Rieter Holding AG

Ladies and gentlemen, welcome to the semi-annual Report 2023 Conference Call and Life webcast. 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 Thomas Utterly, CEO. Please go ahead, sir.

Good morning, ladies and gentlemen. A warm welcome from my side. First, our performance in a nutshell. The first half year was marked by a continuously low market sentiment with respective low order intake. However, our financial performance has substantially improved in the top line and also in the bottom line area. Second, the team has worked on the strategic front and we have developed a performance program called Next Level. This program entails some very tough decisions. We believe that they are necessary to ensure the long-term success of our company. Next Level should allow Reiter to achieve an ambitious financial performance at any time in the cyclical market of textile industries. In order to get there, however, we will need to make some painful adjustments. I will explain what this means shortly. First, Let's look at the agenda. We would like to share with you some insights into the market environment. Then Kurt will elaborate on the financials. Afterwards, I will take you through our planned performance program next level. And finally, we give you an outlook for 2023. I will go directly now to slide three and we'll stay quite brief with the key messages on the first half year 2023. Overall, we had a solid financial performance with positive EBIT and net profit. Our order intake was suffering according to the very low market sentiment driven by a low demand for textile products. However, our backlog is still healthy and covers the second half of 2023 as well as the beginning of 2024. I was positively impressed about our operational improvements. We further stabilized our supply management and were able to achieve a remarkable increase of our sales volume. In the first half year of 2023, we turned therefore increased volumes, strict cost management, and improved processes into results. Our gross profit, our EBIT, and our net profit showed remarkable improvements. Also, free cash flow improved, but was still suffering from a high level of networking capital. All in all, we made the right step into the right direction and will continue to work hard to improve our operational performance. More details will be presented afterwards by Kurt. Let's move now to the market environment on page number five and six. On page five, you see the market development of 2021 until 2023, based on purchasing decisions of our customers and not based on deliveries. It is clearly visible that after the very strong semesters in the second half 2021 and first half 2022, the market slowed down dramatically. Although the first half year 2023 is slightly above the second half 2022, we still suffer from a very low investment sentiment. Our expectation is that volumes in order intake will pick up only in the fourth quarter of 2023 at the earliest. On a regular basis, we measure the operating rate of spinning wheels worldwide. You see this on slide number six. As you can tell, this operating rate is roughly 10 percentage points lower than in 2022. However, we saw in the first six months a slight improvement from even lower levels at the beginning of the year. We expect that this will further improve towards the end of the year and that the corresponding demand for consumables, wear and tear and spare parts will probably recover later in 2023. Let's turn to slide seven and our presence at the ITMA. At the lead exhibition ITMA this June in Milan, we presented many new innovations which demonstrate the technology leadership of Reiter in the industry. Our focus was on technology quantum leaps, which enable our customers to have the lowest cost per kilogram yarn. In addition, we focused on digitization, automation and recycling solutions. The feedback of our customers was overwhelming and it gives us great confidence that once the market picks up again, our order intake will grow as well. The reservation list we had for all our new machines were filled within a few days. Let me now hand over to Kurt who will lead you through our most important financials. Kurt, please. Thank you, Thomas.

Good morning and welcome also from my side to this call. Let me start with some key figures on slide nine. In the first half of 2023, global market downturns, which were already apparent in the second half of 2022, led to a low order intake of 325 million. Sales of 758 million were recorded. This corresponds to an increase of 22.2%. Gross profit increased by more than 50 million. The biggest contributor was the sales volume growth. The growth margin increased from 21% to 24% and confirms the improvement of the margin quality. EBIT increased by 35.5 million to 25.2 million, or to a margin of 3.3%. Free cash flow in the first half of 2023 was at 10 million. This reflects the positive trend in operating profit, while the net working capital remained at the high level. which means it has not yet contributed to the free cash flow. Net liquidity mirrors the currently high sales volume. Basically, the increase in net working capital is temporarily financed with short-term loans. This is expected to normalize in the second half year of the year, when the current backlog is further processed. As you can see on slide 10, RETA recorded a low order intake of only 325 million in the first half of 2023. Lower than in the corresponding period of the previous year, however, higher than in the second half of 2022. The order intake in almost all regions was characterized by the reluctance to invest in new machines. Only in China, order intake did increase due to investments by spinning mills in improving their local competitiveness. At the same time, demand for consumables, wear, tear and spare parts declined due to the global market downturn. We currently see a quite strong project pipeline under negotiation. However, high interest rates for investments as well as low demand in textile end markets are weighing on order intake. The business model of components and aftersales is less cyclical than the machines and systems. Hence, the reduction of order intake is less prominent. On June 30th, 2023, the order backlog was at around 1.1 billion. This is more than 1 billion lower than last June, but still extends well into the year 2024. As in the previous year, Cancellations in the reporting period were around 5% of the order backlog, also impacted by the effects of the severe earthquake in Turkey. In the first half of 2023, REIT deposed sales of 758 million, as you can see on slide 11. This corresponds to an increase of 22.2%. The business group Machines and Systems recorded a very strong project execution, despite some postponements because of the earthquake in Turkey. In addition, Machines and Systems' after-sales growth is supported by a base effect. The acquired Winder business was only consolidated as of Q2 2022. Consequently, 2022 includes three months, while 2023 includes six months in sales of this business. The business group components experienced a base effect as the SSM business benefited from a significant peak in a specific market during 2022, but this was not repeated in 2023. Although decreasing, Reader still faces issues with material shortages. A dedicated cross-functional task force to improve the situation is still in place. Let me move to slide 12. Growth profit increased by more than 50 million. The biggest contributor is the sales volume increase. The growth margin increased from 21% to 24% and proves the step-by-step improvement of the margin quality. This includes higher price quality, higher productivity and efficiency in project execution, as well as strong focus on cost management. R&D as well as SG&A increased mainly for the following three reasons. A base effect from the acquisition consolidated only as of Q2 2022, as mentioned before. Expenses for alternative technical solutions to overcome material shortages and higher marketing expenses related to the ITMA 2023, an important trade fair that only takes place every four years. As a result, Reiter posted in the first half of 2023 an EBIT of 25.2 million and an EBIT margin of 3.3%. Finally, let's move to slide 12. As communicated on July 10, Reiter sold the land in Winterthur, which is no longer required for the operations, to Al Real. The company is acquiring the land with a total area of around 75,000 square meters. The agreed sales price is 96 million. Transfer of ownership is expected to take place in the fall of this year after fulfillment of the legal and contractual completion conditions. Reiter anticipates a positive impact on EBIT of around 70 to 75 million in 2023. The resulting cash flow is at 85 to 90 million. The new free campus currently under construction is not part of this transaction. With this, I hand over the word back to Thomas.

Thank you, Kurt. Let's now turn to the next agenda item. Next level on slide number 14. In my first couple of months here, I had to learn what all of you already know. We are in a cyclical business. In the past, Riete was financially performing below expectations, not according to yours, but also not according to ours. With the actual cost structure in products, but also in overheads, we risk sliding into negative profitability whenever we face a low market scenario. Therefore, the team has worked hard to develop a program which shall enable Riete to create long-term value for our customers, employees and shareholders. Reiter as a technology leader is planning a performance program called Next Level. Before I present the details, let me say this. This program is extremely urgent, but also contains some painful elements. Given the cyclicality of the business and the company's previous underperformance, we have to make radical changes now. On slide 15, you see the goals of the program. Strengthen our sales excellence, sharpen our customer focus, improve the cost efficiency in our production and optimize our fixed cost structures, the so-called overheads. With this program, We want to create an agility which allows us to stay successful in the cyclical machinery business. Let's move to slide 16. The challenging market situation over the past two years was marked by severe disruptions in the global supply chain in conjunction with rising material, energy, labor, and production costs. I took the share price development of Rieter and the whole company story is well reflected in the price. The cyclicity of our industry is a threat and we must create much more resilient responses to it than in the past. On slide 17 you can see the dilemma we are in when we talk about the cyclical markets. Our DNA is still driven by new machines and systems. In a high-market scenario, we create a negative business mix between this business group and the after-sales and components business groups. In order to execute backlogs, we have to increase our capacities aggressively, add to our supply chain management hassles, and invest more into R&D and production. However, when the market drops, we face excessively high cost structures and painful capacity adjustments. Therefore, we must create a solid cost base which allows us to financially perform well at any time in the cycle. This means agile structures and being brave enough to be selective about which jobs we take on board. Let's move to slide 18. In all fairness, we have not managed the cycles well enough in the past. In reality, our shareholder return has been insufficient when you look at the EBIT in the last five years. Looking indicative into 2024, based on the low demand in the textile industry now, we bear the risk that Reiter will again deliver negative EBIT margins in a low-market scenario. This is an unacceptable scenario for us, and this is why we are taking actions now. Let's move to slide 19. In Next Level, we are focusing on a few key performance measures. First, Sales excellence. Push after sales and component business to create a better business mix. In addition, we are adapting our sales processes to capture market opportunities with better prices and more plannable volumes. Second, competitive products. We must bring our product costs down through tougher supplier negotiations and value engineering solutions in the area of simplification and standardization along the whole value chain. Third, effective supply management. COVID and the boom afterwards have shown us the fragility of our supplies, eliminating disruption effects and ensuring a sustainable supply management with second sources for critical components is key for future success. Last but not least, agile structure. We still have too much decision authority at the headquarters. We want to empower our key markets. In addition, we plan to create so-called product power hubs where product management, R&D, and manufacturing footprints for end-spinning technologies are aligned. We want to align this in our key manufacturing sites in Germany, the Czech Republic, India, and China. Winterthur will become a strong innovation and research location for the group, also being the worldwide competence center for our preparation machines. As a consequence, we aim to close our location in Ingolstadt in Germany and adjust our footprint in Switzerland, Germany and the Czech Republic. On slide 20, you see the key financial elements of Next Level. The different initiatives shall mostly be implemented in 2023. Some of them might take a bit of additional time into 2024. After full implementation, the expected benefit of Next Level will be around 80 million CHF per year. Considering one-time costs of 45 to 50 million CHF, we will achieve a payback period of less than one year. Now, let's turn to the hardest part. Here you see the planned full-time equivalent reductions on slide 21. I wish there had been another way. We left no stone unturned. We examined every option available. But if we want to ensure the long-term success of our company, there is no easy way out. We need to make difficult choices now. And we need to make them with urgency. Here's what we intend to do. As per June 30, we had 5,555 own full-time equivalents without temporary personnel. With the planned overhead reductions and transfers, we shall have a net FTE reduction in the overhead area of around 300 employees. In addition, we intend to adjust our capacities according to the expected volumes for 2024 by another 400 to 600 FTEs worldwide in the area of direct and indirect operations employees. This figure mainly depends on the final sales volumes for 2024. This reduction will happen after the release of temporary capacity which we have in our factories. As a consequence, we expect a planned FTE base of 4,600 to 4,800 employees after the full implementation of Next Level. Please turn to slide 22. I already said in the initial remarks, that next level should bring REIT to a new level of financial performance. Depending on where we are in the cycle, we do have the ambition that we at REIT achieve always positive results at any time. This means for our EBIT ambition, in a low scenario between 0% to 4%, in a mid scenario between 4% to 8%, and in a high scenario between 8% to 12%. The Reiter Board of Directors and the Group Executive Committee are confident that the planned strategic and operational measures will lay the foundations for a more profitable and sustainable development of the entire Group. I now come to the last part of the presentation, the outlook, which you find on slide 24. Given the economic situation and the ongoing cyclical market weakness, we expect below average demand for new equipment in the coming months. A revival is not expected until the fourth quarter of 2023 at the earliest. We also believe that demand for consumables, wear and tear and spare parts will not recover until later in 2023. For the full year 2023, Rieter expects a reported EBIT margin of around 5 to 7%. This includes the special effects from the sales of the Rieter area of about 70 to 75 million Swiss francs as well as the one-time cost for next level of around 45 to 50 million Swiss francs. Both special items amount together to less than 2% and are included in this reported 5% to 7% EBIT margin. Sales are expected at the previous year's level of around 1.5 billion Swiss francs. With this, Kurt and myself close our presentation.

The first question comes from Christian Arnold from Stiefel Schweiz. Please go ahead.

Yes, good morning, gentlemen. Many questions from my side, but I limit me to two and go back to line. Order intake was very weak, 325 million in the first half, and you are expecting recovery only the earliest Q4. So you have to assume that order intake won't be that much higher in H2 versus H1, so roughly, let's say, 800 million. clearly below the 1 billion breakeven sales you mentioned on page 22. At the same time, you were saying negative EBIT in 24 is not acceptable. But looking at the orders and the assumed sales development below 1 billion, I mean, the likelihood is very high that EBIT actually is negative EBIT. Can you comment on that?

Christian, you are spot on. Thank you for this question. It's clear that when you look at the moment, our half year orders on hand are at 1.1 billion. Now, if we are performing in sales, let's say in a similar way, like in the first half year of 2023, there is something like 350 to 400 million left. Now, assuming that we might have a similar or maybe a slightly better order intake in the second half, you are right, we are landing at about 800 million as a going-in position for the year 2024. This would be good enough to achieve a sales volume of 1 billion. Why? First of all, if our assumption is right that in the cyclical market, you know, we are expecting towards the end of the year of 2023 that the markets will pick up again, they also will pick up again in the first half of 2024. And whatever we sell, you know, in the first couple of months of 2024, still is early enough to become sales in the second half of 2024. In addition, it's also important to know that the total cycle time between order intake and sales for our component business and for our after sales business is much shorter. So in fact, you in minimum have to add half a year of normal order intake of components and after sales, which is definitely above 200 million, probably more to the magnitude of 300 million. So if you take this 300 million of after sales and components of half year one in 24, plus the 800 million of order backlog, at the moment I still can confirm that we aim to achieve This one billion or even slightly above. However, looking ahead, I cannot yet guarantee that in the new machines and system business, you know, when exactly the markets will pick up. But we have seen there are a lot of projects. Kurt has mentioned that. A lot of projects we are in negotiation. And customers are hesitating, first of all, because of financing costs. And secondly, they are hesitating because the textile market, the end market, has not yet picked up. But there also I believe that towards the end of the year we will see some light at the end of the tunnel. So the question is right. We have asked that question to ourselves as well. And the answer we give to you is also the answer we have given to ourselves.

Okay, thank you very much. And then maybe on the expected benefit of around 80 million per year, You said that the program will be concluded in 2024, maybe 2025. So how much of this 80 million saving do you think you can already achieve in 2024?

Well, it's difficult to give you an exact number, but let me first try to split this 80 million a little bit, because I think this helps to answer that question. So if you take the 80 million, not all of them are personnel related. because you have seen we have different pillars in our next level program. So roughly 50 million is really working on our overhead costs. And the main impacted locations are in Switzerland and in Germany. 20 million we are expecting from continuous cost leadership and cost reductions on our products. And about 10 million is coming from our improvement in the way how we are managing sales, you know, being a little bit more picky if we can, in all fairness, being a little bit more picky in the quality of the orders we take on board. So the 20 million I'm expecting to come next year, the 10 million I'm also expecting to come next year, and the 50 million, this is depending on the consultation we have on our Swiss location here in Winterthur and the German locations. So this might be the case that some of the savings only start during first half of 2024. somewhere in the first half. But if you take, you know, of these 50 million, two-thirds to come, then I think you probably are on the safe side, and this would bring us definitely to a positive result for 2024.

Thank you very much.

The next question comes from Emre Abazic from Badr Helvea. Please go ahead.

Yes, hello, can you hear me?

Yes, very well.

Perfect. Yeah, just another question regarding the cost reduction or the restructuring program. Do you expect further one-off costs then in 2024? And if so, how much approximately?

So you mean if there are another one-time costs to be expected in 2024? Yeah, if you proceed with the reduction. No, no. No, we aim, first of all, you know, the costs we will have actually this year. We will also book this year. And for the remaining now already announced changes, we would build up a provision by the end of the year. So there should be no one-time costs net in the 2024 results.

Okay, great. Thanks. And do you see any risks to the execution of the current backlog when reducing your workforce now in the first step?

This is a very valid question. So I think when you go to the chart of the FTE development, you see that there are in fact two different type of headcount reductions. The first part are overheads. overheads in administration, overheads in product management, overheads in R&D. They are not so much volume dependent. So those 300 net FTEs have no impact on our execution capabilities. Then we talk more about the 400 to 600 employees, the direct and indirect employees in our production facilities. There, of course, we will not make a one-time cut, but we will reduce capacities according to our execution volumes to avoid that we do have an execution issue at the end. And I can confirm that this company, and I would say the whole industry, is very knowledgeable how to deal with these fluctuating volumes So we will not do silly and stupid things, but we will reduce those capacities according to the need of the volumes to be delivered.

Okay, perfect. Thanks a lot.

Next question comes from Sebastian Vogel from UBS. Please go ahead.

Hello and good morning. I have also two questions. The first one is on Turkey, and I was wondering if you can share your thoughts on how you think the next sort of 12 months will pencil out in terms of order momentum potentially coming back or how do you think the situation is evolving there with regard to your business?

Well, actually we have seen that our order intake is on an all-time low. In all fairness, over the last couple of months, order intake was as bad like in the first half year 2020 when we had COVID-19. This can't be a sustainable level for the market. And we know markets will come back. We had some hope, I have to say, you know, that maybe, and we have announced that at the year-end closing call. We are expecting this after ITMA. We also had fantastic feedback from our customers after ITMA. It was really super impressive also for me to be, you know, the first time there. There was an extremely positive feedback from our customers, but we also felt that they are hesitating to push the bottom now to execute investments because of the financing situation and still some uncertainties because their customers are still also on a low capacity level. But this will change. I have no doubt at all. The only question is, is it really towards the end of 2023 or does it slide into 2024? That's the only, you know, the real unknown factor. So these new investments into machines and systems, we see it should come up towards the end of the year, but maybe it takes another three months. Now, that's the reason why we are pushing so much now after sales and component business, because component business, the majority of the component business is also replacing components on existing machines. So here we talk much more about the existing installed base. And this does not change. The only question there is how strongly are they utilized, the existing machines? And that's the reason why we have shown the utilization or operating rate of those mills. where we stand at the moment at 70%. Last year, it was 80. At the beginning of the year, we showed a little bit more than 60. And in a high phase, it would be up to 90%. So there is still a way to go. But also here, we believe it comes back. And this, of course, helps us also then for sales because whatever we have as an order intake in components or after sales, has a much shorter cycle time to become sales. So that's how we see it, expecting or to a certain degree also hoping a slightly better second half in order intake than in the first half and definitely picking up in 2024.

And their follow-up specific on focusing on Turkey with the earthquake backdrop, This sort of, I guess, around like 80 million runway that you have seen there in terms of sales. Is that also something what we should get used to it for a little bit further until all the sort of work has been done that the industry or the local industry can be back at full swing, so to say?

I think in the mid term, you can expect that Turkey is back at full swing. Now, Turkey, of course, is also suffering from a low textile product demand, like other countries as well. So now, after the earthquake, we made our own investigation. We were visiting every single mill. We were classifying them into totally damaged, to be totally rebuilt, or slightly damaged, or having not really issues. And it was quite amazing how fast the Turkish mills came back. They really were doing an extra effort to come back to the market as quick as possible because they feared that they would lose volumes to other markets. Now, still, we have, of course, a couple of mills who have been destroyed and they have to be replaced. And there are plans also to replace them. So to, you know, to rebuild the building, to buy new machines. But here, It's also a question of financing. The financing will happen via the insurance companies. And this takes a little bit of time. It is not overnight and you get a couple of million sponsored by the insurance company. It takes some time. And this will take well into 2024 until we can see that now the order intake in Turkey will pick up. And then you have to add another year until this order intake goes into sales. So the sales volumes for Turkey in 2024, I am expecting still at the low level, but then 2025, later 26, it will come back.

Got it. Many thanks.

We have a follow-up question from Christian Arnold from Stiefelschweiz.

Please go ahead. Yes, a question for Kurt. How much was the the external growth. So how much sales came from actually this consolidation effect we still had in H1?

What's the number? After sales was 6 million, this I have. All together, roughly 30 million. If you want to have the exact numbers, give me a call and I can give you the numbers.

Okay. Okay. Okay. And I think you had some moving costs for the sour activities, right? Was that already booked in H1? And if so, how much was this additional cost? And is there anything coming in H2?

No, this is fully booked in H1, in Q2 of H1. And it's allowed to meet a single-digit million number. Around 5 million, I would say.

Okay. And maybe you also said that you will close your facilities in Ingolstadt. Could you remind me if these properties belong to Reiter or actually you have rented these properties?

This is a rented property. After the restructuring in 2018, it was rented then.

Okay, thank you very much.

We have another follow-up question from Mr. Stefan, Sebastian Vogel from UBS, please go ahead.

Perfect, two follow-ups if I may. Quickly given all these moving parts on your side, how do you think on CapEx for the remainder of the year and the beginning of next year?

Well, in all fairness, if you look on our balance sheet, there's not so much money we should spend for CapEx. So the team was very restrictive, you know, approving any CapEx requests. But still we do have some CapEx, of course, because we also have the move of our winder business within Germany from Uebach-Pahlenberg, this is the facility of Sauer, where our winder business was still in, into a new facility in Heinsberg and this has a substantial impact of CAPEX investment. Taking all this into account, I think we should say we will be maybe like in something like 50 million or so in CAPEX.

Around 50 million, I would say, but this is not the new normal level that you have to mention here. This is a special effect from this. The new normal will be between 30 and 40 million. So if you want to make your plan put 35 million in your plans.

Got it. And one other follow-up question on the supply chain situation. I mean, given now you're also trying to work there and improve things, how long do you think you will be still be facing supply chain constraints in your business to such a level where it still sort of hurts your way of bringing out the business or bringing out the machines out of your factories?

So there are two elements. One is, let's say, supply management, so critical components, supplier management. these, let's say, hassles we had because of the volumes will disappear within this year. There will be nothing left next year. I think we cannot blame for four years that we have supply chain issues, in all fairness. And the team has super improved the performance, I have to say. The waiting time for customers, the waiting time for missing material has been dramatically reduced in the first six months of this year. So I'm very confident that we will get rid of that topic latest by the end of the year. So somewhere in Q4, this should not be an issue anymore. There are still some elements, but not so much. The second topic maybe also regarding supply chain is product cost improvement. This will become a continuous process for us. So this will not stop at the end of this year. We will now prepare that we have this announced, let's say, cost improvement of 20 million in the year to come in 2024. And so also there, I think the ideas, the organization, the tools, the process will be well in place in 2023 to achieve those results in 2024.

Got it. Many thanks.

We have a follow-up question from . Please, go ahead.

Yes, hello. I have another two questions. You mentioned that the reservation list of the ITMA is full. Could you add some quantitative color to that, like if it were to all materialize, what this could mean, potential orders just on a higher level going forward?

So I can give you one example. I mean, we had so many machines we were presenting at the ITMA. This will maybe take another extra call, but I'll give you one example. We have presented our new J70. That's the new air jet machine, which had phenomenal feedback from customers. This is a new product, and we are running already a couple of machines in the market on customer sites. because we want to make sure that we meet our customer requirements and their expectations about quality, about how fine the fabric is, speed, and different ranges of applications. So we are still testing that. And we say, well, okay, we want to present it because we don't want to wait another four years. So we made a reservation list for the first 20 machines to be supplied in the second half of 2024. That's the idea. So we still are testing. We are still ramping up then our manufacturing. We do the proper industrialization because very often there you make a lot of mistakes. So in the second half of 2024, we would like to start with deliveries. we could have filled three-digit numbers for reservations. And when you take just one machine, half a million, you can imagine that this has a substantial potential for us in the future. Easily, we could have filled the three-digit number. But we had said, no, we want to make the things right, right from the beginning, because otherwise, if we then have, you know, an early bird issue, then you pay three times the cost than if you do it right now before you really go into the market.

Got it. Perfect. Thank you very much. And the second question would be regarding the reader site, the sale to Alreal. Is there some sort of profit sharing agreement on the development of the project afterwards? Is this going to be a done deal in H2M? No relations to it anymore afterwards?

Yeah, it's the 96 million we communicated and the rest of the details we do not disclose in this contract.

Okay, thank you.

Gentlemen, so far there are no more questions from the phone.

We now move over to the questions from the webcast. The first question comes from Andrea Frey from Credit Suisse. Can you please provide a rough guidance for NETSTEP for 2023 and 2024?

Yes, okay. 2024, of course, is a long time range. But 2023, as you can see in our balance sheet in the half year now, We have quite a high level of networking capital, especially our inventory level is very high, also our trade receivables. This is related to the sales volume we had in the last two months. So we expect this clearly to go down to the end of the year. And we also expect then after the end of the year a further normalization. Of course, it depends then on the sales we have and the order intakes we have. But the level of networking capital is really driving this. And then in addition, we will see, of course, the cash flow from the sale of the land here in Winterthur. This will be here in Q3 or latest Q4. So we expect it in the second half to come in as well. So this is another, cash flow-wise, is another 85 to 90 million that reduces the net debt. So this will shape the balance sheet in the next half year. Does this answer your question? Okay, you are not online. Sorry, it was a web question. I cannot write. Sorry. I hope this answers your question.

The next question is coming from Till Hirsykorn. He's asking, how many job cuts do you expect at the headquarter in Winterthur? What means overhead here in Winterthur?

So maybe I picked that up. You remember I refer once again to the overall slide we have shown about FTE development. Starting with 5,555 people and somehow ending at the end of the full implementation at 4,600 to 4,800. There we have this topic of 300 people overhead reduction. This also includes the site in Winterthur. And when we talk about overhead, there is no difference in Winterthur to other sites. We talk about administration jobs. This can also be HR, finance, sales support. So all these typical jobs for administration because our volumes will go down in the future. The second topic is that we are introducing these product power hubs. And today we have product management functions and also certain R&D functions here in Winterthur. And some of them we will reduce because we believe we have too many projects and we want to focus on those with strategic priorities. So there will be also a reduction in those two functions overall in Winterthur. Then, as a third component, there will be shifts. So some of the R&D and product management functions will be shifted from Winterthur to other locations. However, some of the functions we have in other locations will be shifted to Winterthur. So there is a whole potpourri of different, let's say, dimensions. Now, all in all, you can, with the plus and the minuses, there will be something like 100 positions net being under discussion for Winterthur. I want to say that we are now starting a consultation process. So these are vague figures because we are a very responsive and responsible employer and we will now discuss with our employee representatives. What can we do? Are there other possibilities to achieve the expected results? And once we have closed that process, then we can really communicate final numbers.

The second question from Mr. Hesikon is concerning research and development. How does Next Level go along with the New Research Campus, which stands for innovation? Will RETA concentrate R&D at the headquarter in Dittator?

Well, it is a little bit of a follow-up question of before. Of course, more or less in a year, we will move to the new campus. And the new campus is a very functional building. Why functional? Because it will include a big technology and innovation center. We want to test different types of applications there. we need the center to train our people in the field. But we also need the center as a demonstration project for our customers. So inviting customers to show them what we have, the latest technology, and even training their employees. So Winterthur is extremely important for us as the new real technology and innovation center. Now in terms of products, all the preparatory machines, the product management and the R&D will be concentrated in Winterthur and we will move some of those functions from other locations to Winterthur. Because it's very important that at the beginning of the yarn production process, you really create high quality because you cannot compensate or correct that enough in the end-spinning technology. So it's a concentration of preparation machinery and a very high importance of this new technology and innovation center.

Okay, and the next question comes from Sebastian Hoyes from Vero Capital. Could you remind us of your shareholder structure now after recent changes?

Yes, we can. This is 33% Peter Spooler Holding, a well-known shareholder, and there is almost 8% Big Point Holding AG, which is Mr. Hefner.

I think that's it. I have no more questions.

Thank you so much for attending this call. I hope you were able to answer all your questions and to give a little bit more transparency about our plans. I think it's very important that you understand that, first of all, next level is super important for us. It has a certain urgency for us, but that we are all convinced we are doing exactly the right thing. So the board of directors and the group executive committee are fully convinced that with the execution of this program, we will financially perform in the future at any time, independent where we are in the cyclical markets. And we believe that this will happen. We are committed to that. We will work very hard on that. And we need a little bit of luck definitely also from the market development that order intake will pick up. But I would say for 2024, I'm not so much worried. And then once the market will anyway come back. I wish all of you a good holiday season. For those who go to the holidays, looking forward to see you again on our call for the third quarter volume discussions.

Thank you very much and goodbye.