Cloetta AB
STO:CLA B
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Cloetta AB
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Ladies and gentlemen, welcome to the Cloetta Quarterly Report Q2 2018. I will now hand over to Jacob Broberg, SVP, Corporate Communications and Investor Relations. Please begin.
Thank you very much. Welcome to a warm and sunny Stockholm day and Cloetta Q2 report. As usual, I have Henri de Sauvage-Nolting, our CEO, with me; and also Danko Maras, the CFO. And Henri, you will start. Please go ahead.
Yes. So Q2 highlights are the EBIT improvement and also the branded growth, offset with the negative development in pick & mix. When we peel that down, we see that the net sales grew, that's the Candyking inclusion effect; and the organic growth amounted to minus 4.9%, and we'll unpeel that a little bit further on.If you look at the operating profit adjusted, pleased to see that, that is up to SEK 145 million, and also the operating profits in total at SEK 155 million is better than last year. If you then look at the profit for the period, you can see that we end at SEK 97 million; also last year, we had a one-off, which makes the comparator of course, quite large.Cash flow more or less stable at SEK 119 million. And the net debt/EBITDA at 2.77, and that was after the payouts of the special dividend and the regular dividends.If we then go to the markets. Big thing was that we saw markets declined in all of our markets and also more than we anticipated. Of course there, pick in Sweden was an expected Easter effect that we've seen this in all markets. We can measure that in Nielsen, that's only the packaged goods. But if we look at the POS data on the pick & mix, we can see that the pick & mix market declined substantially. Again, Easter, but probably also some other factors.If we then look at the organic growth, we came at a minus 4.9%, all coming from pick & mix. Not good, of course, and I'll go a bit more into detail into more slides. The positive news is that all the focus on our brands and the packaged goods starts to pay off. So even with Easter impacting the biggest market in Sweden, in total, we were able to grow with 0.6%. Not where we want it to be, but given the market decline in all the markets, this was really positive also leading to shared growth in most of the markets and categories.If we then look at pick & mix, it declined 19.4%, and of which Candyking accounted for 1/3, mainly driven by the Norway sugar tax and the Easter effect in Sweden. Again, we have some more information on that.If I then go to the next slide, Jacob, looking at the changes in net sales, you can see organic growth as minus 4.9%; structural changes, that's the inclusion of Candyking, that has now come into our numbers. So this is the last quarter that, that will be reported like this because now it's 1 year ago since we included this business into the Cloetta business. Exchange rate at 3.6%, leading to a total of 4.1% growth. Most important is to fix the organic growth, of course. And then also, after the previous call, we tried to unpeel a little bit more the pick & mix sales development. So if we break it down, you can see in total pick & mix, you can see the minus 19.4%. Yes? So that is the total pick & mix business in the quarter, minus 19.4%. If we then break it down, you can see the Candyking part at minus 12.1%. And that is largely due to 2 things. One is the Norway effect and the other one is the phasing of the Easter sales, mainly in Sweden.And if we then take the pick & mix, excluding Candyking's, you could say that the old Cloetta pick & mix business, you can see minus 29.3%. So a much larger decline. Okay, where is it coming from? Of course, that is where the Coop contract plays in. So then below -- the lowest row you can see, excluding Candyking and lost contracts in Sweden, so that's basically the old Cloetta business without Coop, you can see that the Easter effect over there was minus 7%. And so that gives you a little bit of a feeling where the organic growth problems in pick & mix are coming from. So it is very transparent. It's also very centered around 2 areas. So one is Sweden, with the lost Coop contract; and the other one is the Candyking business, or the old Candyking business in Norway with the sugar tax and promo impacts we can see over there. And then for this quarter, we have the Easter effect, which is something which will normalize out now for the rest of the year.Then how are we doing with the integration? We had the big milestone on the 1st of May. All of the 4 Nordic countries went into the Cloetta ERP system. So these were the 4 Candyking businesses, which the previous were on a different platform, they now go in -- that now gone into the Cloetta platform, which is really important to get even more transparency and synergies and ability to steer the business in the right way. So that was quite a big task for us to get that all in. And like with any go live, there are always some unexpected things we need to sort out. But that now means -- it means that things like group planning and merchandising optimization, that all can be done now much more integrated rather than have it getting 2 different systems. And we're not completely ready because the U.K., which is also a good running Candyking business, that is still on a different platform. In due course, we will start the project over there as well to start working on the integration. And then many other things, which are lying outside of the ERP system go live, which we are working on like other systems which are supporting, in particular in the merchandising, the field sales area.It's good to see that the insourcing is completely on plan, and also contributing to the coverage. And the lower cost in supply chain, and the SEK 100 million is still standing very, very strong. So with having that said, I hand over to Danko.
Thank you. Before I start, I just want to take the opportunity to let you all know this is my last day. It's been a great journey working for Cloetta, those 6 years I've been working with you. I want to thank you for the good cooperation. For those of you, analysts, who have been or are on the call, it's been really, really nice working with you. Cloetta is a fantastic company, fantastic brands. I'm not going away too far. On Monday, I start at Intrum. And some of you guys are following Intrum as well, so I look forward to working with you, but from another company.So with that, moving into the profit for the period, which was an improvement, significant improvement in almost all aspects. You can see the gross profit on Page 7, SEK 559 million, SEK 40 million more. Obviously, the inclusion of Candyking has an impact, but this is also now when we start to see good production coming through with the event that we had last year with Turnhout. We are now coming up to a better delivery on the supply chain part and production is good, yielding good coverage or fixed cost leverage for us. So benefit is coming through there.In addition, this is the first time you start seeing it, you also see a gross margin improving 130 points versus last year. The inclusion of Candyking has been dilutive ever since we acquired it. But since we now only have 1 month of known comparators, you now start comparing like-for-likes. Obviously, we want to improve that gross margin going forward with the synergy realization; and in this particular quarter, we are now starting to see a good impact of the insourcing of our Candyking product. So a good delivery in gross profit and gross margin.That is trickling down to the operating profit adjusted, which you see is SEK 145 million versus SEK 115 million last year. So SEK 30 million improvement. So on top of the improvement you see on production, you also see good cost control, where indirect and overheads are -- they're low last year. And on top of that, we're also getting some synergies from the Candyking integration and overhead. So a good delivery, overall, on the adjusted operating profit.The peculiarity we had in Q1, where operating profit is higher than the adjusted one, continues. And this is because of the impact that was highlighted about pick & mix. The earnout adjustment that we need to do, we have an earnout liability that will be paid based on the combined volume in December this year, it's coming down as an effect of the reduction of volume. We also then will pay less on the earnout, and that's the adjustment you see. So it's both good and bad news. Of course, we want to grow pick & mix, but the actual payout adjustment has resulted in a credit of SEK 10 million in total. There were some cost as well, but the net impact is plus SEK 10 million. Last year was the acquisition and then we had a lot of one-off costs of about SEK 25 million. So the swing you see between last year and this year is SEK 35 million, improving operating profit, in total, then with SEK 65 million. So really a very high delivery compared to last year, but the swing in exceptional item is explaining them.Good margin on 10.5% on operating profit. 9.9% operating profit margin adjusted. Net financial items is a little bit higher. I'll come back to that in the next chart. Profit before tax, SEK 128 million. We got a 24% tax rate. No surprises on the tax, in particular. And then profit and loss for the period of SEK 97 million is because we did a significant write-down on the discontinued business in Italy last year, you have the swing of almost SEK 420 million.So from a good EBIT to cash flow. I would say a good cash flow. As you can see from operating activities, SEK 165 million versus SEK 84 million last year. That is an effect of the good EBITDA or the good income statement, not having any major surprises on interest on tax, delivering SEK 165 million.On the interest part. As you might be aware, we have refinanced our facility agreement. We sent out a press release earlier about that. And the way it works is that when you have transaction cost associated with those facility agreements, you have to capitalize that cost and amortize it over the lifetime of the duration of that contract. And because we refinanced, we have to release it, and that's the only reason to why you're seeing a higher finance net essentially than last year. It's about SEK 7 million. On the other hand, we are now in the market with the commercial paper program. And we have borrowed up to about SEK 500 million, and the indications that we are getting is somewhere around 20 to 22 basis points of borrowing cost incrementally, which we think is good for Cloetta. But we will, of course, try to get that even lower.So very happy with that, and therefore the net debt/EBITDA that you're seeing in the quarter at 2.77 is equal to last year. And we continue to be a good cash generator. The only bill watch-out that we had for the quarter was the working capital movement. And here, we do see a net impact of between receivables and payables, which are 0. And essentially what we are seeing as an increase is our inventory. And that is an effect also of us building out more production for safety stock levels and so forth.So we can do more on working capital, absolutely. I'm not very worried about the particularities of the quarter coming. Please remember that in the comparators, you have Italy included. So that was about SEK 200 million positive cash flow in the first half year, which will not be consuming cash in the second half of the year as we are no longer including it really in our numbers.Nothing more particular for the cash flow. We spent a little bit more on CapEx, but that's because we capitalized the ERP costs and they were a been higher than what we had in the past because of the implementation of Candyking. But all our benchmark numbers from the balance sheet are below target levels, so really a good delivery in that respect.So with that, over to the CEO.
Yes. So what is the focus? Overall, you could say, it's getting the business fundamentals right, building the platform for sustainable growth. A lot of focus on growing the base to mitigate the particular lost pick & mix contact in Sweden. The tax impact, we're getting more traction, more structure. And you see now, has started also much more cooperation across the countries to try to leverage scale in marketing mix development. So a lot going on over there. And as you can see from this quarter as well, it's a lot on constant growth margin. Price increase in Sweden has been announced to the trade, so that's public information; and also the cost program, of course, is really important in getting traction. And that's not a one-off, we'll continue with that for next year.Candyking integration, of course, it's a big business for us. It's across multiple geographies. And in each country, we need to integrate and now streamline the operations in a good way after we now have the go live on the ERP system. And U.K. as the next step, and, of course, the insourcing and there's still a lot of volume we can bring in, and that is quarter-after-quarter executing the plans. And then Lean as a way to improve the efficiency. Danko already mentioned the issues we had exactly more or less a year ago in the Turnhout factory, so it's good to see that supply chain is running on the stable controlled way, improving efficiencies. And also, the Turnhout line is coming towards the end of the ramp-up phase. The manufacturer of the machine is still there with us to iron out the last smaller technical improvements we are requesting from that line. So that's also good to see that, that is coming onstream.And like always, in the end, we are selling products to consumers. So also our investors should be interested in that. So we're stepping up the Choice for You program by offering more lower and no-sugar products. So we tested that last year in the Netherlands, we have a lot of success with that. So that is now being rolled out into the 4 Nordic main markets. You can see the Gott & Blandat, that is the main brand we have here in the Nordics. But also in Finland, we're doing this. And you can see that we copied, basically, what we did in the Netherlands with the 30% less sugar offering and also a no-sugar variant. And then in the Netherlands, we have next to the Red Band candy brand, we have a licorice brand called Venco. And also over there, we're now doing sugar-free launches to capture that trend. So we think it's good business, but that it's also good to offer consumers and also other stakeholders alternatives in this category, and that is something we will continue to expand on. Yes, and last but not least, we bring a smile to people's Munchy Moments. This is where the money is being made. These are the brands where we are selling. It's getting more consumers standing in front of the shelf to choose a Cloetta product, paying our customers. Customers being happy for the good service. But also, what we can add to the category, and they are paying us. And that's where the money in this business is coming in, and that's where the prime focus of this business is on.So with having that said, we can open up for questions.
[Operator Instructions] And our first question comes from the line of Nicklas Skogman from Handelsbanken.
Yes. I have a couple of questions, please. The first one is on the -- your production volumes and how that benefit the gross margin because you highlight the higher production levels as is beneficial to gross margins in the quarter. But in the cash flow part you said that you have been building inventory ahead. So I was just thinking, how should we think about -- because with higher production, of course, you get a lower unit cost, but you've been building inventory. So how should we think about this going forward? Have you -- has there been sort of overproduction in the quarter?
Nicklas, I'd take that directly. So the delivery of fixed cost leverage is disproportionally high relative to the inventory build in the quarter. So there are no one-to-one relation between the 2. What you are seeing is a good throughput of produced volume compared to last year. And if you were around last year, you might remember we had a very low absorption in that quarter. So the impact of the inventory level is not going to increase every quarter with the delivery in the income statement from a fixed cost leverage. So you saw a onetime movement of inventory. We are not excessive in inventory. We are not below. We are having a good level of inventory. So I would say that's more of a one-off effect. And the production volume is the fixed cost leverage that you will see a benefit from in gross profit ongoing as we have announced with the Candyking merger, that we will get a bigger fixed cost leverage. So there's a lot of volume that continues to come in for supply chain to produce that will lower the fixed costs.
Okay. And then secondly on the marketing spend, which you said was lower in the quarter. I was thinking how much lower was that? And do you have any guidance for the increased spend in H2?
Yes. What we do is we plan our activities when it makes most sense to do them. And this year, we see a few big activities coming up in quarter 3, like a few which I just mentioned, the low-sugar [ bearings ], and therefore, we also moved the marketing spend from -- a bit of that from Q2 to Q3. I mean, it's not major. We're not talking big impacts. But it is, I would say, 4%, 5% of the total marketing spend, which we have moved from Q2 to Q3. So on total year, marketing spend should be slightly up in line with what we have communicated before, that we're starting to slowly increase the marketing spend in order to be more competitive in the different markets.
Okay. And then lastly on the new lower-sugar products, do you see yourself getting new customers with this offering? Or is it just current customers switching to a lower-sugar alternative?
Yes. So what we see -- I mean, we have now a very good experience from the Netherlands, because we have been in the Netherlands now for 3/4 of the year and we see both. So we see both people who are, let's say, light users, so people who are buying the brands but not very often, that they are becoming like medium, heavy users. But we also see new people coming back into the brand. And the split is about 50-50. So that's quite positive and that's why we also believe that this is really interesting from a business point of view. Next to that, of course, we have our customers who are very interested in these kind of offerings. But also, if you think about broader stakeholders, like governments, we just, of course, seen the sugar tax discussion in Norway, it is important that we have these kind of offerings in our portfolio.
And the next question comes from the line of Nick Fhärm from SEB Equities.
My first question goes to the issue with the Coop contract. I believe initially you estimated the impact, on a full year basis this year, between SEK 130 million to SEK 150 million. And I think most recently you said basically SEK 110 million to SEK 115 million in that magnitude. Is this still the case now that we're halfway through 2018?
I think what we can say is that the original estimate of between SEK 140 million and SEK 160 million still holds. What we also can say and what we also communicated in Q1, that we expected the Coop own concept to be up and running on the 1st of January. But that took more time. So they were ramping down from December, but the last stores they converted were done within Q1. So therefore, we did not have the full effect yet in the first quarter. But the full, how do you call that, the full run rate or the full effect is still SEK 140 million to SEK 160 million. And of course, a lot of that depends as well on how good the Coop concept is going to perform in the markets because we are supplying our bulk items to Coop, which they then sell in-store.
And how do you expect the second half sales to impact between Q3 and Q4? And what was the actual estimated impact in this quarter, please?
Yes, we say it's around SEK 150 million on the full year basis. You could expect something like SEK 30 million to SEK 40 million a quarter of impact. There are some variances with Easter Q1, Q2; a little bit of Halloween in Q3, Q4, but I would say that's a good average to estimate.
Perfect. And what is your own estimate for organic growth in Q2? If you adjust for the shifted sales due to Easter as well as the lost Coop contract, what will be the sort of underlying organic growth rate according to your own calculations?
I think what you could -- we just talked about Coop being around SEK 40 million effect, I would -- it's a bit tricky because the Easter effect is different in different markets. And I would say probably the effect on Q2 was about 50-50 between Coop and Easter. So I would say that's more or less the effect that you can -- I think you can also see that -- yes?
Yes. But that probably means that your sort of true organic growth rate in the quarter was probably slightly positive actually? Can I...
Well, I don't like all these excuses. I mean, we just lost a Coop contract, which is not good. The customers should be happy with our business and what the service we provide. So all companies making -- correcting organic growth for this and for that and lost things here and there. Now we have just not done a good service to our customers. And of course, with pick & mix, it is a bit different because there's a lot of other different elements and it's a bit more binary that you gain one or you lose one. But we just have an organic growth of minus 4.9%. And then we can say, okay. Well, if you unpeel it -- like we said, there's 2 divisions. We have a pack division with much higher margins, that it is so crucial to make that growing because that's where we will make margins which are an improvement for the 14%. And on the pick & mix business, we're integrating. I just explained that. But we just need to become better as a provider of concept, that customers are knocking on our door because they want to do business with us and not try to do it themselves or going to a competitor. And that's clear if you look at these numbers with the lost Coop contract. We're not there yet, but it's my firm belief that we will be there. And we are getting the right people on place supporting also the different countries, people with retail experience. So we will get there. This is a big thing for Cloetta.
Absolutely. Final question, and then maybe I can come back later in the call. But I was just wondering, when you lose 12% of top line in Candyking, what's the leverage there? Would it be a fair assumption to say that you're probably loss-making in this quarter if you look at Candyking isolated? Or is there any particular reason for why you would be able to sort of shift out costs, sort of variable with that sales development?
We're not -- we're making profit on Candyking. But you can also, of course, see from when we acquired it, it was not very high. But of course, on the other hand, we are improving with the insourcing, we're improving the trends for prices because we are better at producing that ourselves than buying it from a third party. I mean, as I already explained, the big impact for the Candyking business is the Norwegian business where the sugar tax led the sugar debate, which has led to all customers in Norway not promoting pick & mix. And promotions are really important not only during Easter but also in the other months. That is the main reason for the Candyking loss. There is one other smaller reason, which is that we decided already, when we acquired Candyking, that we would step out of a loss-making Polish business. It was heavily loss-making -- heavily but it was loss-making, we looked at it, we could not see a way on how to make it profitable looking at the market conditions and pricing, so we decided to step out of that and inform the customers that over 2017 we would unwind that business. And that actually is helping us in the profitability. Those were the 2 reasons for the Candyking business to be down. We initiated the Polish thing. Good decision. But of course, in Norway, we need to work hard to -- yes, to compensate for that. We have one major customer in Norway and, of course, we're in constant dialogue with them on how to cope with this less volume, both from a consumer, but also from a cost perspective.
And the next question comes from the line of Mikael Löfdahl from Carnegie.
So first of all, could you say something about Norway and the current trading in Q3? I guess that sugar tax could go away as consumers come back and marketing spend perhaps increases in the retail chains and so on. But how has Q3 started?
No, we're not going into forward-looking statements. But what we can say is that we have seen, in Norway, a positive growth in our packed business or our branded business in Norway is growing. So that is very pleased to see. That also means that we've been able to adjust to new price points with the sugar tax. And I'll tell you again, I mean, it is really a -- well, a fiscal measure. I mean, you don't pay any tax -- not pay any sugar tax on a kilo of sugar, you don't pay it on ice cream. But if you buy Läkerol, which is not containing any sugar, you pay this sugar tax. So that is a good sign I would say. That's, of course, not only the sugar tax, that's also the other things we're doing in the sales fundamentals, in particular, and also with the branding, yes? And then if you look at the pick & mix business, of course, the -- also in Norway, the biggest quarter or the biggest month is the Easter sales and that effect you have seen. Now it is time to work with the customer and see, okay, the next big one is Halloween, that's not by far as big as Easter, but how are we going to operate? Now one thing which we can see in Norway and what we also hear is that there is a lot of discussion in the Norwegian market, particularly between retail and the Norwegian government, because the Norwegian market is quite impacted even though it is like 1% to 1.5%, because there's a lot of Norwegians who are actually going out across the border to do shopping in Sweden. And I think from top of my head, it's something like 60% of the Norwegian population is living in places with only 1 hour or less drive to the border. And we're not talking here about candy, but we're talking about a lot of other categories, which are cheaper in Sweden. Of course, that is hurting the Norwegian trade. And so they are also lobbying hard to get rid of some of these measures like other governments in the Nordic have tried and left. You had, in Denmark, the famous fat tax, which led to the same kind of behavior of Danish consumers then shopping in Germany, and then the government decided after 2 years to abolish it. So there are certainly a lot of discussions going on to see what is the real purpose of the sugar tax because as you have said, it's also something which doesn't really prevent people from eating less sugar because it is the same tax on all products in the category.
Okay. Further on Candyking. You do provide a lot of growth numbers here for us to try to figure out underlying growth and so on. But Candyking, I mean, it was consolidated at the end of April last year. So it was not part of the group in April. And this year, April was the Easter month. So could you just say something about Candyking's organic growth during the whole quarter of Q2 this year, year-on-year?
That's been -- that's the table we showed. So the Candyking organic growth, so this has nothing to do with Cloetta organic, nonorganic. So Candyking declined minus 12.1% in the quarter. That's like-for-like.
So that's FX adjusted as well then?
Yes.
Yes, yes. So just to come back to that point, it's Danko here, Mikael. We had this discussion in the previous quarter, and we said we will consider for this particular quarter to show you the organic growth for Candyking in isolation, and that was a bit unusual because 2 months are organic; 1 month, the month of April, is what we call structural growth through acquisition. So the table that you see, we've actually taken away that and said that's the organic underlying like-for-like comparator on Candyking. It's the only time we will do that. So -- and the problem disappears because from Q3 onwards, you will have a comparator by quarter. So we have that number [iindiscernible].
On the gross margin then, you -- I guess the mix in this quarter is positive also for the gross margin as pick & mix decreases in proportion. Could you say something about the gross margin development within packaged, if that has improved? Or is it only the mix?
No. I would say, if you look at the -- you're absolutely right. So we have a negative volume and a positive mix, and the effect of it is basically neutral. And then you have the production benefits coming through, which is the fixed cost leverage that we are seeing as an enhancement. And to that, you also have a somewhat tricky price implication. But if I look at it overall, then the tax business is holding its margin from a commercial point of view. And you're getting a boost from restoring, let's say, the supply chain production. So it's a recovery from a somewhat negative comparator, I would say. But you don't see a significant improvement in the profitability from packaged, holding its course. That's what I would say.
Okay. And you touched on pricing. You'd said in connection with Q1 that you would implement price increases to mitigate the currency movements not the least. At that point, I think you mentioned price increases would probably start to come through in August, September or so, and gradually impacting the margins. So is that still the case?
Yes.
Yes. So like we said last time when ForEx or raw materials start to move adversely, we cannot act on the spot price difference or it needs to be in the market for a while. And then there is a 3-months', how do you call it, notice. So we need to inform customers that 3 months later the prices are going up. So that we have done, and that means indeed that as from quarter 2, August-ish, these prices will go up.
Okay. And on -- another thing on the gross margin. The effects from last year's fire in Turnhout and now that the production is more or less up and running, when -- or did we see any gross margin improvement quarter-on-quarter from taking back production perhaps from some third party? Or will that come in Q3? Could you say something about that?
It's Danko here. So you are starting to see synergy realization from the Candyking insourcing. It was much smaller in Q1. So now, as we have said, the generation of the benefits from this Candyking acquisition is coming through more in the second half of the year than in the first half of the year. So that you will start seeing coming through as a positive. And please bear in mind, also, that we did not have a financial impact because of the fire in Q2 last year. What we did have, though, was a very low production volume in Q2 for many different reasons. So I'm not going to go into those and bore you with those. But now we are restoring that level. So you get first fixed cost leverage benefit and now we are then increasing volume. The fact that we are having Candyking insourcing, we also have volumes from Italy that we are moving in. And the third-party production that we've had is going to be insourced as well. So there is volume for supply chain to produce, and the task for supply chain is to do that as a low cost as possible. And that is progressing now in a positive way also with the new machine coming in. So more in the second half than what you've seen in the first half will come from that.
And just to add on that, the added Turnhout machine fire we had, it was last year in June. It was one of the last days in June. So the comparator with last year is not in any way affected by the Turnhout.
It's just lower production volume for other reasons.
Yes.
Okay. I was just thinking quarter-on-quarter, if there were any positive effects in Q2 versus Q1 from Turnhout up and producing again?
No. No, you're not seeing it. You will start seeing it in the second half of the year. Because then the implications of the fire had a negative effect, both in Q3 and Q4. Not only internal but for the whole network, it became a big of a -- a bit of an issue.
Okay. Good. Final question, just if it's possible, you're mentioning in the second half more synergies coming through from Candyking. But is it possible to quantify anything, how much did you see already in Q2? And what is the delta moving into the second half? And perhaps, also -- I mean, you have the target, what you are going to reach in 2020. But the work in terms of insourcing or production, is that moving faster or in line? Or sort of when will it be material?
I realize and I appreciate that we can be a bit more detailed, but as with everything when we are doing these activities, I think it's more important to go back to the headline of the SEK 100 million that we said we would do. Is it going faster or slower? We said that it would come more in the second half of the year. What makes me very encouraged is to see that we are delivering synergy realization as we have planned internally a little bit ahead of schedule. And that's great to see because sometimes acquisitions don't go your way. But this time, we are seeing it coming through and we know that there's enough in the pipeline. So if everything works well -- in the supply chain, you'll never know if there's something happening. But if things go as we have planned, it will come in the second half of the year into 2019. And with fairly high comfort level, I have to say, even though that might be the last thing I'm saying here. But it is -- I'm very encouraged with the integration work and the realization that we are seeing coming through now.
Of course, there are 2 big underpinning factors: one is the Turnhout line getting up to speed, which gives us also the capacity to execute those plans; and the second one is the go live on the ERP system on the 1st of May after we worked ourselves through the smaller issues, which you always have with an ERP go live. We also will start to see back office synergies coming through in quarter 2 because of that. So of course, those 2 big events are pointing to what Danko is underlying, that most of it will then come into second half.
[Operator Instructions] As there are no further questions, I now hand back to you, speakers.
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