NV Bekaert SA (BEKB) Earnings Call Transcript & Summary

Good afternoon or good morning, everybody. Good morning or good afternoon to our analysts and other participants on this call. Please be informed that the meeting will be recorded and published for replay on our website after this meeting. I refer to our safe harbor statement, which is here on the slide, which applies to the presentation that we will use today as well as to the statements made by our speakers. Oswald Schmid, CEO; and Taoufiq Boussaid, CFO, will guide us through the news that we are sharing today, including our business context and priorities, the results for the first half of 2021 and our revised outlook and ambitions. I now give the floor to Oswald Schmid.

Thank you very much, Katelijn. And a warm welcome to all of you, on behalf of Taoufiq and myself, on this Friday afternoon, in this fast and very special call. I'm happy that the pending cases are now resolved. About 10 days ago, we unveiled the key financial highlights of the first half results of Bekaert for early release, as you know. And since our performance for the first half of '21 turned out to be out of our expectations. And today, of course, we will further explain and clarify what the drivers of this outperformance are and then, of course, how we proceed in leveraging the step-up in the performance in the near future and in the midterm. So let me start with some macroeconomic developments we have witnessed in the second quarter of this year and, for sure, illustrate the characteristics of our business context where we are. So when we look on our business in second quarter of '21, we see a picture, and this is also reflected in the first half of the year, was a tight disbursal. On the one side, we have seen a significant rebound and surge of demand in most markets, in fact, in most of the regions. On the other side, we were confronted with some global supply chain interruptions. And I think we are aware about the container shortages, microchip shortages, especially the automotive industry. The other element was the commodity price increases on raw materials, but also packaging materials or other commodities. They're quite significant, and this in addition to the transportation costs, which increased heavily. We have also witnessed an acceleration of the reversed globalization trend. And this, of course, was supported with the supply chain issues and some trading tensions we have seen among some countries. And last but not least, we have experienced as well that the COVID-19 is still around, and there's still a lot of uncertainties and ambiguities which we can find on, I would say, in all the markets. So how this is all reflecting the demand developments for Bekaert? So let's have a look at each of the markets which are really relevant for us. Let me start with the tire markets, which were in Europe, EMEA and in India. They've been very strong. And the demand in North America in the second quarter was picking up. But as we see in China that the demand is tailing off at the end of quarter 2. And this was reasoning by the container shortage and also some fiscal tax reforms. We further have seen that demand from the auto OEMs rebounded as well, not yet to the pre-COVID levels. And there's always the impact of what I mentioned before, the global chip shortage we all experienced. On the second market we are in, we saw a very strong demand for construction. And this exceptionally in Latin America, especially in the first half year, and the progressive demand improvement in the rest of the world as well as solid demand for elevator solutions. The trend of reversed globalization have been beneficial to us. Because, as you know, we have a very -- as a global player, we have a very global footprint and foothold in all continents. And this allows us to really be very close to our customers. And further, we had some nice project wins in large infrastructure projects, and I will show some of the examples in the next slides. When we go to energy and utility, we also could see that the demand was particularly strong, with positive evolutions for flexible pipe armoring and offshore wind applications. And there were also robust demand for overhead power cable solutions and linked to the RDOF investment in the U.S., which brings the Internet to rural areas in the United States. The other markets where we're in, we saw a solid demand from agriculture, in fishing and marine, but as well as in mining markets. There was quite a boost for hose reinforcement and filtration solutions. And there's a growing interest we have seen for digital solutions, and we have one very good example, which is VisionTek, which allows us to monitor the ropes and to reinspect if they are safe or need to be replaced. Allow me to show you some of examples, some highlights where we have been with our partners. And one of these highlights is Hampton Roads, it's bridges and tunnel, in the State of Virginia in U.S. And this is one of the largest infrastructure projects in Virginia ever. And it's connecting different islands in Hampton. And of course, our product, Dramix, as you know, the steel fibers, they are really used in tunnel sections of this new infrastructure. And we are very proud to be their partner of choice. Another example is the ones in France. And here BBRG has won the project to supply the mooring lines of such floating turbine. Another examples are -- and this is one of our big customers in Australia, BHP, in the mining, it's the first time that they use a synthetic guideline developed by BBRG in partnership with Applied Fiber. And this is a high molecular polyethylene rope and polymer, which is then really makes a -- also completely different way how to work because it's much lighter than steel. It was the first, I would say, success story in a co-development with our customer and with Applied Fiber. Another example of a very nice long-term contract, we see SWS together with Proalco. They concluded a global long-term supply contract with the right plate later. So allow me now to summarize the focus and the priorities we had in H1 of '21, and our actions there appeared across 3 main areas and each contributing about 1/3 to the EBIT improvement we achieved and this has been substantial. The first part was still to capture the growth from the volume recovery to pre-COVID-19 levels. We have seen a global demand rebound. I think we were able to be customer-centric. And the go-to-market strategies and the focus really paid off. Our supply chain ensured delivery continued to our suppliers. The second part, and I think this is a very important one, during the COVID-19 time, we took really structural improvements of the -- for the performance businesses. It was about product and business mix improvements. It was about a clear pricing discipline aligned with the raw material pricing trends. And there was an acceleration of commercial and operational excellence, now even getting more closer to the customer, serving better. And of course, there's a continued effort to make sure effective working capital cost and cost control is taken care of. Another one that should -- we will go into this one. These were temporary tailwinds. This was a positive inventory valuation impact from the raw material prices. And if we let this -- exclude this impact, our underlying EBIT margin reached about 10%. But in addition to these 3 elements, we have continuously worked over the last 6 months heavily to work on digitization of our company. This was one automating processes. It's streamlining processes, getting, for example, operating more and more efficiency in our factories and also in other enterprise processes. The second part was to use digitization for customers or partners to be -- to make their life and the ordering and the dealing with us much easier. Sustainability, we have worked heavily because sustainability is an increasing importance all over the globe, from the customer to the suppliers and, I think, also from the society point of view. We have further established a clear innovation outlay. We have to make sure that in the future we are contributing and helping our suppliers -- our customers to gain innovative solution for their needs. And we now come a little bit to look at our 4 businesses that's serving the global markets. We see that Rubber Reinforcement with 43%, for sure, is the biggest part; followed by SWS. BBRG and the Specialty Businesses around -- both 10%. Let's look how the regions are allocated. We see EMEA we're about 35%, the Asia Pacific area about 31%, LatAm and North America together another big 1/3. So we are well distributed with our business according to the regions we see here. A quick look on the sales breakdown shows very clearly that the tire and automotive is the biggest part, followed by construction and agriculture and some other areas where we are in with a low digit number on this one. But now let me come to the highlight, and I think we are very proud and very thankful for the business we get from our customers and for the dedication, engagement of our people to achieve such results. And of course, it would not make a lot of sense and would be maybe not representative to compare only to 2020, which was, as we know, a very special year, first half year especially. So let me compare it also a little bit with 2019. When we look on the sales, we have achieved this year EUR 2.3 million (sic) [ EUR 2.3 billion ] in the first half. It's compared to last year with EUR 1.77 billion, that's 30% plus. When we compare it to 2019 first half, we see we delivered, thus, in those x2.2 and now we are ending up with 2.3. So we have from the sales volume point of view above the 2019 first half year results. Let me talk about the underlying EBIT. And here, you see, last year, we had 5.2%, and we leveled up with 7.2 percentage points up to 12.4%. If we now would in -- do exclude the inventory valuation, we will still be around 10%. In comparison to 2019, it's 5 -- we have been at 5.7% and now above the 10%, and, respectively, the 12.4%. ROCE, another big step-up of -- that's about 19.2 percentage points coming from 7.7% last year, going up to almost 27% in this year. Operating free cash flow, I would say, really another highlight, coming from EUR 61 million in 2020, it's EUR 78 million in 2019. We reached now EUR 155 million, which means x2.5 of 2020. Net debt significantly lower by EUR 436 million, coming down from EUR 955 million to EUR 519 million. And I think all of you are very keen to understand in more details about the financials, and I would like now Taoufiq to take it over. Thank you.

Thank you very much, Oswald. Hello, everyone, and thank you very much for joining us today. So as Oswald said, a very strong performance overall delivered for the first half of 2021. And the first landmark target or achievement that we have delivered is obviously the level of sales. And just to give you some flavor around that, so we have delivered, as you can see in the slide, level of sales at EUR 2.3 billion in consolidated, EUR 2.8 billion in combined. So a great performance overall across our 4 business franchises, which was done on the back of 2 main catalysts. The first one was obviously our ability to capture the full potential of the demand rebound, and this has been translated into an organic volume increase of roughly 23%. And then second catalyst was the very disciplined and structured approach in terms of proactively managing our mix and our pricing. And this has triggered an additional 8% improvement to our top line. I will elaborate later on the sales performance of each BUs. But before going there, just some additional drill down in the P&L. So as you can see in the next slide, please, we have increased our gross profit by EUR 221 million. So that's a staggering improvement of 87% versus H1 of last year. In absolute terms -- or sorry, in relative terms, this is a very significant improvement of 620 basis points in gross margin at 20.5% in comparison with the 14.3% that has been delivered in H1. And we see actually all our 4 businesses contributing to this very good performance in terms of gross profit. RR and SWS are delivering, respectively, 17% and 20% of the gross profit contribution. But it's important as well to highlight that Specialty Business and BBRG are delivering a gross profit level which is above the group average at 33% and 22%. So a very good level of performance overall. In terms of overheads, so in percentage of sales, so we have maintained our level of spending relatively flat or at a good level at least, so better at 8.5% compared to last year. In absolute terms, it did increase for a couple of reasons. The first one is that last year, obviously, we have benefited from some unemployment, which has been reflected in our P&L that obviously we don't have any more in 2021. So this is creating a disconnect or a variance versus last year. We also had some adjustments in different provisions in our book touching the compensation scheme of our colleagues and employees. And we have also tactically added some additional capabilities and some key functions for us, like in the selling and also [indiscernible] So this is what's driving. But I mean, what I also would like to highlight is that there is a portion of the savings, a significant portion of the savings, that we have captured last year, which is still sticking. And when at the next page, you will see that a significant part of our cost-effort saving is crystallized. But before going there, I think it's important to spend some time to explain or to repeat how our overall performance has been delivered for 2021. So you see we have mainly 3 building blocks: the inventory valuation, the volume and the price/mix. Starting with the inventory valuation. So it's something that you guys are familiar with. But as we like to call it, this thing is a blessing as much as it can be a curse. What I mean by that is that FIFO, without being able to manage the pricing, can have a reverse effect in the sense that it dilutes the margin and you lose the benefit of it in your overall P&L contribution. And here, for 2021, what we see is a combination of both inventory valuation impact, but also the price and mix of aggregated. It adds up EUR 126 million to our P&L. And it's not something where we just wait for it to happen, obviously. So there is tremendous work. And we see the changes that we have implemented with Oswald and the rest of the team in terms of proactively managing the wire rod impact on our pricing and making sure that this flows to our P&L and that we still capture some of the benefit of the noncash inventory valuation. Volume was -- I mean, follows the same reasoning. I mean, again, there is a global demand, which is triggering the overall volume increase. Again, as I -- as we say, I mean, the customers have the choice. And we relied on our customer excellence programs and initiatives to make sure that we capture the full potential coming out of the volume. This had obviously a knock-on impact on our cash conversion costs and the over absorption of our fixed cost, and this has delivered the very good results that we see in our P&L. As I mentioned earlier, so we have continued to implement additional structural cost-improvement actions. So part of it was already triggered last year. We see part of it sticking. And on top of that, we are continuing as well to work on our different type of initiative to make sure that we optimize our costs. So moving at the perspective more from the business unit standpoint and moving to the next slide, and I will start with the Rubber Reinforcement business. So what we see here is a very strong and impressive sales growth of 43%. It was mainly demand -- driven by the demand rebound to pre-COVID levels. The organic contribution in this overall 43% is roughly 30%. And then when we combine it with the price/mix and the passed-on wire rod material price changes, that adds up another 30% to the overall contribution. The demand has been primarily pulled through the replacement business for both TBR AND PLT in the context where the light vehicle sales in Q1 and Q2 has fell by, respectively, 5% and 8% versus December 2020 levels due to the chip shortages that we have alluded to. From a regional perspective, the Europe tire cord demand has surged, mainly driven by the fact that there are lower imports, which are primarily resulting from the container shortages and the higher freight costs. In China, it's kind of a slightly different picture in the sense that the tire industry has overproduced in Q1, which has led to some excess inventory in the system. And in addition to that, the increased prices for the raw material has resulted in weaker demand and has a slowdown of the production in Q2. We do think that -- I mean, we will have to absorb -- or the system will have to absorb this overcapacity. We do expect that the situation will potentially stabilize, if not improving, between now and year-end. From the profitability standpoint, I think it's important to look at the evolution compared to 2019, 2020 being a very peculiar year because of the COVID crisis. But when we look at the performance versus H1 2019, we see that the profitability for RR has skyrocketed. We see an increase of 39% in gross profit. Underlying EBIT has improved by 48%, and ROCE has gained 11 percentage points. So very strong performance overall for the business unit. Then moving to Steel Wire Solutions. So as well, a very strong sales expansion of 35%. The strong performance was driven by both a combination of the price/mix effect and the passed-on wire rod changes, which has contributed to overall half of this top line change to roughly 18%. And then the volume has complemented by -- was complemented by another 17% from a regional perspective, mainly driven by Latin America, EMEA and China. When we look at the business from an application standpoint, so we see that agriculture, utilities and construction have done very well. We had some concerns about the automotive sector, but we did see in 2021 a rebound for the automotive application versus the low 2020 levels. The other explanation driving the very strong results that we see in SWS has also to do with some of the explanation that Oswald has provided. So we are dealing with an environment with global trade tensions touching different areas. I mean, starting with the logistics, it's the availability of containers, the very high cost of the overseas transportation, but also some of the trade barriers that have been created recently. And one example being the nonrefundability of the VAT in China for some of the steel-related exports. So the third element explaining as well the very strong performance that we see in Steel Wire Solutions, and we have also touched on that, is that the business is benefiting from a global footprint, which somehow makes us immune to some of these trade tensions that we are currently seeing. So versus 2020, overall for the business, we see that the gross profit has jumped by 85.3% from EUR 93 million to EUR 172 million with a very strong contribution, as I have already mentioned, from Latin America and EMEA as well. Moving to Specialty Business. So the BU has also reported a very strong sales increase, 23% for the first half, with a very strong momentum across the 3 subsegments of the franchise. So in Building Products, we saw a very strong demand growth, primarily in Europe and a strong product mix overall. In combustion, we saw an increased demand for environmental-friendly burners, primarily in EMEA. And in Fiber Technologies, the business has achieved a very strong growth in high-end filtration and conductive fiber markets, in general. So very strong performance overall for the Specialty Business. Last but not least, on BBRG, so we are reporting an organic sales growth of 4.5%, primarily driven by higher volumes and with the Advanced Cords segment being the main contributor. The key information and the important one here is that, for quite some time, we haven't seen such a strong order book in the business. So versus the start of the year, we see our order book in BBRG increasing by 45% for ropes and 11% for Advanced Cords. So a very promising market dynamic and prospect for the business. From an application standpoint, we did see a very strong demand in crane and industrial markets, a recovery on the U.S. onshore oil and gas. It was one of our key areas of concern, but we do see it trend towards stability and recovery. And as well, a very strong demand for hoisting in China. When we look at the overall performance for the business and you have the metrics in the slide, I think that there are very clear indication that the profit restoration programs have gained significant traction. We see the result out of it. So our approach and strategy was the right one. And now with the level of performance that we see and that we're projecting short term, BBRG will not be the business which was margin dilutive in the overall group performance. I mean, we're moving to a whole different ball game with the profitability, which is trending towards the 10% mark going forward. So to summarize and moving to the next slide and some just quick comments on some additional P&L KPIs. So an EBIT margin ending up at 12.4%, record-high level for the company, excluding FIFO, 10%. So that was our midterm guidance some time ago. So we are very happy to see that we are ahead of schedule in terms of this level of performance. So that's -- with this level of performance, I mean, we're increasing our profitability of roughly 7.2% versus last year. So the result after tax, knock-on impact, so we see the same kind of strong evolution with result after tax amounting to almost EUR 200 million, up EUR 176 million with -- as well as something which is quite important, so we highlighted it separately here in the slide. We do also see a very strong contribution coming from our shares in the result of the joint ventures and associates. So our activities in the Rubber Reinforcement business and the Steel Wire Solutions business in Brazil is performing very well and adding up a very nice contribution to our results. So one last word on this slide. So you see that our effective tax rate now is normalizing. So we have achieved a level of ATR standing roughly at 26.5%, so significantly down versus the levels that we used to see some years ago. So this is on the back of some measures that we have implemented and also the increased profitability, which does allow us to make a better use of some of the tax assets that we have in our books. So now moving to the cash and the balance sheet, starting with the working capital. So again, another record to report there. So working capital in relative terms is reaching a record-low level of 13%, down from 20% in H1 of last year, 16.4% for the full year 2020. So very strong performance in terms of working capital, despite some of the adverse factors we have to deal with -- adverse factors, not really, but adverse factors in terms of managing the working capital. I mean, the first one is that we obviously have an increased level of activity and ones -- I would expect that this triggers automatically an increase of the inventories, receivables and so on. We did have that, but in a contained way, which does allow us to still deliver an increase of almost 3% in working capital versus last year. So when we look at it by categories, so we see that the main contribution of the overall increase is coming from inventories, so roughly an increase of EUR 192 million. So it's a combined effect of 2 elements. The first one is the value of this inventory, which is increasing. So this is driving 50% of the increase. And the second one is the overall volume, which is increasing in relation with the higher level of activity. Receivables as well, a net increase of EUR 92 million, somehow compensated by our factoring. So we didn't implement any new factoring program or anything like that. I mean, at some point of time, it will stabilize because the majority of our factoring programs are capped mainly for the ones in Europe. But the unit value of our receivables increasing with the wire rod price increases, we see an knock-on impact on the overall contribution coming from the factoring. So payables, I mean, nothing really more to add. I mean we do see an increase as well there, which is the result of the higher purchase inventory items associated with the increased activity. So to conclude this section, just one last slide and probably just one key information or highlight. It's regarding our EPS. Obviously, it's not rocket science there, I would say. So -- but with the very strong results that we're delivering, I mean, we are multiplying our EPS by 6. So a very, very good performance and a very strong move towards increasing the total TSR of the company. So we're very happy about these results. So this takes me through the last part of this section and the guidance that we see now as far as 2021 is concerned. So obviously, some of you might ask, okay, you have given the guidance for your Capital Market Day, and now you're providing new guidance. Well, it's not a completely new guidance. It's an adjusted guidance based on the latest information that we see. We did use, indeed, some caution when we provided the guidance for the Capital Market Day because we were still dealing with many tailwinds. And seriously, we needed a crystal board to figure out how things could move. Typically, one of the key one -- the key one being the evolution of the raw material prices evolution. Now with the stabilized assumption that we have, we are more comfortable projecting our sales evolution and EBIT margin. So we do think that we will see an upside of roughly EUR 200 million in terms of consolidated sales versus the EUR 4.4 billion we have provided in terms of guidance for the sales. And now with all the actions and the confirmation of the mitigating actions that we have achieved over the last couple of months, we are more confident that we should be able to reach at least 10% -- 10% or better EBIT margin on sales, and the leverage remains unchanged at the leverage target below 1. As a result of that, I mean we wanted to be consistent. And we are also adjusting our guidance or ambition for the midterm. For the organic sales growth, no change. So we're still aiming at a 3% CAGR. And in terms of EBIT, we want to capitalize and crystallize many of the good things that we have done so far. I mean, we have something like 5 or 6 quarters in a row where we have confirmed our guidance and expectation. And I think that now we are reaching a level where we can be more confident and also show a bit more ambitious -- ambition in terms of our level of profitability. So we want to guide now for a level of EBIT margin on sales of 9% to 11% throughout the cycle, and the free cash flow yield remains unchanged. So to conclude, so thank you very much. I mean, I'm sure that you will have some follow-up questions, and I hand it back to Oswald.

Thank you very much, Taoufiq. And I think we started a value-creation journey. And when we look at this one, we said, let's create value to the utmost for our customers, for our employees. And we commit to higher performance, and we care about the world about us. And I think it's not only about raw material prices. It's really about capturing the growth. It's really about, I would say, working on the cost. It's really about being close by the customer and make our customers successful, understanding what their needs are and being able to serve them. When we talk about truly better together, this is a slogan we have in Bekaert. It's really -- what I can see and I think we can all be very proud of is the dedication and engagement of our people in turbulent times, in difficult times and times of uncertainty. When we talk about commit to high performance, it's really not hesitating to go for the full potential. And when we talk about caring for the world around us, we have established in the last 6 months a very, very strong ESG program. We have started with experts, and we are really looking forward to offer sustainable solutions also in the future, combined with innovation. So at this point of time, I think we continue this journey, and we have 3 strategic imperatives. The first one is performance. This is the day-to-day business operation, commercial excellence, being customer-centric, being ambitious and committed to deliver. The second part is, with all the transfers we have in innovation, digitization really to transform our company, which are then is based to look how we can grow. And I think we have in our strategy -- we want to call to -- Taoufiq has mentioned 3 pluses in organic growth, but being better positioned and focused on providing innovative solutions to our customer as well. So we called it in the summary video. Still, I would like to thank you here and open the line for questions and hand back to Katelijn.

Thank you, Oswald, and thank you, Taoufiq. We now, indeed, invite our covering analysts for a Q&A session. [Operator Instructions] I first give the floor to [indiscernible]

Yes. So my first questions -- or set of questions would be on the outlook for the second half. So you point to seasonality and the raw materials evolution as a reason for the lower second half in terms of earnings. And if I calculate right, the EUR 4.6 billion sales guidance implies a roughly equal second half in terms of sales. Nevertheless, the underlying EBIT that you guide for is EUR 180 million. So that's roughly a EUR 100 million delta versus the first half. So can you help me understand this EUR 100 million delta and what the driver is for this lower expectation? And related to that, from my understanding, you expect raw materials to stabilize as of Q4. But if raw materials merely stabilize, why should that lead to a negative inventory revaluation? This is my first, yes, my first [Audio Gap]

[Audio Gap] the prices in our final -- with our customers. We do think that with what we see in China happening, its contribution for the second half of the year. So these are the 2 main reasons, which will probably push us a little bit down versus the level of performance that we have achieved in H1.

Okay. So my second question is on the raised midterm guidance. You sort of referred to it already. But what surprised me is that, a mere couple of weeks after coming out with the 5-year plan, you already reviewed it and changed it or lifted by 100 basis points. So what explains the -- what has changed since early June that you now feel more comfortable in pointing to 9 to 11 percentage margin instead of the 8 to 10?

Yes. There are a couple of reasons. Well, 3 reasons actually. The first one is that when -- first of all, I mean, we were working on our strat plan exercise when we first meet for the Capital Market Day. We kind of reworked the assumptions, crystallized them and made sure to understand where it was coming from. So the main things which was driving our assumptions during the Capital Market Day is obviously the evolution of the wire rod prices and our ability to mitigate the impact. So going from the assumption that we will have a negative FIFO next year if the prices start decreasing in Q4 of this year. We're kind of -- or I'm comfortable to already project a very strong or stabilization of our gross margin percentage. But now we kind of mitigate these risks through other measures. So I mean, you can see that we're still working full stream on optimizing our cost base as this will -- is something which will contribute a bit more. We do think that some of the tailwinds that we have benefited from in some of our specific markets have the potential, if we control them properly, to be a bit more stickier than initially considered. And there is as well an overall feeling -- I mean, when we discuss with the different agencies and companies helping us to identify the prospects for the next coming years, there is a higher level of confidence in the overall demand next year and potentially beyond. So when we combine all these elements, this has given us a better confidence on the external factors. We have a fairly high level of confidence on what is directly on our control. But the cautiousness that we had was really driven by these external factors that were very difficult to read and that we think we have managed to stabilize or somehow mitigate a bit better.

Okay. My final question before I go back into the queue is on the other line. There is -- it has increased to EUR 33 million.

Yes.

I think the run rate in the past was about EUR 25 million. So what is the reason? And should we take this number as sort of run rate going forward? And in the overheads, you point to consultancy fees, et cetera, so -- and incentive program. So what is the reason for the increase there?

Well, I mean, again, it's variance. It's not really a run rate. I think that our run rate is when you look at the overall percentage of overheads on SaaS. So I think that overhead around 8.5% is really what should be our run rate. If you see a negative variance, it's mainly driven by the differences versus some of the one-offs that we had last year in terms of external contribution that were not repeated this year.

Frank Claassen.

Yes. Frank Claassen of Petercam. Also a question coming back on the medium-term guidance, the 9% to 11%. So how should we read it in relation to the FIFO adjustments. So the 9%, is that a sort of new minimum, even if we have some FIFO adjustments maybe next year or the year thereafter? So how is that relationship? That's the first question. Then secondly, what is happening on the competitive environment. Of course, you benefited from some supply chain issues at the local competitors, I think, mainly in LatAm. What is your expectation there? Will they get more wire-ups? And will they come back on the market? And what are you seeing there? That's the second question. And then thirdly, maybe housekeeping CapEx was pretty low, EUR 40 million. What is your current view for CapEx this year and also for the coming years? And then in relation to that, the Vietnamese plant. With the strong demand, are you thinking of quicker ramping up that one? What are your thoughts on that?

Okay. Oswald, do you want to start? Or should I start with the 9%? You're on mute.

I have answered your question, but you didn't hear it. Sorry for that. So maybe I'll start with your last one. Yes, indeed, our CapEx was quite low. This is absolutely -- very clear on this one. And now we will increase the CapEx. I think we have a very clear picture as we have an intention for this year. And there are 2 reasons. The one is -- and this is what our Taoufiq introduced, how we spend the capital. It's about the capital allocation in the recent past or in the past, the way we spend the CapEx was maybe not in the way we would like to see the returns. I think we have now a very strong since, I would say, 1.5 years already, a very strong capital allocation program in place, which really identifies the projects we want to do. We get the return. And I think we are increasing the CapEx. Because on the one side, we need also to feed the growth for the future, but on the other side, to spend it properly. We see a big initiative, for example, with digitization. We are spending a lot to automate our processes to have customer who bought us to really be state-of-the-art and also be interconnected with our customers. When we talk on the Vietnam, I think with Vietnam, it's an absolute was the right decision because it's not in China, that's close on us. But when we look on the capacity that we are ramping up, we are accelerating. In the first phase, it's about 75,000 kilograms, and we are really ramping up in order to make sure that we can get the homologation with our customers. As you know, homologation for tires always it takes a little bit of time. But our customers really request us to have it. And I think when you see this reverse globalization, I think it was quite a logic one to go to Vietnam. We have been a little bit hesitating last year because it was absolutely under different world. If the demand continues, it means they're slow. But when we are seeing in the second half of the year -- in the first -- we're confirming, we are really pushing it upwards, and I think it was very good. Then it's about 50-50, which goes to Asia or we can go to other places of this world. About the -- I think it was one of the medium. Taoufiq, you want to...

No, it was -- you had another question or I can answer it on the competitive environment and some -- the stickiness of some of the tailwinds.

Ah, yes, yes. Okay. We love competition. This is why -- it's the first thing because it keeps us thinking what can we do better, how we can differentiate. Yes, when we see in Latin America, it's absolutely true that there might be other, I would say, opportunities to import from some warehouse. But in this very moment, I think we have a very strong position here. It might go away. But on the other side, we have done a lot with our customer to stay somehow also with us. And I'm not sure, and I think we are close -- we are watching very closely the markets. But I think we have a very solid position there. But of course, competition will be around. And I think we have to face this day by day.

And on your first question, so our ambition is to set the 9% as the new floor. So regardless of what happens with CapEx -- sorry, with FIFO, we want to sustain or to deliver at least 9% level of profitability. The reason why we're saying that, I think that we can benefit from a couple of things, which can help us mitigate the impact from FIFO if it drops dramatically and very quickly. The first one is that we will have -- if this happens next year, we will have a lag between the moment where we start seeing the drop of the raw material prices at the moment where we need or we will need because we're pushed from our customers to start reducing the prices. The other thing is that we believe that some of the trade tensions that we currently see will still generate some tensions on the overall availability of goods, which should help us sustain or at least delay as much as possible the impact from the high level of -- well, the high level of -- the level of pricing that we see currently. So a combination of different factors, which, hopefully, should allow us to navigate during the period where the prices will start dropping. The other thing is that we will also have a very proactive way in terms of managing the downturn, in terms of FIFO. Obviously, it will be driven by the level of inventories that we will have on hand, and we will try to manage proactively this level of inventory to minimize the impact from the negative FIFO whenever it happens.

Okay. That's clear. And why do you now anticipate no more decline of the wire rod prices? While you did anticipate this at the Capital Markets Day, why -- what has changed your view in 2 months' time?

Well, I mean, we're relying on statistics and the negotiations that we're doing with our suppliers. So we typically -- for the big ones, we typically have a negotiation, which allows us to have a 3-month visibility. So we have concluded the latest negotiation which kind of are setting or confirming the pricing level for at least Q3. But overall, when you look at the dynamic by region, we do see some indications that if it's not slowing down, but at least the machine will cool down. And we do think that this will hopefully stabilize the prices. Otherwise, we will just have to live with another increase in FIFO and a higher contribution in Q4. So -- and we cannot complain about that, provided we stick to the very good level of pricing discipline that we have.

Okay. Then I would give the floor to Martijn.

Yes. Martijn den Drijver for ABN AMRO ODDO. My first question is with regards to the balance sheet or the capital structure. You have a net debt-to-EBITDA of 0.7x. Even if CapEx goes up significantly in the second half, you will have significant free cash flow. So since you've changed your medium-term guidance quite rapidly, perhaps you've also changed your opinion on what to do with the free cash flow. Are you still of the opinion that it will be further debt reduction and normal dividend? Or are you now considering share buybacks or a higher dividend payout? And that would be my first question.

Okay. I read your note from this morning, Martijn. So I mean, what I can tell you is that there is a change in the way we're looking at it in the sense that now, I mean, all the scenarios are on the table. I mean, we are not saying we don't want to do share buybacks or things like that. I'm not saying that any decision has been taken. But we have a willingness and openness to discuss it. And typically, we have two type of scenarios. It's whether we say, Okay. We want to maximize the TSR, we will distribute whatever we have, we'll increase dividends, and then we end up with a company similar to what we are today, which is still very difficult to be read by you guys, with cyclicality that we know, with applications which are still somehow perceived as commoditized. It's not completely the reality, but this is the reading that we have. So we have also an agenda where we want to move from that. It doesn't exclude considering a liquidity event. The ideal scenario will be to do a combination of the two. But for us, we have the strong belief that we can return more of the profit if we change the company, if we are able to increase the level of the envelope of dividends that are being distributed and avoiding the very good years or the perception that we are in a very good year. Therefore, we need to do liquidity event. We want to stabilize, I think move out from cyclicality. And this will require investment. It will require investment in terms of innovation. It will require M&A. You say that it's not your preferred solution. It's something that we do think does generate a higher level of value for the shareholders. Having said that, and as I stated earlier, there are no more holy cows, and we are really open with -- to discuss with our Board's different types of solutions to return the profits.

Okay. Just one remark. I'm not objecting against M&A as such, just large acquisitions that would raise the risk profile and extend the product portfolio. But that's just a comment.

Yes. If this can help -- I mean we don't want to do unconsidered things. And I think that we -- I already had the chance to elaborate on how we want to do that. I mean when we presented our strategy, I mean, we identified the markets where we think we can generate higher values. So when we do an acquisition, it will be only something which can take us in the 9% to 11% that we have stated in the interim guidance or higher. We don't want to start doing things where we will bet on future synergies and things unless they are very obvious and then we'll go for it. So we're very mindful of the risks, and we're managing this aspect very carefully.

And to comment and add something, it's about less cyclicality. I think this is also one topic when we go for it, to reduce the risk of cyclicality as well.

And ideally, a business which doesn't generate FIFO anymore.

Yes.

Okay. Thanks for those clarifications. Then the second one, going back to the inventory revaluations. You've provided the number, which is very, very helpful. I hope you continue to do so. Perhaps even take it out of what you call underlying EBIT, so really going to a recurring EBIT. But that's just a side remark. The question is, the number that you've reported in the first half, can you split that out between RR and SWS? And if we think about the second half of the year, I'm not going to ask for an absolute number, you've already given some guidance as to roughly what we can expect. But do you think it will have the same split as it has in the second -- in the first half? That would be my second question.

Sorry, Martijn, I missed the first part of your question. What is the split that you would like me to provide?

Well, in the press release, you've mentioned that the inventory revaluation effect was EUR 56 million.

Yes, yes, yes.

Year-on-year, your effect was EUR 65 million, but it's not split out per division. So I would -- just to give us a rough sense of where...

It's mainly Rubber Reinforcement and steel wire solutions, and it split 50% each. In the rest of the business units, it's irrelevant.

Got it. And you expect the same type of split then, I guess, for the second half whatever it becomes?

Yes. Yes.

Okay. Then coming back on the -- that's the third question. On the competitive environment. You've provided some clarity on Latin America. But if we look specifically at Rubber Reinforcement, Qingdao (sic) [ Xingda ] is probably hampered by COVID-19 lockdowns from its operations in Thailand. BMZ is hampered by the sanction from the EU from its Belarusian operations. I'm not going to ask you how long you're going to benefit from that because you don't have a crystal ball. But do you think that some of that volume, some of that market share that you've gained can be sticky? Or will, once this situation returns to a normal situation, we don't know when, will you lose that volume? And will you lose the benefits of that volume?

Maybe I can take the question regarding Russia, BMZ, I think, Russia, I think BMZ. Even before any sanctions have been in place, Martijn, there was always a request from customer to have a higher share or a big cut. So I think we have -- this is always some -- which is sticking as well, and we are investing in Russia to serve the customers' needs. And this is -- yes, a little -- of course, a little bit of fluctuation with BMZ now and so on. But in general, we have an increasing cut because there are also future customers within Serbia, and we also would then provide, for example, out of Russia, material. So I think that is a part of, of course, a stickier part maybe a bit -- maybe volatile on this one. When we look on China, China is, of course, a competitive environment. It's about early. And what we have done over the last months, I would say, getting a very close relationship to the ones which we see in the second tier -- yes, we call them second tier of our suppliers. And this goes very well. And of course, it's a volume, the volume is, in the moment, a little bit down, but we don't see yet that the price competition starts in this one. There's a lot of ongoing in Xingda, but I think you know this as well as I do, but I don't see that this is somehow, in the moment, a competitive issue. I think it's more something if China will -- it's still, I would say, during COVID time last year, they were not so much affected, let's be honest, as we have been in the rest of world. But I think it's more the question, there's a little bit of a tailing of what we said at the beginning. This is coming back in the fourth quarter already and then will it take longer. I assume that the volumes will be better, I would say, from the fourth quarter in the moment. And I think this is what our fixed -- there was some overproduction. This is now leveling out. This is now balancing out. So this is, for me, the main driver and not the competitive one. It's more the demand which indicates for me that future volume.

Okay, Wim, if you're ready to raise your questions.

Yes. Wim Hoste, KBC Securities. A couple of questions from my side. Maybe on the structural cost improvements first. There was a number of EUR 16 million mentioned in the EBIT bridge that you provided. There is still ongoing initiatives, for example, in ropes, et cetera, consolidation of the North American production footprint. So can you maybe offer a little bit of guidance? What is baked into your full year EBIT guidance or EBIT margin guidance in terms of additional cost improvements? So maybe we'll do the questions one by one. So please feel free to...

Yes. So the improvements that we have or that are still supposed to happen, the ones that you are mentioning, are not expected to kick in, in 2021. We are mostly expecting them in 2022. To give you a rough order of magnitude. So Canada will be generating a recurring saving of roughly EUR 10 million year-on-year. So that's basically a payback of 1 year for the plan that we have triggered there. So apart from the things that we have done in H1, which will start generating some improvement in H2, there is nothing more embedded into our projections for the year.

Okay. Clear. Then second question on BBRG. You mentioned some numbers on the order books. If I noted well, it was 11% increase in A-Cords, Advanced Cords, and 45% in ropes, how fast will that crystallize in additional revenues? Is that something that we should fully start to see flowing through in H2? Or is that going to be spread much more over a bit longer term?

Yes. So we have a lead time typically of 3 months for the projects in BBRG. So there is a very strong expectation that we should see the contribution from this strong order intake, not entirely, but for the big part of it in H2. The oil and gas project might take a bit longer, but it's nice, relatively small part of the overall improvement. But for mining, crane, industrial, fishing and [ meridian ] rope markets, we will see the contribution from this strong order intake in the mix in H2 2021.

Okay. Clear. And then coming back on earlier question with regards to CapEx for the full year. I don't think there was a concrete number mentioned. So I was wondering if you could provide a specific guidance for CapEx on 2021.

EUR 150 million to EUR 170 million.

Okay. That's still unchanged from...

Yes, yes, unchanged.

And then over to Emmanuel.

Yes. A couple of questions. First of all, on the top line guidance. So I think implicitly, you are stating that sales growth will be around 15% in the second half of the year. Could you split that up? And how much will be volumes and how much price/mix?

So we're still aiming at the same kind of profile that we have seen in H1. So with an overall contribution of 30%, which would be volume and 10%, which would be mix, roughly.

Okay. Yes. Then secondly, just coming back on the earlier question on share buybacks. I fully understand your reasoning. The only difficulty I have is that if I do my numbers and I even take the low end of your EBIT margin guidance, the stock is trading at a free cash flow yield of probably around 15% ex working capital. So in the current market, it just does not seem so easy, I think, to find the M&A that is offering the same kind of return dynamics.

Yes. I mean, that's what I keep saying. Unfortunately, we are -- the [ cut ] is the cash machine and we are very strong on that. But I mean, the thing is that we will be -- I mean we still want to deliver a strong EBIT performance and ROCE performance. And we have set very clear targets in terms of contribution for potential targets in M&A, when and if we will do them. So there is no expectation, and I don't think that -- and Oswald, please feel free to comment on that. We will not do anything which will end up diluting any of the performance that we are delivering. And then if we don't find anything, so then your question around the liquidity event becomes more acute and we will have to fully provide you the answer, the timing, the amount on that. We are not there yet. We need first to scrub the market and see what we can do in terms of M&A and then we will reopen the discussion 3 months from now.

And is that something that will take a long time? Because leverage is really getting quite low. I know that some companies are often very patient and having big net cash position, but I've never seen it that big. So is there a level where you would really say, okay, we want to move to have the optimal capital structure?

Well, I think, again, we are reasoning more in terms of timing rather than a reasoning in terms of thresholds and things like that. So I think that we have given to us a very tight schedule to finish our thinking around the M&A. So we're working at it full steam, as we speak. And I think Oswald just came out of a meeting with our Chairman on that today. So I mean, before year-end, we should have a very clear visibility on what we do. And before year-end, we will be able to tell you, okay, what we do with our capital structure.

Allow me to come back on this one, just confirming and building on what Taoufiq has mentioned. We will not do any opportunistic shopping. This is very clear. This sometimes happens maybe in the past, but this is also the way we do it. We have our 3 steps: perform, transform and grow. I think we have done a lot, whatever could do, for example, on the self-help measures, on the cost, on the pricing, this was the performance part. In addition, we have done digitalization, innovation, sustainability, which is more the transformer part. And in parallel, we look now, of course, on the growth part. And here, we are very clear, it can -- whatever we can do, it cannot be dilutive. It has to be something which goes at the same direction, strategic direction we have in here with Bekaert, for example, less cyclicality, more system offering, more solutions offering and not only depending on the variable price development. I just came out, I would say, of the steering committee. And exactly as Taoufiq was mentioning, we will take the next weeks and a few months to really identify and to make up our scenarios. And I think the good thing is we have now, I would say, the opportunity to say, what are the options we have and we didn't have this before. But this is now we have. And maybe there's an indication or a consideration that the best of both worlds maybe it would fit, either or can also be. But I will assume by end of the year, we should have a more clear picture as we are doing an intensive work now to look what are the markets, what are the final end markets, what is the profit pool can have? And what is our ability to win and our rights to play. So this is a very intensive exercise. And I think it's, I would say, quite a strong group is involved to look where Bekaert can be in the future direction.

Yes. Yes. The only issue I still have is that the opportunity on the buyback might be gone by then. And even if you would spend, I don't know, EUR 100 million or something, it's not having a negative impact on your M&A ambitions. But all right. Then another question I have, so you raised the REBIT margin targets shortly after the CMD. I think you have already explained quite a bit why that is. I think one element that you did not discuss yet is that in the long term, you expect to increase profitability from innovations and new products. Is there anything related to the innovation part that has substantially changed over the last 2 to 3 months, like, I don't know, big contract wins or something like that, which also helped you to raise that guidance?

Oswald, you can probably elaborate on what we're doing on innovation. And...

In innovation, we have a very, I would say, a very thoughtful production. We divided our whole innovation approach in 3 engines. And the engines, zero waste, where we really go and say, hey, this is about daily continuous improvement. The supplier wants some amendments on the quality. Hey, let's do it and the customer is happy, for the customer. The second thing is where we go for incremental innovations, which are very clear with the products we are using, the applications there. Let's say, we did the higher tensile side for our steel cord. What we need -- not only -- a steel rope, we did also made a synthetic rope. This is what we see for example, in [ BBG. ] And there's another part, which we are looking at and this engine tool. An engine tool, this is where we really started to say, hey, when we look on the future, what are the mega trends? This is smart. This is connectivity. There are a lot of things, and I always have a little bit of a vision of a smart wire, which allows us to capture data and get out of information, provide a service to this one. So by doing that, we have also hired a new CITO and just -- her signature was done last Friday, and she will start in the mid of August and here, we come up with a different level of innovation. We want to have a clear -- have a clear road map that we say in the next 5 years, we need to renew our portfolio or provide additional innovative product solution about 20%. So there's a clear task, that we need -- otherwise, it can be compensated or a bit jeopardized. We have a clear road map and to look at all the business units in all the product portfolio, and we do have a clear portfolio management of the innovative products we want to provide. And here we have established, I would say, it's just you're asking on the very like, day, even, a new organization, how we drive this in the future. And there's also more investment foreseen and also the way how we do innovative -- innovation is also handled in a different way, and this is also kept by the capital allocation. You know that we invest in the right topics which have vetted behind and very strict portal management.

But nothing has really materially changed with respect to product innovations. It's not like you made a major breakthrough or you have a very big customer that is ordering one of your new products, which is making you more confident on the mid-term profitability?

We have common developments with customers, but I can't display them, but this is a lot when we have some special adhesions, special performance. Yes, we have this, this is ongoing, I would say. This is a continuous start what we have today. And we are reinforcing that because we see it from the customers' demand, all the sustainability topics. They require different logic for the innovation. And here, we see a lot of requests coming from the customer, hey, what can we do together? We are also discussing, for example, with our suppliers about the green steel opportunities, all the sustainability that we stipulate in there significantly.

Yes. Okay. And then my final question is just a housekeeping question. The cash tax rates, cash interest rates, working capital to sales, I think all these metrics came in better than what I expected. I think you only have a guidance on working capital to sales, which is that it will be around 17%, if I remember well. Is that still sticky? Or has that changed? And could you give some guidance on cash interest, cash taxes for this year and next year?

Well, in terms of working capital, so we're aiming at least performing at the level of last year in percentage of sales, so slightly above 16%. In terms of the cash taxes expected on a full year basis, we will be trending around EUR 100 million. And cash interest is expected to be around EUR 30 million, 3-0.

Yes, the cash tax rate? I have to make the...

The amount -- yes. I need to -- we need to come back to you with the rate. But the tax -- sorry, the taxes would be -- our guidance is 27% versus 26.5% where we are now.

Then I would give the floor back to Stijn because, Stijn, I think you have some additional questions.

Yes. Yes, a few follow-ups, if I may. The first one is on the impact of wire rods in the price/mix effect in Rubber and in Steel Wire Solutions. So in Rubber, you had 12% combined price/mix effect and in Steel Wire, you had 18%. Can you split out the impact of higher wire rod prices on these -- on the -- for these 2 divisions in the sales bridge?

Yes. So for Rubber Reinforcement, the wire rod and the price/mix is roughly 12.4% on the top line. That's for Rubber Reinforcement. And I need to -- I don't have the figure for Steel Wire Solutions, but we might come back to you on this one.

Yes. But for steel wire, it's 18%. And for Rubber, it's 12%, but there's obviously different movements here, but I will check with IR after the call. A second follow-up is on BBRG. If I'm right, if I remind right, last year, you had some one-offs, some one-off contracts at high margin in the first half which didn't repeat itself in the second half. Do you see the same pattern this year or do you think that's sort of the first half that we saw this year should extend into the second half?

Yes. I do think that there is an obvious pattern when it comes to the timing where you capture the good contracts. Unfortunately, I mean, there's no seasonality or campaigns which can trigger that. So it's very hard to tell you that in H2 we'll be higher or lower. What we can say is related to what I have stated earlier, the order book is very strong. It's an order book with a good level of margin. So we should not expect and we are not expecting profitability dilution for the second half of the year, like what we have seen in 2020.

Yes, related to that and also touching upon the M&A question, if you would venture in these kind of businesses, which are more product -- project-driven, hence, more lumpy, more volatile, than you would sort of exchange FIFO impact for more volatility and lumpiness in this business. So yes, can you share your view?

I mean, I'm not -- I don't completely agree with your statement because I mean, let's assume the theoretical case where we go indeed for more contract-driven type of business. I mean, this contract are contractually driven, and the performance is mostly related to how well or how bad we execute. It doesn't generate a volatility in itself because most of the parameters are set contractually. I mean, you will have a price escalation formulas, you have back-to-back type of contractual setup with your suppliers and things like that. So it's not meant to generate -- once you capture them, it's not meant to generate a high level of fluctuation once you get them in portfolio. What drives typically the volatility on this type of project is the availability of funding or not. And somehow, it's also correlated to the patterns that we see in a typical steel type of business which is more driven by the demand. So as far as I'm concerned, and typically, I mean, if we refer to services contracts, I mean it's something that will lock for a long period of time. It gives you a horizon of visibility. You have a better control on your prices and your cost. So we do see more benefits in this type of businesses than the transaction business that might have now.

Okay. My final question, maybe a bit of a sensitive one, but I'm sensing there is a bit of a conflicting view on the capital allocation matter between management and the Board. Is this correct? And can you share some light on the discussion that is taking place on this matter?

Yes. No, I don't think that there is a conflict. And I'm completely transparent this year and probably, Oswald, you can also confirm that. I think that we are reaching a very aligned point of view now. There was indeed a cautiousness around this kind of subject because of our level of leverage and so on. Now that this burden is fading out, I think that we discuss more openly these questions. And I think that we do see an alignment. I mean, we want to give a drive to our strategic plan, transformation, innovation, inorganic growth. And again, as I said, there are no holy cows, and everything has been discussed and is on the table. And probably, Oswald, you can confront that question, what is it on your side.

I don't know how it was before. I don't know if this old times or what. We can say that I've spent the last 2 days, with also Taoufiq and the Board, there's a very open discussion and, I would say, very constructive. And the management, we, in the BGS, as we call ourselves, we have made a proposal on the [indiscernible], if we would like to proceed and we have. Absolutely, there's no -- Taoufiq is right, there is no holy cow, very open, very trustful. And I think, I feel, honestly, full support that we would like to do because the desire to move Bekaert on to support our journey. I always feel very much supported. This is where we have in the evening, we talk specific topics, it is very open. I don't see anything -- what you might see as sensitive. Not at all.

And as well on the share buyback subjects and things like that, I mean, we discussed it actually. It was yesterday or today -- it's really, as I said, something that we definitely have on the table, and we are completely aligned on the subject.

Okay. Something that I noticed is that in the midterm guidance, you didn't repeat the leverage target of below 1.5. Is that deliberate?

Well, I mean -- yes, it is deliberate. I mean it's very difficult to tell you exactly, okay, this is the leverage that we will be targeting because is it with or without acquisition, is it with or without a liquidity event. So that's why I think that now what we're aiming at is we're saying, okay, we will be below 1. Long term, I mean, we might have to do some tactical acquisition. That will not be part of strategic plan that we want to have. But I would not look at it as something which is firm and fixed. It will evolve along the way. And the level that we're guiding for is a medium type of -- middle type of guidance that we are considering.

But you don't guide at any level anymore? It could be 2.5.

Well, I mean it can be 2.5, but if we do 2.5, I mean, we will also be guiding on higher level of sales, which we are not doing. And 2.5 will happen only when we will have the full reflection of the proceeds coming from potential M&A. There are no underlying business reasons which should take the leverage that we see at 2.5 without additional investments in M&A.

Martijn, you have additional questions?

Yes, I do. Two questions on further optimization programs. Could you share with us your thoughts on combustion and possibly moving production from the Netherlands to Eastern Europe and how far you are, if that is the case, with developments of such a plan and how a time line would look like? And a similar question on ropes. You've done the restructuring, the reorganization of North America. But it's still -- there's still quite a number of production facilities across the globe, which is unlike, for example, we see in building products. So can you share with us what your thoughts are on the optimization within ropes? And then my third question is on the GV/associates in Brazil. Obviously, if you grow 50% in a year in the first 6 months, you must have been taking market share. So can you share your thoughts on how sticky that is? If those margins are equal or higher than they are for RR and SWS, should we then take into account a similar uptick in cash dividends to Bekaert? So similar to the uptick in earnings? Those were actually it.

I think I'll get started, and I thank your compliment. For BCT or combustion, it was a little bit our, let's say, it's a small business, not such a big business like high, always close or above EUR 80 million, 90 million. But nevertheless, it was about it, we say, what can we do out of this business? It was a turnaround case. A very small case, but nice turnaround place. And I think what we did, we had a plan, the plan, you have been -- I would say, us, that's in place. And the turnaround goes very well, and this includes also the shift production from us into Romania. We have been a little bit delayed with COVID, people could not travel, the training couldn't take place, et cetera. And the second thing is what we do there is really, I would say, an operational turnaround, yes? And the other thing is what we do is all with customers. We do much more whole development. Is the customer like Bosch? Is the customer like [indiscernible]? All this on the combustion business. The key question may you have in mind, Martijn, later on what to do with that? I would assume, if I would be you, what are you doing next? And I'm very frank on this one. I think they are good -- after the turnaround, it would not dilute our business and what we expect on the guidance. Absolutely not anymore. We have here hired a guy, a fantastic guy, and he is even advancing his plan and we are very proud of it. Because sometimes, these things get a little bit off sight for him because he's not big. But I think we have a very strong focus on this one. And then of course, we look, is there maybe a strategic investor or can we do something with this one? Because the margin get really good and the focus is there, the management is there, the closeness to the customer is there, and the operations, I would say, are really fixed. And this is very much also depending on the markets. What is the product offering in which market? We have in North America, only a special market we pursue. In China, we had also to do a footprint relocation. This was a fully underutilized operations we had and we combined it with an existing production place and when you look at the size, this was [indiscernible]. So this is the things which are really sticking and going well on this one. I think the second question you had, on ropes, yes? And I think this is the same -- we would question, I would say, quite frequently everything. And I think to do this in Canada, to consolidate, to close, it was absolutely true. It was the best thing we could do. And this is why I think it was -- but the volumes, we have to allocate. We get another volume, I will say a part is in the U.S. now, and a part is also in [indiscernible]. I think there's a lot ongoing in U.K., also very successful. It is supposed to fulfill the profit restoration plan already going in and will kick in. I have to ask Taoufiq about when and to what extent. I think Canada will kick in maybe in the beginning of next year and not ending more in the second half of the year. But others are already -- and these are included here, but we continue. But it's also depending on the project. BBRG is also the project business. And what we see, a trend which might be positive and not yet fully evaluated, is the bridges. I'm in Germany. When you look in Germany -- in other countries, the bridges are really, I would say, where I think the infrastructure will need to put some stimulus in, the government. The bridges are -- so this is what we are evaluating, is there more in this, and we have -- the Leverkusen Bridge,for example, is the one we received. So I think it's project business. And this is -- we have to understand what is the fund, what is the lead -- what are the leads in this project business. But everything is somehow always on the radar, and we do it just by step by step.

And on your question, Martijn, on the Brazilian GVs. I mean, first of all, from the technical standpoint, I mean, yes, I mean, the royalties we receive will follow the level of performance that we delivered there. As far as what is driving this level of performance, I think that it is very much subject to the same type of tailwinds that we see in the rest of Latin America. I mean you have obviously the FX situation. So the Brazilian real has significantly devaluated. So the Chinese imports and so on. We did see a [ 75 ] sales growth both for Rubber Reinforcement and Steel Wire Solutions for the first half. We do expect this to continue. Can it be translated into gaining market share? I think that part of it, yes, because I mean, 6 months without the competition or with lower competition does create a higher level of intimacy that we can translate into incremental market share. But that would be, in summary, the type of dynamics that we see currently in Brazil.

And was my remark on margins spot on in terms of does the -- do the Brazilian margins -- are they similar to what we see in your own operations? Or how should we view that?

I will have to check this one. I don't have the answer for you. We can get back to you.

Okay. And if there are no more questions, then I hand it back to Oswald.

Yes, there's nothing much to say at the end, just a big thank you for your participation, for the questions you have raised and I think it was very -- a good interactive discussion. Thank you for that. I do understand vacation's in front of the door of many of us or some of us, at least, so I wish you a good summer season. I think there will be, after the summer break, investor relations meetings anyway to be continued. But I think in November latest, I hope we have the chance to see you all again, safe and healthy. And thank you very much for joining us in today.

Thank you.

Thank you, all the best.

Thank you very much.