Zumtobel Group AG (ZAG) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to Zumtobel conference call on our Q4 and full year results for our 2022, '23 financial year. With me on the call are Alfred Felder, our CEO; and Thomas Erath, our CFO. Alfred Felder will walk you through the highlights of our quarter and full year while Thomas will discuss the financial performance. After the presentation, both gentlemen will be available to answer your questions. In case, you have not a copy of the report and the presentation, you may find both documents for download on our web page. After the call, a playback of this conference call will be available on our web page as well. And with this, I hand over to Alfred.

Ladies and gentlemen, good morning, and thank you for joining us today for our year-end call. Looking back at our fiscal year '22, '23, we are very pleased that our company performed better than originally expected at the beginning of May 22. The economic and political environment was more than challenging, again, mainly driven by most of the year of a continued shortage of components and drastically increasing inflation. But all in all, we are very proud that we have successfully navigated to this difficult situation. Our revenue, as you can see, from the first page rose by 5.3% year-on-year to EUR 1.2 billion, and EBIT increased by 38.7% and to EUR 84.3 million, which is a margin of 7%. And that reflects the upper end of the latest adjustment what we did from between 5% and 7% as well as our initial guidance. We also want the shareholders to participate the success. Therefore, the Management Board will make the recommendation to the next Annual General Meeting to distribute a dividend of EUR 0.40 per share for the '22, '23 financial year. That represents a dividend increase of 14%. I just would like to share before I go into the financials and then Thomas hands it over to the more details and a couple of projects on the next page. I don't go into all, but I would like to mention a couple of this, one is the Dubai Expo was approaching, driven with the customer of Tridonic together, where we also have been awarded by the award DALI over there in Dubai. The second one in Macau, where we have been very happy to be part of the development of the disparate metals complex, a very large hospital and become the second public hospital in Macau. And this project grows over 7 buildings. And here, we are providing several lighting solutions from both brands strong. And from [ Sotoras ] and last but not least, the Malinas Retail Park in Belgium is considered one of the most sustainable retail parks in Belgium. And here, we are very proud that we could eliminate this following the international dark sky association picture with self approval. So with our products, what are basically adjusting the light and the light temperature the part depending on the day and night requirements. Sustainability on Page #4, it has been an integral part in Sumter, but we have been telling you a couple of times already. But especially during the last year, we -- I think we can proudly say that we made substantial progress here. The 3 main goals of our sustainability strategy the climate neutrality by 2025, the circular economy and becoming the partner of choice remain unchanged. But the focus areas addressed within these goals are continuously intensifying. Our efforts to achieve climate neutrality include 50% reduction on Scope 1 and 2 emissions with a systematic cutback in our upstream and downstream Scope 3 emissions. And we are currently measuring the target reductions all emissive -- emissions, sorry, along the value chain for our net 0 goal in developing a road map that will be validated by the science-based targets initiatives what we have joined last year. In that way, that Zumtobel Group goals to reach climate neutrality will become climate neutrality and net 0. Also the other topic on implementing Circle design rules in product development is another focus and together with our customers, partners and suppliers, we want to develop further approaches to close product cycles. And this the first tangible example, we just have launched a new product the so-called freestanding luminar platform, but follows strictly those circle design rules, and we are very curious now on the acceptance on the market. We have just done this in April. And finally, our goal to become the partner of choice for this stakeholder means, not least the activity management of due diligence, responsibilities and along the entire supply chain. We do not only support, but expect inclusion diversity, equal opportunity our own company, but also by our suppliers. And that means our employee development program is designed to provide our colleagues with the best knowledge and tools. In this way, we are not only a direct contact with our customers and suppliers, but to partners in all matters and sustainability. And as you see it on the right side, we continue to receive the awards, especially proud I am that our technology brand, Tridonic received the first ever EcoVadis rating in '22, scored the [ Simon ] metal and this places our components business in the top 25% of over 100,000 companies rated by EcoVadis worldwide. The Zumtobel Group, again, was awarded by the growth level in 2023, which brings our company among the best 1% in the branch comparison. And in addition, we renewed our AA rating from MSCI and are again part of Hosted Sustainability Index servings. Just as an example where we believe that with this will compensate to a certain extent, the slowdown in the new construction is really the energy savings we like. The then situation of energy and energy prices gives us the opportunity to enter into this business. And I think we as a group with our both our 3 brands are perfectly suited to drive here this business. It's based also in part that the EU will bend the resin [ lamps ] with integrated ballast definitely in September '23. And obviously, in combination with the high energy prices, this is helping really customers to save energy and to become more clean climate vehicles. You just see here from this chart a couple of examples how much energy can be saved it's somewhere between 46% and 70%. That means refurbishment is a key pillar of our strategy moving forward next to, of course, new installations. But obviously, I guess we are coming to that in the questions. We are seeing definitely a downturn in the construction industry, especially when it comes to new bit. Slide 7, let me just turn on the results for '22, '23. As mentioned at the beginning, we recorded a 5.3% increase to EUR 1.2 billion. The selling price increases and especially also the positive FX effects have more than offset the higher material costs, which were intensified by the U.S. dollar appreciation and higher energy costs. Specialty Lighting segment showed more momentum with a plus of 6.9% and in the campaign covenants only at 1.2%. Thomas will highlight this in more detail, especially second half of the fiscal year, we shall see a -- really see a downturn. The EBIT significantly increased from EUR 68 million to EUR 84 million, and the net profit improved to EUR 60 million. How the results are in relation to the previous years. You can see on the next page. And as you can see here, we have been able to make steady progress after restructuring the business, despite the COVID, what impacted us, of course, more than 2 years, the supply chain challenges as well. The war in the Ukraine, we are consistently improving profitability. We are proposing a dividend of $0.40 per share. This represents a payout ratio of slightly below 30%. And the dividend increase of 14% compared to the previous year. I would like to draw your attention to the agenda of the invitation to the Annual General Meeting at the end of July. We, as a management board, are proposing to the annual shareholder meeting to authorize the Board to buy back shares with a limit of 10% of the issued share capital. This result show that the Management Board and the entire company has steadily and significantly improved operating performance in recent years, and we want our shareholders to participate in the company's success in Germany. With this, let me now hand over to Thomas, he will give you a very closer look to the development of Q4 and then also the full year general results.

Thank you, Alfred. Good morning, ladies and gentlemen. Also welcome from my side. Let me start with the Lighting Segment on Slide 9. Revenues in the Lighting Segment rose in Q4 by 2.5% to EUR 225.8 million, and here mainly driven by price increases. Q4 EBIT in the Lighting Segment more than doubled from EUR 6.3 million to EUR 16.2 million. Revenue increases in lower warranty costs more than offset in particular, higher personnel expenses. As a result, our EBIT improved significantly from 2.9% to 7.2%. Looking at the EBIT development for the full year, even in the Lighting Segment rose substantially from EUR 45.2 million to EUR 72.9 million. And led to an increase in the EBIT margin from 5.3% to 8.1%. Moving to the Components Segment. Revenues in the Components segment, unfortunately, declined by 9.9%, with sales of EUR 87.4 million in Q4. Higher selling prices were unable to offset the loss in volumes and unfavorable FX environment. In addition, Q4 revenues also declined due to the customer's high inventory levels. This was a result of the overstocking in the times where semiconductors were not available. Nevertheless, we were able to beat the result of Q3. The decline in the revenues on the one hand and higher material expenses, on the other hand had a negative effect on EBIT development. Although EBIT fell to EUR 7.6 million, the EBIT margin is still at 8.7%. Looking at the full year comparison, EBIT in the Components segment dropped from EUR 36.4 million to EUR 29.1 million. As a consequence, EBIT margin declined from 10% to 7.9%. Slide 11 shows the overall results for the group. Sales after 8 consecutive quarters of growth declined slightly by 1.6% to EUR 297 million in the fourth quarter, mainly due to a decrease in volumes. However, the increase in selling prices and lower warranty costs more than offset the lower sales volumes as well as the high material and personnel expenses. EBIT nearly doubled to EUR 16.3 million. The EBIT margin was at 5.5%. Slide 12. Let me explain the main building blocks of our EBIT for the full year in more detail. Let's start with last year's EBIT with EUR 60.8 million, the above-mentioned increase in prices and favorable effect led to a positive effect of EUR 66.7 million. This positive effect was, however, partially offset by higher material costs, the U.S. dollar appreciation as well as an increase in energy costs obsolescence provisions and higher personnel expenses. Based on these factors, our EBIT increased to EUR 84.3 million. Slide 13 provides you with the information on our income statement. EBIT of EUR 84.3 million I already mentioned. Our financial results was negative EUR 18.2 million. Our net financing costs increased to EUR 6.8 million. Other financial income expenses amounted to EUR 7.2 million. And the result from associated companies was a loss of EUR 4.3 million. This last amount includes the impairment loss from one of our shareholdings in [ Benton]. After the deduction of the income taxes, our net profit for '22, '23 increased by 31% to EUR 60 million. As a consequence, earnings per share rose to EUR 1.39. Now let's move to the cash flow statement. Cash flow from operating results increased year-on-year from EUR 122 million to EUR 140 million, mainly driven by higher profitability. The negative trend from change in working capital is significantly lower than last year. Cash flow from investing activities totaled EUR 54 million compared to EUR 41 million in the previous year. In addition to the investments in property, plant and equipment, this position also includes cash outflows of EUR 9.4 million for capitalized development costs. As a result, free cash flow more than tripled from EUR 16 million to EUR 52.3 million. Let me finish with Slide 17. Our already strong balance sheet further improved since the last year. The equity ratio increased to 42.1%. Net debt decreased to EUR 87 million and debt coverage ratio is at a very healthy level of 0.62. And hereby, I hand over to Alfred again. Thank you.

Yes, let's have a look at our Page 16 you know this curve already where we proudly showed that for 8 consecutive quarters, we have been able to grow versus the previous year. Unfortunately, our solid term from Thomas explanation, we see some headwinds in the Components Segment, mainly through to the high stock level that the customer base who get all the parts in the second half of the year. And that resulted in a slightly negative growth despite the fact the lighting brands are still in a growth mode. Slide #17 shows where the different regions where we are operating has been again, DACH has been an ultra strong region led by Switzerland. Obviously, here, we are benefiting that Switzerland was happening over the period relatively slow inflation rate, which means the construction industry in a very healthy shape. But also Germany and Austria have been performing so that you see here, both in Q4 as well as an entire fiscal year, we have been showing a substantial growth. Generally, we have also good development in the Northern and Western Europe, only negatively influenced again by quite a significant drop in Great Britain due to a weaker market environment, some postponements of the project. And the largest increase here were recorded in business, especially proud here in Nordic where the restructuring over the last years finally pays off. On Southern and Eastern Europe region, the results were mixed. When we talk about Italy, some of the Eastern European countries in France, we have -- they have been able to offset the results in other markets. Asia and Pacific, witnesses declines covered to the entire market, mainly as you know, we had been suffering quite for a long time in China with the very strict COVID policy and that was only lifted and that we are hoping and seeing progress within this year. And last but not least, the previous year -- previous -- previous year, weaker regions, Americas and EMEA recorded a very nice growth. The strongest growth was recorded in EMEA, with especially a couple of really highlight projects in Saudi Arabia and generated the increase after 2 below average period. With that, I'm coming to Slide 18 on our outlook. And all the positive development and achievement we considered, we continue to see the current geopolitical situation quite tense. And that again makes it difficult to predict developments in '23-'24. In the further course of the volume, crane, the energy and raw material prices, and especially in Austria and in Central Europe, substantially higher personnel costs as well as inflation interest rate trends will have a significant influence on the economy, and therefore, on the success of our group. Against this backdrop and with the reference of all this above-mentioned uncertainties, we do expect a moderate growth from 1% to 4% in '23 to '24 and the EBIT margin in the range between 3% and 6% simply because we believe that in the second half of this fiscal year or the calendar year, we will see again a certain price pressure, we are not able anymore to hand over most of these cost increases to the market. CapEx spending is estimated to be around EUR 60 million in '23, '24. And that brings me to the end of our presentation. Thank you so much for listening. And now Thomas and myself will be open for your questions.

[Operator Instructions] And we have the first question from Markus Remis from Raiffeisen Bank International.

Congrats on the figures. First of all, related to the buyback authorization that you're seeking, can you share some thoughts what would be the conditions needed to actually start a buyback program.

Markus, can you repeat the question, you're referring to the share buyback.

On the share buyback that you have put on the AGM agenda, would interested if you could maybe share your thoughts on when you would actually start buying back shares? Is that contingent to certain conditions. I don't know if it's the share price or your balance sheet specifically. So when you might become active?

As you can see, we have a strong balance sheet. We have -- cash is not an issue in our growth. And we would ask -- we can do this only with the approval of the Supervisory Board, and we would get that we asked a Supervisory Board for a part of this 10% to be affected late autumn, beginning of winter.

A bit small...

On the supervisory port.

Okay. But it's more than just how do you say, a [indiscernible] there is the intention to?

No, no. There's a real intention that our shareholders can also participate on our economic success.

As Thomas said, we are having a cash flow healthy situation. We believe that will also continue despite the fact that we might face some challenges in the market. And obviously, shareholder meeting is on end of July and the earliest possible timing would be late autumn to start with.

Okay. Very clear. Yes, then maybe coming to the operational part of the business. I mean what have you baked in the top line guidance, I mean, volume versus price assumptions? And maybe you can also break that down a bit on the segment level?

Yes. So basically markets that you have seen, let me start with the challenging situation on the Tridonic. Tridonic had a fantastic first half year. The reason was that in the first half year, slowly and constantly, we were able to get the necessary components, and we are able to satisfy the volume needs of the customers. The second half year, we saw that we went out of allocation. And obviously, with this policy what our suppliers of components affected to us, and we give to our customers, the customer had to take the volume. And obviously, that was the start when their warehouses were getting full because most of the customers order much more than they could get and in allocation that's a typical phenomenon. And therefore, we see that warehouses needs to be depleted and it did looks a little bit longer. So we are seeing some slight improvement right now. So when it comes to volume, obviously, in the second, let me say, after the second quarter of our fiscal year, we believe that, that will increase again. We also do currently not see a deterioration on prices downwards, material cost, high inflation, high wage increases are stabilizing this. And the same applies now for the Lighting Segment. The Lighting Segment is in a better shape. As you know from our business, Markus, we are now benefiting that our, let me say, day-to-day business comes back. So with more short lead times, customers are going back to the old team ordering path today and want to get it in 8 hours. That was not possible in the risk allocation system. And therefore, we are seeing a certain momentum here. To answer your questions, we believe that the volume increase will be very moderate. The prices, we still believe that we can keep in the market simply because all the material costs for all the suppliers are high. And therefore, it's a slight and very moderate volume increase and the rest will be again keeping the prices high.

Okay. I mean you elaborate then on the cost pressure that you're seeing, and you all know yet it's an [ 39% ] Increase of the wake of the collective bargaining in Austria. I mean are there other cost positions that have a countering effect? I mean what's your kind of perception of the dollar, maybe you can share some information here on where you hedged, how much you've hedged? And any cost items where you currently perceive some declines? Or are you mulling any notable cost-cutting measure?

Well, first, on the U.S. dollar. We have hedged 1/3 of the volume at EUR 1.09, but also Swiss francs have a huge impact on us. So here, we have a very favorable rate of EUR 0.97, also half of the volume hedged for the whole year. And also the British point with 0.87 to the euro. Here, we will benefit. This is our better rates than last year. And on the material costs, we see that aluminum is going down. Copper is stable. Here, we have to see what is happening. Of course, energy is much less than last year. Here, we have hedged until Q4. And of course, we will need to see how we fight with this cost increase. We will -- we have contract workers here in Dornbirn, around 100 people, and those positions will be shifted to lower-cost countries.

In general, Markus, I may add to that, what Thomas already said, we will, of course, use this year now to again look into our footprint. On one side, the advantage that in Dornbirn, we are now mainly already manufacturing highly automated products with large volume. I'm talking here now about the lighting situation. And on the other hand, we have Nis, who is basically a perfect fit for doing the small menu work. And most likely will accelerate this, that we are having a better balance between the automated lines in high-cost countries and the manual lines in lower cost countries. And obviously, you mentioned it's not easy and challenge that in Austria, we do have a 10% wage increase. And obviously, you know the rules, how this applies. We are also expecting with inflation being as they are in Austria. It's clear that also May '24 will be another substantial wage increase, and we want to prepare for that and then adjust our footprint.

Okay. That's very clear. A final question from my side. On the M&A side, I mean, a topic that has been accompanying you now for some time? Any update on the status quo you can give us?

Yes. We are constantly monitoring that we have, let me say, a couple of targets in the biplane that are currently under evaluation, but it's too early now to share where we are. But that's also over the last year, the market environment has changed quite significantly, and we need to reevaluate how we move forward. But we will let you know as soon this [indiscernible].

[Operator Instructions] Our next question is from the line of Michael Marschallinger from Erste Group.

I have 2. First one will be on the refurbishment we already talked about. Could you give us more color how the demand developed throughout last year through the quarter? Did you see already the momentum really picking up through the quarters and what you currently seeing and are expecting to further develop?

Thank you for your question. Very good question. So it was a very interesting development where we have been on a very steep learning curve. When it comes to refurbishment, the trend right now goes more in a direction where customers are more interested for cost reasons, obviously, more interested not to replace the complete old feature with a new LED feature, but basically are seeking for refurbishment kits. And this refurbishment consists basically of an LED module plus the necessary sensor technology plus the driver. And we have been starting with that more or less as CBD products. And now we are having a couple of those standard refurbishment kits that are fitting into our luminaires and potentially also in competitor luminaires, whereas basically within a click, easy to replace. That is running very well. It is very strong out the demand out of the DACH region. The second one is when it comes to refurbishment, obviously, the people do not want to have a lot of construction in their buildings. And so here, if they want to have not only switch on, switch off the light, which start with LEDs, they are seeking for wireless solutions that basically enables this technology, and that's again combination with refurbishment kits and luminaires with our connected solutions are perfectly, also mainly carried not mainly, but to a strong extent driven out of the DACH region. We will see now what happens after the summer break when it's not any more possible to bring fluorescent tubes into the market because we will expect that then this replacement will even intensify. So we see already now that this refurbishment is helping us to compensate to a large extent, the drop in new construction and new buildings across the European companies. It's gaining momentum in a nutshell.

Second question, once again, on the EBIT margin guidance. I have to say, give me your comments if I don't see any deterioration in pricing donor hedged material prices coming on energy prices all this 3 to 4 that the lower bound of the guidance, 3%, 4% seems overly pessimistic. And do you really see any possible scenario for that to happen?

Well, as you can see, we need to restart the engine of Tridonic. You see that the revenues declined heavily. The big momentum they had in the first 2 quarters was reversed in the second 2 quarters. And we don't know exactly how long it takes until the inventory with the customers of Tridonic is used up. Then we need, of course, to counteract on the inflation, on the personnel expense increase. This will also take some time in order to shift labor from one point to the other. And so that's why we have this quite [ big time base.] The faster we are, the better our EBIT margin will be. And the sooner the demand with Tridonic will pick up, again, the better the EBIT margin will be. But -- this is -- cannot be calculated when this will happen. So we need to give a quite big time base for our EBIT margin guidance.

Maybe Michael...

Sorry, but you assume the pickup after the second quarter, if you have, understood.

Yes, I wanted to comment. Let me just elaborate a bit. Original assumption was back in April time frame that by April onwards, this high inventory level that the customer base is depleted. That is not the case. We are still seeing that is increasing, but we expect another 2 to 3 months until we are back up. And obviously, then we are already full in our quarter 2. And that gives exactly the uncertainty. When is it exactly the case because, obviously, we do not know the inventory level we just know from the interfaces with our customers where roughly what they sell last as then. That's, I think, the biggest uncertainty is less currently on the alumina side. It's more on the component side. And despite you see what Thomas was showing you in the components segment. The EBIT has dropped significantly in the second half for Tridonic and stabilized, et cetera, at a high single-digit level, but not anymore at double digit. And that gives the uncertainty, and that's why we thought that we are giving this large bandwidth.

The next question is from the line of Laurent Stöckli from Quaero Capital SA.

Just a quick question to understand your guidance. You've explained that personnel costs will be higher this year and that we understand that Tridonic is going to have probably a continuing enough environment in the first half of the year. But your guidance, on the one side, you say you're cautiously optimistic and on the other side, you're talking about a margin or EBIT margin of 3% to 6%, which suggests a fall of EBIT of between 50% and 50%. Can you just explain that sort of fairly strong indication for 4 of EBIT this year.

Yes. I think Thomas explained it. Thank you, Laurent, for this question. One is it obviously this bounce back of the components business with the volume comes earlier, let me say, if now within July, we are seeing a normal order intake because the stock that our customers is depleted. Then I think we are back on track and then we are growing more on the higher end. That's one. The second one is we are not sure, and I don't know how familiar you are with Austria, but with 1/3 of our people we have a wage increase of 10%. We are not sure whether all these fixed cost increase, we can again hand over to the market and how it was possible in the past. We see as all our, let me say, competitors and us are able to deliver and construction shrinking, we are having an oversupply. And despite high inflation, we believe that we are seeing again at least in the second half of the year a price pressure. Obviously, if on one side, the volume comes back quickly, and the inflation stays that we are able to hand over the price to the market, then automatically, we will end up with a higher level. If not, then it might even get worse. So that's exactly the uncertainty where we are in.

We have a follow-up question from Markus Remis.

Taking good [ granular ] now, if I may, -- looking at the Components Segment and the development of the earnings over the course of the quarter. So I'm looking now at Q4, EUR [ 87 ] million and EUR 11 million of EBITDA, the same EBITDA figure was basically achieved in the first half on revenues of [ EUR 103 million and EUR 94 million. ] So -- can you put that into perspective how you've managed to maintain the earnings level despite the revenue pressure?

You're mainly talking about the Components segment, right?

Components segment, specifically, so I mean Q1 was strong in terms of top line, as you rightly pointed out, but still, I mean, on revenues of, I don't know, EUR 50 million or EUR 7 million less Q4 EBITDA was pretty compared with EUR 11 million or actually fully comparable?

You mean now last year or the year -- this year?

In '22, '23.

Well, the raw material prices have to be taken into consideration. Raw material a year ago was much cheaper than a year later than the U.S. dollar rate is heavily impacting in the results of Tridonic. There are a lot of variables in this equation.

I think, I guess, if I understand you're right, Markus, you were saying looking at the second half with 6% EBIT and 8.7% EBIT despite the lower volume, that's not so bad compared to the first half with the higher value, right?

Exactly. That's my point. So when I look at the profitability in Q4 '22, '23 in both in absolute terms and then expected there is the margin is still quite healthy despite nearly lower revenues than the seasonally strong Q1 and Q2.

Well, as I said, it's not so bad, the result. But this was also influenced from transfer prices within the group. The Tridonic increased transfer prices to the lighting segment in the second half of the year. then there are shifts in government subsidies, depending on which quarter you record them, but I agree, despite the lower volume, the result was not so bad. Nevertheless, Tridonic is a high-volume business. And if you have the loads, then you -- then it's very profitable. If you lack of the load, it's going the other direction.

Okay. Okay. So the 10% decline in components to put it down, that was a volume effect in the final quarter?

Yes.

But Markus, what you are saying, just obviously, you see that the Tridonic is able to manage this very well. That's why we believe also in the second half, but you see also a trend here. You see a frame that -- we have minus 8.3% in Q3 and minus 9.9% in Q4 and without basically knowing exactly where we will end in quarter 1, but that is currently not improving. So obviously, simply because the customers have to take that volume, what they have ordered and they are still having high warehouses. And therefore, we believe Q1 will be challenging and depending on how this market comes. The market is not unhealthy. But obviously, the entire market of semiconductors, the entire market of components and you see also in our inventory level where we are extremely high, all-time high as it at the end of the fiscal year. Also, our customers on the components are having the same effect.

No, certainly. So there will be quite a base effect and also you want to be considered yes. Okay. No, that's very clear.

Next question is from the line of Roland Konen from Value Holdings.

Congrats to the figures. 2 minor questions from my side. First one is on the impairment on the associates. I guess we talked about Q1 or Q2. It depends on the inventor on impairment. My feeling was that this was cleaning up this position. Now we see instead of 2 million negative result in this line, minus 4.8. Could you explain this furthermore, -- is this just cleaning the balance in the light of the very good earnings situation of the last fiscal year? And my second question would be on the personnel side. We saw minus 2% of the numbers of employees on average, but minus 5% when we compare the reporting date. Is this a result of the more productivity of you? Or is the sign of the lower work or the lower order intake in the last month of the fiscal year, you explained especially for the Tridonic side.

Well, [indiscernible] in the first half year, we brought off half of the value of the shareholding. And as you said, also in good times, you can also provide for -- or take a more conservative outlook on the development of your investments. So we fully neutralized the value of invent in our balance sheet and P&L. With regards to employees, this is a very tricky question because we have a high labor-intensive operations in China. And depending on how many people there are -- you have a lot of employees more or a lot of heads more or less. So depending on the load of the Chinese factory, this makes the swing of our employees. It's not the broad based through all countries, it's more China-related than related to Europe.

Okay. Understood great [indiscernible] of all these explanations.

[Operator Instructions] So far there are no further questions, and I hand back to Alfred Felder for closing comments.

Ladies and gentlemen, thank you so much for listening. Thank you so much for the questions. Then this brings us to the end of our call today. But again, we believe that after Q1, and I think we talk again at the beginning of September, we will have much better visibility on how this how much surprises this fiscal year will have for us and how we will take them. Thank you so much, and have a great day.