NV Bekaert SA (OTC:BEKSF) Full Year 2021 Earnings Conference Call February 25, 2022 8:00 AM ET
Oswald Schmid – Chief Executive Officer
Taoufiq Boussaid – Chief Financial Officer
Katelijn Bohez – Chief Communications Officer & IR
Conference Call Participants
Emmanuel Carlier – Kempen
Frank Claassen – Degroof
Ronald Evers – ABN AMRO
Stijn DeMeester – ING
Good afternoon, and welcome to our webcast and to our Bekaert Results for the Full Year of 2021. A warm welcome from Taoufiq and myself to this webcast.
It’s a special webcast under special circumstances. I recall 2 years ago, we woke up once in February, and we learned the virus is changing our private lives, our professional lives and our economics. And we have learned to deal with a lot of uncertainties and ambiguities.
In the recent hours, we learned again that we have a VUCA environment. And this VUCA environment, over the last 2 years whilst we thought the coronavirus will go away and new events are coming up, has taught us how we deal with these ambiguities and uncertainties. And I’m very proud to say today that we are really, I would say, like to share the impressing results we have been able to achieve under this circumstances.
When we look on the journey of our Bekaert over the last years, you see we started in 2018 with an EBIT, which was about 5% lower, even lower than the 5% and ending up in the year of ’21 at 10.6%. When we compare the ROCE starting with 8 and coming up with 23.7 in the year of ’21, I think this is really reflecting, I would say, a very impressing milestone on our journey, and this is a sustainable journey.
And it’s a journey which we started in ’19, there was a lot of work done on the leadership, the way we really gauge capital allocation, and we created in 2020 a value creation agenda, and we talked about performance, transformation and growth. And the year of ’21 was characterized, but we would like to grow creativity beyond steel.
And when we look at the numbers, this is something which is a result of hard work, dedication and engagement of our 28,000 people. It’s a sustainable performance what we have seen.
And you might say comparison with 2020 might not be appropriate, but I think this is why we put in 2019, which was a significant, I would say, an excellent year as well to show the improvement.
And two things you might remember of this slide. The first one is we have achieved great performance across the board from the top line to the bottom line. You saw our ROCE figures and the deleveraging are stronger than ever. What you can also see is the 2021 performance exceeds both what I said before last year, but also the pre-pandemic levels of 2019.
So overall, we resulted in sales of €4.84 billion. And this is when you compare to 2019 plus 12% and 2020 would be even 28%. The EBIT is now 10.6%, really jumping up another 5 percentage points from the previous periods, 23.7% what you have seen before in ROCE. And the earnings per share is a very strong one, going up, mostly tripling to 7.14 and deleveraging continues to 0.61.
And this performance, what we can see is, on the next slide, it goes across the board. You know our four divisions, Rubber Reinforcement, Steel Wire Solutions, Specialty Business and Bridon-Bekaert Group, the BBRG. Rubber Reinforcement costed €2 billion, Steel Wire come close to €1.8 billion; and Specialty Business as well BBRG roughly about €500 million.
But most important is when you look in the lower line, you see between the year of 2018 and ’21 [Technical Difficulty]
Sorry, everyone. We currently have a technical problem. We will continue the presentation in a minute.
We are back. Yes. Apologize for this technical disruption. Good to have you back again. Allow me just – I’m not sure where we have been cut off, allow me to go back to this slide.
And this was about the four business units, about the revenues. Really high sales they have achieved in all areas, €2.1 billion for Rubber Reinforcement, €1.8 billion, which is, I think, the ever high we had overall in Steel Wire Solutions, €500 million for the Specialty Business, and €500 million for the BBRG.
But I think the underlying – the last line is maybe the most important one. When you see the development of the EBIT underlying percentage covering the years 2018 to ’21, and here, you see the improvement of Rubber Reinforcement coming from 9.1% in 2018, delivering 11.8% in 2021.
More impressive, even when you look at Steel Wire Solution coming from 3.7-ish going up to 11.3% in a very difficult environment as well. But also Specialty Business now coming from 6% of EBIT underlying now to 14.7%.
And last but not least, maybe this is the most impressing one and BBRG as you know, many of you know the story of BBRG, we were negative and now coming up almost to 10% running nearly 9.3%.
We have this diversity in business units, which gives us a very good balance in all the segments we are in. But when we now look to the areas where we look at representing our business in the regions, you will see Latin America taking a huge portion of 34%; EMEA is followed by 28%, Asia Pacific is covering 26%, and North America, 12%.
Now look on the sales for the end market, of course, tire and automotive with our steel core business is actually represented and stronger followed already by construction, basic materials, agriculture. Our diversity in energy and utilities, further to equipment and consumer goods is complementing our portfolio offering to the markets.
Now let’s go to the topic of the environment we have been facing in ’21. And what I said before, it was not an easy environment. Supply chain interruptions, cost inflation, energy hikes, geopolitical events, COVID-19 was still around, labor scarcity.
But what we did is how did we responded? And it looks that our execution paid off tremendously. The closeness, customer proximity and the commercial excellence in a disciplined way, we continue to work forward and further footprint adjustments, operational excellence, how we serve the market, supply chain topics and all the processes in our factories, further, of course, elaborating efficiency improvements in our organization.
And one topic I would really like to thank our marketing and salespeople, the pricing discipline. We have seen cost increases on wire rod. We have seen cost increases on logistic, packaging, energy, and they have done a fantastic job to make sure that we have been able to pass on these cost increases and secure our margin.
Of course, from the financial part of view, effective working capital and cost control were crucial elements to keep this performance. But we did not only look on the day to day performance.
We were also looking what is really important to secure also the future of the journey in a way that high performance is given, accelerating our transversals on digital, sustainability and innovation.
We have seen that we have been quite diverse, and you know this very well environment of our business units in all the sectors we are in, allowing a good balance of regional topics, of product areas.
And for example, Rubber Reinforcement, we have seen a solid tire demand overall, very strong in US, very strong in India. But on the other side, of course, seeing that China is softening, and we have seen also the export business was a little bit weaker as we have seen before.
When we look on Steel Wire Solution, again, strong demand across all the regions. There was a big boost in price and also in demand in Latin America. And we were benefiting also in many other areas about the reverse globalization. Because we could really prove in ’21 the closeness to our customers, not depending only from one country to export, we could serve locally their needs.
On the other side, of course, we have been also facing some raw material shortages in US, sometimes COVID with people in quarantines have given us a hard time to make sure the production is up and our customer gets the service they need.
Specialty business, I think it was really amazing to see the improved performance in the high end filtration and also in the hydrogen market. I think here, we have a quite unique technology position. And we see that the market like to see that, and they are coming in with higher demands.
But we also picked up in economy friendly combustion solutions, but of course, on a global – being a global business, supply chain constraints are still with us.
BBRG recovering very well in the energy and mining markets, and we have a record on the increase of the order book for the ropes business, and we are very proud of this. I think we never had this order book business as before.
But of course, there have been areas where there have been a weakening demand, mainly in OEMs, there’s still this chip shortage around, but I think it’s going to catch up in the year of 2022.
When we now look on what we said also to secure the future and this is really about investments in digital, innovation and in sustainability. I think the most crucial part is that we really are digitizing our company and we get a data driven company.
We’re increasing really the way –and you see six plants. We are really increasing the way how we run manufacturing, how we look at the processes, how we really in a smart way improve the manufacturing.
We have developed and launched already three portals, which we’re using to have a much higher customer engagement and much higher customer proximity in these portals, and we see already a higher growth in ordering by online than we will see in analogue, yes.
And of course, artificial intelligence is one of the future where our predictability, our forecasting is somehow also progressing in the way and give us a much better base to work on.
Sustainability, it’s not only about sustainability, it’s about environment, it’s about sustainability and it’s about the government. And we have a clear strategy in our ESG. It’s about green energy. It’s being a part of the solution. It’s making sure that we have energy-efficient operations that we not only cover the Scope 1 and 2, which are our internal ones. It’s also that we look on what can we do in the Scope 3. And as you know, this covers the suppliers and this covers also the customers as well.
But we also look at a lot of pilots. And we started in India and in Spain with solar farms. We have done already to prove the concept with our plant in Turkey, and this project was called You know Watt! to make sure that we have the right ideas and the right setup that we have. Our SBTi targets are submitted and they are under evaluation, and we expect in the fourth quarter to get the response of that.
But in addition to the ESG, we want to be market makers. And this is really about where we see areas, maybe not in the next 2, 3 years, but I think there are areas and there are trends, there are mega trends, we want to be in. And this is hydrogen, this is all about data. It’s about 3D measuring, for example, remote services for ropes, but also to be capable to make digital twins for our core processes.
And this then would allow on a platform also to provide further processes and services to our customer. And I think this is where we also look to be, I would say, quite advanced and we already have 1 company, as you know, which allows us to have the supervision of ropes [ph].
When we say in a summary, smart, sustainable and safe wins, and I would like to give you a selection across the board. We have achieved the first in underground with steel fibers for the Grand Paris Line 16. Our BBRG teams delivered crane wire ropes for two vessels used to install offshore wind turbines, and we are a supplier of flat carbonized cable armoring wires for the subsea cable as a part of the Euro Asia project. And this connects now Greece, Cyprus and Israel. And you can imagine what the circumstances and specification of this cable armoring wire is to be in the sea over a very long time.
In Colombia, our solution is a part of connecting of the Capital Villavicencio. Bekaert delivered more than 3,500 tons of Dramix 3D for 18 tons. You can see clearly a balanced portfolio I mentioned in the beginning.
But now allow me to express my thanks to our Bekaert teams, who ensured that our plans run well, the customers were served well in an environment I described before. We ensure that we make ourselves, customers successful. The teams, I would like to thank their continuing the journey of transformation and growth agenda.
And I also, of course, would like to thank our customers for their loyalty and trust; our suppliers that give us confidence and they supply this in a very difficult circumstances where sometimes raw materials were short. And we have been able to keep the supply chain up. And of course, our investors for their trust and confidence in us. It’s really a true end to end connection when we look on the whole value chain.
But this journey is not an ending one. It’s a continuous journey and it doesn’t end here. We will continue to work on perform, on transform and growth. And we are really excited to go further up the hill and to take the next milestone and I’m sure about that we achieve another milestone in the history of Bekaert. Thank you very much.
Now I hand over to our CFO, Taoufiq.
Thank you very much, Oswald. Good afternoon. And thank you very much for joining the call. So I will be elaborating on some of the very strong financial metrics that we have delivered this year.
Just before starting, just wanted to make some introductory remarks because I think that strategy and the execution that we have been conducting is yielding results. You will see it in the financials that we will be presenting.
And I think that more importantly, in a context where we were dealing with significant VUCA constraints, the strategy has allowed us to reposition the company towards a stronger situation, you see it in our balance sheet.
We have been opportunistic when it was required. We have been very disciplined when it was needed. You see it in some of the metrics as well that we will be discussing. And at the end, I think it’s important to say and Oswald has touched on that, that our growing performance is really a translation of the fact that we’re working the top.
And let’s go into sales, and I will further explain some of the underlying business drivers behind these statements. So overall, when we look at the sales, so when we did our mid-term guidance, we were guiding for a sales of €5 billion plus over the cycle. With our current performance delivered in 2021, we are not far away anymore from that.
So we’re at €4.8 billion, with a significant improvement versus last year. So our sales are up 28% versus 2020, were up 12% versus 2019, which was kind of more of a normalized year. And we see as well a very strong momentum when we look at the combined sales at €5.8 billion, so not far away anymore from the €6 billion that we had as line of sight.
So there are several catalysts which have crystallized this level of performance. The first one is the volume. So unlike last year where our sales expansion was primarily driven by volume, this year, it’s only the second catalyst, but it’s still driving roughly 9% of the top line expansion.
The major driver in 2021 has been related to the very strong performance that we have delivered in terms of managing in the right – with the right level of discipline on pricing.
So we have been able in a context, which is – which has been characterized by strong cost push inflation to push the prices and to have a top line expansion, which has been also translated into a gross margin contribution.
The last or the third element explaining the good performance that we have in sales has to do with our pricing and mix. So we have referred several times to the fact that we are working on segmenting, in a more intelligent way, our portfolio of applications, and this is yielding great results that we see in 2021.
I will later on further elaborate on the specific metrics by BU. Just would like to drill down a little bit more into the P&L and looking at some of the additional metrics. Can you, please, thank you very much.
So the first indicator is the gross profit. So you see a significant boost in gross profit €886 million, so €304 million up versus last year, that’s 50 – more than 50% expansion. So in relative terms, I think that this figure doesn’t tell the story. But I think that if you look at the evolution since 2019, I think that there we have a story.
So 2 years ago, we were delivering a gross profit in the range of 13.6%. We have further improved it in 2020, and we have reached almost 16%, and we’re delivering an improvement versus 2020 of 280 basis points at 18.7%. So again, a very good performance that we’re very proud of.
Looking at this performance by BU. So RR and Steel Wire Solutions had both improved their gross profit margin on sales by 300 basis points, so respectively, at 15% and 18%, so very good performance overall.
Specialty business and BBRG generate, respectively, a gross profit margin of 30% and 22%, so they continue to perform above the company average gross profit percentage.
Drilling further down into our overhead. So our overheads have improved in percentage, and we have reduced them by 50 basis points. In absolute terms, we have an increase of €73 million.
These increases are all due to nonrecurring one-offs. So the first one is related to the fact that we have to phase out versus last year of some of the mitigating COVID-related actions, which have allowed us to offset some of the overhead costs. Obviously, this is not happening anymore.
We had also to adjust some of our compensation-based schemes and incentives in order to adjust them with the level of financial profitability that we’re delivering this year.
And the last item is related to some practical spend mainly related to innovation, digitalization and sustainability, where we have involved some external consultants. So that’s for the metrics I wanted to touch on, on this specific page.
I think that the next page does give a simplified view of where we stand in terms of EBIT buildup. So obvious metric is the significant boost that we had in terms of EBIT underlying.
So €243 million incremental contribution in 2021, bringing us at 10.6% EBIT-U [ph] on sales in absolute terms, that’s corresponding to an increase of 90%. So a quite strong, a very strong figure in terms of EBIT delivery.
So this has been the combined effect of several factors as you can see. So we have the contribution from volume. So we have captured the operational leverage coming from the volume increment that we have.
We have been, as I mentioned as well earlier, a quite strong focus on the pricing, and we have been very successful in mitigating the inflation effects that we see in many of our input costs. And last but not least, the smarter product segmentation that we have been working on is leading what is also contributing to this boosting in performance.
So we had some drags in the overall EBIT buildup. So this is mainly related to some costs and the phase-out of the cost. So we have a €95 million contribution which was coming from last year that are not repeated this year. But we have been able to absorb them and still be able to deliver on the significant EBIT improvement for 2021.
Now looking at the detailed performance by business unit, and I will start with the Rubber Reinforcement. So Rubber Reinforcement has grown their top line by 27%. With the same profile as what I have described for the total company, it’s primarily driven by a strong pricing discipline. We had also a revenue expansion, which has been driven by the volume. The mix also has contributed there. So a quite balanced mix of levers explaining the very good performance that we see in terms of sales.
When we look at the performance across the regions, we have a significant growth rate across some of the key geographies where we are present. So in Southeast Asia, we have been able to grow our business by 50%, in EMEA and North America, we have grown by 40%, China in value, we have an expansion of 12%.
This really is a little bit contrasted when we look at the volumes in the case of China, where the volumes actually have contracted by 5%. So we had to deal with some headwinds when it comes to our business in China, mainly related to the fact that the domestic market was a bit softer, had lower exports out of China, mainly related to the shortages in containers and also the increasing freight cost.
But despite these adverse factors in China, margins have been very well managed overall in a context as well where the domestic market was characterized by an overcapacity and stronger competition, competitors were running after volume as you can expect.
I think it’s very important to look at as well the level of performance we’re delivering in 2021 in relation with where we were in 2019. So if you look at the sales, we have grown by 5%.
But when you look at the profitability metrics, our gross profit has grown by 26%, our underlying EBIT by 44% and our ROCE has gained 8.3 percentage points. So overall, a very, very strong performance.
Moving to Steel Wire Solutions. So Steel Wire Solution is also reporting a significant boost in the top line, so in the range of 37% on the back of a very strong pricing and mix effect, which is contributing overall for 28%. And then there is also a volume growth of roughly 9%. So volumes have surged in Latin America by almost 20%. We have elaborated on that throughout 2021, and also a significant growth in EMEA by 9%.
On the other side of the chart, North America has somehow contracted. So we have a drop in terms of volume by 10%. It was mainly related to some shortages that we had to deal with in terms of raw material, but also in terms of labor and this has led to this contraction in volume.
By application, the demand has remained quite strong in agriculture, in construction and in utilities. We were kind of worried about the situation with the automotive sector, but we did see a rebound in 2021 versus the 2020 level.
And again, the business being truly a global business has benefited from some of the global trade tensions that we see both in terms of supply chain, in terms of also a fiscal or tax related trade barriers that we have seen. And this footprint has really been a key asset for us to drive this performance upward.
So the EBIT has more than doubled, thanks to the many different contributions coming from the volume of the business that we see. Latin America has been a significant contributor in this performance. And there as well, I think it’s interesting to look at the performance of 2021 in relation with 2019.
So while the sales have increased by €370 million roughly, we see that the gross profit has more than doubled. We have multiplied by four the underlying EBIT and the ROCE has increased by almost 30 percentage points. So again, an impressive level of performance delivered by Steel Wire Solutions.
Moving to Specialty business. So Specialty business is also reporting a very solid sales increase, 22%. And we see a strong momentum across the three segments of the franchise.
So in building products, we saw a very strong demand growth, primarily in Europe and a strong effect coming from the boost in pricing and mix, which has been translated into a sales expansion of roughly 25%.
In Fiber Technologies, we have achieved as well a sales expansion of 25%, on the back of the business – strong business performance in Asia and also the high end filtration and hydrogen markets overall, which have performed very well. Combustion business has been also very good, and we have expanded the sales by 10%.
So again, comparing the level of performance of ’21 versus ’19, €62 million sales expansion, but translated in terms profitability by gross profit, which is increasing by 23% and underlying EBIT at almost plus 40% and the ROCE, which is gaining 10 percentage points.
Last but not least, BBRG. So BBRG as well, a very solid sales increase versus last year, 13%, mainly driven by volume equally split between the ropes segment and the Advanced Cords. Very important to mention that during 2021, we saw a significant increase in the order book for the ropes business.
So between January and December, we saw an incremental 96% increase in the order book. So a very important indicator for us to charge on the solidity of our projections for 2022.
So by application, we see – we saw a very good level of performance coming from the demand in crane and industrial markets. The oil and gas onshore business in North America has recovered. It was kind of sluggish in 2020, but it’s stable, it’s back to a level where we wanted it to be. And other applications such as fishing and marine continue to be quite resilient.
In Advanced Cord, the OEM automotive business has recovered during 2021. It’s kind of slowing down again in Q4 of 2021. But overall, we’re picking up, and we did see a solid demand as well from the elevator and hoisting business overall.
So when we look at the trajectory that we see in terms of profitability in BBRG, I think that it’s clear that the profit restoration plan and the turnaround actions that we have taken are yielding results. So we’re moving from a situation where BBRG will soon become accretive in the total profitability of the group. So last year, it was still a bit dilutive, but we’re very confident that we will be accelerating this level of performance.
And again, looking at the performance from a historical standpoint. So you see that versus 2019, we didn’t grow that much the sales, but what an amazing performance when it comes to EBIT, where the gross profit have sored [ph] by 44% – sorry the gross profits by 44%. Underlying EBIT has – is almost four times as high as 2019. And our ROCE is 8% higher compared to last year. So many things to be very proud of when it comes to BBRG.
So to summarize and to elaborate on some additional metrics for the P&L. So you see a very strong boost in the result after tax, so standing at €343 million, an increment of €230 million roughly versus last year. We’re obviously paying more taxes. Of course, I mean now our profitability is boosted. Having said that, our ETR is back to a normalized level of 28% in 2021 and we are projecting to see it stable in that range for the foreseeable future.
Now moving to the balance sheet items and the working capital. So another record performance, I would say, 12.6% working capital average on sales for the year, so very, very strong performance.
So if we look at the working capital, as of Q4 we’re at 40%, so relatively stable versus last year. But the 12.6% is a significant improvement versus the average that we have delivered in 2020.
So we were kind of worried with the evolution that we were projecting in inventories. I mean we had a boost in activity, which was driving an increase in tonnage, but also the fact that the raw materials were more expensive needed to be reflected in the valuation of the inventory.
So in absolute terms, we have an increase overall in the inventory values by roughly in €428 million, but this is mainly driven by these two elements that I have referred to, so 60%.
If we exclude the FX impact, which is embedded there, which is roughly €40 million, if we exclude this element, there is 60-40 split between increase in absolute terms coming from tonnage and valuation.
In terms of accounts receivables, so we have been very diligent in managing our accounts receivable. We haven’t increased significantly the level of factoring versus H1. So we’re closing the year in the range of €225 million of factoring.
Overall, our level of payables in percentage receivable story is improving. We have been following very tightly the over dues, the payment terms. We have been motivating in a nice way our sales teams to make sure that we collect faster than what we used to do. And this is yielding some very good results as you can see it in the evolution for the accounts receivable.
Payment – accounts payable, basically, it’s reflecting the evolution primarily driven by what’s happening in the inventories. So it’s the main component that we have in the account payable. And all in all, so a very strong performance when it comes to the working capital at 12.6%.
We don’t think that this is a normalized level of performance. You might claim that I already said that last year when we delivered 16.4%. We wanted to remain cautious because we want to make sure that we have the right level of working capital to allow the business to operate at the right level. We can elaborate later on, on that. But 12.6%, I think that – it’s a level of working capital, which leaves very limited low hanging fruits to still tackle to further optimize it.
So translating this into cash and net debt. So we have, thanks to the results in working capital and as well from the EBITDA contribution. We are now holding €677 million in cash on hand. This is after €480 million of – €460 million of debt reimbursement, out of which €380 million was the convertible bond that we have reimbursed in June. So a very strong cash position, which is allowing us to reach a debt leverage of 0.6% roughly, so half of the multiple that we were reporting in 2020.
And to conclude, I think the relevant metric here is the earnings per share. So obviously, all these improvements have a knock-on impact on the EPS. So very happy and very proud as a team to report EPS multiplied by three at €7.14.
As a result of that as well so given our strong balance sheet position, given the cash generation, given the performance that we foresee in the short term, we have proposed an increase of the gross dividend by 50% compared to last year. So our Board has approved dividend of €1.50.
And we have also heard the comment expectations from many of the analysts [indiscernible] and also some of our investors. And we are also launching a share buyback program of up to €120 million. So we’re finalizing the arrangements, and we should be formally announcing it next coming weeks.
Outlook. So that was a very difficult one, actually. I read some of the comments from some of the analysts this morning, we would have hoped to be able to guide more accurately. And I think that we would have been in a position to do it probably two weeks or one month ago.
But with what’s happening currently in terms of geopolitical situation and all the knock-on impact that it can have on many of our businesses that we cannot measure, we cannot anticipate. So we want to remain again rather cautious.
I mean, we still confirming the guidance that we have given. So we still project an expansion of our top line at 3% plus. We are still committing to a margin level, which will be at 9% to 11%. We will need to see how we will mitigate some of the tailwinds – the headwinds that we’re facing and broader demonstration that it’s something that we’re becoming quite good at.
We had to deal with the COVID. We had to deal with raw material inflation. Now probably, it will turn into something else, but we have the agile and the reactive organization to allow us to do that. But I think that confirming the guidance that we have given 1 year ago, almost a year ago is another sign of confidence on the potential of our business.
Okay. So with that, I think and open it for Q&A.
A – Katelijn Bohez
Perfect. Maybe before we start, just one housekeeping issue. So just to let you know that the recording – this meeting is being recorded and published for replay on our website later this afternoon. And second point is I refer to the safe harbor statement in the presentation, which applies to the content statements made by all the speakers.
So I’m now going to open up the floor to your questions. The first question is from Wim. And Wim if you could unmute your microphone, turn on your camera, and if you could raise maybe a maximum of three questions, that would be great.
Yes, good afternoon. Thank you very much for the opportunity to ask questions. My first question would be on the Rubber Reinforcements, please. Can you elaborate on the market conditions you’re seeing at the start of 2022 in the various markets?
And obviously, I’m definitely interested in your comments on China. Michelin is hinting at a little bit of improvement recently of the passenger car tire market in China. So I was definitely wondering if you also see a similar picture. So that is the first question.
Second question is on why ropes prices, availability and competitive dynamics linked to that. I recall that you benefited in 2021 from a better sourcing diversification than some of your competitors. And so I was wondering if you could update a little bit on that.
And then third would be the impact of inventory valuation effects on EBIT. There was a significant boost in 2021. If the graphs, I’m tracking on Bloomberg, that suggests a slight decline of raw material prices are true, then is it fair to assume that we will see a reversal of the positive inventory revaluations already in H1 2022. So those were my questions.
You want me to start on – the first question, Wim, thank you very much for the question. It’s about Rubber Reinforcement, how we see the market evolution in the different markets, I think was your question.
Yes, indeed, China was a little bit soft and weak. I think it will even start in the second half of the last year. And what we – and always they have answered a little bit, when you say about the best car, yes, we see a recovery. We have also seen a quite stable – maybe on a little bit of lower end in China on the car tire business. But we assume some, I would say, further stimulus from the China government to keep here the demand up.
But I think in the second half, this is what our prediction is there might be a further ramp up. But today, we are – because of also less exports, yes, we for sure have a lower demand, as we would have normally in the booming times of China.
When we go outside, we see and you have seen it before, we see very good demand in India, for example. We have done a fantastic job in ’21. Honestly, this was one of our highlights, we did not explicitly refer to. But for sure, there not only the financial, but also the market positions we could gain there.
We see it further when we – say our, let’s say, companies, big six as we call them, the traditional big tire companies where I spent also 15 years in that. I think there’s good demand further forecasted on this level where we are in. I don’t see a major disruption in those areas. But of course, as closely honest, we look at environment and circumstances we are in, we don’t know.
But as of today, and I think also the first quarter shows also that the pricing is quite still favorable. We have a lot of costs, as you know, on energy and many other topics. And yeah, I think we are in discussions with our customers to make sure that we can have a margin management as we would like to see.
So China is maybe the one single question mark. And I think China is changing, and overall, it’s not only in the market. It’s also in the political situations, but we don’t see it being strong in the truck tire market, a bigger change there.
The second one, do you want to take, Taoufiq.
The next two, okay. So in terms of wire rods. So again, we are in a very fluid environment. So it would be like reading in a crystal ball, but we do have assumptions. We do have assumptions and we see what is happening so far. So I think that we have different type of evolutions depending on the regions that we look at.
If we look at Europe and America, so the markets and the prices overall, have been picking at the start of 2022. So there is still an increase versus the level that we saw in 2021.
Having said that, there is a gradual better balance between the supply and the demand in this specific region. And we are not expecting a significant drop of the current level of pricing. The reason being that we don’t think that when it comes to the wire rod pricing, the level of pricing will be driven by supply and demand. I think that it will be more driven by the underlying cost associated with the wire rod. So it will be iron ore evolution. It would be energy cost, potentially transportation and so on. So that’s for Europe and the Americas.
As far as Asia is concerned, so the price has started to decrease in 2022, but we do see potentially the possibility that the prices will be pushed upward and this is mainly due to the fact that some of the input costs associated with wire rod, such as iron ore, cooking coal and so on, will be impacted and will increase.
The demand is when will potentially increase in Asia. So you know that the steel production and whatever is contributing to the carbon emission has been tightened in terms of production in China during the Olympic Games period. And this is – and it will be potentially realized.
So what it means for Bekaert? So looking historically at the situation, so now the prices as they stand now are roughly 55% higher compared to the pre-pandemic period, so a significant increase.
We do expect a continuation of the increases overall during Q1. We are banking on a stabilization for the balance of the year. It will be very hard to tell you whether it will decrease for the balance of the year in Q3 and Q4.
And the next question is related to the FIFO impact. So actually, we don’t want to call it FIFO impact anymore, and we will elaborate on that later on during the year. We looked at it from all the possible angles. And I think that we’re progressively reaching a conclusion that more than a FIFO impact it’s a purchase price variance impact because we are valuing anyway our inventories at standard cost. I think that FIFO is probably a terminology that we should rethink.
Having said that, indeed, 2021 significant so called FIFO impact in the range of €116 million, given the evolutions that I just described we might see still a positive impact during Q1, nothing close to the levels that we have seen in 2021, and it will probably come to a neutral level if the prices don’t increase anymore for the balance of the year.
Allow me to add one on the first questions because I forgot to mention, we have the original equipment tires and we have the replacement tires. And I think when the chip shortage maybe comes to an end, of course, the OE, the original equipment, they will also pull up and I think some of the tire manufacturers are referring to this one. But when we see the replacement tires, I think this is going on very well.
Okay, very clear. Thank you for the all the explanations and congratulations with the good results.
Thank you very much.
And thank you, Wim.
So the next set of questions is from Emmanuel Carlier of Kempen.
Yes, hi. Good afternoon, all. And congratulations as well with the great turnaround. So three questions from my end, the first one is on profitability. So I think if you exclude the FIFO effect, the underlying EBIT margin was around 9%. But if you try to split it up in H1 and H2, H2 was a bit softer than the 9%.
If I look at the mid-term guidance that you have, it’s still 9% to 11%. So you’re actually saying that profitability in 2022 will be better versus the second half of 2021. So I think it would be very helpful to better understand what will drive, yeah, that profitability improvement? That’s the first question.
Then a second question is on volumes and price mix. So on price mix, assuming that wire rod prices would stabilize at these levels, have you done the calculation of what it would mean in terms of the full year effect on price mix.
With respect to volumes, looking at the tire builders, I think most are guiding for around 2% to 3% growth. So I guess that’s a good guidance for the Rubber Reinforcement business. But I would love to hear some volume guidance as well on the other BUs.
And then the final question is on M&A. So of course, you cannot comment too much. But I would like to get a bit of a feeling on the progress you have booked with respect to M&A over the last couple of months?
Question number three, on volume. Emmanuel, you have asked four questions.
It’s just three or four. Sorry for that.
No. Thank you very much for the last question. I would like this has a bigger context. When we started 18, 24 months ago, we started with perform, transform and grow. The lay out basis and to transform where we need to go in digital in sustainability and innovation, and the last part was the growth part. And I can – you’re absolutely right. I cannot tell so much, yes. I don’t want to disappoint this one.
But we had a – we have a short list – a long list of 30 companies, and we have a short list about 10 companies. And it is also a little bit linked to the issue, how deep is their wallet, how big is the wallet of Taoufiq. This is always linked to it. And one year was different then it is this year. So this also changes what we have in mind.
And the principle is very clear. There are topics where we would like to strengthen the core, but it does not make sense to do the same over the same. You know what I mean, we also want to go in adjacent and the other partners where we say, hey, let’s go in this digital solution, let’s go in this hydrogen, et cetera. And these are things which are more long-term orientated as well.
So we – what you think about, it’s not only an M&A, Emmanuel, it’s also where we have joint developments, where we need to go for partnering. And where, indeed, we would say, hey, this is a clear M&A target. But as you know, so targets, business has to be developed. There’s not that we say we can do in two, three weeks or two, three months. It really takes time if we want to do the right move.
We are not under urgency. I think we will continue to perform and transform, and we will continue to look in the markets, which are the targets, and we have about 10 where we are going to deep analysis doesn’t say that these are the final ones, but which fit in the end markets we want to serve.
And this is really about future of construction. This is about differentiation in the, let’s say, in energy, but it’s also what I said before, looking to strengthen the core. And we – and you can imagine this is a lot of work, what we are doing in the background. We have to understand the market, the market dynamics, who is also willing to join in to partner and to go ahead with Bekaert.
But intensive work on this third pillar of the growth part is done here. And of course, let’s also be frank, there should be a much, much more asset light topics, less CapEx intensive. I think this is also going beyond steel, this is what we say.
Let’s go beyond steel, let’s not fall to alternative materials, let’s look for alternative solutions, which are part of the smart digital solutions. We are offering in one example. You might have seen before VisionTek is the one, and we’re looking at some other areas where we can have more services out of the digital solutions. Now Taoufiq, really important ones.
No, but you can still answer a very important one. What about the tire’s volumes?
The tire volumes, yes?
You asked had a question on volumes and – tire’s volumes, Emmanuel, right?
I think on the tire volumes, you kind of indicated that you expect to go back to growth. So I think that one is quite clear. It’s more how you look at volumes for the other business lines.
Yeah. Okay. So I will start with then with your first question, the profitability H1 versus H2. So historically, H2 has – is a low month, low six months for pickup. So we have very strong months in performance in H1. H2 tends to be lower for two main reasons. The first one is that you have in the middle, the summer vacation, you have the year end vacation. And you have also some activities which are seasonal, mainly related to agriculture and construction where we have a drop in the volumes associated with that.
But that – I would say, that’s what is structural. But beyond that, we had also some specific situations happening in 2021 H2, which will also have an impact on how you will be able to compare them to H2 of 2020.
First thing is that we started having a drop of the volumes in China throughout H2. It’s a drop, which obviously had an impact on the fixed cost absorption and our cash conversion cost did suffer from it.
What will change in 2022 is that we’re expecting that China will be back online with normalized volumes in H2 2022 and will, therefore, allow us to have a better level of performance in terms of cash conversion cost. So that’s mainly the primary driver.
So we are also working on mitigating plans should this not happen for the moment. We wanted to avoid taking stringent measures to reduce the cash conversion cost because we were thinking about the time that it will take us to ramp up and things like that.
Having said that, there is no – and if we see that the ramp up of the volumes are not coming within the framework that we’re currently aiming at, we will take measures to stabilize and to mitigate the impact on the cash conversion cost.
The other aspect and third aspect is that the impact on the cost on some input costs like utilities and so on, started hitting us badly as well in H2 versus H1. We didn’t suffer that much from it during the first part of the year. In the second part of the year, we started being impacted. And you have some period of inertia before starting tackling this.
So we started implementing negotiations with the customers to be able to pass on some of this cost inflation. So now it’s up and running, but you have a delay where we couldn’t do a full offset of this order – right level of offset for this energy and electricity and so on. So that’s basically the explanation behind the profile of the profitability in H1 and H2.
That’s clear. Thank you. And maybe the final question was a bit more color on how we look at the volume trends for the other business lines?
Sure. Sorry, for that Emmanuel. Indeed, when I look on SWS and this is a geographical business as you know. Now when I see Latin – I see North America going well. I think we haven’t quite a strong demand there as is also for Latin North.
Europe is going, I think, remain on these levels that we are seeing today. If there is a little bit of a cloud, and this is also a level geopolitical topic is maybe a little bit on Chile, then they have been tremendously contributing in last year to the overall success of SWS.
And this is what we are watching today. Here, we need a little bit more time to understand. But it doesn’t look so bad today, but this could be a certain part of uncertainty in these markets.
When we talk about Specialty Business, honestly, it’s a smaller part of – it’s 10% of our business. But we see in all areas, filtration business, this is our construction business, is this our – we have a fantastic improvement on our host wire business, which we had a very special focus on belongs also to Specialty Business. And also, we could turn around the combustion business was also very successful. They have a very strong demand throughout the four sub business units, this will continue.
And when you talk about filtration where we have the hydrogen, here we see, of course, on a lower scale, really a very strong demand because of the technology we have. The systems membrane, which is coated and allows then the production of hydrogen for electrolysis. And here, we’re looking to do some very nice things, what we said before, on getting capabilities in for coating, et cetera. This is something which we may explore in the next 3 to 5 years, but we’re sure we are on the right trend.
And we are also looking hydrogen is about a race of the technology to get the costs down. And here, we are participating in this journey and making sure that we are organize them.
When you talk about BBRG, the ropes you have seen the fantastic recovery. And what I mentioned before, we never had such an order book of this magnitude, if I remember, that point correctly. So – and this is what we see here that there is a recovery. And this is, of course, linked to all in rope price as well. It’s about 90 to 100, and this is also different. And here, I think we are quite confident, especially, I think the second quarter should be a good one, what we see from the order book directly.
But all in all, on a group level, so you would kind of expect, yeah, I would say, a slight volume growth in 2022, unless we would go to a recession, of course.
Unless China, unless we added the VUCA elements, we aim this is how I would, yes absolutely, Emmanuel.
Thank you, Emmanuel.
So the next set of questions are from Frank Claassen of Degroof.
Yes. Good afternoon, all. Three questions, please. First of all, on Russia, if I’m not mistaken, you have a plant there. How important is this plant? And yes, what is the current unfortunate situation? How could that affect your operations over there?
And secondly, on Latin America, you’ve made – you have very strong growth there, also because you gained market share. How are the local competitors doing now with the supply chain, with the wire rod availability, do you see them coming back? What is your view on that?
And finally, could you help us maybe with the CapEx number for ’22? What is the rough indication, and what are the main growth projects for this year? Thank you.
You want me to start on Russia?
Russia is Russia. Yes, we have the plant. It’s in Lipetsk. It’s one of our younger plants. It’s 10 years old, it’s about 500 people. It’s mostly, I would say, it’s tire and a little bit of Dramix. And all the business we do is for Russian customers. There’s no export outside. So when we talk about wire rods supply, when we talk about energy supply, this remains within Russia.
Of course, we are looking what is the exposure. Of course, it’s a small percentage of all our sales. It’s one – we have about €70 million sales over there. So it’s a minor part. And as in the moment, of course, we see it’s too early to really to say, but it cannot have because of the size, a big impact on this one.
Of course, if Russia would shutdown energy would cover then whole Europe, it will be a completely different game. But from our point of view, from our operations, we see currently and also not in the future.
And what’s interesting is the demand in Russia is very strong on bead wire, on tire cord, and we have been asked by a lot of local customers really to expand there. And it’s also from the cost position, a very good plant what we have there, but it’s only Russia for Russia, so we don’t expect really a different one.
I think your second question was about LatAm, about competition coming back. You still see China – this was, I would say, in previous years, I would say the main driver of price effects was the China exports and you still have the logistics, sometimes the container, the freight is of higher value than the content that is in the container. We don’t see in the next months that the logistic and I would say, container availability is really changing significantly.
The second thing is it’s not about just the supply chain, it’s also about the customer relationship. We have done a lot of digitization. We have done a lot of end-to-end integration, how we come together with the customer. Is there an uncertainty because we had the new election in Chile. You’re absolutely – will there be a change of tax? We don’t know yet. As of today, we don’t see big differences.
But we think we have a also a cost competitive situation. It’s not only that the market maybe is not so fluent as we thought, but I think we have done a lot to improve and to be cost leadership because there will be a point of time there may be competition get up and we have to be prepared. I think the third one was on CapEx.
Yeah. So CapEx, so we’re anticipating a level of spend in the range of €200 million. You asked a question about the main projects. So the ones that come to mind, it’s the ramp-up of Vietnam to finalize the plan there.
In BBRG in the US, so you know we have closed Pointe-Claire in Canada, and we’re centralizing our production in the US, so it will ramp up some additional capacity. So we will invest in BBRG US.
In Fiber Technologies as well we will do some investment to scale up our capabilities. So very good demand as you can see from some of the results and the information we shared earlier. So this will be some of the top investment projects that we will be spending on.
Okay. That’s clear. Thank you very much.
Thank you, Frank.
So the next question – set of questions is from Ronald. Ronald, if you could maybe mention the name of your company.
Yes. Ronald Evers, ABN AMRO. Although I am here instead of Martijn, as Martijn is skiing today and he asked me to handle his questions. Let me in. Thank you very much for getting me the time to ask his questions.
First of all is on the – my question is related to the JV you have with ArcelorMittal in South Africa. I think it did extremely well, €108 million net profit, and Bekaert owns about 45%, if I’m right. And it is net cash €13 million, 1-3. How much of the profit can be paid out in dividends? Was that 70% historically?
Then my second question because I only have two, and that’s a question from Martijn. That’s basically also on the supervisory board, and if there will be any changes expected in the next couple of years? And then he means the level of independent directors versus the, let’s say, non-independent directors. Thank you very much.
I will start with the…
Yes, yes, with the last one. You will start with the joint venture.
Yes. So on the joint venture. So this is Brazil actually. So our joint venture is in Brazil. So as you rightly noticed, there is a significant boost in performance. A part of it is related to one-off event, actually it’s a tax credit that we have been able to capture. It’s roughly 40, 53, €34, million, sorry and we haven’t received the corresponding dividends related to that. So it’s supposed to come during 2022. And we’re aiming roughly out a dividend, which is corresponding to our participation percentage in the result of the JV.
Thank you. So will 100% of the dividend be up-streamed? And then – so basically, you get 45% of the dividend up-streamed and 100% of the net profit will be up-streamed?
All right. Thank you very much…
I think there are two members of the supervisory board are retiring. I think this is for the age of reason, and I think this is about replacement. This is not up to me now. I think you have been awaiting this response to this one, and it maybe takes a little bit more time until we have the AGM.
Super. Thank you very much, indeed…
Okay. So the next set of questions are from Alexander of Kepler.
Good afternoon. Also from my side, congratulations on nice results. Most of the questions have been asked already. But I was just wondering on the Rubber Reinforcement segment. There, you have a super-tensile and hyper-tensile tires. I was wondering how this market is evolving and how much – is this as a complete part of the Rubber Reinforcement segment potentially?
I think it’s…
More percent and growing.
20% and growing.
Yes. I wanted say, it’s 20% and growing. And why is it growing because it’s to contributing sustainable solutions because the tire industry, they have two tires; light, weight and less rolling resistance, and both of them are contributing to this one.
And here, I think we are quite unique in the technology. We get a lot of requests from our customers, and this is increasing. In the environmental topic, this is one of the topics. We are working together with, I would say, all of these tire companies because they have all the same aim, less rolling resistance and a lighter tire, et cetera.
And how is the margin difference between the two?
Yeah, of course, you aim for a higher margin when you have a higher value offering. This is very clear, yes. I have difficulties unless I look to my CFO to display any margin on this one. Of course, otherwise, we wouldn’t do it, also to be honest.
Yes. And just a small correction, actually 20%, that’s the ultra-tensile business. So this is that’s the high, high end. When you look at all the premium products, so that’s basically 40% of the total portfolio. So it was 40% 2 years ago. Now it’s in the range of 44% of the total portfolio. The 20% is the high, high-end ultra-tensile application. They are coming definitely at a premium price, that’s all we can say at this time.
I think we’re also seeing China higher demand on this high performance, I would say, tensiles that we have today. This is also one where we see getting more out of the commodities coming into the higher end then in the premium segment.
Okay. That’s very clear. Thank you. And then maybe to follow up on my colleague Emmanuel. What was again the leverage you’re aiming for if you’re looking at targets, M&A, et cetera? If you lever up, what is your leverage guidance that you would maximum obtain? In other words, how big is the wallet?
How deep is the wallet? This is what you say…
We have stress tested an EBITDA leverage or an EBITDA multiple of three times. But with very stringent rules to reduce it back to 1.5 in 24 to 30 months max.
Okay. And maybe then as a last question. Could you maybe elaborate some or give some additional insights on larger projects and the order book for – that you have currently?
The order book, I think, the large projects that we have. Sorry, to…
We can, maybe we can show up this slide. Go back to – just to remind. There are a lot of smaller projects and there’s a lot of big project, but Gazelle Wind Power, for example, is one, yes.
And we see – I would say, in general, I would say, the mining industry is picking up. We took just one of the examples, but we have many more of them, which are in the order book of BBRG. Do you have deeper insight on this?
So we have the interconnector, the subsea cables. So this one is…
And this all in BBRG, I think.
Yes. It’s only on BBRG that you’re asking the question, Alexander? Or do you have something else in mind?
Well, BBRG is one of the key segments that I’m interested in, but it’s also an overall question. If you can put this in absolute – absolutely a little bit would be nice.
BBRG is the only project-driven business that we have. So that’s why, I mean, we have a closer visibility on what’s going on. The rest, I mean, you see we’re making reference to some products or some projects in Specialty Business, but they are not projects as such. They are not long term or midterm. It’s an order we receive, we deliver it.
And usually, we close the deal, except if there is a big infrastructure project, which are going on for a long period of time. That might be the case specifically in the Grand Paris Line 16, which is a long-term project which would require from us to support the civil engineering work for quite some time. But the rest is a ad-hoc, spot-on orders and contributions we’re making.
Thank you very much.
Okay. So the next set of questions are from Stijn of ING.
Yes. Yes. Good afternoon. Thank you for the opportunity Unfortunately, I cannot put on my camera on, my system would crash. That wouldn’t be – I think it was me who crashed the presentation earlier on.
So a couple of questions, if I may ask them one by one. My first question touches upon the question of Emmanuel on the second half profitability. Can you help me understand, when I combine the EBIT bridge of the first half that you provided then and the full year ’21 EBIT bridge, I deduct a negative impact from the reversal of COVID mitigation measures in the second half of minus €111 million, and that is the result of €16 million positive cost improvement in the first half and then this minus €95 million that you have over the full year.
So can you help me understand this number of minus €111 million in the second half? Because in my knowledge, then the majority of the COVID mitigation efforts were in the first half of 2020. So why would it show up in the second half bridge?
You lost me a little bit, Emmanuel [ph] with the figures that you were referring to. So we will have to reconcile them. I mean what I have in mind as a delta in terms of COVID mitigating actions is €95 million spread throughout the year. And we started capturing some of this COVID measures, I think it was towards the end of Q1, and we benefited from it until the middle of Q4, basically. So…
What I’m trying to understand is why this bucket of COVID mitigation didn’t show up in the first half bridge?
We would need to check that. I’m looking at my team. I don’t recollect…
Because there you only have a positive impact of structural cost improvement action of plus €16 million. So yes that’s…
Okay, we will do the reconciliation, and will get back to you. I will look at it together and we get back to you on this one.
Okay, okay. Good. My second question is on volumes over the second half. If you look at Q3, there were minus 5.5%. Q4, they were minus 9.5%. What is the underlying number for China for those two quarters?
So I would assume that it’s beyond. I mean, that is more negative than the minus 5.5% and minus 9.5% that you report. So can you give me a sense of the debt that we are seeing currently in China?
Yeah. The volumes in China have basically dropped between 5% and 9%. So this is what we had, and we have compensated half of the Chinese drop by incremental volumes in Europe. So these are the high level metrics that we have, but we can break it down for you by quarter, and we can send you this.
Okay. Yeah, helpful. And then sort of a question on FIFO versus price variance as you would like to call it from now on, and I understand that this is a moving target.
But can you help me understand if the wire rod price would be stable for the full year compared to the end December 31 price, the impact in the bridge that you would show at the end of ’22, would that be zero or minus 120?
No. It would be zero.
Would be zero. So there’s only a negative impact if the prices are trending down again.
Okay. Understood. Final question, if I may. That’s a fourth one, but it’s a short one. Can you put a number on the sales exposure to Russia and Ukraine or the wider Eastern European region?
No. It’s only as Russia for Russia. It’s only Russia for Russia. So we have one plant, it’s €70 million. So that’s 1.4% of total company.
Okay. All right. Thank you.
Okay. If there are no more questions…
Yes, it was a old…
Okay. So in that case…
Thank you very much.
Thank you very much. Stijn will get back to you with your reconciliations. Emmanuel, I see the question.
Yes, sorry. These are very, very short questions to answer, I guess. On working capital, I’m not sure if I fully understood your comment, Taoufiq. You mentioned that the working capital to sales will be sustainable going forward?
Well, what we’re saying is that at 12.6% average, we think that we’re reaching really the rock bottom of what we can do. So we really put a lot of pressure to stress test how far we can go. Depending on the evolution of the business, we might let it go by 1% or 2%.
So that’s why I’m more aiming at the stabilized working capital in the range of 14%, 14.5% rather than 12.6%. And this is on average full year.
Yes. Okay, helpful. Thanks. And then on costs, could you remind me the — could you quantify the number of cost savings that is not yet included in 2022? Because you did quite some optimization at the end of 2020, I think it’s around €12 million, but yes…
So it’s basically €22 million that we do not see yet completely in the P&L. So €10 million is coming from the recurring saving after the closure of BBRG or Pointe-Claire BBRG in Canada. So this is restructuring, which has costed us roughly the same amount. So it’s a payback in 1 year. Belgium has costed us €22 million. We have a payback of 2 years. So we’re expecting a recurring saving year-on-year of €12 million.
And then I think in the presentation, you mentioned that there was some kind of potentially one-off costs, you refer to tactical spend related to innovation and digitalization. Is this – could you quantify the amount you spent on that? And is this something that will recur this year as well?
No. It’s purely cost of consulting. So I mean, these consulting activities have stopped. So we have spent €10 million to €12 million in consulting activities associated to these areas. We don’t see an immediate need to re-duplicate these costs again in 2022.
Okay. Yes. So these cost savings will also be quite important in terms of profitability improvement and…
Yes, yes. Absolutely.
And the really final question from my end is on the associate line and the minority line. What is the best way to kind of predict that, because I guess that in both lines, you benefit as well from FIFO effects?
So is the best way to predict that going forward to look back towards a kind of normalized profitability level? Or do you believe that these businesses have also structurally improved?
I think that it’s an improvement, which has been definitely driven by the demand situation and the material or the raw material prices. Because it’s businesses associated to areas where we do not see major structural changes from the market, the demand or anything like that.
We don’t see – to our knowledge, we don’t think that they have done significant changes to their operating mode. There have been historically very strong and very good contributors in our results. So I would look at it from a normalized perspective, assuming that significant part of this improvement might be coming from the raw material side.
Okay, yeah. Thank you. And then I have actually one really final one. This is on the wire rod prices. So if the – if prices stabilizes from – at current levels, how much would that be kind of positive impact with respect to sales, because I did the kind of numbers. And to me, it looks like you would still have a kind of tailwind of maybe 10% on a full year basis.
That’s about it, yes.
Okay. Okay, thanks a lot for that.
Okay. Thank you, Emmanuel. Everyone, thank you.
Thank you all.
So thank you all for your participation. Our next appointment together is on the 11th of May at the Annual General Meeting. And in the meantime, I’m sure that we’ll be meeting on the conferences or the one to ones.
Thank you very much. Thank you. Bye-bye.
Thank you. Bye.