Swiss Steel Holding AG (STLN) Earnings Call Transcript & Summary

Ladies and gentlemen, I would like to welcome you to the SCHMOLZ + BICKENBACH analysts and investors conference on the 2019 annual results. We are delighted that you have taken the time this afternoon to follow our presentation live at the Widder Hotel in Zurich. I would also like to welcome those ladies and gentlemen who are following the conference via webcast or telephone. The speakers today at today's conference are, as usual, our CEO, Clemens Iller; and our CFO, Matthias Wellhausen. The slides for the presentation, which we'll follow immediately, media release and the annual results -- annual report 2019 have been available since 7:00 this morning on our website. During the conference, the speakers will make forward-looking statements as described on Slide #2. These statements are based solely on our expectations or projections of our future performance and may differ materially from actual results, performance or achievement. With that, we can start the presentation, and I hand over to Clemens. Clemens, the floor is yours.

Thank you, Ulrich. Yes, good afternoon, ladies and gentlemen. I'm even more pleased last year that you have found a way to the conference here at the Widder Hotel. This is not only because we have some circumstances at the moment that make traveling not so easy, but also because this year, I cannot report too many good things about the annual results. I'm, all the more pleased that you have not lost the interest in our company. We suppose that today, you are less interested in past figures than in hearing from us, how we intent to get the company back on track and make it even more competitive once the refinancing has been completed. We have, therefore, changed a little bit our usual reporting pattern. For my colleague, Matthias, and for me, this means that we will report to you today on 2019, a little shorter than usual. We want to focus more on the future and the planned measures to improve performance. Let me start right now with a review of 2019, which was probably one of the most difficult years in the company's history. This was mainly driven by a decrease in demand. We have not seen it since the financial crisis in 2008. As a steel company, we are cyclical by nature, and therefore, exposed to normal economic fluctuations. As the past has shown, we can cope with this kind of fluctuations well. However, what additionally burdened us last year and could not longer be compensated by cost reductions and further adjustments were the effects of trade conflicts and global political uncertainties on our business. In our sales markets, above all, in Europe, these influences caused massive uncertainty among our customers and led to a collapse in demand for special steel. Also, the decline did not really surprise us, it was the extent and the duration of the weakness in demand we did not anticipate. In addition to that, we have still 2 business units with Ascometal and Finkl that are still especially sensitive to economic swings. On the next Chart #5, the most important topics of the last year are summarized. The economic slowdown and the associated decline in demand have led to a sharp reduction in the high inventories built up in the recent years along the value chains. A weakening of demand, especially from the automotive industry, had already become apparent by the end of 2018. However, the price is intensified in the course of 2019, also affecting other important end markets such as mechanical, engineering and plant engineering. The extent and the duration of the decline in demand was unusually strong and long, which we did not expect at the beginning of the year. In line with the economic forecast at the time, and I have to stress the point also in line with comments of our customers, we also expected a gradual economic recovery in the second half of 2019. We were no longer able to fully offset the impact of this pronounced market weakness on earnings with internal measures, which in turn meant that we did not achieve the targets we have set ourselves at the beginning of the year. The market weakness resulted in a significant decline in sales volume, in revenue and EBITDA compared with the previous year. In addition, due to the deterioration in the market situation and in the medium-term prospects, we had to recognize impairment losses of almost EUR 313 million in the business units, Deutsche Edelstahlwerke, Ascometal, Finkl and Steeltec. If there are 2 positive developments to be highlighted, these are the savings from our performance improvement program and the development of free cash flow. Costs were reduced by EUR 50 million in 2019 as planned. Also, free cash flow was negative. As in the previous year, it improved significantly as a result of systematic and decisive reduction on inventories across the entire group. However, this was not enough to sufficiently improve the balance sheet, which is why a capital increase became necessary in the course of the fourth quarter. The capital increase was successfully completed at the beginning of January 2020. With a strengthened equity base, we pushed ahead with the comprehensive refinancing of debt with the lenders. We expect -- restructuring opinion requested by the banks for the loan agreements was completed at the end of February 2020. We expect that the group's comprehensive refinancing, including the partial or full repayment of the outstanding bond, will be completed by the end of March. This will enable us to look ahead again. We expect the market environment to stabilize in 2020, despite the influence of the coronavirus. Inventories have now reached a low level, and sales volumes should come closer to actual demand. In addition, we have already started to implement a comprehensive restructuring and transformation program lasting until 2024. We expect significant savings and additional revenues from this program as early as 2020. I will come back to this later, together with Matthias. Also, we are cautiously optimistic for 2020, I cannot spare you a comment on the coronavirus. We have looked at it in detail and the -- of course, tried to see what kind of effects this might have on our business. However, due to very unclear situation with a lot of anecdotal information, it's almost impossible to quantify possible effects for us. A lot will depend on how long and how intensively global trade flows and market sentiment are affected by it. Accordingly, our focus is on the restructuring and transformation of SCHMOLZ + BICKENBACH, which is completely under our control. I will come back to this topic in the outlook. Let's continue with Chart #5 -- no, sorry, it's #6, an overview of important macro indicators. From this, you can easily deduce why our earnings in 2019 were weak. The surprisingly robust price trend for scrap and the most important alloy, metal nickel, along with improved product mix is the main reason why selling prices rose by almost 3% compared with the previous year and while annual sales fell disproportionately. Ferrochrome, on the other hand, with a price decline of 18%, has developed as one would expect in a market environment such as 2019. The figures from the 2 industries, which account for about 2/3 of the group's total sales volume, underscore the downward momentum that has persisted throughout the year. After the German mechanical and plant engineering industry reported an 8% decline in new orders. In the third quarter, new orders for the year as a whole were actually 10% lower, which was a big and our most important end market. The automotive industry production collapsed last year in all important countries and regions. Germany was a minus of 8%, the U.S. was minus 10%, China was minus 9%, could not escape the crisis. The automotive industry has not got off a good start in 2020 either. Figures for the first 2 months from China, for example, show a 41% decline in car sales. With the decline in [CUPRA] being as high as 80%. In Germany, around 8% fewer cars were produced in January, while February is likely -- if not indicated so far, is likely to have been weaker as well. Although, forecast for 2020 have become even more difficult in recent weeks, most experts expect the global automotive market to continue to weaken in 2020 also at a slower pace. Especially the pronounced market weakness in 2019 resulted in the figures shown here on Chart #7. We had to accept a 12.6% decline in sales volumes to 1.83 million tons. In terms of sales, the decline was proportionately smaller at 10% to EUR 2.98 billion. The reason for this very -- this were overall favorable raw material prices on the one hand and improved product mix with a higher proportion of high priced stainless steel grades on the other hand. Sales were also supported by the selling price negotiated in annual contract at the end of 2018. Those prices were fixed in an environment on high demand and therefore, had good conditions. In terms of adjusted EBITDA, the sharp decline in volume led to a 78% drop to EUR 51.2 million. Net income was additionally burdened by the impairment charges of EUR 313 million in various business units. Despite a negative figure at the end of the year, free cash flow was a bright spot, while a minus of almost EUR 160 million had lesser than the previous year, mainly due to the high investments in Ascometal. The cash flow in 2019 was limited to EUR 7.1 million and the cash outflow to EUR 7.1 million. This was achieved primarily by means of consistent inventory reduction in all business units. In expectation of lower demand, the business units had to proactively and rapidly reduce their inventories. That brings me to the end of the discussion on the annual figures, and I now give Matthias here the word to discuss fourth quarter figures.

Clemens, thank you very much. And ladies and gentlemen, also from my side, very warm welcome to the brave physically here in the room and to the interested ones on the phone. Yes, the fourth quarter was marked by the continued weakness in the sales volumes. We reported on that trend in the previous 2 earnings releases already and Clemens addressed again the main developments. I will therefore, concentrate my brief presentation on selected aspects. So we have more time for discussion afterwards. If we turn to Chart #9. As usual, the figures are comparing here to the same quarter last year. Sales volumes and revenue were each down by 22%. Although, the same quarter of the previous year, you will remember that had already been affected by the EU; safe cut measures and by the beginning stagnation and the offtake from automotive customers. So it was already not a good quarter last year. Yet, we are down 22%. That indicates that this has been a particularly weak quarter. If you exclude, for instance, Ascometal, we have to go back to the year 2009 to find a comparably low volume. Yes, as in previous quarters, we cut back production somewhat stronger than the sales in order to reduce our inventories further, which you will have noticed in the working capital as we come to that later a little bit. The decline in demand affected mainly quality and engineering steels with a drop of more than 25% versus the previous year. This product group is used to particularly a high degree in the automotive industry and was strongly affected by these trends that Clemens was alluding to, production down, but also amplified by the inventory reduction in the supply chain. Sales volume for stainless and for tool steel fell by 8%, and this reflects -- the smaller decline reflects the broader diversification of the customer base between the industries for these products. The average sales price remained practically constant at a little bit below EUR 1,600 per ton. However, the more favorable product mix compensated here for the negative developments by product group, especially in engineering steel. The sales price of our engineering steels was down 10% versus the same quarter in the previous year. That was driven by the drop in raw materials and pressures on the base price. Note that Clemens had highlighted that raw materials were not dropping down so much during the full year. However, in quarter 4, we saw a market downturn, particularly on scrap and also on nickel. So that weighed on the prices, but also on the surcharge, but also on the base prices for engineering steels. By contrast, the prices for stainless and tool steel moved only very slightly. It was up 1% for tool steel and down 1% for stainless steel. Nevertheless, the fourth quarter also showed the first positive prospects from the market side. For the first time since September 2018, the order backlog rose slightly after reaching the very low point in October. The moderate upward trend, by the way, continued up until beginning of this week, so no corona effects here. It stands -- it stood at the year-end. It stood still at 417 KT. That is not yet a normal level. However, it is an improvement versus the previous months. And what we trust here is that indeed, and Clemens indicated that the destocking, mainly in the auto industry, but also in the distribution business has reached -- has bottomed out. So no further destocking. Apparent demand -- going forward, apparent demand equal to final demand. That's good for the start, and we come back to that later. Coming now to Slide #10, which looks at the key earnings figures. Well, in the tense situation that we had continued in quarter 4. We made very good progress -- we focused, and we made good progress in reducing our costs. Short-term work was implemented and executed in large part of the group that meant that personnel cost or labor cost, including external employees in this case, they were down by more than 10% compared to the previous year's quarter, and that is despite inflation. Maintenance costs also were adjusted to the production level. Overall, these costs were down by even more than 30%. So in these 2 categories, very good progress and adaptation of the cost base to the volume developments. Also, our cost savings programs, Clemens alluded to that, we reached our target, could have done more. The volumes would have been better, but it was -- at the end, we reached the EUR 18 million that we had given us as a minimum target in the fourth quarter. Yes, with all the success on the cost side, still we could not compensate for the topline development. So the adjusted EBITDA was still slightly positive at EUR 1.4 million, but it was EUR 38 million down versus the previous year's result. EBIT, the earnings before interest and taxes, was negative at minus EUR 53 million. This figure includes, by the way, EUR 16.5 million in one-off expenses. These are particular onetime effects from the adjustment of inventory valuation due to the impairments that we had done in the previous periods. It also includes contracting service, integration cost, particularly in connection with Asco, but also general expenses for the restructuring of the group in this position. The net result for the group after interest and after taxes was then a loss of 70.5 -- EUR 75.9 million. Turning to Slide #11, which is cash flow and financing. The free cash flow for the quarter was negative at EUR 48.6 million. And if you follow us for a longer period, you'll find that unusual because you're used to a positive cash flow in the fourth quarter, which is normally because we have significantly less activity in the -- than in the previous quarters. And due to the seasonal pattern, we release from the working capital regularly, cash. Well, this favorable development in the working capital has also happened this year. We have indeed been releasing further cash during the course of that quarter by EUR 90 million. Even though, in the previous -- although on the preceding 9 months, we had already been releasing quite substantially out of the working capital. Nevertheless, because of the low profitability and the spend for capital goods, we ended up with a negative working -- with a negative cash flow. And as a consequence, the net debt rose from quarter 3 to quarter 4, somewhat to just below EUR 800 million of net debt. The liquidity headroom was still positive. However, obviously, it had been declining. But more importantly -- then on that part, we -- the low EBITDA together with the increased debt resulted in the enormous financial leverage of 15.6. And the equity ratio, which had already been diluted due to the impairments of the preceding quarters ended up at the year at 9%. Well, you are all aware, we then had a capital increase of CHF 325 million that we successfully completed on January 8. Net debt was then reduced accordingly and both leverage and equity ratio were brought back to better levels here. Pro forma ratios after the transaction would state 10% for the leverage and 25% for the equity ratio. However, the capital increase was only a very first step. We are in advanced discussions with our banks and our largest shareholders to also restructure the debt side. Our goal is to secure the debt financing for the upcoming restructuring for the long term, for the entire period of the restructuring that is ahead of us. Together with a very carefully detailed work plan and an adapted effective organization, we will again achieve an EBITDA margin of at least 8.5% over -- within the next 5 years. Clemens will go into more detail on this restructuring plan with respect to the operational projects. Yes, on the financial side, we concluded already the relevant term sheets with our banks on the syndicated loan and the ABS already in December as well as with BigPoint Holding concerning a shareholder loan. This was, I'm sure you are aware, indicated in the prospectus for the equity raise. The final touches on these agreements are well advanced. And by the way, including the external review of the restructuring plan, and we are confident that we shall finally conclude during the coming days. Also, the reduction of the outstanding bond is well underway. As you know, with the capital increase, BigPoint Holding has significantly increased its share in our company and holds now 49.6%. In terms of the conditions of our bond, this has triggered a so-called change of control. This change of control then obliges us to offer the bond investors to sell their shares -- sorry, to sell their bonds to the company at 101% of its nominal value. And on the next slide, it's already there. You see that the timeline for this process is well determined, and we are also here pretty much advanced because bondholders must decide whether or not to accept the offer until basically the day after tomorrow, which is the March 13. Whether or not, then we will execute our right to repurchase the outstanding bonds, will be determined after we know the decision of the bondholders. And that will be decided after the 13th of March. So overall, we are very well on track on the financial part, and I think Clemens will give more information on the operations side. Thank you.

Yes. Thanks a lot, Matthias. Let me now explain, on Chart #14, how we intend to put the company back on track once the financing is completed. The basis for this comprehensive program here with 4 main pillars was developed in the course of an independent business review already late last year and verified in the so-called restructuring report or S6. This S6 report is also an essential component of the loan agreements still to be concluded with our lenders. Matthias was just talking about that. The measures can be roughly classified into 4 areas of work as shown here in this chart. So the first group of structure measures eventually comprises 3 elements and will contribute a total of EUR 70 million positively to EBITDA by 2024. Structural and organizational adjustments with permanently -- will permanently reduce the cost basis. This works stream include the project so-called DEW, or Deutsche Edelstahlwerke 2020+, which will make the DEW business unit leaner and more efficient. This is associated with the simplification of organizational structures. And that also means, of course, a reduction in personnel, which is currently being developed and will be implemented promptly after validation. The second business unit that is in the focus of this work stream is Finkl Steel. The turnaround already initiated is being driven forward at full speed. The 2 sub programs at DEW and Finkl are contributing the lion's share to the EUR 70 million EBITDA effect. The structural measures also include the closing of the rolling mill at Ascometal in Les Dunes, which will lead to a permanent saving of EUR 8 million already in 2020. In addition to the structural measures, tactical measures such as short-time work will be implemented at the plants in order to improve the earnings situation in the short term. The second block is summarized under the heading operational excellence. This includes a large number of individual projects. On the one hand, these will compensate for the annual recurring cost inflation through continuous improvement, but will also lead to a higher operation performance. To illustrate this area of work, let us take the project that will improve yield. The process parameter called yield defines how much of the material used is generated as waste after a process step. By increasing the yield and thus, reducing the amount of material that cannot be used after a process step, the operation performance can be improved, in some cases, significantly. The same applies to the use of raw materials. Efficient use, for example, through the optimal composition of scrap can optimize cost and that leads to significant better earnings. All measures will be -- or will contribute EUR 119 million to the EBITDA by end of 2024. The third package of measures comprises the strategic CapEx projects. I have spoken repeatedly about this over the past 2 years, including the investments in the new walking beam furnace at Swiss Steel, in the Nadcap-certified heat treatment at Ugitech. By the way, yesterday, we have produced the first piece out of this new furnace in Swiss Steel. We expected -- or expect the strategic CapEx project to make a positive EBITDA contribution of EUR 26 million by 2020 (sic) EUR 6 million (sic) [EUR 26 million]. In addition to the projects already planned in detail, we have developed additional measures that will reduce our dependence on market developments, help leverage synergies at group level and eliminate certain overcapacities at, for example, Ascometal and DEW. These include the evaluation of the introduction of a shared service concept, streamlining of administration, but also specific measures at Ascometal and DEW, which I will not go into detail yet due to the time constraints. The sum of these sub projects will contribute EUR 59 million to EBITDA by 2024. In order to ensure that all these individual projects here in the group are able to carry out and -- the complexity to scope -- to cope with this complexity, we have reorganized also in our holding. We have set up a strong transformation office, consisting of our own employees and external specialists. If you go to Chart #15, this summarizes the effect on EBITDA until 2024. Overall, we expect the restructuring program to make a cumulative contribution of EUR 275 million, of which, 60% is based on cost measures and 40% on market measures and sales-enhancing initiatives. The road to achieving this goal is long. However, we see elaborated plan in our pocket. On financial solid foundation, we are convinced that we will succeed in restoring the competitiveness of SCHMOLZ + BICKENBACH. This brings me to my assessment on the market environment in the current financial year and the annual outlook on Chart #17. Uncertainties regarding future global economic growth have increased massively in recent weeks now as a result of the negative effects of COVID-19. Visibility is correspondingly low and the stabilization in our end markets observed at the beginning of the year has recently been called into question again. Nevertheless, we can state that the inventory situation has largely returned to normal after a year marked by destocking in 2019. As a result, incoming orders should once again increasingly reflect the actual needs of our customers, Matthias was mentioning that, which is also evident from the fact that the order situation already improved towards the end of the year and also now in January and February. It remains to be seen whether the effects of the virus will have a lasting or a temporary effect on the growing economy. The only thing certain is that volatility is very high. Consequently, the steel industry, as a whole, will remain under intense pressure in a downturn that is longer and deeper than a normal cyclical downturn. This brings me to my last chart here, #18, with the priorities for 2020 and the outlook. And the first important milestone, we want to have fully completed the refinancing of the company by the end of March. What was -- already been started in parallel and is gaining momentum is the rigorous implementation of the individual projects as part of the comprehensive restructuring program. We must tackle these with determination if we are to see the expected positive financing effects on earnings as early as 2020. In order to closely accompany and monitor the projects and to take corrective actions when necessary, I mentioned that we are strengthening our transformation office, which will also help us to identify ideas for improving operational performance that go beyond the restructuring program and to implement them quickly. Based on these priorities, we have set our forecast for 2020. This forecast is mainly based on the implementation of the restructuring program and is, only to a lesser extent, dependent on global economic development. Excluding the expected impact of COVID-19 on the global economy, we expect the adjusted EBITDA in 2020 to be significantly higher than in 2019. This is the result of the first positive financial effect from the implementation of the far-reaching restructuring program. I would like to close with that here -- my presentation and to finish the outlook. Thank you for your attention, and we are opening now the Q&A session.

[Operator Instructions] We'll take some questions in here and then switch to some questions over to phone. So who asked the first question in the room?

So my name is [ Arnold ] from [Cosaze]. Just a quick question for Mr. Wellhausen. Do you expect to sell one of the business units in the short term to generate more liquidity?

No, we don't, for various reasons. One of them certainly, this is, overall, not a good time to sell assets. Secondly, all if -- strategic direction has not changed fundamentally for SCHMOLZ + BICKENBACH. And thirdly, we clearly base our financing concept on a situation without such sales.

[ Daniel Gurney ] from [indiscernible] I have a question. On a pro forma basis with your -- with that bond being fully repaid, what the leverage ratio look like? Because you said, it was off the capital raise. It was a net debt EBITDA of about 10x. If you would assume a full repayment of the bond, how much of that gives leverage? And then in absolute terms, this I saw, and I thought, well, it's the whole month for the capital raise going forward to bondholders, and we end up with a high level of debt.

Indeed, the bond buyback will change the structure of our financing, but it will not change the leverage as we calculated because we take all the full net debt as composed of bank debt and bond. So we clubbed these 2 together. So what we will be seeing is there will be less of bond, and there will be more of financing from the banks. So the bond -- the loan taking of the bond doesn't change the leverage or our equity ratio. But of course, does changes liquidity potential because if we take out EUR 300 million, if you so -- like of existing facilities, if you want to call it like that. Again, the answer here would be that this -- that the planning that we are undertaking that gets validated very meticulously is based -- will provide sufficient headroom also in conservative projections of the business development. So this will be taken care of in this financing concept.

I have an additional question. Did I understand you correctly that you were aiming for an EBITDA margin of 8% by to 2024?

8.5%.

25?

8.5%.

8.5%. May I ask you why you're going for 8.5%? Because if I look at all the steel companies from ArcelorMittal to [indiscernible] Magnitogorsk. I still have this feeling 8.5% is not an extremely ambitious level on a basic state steel industry with a normal economy.

This 8.5% stemmed from an external benchmark indeed, not invented only by us, but validated by the external advisers we have currently deployed. And it also provides for a, let's say, return on capital employed that would definitely match our weighted average cost of capital. And maybe when you say that it's -- it doesn't look impressive, please understand that we have a mixture here between different steel products that we are producing. We have engineering steels, tool steels, stainless steels. Stainless steels being inflated by the raw materials sitting in the revenue, but not producing any EBITDA. So that is typically something that does need to be considered. And hence, we think that the 8.5% decent target, which -- on the average of the cycle. So it doesn't mean that this is the peak that we should be earning. It's the average of the cycle that we have to look at here. And by the way, it does not...

Average or [indiscernible]

Yes, yes. And this does not so, let's say -- actually, it's a confirmation of an earlier target setting. We haven't published such a target for a while, but if you would be going back to 2014, you would find in the documentations of our presentations, you would find these figures almost, it was at 8% then. So we beefed it a little bit up. So -- but this is a -- yes, this is the way it comes.

So operator, do we have a question coming on phone?

Mr. [indiscernible] had another question.

He doesn't like the 8.5% but...

[indiscernible] looks like he's satisfied right now.

I'm at the moment [ satisfied ]

So will give you after the next call, and so we gave you the mic again. So do we have somebody over the phone?

[Operator Instructions] So the first question is from Rochus Brauneiser of Kepler Cheuvreux.

Yes, a couple of questions from my side, actually. Can you talk about how you see shipment growth as of now? You said that your guidance is not including corona effects and I appreciate that. Probably it's a bit early to quantify that, but based on your pre-corona guidance, what is your shipment expectations for the year?

Mr. Brauneiser, we have -- I mean I can only say at the moment that we are in our plan. We said that from October onwards, we have seen now month-by-month a better order intake, and this reflects also, of course, now in our order backlog. And shipments are online as well. So -- but yes, one thing that so far, we have not seen really an impact is on the corona or neither in the shipment nor in the order intake. But saying that, of course, I cannot say that this is in a week the same. It depends really on how this develops.

Mr. Brauneiser, would add too -- maybe also, what we can add is our view is that the crisis that we had in 2019 will take some time to fully recover. So until we are back to the levels of 2018, we'll take a couple of years. So it's rather 2022 than 2020 in terms of volume growth. So what we would be thinking is, we will see a single-digit growth this year without corona, but we will definitely not be back to 2018 levels.

Okay. And when it comes to the first quarter, based on the better order entries and order books, would -- is it -- what is your visibility that you can achieve the typical shipment growth you have had usually in the Q1 versus the preceding quarter?

Once again, we learned to be humble with our predictions. If you remember, the previous year, Mr. Brauneiser, we both here, Clemens and I, can -- all of a sudden had to report always of some offtake stops of the customers who manage their inventories very aggressively. So it's a tough call to qualify what Clemens has said earlier further. Yes, it's going better than what we have seen in the previous quarters. Would there be an impact going forward from the corona? And in terms of offtake, it's very hard to judge at this point in time. Without corona, what I said, we'll see certainly a quarter according to plan with less depressed demand in the previous half year, but more than that.

Yes, Mr. Brauneiser, maybe before you ask the question, of course, the oil price change right now last days has also, of course, given us some problems to forecast because so far, there has been not -- at least, I'm not aware any cancellation, but it's true that the customers are worried in the U.S. So they have called in, in the last 2 days, to say, " Oh, we have to see what's going to happen there. " But so far, nobody has canceled. But all this is brand new, yes, so it's very difficult to say, Oh, this will have an impact or not.

Okay. What is your share of the energy and gas business in the U.S.?

In total, SCHMOLZ + BICKENBACH is in the range of 12 percent-ish, is -- but it's all in -- yes, that is mainly oil and gas, the 12% in the U.S. It will be a little bit higher. I think it's -- even though, it has been depressed for a while, is somewhat more exposed. That's all we can say. But this is not all from the -- for the rig business.

Or the frac blocks. This is not only for the frac blocks.

It's -- we also sell material that is for the infrastructure building in Texas, which is mainly a little bit less impacted. So once again, that is hard to assess at this point.

Okay. I appreciate that. On the guidance, when you say you expect an EBITDA significantly above previous year, it leaves a wide variety of outcomes. Based on what you said in terms of volume growth that you expect a single-digit growth -- volume growth in 2020, what would be kind of a midpoint for what you could see as a wider range where earnings should arrive pre corona in -- based on your planning?

Well, we are intending to give more quantitative light in the next earnings release. At this point in time, we don't think it is appropriate to give a quantitative guidance for the full year.

I know -- Brauneiser, understand after last year's -- 3 year -- 3x profit warning that we are a little bit careful now with all these unforeseen circumstances. But you have -- I mean, we mentioned it. We have this restructuring report, the S6. It has a clear number inside. This is what we are heading for, and let us now see if this 2 special effects have an impact on that. And that's why we said, today, we don't want to give a quantitative number and do this then with the next earnings release, which is, I think, May or -- yes.

Okay. Another question is on your 2022 target in terms of volumes when you want to get back to 2018 level. Considering that Europe's economy is pretty much depressed and corona is definitely not a great job. Can you elaborate briefly how you want to get to this 2018 volumes without any tailwind from the market?

No, we do expect a tailwind from the market, overall. Also the work together with our consultants has -- and we had intensive ones. It's confirming that the markets are still intact, be it electro vehicles or whatever you look there, there are also counter trends in terms of larger vehicles, safer vehicles, heavy vehicles and so on and so forth. So we do expect -- and hybrid-propelled cars. So overall, we do expect the market to be overall intact the market perspective. However, as we have said that it's going to take a while until the, let's say, after this sharp drop, we have reached the same level as in '18 again.

Okay. And on the restructuring. So this comprehensive plan you're now starting to implement, what kind of personnel reduction is triggered by that compared to the end 2019 workforce level?

Want to give the number?

You want to hear the number of...

Number of personnel reduction which will be triggered by these new plans?

Yes, it's -- there's a focus on Germany, clearly, where productivity is a prime topic. We will also have to look into the SG&A area where it's less clear of how many -- to what extent it will also mean reduction. But overall, we would be looking at north of 400 persons.