Concentric AB

STO:COIC

Earnings Call Analysis

Concentric's Strategy Amid Market Challenges and Electrification Growth

Concentric's Q2 net sales dropped 13% to SEK 955 million. Despite market challenges, electric product sales remained strong, growing 12.7% year-over-year and contributing 23% to total sales. The company reported an operating income of SEK 124 million, down from SEK 175 million last year, due to a SEK 100 million warranty provision. Operating margins stood at 13%. Cash flow from operations improved significantly, reaching SEK 103 million. The book-to-bill ratio was 89%, indicating potential weaker sales in Q3. Concentric continues to invest in electrification and new market opportunities, expecting further progress in energy storage and data center cooling solutions by early 2025.

Challenging Market Landscape

The earnings call presented a stark picture for Concentric in Q2 2024. The company reported a 14% decrease in net sales, dropping to SEK 955 million compared to the previous year. Both the Engines and Hydraulics divisions faced comparable declines, with sales down 13% and 16% respectively. The weaker demand signals a broader contraction across their key markets, particularly agriculture and construction, which combined account for about 50% of total sales.

Operational Impact and Financial Performance

Compounding the sales decline, the company’s operating income fell significantly to SEK 124 million, down from SEK 175 million a year prior, leading to an operating margin decrease to 13% from 16%. This drop reflects pressures from reduced sales volume and necessitated provisions for a warranty claim of SEK 100 million related to manufacturing defects. Notably, despite these challenges, the operating cash flow improved to SEK 103 million, yielding a cash conversion rate of 137%, indicating strong management of liquidity amid downturn.

Preparing for Future Growth amidst Costs

Looking ahead, management anticipates sales in Q3 2024 will be slightly weaker than in Q2. They recognized the need for proactive cost-saving measures to maintain operating margins under difficult economic conditions. The company’s book-to-bill ratio, indicating new orders against revenue, stands at 89%, signaling potential sales softness in upcoming quarters. This underscores the significance of expense management strategies being implemented across both divisions to adapt to the lower demand environment.

Elevating Electrification Efforts

On a more positive note, electrification sales remained resilient, growing by 12.7% year-over-year and comprising 23% of total sales, up from 18% last year. This growth was bolstered by strong prototype shipments, up 114% from the same period last year. Concentric is focusing on expanding their e-Pump solutions, particularly for data center cooling, with a market entry expected by early 2025. Enhancements in their manufacturing capabilities in Escanaba, particularly for high-voltage products, are nearing completion and will cater primarily to the U.S. market.

Strategic Developments in Joint Ventures

The company also highlighted significant progress in its joint venture with Alfdex, which recently secured two major contracts valued at SEK 1.3 billion. With their innovative electric separator product range, Alfdex has strengthened its competitive positioning in both the global truck and emerging off-road market segments. These developments are expected to enhance revenue streams and improve market share.

Navigating Supply Chain and Inventory Challenges

Addressing the inventory challenges, the management emphasized a robust inventory reduction approach to align stock levels with anticipated demand. They noted having made progress but acknowledged that further measures are essential as customer adjustment timelines lag behind production rate changes. The overall inventory strategy appears focused and aggressive, aiming to mitigate excess holding costs.

Conclusion: An Investor's Perspective

In summary, Concentric is navigating a complex landscape characterized by decreasing sales and operational pressures. However, their commitment to electrification and strategic partnerships presents a silver lining for future revenue growth. Investors should watch for effective execution of cost-saving measures and the company's adaptability to market trends while being aware of the challenges posed by weak demand in critical segments.

Earnings Call Transcript 2024-Q2

[Operator]

Hello, and welcome to the Concentric presentation of the results for Q2 call. [Operator Instructions]. Please be advised that today's conference is being recorded. I would now like to hand over to Martin Kunz, President and CEO. Please go ahead.

[Martin Kunz, executive]

Good morning, everybody. A very warm welcome to Concentric's Q2 interim report. Today, our session is only virtual, so no physical presence in Stockholm. And let's move on straight into the report and move to the Slide #2. If we look at the quarter as a whole, our net sales have been reduced by 13% to SEK 955 million and there is minimal movement on foreign exchange in the quarter. Our sales of electric product remained strong with SEK 224 million this quarter, representing 23% of the group sales. As you have seen from our press release a couple of weeks ago, we have made a provision for customer warranty claim for an amount of SEK 100 million.

The operating margin before items affecting comparability was 13%. And our cash flow from operations was SEK 103 million, significant improvement over the first quarter with a cash conversion of 137%. Our book-to-bill ratio in the quarter has been at 89%, and our customer demand has further reduced during the quarter, especially for hydraulics products versus the guidance we have been giving when we presented the Q1 earnings. So, in a nutshell, a difficult quarter with difficult market conditions. Our underlying sales have reduced by 14%. Our operating income came in at SEK 124 million, and the cash flow from operations has been SEK 103 million which are the key highlights of the quarter. And again, a very strong quarter in terms of electric sales. And I'm coming to that a bit more in detail when we look at the strategy session. So, let's move to the next slide.

So, we continue despite the difficult market situation to drive our strategic agenda. And we are seeing in the market, in general, a slower adaptation of electrification. However, we have been able to increase our electrification sales year-over-year. That means versus the same quarter last year by 12.7%. And the electric sales are 23% of our total sales versus 18% in the same quarter last year. With that, let's move on to Slide #4, and go a bit deeper in our strategic agenda. This is mainly now about electrification and our investment plans in India. So significant strides have been made to prepare our e-Pump solution for the data center cooling for our first inaugural customer. That continues to develop very well, and we have made good progress during that quarter, and we're expecting also good progress in the rest of the year, and get with this solution to the market with our first customer on beginning of '25.

The enhancement of our Escanaba plant, where we have made significant investment in our high-voltage fan production capabilities are nearing completion. That has been a very important strategic project to support our electrification growth, in particular, in the U.S. market. Also encouraging, despite the fact that electrification, the adaptation in the market is slowing down, we have again seen strong shipments of prototypes of 114% more than the same amount in Q2 last year for electric products. And that confirms that there is a high customer interest in the market for our electric product range. But it also confirms what we have already mentioned a few times in previous earnings calls is that some customers use prototypes longer than what they usually would use them because they are not yet up for larger mass production or serial production.

So that also explains partially why our prototype sales contain -- remains strong and growing. So, we're expediting our electrification strategy by enhancing our capabilities and launching innovative products. And we are working in advancing new business opportunities in both our current and emerging markets for electric products. And last but not least, the expansion plans for our Pune facility where we are undertaking significant investment to prepare this facility for the coming growth in the next 3 to 5 years in the Indian market, driven by many of our large global customers and also domestic business opportunities. Let's move to the next slide.

We thought it was worth also mentioning strategic agenda on Alfdex, our joint venture with Alfa Laval. Alfdex is the global market leader in crane case ventilation. And the joint venture has recently materialized 2 new business wins with a total value of SEK 1.3 billion. And this is all due to the launch of the new electric separator product range. Alfdex doesn't only significantly strengthen its position in the global truck market, it also makes strategic inroads into the off-road market that has traditionally been a minor segment in the Alfdex customer portfolio, where more and more off-road customers are now also appreciating the strength of the electric separator for the new engine platform.

So those 2 new business wins. One is for the electric medium-duty separator. One of the world's leading manufacturers of off-road agriculture and construction equipment has decided to use that product in the new engine generation. And this is a 5-year agreement with a total value of SEK 300 million. On the truck side, which has traditionally been the main market segment for Alfdex, Alfdex won a very, very attractive new business, which will be supplied to a globally leading truck manufacturer. It's an 8-year agreement with a total value of SEK 1 billion. And needless to say, that this business has been worn by Alfdex, thanks to the features, the quality, and also the high performance of this new electric crane case ventilation product. That was our quick strategy update. And with that, I hand over to Marcus Whitehouse, our CFO, who will walk us in detail through the financials of the recent quarter. Marcus, please.

[Marcus Whitehouse, executive]

Super. Thank you, Martin, and good morning, everybody. We'll start on Slide 7, reviewing our Q2 results and starting with sales. As Martin touched on, this is a challenging economic cycle, and this has been a challenging quarter for us and the broader market. And we are down on sales in terms of what we expected and guided for this second quarter. Sales have come in at SEK 955 million, down 14% year-on-year, with minimal impact, plus 1% from our foreign exchange movements.

Both of our divisions, Engines and Hydraulics, have been equally affected. Engines are down 13% year-on-year. Hydraulics are down 16% year-on-year. It is also worth noting that both Engines and Hydraulics are down quarter-on-quarter by circa 5%. And we've seen our sales weaken as we've gone through the second quarter. The graphic below shows how that 14% breaks down over our 2 reporting divisions, that's 9% in Engines and 5% in Hydraulics when flexed to the split of the divisional sizes.

If we move to the next slide, please, Slide 8. Weaker sales are impacting our operating income in absolute terms and as the operating margin. Operating income for this quarter has been reported at SEK 124 million, down from SEK 175 million this time last year, and an operated margin of 13%, down from 16% last year. This is the underlying operating margin. And as we disclosed within the press release recently, we do have a warranty claim from a manufacturing defect, and we have booked in this quarter a provision of SEK 100 million. Important to note, there's been no associated cash outflows during this quarter with that provision. As you can see from the graphic below, the drop in absolute terms of the operating income is broadly split in the sales split of our 2 reporting divisions, namely 2/3 towards Engines and 1/3 towards Hydraulics.

If you move on to the next slide, please. Slide 9. As we now just sort of delve in and look back at the history -- the recent history of the group and the reporting in terms of sales and operating margin. We can see in that top graphic that our sales have been dropping all bar Q1 of 2024 when a little bit of a rebound, but they have been dropping since Quarter 1 of 2023. As we've already stated, our underlying sales for the group were down 14% year-on-year, and our book-to-bill ratio stands at 89% at the end of the second quarter. That suggests that sales in the third quarter will be a little weaker still. Our underlying operating margin is at SEK 124 million with the associated operating margin of 13%. And again, as we can see for the graphic, our operating margin has been in that sort of 13% level over the last 3 reporting quarters.

Next slide, please. What we're at to see with the Engines and Hydraulic divisions really does replicate what we've seen with the group. The underlying sales in our Engines division is down 13% year-on-year. It's down 4% quarter-on-quarter. Book-to-bill ratio is at 90%. And again, as we can see from that graphic, our sales in our Engines division has steadily dropped over a number of quarters since the peak of Quarter 1 of '23. The underlying operating income has been reported at SEK 84 million with an underlying operating margin of 12.9%. Margin is broadly similar to that, that we've reported within the first quarter, supported by a better Alfdex performance. The warranty provision relates to the Engines division, and therefore, the warranty provision has been booked within the Engines division. Next slide, please, Slide 11.

Well, as we just touched on, Hydraulics, very much mirrors what we're seeing within our Engines division. Underlying sales are down 16% year-on-year, down 6% quarter-on-quarter. Book-to-bill ratio, again, is similar 90% for Engines, 87% for Hydraulics, again, suggesting that Hydraulics is facing similar headwinds in order intake and will probably be affected in terms of sales in the coming quarter. Underlying operating income reported at SEK 42 million with an underlying operating margin of 13.7%, down 2% year-over-year, and down 1% quarter-on-quarter, again being affected by weaker sales. If you move on to the next slide, please. Slide 12. As Martin touched on, it was pleasing to see that our cash performance was better in the second quarter.

Our operating cash flow was SEK 103 million, representing a profit to conversion ratio in the quarter of 137%, 79% for the half year. Whilst the graphic shows our working capital as a percentage of sales has dropped to 9.4%. That's clearly affected by the provision that we booked without the cash flow. Therefore, the underlying working capital is near the 12%. We have made some progress on inventory since the start of the year, and that work will continue during the second half. Net debt, gearing, and cash. We haven't booked any pension remeasurements in the first 6 months of this year. Our group's net debt position now stands at SEK 777 million, down from SEK 950 million this time last year, and our gearing ratio has dropped from 42% last year down to 35%.

Our net debt-to-EBITDA ratio, key important ratio for us now stands at 1.33. And the cash and cash equivalents that we've got at the end of this quarter now stand at SEK 374 million, having paid a dividend of SEK 158 million during the quarter. And despite the challenging market conditions, our balance sheet does remain in very, very good shape. With that, I will now hand you back to Martin to take us through the Q3 outlook. Martin?

[Martin Kunz, executive]

Yes. Thanks, Marcus. Let's move on to the Slide #14. So, as you have seen, we continue to operate in a difficult market environment, and we continue to estimate our end markets will be weaker during 2024 compared to previous year. The net sales in the third quarter of '24 are expected to be slightly weaker than the net sales we achieved in the second quarter. We have clearly seen, and one indicator for that is the book-to-bill ratio that we have seen in the second quarter that the demand from our products has weakened, and we are proactively implementing additional cost-saving measures as we speak to maintain robust operating margins during this challenging economic period. But it also means that we continue to execute our strategic plan.

We are making significant progress in the coming quarter in enhancing our electrification capabilities and securing new electrification business opportunities, and that is both in our existing markets as well as in our targeted new markets outside our traditional commercial vehicle market segments. With that, we're at the end of the presentation, and we're happy to take questions now.

[Operator]

Thank you. [Operator Instructions]. First question comes from Julia Utbult at SEB.

[Julia Utbult, analyst]

I would like to start on the question regarding the demand situation. So, we understand that most of your end markets show weak demand now, but can we have more details on what you see in terms of demand for your largest end markets, please?

[Martin Kunz, executive]

So when we look at our large end markets and I mean, most of you are familiar with the segments that build up our total sales. In particular, we are seeing a very stronger weakening, let me say it like that, than expected in agriculture, and also in construction. Both of those segments represent 50% of our total sales, roughly. And when we look at the big blue-chip customers that have made their announcement about their business expectations in agriculture, in particular, and construction, they are reflecting that picture in their numbers, and they are also taking respective actions in terms of adjusting their cost basis. So, these are the -- I would say, Julia, to your question, agriculture right now is the most critical market in terms of the decline we have seen followed by construction, but we've also seen weakening in other market segments, but not to the same extent.

[Julia Utbult, analyst]

Did you see any material movements during the quarter?

[Martin Kunz, executive]

We did see, yes. If you remember, we guided the market for similar sales than what we achieved in Q1. However, we came in weaker. So, there was weakening during the quarter. And as we mentioned previously, we are expecting further weakening for the rest of the year. I think before things changed in the market, several parameters have the change starting from in interest rate and a few others that are currently impacting the demand in our end markets.

[Julia Utbult, analyst]

And then following up on the 2 large orders in Alfdex that were announced yesterday. Can you say anything about the margin in the orders?

[Martin Kunz, executive]

The margins are in line with the Alfdex, let me say, average margins. Similar to what we say when we speak about the margins at Concentric for our electric products. I mean, we have to say here that Alfdex really has brought great innovation to the market with this leading electric separator. And we're seeing also that the competition in Alfdex traditional market is reducing. That means Alfdex is strengthening its market position. And I think that together with the high level of innovation, the features that this product provides allows Alfdex to keep very good margins with those products.

[Operator]

Your next question comes from Björn Enarson at Danske Bank.

[Björn Enarson, analyst]

I have a few questions. And first one, maybe if you can have some more color on your margin expectations. Last fall, you saw some quite rapid changes to demand, and perhaps you were a little bit lagging in adjusting cost levels. Would you say that you have a similar situation right now? Or are you more ahead of the curve in terms of cost takeouts?

[Martin Kunz, executive]

Yes. This is Martin. Happy to take your questions. So, as we said in the report, we're taking actions as we speak. So, I think we're -- I would say we're not neither ahead of the game nor are we lagging. But we also need to look at the organization and look at where we can take further cost out without damaging our capabilities to drive our strategic agenda. So, it's as usual, a fine balance. But obviously, we can't give any margin guidance for the coming quarter. But what we can say is that we're actively implementing further cost actions to adjust the cost structure of the business to the low -- the expected lower level of sales.

[Björn Enarson, analyst]

So it's more like a capacity, in terms of volumes. I mean, you're expecting lower volumes, you're reducing capacity?

[Martin Kunz, executive]

Correct. We're using capacity costs, but we're also looking at all other costs. And that also includes pricing to customers in areas where we feel that we probably haven't fully recovered or we can do some more pricing. So, it's not just the pure cost action. But obviously, in the current market environment, pricing actions have to be very, very sensitive.

[Björn Enarson, analyst]

And you touched on inventories. It's more to be done, and I understood that as your own inventories, and can you say anything about the inventory headwinds from customers? How is the inventory cycle looks like?

[Martin Kunz, executive]

I think, first of all, we have made progress in the second quarter on inventory reduction, but further progress is needed and all our teams are actively working right now on further reductions of the inventory. There should we usually have, and I'm going back a little to what we saw in the last 3 years, everybody has been carrying higher inventories. And often, the time that customers give us when they reduce their schedules is not necessarily at the same time, we have in adjusting our supply base. So, there is always a time lag. But we're actively addressing that with a very aggressive inventory reduction actions and those are, I think, making good progress. But they still, let me say, are being executed. So, I think we have a robust inventory reduction plan to adjust also the inventory levels to the levels of business that we're enjoying for the coming quarters.

[Björn Enarson, analyst]

And maybe one last question on the new markets that you have highlighted, is it -- I mean, the data center is one of the big parts and we should expect revenues as of first quarter next year? Is that so? And also, can you talk a little bit about revenues from the other 3 new markets that have been announced?

[Martin Kunz, executive]

Yes. I mean, we usually, you remember, focused on those 4 new markets. One, as you mentioned, is actually data centers, where we're making very good progress together with this inaugural customer to bring a very innovative solution to the market. And for the moment, the plans look like as they hold for a launch in the end of the first quarter next year. We're also making good progress on energy storage in terms of increasing volumes there. Then we have trailer electrification and power generation, which are a bit behind in being mature in terms of volumes, but we expect making good progress in all 4 of them, and we are permanently looking at additional new markets where our existing products might add value to potential new customers.

[Björn Enarson, analyst]

And those you have not mentioned, anything?

[Martin Kunz, executive]

As usual, Björn, we mentioned when things are mature and we have something positive to communicate. But rest assured that we're actively working on business opportunities in those 4 identified markets, but also in other markets of similar nature where the whole theme of either liquid cooling or thermal management with our product is applicable.

[Operator]

Next question is from Mats Liss at Kepler Cheuvreux.

[Mats Liss, analyst]

A couple of questions. Well, first, I mean looking at the 2 segments, Engine and Hydraulics there. Could you say something there about the mix between, well, lower production among customers than maybe inventory reductions? This is still in the Hydraulic segment that you see inventories being reduced or couldn't?

[Marcus Whitehouse, executive]

Mats, it's Marc. Matt, I think we passed necessarily the inventory corrections or the destocking that we've been talking about through sort of the latter part of last year and the early part of this. I think we're now open to just what the markets are doing. And as we've discussed before, both Engines and Hydraulics now are experiencing that problem. We know from quarter 2 of last year, Hydraulics through construction and argon, and industrial was feeling the pressure a little more than what we're starting to see now, and certainly through the second quarter is the Engines guys are starting to react to that same pressure and weakness within the market. So, both now are feeling it pretty much equal on both sides of the house. I don't think it stopped corrections. I just think it is now what the market is doing, i.e., it's generally weaker.

[Mats Liss, analyst]

And then looking at the gross margin, I guess, it's the easing is in line with the EBIT margin. So maybe it's not too much to add there. But, well, is it capacity and lower volumes that affect also the gross margin? Or could you say something there?

[Marcus Whitehouse, executive]

Yes, it is. Within our gross margin, we've obviously got capacity costs with fixed costs associated with manufacturing. So yes, us carrying additional heads to the lower volumes is putting pressure on the margins. It's also -- we've got to reduce obviously direct labor as well to those lower margin levels. And it's that aspect that I think is principally starting to give us that squeeze on the operating margins in this quarter.

[Mats Liss, analyst]

And then coming back to Björn's question about data center. I guess, I mean, there are some technological changes there. I mean, suppliers of cooling equipment are moving more towards from air cool to liquid cooling. Are you affected to any extent by that technology shift?

[Marcus Whitehouse, executive]

No. In fact, it's a positive advantage for us, Mats. We've got nothing in air cool for data centers, but that move to greater energy that's produced with the new modern chips is driving that market towards liquid cooling to control the heat that is being emitted. That drives straight into our sweet spot, in that we can offer electric water pumps, coolant pumps that can service that particular sector. So that's a really positive move within the market to align with our technology offering.

[Martin Kunz, executive]

Yes. If I may add, Mats here. This is Martin. Look, our solution is actually a so-called direct-to-chip cooling. That means it's -- the underlying requirement is pooling these new super mega-chips that Nvidia and others are bringing to the market. And so, for us, the trend to liquid cooling, and in particular, directed chip cooling where the chip is cooled from underneath indirectly through an aluminum plate that then is cooled through our flower pumps is absolutely a very favorable trend for us, where we see our liquid cooling capabilities being applicable to a completely new market.

[Mats Liss, analyst]

And you mentioned one customer in the data center segment. Do you need more customers to get operational leverage? Or is it so sufficient with these customers that you have mentioned? Or maybe you have other customers coming on?

[Martin Kunz, executive]

I think it's never sufficient, but having one customer also the one that we have is an important customer, and there's a lot of potential for growth. But as usual, when you get into a new market with an existing product, you need to learn the market. You need to understand what the requirements and the features are. And we are thankful that we are doing that together with this very important global player in this market. But we're also looking obviously at additional customer to provide further growth opportunities in this new market.

[Mats Liss, analyst]

And then maybe touch upon these measures that you talk about to balance demand. Could you be somewhat specific there? Or is it more cutting manpower or reducing terms and that kind of measures?

[Marcus Whitehouse, executive]

Yes. I mean, we can't be specific on the amount, Mats. But yes, I mean, we're taking some head count reductions within the business to align the cost base. So, that's what we're working on at the moment.

[Mats Liss, analyst]

And could you just remind me on the mix there with between, well, the number of temps that you had?

[Marcus Whitehouse, executive]

I mean, we typically run sort of 20% of temps within the direct labor. So that gives us an element of flexibility. But we've also got the capacity cost issue, which is more permanent. So yes, direct labor can flex a little easier, more work has to be done in terms of trying to address any structural capacity costs.

[Mats Liss, analyst]

And you are running at 20% now, or have you sort of already started to?

[Marcus Whitehouse, executive]

No, that's traditionally where we've run. Obviously, we've already been correcting some of our direct labor over time as volumes have dropped.

[Mats Liss, analyst]

And finally, just if you could, well, update on this warranty issue there, is it sort of sufficient in the charge you've made now?

[Marcus Whitehouse, executive]

We've got no further information at this moment, other than the information that we use to base the estimate on and what we booked within the Q2. So, as we said before, we'll probably need another couple of quarters of actual information to flow through. So, we'll be in a much better position to know whether that's right or wrong by the end of the year. But at this moment, we've got no information as it would suggest it's not. And as I say, we're moving forward now with the customer to stop making some of those payments in the third quarter to rectify the situation.

[Mats Liss, analyst]

Okay. So, the cash impact in sort of.

[Marcus Whitehouse, executive]

Correct. The cash impact of the outflow will start within the third quarter.

[Operator]

[Operator Instructions]. Please stand for what is currently your last question, and that comes from Hampus Engellau at Handelsbanken.

[Hampus Engellau, analyst]

Two questions from me. And first question is related to the new products and what you're doing on the data center business. Martin, would it be possible to kind of discuss on how much is a customer-specific product that you're developing? And how much of this will you be able to leverage for additional clients in this segment?

[Martin Kunz, executive]

I think, first of all, our strategy in going into the market is always based on existing products. That means we're not doing a complete genuine new product development to get into those new markets. But that might mean that -- to make the solution, in that case, the coolant -- the electric coolant pump fit for that purpose, there might be minor changes in material to get to a certain thermal performance. There might be minor changes in the software coding, but it's, in general, all based on an existing product.

[Hampus Engellau, analyst]

Okay. And can you remind me, is this kind of like talking-edge where we hear that they are doing individual liquid cooling on each GPU in the data center? Is that the business you have been pitched for, or is it more?

[Martin Kunz, executive]

Yes. We can't go into further details on this call here because we have nondisclosure agreements with the customer. We can only say that it is a leading-edge new technology for cooling with that customer that is really, let me say, different to what have been offered in the market so far.

[Hampus Engellau, analyst]

And maybe coming back to the demand situation. If we look at your business in terms of end segments, talking about trucks, ag, construction equipment, and Industrial. Would it be possible for you to highlight or talk about book-to-bill here? Is it fair to assume that much of the drop that we saw sequentially in the book-to-bill in both segments is related to ag and construction equipment, that would be possible for you to kind of give us a ballpark on their book-to-bill walking track?

[Martin Kunz, executive]

It's a bit difficult to say, Hampus, in the analysis. I think the book-to-bill that we're showing here is a plant across all our end markets. And not all of them are basically performing at the same level. But we are waiting permanently also for what our customers publish in those end markets about their book-to-bill ratio. And then we see, obviously, how much it affects us and how much not. But right now, I think the 89% that we have shown in the second quarter is a plant across the different end market segment, which a bit of difficulty to analyze where it exactly comes from, which market.

[Operator]

We do have one more question from Björn Enarson at Danske Bank again.

[Björn Enarson, analyst]

But coming back to data center, the order that you have announced, and that is for one customer. Is that for their entire installed base, or is this for a few centers? Do you see a roll-up story with this customer? Or is there a potential roll-up story with a similar customer?

[Martin Kunz, executive]

It's a new solution, Björn. It's a new solution that this customer brings to the market, very innovative. And so, there's no refurbishment of old data center. It will be a complete new technology that finds its way into the market with this customer. But obviously, it's piggybacking on significant growth expected for liquid cooling overall in data centers. And when you look at the publicly available market information from literally nothing that was liquid cooled 2 years ago. The market right now is expecting that liquid cooling will go up to 30% of total cooling solutions and data centers. And obviously, that customer with that solution is obviously riding on that wave of technology and market trend, which is helping us, obviously, to get into that market. But as back to Mats question here as well, we're obviously looking to expand beyond that one customer, but we need to learn that market.

[Hampus Engellau, analyst]

Yes. It will be interesting to follow.

[Operator]

There are no further questions. So back to Martin for any closing remarks.

[Martin Kunz, executive]

Yes. Thank you very much. Thanks to all of you for attending our Q2 webcast here on the Concentric interim report. Thanks to all the questions, very constructive questions that have been raised during the session. Thanks to Marcus for the presentation of the financials. And last but not least, also thank you for our audio team that, again, supported us well in the background. We wish you an ongoing nice summer period. Enjoy vacation if you haven't had them yet. And back here in a few months with the next quarter. Have a great day, and thank you very much. Bye-bye.

[Marcus Whitehouse, executive]

Thanks all. Bye-bye.

[Operator]

That concludes today's conference call. Thank you for participating. You may now disconnect. Speakers, please stand by.