Traton SE (8TRA) Earnings Call Transcript & Summary

And welcome to TRATON's Q2 and First Half 2026 Results Call. My name is Ursula Querette, and I'm Head of Investor Relations at TRATON SE. With me on the call is Christian Levin, our CEO, who's dialed in from Sweden; Dr. Michael Jackstein, our CFO; and CHRO is here with me in Munich. Christian will start today's presentation with the key results and highlights of the second quarter and accumulated first half. Michael will then guide you through our financial performance in more detail. As always, we will conclude the call with a Q&A session open to financial analysts, investors and media representatives. [Operator Instructions] Please note that this call, including the Q&A session will be recorded and a replay will be made available on your website later today. You can find our 2026 half year report, which we published this morning and the slides to this call on our IR website. Before we start, let me remind you of the disclaimer with respect to forward-looking statements on Page 3 of our presentation. And with that, I'm handing over to Christian.

Great. Thank you very much, Ursula. Welcome also from my side to everyone on the call. So some of the Q2 headlines that we present today most probably already familiar to you. We published our unit sales on the 10th of July, and then had to publish our adjusted return on sales figures in an hack release on July 13. So I think today is more about putting these figures into a context, our improving top line momentum, demand signals behind that and how all of this plays into our outlook for the full year of 2026. But let's start with our top line. So after a rather slow start of the year, our Q2 unit sales increased with 4% up to almost 83,000 units. This reflecting a slight year-over-year improvement in Europe and better sales momentum in South America, where we are already supported by the first mover Brazil incentive program deliveries. North America, however, still lagging as the recent order improvement has not yet been translated into delivery. For the first half of this year, unit sales were down 1% compared against a relatively strong last year period, where tariffs have not yet impacted deliveries negatively. Also, sales revenues increased by 4%, up to EUR 11.8 billion in Q2, well in line with our unit sales. And as a result, we were able to bring our half year sales revenues back to a flat year-over-year level despite the slow start of Q1. Then for profitability. Q2 adjusted return on sales improved up to 8.1%. This was clearly above last year and higher than originally expected, hence, the pre-release. Why is that? Well, mainly due to the earlier recognition of U.S. tariff refunds at international, but not only, also supported by several operational improvements. And bringing the half year adjusted rose up to 7.0%, pulling forward part of the profitability support that we originally expected in the second half of the year. Like in Q1, the very highlight of the quarter is then the strong increase in order intake, up 44% year-over-year in Q2 after plus already of 18% in Q1, summing up to a 30% improvement in the first half of this year. Let's turn to the next page and digging a bit deeper into the demand develop, there we have it. So we continue to see strong demand signals across all of our key regions. Order intake again, exceeded deliveries confirming an ongoing recovery in the truck cycle. The book-to-bill ratio ended up in Q2 at 1.2. In Europe, truck order intake increased by 23% year-over-year to around 29,200 vehicles. This was partly supported by a weaker prior year comparison, but also by a strong brand level improvement. Scania up 30%; and MAN increased orders by 17% despite the German home market still being behind our expectations. In North America, truck order intake almost tripled to 22,700 trucks with International Motors accounting for the vast majority of the increase. This, of course, reflects improving U.S. fleet economics, strong freight rates and some EPA 27 prebuy activity. At the same time, Deliveries remained below last year as our order conversion is coming through gradually. In South America, demand continues to be supported by the second tranche of the Move Brasil program, boosting our Q2 truck order intake by plus 20% to around 16,500 units despite the ongoing macroeconomic challenges, especially in Brazil. This order growth was mainly supported by a strong increase at Scania, while Volkswagen Truck & Bus remained broadly stable compared to the same period of last year. First, trucks from the tranche 1 of the Brasil, the Move Brasil are now being delivered, which also supported our delivery figures in the region during Q2. And by the way, the second tranche of this program of approximately EUR 3.5 billion, by the way, has now also been fully utilized ahead of expectations. So overall, the recent demand pattern clearly points to a back-end loaded delivery volume in this calendar year. This also is supported by the fact that unit sales were still down year-over-year in the first half, while the comparison base becomes easier, of course, in the second half of this year. Okay. Let's switch slide. And as just discussed, the truck cycle is moving upwards, especially in Europe and in North America, where order intake again clearly exceeded unit sales in Q2. This gives us increasing confidence for growing deliveries in the upcoming quarters. At the same time, one should remember that our markets, tariffs, the overall geopolitical uncertainty have not at all disappeared. So our approach remains cautious. Looking at our main regions, starting with Europe, registrations are developing within our market outlook, while order momentum remains solid. Based on this, we leave our outlook range with a midpoint growth of 2.5% unchanged. In North America, the picture has become more encouraging. The positive order -- the order trend is firmly established. Against this increase, we decided to narrow the North American market outlook range towards the upper end. This lifts the expected midpoint to a growth figure of plus 5% from a plus 2.5% beforehand. And looking only at Class 8, it could grow even more by a 9% equal to 282,000 trucks. South America. In South America, the macroeconomic challenges remain but deliveries continue to be supported by the Move Brasil order intake increase. So with this mixed picture, we leave our outlook range unchanged with the midpoint remaining at a minus 5%. In China, registrations developed very strongly in the first half of the year. While we do expect some calling down in the second half, the strong year-to-date development allows us also here to narrow the outlook range. This brings the expected midpoint up to 0% from a previous minus 5%. So overall, the updated market outlook reflects a clear upward cycle, while still taking into account the remaining uncertainties that exist across all our regions. With that, let me now turn to how we are translating this improving market momentum also into stronger operational performance through targeted initiatives at both brand and TRATON Group level. Let's change slide. Starting with electrification Scania is strengthening our European capacity with a planned EUR 70 million investment in the French Angers factory. While MAN is closing a portfolio gap in the BEV portfolio by launching the new 16-ton MAN eTGM. Continuing with digitalization and efficiency at international, we have launched My International to simplify fleet management and enhance uptime while Volkswagen Truck & Bus is advancing production digitalization and automation in our Brazilian Resende plant. And on services, TRATON Financial Services is broadening its insurance offering, while continuing to ramp up its geographical footprint. Latest new addition is Norway for MAN Financial Service. And finally, at TRATON Group level, our first green bond and green loan issue totaling EUR 850 million support investments in battery electric commercial vehicles and ultimately, further help our future BEV group. All taken together, these initiatives show that we are very actively improving our business, not only benefiting from a favorable market cycle. Slide again building on the recent green bond issuance, let me update you on the BEV transformation. Also here, we saw a clear acceleration in the second quarter of this year. Battery electric vehicle deliveries increased with 67% year-over-year up to 1,050 vehicles, an even stronger rate than the plus 38% we saw in Q1. For the first half, this brings BEV unit sales up to 1,907 vehicles, up 53% year-over-year. In Europe, our BEV ratio, excluding the van, the MAN eTG continued to increase from 1.9% in first half last year to 2.6% in the first half of this year, supported by growing customer interest and as I mentioned, a broader product and services offering. Incoming BEV orders also continued to grow in Q2 but at a modest pace than deliveries, which is mainly explained by North and South America. In Europe, charging infrastructure remains the key enabler, but unfortunately, also a bottleneck for BEV adoption. We did, however, see further progress during the quarter. Milence secured EUR 120 million financing facility to further scale its pan-European public charging network, including now megawatt charging system technology. And TRATON Charging Solutions continue to expand across to public charging -- across Europe through Scania charging access and the MAN charging go while our depot charging initiatives such as Erinion support customers for charging mainly at their own operating locations. So important building blocks are being put in place, but to support a broader BEV adoption in Europe and to meet the CO2 requirements, the role out of charging infrastructure and stronger support for battery electric vehicle TCO needs to accelerate and accelerate significantly. So to sum it up, the truck cycle is moving upward. Our market outlook has improved, and our Q2 profitability was stronger than expected with an adjusted return on sales of 8.1%. Beyond the cycle, we continue to execute on initiatives that strengthen our operational performance and future growth, including the continued acceleration of the battery electric vehicle transformation. So with that introduction, allow me now to hand over to Michael for a closer look at our financials. Over to you, Michael.

Thank you, Christian, and a warm welcome from my side as well to all of you. So as Christian already mentioned, the top line development improved in the second quarter. Unit sales increased by 4% year-over-year, driven by a 3% increase in European unit sales despite a 9% decline in Germany, a 13% increase in South America, supported by Scania and Volkswagen Truck & Bus in Brazil with first deliveries under the Move Brasil program. This was partly offset by a 9% decline at International in North America, where the recent demand inflection is not yet fully reflected in unit sales. Sales revenue also increased by 4% year-over-year in the second quarter, driven by higher new vehicle sales and improved vehicle services business and continued growth at TRATON Financial Services. So overall, Q2 shows a clear acceleration in top line momentum. Given the slow start in Q1, this is not yet fully reflected in the cumulated half year figures, but it clearly supports our expectation of a stronger segment half. Turning to the next page to profitability. Here, we also aim for a stronger second half versus the first half. However, as flagged in our top release part of the expected H2 earnings support materialized earlier than anticipated, driven by the tariff-related catch-up effects at international. From Q2 onwards, International recognizes the full amount of minimum expected Section 232 tariff refunds as the receivable. This reflects the increased likelihood that at least around half of the import value will qualify as U.S. content. This new booking logic was also applied retroactively to the fourth quarter 2025 and the first quarter of this year. In addition, we booked a one-off receivable for expected recoveries related to EPA tariffs as we now have a basis to reclaim amounts already paid. Taken together, this resulted in a positive catch-up effect of around EUR 120 million in the second quarter bringing international to an adjusted RoS of 5.6% in the quarter. Beyond this timing effect, profitability was also supported by solid operational performance. High unit sales especially at Scania and Volkswagen Truck & Bus helped improve fixed cost absorption. Price mix effects, some foreign currency tailwinds and continued cost discipline across the group also supported profitability. As a result, adjusted return on sales for the TRATON Group reached 8.1% in the second quarter and 7% for the first half. So compared to our original phasing, part of the expected H2 earnings improvement was effectively pulled forward into the second quarter, while the underlying operational performance also improved. At the same time, we should not overlook the headwinds. R&D activity is increasing and will continue on a high run rate, especially as we invest in e-mobility and our trade modular system. In addition, we saw first input cost pressure related to the Iran war. And of course, tariff costs remain affluent. Let's now look at the performance of our segments on the next page. Overall, TRATON operations increased sales revenue by 4% and achieved an adjusted return on sales of 9% in the second quarter, supported by solid volume growth, operational improvements and the tariff-related catch-up effect at international. At Scania, the main takeaway is strong earnings leverage. Sales revenue increased by 7%, driven by higher unit sales in China and Brazil, while earnings grew by 27%, bringing the adjusted RoS to 11.6%. A strong vehicle services contribution, product mix and renewed currency tailwinds supported the development. These effects helped offset the continued impact from China operations and higher R&D activity, which remains a clear margin headwind. At MAN, the focus is Brazilian growth despite a difficult home markets. Sales revenue increased by 4%, even though Germany clearly held back the overall development. But MAN still grew European unit sales, thanks through a dedicated effort from its sales team and continue to build best momentum, all live from a low base. Adjusted RoS came in at 6.7% in the second quarter, while a better fixed cost absorption, supported profitability, higher R&D activity and first, Iran-related input costs weighed on earnings. At International, the main point is time. Sales revenue declined by 7% as the recent order recovery has not yet fully translated into unit sales. Earnings benefited from the tariff-related catch-up effect while tariff costs remain a headwind, and vehicle services was softer in the second quarter. As already pre-released, the adjusted RoS was 5.6%. At Volkswagen Truck & Bus, Move Brasil was the key driver. Sales revenue increased by 22%, but also supported by higher bus sales from government tender wins in Brazil. Profitability was held back by negative price/mix with adjusted RoS coming in at 10.9%. And finally, at TRATON Financial Services, the focus is on scaling the business. The increasing portfolio volumes drove revenue up by 21%. Profitability in the core financing business improved while ramp-up expenses and elevated risk costs partly offset with development. So return on equity came in at 8.7%. Turning now to net cash flow. TRATON Operations reported negative EUR 269 million in the first half. This mainly reflects the weaker operating performance at the start of the year, the usual first half working capital buildup and the full cash burden from Section 232 tariffs. And last but not least, ongoing investments. At corporate items level, the June dividend payment of EUR 465 million was more than offset by the 2 senior truck placements with total proceeds of EUR 523 million. Overall, with negative net cash flows, both from TRATON Operations and corporate items, net debt increased by EUR 351 million compared with the year-end 2025. Looking ahead, in line with our usual seasonal pattern, we continue to expect stronger cash generation in the second half of this year. Let me conclude with our updated outlook for 2026. Based on the stable revenue development in the first half, the improved market outlook, especially for North America, and the overall positive order momentum, we are narrowing our guidance range towards the upper end. We now expect unit sales and sales revenue to develop in positive territory between 0% and 7% growth. For adjusted return on sales, we achieved 7% in the first half. This gives us a solid basis for the full year, and we are, therefore, raising the lower end of our guidance range to our previous midpoint of 6.3%. The upper end remains at 7.3% while we continue to aim for a stronger second half. If this materializes, however, the gap versus the first half would be smaller than originally planned. There are 3 reasons for us. First, part of the expected second half earnings improvement at International from tariff back was already pulled forward into the second quarter. Second, we expect additional Iran-related input cost pressure, which was not reflected in our original guidance, but we have been pointing to this risk since the first quarter. And third, R&D expenses will continue on a high run rate in the second half. In terms of quarterly easing, Q3 should be seasonally weaker, especially due to the holiday effect at MAN and Scania. We then expect a strong Q4 in terms of revenue and margins, in line with the usual seasonal pattern. And this year, supported by the high order backlog we have built up. As said, geopolitical risks remain an overarching uncertainty. For net cash flow of TRATON Operations we are maintaining our guidance range, while we expect cash generation to improve significantly in the second half, higher primary R&D expenses will weigh more on cash flow than our operating results due to capitalization. Cash refund from tariffs could provide additional support, but the timing remains uncertain. Overall, our second quarter and half year financials show that our business has gained momentum. Order intake is stronger. Our truck market outlook is confirmed or has improved, and our first half profitability gives us a solid basis for the full year. That is why we are narrowing our guidance ranges towards the upper end, while still taking a prudent view on tariff costs, cash flow and geopolitical uncertainties. With that, I'm happy to hand it back to you, Ursula.

Thank you, Michael and Christian. [Operator Instructions] Let me take the first question, which comes from Harry Martin from Bernstein. .

Can you hear me?

Yes.

Perfect. The first question I wanted to ask about is the very strong order intake. It is pretty strong across the board. So it looks like there is clearly a market share gain story here as well as just the market strength getting better on the cycle. So can you reflect on how this has been achieved? Is there anything the price driven or is this all product improvement and better TCO for the fleets? And how are you doing this better than the competition? That's the first question. And then the second one, just on truck pricing. It doesn't look like new vehicle average selling prices increased in the second quarter despite some of the improvements in the cycle. Does this get better in the second half? And then with that raw material inflation, what is the assumption on price cost on the orders in the order book with the outlook on raw materials?

Thank you, Harry. Christian, do you want to take the question on order intake and market share?

Absolutely. So actually, we're not seeing particularly strong market share gains with a few exceptions. But we start in Europe, Scania has actually lost a bit of market share, focusing on keeping pricing up. And on your second question, seeing increased gross margins as a result. MAN, according to plan is regaining market share. They have the better product line up now with the comes engine and driveline in their products, and we see them climb being up a little bit. In Brazil, Volkswagen Truck & Bus is maintaining very strong market share. Scania has also here focused on keeping up the premium pricing position and has lost market share. In the U.S., we have also slightly lost market share. We started to build order book and increase production, I think, a little bit later. So we have not gained we're rather flattish or perhaps we have lost a little bit. So -- and you can -- we could mention China, where volumes are increasing thanks to the next year, but also Scania is now benefiting from the production plot in China or Southeast Asia, so there we see the policy increases. So no, we're leading our pricing positions for any of the brands rather the opposite and market shares have not been increase on the average. With the good buildup of order books, that's how this plays out in the second half of the year. I thought I hand over to Michael for the second part of the question.

Thank you very much. Thanks, Hari, for the question. I think -- actually not too much to add. Christian already covered a lot maybe where I can complement a little bit more specific to the second part of your question to the pricing and especially to the higher input costs. I can say that, yes, because of the higher input costs, MAN increased prices in June, so we are looking at this. I think the key message as already mentioned by Christian, that if we look at increasing prices, this is primarily based on our product offering, which is quite strong, as Christian was alluded to with regards to the MAN product offering to the CEE, where we started conversion last year where we are increasing penetration, so this is typically the basis for higher pricing and else. Maybe final comment to complement in the U.S. I mean we were into the good order intake momentum. If that continues, then typically, if there is a strong order intake, and there might be also optionality for some some pricing optionalities in the second half of the year. Let's see. .

Thank you. Next question comes from Alexander Jones from Bank of America.

Two questions, please. Firstly, [indiscernible] overnight announced that they have completed negotiations with the U.S. Department of Commerce on sort of a tariff, could you give us an update on where your discussions with them are and what level of your content you think could be achievable under that framework on Section 232, please? And then secondly, EPA27 final rules, proposed rules came out a couple of weeks ago and suggested sort of a way to comply without complying if you will, by paying some penalties. Does that change your plan at all for 2027? And how do you think of how the sort of market landscape might evolve into next year, given you previously highlighted an advantage with new engine?

Okay. Michael, you...

Yes. Thanks, Alexander. Let me start with the first one, and then I think handing over maybe to Christian for the EPA27 question. So with regards to the first question, I think, yes. I mean, I've seen the dock release of Daimler Truck, but you will certainly understand that we will not comment on this and don't have the more insights beyond what was written there. When it comes to ourselves, we are still in talks with the U.S. administration, and this is pretty much what I can say at this point in time. So we continued the good parts now in the third quarter. But at this point in time, we cannot give an indication here.

On the EPA27, you're right. There is now a proposal that needs to be discussed, which as you put it uniquely allows you to continue to work without actually achieving the emissions level in the EPA27 regulation with a penalty. No, it does not change our position. I still think that we are in a very favorable place. Let's see how this finally plays out. We have with the strong order intake basically already sold out our 2026 production. So we now start discussions with customers for 2027, which is, of course, bothersome in a situation where EPA27 is not totally clear. But we have optionality. We have the youngest engine platform in the world, which was from the beginning on side for EPA27. So with very small indices, we've reached that level. So we're ready to deliver that. But we can, of course, also choose to continue with the current platform as that is financially more viable. So still exciting times in the U.S. to see where this finally ends up. We are 5 months to the legislation. And this is, of course, a very unusual situation. But I think, again, we have really good optionality. So we are not going to end up being losers in this game. I'll stop there.

Thank you. Then let's turn to Daniela Costa of Goldman Sachs.

Actually, I wanted to clarify regarding the tariffs because I guess in the presentation you mentioned Section 232 and EPA. But on the question before when you were asked about the negotiation on content from one of your peers, it became a little bit less clear to me exactly what are you including today. So just first, maybe the clarification question on when you mentioned in the presentation, Section 232, this is because you are assuming now you will have higher content from the U.S. allowed, right? So it's related to those negotiations with administration? Or am I wrong? And then I ask the question.

Yes. Thank you. Thank you, Daniela. Happy to take that one. And there, of course, with regards to what we have booked, they can be very, very clear. So you recall what we said during our annual press conference in Q1, we basically always said and this is still the case that 100% of our vehicles are USMCA compliant. To be USMCA compliant, you have to have a little bit more or roughly 50% U.S. content. So that gives you the indication. And then we said at the annual press conference and in Q1 that we took a prudent approach. So we booked a receivable of roughly 50% of the roughly 50% U.S. content. So that was the practice so far. What have we done now? Now we are assuming the level of the USMCA compliant U.S. content, meaning roughly 50%. And this led then to the tariff-related catch-up effect, so to give you a ballpark figure, we looked the receivable in Q1. And again, that was 50% roughly -- of roughly 50% content. There was in the ballpark of EUR 30 million, as we said. And so you have to double this, which leads them to an effect of EUR 30 million in the quarter in Q1 and in Q2 makes EUR 60 million, but we already started to pay tariffs for 232 in November and December, which adds another EUR 20 million. So roughly the effect linked to the catch-up of 232 is roughly EUR 80 million. And then the rest comes from where we also came to the conclusion to meet the virtual certain criteria under accounting standards that the reimbursement procedures now are in place to reclaim here and announce. So to be very clear, so my comment first to Alexander's question was linked to the negotiations, where I can just say, we are still in negotiations. But when it comes to what we have booked then we have assumed here the U.S. content under USMCA, which is on a level of roughly 50%, to be very clear.

Okay. And then maybe following up on that, like if we were to take the EUR 120 million off, we would have seen you slightly little taking but closer to breakeven. Obviously, having potentially a higher content and not having what you had in the last couple of months, you're confident that sort of your underlying profitability in international, if you don't get the negotiation doesn't end up successfully, you still think you can be more than breakeven underlying for the year? And how should we think about then the potential upside from the negotiation?

Let me start first of all with a clear answer. That is, in short, yes. We believe that the second half should be better than the first half. You're fully right. In Q2, we had the extraordinary effect. Why are we confident that the second half must be better than the first half. This is very much linked to the really good order intake that started basically in December last year and continued now in the first half of this year where we are confident that we will translate this order intake momentum then into unit sales in the second half of the year. In addition to this, you might recall that we also have done some homework, meaning that we have, in a way, restructured the indirect area. So we have a clear focus here also on costs. So in the combination of all of that, we are positive that the second half should be better than the first half, indicating that we should be clearly above the breakeven RoS that we achieved last year. Yes.

Thank you, Daniela. Next question comes from Klas Bergelind from Citi.

So I just want to start on the Scania margin. I'm trying to understand how the margin would look like without the China impact. You also have the impact from R&D in there? And if you could say to what extent the China investments and underutilization will abate into next year and how we should think about the R&D pace into next year? Trying to sort of understand from where we are today and if you would see less of an impact from China and R&D, to what extent that can boost the margin?

Okay. Do you want me to start, Ursula?

I was looking at because it's a mix of Scania and MAN, maybe you can start...

But I'll give -- I'll take the first part of it and you ship in Michael, but good question, and I cannot give you 100% clear answer, Klas. Of course, we have said from the start that underutilization or under absorption in China will, of course, be an issue until we reach some kind of normal level of production, and then we need to be above 20,000 somewhere units. We're aiming at 10,000 this year. We're filling up pretty well. We have really good reactions on the next year. We are negotiating with the first bigger fleets for more substantial orders, but also retail orders are coming in nicely. Plus, we see more and more opportunities using the Scania product from China for exports to even more markets than we initially anticipated. So we're on the way, but it's going to weigh on our results this year and potentially also next year. The R&D costs and areas where I will need Michael's help are indeed high. They are higher than what we expected. On one hand, of course, fully explainable by the fact that we are investing heavily into electrification of the digitalization. But it's also an effect of creating the group R&D where we are now sharing the R&D costs across the group. So a little bit hard to see exactly where that going to end up this year. We have said that we are long-term aiming at coming in in and around 45% of our total turnover on a group level in R&D expenses. But I think I hand over to Michael to complement on the R&D side.

Yes, happy to do so. I think the China part is super well covered and then maybe just to complement a little bit on the R&D side. I mean it goes without saying in general, we spent quite a significant amount for R&D, but for a very good reason, we're in the transformation. We've developed our trade modular system. In addition, we go for electrification, autonomous driving, software-defined vehicle. So the R&D spend is there for a reason. Being aware of this R&D spend, we are super clear here as the management team, and this is a continuation of what I said already in Q1 and during the annual press conference, we put really an extra focus on our cost work. And just to complement here, yes, R&D spend is significant. But I really want to underline that in all our brands, clearly, you're also including -- because you asked about Scania, we see the positive effects from the cost work to offset here partially at the R&D spend that we do for very good reasons. So you have to see that in a way together. Then let me just add maybe one component, which is FX effects. You know that for quite a long time, we had tailwinds from FX effects than this turned last year and also at the beginning of this year into headwinds. Now we are seeing a slight tailwind again. So FX effects can also play a role in the one or other direction. But what I really want to outline is we put a clear focus on cost work in the entire TRATON Group, and also Scania is doing a super good job here, and we see the positive effects reflected also in the margin.

My second one is on the cost inflation. You said a low triple-digit million annual amount gross before Michael. Has that changed, i.e. its impact now higher? And if you could try and help us with when you will read sort of a full run rate or like a full annual effect, whether that's going to be fourth quarter or also go into the first half of '27?

So my understanding is you were relating the question to the input cost effect from the Iran war. No, I can confirm what I said already in Q1, we still anticipate or calculate with the low triple-digit million effect. Maybe I can complement and say that we saw the first effects now already in Q2, but that was only a double-digit million effect clearly below EUR 50 million. So there is then more to come in the second half of the year. And there was -- what I was into also during the presentation, where I said once we calculated at the beginning of the year, expectation for the first half and second half of the year, then this Iran war effect would be higher input costs or also to some extent, higher energy costs, but this doesn't play a big role. I would also reiterate what I said in the Q1 call, that's potentially a low double-digit million impact, but we see that this will have an impact in the second half of the year. But nevertheless, as we were into, we clearly have the ambition still to deliver a better second half than the first half despite these input costs from the Iran war and despite the pull forward effect of the tariff related effects.

Okay. Thanks, Lars. Next question comes from Jose at JPMorgan.