Rieter Holding AG

Ladies and gentlemen, welcome to the Semiannual Report Media and Analyst Conference Call. I am Sandra, the Chorus Call Operator. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Norbert Klapper, CEO. Please go ahead, sir.

Thank you very much. Good morning, everybody. It's a pleasure to talk to you about the half-year results 2020, although they are not good. which is not a surprise to you. We have announced that already in late May. I will start with the key messages on page two. As I said, we already published in late May that our business has been severely impacted by the COVID-19 virus. And as a result, we booked in the first half year an order intake of 250.7 million. We booked sales of 254.9 million and an EBIT due to the low volume of minus 55 million. Before restructuring charges, the EBIT was at a level of minus 46.9 million. Obviously, we implemented a COVID crisis management when the crisis emerged. and our restructuring actions that we announced in January are going according to plan. We expect a better second half of the year, and I will come to the reasons for this assessment. At the same time, we continue to implement our strategy because we are convinced that this strategy will still be the right one after the COVID-19 crisis. And I have to announce a change in the group executive committee. So now I move on on page three, which gives you some more details on the numbers, comparison between 19 and 20. I would like to focus here on the reasons of the numbers, reasons for the numbers. The low order intake, yes, there was as a result of the COVID-19 outbreak, there was a deferral of investments and scheduled deliveries by customers. And what is even more harmful to the retail business is when the mills stop production, and this is what happened in March. There was a sharp decline in demand for wear and tear parts, which we supply out of our components business group, and for spare parts, which is what we supply out of our after-sales business group. And both were suffering, as well as the machines and systems colleagues, from the crisis. And we see that in the order intake and also in the sales number. The reason is always the same. It is in the machines and systems business, the... the investment sentiment, which was basically zero when the outbreak happened, after the outbreak, and the postponement of deliveries, and for the components business and the after-sales business, it was the fact that the mills had stopped production at a great extent. EBITDA, EBIT before restructuring charts, and net profit are a result of the low sales volume. I would like to mention here that we have been able to reduce our SG&A cost line by $10 million compared to the first half year 2019, but this was by far not enough to compensate for the low volume. When we come to the free cash flow line, you see that our free cash flow was at $95 million, minus $95 million. $55 million out of this went into inventories. that we will need for our shipments in the second half of the year. And the net liquidity line needs also some explanations. In December 31st, we had liquid funds of 285 million and a debt of 122, which led us to a net liquidity of 163. You might remember this number. Now, half a year later, our liquid funds are at a nice level of 253 million still, a little lower than in December, but still high. But we have debt now of 217 million because we drew term loans in March to make sure that we can pay back the bond that we have out there in September. That is why we did that, and this is how liquid funds of 253 million and the debt of 217 million come together to a net liquidity of 36 million. When you look at these numbers, you see that liquidity will not be a problem for Rita, even if the crisis takes a lot longer than we expected. On page number four, you see the order intake by business groups. And I already talked about that. It is always the same story behind that, the postponement of shipments, the low investments, and on the other hand, the mills, which have been stopped. On this slide, I'd like to highlight the third bullet point on the right side of the slide, the order backlog. The order backlog is still at a level of 490 million. And that is one of the reasons why we are convinced that our second half of the year will be better than the first half of the year. In June 2019, for comparison, we were at a level of 295 million. So we are in a much better position this year. I come to page five now. They tried sales by business groups. Same story again. I don't want to repeat it. You see how much our two business groups, components and after sales, suffered from the market situation. And as I said already, the reason is that so many mills had stopped production because of the low fiber demand, which was a result of the lockdowns. On page six, you see the sales development by region. There is two regions that stand out here. This is India, where the decline of sales was very high, 73 percent. And the reason is that the lockdown in the country basically stopped people from shopping. And we had a different situation in Turkey. In Turkey we had an improvement compared to 2019. We have to say that in 2019 we were at a very low level in Turkey and there was an upswing in the first half of the year and this is associated with the innovations that we presented in Barcelona. We had additional sales here that we generated due to the fact that we presented the new machines one year ago. All right, so that was the overview, the market and sales and order intake. And now I'd like to hand over to Kurt, who will walk you through page seven and the following pages.

Thank you, Norbert. Welcome and good morning from my side. I start on page seven with EBIT before restructuring charges. The first half year 2020 ended with a loss on the EBIT before restructuring level of 47 million compared to last year's loss of 1.6 million. With 48 million, the lower gross margin was the biggest contributor to this deviation. The volume effect on the gross margin counted for 44 million out of these 48 million. The divisional mix shift to more machines and systems with a below average margin added another negative 11 million. Overall, readers saw a reduction of the gross margin of 1.9 percentage points from 27% to 25.1%. The other income expenses before restructuring were 6 million lower than last year. This is mainly due to the higher income in 2019 from the sale of real estate in Germany and India, as well as the reduced income from export incentive schemes, which are volume-based. The cost-cutting measures already mentioned by Norbert and implemented in the first half year contributed, among other things, to a reduction of SG&A expenses of around 10 million. On innovation, however, Reiter did not compromise. Consequently, R&D expenses did not decrease, actually even increased slightly, despite the market situation. Reiter intends to forge ahead with the strategy in the coming months with a view to strengthening its market position for the time after the COVID-19 pandemic. I'm going to slide eight. The COVID-19 pandemic led to a market situation where demand for the goods and the services of all three business groups decreased significantly. This exceptional market situation gave rise to losses in all three business groups. The business group machines and systems is affected by the deferral of investments and deliveries by customers and posted sales of only 120 million, a drop of 100 million compared to the previous year's comparable period. Combined with the ongoing innovation program, machines and systems recorded at the epic level before restructuring a loss of 40 million. At the same time, the demand for wear, tear, and spare parts declined sharply due to the suspension of production in many spinning mills around the world. This is reflected in the low sales of the business group's components and after sales and as a consequence, in an EBIT loss for both business groups. I'm on slide nine now. REITER has implemented comprehensive crisis management. Priority is being given to protecting employees, fulfilling customer commitments, and ensuring liquidity. The necessary measures to protect employees have been implemented worldwide and the order backlog is being processed largely as planned. The liquid funds to repay the bond due in September 2020 are on Reiter's balance sheet already. In January 2020, Reiter reported on structural changes in Switzerland, Germany, the Czech Republic, and the Netherlands. This restructuring program is being implemented as planned. In addition, Reiter has introduced 40% short time working in Switzerland and Germany, for the third quarter of 2020. Similar measures will be implemented worldwide within the scope of the available legal options. The decision regarding whether to apply for an extension of short-time working for the fourth quarter of 2020 will be made in September. Now a few words on the balance sheet on slide 10. REITER's balance sheet is solid. Liquid funds are above 250 million. The repayment of the 100 million bond in September was prepared in due time and the funds are included in the just mentioned 250 million. Hence, the current financial debt increased accordingly. Depending on the situation in the financial markets, REIT may consider issuing a bond at a certain point in time, but is not under pressure to do so. Reiter expects a stronger second half of 2020 in terms of sales based on the order backlog of around 490 million. The increase in networking capital of 47 million is in line with the plan to fulfill these customer commitments in the coming months. The equity ratio dropped by almost 10 percentage points to 38%. Besides the effective lower shareholders' equity, this is also due to the increase of liquid funds and financial debt for the repayment of the bond mentioned before. The balance sheet was stretched for some 100 million. Without this effect, the equity ratio would remain above 42%. With this, I pass the word on to Norbert. Thanks very much for listening.

Thank you, Kurt. We are on page 11 now. Continued implementation of the strategy. You are aware that in the recent years we have pursued the strategy based on the cornerstones of innovation leadership, strengthening the component and spare parts business, and adjusting the cost structures as needed. We have reviewed the strategy in the light of COVID-19. We were convinced before that the strategy is the right one, and we are convinced that the strategy will be the right one for the time after the pandemic. So we move on. In June 2020, we have received the building permit for the project Rita Campus. Depending on the market situation, construction work will begin in the first half year of next year. Campus, just to remind us of it, comprises a new customer technology center as well as an administration building on 30,000 square meters at the current site in Winterthur. And this project is a key element of our innovation strategy. I'm moving on now to page 12, where we see the rationale for our expectations for the second half of the year. We expect a stronger second half of the year due to three reasons. Number one, we have an order backlog of around 490 million. Some of it goes into 2021, so not all of it will be booked this year as sales, but there is a high proportion which we expect to turn into sales. We have an improved cost base. You saw what we have done so far and what we are doing in addition now in Q3. And what is very important is we see signs of market recovery. Let me explain that. What does that mean? We monitor capacity utilization at more than 600 spinning mills around the world. And at the beginning of April 2020, the proportion of mills which were in production was around 40%. So 60% of the mills were idle. By the end of June this year, the proportion of mills which were in production had improved to 80%. So only 20% were idle. And this improvement tells us that the market is picking up again. And this is why we are confident that the second half of the year has a good chance of being better than the first half of the year. However, The level of uncertainty and the low visibility remains. The high level of uncertainty and the low level of visibility remain to be there. So we don't give an outlook for the full year. And there is one more thing I would like to share with you. We have a change in the group executive committee. It is a change that is going to happen one year from today because that is the agreement that we have. Mr. Lieske who is the head of the business groups, machines and systems, and a member of the group executive committee since 2015, has decided to leave Rita. He will pursue a career opportunity in a different industry. And the board of directors wishes to express its gratitude to Mr. Liske in advance for his many years of valuable service and his major contributions to the further development of RETA. We will announce details about his succession when time has come. Thank you very much for your attention and we are open for questions now.

The first question comes from Adrian Knobloch from ZKB. Please go ahead.

Mr. Knobloch, your line is open. No, I don't have a question.

Okay.

We take the next question from Christian Arnold from Mainfirst. Please go ahead.

Yes, good morning, gentlemen. I have a question on the outlook, which is rather unspecified, but nevertheless, maybe we can talk a little bit on that. I mean, you are based on the backlog and on the signals you get that we have some improvements so talking about the backlog i mean here we have the large egyptian order right this 210 million and i believe like two-thirds about will be only due in 21. so i wonder is this backlog enough to have a second half being break-even assuming that what we have seen so far in June so that we have the same magnitude of activities in the spinning mills would that be enough to have a break-even result in H2 and the second question I have is the development of the different business units. So with this 80% activities, is it a fair assumption that let's say the components and the after sales businesses should be clearly in black figures? And yeah, that would be my question for the moment.

Well, you know that the break even of the company is around 800 million sales. I guess you can say it has improved due to the changes that we made on the cost structure. But let's say this is the ballpark figure. So for the second half of the year to be break even, we would need sales of around 400 million, right? And the backlog and the signals from the market tell us that this is doable. We don't know whether it's going to happen. There is a lot of uncertainties here. Postponement of shipments, which we saw in the first half of the year, if that happens again due to a second wave. we might not see that number. So that is why we don't give an outlook. The level of uncertainty is too high, but from what we see today, a sales level of 400 million is not out of reach. And of course, you need a good components and after-sales business or a decent after-sales and components business to... to get a break-even result out of the 400 million, because in the business group mix, the margins of the components in the after-sales business is higher than the margins of the machines and systems business. So it has to work in a couple of ways. The absolute figure has to be in the right dimension and the business group mix as well. Again, Level of uncertainty, very high. This is why we don't give an outlook.

And maybe just to add on the order backlog, you rightfully mentioned the Egyptian order, and the total is 210, but in the order backlog, there is only 165 of this.

Okay.

The next question comes from Dominik Felkes from NZZ. Please go ahead.

Thank you. Well, I'd like to ask you about the mills. You've mentioned, I think, that only 20% are now still idle. However, how about utilization there? What's the anecdotal, maybe, evidence you have? I mean, how busy are these mills?

And second question, maybe, just, I mean, So, shall I give you an answer to the first question?

Sure, yes, please.

In early April, according to our observations, the capacity utilizations of the mills that we monitored was around 30% on average. By the end of June, our assessment was that we are getting closer to 60%. But this is not the normal. The normal is around 80%. So we've come quite a way, up from 30 to 60, but we are not at the pre-crisis level yet when it comes to that utilization.

Right. And the second question will be really... What makes you so confident that you can really just maintain your strategy and that things won't be fundamentally different after the COVID crisis?

We did not see a change in demand patterns based on the crisis. We did not see a big regional shift in terms of capacities. There might be some, but we don't think it will be going very fast and that is why we think the strategy is still the right one and will be the right one when the pandemic is over.

So the question will be maybe just so textiles or basically will still be made in the same places or it's not that we will have some shift maybe back to Europe or to the US or just to like it's been mentioned in other markets you know just just to um this is this this national national renationalization theme or uh that's not happening in in your industry or yeah the new shoring um there might be some new shoring in spinning

I have to make a differentiation here. In textile, there might be a significant amount of nearshoring when it comes to garmenting production. We already see ads in the newspapers of companies who promote their garmenting operations in Portugal, for example. But that doesn't mean that the yarn is being produced in a spinning mill in Portugal as well.

Right.

So this is why I'm making a difference here. The nearshoring in the spinning business might also happen to a certain extent, but I guess it will not be as significant as we might see it in the garmenting.

And last question, why is that? I mean, why is the garment production coming back to a place like Portugal?

Because the supply chain for the textile chains, for the trading, for the companies, the big brands, is a lot shorter, it's a lot more flexible, and they can push their short-term demands very quickly to a factory which is very close, they react very fast, and the transportation doesn't take too long. We see the same thing happening in the Balkan countries. garmenting operations getting started there. And the reason is that the supply chain and the reaction time between the European consumers and what they like and what they don't like, and the garmenting operation is a lot shorter than compared to an Asian-based supply chain.

Interesting. Thank you very much.

The next question comes from Armin Reichberger from ZKB. Please go ahead.

Good morning, gentlemen. Well, you say for second half a sales of 400 million is not out of reach. So to put the upper end of possibilities, if you have to name a tag on sales capacity for a half year, what would be the number you would tag on this?

I mean, you know our sales numbers, yeah? And you know our half-year numbers for a very long time. You know what we can do if we have to, yeah, and if the business is there in half a year. But, I mean, I can't give you a number here for the second half of this year. The level of uncertainty is just too high.

Yeah, I mean regarding your capacity, I mean you restructured a lot and so I wonder what's your actual capacity now?

The capacity will not be the bottleneck.

But what if you have to put a number on your capacity?

I mean it depends too much on the mix. If I told you a number now, it would just be true for a certain mix of machines, mix of businesses, mix of countries. It will not help you.

Okay. Then about the equity ratio, what do you expect end of 2020?

I turn to Kurt now.

As I mentioned, the equity ratio was lower because of the 100 million we have on the balance sheet. And, of course, if you repay the bond, then it will shorten the balance sheet and it will immediately jump up. And, of course, then it also depends on how the business develops.

So, Richard.

Thanks, Rebecca. And we saw quite an increase in net working capital in the first half, which was planned because of the higher volume in the second half. And of course, also depending, of course, how the business will be then in the first half of next year, there will be a reduction of net working capital maybe, but at least not as strong increase as we have seen in the first half. But once again, this was planned.

Okay. And a question regarding the mills. You said you observed them and 80% of the mills are running. But when I understood the former answer correctly, then of these 80% of the mills, they are only used by 60% now. Is that correct?

Yes, that's correct.

Okay, thank you.

The next question comes from Andreas Meyer from Finanz und Wirtschaft. Please go ahead.

Yes, hello. Good morning, gentlemen. Do you hear me?

Yes, we do.

Aloha, Meyer. Can you say maybe something about your development in the markets, how you developed your position in the market, your market share? Did it change during this COVID crisis and what do you expect for the next quarters in this development?

What I can say is that our hit rate, our successful quotations, which were turned into orders, has improved after the trade show in Barcelona. We will also see that in shipments at a certain point in time. However, the market is very low now. So it's nice to enjoy a better market share. But if the total market is so low as in the moment, that doesn't help you too much. So no reason to celebrate, but moving in the right direction. Let me put it this way.

Okay, thank you.

The next question comes from Rolf Renders from Helvea. Please go ahead.

Good morning, gentlemen. One understanding about the compass which you mentioned to plan to go ahead, market depending. What should I understand about that?

Well, the rationale here is that we have planned to start with the construction work in the first half of the year if the market recovery goes as expected. if we see a second wave and the whole world falls apart, we will reconsider this decision.

Okay. You would reconsider the decision to start then, but not to reconsider the whole campus?

Absolutely. Campus will happen.

Great. Okay. Thank you. And then what I find most interesting is to learn from you what happened to the industry after basically all the retail shopping and clothes shopping in the world closed down. Then the companies producing for the clothes to get into the shop, they basically stopped. Then there was a big argument about invoices to be paid. This kind of negative wave which goes back into the industry and the appetite for CapEx investments. What's What do you see there around the world? What is the discussions bringing?

You mean in our industry, spinning equipment?

Well, more with your clients. So the clients basically didn't have to bring the yarn anymore because they did not have to be transferred into clothes. So there's a negative wave of...

at least a one-time wave coming through and there are big discussions going on on who is paying those bills yeah well i can i can say that there is customers who are just waiting and trying to weather the storm they have reserves they Many of them operate their mills at break-even level now. This is what we learned from a couple of regions in the world. It is enough for them to run at break-even, but they don't make money. Others think they have a great opportunity now to invest and to win market share by investing now. And that is the customers that we are talking to on new projects. So it comes in different flavors. There might also be a number of customers who will lose their appetite on that business, on the spinning business and move on to other things after the COVID-19 crisis. The longer it takes, the higher this proportion I think is going to be. And that might help to reduce the overcapacity in the markets. So that is the three groups of customers that I would like to mention as an answer to your question. The guys who will lose their appetite, the guys who are trying to weather the storm by running at break-even, and the guys who think, wow, there is an opportunity now, let's invest.

Okay, that's very interesting. Thank you. And how do governmental subsidies work? How do they get reactivated or how do they play a role? Could you maybe mention that per key region, for instance, Turkey, China, other, Asia? Because it normally requires subsidies to give push on Capex Air.

We don't see a lot there at the moment. What we see is what we also saw in Europe. This is the support of the governments for survival. That is what happens at the moment. And that happens across the world, no matter where you look. But what has not happened yet is a major move of a government to say, okay, guys, now let's make sure that we trigger new investments at a greater scale so we do an additional subsidy program at a significant level. This has not happened yet.

Okay, thank you. And specifically on Turkey, being at such a high-end market?

In Turkey, the proportion of customers who think that there is an opportunity now is higher than in other regions.

Okay, interesting. And then, so you keep on to the strategy and weather the storm now with a decent order backlog. What kind of financial returns do you expect if things go as planned going forward?

Kurt, this is your question. Whack! Whack! This is the whack question, right? Ross, somehow I didn't expect that question, I have to admit.

Okay, Kurt. Luckily, it's a very easy question to answer. Of course, the returns we have to make on our investment capital have to be higher than what we spend for the capital or on our assets, the return on the assets we have to make. So we have around 9% weighted average cost of capital and of course it's the target to be above it. If we are below it, we are destroying value.

Okay, that's great. And you expect to make that in the next five years or so on that horizon?

Yeah, I mean, the textile is a cycle business, and you cannot expect this to happen every year. But on average, this you have to achieve. If you don't achieve it, then it doesn't make sense to run the business. And, of course, now we are just coming out of this cycle, of this down cycle, and now we have this COVID-19 situation, which makes it a bit more difficult to come out of this situation. But in the midterm or long term, this has to be the target, yes, of course.

All right. Thank you. No more questions. And good luck for the second half. Thank you.

Thank you all. Thank you. Good morning, gentlemen. Thanks for taking my question. The first one is a follow-up on your observations regarding the capacity utilizations and the mills which are producing. So at the moment, to understand that right, you have 80% of the mills are producing with a 60% utilization. And if you go to pre-crisis levels, you would see 100% of the mills are producing and 80% utilization. Is that right?

That is a ballpark figure. Let's not take it the scientific way here, right? But that is a reasonable assumption on where the industry is at the moment based on the observations of 600 mils. And it's a reasonable assumption of where the industry was before the crisis hit us.

Okay. And then I have missed the first couple of minutes of the call. So if I ask a question already asked, I apologize for that. You mentioned also on your press release a 5% cancellation or below 5% cancellation. Can you elaborate a bit on that one? This happened in the beginning of the Q2 at the end or is it, you know, all the pass-through or how does this develop and which countries or which kind of product segments has this been?

I mean, I can tell you that it happened in May and in June and And the countries which were affected were Uzbekistan and India. And the level, as we already said a couple of times, the level is lower than what we usually have in such a situation. In the past, we had 10% of our order backlog as a ballpark figure, which were canceled. And we are not at that stage at the moment. We are significantly below that.

Thank you. And then my last question would be, have you already mentioned something about the pricing environment?

Well, it is not a secret that in such a situation where the market is so dry, there is competitors who think they need lower prices. And sometimes we have to react to that. But I can tell you that this doesn't change our strategy. We are not in a price competition. We don't want to be in a price competition. We want to be in a performance competition. And we keep on beating that drum. But in the current market situation, there are situations where we need a compromise.

But this is not different to situations you have observed in the past in crisis, where you also react to this price pressure, though this is nothing unusual in this part of the cycle.

Price pressure is not unusual, but the price pressure based on the investment sentiment, which was, I could say, which was down to almost zero, the price pressure is higher than in other situations.

Thank you so much and good luck for the second half.

Thank you.

The next question comes from Mark Posa from VVAG. Please go ahead.

Yes, good morning, gentlemen. I would have two questions. The first one would be from a more strategic, high-level perspective. Could you describe your market share development over the course of the last couple of years and how the competitive landscape looks like today and how you expect it to look in maybe three to five years' time? And then the second question would be in relation to man-made fiber products Is it fair to assume that the constellation will remain pretty stable? There will always be some sort of a coexistence between those two approaches?

Yes. The market share development We have a market share development of around 30%. We had it at that level for quite some time. Sometimes it's a little less, sometimes it's a little more. It depends on the mix of markets and the mix of products that the market buys. So we could say 30% is the level that we are at, that we have been at for the last couple of years. The competitive landscape, I always try to explain it by putting our competitors in three buckets. There is the Asian competitors, China and India, for example. They are good companies, have a good cost structure, but their battle is to catch up with the performance of the equipment that they supply. Then we have the second bucket which is the usual suspects, that's how I call them. This is the competitors who have always been around, forever I could say. Trichler in Germany or Murata in Japan. In the mature markets where this is the equipment suppliers who continue to be in the market despite the fact that the spinning mills in their regions disappeared. And Rita is one of them. And then we have the hybrid competitor, Saura. I call it a hybrid competitor because Saura has a Chinese owner. It's a Chinese company, but they have Western technology because the origin of the company is a German company, which has been acquired in 2012 by the Chinese, by Mr. Pan from China. Jinsheng is the name of the group. So this is the three categories of competitors that we have. Do I expect a major change here after the crisis? I'm afraid there won't be a big change, because based on the programs that the governments have launched to support even companies who would be in trouble, or would have even been in, even companies who would have been in trouble before the crisis, they survive, they will survive due to the money that they might receive, so I don't think we will see a big change here. They will still be around after the crisis. And the second question, the coexistence between spun yarn and filaments. We need to pay attention here. In the spun yarn, which is what Rita machines are processing, there is 50% of the fibers that are being processed are man-made fibers, and 50% is cotton. So the man-made fibers are important in the spun yarn segment as well. As I said, polyester, viscose, this is the two major categories here, and they are being processed over our machines as well, same way like cotton. And then we have the filaments. The filaments is the fibers, polyester in particular, which are not being cut and spun on a machine. They are textured and they are produced as endless fibers without cutting and later spinning on our machines. And from our perspective, this will stay that way because nobody has invented yet a filament which could replace spun yarn. neither from a cost point of view nor from an attractiveness point of view in terms of textiles, of touch, of the comfort of wearing the textile. Filament is not at the level where spun yarn is, and we don't see that happening.

Does that answer your questions? Yes, thank you. Great, thank you.

The next question is a follow-up question from Armin Reichberger from ZKB. Please go ahead.

Yes, you mentioned a machine or machines you introduced at ITMA in Barcelona and which were successful in Turkey. Can you elaborate which machines you were talking about?

Yeah, the top sellers, which you see in our numbers, is the new CART, the C80, and it's the new Comber, the E90. Both machines had been introduced in Barcelona.

Okay, thank you.

Gentlemen, so far there are no more questions.

All right. So thank you very much.

We have a second registration from, I'm sorry, sir, from Christian Arnold from Main First. Please go ahead.

Yes, on the short-time work, I think we discussed that before, but nevertheless, maybe you can remind me. I mean, we have seen other industrial companies being very fast in introducing short-term work in the second quarter. In your case, that is actually happening only now in the third quarter. Why is that?

Well, it could be a little nasty here. The ones who had introduced short-time work in the second quarter might have had a capacity utilization problem before the crisis, right? I mean, we are fully booked. Our books are full. So we were busy in the second quarter. And then the crisis hit us and our workload went down. The first thing that we did is we went down with our vacation accounts. and with our overtime accounts. And when we were through with that, we introduced short-time work because the preconditions were there, the workload required it, and that is why we did it the way you've seen us doing it.

Thank you.

The next question comes from Armin Reisberger from DATKB. Please go ahead.

Yes. A follow-up on this question. I mean, that sounds strange to me. Your workload now came down, but you expect in second half year more sales than in first half year. So how does that fit together?

Well, let's not be too detailed here, right? But the workload of our sales guys has, of course, gone down because customers don't buy. The workload of our factories has to be looked at in different ways. The factories which are working off the backlog are busy. The factories which are suffering from the low order intake, the short-term order intake, which we, for example, have in the components business, they are not fully loaded. So we had to introduce short-term work there.

Okay, thank you.

Makes sense.

Gentlemen, this was the last question.

All right, so we really went into the details, but I would like to thank you very much for this discussion and also for the interest in where Rita is going and the interest in how Rita is coping with the crisis. It is, of course, a very unpleasant situation to book a loss of more than 50 million. However, I guess we did what we could do to make it as small as possible, but at the same time continue to implement our strategy, which is really important to us. We need to be there when the market comes back. We want to be the ones that are among the winners. And that is why we continue to invest into new products, into new solutions, into R&D. but at the same time we have to react to the market situation where it is required, and that is what you see in our numbers. I thank you very much for the discussion. I thank you very much for your interest in Rita, and I thank you very much for the good wishes.