Donat von Muller - Head of IR Juerg Oleas - Chairman of the Executive Board, CEO Niels Erik Olsen - Member of the Executive Board Steffen Bersch - Member of the Executive Board Helmut Schmale - CFO

Andre Finke - HSBC Jack O'Brien - Goldman Sachs Sven Weier - UBS Sebastian Kuenne - Berenberg Lars Brorson - Barclays Klas Bergelind - Citi Denise Molina - Morningstar Sebastian Ubert - SocGen

Yes, also from our side welcome to GEA Group's third quarter conference call 2016. It's usual our CFO, Helmut Schmale will shortly present the quarterly numbers.

But given that this call presents the first opportunity for you to understand and discuss the underlying factors of our recently revised guidance for 2016. We will later also accept questions from the buyer side in the Q&A.

In fact, the entire executive board of GEA is present here today which may be of interest and Niels Erik Olsen, Head of the Business Area Solutions; and Stefan [ph], Head of the Business Area Equipment. We have set asides up to 90 minutes for this Q&A.

On a personal note, briefly accept my apologies as I could not return every call and email in the past couple of days but also for the IR team it was rather a busy week. I would now like to hand over to our CEO, Juerg Oleas, on introduction.

Thank you very much, Donat. Dear audience, I would like to welcome you on behalf of the executive board as Donat just said.

It's [indiscernible] whether it was me or you will have about it experience of GEA members. We are pleased to have the opportunity now today to explain invest the development during the last couple of days.

On behalf of the executive board, I would like to express my deep regret that we had to issue an unexpected problem and unfortunately, cannot deliver on our guidance which we issued for 2016. We also realize that you would have preferred of course to listen and to talk to the executive board immediately after that profit warning.

But I also do hope that you have some understanding that we have taken the time during the last couple of case to get prepared to provide today more details beyond our communication and talk and to be able to answer your questions. I would like now to hand over as usual to my colleague Helmut which will take us through the numbers of Q3.

Many thanks Juerg, welcome from my side. We can then start the presentation.

The third slide, the key figures slide just summarizes the main messages for the third quarter. We will address all topics during the upcoming presentation.

Let me add one element here you will find in the detailed material that the EPS came down for the quarter from $0.86 to $0.21. That's includes -- this variance includes an elements from discontinued operations where we settled a legacy case in 2015.

This continued operations contributed about $0.50 to the EPS in the year 2015. Let's continue then with the overview of the quarter three.

The order intake development is a mixed bag, pressed the volume for our business equipment is up, the value for the business area solutions was soft and below expectations, in particular for the month of September. The equipment, the weakeness in the merchant feeding business is ongoing, whereas other product groups like separation of food processing grow strongly.

If all the double digit decline in NBF, the order intake for the first quarter would have been here up more than 8%. Isn't our solution be order intake development in BAS reflects above all delays is large projects for the dairy processing industry.

For some projects which we -- which we're foreseeing to materialize within the month of September, we did not receive the final approval from all customers. This mainly explains the lack of large orders in the quarter.

Overall sales are organically down by 1.8% based on the development in the business solution. Sales for BAS were weaker than expected in quarter three.

The September volume pushes us behind prior year. Some projects were slower or ramping back or pushed back in execution by clients.

Against this the sales volume for our business area equipment was going plus 1.4%, and this despite the fact that MDF declined by some 8% organically in the quarter. Operating EBITDA in quarter fee for BAS was impacted by cost overruns in a few major projects which drove down the profitability of the business coupled with adverse operating leverage from 4.3% organic sales decline.

Business area equipment has a slightly one-year decline despite sales growth due to adverse operating leverage effects from 8% organic sales decline in dairy farming. The next slide displace the development of all portability since quarter three 2011 in LTM sense.

We improved much here forever although we came down now in quarter three, we are still training at an operating EBITDA margin level of 13%. The order intake in September was surprisingly soft.

On that background, Q3 only generated large orders in the amount of €36 million. This development was impacted above all by the dairy processing industry.

Moreover, we observed a general slowdown in customer decision making processes. A €754 million of a small order volume was slightly down year-on-year due to the weakness in dairy farming and small orders in business solutions.

However, mine perfect that year-to-date the order intake is still up 3% organically. This is a new slide which we edit to deliver more granularity in a single country perspective not corrected for currency fluctuations.

In an ATM year-on-year comparison, pharma, chemical, beverage and food volumes grew. However, this was mainly offset by the volume reduction in dairy farming and dairy processing.

On the right hand side we displayed the state's performance of our top countries. What you may find interesting is the fact that in a country perspective, the sales growth delivered a very colorful picture.

Some countries like Russia, which by the way at first glance seems to be counterintuitive are growing strong over important markets -- strong other important markets like China in a downbeat sentiment. While the emerging markets have declined by 4% year-on-year LTM quarter two in 2016, the region now turned into a growth contributor.

We signed on this page the user drilldown in quarter-on-quarter, year-on-year and LTM year-on-year development of our main customer industries. The backlog rolls year-on-year to €2.3 billion and the book-to-bill ratio is about €1.04 billion on the rolling last 12-month basis.

The operational return on capital employed remains in our target corridor between 20% and 25%. However, if we see what's going up and the recently acquired companies kicking in, in the capital employed.

The capital employed kicked up to €2.234 billion. The working capital was based on the goal on the receivable side.

There was a lack of focus during the transition into the new organization and an element of the transfer into the shed service center might be in here as well. Due to the fact that we are now at 13.5%, we think it is rather unlikely to bring it to 13% or below for the full year.

That's why we have adjusted our working capital and vision accordingly to 13% to 14% of sales. SX [ph], the OM slide depicts the unadjusted cash flow driver margin which was impacted by the various charges unfit for 2020, particularly in 2015.

But it was rebounding until quarter two 2016. It came down quarter-on-quarter because of the lower LTM EBITDA, higher LTM CapEx and higher LTM changes in working capital as compared to quarter two.

The operating cash flow driver, the blue line which is impacted by the same factors declined from 11.1% to 10.2%. We adjusted against that backdrop of our forecast operating against the backdrop of our forecast operating EBITDA.

The guidance to around 10% for the fiscal year 2016. Net liquidity, before this continued operations and uses of funds such as dividend and acquisitions the net position improved by some €133 million year-over-year.

Adjusting this balance for one-off charges this cost comes to a cash generation of slightly over €270 million over the past four quarters. Services, the service volume again organically outgrew GEA's OEM sales making for a share of service of meanwhile 30% of crude revenues.

The service share of each service share of each business is displayed at the bottom of the business contrasting 2016 with prior year. The service business in VA solutions which has been structurally a lower share of revenue is now grown more dynamically.

The growth in GEA [ph]is limited because of a substantial reduction in the service volume of the milking and dairy and common business this. This ends my part of the presentation and then I would Helmut for 2016 guidance.

The slide here is [indiscernible] which we issued and [Technical Difficulty] next slide which is an explanation of what has happened between or what we believe is going to happen 2016 or in the year 2016. If we start on the left side of course the results of EBITDA level of the 21 which we had last year and we do see that we initiatives for 2020 or capacity adjustment etcetera.

We got more or less we will get 60 million savings which were also within our plan. Then the next block which indicates roughly a minus 20 million comes the as commented already partially by Helmut of quite a substantial loss in sales when I compare to previous year which we believe will not be able anymore to be an improvement or recoverage in the last quarter and this pace we have will lead to a minus 20 million compared to previous years on EBITDA levels.

Then we have the next block which we titled a focus special projects of about 20 million and I would like to explain you here a little bit more in detail what we mean with a couple of special projects. We usually are managing in mainly basic areas of solutions portfolio of about 5000 projects of all kind of ranges can be below 1 million, can be above 50 million or 60 million.

Of course the vast majority of the so called smaller ones which I would rate as being around 1 million or 2 million. Every year so far we have seen unusual accumulation of events where because of first of a kind technology innovation or innovative things but especially complexity in the project we have sometimes some unforeseeable hick-ups and we always had factor in that because in our budgets as I just did it happens from time to time when you do innovations you have to risk one or the other same trial will fail.

However this year we saw unusual accumulations of such events happening from the past developments and innovations from the path, the technology issues are now identified and mitigated and currently for the next year we do not see an abnormal number of high risk projects. While we will obviously will continue to do innovation and here and there and we will go -- also get set backs but it is a normal event in our business, it just thing which is accumulation of 2 or 3 unusual events which let us to the conclusion that for the full year we have to increase the provision but we’re convinced that for those projects that this was the end and we do also believe from today's point of view that for the next year we will see such things but in the normal order of magnitude as we have already seen.

And I would like to come to the next block which has particular 25 million negative impact, I would like to explain it's title sales volume short fall in the coming out from the business area solution. Unfortunately we have started as Helmut also indicated in some of his comments we have started to see a slowdown in customer decision making processes.

This starts impacts in the meantime our order backlog conversion rate on the one side but also at the other side we see a similar challenge when it comes to customer CapEx decision making process. I will give you an example it could mean that the customer sent us a letter that we have been the lucky winner of a project that they are applying with his Board to issue the final purchase release and then usually in normal times that also comes within one or two weeks and in these times we do see it as quite often it happens those Board decisions are being postponed to our next Board meeting etcetera and that’s of course development which sort of impacts.

The next block on this chart is so called gross margin impact in the business area solution and of course this is quite heavy block and I would like to explain it in a little bit more detail. One component this [indiscernible] the one component of it are higher than expected on the ramp up cost which has to do with the establishment of single organization and to a certain extent work shadowing meet.

In the complex business solutions or at least in parts of it we see some performance [indiscernible] during the establishment of the new organization, for example change in the shifts of resource furthermore running the business which reduced track record and experience in the news actually that structure in the past, that’s called as an example that leads for more [indiscernible] longer duration as we originally planned. Not in all areas but in some areas.

An additional item is that we do see effect of precalculations within some areas where the markets are more competitive. We are taking counter actions to mitigate this impact and therefore we consider this as a temporary issue until the organization in the complex parts of this business area is fully settled.

From the next slide you will see the slide of our financial information, so called additional information and before we go to the Q&A let me make allow to make some additional statements. We have talked about some critical information but I also would like to remind you that we have applications and product groups that’s clear which are currently either growing at double digit rate or increased their profitability over the past three years by 100 to 200 basis points due to the -- for 2020 initiatives.

You can say that the necessary equipment if you would take out the MBS which is suffering a severe crisis when it comes to the fiscal 2020 saving both kind of improvements we have planned it delivering in totality very well on track so that makes us very happy and we do also seem a bit inside the solutions, a couple of application errors which are growing very strong and are more on track than some of the critical areas. Furthermore our recent acquisition which we did also in the business as solutions and I remember them are confirming according to plan or even slightly above that which was caused, which makes very happy and confident for the next acquisition.

We as a management team are fully convinced that our strategy is the right one to make even stronger companies and one organization [ph] is the right platform to build for our future. The implementation of our strategy and initiatives is a huge task.

We already see benefiting equipment business as I lined out and in parts of the solution business areas and we’re therefore convinced that we will harvest the full potential of this case. As presented at the Capital Markets Day there are several initiatives being launched to further strengthen our competitiveness.

We can reassure that our strategy and the entire global leadership team of GEA are deeply committed and are implementing measures to contract some of the negative impacts incurred in this period because we have passion for this company and all the stakeholders. Now I would like to hand over to the Q&A and my team and myself are more than happy to answer your questions.

First one relates to dairy processing and your comments on both the slower order intake but also the delay in execution of some projects do you think that this could be a sign of cooling and the whole dairy processing cycle and some of your customers could become sustainably more cautious on their reprocessing and what could that imply in terms of risk for your medium term organic growth rate given that you mentioned dairy processing as one of the three key growth areas at your Capital Markets Day. The second question relates to the project and cost overruns you mentioned, I just wondered whether that’s -- there was also some relation to the 2020 redundancies, is this your workforce maybe not big enough anymore to execute some of those projects and the second part related to this position.

Some of the other items you mentioned in your EBITDA bridge, why has that occurred or surprised that you caught in such short time during the Capital Markets Day. Has there been any issues with the internal reporting systems or has there been any internal business lines deliberately reporting late of some of these problems maybe you could comment them in here and lastly you’ve reiterated your 40% to 50% dividend payout for the running, have you thought of raising that temporarily to compensate for the weakness of the share price?

Thank you.

Maybe I will take it up, Helmut Schmale with regard to the dividend payments. I mean we will keep growing our guidance on the dividend payment as we face it to be 40% to 50% of all our profit and we don’t see any need to exchange that as a underlying ongoing guidance shortly.

So I would like to take the question about the cost overrun and regarding the workforce and whether this has something to do with reporting issues or not having enough resources. As I said it's accumulation of event.

I don’t think it's about reporting issuance that’s not the issue, but as I mentioned during my explanation on that slide with [indiscernible] from 2015 to 2016 it is a combination of several things and those combinations which has accrued when we did see the September numbers to an extent that we had to reaccess the whole situation and we felt that further potentials because in the and especially in the project business you always have that is where you committed it or take actions to counter act certain developed but our assessment was then that this counter measures will not be enough to counter those deteriorations which we did -- when we got the results of Q3 therefore we decided that we have to reassess our guidance. I would like to you then asked the dairy question and I would like to hand over to [indiscernible] to answer about the market.

So the slower position making dairy industry here is two fold, it has affected our current order backlog where we have seen delays on the customer side, on decision making affecting the execution of these and these are related to a number of projects and a few bigger ones where it has been entirely in the customers decision and control and this has to do with some in efficiencies on our customer side but also maybe a concern about their progressing of investments and whether they are holding on to some of the investments or forcing them and we have some specific examples where they have asked us to progress on the projects and for the cost commitments. So this is affecting our order backlog and that’s the primary FX effects on us right now.

The other effect is the decision making in CapEx expenditure in new CapEx expenditure like you’ve explained the Board decision seems to take longer in some of the customer size and this has been part of the reason of the order delay here from September into Q4 and we’re monitoring this closely going forward in the coming months and that will part of our budget '17 assessments by then.

I think you asked also about what is the impact on the long term growth, we are monitoring this very carefully, what Niels is right, this can be a thing which normalizes again but of course it can also go into another direction. We certainly will keep you updated on how we assess the situation whether it's global economic cool down or whether it's dairy processing specific thing but I can also say that we have also seen some other areas besides dairy that customer decision making process is not as fast as it used to be in other times.

Maybe just as a clarification, I mean your comps, as you can imply that you could hold any kind of internal fraudulent when it comes to recording some of these issues to the Board is that correct?

Yes. If you mean fraud in the book keeping or booking etcetera yes and let me say in general not only the book keeping.

The answer is just yes.

I just want to get to the bottom of the volume short fall you’ve seen in business area solutions. You’ve talked about a 25 million hit from '15 but actually if we take the midpoint of guidance in '16 it's more like a 70 million, hit, on revenues that are down 250 million, 300 million so what I would love to understand in a bit more detail is I mean that seems like quite profitability so whether the profitability of these projects was above group and secondly the, sort of feasibility of these delays actually turning to cancellations and whether you’ve the capacities to make these projects do?

Okay. Let me see if I heard your question correctly and if not you please repeat the question.

you’re referring to the short fall of the in the volume and the EBITDA impact in the business added solution. The leverage is not any special, of course you’ve to be aware that we have in the business area solution.

We have so called fixed applications and they have quite a different gross margin profile, I would not like to name here in this call the gross margins, but it is almost a factor two between one application and the other one. They also do have it hasn’t apparently having quite a different growth profile.

So it is not one leverage for the business areas solution. It depends very much about what is the current composition do we have 30% dairy, 20% food, 10% utilities or visa-versa, etcetera.

And if you then have a set back at one of this applications or in a couple of them that has an impact not a very big one but it has an impact on the so called leverage, so it's not an easy mathematical number to say I go backwards 100 million sales and therefore it's 20 million EBITDA.

But I guess secondly, have you seen a change in the competitive environment that might give you cause for concern perhaps with some other projects in the order backlog?

As I said when I explained my [indiscernible] on the slide number 19, we did observe there was in some areas tightening of competitiveness which then leads to sharper calculation or a sharper pencil but what I also can say we do not see any worsening currently from today's point of view, I’ve to say we see stabilization means that the calculations we’re doing to get the orders today in that area are at the same level as normal level, so we do not see it's going down. However please keep in mind the margin calculations and the profile of the margin is quite different between the different applications and therefore it depends what we have more in the food area or more in the dairy area or more in the utilities area, you name it has been an impact but all in all I can say that from today's point of view we don’t see that in the precost margins or in the some of necessary solutions we have a deterioration compared let's say to the beginning of the year.

Couple of questions please the first one is on the dairy processing delays, I mean one of the dislocations we found in the dairy market is in China instant formula, the regulation change that is quite impacting some of the players so higher revenue and order delays somehow related to that to infant formula milk powder and if that maybe a cause for that. The second question is I mean as you said this happened after the Capital Markets Day.

So do you feel that you now have fully your arms around the situation or are you still investigating on some of the issues, the third question is actually what you’ve just said that you’ve some inefficiencies also behind the 55 million in the EBITDA bridge and that once the organization is fully settled that the fiscal tier [ph] I mean does that mean that next year there are still some inefficiencies in the system given that 2020 is still going on and the last question please is that I think the CMD also managing that some of the new cost savings would be used but to stimulate your growth in some of the areas and regions is there any chance kind of accelerating those measures given the weakness in orders elsewhere. Thank you.

I would like to start with your second question, the first question I would then leave to Niels to talk about the regulation, so in [indiscernible] in China and the impact. Your second question was do you have now your arms around, the issue of 5 million, are you still investigated.

I will not be honest to say that we know every detail but I think we know it pretty well what are the issue. We have initiated and taken counter actions as I mentioned when I explained the issue in the big slide and therefore we view confident that we know what it is and that we know what we have to do.

However what is a bit more difficult to predict, when will it fully disappear and that’s -- I think your second question where you say when that is settled is it then gone fully for or will there be a carry over to 2017. From today's point of view I will believe, I think that there is a carry over into 2017 because we are now at the end of October so 2017 will start so it would be blind for me to say that it's final but I'm positive in thinking that we will get our arms around it, we will see a carry over into 2017 but we will fix it.

And then your other question was about whether we will accelerate some of the other new initiative, I don’t think so from today's point of view. We have there our project plans because we also have to be careful that we do not overload the organization with too many initiatives at the same time.

We have a careful plan for those initiatives presented in London. However now we have in addition to that other actions which are going on in order to accelerate in getting the arms around as you said it on the 55 million and I think we cannot accelerate the other initiatives because that would mean that we loathe [ph] the organization even more.

So we will do those according to plan, we present the number in addition we have additions to fix the issues of the 555 million. I would like to now handover to Chinese infant formulation to Niels.

Yes, I understood. The question has been specifically infant formula, of course their industry and the powder dairy industry is composed of different elements but specifically on the instant formula powders we have seen little bit of a mixed picture I think we see larger players well known players going ahead and also others passing their initiatives as new comers still investing into this industry.

Some of the delays that we have had here in the portfolio on the backlog projects is related to this. Infant formula is related to other dairy products.

The regulations in China specifically as you can read in the industry is a little bit difficult to predict at times. We have seen earlier in the year the strong drive at least when we talked to our clients that there is a strong drive to fill a demand, however some of the delays we have had just now is related to pausing [ph] in the same area and uncertainty about what these regulations means.

This is what we can think from talking to our clients.

Okay. Then maybe just a follow-up I just have in terms of what I went accelerating the measures I understand obviously not the cost saving measures but I think you gave example of Colombia, Mexico, those attractive markets, what I meant is more your initiative to win projects there so maybe not so much accelerating the cost savings but the projects to win those contracts in those countries.

Yes that I can't confirm that we of course will use the current organization, the so called one way organization as it was presented in London to get projects, not only projects of course to increase the volume in service business in part in equipment and in projects. So I’ve no issues that to confirm that we will push that further and to get the order intakes to also maybe mitigate some of the delayed issues which we have been explaining you.

So from today's point of view there is a chance that you see a little bit on the fact like we had last year Q3 [indiscernible] was weak but then you had surprisingly strong Q4 on that end that’s going by your pipeline at the moment.

The pipeline is there but I have to say and also Niels has explained that as an answer to the other question, we’re a bit insecure because it is accumulation just in the last couple of day where we actually should have caught an award and this has nothing to do with the one way organization and customers shifted from one week to the other. I will not say this is alarming thing, I'm just saying that we’re watching this very carefully and we do hope that this does not develop any further.

Hi, gentlemen. I have a few questions regarding the EBITDA purchase that you showed on Page 19.

First thought I was wondering the fiscal 2020 savings target was $80 million I think for this year, not $60 million; maybe you can clarify that. Then I have a question on the $55 million, I think that's the main issue today.

What I see is that it's related to business solutions; so you lose -- let's say of the $55 million, maybe $35 million in gross profit in business solutions; that's about 200 basis points that you basically cancel for the current year. Now when I look into the division and I see the order book of $1.6 billion, I of course wonder what content of gross margin do you have in these $1.6 billion and has that also been priced in a way that I will lose 200 basis points of gross margin next year.

That would be my second question. And then on the oneGEA cost, let's say of the €55 million, €20 million or so is the OneGEA cost.

I'm surprised that this cost comes all of a sudden into Q3 -- it seems to be a bit more like a balancing account from my perspective because of the CND you didn't mention any additional costs. Maybe can clarify that and that would be my first question so far.

Thank you.

Yes, Helmut Schmale, I'll take the first part. The €60 million is only additional amount of savings compared with the year 2015 but we had already about €20 million savings.

So you're right, with your observations the total is €80 million and €60 million is only the additional slides for 2016.

Yes, let me take the third question and then I think my colleague will answer the second question. The third question about whether that was core balancing thing or whether that was the surprise etcetera.

As I mentioned already, when we got in the numbers for September we were quite negatively surprised, specifically in this area which we are talking here about. And it is a combination of several things happening at the same time which tends to lead us to have to investigate what can we still make based on this negative surprise of September.

Can we still make the full-year promise or not. And that unfortunately -- and we regret that very much negative conclusion that we cannot hold anymore -- our EBITDA guidance and also the rest of the guidance part which we have changed.

Regarding the order backlog, gross margin and these things, I would like to hand over to Neil [ph].

Yes, referring to the 200 basis points; I think when we look at the backlog, that the backlog quality has actually regained itself to a normal level. It is our execution efficiency that is currently driving to a lower cost margin when we look for the remainder of the year and what we have achieved during the transition here.

So we don't see an issue remaining in the quality of the backlog, it is more temporary execution effect.

Wait. And you say it's an internal issue but if I remember correctly, the support 2020 restructuring was relating to administrative issues and functions, not so much in the production and distribution of the business.

So what is the reason for that sudden 200 basis point loss? And of course I would like to know from going forward what changes have you made in the pricing of tenders that ensures that you will recapture the 200 basis points going forward?

Roughly 60% is related to the gross margin here. And we have the execution inefficiencies.

Sorry, one second. Yes, so we have the 2020 savings that go above this.

So the execution inefficiencies that we have is causing post-delay and also the drop in margins currently which is of course an inefficiency -- maybe driving cost up in the way we have to do work chattering or just spending more hours in executing the same projects. And that is a temporary thing that we expect to go over.

So the contract baseline calculations as such has been restored to the normal gross margin level. So the portfolio going forward and going out of this year is said to be normal compared to what we have seen as early year or the starting year performance of the organization.

I hope that answers the question.

What we can maybe add here is that we added also to a risk rate of a newly calculated project and also more safety effect of in our calculation as a spontaneous reaction, so what to what we saw.

Yes, there are two other mentions that we did that you -- the security provisions now has been also increased to mitigate this situation. And also on our supply chain side, we have introduced what we call supply chain savings factors into our costings simply to capture some of the supply chain initiatives that we do but it's also providing more certainty and more sturdiness in the portfolio and the backlog going forward.

So we are more certain about the quality of this now going out of the year compared to going into the year to the restructuring.

That supply chain saving factor -- maybe we need to explain that that is meant to wipe out any potential savings on the procurement site and not to give it away in pricing to the client so that we have a kind of contingency in there. Yes, we also -- your question, just audit on an overhead reduction program and not production reduction program.

But keep in mind that is -- especially in the project basis, it's not only engineers involved, I would also hint that even people which now are in the shared service organization have a greater contribution to the execution of projects in several areas. And as you know we also reduce care and you can call that overhead etcetera but it is a combination of different factions that we did not only reduce the target size in the pure overhead, it -- it's mainly an overhead thing that we also reduce -- we have reduced span of controls and all the things.

We also reduced people in the operations.

Okay. I have one final question regarding dairy farming services.

The fact that you have this $20 charge or reduced EBITDA expectations resulting from varied service volumes seems to indicate that you lost high margin business. So overall you have only as improved a slight decline in sales but you lose a lot of margin because various services -- or dairy farming services might go down.

Can you give an indication of what happens there? Is it that farmers switch to other products that they have replacement products for your consumables or does the ratio not change much at the moment?

Thank you.

Yes, I'll take that question. Let me explain that in the following way; the assumption that this is only caused from the service area in dairy farming is not correct.

It assists the entire composition of the business consisting of a certain larger percentage in new equipment business and a lower percentage on the service side, so it is not only coming from the service side. For the service related part of the business, we have to say -- we also questioned what is happening there.

The business itself is composed of -- let's call it maintenance and parts business, and it's also composed of consumables like Linus [ph] or hygienic materials. All that business is proceeding what we see -- it's an extension of service intervals but we also do see due to the culling offers [ph] that service is not done at all.

So the general customer touch points further remain and the service business in its substance is stable, only certain parts are delayed.

But it's contradictory to the fact or to your claim that services is a stable business within dairy farming, and now it seems that it comes down at very similar rate to the equipment side. Would you confirm that?

Can you repeat that question because if the question is -- the service share is going up.

Okay, thank you very much.

Hi, and could you confirm that the other contracts -- you say you typically have 500 or so projects a year; any that drove a $500 million -- have they all been with you for technology or whatever the problems are -- so you're confident that anything over $10 million in the backlog is also problem free?

Yes, Niel Olstein [ph] speaking here. We are running roughly 5,000 projects in parallel here and Juerg explained about handful of that projects that we had here.

The governance around approval of projects is relatively rigid. We have a structure for approval levels by applications under managers subject to size and complexity of the projects, and also may lead the global leadership team and the executive board reviewing projects if they have a larger size and larger complexity or technical risk.

So we feel we have a pretty good governance going forward and impression of all of these projects; each of the six applications send to our managers and their management teams are also reviewing these on a monthly basis and tracking the risk developments on such projects and in order to mitigate these early if something is occurring of technical -- for execution complexity or challenges there. In terms of innovations, we -- that's all -- that's embedded in the technical risk review; that is a review of course in the development phases in our development departments but also on projects.

If we are introducing something on a project that has a new technology elements; and as Juerg mentioned we do not have anything in the pipeline that goes to that extent that we have seen on this handful of projects with particular new technologies that we have now implemented and also mitigated the effects of these. So the answer is, we are confident about the governance and also that the portfolio going forward here now is a more normalized portfolio.

Thank you. And in terms of the delays, if you had any cancellations -- and also in relation to the delays, could you give us an idea of the average delivery time you expect today, fuel the backlog compared with what it was at the beginning of the year.

The execution or delivery time for 5,000 project portfolio, that is actually a weighted average of 24 months -- 21 months sorry, of the whole portfolio. There you see of course projects that are smaller than €1 million maybe being executed, let's say in nine or twelve months where some of the very large projects may run for three or even four years sometimes or two to three years.

But the weighted average is roughly 21 months.

And is that longer or shorter than at the beginning of the year?

We are not able to measure; I mean we have -- we haven't -- let's say a normalized expectation for certain sizes of projects that we estimate in the portfolio. And when the managers than operate the schedules and the cost to complete everything even taken offset in this normal execution time, it's difficult to measure how this varies on the whole portfolio from the customer delays side.

And I would say we have detected these delays specifically in the last couple of quarters here and the recent events -- but they are to some very particular projects that has cost a more significant losses. So it's hard to measure up against the whole portfolio and the average of that.

And in terms of 65 million of cost burden, you say it will continue on into 2017, will it be eliminated by 2018?

That's the $1 million question. From today's point of view, I feel that we will be able to sort those issues within 2017 but I would have to say you can never give a guarantee for that but from our past experience and the fantastic people we have; I'm convinced that we will solve that part of it within this year and then some part will carry over into 2017.

And is there going to be an additional cost -- I've run above your current restructuring project to eliminate the 55 million.

From what we see currently from today's point of view.

Okay.

But I understood your question that you mean -- whether we have to lay-off more people or something like that's…

Not so much laying off people but I mean usually to generate cost savings, there is an upfront cost. You've got a cost cutting program underway now so is the cost of delivering the $55 million reduction in costs going to have a bill that you have to pay for next year?

I could not totally exclude that because one thing to solve some of the missing growth of issues is of course as I mentioned the work shadowing or attempts. We have done an assessment of it, with it means for this year and that's the part of the number they have mentioned here.

I cannot exclude that we will have to have some further investments in order to sort of the $55 million but also from today's point of view don't believe that we would be then talking about big numbers.

Okay. And you're indicating we've had no cancellations yet but just delays; have you had any bad debts with any of your customers?

No, there is no space spark in net debts. We this year rolled that our -- was somewhat higher but there is no indication that coming from this -- we today have any real increase in the bad debt.

Yes, thank you, good afternoon everyone. Just firstly coming back to the problem for Juerg, I just wonder whether is there anything specifially happen in common -- I mean you mentioned technology but it's in a certain business line, certainly region where they booked to the certain time which means they've all come together.

Could you just clarify that? And then in addition, you know with these issues that you observed through the first half of this year and you are hoping to kind of catch up in the second half -- or they just materialized right at the end of the third quarter.

That's the first question. Thank you.

Yes, I will not go too much in detail to explain about what technologies because I cannot exclude, some competitors are also listening to this call. But what I can tell you -- one of this product is/or -- one of these issues is composed of four lines of a new technology, we call it the Series 1.0, please have an understanding that I'm not going to sell what type of technology it is, which we cannot test.

It's not that when you make cars, so where you can crash the cars 1,000 times and then you feel sure that it will work. This, you have to install at the customer site and then test it has.

Usually, customers are willing to make some concessions to test the new technology, but still it's a contract where you have to deliver certain things. So we sold four of those lines and we started to see, as first -- as a new technology, we started to see some issues and we thought that with some engineering measures, it will be fixed, but unfortunately, we had to realize that it needs more effort and that is then one of the remaining impacts we talk here.

Now we, of course, stopped selling these technology Version 1.0. We have reengineered to 1.1 or 1.2, and we have sold that again carefully with much more caveat.

Of course, we have learned also from the first four lines and so, that we want to tell a bit more reductive commonality, and the commonality of four lines. And then, the other one is the other project, which is on a very high R&D level.

It's actually [indiscernible] for GEA because we finally mastered it, the technology and the plant is in operation. However, we are still debating with the customers, and we did hope because of course, we had some delays and also overruns for the customers in order to make that technology fit for operations.

And we think it was about two weeks ago. We see the letter from our people that we could -- still not settled.

We were quite confident. So we then looked into the contract what would be the maximum healthy risk for that, and we did not provide for the maximum because we still believe we have a good case, but we made a weighted assessment and then we took that hit, which has nothing to do with the first one.

And then there is another similar issue in another project, where for the third time we went into a project, which is quite a complex thing. It's not so much about technology.

It's about complexity of the project. But I also would like to say that at the end, I'm an engineer, you have to do these things and you should not shy away from the things.

Of course, you have to do that very carefully and safeguard the Company. But if you want to have from time-to-time a breakthrough in technology, you have to do that.

You do remember at the Capital Markets Day, we presented to you innovation. I think it was the new milking robot.

It was the tablet pressing machine, etcetera. Those developments are breakthrough technologies, which we all want to have because it's organic growth, it's pricing power, etcetera.

It's good for our customers, but you have to be aware that sometimes you have to set that here, especially because we are usually the business where we cannot test this in our own workshops or labs. We have to install it because we need the liquids or the food or whatever the grains from the customer in order to test those lines.

Thank you. And then just maybe moving on to the backlog, if you got a review of the backlog, it's just to make sure there's nothing perhaps that would need to come out of it, given the push-outs that you've seen in some areas and then obviously as we look at it, the backlog year-on-year is growing.

So from our modeling perspective, all our sequel that would support growth next year. But when you look at the phasing of those projects, is that assumption right or some of these now slipped into 2018 and actually, 2017 doesn't look like it has the same kind of topline growth?

Thank you.

I understood the question correctly. Niels Olsen speaking.

The backlog composition as mentioned on the margin level, we see that actually healthy and we have done some litigations this year that should further strengthen the quality of the backlog. The timing and the sequencing of the project, that's where the current delays is affecting that and what that means for the execution; rest of the year, we have assessed here in the last weeks' efforts, but what does that mean for 2017, how well are they progressing and are we having further processing in the dairy industry potentially and that we will have to estimate during our 2017 budget rounds, how we see that.

So, all then, rest of the year, and this assessment would find the basis for our federation for 2017.

I had a few follow-up and maybe just to the one Niels that you just responded to. Can we just trying to walk through the numbers on the dairy processing side and first of all, can I start by understanding that the revenue shortfall not year-over-year as you have in the bridge, but the revenue shortfall relative to earlier guidance, which I made to be about €300 million.

How much of that is dairy processing?

He can just look up that number, if you would allow him to come back with that for seconds.

Maybe, if you have second question, while Niels is looking -- checking the number.

Yes, sure. And I guess -- I'm just trying to calibrate what we are seeing on the dairy processing side.

If dairy processing is an annualized revenue business of about €900 million, of which you're invoicing, call it 45% or so in Q4, that means we've got a revenue in dairy processing in Q4 of about €400 million. I'm trying to put that €300 million revenue shortfall relative to earlier bridge or relative to earlier guidance in perspective.

Could you explain how you come to the -- when you say €900 million, you include--

Let me try again. What is -- you've changed your revenue guidance from a moderate increase to a moderate decline.

What is, in revenue terms, the number?

Our interpretation of moderate, whether it's to upper side or the lower side, is anything in the range from 1.2% to 2.5%. So you can make then the mathematics plus -- let's assume plus 2% to minus 2%, it would be 4% to delta.

Thanks, last year's -- I mean, we're not correcting for exchange rate, I mean €400 million thing, it would be something around -- I make the mathematics correctly about €200 million, and you wanted to know how much of that is dairy processing?

Yes. It's RFP applications portfolio.

Roughly, we see maybe €150 million out of dairy on these drifts here that the volume we are looking at the moment.

And am I right in saying if Q4 revenue invoicing is about €400 million on a normalized basis, if that's about 40% of your Q4 revenue that you don't expect to come.

Definitely, there is less ally -- in relation with costs, the volume then for the whole BA Solutions in the quarter four would be some, let's say, around €815 million.

But that's not only diary.

That's the whole business area.

And can I ask a slightly bigger picture question then is because we see milk prices recover, but at the same time, we see production declines now coming through in Europe. You saw Fonterra this morning and obviously with all their August numbers, we've talked to a few of your European dairy processors, they are saying September and October production declines are accelerating.

So clearly, they're all in fact here on commissioning any major new investment initiatives. I wonder whether if we could ask you.

Juerg, I appreciate your point earlier, get the lack of visibility and you haven't clearly reported yet for 2017, but if you look into the crystal ball, how far we await do you think from a more normalized market condition? Is it a couple of quarters or a couple of years?

I think and I appreciate the question. We had some discussions also in London about this and I would say that -- I don't know if you can expect something normalized because I don't predict that the dairy industry would be back to something that we've seen before maybe, because there is an ever-changing condition year-on-year.

What we have seen completely here is that the supporting of decision-making and we have seen -- maybe we are estimating maybe different drivers for that. Obviously, we're talking to a number of our customers management's teams about this.

So I would say some of the, let's say, main observations; one is the instant formula that we've talked about, the consequence of the changes of the Chinese regulation is sometimes difficult to predict. And even today and maybe this is the concern we have to look upon in the coming months.

We see different interpretations offset by our customer management teams. Some of them are progressing, some of them are pausing.

If you talk about milk prices, recovering of the milk prices, we've seen some recovering. I can't predict how that will recover in the coming year or years.

We have seen milk volumes decreasing again in Europe whether it has been regulations stimulating that. However, we have also seen that the customers in Europe still have to process milk volumes that they have had difficulties in processing and the desire to way that they would like to do.

Example, they would like to go into higher-value products and not just produce the milk volume to the lowest possible value milk powder as an example. So we see investments going on in this regard.

We also see till the competition on milk prices in a way between the different co-ops with the different owners where I think the long-term effect of this will be that you have to see a consolidation still in the industry. And some of the past three to four years [indiscernible] was also related to consolidation.

So I believe fundamental consolidation has to go on, in particular in Europe where we see relatively many smaller producers still and we see the pressure from the large ones like the [indiscernible] or similar. So I think there is a drive for investment still, but there's certainly an uncertainty around the demand on the instant formula side and there is also the new nutrition sources discussions out in the market, how much will that influence dairy or would it supplement dairy or would it have a negative impact on dairy globally in the mid-long term.

This is also what we are discussing. So, I think -- I don't expect to come back to what would be a normalized dairy industry that we saw two years ago or three years ago.

We see different other effects right now. This is not a very precise answer to you, but these are some of the observations that we have done very recently.

Yes, I think you named it yourself, you called it a crystal ball. It's right in this space.

We are getting mixed signal. You mentioned from TERA report other changes, but we also of course carefully write what [indiscernible] others like Nestle, etcetera.

And we see our own indications. So I hate to say that, but we cannot give you a better answer.

The only thing I can tell you we are looking in this very carefully currently because there is a lot of news pumping up. We have to sort those news.

And we have to then draw our conclusions out of those news into the future. It's difficult as it is because of course it's our duty then when we look to the budget 2017.

But let's put it that way, I do not want to be negative. But you would not see us -- if you could see us jumping up and down for happiness because of dairy.

I understand. Can I say thanks for that.

That's helpful context, earlier Niels. Thank you for that.

Can I return to the €55 million in your EBITDA bridge and I'm not sure I quite understand still how much is pricing and how much is what you call ramp-up costs and of that ramp-up cost, what was in your numbers in Q3 and in the first half already?

That's -- to split those things is a very difficult task, because if you need an additional temp, it can have difficult sources. It can be the work shadowing, the ramp-up, the new roles and the specification in a function.

It can be the reason that you need a new temp, an additional temp for a longer duration temp, it can be that it is because of the market conditions we have mentioned in certain areas, the pencils had been more sharpened and then when you go into the execution, you realize that you need support in order to get those things done. So I would like to ask when [indiscernible] that if it not would be fierce, if you just say, it is 20% this and 30% is this and 50% is this, that's very difficult to say.

You had the second part of the question, could you repeat that please?

Yes, just to that, I'm just surprised you can't tell us whether within that €55 million, whether it's €10 million or €50 million, which is cost ramp-up, I'm surprised. And second to that, you can't help us to scope the headwind in 2017, but for sure, it will be lower than it was this year, would that be a fair assumption?

The headwind regarding the challenges definitely.

No, the headwind regarding the ramp-up costs.

The headwinds regarding the ramp-up costs, let me think. Yes.

Maybe, Niels.

I think we have a sort of impression about the inefficiencies here, that's one of the elements in this bucket and that's going life with the new organization here where new roles, new capacities, we are mitigating this year here by training a lot of our people in the business processes here to regain that efficiency and through that and also settling to reduce the 10% the work shadowing that Juerg was referring to. So it's clearly our impression that this is predominantly a 2017 thing, but we cannot estimate the effect into 2017 as well -- 2016 effect and what the spillover into 2017 will be.

The other element that was raised was the pricing competition, the effect of the pressure of our cost estimations from earlier. This was something on our margin quality on the backlog that we discovered earlier in the year and actually corrected that in the Q1 by being extra observant to our proven levels on new contract calculations from the effective ladder, but the parts that was more on the costing basis of it, where we could only see that coming through as the projects were more completed throughout the year here, we can track that back to something that was probably towards the second half of last year.

But it has been -- you cannot measure this before you see the execution of the projects being more complete. However, we are convinced that we're seeing the tailenders that this year here that this will not go into next year and we also made other measures that was referred to before the supply chain savings factor introduction or reintroduction, as well as the general security provisions of the projects that we have increased by 100 basis points here now.

So this part of it, we feel quite confident that has been stopped within this year. The other part about the inefficiencies will be a tailend of that, but my best guess right now would be that the bulk of it would be in the current year.

Just to understand how much was already in the numbers in Q3 and in the first half, so of that €55 million bridge year-over-year, what have we seen and what will come in Q4?

It's roughly 60% to 70% that is in the Q3 year-to-date.

Can I be allowed a third and final question, just on capital allocation. And I wasn't so much interested in your payout policy, but really more on your thoughts on applying balance sheet at a time when your stock is down 30%.

I presume given the internal issues, is it fair to assume that M&A or at least larger M&A is off the table for now. And what are the thoughts about a buyback as we go into 2017?

Let me take that question. I cannot confirm that our M&A activities will slow that down.

We are following our strategy and we are looking for a target and we are discussing also currently with quite a lot of targets. So the problem we have related in some areas of Business Area Solutions will not at all give us a signal that we will not make for the time being M&A acquisitions because it would be an additional burden to integrate them, etcetera.

That is not the case. So the M&A is going on as we have planned it even because -- even with off the lease some negative surprises we got in September.

So that has no impact. And when it comes to your second part of the question regarding potential share buyback, etcetera, we will stick to the plan presented at the Capital Markets Day that -- you remember that slide, I don't know whether you were there or not, where we -- where Helmut Schmale presented that plan that we have a plan when we will discuss, [indiscernible] Supervisory Board and then take a final decision.

So that will not be impacted by the share price as it is currently because if we were to try to make any decision regarding a share buyback or an extra dividend, it has to be triggered that we would come to the conclusion that we would have certain surplus amount of money, which we will not invest in M&A, but not invest in M&A because we would be scared to do it looking at the current situation, that would not be the reason. So the augmentation is exactly the same as we did in the Capital Markets Day.

I would like to come back. I'm not sure you ask some of the fourth quarter sales, I'm not sure, but I said €850 million or €750 million; in fact, it's €750 million, so please correct if I said it wrong.

Maybe, you have already answered some of my questions. But firstly, getting back to the gross margin impact, €55 million, on the price mix, it's is in a different way, price mix on new orders, which could change to gross margin next year in solutions.

We always had dairy processing orders at the low level previously. There were lower price that move through the backlog.

Can we talk about the pricing on the new orders? Can we be sure that the pricing on the new orders has improved?

Yes, as Niels explained in answering some of the previous questions, when we look at the current pricing of orders for the current order intake or our offerings, we do see that it has improved.

But is it still negative?

Negative compared to what.

Well, is pricing down year-over-year on a comparison basis?

Sorry, Niels speaking here. The backlog composition from September last year to this year on order intake has increased 100 basis points.

100 basis points, okay.

Yes. So the mix has improved.

You can argue that's a composition, of course, of the mix of the industries where we see different margin levels as well as the governance around the costing and the pricing that we do.

Okay. Then I saw the struggle a little bit, why we didn't get any information that you have more cost for OneGEA and fit for 2020 to realize the savings, which means that the net number is lower than the €125 million, will it be more costs in 2017 to realize the next €40 million to get to the €125 million, or we are down on the cost side?

Well, as we said, we believe we cannot 100% exclude any smaller further cost, but from today's point of view, we are confident that we have understood the balance and the impact. So we believe that we know what it is.

But nevertheless, I would say some of those things, which we have identified, will have to carry over into the next year, but we don't see when you -- the second part of your question, the next €40 million of annualized savings for 2017, we don't see from today's point of view that we will have in addition some extra cost to get those extra €40 million.

Okay. And then a question on internal reporting and controls.

I can fully understand that one order can slip between two quarters, you didn't get a large order in dairy processing that you first expected, but help me understand why you on October 5, after the end of the quarter, failed to inform the market about the poor quality of the backlog? Do you feel any need to invest in IT, your internal reporting to be able to meet the gait such slippages in the future?

I think at the end of the day, as we said, the surprise at the last of September result as such and then we started in a broad analysis what may potentially implications that would mean looking further down the road and this, of course, will need then to do diligently in order to get a broader view on what is the underlying risk, which appear into the remainder of the year. Normally, what happens if you only see the following margin quality of orders, once you are approaching more to the end of the completion of those orders and -- as a ramp-up and then it's a mix of timing here.

So it has in margin not so much to do internally for the instructions. However, we said also that we are looking forward to invest into, as we call it, a digital call in order to harmonize more of the processes and the procedures and that we will do overall on the upcoming years and Klas, that is, for example, also that we have more details on even better visibility of margins growing at.

Okay. Final one is actually not on the bridge, I'm going to ask about orders.

Base orders in the quarter, they disappointed in the first quarter, there were strong in the second and now they're flat this quarter year-over-year. I had expected more from base orders this quarter.

This is where we see the cross-selling opportunity in particular in food and in the new solutions. Now, we see food weakening here quarter-on-quarter when we look at the slides.

Can you tell us why base orders slow down? Was this year's dairy farming weaker quarter-on-quarter that offset the cross-selling?

Quarter-on-quarter, dairy farming was again weaker. So we did hope that the month of September is going to show some stabilization, but it did not.

So that is one parcel stone of this negative surprises. And of course, it has certain implications on the so-called small orders that these small orders where on a high level, if you look at the chart number 8 [indiscernible] presentation, last quarter, then this quarter -- and this quarter, but then they were higher than Q1.

As you also rightly said, so it is a variation. If you look at a couple of quarters, it varies between and €800 million and €720 million, up and down.

And I think with €754 million, which Helmut Schmale has presented in our goal, was somewhere in the mid-range. That's keeping always in mind that we have this pressure on the milk and dairy farming, so-called small orders, which is the vast majority of it.

I will try to move quickly. So first, I want to ask you about the €200 million in revenue that you said was associated with EBITDA.

So I was wondering how much of that do you think are orders that you will see coming into 2017? Do you have any difference in your degree of confidence between the orders that you talked about?

And then the second question is, can you give us some color on the geographic difference between the orders -- were the delays coming from emerging markets or from Europe, and was it from local or multinationals? And then, the last question is related to consolidation in dairy farming.

I know you said that still needs to really progress, but what you have seen that they are upgrading the acquisitions that the smaller dairy farms that they are taking on and do you think that over the long term, you could see more modern equipment demand from consolidation trends?

Okay. Steffen, would you like to take the last question directly?

Maybe, I'll take directly the question on the dairy farming side. Yes, we do see a consolidation in the markets currently.

As you have heard in previous events that we have done substantial investments, particularly on the automation side in order to handle larger herds. So we're expecting -- and we also do see an upward trend in those kind of orders in relation to our conventional business.

So yes, we are expecting that from that end of the business, we can expect higher orders. However, we have to say we do see that the milk prices are -- yes, they are currently slightly up.

If that is triggering immediately something in terms of order placements, we have to carefully review and we'll see in the upcoming year.

Yes. Then, you had a question about whether there is sluggishness of the decision-making process is coming from specific geography or the economic areas.

I can confirm to you it is actually all over the world, of course, not in every country, but we have seen some sluggishness in Southeast Asia. We have seen it here in Europe in several places.

We do see it a bit less in the US. We do see it a bit less in some specific countries in Latin America.

Why I say some specific because some other countries in Latin America anyhow are not going very well economically as you all know, but I would see to later extent in Latin America, but we get clients from Southeast Asia and in most parts of Europe, Western and Eastern Europe. Regarding the €200 million, if Reinhold Siegers is here currently, I would like to ask him.

The interpretation of the growth has managed that if this is now postponed this year, what is going to happen next year. For a part of that, we don't know yet, because that depends on the final client decision and for the other part, I would say, it's just [indiscernible] execution of client side because you are slow in ramping up the time.

Niels, anything to add?

I think that's clear on [indiscernible]. Even it should roll into next year, but it's all in the customer's hand and the relation you have seen.

Some of them that have been suspended, we don't know if they will effectively be cancelled, so that's the main part of it. The other part is the decision-making on strategy that we have reported here of what impact will that have on our order intake in the current quarter and next quarter, is there a similar pattern and that will also affect, of course, our opening position in 2017.

Okay. Can I just follow up and ask about the suspension, the suspended orders, is that the bulk of it?

Now, there is a large number of projects that has been building and that's simply just delivering, laid up you will see and there is some that has been suspended that cost concern and in particular, one bigger one that could eventually be completely cancelled which will mostly then -- in case, further cancellation that would mostly affect the 201, but otherwise it's predominantly delays.

The two follow-up questions at least from my side. The one is on your beverage segment, I think on slide 10, you have been showing the sequential order momentum, the LTM momentum and it's anywhere between down 1% to 5% and above 5%, and I was just curious because your competitor [indiscernible] has just reported numbers where they had order intake, up 8% year-on-year; up 9% sequentially.

They said there have been more active market. They also said competition is not as aggressive anymore.

So obviously, that is just one of you, I would be just curious on how you see this beverage segment overall. If you also see it generally a little bit more excess so that we could see more orders going forward or normally tend to have a bit of a different view than kroners on that.

And the other question is just on craft, I was just wondering to what extent you did benefit from that or is it just a minor issue in your beverage division or maybe you can give us some color on the craft brewing? Thank you.

Okay. In general, talking about beverage, I can say, I will not call it that there is an upside or downside to that, the market per se.

The demand is high. What I would say it's normal environment there.

However, as I also have indicated in the Capital Markets Day it in certain areas at least, it's quite a competitive market. And we, of course, are not willing to take orders there at, let's say, this favorable condition, which does not only mean margin-wise, but also terms and condition-wise.

So for us -- for ourselves, that market is okay. So we have folks in this market.

When you compare year-on-year or the sequential -- not sequentials, but year-on-year, comparisons keep in mind that I think it was in Q2. Lastly, if I remember correctly, we've got a very large order in Korea.

In that segment, the brewery was about €80 million. Those type of things you have, of course, not every quarter or every month, so that you always have to keep in mind.

But I would say the beverage market from the demand side is okay. On the competitors' environment, it's more competitive than some of the other applications.

Towards your question about the craft beer. I would give that to Niels.

In craft beer, Sven was asking whether we are taking some benefits from the market of craft beer.

Yes, we have. It's sometimes smaller units.

But we actually have a very successful business in the craft beer that is growing, in particular in the US, North America. And it's something that we also benefit from in some of the European countries, where craft beer is progressing quite well.

So we're tapping into that gross rate that we see there. As far as the bulk of the business is still influenced by larger brewery contracts also and I would also say in comparison with our competition, there is also difference in footprint between processing and selling and bottling between them and us.

Maybe a quick follow-up on the beverage point of view, because that goes back to my earlier question, I mean, you said it's very competitive, you've been very selective. On the other hand, you have been saying at the CMD, you want to simulate growth.

I mean, is this one of the areas like beverage project in Mexico, Colombia, where you want to be more active or is this more the other areas of your business?

No. that's one of the areas.

A few questions from my side. Sebastian from SocGen.

With regards to that potential cancellation of the large order, can you shed some light on the size of that order in particular and then also, if I'm not wrong, you talked from the beginning of the year that you expect up to high-single-digit drop in the dairy farming business, why did you just by now put down the €20 million negative volume impact and what was your working assumption before? Any similarities on these lower cost reserves?

You also talked about that earlier at the beginning of the year, that the backlog had lower margin quality, what was your working assumption at that point where we now see the €55 million? Thank you.

Yes. Coming to your first question about the suspension, it's actually we have been talking largely about the cancellation, only a suspension.

I think what Niels said is, of course if you have suspension, there is a risk at a certain point in time, it could turn into cancellation, but on the larger orders, we haven't received lately a cancellation. What we have been asked specifically in one larger project is to suspend parts of that project, not all the project, because the projects composed with seven parts, then one part of it.

Sorry, could you repeat your second question?

That was with regards to the EBITDA bridge, you have been talking since the beginning of the year that you expect the dairy farming business dropping up to a high-single-digit growth rate this year and now with Q3, you have released that €20 million negative impact. You must have had something in mind before that already -- when you talked about single-digit drop in that business and also the margin profile of the backup.

In solution, you indicated that it has been weaker than a year before. So you must have had some negative impact already in mind when you have talked about that in your original guidance where we now see this €55 million, just to get understanding why we just now see those numbers in long term have been talked through that earlier?

Let me explain that bridge once again. That bridge does not explain what we have seen since the numbers coming in for September.

That's just year-on-year. So you have on one side, what we have earned the savings and then of course, in the ideal world, that would have been a plus of course instead of a negative volume impact on the solutions side, a positive volume impact.

So if you would, instead of detecting €25 million, you would add something new to the organic growth and without every scores, and then that would have led to 2016 results. But what you see there the pluses and minuses, it's not something, which we just noticed in September.

It is for the whole year. Part of it is what we then saw that.

We could not anymore for our ambitions for September quite not met, and that's when we then looked in what relevance it has for the rest of the year. So coming back to you, [indiscernible] dairy farming question means that of course we were aware that this is lower.

We also did see the negative impact. And that's a surprise in September.

It was not this €20 million there. That is the full-year impact, a surprise if you want to call it like that, is that in NDF once again it went further down, we see order intake in September.

So we had to assume that the rest of the year, the remaining three or four months, quarter four will be on an even slightly lower level and that has an additional impact, but this is not the €20 million, the €20 million is the full year impact.

Okay. And Similarities then also for that €55 million, is that right, that you had some of those in mind as well?

Yes.

But then I'm questioning still why didn't you talk about that at the Capital Markets Day honestly?

Maybe -- this is Niels speaking, if I can contribute to that. So I think you referred to the margin situation.

The drop in the backlog margin, we discovered due to the pricing intensity last year. We discovered that earlier in the year and we actually corrected that, so that the new orders and the project backlog retained its margin to normal levels by the beginning of Q2 that we knew of course about.

So the surprise and the effect here that we learned in the end of Q3 with the September numbers is related to the inefficiency in circulating the new authorizations here. That effect came out to its largest extent here in Q3.

And then the costing element, not the pricing elements, but the effect of the challenges to costing element from prior is something we can only detect when it comes out, when the purchases are executed, which is the effect that we also read here. So the pricing and the margins on the contract base lines did not indicate anything wrong here because that was already restart at the end of Q1.

Okay. Thank you very much for this session and for the very intensive questions.

I hope that we could give the answers you were looking for. So thanks again for your patience and once again, I want to emphasize that we regret that we had to negatively surprise when coming out with the revised guidance.

But I can promise you that the Executive Board, plus our Group leadership team are fully and totally committed to make this -- to make here, which is already successful company and even become more successful company, and that we are prepared if there would be headwinds from the global economy, from some industry, we are prepared to challenge them and to take right actions. Thank you very much and have a nice day.