SGL Carbon SE

Welcome to our conference call on the first half '21. Following the publication of the preliminary figures and the guidance increase in Mid-July, the Board of SGL Carbon will provide further details on the business development today.

On behalf of SGL Carbon, Torsten Derr, our CEO; and Thomas Dippold, our CFO, as well as part of the IR and the finance team will participate in the call. After our presentation, you have got the opportunity to ask questions.

Thanks. And it's time to hand over to our CEO, Torsten Derr.

Yes. Good afternoon, everyone.

I have the honor to start with the highlights of our presentation. And we're very satisfactory first 6 months in this year.

And you can see on this slide that our top line went up by 8.8%. And our EBITDA pre, which is the key figure of our company, is up almost 71%.

And the reason is very simple. First, we experienced a recovery of our core markets.

Semiconductor is up. Automotive is up and LED is up, first.

Second, our restructuring program is perfectly on track. And third, we are running a margin before volume strategy, and this lifted our EBITDA up.

The order entry we observed in all business units is very satisfactory. And we were able to give price increases to our customers to compensate the rising raw material costs.

As a consequence of this, we have changed our guidance and improved our outlook. Our EBITDA pre on a full year basis is now guided between EUR 130 million and EUR 140 million.

And with this, I would like to hand over to Thomas Dippold, our CFO.

Thank you, Torsten. It's my honor and warm welcome also from my side to present the figures in detail.

On Slide #6, you can see our top line and our guiding result key figure, EBITDA pre. Our sales went up on a year-on-year comparison compared to first half of 2020 by EUR 40 million, which is almost 9%, and our EBITDA pre increased, as Torsten just pointed out, by almost 71% or another EUR 30 million.

This is a very, very good development. We are very happy with what we see here.

And again, especially the margin improvement to 14.4% of our EBITDA pre margin compared to sales is really going into the right direction as last year's time. So especially Q2 was hit by COVID, we were at 9.2% EBITDA pre margin as a comparison.

On Slide 7, you can see where the sales from the business unit split is really coming from. Our largest business unit, which is Graphite Solution, went up by EUR 8 million in the top line and sales, which is mainly what half of it is due to the fact that we had this contract termination in Q1, as we already announced.

Our Process Technology business unit is suffering still from a lack of order intake, where as our 2 carbon fiber businesses with the Carbon Fibers & Composite solutions are both up each by EUR 20 million in the top line, and really show a very strong development. When we look at the underlying markets on Slide #8, you can see that our Granite Solutions business has very strong sales and order intake in our semiconductor business.

Process technology is, well, almost significantly on the chemicals industry or petrochemical industry. And there, we still see a lack of order intake or some proposement of project even.

In Carbon Fibers and also in Composite Solutions, especially our Automotive business is recovering from the shortfall, which we saw, especially in the second quarter last year. And automotive is really booming with our product, and we are very happy with the development we see there.

And then coming to the business units, in particular, Graphite Solutions, as I just said, almost 4% up in sales or EUR 8 million if you go to the euro figures. Where does the growth come from?

Mainly from semiconductors and LED business, which grew by almost 20%. And this is also what we have to say, a high-margin business.

And this is why also our EBITDA pre figure grew by EUR 8 million or rose by 21.5% if you look at that. Our EBITDA pre margin in our Graphite Solutions business unit reached 20%, which is a very high figure and even exceeds the margin we have seen in 2019 in the pre-COVID times.

So this is really a strong performance, mainly due to the fact that we have some savings due to our restructuring and transformation projects, but also a higher utilization of our capital-intensive assets, this both helps very much. We see some impact from higher raw material prices, but they were largely offset by the fact that the savings are far bigger than the raw material prices.

Slide #10, Process Technology. As I just said, we are below last year.

We have a sales drop of over 9% or EUR 4 million, respectively. We still see a lack of demand from chemical industry.

And -- but however, in order intake, we see a slight recovery, but we cannot see it here in the figures for the first half of 2021. There will be improvement in the second half of the year.

And then we also think that our EBITDA pre will improve quite a bit and reach at least our internal expectations. So far, we are more or less slightly above the bottom -- above 0, but we see a decline of 9% in our margin.

And we do see some savings, but however, a drop of EUR 4 million in the top line could be offset by that. Coming to Carbon Fibers on Slide #11, where we see the strong performance in the top line.

We went up by 13% or EUR 20 million in growth. We see a huge demand from Automotive, and this is about to continue in the second half of the year.

We also have to bear in mind that first half of 2020 was -- by the COVID impact, especially the second quarter hit our carbon fiber business very much. So therefore, this rebound is -- was also kind of expected.

However, when we look at the EBITDA pre improvement where we see almost more than double of our EBITDA pre and the increase by EUR 17 million. This is a very strong performance.

And there also our joint venture with Brembo, the BSCCB really paid in with some EUR 6 million improvement in their bottom line. This is also very good.

In Carbon Fiber, we are very successful to pass through the raw material prices. Acrylonitrile the prices really shot through the roof and almost doubled or tripled it depends on the time.

But this was -- well, quite high. When you look at the spot markets, however, we mentioned it overall that the prices can be passed through to the customers.

Last but not least, when we come to the last operative business unit, our Composite Solutions, where we also see a strong performance. Sales went up from almost EUR 42 million to over EUR 60 million on a year-on-year comparison, which is another EUR 20 million or more than 50% growth.

This really shows that the strategy to grow into some large-scale solutions and projects, especially for automotive and the battery cases is really paying off, and this is a strong performance. And there we also see in the bottom line that we really achieved the turnaround and improved by EUR 11 million from minus EUR 5.5 million loss in the first half of the year 2020, to EUR 5.7 billion and a 9.5% margin in the first 6 months of this year.

Again, this is due to the fact that we have a higher utilization of our capacities but also the product mix, especially with the large-scale product, this really shows a strong impact. On Slide #13, you see our corporate development where we bundle all the corporate functions and services there, the sales declined.

How is that? We have sold some land and buildings in the second half of last year, which we rented out before.

So after we sold it, of course, we don't see a rental income than anymore. And you also know that our corporate function, Corporate Services charged some of their services to well, Showa Denko.

But as they terminate the contract and left our plant in Meitingen there's also no sales to be -- that can be charged to them. And therefore, we also adjusted our cost structure accordingly.

However, this could not be 100% offset. So when you look at the EBITDA pre, it deteriorated from minus EUR 5 million to minus EUR 10 million.

However, this was affected. We only see one one-off issue, which is consultancy expenses, which is due to the transformation program, which we haven't, but which we thought could be a restructuring expense.

But however, it had to be shown in the operative result and this is in there. On Slide 14, you see our key figures and ratios that are maybe also worth mentioning.

Our equity ratio improved by almost 3 percentage points, which is due to the profit we made but also the interest increase in the long run that we saw, which lowered our pension liabilities quite a bit and increased the equity accordingly. Our total liquidity went up by EUR 42 million and reached EUR 184 million, whereas year-end was EUR 141 million.

And as a consequence, also our net financial debt went down by EUR 40 million, and is now at 264 -- EUR 246 million, sorry, and our leverage ratio went down to 2.0%, whereas at year-end, it was 3.1%. We are very happy with our ROCE development.

Our ROCE rose to 8.0% on EBIT pre basis. And the cash flow was also very strong, especially the cash flow from operating activities with EUR 65.9 million where the first half of the last year was EUR 50.5 million.

CapEx is still very low with EUR 15.2 million. We expect a lot to come in the second half of the year.

So we will -- which you can also see in our guidance where we also say what the respective CapEx is, we still expect the CapEx to be in the range of our depreciation, which is around EUR 50 million, EUR 55 million. And last but not least, the total free cash flow.

And you remember that in the last 7, 8 years, we will almost -- every year, we held a negative free cash flow. And this year, in the first 6 months of the year, we have achieved a free cash flow of EUR 56.5 million, and we are very happy with assets and movement of EUR 20 million.

My last slide to be presented before I hand over to Torsten again is a few more key figures I'd like to highlight. For our net result, also for -- we haven't seen that very often in the last years that in the first 6 months of the year, we saw a positive net result compared to the same period last year.

We improved by EUR 32 million from minus EUR 13.8 million to EUR 17.9 billion. I think this is a huge turnaround we also see in the very bottom line in the network side, and we are very happy with that development.

Our free cash flow, as I just pointed out, went up by EUR 20 million, and our net financial debt went down by EUR 40 million accordingly. Again, we are very happy with that development.

And with that, I hand over to Torsten to give you the outlook.

Thank you very much, Thomas. I'm going to start with the transformation program.

As you know, we started the transformation program of SGL in the fourth quarter last year. The transformation program runs until 2023, and it is pretty much front-end loaded.

So we will have the majority of savings and measures realized by end of this year. In total, the transformation program is cut into 700 initiatives, and we have realized already 66% of it.

And we had a very low leakage or slippage rate that means we lost almost no savings, which we had planned, but we generated more initiatives in the time to come. The savings were planned above EUR 100 million, and we are happy to say that we realized 60% of it.

And along with this comes a headcount reduction, we wanted to reduce our headcount by more than 500 people, and we have already realized 84% of this headcount reduction. Next slide shows the price increases, which we observe coming from raw materials and logistics.

And please look to the upper left box. These are the 3 main effects, which we experienced: Raw materials went up by between 20% and 50%.

This is, for example, resin for our composite acrylonitrile, which doubled in price for our carbon fiber or pitch and coke, which went up somewhat around 20%. This is an absolute figure at a large effect.

There is second logistics effect, and we saw tripling or container freight costs, which were 4x as high. For example, from Japan to U.S., the container freight is 4x higher and was raised from around $2,000 to $8,000.

But overall, in absolute figures, this is a rather small effect and we can easily digest it. Energy had zero effect.

We did a nice job here. We hedged the energy prices and the net effect on energy will be zero.

We have to secure availability of freight room and of raw materials, and we did a good job so far. So no production reduction costs by raw materials or by missing freight room.

What are we doing to compensate these increases. We have price increase programs in all of our 4 business units, and we will compensate the raw material price increases, either by price increases, which goes into the direction of our customers or by additional savings.

The rigor on pushing through the price increases depends on the utilization of the plants of the affected products. If we have a low utilization, we go for the utilization.

If the utilization is high, we push through the price increase by 100%. Because our key figure is the absolute EBITDA, which we want to maximize in our company.

And we were pretty good end of last year as we concluded a lot of contracts with raw material price clauses. Our big carbon fiber contracts contain acrylonitrile price fiber, which means acrylonitrile price goes up, price for the customer goes up and we have a zero effect.

You see, we are going a margin before volume strategy, and we are very confident for this year that we can compensate the negative effects from rising raw material and logistics costs. This is why we raised our guidance.

Old guidance and top line was EUR 920 million to EUR 970 million and we lifted it up to around EUR 1 billion in the top line. And our new guidance for the EBITDA pre, which is our key KPI was raised from EUR 100 million to EUR 120 million to now EUR 130 million to EUR 140 million.

And the reason for this is the successful transformation program, a very good order entry in all 4 business units and our margin before volume strategy. Our other guiding KPIs in 2021 are on track as well.

And you can see that we focus on bottom line and cash. Our ROCE based on EBIT pre was guided before as a slight improvement, now we see a significant improvement.

Consolidated net profit, previous guidance, minus EUR 20 million to 0, now we see the net profit slightly positive. As Thomas said, our investment last year was at a level of EUR 55 million, and we see it now in the range between EUR 50 million and EUR 60 million.

And the free cash flow was previously guided by EUR 20 million, now we see it at more than EUR 20 million. Coming to our business units.

Here, you can see our 4 business units, and I start with the largest business unit, Graphite Solutions, which makes up 50% of the top line and the bottom line of our company. Here, we see a slight increase in sales and a significant increase in EBITDA fueled by automotive industry and very strong semiconductor sales.

Process Technology, EUR 100 million plus/minus top line. This is stable both in sales and in EBITDA and process technology suffers a little bit from the pickup in the chemical markets.

But since 2 months, we have very, very high order entry, and we need some 6 to 8 months that we see the order entry in the bottom line. And we are expecting a pretty good first quarter of next year from the order entry received currently.

Carbon Fiber. Carbon Fiber is a real success story.

We exchanged the business unit heads, the new business unit head is on board since end of last year. And this was a focus point of our restructuring.

And we see in both in sales and EBITDA, a significant increase in the figures, driven by wind energy. So we produce carbon fiber, which is used in the blade of turbines.

And secondly, we are seeing a very big recovery in automotive industries following the COVID quarter in last year. And last but not least, Composite Solutions, the second turnaround story.

This was negative in EBITDA in the last years. And this was the year where we turned it around, significant increase in top line, significant increase in EBITDA pre and also driven by automotive and electromobility.

So I want to close with the key takeaway messages. You have seen our transformation project is fully on track, and we are very happy with the transformation program.

We see a pickup of demand driven by automotive and semiconductors, and we are observing a very good order entry in all 4 business units. We have capacity utilization in most of the business units, and this leads to a cost degression effect and improves our bottom line.

We are seeing higher raw materials and also increases in freight costs, but we are able to compensate it with either savings or price increases at our customers. Our liquidity improved by EUR 40 million and net financial debt is down by almost EUR 40 million, and we have lifted our guidance for the full year 2021.

This concludes our prepared messages, and we are happy to answer some questions.

Can you hear me? [Anya Johan] Commerzbank.

Yes. Yes.

Okay. So I've got 5 questions.

And the first is you budget higher turnover and higher profitability, EBITDA and EBIT. But the net profit, you plan to achieve this just about a year, whereas you already achieved EUR 18 million in the first half year.

This means that in the second half year, you plan a loss or reduced earnings after tax, this must be the result of a financial burden or something. So I cannot just trace, the reason for this only slightly above 0 budget, if you could explain this please.

Actually, it's just being conservative. When we announced that at our guidance at -- and rose our guidance on the 13th of July, we just could see, at that point of time, as we haven't consolidated everything that our top line and our EBITDA pre looks promising and that we want it on the capital market immediately about that we are very sure that our previous guidance will be -- well, will be at top.

And at that point of time, we just said that our net result is slightly positive. And now that we finished our real, well, half year-end and you could see where the net result is.

We definitely don't plan to get worse in the second half of the year. This is what we can promise for sure.

For that reason, you can call it conservative from today's perspective, for sure.

Okay. Then the second question I've got, the acrylonitrile business and Carbon Fiber business used to be one of the most critical sections.

And I wonder what factors make -- just make up the success, which was at least in the first half of the year? I have understood the explanation, the automotive industry and the wind industry, they have higher demand, et cetera.

But I wonder why the turnaround has been so clear? And how sustainable is this turnaround is going to be?

Is it not by accident or if this is really a sustainable improvement?

Sustainable improvement. And we did everything what we can do, first carbon fibers were focus of our cost reduction program, and it benefited from this.

We renegotiated a lot of contracts and sometimes we have multiyear contracts. So this is not a short-term effect.

And we did also value chain extension. What does it mean?

In the past, we sold carbon fibers to the customer. Now we mill the carbon fiber and have chopped carbon fibers.

We add a value step and sell it for a value-added price to other customers. So we produce prepregs out of it.

So we did extend our value chain in some cases. This was just an example and is not at all coming by accident.

We think that we can continue this path.

It means there's more backward integration in this.

No, forward integration.

Forward integration. Okay, you produce a higher part of the value chain, understood.

And it is more profitable?

Yes and more value-adding steps in the chain until it reaches our customers.

But again, also a huge restructuring that under carbon fiber was -- all the plants of carbon fiber were really the target or the main target in our transformation and restructuring projects. So we took out a lot of costs.

We improved a lot of things there, and this really pays off.

Maybe the another reason I forgot. Last year was a COVID year, and we were not fully utilized.

And now, the wind industry is running that well that we can sell every kilo we produce. So this also a cost degression effect, but this will go on.

We have the green deal in Europe and we need wind turbines. And the modern wind turbines can only be produced using carbon fibers and all producers of wind turbines are in contact with us and they ask for volumes.

Okay. And another thing, I read in the press that semiconductors are -- there is shortage, which prevents the automotive industry from producing.

How does this shortage of semiconductors affects your graphics business?

Yes. I'm sleeping better now with the shortage because we were so sold out.

The customers wanted to have so much volumes that we, in Germany, you say we live from hand to mouth. And now we can build up a little security inventory.

And now our supply chain is a little bit more relaxed, but despite the shortage of semiconductors, order entry and offtake is pretty good. So we don't see effect right now in our order books and in our top line.

Okay. And last question, your -- in your annual report says that you bought part of the convertible bonds, EUR 8 million.

I wonder what is the background for this transaction? I didn't really see it in the cash flow statement, but I read it in the text.

So I wonder what is the reason behind it.

No, no, apparently, you read it very carefully and this is true. We bought back a little bit of the convertible.

We were offered some EUR 8 million there, and we thought the offer is attractive and our liquidity situation is quite, well, quite good. So we decided to lower our debt there as well and also to show that we are willing to reduce our debt accordingly.

And this is -- we just used the chance, which we have taken.

3 from me as well, please. Perhaps starting on the restructuring program.

There seems to be progressing very well in terms of the cost savings. You target the completion by end of '23, but I guess, realistically, you get there before that.

So my question is, what's the kind of next steps after this? Can you give any -- or shed some light on your thinking around this?

Is there more initiatives or more cost savings to be realized?

So I try to give you an answer on this. Almost every week, we develop new initiatives, but not in the extent that every month, we have 100 new initiatives, maybe 5 initiatives, 10 initiatives per month.

So the savings are growing from month to month, but the majority will be done by end of this year or mid of next year. And of course, we are thinking about the next step.

We did a strategy project for the whole company, which we call strategy recap. And we reviewed the strategy of our 4 business units.

But I'm very sorry that I do not want to disclose anything yet. We will come up later on, maybe at the Q3 figures for what is strategically planned.

Of course, after doing the restructuring, we want to reenter the growth phase again.

Sure. Okay.

And my next question, you spoke a bit about margin before volume strategy and price increases where capacity utilization is high. Can you give us an idea of current utilization across the company?

This is -- we are so diverse in processes and plants. We are running 29 production sites.

It makes no sense to give you an answer. We are pretty fully loaded in our graphites.

We are fully loaded in carbon fibers. In process technology where we produce heat exchangers utilization is low at 70%, 80%, but we have a very good order entry and it will be refilled during this year.

But I had to answer this for all our business segments and to give you one answer makes no sense.

Well, maybe from -- when you look at the top line, then you can probably also derive it a little bit. In 2019, we had a top line of EUR 1.087 billion.

And now our current guidance is EUR 1 billion. So there would have been just in case if we grow just proportionally and prices would also be the same, another 8% if you just compare it to 2019 to go without capacity increases, but it's exactly as Torsten was saying.

We do have overall, some idle capacity also compared to 2019, but especially in the markets we just described we're running on full steam and we are 100% capacity utilized there.

Okay. And my next question would be on maybe a bit on next year.

I mean, maybe it's a bit early to say, but specifically looking at the carbon fiber division, how at this stage, should we think about the loss of the BMW business for that division? And do you think wind energy can compensate for that over the next year also from a margin perspective as well?

So we are going to lose BMW i3 business. And this we communicated openly since 1 year.

And we will end the supply of BMW with carbon fibers by mid of next year. And we will lose a very low double-digit amount of EBITDA, but we are able due to very good running wind energy to compensate this.

And this is why we are doing premarketing capacity expansion currently that we have a strong foothold in the wind energy market and absorb the released carbon fibers, which now go to BMW. And we try to keep the net effect in EBITDA as low as possible.

Okay. And my last question is on the CS division.

You've seen a good recovery there. Could you shed some light maybe on the ramp of the new business that you have there in terms of the battery cases?

And just when you expect that to hit the full outlook?

Yes. And maybe you have read in the Internet or the newspaper that a lot of electric vehicles starts to burn and even steel cases cannot -- are not fireproof when the battery starts to burn.

And this is why we developed a battery case made out of resin and carbon fibers. And U.S.

automotive producer put this in first serial application, and we also have interest from other OEMs and this is going to start in the fourth quarter this year. This is the main reason for turnaround, and these are large amounts of battery enclosures.

Okay. And the -- how long does that take to reach full utilization would you say for that particular order in terms of the battery cases?

The ramp up and ramp down costs of automotive production. There's a lifetime of 6 to 7 years for this type of car, and it maybe needs 1 year or 1.5 years to ramp up to full utilization.

But there are other projects already in the pipeline. So we're not just depending on just 1 contract as we -- where we were with the take-or-pay or when you look to the carbon fiber business.

In our composite solutions business, we try to avoid this just to rely on 1 customer and 1 contract. We want to broaden our production base also with other customers, and there's a lot of demand and a lot of design-ins for battery cases, especially in e-vehicles.

And then maybe the next part of the answer is our leaf spring business. Leaf spring is a main spring in a car where the wheels are attached to.

And there, we replace steel leaf spring. And this is made also out of resin and carbon fiber, and we see a lot of interest for carbon fiber-based and glass fiber-based leaf springs, and we are in some new cars also.

And this is the reason for the turnaround in that business.

And especially because we are in serial production and not just manufacturing smaller lot size. This is really serial production that we go in there and there we have economies of scale and higher asset utilization that really paid off this strategy.

Yes. Just one question from my side.

You talked especially in the Process Technology segment about a strong order intake in the last 2 months. And I know it's not an official KPI of your company, but maybe you can give us an indication for the company at all?

How order intake was in the first half of the year? Or if you don't want to share this number, how book-to-bill ratio was in the first half of the year and also compared to the last year?

Well, Lukas, the question, let me answer the following way. We reached already in the book-to-bill above 1.

So we are growing, especially in the second half of the year, and we see a recovery overall in the PT business, our process technology business. We'll reach at year-end, roughly the same sales amount as last year, which was EUR 90 million sales.

And this is what we think we can achieve also in this year, maybe top it a little bit because second half of the year, we see also exactly as Torsten pointed out when he described the business from order intake to really a conversion into sales, it takes roughly 6 months, and we saw a good order intake in May and June. So especially the Q4 will be quite strong for the PT business.

And there, we see a recovery, and we hope to achieve if there were not any project push outs into the next year or maybe even slightly exceed the sales of last year. And this is also why we guided this key figure as stable.

And for the compete group?

What do you mean complete group?

Order entry.

In terms of order entry or book-to-bill?

No. This is something we don't disclose, to be honest.

And for some businesses, it even doesn't make sense because -- I mean in carbon fiber -- so far, we don't disclose that. It's not one of our official KPIs.

But I mean we indicated that we see a lot of order intake, especially for the second half of the year. And this will be also converted into sales later this year, but also, I think we will have a good start into 2022.

I'd like to start with carbon fibers. In the last call, you said that there are very limited capacity additions to be expected in the next 1 or 2 years.

Has that changed with the stronger demand? Do you see that there is more appetite from PS to invest in additional capacities?

No, growth in demand is higher than growth in capacity. So the market is going to shorten according to our view.

Second question. Did I understand right, the battery case order that was not part of the sales increase in the first half.

It's still to come, but was not the driver in the first half?

Yes, right. They planned the SOP, I guess, in June or July, and it was postponed to September, and this is why it was not in the figures the first half year.

You were talking about the strong rebound in -- a strong rebound in the automotive industry. Is that mainly coming from existing orders?

Or did you had success in getting new orders for new parts in cars from various customers?

Both, we see increases of existing business. Sometimes you have a 100% contract and they ask us to expand it to 130%.

And currently, we are hiring quite some people to fulfill these orders, but also new inquiries are at a very, very healthy level currently.

But that is for existing parts. So that's not...

No, no. Also for you.

So existing parts growing and also quite a lot of inquiries from new business.

And is there something structure you can share with us. What kinds of parts in cars, in general, are now where you see more interest in the -- for the carbon fiber business?

Yes. As we said, battery enclosures and leaf spring, they make up the major chunk of our composite business and there is strong interest, but we have also a variety of small parts which we produce, for example, for luxury sports cars, and there's a huge, a very huge demand currently for carbon fiber containing parts.

Okay, understood. So that -- these sharply growing business is really in the composite business.

So not in carbon fiber and the pretax is in the composites?

Yes. But we still have the i3 BMW, right?

The car is running pretty well, and we have a record order entry also there.

Then one -- yes, maybe only a housekeeping question. But in the corporate line, you highlighted why expenses are higher.

The fees for consultants and lower rent fees. Is there something you could share with us what the underlying level of expenses for this line will be in the second half of this year and maybe also going forward?

Well, we've already anticipated the budget phase for all corporate functions and corporate services. And this is also -- you called it housekeeping, Andreas.

And this is exactly what we are about to continue. We will adjust our overhead structures accordingly.

We will streamline any further. You know that from previous 20 corporate functions, we anyway summarize them into -- or bundle them into 10.

And out of that, we try to optimize our processes and just focus on the most important things. There will be another reduction also for next year that we plan in our overhead costs.

And you can expect that this amount that we see there as a loss that is going to almost double until the end of the year. You see the figure with a minus EUR 10 million for the first half, but it includes a one-off effect, as I said, with EUR 1.8 million, which we couldn't classify as restructuring costs due to some accounting issues that our auditor mentioned.

So it's in there. If you deduct it, then it's EUR 8 million, take it times 2 because I mean the costs are rather proportional, then you're there.

Okay. And that's also something we should look forward for next year?

Or did I get you right that you intend to decrease these expenses going forward?

You got me right, but we give our guidance for next year later on this year or beginning of next year, it depends. But firstly, we have to finish our budget phase, and we see maybe if we need some special projects, whatever we need this is the answer for this year.

But as I said, we try to streamline processes and to optimize our business not just in the operating business units, but also in the corporate functions and services.

And then coming to the last question. Looking on the size of the business in carbon fiber and the composite, it looks like that you have quite a number of sites for this business.

Is that necessary? Or does that open up also room for improvement?

Yes. We were running a site consolidation project and first of all, we separated our sites into heavy asset sites.

For example, a carbon fiber plant is heavy asset. There are several hundred people working, a lot of CapEx you have to invest to build up such a plant, and we have so-called light assets.

Light asset is a machine shop with 10 people working there. And when we talk about sites, it's a mixture out of this heavy asset side, where we have maybe 10 to 15 and the other half are small machine shops.

And we might close down or divest very, very small amount of it because the light asset sites are all accretive and they make money. This is what we can say for the time being a little reduction and we might keep some of the complexity.

Very last one, sorry, very last one. Could you give an update, how you see the conversion of your site in Portugal from the textile lines to fiber precursor lines?

Yes. We have now converted 2 textile fiber lines to precursor fiber lines.

They run at full speed and serve our capacity in Muir of Ord and a little bit of the capacity in Moses Lake. The rest of the precursor is coming from our joint venture in Japan, Mitsubishi.

And currently, we are in the makeup by analysis how the setup will be next year, but we would be able to convert next line, but we are not sure yet.

Yes. Thank you.

I also didn't see any questions. So I have to close the call.

If you have further questions, please do not hesitate to contact IR team Jurgen or myself. And last thing I had to do is have a fantastic afternoon.

Thank you. Bye-bye.