Fuchs SE

Dear ladies and gentlemen, welcome to the third quarter results 2025 analyst conference call of FUCS SE. This conference will be recorded. As a reminder, all participants will be in a listen-only mode. After the presentation, there'll be an opportunity for analysts of FUCS to ask questions. May I now hand over to Andrea Schaller, Head of Investor Relations at FUCS SE, who will start the meeting today. Please go ahead.

Yeah, thank you, Sharon. Good afternoon, ladies and gentlemen. This is Andreas Schaller speaking on behalf of HooksSE. I wish you a very warm welcome to today's conference call on the nine-month earnings. Before we start, maybe let me quickly introduce myself. I'm the successor of Lutz Ackermann as new head of investor relations at HooksSE. I have almost 25 years of experience having worked in various sectors like semiconductors, building materials, and also machine building. And now I'm at the company that supplies all these sectors with very innovative lubricants. So I'm very happy to be here and just look forward to discuss the Cook's Equity story with you and support you together with my team whenever you have questions. With me on the call today are our CEO, Stefan Fuchs, and our CFO, Esma Zaglik. As always, Esma and Stefan will lead you through the presentation, followed by a Q&A session. We also have the Investor Relations team here with us, so Theresa Landau and Niklas Neff. And actually, it's Niklas' birthday today, so happy birthday, Niklas.

Hey, thank you.

Yeah, all the documents to this call you can find on our web pages, and we assume that you have them in front of you. Please be also aware of our on the last page of the presentation. And now it's my pleasure to hand over to Esma. Thank you.

Please go ahead. Thank you, Andreas. And first of all, happy birthday to you, Niklas. And secondly, Andreas, great to have you here and welcome you on board, actually. We are really looking forward to work with you. But let's go and talk about our financial highlights for the third quarter. After a tough second quarter, we saw a strong recovery in Q3. But still, the environment is challenging, especially in Europe, where the demand remains weak. Mainly, uncertainty in the market overall continues to. Despite all the volatility, we managed to grow our business both organically and through acquisition. Sales rose by 1% to 2.7 billion. Currency effects had a negative impact of 51 million, mainly due to the stronger euro versus the US and Australian dollar and the Chinese renminbi. EBIT also developed positively in QC. even exceeding last year's Q3 results. After nine months, we reached a profitability of 326 million, which is 8 million or 2% below the prior year. So, what were the key drivers? It was a strong business mix, especially in North America, continued growth in Asia, here to mention China, and the first effect from our cost measure initiative we have initiated a quarter ago. Our free cash flow came in at 181 million, which is a solid result. So all in all, we are on track, and that's why we confirm our 2025 outlook as communicated in July. On the next slide, you can see the sales development by quarter. Compared to the previous quarter, sales increased by around 2% to 869 million. The growth came from all regions. However, if we compare it to Q3 last year, sales fell down by 6 million. This decline is mainly due to negative currency effects impacting the quarter by 32 million. As we all know, the euro continued to get stronger in Q3, which led to a higher FX impact than in the first half of the year. Looking ahead, we expect Q4 revenues to remain broadly in line with our prior year. Let's move to the next slide and take a look at EBIT on a quarterly basis. The picture has changed compared to the last quarter, which is actually a good signal. We can see an improvement of 16% in EBIT sequentially, and we are even slightly above our strong third quarter of last year. For the last quarter, we expect EBIT to develop in line with our expectations, which would bring profitability to almost the same level as last year. Having a look to our group sales development, we are actually happy to see sales growing year over year, and this both organically and through acquisition, despite the tough market conditions we are facing right now. As of September, sales reached 2.7 billion. That's a year-over-year increase, as mentioned, of 1%, or 34 million in absolute terms. Both organic growth and acquisitions were contributing equally to this positive development. The organic growth came mainly from Asia Pacific and the Americas, which is underlining the strength of our local-to-local strategy and the strategic investments we have made over the past year. The growth of these two regions was even being able to offset the moderate organic decline we have seen in EMEA. On the external growth side, our acquisitions, especially LUBECON and SHU, now Fuchs Swiss Lubricants, made a strong contribution. Further additions came from BOSS and IRMCO, both being a part of Fuchs since the beginning of this year. As you possibly read in the news, early October, we expanded our presence in Switzerland by acquiring our longstanding distribution partner, ASEON Swiss AG. This company will be merged into Fuchs Swiss Lubricants by the end of the year. Despite all the good development at the top line, unfortunately, a part of the growth got offset by negative currency. Taking a closer look at some of our KPIs, about sales and EBIT we have talked about. Looking to our gross margin, we see a steady improvement. Year to date, our gross margin stands at 34.9%, which is above last year. On the other hand, our functional costs increased also, mainly due to recent acquisitions we made, inflationary cost increases, and one-time investments we did for new customer projects. Some of these costs are one-off costs or pre-investments, which will normalize throughout the year. However, the rising cost base due to inflation still needs to get closer attention. To manage this development, we have introduced cost control measures, as we have announced also in our last call, of which we could see positive effects in Q3. So far, EBIT is down 2% year over year, but towards the year end, we expect to reach prior year levels. Our key balance sheet indicators are on track. As of September, Free cash flow reached 181 million, and both CAPEX and the change in net working capital are almost in line with last year. So, looking into the region, in EMEA, the main growth driver are our acquisitions, which successfully offset the organic decline. The decline in organic sales is mainly due to the challenging economic situation in Europe, here especially the weak automotive manufacturing sector. On the positive side, the acquisitions supported not only on the sales growth, but also contributed positively to earnings. I think it's also worth to mention that by the end of Q3, Total profitability in EMEA was slightly above the prior year's level. I think that's a good sign, despite all the difficult market environments we are facing in Europe. Moving over to Asia, the main growth driver in the region was clearly China, which showed an excellent result. Our decision to invest in local production is really paying off. India also gained momentum and grew faster, while Australia continued its positive trend, especially supported by solid growth in the automotive aftermarket sector. All of this together led to a profitability increase of 17% year over year. So in summary, the development in Asia Pacific is very positive. and clearly confirms the strength and the potential of our regional strategy. Now coming to North and South America. As we all know, the region has been a bit volatile in recent months, mainly due to ramp-up activities and unfavorable products. After a challenging Q2, we saw positive momentum in Q3. Sales increased compared to the previous quarter, and EBIT improved, reaching its strongest level so far in 2025. The main drivers are a better product mix and the improved cost base we are seeing in the U.S. The one-off costs related to the Mercedes business are largely behind us, and volumes are ramping up, which is a positive sign. So in summary, year-to-date sales are up 2% and profitability is recovering. Now turning to the development to our net liquidity. Earnings after tax were close to last year's level. CapEx was in line with our expectations and the contribution from net operating working capital was also roughly on prior year levels. As a result, free cash flow before acquisition reached $181 million by the end of September. However, despite the solid operating cash flow, dividend payments and acquisitions led to a cash outflow, which reduced NET's liquidity to $30 million. On the next slide, we take a closer look at the quarterly development of our working capital. Overall, we see the usual seasonal pattern, an increase over the course of the year, followed by a reduction towards the year end. The increase in Q3 is actually cut-off related. Inventory increased to prepare for a stronger sales month like October and November. Positive to note is that we managed to improve net working capital compared to last year, both in absolute terms and also as a percentage of sales. For the fourth quarter, we expect a typical seasonal decline in working capital as we move towards the year end. Now a quick look at raw materials. For base oil, we saw only minor price movements in the past quarter. Euro-dollar currency effects are positively contributing. Looking ahead, base oil prices are expected to soften slightly. When it comes to the additive packages, prices remained broadly stable during Q3. But here as well, we expect a slight softening in the near future. However, developments around tariffs and current exchange rates remain uncertain. and should be monitored closely as they could still have an impact on the material prices. As you know, in July, we have adjusted our outlook, which we confer now again. We expect sales to remain at the same level as last year, slightly higher in volume, but balanced out by currency headway. For EBIT, and our S3A, we expect 2025 to close at a strong level at 2024. When it comes to the free cash flow before acquisition, we assume a normalization after last year's exceptional results and expect to land at around 260 million. So in summary, 2025 is expected to end at a similar level as last year, which is a solid result, especially considering the high uncertainty in today's market. We are confident about our future because we have a strong business foundation, resilient structures, and above all, very committed and motivated teams. But at the same time, the market environment remains uncertain. So therefore, we have to watch closely the market development and be prepared to any potential headwind. With that being said, I come to the end of my financial presentation, and I would like to hand over to Stefan.

Thank you very much, Esma. Before we enter, you know, your questions and we will answer a few slides about news from the Fuchs world since we met the last time. And I think the first part, Esma already mentioned, you know, with 70 subsidiaries across the world, we were blank in Switzerland. So we had no subsidiary. We had a distributor there. And Switzerland is a high-tech country. It was very nice that when we took over Lucon, they had a subsidiary in Switzerland and then we acquired Strube at the end of the year. And we have now a facility in Rheiden in between Lucerne and Basel. It's a modern facility. The building you see here on the picture is like an old abandoned part of the property which we will demolish moving forward. But now we have merged the two companies, Lupron and Stroop, and have renamed them in Swiss lubricants. And we have now also acquired the RCO distributorship. And all in all, we have now about 50 people on the ground, and we have revenues of 20 million Swiss francs, which are nowadays 22 million euro. And I think that's a good basis to go in the future. So that was for us a really nice development. And then in the next slide, as you all know, sustainability is very important to us. You know, it's at the bottom of our heart. And the economic part, Esma went through, I think, you know, the third quarter was on the good old track record you know. So on the economic side, I think we do well in the current circumstances. But I want to go into the other two parts. And if you go on the ecological part, the one part is lubricants themselves have a positive impact on the CO2 balance of our customers because they hinder wear and tear, but they also prohibit corrosion and many other things. They cool, they help the electric conductivity. But our customers also want to know in the sheer chemistry how much CO2 footprint is in each kilogram of the products we deliver. And we have an automated system now built in our recipes in SAP, but obviously we need to make a couple of assumptions. and to be clear we have them certified by the tooth island and i think we are front runner in the lubricants business that we can now tell our customers with a click on the on the mousepad you know what the co2 balance per kilogram is i think that was very important for many of our customers and then on the social side we have a lot of social projects around the world so um Our people are there not only for making money and succession planning in the countries, but also to be a good citizen. So we have a lot of social projects in the south side of Chicago, outside of Johannesburg, in Mumbai, wherever our plans are, or in Sao Paulo. And we have scholarships and things like this. And then in Germany, our flagship part is our Fuchs Förderpreis, how we call it. We do that since 26 years. and we started humble and now we have increased the amount to 75 000 euro last year because it was the 25th jubilee of that sponsorship award but now as esma said with the cost avoidance we turn around each euro on on you know marketing on traveling on consulting but that part we wanted to keep because it's very important for us and the region and it's not only spending 75 000 euro but it's also to provide a platform to all the people who do that you know and sacrifice private hours in doing social work and as it functions we have 50 applicants for projects and they go through the city of mannheim through their social welfare department And then we actually celebrate 16 projects. There are about 100 people here. The mayor of Mannheim is here. And we spend two hours with them. And they give us feedback what they do with the money. So it's a very emotional part. And I just wanted to share that with you. It was two days ago. And it's always a very nice ceremony. Now I hand back to Esma for the last slide for an announcement. And then we are happy to end the discussion.

Yeah. And we are happy to announce our next Capital Market Day. which will take place on Thursday, April the 16th next year at our headquarters here in Mannheim. This event will be a special one for us as we will officially launch our new strategic program, FUCS 100. You all may hear it already. This strategy is led by our Deputy CEO, Timo Reister, which will guide us from 2026 to 2031. the year where Fuchs will celebrate 100 years of anniversary. So we are very much looking forward to welcoming you here in Mannheim and sharing our vision for the future with you in person. A formal invitation will follow in the coming weeks. And I think with that being said, looking forward to see you here in Mannheim the next year later.

Okay, now we can start with the Q&A session, please.

Thank you. To ask a question, you will need to press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. We will now go with our first question. And the first question today comes from the line of Sebastian Bray from Burenberg. Please go ahead.

Hello, good morning and thank you for taking my questions. My first one is on the associates income line at Fuchs. This seems to be one of the reasons why the margins have held up reasonably well year to date and notably there was quite an improvement year on year in Q3 results. Could you talk a little about what has improved in the equity income associates and if this could be expected to continue? into Q4 and 2026. My second question is on the organic volume growth in the Asian market. If you were to just come up with one cause that is driving this versus, let's say, two, three years ago, is it that Fuchs has signed good deals with Chinese automotive manufacturers or are other reasons at play? Thank you.

Okay, Sebastian, thanks a lot for the question. I will start with the Chinese question, which is very important. As you know, a good part of Fuchs in Asia is China, followed by Australia, India, and some other important countries. We are in China since 40 years, and we have spent the last 10 years to really make deep localization in China. We have built our formulas based on our IP around the world. In China, we have increased our capabilities with testing products, with developing products, and our Chinese colleagues are very fast. You know the terminology of China speed, and that is also true for our colleagues, and they have developed really cool products. and then what we now do we know we go with our chinese ovm customers and if i talk about ovm customers not only in cars and and trucks and and and you know construction equipment but they are also in the machine industry uh in the windmill manufacturers all mining equipment part we go with them internationally and i think that's that's the the difference of us to many other journal middle stand companies because we very early on said you know the know-how cannot only sit in manhattan and we wanted to really push us as one part of our books 2025 strategy us and china and and the chinese colleagues have been much faster than the u.s colleagues they've also done a good job but that's the main reason

And in regards, Sebastian, to your question of our development of the equity, it's actually coming to good business partnering, let's say this way, from Middle East, especially. And yes, we expect here also going forward and improving.

That's helpful. Thank you for taking my questions.

Thank you. Your next question. comes from the line of Konstantin Hesse from Jefferies. Please go ahead.

Thank you very much for taking my questions. First of all, Nicholas, happy birthday. And running over to the questions. Look, number one would be visibility in 25, right? I think that it goes without saying that you did surprise us with the guidance cut back in July because of a very weak June forecast. despite previously having been talked about, that momentum remained relatively okay. So I'm just wondering, as we move into the end of the year, how comfortable are you with the visibility that you have from today that we could potentially not see a worsening situation again and could potentially have to see an adjustment to the guidance or anything like that? So just in terms of visibility, how does it look like until the end of 2025 as of today? That's the first question.

Thank you, Konstantin. I'm very happy, especially for Jefferies, because we were glad when you took over the coverage and then just you took over and made a recommendation. We had to lower our earnings outlook, so I was a little bit concerned about your mood. But honestly, we don't have yet a good visibility in 2025 moving forward. And we were caught by surprise in the second quarter. My reading on that is really that we have just lost a few quarters in North America with regard to local consumption being down on the uncertainty of the tariff for the consumers of white lines, cars, barbecues, whatever we supply there. And that was the one part. Each month is a little bit different. So we had a wonderful July. We had a terrible August. We had a very good September. And trading has not changed yet. But you read the newspaper with cheap shortages and other things. You never know what comes up on the next morning. But we are confident with our outlook. We know that we have to do a little bit better in the fourth quarter compared to last year, which we see doable. But for us, mainly it was to hit the third quarter. That was very important. And the third quarter last year was extraordinarily high. And I think we made it this year again. And honestly, we didn't have to take the silverware out of the cardboard to show you that number.

Sounds good. So October remains a good momentum so far.

So far, but honestly, only early January I can tell you how we close on December. Sounds good. I mean, just from a normal pool keeping, we don't expect surprises.

Sounds good. Sounds great. Look, I just want to have a bit of a conversation. And as we go, a couple of questions on one on Capital Markets Day, one on 26. I mean, you haven't grown in 24, haven't grown in 25. If I look at 26 overall macro, right, I look at the IMF estimates, there's been some slight tiny upgrades. For 2026 numbers, I think the VDMA expects a very small recovery in industrial activity going into next year. So just thinking about the building blocks into next year, without guiding, just speaking qualitatively, is there anything that, from an underlying perspective, but also potentially from acquisitions that you've done this year, where you could potentially see an accelerated growth profile in 26 compared to 25.

I think it's an excellent question. And the one correction I want to make when you say we were not growing, actually in 25, we see a volume growth which we have not seen for a number of years. And that's not 1% or 2%. So we are happy with it. We have, when we saw the huge raw material increase in 21 and 22, we saw a little bit of softening late 24, early 25. That is reflected in the selling prices. So when SMA shows you the organic growth, you have the volume growth, you have the selling price on existing business, and you have the mixed part with it, you know, and gaining the Mercedes contract that is rather on the lower side. So volume growth was there this year. The guidance for 26 was quite a battle internally. And honestly, we have very much pushed for a modest budget. For us, it was important because when we really looked, you know, in 2019, we saw the US-China conflict big time. Then in 20 and 21, we had COVID. 21, 22, we had a raw material increase of almost 70%. Then we had the Russia war. So each year had something new. Then Donald Trump re-election and tariffs. and we have not made our internal volume budget for a number of years and we confronted our people you know in the middle of this year and we told them we have to learn to make our budget again so we we made sure that we don't have you know wild dreams on the volume so each one of them was was very modest on the volume you know uh uh internally asthma provided us with a in a positive manner a very mean allowance for fixed cost increase and they have all budgeted accordingly and for me that's a much better budget because to allow for more spending is an easy exercise so I think for us internally it was important really not to allow for dreaming on the top line but to make sure we are realistic I think for Fuchs 2025 we have a number of initiatives going on where we have the business already But you never know what is, you know, happening on the other side. So the volatility is out in the market, but that's a little bit on the basis. I have seen a first-come, a last-buy that's on the clock, but I can't share anything more than that.

Fair enough. That makes sense. Thanks. Maybe just on the capital markets today, talking about the target format, right? Historically, you've typically given an EBIT target. I'm just wondering going into this one, is there going to be a roughly, is the idea to be basically a similar target or are you expecting to provide the market with something different?

I think we will have a target, but the one thing is we will condition the target, what we have not done the last time, and then we will review the target specifically. target most likely each year and discuss it with you and then correct it down or up, you know, however we are going. But it will be very much conditioned because the last time we just put a number out and yes, I think what we have delivered last year and hopefully deliver this year is on the current circumstances, not a bad result. It doesn't fulfill our own aspirations, and it didn't fulfill what we were looking forward with FUCS 2025. But let us discuss it internally, put it to paper. We discuss it also with our supervisory board and with our co-management meeting in March. We have a whole timeline behind, and then in the middle of April, we will share and discuss it.

Understood. Thank you so much.

Thank you. Your next question comes from the line of Michael Schaffer from OdoBHF. Please go ahead.

Yeah, thanks for taking my three questions. So the first one, I want to come back to APEC growth, which you have shown in Q3, and maybe a bit more color, basically, what you really understand on specialties being the key growth components and maybe Looking into 26, so what's the kind of growth pattern we should expect, which you have maybe already in the books in terms of OEM model wins and things like that? Any color on the kind of sustainability of the growth trends, which we have strongly seen in 25, which I think is rather triple the growth, which you have shown in 24 so far. Any color would be helpful on that one. And the second one is you elaborated on the US market showing a nice catch up in Q3 compared to a rather challenging Q2. So where are we there now? Is this kind of normal run rate, which you have now achieved, or how should we think about this one going into the fourth quarter? And lastly, third question, on the raw materials outlook, Esma, you flag basically expectations for also a decline in the loop additives space and then also on top of the base oils like decline. So where does this come from, this view on lower additive costs? Is this something which you have already signed and in your books or just a bit of knowledge on that one? Thank you.

I can maybe comment a little bit on the raw material thing. We don't see a material decline coming up on base also on entities. I would be a little bit careful. And as I've explained to you before, we do half of our stuff, you know, more or less related to the dollar most likely, you know, but half is foreign currencies. And if your currency weakens in South Africa, Australia or China, your raw material costs increase in those countries. And that more than off-takes if you have a dollar-nominated decrease in base in Europe. All in all, if I have to make a conclusion, it's rather a little softer than a little higher, but we don't see such a material change. And if you look at our cost margin, we have increased it again now a little bit in the third quarter, but we are in our comfort zone, knowing the mix of the business. But on APEC and more than anything,

Let me start first with North America, because that was actually in Q2 a bit of a pain point. If you recall it right, in July, I was saying, first of all, we have inflated ourselves in North America for the first time. We had a ramp up of the Mercedes business. We had a runoff topic. And now we are seeing, actually, that they are facing us. And if you say, is that now the run rate? No, on the other hand, all we are seeing right now is that our specialty business sequentially is picking up. Not on the level where we have been last year, but the market is slowly picking up on that end as well. So for Q4, our expectation would be at least America's being on the run rate of Q3, maybe even slightly higher. And that would be actually the average runway for what we would expect for America going forward. If it comes to APEC and to growth components, I mean, we mentioned specialty segments, and you all know one of our main growth drivers we are having in China is the wind. And as of effect, That one is growing locally, but with the OEMs on site and also in the automotive, we are expecting actually to grow with the OEMs and the producers outside of China. And that's the growth path we are seeing in China going forward.

Okay, thank you very much.

Thank you. As a reminder, if you would like to ask a question, please press star 1 and 1 on your telephone and wait for your name to be announced. We will now go to the next question. And your next question today comes from the line of Martin Rudiger from Kepler Shubro. Please go ahead.

Yes, thanks for taking my two questions. The first is a clarification question to Esma Saklik. You said in your speech about the outlook that you expect profitability to be almost at last year's level. And then you said EBIT in 2025 will be on a similar level as of 2025. do you want to convey that EBIT might be slightly below last year's level of 434 million euros? That's my first one. The second question is to Stefan Fuchs. You have significant exposure to the automotive industry and you mentioned already the supply shortage of ships from Nixperia. And we hear some car producers implementing short-time work because of these supply issues. Do you think this could become a concern for you?

Let me maybe first start, Stefan, in regards of a similar and maybe and might be. Frankly speaking, Martin, it can be also slightly above instead of being below. And so it's difficult to say, we say, let me say it this way, we say we will be on the level of last year.

it was a wording which i was using because i can never say if the dot and comma will actually we will achieve and that was the reason why i phrased this accordingly on the car exposure as you know 25 of our business is with trade and automotive aftermarket which has nothing to do with any car manufacturing all the chips you know which are of those cars needing an oil change already in those cars When it comes to a major shutdown of the German car industry, obviously, we will also have a dampening impact, but we don't see that at the moment because we supply a lot of trees in those cars, we supply a lot of shovels in those cars, but I don't see a shutdown coming up like we've seen during COVID. But obviously, there are many other risks you can name which could still derail our outlook.

which are not known yet, but so far, no impact. Thank you.

Thank you. We will now take the next question, and the question comes from the line of Anil Shenuri from Barclays. Please go ahead.

Hi, good morning, and thank you so much for taking my questions. I've got two, please. The first one is on cost-cutting measures which you spoke of. You said that you've seen the initial impact of the cost-cutting measures in Q3. So does that mean that we will see the full impact in Q4, which in turn would imply that there'll probably be a higher contribution of cost from these cost-cutting measures in Q4? And also, if you could give some color on the nature of this.

Apologies, and the line is very quiet.

Sorry, can you hear me now? You're still a little bit quiet. Sorry, any chance you can hear me now? OK, yeah.

Right, sorry. So I had two questions. One, the first one was on cost-cutting measures. You spoke of seeing the initial impact of these cost-cutting measures in Q3. So does that mean we'll see the full impact in Q4, which in turn would imply that there will be a higher contribution from cost cuts in Q4 compared to that of Q3? And also, if you could give us some color on the nature of these cost-cutting measures, please. I'm just trying to understand if these costs are expected to come back in 2026. Or is there any chance that there are more scopes for more cost cutting if macro conditions do not improve in 2026? So that's my first question. And secondly, and I'm sorry if I missed this, have you lowered the bonus provisions for 2025, given that you had to cut your guidance in Q2? And if you have, then has that by any chance benefited the Q3 results? And could that benefit Q4 results as well? So no. That's all I have for now.

Great. Let me start with your first question. So the last time when we got the question, we said actually the nature of our cost measure program is around a lower double digit. We started this package, or actually we started about talking cost measures and reducing it already in May, June. So we are seeing a quite significant impact already in Q3. And I would expect, and that's actually how we are faced with, more or less balancing or having the same amount also in Q4. Coming to your second question, initially, I think it was last quarter, I also stated we are not doing results by reversing bonuses, et cetera. So far, our KPIs are on the level as last year, and that's actually how our bonuses went. And we have, as we are normally usually doing, our bonuses for nine months in. So year over year, you should not expect actually any pluses or minuses, a big impact coming from any bonuses.

And the same relates to Q4, as we are targeting or heading off achieving the 2020 bonus.

Great. Thank you so much. That's very helpful.

Thank you. We will now take our final question for today. And the final question comes from the line of Lars von Kleff from Deutsche Bank. Please go ahead.

Thank you very much. Good afternoon. Thanks for taking my questions. Well, first of all, I'm glad that you specified your Q4 EBIT outlook because when I first saw the Bloomberg report, headline saying that you expect profitability to be on the previous year's level for Q4. I was scratching my head how that could then work with reaching our guidance, but that is clearly understood now. Looking at Q3 and EMEA, profitability was nicely up, revenue were flat. I guess some of these positive effects were also already coming from the cost avoidance measures, especially in EMEA, correct?

Yes, that's correct.

But you also know that in EMEA all equity results is where you get a million extra, but yeah, correct.

Okay, perfect. And then looking at the split of the EBIT by division, I saw that holding and consolidation EBIT for the first nine months was 3 million, and I know it was a 3 million positive contribution in H1. So holding and consolidation must have been minus six in Q3. Is this cost for the implementation of these measures, or am I missing anything?

Lars, you gave the answer already. It is actually related to our Transform to Grow project, which is sitting there right now.

And that was it, or is there anything additional to come in Q4, maybe early 26th?

You mean from the cost base there?

From the cost side.

Yeah, yeah. We are running this project, but it's on budget. And yeah, it will be actually a project for the next year. And the cost will evolve accordingly.

Oh, the cost for the implementation or the reduction of your production costs?

No, the cost of the implementation.

Okay. Okay, understood. And yeah, I mean, you call it targeted cost avoidance measures, but I guess you already gave the answer. To a certain extent, I was afraid or I was worried that this could also be partly a postponement of costs into the next years. But you're more or less not only avoiding the costs, but also taking them out as I take it or cancel these costs.

Yeah. What are we doing is of course, being a bit more cautious if everything what we are spending right now is really needed to be spent. And if you look at travel, if you look to consulting fees, etc., that will not bounce back again. It's just not the spend you're doing right now.

Understood. Thank you. And then the last one, networking or net operating working capital to annualized sales revenues. You guided for a range or had a target range of 21% to 22% in the past. Is that still valid? Because you haven't achieved that for the last two years now.

That's a fair question. And I'll see it the same way as you from a PFO perspective. And that will be also our guidance going forward. Of course, we have to see our setups, et cetera. But nevertheless, that should be actually what we should target for.

Understood. Thank you very much. I'll go back into the line.

Thank you. Thank you. That was our final question for today. I will now hand the call back to Andreas for closing remarks.

Thank you very much, Sharon, and thank you very much to all of you for your interest in our company and the earnings and for your questions. We look forward very much to seeing hopefully all of you then at our Capital Market Days next year, and the next earnings publication will be on March the 20th when we publish the full year results. So thank you once again for your interest. If you have further questions, don't hesitate to contact the Investor Relations team, and you may now disconnect. Thank you very much.

Thank you. This concludes today's conference call. Thank you for participating. You may all now disconnect.