Nkt A/S

CSE:NKT

Earnings Call Transcript 2021-Q3

[Operator]

Good day, and thank you for standing by. Welcome to the NKT Q3 report 2021. [Operator Instructions] Please be advised, today conference is being recorded.I'd now like to hand the conference over to your first speaker today, Alexander Kara. Please go ahead.

[Alexander Kara, President & CEO]

Thank you. Good morning, everybody, and welcome to the Q3 report, and thanks that you take the time to listen to our Q3 results. In the room, I have here 2 more presenters; Line Andrea Fandrup, my CFO and Basil Garabet, President and CEO of Photonics.Let me start here with the key messages for Q3. And as you know, we have preannounced our Q3 result on the 19th of October. And since then, our numbers -- figures have not changed as such, maybe not too much news. So -- but if you look at Q3, NKT Cable overall grew 10% organically. This was supported by all 3 business lines and also the impact, consequently, on the operational EBITDA.Our high-voltage order backlog is EUR 2.9 billion in market price end of Q3, which is at very high level. Also, I would like to mention here in Q3, we -- NKT Cables received a higher sustainability rating from 3 independent rating agencies, which is a consequence of our actions taken in the area of sustainability.Coming to Photonics. Photonics had a record high Q3 in revenues and also an improved EBITDA. But in addition, also highest Q3 orders received of up to 25%. In Photonics, we are ongoing with the strategic review, and we have appointed our lead financial adviser, JPMorgan.If you look at the Cable's performance in Q3, specific, as mentioned, all the 3 business lines have contributed on the revenue growth. And you see on the graph on the right side for Q3, 11%; and for the first 9 months, 19%. On operational EBITDA, we have changed from 7.1% to 13.5%. This was mainly driven by Solutions, which included an insurance onetime income of EUR 20.7 million. But also without this insurance, we have improved the Q3 '21 number compared to Q3 '22 (sic) [ Q3 '20 ].If we look at the 9 months’ result, we increased operational EBITDA from EUR 48 million to EUR 117 million, or without insurance, to EUR 96 million, meaning an increase in percentage from 5.8% to 12.1% including insurance, or from 5.8% to 9.9% without insurance. We had some good development on the application side with the improvement, and I will come later back to that. In Service & Accessories, the increase on revenues was mainly driven by Service and also we had a modest EBITDA growth.Coming to Solutions, we worked on various projects and we finalized the Moray East projects, 220 KV high-voltage AC cable, which provides power for 40% of the Scottish households. Further, we have launched an initiative, as already pre-announced in Q3, to improve the profitability on the Solution business, where we focus in Cologne on moving the lower part of the high-voltage cable to Velke Mezirici, and focusing Cologne on the higher voltage on AC and DC.This will impact -- has an impact on the workforce in Cologne. So we will reduce the workforce and it is more than 100 FTEs, which also resulted in a EUR 14.5 million one-off costs in Q3. The focus of moving the production of the lower end of the high-voltage to Velke and to increase the focus on high-voltage AC and DC in Cologne requires an investment of EUR 25 million, which is a split between Cologne and Velke. So overall, those together add the EUR 14.5 million, EUR 15 million round; and EUR 25 million with the EUR 14 million on cost and investment initiative as informed earlier.If we come to the high-voltage market development, we have received orders in Q3; in and out orders and variation orders of existing orders. Further, we selected a preferred supplier for the Champlain Hudson Power Express transmission line, which is a project which brings power from Canada to New York. This is not yet a firm order and as such, also not in our backlog, and we're working on the contract negotiation as we speak.In the first 9 months, around EUR 2.5 billion of projects have been awarded in different regions around the globe. And we have seen mainly in '20 and '21 DC technology versus AC technology.Looking at backlogs. Our backlog has slightly been reduced from EUR 3.16 billion to EUR 2.97 billion in market price or to EUR 2.52 in standard network price. And you can see on the graph, in round numbers, the distribution of the backlog that will be executed in 2022 and in 2023 onwards.Overall, we are working on different projects in execution, offshore wind, interconnectors and oil and gas, and you see a list here on the slide on the right side.In Application, we have made some good progress in driving our efficiency in the factories, factory output, and this has increased operational EBITDA by 2.6% from 5% to 7.6%. And further, we work also on commercial initiatives, which includes also pricing. So we see good momentum here in application. The business on the building wires, good output in -- from Warszowice in Poland. But also on the medium voltage side, with medium-voltage demand in Scandinavia. So this is really a positive highlight of Q3.Coming to Service & Accessories, the revenue growth was mainly driven by service and the closeout of repair jobs from the first half of this year, and as a consequence, the EBITDA. What we also plan to do is, over here have initiated is execution hub in Gdynia, Poland, to prepare for the coming growth in Poland on offshore, but also the high demand on onshore. In Accessories, we had good medium voltage deliverables from Nordenham, whereas we have some challenges on the high-voltage side with the Cologne footprint moving to Alingsas with increased cost.Coming to our ESG rating, as mentioned in the beginning. So we do a lot on the sustainability side. We have all -- all factories running on green electricity. We work on reuse of cable scrap, for example. Also our forklift run on either electrical or on biofuel and so on. So Scope 1 and Scope 2 is less than 5% of the total, whereas 95% is Scope 3, meaning, for example, CO2 emission from raw material and so on. But also here, we have started actions with our suppliers to improve and reduce the scope 3 side.On the diversity and inclusion, we have completed in Q3 an employee-wide survey. And also here, we have improved and we plan to have 30% of female leaders in 2024. So you see the ratings here, a quite good improvement compared to previous year.With this, I would like to hand over to Basil to -- so that he can talk about Photonics.

[Basil Garabet, Chief Executive Officer and President]

Thank you, Alex, and good morning. We'd start off this quarter by announcing that we are separating a different segment in our reporting. The segment is Quantum and Nano Technology. Now this segment has been part in the past of our industrial segment. And for this reporting and going forward, we've decided to separate it out essentially because we've seen some tremendous focus on the area from -- in different governments and different industrial portions of the industry, but also because it's growing quite significantly for us.Quantum today covers about 16% of our revenue in the last 3 quarters and is growing. As a segment, quantum technology covers a range of very fast-moving areas, especially in quantum computing and quantum sensing and in quantum communications. Nano Technology also covers the applications within the development of Advanced Materials, mainly for the Quantum deterrent areas.Moving on to the performance in Q3. As Alex mentioned earlier, the revenue increased in the quarter and is actually a record increase -- sorry, a record total for us. Considering Q3 last year was our first quarter of growth after the pandemic. This quarter, and it was a record quarter, but this quarter is 10% over the same quarter in 2020. EBITDA also rose significantly to EUR 3.2 million, again, driven mainly by the higher revenue and gross margin improvements.Component with all of this is, we've had the highest ever Q3 order intake, again a record at 25% over the same quarter of last year. So business is moving well in most of the areas, especially in Industrial and Quantum technology.We move to the next slide to outline the business development in Q3. In medical and life sciences, the trend did continue with regards to improvements, especially in ophthalmology and in microscopy, were quite strong quarters for us. In Quantum, the area that contributed mostly has been in Quantum Computing and all the research associated with Quantum Computing.On the industrial segment, which is still our largest segment and showing a significant growth. A lot of the growth has come from our segment in the semiconductor industry and in remote sensing. In aerospace and defense, the growth was relatively flat, but still positive, but affected by timing factors. And we have existing projects and some interesting projects on the horizon that will move it forward.And with that, I'll finish my segment and pass it on to Line. Thank you.

[Line Andrea Fandrup, Executive VP & CFO]

Thank you, Basil. So, turning to the financial highlights of the Group. For the third quarter, the revenue and the operational EBITDA came out satisfactory. The 10% growth in both NKT Cables and NKT Photonics was a good contribution across both of the businesses. When you look at the earnings, also these improved compared to last year, especially take a note on year-to-date performance, up significantly compared to the year-to-date result of 2020.On the margin level, also improvements across both businesses. And with a one-off item related to the restructuring of Cologne, the total EBITDA of the combined companies end at EUR 34 million for the quarter. On the net result, we are at, for the quarter, at a zero and the year-to-date performance of EUR 13 million compared to the minus EUR 44 million last year. FTEs is increasing year-on-year for the Cables part, particularly which is due to the expansions in our Solutions and the higher activity level in Applications.On the balance sheet highlight, it worth to notice that the working capital improve was favorable compared to the Q2. For the Cables part, a EUR 106 million reduction in the working capital, mainly due to milestone from Solutions business. With the good improvement on earnings and working capital, the ROCE over the quarters also improved.And net interest-bearing debt decreased compared to Q2. So we're now at a SEK 97 million for the quarter and a 0.7x EBITDA compared to the EUR 1.7 billion for the last quarter. Also in this quarter, we have refinanced our revolving credit facility. And for now, have engaged with 5 banks for a 3-year facility of EUR 200 million.A little bit more specific on the working capital, where we could say we are back to a more normalized level compared to our Q2 with the milestones payment on the Solutions business. Also, our overdue, our accounts receivable balance in the Applications business decreased. And over the time, we will see this fluctuation coming in with -- especially the project and solutions business, award and milestone payments, where application business is more running a business related to the inventory and the accounts receivable.On the cash flow statement, I think satisfactory to note that our cash flow from operating activities is at EUR 146 million. This is, of course, due to improved earnings and also the positive impact on the working capital of the quarter. And we continue our expansion program. And by that also we increased our cash flow from investment activities, but this is more than offset by our cash flow from operating activities. Therefore, our free cash flow for the quarter is EUR 99 million.On the outlook for the year, as the 19th of October press release stated that we are now expecting the NKT Cables to come in at around EUR 1.2 billion on the revenue for the full year and an operational EBITDA in between EUR 125 million to EUR 135 million. NKT Photonics outlook is unchanged compared to the -- after the second half, an organic growth in revenue of 8% to 15% for the full year and an EBITDA margin of 6% to 8%.So the key messages of Q3 is noting the growth of revenue of 10% organically across all business lines, a still high-voltage order backlog of EUR 2.97 billion in Q3, and we continue to add a number of projects book-to-build quarter-by-quarter. The record high EUR 18.5 million revenues for Photonic is understanding that there's a solid recovery from the COVID impact of the last year. And then the continued review of the strategic alternative for Photonics where we now engaged JPMorgan as lead financial advisor.With that, we will turn over to question-and-answers.

[Operator]

We will now begin the question-and-answer session. [Operator Instructions] Your first question comes from Kristian Johansen of SEB.

[Kristian Johansen]

I have 3 questions. So first one is on the German corridor projects, and if you can update us on the expected production start for these 2 projects you have, considering the customer dialogue, I understand you're going to have?

[Alexander Kara, President & CEO]

Yes. On the German Corridor project, we have discussed in the last quarter with the customer and we will produce next year for SuedOstLink and SuedLink cables, and it will have an -- quite also a big impact on our revenues next year.

[Kristian Johansen]

Okay. That's very clear. So will you produce according to the original plan? Or I mean, will you produce a bit less than originally thought, but still a meaningful amount, is that what you're saying?

[Alexander Kara, President & CEO]

It's a meaningful amount, not exactly as originally planned, but a meaningful amount.

[Kristian Johansen]

All right. That's very clear then. And then my second question is on the backlog mix. I think you righted yourself that you've primarily been taking in DC orders. So, again, focusing on 2022, what is the outlook and possibility to actually take in orders on the AC cables, which can have a revenue impact next year?

[Alexander Kara, President & CEO]

Yes, of course, we work on various tenders for AC cables, but also for MI Cables, and there can be cable projects awarded, but their likelihood -- they must become very soon in order that we have a meaningful contribution in 2022. So we look now how -- that we focus on the backlog what we have, meaning we have a [indiscernible] backlog AC. We have a lot of DC offshore project in the backlog and 3 projects now the German Corridor projects. So...

[Kristian Johansen]

Just to clarify, so do you see tenders being awarded within the next 3 months on AC cables, which could make a difference?

[Alexander Kara, President & CEO]

It will be difficult then -- really to come fast because you have also a time tied with start production. So for '20 -- for next year, it will be difficult that we get revenues. And if at all, then it might be not substantial.

[Kristian Johansen]

I understand. That's clear. Then my last question is just on the strategic review of NKT Photonics. So in the light of the fact that you've now hired in an adviser here, can you sort of maybe elaborate a bit on what your conclusions has been so far? And what potential outcomes are you now looking at in the [ latter's ] development?

[Basil Garabet, Chief Executive Officer and President]

Hi, Kristian, yes, we obviously has announced of -- hire of JPMorgan and there are no conclusions as yet, and really any question should be directed at JPMorgan.

[Kristian Johansen]

Okay. But can you say whether a sort of industrial sale, an IPO and so on, is that still in play?

[Basil Garabet, Chief Executive Officer and President]

Again, everything is on the table, and that's the reason we have hired JPMorgan. So I would suggest communicating directly with JPMorgan on this issue.

[Operator]

Your next question comes from the line of Akash Gupta of JPMorgan.

[Akash Gupta, Research Analyst]

And I have 3 as well, and I'll ask one at a time. The first one is on 2022 Solution revenues bridge. So I think now you say that a quarter of your backlog will be for 2022, and that gives me a number where consensus is roughly EUR 200 million above that. So basically, you need to get EUR 200 million more in orders to hit 2022 revenues.And if we do the same sort of work for last year, like if you look at your last year backlog and how much at this point in time was due for 2021, I think the info out after Q3 was around EUR 100 million. So the question I have is that, do you think that this consensus expectation for Solution business, which has roughly EUR 200 million more in revenues than the backlog you have at this point in time, do you think is realistic or could there be any upside or downside risk from new orders?

[Alexander Kara, President & CEO]

Yes, Akash, thank you for the question. I mean, we gave some indication about the revenue with 25%. What you see and the 25% of the EUR 250 million -- EUR 2.52 billion is roughly EUR 660 million. And this is a round number. So a percentage up or down is a EUR 25 million impact. That's number one. So it's -- and then there's Champlain, for example, is not in the backlog yet and would have a positive impact in 2022, provided it becomes an order. So we can also have further impact -- the positive impact from projects not yet in the backlog.

[Akash Gupta, Research Analyst]

Okay. So you think consensus for next year could still be doable?

[Alexander Kara, President & CEO]

I mean we will guide on the next year in February. And I gave you some hints with the 25% of the EUR 2.5 billion and the 1% is EUR 25 million, so 2% more, and we already have EUR 50 million plus projects which are not yet in the backlog, for example, in Champlain, can have a meaningful impact.

[Akash Gupta, Research Analyst]

And my second one is on cash flow. I mean, Q3 was pretty strong, and you said working capital is now more normalized after a step-up in Q2. Can you say anything on Q4? What your expectations are on both progress collection as well as on CapEx, and what sort of trajectory we should expect for Q4 cash flow?

[Line Andrea Fandrup, Executive VP & CFO]

Hi, Akash, this is Line talking. I think our investment programs we have -- really have trust upon, and they are a significant impact also to our cash flow for the full year. If you look at a proxy for working capital, I think Q3 will flip you most. Usually, we will continuously in the Solution business, have milestone payments, which is a major swing. And then if you do a proxy on the applications, I think you can do percentage [indiscernible] something like that. So not to be exact, but I think those things will give you some proxy for the capital and cash flow of the fourth quarter.

[Akash Gupta, Research Analyst]

And my final one is on COVID headwinds. So I think in the last couple of quarters, or maybe since the start of the year, you are highlighting that uncertainty from COVID and also from raw materials. The question I have is that, if you look at your, this year's guidance, how much of COVID headwind have you seen or have you factored in that guidance? And if we haven't had these headwinds, what could be the upside this year in EBITDA?

[Alexander Kara, President & CEO]

I mean for Cables, we have managed during the whole COVID-19 period very well, with our actions to protect our employees and we had the minor impact in the past. And we also do not expect to have an impact until the end of the year. So no plus and no minus.

[Line Andrea Fandrup, Executive VP & CFO]

And I think what we don't do is narrow this down to a single absolute number that would be the net impact of COVID. Our business as other's businesses can be impacted by similar activities. So when we give an outlook, of course, we [indiscernible] COIVD, it could be execution. It's a lot of different items. And then that's what we cannot account for when we do an outlook.

[Operator]

Your next question comes from the line of Claus Almer of Nordea.

[Claus Almer Nielsen, Senior Analyst of Capital Goods and IT]

Yes, I also have a number of questions and take them one by one. The first goes for Photonics and you Basil. Could you please provide a bit more color to this Quantum and Nano Technology division? What is -- actually applications or technologies that is within this segment? That will be the first one.

[Basil Garabet, Chief Executive Officer and President]

Hi, Claus. Yes, in the Photonics segment, which is very fast-growing for us, the main driver there at the moment -- and by the way, we've been in this segment. This is not new for us. We've been supplying into the segment for the last 20 years. It just hotted up in the last year quite significantly. But the main pull on that is in Quantum computing, and it's an area where our lasers make a significant difference.So we're seeing a lot of push and a lot of pull from customers on that and a lot of market movement. If you look at the investment by governments and companies worldwide, it's quite a few billion euro being spent in China, in Europe and especially in the U.S. and that's the segment that we're pulling out because it's moving, it's exciting for us, and it's an area where we make a big difference.

[Claus Almer Nielsen, Senior Analyst of Capital Goods and IT]

But Basil, just trying to figure out the potential. So Quantum computing is still low in volume terms. So -- and I guess, as you said, this government, this might be more -- nothing in big commercial volumes yet. So if things are progressing as hoped for, could this be a significant increase in the volumes, if you look 2, 3, 4 years ahead or how is the outlook?

[Basil Garabet, Chief Executive Officer and President]

No, absolutely. And if you look at all the investments in Quantum, whether it's in computing or communication or a cryptography, it's been driven by big data, it's been driven by banking, it's been driven by security, it's been driven by medical and life sciences. So there's a lot of pull on that. So the Quantum Computing industry as such, which is still in its infancy, is getting a lot of boost to basically take it where in 4, 5, 6 and probably a little bit more years, the amount of products that needs to be out there is significantly high. And that's the exciting part.Now obviously, what we sell is very high value, very high technology, very sort of involve huts that make up that. And in quantum computing, it's basically they use lasers for -- these are atom computing where you trap and cool and spin and get all kinds of quantum effects from the atoms to be able to make the computer work. So this is hotter.

[Claus Almer Nielsen, Senior Analyst of Capital Goods and IT]

Sounds good. Then, will this strong performance so far this year, both in your order intake and in your revenue? So in 9 months, you have had a 20% organic revenue growth, I think, and you're guiding for 8% to 15% full year. So what is actually going through -- go against you in Q4. Would that means a quite depressing Q4.

[Basil Garabet, Chief Executive Officer and President]

Well, if you look at Q4 of last year, it was a record for us. So, again, we're performing well, but there are -- there are some issues that do affect our shipment strength. The business is still very buoyant. The orders are coming in. Business is very good. The outlook is very good. What's working against us is the possibility of COIVD affecting us. There's a spike in Denmark at the moment, especially in the Copenhagen area.So because most of our shipments are back-loaded into the second half of the quarter, what happens is if we miss a week or 2 -- I mean, we're not that many people. So if it takes out 3, 4, 5, 6 people from a production line, it shuts us down for a week or so. And that affects revenue.The other thing that we're seeing is that even though we have everything in place with regards to supply chain, we're seeing that things can change with 1-day notice. We'd have 1-day notice of a supply with a key item coming in change. So that's what we -- that's why we have this range at the moment, which is the 8% to 15%. We're being prudent on that. So if everything was fine, we would be -- we'd be doing better, but we can't sort of guarantee that with the current situation that we're in.

[Claus Almer Nielsen, Senior Analyst of Capital Goods and IT]

That's fair. Of course, Q4 last year was the best quarter ever because you are a growth company, but it was not like you had enormous growth in Q4 last year. But just to be sure, so the way you are guiding is who knows what happens tomorrow or next month. And therefore, if things happen, then you will probably be able to absorb that in your guidance. And if things do not go wrong, then it could be more ROCE than your guidance is reflecting. Is that the way to read it?

[Basil Garabet, Chief Executive Officer and President]

Yes.

[Claus Almer Nielsen, Senior Analyst of Capital Goods and IT]

Got you. Okay. Then moving to the Cable division. Champlain, maybe an update on the milestones. There is this public hearing going on in Q4? Is everything going well there? And also, should we expect that the -- hopefully, signing of the contract will happen in Q1 next year? An update there would be helpful.

[Alexander Kara, President & CEO]

On Champlain, I mean, we are in the negotiation with the customer. And they have got the TDI, got the green light from [indiscernible]. There's one permit missing public hearing, which should be -- happen in Q1. We expect that this should be not too difficult, but you never know. You need to wait until you have it. And again, we are in the negotiations. So we said we expect that it will be an order in 2022.

[Claus Almer Nielsen, Senior Analyst of Capital Goods and IT]

Okay. And then going to your investments in Poland. I guess that's -- that must be due to strong hopes to get your fair share of the offshore wind key projects. Can you give us an update on the timing and possible discussions with developers?

[Alexander Kara, President & CEO]

What we are doing in Poland, we are creating an execution hub, and we start here with hiring jointers in -- and they will be located in Gdynia, and we will expand that as we capture, hopefully, some orders in Poland. And then we will expand on that.

[Claus Almer Nielsen, Senior Analyst of Capital Goods and IT]

But I think normally, you don't do these investments ahead of some specific regional or local investment ahead of getting orders. So why is Poland different than other European offshore wind markets?

[Alexander Kara, President & CEO]

No, in Poland, there's a growth expected. And then also with Poland with adding a local workforce, which you can also utilize in -- for service activities outside of Poland, you should have an advantage on the cost base. It's not only in SSL, we use execution up for Poland itself.

[Claus Almer Nielsen, Senior Analyst of Capital Goods and IT]

Okay. So it's not like you have a number of Polish projects on more conditional status. So once these projects, hopefully, win in auctions, it will be in KT projects. So more -- how certain are you about your market share in Poland?

[Alexander Kara, President & CEO]

Okay. That's a good question. I mean, we work on tenders and so on. And we -- historical, our market share is somewhere between 20% and 30%, and that can vary. Last year, it was more. So this we need to see. You cannot -- we just prepare that on the -- its manpower mainly and the jointers, and we can -- then if needed, scale it up. That's the plan.

[Operator]

Your next question comes from Jakob Magnussen of Danske Bank.

[Jakob Magnussen, Global Head of DCM Research]

Two questions from my side. Can you talk a little bit about your plans for the upcoming hybrid that has its first call date next year? Are you -- what are your thoughts around calling this brand? And furthermore, around refinancing it potentially? Will you be refinancing it or will you be -- also be drawing on your credit facilities? And on those lines, also your cash position has improved. So what are you thinking about distributing some of that to shareholders in the maybe short to medium term? Yes, let's start with that.

[Line Andrea Fandrup, Executive VP & CFO]

Thanks, Jakob. So on the hybrid, and I guess, in general, what you are asking about is our cash position. I think right now, a satisfactory performance, of course, coming out in a better cash flow position. And if you see, there is a list of a significant change due to the significant transition. Our, let's say, readiness for where the markets are growing and what will happen? We are pretty agile at the moment. And that means, of course, there's a lot of things going on.Of course, dividends to shareholders could be one thing, investment in the business could be another thing and the financing, thinking our financing structure not to have the hybrid could be another thing. So I think for now, we are working with different hypotheses and not to be concerned about that. So we will come into 2022 and we will walk through on some of the directional things in this regard.

[Jakob Magnussen, Global Head of DCM Research]

Okay. And then just a conceptual question or your thoughts around when or if you are awarded the Champlain U.S. cable, what are you thinking about setting up construction capacity in the U.S. versus producing the whole lot in Europe and then shipping it to the U.S?

[Alexander Kara, President & CEO]

The -- implied we get an order, we can produce in Europe, in our factories, but we have also possibilities to produce in the U.S.

[Operator]

Your final question comes from the line of Daniela Costa with Goldman Sachs.

[Daniela C. R. de Carvalho e Costa]

Actually, I have 2 questions -- 3 questions. One is actually a follow-up on the prior question. Can you elaborate, so you said you have possibilities to produce in the U.S.? Exactly what are you talking about? I thought you didn't have local capacity. So interesting to hear there.And then the second thing, was wondering if you could give us some indication of what are the biggest tenders that are going on at the moment. And if you still think that the price of current tenders is increasing given the industry, in general, is more utilized?And then a follow-up on Photonics on the comments earlier. I was just interested on hearing the motivation on why you're now giving us the split of the business. Is that in any sense kind of mapping how you're addressing the process of optimization, mainly maybe sort of like more on a piecemeal segment-by-segment versus the whole of Photonics or no. Just what's the motivation there on giving the disclosure on the details?

[Alexander Kara, President & CEO]

Okay. Maybe for production, I mean, obviously, we will not produce in a factory from Prysmian or Nexans, but there are also other companies which is not a direct competitor where we could produce. And yes, I'm not sure that I need to be more specific. I think it's pretty obvious.And coming to the next question about ongoing tenders. And so what we expect going forward, of course, is in a time frame from April to July expected awards from U.K. CFD rounds. So there are several projects which are -- could be awarded in an area of 10 gigawatts. And there's in the U.S., projects ongoing, some has been already awarded and some may come.And then we have in Europe, several projects in Poland, we have projects in Germany and Netherlands on offshore wind. We have also interconnector projects with MI technology, and those are publics known information. And then there's also projects which expect to come in the oil and gas field in Europe, but also in the Middle East. So there's a lot of activities on several tenders with different technology, different regions and we acted on several projects.Of course, we expand our capacity in Karlskrona and Cologne, and we need to see what can we take on orders in order to fulfill commitments on the delivery time? So in the expense, we have auto limited capacity; that seems also to be understood.

[Daniela C. R. de Carvalho e Costa]

And the last...

[Line Andrea Fandrup, Executive VP & CFO]

Yes. Sorry, on the Photonics. You asked then, you will have outage. We've been completing new segment of Quantum for now, but we're not -- we're having the strategic view. The Quantum segment is an important part of the Photonics business as such, with a good growth so far and an increased focus. And that's the main motivation of that.

[Operator]

There are no further questions coming through on the line.

[Alexander Kara, President & CEO]

Okay. If there's no further question, then thank you very much for good questions and your time, and wish you a good day and talk to you for the Q4 numbers. Thanks. Bye-bye.

[Operator]

Thank you. This concludes today's conference. Thank you for participating. You may now disconnect.