Kloeckner & Co SE

XETRA:KCO

Earnings Call Analysis

Earnings Call Transcript 2024-Q2

[Operator]

Good afternoon, ladies and gentlemen, and welcome to today's Q2 2024 Analyst and Investors Conference Call of Klöckner & Co SE. For your information, this conference is being recorded. At this time, I would like to turn the call over to your host today, Mr. Fabian Joseph. Please go ahead, sir.

[Fabian Joseph, executive]

Yes. Thank you very much. Unfortunately, we had to end yesterday's call due to an unexpected fire alarm. I am pleased to report that everyone is fine and situation has been resolved. We apologize for any inconvenience this may have caused, and happy to welcome you again to our Q2 call today.

With me today are CEO, Guido Kerkhoff; our CFO, Oliver Falk; and our CEO, Americas, John Ganem. They will guide you through the presentation, and afterwards, we're happy to take your questions. With that, I'd like to hand over to you, Guido.

[Guido Kerkhoff, executive]

Yes. Thank you, Fabian. And yes, the evacuation and everything yesterday went very well, and nobody was injured and the [ firefighters ] were there. There's always a lesson to learn, and one has to say the evacuation of all our people went as planned and as it should be. And for me, it was [ confusing ] to see that even the word safe environment works here at corporate headquarters in a test case [indiscernible]. And again, apologies from our side, but we had to leave the building. It was very loud inside.

Now, and a warm welcome to this call. As already yesterday, I'll start from the beginning, so that for everyone who will listen to it later on, the recordings have everything in place. As in the recent analyst and investor conferences and financial statements were prepared according to IFRS 5 and include our continuing operations. This means Q2 '23 figures have been adjusted in accordance with the requirements of IFRS 5.

I'd like to start right away with the highlights of this quarter in which we once again demonstrated our ability to perform in a difficult market environment. Shipments came In considerably above previous year's level, despite the ongoing challenging macroeconomic environment due to the continued strong development of Kloeckner Metals Americas and driven by our acquisitions through the second half of the year 2023.

Sales were at a constant level year-over-year as a result of the overall lower price level despite an increase in shipments. Gross profit came in at a constant level year-over-year despite the significant steel price correction during Q2 '24. Despite the ongoing challenging macroeconomic environment as the significant steel price correction during the quarter, we achieved an operating result within our guidance range, and EBITDA before material special effects came in at EUR 42 million, with a particularly strong performance of our U.S. business, a solid result considering the challenges during Q2.

Driven by our solid operating performance, we generated a strong operating cash flow of EUR 61 million, a considerable increase year-on-year. In total, we generated an operating cash flow of EUR 18 million in the first half of '24, also according to our guidance. As a result the acquisition of NMM in Q3 '23, net debt went up year-on-year to EUR 779 million, but went down quarter-over-quarter by EUR 11 million. And if you take a look at the increase year-on-year is EUR 183 million, but we spend last year, with all the acquisitions, almost EUR 400 million. We have reduced our debt level by already half of that organically, which clearly shows the performance, the cash performance of the company even in such a difficult environment.

Let's now focus on our strategic achievements in the recent past. Generating less volatile earnings while increasing our underlying profitability base is the key part of our strategy: Klöckner & Co leveraging strength. Developing our high value-add business, HVAB, is an important lever to achieve this goal. As you know, we closed the divestment of part of our European distribution business in Q1 '24 to focus on the more stable and more profitable HVAB.

Spot-heavy entities were exposed to the low margin, cyclical commodity distribution business, hence, the sales significantly reduced our exposures to the steel price correction in H1 '24 and also prevented us from more windfall losses in Q2. Our HVAB and service center business, more stable and less dependent on steel price developments as these businesses are characterized by mainly longer-term contractual relationships and strong customization and more value add, of course. Also in the first half of '24, HVAB makes up around half our operating results.

We will now have a closer look at the strategic initiatives on how we further strengthen the HVAB in recent months. As we stated before, we have the clear goal of substantially increasing our underlying profitability base going forward and generating stable cash flows while reducing the volatility. We are proud that we recently closed the acquisition of Amerinox Processing.

This company is a full range stainless steel and aluminum toll processor that offers polishing, buffering and cut-to-length services for both sheet and plate. We've acquired an industry-leading and highly profitable business with extensive polishing capabilities, capabilities we didn't have to such a degree before that. We will add the leading processing capabilities to our existing strong products and services in order to establish an unrivaled portfolio in North America.

Going forward, we will continue our opportunistic, highly selective performance and growth-oriented M&A approach. And let me once again say here, the business itself is already profitable, above our levels, and we can indeed have more business coming to them because we were lacking, for our customer base, these abilities.

In the DACH region, we also [ pressed the heat ] with strategic initiatives. In Velten, we installed one of the most advanced laser systems in Germany, further step in transforming our distribution warehouse into HVAB centers. Additionally, this investment will accommodate for further growth mainly with customers of the machinery and mechanical engineering industry.

With this investment, we extend our protection capabilities incorporating advanced technologies like state-of-the-art laser systems to enable profitable growth and clearly follow the strategy to put more emphasis on the HVAB. Further, we see growing demand in the defense sector, and we actively position ourselves to benefit.

And I must really say without the investments in the past in burning tables and laser equipment, we wouldn't have been in a position that we can indeed approach them and benefit now from the growing demand in this sector, because they're asking more for preproduction and HVAB business.

With that, I'd like to hand over to Oliver to have a closer look at the financials.

[Oliver Falk, executive]

Yes. Thank you, Guido. As you already stated, the market environment remained challenging in the first half of the year. You can see the magnitude of the significant steel price correction in the U.S. in quarter 1 and quarter 2 on the left-hand side of the slide. For instance, hot-rolled coil in the U.S. dropped by more than 30% year-to-date, which is quite remarkable in historic standards.

Despite those steel price declines paired with the ongoing challenging macroeconomic environment, especially in Europe, we achieved an EBITDA before material special effects of EUR 42 million in quarter 2, 2024. Further, we generated a strong operating cash flow of EUR 61 million in quarter 2 2024 and a positive operating cash flow in the first half of the year.

Our commitment to increase our exposure to HVAB will help us to reduce the volatility of our earnings while generating more stable cash flows. The sale of part of our European distribution business, which was completed in quarter 1, 2024, is also in line with this strategy. In addition, we continue to leverage our digitalization and automation initiatives. The number of digital quotes, for instance, for continuing operations increased by more than 39% year-on-year on the first half of 2024.

Let's have a look at shipment sales, gross profit and gross profit margin for the second quarter of 2024. Shipments were up significantly by 11% year-on-year and slightly up by 2% quarter-on-quarter, again, driven by the strong development of our segment, Kloeckner Metals Americas. The year-on-year increase is mainly driven by our acquisitions in the second half of 2023.

Sales were constant and came in at EUR 1.8 billion in quarter 2, 2024, due to the overall lower average price level. Gross profit came in at a constant level of EUR 294 million in quarter 2, 2024, after a gross profit of EUR 296 million in quarter 2 '23. Gross profit margin went slightly down year-on-year from 16.9% to 16.6%.

We will now focus on the EBITDA for the second quarter of 2024. EBITDA before material special effects came in at EUR 42 million. In quarter 2, we had a positive year-on-year volume effect of EUR 34 million and a negative year-on-year price effect of EUR 38 million. OpEx increased by EUR 19 million year-on-year as a result of higher personnel expenses, mainly resulting from recent acquisitions. However, the positive volume effect overcompensates the increase in OpEx. Lastly, we had minor positive FX effects of EUR 1 million.

We are now coming to cash flow and net debt development. In the second quarter of 2024, we had a net working capital release of EUR 45 million. Taking into consideration interest, tax payment and other totaling in EUR 26 million, our cash flow from operating activities came in at EUR 61 million in quarter 2, a strong result so far. Including net CapEx of minus EUR 21 million, free cash flow was at EUR 41 million.

Let's look at our net financial debt. Negative cash effects were visible for FX, leasing, others and the dividend we paid in May to our investors. Our net financial debt decreased quarter-on-quarter from EUR 790 million to EUR 779 million, driven by our strong cash generation. All in all, we maintained a very strong and solid balance sheet with equity of around EUR 1.7 billion and an equity ratio of 46%. I now hand over to John to have a closer look at our end markets in North America.

[George Ganem, executive]

Thank you, Oliver. Let me start with just a general overview of the market situation in North America. The U.S. economy continues to be resilient, with second quarter GDP growth coming in at a stronger-than-expected 2.8%. Consumer spending and low unemployment continue to support a soft landing scenario.

Fuel consumption in the U.S., however, is facing headwinds, with higher-for-longer interest rates and political uncertainty combining to constrained business investment. With underlying steel demand temporarily under pressure and steel prices moving down continuously over the first half as Oliver pointed out, buyers have focused on destocking, causing overall buying activity and apparent demand to be significantly reduced in the second quarter.

The situation in Mexico is more positive, with strong demand growth as a result of ongoing reshoring investments. We are clearly at the beginning of a prolonged expansion of manufacturing activity in Mexico. North American prices look close to a cyclical bottom, and import volumes into the U.S. are now expected to decline significantly. As such, overall U.S. market conditions should turn more positive as we progress through the third quarter and into the fourth quarter.

For the full year 2024, we estimate overall demand in the U.S. will be stable to down by approximately 2%, with the actual situation varying across industry segment. A 2025 demand recovery is expected, supported by lower interest rates and more clarity on trade and regulatory policy after the November election. And as I already mentioned, steel demand in Mexico appears to be on much firmer footing and is expected to grow solidly between 2% and 3% in 2024.

Now looking at the expected development in specific market segments. Construction activity is moderating, with nonresidential building square footage forecasted to be down 2% in 2024. Residential activity is treading water, with housing starts generally range-bound, builder sentiment turning somewhat more negative and record home prices and high mortgage rates creating a severe affordability problem.

On the other hand, nonbuilding investment in infrastructure will continue to grow strongly by approximately 15% year-over-year, providing a partial offset to the slowing growth trends in the building sectors. Manufacturing activity continues to be stuck in neutral, with the ISM Index in contractionary territory for much of the past 15 years. New orders for industrial and off-highway equipment have come under significant pressure and are now expected to be down between 4% and 6% in 2024.

The Transportation segment is seeing a more positive development but will not be the significant growth engine we've experienced over the past few years. North American auto sales and production are expected to be slightly positive year-over-year. Here again, the situation, which goes much stronger, with production forecasted up 7% in 2024, while the U.S. will be stable to modestly higher. Appliance, HVAC and electrical has been stable and are expected to continue moving sideways to slightly down, which is generally in line with the previously mentioned trend in residential construction.

Similar to automotive, the outlook in Mexico for these segments is more positive than in the U.S., due again to the dynamics of reshoring, and energy continues to be a bright spot, with investments in renewable power and power transmission projects expected to grow between 9% and 10% in 2024. Extraction activity remains muted, with rig counts down by approximately 10% year-over-year in July.

So I'll end with a quick summary as follows: second quarter market conditions were clearly very challenging. While we do expect more positive trends to appear over the second half of '24, a significant or meaningful recovery in demand is not expected in the near term. Despite these difficult market trends, the Kloeckner North American business continues to outperform the competition, with strong year-over-year growth and record market share achieved in both the second quarter and first half of 2024.

Our investments in Mexico are proving to be extremely well timed, with realized growth synergies more substantial than anticipated. Current new business momentum is extremely positive and should continue to drive meaningful growth across the entire North American network regardless of any underlying demand challenges. And as mentioned by both Oliver and Guido and as seen by our recent investments, we also remain laser-focused on expanding our portfolio of higher value-added products and services.

This strategy is already paying dividends as evidenced by our solid Q2 performance despite continued and unprecedented price volatility across our core product lines. And finally, we remain strongly optimistic about the long-term demand fundamentals in both the U.S. and Mexico and are committed to strategically positioning our North American business to take advantage of the growth opportunities that will arise again as markets recover and steel demand begins expanding again in the not-too-distant future.

With that, I'll turn it back over to Guido.

[Guido Kerkhoff, executive]

Thanks, John. Overall, in -- now coming to Europe overall. In light of the challenging macroeconomic environment, we expect that the real steel demand in Europe to develop stable to slightly declining in '24. And that does highlight a bit the sectors in Europe.

Construction industry. Overall, so we expect a slight decline in '24. Development of the sector is still negatively affected by the higher interest rates despite the slow decrease, but still the increase in construction material prices coupled with labor shortages and growing economic uncertainty. However, we sense that the interest rate decline is becoming more and more recognized, and the market might continue.

Manufacturing, machinery and mechanical engineering. Mechanical engineering is also projected to see slight declines. Order intake remains weak as the overall economic conditions and industrial activity dampens perspective. When it comes to defense, however, we've sensed stronger demand. As I already outlined, we already achieved significantly higher order intake than in the past and continue to actively position ourselves in the sector, especially with a now more developed HVAB capabilities for that sector.

Transportation -- let's first focus on automotive. The automotive industry is expected to see slight contraction in '24. We sense that demand and order intake remained weak, while inventories of automobile manufacturers remain high. Shipbuilding. We continue to position ourselves to benefit from projects, especially in the gray ship sector.

Household and commercial appliances segment. With marginal impact on our European business, we expect a broadly stable development in '24, driven by prolonged weakness of the manufacturing sector and the subdued economic outlook, which affects customer demand. Energy industry. The trajectory towards green energy generation continues, and we'll position ourselves to benefit.

Before I turn to the financial outlook for Q3 and full year '24, I'd like to make one more point about the outlook for our end customer market. Given the challenging outlook in our end markets and taking into account that we restructured in the last year, we continue to press ahead with the implementation of our strategy to focus on more value-add businesses.

Now coming to the outlook. As John and I pointed out, we still expect the macroeconomic environment to remain challenging, even more pronounced in Europe than in the U.S. For the ongoing quarter, we expect an EBITDA, therefore, before material special effects, to come in at a level of EUR 20 million to EUR 60 million. For the full year '24, we now expect a slight increase in shipments despite the market environment mentioned before with 0 to minus 2% overall. But as John rightly mentioned, we seem to gain market share at least in this environment, so we seem to be on the right track to developing.

Sales are expected to come in below previous year levels as a result of the steel price correction on the first half of the year and the resulting lower average price levels. Despite the price correction and a persistently challenging economic environment, we were able to generate EBITDA before material special effects of EUR 83 million in the first half of '24. For the '24 financial year, we're now forecasting EBITDA before material special effects of between EUR 120 million and EUR 180 million. Further, we expect a significantly positive operating cash flow, but below the level of the previous year.

And that means if I sum it all up, that even in such an environment where the market and the prices are going down on a pretty high level, we as Klöckner are now, after our portfolio changes, even in such an environment, in a financially solid and stable not loss-making situation going forward and can continue, therefore, our path ahead of transforming the company according to plans and do not need to react.

We did the restructuring already last year in our European businesses, which many of our competitors are only doing now. That means that even in such a situation, we can now position us well towards our customers, continue on our path forward so that once the economy and the markets will come back, we should be in a stronger position to participate off the growth plan.

With that, we're now happy to answer your questions.

[Operator]

[Operator Instructions] First up is Thomas Schulte-Vorwick from Metzler.

[Thomas Schulte-Vorwick, analyst]

I would have 2, please. So my first question is about the current trends and HRC spot prices, both in the U.S. and also in Europe. So it would be great if you could maybe give some more color in terms of the current dynamics and reasons behind the negative price trends here, and what your expectations are going forward for the H2 and also for the next year, also what the price assumptions are that you baked into your guidance ranges. And what do you think it will take to get back into an upward trend here?

And my second question would be about the potential impact of the presidential election in November on your U.S. business. So is there currently a sense of uncertainty in the market on the demand side shortly before the election? And do you see a material impact on the business environment due to the outcome of the election? So would you welcome further tariffs, for example? That's it.

[Guido Kerkhoff, executive]

Yes. Maybe I'll start with the first one, and John, you might take then the second one. So the steel spot prices, what we currently see is some trends, especially in the U.S., of a stabilization and maybe some slight upticks so that the downward trend at least doesn't continue like it did. In Europe, it's still a bit uncertain, but I think the downward trend is not as exposed as it was. So difficult to predict what happens. But we've come to levels, I think, that even when we've seen it from the mill side and the raw material side, where it gets difficult for them. So there are some volumes where it shouldn't continue and stop.

That would help us a lot going forward. I mean if you take a look at our EBITDA for the first half and you take a look into the windfalls that we have seen, I mean we would have had almost double the result if no windfalls, just the weak demand, would have been there, and it would have been a completely different picture. Now that means that if price trends stop, we'll be in a way, way better situation and can benefit then from the market share growth that we have even in such kind of a negative market volume trend scenario.

Having said that, what you have to take into account is that if that stops, it will take, say, a quarter until it's really through the figures. Because sometimes we have in the contracts adjustments that will just lead to changes in the next quarter then. So therefore, I think for Q3, it might help at the end of Q3, if that all stops, to get a rebound rather towards the end of the year that, if that's going to be stopped. But again, with no windfalls, we would have seen, even in such a weak market volume development, completely different pictures of Klöckner with a much, much stronger profitability.

With that, I'm handing over to John. Presidential election.

[George Ganem, executive]

Wow, that's an easy one. I think this is very difficult to quantify. I'm not sure there's a significant difference from a trade policy standpoint between the 2 parties. We're pretty well protected, and I don't think that's going to go away regardless of what happens in the presidential election.

So I think from a steel demand perspective, I don't think there's a material impact. I think there has been a temporary impact leading up to the election just based on the uncertainty. Certainly, there is some regulatory policy issues that have to be resolved, and uncertainty, of course, doesn't give people a lot of confidence to invest heavily.

That, coupled with the higher interest rates, I think, are really what's holding the manufacturing sector back. And I think that should resolve itself, as Guido said, as the year progresses and we get into the fourth quarter. You get past election, I think we'll know what we have. But I don't think there's a material change in our outlook regardless of what happens in November.

[Guido Kerkhoff, executive]

No, just adding to that one, I fully subscribe to that. And what we have historically always seen is the U.S., if an election is upcoming, that the consumer demand and the investment levels are, in the year of election, always lower due to the uncertainty independent of what other situation and contestants we have in the U.S. So therefore, by whatever happens, that there will be more certainty and clarity, and therefore, the whole [ back ] investment in consumer demand will increase and therefore, steel demand, in however the outcome will be, is pretty likely.

[Operator]

So next up is Christian Cohrs from Warburg Research.

[Christian Cohrs, analyst]

I have 3, actually. First of all, can you maybe elaborate about the organic growth you've had in the Kloeckner Metals Americas division in light of the acquisitions you have done last year? I think this would be a helpful information. Maybe you can specify the organic trend in shipments.

Secondly, on your Amerinox Processing acquisition, could you please provide some ideas about sales and earnings contribution and the deal terms? And lastly, your group EBT was negative. Nevertheless, you paid quite a substantial amount of taxes. So can you shed some light on that? And what do you expect how this is going to evolve in the upcoming quarters?

[Guido Kerkhoff, executive]

John, will you take the organic growth on the Amerinox then I can continue over group EBT?

[George Ganem, executive]

Sure. The organic growth, if you peel out or take out the impact from the acquisitions, year-over-year growth in North America of our -- on a same-store basis is over 4%. That is significantly higher than what the MSCI, which is the U.S. shipment service center institute -- shipments reported by the MSCI, which are actually negative year-over-year, year-to-date. So that's the reason my comment that we've achieved record market shares in the U.S. that's predominantly on an organic basis.

As far as Amerinox, I mean we really didn't publish any of the financials, so I'm not necessarily comfortable giving those numbers. We agreed with the buyer not to disclose that information. I can tell you that it's a toll processing business, so obviously, the revenues are purely related to processing services. So it's not a significant revenue driver, but extremely profitable because of the product mix. And I think the real benefit to that acquisition is going to be the synergies associated with it.

As Guido alluded to, we do not have internal polishing capabilities, and that really precluded us from growing in certainly stainless steel, and we were finding ourselves in an uncompetitive situation. So we've addressed that with this acquisition, so we think there are significant synergies to grow that platform and the intellectual property that we have acquired with Amerinox, and we'll actually look to expand our polishing capabilities further across the entire network in North America.

[Guido Kerkhoff, executive]

Yes. Maybe adding to that one. The numbers, as you can hear from what John said, even stand-alone, are accretive from day 1, even without all the synergies and the additional customers we bring into that business. And size-wise, its turnover is kind of a mid-double-digit thousand tons of volume that they can process.

So then you get kind of an idea. I think this is something we can say. All the deal terms are very straightforward. It's [indiscernible] own, what we bought, so it was a straightforward transaction. No big risk or big due diligence is needed just to look into the sites and the contracts with the customers.

On the group EBT side, you rightly mentioned that there are -- that we're negative on the group's pay taxes. John's making money, so unfortunately, we have to pay taxes. And going forward, we will tell that we can recover the losses that we have in the other regions and cover that. So therefore, you can't project it as it was in the first half.

[Operator]

Next question comes from Lars Vom-Cleff from Deutsche Bank.

[Lars Vom Cleff, analyst]

Yes. Three, if I may, and I would ask them one by one. First one, unsurprisingly, your net debt level increased significantly after the NMM acquisition. How fast do you think you can bring that down again? And is there a target level you're aiming at, either relative or absolute?

[Guido Kerkhoff, executive]

Well, Lars, first of all, let me state again, I mean, if our net debt levels would have just increased by the level of the investments we did, that would have been -- or that would be today EUR 200 million higher than it is. So even after the acquisitions we did, we had IMS and Sol Components and others as well, we could reduce, and we paid our dividend and still we reduced. So therefore, I think we're progressing on the organic paydown of our debt quite okay even in such a difficult environment. That's the one thing.

The second thing is about the right level. That is a bit -- very often, people look into leverage and all that stuff. In still such volatile earnings that we do see, it's difficult for our business. With the current level and to refinance it and how much firepower do we have to refinance and not be under pressure from banks or anyone else, we're in a very comfortable situation. So we're well financed through. It's -- very much of our stuff is asset-based. So therefore, we can do it.

And we don't do, for example, sale of leasebacks in an aggressive way like many of our U.S. competitors. So there is enough room. So for me, it's rather a question of where do we invest it into and how much and how fast is the payback that we get? So I feel, with the current levels, very happy. And I wouldn't use only leverage calculations. If you see results that are driven by windfalls, you have to take kind of a through-the-cycle calculation if you really want to use relative figures.

[Lars Vom Cleff, analyst]

Yes, understood. I mean I'm not complaining about your level. No, I worried it was just -- I mean, interest expenses this year, if I take the first half, it will be EUR 60 million for the full year. And I was only curious to see how fast that can come down again.

[Guido Kerkhoff, executive]

Our focus clearly is wherever we can reduce. And as you rightly say, because the higher interest levels now for us is we're working capital-related finance. So it -- we don't have like other companies that we can say we have longer-term agreements, so we will just kick in, in the longer term. It kicks in immediately, in our case. That's why we're trying to get down the working capital and do everything we can do there to get the interest expense down. But that's it. It's the interest expense, not so much to that level.

[Lars Vom Cleff, analyst]

Understood. Perfect. And then maybe you're showing your sales split by business in the meantime, which we really appreciate. Is there an HVAB target ratio? Or asked differently, I mean you brought your distribution down from 37% to 20% within 4.5 years. I mean if I play devil's advocate, the question would be, do you need distribution at all? Or could you solely focus on HVAB?

[Guido Kerkhoff, executive]

Yes. Yes, [indiscernible]. We were expecting that, and we were internally discussing a lot about do we have a certain percentage of HVAB and distribution where we want to go? And I can tell you why we didn't do that. Because imagine for a moment, you have a peak in steel pricing coming up, then the distribution level will just go up because prices go up and not the size of the business, and therefore, you have a certain fluctuation. I mean you can see longer-term trends. What we're going to do is absolutely grow the HVAB business. And therefore, the 39%, given current price levels is, for us, not the end.

Now on the other hand, do we need all distribution businesses or shouldn't we just skip it off? To some degree, I do understand it, and we have reduced the countries where we only have that. We did it. But very often, we have sites that are mixed, and we have customers that ask for HVABs and our customers on the distribution side. So the broad scope of our offerings is, for many of our customers, the key argument to go with us. So therefore, it's -- in certain cases, it's kind of an entry point, and you have to do that as well, and then you can grow with the customer and have a broader offering and make more money on the other stuff.

So therefore the question, should we reduce it to 0? No. If we have sites that are just distribution and are not profitable or loss-making, we close them down and focus on the other stuff, or we use the warehouse space level that we have to move them into HVAB sites. But on the other hand, again, many of our customers like to have the distribution business as well because they have a broad range of demand.

[Lars Vom Cleff, analyst]

And then maybe a quick last one. I mean you said digital quotes increased by more than 39% year-on-year in the first half. Looking at your total quotes, what percentage stake is digital nowadays? And is there also a target level you think you can grow this to and by when?

[Guido Kerkhoff, executive]

Yes. Well, you may have seen in the change of our targets internally and even our bonus agreements that in the past, we were only focusing on revenues, digital revenues. That was the first number we always gave out. Sometimes, it can be easy to drive that number up if you try to get your big orders via your online channels. But the huge workload is not just in the revenue, the huge workload is in the number of orders and the quoting beforehand.

That's why we changed our target was that we don't focus on the revenue anymore. We focus on the share of the digital orders and the digital quotes even beforehand, and then the sales efficiency after that, how many manual corrections do we have? The less we have, the more efficient is our full process behind. And we saw that people were indeed focusing a lot on the revenue, which was not bad as a starting point. But that we had, therefore, some digital orders, but way less digital quotes.

So if you take a look at the today's level, what we have achieved, we're now at -- a bit more than 1/4 of our quotes that we send out digitally. When we started to report on that, it was a mid-single-digit number. So we drove it up over 2 years significantly. And the share of digital orders is already up to 36%, so we're developing in the right direction. We were starting last year on a level with the digital quotes end of the year at 17% and could get it up this year to already 26%.

So it's really significant steps, and that helps us to be more efficient and to use less people. A, you don't get them, and B, if you want to grow your revenue, the more orders you can send out, the more quotes you can send out, the faster you can do it, the more will come in. And we think it's currently -- again, we've done our restructuring already last year, even in the difficult German environment. Our competitors are doing it now, and we think we can now grow because we can use our people and our better digital tools to send out more orders. So we are aggressive.

[Operator]

Thank you. At the moment, there are no further questions. [Operator Instructions] There are no further questions.

[Guido Kerkhoff, executive]

Thanks again for all the questions you have. If you still have any more questions, Fabian and me, we're still available, so just give us a call. And thank you very much. And again, apologies for having it in a second time.