Semperit Aktiengesellschaft Holding (SEM) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and welcome to our results presentation for the first half year of 2020 for the Semperit Group, which included 2 very different quarters. One where the global economy was slowing down, but still in a normal mode. And one where the world faced by the corona pandemic, an unprecedented once in a lifetime event. The latter, as you know, caused a deep global recession and for many industries an extraordinary economic depression. As a first assessment from my perspective as the CEO of the company, I can say that we benefited from tailwinds in our medical sector, as the pandemic caused huge global demand in protective and hygienic equipment, which resulted in exceptional revenue uplift at Sempermed. And in turn, we faced headwinds in our industrial sector due to the economic slowdown and disruptive demand after the corona outbreak, but also volatility and supply chains and customer relations. All in all, it was a pretty good first half year for Semperit, and we have coped very well with truly exceptional conditions. With me on the call today is Petra Preining, who, as a personal comment, does an outstanding job as our interim CFO, and he will present a very impressive set of results later on. I would like to emphasize at this point that I'm happy and proud of how our company has developed so far. Therefore, it is a special concern of mine today, to thank all our employees and stakeholders for their personal commitment, patience and perseverance over the last few months. As the CEO of Semperit Group, I'm impressed by the restless support and dedication of our team, which makes me confident and very optimistic that we will come through the corona crisis as a stronger company. So let me start with the key highlights for the first half year 2020 at Slide 3. Against the backdrop of the corona pandemic, revenues were only down by 4.2% at EUR 418.9 million, with top line pressure in the industrial sector, largely offset by significantly higher production volumes at Sempermed. As we stepped up the restructuring process and implemented strict measures in our response to the corona crisis, we managed to improve EBITDA and EBIT significantly both at reported and adjusted level. It goes without saying that I'm very pleased to report a 47.2% year-on-year increase in EBITDA at EUR 57.6 million, and adjusted EBIT at EUR 43.4 million, having more than doubled compared to the same period last year. The extraordinary economic volatility over the last few months triggered two events for major impairments, which affected EBIT, including the reversal of the Sempermed impairment losses at EUR 88.8 million and the EUR 20 million impairment loss at Sempertrans. This resulted, ultimately, in a significant improvement of net profit at EUR 101.7 million compared with a EUR 5.8 million over the last -- first 6 months last year. I'm also delighted to be able to report a strong improvement in our free cash flow, up by 18% year-on-year to EUR 47 million. As we are still in unchartered territory after this external market shock, it is important that we focus on those levers where we, as management, can have an impact on. And Petra will highlight our efforts on strengthening the balance sheet, reducing net debt and, ultimately, enhancing liquidity. In this context, we stick to our CapEx discipline, which amounted to EUR 11.9 million over the first half year, and we still aim to remain below EUR 40 million by year-end 2020. Please note that due to the new industrial strategy and strict corona measures, CapEx will be back-end loaded towards the fourth quarter of 2020. Turning the page at Slide 4. I would like to provide a high-level update on our corona response so far and more importantly, the structural realignments this has led to. First of all, health and safety of our employees and customers remains the key priority. In this context, two plants had to be closed due to instructions by the authorities, but they are now fully ramped up again. By now, in total, 9 people of our global workforce of roughly 7,000 employees, independently from each other, fell ill, but all with only mild symptoms. And even more importantly, they have fully recovered by now. In terms of supply chains and against the backdrop of higher inventory levels, we managed to secure major supply sources, but in this context, faced two specific challenges: one, on the hand, the supply of finished goods for exam gloves had to be replaced, as a result of some overheating in the market. And on the other hand, there are limited nitrile capacities at this very high level of market demand. As to the demand dynamics, I already mentioned that we faced headwinds in our industrial sector, for customer sentiment, and hence, the planning for future projects remains often unclear as customer behavior and expectations are currently volatile. In turn, Sempermed went through a very high demand surge where we currently observed that market price levels are further increasing. In terms of restructuring, as I had emphasized at our previous Q1 2020 results call, we feel vindicated that we had started with a deep and thorough transformation process at an early stage. This restructuring effort in recent years helped not only to improve operational efficiency, but we are now in a much better position to weather the storm of the pandemic. Even more so the corona pandemic has helped to accelerate our initiatives in digitization and innovation, customer intimacy and operational excellence, and the numbers we present today speak for themselves. We achieved discretionary cost savings as a result of the strict corona measures of 5% against the cost base, excluding material costs of the same period last year. Please note that we used government support to a very limited extent only, and it comes essentially down to our own effort, which delivered the results we are reporting today. Having said that, accountancy rules led to a reversal of impairment losses at Sempermed and an impairment loss at Sempertrans, which, overall, had a significant positive impact on the bottom line. Finally, as we are closely watching the uptick of new infections rates worldwide, let me reassure the market that Semperit has all focused on being prepared for a potential second wave of the pandemic through the structural realignments we have implemented over the last few months. At the same time, despite the corona setback, we are not losing sight of our new industrial strategy, as we highlight on Slide 5. Here, we summarize the key ambitions and strategic pillars while providing an update where we do currently stand. As I had outlined before, some of these elements had to be postponed due to corona, the lockdown and severe travel restrictions, notably the separation from the medical business, but we remain committed to implement these cornerstones as soon as realistically possible. At the same time, the focus on our industrial rubber strategy, including product diversification and innovation and digitization continues as planned with our higher market and customer orientation, in fact, being accelerated through the corona pandemic. Even though I cannot speak about details, allow me to give some examples of our innovations that have lately occupied our R&D department. Especially in times like these, antibacterial escalator handrails that protect people are particularly contemporary. Another good example is flame resistant door profiles or the next-generation of the extremely operation resistant Semperit SIGMA hose, which was recently launched. Now in the market also is the Green Evo Star, an environmentally friendly sheeting with sustainability and materials and processing. Ultra cut and broad resistant cover increased the lifetimes of conveyor belts in heavy-duty applications. Now after this short excursion into the world of our product innovations, let me just continue with our operational highlights, starting at Slide 7. The chart on the left shows the only minor pressure we had to face on revenues. It covers 2 trends, the very positive revenues coming from the medical sector, which could almost completely compensate for the pressure on the industrial sector. The chart in the middle graphically illustrates how we managed to step up EBITDA improvements over the last 4 years, with the EBITDA margin exceeding our original target of 10% at half year 2020, thanks to the exceptional performance of the medical sector. Overall, this was the tenth quarter of sequential year-over-year improvement in operational EBITDA and provides evidence that our transformation and restructuring process has made a material impact. At EBIT level, we essentially benefited from the reversal of the Sempermed impairment loss resulting in a reported EBIT of EUR 112 million. On an adjusted level, however, EBIT was still more than twice as high as over the same period last year, which underpins my conviction that we are on the right track. Over the page, when looking at the operating result of the industrial sector only, we even managed to achieve a margin improvement at EBITDA level, and this against a high comparable level of half year 2019. While in absolute terms, the Q1 and Q2 2020 EBITDA numbers were below the comparable periods of 2019, the combination of lower revenues and higher operational efficiency led to a further margin improvement. Still, I have to add, besides mentioning the high efficiency, that the first half of 2020 was not as significantly affected by negative corona impacts as maybe some other industries have seen it. The second half of this year will unfortunately, definitely see some more pressure on these results. Turning now to the segmental analysis and starting with Semperflex at Slide 9, which suffered the most severe top line pressure among our industrial segments. The reason is reduced market demand as a combination of the corona pandemic in half year 2020 and the earlier start of the global economic downturn in already 2019. The revenue decline had a direct impact on the operational profit level, as EBITDA was down by EUR 5.1 million or 17.9% year-on-year. While the size of the order book has further decreased year-on-year, we focus on continuing efficiency improvement, which, among others, has resulted in further waste reduction, notably in the business unit industrial hoses. On the next slide, Sempertrans was faced with lower demand in Western Europe, but had also to cope with the corona lockdown in some major markets, like India, resulting in revenues being down by 9.2% year-on-year. The comparison at operational EBITDA is somewhat distorted by EUR 1.3 million positive nonoperational effect from the first half year 2019 due to the sale of assets of the closed factory in China. Without this one-off effect, year-on-year EBITDA would have almost been stable in the half year -- in the first half year 2020. As mentioned before, we had an impairment loss at Sempertrans of EUR 20 million, triggered by sustainably negative corona impacts on the markets and thus development prospects of Sempertrans. However, operational EBIT was still at a respectable EUR 4.4 million compared with EUR 5.6 million over the comparable period last year. The top line and operational performance for the new industrial segment for profiles and sheeting called Semperseal is presented on Slide 11. Reduced market demand led to both revenue and EBITDA decline, with the latter being down by EUR 0.9 million or 11.8% year-on-year. However, the EBITDA margin in the second quarter improved strongly, both quarter-on-quarter and year-on-year, which is another sign of improved operational efficiency and better quality of the order book despite the latter being below the half year 2019 level. It is worthwhile highlighting the fact that we managed to outperform the competition in terms of delivery and reliability of supply, as our stronger focus on customer intimacy got traction. Finally, among the industrial segments over the page, Semperform was faced with lower economic activity starting already towards the end of 2019, which essentially affected the order intake of special applications. This combined with the corona impact, resulted in revenues down by 11.1% and EBITDA by 4.1% year-on-year. However, as was the case with other industrial segments, the EBITDA margin improved by 1.5 percentage points year-on-year, reflecting our restructuring efforts. While the order book is significantly down year-on-year, as we speak, all our production sites are up and running and productivity is at high level. Turning the page. Sempermed is no doubt the highlight of the period with an extraordinary uptick in revenues as a result of exceptionally rising demand and higher market prices supported by our own efforts for high production output. This fed through directly to EBITDA, which was up by EUR 23.2 million year-on-year with the EBITDA margin of the first half year being at 13.5% and in a single quarter even at 19.7%, compounded by higher operational efficiency and higher market prices. As you would expect, our order book for Sempermed has improved dramatically with the order intake as a result of the corona outbreak being more than 3x as high as in normal periods. As mentioned before, the reversal of impairment losses at EUR 88.8 million resulted in reported EBIT for the medical sector at EUR 110.7 million EBIT. With this, let me hand over to Petra to take us through the financials.

Thank you, Martin, for your kind words, and a very warm welcome to everybody from Vienna. Indeed, I'm happy to be part of this team at such a challenging period, and at the same time, to report some outstanding results. While we use government support only to a limited extent, we further strengthened our balance sheet, refinanced debt and ultimately increase liquidity. Therefore, also on my behalf, a great thank you, not just to everybody in the finance team, but all our employees for the commitment and strong support over the last 6 months. On Slide 15, we briefly summarize some of the key efforts to strengthen our financial position in recent weeks, which we'll touch on in greater detail over the next few minutes. What is important to emphasize here is that all these measures are indeed our own efforts. Without taking much advantage from corona related state subsidies, and in fact, been proactive where possible in trying to withstand the impact from the pandemic. First of all this includes strict cost containment, as Martin has described earlier, and therefore, creates a good foundation for future cost control. At the same time, our strong operational results in the second quarter 2020 led to higher free cash flow generation. As a result, we were able to strengthen our balance sheet and enhance liquidity at such a critical phase, which I will discuss in more detail towards the end of my presentation. Finally, we further reduced net debt, implying a very low gearing ratio of 0.4x net debt to EBITDA. This made our financial position not only resilient against the corona impact, but also strong to go ahead with implementing our new industrial rubber strategy. Over the page, we look at the first half 2020 group revenues by segment, where demand is disrupted in each industrial segment and vice versa, there is tailwind for Sempermed. In terms of the financial impact, I would just add that we need to implement further cost optimization and reshape our financial profile consistently to dampen the highly volatile and hugely uncertain top line pressure in the industrial sector, which is most likely to continue for some time. At the same time, Sempermed's top line profited from the market dynamics in combination with the successfully improved operational efficiencies. As you might be aware, Semperit is not the biggest player here, and we do not drive the price development. Nevertheless, as prices were up, some 20% to 30% above last year's level. And also the demand was above expectations. We were able to improve the top line by almost 15%. On the next slide, we present reported EBITDA by segment, which graphically illustrates to what extent significant revenue changes impact the operational result, notably for Semperflex, but even more clearly for Sempermed. You should also note the EUR 3 million year-on-year EBITDA improvement at the corporate center, which is further evidence of strict cost containment and making increasingly our own effort in implementing the transformation and restructuring process. In terms of operating EBITDA margin, we are pleased about the 23.7% at Semperflex, despite all the top line and margin pressure in the first half of 2020, but also a strong 20.2% margin at Semperform. In turn, the 13.5% operating margin at Sempermed compares with minus 0.2% over the same period last year and was a major contributing factor in achieving the 13.7% group operating margin at this time around. Turning the page, we summarize the main elements of our group P&L. And given the discussion so far, I would just focus below the EBITDA level. As Martin had discussed earlier, the reversal of past Sempermed impairment losses at EUR 88.8 million combined with EUR 20 million impairment loss at Sempertrans, resulted in EUR 112.2 million EBIT at group level, which is more than 5x higher than the same period last year. In our ad hoc announcement from third of July this year, we also guided that we now expect group EBIT by year-end 2020 to be in the range of EUR 110 million to EUR 160 million, which is largely depending on further price developments for medical class and the availability of relevant raw materials. Nevertheless, based on these good results, we are optimistic and assess the probability of landing at the upper end of this range currently to be higher. As the tax situation is somewhat more complicated this time, we provide you with a separate table on Slide 19. Due to the write-up for Sempermed and the right down for Sempertrans, the tax line in the P&L is blurred by some one-off effects. Basically, current income tax expense increased from EUR 6.4 million to EUR 9.3 million as a consequence of increased profits earned, especially by Sempermed's companies. Furthermore, the increase in tax is caused by withholding tax payments for dividends received from Chinese and Thai subsidiaries. However, there are positive deferred tax effects that are one-off in nature and will revert to tax expense, again, over time. The main impact here is from losses, carryforwards and allowances that become recoverable in the foreseeable future, as more taxable profits are expected in Sempermed. They recognize deferred tax assets will lead to tax expenses when the future profits come in. This will lead to a more normalized effective tax rate in the future. The same is true for deferred tax assets being recognized as a consequence of the Sempertrans impairment. In IFRS accounting, the write-down pull forward a slice of future depreciation charges that are tax deductible. Therefore, the tax saving potential of these future depreciation charges is front-loaded as well. Over the page, we show quarterly CapEx developments by segment, with a clear focus on maintenance CapEx and further strict cost control in the wake of the corona pandemic. At the year-on-year comparison, you can see greater CapEx commitments for Semperform and Semperseal, which is partly due to the split of Semperform and hence the new setup. At the same time, CapEx for Semperflex and Sempertrans was reduced to a fairly low level. We still aim for CapEx to remain below EUR 40 million by year-end 2020, with most of the maintenance CapEx being back-end loaded towards the fourth quarter 2020. On the next slide, we present the components of working capital at a quarterly basis, showing an increase of all three elements since year-end 2019. There is no doubt that the huge volatility after the corona outbreak notably disruptions in supply chain, transport and raw materials has resulted in great difficulty of tightly managing working capital. As the CFO of the company, this is close to my professional heart and I'm keenly aware that the inventories, but also trade receivables have gone up by some margin. However, in terms of trade working capital as a percentage of revenues, we continue to be below our 22% target and fully appreciate that some other industrial companies have suffered a much greater spike in this particular metric. The main element of our free cash flow development are presented on Slide 22, which indeed is one of the highlights of the first year -- the first half year 2020. Both active working capital management and strict cost control in concert with high profitability continue to support strong cash flow generation. [indiscernible] the resilient operating cash flow of EUR 53.6 million, down by 9.8% compared to the same period last year. This combines with a much lower cash flow from investment at EUR 6.6 million resulted in a free cash flow of EUR 47.1 million, essentially continuing the upward trend over the last 3 years. Difficult times like these, we believe, even more that cash is king, and we'll continue with our restless focus on strong cash flow generation despite some temporary setbacks in working capital after the corona outbreak. Finally, on Slide 23, we present balance sheet details and the reshape in our financial profile as we made several changes with regard to the hybrid capital and further repayment of the corporate Schuldschein loan in recent weeks. Most importantly, through the corona pandemic, we managed to increase the amount of cash and cash equivalents by EUR 26 million year-on-year to EUR 167 million as of 30th of June, 2020. In terms of securing liquidity, we agreed in a more flexible undrawn credit facility of EUR 75 million. At the same time, net debt was reduced by another EUR 37.8 million since year-end 2019 and amounts now to EUR 35.7 million in total. This implies a net debt EBITDA multiple of 0.4x compared with 1.1x as of 31st December, 2019, and is well below our covenant. Finally, the equity ratio is 45.7%, well above our own target of higher than 30%. As to the hybrid capital, I should mention that we will not draw the remaining EUR 20 million of the total EUR 150 million. We have recently terminated the outstanding line in the course of the efforts to optimize the cost of capital. Parallel, we secured a credit line guaranteed by the Austrian Control Bank under favorable conditions, but we are not in need to draw any cash so far. With this, I've come to an end of my presentation and hand back to Martin for final remarks.

Thank you, Petra, and let me come to some final conclusions and our leadership priorities and the action plan for 2020 at Slide 25. Ladies and gentlemen, as we face uncharted territory after such a black swan event in Q1 2020, management needs to apply a very fast, decisive and hands-on approach in the short term. Leadership in this daily crisis management, however, should be based on a clear mid and long-term strategic outlook, which continues to be impacted by economic, social and even epidemiological uncertainty. So let me summarize some of our key convictions, observations and action plans for 2020 and possibly beyond. First, as we have shown for numerous examples in our current business, our transformation process has not only been continued, but accelerated through the recent corona crisis. We have applied a very customized and flexible approach for specific separate markets, and kept management focus on cash generation. In times like these, the latter is crucial to keep our strong balance sheet and preserve liquidity, as Petra has shown earlier. Furthermore, we have intensified our control of the cost base as we expect the pandemic to last longer. In order to be sustainably well positioned for the future, even after the corona crisis has been overcome, we have launched a project to examine and evaluate potential savings in our administrative and selling expenses, so with SG&A. We want to position ourselves more effectively and efficiently in these areas. The focus is on a more efficient process design, a reduction of duplication and the exploitation of synergies. The project is divided into three stages, whereby it was first necessary to create transparency for the given cost and structures. Based on this, the potential savings at headquarters and in a further step at group level are currently being examined. Second, as we have repeatedly highlighted today, we expect and get prepared for a material top line and margin pressure in the second half of 2020. To address these multiple challenges, we keep our management focus on cost containment, customer intimacy and the flexible adoption of the organizational and financial structures. In this context, health and safety remain a top priority, as we get actively prepared for a potential second wave of the pandemic. At the same time, securing our supply chains continues to be a key operational focus point to ensure further business continuity. Third, and looking ahead over the mid and long term, we continue with implementing our industrial rubber strategy, as announced in late January 2020 and reiterate its main pillars: first, the separation from the medical business despite the current corona effect; second, regional diversification with a stronger focus on North America, though somewhat postponed in recent weeks; third, focus on customer intimacy and build on our position as a reliant partner; and fourth, digitization, for which the current corona crisis has also provided ample evidence for the need to step up and accelerate. As outlined in our recent ad hoc announcement, we feel encouraged by the latest business developments despite the ongoing corona pandemic, and have provided a first guidance for EBIT by year-end 2020 in the range of EUR 110 million and EUR 160 million, which will largely depend on market price development for medical gloves and the availability of relevant raw materials. Nevertheless, I want to add and mention the risks we might face by having disruptions at our production sites, market entries by potential new competitors, most likely coming from China and also the availability of a vaccine that would end the exceptional boom in the medical sector. Having said that, I still want to confirm our guidance to reach an EBIT between EUR 110 million and EUR 160 million. And if I may add, maybe even rather at the upper end, as you can imagine, after these excellent results. With this, we have come to the end of our presentation. And Petra and I are now available for any questions you might have. Thank you very much.

[Operator Instructions] And the first question is from the line of Markus Remis of RCB.

Congrats on the strong results, firstly. Let me start with the topic, which you haven't addressed in the presentation, the material cost development. I mean, looking at the material cost ratio, this is actually the lowest level since the quarter 2 in business year 2009. Can you help us understand what has -- or to which extent, firstly, this is -- this has helped the industrial units? And to which extent this raw material price inflation also supported med? And then also how sustainable that is? We're seeing -- or basically, you referred to some inflation in your comments, but I think this level has been unprecedented for quite some time. And what's the outlook for the second half, please?

So I take the -- this is Petra speaking. I take the material cost development question and the cost question in general. We have basically two supportive active effects to mention. On one hand, the restructuring process of the past years has set up the profitability and made the segment, obviously, more resilient. We were also prepared for an economic cool down that set already in 2019. Even though it's hard to split the economic downturn and the corona effect from each other, but being prepared is definitely -- was a great help in that situation. And on top of this, we have even accelerated our restructuring process. We have defined additional countermeasures to weather the corona crisis checking all positions that we can influence here. And we have to see that the lion's share of approximately 5% -- we managed to decrease the cost base by 5% personnel and other expense in comparison to first half 2019. This excludes raw materials. So my answer is a bit broader now. Nevertheless, on the material costs, we -- as you do know, we had tailwinds from the oil price and other raw material effects, which definitely helped to boost also our EBITDA.

Okay. And can you help us on the second half? I mean, should we also kind of factor in something like 50% or even slightly below 50%, for H2? And also looking at the sequential development in Q2 versus Q1, there's about 700 basis points of margin coming from material costs?

The oil prices, you do know, has gone up again compared to the first quarter 2020. So the effect will be slightly lower than what we have seen in the past. Also the main raw material for the Sempermed has become not only hard to get, it became a rare good. It also became more expensive. So we will -- the effect will, for sure, be lower than what you have seen in the first half. And for the other costs, corona driven cost decreases, I mean, taking travel expense and other items, which we had to decrease like every other company because of the travel restrictions. This very much depends on how long the corona crisis will last.

Okay. Then let me follow-up with a question on Semperflex. When I look at the top line development -- actually, in the second quarter, you had less pressure on revenues than in the first quarter despite most of your customer industries showing a different pattern. So being Q2 weaker than the first quarter, can you help us understand the dynamics here? And then you've been quite vocal that the second half will be weaker. Should we then think about more of the top line pressure we've seen in the first quarter, like 20%, 25%, is that more realistic?

See, I don't want to give any numbers here in terms of the outlook for the second half of a business where, I mean, whatever industry you currently look at, it is extremely difficult to basically understand the market dynamics. When the crisis started in the first -- at the beginning, Semperflex didn't see an immediate reaction because some of our customers started to basically build up stock to be ready for ramping up right after the corona lockdown. Then we saw a phase for a couple of weeks where the order intake basically decreased strongly because customers were shut -- I mean our customers shut down their production. Then we saw customers coming back. Now we're in the summer break. The second half will definitely be driven by price pressure. That is what we currently see. And we're taking so far still a pretty strict position here. But -- I mean, we expect pressure in the second half of the year, but I cannot tell you at this moment in time, to which extent it's going to hit the business. Right before the summer break, I had a more positive feeling than still maybe 6 weeks before. Now it's the summer break, so we're all basically looking for the order intake number in September when the businesses start to more and more ramp up, and then we will also understand more of the market dynamics. It's a very mixed picture. Sorry, I'm elaborating here, but I'm sure you're interested in the nature of the business because we have a -- we do industrial hoses and hydraulic hoses who follow complete different market demands. So to sum this up in one number is, at this moment in time, also in the light of the pandemic and the summer break that we see on the customer side, is extremely difficult. So I would call it, it's going to be ambitious and very much driven by the pricing situation.

Clear. I read with great interest your comments on Sempermed, of course, also on the drivers for the impairment reversal. You mentioned here that market prices for gloves are up by 37% in the -- I think it was in the Q1 call, you gave the indication rather 15%, maybe 20% price uplift. So this implies for me quite an acceleration in the second quarter in terms of pricing momentum. Do you see prices still on the rise as we move into the second half?

Let's put it this way. Yes. That's a very valid question. Let's put it that way. We, at Semperit, already 2 years ago as part of the restructuring and transformation program have established a work stream called pricing, where we, under my personal leadership, sit down once per month on the pricing situation of all segments. This basically translates into monthly reevaluation of the pricing situation in the medical business. So far, we have seen a strong price increase with a even accelerating monthly dynamic. And in case, as outlined during the call, there will not be a vaccine available on the market short term. And the pandemic continues to be as strong as it is. I currently do see further price increases in the second half of the year. Yes.

Okay. Very clear. Do you also have the possibility to further squeeze out more gloves out of your facilities? Or would you say that you're currently already...

No. Sorry, we are fully loaded. The factory is fully booked late into next year, and we're running at maximum capacity. So top line increase can only come through price increase.

Okay. That's the point I wanted to make. Final question from my side. You're quite vocal that the development of the vaccine, then basically represents the end to the boom. It is currently expected that the vaccine will be available around year-end, early 2021. I mean how does that play into your considerations about the right point in time to dispose off of Sempermed?

We took a strategic decision of separating from the business. We have looked very carefully into market dynamics over the last decades, also by external professional support. And what you always see is during pandemics, obviously, the prices increase. And after the prices significantly decline with more and more capacity out in the market, further reducing market prices. So what we expect is after the corona pandemic, basically the battle that we have suffered from for many years to go on even more difficult.

Okay. But let me rephrase it. Wouldn't it be then prudent to sell right now at the peak or presumably close to the peak rather than to wait maybe into next year when more capacity is available, then the vaccine is available?

No, look, you're starting to go into deal tactics here. I'm not -- and that's something I will not comment on. Please understand that.

The next question is from Christian Obst of Baader Bank.

I have 4. Please, can you give us some kind of a split of your glove production? What kind of part is latex and what is nitrile based? The second one, you booked a EUR 20 million impairment for Sempertrans. So this is related -- maybe you can rephrase it to what kind of asset? And what kind of expectations going forward because having in mind that the second quarter was still a good one, so what was the underlying idea about that kind of impairment? The third one is, given the current cash situation, maybe the ongoing cash in from Sempermed, do you think about some kind of a partly payback of a hybrid? Is that possible from the structure of the hybrid? And the last one is, again, concerning the sale of Sempermed. In the Malaysian press, one can read about Top Glove and another company which might be interested in Sempermed. Can you confirm that you are talking to these guys? Of course, it's a special question, I know.

Well, I'll take the last question because that's the most easy to answer. We don't update rumors. And then I also go to the first question, which is on nitrile and latex, it's predominantly nitrile, predominantly nitrile. So a high -- I would say roughly above 80%.

So I take the other questions. The Sempertrans impairment was mainly booked to Belchatow, which is the site in Poland and India. And then I have to apologize, can you rephrase the third question on the hybrid because you were breaking up?

Yes. It's concerning the hybrid. Do you think about paying back the hybrid? And is a possibility there that you're paying back a part of the hybrid? Is that a part of the contract that you can pay back EUR 50 million or something in one step and then the rest in another step, is that possible? And are you thinking about such a step?

Thanks for the question. It's quite obvious with the cash balance we have currently. Since we have now a tender, it’s part of the finance strategy we are currently evaluating. But it -- yes, it would be wrong to say that we are not considering it. And the second question, yes, we are allowed to make installment payments, if they are not regular.

The next question is from Richard Schramm of HSBC.

I would also like to ask about Sempermed. You mentioned that your order backlog has increased dramatically. And you just mentioned that your capacities are booked into next year. I really saw that visibility is, at least on the volume side, secure for the next, yes, 5 to 6 months? Or is there the risk that there is some overshooting of demand at the moment. And that customers at the end of the day might not take all the volumes. They now -- or they because there might be a point where they realize that they have overstocked here? That would be my first question.

Easy to answer. We have confirmed bookings that oblige the customer to take the gloves. If not, they have to compensate us on full amount.

Okay. So volume is then secure for -- over the rest of the year. And the only critical component then, as you mentioned, remains price. But here you are -- if I understood you correctly, optimistic that the trend is still on the upside also for the second half year?

Well, that is a good -- that is a very good question. The risk that we -- well, the execution of risk that we see is obviously on nitrile. Nitrile is a raw material, which is pretty short in the market. We have established, I think, secured supply chain procedures. But I mean, we are secured. But of course, there is always an external risk that something unexpected might happen. But as to our knowledge, we're secured.

Okay. So at the moment, no issue on the supply side, yes?

No.

Okay. And then also a question concerning this reversal of the impairment on Sempermed. I mean, usually, I would have expected that the valuation of an asset is always to the long-term prospects here. And I think we agree that the current situation here is pretty much like a onetime effect, which, as you mentioned, also runs the risk of change from one day to the other, if there is a reason available at some point in the next 12 to 18 months or so. And that the whole situation could turn again to the old and not very comfortable levels with tough price competition and low margins. So what really has driven this revaluation? At the end of the day, your assumption not that there will be a long-term improvement in the industry here. And the risk has declined, but the price effects will come back as negative as they have been before the crisis?

So I take that question. As you do know, corona is a trigger as such to take on the book value. So we did our exercise, of course, for all the sectors and the segments. And as the value was significantly above the book value, there is a clear regulation in the standard that you have to book a write up. There's nothing we can do about that. The current situation also based on the -- on our plans, also supports the height of it. Of course, in case everything will change tomorrow again, then there is a certain risk that there will be an impairment in the future. You can also -- we have explained all that risk in the notes.

Okay. So it's more short-term than I thought I must admit. Thank you for the explanation.

[Operator Instructions] We have a follow-up question from Markus Remis of RCB.

Just I think you already gave kind of an answer regarding further impairment possibility in the other industrial units. But if I understood correctly, you tested all of them. I just want to know for...

Yes.

Can you just help us on the book value of the remaining Sempertrans part? How much -- is this announced then on the...

Fixed assets are close to EUR 40 million.

14, 1 4?

No, 4 0.

And then one follow-up on the corona counter measures, which you've prominently highlighted in the report. Can you kind of provide some indication to which extent that is actually fixed cost in nature or whether that was of arrival I saw in the statements that you saved a few millions on consulting, travel, for instance.

What we have done is, they are all variable costs. They are definitely fixed costs. We have -- I used already one example to take travel costs, for example, and fairs and stuff like this. So they will not be sustainable. They are definitely -- will impact the year 2020 to a significant amount. I don't think this is a surprise. It hits or it -- all the other companies benefit in the same extent to it. This is the -- on the cost base, which I have touched base upon already in my presentation. Governmental side, we have almost not used any subsidies. It's not worth mentioning, basically. So we're very proud that we have managed to dive through the corona crisis based on our own efforts.

And final question on the tax side. Is there any help you can give us in estimating the...

I'm sorry, can you speak up a bit? I can hardly hear you. You're so -- yes, sorry.

Apologies. Is it better now?

Way better. Thank you very much.

Apologies. Is there any help you can give us in modeling this year's tax line? Tax burden that could impact the bottom line?

The tax rate will definitely normalize over the year, but we will not give any guidance.

We have another follow-up question from Richard Schramm of HSBC.

You have talked a lot about Sempermed. I would be interested in the Industrials business because here, you signaled that H2 will be, clearly, obviously, weaker than H1 and that here, the risk is biggest at the moment. Is this already visible in the order books you have that are so thin and prices you have locked in are so bad that you can already have good evidence on this development? Or is it, at the moment, more fear that you have that demand will be such weak and cause the price pressure, which leads to this depressed results here in industrial segment.

I have a little difficulties in understanding you, because the line was a little broken. What segment -- sorry, what segment are you speaking about here?

Yes. It's about the industrial segment, in general, I'm not -- I think it refers to all 4 that you expect them to be clearly weaker in the second half than in the first half.

Listen, I think it's a mixed picture here. Obviously, the strongest hit we currently see is in the mining area, which translate into Sempertrans. That is also something we can closely follow-up on because the number of customers in that market is, obviously, comparably limited to other segments like in Semperflex, for instance. So the biggest impact we currently see is in Sempertrans. Semperflex, as I said before, I get mixed signals. For a couple of weeks, it was better than it was a little lower. In Semperseal, we do see it picking up again compared to where we've been at the beginning of the pandemic. And Semperform, always follows its own logic. It's very much project driven. I also do see more positive than depressing signs. So all in all, if you want to put it under one roof, as the industrial sector, I wouldn't call it depressing, as you said in your question. I would say it's challenging with an unclear situation over the various segments, but with definitely more positive momentum than at the beginning of the crisis, or let's say, after 4, 6 weeks of the crisis. Does it give you a little indication?

Yes, that's very clear and sounds much more optimistic than I thought.

Yes, it's a good question, though, because the one thing we don't want -- we don't want to send out here depressing signals. You've known us for a long time, we're setting out clear signals on how the numbers are. But I'm sure, as you are a professional here, listening also to other companies, it's extremely difficult in industrial business to give an outline for the next 6 months. And we have conflicting signals. And I think what I just tried to explain is pretty much, in a nutshell, how we see it.

And there are no more questions at this time. I hand back to Martin Füllenbach for closing comments.

Well, thank you very much. It's been an interesting discussion. I hope all of you basically share at least the pride that we feel in terms of our numbers. And I'm happy to then report back to you in November on the Q3 numbers. Thank you very much, and everyone, stay healthy. Bye-bye.