NV Bekaert SA (BEKB) Earnings Call Transcript & Summary

Good afternoon, and warm welcome. We appreciate very much that you take the time to be with us on the quarter 3 update. I hope everybody is safe and healthy. And quarter 3, for sure, has been or there has been a significant turning point in many aspects, and we would like to go forward this ones.

Taoufiq?

Yes. Sorry, I had a lag of sometimes, sorry. I apologize for that. Hi, everyone. Very happy to have you all during this call. So we hope that we will be able to bring some more visibility on our performance as of Q3. So really looking forward to the discussion.

Now I will state, we'll start with the markets we are in. And I wondered if we could get the first slide, please. Thank you very much. As I mentioned, quarter 3 really characterizes a turning point in various aspects, but also in most of the markets. And when we look on our main markets, which is the first one, of course, is the Tire market. May I ask to switch? Okay. Now technique works. And what we have seen, it was really amazing. A strong and a fast rebound in all Tire markets as well in the original equipment, which was very weak in quarter 2, but also in replacement. Further, what we have recognized is that there's lower inventory across the whole value chain, and everybody was replenishing their stocks. The third element was that because of flow less import, which has been in the markets through some trading tensions and logistic issues we were missing some capacities on containers. And there was a trend to do more local and regional sourcing. And therefore, we saw in the quarter 3, sales up in our business from quarter two to 50%. This was really a strong rebound. So when we look at the volume recovery, so we are now above last year's levels since August. And this is quite impressing. We have a very strong demand in Asia, especially China, India and Indonesia. Whilst in Europe, it was more normalized and still North America was lagging behind. When we look a little bit ahead in the fourth quarter, we do see that the sale is going to be very strong and might even increase in this quarter to come where we're actually in. In the second market, which is the Construction market, we saw that there is an overall lower construction spending. This had to do with some hesitations and looking forward, how the final stimulus programs would look like in the infrastructure market. And it's always, at the end, how we say the winter season, which is covering our seasonality. How does this turn into our Specialty Business? So in fact, there are no major changes in these business conditions. The Q3 sales have been up 18% from Q2, driven most the business mostly by the mix and less better volumes. So it was more favorable business mix versus the last year, but we don't see any big changes coming up in the quarter 4, exception of what I mentioned before. There may be some usual season-ability (sic) [ seasonality ]. It always depends how tough and how strong the winters are. Sometimes we have mild winters and the construction continues. If, of course, they are very cold one, construction is more impacted on this one. The other 2 markets where we're in is Agriculture, Utility and Mining markets. Here we have seen, again, a continuous good demand. We were considered as essential sectors. And the demand picked up very much in Latin America. And this was mainly linked that there have been less infections on COVID-19 and the measures maybe have been more effective than in other countries. How does this translate in our Steel Wire Solutions, and this was a very solid demand. I think this was that after the Tire market, one of the areas where we really could catch up. The sales went up by 16% from Q2. It's even above slightly the Q3 of 2019, 1.2%. We do anticipate a good demand in Europe and further pickup in Asia and Latin America. And what we also can say for the fourth quarter, despite of the usual season-ability (sic) [ seasonality ] we see there, it will remain quite solid. Last but not least, the Ropes & Advanced Cords, the crane and industrial markets have been at the low level. We saw some picking up in fishing and marine, but in contradiction with the business on oil and gas because it's a project business. And this was mainly hit the U.S. For BBRG, what does it mean? The sales were trending lower. We see a little bit of an 11% from quarter two and the lower volumes in the ropes, this is also mainly that we took quite a wise and strategic choice that will reduce the presence where we have lower margin applications in the field. There was also -- this is also not unusual, for example, in the elevator industry that at the end of the year, there's a softening in conditions for the A-cords because most of the products have been already bought and are about to be implemented and installed. For the Q4, I think the revenue will probably remain what we have seen in quarter 3. Now I would like to hand over to Taoufiq, who will guide us through some financials.

Okay. So speaking of financials, I will just elaborate on a couple of additional points on the Q3 versus Q2 sales, and then I will look at -- we will discuss the Q3 year-to-date what it means for our 2020 performance. So starting with Q3 versus Q2. So you'll see the overall percentage that we have for total Bekaert. So indeed, a significant rebound in Q3 with a v-shaped type of recovery in RR, stabilization somehow in Steel Wire Solutions and Specialty Business, which are slightly below the Q3 of last year. While in BBRG, we still see some longer downturn in some of the key markets. Drilling down into RR, so what we see is that all the regions with the exception of North America have recovered fast, after being heavily impacted by the COVID slowdown. China was already strong in Q2, as you know. That was mainly driven by a dynamic domestic market. It did further recover in the Q3, thanks to the combined effect of the domestic and the export sales, which have also picked up. The global capacity utilization in Q3 was picking in September, and it was in the range 95%. For Steel Wire Solutions, saw a very strong Q3 as well with strong performance across all the forty segments of the business unit. They have reported -- well, they have benefited from the combination of relatively low wire rod prices and also some supply shortages in some markets, which have reinforced our position, thanks to our global presence. The sales have increased by more than 40% in LATAM, Latin America during the quarter. I think it's remarkable enough to be highlighted. On Specialty Business saw a strong rebound in Q3. But the BU main segments are still facing some headwinds. Building products, you see some pressure on pricing from competition and the construction sites because of the prices and the containment measures are not completely operational. On the fiber business, we did see some orders being postponed during the quarter. However, the business mix that we reported on Specialty Business did compensate some of these issues. Then moving to BBRG. So a lower level of activity compared to Q2 and as well to Q3 of last year. In many aspects, this was also a deliberate business decision, you know, and we have mentioned it already a couple of times. We're strongly focusing on smarter segmentation, trying to maximize the margin generation of some of our product. And this has been the focus of the business actually since the year started. The COVID is tracking a drag, as Oswald has mentioned on the rope sales. North America is the main region being impacted mainly on the oil and gas sector, which has been weak during the quarter. While on the other end of the spectrum, we see that the fishing and the marine business was quite strong. So this is the key messages for Q3 versus Q2. If we move to the next slide, which looks at our year-to-date sales 2020 versus '19. So overall sales are down 16% versus last year, year-to-date September actuals. They're down as well versus the -- our own budget assumptions. The Q3 sales are up, however, as I already mentioned, 24% versus Q2. But still down 8% versus Q3 year-on-year. Year-to-date, we are reporting a volume decline of roughly 12.5%. This is the result of the slowdowns on the key markets and segments. We have the usual deviations or gaps resulting from the past on wire rod prices, which has amounted to 4.4%. And we did also suffer from some FX unfavorable impact that we have compensated through an improved mix -- pricing and mix, which did contribute up to 3% in our overall sales performance. Looking at these figures by business unit, Rubber Reinforcement saw sales down 23.3% out of which 17% is driven by volume. Looking at it by region, we see that there is different dynamic depending on the region we're looking at. Starting with the biggest dip, that's mainly in North America, sorry, with a 40% deviation, 20% gap in EMEA and 15% in China, cumulative end of Q2. So in Q3, we see a very steep rebound on the demand. So we already mentioned some of the figure with the pickup of up to 50% versus Q2, with strong performance in EMEA, South Asia, which is mainly India. And with this level of performance that we saw in Q3, the volumes are almost at the same level of Q3 of last year, so -- which is a quite encouraging sign. Looking at Steel Wire Solutions, so sales are down 11% for the first 9 months of 2020. So the overall impacts that we got were the usual ones. The volume, which was lower, the wire rod prices, the FX. We did see as well the same pattern as in Rubber Reinforcement with a strong rebound in Q3, which was up 16% versus Q2, but still moderately down versus last year's same period of 4% in average. So the major part of the decline that we had year-to-date was coming from Latin America, followed by North America and Southeast Asia. Southeast Asia, just as a reminder, that was mainly the result of the closures of the plants in Ipoh in Malaysia and Shelbyville in the U.S. So just to be able to compare things like to like. On the other side, we had a very strong performance in EMEA, which was up 8% and China, also significantly up 12.5%. We saw good performance despite the crisis. Specialty business down 7% -- 7.3% versus last year, the first 9 months. Mainly driven again by the building products and the fiber business as a result of the slowdown. We did see the sales starting to rebound towards the end of Q3 and we did see this trend throughout all the subsegments that we have in the Specialty Business. Last but not least, BBRG. So sales decline of 9.7% versus the same period of last year. I already mentioned that we had a weak oil and gas, especially on onshore in North America, a weak mining with the exception of Australia, soft business in crane and industrial, but showing signs of improvement across several regions and a very strong fishing and marine. So with that, I hand it back to Oswald.

Thank you, Taoufiq. Allow me to give you an overview, and I think we experienced ourselves as well COVID is still around. And what we see while life and business is back in China to normal, but in Europe, by far away, it hits us very hard. U.S., again, when you look at India, it's the same. And just maybe all of us have heard in Russia, they have the highest mortality rate since the start of this one. What did we do? We started quite early. It was April -- end of February, early March that we say we need a very strong approach to this crisis. We cannot wait until and hoping that's going to pass by in a few weeks, no. We are very sure that this crisis will take a bit longer. And whenever you look on pandemic, the second wave is always harder. So what we did in order to make a strong emerging, we had 8 work streams in place. We started to drill with a crisis management. And of course, the first aspect of this management was to keep our people healthy and safe. And we have undertaken tremendous efforts in standardizing mask, temperature masking, shift splitting and many other actions. And we always questions ourselves, can we do more to keep our people safe and healthy. We have also looked in other companies. We learned a lot from China, for example, because they took quite early the measures. We have also gotten notified bodies who were helping us to even improve on this one. In the result, we were very lucky to have only in comparison to the pandemic very few infection, we can take a lot of health measures to keep them low. The second topic, of course, was to make sure that the liquidity is there. And we have cost mitigation actions in place, which help us to protect the business and the company. And then the third one was where we were heavily working on in the second quarter, in the one way, reducing wire rod deliveries. And now in the third quarter, this is the turning on the heel to get sufficient wire rod for supplying our plants and to order to meet the customers' demands. This was a big task for the procurement to get this effort done. The procurement continue to negotiate in virtual worlds and virtual campaigns to get further cost reductions. We also learned the new way of working. And I think our exercise today is really explaining and expressing how this now works. And communication was absolutely key for customers, but also internally. And I think this has been a substantial input that we now have a good chance, and we did it already. And I think the figures, Taoufiq has shown that we are emerging stronger from the crisis. So we have taken effective actions to correct our people to make sure that the supply to the customer is given and, of course, to protect our company in terms of financial positioning. May I ask to go to the next one. And of course, let's be thank you to our people because the spirit of better together make this happen. But there's also a big thank you to our customers. Because during the hard time in the second quarter where we share the pain, now we could share the gain. Because the customer really appreciated our reliability that we have been communicating constantly that we have exchanged all the up and downs, the waves of demands, and this is what we can see now that we get orders from customers and they really award us for this trust and confidence they have put in us. But it's also on the other side of the value chain, there was a close cooperation with suppliers. Also when the demand went down, we were very close to suppliers to cancel orders in order to protect our working capital. But on the other side, now, when it comes back, it looks like that we get more viable to supply the higher levels of demand than maybe our competition. And this is, again, very much appreciated by our customers. Also a big thank you to our suppliers. At the same time, we were in a position to go in higher-value business, and we have changed our product and business mix to the benefit of having a better margin on those products with a higher value. Can we go to the next one, please. And here, I would like to hand over to you, Taoufiq.

Okay. So a key message is in terms of balance sheet, I would not read down immediately into the net debt. Just wanted to give you some high-level perspective on how we're performing in terms of working capital, and then I will make the link with the net debt. So the working capital, I mean, if we compare it to the same period of last year, so we have -- we are reporting a decrease of more than EUR 200 million. And if we compare the same figure versus the close of 2019, we are almost stable. So -- which is, in itself, given the circumstances, a very good level of performance. Looking at the different categories and the key one. So inventory, we continue with our efforts to optimize our level of inventories in our supply chain, so a significant decrease that we are pleased to report as well in terms of inventory. Accounts receivable. We also see a decrease with the level of factoring, which is roughly in line or exactly in line with the year-end 2019. So again, a quite good performance in terms of optimizing our DSO. The average working capital as it stands as of September '20 is in the range of 19.2%. So down versus Q3 of last year, which was around 20%. At year-end, we were at 18.2%. So we still aim at the level of working capital, which will be between 19% -- or 18% to 20% before year-end. So this is leading us to the cash. So we were able to deliver a level of operating cash flow in 2020 year to date, in the range of EUR 190 million, so in line with the performance of last year. Despite a drop of EBITDA in absolute value. As a result, so cash and cash equivalent at the end of the period, which is amounting to EUR 820 million. So if you neutralize some of the committed facilities on which we have drawn and so on. If you net out all these one-off elements and you look at the operational cash, we still -- we were still able to deliver EUR 150 million of additional cash during the 9-month period of the year. So as a result of that, as you can see, net debt, which goes down to EUR 834 million. So that's roughly EUR 350 million down versus September 2019. And another EUR 140 million down versus the close of 2019, where we had a net debt, which was in the range of EUR 977 million, as you can see it in the slide. And this is leading to the very good performance that we're able to disclose in terms of leverage where we are ending up year-to-date with a multiple below 2, with the expectation to keep it below 2. And again, with a level of performance, which is ahead of the plan that we had initially considered. Last but not least, so I guess that most of you have followed the post balance sheet event in terms of refinancing. So a very successful refinancing. We are, again -- we were again able to secure the totality of the amount requested in a day. So that was very good. We did it under a very favorable financial conditions with an interest rate, which was quite advantageous. So again, a successful milestone delivered for us. And obviously, it helps us get a better visibility and optimize the maturities of our debt on the long term. So moving to the next slide. So in terms of outlook, so I think that by now, I think that we're bringing in a demonstration that our structural improvement that we wanted to focus on are giving results. So I think that now we're moving through the phase where we need to crystallize most of this improvement and really embed them into our way of operating. So this is how we want to build out the agile model that we want for -- for Bekaert and given the very stressed circumstances under which we were during this period of time for the last quarter or at least, I think that it's bringing the demonstration that it does work. It does give results, and we see it both in terms of P&L and balance sheet. Unfortunately, we are not done yet. We're not over. We are not at the end of the channel with the COVID pandemic. So it still continues. We don't know if we are in a second wave. If a third wave will start again. So that's why it makes the projection is still very difficult to assess. However, with what we know, with what we see, we do believe that we will be able to deliver a step-up in performance in the second half of 2020 which, again, given the circumstances, is a very strong level of performance. With that, our level of EBIT will be close to 2019. Automatically with the level of sales we're reporting, the underlying EBIT margin will also increase. And again, something that we are quite pleased with. I already mentioned that we will still keep the focus on optimizing our working capital, making sure things don't deviate that we keep strong control on inventories, on receivables. And our intention is to keep our leverage by year-end with the multiple below 2. And again, it's something that if we achieve it and when we will achieve it, we'll be ahead of the plan that we have initially considered. With that, back to you, Oswald for some brief closing remarks.

Thanks, Taoufiq. Just maybe 2 dates to save. There's the announcement of the results 2020, just for safety, so the third of March. And we plan a Capital Markets Day, that was during the month of March. But now, of course, we are more than glad to take any questions which came up in your mind, and I already see some hands raising.

[Operator Instructions] Emmanuel, I see that you have been raising your hand since the very beginning of the meeting. So I give you the floor first.

Is it better now?

Yes. Yes. We hear you.

Yes. Good. Now, yes, first of all, I want to congrats everyone, of course, with the great performance in these very challenging times. So I have 3 questions. First question is on the CapEx. So the CapEx spend was fairly low in the first 9 months. Could you give an update on the guidance for 2020? And also for 2021? Because I see CapEx estimates of around [ EUR 175 million ], which still looks quite high to me. And maybe related to that, if you could give a kind of indication of how much CapEx is required to just go back with the volumes towards the pre-COVID-19 levels? So that's the first question. The second question is on 2021 estimates. If you could just share your thoughts on how you look at yes, potential volume recovery and what it would mean in terms of operational leverage because part of the savings are temporarily because of furlough, et cetera. But yes, I guess the volume recovery should more than offset that. So just kind of indication if you expect profitability to further improve in 2021. And then the last question is on capital allocation. So the capital -- or the net debt to EBITDA, I mean, will be way below the 2x by the end of 2021. I think you will have something like EUR 300 million headroom if you would target 2x. So to me, a share buyback looks the most attractive option versus, yes, the low share price and what the return on invested capital is of Bekaert, but I'm happy to hear any of your thoughts on that.

Okay. So I will start with the question on CapEx. So for the CapEx, we -- for 2020, so we confirm the guidance that we have already shared. So it will be in the range of EUR 100 million. And for 2021, before giving you a guidance, I think that what I need to state is that we also want to do differently when it comes to allocating capital [ to welcome ] in a general way and specifically to CapEx. So we are planning to be more selective, making sure that we invest where it generates the highest level of return for the company. So we will be introducing and we are in the process of introducing a very strong governance and processes on that. And this will free up automatically additional resources in other areas in a sense that we will have less waste, hopefully, with projects which are more closely tied up with our strategy and projects and investments, which do generate a high level of return. So as such for the time being, the level of investment that we see for next year will be definitely increased compared to this year. We still need to fine tune the figures, but it will be in the range of EUR 140 million to EUR 150 million. That's the expectation that we have for next year. Okay. The next question on the 2021 estimate. So again it's back to what we did refer to when we discussed the outlook. I mean, there's still some uncertainties surrounding the evolution of the pandemic. But assuming that we do see the trend that we see in -- which has started towards the end of Q3 or throughout Q3, and that is continuing in Q4. We do expect the crystallization of this upward trend, and we are estimating that our overall volume of activity will increase. So we will definitely not be dealing with the depressed that with the volumes that we have now. I think it's still a bit premature to give you the exact percentage that we have, we will certainly share it with you. All we can say at this stage is that we're expecting the recovery to continue. We don't see a recovery up to the 2019 levels to happen next year. It might take a bit more time. But the combination of the increase in volume and all the structural actions that we are taking are -- will definitely generate incremental value and incremental profitability. So the ball of the game will be about how do we crystallize all these improvements. I think that we have brought the demonstration during these 3 months, these 3 quarters that -- I mean, we're serious about it and we want to sustain them. And this brings me to the following point on your question about the temporary measures and so on. Indeed, there was a part which was related to furlough and things like that. But this furlough has essentially compensated for all our workforce that we didn't want to demobilize. So I mean, we kept our workforce despite the fact that the volumes were down. And we are working in parallel on a set of measures in order to make the savings coming from different areas of the business. I think that in many areas, we were suboptimal in terms of setup, in terms of way of spending, in terms of way we were deploying our capital and expenses. We're looking at it, and we're building a plan, which will allow us basically to replace completely all these temporary measures that we benefited from. And that will aim to be more structural. So that's our intention. I think that the baselines and the foundations that we have built we will need to rely on it. Some of the savings that we have done will not completely disappear. I mean there is a new way of working. I mean, we have been more agile. And I think that the crisis has also created a sense of urgency for us to challenge ourselves and to look better at how we are spending and it's giving results, and we want to continue relying on that for next year. So on your question on the share buyback. So it's actually a question that we have been asked ourselves internally. I mean, I have to say that it's not clearly a priority for us at this stage. We do see the benefit from it. We will further look at it, further discuss it. And if we see an opportunity in doing that, we will definitely bring it up to our Board and make a proposal for them. But for the moment, I think that it's something that we have in top of our mind, it's not in the center of our radar screen, so to speak.

So -- but that means then, if I may, that you see investments that you can do at a return on invested capital that is above the historical -- above the historical average for the business?

That's definitely -- this is how we want to set up how new ways of doing and our new practices to target exactly that objective. So we will clearly establish clear metrics now for every project where we want to invest, where we will have milestones before releasing additional funds. We will have gate reviews to validate that the assumptions are still working and that the execution is per -- as per the plan that we have set to ourselves. And the end result will be exactly what you're describing.

Frank, you're next in line.

Yes. This is Frank Claassen of the Degroof Petercam. Two questions, please. First of all, on your competitive environment, do you expect. Yes. What is your expectations on that, given that some of your competitors have not had ideal supply chain, so issues with getting wire rod. So you think that they will come back? And yes, what does that do to the competitive environment? And then secondly, more on your margin ambitions longer term. If I do some back of the envelope calculations, I already arrived at, let's say, 7% roughly for the second half of EBIT margin. If I'm not mistaken, that is your medium-term target. So what is your view on your medium-term ambitions, given that you're already going to reach them in the second half of this year?

Thank you, Frank. And maybe I take the first 1 on the competition and Taoufiq will take the second one. We split up a little bit. We'll have competition, honestly. And I always have competition, the whole career because it makes you unresting. You always look what you can do better. And I think this is what we do. When we look on the competition, for example, we have seen in the second quarter that we have a little bit heavy decline in the market share, for example, in China. Yes. But this was also voluntary because there was a price for. We didn't want to enter this price for because this would have -- normally, prices go down, you never can recover. And now we're gaining quite significant the prices back because of the volume -- because of our, I would say, relationship to suppliers, we get more reliable. But there's also -- I think when we look on our global footprint, it's highly appreciated as we have -- we are close to our customers. And when we see all these trade wars, et cetera, I think we see a different behavior of our customer. They want to buy more local or regional and this is what the award us as well. Yes, there will be, what I will say more Chinese exports are coming et cetera and containers maybe be sufficient over there. In the moment, it is restricted because transportation costs went up very heavily. So there is a restriction. But I think we are established with our customers that even the new customers we have on, we're going to have a recurring business. This is what we see, and this is why we say it would be a stabilizing demand and not the one up, on off. This is what we say. And this is also what I mentioned before for the fourth quarter to come that we see this as a stable trend this way. Yes but we are benefiting on the reliable supply base. This is true. Of course, we capture these opportunities. And it would be a mistake not to do that. Yes. Taoufiq, would you like to handle the expectations?

Yes. So okay. So in terms of margin. So I mean, again, this is the discussion supposed to be a trading growth date, so we are not supposed to drill down too much in terms of margins. But I will try to answer or to give you some indications about that. So again without saying if 7% is the figure or not, but assuming that your calculation is right. This indeed will take us to a situation where we will be ahead of the plan that we initially set up. So we were aiming at 7% by 2022. And I think that the acceleration of all the structural measures that we're taking is taking us at a faster pace towards this target. So then the question becomes, what do we do next? Do we satisfy ourselves with this level of margin, we go above -- I mean and there, I think that one of the answers that I can provide is that we will need to sustain this level of margin as a first step, meaning by that, that we will need to absorb the additional volume that we are expecting next year. And we need to do it in a profitable way. So I think that it's something that we have already started this year. We see a significant improvement coming from the pricing and mix, something which hopefully will help us move from this perception that we are in a commoditized business and so on. We are rethinking our way of having a more profitable growth, focusing on more added value in our products, looking at how we can embed services into what we're doing, how we can embed higher integration in terms of digitalization and so on. So I think that 1 of the first steps will be... [Technical Difficulty]

Taoufiq, are the phones like, can -- the same for you, Frank?

No, I'm not, but -- no, actually.

Frank, can you hear us?

No, no, I can't hear you here. I think there's -- in the connection.

Can we start? Do you hear me now?

Oh, you're back.

Okay. So I don't know where I left it. So sorry for that.

You were saying about the higher services.

Yes. So okay. So again, I mean, what I meant by that is I mean we need first to crystallize our level of profitability and then try to understand how we can drive a new backup in terms of the products that want to put on the market, focusing on higher-margin generation.

And I think what we can add, will be a higher focus also on the capital allocation on innovation to look it early, where we can add, I would say, sales volume for innovation and how much is going to be the percentage of the future. We do benefit, for example, of increasing rim sizes on your tire. I'm sure you are also helping us here that. The inches always gets higher and higher. And the higher the inches go the more steel cord is used and the more higher [ paint ] size [ steel coat ] you need there. So this is really where we go into the higher value business. And I think here, we are benefiting, of course, from SUB trend, et cetera, et cetera. Yes, this is going to very supportive.

And will you also be using the Capital Markets Day early next year to give some more color on what your new ambitions will be? Or is that too early?

I think it's in the very moment, a bit too early. But of course, we would not like to miss such an opportunity as well, yes.

Wim Hoste [Operator Instructions] If not, I will pass the turn to Martijn den Drijver.

Is it okay? Sorry I was -- sorry for that. Wim Hoste, KBC Securities. A couple of questions from my side. First on, yes, digging back into the discussion on higher tensile steel cords. Can you maybe update us a bit more on what exactly is the market situation? I think you were the first -- typically a first mover in the market, bringing up the level in terms of tensility of the products. Is competition following? Are you still having a lead there, a bit of additional clarity on that, who's catching up with you? That would be helpful. Second question is also on Rubber Reinforcements. I think at the beginning, there was a mentioning that there was some inventory replenishment in the Q3 numbers. Can you maybe specify how big of an impact that had on Q3? And then the third question, and I'm going to leave it there is on BBRG. We see revenue coming down, I think, partly as a consequence of the portfolio pruning you are undertaking. Can you maybe shed some light on whether you are coming to the end of that exercise and all the low-margin products have now been filtered out of your system? Or is there still additional effect of that to be expected In the remainder of the year and then also into next year. So these are the questions.

Thank you, Wim. I think your first question is a little bit linked to the order book and the quality of the order book. And yes. Taoufiq, you would like to respond to this one?

Well, the first question was on the tensile market, then...

I think here, we are always -- I would say is our core business. This is our technology. Here we always want to be ahead. And here we are ahead. Of course, competition is always there, and we will try to follow-up. But as of today, we get premium, to a certain extent, on these higher qualities, very, very clearly. This we see in old application that we go for a higher end that there we have, for sure, a competitive advantage. Your second question was more on the replenishment of the stock. Yes. Of course, when the stocks are low, our inventories are low, there is a much more eagerness to fill it up on both ends. Yes, of course, this has caused a little bit a peak in the timing of filling it up. And maybe there was an absolute peak and it comes down a little bit, but the demand is still strong. And for the customer, it was also quite difficult to understand in their SOP, what's really coming up to for the stock and what is really [ the market, in essence ] the market. But I think we have a quite good view now that the peak as we have may come down a little bit, but it will remain strong for the fourth quarter. Yes. It's not only filling up, it's a little demand. We were looking also on mileage, how much was driven, and then you get a different picture. On the one side, the mileage is down of the cars. But on the other side, you see, maybe I don't know how it is in your country. Many people are using the cars again when they go to work because they're afraid of public transportation. So this is rate of also the overall reduction of the mileage. I think in BBRG, yes, we have taken -- there's 2 fair effects, I would say, Taoufiq, please complement. The one is there's a seasonality. Yes, this is a project business. We always have to look what's in the project up pipeline. This is always an up and down. This is not a continuous business. And the other 1 we have taken here clear, I would say, steps to get maybe out of the lower margin on. But, Taoufiq, you want to make the comment on this as well.

Yes. Yes. Well, I would just add 2 additional things. I think that what is impacting BBRG is what Oswald has just referred to with the seasonality. And also the -- the punctual pick ups that we get whenever we are in a position to capture good margin projects. So this happens on a continuous basis, but it also triggers a phasing issue. So we did benefit from some good project margins. We did generate a level of margin above par during the first half of the year. We did expect some of these project also to happen during the second half. It didn't happen yet, but we're still hopeful that there is no reason why it should stop. I think that without positioning on that we have decided to go for. We are in better position to capture these projects. So we're still hopeful that it will happen. Unfortunately, it's not something linear. So it goes and it comes. On the second point that I wanted to make is that, I mean, the overall plan that we have as far as BBRG is concerned. I mean, it's focusing both on the commercial part, and what you have mentioned, being more selective, having a better segmentation. This is something that we still need to continue. I don't think that we have completely done that we are completely done with the exercise. So we still need to see how we can squeeze more margin from some of these products or take the decision to move out from that. And the other part of the equation is about the so called profit restoration, which is about our structure, our organization, our footprint and so on. And this is also an exercise, which is still ongoing, that has to continue throughout 2021 and which is also expecting to have an impact on our P&L.

I think just to comment on there, some interesting projects out in the bridge business, especially in Germany, what we have seen a lot of bridges, which need to be refurbished. But of course, it's tendering and all this project work, this has a longer lead time. So this what Taoufiq was saying, it's not the regular business. It's really project business with all the delays and orders which is needed.

[ Stan, ] May I welcome you to a Microsoft Teams Meeting.