Rockwool A/S (ROCKB) Earnings Call Transcript & Summary

Good day to everyone. Welcome to the ROCKWOOL A/S conference call regarding the results for the first quarter of 2023. My name is Thomas Harder, I'm Director of Group Treasury and Investor Relations of ROCKWOOL A/S. Today, I'm pleased to present CEO, Jens Birgersson; and CFO, Kim Junge Andersen. [Operator Instructions] As a reminder, this conference call is being recorded. First, Jens Birgersson will go through our presentation and give you an update on the results for the first quarter of 2023. Afterwards, we'll be ready to answer all your good questions. Before I hand over the words to Jens Birgersson. I must ask you to notice Slide #2, which is the forward-looking statement. Please be aware that this presentation contains uncertainties. Now we can go to the next slide, which is Slide #3. Jens Birgersson, I will now hand over the words to you.

Good morning, everyone. I'll try again with the mic on. If we look at the last quarter, we are obviously not satisfied with how the market developed in several segments. We predicted it, and I will come back to some of the capacity adaptions we have done. So it was as we expected. But what we are quite satisfied with is how we have now recovered margins after the price increases that we did last year. We have seen in the quarter that we have gotten a balance up all the way from the contribution margin and down to the EBIT margin. So that's positive. Let's go to the next slide. Looking into our 2 different businesses and how the top line developed. Last year, Q1 was an incredibly high comparable. In terms of production, it's one of the best production quarters we have had in the history of ROCKWOOL, and we were a little bit surprised by how strong Q1 was last year. So if we compare the sales versus that benchmark, 7% is not too bad because that's almost on par with the year before 2021. That was more of a normal quarter. If we compare the businesses, the Insulation business and the System division business, we see that we reached a slight growth. Plus 4% on Systems division, and that was mainly driven by Grodan -- mainly driven by Rockfon that overall had a very good quarter. Also some of the Grodan businesses had a good quarter, and the other System division businesses had a little bit tougher times. On the Insulation business, apart from North America, parts of Asia, we basically saw a decline in most markets. There were exceptions. But generally, it was a little bit slow quarter declining quarter. Move to the next slide. Regional Development on Slide 5. In Western Europe, to our surprise a little bit, United Kingdom came up and started to grow again. So mid last year or third quarter, we saw the U.K. market slowed down quite a lot, and I don't know if it's the Sunak effect or what precisely caused it. But then when we entered this year, the market recovered, and we actually ended up in a situation where we have taken down a little bit too much capacity. So we delivered everything we produced in Q1, but we have seen a market that is back in growth territory. I think the big reason or one of the reasons for that is that noncombustible insulation is very sought after now in the U.K. and that the market is really shifting over. We also saw single-digit growth in France and in Spain, even double-digit growth. If you look at the rest of Europe, you basically saw weaker top line than the previous year. Eastern Europe and also some of the Nordic markets, if you take Denmark and Sweden, where you have quite a high content of residential in our top line, there, we saw a quite a dramatic decline. We are quite used to that in Eastern Europe. When it booms, it booms. So when it goes the other way, it stops very quickly, and it was quite broad-based in those markets. North America U.S. double-digit growth. Canada, good growth. Some markets in Asia, good growth. China is moderately growing, but I just want to remind you that less than 1% of our business is in China. So it doesn't have a big effect on us. So what happened actually in these markets? If we look at building permits, new building starts et cetera, it's all down quite low. You see a big decline in building permits in Germany. And also building starts the same pattern in, for example, Denmark, where residential construction, single-family houses has come to down to very low levels, and we feel that. On the more industrial side, it varies per market, but there are a fair amount of canceled or postponed projects. And for example, in Poland, the project pipeline has probably halved in Q1. Again, that could change as we move into the year. But generally, I think the interest rate and the cost increases in building materials have started to impact the market. Let's go to Slide 6, profitability. We had the goal last year to kind of bridge the gap and get back to healthy contribution margins. We have taken a number of steps to do that. We still have inflation. So Q1 versus Q1, we have on average per unit produced higher cost than before, but now the prices have catched up. We only did very moderate price increases in Q1, and that is an aggregate of the whole world. So there were many markets where we didn't increase prices at all. And then we had like North America, some places in Asia and the U.K., where the prices continue up. But overall, flat or a little bit increase in prices. But market by market, segment by segment, we have adjusted a fair amount. Looking at another contributor, we have reset the business. Our goal is to maintain market share but to adapt the business to the current market size. So if you compare quarter-to-quarter, you cannot see that in our press release because we show kind of our own contracted workers that we have on permanent contracts in our report. You see a reduction of about 230 jobs quarter-to-quarter there. But the real picture is that we have adjusted with about 800 jobs compared to Q1 last year, but we were on record output till now. And that, as we have explained a couple of times, is because we have a high proportion of contingent workers with short-term contracts so that we can ramp up production, in line with the season and also like we had to do now to draw down capacity. So basically, we have reduced the manpower roughly the same percentage as top line decline. So that has been done. And that safeguard that we didn't sit with too much under-absorption where we may have a lower revenue. Move on to Slide 7. I guess the interesting aspect here is the margin. Again, if you look at the diagram that the Insulation has come back up in double-digit margin, where we want it after a few quarters, where we've been below 10%. And also the System division has recovered. So that's good. And it's, as I said, a combination of pricing and that the energy costs are down, I mean that we have an overall better price balance. Investments, we continue with the green investments and thus continuing. We are still stuck a little bit with the project in France, and just to explain how that -- how I expect that to play out. We haven't started to break ground. The status today is that we have an approved operating and environmental permit that is -- comes from the state. And we have, in a way, an approved building permit that is local. But the building permit has a provision in it where it says that we need an approval to build on a site, that we need an endangered species approval. The industrial area where we are building doesn't require that, but there is a dispute between the state and an NGO that we are not involved with, but they argue that the industrial area should require endangered species authorization. This is quite common in France, so this has happened. And over the next 2 months, we expect that that will be resolved and that the state will win that legal dispute because industrial areas normally don't have this. And this an industrial area, and what has been built before didn't need it. Once that is cleared, the last obstacle in the building permit can also be cleared. And then towards the autumn, we should start construction. So that's the status of France. Free cash flow, Slide 9, Normally, we build seasonal stock this time of the year. Last year, we didn't really manage that because we sold it all because we had such a high demand, and that is the main reason why you see an improvement here in the cash flow in Q1 last year versus this year. But as expected in Q1, when we build seasonal stock, we do draw some -- we tie up some cash in inventory. That's the main reason. Going to the outlook. Top line, very dynamic construction market. We have seen, for example, Etex in Germany start to grow, so external wall insulation, due to subsidies. But overall, we see quite depressed construction market in Europe. We haven't seen many signs of that energy efficiency stimulus and other measures take effect, and we have reflected that in our top line guidance that up to 10% top line decline. That's the best we can say today. Obviously, we -- this is quite different in different countries. U.S., for example, is looking to have a very good year. But again, we have seen the bank challenges now lately in the U.S. Will that come back and impact the economy to a wider extent? I was in the U.S. earlier this week, and the signals I pick up is that it's not going to impact the economy to a big extent in the U.S. And if that's the case, we believe that we could have a very good year in the U.S. Asia, we have seen some signs of China working up, but maybe not as quickly as we expected. So we had a couple of good months, so now it's down again. So it's -- we don't see the broad-based improvement, at least not in our business. Investments we have left unchanged. And then on the EBIT, we have guided reflecting that there are risks in the market, and we have also included EUR 27 million deduction in EBIT for the Ukraine -- our donation to the Ukraine reconstruction funds. So that's in there. Here in the autumn, we have some uncertainties on energy pricing, how the business cycle would go. It could be better than that if the market holds up or improve slightly. And as usual, our goal is to be in the double-digit EBIT margin area. But we, simply at this stage, don't have visibility into Q3 and Q4. And therefore, we have guided around 10%, but our goal is clearly to be in the double-digit territory. With that, I hand over for questions.

[Operator Instructions] We do have a question from Brijesh Siya with HSBC.

So I'll go one by one. So the first one is on guidance. We have seen the volume, if you can confirm what it was in Q1, and my calculation is it was a 30% decline. So if you take that volume as an indication and given that it's going to -- you are talking about market hasn't improved as such, how does that impact your guidance in terms of margin with pricing? If you can just give a little more comment about how the pricing is evolving. So in a nutshell, if you can wrap it up in what really the 13.5% margin you have done in Q1, what all the variables you see to be deteriorating as we go to reach your 10% target?

Was that your only question? Or do you want me to answer that?

Yes, if you can answer that.

Okay, okay. No, I -- first of all, the last year in terms of volume, we had unusually high volume in Q1 as a percentage of the full year. So the volume decline will kind of improve over the year if the market doesn't deteriorate because we had a very unusual comparable in Q1. We should be catching up to that. And towards the end of the year, we might even get into growth territory because we had a relatively weak Q4. And then it will be a timing issue, how long will this be, will it get worse or not. But statistically, we have historically seen about 18 months of this, but there are so many things that are unusual there. So I don't know if that data is worth anything. On the price, how we reason is fundamentally inflation. Inflation is still there. So even though our input cost in Q4 clearly per unit or per unit we purchase of everything, and then we go buy in [indiscernible] electricity, fleece, melt raw material, natural gas, pallets, P/E films , other consumables, metals, you name it. Compared to Q4, many -- most things have improved. But compared to last year Q1, it's still higher, not on the energy types. On energy, many of those have started to come down but -- and stabilized. But overall, it's double-digit up more expensive. So our ambition going forward is as we see inflation develop , we want to keep that balance. But at the same time, if with a lower market activity we need to defend market volume, we have allowed a bit of room for that. And then depending on where it plays out, it's very hard to discuss the number for the whole business because the way the business looks now, for example, North America looks strong, and inflation although it's a little bit lower, we never had the big energy price surge here. But even though inflation looks to be maybe 1% lower than last year, it continues up. So we have already raised prices more in the U.S., and we have good volume. U.K., we see a similar pattern. Nothing is really getting cheaper in the U.K. So it's a mix of things. So it depends a little bit how the different market plays out. So one should be careful to talk about the price for the overall business. But I would say we are ready to lower prices in the segments where it's needed to make sure we secure our market share. But at the core of the business, we have cut output to a level where we believe that kind of hits a constant market share. So we have not been sitting on extra capacity that we don't think it's needed and try to push it into the market. We have made capacity adaptations, and those are the roughly 800 fewer jobs in the business compared to a year. So I think we have a year where you need a lot of management attention to balance cost versus price versus market share and then get the capacity right, and you navigate. And we're going to do this by market, by country, by segment. So it's all hands on deck out in the businesses to do that. On the other hand, if I look at the challenge we had last year, where in Q3, I think we dipped down to 6% or 7% EBIT margin, if I look at the challenge we had last year to deliver sound profitability, the challenge was, in my mind, a lot bigger because there, if we would have made a mistake, we would have gone into a loss, if we didn't increase prices last year to 30%. This year is more adaption being on top of the market, each segment, and be very alert to the situation. Next question, Brijesh.

The next one is on your pricing comments you made. Have you seen any prices already falling? Or is just your expectation that things could probably [indiscernible] into second half?

Yes, it's a mixed bag of things. So now we have had, for example, very good success in large projects in Q1. There were fewer projects around, but the really large project we have successful, we have gotten almost all of them, and pricing was a bit lower. But since inflation was lower, the project pricing, it makes sense. So price is lower because inflation and costs are lower and these are big projects. And then in the mid-segment, if you go, for example, into Poland, Eastern Europe, there you have the seen prices. And we have not taken so many projects in those segments, and we are assessing the situation now. You can clearly see the pricing on EPS, when EPS competing with us or peer competing with us. Maybe less of an issue there, but prices have gone down in the market quite a lot. So it varies by segment. But Eastern Europe, for sure, we have seen it. And there are also other markets for certain segments where pricing has been lowered and with a certain logic because energy prices is down, and we have a slightly different cost structure. So yes, we see prices go down in Q1 due to the mix of countries we had. We see prices stable or slightly up in aggregate, but there are several places and segments where prices are down.

And we will take our next question from Casper Blom with Danske Bank.

I'd actually like to stick a little bit to the price discussion here. And you mentioned that, Jens , you have seen certain areas where the prices were down significantly. We also see that your local currency growth was hit much harder in Eastern Europe and Russia. And if we start seeing that revenue decline spread into Western Europe, where, as you also mentioned, that building permits are down quite significantly, could we not start seeing prices coming down there? And if volumes are really hit hard a potential price war, if you sort of -- your thoughts on that discussion would be really interesting.

Yes. I don't think -- did I say prices come down significantly?

I think you said EPS price is down quite a lot.

Yes. So they're segments. So first of all, we have a number of segments, and then we have different competitive positions. So I think -- we don't see it as a good strategy to start to price for in a declining market, right? We have taken the approach. First of all, System division -- System business can export from one factory into several markets and in a way that hedges a bit. But on the insulation business, it's local for local. So our approach has clearly been and is, cut the capacity to the market size and then work within that, and lower the price where you need to secure your volume. But you compete with different things in different markets. And what we see is there are also some segments growing like Etex in Germany, which is big segment. And the EBIT, we don't see the same situation. So it's not like insulation -- all insulation. It's different segment, different competition. And it's going to be a lot tougher in segments where we might be competing on a facade stone-wool against EPS and the customer doesn't care about fire properties. That's going to be tough, and we probably can't go all the way there to secure. We might lose a little bit and then we secure a little bit more share in another segment. So I don't see with the setup we have or our approach to business that in any way, we would like to pursue a price war. But I don't want to sit and just accept that others fill their factories, and we just sit there and we do all the capacity adaptions in the market. We -- I want to have our fair share to be clear on that, right? So it's a balance between how tough you are and et cetera, and every market has a different dynamic. And also a fair amount of markets are out of all of this, we don't have the issue. That's about as much as I can say. Otherwise, we need to sit and go into each market, and I don't really do that normally. So yes. But I can say one thing. Eastern Europe, we have seen it before. I mean you remember years where we have had 1 quarter where the volume goes away. It's a different dynamic in Eastern Europe. We see product pricing go down very quickly. When that happens, small contractors are bidding for medium-sized project, and it is a different dynamics of that market compared to the French market. It's just different.

Okay. Just a follow-up then. I think the previous analyst on the call mentioned a volume decline of 30% in Q1. Is that a number that you can confirm?

I -- as you know, I never confirm volume and price. We don't do that breakdown of volume, price/mix that some companies do because we feel it's competitive, sensitive information. But I can confirm that versus the very, very high volume Q1 we had last year, it was, in many respects, a record because of a low season quarter and super strong volumes and a higher proportion. We are down double digit on volumes just to be clear on that, but I won't go into any details on exactly how much it is. But the comparable, as we move forward on volumes, will be improving. So we had a relatively strong first half year last year compared to the second half year because the year was almost 2 different market conditions, a very strong first half year and a quite challenging second half year in terms of market volumes. If you look at last year from a market share perspective, we came out of that about flat market share. Yes.

And we will take our next question from Claus Almer with Nordea.

Also a few questions from my side, and sorry about going back to these market shares and your strategy. But in the report, you're writing you want to safeguard market shares, and that always looks good. But to what extent are you sticking to that statement if as asked if the Eastern European decline will spread to other markets? Is it actually more important to get the market share than staying away and moving also more stable pricing environment? That will be the first question.

Yes. So what's important, market share or price? Is that the question? Yes. And you never have that answer for a whole business. So obviously, there could be segments where you don't really care. You don't want to race down to the bottom. You lose a few projects. And when the business comes up, you have it back. On the other hand, there are businesses where if you let a competitor in, they never go away, and there you might go very hard on it. So it all depends on the segment and your position. And then you have segments where you talk about noncombustible materials, but your competition is other stone wool players and there you have different competitive dynamics. I should also say that market share, there isn't like a master report where you see the market perfect. We have a good feeling for it. So you navigate this, and then you make sure that the overall works out about right. And that probably means they're a little bit up and down compared to last year in almost every segment, some segments being much tougher. It doesn't make sense to hold them if you have 52 EPS competitors in a segment, you might not want to fight so hard there. And in another place, you want to fight. So I'm not -- I don't see it as -- as I said last year, to me, was a much bigger challenge. This requires many, many local decisions and to stay close to the customers. And our team is quite good at that, but it's not easy when volumes go down, but I feel confident that we're going to navigate that. One comment, Claus, on the spreading, Eastern European spreading to Western Europe. Remember, our factories and the nature of our product is the factory that sits in Eastern Europe doesn't really sell to France or the U.K. So it's not a normal mechanism. You end up with a lower capacity in a factory in Eastern Europe and now you're going to sell stone wool from [indiscernible] to Paris. It's too far. So it's a slightly different dynamics compared to if you have European-focused factories in the business, where now the market here is not nice, so then you go further away, and everyone ships a business. It's a bit self-regulating due to the very bulky nature of the goods in the insulation business.

Sure [indiscernible] about the whole market picture, but I hear what you're saying. You mentioned, Jens, that U.S. has had a double-digit growth in Q1, and you also expect this year could actually be a good year. Can you separate, let's call it, your current market from the old factory and how much growth is coming from the new factory? So in the old factory, is that also seeing a material volume decline? Or is it actually across the U.S., you're seeing solid growth?

Yes. So that just recap what had happened. So I go back to kind of the last 2 quarters' comments on North America. So what we saw in Q3 and Q4 was a U.S. and a slightly delayed also Canada that went into quite a big volume decline. I mean we're talking 40% drop down in volumes. And that happened last autumn. And we went month-to-month, we took down capacity. It didn't impact pricing in the market because the inflation was still there. And people think our take was this looks like we have, at least, the construction market recession because permits and all the rest was down. We saw the quite brutal interest rate hikes, and people worried. So we thought, okay, U.S. will go into recession. That was our prediction. When we now look at it, I don't think U.S. have recovered in every respect, but at least our business jumped up to the level we have before that decline. So we went down in capacity and then now in the beginning of this year jumped up again, and now we are busy ramping up even more capacity. We have double-digit growth in the U.S. So that's nice. Yes, we see these banks break. But I met a policymaker in the U.S. last week. And she said, "Well, when you do something like that with the interest rates, something will break. It's not a problem that a couple of banks break. That's a small price to pay and be sorted out." Those were her words. And we certainly see it in the business. So what we say now is we might not understand perfectly how all that works. But last week, I think people are -- when I was in the U.S. on this week and last week that people are cautious but slightly more optimistic and believe that it might not be a record year but a sound business going on, and that they kind of avoided the recession. But again, this can change in a minute, but that's what we see. And we haven't seen that just for a month or 2, we have seen it since it started, and it looks to hold at this stage. So that's where we stand.

And remember that you talked about destocking in last year. But maybe coming back to the first factory you have both, I guess, in Canada and U.S.

Yes, the factories, yes, that is quite simple. You have the Eastern Seaboard. We have good loading. We balanced the factories and optimized logistics. That's basically how we do this. So the Toronto factories, the new factory. The new factory is, obviously, excellently located to cover a lot of areas. So we have pretty good loading on all of them, and the new factory is up and running. The old -- the semi old or the newest factory in the south is running quite well, and the old factories in the north are running well. So it's -- we kind of spread out the load. They're all running fine, and we still have capacity left to grow. And that is always a challenge in the U.S. that we must never run into full capacity in the U.S. So we can't let the graph market grow. So we will just keep expanding, but it's looking good at this moment. But again, anything can happen in a moment. But the fundamentals looks much better than, say, 5 months back.

That makes sense. And then just the last question. The production or the revenue you did in Q1, those products you were selling, how was the input cost? Was that hedged at a higher or lower level? Is that the same cost base next year in Q2?

Yes. So you're talking about the input cost, right?

Yes.

So we don't hedge an awful lot, but we have secured a bit of gas. We have a mechanism of coke that goes like 3 months at a time. We had started to make deals on electricity. We made a 2-year deal in France. We have made a deal in Norway since we consumed a lot for the electrical melters. So we have secured good electricity pricing in France and Norway. So it's kind of a mixed of things. But the fact is still that the cost level per unit produced, I mean, if I equalize them to the same output, then the cost in Q1 is lower than Q4 because the energy is better, but the creeping inflation on most other materials are there. So we are still double-digit up from Q1 a year back. And I don't see that pallets and P/E films and these things will matter we just drop now. That's not what we expect. We believe that all the -- and salaries, of course, the new salary increase is bigger than we had the previous year. So that keeps rolling underneath even though if you look at the inflation curves, both the base inflation in North America and Europe has improved a little bit, but it's still there, still there.

And we will take our next question from Kristian Johansen with SEB.

So my first question is on your margin guidance. So to get to the 10% EBIT margin, are you assuming the contribution margin to go down versus the Q1 though?

Yes. We have this guidance, I would say, to say around 10%. We clearly want to be above 10%. And we have made some allowances in to that guidance for price reductions. We have made some allowances for that energy could jump up again, and we miss a little bit in the pricing because the difference -- I mean we did an effective job last year, even though our Q3 was a harder quarter in terms of margin. But we got the price right. So here, we factored in a little bit that if the energy pricing, gas, et cetera, even though we hedged a little bit more would come up. And the volumes in the market are -- if something drastic happen, it would be a bit more tricky to pass on the prices quickly, and we have lead times. So we factored in a couple of bad news like that, and when we landed on this. But our ambition for the year is that we want to, of course, stay on the same gross margin or contribution margin, whichever one of you look, and keep it sound on that level. Then also you have the other aspect that if volumes -- at the moment, we have the 800 jobs out. That is an adoption of primarily production resources. We haven't touched the white-collar employees. And then you could say you don't do your homework, but we are slow on that here because we see that if the market comes back, I mean the relatively challenging -- it's challenging to hire people at this stage. That might change. We have been a little bit slower on that. And there we should also say that if we need to go into capacity adjustments, reach deeper into the manufacturing or deeper into the white collar, that would also cost a little bit of money. So we will factor a few of these things in on the negative side, But -- and everything has that uncertainty. So that's the reason. But the goal is to maintain contribution margins straight through and have a sound business on that level, but we allowed ourselves to fail a little bit in case it would be needed.

And then my second question, you gave an update on the new factory in France. Obviously, this had -- project has been delayed quite a bit. And in one of your other comments, you also talked about you can't just ship from your Eastern European factories to France. So how big a problem is this delay in France? Because obviously, you also report continued growth in France. So if renovation really picks up in France, are we at risk of seeing you run out of capacity with this delay if you think about that?

Yes. So first of all, my observation is when you look at expanding -- we talk in Europe about bringing back manufacturing from China, put in region for region, have more robust supply chains. And then you run into these type of things, where it's very likely that you build a factory like in [ Radisson ] in the U.S. now, straight through those products. People walked into the supermarket in the Red Rockwool jackets and caps, and we never got a negative comments, but there was a lot of noise all the time. Here, we have noise. We have NGOs against the state because you have this culture that there is always going to be some one protesting, and that's frustrating. So, and we can think about that. If we -- to meet the climate cost, we're going to need many factories more in Europe. And it seems that, at the moment at least, every time we build outside an existing brownfield, we have this protest. And In terms of problem for the business, due to the -- if this downturn wouldn't have come, then this would have been a problem for us, right? Because that -- those terms are missing on that delay, we won't have been selling them. If we would have had another growth year, where we grow 10%, 20% of volume, so that's tough. But at the moment, with the market decline and the improvements we make on other factories, we have started the Romania project, we have some other projects we do to increase output, we should be fine. But it's based on that we basically can start to break ground here early autumn. So it's not a big problem now, but we really need to get going here in the autumn with this project. Otherwise, we need to, I think, consider a different plan, and we have already land prepared in other places. And then we need to build something else in Europe or accelerate one of the other products we have in the pipeline. But when I look at it, it's an attempt by an NGO to put the requirement on an industrial sound area to need an authorization for endangered species. Clearly is this is just a flat field. There are no endangered species there. We have checked. But if you get to that point, you're going to be entangled in bureaucracy. And an approval takes years, and this site is not right. But when I look at it, there are already industrial activities on this site in this area that didn't need this authorization, and the state argue that it's not needed. So I'm quite hopeful that this will work out. What we may be underestimated in this is that the French legal system probably have been impacted by Corona a little bit, but it doesn't have very fast response times. Some countries, you have a certain number of days to respond to something. Here, we have found that many things have taken a lot longer. Even simple things has taken a lot longer to get a court decision on. And -- but now I feel we are coming towards the end where we get to a final decision so that we can start.

And we will take our next question from Yuri Serov with Redburn.

Can I ask you about Russia? I understand that you are not managing that business closely. But obviously, it's an important country for you, so you're paying attention towards there. Why are the volumes fallen so much in insulation of Russia? What explains that? I mean if I look at other building materials, that's not happening.

Yes. So very cold winter.

Okay. I see volume declined -- double-digit volume decline as far as in Russia.

Yes, yes. So you have -- the Russian economy is impacted by the sanctions. But to a lot smaller extent, some people believed. And I -- when I -- and I think we shouldn't go into the effect of the sanctions, but that's not the primary reason for that decline. The primary reason is that this winter was -- remember, this is also a low season. The season starts after the winter is over. This season was a very cold, cold, cold winter. So the season hasn't started, and last year also was the opposite. So that's really the reason, the main reason. And then, of course, we will look at next quarter. Again, we are not managing it. We see the numbers and see how -- what plays out.