Tata Steel Limited (500470) Earnings Call Transcript & Summary

Thank you. Good evening, good afternoon and good morning to all of you joining us from India and other parts of the world. On behalf of Tata Steel, welcome, and thank you for joining us on the call today to discuss our results for the second quarter of FY '21. I hope all of you and your families are safe and with good health. I would also like to wish our Indian participants a very happy Diwali in the first of the year. Today's call is being led by Mr. T.V. Narendran, CEO and Managing Director of Tata Steel; and Koushik Chatterjee, Executive Director and CFO, Tata Steel. As we have seen during the last several quarters, in addition to Tata Steel, we will also comment on the performance of Tata Steel BSL and Tata Steel Long Product. [Operator Instructions]. Before we start, I would like to mention the entire discussion today will be covered by the safe harbor clause on Page 2 of the presentation, which is uploaded on our website. Thank you. Over to you, Naren.

Thanks, Samita. Good evening, good afternoon, good morning, and happy Diwali to those of you celebrating Diwali. So I start -- as you know, economic activity has been improving across geographies, with the relaxation in restrictions. The pace of recovery has varied and the risk of further outbreaks [ purses ]. Europe is currently experiencing a second wave with several countries going into lockdown again. And we are running our operations safely and efficiently to service our customers, and the health the safety of our employees and the communities in which we operate continues to remain our foremost priority. Chinese domestic steel demand continues to be quite strong, which has supported international steel prices and kept iron ore prices at elevated levels. While demand and production is still below pre-COVID levels in the rest of the world, it is still being in recovery. This has led to improved spot steel spreads across key regions. In India, the steel demand recovered with resumption of economic activities and in anticipation of steel demand. While the steel demand declined by 10.1% year-on-year basis to 23.6 million tonnes in the second quarter. Apparent steel consumption in August and September recovered to about 96% of FY '20 monthly average. In this environment, we ramped up our steelmaking and downstream operations across our other steel standalone, Tata Steel Long Products, Tata Steel BSL back to pre-COVID levels. Our crude steel production rose by 54% on a quarter-on-quarter basis and 2% on year-on-year basis to 4.59 million tonnes in India. We liquidated the inventory build up to Q1 to achieve our highest ever deliveries of 5.05 million tonnes, which is a growth of 72% on quarter-on-quarter and 22% on a year-on-year basis. I would like to mention that the domestic sales in the second quarter was 3.86 million tonnes, a market-leading increase of about 11% on year-on-year basis. This growth was broad-based with growth, not just on quarter-on-quarter basis, but on a year-on-year basis across all key business verticals of automotive, branded products, retail and IPP, which is industrial products and projects. The product mix was also richer on quarter-on-quarter basis as all verticals focused on higher value-added products. Our downstream portfolio of tubes, wires, et cetera, has done extremely well with a year-on-year increase in volumes. We reduced our export significantly from about 50% of the total sales in Q1 to about 24% of total sales in Q2 and this will further reduce over this quarter and next quarter. In Europe, recovery has been more gradual. Overall demand, particularly automotive has been weak, while the share of steel imports has remained deliberated. Imposition of country-specific import quotas with the quarterly administration, has been actually positive for the EU steel industry and spot hot-rolled wire gross spread improved from August '20 from early unsustainable lows. We've been able to improve our sales mix in the second quarter and increased our deliveries by 15% on a quarter-on-quarter basis to 2.27 million tonnes. This, coupled with the recovering spot -- steel spreads, helped us reduce the EBITDA loss during the quarter, while the full impact of recovery in spreads is yet to be captured due to the lag effect. We have initiated discussions with SSAB Sweden based on the interest received for the potential acquisition of Tata Steel Netherlands business. The company has also come into discussions with the Supervisory Board of Tata Steel Netherlands, and the Board of management of Tata Steel Netherlands so the process will move to the next stage, including due diligence and stakeholder consultations. There is limited overlap between products and geographies between SSAB and TSN from an antitrust perspective, and this will make the transaction easier. Coming to Tata Steel U.K, we will continue to own and operate it. We intend to separate Tata Steel Netherlands and Tata Steel U.K. and pursue separate strategic paths for them going forward. We are also undertaking a series of steps to make the businesses self-sufficient in the U.K., and we continue our dialogue with the U.K. government on potential measures to safeguard the long-term future of Tata Steel U.K. We are now reorganizing our Indian subsidiaries into 4 verticals, as we've mentioned before, to drive scale, synergies and simplification, which will create value for our stakeholders. This will also give you a better understanding of the strength of our portfolio and the resilience of our business model. As a part of this today, the Boards of Tata Steel Long Products, Tata Metaliks and Indian Steel Steel & Wire Products approved the merger of Tata Steel Metaliks and Indian Steel Steel & Wire Products into Tata Steel Long Products, and we expect to achieve a significant progress over this over the next 6 to 9 months. I will now hand it over to Koushik to comment on our financial performance.

Thank you, Naren. Good evening, good morning, and good afternoon to all of you. I hope you are all well and safe and happy Diwali in advance. Let me start by commenting on our financial performance. Despite all the challenges, Tata Steel has delivered a strong set of financial results. Our consolidated revenue for the quarter stood at about INR 37,154 crores, which was higher by about 53% on a quarter-on-quarter basis, largely due to higher deliveries, improved product mix across entities and [ volume ] prices. I would like to remind you that these numbers do not include our Southeast Asian operations as they continue to be classified for as held for sale. Our consolidated EBITDA grew to INR 6,217 crores, with strong underlying performance in India. Our India operations, which includes Tata Steel standalone, Tata Steel BSL, Tata Steel Long Products, generated revenues of INR 23,067 crores, and an EBITDA of INR 6,025 crores as deliveries exceeded 5 million tonnes and product mix also changed favorably. Tata Steel standalone revenues improved to INR 16,362 crores, which is higher by 75% on a quarter-on-quarter basis and about 10% on a year-on-year basis. EBITDA was INR 4,718 crores, which translates to an EBITDA margin of 29% and an EBITDA per tonne of INR 13,127. Fixed cost reduction from material cost optimization and other operational efficiency improvements generated a cost savings of about [ INR 938 crores ] during the first half of this financial year. Our key subsidiaries, Tata Steel [indiscernible], BSL, Tata Steel Long Products, have also delivered very strong operating performance. TSBSL generated an EBITDA of INR 1,113 crores, which translates into an EBITDA per tonne of INR 8,735, while Tata Steel Long Products generated an EBITDA of INR 194 crores, which translates into an EBITDA per tonne of INR 10,512. Both entities generated free cash flows of more than INR 1,450 crores and INR 230 crores, respectively. Our other Indian subsidiaries such as Tata Metaliks, Tinplate and other downstream subsidiaries also reported strong results with combined EBITDA increasing to INR 258 crores in the second quarter of FY '21. Moving to Europe. Our revenues increased to GBP 1.4 billion in the second quarter. EBITDA loss reduced to GBP 48 million in this quarter from GBP 67 million in the previous quarter, primarily with improvements in revenue, lower raw material costs and cost take-out efficiencies. ]Weight ] support from the European and the U.K. government was about 45 million. We have made provision for about 50 million of carbon emission rights in this quarter compared to a net gain of 78 million in the previous quarter. We continue to [indiscernible] our business positions of cash while aggressively managing costs, spend and working capital. We have also been very disciplined on CapEx, spending about INR 1,383 crores on CapEx in the second quarter on a consolidated basis. This is primarily on safety, environment, sustenance and critical maintenance. Strong operating cash flows, combined with aggressive liquidity management and disciplined CapEx spend has helped us to generate free cash flow of more than INR 7,800 crores during this quarter and INR 8,500 crores during the first half of this current financial year. During the last call, we had committed to deleverage about 1 billion annually. I'm glad to report that despite the effect of the pandemic, we have successfully reduced our consolidated gross debt by about INR 4,550 crores and the net debt by INR 8,197 crores this quarter, which includes about INR 3,366 crores of net debt reduction at the standalone level, about INR 1,398 crores at the Tata Steel BSL level. TSLP net debt has also reduced by about INR 244 crores during this quarter. The net debt is now much below the March 2019 level. As of September 30, 2020, our liquidity buffer improved to INR 24,323 crores, which included INR 17,824 crores of cash and cash equivalents. We will be reducing gross debt further in the second half as the business conditions normalize. On Tata Steel Netherlands, we are engaged in consultation with the stakeholders. And as Naren mentioned, and the due diligence by SSAB will also commence, we expect to continue this in the second half of this year. And subject to regulatory approvals, we hope to close the transaction in the next 6 to 9 months. The fees of this transaction will be used to deleverage further over and above our annual target of 1 billion. We are also committed to finding a structural solutions to Tata Steel U.K. And as Naren mentioned, it is primary for us to make it self-sustainable, and not dependent on cash infusion from India. With this, I will end it here and open the floor for questions. Thank you very much.

[Operator Instructions] The first question is from the line of Amit Dixit from Edelweiss.

Congratulations for a good set of numbers. I have 2 questions. The first one is on Tata Steel Europe's performance. So you mentioned that there's a carbon emission provision of around 58 million. And despite that the performance is much better Q-o-Q and even compared to European peers. So had the provision not been there? I mean the EBITDA would have been much better. So just wanted to understand the key drivers of this performance. I mean, because as I understand, cost remains the same. In fact, prices -- headline price also remain the same, but still EBITDA has improved considerably. That is my first question. And second question is, is it possible at this stage to split EBITDA and liabilities between Netherlands and U.K. division?

Yes. I'll respond to the first one. And then Koushik, if you can respond to the second one. I think the European operating performance has been stable over the last 2, 3 quarters. The spreads have basically not been so great, and that's why the financial performance has not reflected the stability in the operations that we've seen over the last 2, 3 quarters. Second point is, of course, we have also received some support from the government, which is there, but that doesn't fully explain -- I mean, that's not the reason why the quarter-on-quarter performance has improved. I think overall, there has been a fair amount of focus on costs. There have been cost takeouts. The spreads have improved a bit. The mix has also improved a bit if you -- because the 2 companies have also come back, they were not fully active in the first quarter. They are now more active in the second quarter. And Europe has responded quite well to the stimulus because the EU has responded much faster than they did in 2018. There are multiple reasons the benefit [ respect ] felt. We've also had coal prices are stable and the spreads have improved a bit Q2 over Q1.

Yes. Just to supplement what Naren mentioned, the EBITDA of September, the underlying EBITDA was actually positive. So your point is valid that if we did not have the provisioning, we would have been in a better position, even if you gross back the impact of the employment benefits that the governments have given. I don't know what you meant by EBITDA and liability. I understand the EBITDA, which is typically -- if I look at the way the EBITDA moves in Europe and in Netherlands and U.K., it's about 2/3, 1/3 in stable times. But I don't know what period you wanted because these are negative, and I don't have it readily. And liability, as far as the debt liability is concerned, it is -- the [indiscernible] , which is the long-term debt is actually at the [ PSE ] level. And the 2 companies or the few businesses have managed their working capital basis. Maybe over -- after some time, maybe in the course of the next few quarters, as the progress on the transaction becomes clearer, we will be in a better position to do the separation and disclose.

Okay. Great. Can I ask a follow-up? Or should I come back in the queue?

Best is if you come back in the queue.

The next question is from the line of Nakin Parekh from JPMorgan.

Sir, 2 questions. My first question is the net debt reduction in the first half has been very impressive. Now the second quarter was a blow out quarter, but the full benefit of higher prices should follow in the second half of the year. So in that context, can we expect a material net debt reduction in the second half of the year as well. Maybe not as much as $1 billion, but can we see a large net reduction? My second question is broadly on this proposed sale of the Netherlands unit. First of all, what happens to the U.K. unit because that is where the big cash drain is. And secondly, if we look at the data, your financials, which are filed in the U.K. and which has the subsidiaries and all those entities, it effectively suggests that the Netherlands unit has an average EBITDA of roughly $500 million to $550 million between F '15 and F '19 normalized years. Would that -- and which effectively implies a $70 to $80 per tonne margin. Not in these times, but are those assumptions correct? Or is Netherlands a much higher or lower profitable business than those $70 to $80 per tonne?

So if I can answer sequentially, the first one, as far as the debt reduction, I think there will be debt reduction, but more towards the gross reduction. We will be using the cash flows as well as the current liquidity. And certainly, you can see the gross debt reduction to be more in the second half, and we will follow it up in the next year also. As far as your question on what happens to U.K., I think Naren di answer that we will own and operate currently. We will -- we have a task ahead in that in terms of making it self-sustaining and ensuring that we don't have to support it financially from India. And therefore, you will hear about our plans going forward in the next few weeks and months because that's an ongoing work in progress. Also, it will be finalized as we separate the 2 companies between Netherlands and U.K. There will be opportunities for cost take outs and opportunities for running it differently, and we are looking at all of that. As far as Netherlands is concerned, your numbers are ballpark right on a normalized basis. There has been times where Netherlands has been in the zone of $60 to $70 per tonne. And -- but those are times when you have a stable spread of beyond EUR 225 to EUR 230 per tonne in Europe, more likely EUR 240, EUR 250, that's the time -- that's the level at which Netherlands makes that kind of a spread. If that answers your question. I don't know, Naren, if you want to add anything.

So I think just to add more on the first point that you made. Yes, this quarter, we've also gained from the extra inventory that we carried into this quarter. So there was a cash release because of the inventory reduction during Q2. That level of inventory reduction is not possible in subsequent quarters. But having said that, the pricing and the market conditions are better, will be better in Q3 and Q4 as compared to when we were in Q2, which got better as the quarter went along.

Understood. Sir, just to clarify, is there any outer timeline for this Netherlands transaction? Will it drag on for like the way the proposed transaction with this and moved on? Or is it something that can get over in the next 2 to 3 quarters?

So I think, Koushik just said, -- yes, go ahead, Koushik. Yes.

No, Pinakin, I think I said that the -- we have just initiated conversations. So there will be stages in these transactions, but we are certainly looking at a tighter timeline, if it all goes well. And that's what we are focused on. I would imagine that SSAB is also very keen to work as [ PDB ] as us. And therefore, it is -- I don't think we can give timelines, but our interest is focused around the next 6 to 9 months.

I think the big difference between both transactions is that we are not expecting competition commission issues simply because the overlap area in the system transaction was packaging in auto, and those are not concerned at all with SSAB. They're not in packaging. And between us the auto footprint is not so significant. I mean -- so we don't -- that took a lot of time last time. We don't expect that to be the one which drags the timeline.

[Operator Instructions] The next question is from the line of Anuj Singla from Bank of America.

So first question is regarding the net debt and the CapEx. Our net debt reduction has been much faster than what would -- we would have anticipated at the beginning of the year. And consequently, when can we expect the Kalinganagar Phase II CapEx restarting? Is there a formal guidance you can give us on CapEx, maybe for the next year and the timeline there?

Yes. So on Kalinganagar, as we said, even before the year started, we were focusing on the pellet plant and the cold rolling mill, and that remains our focus even when we [ see pursuing ] a bit on the CapEx. And we will follow-up with growth after we come closer to completing the cold rolling mill and the pellet plant. So I think we hope that by the end of this quarter, we will be in a better position to comment on this. And we had already done a fair amount of work in both these areas. So we should be able to accelerate fast once we decide to move ahead.

Okay. Okay. And the second question is with regards to the European operations. So the Netherlands Trans [indiscernible] plans, which is up for sale, it's regarded as one of the best, most efficiently run plants in Europe, port-based and best in terms of profitability. So -- and the U.K. plant is exactly the opposite of that. So it's good to see that we are reducing our European footprint. But when I look at the portfolio, the asset, which is right under step, that is actually, we don't have a visibility on that. So if Netherlands goes out of the portfolio, don't you think finding a solution for U.K. will become even more difficult, like our deal with TK included both the plants. But at this point in time, it's only Netherlands. So do you think it becomes more difficult to find a sustainable solution for U.K.

So firstly, in U.K., also a lot of work has been done over the years to shrink the problem in some sense, both physically and financially. Okay. So the U.K. business is now a 3 million tonne business and which was significantly negative EBITDA actually was breakeven and positive EBITDA until the last year or so. The pandemic and economic slowdown hit us. So I think we are in a much better place in U.K. than we admitted 3, 4 years back. That is why. Secondly, there is a discussion going on with the government, which is looking at multiple options to see what is it that the government can do to help us. Of course, we've had some help, which has been available to pretty much everyone in the industry there because of the initiatives or the analytics of the government. The third thing is we are also waiting to see what happens post Brexit, what is the impact of the economic activity in the U.K., what are the steps the government is taking to revive economic activity in the U.K. and how that can help us. So there are multiple things which can happen. So I think we are focused now on making U.K. self-sufficient, cash neutral, not dependent on cash from India. And I think we are comfortable that we should be able to get there sooner than later. And in the meantime, we will look at all possible options.

So if I just may add to what Naren mentioned. But the -- one is that the size of the portfolio as far as U.K. is concerned, gets much smaller. Second, it is in this world having a combined solution is perhaps more difficult. And in effect, this will provide us with more stability flexibility and look at all options as to how to make it succeed.

Okay. Understood. Lastly, if I may, can you talk about what kind of price increases we can anticipate in 3Q on a blended basis for Tata Steel India and on the coking coal side as well? If you can give some kind [indiscernible] .

Yes. So I think if I look at this quarter, I mean, Q3 versus Q2, we are expecting about INR 4,000 to INR 5,000 increase. I think Q2 to Q1 was about INR 3,500. Q2 to Q1 was more because of the mix. We exported less and it was not so much of domestic price increase because most of those price increases came in August and September and [ didn't ] play out. And hence, most of the increase in Q3 is basically on the price increases that we've got. So that's the NR guidance that I can give you. Prices, of course, we've increased prices in this month as well. But we are certainly seeing that we are -- now the rate of price increases over the next few months will be different from the last few months. But it is also a function of international prices, which, as you know, in the last 10 days have been quite strong in Asia. So let's see what happens in China. Because even today, prices at $540 are nowhere near all-time highs of $600, which used to be the average price till maybe 3, 4 years back. So I think there's still some headroom for the international prices to go up. Iron ore is still quite strong. In terms of coking coal, I think you're looking at $5 to $10 from a consumption point of view, reduction. And let's see what happens in Q4 because coking coal prices have been running a bit soft, given what's happening between China and Australia.

[Operator Instructions] The next question is from Sumangal Nevatia from Kotak Securities.

First question is on the Europe. Is it possible to share what is the cash burn in 1H? And since both the [indiscernible] divestment and some though the government might take another couple of quarters. What is the output of this cash burn and profitability over the next couple of 1 to 2 quarters in Europe?

So in the first -- I must say that in the first half of this year, we have not supported Tata Steel Europe on any funding from India. And this is something that is, as Naren mentioned, and I emphasize that this is actually the fundamental part of the business. We have looked at working capital. We looked at cost takeouts, and ensuring that the CapEx numbers are also controlled and focused only on what is essential. So in the first half of this year, Tata Steel has not supported by putting in any equity or any sub debt or any investments. They have managed the working capital effectively. Obviously, with the price increasing, and the market looking better, we expect that this should continue. And end of the year, the full year basis, we will see as to what is the total burn that is there. But effectively, it should not be more than a couple of hundred [ million ].

Understood. Sir, next question is with respect to the merger of subsidiaries which we have announced. We are not surprised with that because the understanding was that the natural next step would be something similar to Bhushan, where we'll be looking to launch these individual subsidiaries into Tata Steel. So if you could color, what is the thought process there? And I mean, what sort of synergies will -- from a [indiscernible] business and Tata Steel Long would have?

Yes. So as we said earlier, basically, we are looking at grouping our subsidiaries into 4 clusters, right? So we said: Long Products; downstream flat products; Utilities; and infrastructure and mining. So Metaliks could go either way, but the advantage of Metaliks going into Long Products is -- the upstream is very similar. They operate similar-sized [ block services ], whether it's in Usha Martin or what in Usha Martin steel business or the current unit of Tata Metaliks. That is one. So there is a lot of value in the upstream in terms of cost synergies and best practices and things like that. Because Tata Steel operates much bigger blast furnaces, and it's a different ballgame all together. Secondly, from a value chain point of view, both are basically adding value to Metaliks. So one is BRI going into Long Products and the other is foundry great pig iron going into [indiscernible] iron pipe. So there is a little bit of value chain kind of similarity. The products are different, of course. I mean of course, it's also a matter of definition. In Europe, pipes are also called Long Products. So it's -- but that's not the driver. I think fundamentally, we saw cost synergies, we saw operating synergies as big drivers of Metaliks sitting into the TSLP kind of cluster. And ISWP is basically downstream long products. So it is basically doing wires and wire rods and which is straight fit into the long products portfolio.

Understood. Just sir, so in the long term, can we expect some savings in Tata Steel Long Product to come into Tata Steel. Because Tata Steel is also not purely flat and the [indiscernible] some overlap there as well. So not something in the near term or medium term, but in the long term, will that be the natural next step?

So we are thinking of the long products business slightly differently. Because Tata Steel, primarily the big blast furnaces are more suited for [ boot ] scalable flat products business. So if you look at Kalinganagar and Angul, it is primarily flat products. [ Gumption ] [indiscernible] for historical reasons has a bit of long products in it. But all the growth in long products, we believe, will come more through Tata Steel Long Products. We are also moving what is called the Steel Recycling business, which we started with the first plant in [indiscernible] into this entity in some sense. Because we also believe that going forward, there is an opportunity to grow the recycling business, use the EAF route in parts of the country, which don't have iron ore, but where there is scrap to develop EAF kind of long products business, which is more carbon efficient and more cost-efficient because of the way it is done. And we also have an asset-light model where people can put up the facilities, whereas our value will come from the distribution and branding, which is where a big strength is for us for our rebar business. So there are multiple models, which are possible, and that's why we wanted to keep the long products business a bit separate because there are different operating models, we can build for the long products business, not limited to the classical blast furnace, big steel mill shop, big rolling mill, which is typical of flat products businesses.

The next question is from the line of Rakhi Jhunjhunwala from Rare Enterprises.

Congrats on find performance. What I wanted to understand is you said, steel price this quarter should be INR 4,000 to INR 5,000 higher than the last quarter on average. So realization.

Realization. Yes. Steel prices would be different, but we are -- I'm saying realizations because partly, steel price is partly fixed.

Right. Sir, one thing on, what is the capacity in Netherlands? And what is the capacity in England?

7 million in Netherlands and 3 million in England -- 3.2 million in England. 6.8 million, 6.9 million in the Netherlands.

And Netherlands is profitable?

Traditionally, yes, Netherlands has been more profitable. Because Netherlands configuration wise is also better equipped. It has a pellet plant. It is on the coast, and it obviously runs a very efficient operation.

And the debt in both companies -- we are debt-free except [indiscernible] .

Koushik, do you want to comment on that?

So debt, there is no debt in individual companies, which is there in the consolidated, and working capital debt is there in terms of securitization is [indiscernible]

So therefore, there is not much debt in the Netherlands company will be proposed to sell. Am I right?

Not on the company, but on a consolidated European debt is about EUR 1.7 billion.

All right. And what is -- I mean, have we finalized the broad commercial terms with them and their good series of process or transaction, which is expansion of interest or finalization of not exact, but broad commercial in term, and then the due diligence and then collection of terms and then regulatory approval. Sir, we had the [indiscernible] today.

That's correct. So we are at the stage where -- yes. So we are at the stage where we've brought the interest. We are going to get into due diligence after -- I mean, today. And then the discussion in Europe, especially mainland Europe, there is a consultation process, which is something we don't see in Anglo-Saxon world. So there is a consultation with unions, et cetera, and with the stakeholders, the Supervisory Board and the Board of management. And then the finalization of the terms and then...

No, do you allow? But do you allow. But [indiscernible] question. Are you allowing somebody a due diligence without agreeing on broad commercial terms? Because if you won't add final price, why -- then what is the due diligence mean. I mean without agreeing to some broad idea [indiscernible]. I don't see in the exact terms, but does find is 5%, 10%. There should be some agreement on the broad commercial term.

So that is in place in the sense that when the offer came in terms of expression of interest that they have indicated that this is the broader commercial valuation, et cetera, that we will do, which is something which is obviously, nonbinding, and that's why it's important for us to -- for them to go through the due diligence process and confirm and that's [indiscernible] more definite and certain.

So as I understand, there is a basic understanding on the commercial term. They will vary by certain percentage after the due diligence and the consolidation. Am I right?

That's correct.

So that is the most important part of the transaction is the price and the proper due diligence and regulatory approval. So it can be done fast [ hiding ]. Are they proposing to keep all the labor -- and are they proposing to keep all the labor and -- otherwise, then there is no problem with a consolidation. See, the main problem is the demand of the labor, yes. If the labor is retained, that's...

So they are particularly a company where they work -- they are specifically a company that they work with the management of the company. So they don't have big plans of redundancies or something. That's not on their going Board at least. But they will have to do their due diligence [indiscernible].

I think what is important is the consultation process is a legal requirement and the unions and others who we have to consult are allowed a certain number of days. So it is for them to decide whether they want to take, if it's 45 days, 45 days or whenever they can agree to the terms or whatever sooner. So that's why -- they will have a say in -- and if they agree sooner, that's [indiscernible].

[indiscernible]

And they will [indiscernible] Yes. Come again. What did you say?

No, I was saying that there is another process, which is the separation of the 2 companies. Today, we run the company as almost like one company. So there is a separation process, which is only time dependent. So that is the only part. And that's why we're saying that we want to do it in a much faster manner. But these groups have to be -- the process has to be followed, and we need to take everybody along in doing this.

Yes. I don't know my impressions is right. My impression is, commercial terms understandings. And I don't think there a problem with due diligence. Problems are the trade union and the competition commission. If you are assured the trade commission, the trade unions won't object and the competition commission, we'll do it faster than I -- it can be done fast.

You are right.

And that is not going to -- hopefully, this is not going to be the last, like the German transaction.

We don't expect that to understand.

Yes, we don't expect that..

And another thing I feel is, what stopped us from just closing the British port operations? I'm not following it. I mean what is it -- we keep losing money and we don't want to stop it why because you are in love with the labor [indiscernible]. No, I want to ask this question...

There is also cost of closure.

Pardon?

There is also a cost of closure.