Hexpol AB

STO:HPOL B

Earnings Call Transcript 2020-Q1

[Operator]

Hello and welcome to the HEXPOL AB Q1 results. [Operator Instructions]Today, I'm pleased to present CFO, Peter Rosén. Please go ahead with your meeting.

[Peter Rosén, Interim CEO, CFO & Investor Relations Manager]

Thank you and welcome to the presentation of the results for first quarter 2020. I'll take you through the presentation, where we will start with the business performance, and then we'll go into the more detailed financials. And I'll also give you an update on the integration of the Preferred acquisition that we did last year. And then, of course, we will close off the meeting with Q&A.If I can ask you to turn to the first page called Q1 2020 Key Highlights. And just before we go into the details of the quarter in itself, I just want to summarize some of the highlights for the quarter.We as well other companies have been impacted by COVID-19. When it comes to our company, we currently do not have any COVID-19 cases among our employees, and all our sites are up and running. When it comes to ensuring the safety and well-being of our employees, we have in every site adopted our operations according to the local requirements and recommendations. Generally speaking, this means ensuring social distancing, both in production and office areas, but also allowing for working from home whenever possible and, of course, increased focus on personal hygiene, such as washing hands on a regular basis, all with the purpose of minimizing the risk for our employees.Regarding the actual production and delivery of our products, we did not experience any major issues. Our sites have -- were applicable in being essential, meaning we are allowed to keep them open.During the first couple of weeks, when COVID-19 hit Europe and the Americas, we did experience some difficulties, but this was mostly related to the general uncertainty of some government decisions. In most cases, this is -- these issues were quickly resolved. So currently, we receive all the raw material we need, and we can also shift the finished product to our customers.However, from a demand perspective, we started to see the drop in demand during March with an accelerating negative impact towards the end of the quarter. The most hard hit customer group is, of course, automotive where we saw most of them closing down their factories in Europe and Americas during March. Asia, and specifically China, is on a somewhat different time path, ahead of the rest of the world. We closed factories during February but fully opened currently. However, from a HEXPOL Group perspective, this has a smaller impact since they only make up some 4% of our total sales.Looking ahead, it's obvious that COVID-19 will have considerable negative impact on demand and not least during the second quarter of this year. Despite COVID-19, we delivered higher sales in the first quarter compared to the same period last year. Sales were up 10%, driven by the acquisition of Preferred that we did last year and also helped by positive FX effects. The organic sales were down, partly affected by COVID-19, and I'll come back to this in more detail later in the presentation.The operating margin was down compared to the same period last year, to a large extent driven by the Preferred acquisition that runs with lower margins but also affected negatively by lower organic volume.We delivered a strong cash flow in the quarter, and we stand with a strong balance sheet and solid liquidity position after the first quarter. And lastly, the U.S.-focused restructuring program that was launched last year follows plan. This includes both the integration of Preferred, and it includes the associated cost reductions.During this quarter, we have about SEK 50 million as restructuring costs. Part of this is related to the cost reduction programs in the U.S. As we've shown before, we act quickly to capture savings. During the second half of 2019, we did the first cost reductions, for example, by closing 2 plants. During this quarter, during 2020, we further reduced the number of FTEs, and these are predominantly white collars, and there will also be additional cost reductions during next quarter.The cost reductions regarding the white-collar staff are driven by the need and the possibility to lower our cost base. And this program has also started before COVID-19 hit. However, COVID-19 has accelerated the need for the savings when it comes to white collar. The need for cost savings in production are handled immediately in the day-to-day management of the business and consists of the combination of short-term work, furloughs, use of holidays and layoffs, depending on country and situation.If I can ask you to turn to the next page regarding the financial highlights. You see that the sales increase was 10%, from SEK 3.8 billion to SEK 4.2 billion this quarter. The increase is seen in the Americas, and it is driven by the acquisition of Preferred, and we'll come back to this a little bit more in detail later on.At the same time, operating profit -- adjusted operating profit came in at SEK 587 million, which is on the same level as last year. And the lower operating margin is, to a larger extent, driven by the Preferred acquisition, but also, as I mentioned, to lower organic volume. Earnings per share at SEK 1.29, which is an increase of 2% compared to last year.If we then change to the second -- other page regarding sales development. Of the sales increase of 10%, the Preferred acquisition added 15%. We saw positive FX effects of another 4%, and organic sales came down 9%. The lower organic sales were seen within Rubber Compounding and specifically to automotive and what we call Tire and Toll plus general industry.During 2019, we saw organic volumes coming down to automotive. However, during the beginning of this year, prior to COVID-19, we saw a slowdown in this drop. However, as the COVID-19 came, the drop accelerated again. And the same goes for Tire and Toll that, to a large extent, is connected to automotive. When looking at our regional sales development, the Americas represent a little bit more than 60% of our sales, while Europe and Asia represent 35% and 4%, respectively. At the same time, we see a sales increase in the Americas with 20% driven by Preferred, while Europe shows 4% lower sales compared to same period last year, and Asia shows about 2% lower sales compared to 2019 first quarter.If we then change, go to the next page and look at the more detailed look at the financials. We delivered a result in line with last year. At the same time, we delivered a stronger operating cash flow of SEK 527 million, which is up almost 50% compared to the same period last year. And we've seen equity asset ratio of 57%. So despite the challenges brought on by COVID-19, we closed the quarter with a strong financial position.If we then move over to the next page and look at the operating profit. We delivered a profit of SEK 587 million, which is on the same level as last year. The higher sales that we saw in the quarter were offset by the lower operating margin. And the lower margin is explained by the acquisition of Preferred that still has lower margin than the HEXPOL Group average. The lower organic volume also has a negative impact with less cost coverage. At the same time, despite the COVID-19 challenges that we saw towards the end of the quarter, the margin of 14.1% in the quarter is higher than both Q3 and Q4 of 2019.If we then move over and look into the business areas. We start with HEXPOL Compounding. Also here, we saw sales increase of 10%, from SEK 3.5 billion to SEK 3.9 billion in the quarter. Including Preferred, we saw increase in most customer segments in the Americas. However, organically, we saw primarily drop in sales of automotive, tire and toll and also to general industry, to some of a lesser extent. We saw a clear distinction before and after COVID-19, and that's not least after the automotive producers closed their factories during March.Europe saw somewhat lower sales and then, again, primarily to the automotive customer segment. Asia saw lower sales, but they work along a different time line compared to the Americas and Europe. The factories in China closed down during February driven by Chinese New Year but also the current new decision to close due to COVID-19. Our factories in China are since up -- since some time are running and sales are picking up. However, from the HEXPOL Group perspective, this has a smaller impact due to the size of our Asian business.The TPE business compounding saw lower sales, and this is entirely related to the automotive closing down. At the same time, TPE saw somewhat higher sales driven by increased demand from, for example, medical equipment customers. All in all, for the business area, we saw an operating profit of SEK 554 million in the quarter, which is on the same level as last year, giving a lower operating margin compared to Q1 '19. However, operating margin of 14.2% for the quarter is higher than we saw in both Q3 and Q4 of 2019.If I then ask you to flip over to look at Engineered Products. Sales were stable at SEK 262 million in the quarter, and so is the operating profit of SEK 33 million. And even though individual customers were impacted towards the end of the quarter, the impact from COVID-19 was smaller in this business area compared to Compounding. Overall, there were smaller developments in this business area where gaskets and seals saw somewhat lower sales, while wheels showed somewhat higher sales. The operating margin for Engineered Products was stable compared to the same period last year.And if I then can ask you to move over to the next page on working capital. At the end of the quarter, our working capital stood at SEK 1.2 billion, which is some SEK 200 million lower than the same period last year. As you can see, over time, we do have movements in our working capital, and this is primarily driven by our acquisitions over time. In general, the companies we have acquired operate with higher working capital compared to HEXPOL legacy business. And when we integrate the acquisitions, we have worked hard to bring them into the HEXPOL way of working and also bring down the working capital. The movements in absolute working capital, as you can see in the graph, represented by these tables, they're driven by the acquisitions of MESGO in 2018 and Preferred coming in, in Q3 of 2019. Over time, as we integrate the acquisitions, working capital in relation to sales, that's the line in the graph, improves. If I can then ask you to move over, take a look at the cash flow. We delivered an EBIT in the quarter of SEK 537 million, and that is largely translated into cash at the end of the quarter with SEK 527 million. During the quarter, we saw relatively flat working capital, but investments are below that of depreciation and monetization. So a very strong cash flow during the quarter.And if we then look at the next page and look at net debt. We have a strong financial position with SEK 2.1 billion cash at hand. We used some SEK 3.9 billion of our credit facilities, which leaves us with a net debt of SEK 1.9 billion at the end of the quarter. And this also means a net debt-to-EBITDA ratio, which stands at a healthy 0.76.You will see that net debt increased as compared to Q1 2019, but that is driven by the Preferred acquisition that we did during last year. Overall, compared to the end of 2019, the strong cash flow that we generate in the quarter is visible as our net debt position improves.If I can then ask you to flip page, and then we'll take a look at where we stand on the integration of the Preferred acquisition. And just before we go into it, just a short summary. We acquired Preferred 1st of July 2019. The price we paid was about USD 230 million on a cash and debt-free basis. And for 2018, sales were about USD 240 million, and they had 6 sites, where 5 were in the U.S. and 1 in Mexico. And there were some 540 FTEs employed by the company. And as I mentioned before, this business ran with a lower margin compared to the HEXPOL Group.What we've done after the acquisition is that shortly right after this acquisition, the Preferred head office was closed. And there was a first adjustment of the organization, where the most obvious functions were rightsized. During Q3 and Q4, we closed 2 production sites, 1 was a Preferred site and 1 -- the second one was HEXPOL site. And even though the latter was a HEXPOL site, it was motivated by the acquisition of Preferred.And we also started to align the way of working for HEXPOL directly. One, this -- we'll settle this as the adjustment of working capital where HEXPOL runs a leaner balance sheet. Preferred is today integrated into HEXPOL. The organization is in place, and we have a mix of legacy HEXPOL staff and Preferred staff in both senior and junior positions.And overall, the integration follows plan, but we also see that there is still more to be done. Related to this, for example, even before COVID-19 hit, we saw the need to bring down our costs further. Therefore, we started a cost-cutting program during the first quarter, the beginning of this year focused on white collars, and this has been accelerated due to corona. First phase of cost reduction was done in Q1, hence, the restructuring cost that you see. But there will also be a second phase that will follow in the second quarter. And when it comes to the targets that we've expressed of USD 5 million in savings during this year and $9 million on an annual basis after 2020, we're confident that we will deliver.And then if we move over to the next page, I just want to summarize the implications of COVID-19 for HEXPOL and what it means, both for the quarter we just closed and to whatever extent we can express going forward.We experienced lower demand towards the end of the quarter, specifically from automotive customers. And despite the lower demand that we saw, we will see even more lower demand in the second quarter. Automotive has been closed during the whole month of April, and we do -- we will see a slow start up to come in within Europe and the Americas. However, it will take time for production and not least demand to build up for their products.And even though automotive is the most obvious example, there will also be disturbances regarding other customer groups but, we believe, to a lesser extent. And overall, the uncertainty going forward is, in general, very high. It's more or less impossible to see where second quarter or the quarter after that will end up. However, when it comes to our own operations, our sites are up and running, and they are running without major supply or delivery issues.We will continue to focus on ensuring the safety and well-being of our employees. And we will continue, as we've always done, to manage our working capital. We believe that our organization, which is decentralized but coordinated is a strength in a situation like this, where local conditions vary between countries and even within countries. And there is a great need of speed of action. And we think that our organization works very well in such an environment.On the cost side, we accelerate cost saving programs already identified prior to corona and we'll limit CapEx. The cost saving programs are primarily related to the white-collar savings. Production costs are managed on a daily basis directly by the plants.And lastly, as already communicated, the Board will, at today's AGM, propose to postpone the decision of the dividend payout towards the second half of the year.And if we then go over and summarize the first quarter. Apart from COVID-19 effects, we delivered sales of SEK 4.2 billion, which is an increase of 10%. Operating profit is SEK 587 million, and we do deliver a strong cash flow of SEK 527 million, which is an increase of about 49% compared to the same period last year.The process of integrating Preferred and taking out costs follow the plan, and more costs will be taken out in accelerated cost savings. And as I mentioned, production costs are managed day-to-day to demand match -- to match demand as good as possible. So we closed the quarter with a strong balance sheet and a solid liquidity position.And looking ahead, it's obvious that COVID-19 will have a considerable negative impact on demand, not least during second quarter. But it's our belief that the combination of the financial strength of the company that we have, combined with a decentralized organization, gives us good possibilities to come through this in a good manner.All right. Thank you for listening, and open up for questions.

[Operator]

[Operator Instructions] Our first question comes from the line of Douglas Lindahl from Kepler Cheuvreux.

[Douglas Lindahl, Analyst]

Peter, hopefully, you can hear me. And on the solid report today, a few questions from my side. I was wondering if you can comment a bit more specifically on the degree of organic sales drop you've seen in March and since then. Are we talking about negative organic growth in the run rate of negative 25% year-over-year? Or if you can give some sort of ballpark number, at least what you've seen in March.

[Peter Rosén, Interim CEO, CFO & Investor Relations Manager]

Yes. To be very clear, it's very difficult to say what will happen after first quarter. Uncertainty is so high, it's almost impossible to answer. What I can say about the first quarter, I can say that the first 2 months of the quarter, we were operating quite stable, and we saw positive developments when it came to organic sales compared to last year. The drops that we saw towards the end of 2019 stabilized and improved during the beginning of the quarter. But during March and accelerating towards the end of the month, COVID-19 hit organic sales and predominantly then on automotive. And as you know, not least in Europe and Americas, automotive closed down. Since they represent 37% of our sales, their closure hit fairly hard towards the end of the quarter.

[Douglas Lindahl, Analyst]

Okay. And on the raw materials, this is something you previously commented on each quarter, but I see that there's no comment on this now. But can you maybe give some sort of comment on how you've been affected both on top line and margins given petrochemical prices? And also, what discussions have you had with clients regarding pricing?

[Peter Rosén, Interim CEO, CFO & Investor Relations Manager]

Yes. During the first quarter, there were quite limited movements of raw material prices. However, going forward, we expect prices to come down. There are a number of drivers of that. Of course, oil price is one driver. So we will expect the raw material prices to come down going forward. It will impact Q2 and probably to a higher extent towards after Q2.But keep in mind that -- I mean we have price-regulated contracts with most of our customers. So changes in raw material costs, they expect to see lower sell prices as well. And the customer contracts are, to a large extent, regulated by month or quarter. So Q1, limited impact. Q2 will see more and even more so after Q2.

[Douglas Lindahl, Analyst]

Okay. And on the topic of pricing. Now you've had Preferred for around 3 quarters. Has this had an impact on your pricing power in the U.S. yet? Or is it -- I guess in this current market environment, it's difficult to sort of make that assessment maybe?

[Peter Rosén, Interim CEO, CFO & Investor Relations Manager]

It is very difficult to make that assessment. Right now, the uncertainty is too high. But overall, we are quite satisfied -- very satisfied with the acquisition of Preferred.

[Douglas Lindahl, Analyst]

Okay. And on your cash flow, which is improving quite a lot now, what are your future plans for potential excess cash? Will it primarily be returned to shareholders in extra dividends or -- and then in that context maybe a comment on M&A as well?

[Peter Rosén, Interim CEO, CFO & Investor Relations Manager]

So I'll take the last question first. When it comes to M&A, we have the strategy to grow both organically and with -- through M&A, and that hasn't changed. So we're still committed to the same strategy, and we still believe that there are several possibilities in various areas, both geographic and product.That being said, COVID-19 sort of upends the whole marketplace. It's very difficult to set a fair value on companies right now. But we still go through -- we have the same strategy, and we're still looking at possibilities. We believe that towards -- when we come through this, maybe there are more possibilities after COVID-19 than before COVID-19. So that still remains.When it comes to excess cash, difficult to say. It depends very much on how COVID-19 develops. The Board, as I mentioned and as you know, will propose postpone decision regarding dividend payout towards the second half of the year, when they and we know more about where we stand.So right now, yes, we do generate cash. We are looking at M&A. When it comes to dividend, the Board will come back towards the second half of the year, when we hopefully have a more stable situation in the world.

[Douglas Lindahl, Analyst]

Okay. And a final question. I noticed that your mix in Compounding was -- you had slightly higher sales in TPE, right, due to medical. Is this something you expect will continue in Q2, I guess? And will that sort of put a cushion on margins? Or is this not something really to extrapolate too much on?

[Peter Rosén, Interim CEO, CFO & Investor Relations Manager]

No. You shouldn't extrapolate too much on it. Looking at TPE, yes, there's a positive development, but in relation to size of Rubber Compounding, it's -- it will not have a major impact on the overall margin.

[Operator]

And the next question comes from the line of Mattias Holmberg from DNB.

[Mattias Holmberg, Analyst]

So I was thinking a bit about the cost-cutting programs that you launched now in Q1 and planned for Q2. So first of all, are the savings from these programs reflected in the $5 million and $10 million (sic) [ $9 million ] in cost savings that you target for 2020 and beyond?

[Peter Rosén, Interim CEO, CFO & Investor Relations Manager]

Yes. They are reflected in the $5 million and the $9 million targets that we've expressed before. But since we accelerate the cost saving programs, one can expect to see these savings faster than what we've communicated before. So we will see the savings faster.But that being said, again, I hate to come back to this, COVID-19 sort of changes that from where -- what do we compare it with because there will be other cost savings also in production that we will see depending on how the volumes come through. But yes, the short answer is yes, it's the $5 million and $9 million, but the sales will come faster.

[Mattias Holmberg, Analyst]

And then also maybe an integrated question. But previously, I've seen that you disclosed in your annual reports the share of sales towards the automotive industry, which last time was 36%, I think, in 2018. I couldn't find that number in this year's annual report. And I'm just curious, given how much has happened in the automotive industry overall and then post the consolidation of Preferred, if that number has changed significantly, that could be worth knowing for us.

[Peter Rosén, Interim CEO, CFO & Investor Relations Manager]

It hasn't changed significantly. It has come up 1 or 2 percentage points.

[Operator]

The next question comes from the line of Karl Bokvist from ABG.

[Karl Bokvist, Analyst]

So I was just wondering about -- or maybe a follow-up on an earlier question. We've seen some other industrial companies mentioning how organic sales development in their industries were about down 20% to 30% end of March, beginning of April. Just curious, I mean are -- is this the kind of range that you are -- that you have already seen? I mean I realize that we can't extrapolate anything or make comments about a too-far-distant future but just to get some insight.

[Peter Rosén, Interim CEO, CFO & Investor Relations Manager]

I'll come back to -- we saw the negative impact from COVID-19 during March. If you recall, last year, you saw in Q3 and Q4 organic volumes in the range of 9% to about 13% down. We report here after first quarter negative 9% impacted, negatively by COVID-19. So prior to 2019, we saw lower organic growth than the 9%. But much of it is related to automotive, and they make up a little bit more than 1/3 of our sales. So I think I'll keep it at that.

[Karl Bokvist, Analyst]

All right. And could you perhaps give some comment on the margin development of Preferred just in terms of how you think that you have progressed already in terms of integration, whether it's on gross margins or EBIT margins, where you have realized savings? And also, I think you mentioned ahead of the year that you targeted a possible additional restructuring costs of SEK 100 million. Now you took SEK 50 million. So is it fair to assume that you will take another SEK 50 million in Q2? Or do you see a risk that there will be more or less restructuring costs than the initially targeted SEK 100 million?

[Peter Rosén, Interim CEO, CFO & Investor Relations Manager]

I'll take your last question first. Regarding the SEK 100 million, I think, again, on the same time, it depends a bit on how COVID-19 develops. There will be further cost reductions in the second quarter, and there will be further restructuring costs. Whether we will end up at exactly SEK 100 million, that is difficult to say because it depends on how COVID-19 develops. But at the moment, we still stick to SEK 100 million. If that changes, then we need to come back to that. But we will continue to see cost reduction progress, and we will take additional restructuring costs in the second quarter. But keep a little bit open on the total size of it, depending on how COVID-19 develops.When it comes to Preferred and the margin, we were quite clear when we acquired Preferred that they were operating at a lower margin than HEXPOL Group at the moment, at that time. We were also clear that we are working towards scaling them up to a higher level and get them closer to HEXPOL Group levels. That is a process. It takes the time. But we are quite satisfied with the progress that we've seen. And the integration of Preferred, both from a working perspective but also from a margin perspective, follows plan and we're very satisfied with that. And that is also part of the explanation why you do see a little bit tick up in the margin when it comes to -- compared to Q3 and Q4 last year.

[Karl Bokvist, Analyst]

All right. And final question for me is about contracted volumes. Do you have any sort of prenegotiated minimum volumes heading into Q2? Or is it so much -- so a high-degree variable that it's impossible to say that you have some sort of floor when it comes to deliveries? And also, I think -- you had a question about it earlier, but how should we think about medical demand going into Q2 and also perhaps rubber related to the consumer side?

[Peter Rosén, Interim CEO, CFO & Investor Relations Manager]

And so I'll take the first question first when it comes to contracted orders. The simple answer is to -- no. As some of you know, the shelf life of our product is quite short. It's up to about 2 weeks, which means that the customers order on a very regular basis. The big customer orders several times per week to get our products into their production runs.There are no committed, from a legal standpoint, orders as some of the -- some other industrial companies have -- with a longer lead time. So we are depending -- dependent on the orders coming in. And we have a very short order book, and it's not legally binding as such. On the positive side, that means also that when customers do ramp up, we do see it quite quickly.And could you please repeat the second question as well?

[Karl Bokvist, Analyst]

Yes. How do you see medical and consumer demand ahead? And perhaps one shouldn't extrapolate too much, but just your thoughts on what you are seeing in these end markets.

[Peter Rosén, Interim CEO, CFO & Investor Relations Manager]

Yes. Again, I think you're right. You shouldn't extrapolate too much on it because in relation to Rubber Compounding, it's a smaller business. But isolated in itself, we do see some positive signs that demand is coming up for these products. But again, from a group -- HEXPOL Group perspective, keep in mind that it's a smaller business.

[Operator]

[Operator Instructions] Next question comes from the line of Klara Jonsson from SEB.

[Klara Jonsson, Research Analyst]

So first, I have one about the reduced work hours for some of your plants that you talked about. Could you comment on roughly how much of personnel is involved and how big the reductions are?

[Peter Rosén, Interim CEO, CFO & Investor Relations Manager]

First of all, when it comes to cutting down work hours, the way we do it differs from country to country, and in the U.S., actually, a little bit from state to state. So what we do is -- but we follow and adhere to the local regulations. So the techniques and methods are a bit different from country to country.That being said, what we do is that each site tries to adjust our manning in production as much as possible to the demand levels that they have. And therefore, it differs. Some sites run at higher capacity, higher utilization levels than others do. So it differs very much from site to site. So it's difficult to say or answer in percentage at what levels are we running on. Also, since we have a very short order stock, it changes from week to week. What I can say is that we work very closely in each site to get the manning as opposed to the demand as possible.

[Klara Jonsson, Research Analyst]

All right. But I mean is it involving 50% of your employees or 20% is substantial or just all over?

[Peter Rosén, Interim CEO, CFO & Investor Relations Manager]

In a sense, it impacts all since the planning in each site takes a look at the demand. And then they look at how much people do we need in each site to produce those volumes. So in that sense, it's a fluid situation.

[Klara Jonsson, Research Analyst]

My next question is about your cash flow and working capital, and you had quite a nice improvement there in the quarter. Could you give any color on how much of the improvement was related to the buyers and the expectation of lower sales in Q2? And how much, if there is any, that is thanks to your own structural measures and improvement?

[Peter Rosén, Interim CEO, CFO & Investor Relations Manager]

When it comes to the improvement in working capital, that's on us. That's the way we work with working capital. If you look at -- if we take the Q1 numbers for 2020 compared to last year, Q4 -- or compared to Q1 last year, the movements that we see, the improvements that we see, that is because of the way we work with working capital.And it's -- I mean there are 3 ways that we do this, and we've done it for many years. One is, of course, to keep the inventory as low as possible. We make sure that we get paid from customers, and we try to extend the payment terms to our suppliers. And that's what we do, and we do this on a very regular basis. And that's why we have the improvement in working capital.The one thing that we perhaps keep even more focused on right now is, of course, the payments from customers to make sure that they pay us on time according to the agreements that we have. We do expect that some of the customers perhaps are under some pressure, but we work hard to maintain the agreements that we have and the payment terms that we have.

[Klara Jonsson, Research Analyst]

So if I understand you correctly, the improvement isn't that all related to you taking down inventory because you expect lower sales in Q2?

[Peter Rosén, Interim CEO, CFO & Investor Relations Manager]

Our inventory levels in general are quite low from the start. So we don't increase or decrease the inventory specifically to -- related to COVID-19. We try to maintain the inventory levels we need to deliver on the orders that we have and to produce those orders.

[Operator]

And the final question comes from the line of Johan Dahl from Danske Bank.

[Johan Dahl, Analyst]

I have my question answered.

[Operator]

As there are no further questions, I'll hand it back to you again, Peter.

[Peter Rosén, Interim CEO, CFO & Investor Relations Manager]

All right. Thank you very much for taking the time for this call and also thank you for your questions. I wish you a very good day.

[Operator]

This concludes the conference call. Thank you all for attending. You may now disconnect your lines.