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Good morning, ladies and gentlemen. And welcome to Huhtamäki’s Results Call for Q1 2023. My name is Kristian Tammela, VP of Investor Relations. Today, our call started a bit earlier than usual as we also have our AGM starting in a few hours. But otherwise, we will follow the normal structure as we start off with our CEO, Charles Heaulme; and then CFO, Thomas Geust. At the end, we will have time for Q&A as normal.
And with that, handing over to Charles.
Thank you, Kristian. Good morning to all of you. And welcome to this session about our Q1 2023, where we are delivering a stable development in a challenging market. I would like to start by giving you a couple of key messages about the context and our business performance before we dive into more details.
And the first thing is about the market trends that we have been experiencing during the first quarter of 2023 is basically in line with the latter part of 2022, meaning that the overall demand was impacted by continued inflation pressure on consumption.
And then, at the same time, we have clearly seen across geographies and categories that the supply chain has become much more stable, much more predictable and this has as a consequence destocking in the value chain, obviously, for cash flow improvement reasons and return to seasonality in certain geographies.
In this context, our financial performance is, we are delivering a comparable growth of 2% on the net sales and that’s despite the pressure on volumes, we will come back to that. And our adjusted EBIT profit decreased a little bit somewhat from the comparison period of Q1 2022.
This performance needs to be put into a certain number of context and the number one thing I would like to say is this, our Q1 2023 underlines a few important facts as we expected actually in line with the quarter four of 2022, where the demand continues to be soft as a result, as I said, of the inflation pressure.
However, and that’s probably important to note, however, with a month of March, particularly the end of March, which is showing signs of stronger demand. The second aspect on this Q1 is as well the pricing adjustments continue to support our sales, however, at a lower pace as raw material inflation is cooling.
Second key message I would like to give about our financial performance in terms of the context is the comparison to the period Q1 2022, which was, as you may remember, a strong quarter for our company with a strong volume growth on group level. There was no seasonality at the time in Q1 2022 as customers were securing availability of products.
For instance, in North America, while the supply chain and availability of raw material was a real issue, the purchases, the demand, the pattern was very strong. The second aspect on Q1 last year is specific to our Flexible Packaging segment. We had in the Q1, our stronger quarter -- strongest quarter in the whole year 2022 with about 30% of the full year profit.
Third comment on the financial performance is our cash flow continues. You may remember that in Q4, we delivered a relatively strong cash flow. We continue to improve the cash flow in Q3 and we benefit from particularly better conditions for working capital.
All this in summary to say about the year that we are not changing our view on the year 2023 as we commented to you back in February. We continue to believe that the second semester will see better sales development, number one, from seasonality point of view and comparability as well.
But as well because we have, as a company invested in 2022 and we have capacity coming online during the second semester some in Q3, some in Q4 and that gives us a positive view on the second semester as opposed to the first semester.
And second, about the year 2023, we have initiated substantial productivity actions, which are underway in order to secure competitiveness as demand is soft, but as well in order to be as competitive as possible when demand will reshape for growth.
That’s about the financial performance for the quarter before we dive into more details, but a word about our updated strategy. You may remember, on 27th of March, exactly a month ago, we were communicating in our Capital Markets Day, our updated 2030 growth strategy, which is focused on technology-enabled innovation and operational performance in order to allow us to be more ambitious on our value creation trajectory.
And that’s something that I would like to comment now very quickly. It’s -- if you were at our Capital Markets Day, this is a slide that you have seen. But I think it’s worth reminding that we see, number one, a strong, a substantial transformation happening in the packaging industry, which has to do with sustainability, consumer’s requirement, changing in consumer’s expectations, particularly on sustainability, customer requiring from us innovation for functionality and for sustainability. Those are deep transformations, which are very positive for the packaging industry.
In this context, we said our profitable growth strategy is built on four imperatives; scale our profitable core; second, innovate for sustainable solutions; three, operational performance, step up our operational performance; and four, build further strategic capabilities that we consider essential for our future for the decade.
And when we add this strategy to the three key packaging technologies we are mastering today in our portfolio, at the same time, as we have this global footprint that helps growing together with our global customers, we think we are uniquely positioned to capture the innovation opportunities in the market.
And that’s why we have increased our financial ambition remaining into a policy of 40% to 50% dividend payout ratio based on the target of continuing to grow our EPS on an annual basis. Thanks to four basically key indicators that -- where we are clearly giving targets.
Number one is the comparable growth of 5% to 6% on annual basis and then on the adjusted EBIT margin, we want to reach by 2027 10% to 12% margin with an improvement of our return on investment between 13% and 15%, remaining in the financial leverage corridor of 2 times to 3 times the adjusted EBITDA from a leverage point of view. That’s about the strategy.
Back to one point, which is really important in our strategy, that’s the innovation, the technology-driven innovation for sustainable solutions. And there, I would like to offer today, I am not sure it’s out yet into the communication release, but it’s coming today and the announcement of the launch of a groundbreaking solution in Flexible Packaging from Huhtamäki, which is going to set new industry standards in paper, PE and PP Retort.
And this -- you have the illustration of the packaging that in theory looks like the same packaging as usual from a flexible point of view, but that has very important attributes from a circularity point of view as this is setting new standards in three types of mono-material solutions.
These new solutions are replacing the conventional Flexible Packaging solutions that we have until now and it will be a completely new structures of Flexible Packaging, which will meet or help our customers to meet their 2025 sustainability pledges.
We know that most of the global FMCG customers have made 2025 pledges on circularity and that’s our contribution to their -- to that strategy. This new packaging are designed for recycling for reduced material use with a high protection performance and on top, it’s offering a competitive solution.
The first investments on this blueloop mono-material solutions in Flexible Packaging were made in 2022 and they are coming now online in two factories in Istanbul, Turkey and in Ronsberg in Germany, and then we have other sites -- other manufacturing sites following shortly.
That’s for a quick introduction. Now moving on to page six on the business performance on the sales. In the first quarter 2023, we are delivering basically a stable sales level, which in reality in comparable terms is a growth of 2%, because we have the negative impact of minus 2% from the divestment of our Russian operations back in end of August 2022, to be noted that for the first quarter since long, there is no impact on the consolidated level from currency.
Moving on to the same sales but broken down by segment. You see that how the breakdown is playing in terms of the 2% at Group level between Foodservice Europe-Asia-Oceania with an 11% comparable growth. That is linked to a demand that continues to soften, and however, it’s different depending on geographies and it’s particularly still soft in Asia even though we are starting to see the effect of the easing policy in China, but it’s yet shy over the first quarter, more stronger in March.
North America, 2% comparable growth with significant variations in demand across the different categories. For instance, the demand in Foodservice was solid, while the demand in consumer goods suffered from the pressure on -- from inflation on consumers.
The demand for Flexible Packaging declined in line with Q4, but you see it with minus 5% comparable growth. It’s particularly linked to emerging markets, to be noted that as well our volume are suffering in Europe, but particularly on the export to emerging markets.
And then on fiber, we have a 17% growth, where we will see it in more details. It’s a lot supported by pricing because the demand for fiber-based egg packaging has been softening for reasons that I will come back to in a minute.
Looking on the slide eight at the P&L, we see that the adjusted EBIT decreased during the first quarter minus 6%. Of course, it is linked to the lower sales volume, but it is particularly linked as well to the divestment of our operations in Russia, which were profitable -- highly profitable operations and until the third quarter of last year.
The adjusted EPS is following, of course, the improvement of EBIT, but as well with higher financing cost as expected. And we have a lower CapEx during the quarter, but it’s more linked to timing than a slowdown in our capacity and innovation project.
Quickly, a review segment by segment, a couple of words. First of all, slide 10 for the ones following offline, on Foodservice Europe-Asia-Oceania, where we see strong sales that continued during the first quarter. The demand for Foodservice Packaging softened slightly. At the same time, the raw material prices continued to increase. So we may come back to raw materials in the question -- Q&A session and that’s specific to Foodservice particularly.
The sales increased mainly in Europe, but actually, were more negatively developing in Asia, particularly in China. However, in China, as I said before, March was strong. So it looks like there is signs -- tangible signs of the economic opening in China.
The pricing and the mix supported our sales growth, while of course, as I said, the lower sales volume had a slightly negative impact. The EBIT profit decreased mainly due to this lower sales volume and the consequence of this volume decline in terms of production efficiency in some markets and then I am repeating myself, but the business in Russia was divested in September 2022 and that has a significant effect on that segment.
Sorry, I have the slides jumping up. North America, on the next slide, we see continued variations of the demand across categories. Significant cost inflation has continued and the net sales growth was mainly driven by Foodservice Packaging, while the seasonality has impacted sales in other product categories. The growth continues to be driven by pricing. So it’s 6% reported growth.
And the adjusted EBIT has improved. That’s a strong result with very close to 12%, supported by the net sales growth and as well the increased operational efficiency. So that’s a very positive result that continues in our North American segment.
Flexible Packaging challenging, again as I said, very much in line with Q4. The overall demand for Flexible Packaging declined, very much linked to inflationary pressure, again, very much into emerging markets.
The -- there is another aspect that is particularly visible in that segment is the destocking in the value chain. We have customers in certain categories or geographies with up to -- from last year, one year of stock, because of the disruption in the value chain last year, there has been an increase in the order pattern, which of course, we are seeing in the destocking.
That’s only a temporary effect and we believe it will normalize at least in second semester and maybe in the second part of the second quarter. The adjusted EBIT decreased impacted by this lower sales volume and a negative sales mix.
Finally, on the Fiber Packaging, as I said, a comparable growth of 17%. However, it’s very much pricing driven and the -- as I said, the demand on Fiber Packaging was relatively soft and that’s -- particularly that’s not linked to the inflation in that segment. That’s linked particularly to the supply of egg due to the avian flu. That’s the main factor affecting the volume of sales.
The particularly good news is as well the strong performance in terms of profit with a 12% EBIT margin, which is a lot linked to pricing, of course, but as well the prices of recycled fiber that were lower than in Q1 2022 linked to a reduced demand overall in the e-commerce for instance in the demand for recycled fiber.
So, with this, I hand over to Thomas for the financials.
Thank you, Charles. I would like to highlight a few things before I could start to go through the numbers. Although already highlighted by Charles, the seasonality which is back is visible in the first quarter this year.
You might remember that we had a very strong quarter last year, €97.5 million of EBIT delivered and that’s on the back of a supply chain distress, which made our customers actually stock up during Q1 already last year. So a quite flattish level of quarterly development in 2021 -- 2022, which we believe will look slightly different in 2023. So that’s my first comment on a general basis.
Then the other comment would be that as you saw already in the first page, the Russian divestment had a roughly €23 million impact on topline, which is obviously visible in the net sales, but it’s also visible in the EBIT. With the EBIT impact in, we would have been only very slightly down on EBIT when it comes to absolute EBIT for the quarter.
Other things to point out here is definitely the high financial costs. That’s against a not, I would say, reflective level of our finance costs even in 2022, we had some one-offs in 2022. However, I have been stating that our finance costs should be roughly €5 million a month.
So the expectations should have been that we would have been slightly above €15 million for the quarter. Unfortunately, here we do have some FX-related costs, which are impacting the finance cost. But with that said, our view is still that €15 million a quarter should roughly be the right level for financing.
On tax rate, we are at 24%, the same level as previous year, and with that one, we are then delivering a 19% adjusted EBIT -- adjusted EPS decline for the quarter.
On the currency, you can see that the currency is trending basically negative for most of the currencies. USD is still slightly positive, but also there the comparison will become more difficult versus towards the end of the year as the like-for-likes are getting closer. So I would be expecting a slight headwind during the rest of the year on the currency side.
Net debt level, we have decreased our net debt versus the India’s end-of-year situation, obviously, on the back of a strong cash flow. We are -- have deleveraged our net debt-to-EBITDA to 2.4 and the gearing has also improved to 0.74.
So really the improved cash flow, which of course, is something we all should be expecting after a tough cash flow situation in 2022, and with all the efforts we have been putting in, in order to improve that. So with other words, it’s really strong cash flow quarter, which is actually not the typical pattern for Huhtamäki. Q1 is normally our weakest cash flow of the year.
On the debt side, we have 2.8 years of maturity. We are here continuously working and planning for refinancing of our debt level. It is clear that our interest rate levels have increased. They are close to double versus previous year same period. But that’s, of course, the situation prior to the bond we issued in June last year.
So quite a similar overall financing cost situation versus where we were late last year. And the finance market, all in all, seems to be still functioning. So we are quite confident in that Huhtamäki has good availability to financing in the market.
Here on the free cash flow, you can see really where the main improvements have been coming. Although in relative terms from a comparison basis, the working capital is clear -- impacting clearly less versus previous year. You can see here also that the working capital still increased versus the end of last year.
This also is a bit of an indication of how strong the back end of the quarter was, which basically means that we collected or issued quite a lot of the receivables -- trade receivables versus the end of the quarter.
Also, the fact that the seasonality leads to the normal stock building in order to have material available for sales, especially in North America can be slightly seen in the inventory. But, all in all, a very strong performance also on working capital.
CapEx is slightly lower compared to previous year, and therefore, the main contributor to the cash flow, all in all, comes from the profitability beyond the relative improvement on working capital.
If you look on the asset side, here we have mainly the changes from, of course, the divestment of Russia but then also from currency. So the currency impact has -- is always quicker into the balance sheet.
If you look on the return side, we are not yet performing in -- on the level where we would like to be. However, remember that in the assets used in the calculation for return on investments is on a multi-quarter basis. So from that sense, it’s always a lagging indicator as such. But we are confident in seeing also the return on our assets improving going forward.
So if you come then to the financial ambition, which we as Charles indicated launched in March, we are trending below on basically all the parameters currently, except for net debt, EBITDA and then on the dividend payout, which hopefully will be confirmed in the AGM today. And nevertheless, I would like to highlight here that this is quite typical to Huhtamäki that after Q1 we would be trending on a lower level than we would be for the following quarters.
So, with that one, I think, we can actually open up for Q&A.
[Operator Instructions] The next question comes from Jutta Rahikainen from SEB. Please go ahead.
All right. Good morning, everyone. Thank you for the presentation. I have a few questions. Maybe we will start with the emerging markets. I think you covered China quite well already, but could we have some comments on Turkey, Egypt and also then India? Thank you. That’s the first one.
Thank you, Jutta. Good morning. So, China, yes, I commented already. The situation in Turkey, Egypt and India is, so I would take Turkey, Egypt in one go maybe and then India separately. So, Turkey and Egypt are still suffering a complex macroeconomic environment, particularly affecting two aspects; one, which is on the consumption linked to the inflation; the second one, which is the level of the currency and the huge uncertainty around potential strong devaluations coming. We specialists are speaking about possibility of devaluation in Egypt relatively shortly.
In Turkey, in addition, there is the uncertainty linked to the coming election in a couple of weeks and where the outcome is relatively uncertain and what is uncertain as well is what would it mean from a business environment point of view. So our demand has continued to be, I would say, soft, but clearly in decline compared to the comparable period of Q1 2022 in those two markets.
In India, this is a different situation for us, where we are starting to see some recovery in -- according to our plans. We have said quarter-after-quarter that we have plans ongoing to improve the situation in India, particularly in terms of competitiveness.
So we see -- we continue to see the same pattern in India as before in terms of when the demand is low, pressure of inflation, consumers tend to go to cheaper products, which is unfavorable for us as we play in the high end of the market.
But what is more positive is that we are starting to deliver much better on profitability in India and that’s thanks to all the actions that we have been taking; number one, in portfolio management; and number two, in reducing our cost base. I mentioned at the beginning that we are accelerating our productivity activities, part of it has been in India and that starts to show results.
If I may add still a few comments on that one. So remember here maybe you have the -- one of the bigger impacts also of the very or relatively stronger quarter last year. So the quarter fur -- quarter one for really was still better than towards the end of the year. So comparison Q1-to-Q1 is more challenging than how we would compare towards the end of the year.
Yeah. That was a good point. And the lease started to weaken, was it Q3 2022, just thinking about the year-on-year comparison going forward?
I would say, the challenges started really in Q2 more visibly, even late Q1, but it was then a continuously challenging market with really the high inflation and not the salaries completely following the cost inflation.
I think on the Elif we have seen two periods since we have acquired the company, Q4 2021, Q1 2022.
Yeah.
That’s the first period, where it was really about the devaluation shock at the time, the first one.
Yeah.
And that took us by surprise, and obviously, like anyone and we are not so exposed in the company in Elif on currency but still a part. So that has had the first impact. Second period, as Thomas was saying, was more continued devaluation, but at the same time, impact on the demand in the market as of Q2 2022.
Yeah.
So, we are still positive. I mean we are -- if you ask us are you still happy to have acquired Elif? Absolutely. Are we happy with the timing and the macroeconomic event that happened after? No.
But there is better days to come, because it’s, again; number one, it’s a huge market, more than 18 million consumers, it’s growing. I don’t want to enter into the result of the speculating, but there may be better days to come from a macro point of view and then it’s a very competitive place where to have a mega factory, like, we are investing in that factory, so that will help us and we will come back certainly on this in the next quarters.
Okay. This is clear. Then my second question on the improvement you said you saw in March and specifically late March. Would you dare to call that’s a sort of macro trend change for the better, now that we are still at end of April, so you probably know a bit about April as well or should we think it’s just more random walk, months differ from each other?
Sorry, your question is about China?
No. No. All in all, that for the third quarter.
No. All in all.
Correct.
Yeah.
It was a bit difficult to hear. I understood. It was the strong end of the quarter. I think here it was what we also indicated that the return of the seasonality and especially, A, I would say, quite strong end of the quarter, especially for the retail in North America, that’s the thing that sort of changed the trajectory.
All in all, I would say otherwise, the macroeconomic situation is quite similar. But this was really the proof of the return of seasonality in North America, I would say. So, though, Easter was early and then the last week actually we had quite good deliveries in retail in U.S.
Yeah. I think on this, it would be fair to say, we see the year in three parts, but mainly first semester, second semester. First quarter is, as we commented, with lots of different factors that consolidated together to soften the volumes.
There are two variables in the volume softening of Q1, the demand and the destocking, where it’s relatively difficult to anticipate what Q2 is going to be. We believe that the demand in Q2 will continue to be at the same level as Q1, not better. The destocking, the big question mark is there still a lot of stock in the value chain. That should start to not be a problem anymore in Q2, but it’s still a question mark, let’s say.
So Q2 we are a bit more reserved and second semester those aspects should disappear even though it would be pretentious to say that we know about demand in second semester. The demand will come back, is it in 2024 in the second semester? Who knows. You may know better.
Exactly.
Yeah. So it’s -- we don’t want to speculate on this. And then the last point, and I said it already, but I think it’s important to mention, you all know that we have invested in 2022, some of it will come online in Q3, some of it in Q4, the rest in 2024. We have even our factory -- our fiber factory in South Africa, that is coming online in Q2.
So there is -- in each quarter, there will be good news, if I may say, may not have a significant impact on the overall company, but still it’s aggregating to the additional volume quarter-after-quarter.
All right. Thank you. I changed my headset, so hopefully, you hear me better now. One more question actually, so…
Yeah.
… on the price mix for the quarter and the volume part, so is it fair to assume that volumes were down maybe 5% or was it -- what sort of magnitude just so that we can split with the comparable sales growth?
So from my -- I would say, it’s a fair assumption. So low mid-digit, single-digit. Yeah.
Thank you and I will hand over to others. Thanks.
[Operator Instructions] The next question comes from Calle Loikkanen from Danske Bank. Please go ahead.
Yes. Good morning and thank you for the presentation. Jutta already asked a lot of the questions I was supposed to ask. But perhaps just on the price and volume developments still going forward for the rest of this year. Do you still see potential for price increases during the year or do you think that this price component will kind of wane off as we go further into the year?
Good morning, Calle. The -- I mean the easy simple answer is the price, we are coming at the end of the price season, if I may say, I mean, in terms of passing through. It’s much more complex.
It doesn’t mean that kept in specific categories or geographies, we won’t have a further increase of prices. Of course, we are -- our number one priority is to define in this context, defend the margins and as well the cash flow.
But we don’t want to become non-competitive obviously. There is pressure in the market because the demand has reduced. Therefore, there is more pressure for at least keeping the prices stable. So you should not see so much pricing versus quarter-over-quarter.
However, as a comparison to the year before, you will continue to see sales growth linked to pricing because our pricing didn’t just happen on the 1st of January 2022 and 2023. So, therefore, there has been some pricing in Q3 2022.
So, for instance, there will be pricing benefit in the sales of Q2 this year. I am not sure I am getting to confusing you. But the point is, so there are two aspects. We will have a pricing benefit into our sales linked to the comparability to 12 months ago. However, continuing to increase pricing during the year is getting more stretched.
Yeah. And maybe to add, as we have the component also of mix -- in the mix section, obviously, we have the new investments coming into topline as well. So we expect them to have a better value contribution then as well. So you have that component also to take into account.
On the -- maybe still on the cost side, so which is one of the argumentations for pricing. The cost picture, yes, for some commodities, there might be a easening trend if we say that way. But please remember also that there are so many other costs, which are still continuing to increase like labor cost and energy. So, there are, for sure, not a significant is in the cost environment.
Okay. And do you feel confident that you are able to then kind of pass on these type of costs like wage inflation and so on into your sales prices or are the customers not only looking at the raw material price development?
So far so good, I would say, that’s what we have done in Q1. However, as said before, it’s getting tighter and tighter, because of the demand reduction. So the negotiation power is reducing to be transparent and we believe that it will be more difficult to pass on further increase.
But, again, as said, in specific categories, for instance, all geographies, where we have energy cost increase or the overall labor inflation, that is -- a concept that is relatively well accepted, the labor -- at least the labor inflation, because that’s across the value chain. It’s not specific to us.
Okay. That’s helpful. And then, perhaps, lastly, on the raw materials, what kind of raw material price development do you expect for the rest of the year and do you see a risk that, we have seen the prices of some raw materials coming down already, do you see the risks that you need to then or the pressure increases to kind of lower prices in some product categories perhaps?
It’s -- so on the raw material, like, if I extend your question to all input costs, it’s a mixed bag, which is slightly positive still in the beginning of the year between the raw materials decreasing like polymer and resins like recycled fiber, the raw materials still increasing, like, paperboard because they are more linked to longer term contracts.
Between the energy that is in the spot market decreasing now, but we have had for availability reasons to make certain contracts during the year 2022. So, therefore, they are still in -- again, comparing to year-over-year, there are still areas or geographies where we have higher energy cost. Then labor which is higher in average 7%.
When you add all this together, it’s a mixed bag and it will ease probably during the year, but particularly on the energy, we would expect. The rest we think is going to remain relatively more the same equation, meaning resin polymers continuing to decrease or reduce or remain at the level where they are at the end of Q1. Recycled fiber should not increase, because it’s very, very linked to the demand, which has dropped a lot with e-commerce dropping.
Then energy, as I said, energy, we believe that we had the worst quarter in Q1 for us for different reasons in specific geographies. So better days to come in the year. And then labor is a given, I mean, labor is already factored in. That’s basically 7% in average. So we don’t expect a major change in our input cost structure across the year.
On average. And then, again, remember that there are regional differences, for instance, India market, as you recall Calle, is a different market than some other markets.
Absolutely. Absolutely. Thank you. And then perhaps just a final question on the product or the new product innovation that you have talked about in the beginning of the presentation for the Flexible Packaging. You said here, it’s a groundbreaking solution. Can I just ask that do the competitors have similar products available in the market or this is -- is this kind of completely unique for Huhtamäki, and therefore, a competitive advantage? And also, is the plan that you convert all your kind of traditional Flexible Packaging into these kind of products or what’s the kind of the potential for this product?
Yeah. I think you said it almost all. Yes. It is completely new for us. It’s according to our market intelligence better than any available solutions available today or what we can figure out upcoming.
So we believe that is going to give us, from a portfolio point of view, a competitive advantage, pretty significant. We can say that in first discussions with customers are extremely promising about the reception of the concept, because that fits completely into their strategy and into their pledges from a sustainability point of view.
And everyone is always asking when there is sustainability innovation, what’s -- how much more expensive is it, because there is innovation, technology and so on. Here, of course, there is some value into it, but it’s a very competitive solution compared to what we usually believe is a new sustainable structure.
So from all these aspects and it’s completely retrofittable into the existing machinery of the customers. So customers don’t need to invest into a new machinery. So it’s kind of same for them, except that the same functionality, same production specification, but the end result is a product that is completely sustainable from a circularity point of view. So it’s -- that’s why we say it’s a breakthrough.
All right. Sounds very good. And then...
And you had a question, sorry, Calle.
Yeah.
Into your question, at the end, you said, are you going to convert your portfolio? Yes. The plan is, of course, it’s not going to happen in 2023, 2024. It’s going to be gradual. But you are probably wondering why we invested relatively a lot in 2022 and we said that we will continue to invest in 2023, that’s because factory-after-factory in the flexible segment, we are changing the equipment for to be able to produce this -- to have more capacity and produce these new structures.
And maybe just to not paint a too big picture of the replacements, it’s not all the equipment that needs to be replaced. This is a specific…
Yeah.
… part of the production equipment, just to clarify.
Yeah.
Yeah. Absolutely. Absolutely. All right. Thank you. That sounds very good and interesting to see how that will play out. Thank you. That’s all for me.
Thank you.
[Operator Instructions] There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.
All right. Thank you for attending and listening into our call. And with that, we wish you a good day. Thank you.
Thank you.
Thanks.