Técnicas Reunidas, S.A. (TRE) Earnings Call Transcript & Summary

Hello, good afternoon. This is Eduardo San Miguel. Welcome to this first half 2020 results presentation that will be conducted, as always, by Mr. Juan Lladó, President of the Group. He will take something like 15 minutes, and you can pose your questions after the speech. And now I give the floor to Mr. Juan Lladó.

Hi, hello, everyone. I have a presentation, which I'll try as always, not to make it very long and go to the point. What are we going to be talking about today? Obviously, today is the second quarter 2020 presentation -- the results. And let's go forward. Where are we in this complicated as a very sad situation. Complicated, but obviously I have to save that -- we have to say that we are, as I always say, modestly optimistic. And why so? You may say, why you're always optimistic? I'm not optimistic. I'm very prudent that I have to be optimistic. And as we go through, as we go forward, we'll see why. Because we'll talk about the backlog. And we talk what back though do we have, and with whom outstanding customers, which is a very important to manage difficult situation, having a good backlog and with good customers. And having a good backlog and good customers, we'll see how are we manage in this situation with our customers? How are we -- how is execution going under COVID? Are we doing well or not? And the answer is yes. How are we putting in place, what we've talked about more than 6 months ago, what we call the TR-ansforma efficiency scheme -- plan, which is good. Is already embedded in all the projects, specifically, not only the structural costs, but in all the new projects, which is good news. Efficiency plans are done in good times to make them work when times become difficult. That's why you go to train, to train for to be able to climb uphill, and we're well trained and we're doing well. All of that translates into results, which obviously, were not the results that we had expected in February this year. But nobody had expected anything that is happening today in February this year. But I guess, the results, if you take the optimistic side, are very decent results within this situation. And we have, within this situation, in a very acceptable financial position. We say its healthy financial position. We don't want to use the terms of robust or strong and whatever -- healthy. We're healthy and that allow us to do a very good management of our jobs. And very important, we continue having customers and the pipeline is still very much alive. And we're going to be seeing -- we've seen already and we're going to see with our prime customers, conversions and awards within the next 12 months. So I practically have made the presentation on the introduction. But I'll -- now I go through really quick through one -- through the different slides. And this is quick, this is the backlog. It is true that today we have EUR 10.1 billion backlog, which is more than twice on your annual sales. And within this situation, this is good news. It is not good news, the size of the backlog, because you can have a great backlog and enough of business. In this case, we have a backlog with the customers we wanted to have. These is the customers that I like to be with if I have to run a crisis. I like to be with Aramco. And I'm with Aramco. I would love to be with Exxon to manage the crisis, and I am with crisis. I would love to be, and I am with KPC, which is KIPIC, which is Kuwait. With Kuwait oil company, so the main oil company with whom we're doing 2 big huge jobs. And I'd like to manage this crisis with them and we're doing that very successfully. We're doing very successfully with SOCAR to whom we have delivered a great refinery in Turkey. To whom we've bidding a huge job, and with whom we're working in a very complex job -- very complex job in the middle of the Baku -- Aliyev Baku and I'd like to be with them. And obviously, we're doing well, managing project-by-project, quite difficult, but quite successfully all the different projects we're working for the ADNOC group of companies. So this is within this complexity because, obviously, we have to manage this business under definitely new situation. This is good news. And it is good news because having this backlog and having this set of customers allow us to work project-by-project, customer-by-customer and job-by-job. It's not the same, a big refining jobs that is about to finish in Saudi Arabia, then a job that we're just starting to buy equipment and it has to do with gas. This is a different -- they are different stories. It is different customers, different amount of -- different workers, different sites, and sometimes even different local regulations. We're working extremely well with customers that are looking for ways with us to accelerate. Obviously, it's not easy to accelerate when the local laws, even though the customer is part of the law, makes it very difficult to input 15,000 workers. So we have to find ways with them. That's why I'm somehow happy of continue working with less amount of workers -- with 5,000 workers. And finding ways with them to progress, to prioritize one unit against the other and adjusting to the label mobilization, which is very difficult, but very different in Oman. It's not the same Oman and Saudi Arabia and it's not the same Saudi Arabia as it is improved, and is working all around the world. And I have to tell you with -- in this sector they're all very professional and we're doing quite well. Obviously, managing these jobs, it has an effect -- a direct effect in the way we cannot progress, in the way we can complete our milestones. And therefore, we have to through the supply chain, manage our cash, and we're doing so. And we're doing so, obviously, our working capital has not improved and we'll see at the end, but it's a reflection of a good management, having still a positive net cash position. So at the end of the day, what a manager has to do today? It has to be flexible and we are with flexible customers, and very professional. It has to be creative because we have to work under a circumstance that we have never worked before. And we have been very successful being creative from teleworking to managing the site. And it has to be a -- it has to be flexible, it's different to adjust. It is not the same how we work in Oman and how we're working in Bu. It's a totally different story. But in both of them, we're reaching good agreement with our customers and we are progressing quite good. So managing execution under COVID, which is a title of this slide. I think it's summarized in this 2 main points, its good news. I mean we've been quite successfully -- despite our stress and our pressures on the customer site and our site, quite successfully progressing in all different jobs. And probably if I wanted to give some color, I give you some color on this message. I decided to put 2 pictures. And this is the only purpose of these 2 pictures is to add some color to the message I'm giving to you. We will not be flexible. We will not have good customers. We will not be creative. We were not able, and we are to direct in the middle of -- in the middle of May, one of the biggest vacuum distillation units for the refinery of Duqm in Oman. And this is the picture. And this -- I don't know exactly the date, but it was somehow mid-May, that's a reflection of all the points that I've placed before. This is Oman. And then this is the last slide. This is a big cash plan. Everybody knows very well this is Haradh. This is how -- which is well advanced. And here, again, in the mid of May, in full cooperation and coordination with our customer we're erecting a huge -- a flair. Now you see here the picture of the plant on one side and the erection of the other. The purpose of these 2 [ slide ] is not only words, but pictures on how through this -- I hate to use the word pandemic, but there are these different situation, we have to find different ways to work. We're going to be having and we will have different impacts. And we have to be ready to manage them, and we are. We've managed probably the worst and we've learned together, probably how to manage the near future. On the other side, at the very beginning, I said that I felt comfortable because our TR-ansforma plan, which we started at the beginning of last year, we started to even to value what we wanted to do last year and why last year I told you before, and that's because TR-ansforma plans, efficiency plans, cost reduction plans, redesigning plans, strengthening or planning and cost control or risk management, everywhere, everything has to be do -- has to be done when you're healthy. I mean when you're healthy, that's when you have to do the good checkouts. And then you have to take all the measures just in case one day you know that's healthy. And then we started 2019, which probably everybody knows, that was one of our record years in awards in terms of quantity and quality. It's a year that we have delivered more jobs. And we started together with 2 big consultancy plan that today is fully in force. Today, it's not consultant plan, it's TR plan. This is translating already in corporate cost reduction. This is already translating in very specifically new jobs, obviously, in a very efficient procurement and subcontracting strategy. This is already translating and it's embedded into the project and it's translating into positive numbers in a far more efficient management of our site. We had huge jobs and we had to done -- and our whole purpose before was to finish them. Now we have new jobs and the whole purpose obviously is to finish them in a far more efficient way. And it has, as I said before, it has caught us working. I mean this crisis, which, obviously, we have to manage this business under big crisis, it has covered with the lessons learned somehow. So this is good news. This is -- makes me feel prudent, but optimistic about the managing of the business. Obviously, this translates into numbers and now -- and this first half of the year results, they're not even closer to what we had thought affected and even where I told you in -- when I told you in February, when I told you at the end of last year, and when I told you in February. We were expecting, and we were comfortable, and we had a great Christmas, and that we had a very good presentation towards the end of the year. And then somebody called COVID-19 came over and messed around the whole business. But if you do an analysis, obviously, we were expecting to have a growth in revenues. And those revenues, very specially this last quarter has been drastically reduced. And it's not because we have less backlog, because we do have the backlog. It's because the managing definition of a jobs is far more difficult. And we have to go job-by-job, milestone-by-milestone, progression-by-progression, certification-by-certification. And we cannot run, we cannot -- it doesn't translate in sales. And if it doesn't translate in sales, it doesn't translate in margin. And if it doesn't exist in margin, we don't have the expected results. At the same time, we have the impact of COVID. And obviously, we have impact of COVID which we have to take into account, which reduces our margins. And this year, these first 6 months that we've been talking about, our power problems. We have been hit and we have taken our costs to completion in our power division in the 2 jobs that we're having problems. One is in Finland and the other is in U.K. So we have been talking about in May. Sometimes we have good agreements on the U.K. side, and serious disagreements that in the Finnish side. In both cases, there are customers, I don't want to talk about them. I have a lot of respect for our customers. But all we can do now is take the hit and continue working forward as there are other projects in the oil and gas division and doing extremely well. And there are other projects in the power business are doing very well. And we have been very successful in the delivery in some of the big problems in the power division. So this is the business, and there's probably the most prudent way to manage them is take the hit. That hit has been compensated, has been practically offset. Sometimes we have good news. Very often we have deviations when we're delivering jobs, there has been 2018 and 2019. But over 6 months we've finished jobs. When we're closing out the jobs, we have been successfully with changed orders and improvements of the jobs, which is very difficult to account for. And because it's very difficult to account for, it has -- we didn't account for them and when it came, it has allowed us to offset the hit in the power division. So at the end of the day, this -- the summary of this P&L is, less revenues - less margin. And then 2 extraordinary impact. One, negative on the power division and one positive in our core business, which is the oil and gas division. And all of that, within a COVID situation, which obviously it doesn't help, which translates into a working capital that is a little bit more tight. If we were expecting to have, as I said before, and I'd be very transparent, a net cash decision. Obviously, when I said before that EUR 400 million was ambitious, but I believe somewhere in between EUR 250 million and EUR 350 million was more or less the average that we had in our plan. As completion of the milestones, and payments of the customer's month end becomes more difficult, translate into net cash position, which is a bit more tight and is EUR 154 million, which is understandable. As I said before, difficult to achieve progress, difficult to get certification of completion on the jobs as you do not run, despite customers trying to help us, difficult to achieve milestones. Despite of many customers that are negotiating with them quite successfully partial completion of those milestones. So that's what I say -- we have strong and good customers. And in August this difficult -- makes it very difficult to manage the working capital and is not as good as we had expected. And then on the good side, I mean, we're managing the business, but also we're managing opportunities. And people may wonder if you haven't got that many awards, why do you have EUR 42 billion of opportunities or EUR 42 billion of pipeline. And the answer is, yes, we have. I mean we -- and most of you, which -- the ones who are experts in the market, they there are big investment plans in which we are part of all of them in the Middle East, in Asia, in Russia, in Turkey, in Azerbaijan. They're big investment plans on which we prequalify. In many of them, we are already working on the FEEDs that we had been awarded over the last year and a half. In some others, there are open books that we're negotiating with customers the time to convert. And obviously, there are delays, but -- they're not -- we're not talking to year delays, we're talking monthly delays. So the opportunities, if we compare this crisis, with the crisis of 2014-'15 is totally different. Obviously, everybody is confined, everybody is waiting and seeing sort of the level of working with our customers. The small awards are increasing on the front end because they want to continue, they want to have in the frontend that we're working with customers. They want to have their jobs better defined, and we have been better defined for the day of conversion or for the day of making a decision of investment -- a final investment is very intense. And that gives me the -- allows me to send a message to you that that are the awards to this year and in 2021 that they're going to be strong. It's a good message. So I'd like to finish. When -- I guess, the outlook is very much my introduction. And my introduction is, I'm facing the future, as I said before, with fervency, I'm prudent, but I'm optimistic. And that allows me to review all the things that I said before. And I'm optimistic because we rather work efficient with our customers and with our backlog. I'm optimistic because the way we're managing the jobs with our customers, I repeat, under this COVID situation, we're doing quite well. Teleworking has proven to be good. In managing site-by-site, customer-by-customer and job-by-job, we've been very successful. I'm optimistic because our TR-ansforma plan is working, and we've seen the result. This is not an idea anymore. It's an ongoing result, which is working. I'm optimistic because we have -- if we put them all that together with net cash position in a rather healthy financial position. And I'm optimistic and always prudent, but I'm optimistic because the pipeline is ongoing. I mean our -- and that's the measure of our estimation in commercial division. Despite of not being able to travel, we're presenting bids in the market, we're negotiating conversions, which is getting an awards. Although, a small job with Aramco, but it's a sign that Aramco continues working with TR in the Ras Tanura Refinery. They wanted to have a new job. And through this mess, because it's been a mess, we have clearly agreed, and still assigned an important job. Important for the quality. It's our Stripper plant in Ras Tanura, it gives the message. It's not going to solve the P&L or TR in 2021, but I think it allows me to give a very positive message to the market. And you see some awards in the future, 4, 5, 6 months. So well, having said that, I think it hasn't taken more than 20 minutes -- 23 minutes, I think. I was planning to doing 15. I'll open the floor for any questions you may want to pose.

[Operator Instructions] We already have a question from Michael Alsford from Citi.

So I've got a couple, please. So firstly, I appreciate the current environment is challenging, and you mentioned that there's been some impact from COVID in the quarter. Could you maybe perhaps quantify what that cost or cost impact has been to try and understand, I guess, what the underlying margins are doing. Because, I guess, you talk about an optimistic outlook and a strong backlog, but the market doesn't seem to believe that. And I just wonder if you can give a bit more confidence as to the direction of margins going forwards as you move through into procurement and in further phases of these projects. You talked previously about getting back to sort of EBIT of 4%. I'm just wondering if you can perhaps give a bit more color as to progress of margins in the coming quarters.

Michael, first question. I mean what is the impact in these numbers of COVID? I don't know the precise number, but somewhere in between $40 million and $50 million. I think it's $44 million or something, give or take. That's the net impact. We've analyzed, what are the extra costs, some of the some of those, because we already recovered with -- from some customers, with some others we're negotiating. But as of today, the net result -- the net cost of COVID is $45 million. Margin now. I have a problem telling you what is going to be the margin next 3 months and the margin at the year-end. And I have -- but I can tell you something -- something positive. I can tell you that the margins on the projects are good. And the margins in other projects that we have in the backlog, if anything, are improving. I mean we're buying well. We're very prudent on the construction. We are doing construction by units and not the whole plant because it's necessary, because we cannot have 25,000 people on the job and customers like Repsol. So we're doing by set of units or by systems. So we're starting -- we're getting good prices. And we have pressure, obviously, in run, certificate, get the milestones done and get paid. But we're not getting the pressure from the customer. We have our own pressure because we have to finance restructure. We have to finance TR. We have the -- to have the pressure that the working capital -- managing working capital and managing projects in processes. But we're not getting the pressure from the customers. That's why I said at the beginning, like a good sign -- a good message for our customers. So our customers, they want to continue working and they want to work with us in the most efficient way. So the managing of the backlog is good, and the margin in there. And if anything -- if anything in a longer period of time, because it's going to take longer to finish all those jobs with -- and many of them 1/3 or 20% of the needed workforce, it's going to take longer. And -- but we're not going to be running through less margins. So the issue here is how we're going to be accruing sales and how we are accruing margins. On top of that, some of the structure cost, we have to suffer. They're going to be partially offset, if not totally offset, by our TR-ansforma cost reduction plan. Having a plan to cost -- and make it even bigger is easier than not having anything. I mean we're having a plan. Obviously, on the structure, we're having a plan on efficiency of engineer and engineers. We're having a plan on procurement and everything that seems to place. And now we're seeing now that it's allowing us to offset in a great deal the extra cost of the COVID. So it's very difficult on a quarterly basis to see what is going to be my margin in September. Because the greater -- the thing is, this is like a moving target. But overall, I can tell you that the big jobs -- the new jobs are healthy and we are executing them within our markets, and sometimes even better.

And maybe a quick follow-up, if I could, on the working capital. I know, again, it's a difficult one to call because there's an uncertain environment. But what do you say that you feel that you're at the bottom of the cycle, i.e. that net cat cash position at EUR 154 million is the low point in the year or do you see further working capital outflows ahead of you?

All I can -- again, difficult. I mean the message is, we're going to have a net cash position. We're going to have a healthy balance sheet. But if you see the size of our jobs and the payments that we have to get paid on a quarterly basis, they're huge. They're huge on the Asian side, they're huge on the Middle Eastern side, whether it's Aramco, whether it's Duqm or whether it's ADNOC. And sometimes, we've seen that we have a month with a very tight working capital and then 15 days later we get paid -- our net cash position on a monthly basis is very big. So it's very difficult. It's going to be volatile. We're going to be positive. We do expect to be comparable. But I cannot tell you that this is -- I don't want to start working with numbers and saying that $150 million is the bottom. We might see a quarter that is $110 million and next quarter is $275 million or $350 million. Depending of milestones in payment, this is rather volatile. Thank you very much, Michael.

We have another question from Francisco Ruiz from Exane.

I have 3 questions. The first one is mainly related to the number that you gave to the previous question. So can we assume that in the H2 of this year, we -- in a case of a smoother COVID impact, we could have almost half or almost entirely these $45 million back into the margin. The second question is on the TR-ansforma plans. You commented that there has been a possibility of increasing the initial scope of the plan. But could you give an idea of how much this plan has added to the margin in H1 and what are -- what could you estimate for H2 and then year 2021. And the last question is on the project that has been commissioned during this quarter, mainly Jazan and probably Fadhili as well. Could you give us an idea of how it was and if you have any problem with the clients?

Francisco, first question, are we going to recover the $46 million? I mean if I have taken as a loss. It is a loss. It doesn't mean that project-by-project, customer-by-customer, we're not trying to recover some of that impact. It's going to be difficult, but we're going to be trying. But as I said before, I do expect that in intermediate term, our margins may improve despite of this cost because of a better procurement terms and because a far more efficient execution terms, and less pressure for customers. We don't have the pressure that we suffered before, say you have to run and you have to pay overtime. First of all, because we cannot -- I mean, you cannot now run a job with 15,000 workers. So we are [ green skinned ] with customers. That, if anything, would allow us to manage the margins better, and our contingencies better and our relationship with our subcontractors and suppliers better. So it's a mix. But don't expect me to come next quarter, say, I've recovered $46 million because -- due to training efficiency. It's going to be embedded in the margins of the projects. As well as the TR-ansforma. I mean TR-ansforma is already adding into the project. I mean at the end of the day, TR-ansforma is a safety net. I mean TR-ansforma is what is making it efficient. TR-ansforma is -- was making us that the new jobs and with possibly now that the engineering we're able to do to design with less engineers. Is that TR-ansforma? Well, probably yes because we have put the system into place. But it's very difficult to take the margins away from project managers then give it to the TR-ansforma account and we don't want to do that. What we've seen is after starting TR-ansforma is that both structure, engineering and project management will becoming far more efficient, and we're making more money. But I don't want to take the money away. And I don't want to make it public either from project managers. So the project managers to be part of TR-ansforma, make money and get a great bonus, as that's what I want. And that's how I think the business should be run. And the third question is Jazan and Fadhili. Jazan has been our nightmare and has been a nightmare for the last 8 years. And I think it's been our nightmare and our competitors' nightmare. And probably we had to do it again. We would have done it differently with contractors, suppliers, subcontractors. I think everybody has made a lot of mistakes in this job. I never want to blame the customer. We're their contractor, we took the job, and it has been a disaster for our margins, for accounts, but it's done. It is done and the job is there. It is done with quality and most importantly, we have kept the customer. And we have kept one of the most important customers in the world. And now everybody knows and many investors knew because it has been presented to investors when Aramco was with doing their -- they're going public through IPO. So ideally, there were 5 trains. Over the last 6 months, we've started to startup train-by-train, instead of the 5 trains at a time. The last train with a startup I think in February. It's already run by the customer. There are minor details and punch lists that we have to finish -- minor. I mean nothing that affects operation as already Aramco is operating the plant. And I have to tell you that I had -- I thought we were going to do better, that we'd make money. We're doing fine. Not as -- and it's been a good job. And I think it will be good job for TR, and it's been very good job for the customer. So Fadhili is a good story. It was a challenge. It's huge. It was a big challenge that we took. But I think we've done a good managing of the job. Probably we are -- like always, we always go -- we're going today to lessons learnt. What we should have done should we have to do that job again. Probably, we would have done it differently. We would have started train by train instead of all at the same time. That's how lessons learned that we do all the time, and we would have done even a better job. But overall, it was a good job. And it's probably -- this is the largest project finished and delivered by TR [ at one ] in Saudi Arabia. Where everybody thought that it was very risky, well, we have proven to the market that it's not a risky. I don't want to say out loud because I'm going to be getting competitors. That is the country that you can work and it's the country that you can deliver huge, large, complex jobs successfully.

Our next question comes from Mick Pickup from Barclays.

Couple of questions if I may. One -- firstly, you mentioned a loss in power because of the U.K. and Finland. You couldn't just tell me what that loss was for the first half. You normally give it in your full presentation or your full details later on, but you don't give it in your presentation. So what is the loss in power in first half? Secondly, if I go back to the COVID cost question. I'm sorry to just going back to this. You've just done EUR 33 million of operating profit in the first half, and you're telling me there is a $44 million impact from COVID. Now is that across the half? Is it just in the quarter? And does -- is it actual costs that you didn't expect or does it include a revenue impact on productivity coming through? Because I'm just adding 44 to 33 and thinking this margin is already back towards 4%. And finally, in your business pipeline, I noticed that you take the pipeline now and you've disaggregated it into natural gas, clean fuels and petchems and then biofuel and renewables. I think historically it was oil, gas, downstream and power. Can you just talk me through the reorganization or the reclassification of that? And on the oil side is it -- that there are no oil projects, in particular you're looking for at the moment or is it just been moved elsewhere?

Okay, let me make -- let me start by the third question, which is whether we reorganized our business. Our business is the same business. But I think we've been badly influenced by you.

Everybody is, don't worry.

And being badly influenced by you, I think we have to -- is a way of giving the message to the market that refining and petrochemical are very often is very close to a clean fuels and is necessary and is very clean. And is necessary for this transition to a cleaner world. And this natural gas is natural gas. We cannot rename it. The natural gas, it seems everybody likes it. And -- but clean fuels and petrochemical, lot of people get confused and at the end of the day, petrochemicals, I like to add up to clean fuels, because this -- sometimes this makes -- allows me to give a message to the world that we are not that dirty, and we're necessary. It's just -- and its cosmetics. We've always been the same. But we have to give the message to the market that being the same, we're necessary, we're clean and we are an important part of the transition to a cleaner world and necessary. Otherwise, everybody thinks that a windmill is the only thing necessary to survive.

In the last quarter, you had EUR 40 billion in opportunities and 17% of it was in oil. You described it. So it's about EUR 6 billion of opportunities in oil, which wasn't considered downstream. So it's just -- where is that going?

That is -- when I say natural gas its oil and gas. It's probably mistake. And maybe wanted to be very clean, too clean and we didn't put the term oil. But its oil plus gas. We were trying to be too cosmetic, sorry about that.

On the power breakdown -- the loss in the first half.

And obviously, in the power breakdown, we have in the U.K. we have an issue. We get along with the customer. We negotiated with the customer well. I think they understand us. I think they're using sort of a mix of directed lack of productivity, difficult for us to finish. Difficult for us to finish a job that we thought we had pretty much organized about 9 months ago. It has mixed up with COVID. And it was soft. Now we're having problems again that it was soft and now we have more than 1,000 people on the job. But it has had a great impact. We have decided to take the whole impact. I mean if provided we're doing well, we have -- we've done a thorough analysis and we have taken the impact. We have to be healthy and in this -- and they impact is $78 million to be precise.

78? 7-8?

7-8. And is -- and it is what it is. I mean -- so we have taken the impact piece over the last 2 quarters and that would allow us to focus better in managing this not very comfortable crisis. It obviously has been offset by the other profits, but the impact is there. And the problem is ours and maybe we may recover something in the future. But unless this -- we have to focus on the rest. And we have to focus on the customer and finish and deliver the plan, period.

But I would say that the oil and gas business is actually doing very well at the moment.

The oil and gas business is doing well. We have a -- we're having issues not with margins, not with our customers, not with construction, not with procurement. We're having issues that every single job has to be somehow redefined. I mean if you got to Duqm, which is a good job, and everybody knows and everybody can go and see it. It's a huge job. We're doing very well. That's where you have the big vacuum. We have a good customer, but a customer wants to run. But we have to find a way together with the customer how to run because the customer wants to run, but we cannot bring workers. So it's good news that we have a good customer. It's good is good news that we're doing the job efficiently. But it is not good news that we cannot run because we like to run. To run means certification, progress, milestone, cash, working capital positive and new jobs. So while oil and gas business is doing well, but I would prefer to manage this business under -- as I had planned in February 2020 this year.

And then on the COVID cost of $44 million, does that include the volume the impact as well? That's the overall impact on the business. Or is that just extra cost that you have had to absorb?

If -- it's the direct extra costs that we do consider that is difficult to directly recover from customers. That is not into negotiation. We may recover something, maybe not through COVID. This is something else, a different order, a better procurement terms with other procures, but it's not -- because as you know, I'm not taking it via volume or via economies of scale. That's part of the day-to-day business that you see in the balance sheet. Less turnover. Obviously, we have to be very efficient and we're working extremely hard to be efficient and to put in place the details of the TR-ansforma. Now its details of the TR-ansforma plan to somehow diminish the volume impact of working in this new COVID environment. This COVID -- this $45 million is just pure direct impact.