Elringklinger Ag

Dear ladies and gentlemen, welcome to the conference call of Elring Klinger Group. At our customer's request, this conference will be recorded. As a reminder, all participants will be in a listen-only mode, and after the presentation, there will be an opportunity to ask questions. If any participant has difficulties hearing the conference, please press Starkey followed by zero on your telephone for operator assistance. May I now hand you over to Dr. Stefan Wolf, CEO, who will lead you through this conference. Please go ahead.

Thank you very much, ladies and gentlemen. A warm welcome to all of you to our conference call regarding our figures for the second quarter 2020. Quite a difficult quarter, as you can imagine. Our agenda today is as follows. I will start with a short introduction on markets and, of course, on the key issues of the second quarter 2020, which could be labeled as the coronavirus quarter here in Europe. Afterwards, our CFO, my colleague, Thomas Jesulat, will present the financial figures of the second quarter, and I will then close with the outlook on the fiscal year 2020. And, of course, at the end, as usual, you have the possibility to ask questions, and we are more than happy to take your questions and answer your questions. Companies with relevant activities in Europe and North America have been particularly hit in the second quarter of 2020, while the first quarter was more the Asian or Chinese quarter with regards to the coronavirus pandemic and its consequences. This applies above all to the automotive industry, to our industry, the supply industry, of course, as well. From March on, production in many European and North American countries has been scaled down or even closed for a couple of weeks. As a result, we noticed a harsh impact on our industry. On a micro basis, the collapse of international auto markets was reflected in a sales decline of 41.9% to 252 million euros. Adjusted for effects from foreign exchange, translation and M&A activities, the revenues fell by 40.5%. Compared to the contraction of global auto production that was at 44.5%, we could manage to outperform the market once again by 4 percentage points. The substantial slump in revenue in the second quarter of 2020 as a result of the coronavirus pandemic led to an EBIT of minus 32.4 million euros, including the solid first quarter. You remember, we had 16 million in the first quarter. EBIT stood at minus 16.4 million euros for the first half of the year. Even against the backdrop of the corona crisis, we were able to continue on our chosen path. You remember that from the last calls and from last year. We achieved, in this very difficult situation, a positive operating free cash flow of 25.8 million euros, and we were able to further reduce our net debt by 23 million euros. Over the past 12 months, just to remember you, over the past 12 months, we have improved our net debt even by 120 million in total. At RENCLINO, we luckily have noticed a relatively low number of coronavirus infections so far, and we are really happy about that. Among others, it can be attributed to the fact that we have implemented preventive measures as early as the end of February, but we also see a high group-wide discipline in implementing and living our protective measures like comprehensive hygiene rules, special office guidelines, or, of course, global travel restrictions that we implemented already end of February. When we look at the year to date, 2020 has been impressed by the coronavirus pandemic, of course, which led to extensive measures being taken by states around the world from February or even the end of January 2020 on for the purpose of protecting the citizens of those countries. As a result, economic activities came to a standstill in most countries. If we look to Asia, especially China, that was already in February. And if we look on the European and the American continents, that started end of March. From the end of April on, a number of European and American countries gradually relaxed their protective measures again, first in Europe and later also in North and South America. Accordingly, automobile production resumed little by little. However, demand within the automotive market remained very sluggish, especially in Europe. In North America, it developed somewhat more dynamically, and China, the world's largest automobile market, has largely returned to its normal level since early April. The rest of the year mainly depends on the sustainability of the demand situation in our industry. If there is a very slow or even no recovery, the cut in our industry will be quite deep. More about that in our outlook that I will do later. So now let me hand over to Thomas Jeselat, my colleague on the management board, our CFO responsible for financing, and he will explain the quarterly figures.

Yes, thank you, Dr. Wolf. Ladies and gentlemen, a warm welcome also from my side. I would like to comment the financial results for the second quarter, starting on slide number five. The economic consequences of the coronavirus pandemic are reflected in the group's order books. Order intakes slumped to 193 million Euro in the second quarter of 2020, and this represents a decline of 227 million Euro or 54.1%. Adjusted for currency effects, Order intake decreased by not more than 51.5%. The same pattern can be seen in the order backlog. After €1.63 billion as of June 30, 2019, the group recorded orders worth €929 million at this year's half-year reporting date. Therefore, order backlog is down by 12.6% compared to the prior year figure. Due to the collapse of international vehicle markets, group revenues fell by 41.9% to €252 million, while it amounted to €434 million in the same quarter in 2019. In organic terms, which means adjusted for the effects of currency translation, and M&A activities, group revenue fell by 40.5% in Q2 and by 25% in the first half. Revenues in the second quarter 2019 were diluted by currency effects of 4.9 million Euro in the second quarter and by the divestment of the Hungarian industrial park with an effect of 1.1 million Euro. Compared with the global vehicle production, which contracted sharply by 44.5% in the second quarter and by 33.2% in the first half of the year, Erwin Klinger once again managed to outperform the market as a whole by 4 percentage points in Q2 2020 and by a good 8 percentage points in the first half. The revenue shortfalls recorded in the second quarter 2020 affected all regions. Let me focus on the main three. In Europe, including Germany, group revenue from sales fell in Q2 by 42.9% to 128.5 million euro. At 34.8%, Germany saw a less pronounced decline. Group revenue in Europe therefore proved significantly more robust than the European vehicle market, which suffered a 63% decline in production output in the second quarter of 2020. In the region of North America, sales revenues slumped by 54.3% to €53.4 million. Here too, however, the impact on Erling Klinger was less severe than that felt by the market as a whole. With a downturn in production output of 69% in Q2 2020, the North American market was hit particularly hard. In Asia Pacific, Erick Linger recorded the smallest regional downturn in sales revenue with a decline of 13.3% in the second quarter of 2020, Although China was affected by extended New Year's holidays in February and subsequent planned closures due to the COVID-19 pandemic, the situation returned to normal in the second quarter. By contrast, the situation in other Asian countries, including India, did not improve in the quarter under review. With regards to our segments and business divisions on slide number seven, we see some revenue shortfalls. VOE business remains the largest segment representing three quarters of sales. Revenue fell by 173 million euro or 48% to 188 million euro in the second quarter of 2020. Within the long-standing divisions of shielding technology as well as cylinder head gaskets and specialty gaskets, revenue in the second quarter of 2020 fell by more than half in each case compared to the same period in the previous year. The lightweighting elastomer technology division, which develops and manufactures innovative lightweight structural components in addition to engine-related parts, was relatively less affected, and therefore enlarged its share of group sales. The e-mobility division, which comprises the areas of fuel cell and battery technology, as well as electric drive systems, also recorded a below-average decline in revenues, generating 5.8 million euro in the second quarter of 2020, compared to 8.4 million euro in the second quarter of 2010. Slide number eight presents the earnings figures for the second quarter, which are linked to the volume impact of the pandemic. The group's EBITDA was pushed down into slightly negative territory at minus €0.9 million in the second quarter of 2020, after €39 million in the second quarter of 2019. The Erling Klinger Group EBIT fell to minus 32.4 million euro in the second quarter after 10.2 million euro in the quarter in the previous year. Therefore, the EBIT margin was at minus 12.8%. Compared to the same period a year ago, net finance costs fell to minus 6.3 million Euro. In the second quarter of 2020, the group recorded an improved net result from currency translation, a better net interest result, but a lower share of bottom line result of associates in Q2 2020 compared to prior year figures. 3.1 million Euro. The group's income taxes were in positive territory in the quarter under review. As part of the government's COVID-19 aid measures, the group took advantage of tax relief in Germany, including tax deferrals. As a result, net income for the Erwin Klinger Group stood at minus 35.5 million Euro in Q2 2020, also of the known controlling interest calculated on an unchanged basis of 63,359,990 shares, earnings per share attributable to the shareholders of Elvenklinger AG amounted to minus 56 Eurocent in the second quarter. We now come to slide number nine, the substantial slump in revenue in Q2 2020 as a result of the coronavirus pandemic was cushioned slightly in terms of earnings performance, but not compensated for in full by the existing efficiency program and measures initiated by the group at an early stage to adjust capacity levels and intensify cost savings. There are the following drivers to be identified. The impact on sales volume by the pandemic also affected earnings. And instruments like the German Kurzarbeit or similar ones in other countries help to compensate the decline of EBIT. All in all, the coronavirus impact amounts to roughly 67 million euro. External factors like tailwind on the raw material side or reimbursement of duties improved earnings by 3 million euro. And the efficiency program includes several dimensions. Savings have been realized by reducing personnel costs, selling expenses, as well as general administrative costs, and help to offset the negative effects of the crisis to some extent. Let me now turn to slide number 10, showing the performance of our segments. The adverse effects of the coronavirus pandemic on the automobile industry had the most significant impact on the original equipment segment as it is directly affected by changes in the volumes requested by manufacturers. As mentioned, segment revenues fell by 47.9% year-on-year to €188 million in Q2 2020. With regard to earnings, the long-standing divisions had improved their earnings performance in Q1 despite declining revenues due in part to the efficiency program but we're still well below the break even point due to the significant sales decline in the second quarter. Even though conditions were difficult, the aftermarket segment recorded an encouraging increase in revenue, which grew by 6.7% to 91.3 million Euro in the first half of 2020. In the second quarter, the segment succeeded in maintaining the supply of spare parts to the market in all major regions, despite far-reaching logistical and trade-related restrictions. And as a result, revenues generated in the second quarter remained high at 39 million euro, and the high level of efficiency related to materials planning, warehouse logistics, and trade channels as well as forward-looking inventory optimization are reflected in the segment's solid earnings performance underpinned by group-wide cost discipline. The engineered plastic segment has been faced with declines in orders and revenues, which were recorded, for example, in the mechanical engineering and automotive sectors and regionally in Germany, Europe, and the U.S. Segment revenue in Q2 fell by 17.1% to 23.8 million euro, and with continued strict cost discipline, segment EBIT amounted to 1.3 million euro in the second quarter. Revenue and earnings contributions of the segment other are of subordinate importance, accounting for less than 1% of consolidated revenue. Now we come to slide number 11. Networking capital has been managed down to 417 million euro over the past quarters. Compared to the end of March 2020, it decreased by 36 million euro. While we have already focused on reducing and optimizing these items in previous periods, developments in Q2 2020 were influenced in addition by the decline in orders and revenue in the wake of the COVID-19 crisis. Purchasing volumes and inventories were proactively adjusted downwards. The decline in revenue, which had reached dramatic proportions in February, first in China, then also in Europe, led to a reduction in trade receivables. As part of the efficiency program, we followed a disciplined approach in our CapEx activities, In response to the COVID-19 crisis, measures were stepped up even further. Key investment projects, however, were not halted. Projects associated in particular with new business areas, which are of significant importance to the group's strategic positioning, will continue to be implemented. CapEx in property plans and equipment and investment property amounted to €10.4 million in the second quarter after €20.7 million in prior year's quarter. The CapEx ratio was down at 4.1% in the second quarter. Net cash from operating activities was used to fully finance payments for investments and also to build up additional liquidity reserves. Therefore, the Elvenklinger Group generated operating free cash flow of €25.8 million in the second quarter. Due to the solid financial situation, the Group was able to further reduce net debt in the first half of 2020. As of June 30th, net debt amounted to €580 million compared to €595 million at the end of 2019. In the period under review, there were no significant changes in credit terms, not even as a result of influences from the coronavirus pandemic. As of June 30th, Elring Klinger complied with all covenants, agreed with financial institutions, and as of June 30th, the debt ratio, which is a net debt to EBITDA was 3.8 compared with 3.3 at the end of 2019 and 4.4 at the end of the first half of 2019. Regarding our maturity structure, you can clearly see a positive effect of our syndicated loan with a volume of €350 million. And with regard to the current liabilities, we will not have to refinance the full €149 million in 2020, but only €3 million. The rest is either short-term revolving or due in 2021. Last but not least, I would like to focus on the liquidity position of 295 million Euro, including unused credit lines, which still is quite comfortable. Having said this, I now turn back to Dr. Wolf.

Thank you, Mr. Jeselat. We will now look first on the market for the rest of the current year. In general, the economic impact of the coronavirus pandemic still cannot be accurately assessed as the uncertainties are simply too pronounced at present. It is rather impossible to predict how quickly the demand situation in Europe will improve, nor is it possible to assess how the economy in North America will develop in the near future. What is more in view of the rising number of Corona 19 cases in numerous countries such as the United States or especially Brazil, also India, or even some European countries, it is really impossible to predict whether there will be a further wave of infection in individual countries or across entire continents. Thus, renewed restrictive measures in the course of the pandemic cannot be ruled out for the rest of the year. And these measures would, of course, hit the economy, all the economies worldwide severely. Based on today's perspectives, Q3 and Q4 will also show a decline in light vehicle production year on year. Having all this in mind, we expect for the fiscal year 2020 that the Chinese market is going to decrease around 15%. The European and North American markets probably fall down by around 25%. and the South American markets are going to shrink by around 30%. And that, of course, leads to a decline of global light vehicle production by approximately 22% for the full year 2020. I will close this presentation with the outlook for the group on the fiscal year 2020. Due to the described major uncertainties, it remains difficult to provide a sufficiently reliable and accurate outlook for this year. Based on the information and estimates available today, RENKLINGER can confirm its annual guidance presented in Q1 2020, and we anticipate that the change in revenue will be slightly better than the figure relating global light vehicle production. And as I said before, experts are currently forecasting year-on-year decline of 22% in production output for the annual period as a whole. So we are going to be a little bit better. And looking at the second quarter, we see already an improvement. You know, if you look at revenues April and May was double-digit million and June was already triple-digit million, so there is some improvement. In terms of earnings, the group is again anticipating an EBIT margin that is visibly lower than in the previous year. The group also continues to assume that in 2020 the return on total capital employed via ROSI will be lower than in the previous Last but not least, our expectations for the remaining indicators for fiscal year 2020. You see that now on slide number 16. As shown in the first two quarters, Ellen Klinger will maintain its disciplined approach to capital expenditure on property, plant and equipment, as well as investment properties. Due to the postponement of measures, active targeted project management and the general market situation, the Group is adjusting its outlook for the current year. In relation to Group revenues, the volume is now expected to be below 5%. Previously, it was below 7%. The Group will also continue to optimize, of course, networking capital. We are working on that really hard. Taking into account the expected decline in revenues, the ratio for the fiscal year 2020 is expected to be approximately the same as in the previous year. Overall, the group will be looking to record a positive operating free cash flow for 2020. We managed this already in the first half of 2020, and we see that also for the full year 2020. Despite the expected positive operating free cash flow, it is unlikely that the net debt ratio, which is net financial liabilities in relation to EBITDA, will improve further in view of the anticipated earnings situation. Instead, the group anticipates a number above prior year's figure of 3.3. With regard to the equity ratio, Elklinger expects to generally remain within the long-term target range of 40 to 50% of total capital, so not going below 40%. And the group expects R&D costs, including capitalization, to account for around 5 to 6% of the consolidated revenues. Overall, therefore, the group can confirm its medium-term outlook However, the exceptional consequences of the coronavirus pandemic must be taken into account, especially against the background of the high degree of uncertainty in the forthcoming reporting periods. I talked about that already, that almost everything is uncertain. Well, ladies and gentlemen, that concludes the presentation. on the results of the second quarter and the first half year, also the outlook and general market expectations. And Ms. Oezulat and myself are more than happy to take your questions now and we are going to answer your questions. Thank you very much.

Ladies and gentlemen, we will now begin our question and answer session. If you have a question for our speakers, please dial 0 and 1 on your telephone keypad now to enter the queue. Once a name has been announced, you can ask a question. If you find your question is answered before it is your turn to speak, you can dial 0 to cancel your question. If you are using speaker equipment today, please lift the handset before making your selection. One moment, please, for the first question. And the first question is from Christopher. Your line is now open. Please go ahead.

Hi, good morning. Thank you for taking my question. The first one will be on EBIT and also operating leverage a bit. You're breaking out the cost savings that you could achieve during the quarter. So the first question will be how many of those are actually sticky and how much of those are just very short-term measures that you could implement also given the low activity. Would you expect part of that to reverse in Q3 and Q4, or is it really very sustainable measures? And then would you be willing to quantify the short-time work or quarter-byte impact on your earnings? You've included it, I think, in the one tab that's not quite clear, breaking out, or are you unwilling to quantify those impacts?

Yeah, when we look at the EBIT bridge, then we see we have 8 million personnel costs indicated. And as part of the decline in sales, we have another 32 roughly, 32 million, so overall in q2 it is close to 40 million reduction in personnel costs it's a mix i have to say it's a mix between you know short time furloughing in the international context and also the efficiency program and therefore we have taken that apart and my expectation is that you know what we see there the the roughly the higher single digit amount that we need to have continued savings on the personnel side as we go into the second half of 2020. So that amount or an amount close to that, I would expect to be sticky in regard to the second half. you know, when we when we look at short time in Germany, and maybe in Europe, particularly, it's probably roughly, you know, 50% of the overall amount, because we have, of course, in, you know, in North America and the Americas, we have had furloughing in the UK as well. Yeah, So a little bit more than 50% I would expect to be coming out of short-term working here in the European area.

Maybe one amendment from my side. You have to see that the positive effect of this coronavirus pandemic is that you learn a lot. So I'm pretty sure that our travel expenses will be much lower after that than before, because we learned that we can do a lot through telephone conferences, video conferences. And so this is just one example. And I think there are a lot of issues that showed not only in Klingau, but a lot of companies that things can be done differently and that expenses that we had before are not necessary anymore. and that we can sustainably change processes and change behaviors in companies that will result in a quite good reduction of cost.

Thank you. So I take it that going into H2, most of the savings will be sticky and that the support when you ramp up activities from measures like short-time work, it's fading, will not way on your operating leverage. So we could assume actually that the performance that you've shown in Q2 will be close in Q3 and Q4 when it comes to operating leverage, say around the 25%?

Yeah, it'll be adjusted to the lower sales levels that we have in the second half. So the answer is yes to that. We'll see some effects. and we'll see some increased effects, you know, relative to what we had planned initially on the efficiency program, and that will give us some better performance. Yes.

Thank you. And the second block on working capital and free cash flow, essentially. You had a decent working capital performance in Q2. Now, the question is, obviously, when activity picks up again in Q3 and Q4, will we see a partial reversal of... the numbers that you've shown, say in inventory, and also then receivables build again. And on the receivables, I take it like for most of the other suppliers, at least, factoring should have been a headwind in Q2. Do you expect that to reverse as well in the second half?

Yeah. On the working capital, overall target remains 25% of sales. We see now a normalization of sales on a little bit lower level. You know, what happened in the second quarter initially was, of course, you know, the delay or the stop of the supply chain in terms of the raw material that came in. We finished a lot of, you know, unfinished production orders in the group by then, you know, and gave ourselves a good position for the restart because we had on the finished goods side, you know, good levels of inventory to have a smooth restart in June. What we see at the end of June, you know, we see a good inventory basis as a result of that process. and will continue you know to to work on a reduction of inventory for the rest of the year now now i see a you know a normalized level also between accounts receivable and accounts payable in the group so um you know in that sense i would expect that we continue with some improvements here on the working capital on the receivable side We had in Q2 headwinds from a liquidity loss of €20 million to €0 million. And that is picking up immediately again now beginning of Q3. But when we look at the cash flow situation here in the second quarter, we in fact had roughly €20 million of headwind coming from that.

One word to the working capital in a situation that it's not only in our company like that, this is in general, in a situation that we had, it is pretty clear that working capital goes up tremendously because if you look at the situation in our industry, you get your orders, your order intake, you get predictions for the production and for what the automotive customers are going to order. always, you know, three months ahead, six months ahead. And of course, with not knowing that, you know, factories worldwide are going to be closed widely in April and May, we, of course, ordered already in January and February material for the original volumes that were in our books. That's pretty clear. And then all of a sudden we got the material, but we could not produce because the customers didn't need the parts because they closed their factories. Yeah, that's pretty clear. And this will, of course, this material now flows out as sales are increasing. And as I mentioned before, you know, we had in April and May only double digit million sales and in June already triple million sales. You know, so you see the improvement. And that, of course, will lead to the fact that the material goes out and that working capital goes down.

Thank you.

And the next question is from . Your line is now open. Please go ahead.

Yes, hello, from my side as well. A few couple of questions. Firstly, when you look at your expectations, the expectations you've mentioned regarding activity in the second half from, I think, or other institutes, and you compare that to what you actually see in the order call-offs regarding your products, Is that confirming your view? Are you becoming more, let's say, optimistic or, let's say, constructive regarding the second half year? Or do you see that these estimates still have some risk to the downside? Of course, we have now to exclude anything like the second wave or the second half year, which we could not foresee today. But just to view on how the current situation does look like in this respect, that would be helpful. Secondly... I think you, in line with many of your competitors or other companies from the industry, are reducing capex quite significantly in the current year. Could you give us some indication how much of that capex you may potentially have to catch up in the years ahead, or how much of that you can really save, which would thus consistently not return? And I actually can understand that you can't give us anything like a more precise guidance on the second half here, but do you have any kind of, let's say, revenue number in mind for the segment at which you would see results returning to break even with, let's say, a bit of help from short-term work following on the one hand side and the efficiency measures you have implemented on the other side? Thank you.

In regard to your first question, the activity or the order situation that we have relative to projections, I think that what we see, it reflects what we read in studies and in information from different institutions. We are going to be heading towards a total sales reduction of probably 20% relative to previous year overall. So I think, you know, production numbers and expected sales from us roughly is matching also in the regions. On CapEx, we have canceled some. we have deferred some and, you know, we have to catch up maybe a little bit. But what we have to take into account now that the preparation that we have done here on different projects, the development is such that the projects also are being delayed. So it's not necessarily the case that, you know, what was planned as SOP for 2021, that what we had planned CapEx for, that that is still on. That means that customer timelines here, SOP dates, shifted also into the future. So yes, I think there is some part of what we have deferred in 2020 is going into 2021. And otherwise, I think it's just a shift on the time axis. into the future, you know, based on what we have experienced here this year. Okay, your last question.

Point to the direction that with the structural measures you've done, whether you could give some kind of indication at which, let's say, kind of revenue level you would return to break even in the OE segment.

I think this is a too easy question. because we have a change in the sales structure for the second half, and there is also an expected lower sales number for 2021. So what we have to do now, we have to adjust the cost basis through our efficiency program in order to You know, shift this break even back to, you know, the, the nominal level that we have seen in terms of profitability. But on a lower sales basis, and this is effectively what we do for this year and also for 2021. That we have to reduce the cost base. and to maintain a profitability level that we have seen in, for example, Q1 2020. So those activities are underway, and we have to report ongoing as, and you'll see the impact of that, but the goal is clearly to stay on performance levels, such as we have seen in Q1 2020.

That's not the one additional question regarding free cash flow. Did you have any, let's say, meaningful tailwind or headwind from factoring in the second quarter as receivable volumes were presumably going down?

I just mentioned that, you know, the headwind in the second quarter was 20 million cash outflow from reduced factoring, lower receivables and then, you know, less possibilities to sell receivables and the impact was minus 20. Thank you. And I expect that to be reversed largely in Q3.

The next question is from . Your line is now open. Please go ahead.

Sorry, good morning. Can you hear me now?

Yes, please go ahead.

Yeah, sorry about that. I was on mute. You've actually answered my questions, but maybe I can ask you something on fuel cells and hydrogen and the bipolar plates. More of your larger competitors are starting to talk about this a bit more, and I'm conscious, of course, that you have sold Hook in the past to Farisia, which is one of the well, prospective market leaders or intended market leaders by their own ambitions anyway, together with also Michelin, Schaeffler, for example, is talking more about it. So could you just, I know you've talked about it one or two calls ago, but could you just remind us of our ambitions there in the fuel cell and bipolar space? And if you could imagine that you could possibly divest this in the future to free up capital to reinforce your ambition somewhere else, or is this really a very key part of what you want Erling Klinger to be going forward, if you could just discuss your ambitions around that piece again. Thank you.

Well, we have a clear strategy here, and to be honest, of course, we do not disinvest that. You know, this is the future of Erling Klinger, the fuel cell systems and also our battery systems, and also, of course, components for fuel cell systems and also components for battery systems. It's basically a three pillar strategy. We still believe very much in the combustion engine. And I personally believe that we will have combustion engines even in 2050 in much larger numbers. And we are going to see a consolidation in our classical business that is parts for the combustion engine. And we will see here, as I said, a consolidation and the market becomes very interesting for somebody that is leading in technology in those parts for the combustion engine because our customers still build those engines for many, many years. So that is, you know, we are going to invest in that area underproportional, but we are going to invest to keep us on this high technical level where we are so that, you know, the customers basically finally probably say we have to go to Klingon to get parts for our classical business Well, because they know how to do it. The second pillar is that we are going to supply to OE customers, but also to very interesting new customers, new players in the automotive market, components for battery modules and also components for fuel cell units. I'm happy that fuel cells and hydrogen and also all that becomes more and more popular. Everybody talks about it. the government in Germany has installed a person that is in charge of this hydrogen strategy. So we will sell components and of course our main component for fuel cell systems is the stack, the fuel cell stack. Of course, we can also sell bipolar plates if somebody develops their own stack. So we are very flexible here and this will be a big part of our business in the future. That is the components for those systems. And then of course, the third pillar is the systems. Here we are going to be more or less a niche player because the investments would be too high for us to really go strongly in those systems. So we concentrate here on niche applications, interesting niche applications where we can deliver small numbers of systems be it battery systems or be it fuel cell systems. And I think this combination is very good for the future development of the Erlenklinger group. So this is our strategy. And of course, we see quite a dynamic development with regard to fuel cell systems I expect that fuel cell systems and also, of course, components, we have R&D projects with customers and potential customers, also with regard to components, that this really will get even more dynamic development in the years to come. So that is the strategy. And just one thing, as you mentioned, hook. was never in battery components or battery systems or was related to fuel cells. Hook developed and produced exhaust systems and we decided when we sold Hook that we are not going to further invest in those exhaust systems which we see now was a good decision and we did this decision right in the in the right moment. So, yeah, maybe you meant the company New Enerday that we sold because Hooke has never had any relation to fuel cell systems. New Enerday, we thought that was a pretty small company and they were related to the SOSC fuel cell. That means the hot fuel cell that operates at a temperature of around 800 degrees. And we don't really believe in that technology anymore. What we do is the so-called cold fuel cell, the cold stack, which operates at a temperature of about 50 to 60 degrees Celsius. And that's why we sold Nuenode. And that was also the right decision because We are very much focused on mobility, fuel cell systems in mobility, and the SOFC with this temperature of 800 degrees will never be used in mobile applications. It only will be used in stationary applications, and that's where we are not focused on that.

Okay, thank you. I meant hook, not because they are also involved in fuel cell or battery, but because maybe you also previously thought that this might be closer related to what you want to do in the future, and then you sort of reconsidered that. So I just wanted to make sure that there's no chance for you to reconsider wanting to be in, for example, a fuel cell stack component, or maybe to ask it slightly differently. you are convinced that you don't need very large scale to be competitive in this market. So one doesn't need, for example, 20% market share or so in bipolar plates to be competitive with potentially larger competitors.

No, no. We are going to be very competitive here in that business.

Okay, that's great. Thank you.

The next question is from Akshat Kakkar, JP Morgan. Your line is now open. Please go ahead.

Thank you for taking my question. Three from my side. The first one, coming back to your 2020 guidance on outperformance, you mentioned that you expect end markets to decline by 22% and slightly outperform that number. In the first half, you outperformed by more than 5%. I'm just wondering if there is any end-of-life contracts or any big changeovers that we should be aware of in the second half, or is it just a cautious guide based on what volumes could do in the second half. That's the first one, and I'll follow up with the other two later.

Well, we just said that we are going to outperform the market, but we didn't say a percentage number.

I read slightly outperformed, so I was just wondering if there is anything in the second half that makes you more cautious.

Well, slightly can be also four or 5%. Okay, I just wanted to make sure. It's a question of definition.

That's all right, thank you. Follow up, can you quantify the CapEx number for 2020? Is it possible to quantify it as of now?

Yeah, for 2020, you know, the... it would be a mid double digit amount in Euro. And it's going to be below 5% of sales.

Okay, thank you. That's helpful. The next one is on your headcount. I've seen that you've reduced personnel by more than 4% in second quarter versus year end. Can I ask if these changes are permanent in nature? And where are they coming from? Are they basically people that are retiring that you're not replacing? Are they from voluntary surveillance schemes? Are there any restructuring costs that we should be aware of? And if you're planning to intensify these measures, because I see that currently only one-fourth of that reduction comes from Germany. Just wanting to understand how you're thinking about that. And also, if you could, a comment on temporary workers and how much have you reduced temporary workers by in the first half.

We have reduced around about 1,000 people. And I would say the main effects are coming from Erlenklinger USA, Erlenklinger Automotive Manufacturing in the USA, and Erlenklinger Abschirmtechnik in Switzerland. Those are, let's say, the main companies in the group that have reduced personnel. and that is related to restructuring the production, to increase productivity, also rationalization, automation, all that kind of stuff. But also other companies contributed to the reduction of personnel because, of course, in our global efficiency program, which has a lot of parts and a lot of aspects, but also one aspect, of course, in the Global Efficiency Programme is to very closely look into the situation with personnel and to see if we can reduce personnel. And as I said, it's around about 1,000 people that we reduced since the end of last year. And that, of course, is sustainable.

Thank you. And the last one on the maturity structure. Can I get a number please for 2020, 2021 and 2022 specifically for each year and how much of that needs to be refinanced?

Yeah, from a nominal basis, 3 million, like I mentioned in the presentation for 2020 is left. It's roughly 100 million 2021 and it's roughly 100 million 2002.

Perfect. Thank you so much.

And the next question is . The line is now open. Please go ahead.

Good morning. I have two questions. First one on your spare parts business. Spare parts business performed very well, not only in H1, also in Q2. Could you give us an idea what we should expect for the remainder of the year? So for the second half, will there be some reversal effects from the performance we've seen in H1? And the second one is on your e-mobility and also on your lightweight business. Can you give us an update on new orders? I know in some cases you are not allowed to mention names, but maybe you can give us a more general view on that, especially also with regard to the cockpit beams.

Let me start with the last question. Indeed, we are not allowed to mention names. But we received a very interesting and very good order from a competitor. It's a new OE. It's a competitor of this very successful company in California that produces electrical cars. So we are well implemented in this area of new OEs. And this is a real good order and that is related to lightweight parts, not only the cockpit carrier, but other parts. So we are pretty well equipped here. We also have very good discussions with the traditional OEs with regard to those parts. So that will be one of the important products for the Enclino Group in the future. Also, of course, with regard to e-mobility, I mentioned that before, you know, in our three pillar strategy, of course, with regard to e-mobility, that means battery technology and also fuel cell technology. We, of course, have a nice project with the customers, traditional customers in China, also traditional customers here in Europe, and also with customers in the U.S., so that really is very promising. Your first question with regard to the aftermarket, Now, this is a general trend. Every time when the OE markets are down, the aftermarket is going up. That's a general principle that, you know, I'm now since almost 25 years in this industry. So always when we had downturn in OE production or in the OE markets, then the aftermarket was picking up. So people just keep their cars and they have to repair them. Yeah. So this is a trend and I see that this trend is ongoing in the second half year, which is good for us because we have achieved very good margins in the aftermarket and we are well positioned. And you have to see that we started a strategy about two years ago in the aftermarket. We are very, very strong in Europe. I would say we have almost 80% of the market here in Europe. We are not that strong in China, which is an important market, and we are not really strong in North America. And we implemented aftermarket business in North America and in China, which is really, really growing fast and growing good. And we see additional effects from those two markets in the second half year.

Okay, thank you. Maybe a follow-up on your e-mobility and also on electric business. Do you recognize any change in the customer behavior with regard to immobility due to COVID-19? So if you compare demand, let's say, six months ago to now, is there a change?

What we see is that all customers are very much focused on, I would say, this issue, new propulsion systems. So all the projects that they have be it the new OEs or be it the traditional car manufacturers, they have not stopped those projects and they have not stopped the means for those projects, the investments. They are fully working on that. Most of the customers do not have short-time work in those areas. They have the people really working on that. And that's what we see, too, and what we have, too. You know, we also are very much focused on that. And, of course, people are working full power here at Ellen Klingel with the customers on those new propulsion systems. The savings and, you know, the short-term work and all that stuff is rather related to the traditional business than to those new projects because they know they have to hurry up to be competitive with maybe Chinese manufacturers or Korean manufacturers, so they really are very much focused on that.

Okay, thank you.

And there are no further questions at this point, so I hand back to Dr. Wolff for closing remarks.

So, thank you very much for attending our conference. Thank you very much for your interesting questions. And I just want to mention that we have our conference call for the third quarter on November 10th, 2020. And I think we all hope that we can deliver good news and that this corona pandemic is over pretty fast. So let's hope on that. Thank you very much for attending our conference. Stay healthy, all of you. and I'm looking forward to talking to you again in November. Thank you very much. Bye-bye.

Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.