Accelleron Industries AG

Thank you, Moira, for the introduction. So dear ladies and gentlemen, good morning and a warm welcome from my side here in Baden, Switzerland.

Thank you for attending Accelleron's half-year results webcast conference 2024. I am Daniel Bischofberger, CEO of Accelleron.

With me is Adrian Grossenbacher, our Chief Financial Officer. Before we start, let's have a short look at the Safe Harbor statement.

The presentation today contains forward-looking information that naturally comes with uncertainties. Further, the figures in the presentation are in U.S.

dollars and prepared according to U.S. GAAP accounting standards.

Let me go through the agenda. As already said, I will start with the key highlights and market developments in the first half of 2024.

Adrian will then take over for the financial review, including outlook. Finally, as already said by Moira, we'll conclude with the Q&A session.

So let's start with the key highlights. First half of 2024 was another strong half year.

Our revenues grew to $505 million or by 14.5% in constant currency and nominally by 12.7%. Organic growth, that means excluding the contribution of OMT, was 6.5%.

We achieved an attractive operational EBITDA margin of 25.4% thanks to realized operating leverage and cost management. Our cash flow conversion, which is typically lower in first half, reached 34%.

This is a significant increase compared to last year's 17%. Net income was significantly increased to $89 million from $47 million last year, supported by a reduction of non-operational buildup costs needed to establish a standalone and stock-listed company.

Overall, a strong performance resulting from a successful strategy, execution, and the hard work of all our employees around the world. The engagement and passion are world-class.

I would like to take the opportunity to say a big, big thank you to all of them. Please let me elaborate on why we were able to grow stronger than anticipated at the beginning of this year.

Typically we operate with many small orders with short lead times that range from 48 hours to six months. Our typical order book is equivalent to about three months' revenues.

Hence the visibility of our business is limited and smaller changes can quickly occur. Marine new product business is the exception, thanks to shipyards' multi-year order book, but marine new product business accounts for only around 15% of our total revenues.

So in the first half of 2024, merchant marine new building and service market continued to perform strongly, and growth in marine medium-speed service allowed us to compensate for a slight decline in low-speed service that saw a record high in 2023. We received also some large service orders, especially for Navy supply vessels and energy applications.

We've been able to increase the capacity of OMT's Turin factory faster than expected with a positive impact on our inorganic revenues growth. And last but not least, we've benefited from high demand for turbochargers for backup power linked to the growing market for data centers.

In high-speed business, we saw a temporary reduction in sales for gas compression as customers reduced their inventory. Here you see our expected market outlook as presented in March this year.

At that time, we expect that most of our markets to be stable with the exception of container gas compression slightly to decline, and specialized chips and backup power to increase. Here you see our updated market outlook.

In green, the positive changes to our March outlook. The container business benefits from higher freight rates and lower scrapping, driven by the increased demand for shipping.

This is also a consequence of the situation in the Red Sea that forces many ships to take the longer route around Africa. On the tanker side, we can see that chip ordering has increased as more energy trade is happening by sea freight vis-a-vis pipelines.

On the cruise side, we see ship ordering to increase after four years in which ship owners were more concerned about reducing their debt levels of the COVID pandemic. Due to the long lead times for cruise ships, this will have a positive impact on revenues starting earliest 2026.

For the power and gas compression market, we have no material changes in our expectation. While lower gas prices can have certain impact on short-term demand and stock levels in gas compression, structural demand for the North American shale gas remains healthy.

During the last investor presentations, we provided some deeper insight into our marine and gas compression markets. We thought it would be helpful to share more insights into our power generation-related business.

Power plants are built in many different forms, powered by coal, by gas, nuclear, hydro, wind, and solar. Many of them use large gas, steam, wind, and hydro turbines.

Internally in combustion engines represent a niche, covering only 3% to 4% in overall power generation capacity worldwide. Their strengths are the dispatch and fuel flexibility as well as quick response time.

That's why they play an important role in reliable power supply. The largest internal combustion engine segment in terms of installed capacity is backup power, so on the left side of this slide.

We are talking about emergency generators for hospitals, data centers, and other critical infrastructure. These are typically high-speed engines running on liquid fuels like diesel, due to easy local storage.

This is a market which was traditionally dominated by turbocharger suppliers from the truck industry. We are growing our market share here by providing higher power density turbochargers, but are still a comparatively small player but with significant growth potential.

Prime (ph) and Balancing power applications on the right side of this slide are small in terms of installed gigawatts, but these applications require more service due to mid to high utilization rates and are therefore a key market for Accelleron, where we enjoy a high market share of far above 50%. These power plants are also used for baseload power supply in remote areas, for industrial plants that require stable and safe energy supplies in areas with a weak grid, all for balancing purposes where supply of electricity from wind or solar are intermittent.

It also includes some niches such as combined heat and power of biogas where high-speed engines are more frequent. Combined heat and power used in application where customers need industrial process heat or residential heating in addition to electricity.

This application can play a key role in addressing seasonal fluctuations in the power supply and heating demand. Biogas plants are used when agricultural waste or residues from wastewater treatment are gasified and used for electricity generation.

This market is very local and very often depends on subsidies to be commercially viable. Overall, we can observe a shift from baseload to balancing power plants.

The more intermittent renewable energy like solar and wind are used. So single engines range from less than 1 megawatt, more the high speed up to 20 megawatt, more the medium speed is power plant capacity from a few megawatts to a couple of hundred megawatts.

So high-speed engines are typically used for smaller power plants and by industrial customers, while medium-speed engines are more common for baseload and larger utility-type power plants, directly supplying to the power grid. With about more than 30% of our revenues, power generation is a significant part of our business.

But given the different applications and the multitude of local drivers and regulations, it is difficult to derive one global trend, but we see that digitalization and AI, as well as decarbonization, provide us with nice opportunities, be it as backup power for data centers, or as thermal balancing power. Let me now talk about the two acquisitions we recently announced, OMC2 in Italy and True North Marine in Canada.

I'm really happy to introduce these two companies to you and give you more insights on how they fit into our strategy. So let's start with fuel injection.

As presented during the last update, fuel injection is a growing market and production capacity is the biggest constraint for this industry. Besides the low-speed growth that is expected by the increased penetration of dual fuel vessels, we have the clear ambition to grow our market share in the fuel injection business for medium-speed engines by taking advantage of new fuel applications.

Both low and medium speeds require additional production capacity. And this is why we decided to acquire OMC2, a company with 70 employees in Brescia, Italy, specializing in the production of components for medium-speed fuel injection systems.

So in the short run, OMC2 will provide OMT with additional production capacity to focus the capacity in Turin, so the OMT factory on two-stroke components while producing more four-stroke components in the OMC2 factory in Brescia. In the long run, the acquisition, including real estate and land, provides further opportunities to support our growth ambitions, especially in the fuel -- in the four-stroke fuel injection business for the next years.

We expect the transaction to be closed in the next days. Last week, we announced the second acquisition, this time in the digital space.

True North Marine, a company headquartered in Montreal, Canada. Please let me explain the strategic background.

In the context of marine decarbonization, vessel performance optimization is becoming more and more important. Vessel performance optimization has three different aspects, starting from one, operations; two, equipment and its maintenance to three, new fuels.

Operational optimization is the first and most accessible optimization opportunity. We currently address the topic of new fuel with our fuel injection and turbocharging offerings and equipment maintenance and optimization with our service and with our Tekomar software suite.

The addition of True North Marine allows us to expand our offerings to the more operational aspect of vessel performance and help shipowners and operators to meet decarbonization and commercial goals also in light of upcoming regulations. True North Marine's offering will complement Accelleron 's Tekomar XPERT and Turbo Insights to create a combined digital and consulting advisory.

True North Marine provides weather routing, guidance, and voyage optimization software as well as advisory services, including pre-voyage estimates to post-voyage claims. The Montreal-based company employs about 50 employees, including its regional offices in India, China and Greece.

By the acquisition of True North Marine, Accelleron also significantly increases its experience in actual marine operation with parts of the management and employees having been captains, seafarers, and naval engineers. We are pleased to confirm that the current management not only decide to stay on board, but it is also excited to support our growth in digital solutions and our ambition to become an increasingly relevant player in the marine decarbonization.

The company reported revenues in the lower single-digit million Canadian dollars last year, and adds a customer base of about 800 chips to the about 2,500 chips currently equipped with Tekomar XPERT software. The transaction is expected to be closed in the coming days.

So after sharing some highlights of the first half year, our financial performance, and also our M&A execution from our markets, I would like to hand over to Adrian for the financial section. So Adrian, please?

Thank you, Daniel, and very good morning as well from my side. Let me now walk you through our financials of H1 2024, starting as always with the group performance.

In general, we can say that the positive market momentum and trend from the past two years continued in the first half year of 2024, where we recorded revenues of $505 million. Daniel has already mentioned, the main contributors to the top line, leading to a growth of 12.7% in nominal and 14.5% in constant currency.

Organically, excluding the contribution from OMT and in constant currency, we recorded a sound 6.5%. In contrast to 2023, where price increases contributed significantly to the growth, prices played a much smaller role this year.

Consequently, the overall growth is largely volume-driven. On the bottom line, we managed to significantly increase our profitability margin from 24.1% in H1 2023 to 25.4% in H1 2024 with a substantial margin accretion of 130 basis points.

Main contributors were the healthy operating leverage and the effective cost management along the entire value chain, including our support functions. In respect to the support functions, we have entered a new chapter of continuous optimization after the heavy buildup activities of the past two-plus years.

Let me now turn to the high-speed segment, where revenues were slightly lower than in the comparable period of 2023, amounting to $120 million respectively, a decrease of 3.3% in nominal. The main driver has been a temporary decline in the gas compression business due to destocking by our customers following an extraordinary demand in 2023.

A slightly growing power business with gas engines as well as a strong growth in backup power applications, especially for data centers, were not sufficient to fully compensate for the aforementioned. Despite lower volumes and lower index-based pricing, we were able to improve the margin, thanks to effective cost management.

On the next slide, we see the performance of the medium low-speed segment depicted. Revenues in this segment grew by 18.8% nominally to $386 million.

Organically, we recorded a growth of 9.9% for this segment. The contribution of OMT amounts to $36 million, enabled by the capacity expansion.

Overall contributors were a robust growth in marine new buildings and strong service demand for marine medium-speed application which more than offset the slight decline in low-speed service after a strong 2023. For the power generation and cruise business, volumes remained largely stable.

We further recorded some large service orders. As a result of the strong growth, respectively, the healthy operating leverage and effective cost management, the operational EBITDA margin in the medium and low-speed segment increased by 180 basis points to 25.2%.

Before moving now to the cash performance, let us go through the bridge from operational EBITDA to net income to highlight a few specific effects. Starting from the left side, operational EBITDA amounted up to $128 million.

As you can see next to it, nonoperational costs were significantly lower than last year and summed up to $10 million versus $49 million in H1 2023. These costs relate mainly to the remaining buildup activities.

Some expenses relate as well to the two acquisitions. We expect to remain within our original guidance of around $20 million one-off costs related to the build-up activities for the full year 2024.

Linked to the acquisition of OMT, we report an amortization of $2.2 million in H1. Going to the middle of the bridge to the interest finance expense, the interest finance costs, including the impact of interest payments, FX reliances, and pension income.

Overall, this position amounts to approximately $6 million. One further (ph) to the right, we can see the income tax expense, which amounted to $22 million, which is slightly lower tax rate than in H1 2023.

Finally, net income amounted to $89 million, which is significantly higher than H1 2023 or 89% up based on a better operational result and especially due to materially lower nonoperational buildup costs. Now moving to the cash flow, where the conversion stood at 34% from the increased or resulting from the increased net working capital.

Firstly, the volume increase resulted in higher receivables beside the longer conversion cycle. Secondly, we managed to normalize our throughput, which in consequence, resulted in lower purchasing volumes.

Additionally, our lower one-off cost had as well a decreasing effect on the trade payables. Thirdly, inventories were slightly up versus H1 2023, driven by the shift of transportation mode from A to C (ph) for a portion of our new business resulting in lower cost and emissions, but absorbing a certain quantum of capital.

The normalization of our throughput largely offset the shift in transportation mode. Lastly, capital expenditures were on a similar level as the same period last year, underlying our commitment in sustainably reinvesting into our asset base.

Please note that in the past few months, we have seized two M&A opportunities, which are included in below guidance and are totaling up to a mid-double-digit million U.S. dollar amount in terms of purchase considerations.

In line with the trading update in July, our full-year constant currency revenue growth guidance is 9% to 12% versus previously 4% to 6%. For our organic growth, it stands at 4% to 7% versus previously 0% to 2%.

Based on the healthy operating leverage and the effective cost management, we also expect higher operational EBITDA margin of around 25%. This is slightly lower than what we achieved in H1 when we benefited from some favorable service orders.

With the second half of the year typically showing stronger cash flow conversion, we expect to reach the guidance of 90% to 100% cash flow conversion for the full year, requiring a strong focus on cash collection and inventory management. Also, with the two acquisitions announced this summer, we expect to remain well within the net leverage corridor of 0.5 to 1.5 times operational EBITDA.

We further confirm the updated capital allocation framework presented in March of this year. It remains our goal to largely distribute the excess cash generated.

We do not expect the acquisitions to have consequences on our capacity to pay an attractive base dividend, while we would see this amount to impact a potential share buyback. As stated in our shareholder letter, we expect our improved operational performance to have a positive impact on the year-on-year development of our financial performance and the dividend.

With that, I would like to hand back to Daniel for his concluding words.

Thank you, Adrian. So overall, Accelleron delivered another strong performance with significant revenue growth and increased profitability in the first half of the year.

We continued to execute on our strategy and with the two acquisitions, we added capacity and capability to become even more relevant to our customers. We are confident in our ability to continue our success story.

With this, I would like to close the presentation and open up for the Q&A session. So, Moira, we are now ready to take questions, please.

Hi. Good morning.

Thanks for the opportunity. I wonder if I could ask two questions, please.

First, within high speed. Could you speak about where we are on customer destocking in the North American gas business?

Do you see that continuing into H2 and if we were to isolate for that effect, what do you think the growth in that division would look like? Second question, if we could shift to the -- sorry, I'll start with the first question.

I'll come back later. Thank you.

Okay. Thank you, John.

So I take it, so high speed. We have seen the destocking to start around Q2 and it's still continuing.

But based on the feedback from our customers, we are getting more to the end of the destocking. So that probably at end of Q3, beginning of Q4, we see normality on the level.

On the growth, we do not guide on high speed, we guide on overall. So that's already included the improvement.

Thank you, John.

Okay. Great.

One follow-up question. At full year '23 years, results you've kind of alluded to price and inflation dynamics in the service side of the business.

And if I remember correctly, you were a beneficiary of that in your '23 numbers, and you'd expected kind of a headwind into '24 H1. Did that materialize?

And has price cost dynamics around service and personnel normalize? Thank you.

Adrian?

Yes. Back in full year presentation, we referred mainly to index-based pricing on the high-speed side, which would sequentially basically impact us.

I think we have referred to this on the high-speed section. So yes, year-on-year, we have seen that a slight decline.

We as well then said in the medium low speed that we would be at max for the product business stable to slightly declining. I think we are, again, within basically what we have guided there.

And lastly, for the service, we said based on the lower inflationary dynamics not increasing further commodity prices that we would see less, let's say, room to increase further prices and we have acted accordingly. Consequently, the impact from pricing in H1 is minor in that sense overall.

Surely on the labor side in service, usually there we price in local currency. And as we still see salary costs going up in one of the other instance, we adjust, but not in the spare part.

Okay. Thanks very much.

I understand (ph) your question. Thank you.

Good. So, next question.

Good morning, gentlemen. Can you tell me from when on the two acquisitions, OMC2 and TNM, will be consolidated?

Or related to that, is the difference in your guidance, of 9% to 12%, including acquisitions with the organic growth, 4% to 7%? Is the difference of this 5% made by these two acquisitions, or are there more acquisitions to expect?

Thank you.

Okay. First, about when do we start consolidating?

As I already mentioned, we expect the transaction to be closed in the next few days.

This is TNM? For both?

True North Marine, which we said it's in the lower single-digit Canadian dollar and also the OMC2 will come in the next few days. So all in all, again, we expect them to have an impact on this year of probably about less than 1 percentage points on the growth.

So it's included in the 9% to 12%. Then your other question, Charlie, was -- can you repeat again?

If there is anything more there, I think OMT is in obviously?

Obviously, in a 1% and you predict maybe 5% and so we have to expect 4% more to come.

We need to be careful we have still OMT considered inorganic because we do not have a 12-months comparable yet in our books. So we are talking about OMT, OMC and T&M basis which is complete in that bucket.

Just three which is complete in that bucket.

Okay. Thank you.

You're welcome, Charlie.

Good morning. I have three questions, I would ask them one by one.

And the first one is on IMO 2030 and there, if you can tell me if it is impacting your business already today, how you would describe it is like some sort of early movers. And once these early movers are said and done, then it should be again come to sort of whatever 2026, 2027, 2028?

And then you should be picking up? Or how should we see the sort of the impact of IMO 2030 on your business over the next couple of years?

That would be my first question.

Thank you, Sebastian. Let me again explain what's going on, on the IMO side.

I mean IMO has kind of committed that it will go to net zero by 2050 and it has given a curve. But so far, the regulation is not in place yet.

It's still a discussion how this reduction in emissions shall be enforced by CO2 tax or any other means? So we expect that the conclusion will come 2025, and then implementation should be 2026.

So how does it impact? It's difficult to say.

I mean if the regulation and then force regulation is not in place, then we know it's more voluntary, and we might not see everything. But again, already what we see is this kind of dual fuel engines and also some retrofits, which we see already as a positive thing coming.

So we definitely are very curious to hear next year, what the IMO and the member states have agreed upon. And then we will see how fast we'll follow this reduction in the mission.

Got it. The second question is with regard to your guidance statement and where you confirm your dividend policy from the full year.

If I'm not mistaken, in the full-year presentation, you wrote about an attractive dividend policy. In that regard, can you remind me what means attractive for you in this context?

I can take that. I think we stated that in the capital allocation framework, correctly committed to an attractive dividend policy paying stable to growing dividend over time, excess cash to be returned through share buyback unless M&A opportunities materialize.

In line with this refined rationale for the capital allocation framework, we can state the following. Again, in the past few months, we have seized two M&A opportunities, which are totaling up to a mid-double-digit million dollar amount.

It remains our goal to largely distribute the excess cash generated. We do not expect these acquisitions to have a consequence on our capacity to pay an attractive base dividend, while we would see this amount to impact a potential share buyback.

As stated again at the bottom in our shareholder letter, we expect our improved operational performance to have a positive impact on the year-on-year development of our financial performance and the dividend. I think that's what we can state for the time being.

Got it. Many thanks.

And then quickly with regard to the sort of the growth that you've seen in the end of the first half that you potentially have seen over July. Can you share a little bit of light how these sort of numbers or how the sort of growth backdrop is comparing to the sort of average number that we have just reported for the first half?

We are still on track to meet the guidance. So we are, as I said already, very positive about the second half of this year.

Got it. Many thanks.

I'll go back to the queue.

Thank you, Sebastian.

Okay. Before following up with the next question from the queue, I would want to take certain questions that came in through the chat.

First question is from Jane Grief (ph) from ZKB. Congratulating us for the great results and having three questions.

The first question is about the acquisition of OMT and OMC2. Accelleron is now well positioned in the fuel injection business sector.

Are you planning further acquisitions in this area? Or does the acquisition of OMC2 mean that you now have sufficient capacity to address the four-stroke medium-speed engine market in particular?

Okay. I suggest I take that up.

Definitely, I mean, we still have further potential even on OMT with building the test center where we think can release some factory space. And also OMC do it, definitely, short term, we can further increase capacity and also already mentioned with the deal also we got some additional land where we can build factory.

So this should give us enough time and focus on extending the capacity, but all in all, whether that's enough for the very long run, will be proven if the market really develops now to dual fuel engines, I expect that we need further capacity expansion. Again, here, we have two ways to do it, organic or inorganic.

The organic piece is definitely -- it's in our hands. We have to invest.

The challenge here is definitely getting skilled labors. That's why definitely OMC [indiscernible] was a good one because we got 70 skilled labors.

And definitely inorganic normally comes a little bit higher in price, but it also -- it's a running business. So -- this year we will see then once we are getting there, and we are seeing that we need more capacity to come.

But I would say, for the time being, we have enough capacity, and we have no potential to expand the capacity.

Then second question, do you still expect no more one-off costs after those $20 million in '24 or '25, excluding the amortization of M&A one-offs?

It's definitely very early to guide on this element. Nevertheless, we can clearly state that it remains our ambition and we work towards that, that this is a single million amount for the year '25.

One last question from Joni Cliff (ph). You mentioned in the presentation that one reason for the better margin was effective cost management, where exactly were you more effective?

Let's maybe take a little step back. When looking at 6.5% organically, so that comes from the turbocharger side, There, we basically with almost a stable workforce to have managed to increase our output.

For the fuel injection part where we have to expand capacity, I think we have grown not necessarily in full whiskey growing volume, but we have increased a bit our workforce to cope with that material increase. So that has obviously helped, benefited the margin.

Additionally, as stipulated, we have normalized our throughput -- that means we have less idle time along the conversion process or our production process and we have further optimized the mode of transportation. For instance, going from A to C is not only lowering the emissions significantly, but it comes at lower cost.

And last but not least, on the function side, we have more and more in-sourced certain activities which initially we have to have with a third party and therefore, have as well, made a good step forward in optimizing. So basically, this is along the entire value chain, and this remains in focus for us, as always, with our operational excellence.

Okay. Thank you very much.

We have further three questions from Alessandro Foletti (ph) from Octavian. Can you please explain the destocking effects in high speed?

When did it start? How far are we from normalcy?

And when do you think it will end?

Probably just why did we have this destocking? I would say the customer has been a little bit too enthusiastic.

A little bit too many things that doesn't mean the market went down. It's just that we're probably a little bit ahead of the curve.

And now they realize that market are still nicely developing, but they just had a bit too much on stock. So they took advantage of that one.

And as I said, we started in Q2, we expect that to finish by Q3 that -- it goes back to normal in Q4.

Second question on capital allocation. It includes return of excess cash via share buybacks.

Can you explain what are the criteria that define excess cash? Does it need to be below a certain leverage?

Or does it have to be net cash?

I think we have already gone through the framework, but let us reemphasize again that we have stipulated that we want to pay a stable to growing dividend. And that's the anchor basically what is then on top.

Unless M&A opportunities materialize, it could be returned through a share buyback. So in that sense, that could be considered excess cash.

But for this year, I think the excess cash we have largely used for the M&A while remaining fully committed for the base dividend.

Okay. The third question was on the low speed service.

Why was it in decline? Is there a connection with freight rates?

We already explained last year, why we have this high -- record high in low-speed, just again, the low speed is about overhauling the main turbocharge for the main engines, and this requires dry dock. And this normally happens every five years.

And what we have seen in 2022 is that quite a lot of ships didn't go into dry dock because the freight rates were record high. So they tried to delay.

And then we got all this dry docking mainly in 2023. And in addition, because of the high -- a lot of new ships came into operation in 2010 to 2012.

So if you do the math, 10 years later, they also came on top. So it was the normal cycle we had and in addition, some delays and everything happens in 2023.

And now what we see this year now more normalization. We expect originally a higher decline, but we only saw a small decline.

So that's about why we had this low-speed service decline this year.

And one more question from Alessandro Foletti from Octavian about the two companies, OMC and OMC2. Have they have some sort of common history or the fact the names are very similar is purely accidental?

Probably the creativity for finding names might not be so high now industry. So both had about Oficina, Mecanica (ph).

One was in Turin. The other one was in Brescia, but the name I can't remember anymore, but it's purely accidental.

So it's lack of creativity from the names.

And now one more question from Dawn Landes from Kepler Cheuvreux. You mentioned the new opportunities for backup generators and data centers.

Could you please give us more color on your exposure in this area and percentage of sales and maybe quantify the potential for Accelleron? Thanks.

Okay. Again here, we all know artificial intelligence and everything drives data centers.

And in 2023, we already mentioned that we have about $6 million in this kind of turbocharges and this will double this year to $12 million. We expect this rate to continue in this one.

So the increase, but again, that's today, we will see, but as long as the need for data center is here, we definitely see growth potential.

Good. So we are done with the questions from the Q&A tool and I would ask to get the new questions from the phone.

Hi. Thank you.

I'm wondering if you just could comment on how shipyard capacity has affected the marine side of your business. We've seen some of your peers speak about limited expansion of capacity affecting their ability to deliver product among in what you're seeing?

And do you have any concerns or evidence of double ordering due to constraints? Thanks.

So about shipyard capacity. I mean if you take a look, so more or less, the ship deliveries per year were slightly below 1,400.

There's a clear information we got from Korea and Japan, there's no interest or investments in increasing the capacity. The only thing what we see is in China, there's now some investment done, but we have even spoken to other shipyards in China, they are still cautious.

Once bitten, twice shy. So they still remember the time in 2010, 2012, where they had huge numbers of shipyards and a lot had to be closed and quite some company lost money.

So that's why they're very cautious even in China. But definitely, China is about increasing, but, again, here, we don't talk about 10% or 20% increase, not for the time being.

We see small increases. And this will definitely help us also to increase our new business.

But so far, the new business is really limited the growth by the shipyards. So next year, hopefully, there's some growth coming from additional shipyards.

But again, also here in China, it's also the challenge to find skilled labors.

Okay. That's a nice segue to my follow-up question.

You spoke a bit about dry docking activity levels the last, call it, three years or so. Is there a way we could think about the exposure of your business to dry dock and smaller services, so -- or maybe another way to phrase it, beyond shipyard capacity, what do you see as the constraint to your business right now on the side?

Thanks,

John, do you talk about ship your capacity for new business or shipyard capacity for overhauls in repair?

The latter question. Sorry to be unclear.

Yeah. I guess there's enough shipyard capacity for dry docking for all the overhauls.

I mean there might be the challenge for bigger retrofits when they want to do really fuel conversion, getting dual fuel capabilities and so on. That still might be a challenge in the future when -- especially when IMO regulation becomes more stringent and they have to start investing, then we'll see whether shipyard capacity becomes a challenge.

Great. Thanks so much.

Okay. Thank you, John.

Great. May I?

Thank you. I've got three questions, follow-up questions there.

Two housekeeping and one clarification. The first housekeeping is with regard to the nonoperational pension costs, how much were they in H1?

Let me quickly check out of my mind, I thought it's somewhere around $6 million-ish. We have this in Note 4.

Just a second, please. It was $5.9 million, yes.

Got it. Many, many thanks.

And second point is on net working capital and your point that you made earlier on in the DPOs. How should we think there then going forward?

Is that the sort of a DPO level that you have at the moment that is something more sustainable going forward? Or do you see some sort of development in one or the other direction going forward?

Or how should we think about it?

You're referring to days purchase outstanding and not days sales? Is that correct?

Tables [indiscernible].

Okay. Good.

Yes, then I rightly understood. It's always hard to project, but surely, this is more normalized what we see now versus last time.

But actually, we need to bear in mind that we had a decreasing effect as well due to the lower one-off costs. And potentially the purchasing volume, as we have been excelling now has been comparably low.

It might come a little bit back, meaning you would see an increase slightly but surely not back to the levels we had end of '23.

Got it. Many thanks.

And then the last question is a clarification. With regard to your comment earlier on Foletti's question with regard to the excess cash.

Did I understood it correctly that you said that you used the excess cash so far that you could have there ready for M&A? Or was that a misunderstanding on my side?

Yes. I think at large, we said that we would not see a share buyback this year or coming then consequently by remaining committed to the base dividend, right, an attractive base dividend.

I think that I can confirm.

Got it. Many thanks.

That have been three questions then.

Welcome.

Thank you, Sebastian. So Moira?

Thank you, Moira. And again, as I said, yeah, we had a very strong first half year.

And the outlook is very positive also for this second half. And definitely, it's also thanks to the passion and engagement from our people.

And so we are really proud looking forward. And I would also like to thank you for attending this call, and for all the valid questions.

So looking forward and hearing you soon again. Thank you.