Matthew Taylor - Chief Executive Officer Katelijn Bohez - Investor Relations

Wim Hoste - KBC Securities Stijn Demeester - ING Financial Markets Emmanuel Carlier - Kempen & Co Stefaan Genoe - Degroof Petercam

Good afternoon. Wim Hoste, KBC Securities.

Couple of questions on BBRG if I can. So, the price mix was negative in the first half whereas certainly raw material prices were up there as well.

Can you maybe shed a little bit of light what your business strategy will be on product mix and pricing? And then, a second question on BBRG is about the financing.

It seems that you're renegotiating the financing structure. Can you maybe talk what kind of direction that will go?

Will Bekaert inject additional equity? Will there be a kind of cancellation of the current shareholder loans and what will that do to the financing cost of BBRG?

Okay, let me start, first of all, on the pricing issue. You're absolutely right.

That negative 5% is very bad news on the business. And, in fact, as we've gone through – because I spent most of my time in BBRG business for the last four months, and as we've gone through the diagnostics in building up then the transformation plan that we want, agree with the board at the end of August, we have seen there's a lot of issues, but there's two very big drivers of the issues.

And they both do relate in the end to pricing and costs. On the pricing side, it's very clear that there has not been any discipline in terms of the pass-through of wire rod costs.

And I think this is driven by slightly an environment in which volumes are declining and you look at pricing and BBRG has been a premium pricer in the marketplace. And as they looked at the premium pricing, they said, just a minute, we're too far above the competition, so we need to move down.

Unfortunately, as the leader in the marketplace, the competition look at you – and they look at you and say, okay, I need to have a price discount versus BBRG of 10%, 20%, whatever it is. And so, if we bring our prices down to get closer to them, they open the gap up again.

So, we actually – I think we're probably, without meaning to be, guilty of pushing down the pricing in the marketplace. And it means that not only did we not recover wire rod price, but actually we pushed the prices further down than that.

This is on the ropes business particularly. On the other side of that is, as volumes came down, three years ago, as volumes started to go down, there was a mindset that was about filling the factory as much as possible.

So, we went after volume, to drive that volume when the sectors in which we have our strengths are at a relatively low level. We, obviously, looked into other sectors.

And to get into other sectors where we don't necessarily have the expertise or the history, we actually go in with low prices. So, we also push prices down in that sense, but it also then had another follow-on complexity, which was that we added a huge amount of complexity to the business because we went into product sectors and categories where we weren't that experienced and we didn't have products off the shelf.

So, we had to develop and bring products into the business. Those products were not the ones where we had the high level of capability in the organization to make.

And at the same time, they were ones which were relatively small volumes. That drove our manufacturing variances up significantly.

So, scrap rates went up, rework rates went up, it meant overtime went up. So, added a lot of costs.

And so, we were doing business at a relatively low margin to fill the factory, then actually having a huge amount of cost for the factory, which meant that those products were loss-making. So, we actually have, within the business, a huge tail of loss-making products within our lineup.

So, we're actually looking at a huge restructuring of the product lineup to reduce complexity, improve manufacturing efficiencies and improve pricing. We've taken onboard a very aggressive pricing stance in the marketplace to push our prices back up, to push through wire rod increases.

It takes a little bit more time in BBRG than you'll see in other businesses because, in particular, in Europe, a lot of the business is project business. Those project business are signed and delivered over a fairly long period of time.

So, it will take a little bit of time, but we are very confident that if we get an agreement on the plants that we want to take forward on BBRG that we can do a fairly significant and quick improvement in the basic business through pricing and cost actions. I don't think you'll see an improvement in the second half of the year on BBRG because, whilst I think the underlying performance will improve because of the actions we're taking, we also have, as a result of getting into different businesses and so on, we've got quite a lot of obsolete and unsalable stock.

And at some stage, we will have to take write-offs if we're not able to sell those products. And I think that the improvements that we see in profitability, whilst they'll flow through over time in the second half of this year, will be used to offset the likely write-offs.

So, I think you'll see a sort of carryover performance for BBRG, maybe a little bit up on the first half, but actually with the building platforms to make it significantly better in 2019.

And on the financing side?

On the financing side, that's something we're still working our way through. We'll, as part of the review of the overall business plan with the board, we'll take a look at that.

But bear in mind that financing is all contained within the €1.339 billion debt that I've talked about. So, on a consolidated level, it doesn't fundamentally change.

There are options open to us that we want to handle it. We will study each of those options and make the appropriate decision for the business.

It's not a change in total numbers. It's how those numbers are distributed and what we choose to do in terms of where we put it.

Sorry, I have a follow-up on that. Can you change the interest costs?

Obviously, one of the options would be collapse of debt into the Bekaert debt in total. So, you'd collapse the ringfence.

The Bekaert debt interest level is at a lower level than the BBRG one, so you could do that. But there are other implications.

So, it's not a straightforward decision on interest cost.

Thank you.

We'll start and keep going through.

Good afternoon. It's Stijn Demeester, ING.

A number of questions on cash flow. You're cutting your CapEx by some €40 million this year.

Which investments are you then not doing this year? And are you planning to do them in the next couple of years or are they cancelled?

And then, 2019 CapEx, can we assume the same figure in terms of magnitude? And then thirdly, if you're aiming for an end-of-year debt to EBITDA of 2.5, that sort of implies a quite significant reduction in working capital in the second half, maybe over €100 million.

Are you comfortable that you can achieve this, given the working capital at first half?

Okay. Let me talk on which projects.

We're looking at the projects, which at the end of the day are within the scope of the businesses where we've seen the least improvement or most deterioration in our profitability. And at the moment, we are postponing those, not necessarily canceling them for good.

We're protecting the CapEx, which is focused on our primary profit drivers. So, right now, the sawing wire investments are going through, the RR investments are going through, the advance cords investments are going through.

So, those are the three main categories which we're retaining. On some of the wire businesses, we're postponing some of those investments out.

We're also retaining the investment on safety improvements in the business and on the investments required to deliver the BMS cost improvements in the business. So, we're very focused on what needs to be there.

And, right now, yes, I would guide to say that we will keep CapEx at a level that is more in line with our depreciations. So, around about the €200 million level or below the depreciation level until we've shown that actually the cash generation gets back on track to where we want to be.

So, we will do quite a lot of deferment and prioritization of different actions in the business. On the multiple, yes, it does imply a very significant reduction in working capital.

I'm confident of the level of reduction because if you look every year from our half year point to our year-end point, there is always a fairly significant reduction in our working capital, in particular, as we look at accounts receivables. But we have taken on a task very clearly inside the organization to reduce inventories and to reduce accounts receivables.

Yeah.

Emmanuel Carlier. Hello?

Yeah.

Okay. Couple of questions from my side.

First of all, on sawing wire, so you mentioned that that was loss-making in the first half of the year.

Yes.

Could you just quantify it a little bit? And especially, the delta you would expect into the second half of the year?

I'm not going to expect a huge delta because it will still be loss-making in July, August, probably breakeven in September and then profitable in the fourth quarter. So, for the full year, I would not expect a vast difference to where it is at this point in the year.

The losses are not huge because it's been building up progressively through the year, building up, declining progressively through the year. But the losses in sort of May, June period have been quite significant and done away with the profitability that we had in the earlier part of the year.

That's partly due to ramp-up costs as we bring people into the new lines of as we bring the equipment in and so on. But, overall, we're confident that as we turn that around, it will flow through into a significant step up for next year.

The positive don sawing wire. We don't report it in individual blocks, but I think you could expect it to be a turnaround of around about €20 million from one year to the next.

Another question on the restructuring efforts that you have announced. So, maybe also there, a little bit more disclosure on the financial impact of that because I think BBRG, you have given already a little bit of guidance, but if you have to negotiate with the banks in September, I think the plan is more or less ready.

Same for the plant in Italy. I guess, you should have a quite –

The Italian numbers, you'll see in the presentation, they're all there. So, they're already contained in the presentation for the first half.

On BBRG, don't know yet. We still haven't got the plan approved.

There will be some restructuring costs within it. But a lot of the program – a lot of the improvement that we're after is not restructuring per se.

The improvements are actually complexity reduction and efficiencies in terms of manufacturing capability. That said, there will be some restructuring in BBRG.

Exactly how much and where, I don't know yet. And we'll get to that plan.

We have a very clear view of where we want to get to with BBRG over a three-year period. And what we have done is develop a plan which we've provided to the board, but we meet with them at the end of August to review that plan and agree we go ahead.

Bits of it, we're already implementing. Some of the pricing stuff, which we're asking about at the beginning here, that we're already working through there.

They're no-brainers in terms of things that we have to do, but there's actually quite a lot of scope to the totality of what we want to do and which then leads through into what is our cash generation, what is cash usage, how does that affect our ability to bring down our debt and so on, which the board will review and that will also help us then decide on where we go with the financing structure. In the rest of the business, other than Figline, we haven't declared any specific restructuring.

We will look at every operation and decide whether we need to do restructuring or whether we do – are able to do a turnaround of the business. That's why I gave the example of Qingdao.

You could've said six months ago, should we be doing a closure on Qingdao and therefore bring in restructuring costs. Our view was, no, if we could fix the water-air patterning process there, we actually had a unique differentiator which, over time, in China, will provide us with a very strong position.

China is becoming much more environmentally focused and the advantage of not having a lead-based product, a lead lined product in China will be quite significant. So, we're comfortable now that we've got the water-air patterning process, working as it should be, and that's allowing us to move away from being loss-making into the more profitable position.

Can you put your microphone on, so they can hear you online?

So, on the business in US, this has been quite weak for a couple of years, I would say, and I think, in the past, you mentioned that you have been looking into ways to make the business stronger via getting, for example, more vertically integrated. The trade war in the US and the issues you're having today, is that something that could accelerate strategic move there?

It's challenging because some of the ways that we might do it are affected by those very changes in tariffs and trade policies, where does NAFTA go to, all those things come into play. I wouldn't agree with you that our profitability has been poor in the US.

It's actually doubled over the last two years from 2015 to 2016, 2017. We had a significant improvement in our US profitability, but that has come to a stop in the first half of this year and we've gone backwards, primarily because of these increases in material cost.

So, yes, we continue to look at our opportunities, but the reality is anybody we may want to talk to about some of those things has the same concerns as we do over not really knowing exactly where are we likely to come out in terms of the trade issues. And so, there's a little bit of, I think, introspection that has to go on whilst we work through that.

But, yes, we are still quite convinced that there always to achieve more structural and fundamental improvement to our business in North America than just by operational improvement, which is what we've done over the last two years.

Thank you.

I think there was another – Stijn, did you have another question. I'll come back.

The €20 million delta in [indiscernible] EBIT?

EBIT, yeah. Yeah.

And maybe a follow-up [indiscernible], as you say, you expect sequential improvement in the second half in terms of profitability. Do you mean that in an absolute way or in margin?

Both. Unless sales go up dramatically.

Well, then it should still flow through anyway. No, it's a – a lot of it is – that's why I've tried to give you some very specific examples.

Not with the numbers there, but I have very specific examples of things like Qingdao. Figline has been loss-making throughout the first half of the year.

It will no longer be loss-making. So, that's just a straightforward cost improvement to the business.

Where I talked about in terms of India, that's a straightforward profit improvement to the business even on the same sales levels. So, what I'm trying to show you is that, yes, there are very specific areas of improvement that we already know – we are already seeing and we already know that they will contribute to the business as we go forward.

I may give you – and this is a slightly more complex one, but it maybe shows you some of the – how the bits of the puzzle fit together sometimes. But I look at Indonesia for a while, Indonesia which is a very profitable plant for us in terms of our RR business, but actually on a year-on-year comparison, it's deteriorated quite significantly.

Some of that is down to pricing pressures like everywhere on our RR business, but actually the majority of it is down to mix and it's down to mix because a lot of the growth in Southeast Asia is coming from Chinese players, Chinese plants in Southeast Asia. Those customers assume the same prices – they're going to get the same prices as they get in China.

Plus, maybe some freight allowance or whatever. And our cost base in Indonesia is just not the same given wire rod and everything else as it is in China.

We haven't had the capacity in China to satisfy those. So, we've been supplying those people out of Indonesia and making a lot less money on those products.

As our Indian operation now begins to use it's ISC because we've got approvals with the customers, we get a big step up in profitability in India. It frees up capacity in China.

China can then use that capacity to satisfy the needs of the Chinese customers in Southeast Asia from its cost base, which is advantageous, and the Indonesian operation concentrates on the local customers and on exports, for example, into the US market. So, it's a bit of a complicated jigsaw, but it allows us.

That gives a significant profit improvement in India and a significant profit improvement in Indonesia. Sorry, Stefaan.

No problem. Stefaan Genoe, Degroof Petercam.

I've got three additional questions please. First, at the end of your presentation, you mentioned, I think, July was the message to move back to the long-term targets.

So, perhaps an indication first on the long-term target? Secondly, we've had years and quarters of strong performance in Europe.

And suddenly, this quarter, margin comes down quite a lot. The Italian factory was already there last year.

Can you explain a bit more on why this sudden drop? Give some more color there and what particularly happened.

I had a third question. Yes, we've not talked a lot about the tire cord business in China so far.

You mentioned the improvement in sawing wire expected for next year. What improvement should we expect for tire cords in China?

Or do you think business in this – especially in the second quarter has recuperated quite a lot already on tire cord in China? Thank you.

Yeah, okay. On the long-term targets, no different to what we've talked about before.

We still believe we can get to 10%. We're obviously starting at a very different point now.

So, I think it's going to take longer and we can't assume it's going to be done with all the same activities as we had planned before. So, we've got to think harder about some other areas.

In particular, about business mix and portfolio, of where we want to be present. Also, things like manufacturing footprint over time, how do we make that more efficient.

So, other factors will come into the equation to enable us to get there. And they probably will take a little bit longer, but that still remains very much our goal.

In terms of the performance in the EU, quite a big chunk of it is down because a big chunk of the EU business is RR. And a lot of it is good long-term contracts on RR with long-term supply agreements.

Most of those supply agreements tend to have price down clauses in them every year or every couple of years. There was quite a significant one with the customers from the Figline business, and that actually aggravated the situation and the losses in Figline quite significantly.

Allied to wire rod increases. So, you've got contractual price – wire rod increases.

And, unfortunately, not overly efficient operation. So, that's why Figline got significantly worse as we came into this year.

That same issue happened to us essentially in Slatina, Sladko and Lipetsk. We were expanding capacity in all three of those operations.

That expansion has not gone as smoothly for different reasons in each one. So, in Slatina, it's a brand-new line with some new technology and we did face technical issues on that.

So, we put quite a lot of resource into resolving the technical issues, so that we can ramp up the capacity and use it fully. That now is mainly behind us.

So, I think we're going to be closer to being able to utilize the capacity properly. Sladko is along the term issue, which we're resolving in different ways.

It's actually a people turnover issue. So, there is a limited availability of people in Slovakia.

There's a lot of new investment going in. And so, we tend to have a quite high staff turnover rate in in Slovakia, driven by issues like working environment.

So, it's probably a lot nicer to work in a car factory than it is in a wire factory, generally speaking, from a noise point of view and dust and heat and so on. So, we're doing a lot of work on what's the environment our people work in.

So, we're trying to do a lot to improve the environment, but we're also bringing in people from outside – outsiders to back here to try and ease the pressure on local employment. And that seems to be gaining traction, but we've still got to see that we can retain them and solve that problem.

Lipetsk is just a case of really time delay in getting the ISC line up and running to the level that we wanted to. That one, I'm pretty confident is, it will move fairly rapidly.

So, those are the really big drivers. I think, actually, in Europe – and so, what that's done is it means that we have not made the cost improvements that we would've expected to in Europe in the first half of the year.

And by not making those cost improvements, we haven't offset the price decreases, which has, therefore, all flown through into the margin. I expect a lot of that to be resolved as we go through the second half of the year and into 2019.

The more encouraging side to me if I look at where we are on wire rod pricing pushed through on some of our key businesses, so whereas on tire cord generally, we are doing well on recovering around the world. We're still not back at the sort of price minus material gap that we had at the beginning of last year.

But, actually, on certain products like ISW in Europe, there we are. And so, we've priced and recovered the gap.

And it is costing us a bit in volume, which is why you see some of the volume decrease. But at the end of the day, I think we've done a very good job on getting to that position.

We still have to hold that and hold the balance. And I think that we'll see more and more of that flow-through as we go through the year as well.

On tire cord China, the business is very strong. And, yes, we've seen some cost issues through certainly the first quarter.

Volumes have been very good and the business has been performing fairly well. I think we've got an opportunity now to expand on a sales into the market basis.

Our mix of ST/UT product continues to improve. So, I think the fundamentals are actually quite strong.

There has been pricing pressure. And I said on tire cord, we're not back up to where we were at the beginning of last year.

China still has a way to go on that on a year-on-year comparison. So, there we are recovering, I think, reasonably well.

But we've still got quite a long way to go to improve our margins by driving the price minus material gap wider and wider to reach where it was in the first half of last year. But the market remains strong and our position in it remains strong.

Can I ask you about the sawing wire business, the €20 million EBIT delta you're forecasting. Obviously, you start from a loss, I guess, this year into profit.

But on what kind of topline assumption and market share is that based and how confident are you? What is the order book at the moment?

Off the top of my head, I don't know the topline assumption. I can't remember that, but we can find it for you.

Market share, we're not assuming an excessively aggressive market share. So, if I look at where we were on loose abrasive, at one stage, we were at the sort of 60%, 70% level.

It fell down to about 30%, 35%. When the market moved to structured loose abrasive, our share went back up to over 50%, and that was pretty good.

But in terms of diamond wire, we're assuming somewhere more in the 10% to 20% range. Varies by customer.

We're not assuming that we take everybody else's business away from them. We recognize that we're late into the market, but we also recognize we have very strong relationships with the customers and we believe we have some very differentiating technology and performance capability of the product that will give us at least a strong position with certain customers.

And how big is the market now for [indiscernible]?

As I said, I don't know the topline specifically right now. I'll have to get the number for you.

Have we got questions online? If there are questions online, please let us know and we'll take those questions as well.

Yes?

Maybe a question on the wire rod prices. So, it's still going up, but less versus previous months.

But in your guidance, how do you take that into account because this is –

Ask me one on sport. How do I look at guidance on wire rod pricing?

This is a really difficult one. Right now, right now, today, wire rod prices are reasonably stable in China, reasonably stable in China.

They're also reasonably stable in Europe. But if Europe bring in safeguard actions to counter duties in the US, what will happen to wire rod prices there?

In the US, prices are – well, I've already told you what's going to happen on prices in the US. In Latin America, they follow a little bit the trend of China.

And in Indonesia, they also follow a little bit the trend of China. In India, they're relatively stable.

If you ask me in a week's time, in a week's time, I could give you a completely different answer. The volatility is quite strong.

But if I look on average trends, it has stabilized somewhat with a level of underlying increase, but much more stable.

In your guidance where you guide for growth year-over-year in the second half, I guess you have taken into account a quite cautious wire rod price assumption because in the end you don't know.

I don't know. So, we assume limited growth in – or increase in wire rod prices.

And those would end up then flowing through into the topline. I think, as I said before, our ability to pass-through those increases with the exception of North America is now much more robust than it was.

So, I wouldn't expect those to deteriorate our absolute margin. It would deteriorate our margin as a percentage of sales because of the mathematics, but it would not deteriorate our absolute margin.

But it would be an improvement from where we've been in the first half of the year. So, I would not assume huge price increases quite right now in terms of wire rod outside of North America.

I would assume significant increases in North America.

Just a clarification question on the guidance. You're guiding for an improvement in second half EBIT about over the second half.

Do you mean that sequentially or is that the year-on-year? So, are you comparing to the €111 million that you did –

I'm comparing to the €111 million. Yeah.

Thank you.

[indiscernible], Kepler Cheuvreux. One small [indiscernible] question from my side.

You're currently reviewing financing options as a way to deleverage a bit the balance sheet. Would a review of the dividend determination also be an option?

That would be a decision and a discussion for the board based on our performance in the year and our cash generation in the year. I can't really make a comment on that.

Apologies. Another follow-up question popping in my head.

Can you comment about taxes. Your effective tax rate was pretty high in the first half, around 40%, if my memory is right.

So, there have been some decreases in statutory tax rate in Belgium and US. There have been some countermeasures to kind of rebalance it a little bit.

What does that mean for your tax rate?

I'm going to tell you. I'm really not the expert to handle this.

I don't know, Danny [ph], whether you're in a position to give a bit more insight into that than I am. Don't know the numbers off the top of my head, I'm afraid.

The tax rate is the combination of a number of factors. [indiscernible] is not giving you a good idea of the longer-term view, but we're still confident that we're in the range of the longer-term on the 27, 28% in taxes.

Sorry, you've caught me on the one where I really needed Beatriz next to me. So, sorry about that.

Any other questions in the room? Yeah?

Maybe one more on the working capital. Just to be sure, the working capital improvement that you're guiding for, does that include any – I would say, factoring or things like that, just to –

Not beyond any elements that we already do. No.

I think we're actually in quite a good place right now in terms of where we are on accounts payables, with our supplier base. I think we're in quite good shape on that.

I do believe we've allowed our inventories in particular to get out of control of it and we have to bring inventories down quite significantly. And every year we see increase in accounts receivables and we then see a decrease in that during the second half of the year.

We will again push very hard to bring that number down. So, I don't think a lot of what you see between now and the end of the year will be driven by accounts payable.

I think you'll see more – I would hope that we do see still some improvement there, but I would hope you see much more in terms of reduction in inventories and reduction in accounts receivables. Yeah?

Apologize, but I have kind of missed it in the previous conversation on the Brazilian route, which is no longer valid in the second half. So, what will [indiscernible] will be your option in the second half –

Sorry, in the Brazilian –

So, the Brazilian imports –

Right. So, today, we import from Belgo for our tire cord needs in North America.

Because there is a volume cap on Brazilian imports, by the end of August, we will probably run out of – or, no, actually, by the beginning of August that now will run out of supply from Brazil. So, we've had to go and look at alternative sources for our tire cord needs.

Those alternative sources to us tend to be UK, Japan, Spain, all of which have not just had the tariff, the 232 clause tariffs imposed on them. But they also had antidumping tariffs put on them earlier in the year as well.

So, it's a combination of tariffs that is coming through there, together with underlying wire rod increases as well. So, you've got three elements coming together in one price point.

And so, the relative comparison to where we are today with Belgo will be something like 50%. Exactly, will vary on the mix of what we bring from where and so on and who's the right availability for us.

But it's going to be right about 50%.

And you said we have an initial agreement with our customers to pass this through, but you don't think this will be valid on the –

No, I think the agreement will be valid. What will it do to the demand?

So, they've got to take a look at their business and they've got to make a decision. Can they accept that on an ongoing basis?

Can they pass that on to their customers? What are the alternatives that they have?

Maybe it's some of our competition. We don't have a lot of tire cord making competition in North America, but if they say we won't pass it all on to you, where do they stand on that.

And if they have alternatives of imported finished goods, where the tariffs don't play to the same degree, they may find that a better route. That sort of damages the made in America philosophy that they're trying to drive with these tariff changes.

So, I think it depends a bit on the reaction they get from their customers and on the reaction that they get from other players in the marketplace as well. So, whilst they except in principle, and we've had a lot of negotiation and discussion, we've also committed to them.

We're going to try and bring the cost down more aggressively in our operations to help offset some of that increase to them. We don't yet know exactly what their behavior will be as a result of it.

I remember that you had some sort of pact with Kiswire and another importer.

We have no pacts with anyone.

Sort of concerted legal action.

Okay. Yeah, combined lobbying.

Yeah.

Has that led to something or –?

We don't have. We haven't had a response yet on our request for exemptions.

What we do see is not a high level of approval in exemptions in the government responses. So, we're not building our hopes on the basis of getting exemptions for tire cord grade wire rod.

We've done lobbying. We've submitted our exemption requests.

We've worked with the rest of the industry in trying to put that together. We haven't had a response yet, unless something has come through that I haven't heard of, Katelijn?

No.

[indiscernible].

Yeah. I thought it was even more than that.

I was reading in the FT earlier this week. So, there's a lot going through at the moment.

And it also – I think there was a very interesting piece actually earlier this week in the FT on it and it was interesting to read. Completely different responses to products which are more or less exactly the same, maybe slightly different diameter.

That was American wire sales company that had two slightly different diameter products. Otherwise, the wire grade, everything was exactly the same.

Two slightly different. Two slightly different diameters.

One was approved. One was rejected.

No information as to why or anything else. So, we don't – that's why I say, I wouldn't bank on it.

We will fight it and we'll keep pushing it and we're trying to use lobbying. We're using sources that we can here.

We've talked to the highest level in the US on it. But we haven't had a response yet.

Yeah. Sorry, Stefaan.

Sorry, perhaps one small follow-up on the Figline plant with – the ex-Pirelli plant. I can assume that at the point in time of the agreement, future of day contracts, volumes, pricing had been agreed upon at that point in time.

To what extent was it – could you anticipate the changes that are taking place now?

We could anticipate some of them, but, actually, I don't know if you remember last year, we talked about this a little bit. We did accelerate some of the reductions in the Pirelli contract, the long-term Pirelli supply agreement to enable us to extend the duration of the supply agreement.

So, we traded some short-term pricing for longer time volume security of the deal. So, it pulled the issue forward a bit for us.

But we haven't – if I look at the other big transplant plant that we took on, which was the Bridgestone one in Sardinia, the Bridgestone one in Sardinia, we've gone from being – actually, that was actually a loss-making plant when we took it over and it's now a very profitable plant for us in Europe. So, we know we can make the changes.

Despite everything that we've done in Italy, we have not been able to drive that operational improvement in the same way as we were able to in Sardinia. And so, therefore, we've moved into quite significant losses on a monthly basis.

Any other questions? Any questions from the online participants?

No? No questions.

Okay. If there's no other questions, I thank you again for joining us today.

hopefully, you've got a better flavor for what's affecting us and what we're trying to do about it. And I really appreciate your time and the opportunity to talk about it with you.

Thank you very much indeed.