Q3 2024 Marel hf Earnings Call

Good morning, and a warm welcome to our third quarter financial results meeting broadcasting live from our headquarters in Reykjavik, Iceland. My name is minimal feat from Investor Relations and I will be your mother H today, and we will start with presentations from C. E O often Susan and see if O sebastien, Poland will go over the third quarter results or outlook.

And provide an update on the J P T merger.

And we will then conclude with Q&A and if you would like to ask a question. Please use the raise your hand feature and zoom or you can also email us I R Red Dot com.

Speaker Change: With that I'd like to hand over to our Chief Executive Officer arsenic Susan Thank.

arsenic Susan: Thank you Danielle.

arsenic Susan: Good morning, everyone and thank you for joining us today.

arsenic Susan: There are three key points that we want to share with you. This morning.

arsenic Susan: First it is our financial results for the third quarter.

arsenic Susan: Second it is the 2024 and midterm outlook.

arsenic Susan: And third an update on the recent milestones reached towards the potential combination with JBT.

Starting with our financial results.

arsenic Susan: It was very encouraging to see the strong pickup in orders received and poultry, which was key in driving total orders in the quarter to $403 million and a book to Bill to one point all four.

arsenic Susan: We had some softness in the other segments due to continued challenging environments elevated short term uncertainty and timing of orders, especially in plants pet and feed.

arsenic Susan: Revenues in the quarter were $387 million declining sequentially like we had the outlines in our second quarter results due to the soft orders received in previous quarters and the low order book.

arsenic Susan: Our profitability in the quarter improved to 13, 8% EBITDA and nine 4% EBIT. Despite the revenue decline.

We have continued cost discipline in the quarter evidenced by two 5% reduction in the workforce.

arsenic Susan: Market fundamentals in the industry continues to stay relatively healthy and our pipeline overall gives us confidence that we will see further pickup in orders received in the coming quarters.

arsenic Susan: Growing the order book from the current low level of 33% of revenue is instrumental for us to deliver revenue growth and improved operational performance.

arsenic Susan: I will cover our outlook and the JBT update later on.

And with that I will hand, it over to Sebastian to provide more insights into our financial results.

Sebastian: Thank you Ernie and good morning.

Sebastian: I'll start with orders received.

Sebastian: Quarter, three we saw an improvement in orders received to $403 million up to four 2% from quarter, two and up 3% from last year and driven by could protect holders.

Sebastian: Hopefully you had the material step up in the quarter.

Sebastian: Some large projects mainly in Europe.

Sebastian: Orders received for fish.

Sebastian: PPS and meet on the other hand were softer.

Sebastian: You would have received are expected to trend upwards over the coming quarters and market fundamentals continue to stay attractive.

Outlook is positive for poultry and PPS to.

Sebastian: The meat and fish segments, however continued to be soft.

Sebastian: And even with a healthy pipeline conversion to orders keep shifting to the right.

Sebastian: The different segment demand inflation and high interest rate environment only slowly abating.

Sebastian: And continuing geopolitical tension.

Sebastian: Also the time to secure Downpayments and provide financial security of Motors continues to take longer.

Sebastian: Revenues were 387 million six 8% down compared to quarter, two and down four 1% year on year due to the low project revenues on the back of lower Portugal in the recent quarters and the soft order book.

Sebastian: <unk> revenues were $188 million this quarter down, 12% sequentially and down nine 3% year over year.

Sebastian: Recurring aftermarket values. However remained solid with good underlying momentum at $199 million with a small seasonal decline of one 1% quarter on quarter and a growth of one 3% year on year, reflecting morale strong focus on quality surface.

And that with the trailing 12 months level, staying again above $800 million this quarter.

Sebastian: EBIT at $36 2 million came close to quarter two level, but noteworthy on the lower volume and at an EBIT margin of nine 4%.

Sebastian: EBITDA margin also improved sequentially to 13, 8%.

Sebastian: EBIT was driven by a solid gross profit margin, albeit at lower volume.

Sebastian: Combined with the lower Opex in the quarter.

Sebastian: The gross profit margin was 36, 6% with a higher mix of aftermarket.

And improved efficiency.

Sebastian: And that's despite a 6.8 drop in revenues.

Sebastian: Opex came in at $106 million, a lower level than in quarter two with.

Sebastian: With a continued focus of improvement efforts on cost discipline across the business, including personnel and non product related spend.

Sebastian: Consistent with past practice in quarter three.

Sebastian: We also had the release of accruals related to holiday.

Sebastian: Partially explaining our opex dropped compared to quarter two.

Sebastian: Due to the short term uncertainty and a potential business combination with JBT a hiring freeze was implemented in July to ensure further cost control and attentive workforce planning.

Sebastian: Furthermore, in the quarter, we did some targeted restructuring in a number of locations to lower iron ore cost base.

Sebastian: The costs incurred are reflected in our restructuring cost with nearly all of those costs FTE lyrica.

Sebastian: We would normally expect to get an annual run rate cost savings of around three times on those restructuring costs.

Sebastian: Ftes at the end of quarter suite.

Sebastian: Were 7% lower year on year, and two 5% lower than in quarter two.

Sebastian: With continued cost discipline has resulted in our cost base of $337 million in the first nine months.

Sebastian: 6 million down from last year, despite inflationary pressure.

Sebastian: An order book.

Sebastian: Our order book was up to $554 million with a book to bill ratio about above one this quarter.

Sebastian: It's still a soft order book, representing 33, 3% of trailing 12 month revenues with the orders received level that we have in this quarter, we do see an improvement in the order book from the low level in quarter two.

Sebastian: And building up order book, and getting and maintaining a book to bill ratio above one is a key priority as this order book profile the turbos to a great extent, our revenue forecast, our working capital profile as well as cash generation and the ability to deleverage.

Sebastian: Our operating cash flow in quarter, three and positive to $57 million, but year to date operating cash flow standing at $79 million.

Sebastian: The increase since last quarter is mainly attributable to the orders received increase in quarter three.

Sebastian: Driving improved net contract liabilities.

Sebastian: Partly offset by higher receivable position.

Sebastian: And working capital focus program initiated last year continues to progress well.

Sebastian: Control over AR and AP continues to show good improvements.

Sebastian: Slightly up this quarter on a high level of downpayment enforced issued just before quarter end.

Sebastian: And these are part of order sushi process of financially secure in our orders.

Sebastian: And higher via T and import duties too.

Sebastian: Inventory continued to trend downwards with $6 million this quarter.

And the fourth element that contract liabilities had a 17 plus $17 million net positive impact on working capital.

Sebastian: This is explained by the fact that net contract liability driven by the higher level of orders received.

Sebastian: This all resulted in a net decrease of working capital of $7 million in the quarter.

Capex, excluding capitalized R&D was at $5 million per quarter equivalent to one 2% of revenues. This is well below our normalized level of two 3% and due to continued focus on cash flow.

Sebastian: The leverage covenant decreased to $3 75, or lower net debt in the quarter.

Sebastian: We have good headroom and ample liquidity consisting of cash on hand and committed credit facilities.

Sebastian: And we are well within our covenants, which was $4 two five important tweak them.

Sebastian: This will step down to four point, though for quarter four.

Sebastian: Okay.

Sebastian: Poultry.

Sebastian: Very strong protect orders received with growth in all regions and very strong in Europe with closure of some large projects.

Sebastian: Revenues declined seven 6% to 191 million.

Sebastian: Driven by a drop in Portugal revenues.

Sebastian: However, the revenue decline was less than expected.

Sebastian: EBIT margin improved to 15, 8% driven by increased efficiency in opex coming in lower due to the seasonal impact.

Sebastian: The outlook for poultry is good.

Sebastian: Our actual performance for quite a full bore will be solid but.

Sebastian: But still be impacted by the low orders received in the first half.

Sebastian: The overall pipeline is healthy also in North America.

Sebastian: And project orders received are expected to be at a good level in the next quarter.

Sebastian: This will support improvements in operational performance in 2025.

Sebastian: Okay.

Sebastian: Meet.

Sebastian: The orders received are soft in the quarter, mainly due to delays it protects to quarter four and into 2025.

Meet the did half on improved operating performance. Despite continued challenges in the market environment.

Sebastian: Revenues were stable quarter on quarter.

And aftermarket revenues remained resilient.

Sebastian: EBIT turned positive as a result of continued cost action initiatives, the before mentioned holiday accrual releases and a better mix.

Sebastian: The outlook for the <unk> segment continues to be challenging.

Sebastian: <unk> focuses on quarter, four and buildup of the order book and continued cost measures to improve profitability.

Sebastian: And even though market fundamentals in pork has shown signs of improvement in some geographical areas.

Sebastian: <unk> continues to be challenging and.

Sebastian: And we reiterate that a recovery in the meat segment will take time.

Sebastian: Particular for beef.

Sebastian: Fish.

Sebastian: Fish out the weak performance in quarter, three due to soft order book and low revenues and with unfavorable product mix.

Sebastian: And with order shifting to the right.

Sebastian: Revenues were down 19, 4% compared to quarter two due.

Sebastian: Due to a drop in project revenues aftermarket revenues remained resilient.

Sebastian: The EBIT margin was negative in the quarter, driven mainly by lower revenue base and headwind.

Sebastian: Due to cost overruns on a few project for an acquisition.

Sebastian: Operating cost discipline continues and reductions due to action on workforce and footprint are starting to flow through.

Sebastian: Fish has completed consolidation of four production sites into one in Iceland.

Sebastian: Opex was slower due to run rate improvements and holiday accrual releases.

Sebastian: Our focus remains on improving profitability, increasing orders received and continued cost control. However.

Sebastian: However, the order book is soft impacting revenue levels in the coming quarters.

Sebastian: There are some signs of fundamentals improving especially in the salmon industry. The white fixed segment remains challenged.

Sebastian: Yeah.

Sebastian: <unk> patent feet.

Sebastian: P. P F operational performance pipeline and outlook remains solid.

Sebastian: Orders received for soft compared to a strong quarter to partially due to the timing of orders.

Sebastian: Revenues are stable quarter on quarter for both protects and aftermarket.

Sebastian: Following the soft start of the year in terms of orders received.

Sebastian: EBIT margin was driven by a slightly lower volume and headwinds from mix.

Outlook remains solid for PPS at good opportunities in the pipeline.

Sebastian: Fundamentals are solid and.

Sebastian: An improving somewhat in the pet food industry, while the plant based segment faces more headwinds and.

Sebastian: And with this summary.

Speaker Change: I would like to hand over to Arnie for an update on outlook and Jbt's Ofer.

Arnie: Thank you Sebastien.

Arnie: Turning now to the outlook.

Arnie: We have been showing progress year over year in the first nine months of 2024.

Arnie: Our gross profit margin has improved by about 100 basis points through mix and improved equipment margin based on better price cost and overall efficiency.

Arnie: The EBITDA margin has improved by more than 30 basis points.

Arnie: And EBITDA without any capitalization of R&D is improved by about 80 basis points and also in absolute terms.

Arnie: Due to this progress we are reiterating our outlook for the full year 2024 to show adjusted EBITDA of 13% to 14% adjusted EBIT of 9% to 10% and revenue decline in the low single digits.

Arnie: Market conditions have remained challenging and despite positive signs and improved fundamentals on both macro and micro level for our customers. There is continued short term uncertainty.

Arnie: As such we do expect to come in at the low end of the range.

Arnie: Our markets have attractive long term growth prospects driven by favorable trends focused on increased protein consumption automation and raw material utilization.

Arnie: We also see opportunities to continue to partner with our customers to improve their operations with innovative solutions digital offering and quality service.

Arnie: We are therefore very excited about our future and reiterate our midterm outlook.

Arnie: Moving to the update on the potential combination of model N JBT.

Arnie: Several milestones have been reached in the past few months.

Arnie: Shareholders of Jbt's supported the merger regulatory work streams are progressing well and JBT is targeting to close the transaction no later than January 3rd 2025.

Arnie: But more on that later.

Arnie: We've also been working hard on pre integration planning together with the JBT team ensuring that we are ready for day, one to capture the great opportunities that JBT model will have.

Arnie: Together as a world class team of experts across technology markets products and processes, we will have the opportunity to provide industry, leading solutions and services.

Arnie: We approached our combined organizational design to ensure that we have a platform in which we can achieve great success together with clear focus on our customers.

Arnie: Both organizations have been deeply involved throughout this process working together to align on the structures that will best serve our current and future customers and strengthen how we go to market.

Arnie: As previously.

Arnie: Really communicated Brian deck will be the CEO I will be the precedent and that <unk> will be the CFO.

Arnie: Brian and I will each lead to business divisions, and I'm very excited to learn more about the diversified food and health business and continue on the journey with the recently combined division of fish and retail and foodservice solutions.

Arnie: Looking at the at the business divisions.

Arnie: Our focus here is on the value proposition and aligning on the structures that will best serve our current and future customers across all our end markets.

Arnie: And poultry, we are combining our greatest strengths to serve poultry customers better than anyone else in the in the industry.

Arnie: And fish and retail and foodservice solutions, we're building what we believe to be the most comprehensive primary and secondary fish business in the market and strengthening our foothold and fresh processing.

Arnie: And meat and prepared foods, we are leveraging strong track records and respected brand names with trusted leadership to drive excellence and primary cut up the bone and prepared foods.

Arnie: Then last but not least and diversified food and health. We are already have a strong global portfolio across a diverse set of end markets, such as citrus juices beverages and ready meals and this combination opens the opportunity for industry leadership in the high growth.

Arnie: The pet food market.

Arnie: Moving now to the timeline.

Arnie: We've made very good progress in the last months.

Arnie: First <unk>.

Arnie: Over 99% of shares voted at the JBT special shareholder meeting were in favor of the issuance of JBT shares for the model transactions.

Arnie: Second J.

Arnie: JBT has secured long term financing to complete the merger, which includes the cash portion of the transaction.

Arnie: Refinancing of modest outstanding debt.

Arnie: And payments of transmit transfer transaction related fees and expenses.

Arnie: Third the regulatory work streams are progressing well.

Arnie: JBT has now reported that falling in and in that pre notification process with the European Commission a formal review of the regulatory merger filing began last week.

Arnie: That review is subject to a standard twenty-five working day phase one review period.

Additionally, JBT is targeting to receive regulatory approval from the Australian competition authorities during a similar timeframe as the European Commission.

Arnie: And fourth the offer period has been extended to December 20th to accommodate for this updated timeline for the regulatory review.

Arnie: As a result, JBT is targeting to close the transaction no later than third of January in 2025.

Arnie: So.

Arnie: All of the work streams are progressing well and we are finally, starting to see a more concrete timeline.

Arnie: Therefore, I encourage our shareholders to prepare accordingly.

Arnie: If you plan to tender your shares I would also want to highlight that it is beneficial for all parties that you don't wait until the last days to tender your shares.

Arnie: And please note that you can of course always change your mind after tendering their shares during the offer period.

Arnie: There is strong rationale for the combination and not without a reason that the model board of directors unanimously supports the combination and recommend that modern shareholders tender their shares into the offer.

Arnie: Together, we are expanding our solutions and service offerings, providing holistic solutions expertise leveraging line solutions.

Arnie: And offering expert support across resilient and growing food and beverage end markets.

Arnie: Our complementary digital platform enhances this value delivering insights that drive efficiency reduce downtime and optimize performance for our customers worldwide.

Arnie: And with the unmatched talent and operational scale of the combined company, we have the expertise global rights and resources to make a lasting impact in these high growth markets that have great long term prospects.

Arnie: This partnership gives us a unique opportunity to bring two great organizations, together and create value for our shareholders and industry alike.

Arnie: Before I hand, it over to Turner.

Arnie: I want to thank our team.

Arnie: For their dedication artwork and resilience during this challenging market and as we prepare for the potential merger with JBT.

Arnie: Their commitment and teamwork are instrumental in driving us forward and I couldnt be prouder to lead such an exceptional group.

Arnie: Their efforts truly make a difference thank.

Arnie: Thank you.

Thank you Anthony and thank you for that and we'd like to move into Q&A now as a reminder, if you'd like to ask a question. Please raise your hand, featuring him or you can email I are asking about the dot com.

Speaker Change: First question that we have is spend class berglund from Citibank. Please go ahead.

Speaker Change: Yes, hi, thank you.

Speaker Change: Dana Hi on and Sebastien has caused some safety so.

Speaker Change: Some good progress there on the cost side, given the weaker volumes, which is good to see you are talking about continued sort of improvement efforts cost actions and I'm trying to understand the magnitude here I heard the Sebastian to three times payback on the restructuring, but what kind of incremental number are you thinking on opex into next year and also if.

Speaker Change: You have that at the Cogs level. Thank you.

Speaker Change: Yeah. Thank you good question of course.

Speaker Change: We have been working on it for a time and targeted.

Speaker Change: Improvements in restructuring, we're still looking at going further, especially into the patients that are struggling with their operating performance of course next year provided the combination with JBT will continue we will have to combine those two companies and that will give us another.

Speaker Change: Chance to actually reset our base for the Opex cost.

Speaker Change: Thanks.

Speaker Change: So I asked I mean.

Speaker Change: It's a potential combination right.

Speaker Change: As a stand alone, but maybe maybe you cant provide us.

Speaker Change: Yeah those numbers.

Speaker Change: No. So I think what we what we have been doing in and we will see some of the actions that we've been taking over the last couple of quarters, starting to going to flow through more we're starting kind of on the fish side. We took actions both in Q2 and Q3 that we saw the numbers kind of improving in Q3, and we expect to have.

Speaker Change: <unk> have some tailwind and I think in a Sebastian provide a kind of that context, we're probably looking at based on the actions in Q3 alone probably somewhere in the range of kind of close to $8 million run rate.

Speaker Change: So that will be a tailwind and then while we are obviously following closely is how the commercial side is developing we saw very good intake on the poultry side more softer than in the other segments.

I expect that it was exceptionally so kind of soft and the other segments in in Q3. So we're also just making sure that we are ready we have been taking actions on some footprint, but nothing major on the footprint side. So we're still very vol invested from an infrastructure standpoint to be able to use.

That kind of infrastructure and capacity to capture the growth, but should help but help us.

Speaker Change: When the market turns in terms of operating leverage.

Speaker Change: Okay.

Speaker Change: That's good my second one is on the order intake Lauder project orders there in poultry was this sort of pent up.

Speaker Change: Demand from a couple of quarters ago that came at one says sort of feed costs came down prices went up I'm trying to figure out if.

If we will have a slowdown in orders into the fourth quarter below 400 again, yes, because we had this unusual catch up effect in poultry in the third.

Speaker Change: Yeah, Altria was I would say poultry was kind of strong across the board.

Speaker Change: Europe was really strong in poultry. We also saw improvement in North America I don't think North America is fully back on on the poultry side, then and the pipeline looks good.

Speaker Change: I I been at what we did say is we expect to see let's say the headline orders received number.

Gold kind of trend upwards as you know, it's it's always talk to be spot on for each quarter. So I can have if poultry will M. A poultry is kind of peaking and coming down a little bit I expect that the other segments would compensate for that.

Speaker Change: Okay. My third and final one is on the cash flow good progress on the prepayment side, there given the orders, but receivables through a build to bust and is this just a timing issue or is there something else going on do you expect to sort of collect more.

Speaker Change: On cash in the fourth.

Speaker Change: Yes.

Speaker Change: All efforts will continue and I do expect to to be able to keep the receivables at the sort of level as same as the payables and also expect inventory to sort of tweak.

Speaker Change: To decrease further and therefore, hopefully at the working capital picture, but as mentioned before the main driver for working capital will be the order book or the order intake that will happen in the next quarter and as already said that that also looks upward from this quarter.

Speaker Change: Thank you.

Thank you Klas and next up we have a question Andre Mulder from Kepler. Please go ahead.

Speaker Change: Okay.

Andre: Hey, Andre.

Andre: Here can you hear me now.

Andre: Okay.

Ill start anew.

Andre: On the order intake and again looking at the pipeline would you exceptional for meat, where it's soft.

Andre: Would you expect cultural improved order intake for the other plants.

Andre:

Andre: And maybe pull trees staying at the same level of coming down a bit.

Speaker Change: Yeah, Great question Andre.

Speaker Change: So.

Speaker Change: If you look at it we look at just the quarter itself.

Speaker Change: I do think it was exceptionally kind of it in quite quite soft in the all other segment considering how strongly we're in poultry. So I would expect that our overall for the other segment that that will show improvement.

Speaker Change: Going forward and.

Speaker Change: And just as an example on our end client pattern feed that segment had a soft quarter and its a soft quarter on the intake side, but that was going to very much due to due to timing where it kind of as we look into October already it was kind of let's say on the fence and we saw some good orders coming in on in October.

Speaker Change: <unk> are in that Sacramento area, sometimes around kind of quarter end and and it's hard to time that exactly so I do expect some some tailwind from from the other segments, while we could see it may be poultry kind of softening a little bit but nothing.

Speaker Change: Nothing compared to the first half it was a really strong quarter also with some large projects. We have a good pipeline of healthy projects. There. So there's kind of I think the outlook is good the fundamentals continue to be solid in the industry and production is even increasing so so that's why we're.

Speaker Change: Can I confident despite the strong quarter in poultry to say that we expect the orders received to trend upwards.

Speaker Change: Would it also include meat.

Speaker Change: Ah, yes, compared to compared to two this quarter, we expect it to.

Speaker Change: Be somewhat stronger than in Q4 if.

Speaker Change: If we just the dynamic that isn't in the meat market at the moment is we've seen improvement there Ah Ah the pork processors are showing better results.

Speaker Change: And it's clear kind of that lower input costs.

It's quite okay demand and pricing, it's kind of remaining at a decent level and so the packers or the producer of kind of our customers are profitable at the moment, but there is there will be like we've said, it's going to take a little bit longer. It can have the processor, who have gone through a quite deep cycles. So.

Speaker Change: I feel they will wait a little bit before they start to kind of increase production and capacity. So we can have.

Speaker Change: We're very cautious due to that and due to the pipeline, but I would say there are some more positivity in in Europe, because we have gone the rationalization on capacity that we've talked about I feel like that's reached their peak is not fully done but the landscape is becoming clearer how that will kind of play.

<unk> out and that just when that clarity starts to increase that always helps.

Speaker Change: Okay.

Speaker Change: Two financial questions here Firstly on <unk>, you are now down to a one to one 2% of sales.

Speaker Change: What you will see the level of maintenance Capex.

Speaker Change: We expect normally to be sort of the 2% to 3% of revenues so slightly higher.

Speaker Change: But with the dip.

Speaker Change: Demand at this level, we've been able to sort of push out a few of the capex projects and concentrated on several quality improvements on it but on a run rate, yes, I would expect us to be almost double.

Speaker Change: And Andre can I just.

Speaker Change: How are we to think about that I mean in the environment, where we're not showing growth we should be able to be it can add lets say somewhere in between the 1%, 2% kind of when we've talked about the kind of normalized capex, which is north of 2% or 2% to 3%. That's in the context. When there are when we are growing.

Speaker Change: Our with the market in line with the market or or faster, which we have talked about being kind of 4% to 6%. So we are also seeing exceptional kind of high capex in the past, where we have been investing in our distribution center, we expanded capacity in natura and can ever done other projects like that and that's why you have.

Speaker Change: <unk> seen our capex being high historically, but on a main just pure maintenance side.

Speaker Change: It is kind of it's been maybe slightly lower in the quarter, but he is not far off what we would be able to do in a pure maintenance mode. Okay understood last question.

Speaker Change: You mentioned to release or for holiday accruals.

Speaker Change: Most of the impact of that.

Speaker Change: Yes.

Speaker Change: That is quite difficult to sort of determined exactly overall, the different jurisdictions, but where we see it as a normal trend the way we account for now you can see it in the last years as well and there's a number of million or else they'll be released during the vacation period as accruals. So it does help us in the quarter three picture and we expect quarter four.

Speaker Change: Opex to be more in line with quarter, one and two.

Speaker Change: Having said that we do see a run rate improvement on the on the underlying opex as well.

Speaker Change: Okay. Thank you.

Speaker Change: Hey, guys.

Speaker Change: And we also have received everything in question.

Alex: Alex I mean in SSO and at rates can you also comment on the order intake for P. P. Athletes in particular, please give some more color on the pet food side pipeline and why the environment has been like our schools over the past quarters was packed food manufacturers talked about good demand.

Speaker Change: Great Great Great question, I think it resonates that.

That good demand because what we will be seeing in that business is kind of the retail channel has been improving a bit.

Speaker Change: With with the kind of after quite.

Speaker Change: Quite a cycle on pet ownership during Covid and after Covid I think we're reaching kind of going back a little bit again, and reaching a more normalized level. So that has kind of shown a.

Speaker Change: Now in the numbers that I think felix's is referring to.

Speaker Change: The soft orders.

In the quarter, an implant that in feed.

Speaker Change: We're mainly due to timing.

Speaker Change: It was.

Speaker Change: It can have it is these projects. They are kind of is not like your 100000, but kind of that's not a normal project. There is it's in the millions how we kind of most of the projects in our planned parent feeds and on the on the Vanguards side. So it was more timing and we already see.

Speaker Change: October being <unk>.

Being caught out quite strong compared to our compared to Q <unk>.

Compared to Q3, even though it's only a month so far so it's more around that timing, we're confident around the resilience of that business. The outlook is good and the pipeline has been let's say over over the last six months. It actually has been improving we have it is though.

Speaker Change: We have struggled timing exactly when the when the orders come in silver also destroying we're also kind of striking a conservative tone and that we show to show to show you. The results when they are in the books, but the outlook is good there the pipeline is healthy and we expect to deliver and in line with.

Speaker Change: Past performance there.

Speaker Change: Okay. Thank you and my second question is can you. Please update us on the status of the new distribution center in Eindhoven, and the production footprint optimization in the Netherlands, both of which have seen of course quite some inefficiencies over the past 18 months are both behind US now can you already see benefits.

That's on the new distribution center financially and intensive customer satisfaction for spare parts.

Speaker Change: Yeah. So maybe I start then and you chime in on on the <unk>.

Speaker Change: The global distribution center, we we started that at the end of quarter, two and we've been.

Speaker Change: We've put let's say a small part of our business into the distribution center to make sure that we are learning and working out working out the kind of the the startup phase and the issues and so on because it is truly a state of the art facility with a with a new systems are.

Speaker Change: Cross ERP and transport management system and so on so we are still let's say.

Speaker Change: We've been working through those we call. It teething problems in Q3, we feel good kind of other progress that we're making there's still a few things outstanding on kind of just adopting the saves them, making sure that we are kind of having the right information on master data suppliers and so on so I would say.

It's not only you we've not fully started to see the benefits, but I would expect that how did you worded Felix you said, it's behind I expect it to be kind of more in the rearview mirror in Q4, So that's kind of what we're aiming for and once we've kind of done that work.

Speaker Change: And it works very smoothly, then we will take the next steps and and putting more.

Speaker Change: More into that facility.

Speaker Change: Yes.

Speaker Change: In terms of financials of course are yes, we are investing in it. It is a transition program and the real benefits on the financial side will come when we have moved more of the warehousing in and being able to close the other warehouses. So that's one but on the operational side. We can also already see some of the improvements.

Speaker Change: And the potential that the warehouse like that are showing as.

Speaker Change: As we said we had some teething problems, but those orders that go through <unk>.

Correctly get out of the planned really really fast.

Speaker Change: Well, our automated and complete complete checking and the like so we're really happy with the one sir the happy flow that we can see having said that and as I already said it is rewiring awful lot of systems. So a lot of processes, taking it from other local warehouses spare parts warehouses to one central one and making sure that we still do it right.

Speaker Change: But we do see the promise for it and we will continue putting more and more warehouses in it and then also the financial benefits will start coming through and that sort of an end customer satisfaction.

Speaker Change: Okay Fabulous and on that note I think we will conclude the Q&A.

Speaker Change: Passing the team. Thank you very much for your time and attention.

Oh, yes.

Speaker Change: Goodbye.