Bilfinger SE

XETRA:GBF

Earnings Call Transcript 2020-Q2

[Bettina Schneider, Head of Investor Relations]

Good afternoon, ladies and gentlemen, and welcome to Bilfinger's Second Quarter 2020 Conference Call. With us today are Tom Blades, our CEO; and Christina Johansson, our CFO. Before we go to Q&A, Tom and Christina take you through some of the key highlights of this morning's release and provide a bit more color around financial performance in the second quarter. With this, I hand over to Tom Blades.

[Thomas Blades]

Okay. Thank you, Bettina. And also from myself, good afternoon. If I kind of pick up from where we left off at the end of Q1, I think we guided you towards a -- obviously, a dip in our revenue. Our year-end guidance remains unchanged. So I think the message here is that things are developing more or less the way we expected, even if though we don't like them. But we'll live through it and we'll get through it. So if I go into the headlines here, we are seeing some recovery. So the markets, the signals we're getting, but also our own top line is showing that we saw slow activity in April and May, and then we see some pickup in June, okay. So a long way from where we were last year. But certainly, the bumping along the bottom has now turned into a very slow upturn, which we think will continue. And we do expect further improvements throughout the second half of this year. Orders received in the quarter were minus 15% organically versus same quarter last year. If you couple that with the first quarter where we were more or less on target than for the year-to-date or the first half year, we are at minus 3% organically. Corresponding revenue, minus 29% for the quarter. For the half, minus 19%. That gives us quite a strong book-to-bill ratio, obviously. And that book-to-bill ratio of 1.2 positions us for a bounce back going forward. EBITA adjusted, minus EUR 35 million. I think no surprise there in line with the revenue drop. We have been doing a lot of mitigational efforts and executing well on that, as you'll see as we go through this. The -- I think the details, if you go further into numbers, will show that our losses are now more concentrated in a particular part of the company. And in particular, 2 underperforming entities in technologies where we began to implement strategic measures. I think you'll know what that means quite a while back, and we're well underway to executing on that. Free cash flow was very strong, EUR 129 million reported. That's really a lot of internal work in managing the working capital, but also helped, of course, by the deferred tax payments and deferred social security payments by the government. Those payments are due at a later stage. So they're not eliminated rather they're deferred. And we expect to roll back or pay back some of those in Q3 and Q4. Our balance sheet or our financial position is sound. And for what we see today, we do not expect the need for any additional financing. And with that, as mentioned in the beginning, we do reconfirm our outlook for the year. So that's 20% versus last year, yet a positive adjusted EBITA. If we go into some of the underlying messages that we also have in our press release, I mentioned a quarter of past, present and future activity. Let me show you what that means. I think you all followed our Hinkley Point developments. On the next page, we'll go a little bit more detail on that to show you how those contracts turned into order intake. But again, a great well done to the team. I think far exceeding expectations, again, as we'll see on the next page. With respect to the past, in 2009, we had that unfortunate accident in Cologne with the Municipal Archives. And that case has been dragging on for 11 years. So it's been a difficult case, but very happy, very pleased to report that it's being concluded. Our share of the payment to the city of Cologne is EUR 200 million. and all of that is paid by our insurance. So there's no impact on our liquidity nor on our earnings. And what it does mean, again, it's another project off the lid that was distracting management's time. In the quarter, we also settled with our former Executive Board members. You recall this is the compliance case. It had to go through the AGM. The AGM approved the settlement, and there is a P&L effect of EUR 17 million, which we did book into adjustments. Cash was received in July. So again, closed the books on that another project that was distracting management time and attention. In terms of the future, I think a lot of what we've done, and you'll see that also here in the numbers positions us as a leaner, more agile company. Not only in our SG&A, which is below budget, it's continual show. But also in the way that we've been able to reduce our headcount and give a second look at our underlying structure. So again, as I mentioned, position us as a more agile cost-managed company going forward into 2021 and beyond. Regarding Hinkley Point, this chart takes you back a little bit to almost the same time last year. So on the left side, 2019, this is what we thought at the midyear '19. We thought that by the end of the year, we would have signed contracts for more than EUR 250 million. On the second curve you see there, we began 2020 with actual order intake only around EUR 50 million. We have signed, in the meantime, contracts, well over EUR 500 million. And those contracts are call off contracts. So once we sign, we wait for the customer to then call off the activities. And our accounting systems only recognize the orders once those call offs have been made. So if you look at that commitment, it adds up to more than EUR 500 million. The actual order intake effect, this year-to-date, around EUR 80 million. Between now and the end of the year another EUR 150 million, and then in 2021, EUR 250 million. So although our order intake line is performing well, there is yet more to come out of the Hinkley Point contract. And this curve, this is what's required to keep the project on track and on schedule. Give you a lot more color on the overall market and beginning with E&M Europe. Chemicals and Petrochemicals, this is actually our main market. It makes up 40% of our revenue. And what's been reassuring and reaffirming to see is that our main market is in Continental Europe and that in that market, COVID has had less than 10% effect. So we're quite stable in Continental Europe in Chemicals and Petrochemicals. Energy utilities, also showing a slight uptick there. I think no surprise, again, on the back of Hinkley Point. And interesting to see that a lot of companies now focusing on ESG projects. For example, projects to limit CO2 emissions, to capture and sequester CO2 or even to go further and look at the hydrogen production. In terms of oil and gas, 30% of our revenue, we have been hit hard in the North Sea, the upstream market. I think we shared some of the numbers with you. We see 50% drop in revenue versus last year in that particular part. Major projects have been delayed. Turnaround has been delayed. On the other side, especially on the land side, other projects continue. So on the downstream side, for example, our project with BP in Gelsenkirchen continued as planned and is even expanding. So quite a mixed picture there. But we show red, red and we show the arrows being flat. So no immediate recovery, although within that, we have this mix picture. E&M international. Chemicals and Petrochem, again, a different picture in the U.S., projects are being suspended or even delayed. Whereas in the Middle East, the expansion programs, the modernization programs still continue, in particular, in Abu Dhabi around Ruwais and in Saudi around Jubail.Energy and utilities, Middle East also now looking at alternate power. So nuclear has been on the agenda for quite a while. But also in the Middle East, we're seeing more renewable power concepts. We're seeing some hydrogen electrolysis project. So also there, we see and detect the shift in terms of ESG appreciation. In North America, I think, as before, wind and solar. And I think as the economy recovers, especially in America, we do expect the government to put money into infrastructure and to boost the economy through such projects. Oil and gas, for us, as I mentioned, it's been a hit. The 50% in the North Sea. If I compare that to the U.S., we see about a 40% hit on our business there and a 25% hit on our business in the Middle East. So overall, you do get a mixed picture, as I said. Technologies. There, energy utility is also driven by the Hinkley Point effect. We also see the nuclear business continuing to perform. We do see new projects. Decommissioning does continue in Germany with additional projects and we're well entrenched into that line of business. Pharma and Biopharma, we're getting a lot of questions. Are you seeing an uptake in pharma production on the basis of COVID? No. Not yet. We're kind of late phase in that chain, although we do expect to see it later. What we do see is that our customers are rethinking their supply routes and trying to be less dependent on China and on, let's say, supply chain outside of Europe. So that may mean more investment back in Europe. I think that's the quick run through the markets and how we see things. I will then pass it over to you, Christina.

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

Thank you, Tom. And also welcome from my side. Let's have a closer look on the financials for the second quarter 2020 starting on Page 9. Looking at the order intake, as already mentioned, we had a drop in the second quarter. We achieved EUR 931 million, which would be organically 15% less than in the same quarter last year. However, if we look at the comparable number year-to-date after 6 months, we only organically are 3% behind, and -- which is a very, very solid performance also if you then also add that, that number only includes EUR 80 million from Hinkley Point so far. We have to say that we see very strong development in our base business. We see that we can partly adjust the volumes expected on the frame agreements and increase them. But that clearly still continue to be a lesser order intake on the so-called larger project side. Book-to-bill ratio, 1.2 in the second quarter, which is then giving us a strong position for the second half to start to recover and but also slowly but clearly building our order intake that will be generating net sales next year. As said, EUR 80 million from Hinkley Point included in the first half for the second quarter, we had EUR 30 million of that EUR 80 million included, and we are expecting to see around another EUR 150 million in the second half of this year and then EUR 250 million following in 2021. Order backlog at the end of June very stable at close to EUR 2.7 billion. Proceeding to Page 10, looking at the revenue and profitability. As already mentioned by Tom, we clearly, in June, started to see some recovery. April and May being very rough. The focus during the second quarter has obviously been to adjust to the volumes, reduce our cost and prove that we have an agile organization, but also, of course, to have a strict cost management here. The group revenue in the quarter 2 fell down to EUR 793 million, and 29% organically less than the same quarter in previous year. And there were sharp drops, especially related to the North Sea Oil & Gas business, so Aberdeen and Stavanger, but also a clear decline in North America as our major large projects are clearly coming to an end. Adjusted EBITA decreased down to minus EUR 35 million. We had due to the underutilization, a very, very strong drop in the gross profit as revenue almost overnight were reduced. And we try to cope with the underutilization through the programs, especially in Europe the furlough programs and also, to some extent, laying off people. But as always, when you have these strong drops in a short period of time, you're always a bit behind. Special items or adjustments slightly increased. We had EUR 16 million of adjustments in the second quarter to be compared with EUR 15 million last year. We had an increase in restructuring expenses due to COVID-19 and the lower oil price. And this amount in the second quarter for restructuring was EUR 28 million. That was positively partly reduced by the effect coming from the settlement with former executive Board members, the EUR 70 million that came out of the settlement paid by the insurance P&L effect in June, cash effect in July. The special item for the full year after now have spent or booked EUR 25 million, sorry, not spent, but booked EUR 25 million to P&L in the first half, has now been increased expectations for the full year. Due to technologies, we believe that we are no longer heading for EUR 50 million of special items for the full year, but more like EUR 70 million, which is a very close number to the number we had last year, EUR 72 million last year for special items. And as I said, related to an increase in restructuring measurements in technologies. Proceeding to Page #11. Gross margin, as I mentioned, due to the underutilization, dropped heavily in the second quarter. We achieved EUR 34 million of gross margin percentage of 4.3% is to be compared with 7.4% in the first quarter and 8.5% last year in quarter 2. Year-to-date, we are at 6.1%. Looking then on the other side, at the SG&A. Here, we were able to reduce the absolute cutback beyond clearly, what we had last year, but also below the level that we had planned for. You see that the number we achieved in the second quarter was EUR 73 million, that needs to be conferred -- compared with EUR 84 million in the first quarter or EUR 91 million in quarter 2 last year. Some of these additional savings, they are sustainable. And we are clearly targeting for this year to get to an SG&A absolute number for the full year, around EUR 310 million that is around EUR 20 million lower than what we have planned. A part of that is not sustainable, but something like EUR 320 million will be the true number going forward. And as already said previously, we are targeting year-to-date below the EUR 300 million in the year after. That plan is proceeding and we are well on track here. Proceeding then to the 3 segments, starting off with the largest one, E&M Europe. That has, despite the COVID-19 and the lower oil price, they have been able in both quarters here to be positive. The orders received in the quarter 2 was 11% organically below what we saw last year in quarter 2. The book-to-bill ratio is 1.3. And we clearly see here from June onwards that we are starting off to recover. So we are quite positive in regard of what we will be able to achieve in the second half of this year in this segment. Revenue, rough minus 24%, organically in the second quarter. A lot of that is related to reductions in U.K., in the oil and gas, onshore and offshore business, but also the Nordics with Stavanger and Belgium and the Netherlands. EBITA adjusted, still positive, as I said. So we had a EUR 4 million positive in the first quarter and now at EUR 2 million in the second quarter. Of course, we are benefiting from all the programs for furlough that have been put in place, some of them with short notice in Europe. We are trying to use them to be able to compensate at least partly for the revenue drop and the underutilization for this period of time. And the -- coming then to the second segment, E&M International. Here, we had rougher development. If we look at the orders received, they dropped from EUR 267 million in the second quarter last year, down to EUR 131 million this year. That is an organic drop of 46%. A lot of that is related to North America, where we have not been able to win the large projects that now clearly are coming to an end. But also Middle East, that has been in a lockdown in some countries still being closed for us to get in. Revenue reduced then to -- with a little bit more than 50% in the second quarter. And also here, most of that related to North America. It was partly expected because we had a low order intake last year. But, of course, with the COVID-19 and the lower oil price, the implications were larger than we had a couple of months ago expected. EBITA adjusted, clearly negative. We see we made a small loss in the first quarter, now we have a loss of EUR 12 million here in this segment. It is the underutilization, even if we have laid off both in quarter 1 and 2 a lot of people in North America. And we have been trying to adjust our capacity, obviously, in both regions, Middle East and North America, we haven't got access to the European kind of programs for furlough. The outlook is in regard of revenue, a significant decrease, but we are still expecting in the second half to be at EBITA adjusted positive in E&M international. Then the last segment, Technologies. Orders received, they were rising slightly. So 3% organically, up to the level of EUR 114 million. Here, we have a part of the Hinkley Point order intake going into the books. They are sharing this with E&M Europe. And we are also expecting here in the second half to see further improvements from Hinkley Point. Book-to-bill ratio at 1.1%. Order book backlog increased by 17% organically. The revenue reduced down to EUR 108 million, which is organically a reduction of 20%. Of course, the impact coming from COVID-19 restrictions, especially in Austria and France, where we had at least for 2 months, quite a strong impact coming from lockdowns. Adjusted EBITA, we had a minus EUR 20 million in the second quarter and minus EUR 5 million in the third, a strong reduction in the profitability here as we had a lot of temporary underutilization but also due to 2 underperforming legal entities in technologies, where, as Tom mentioned before, we have taken already in the first half this year, strategic measures to make sure that the second half will be stronger year than what we have seen in the first half. The outlook for the full year is a slight decrease in revenue. EBITA adjusted, a significant improvement, a positive improvement in the second half. However, in total, for the year, we will have a negative EBITA adjusted in technology. We then proceed to the cash on Page 15, a very robust cash flow. Thanks to active working capital management, but also helped by deferred tax payments and social security contributions. We have a very sound financial position and no additional financing needs expected. Looking into some of the details. Net profit, we are at minus 60. That decreased substantially, of course, mainly due to the lower EBITA adjusted. But the cash flow development being an upside here, the combination of being able to reduce the working capital as the sales went down. But also, you've seen all the programs that a number of countries in Europe have put in place, which was noted to defer taxes and social security contributions. These 2 elements have helped us to continue to have a strong cash flow generation. As mentioned, some of these programs for deferring taxes and social security will come to an end at the end of September. Some will continue in quarter 4. And we have a couple of countries that even at this point in time, I promise that we can wait until next year to pay. Obviously, some of these rules are changing as we are proceeding, but we will expect to see that most of these payments that have been deferred during the year, we will settle the latest in December this year. DSO, we are here now at a similar level as in March. So we have 88 days versus 86 days in March. Yes, we have reduced substantially the net trade assets. We have reduced the net trade assets with EUR 73 million versus March and EUR 116 million versus June last year. However, not at the same speed as we have reduced revenue. Therefore, the DSO is with 88 days still as high as it is. DPO, we are at 67 days also a comparable number with a situation as per the end of March 69 days and slightly better than in June last year with 65 days. Net liquidity, including IFRS 16 liability, improved from minus EUR 199 million at the beginning of the quarter to minus EUR 108 million as of June 30, 2020. Measures in place to safeguard liquidity also going forward, the quarter 3 will be the stress test for the liquidity after having the lowest revenue and profitability in the quarter 2. None of our financing instruments has a maturity earlier than 2022. So we feel comfortable that we will also manage this situation going forward. Now back to Tom Blades with the outlook for 2020.

[Thomas Blades]

Thank you, Christina. So again, if I summarize, revenue is down, but in line with expectations. We think we're through the bottom, and we'll begin climbing slowly back up. Order intake has been good, 1.2 book-to-bill. We have a cushion going forward with Hinkley Point, so we think we're also there positioned for the bounce back. And we have the same cash flow, same cash development and balance sheet, which means that we're financed through this difficult period and we're confident. For that reason, the outlook hasn't changed. So we remain on what we told you at the end of Q1. In fact, in May, a decrease of 20% year-on-year on the top line. Nevertheless, EBITA adjustment will be positive and free cash flow reported will also be positive. So with that, I would hand back to Bettina and looking forward to your questions.

[Bettina Schneider, Head of Investor Relations]

Yes. Thank you, Tom, and now we are ready to take your questions.

[Operator]

[Operator Instructions] First question comes from Gregor Kuglitsch, UBS.

[Gregor Kuglitsch]

Can you hear me? Can you hear me loud?

[Bettina Schneider, Head of Investor Relations]

Yes. Now we hear you.

[Gregor Kuglitsch]

Just a few questions. The first one is maybe the kind of related. If you can just quantify the benefit from furlough in the quarter and also related to that, the cash deferral element. So how much of the -- potentially, how much did you defer and therefore expect to unwind in H2? And then can you just maybe elaborate a little bit more on the technology situation? I'm not sure whether these are the same businesses or same legal entities that were issues before and basically, things have just intensified? Or if there's basically new ones? And I guess, when you say strategic measures, what precisely are you doing? Are you shutting these businesses down? Or are you just restructuring? If you could just give a little bit more color that would be helpful.

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

Good. Let's take the first question in regard of the benefit from furlough. We obviously measured benefits for the first 6 months. But obviously, most of that is related to the second quarter, maybe 1 or 2 weeks, to some extent, impacted from March. But in total, we have a EUR 25 million of benefits that we have granted in the first 6 months, and we are expecting that we will have around another EUR 5 million still to come. That is mainly related to the Netherlands, where the rules around the furlough, they will require also that the auditors at the end of the year will approve the way we have calculated it. So the EUR 25 million benefit coming from that in the first half, another around EUR 5 million still to come. This is, of course, based on that the rules will continue to be in place and also based on our forecasted number. Then looking at the -- looking at the deferred amounts coming from social insurances and taxes. We are talking about a double-digit million amount here at the higher end. And that is as far as I can say to help you with the cash flow. It is a substantial amount, double-digit million amount at the higher end.

[Thomas Blades]

If I take your question on the 2 entities and what we mean by strategic measures, I think we also mentioned early on in the year that the scrubber market has gone to 0. No surprise there. The differential between high sulfur and low sulfur is less than $50, ending a payback on a EUR 2 million scrub investment has gone from 15 months to something like 7 years. At the same time, tanker utilization rates, vessel utilization rates have gone down. So customers are not only withholding their orders, they'd like to, in some cases, cancel existing ones. So we are ramping that business down. That's one strategic set of measures. And the other, I think, no surprise. We're looking at the possibility to sell "the entity." We have taken advisers. That process is in progress. And therefore, we see a finite end to both of those situations.

[Operator]

Next question comes from Stephan Bonhage, Metzler.

[Stephan Bonhage, Research Analyst]

A few questions, so my first question is that you said that in June, there was a slight improvement in your sales performance. Can you quantify the exact decline in sales compared to the previous year in that month? My second question is regarding the tax code. If you can give their indication for FY '20? My third question is related to your oil and gas business. I think you were forecasting a 5% CAGR for the business before the pandemic in your strategic update. I think this growth assumption is no longer realistic. So what is your new growth outlook for this business area from a mid- to long-term perspective? And do you see potentially that this business is returning to precrisis levels in the foreseeable future?

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

If I start off with the first question, the slight improvement in June, I think, clearly we have to say that the slight improvement in June is related to Europe. And if we look at what we said about the quarter, the quarter 2, we said that we had a, I think, slightly below 30% in the quarter, lower sales. I would say the -- if I would compare month by month, June will probably be around 25%. So slightly lower than what we saw in the previous months.

[Thomas Blades]

The other question, I believe, on the tax rate. Is that right, Mr. Bonhage?

[Stephan Bonhage, Research Analyst]

Yes. Tax rate for this year.

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

Mr. Bonhage, even also in this year, we do not see that we will capitalize deferred taxes from our German tax group. So the tax rate might still be overexaggerated high, underlying, we have a tax rate of 27%. And but as I said, still distorted by not capitalizing tax assets in the German tax group. On the other side, we also have experienced a little positive effect in the U.S. where there was a new law allowing us to capitalize and to use old tax losses. So overall, the total situation underlying 27%.

[Thomas Blades]

Okay. Then I'll try to tackle your last question. This is always a fun one because I do confess to being the oil and gas dinosaur here on the team. I think the 5% CAGR you referred to, this is from our Capital Markets Day presentation, February 13, where we took our revenue base 2019 and compared it to our expected revenue base 2024. We showed at that Capital Market Day presentation a total company CAGR of 5%. And in line with that total company, oil and gas, also growing by 5%. Now do I have a crystal ball that gives me insight above and beyond the market? Probably not. I can help you a little bit. When we entered into the crisis late March, early April, things dropped fairly quickly in Aberdeen and in Stavanger. And we were looking at 50% lower revenue on the year, and we thought it would continue at that rate in 2021. More recently, we've been working on our short-and mid-term updates, and we think compared to 2019, 2021 will be at about 75%. So a 25% drop on the baseline 2019 and then slow recovery going forward. Why do I base that on just dialogues with customers. We have won contracts. Despite COVID, despite low oil price, we have won new contracts in the North Sea. So life does continue. Will it go back to the boom days, I'm not sure. I think it will be a little bit demand driven. You saw that demand drop to about 92 million barrels a day from a high of 100.2 million, I think. So today's demand is somewhere in line with what it was in 2013. But of course, some of that dip is caused by COVID in people not moving or traveling or flying. So that's probably as much as I can give you right now. But what we are doing is we're looking at alternatives so that we don't rely on the oil price recovery to meet our 2024 guidelines or commitments, if you want. We're looking at alternative measures. So at this stage in time, we've given you an outlook on 2020. And we are not changing our long-term outlook for 2024.

[Operator]

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

[Marc Gabriel, Research Analyst]

Congrats to the team from -- in the crisis as well. I have 3 questions, if I may. First of all, how quickly could you shift the levers again if the crisis is over? So how quickly can you get the people back on board, which you laid off now? That's my first question. And the second question is, when I look at the scrubber market, running back to 0 within 1 year, where you were extremely optimistic 15 months ago, it is naturally becoming increasingly difficult to deliver a sort of constancy in the business model. So the former real estate business was, of course, a solid -- rock-solid anchor. What are the strategic lessons learned from this crisis? And in addition to that, what opportunities do you see to take the volatility out of the business model going forward?

[Thomas Blades]

Okay. Good questions. Let me begin with your first one, which is at around personnel, I think. So we are a people company. And if you look at our makeup, more than 50% of our costs go into personnel costs. A large part -- not only, a large part is our own personnel. Some of it is temporary labor that we take on board to deal with projects but also with seasonality. If you compare our headcount at the end of Q2 this year with last year, we're roughly 6,000 people less. So last year, we had, at the end of Q2, 37,469. Sorry, the end of -- yes, sorry, the end of Q2. And this year, we're at 31,533. So that's a big drop. Within that, 31,533, we currently have 2,733 on furlough. So of course, these we can unwind fairly quickly overnight in fact. And then as we go through towards high levels of activity, we do call on temporary workers. And we're not waiting for that to happen. We're actually already in dialogue and planning additional workers through to the end of the year. So I think one of the lessons learned that you're asking is to rethink what is our manning model? How do we build more flexibility and agility into that? It's one of the lessons learned. Second lesson learned is around home office. Home office always sounds kind of cozy and easy. In our experience, it works when you have defined projects and people working to a schedule and to a delivery point for those projects. I'm talking about engineering, for example. It's a little bit more difficult when you have services, where people have to be on call and work in teams. But home office is certainly a consideration with some parts of our business. And if home office is real and going forward, of course, it doesn't have to be restricted to a, let's say, 10-, 20-mile radius around the office, home office can be done from other countries even. So opportunity there that we haven't yet fully explored, but that the crisis is teaching us to look at. Finally, I think, is the balance that we have between project and services. So the effects that we're seeing in the U.S. is because we have a large project element there. I think going forward, and this is also part of our Capital Market Day presentation, we wanted to increase the percentage of service business that we have in the U.S. to be more resilient through these kind of -- not only COVID cycles but also industry cycles. So I think volatility is that kind of speaks to high-frequency waves. We do think there is a cyclical nature in our business, seasonal nature, which we try to balance with a better organizational structure. And in terms of the industry cycles by trying to have a larger element of service business versus project business. The -- sorry, the scrubbers?

[Marc Gabriel, Research Analyst]

Yes.

[Thomas Blades]

Scrubbers, you're right. We were very euphoric already 2 years ago on scrubbers, and it's really disappeared overnight. What are the lessons learned from the scrubber business, I think, some of the lessons we already had going into this. So we didn't actually want to build up our own resources on scrubbers because we always saw there is a wave. We saw as a rising demand being satisfied. And then the wave declining, maybe the second wave where other owners of vessels, tankers waited to see to what extent the governance of lower sulfur emissions has been released or otherwise. So in order to ride that way, we didn't actually build up any of our own manufacturing, we outsourced a lot of that to a number of partners. And of course, and then back pedaling and shutting it down, that makes it a lot easier.

[Marc Gabriel, Research Analyst]

Yes. Maybe one follow-up question. There are also other business opportunities, I would say, like CO2 storage or the steel industry is working on low carbon steel production and is investing a lot in combination with the government. And I was -- isn't that a field where you have engineering expertise to enter that market as well?

[Thomas Blades]

Yes, we do. And before we start beating our chest, of course, we'd like to build some traction. But we have, I would say, good core expertise in gas treatment. Some of the projects we announced evidence that. And if you look at electrolysis, for example, in producing the hydrogen, the oxygen, there is gas drying. There are flanges and systems. Yes, there, we have expertise. We are also involved in various customer discussions around projects on green and blue hydrogen production, associated CO2 sequestering, but we'd like to get a little bit more, let's say, traction to be able to reference more projects than just to put hopes out there. So you know it's a very conservative group of people. We like to be boring, deliver exactly what we say. We don't like to raise expectations. Maybe scrubbers was one exception where we have to learn and not do that. The other area where we are also quite busy is on either recycling. So the circular industry we have customers who are working on bioethanol on wood fired power stations. So there are things around the ESG theme that we're quite busy on, and we look forward to announcing some of those successes, but only late...

[Operator]

Next question comes from Marcin Wojtal [Technical Difficulty] Okay it seems we lost Mr. Wojtal. [Operator Instructions] So there are no further questions at the moment. [Operator Instructions] It's Marcin Wojtal again from Bank of America.

[Marcin Karol Wojtal, Analyst]

Can you hear me well? Or is there still an issue?

[Bettina Schneider, Head of Investor Relations]

No, we hear you well.

[Marcin Karol Wojtal, Analyst]

Okay. So I will try again, apologies. So just regarding your guidance for 2020. So you're guiding for adjusted EBITA above breakeven which implies a big improvement, obviously, for the second half. But then in terms of revenue, you're guiding for minus EUR 20 million for the full year. So only limited improvement versus H1. So my question would be, are you just being conservative on revenue? What should really drive such a big improvement in profit in the second half? I obviously understand that profit recognition is seasonal in a way, but you don't have the support from the furlough and you have these underperforming entities in technologies. Is it because you took some one-off costs perhaps in Q2, that will not be occurring in the second half, and that gives you the confidence? Or is it just a conservative approach on revenue?

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

Yes. I'm happy to try to answer that. I mean, in the second half, obviously, we had -- we needed some time until we could adjust the E&M structures in Europe. So I think also, as you proceed with topics like adjusting your cost structure to get better and better month-on-month. But you can also see clearly that out of the results in the first half a lot of the big dip came out of technologies. And as we also mentioned, these 2 legal entities in technologies hurt us quite badly here in the first half. And we obviously making everything we can not to repeat that in the second half. That makes a significant improvement for the second half. But then also, of course, the underutilization month-by-month, that will help us. And as you can already see, I mean the E&M Europe, both quarters heavily impacted by COVID-19 and also the oil and gas, but still being profitable. They are, of course, driving then also the improvements in the second half going forward here. So yes, we are still only saying that we expect to be positive at the EBITA adjusted. I think there is still quite a lot of uncertainty in the different markets. We have some assumptions in the presentations, and we are not expecting, for example, a second wave that will conclude in a lockdown again that we saw in April and May to be repeated in the second half. We are not expecting that there will be any further major delays of the turnarounds that are very important for the profitability. And we -- but we are also not expecting that the oil and gas will recover too fast here. So is there some potential to be better than that? Let's hope so. But I think with the uncertainty in the quarter 4 that we still have, it's wise to stay with the guidance that we gave in May and confirm that at this point in time.

[Operator]

There are no further questions at the moment. [Operator Instructions]

[Bettina Schneider, Head of Investor Relations]

Okay. So we conclude today's call. Thanks to all of you for participating. We wish you all an enjoyable rest of the summer. Stay healthy and we'll speak to you again latest in November. Bye.