Bilfinger SE

XETRA:GBF

Earnings Call Transcript 2019-Q1

[Bettina Schneider, Head of Investor Relations]

Welcome everybody to today's conference call on Q1 numbers 2019. Thank you very much for joining us early. As we have our AGM today, we are glad to have a small -- a short presentation now and afterwards, we will answer your questions. We have -- we will start with Tom Blades and Christina Johansson with the presentation, and then the line is opened for you. Thank you very much.

[Thomas Blades, Chairman of the Executive Board & CEO]

Thank you, Bettina. Also from myself, good morning. As you can read on the headline, on aggregate solid start. Most units performing well. We have one or two that need improving, but we'll go into that as we go through the details. Headline numbers, stable demand in our markets. Our book-to-bill roughly at 1. We're quite happy with that. Adjusted EBITA improved. We had a good performance in what we now call E&M, Engineering & Maintenance. In technologies were key -- the losses were mainly, almost entirely, due to one single underperforming entity. Net profit reported was positive. That was, of course, helped by the fact that we were able to sell back to Apleona the vendor claim note, and we also had a settlement in discontinued operations.Negative operating cash, I think not a surprise. It was anticipated the swing back from the year-end push and an increase in DSO compared to Q4 at the end of last year. And then with that, you see that we're quite confident in being able to reaffirm our 2019 outlook.A few words on the markets. We're asked a lot of questions. Do we see signs and uncertainty or weakening? I think in the markets where we are present, certainly where we have our largest revenue base, these are still late cycle markets, they're strong markets, and we don't see any weakening. As I think you can evidence from our order intake. So the North Sea, the customers there have strong cash flows. You saw the reporting of Equinor last week and others, beating expectations, especially around cash flow. And of course, that cash goes into strengthening the balance sheet and goes into strengthening the catch-up of Engineering & Maintenance, and we're also seeing now, especially in the North Sea, plans to extend asset life. All of those things are good for us.We see greenfield projects. So I think you've been aware of them. You've read the announcements in Antwerp and in Belgium. Both INEOS and Borealis looking at significant investments there. Classic refinery expansions in the U.K with Exxon in Fawley, in Germany with Total in Leuna, and now also, BP in Gelsenkirchen. So these are, again, good for us and good for our maintenance, but also our Construction business. Chemical parts, we note a general trend to go towards unit rate contracts. Unit rate contracts means the efficiencies that we build into our operations are actually monetized. That's a lot better than, let's say, turnkey or hourly rates. We like these unit contracts. And the trend, as I said, is moving in our direction.We also note that within these chemical parts, there is a lot of push towards distributed power generation or autonomous power generation. I think that's a reflection on the cost of power, in Germany in particular. And lot of these parts are looking at having their own power generation facilities, a mix, particularly of gas, and also renewables, but they're trying to get off the grid, so to speak. The grid itself, the move towards gas is quite apparent. And I think the activities you see around gas pipelines, around LNG regas and anything around gas, that is a trend we're seeing as well and one that we think will continue for quite a while.Very pleased to see that our aluminum smelting customers, principally in Scandinavia, are doing well. They report good demand for aluminum, in particular out of China. On the downside, a couple of our customers are into fertilizer production. And those are having difficulties. So I am not going to name their names, but I think also there you see the trends, which is interesting, which I'll come to the flip side in a second when we talk to North America. But as far as Europe is concerned, that is an industry that is currently under a little bit of pressure. Cement, also under pressure, but pressure that is good for us, because they are focusing very much on reducing emissions, in particular CO2, but also NOx and SOx, which is where our scrubber technology is used. And we are in conversations with a couple of the leading cement manufacturers around efficiency, driven predominantly by digitalization. So again, playing into our direction. Finally, I think biopharma continues very strong. It has been doing so over the last 3 years, ever since I've been around, that's for sure. And we are seeing no abatement in demand. That's a good business, and it's a business we serve from Europe, but into the rest of the world.Turning the page. As I mentioned, the U.S. also good activity. We're seeing good pickup in shale basin activity in the Permian, the Marcellus, the Utica and the Bakken. And that shale gas currently at $270 per million Btu, that's a low price. It's continuing to, I think, confirm the investment decisions that are being made. So downstream, we're seeing crackers. We're also seeing project towards ammonium fertilizers. And for us, it's also good because we're active in the midstream business. That's the cryo business where we split out the wet face and the dry face in the gas, again, that's good for our business. What we do see slowing down is polyolefins. And I think that's mainly because the market, while not saturated, it is meeting the capacity demand.As you'll see later, both North America and Middle East form are, let's say, growing regions, and we have good developments already in the North America, but also in the Middle East. We are seeing the continued focus, I've mentioned it before, of the national oil company, CNOC, on trying to capture the downstream value, so investing in the refineries and into chemicals, kind of emulating what Saudi had done in Jubail. That is now being planned in Abu Dhabi, which is concurrent with announcements that we're seeing from ADNOC. What we also see that does affect our business is in-country value, or ICV. And this is a general push towards indigenization, trying to further local content, and it's quite interesting because in Saudi Arabia and in the Emirates, in a tender, in the open tender, you may have the lowest price, but if someone else has a higher ICV, or higher in-country value, then they're given the option to take your price and win the contract. So we've been building up our ICV position. We're very well positioned. And although it's been tough, we think we're now in line to profit from that. The energy shift that I mentioned in Europe from coal to gas in the Middle East, there is a shift from oil to gas and even countries that are rich in gas -- sorry, rich in oil, for example, Saudi Arabia and Abu Dhabi, are looking at increasing their gas position. That will come mainly from trying to monetize difficult gas, that's gas with high sulfur content or high CO2 content. Then finally, I think, it's worthwhile noting that overall the demand for power in the GCC, but also in Saudi Arabia, Abu Dhabi, the Emirates, also Oman, in the last couple of years that's been growing quite voraciously and that is now plateauing.So I think that summarizes where we see the market. You saw the headlines from me. Then I would pass it to Christina to walk you through the details.

[Christina Johansson, CFO & Member of the Executive Board]

Thank you, Tom, and good morning, and welcome also from my side. Christina Johansson, CFO of Bilfinger Group. The first quarter in regard of the financial spending, to some extent a bit of a mixed picture, but I think overall, we have to say that we are very positive when it comes to the start of the year. Starting off with the orders received compared with the first quarter last year, we were organically 9% lower on the order intake. I personally have to say, I am not concerned, given the very, very solid order backlog that we took with us out of 2018, and also, the fact that the orders, if I compare the 2 quarters last year and this year that we have less of would be the larger orders, and we know that this have got, to some extent, towards we're facing issue for one quarter to another. So we have a reduction of organically of 9%, but we're not concerned here. We see that we will continue to pick up here as we proceed this year.So -- and then book-to-bill, still at 1. And our order backlog in total being 2% above prior year's third quarter. So a very solid situation going forward into 2019. If we then proceed to the sales numbers to the revenue, here we have also a consequence of starting the year with a strong backlog. We have an increase organically of 11% in the first quarter versus the year before. So a very good start. And we have adjusted EBITA, which is a loss of EUR 4 million and I will come back to that. The reported EBITA being a loss of EUR 3 million. Special items also listed in the presentation, we have a net effect of positive EUR 1 million. So on the one-hand side, we have EUR 7 million coming out of the disposal of some of our entities, and then we have a further EUR 6 million spent on the implementation of IT systems, so net effect EUR 1 million.And looking at the EBITA, we clearly have to say and we will come back to that, that we have on the E&M side, the largest part of our business, we have a clear step forward, further improvements on the profitability, and the negative side is coming clearly from the segment key technologies and in these technologies we have one single entity that caused us quite a lot of downside in the first quarter. I will come back to that as we go through technologies. So the issue is isolated to one single entity. If we then please proceed to the page on gross profit and SG&A. On the gross profit side, we see here that the first quarter last year, we had a ratio of 8.4%. The first quarter this year, we are at 8.1%, and so no step forward here. However, if I take out the effect coming from the single entity, we would have some progress here and the number would be 8.7% in the first quarter. So it is coming back to one single entity, and the issues around that.This area, the improvements on the gross profit continue to be very strongly in the focus. As we have communicated, this is an area where we want to see most of the improvement to bring us up to the sustainable 5% EBITA-adjusted as communicated for our strategy. On the SG&A side, we concluded the first quarter or closed the first quarter with a ratio of 8.8%. This is not a step forward, however; it is in line with our expectation. We have here already during the last 2 years made substantial gains, and we will continue in this area to drive it. The target is to bring the 8.8% until the end of 2020 down to 7.5%. We are presently on a run rate of around EUR 89 million, EUR 90 million for a quarter, which is as I said presently in accordance with our plan.Then proceeding to our segments. We, first of all, have the segment technologies that caused the negative side on our results in 2019 first quarter. So orders received also here lower than what we had in the first quarter last year. However, no concern as it would be the larger projects that we're missing, and we still have a very solid pipeline and expect that we will catch up on this later on this year. Book-to-bill almost at 1. The revenue increasing organically with as much as 14%, so very solid we see here especially the area of scrubbers moving forward and generating revenue. On the margin side, you see that we generated a loss of EUR 10 million to be compared with the loss of EUR 5 million last year in the first quarter. And I can only say that, with the exception of one entity, all technologies entity are improving. They are either in line with the budget or even slightly above budget. So it's one single entity that has caused problems here, partly related to organizational issues, partly related to projects adjustments. And we have a lot of action plans in place to try to recover. However, it will have implications as we come to the guidance for the year. The size of the issues in this entity, the technology segment itself, we'll not be able to compensate in full, but the group will be able to do so. So the guidance for the group will remain the same, but technologies we will need to adjust down due to these issues.So a lot of work going on, on trying to mitigate what is happening in this legal entity, and then, of course, also trying to make the best out of these projects that are now in the spotlight. Proceeding then to E&M, Engineering & Maintenance Europe, very positive development during the first quarter. We see an organic growth in sales of 4%, and we see also an improvement in the adjusted EBITA moving from 1.5% in the first quarter, which is always the weakest quarter for us, to 1.6% this year in the first quarter.Here also a bit of a slow start on the orders received, but no concerns as we had a very, very strong order intake in the first quarter here last year and the pipeline is very solid. So it's just a matter of time this year, we will also see the order intake improving.Then we have E&M international, including our North American business as well as Middle East. Very good quarter, with growth both on the order intake side and also on the revenue, probably the biggest highlight in the first quarter. So organically, a growth in orders received of 35% and revenue organically growing with 20%. We see also here an improvement in the EBITA-adjusted margin from 2% last year to 2.1% this year. Looking very promising for the year and a very good start as I mentioned. So closing with EUR 5 million EBITA-adjusted versus EUR 3 million last year.Then coming to the cash generation. Clearly, a large disappointment for the first quarter. We have to keep in mind that the last quarter in 2018, we had a strong improvement in the last quarter on the working capital side and in regard of the accounts payables, of course, holding back some of them in the last quarter, we now in the first quarter needed to settle them. So you clearly see that we have less accounts payable days versus what we had in December 2018, but we also have a lower number with 69 days than we had in the first quarter last year.In addition to that on the DSO, and here especially on the work in progress side, we were not able to conclude on some of these work in progress to anything to account receivables and getting paid in the first quarter. Also here a lot of actions going on. And we have to clearly say that the working capital in the first quarter was not achieving what we wanted. And therefore, the cash flow was also substantially lower than what we had expected and what we had targeted. So when you look at the numbers, we have here an adjusted cash flow of minus EUR 70 million versus minus EUR 45 million in the first quarter last year. And we also disclosed that due to the changes in IFRS 16, we had on the 2019 numbers, we had a positive effect here of plus EUR 12 million. So the situation is -- the difference between the first quarter last year and this year is even slightly higher.I can only stress that this area gets a lot of attention and focus right now, and we also expect that we will obviously, during this year quarter-by-quarter, improve these numbers. Positive is the catch up on the net profit. Last quarter, effort -- first quarter last year was a loss of EUR 24 million, and we're now moving that up in the first quarter to plus EUR 9 million. So that's a highlight.That will be my presentation on the financial side. And then, I would like to give the word back to Tom in regard of the guidance.

[Thomas Blades, Chairman of the Executive Board & CEO]

Thank you, Christina. I think you have there the details. Looking at technologies, that certainly will impact the upper end of our profit expectations. But we were careful with of our prognosis. That's why we said significant increase of more than EUR 100 million; we'll make that. We are able to cover those shortfalls in other parts of the operations. So I think that's again an attest to our stability, let's say, we're a lot more robust than we were maybe 2 years ago.The revenue, mid-single-digit organic growth, I think you see that we're delivering that. In Q1, we expect to continue to deliver along those lines throughout the year. And then finally, you recall that last year in 2018, adjusted cash flow was positive, the free cash flow was negative, only slightly by EUR 4 million. And we still, despite the, let's say, expected setback in Q1, we should expect to be reported positive on a free cash flow for the year.So I think with that, I would flip the page to our 3-phase strategy. It's been tempting to add a couple of, let's say, light green checkmarks. We haven't done that. So as we go forward, we're looking at growth in new areas. We're looking at net profit breakeven, not on the back of one-offs as we did in Q1, but consistently. And of course, you're aware that we're looking at refinancing. So those are the 3 checkmarks we're targeting as we go forward. I think Q2, Q3 we'll see a couple of those, and of course, the strategy remains intact. And I think you'll see that in the top line performance, we will continue to drive that through to the bottom line. So with that, I will then hand back to Bettina, and I think we're ready to take your questions.

[Bettina Schneider, Head of Investor Relations]

Yes. Thank you very much, Tom. And, we'll start now the Q&A session.

[Bettina Schneider, Head of Investor Relations]

[Operator Instructions] First question comes from Norbert Kretlow from Commerzbank.

[Norbert Kretlow, Analyst]

Questions on the technologies business, if I may. And maybe the most obvious first. This entity, which is underperforming, can you maybe give us more details regarding what is the sales dimension we're talking about? If I interpret the comments regarding the gross margin effect right, then the incremental loss in Q1 should have been around EUR 6 million, that is roughly 60 basis points for the group. Can you confirm that? How should we think about this dimension of lost contribution going forward in the next quarters? And what are the actions being taken in detail? And also regarding technologies, I understand there's still there are some overcapacities in piping. Maybe can you give us an update of what's going on here with regards to order intake expected for larger projects?

[Thomas Blades, Chairman of the Executive Board & CEO]

Okay. So thank you for your questions. Not entirely unanticipated, I would say. I think, when we presented our, let's say, modified 2, 4, 6 in February, one of the things we tried to ensure was better transparency on our numbers, on our operation. And of course, in doing so, you do expose yourself a little bit. But we think it was the right way to go. And I think what it shows you is that within T, where we actually have 5 entities, we're not a V8-cylinder -- not a V8-cylinder engine, but we are a 5-cylinder engine, and when one of those is limping then, of course, you see it immediately. And that's really, I think, what we have here. The dimensions you mentioned, the 0.6% margin uptake. So yes, that's in the range. And going forward, I think it's important to, let's say, share a few more details. So it's not a top line issue. So in that entity, we have seen good growth over the last few years. We have a good order book. And we actually have good revenue development. Where the issues lie is in execution to be honest. And as we go deeper in, as we implement SAP and get into the numbers, we see that the cost to complete exceeds expectations. And that forward-looking basis is what has caused us to make provisions and to report within that entity the loss. As we progress through the year, we are, of course, all hands on deck. Our COO, Duncan Hall, we met in February, is spending a lot of time in that entity and with the management. We have got some of the headquarters people reassigned to work with the team. So right now, it's question of making sure we go through all the projects, multiple projects, it's not a single project, but multiple projects that we do revise our cost to complete and that we then get it under control. Now once that has happened, there is a second phase and that is the claim phase. So it's not just recording higher cost than expected, but understanding why and where these costs arise out of customer request to make changes, then, of course, we have a good case to go and claim. And we need to firm up those cases and then go make those claims. But we've not taken that claim into effect into Q1 and it's something we will pursue as we go through year. So we think we know what's not working, we know what's working. And we think we have the right people on board to fix the situation. So I think that's why, on our total year outlook, we're confident, and we're confident we'll get this entity in line again as we've done with others. So your second question on piping. We don't see a lot of overcapacity. We've done a lot of downward adjustments over the last 3 years, to be honest, in our own capacities. We overadjusted down intentionally, so that when it picks up that we'll be able to then add people to ramp up quite quickly. Why am I confident in it picking up, piping, this is the NSSS, the nuclear services steam cycle order that we're expecting for Hinkley Point, that is still on the cards. We've got one or two smaller projects in Hinkley Point. We're entrenched, embedded at the site with our customer with EDF. And therefore, we think that we are correctly positioned for the capacity and for the expectations going forward in piping.

[Norbert Kretlow, Analyst]

That's good to know. Maybe as a follow-up regarding the losses in this one entity. So is it correct to understand you are in a way to expect loss contributions to go down in the coming quarter, alone from the fact that provisions taken in Q1, should rather, say, buffer a material part of the losses that we see?

[Thomas Blades, Chairman of the Executive Board & CEO]

Calculation you made. We think, it will continue into Q2, it will be a smaller number. And if we can get the entity towards breakeven on a single quarter, it will be Q4, wouldn't be before that.

[Bettina Schneider, Head of Investor Relations]

[Operator Instructions] Next question comes from Marcin Wojtal, Bank of America Merrill Lynch.

[Marcin Karol Wojtal, Analyst]

Could you please update us a little bit on your refinancing strategy? I believe there is still EUR 500 million bond due in December. And I believe, you have issued a promissory note for about EUR 100 million. So what is your preference right now in terms of perhaps some new bond issuance versus bank financing? And when you would expect to have the refinancing fully completed?

[Christina Johansson, CFO & Member of the Executive Board]

Yes, happy to do that. We are still in the process of the refinancing. And so you're absolutely right, the promissory note, we have now around EUR 1 million or EUR 1 million already received. We then have also, as we stated, we have the vendor claim note that we agreed with the equity that they would pay back. So we have received also in regard of the funding, that amount, which was EUR 128 million that has been set. And we are then working on the promissory note 2, as we call it internally. So further financing, and also considering if we would go beyond the EUR 300 million in total, that we have defined as a need. So I'm saying EUR 300 million is what we need to be able to repay the bond, the EUR 500 million bond in December. And we will then collect beyond the EUR 300 million. I think we are open for that, depending on the market. So we are close to being at the EUR 300 million that we need, and we are still considering to go beyond that going forward to also be prepared for a midterm perspective for the next coming years. But EUR 300 million is the need and I would say, around EUR 230 million of that has already been settled. The rest we are working on. And then we are also internally deciding if we also proceed with the bonding exercise. The timing of the closing, the target would be that we will have it all solved until the mid of the year.

[Marcin Karol Wojtal, Analyst]

So just to confirm, did you say that the vendor claim note was actually collected by you? It wasn't in the second quarter, I guess.

[Christina Johansson, CFO & Member of the Executive Board]

The deal, the settlement and the agreement was made in the first quarter. Their cash came in, in April. So we -- that's a part of the refinancing as well.

[Bettina Schneider, Head of Investor Relations]

The next question comes from Jasko Terzic from Metzler.

[Jasko Terzic, Research Analyst]

My first question is also regarding the nuclear project. Could you give us an update, when do you expect the order flow to pick up? If I remember correctly, I think you've indicated Q2 would be a good guesstimate, so to say?

[Thomas Blades, Chairman of the Executive Board & CEO]

That's right. Good memory Mr. Terzic. And we actually expected it last year, to be honest, so we had it in our own 2018 budget and forecast, and it didn't materialize and so we made our numbers, and we are happy with that. As you go into 2019, we're still confident it will be this year and probably less confident on Q2. In the meantime, I must say, we've received additional orders. So although we are -- when we refer to this project, we focus on the NSSS. We've, in the meantime, received orders for balance of plant, double-digit million amount. So the smaller orders keep coming in, which gives us the confidence that the larger one is imminent, just the fact that the precursor projects with some of our peers or rivals, they are not quite on track. They are not quite defined to the point where the customer can tell us exactly what he wants, and then award the contract. So if I am guessing now, lower confidence on Q2, but still high confidence in 2019. And the longer delays, quite frankly, the better it is for us.

[Jasko Terzic, Research Analyst]

Okay. And then you're also talking about the expected pickup in orders due to the good pipeline. Was it only referring to the [ NPS ] side? Or there also other areas picking up throughout the rest of the year?

[Thomas Blades, Chairman of the Executive Board & CEO]

No, other areas as well. So we keep building up our scrubber capability. So what we've done in the last quarter is, we've actually now developed partnerships or outsourcing opportunity with manufacturers and assemblers in Vietnam and China. And that allows us to manufacture closer to the market, and of course, it allows us to ramp up what we now refer to as our production slots. That allows us to go back to the market and sell slots, rather than selling just individual scrubbers with a to-be-determined delivery date, so that's positive. Biopharma is going good. So that is a business that's been growing over the years. We have strong inquiries, even demand from the Far East. We've placed our first order in Russia. And that trend continues. So we like that, and we are looking to see how we can grow that business further. Again, this is one of the reasons why we set up our office in Guangzhou. I think that I mentioned that in February, so also there we see continued demand. In terms of our base business, maintenance, you saw the revenue and the orders. I think if you look at the order intake and you look at the orders below EUR 5 million, that number is actually quite impressive. In Q1 last year, we had some, let's say, accounting type catch-ups where we are trying to recognize the impact of long-term service contracts. But as you look at the Q1 order intake this year versus the other quarters of last year, you see that, that is quite a good part of our business and the pipeline there is strong. Turnarounds, '19 and '20 will be the year of turnarounds. '17 -- I think '16 was a good year. '17 and '18 were a little bit down on what was a great 2016, '19 and '20 will be up again. So across the board, there is a good reason for top line optimism.

[Jasko Terzic, Research Analyst]

And maybe if you could give us also an indication regarding the loss-making unit at technology. What is really changed between the last conference call update and today? And how quick do you think you can turn it around?

[Thomas Blades, Chairman of the Executive Board & CEO]

Yes. This entity was one that we acquired a while ago. It's been growing. And I think the typical switch where it grows from a previous family-run business into a small, even mid-sized within our portfolio, company. As it does so, they kind of outpace the demand for financial oversight controls, and that's really what happened. So running a family business is very different to running a triple-digit-million business. And we've been implementing SAP. We actually changed out the top 2 levels of management in the last 6 months. We brought in the new manager in the middle of January. And all that clarity was maybe a little bit overdue. And as of course we bring focus to bear now, we're finding things that we didn't really want to find, but we face up to it, and as I said we are robust; we can take it on the chin and go forward.

[Jasko Terzic, Research Analyst]

So you think you will turn it around quickly so that the run in fiscal year should turn out to be the case as you expect it a quarter ago?

[Thomas Blades, Chairman of the Executive Board & CEO]

For the group, yes. No change, as Christina said, within T, we're looking at a breakeven for the year. It's going to be a loss for the year and it will be a bearable loss, one that will not impact our group forecast.

[Bettina Schneider, Head of Investor Relations]

The next question comes from Christian Korth, HSBC.

[Christian Korth, Analyst]

I would just like to ask if you could maybe update us on the progress of asset disposals with regards to the OOP, or former OOP business. I mean, this businesses are apparently growing nicely at the moment; they are breakeven now. So do you still plan to sell these, or are you possibly considering to maybe keep them? If they show continued progress? And then secondly, I just would like to ask if you could also give us an update on the progress of your scrubber business?

[Thomas Blades, Chairman of the Executive Board & CEO]

Yes on -- within OOP, as you recall, we had 13 loss makers, all disposed. We had 4 that were accretive of which 2 have been sold. We sold them for a good price, so we were happy in doing that. The remaining 2, one is, let's say, one was in the early stage of the sales process, that is actually our unit in South Africa. I think no secret there. We've actually put that on hold, to be frank. The reason it is performing well, is that Eskom, the public utility in South Africa, they're under serious pressure, and in the course of last year, because they had a cash squeeze, they were actually cutting back on service orders. They've now received some funding. They've given us an extension or a new contract, if you like. It is a multi-quarter contract, let me put it in that way, it's not a multi-year contract that we are expecting. But on the basis of that, we are back in making profits there and we're waiting to see when the multi-year contract, by multi-year I mean the 5-year service contract, comes in, and that I think will be the impetus to add value to the business and to make it interesting to sell. Until then, we've seen there is a lukewarm response in the market, there are rivals or even people interested in buying it. But they are looking for a cheap deal, and we really have no pressure to do so. So I think we still want to sell them. So that is a very straight answer. But we are not in a hurry, because they are accretive. The other entities, the manufacturing entity in Austria, that's also come through a turnaround. It's doing reasonably well. It also has a lot of assets tied to it, which makes it interesting to certain operators in the area, but it is also one that we use internally to manufacture a part of the scrubber process. So I think that entity, we're going to test the water. We've taken advisers and if we get the right kind of offer we will sell. If not we are quite happy to keep it and to run and grow the business. An update on scrubbers, still high demand. So I think we are going to meet our own internal expectations. The challenge, of course, is less in how many you can sell, the challenge is more in how many can you deliver and install, and the failure of getting that second part wrong is substantial, because these ships are going to drydock and therefore -- as we are conservative, we'd rather miss out on an order or two, but to deliver on time, and as of course we get more confidence on the slot planning on delivery and commissioning, then of course we can push the numbers up a little bit.

[Christian Korth, Analyst]

Okay. Would you be ready to give us some kind run rates on quarterly basis, where you're currently standing in terms of production.

[Thomas Blades, Chairman of the Executive Board & CEO]

Our capacity last year, by the end of last year was a little over 60 units, okay? So that's 5 a month. We think today we can push that to 15 a month. And we'd like to think that if everything goes right and the market holds, then for 2019 that an order book of 200 units is feasible. So you see still quite a steep ramp-up curve, but we've got to get a our homework right. We'd rather, as I said, turn away an order than disappoint a customer by not having the scrubber in the drydock when the ship is there.

[Bettina Schneider, Head of Investor Relations]

There are no further questions at the moment. [Operator Instructions] Next question comes from Marc Gabriel, Bankhaus Lampe.

[Marc Gabriel, Analyst]

Very quick. The miss you have -- you're seeing in the technology business, is that mainly compensated by the international business in E&M?

[Thomas Blades, Chairman of the Executive Board & CEO]

To be honest, most of our units are performing a little bit higher than our budget for the first quarter. So it's not only international business E&M, it's also within T, the other 4 entities have been doing a little better than we expected. So it's a broad-based compensation.

[Bettina Schneider, Head of Investor Relations]

Ladies and gentlemen, we will now conclude our conference call. If there are further questions, please contact the IR team today via e-mail and also tomorrow back at the telephone. Thank you very much for joining, and have a good day. Bye-bye.