Imcd Group Nv U/Adr

Hello and welcome to the IMCD first half year 2022 results. My name is Jess and I'll be your coordinator for today's event. For the duration of the call, your lines will be on listen only. However, there will be the opportunity to ask questions. This can be done by pressing star one on your telephone keypad to register your question at any time. If at any point you require assistance, please press star zero and you'll be connected to an operator. I will now hand over to your host, Piet van der Slicke, CEO, to begin today's call. Thank you.

Thank you very much, Jess. And hello, everybody. Hans Koijmans and I have dialled in from different places this time. And after a few words from me, Hans will take you through the numbers and then there's an opportunity to ask questions. You have seen in the press release that we continued the trend of the first quarter with strong growth of all leading indicators, resulting in an increase of gross profit of 42% and operating EBITDA of even 58%. Most of that growth has been organic and all regions contributed to that and also all business segments. Demand remained strong and prices remained on a high level. As shown in our numbers, we were able to pass price increases all to the market and strengthen our margins. Business-wise, we were able to expand cooperation with leading international suppliers adding important product lines. We're also proud to report that IMCD received a top-rated badge from Sustainalytics ESG risk rating, recognizing us as a top performer in the industry. Sustainalytics is a leading Morningstar company in ESG rating. Actually, IMCD ranked first, meaning with the lowest risk among over 180 international peers in trading and distribution, placing us in the top 7% of almost 15,000 companies which were assessed worldwide. We all know that we live in extraordinary macroeconomic times, heavily influenced by the pandemic and the war in Ukraine, resulting also in very high energy prices. So nobody can predict how economic circumstances will develop in the coming periods. We continue to execute our strategy and trust on our strong business model, which will produce growth and has produced growth in the last eight years. So we will continue to do that, not only this year in a spectacular way, but also in the medium and long term. Our focus remains on organic growth and consolidation of the market. Our pipeline is strong and so there's enough, let's say, feedstock for future growth. And with this, I will hand over to Hans to take you through the numbers. Hans?

Thanks for the introduction and good morning, ladies and gentlemen. And I would like to start on page 9 of the presentation where you will find a summary of the first half-year income statement. And as you can see, Forex adjusted revenue increased 33% and gross profit increased 36% compared to the same period of last year. And this 36% gross profit increase was a combination of 6% as a result of the first-time inclusion of acquisitions and 30%, so 30%, organic growth. Gross profit in percentage of revenue increased 0.7 percent compared to the same period last year to 25.2 percent. And this increase was a combination of product mix, currency and M&A effects, changes in local market circumstances, and successful internal growth margin improvement initiatives. Forex adjusted operating EBITDA and EBITA both increased with 49 and 52 percent respectively. And the increase of operating EBITDA was a combination of strong organic growth of 45% and 7% as a result of the first time inclusion of acquisitions. Operating EBITDA in percentage of revenue increased to 13.4% and operating EBITDA increased with 1.6% to 12.8%. The conversion margin, calculated as operating EBITDA in percentage of gross profit improved substantially to 50.8%. And when using EBITDA instead of EBITDA, when calculating the conversion margin as a numerator, like most of our peers do, we would have reported a 53.4% conversion margin. On the next page, page 10, you will find a bit more detail on the year-on-year development in gross profit EBITDA and conversion margin per operating segment. In all segments, we report on a constant currency basis more than 30% gross profit growth. In EMEA, we are happy to report a 36% gross profit growth and an operating EBITDA of $140 million versus $93 million last year. An EBITDA margin of 13.3% is substantially higher compared to the same period of last year, and most of this EBITDA and gross margin growth in EMEA is organic. In the Americas, in the next column, we report double-digit gross profit in operating EBITDA growth, respectively by 39 and 53%. Operating EBITDA and percentage of revenue improved 1.7% to 12%, and like EMEA, most of this growth is organic, In Asia Pacific, slightly lower growth percentages, but still very impressive growth numbers with 34% growth profit growth and 38% EBITDA increase. This is the only segment where growth margin percentage did not improve, and this is mainly the result of the impact of recent M&A in the region. An operating EBITDA percentage of revenue improved 0.3% to 16.1%, and This growth was a combination of substantial organic and a first-time inclusion requisitions. In all segments, we report substantial improvement in conversion margin compared to the same period of last year, and this improvement is the result of substantial organic EBITDA growth, whereby organic gross profit growth more than compensated the own cost growth. Then in the last column, all non-operating companies, including the head office in Rotterdam, and regional support offices in Singapore and the US. Reported costs were slightly higher, mainly as a result of further strengthening of support functions in these offices. Holding costs in percentage of revenue decreased from 0.8% last year to 0.7% in the first half of 2022. Then on page 11, a summary of the P&L lines between operating EBITDA and net results for the period, and a few general remarks. Net finance cost more or less stable, some fluctuations on individual cost lines, and I will come back to that in the next slide. Then income tax expenses increased in line with EBITDA, and the tax cash out in the first six months was about $57 million, as you could have seen in the cash flow statement in the press release. Then non-recurring items turned from a positive 2 million last year in a negative 7 million this year. Perhaps you remember the positive in 2021 was mainly due to the sale of Nutri-granulation activities in the US in the first half of 2021. And this year we had the usual costs related to acquisitions, a bit of cost related to one-off adjustments to the organization. And further, the 2022 costs include the estimated financial impact of winding down of the IMCD operations in Russia. Then amortizations of intangible assets are mainly non-cash costs related to the amortization of supplier relations, distribution rights, and other intangibles. And then last but not least, on the bottom of this page, you could see net results for the period increased 60% to $177 million. And Forex adjusted 50% increase in cash earnings per share to €3.68. On page 12, specification of the net finance cost, whereby costs this year were similar to last year. Main fluctuations were higher interest costs of about close to €2 million, which were offset by positive currency exchange results. End of March, IMCD issued a 300 million rated corporate bond with a fixed coupon of 2.8%. And the combination of this bond and the 300 million bond with a fixed coupon of 2.5% issued in 2018 will make our future interest costs pretty stable and pretty predictable. Then on page 13, a summary of IMCD's balance sheet. A property plant and equipment 32 million relatively low as a result of the asset line business model, then right of use assets of 78 million that these are the capitalized operational leases as a result of the application of either a 16. Then a big number, the combination of intangible assets and related deferred tax liabilities of about 1.8 billion in total are a result of acquisitions done since July 2014 and our history as a PE-owned company. On the financing side, there is 1.1 billion of debt and 1.6 billion of equity, and this substantial equity position covers about 59% of our capital employed. Then a few words about working capital summarized on this the next page, where you will find the absolute amounts of the various working capital components and these absolute amounts translated in days of revenue. As you can see, the absolute amount of working capital end of June increased with 220 million compared to year end 2021. And this increase is a combination of additional working capital due to increased business activities combined with the usual seasonal pattern. Further, it includes working capital as a result of acquisitions in the first half of 2022 and currency exchange impacts on working capital positions. Compared to last year, June, the overall working capital days increased nine days from 56 to 65. And when looking at individual components, debtor and creditor days end of June are more or less stable compared to June last year with 66 and 39 days. A main driver of the overall increase is the absolute amount of the impact of our increased debtor position as a result of the very strong sales growth, combined with increased stock positions to cater for the Q3 order book and the usual fluctuations in other payables. Then on the next slide, a summary of our debt position, leverage ratios, and maturity profile. What I mentioned before, debt increased with about $200 million to $1.1 billion. The increase is, amongst others, influenced on the positive side by the cash flow, on the negative side by a dividend payment of $92 million. and considerations paid for acquired businesses of 93 million in the first half of this year. The leverage ratio end of June based on our loan documentation was about 1.5 times EBITDA, which was well below the maximum set in our loan documentation. And then reported leverage based on IFRS was 2.2 times EBITDA. On the right hand side, our debt maturity profile, which improved due to the new bond issued in March. I would like to finish this short summary with a cash flow overview on page 16. Free cash flow, more or less similar to last year, as increased EBITDA was more or less compensated by the working capital investment as a result of the substantial business growth. Further, CAPEX was about 3 million higher than last year, mainly due to IT-related investments and some office changes and related CAPEX. On page 18, the outlook for this year, in which we express our expectation of operating EBITDA growth in 2022. And with this finish on the summary, I would like to hand over to the operator to open the lines for a Q&A.

Thank you. So if you would like to ask a question, please press star 1 on your telephone keypad. Please enjoy your liners. unmuted locally as you will be advised when to ask your question so once again that's star one if you would like to ask a question the first question comes from the line of matthew yates from bank of america please go ahead hey good morning gentlemen um a couple of questions the first is pretty short term in nature but um

And just going back to slide 14 around the working capital, I see your inventory days are up from 44 to 50 versus a year ago. Is that mathematically distorted by trailing revenue not fully reflecting the amount of price inflation we've seen? Or does it tell me something about the health of your order book going into Q3?

Matthew, I think it's a combination of both. We finished half year again with a strong order book for Q3. At the same time, we also see quite some supply chain related issues. And there we took a bit more stock on board as usual to make sure that we can serve the needs of our customers. So it's a combination of both. Again, we finished the quarter with a strong order book.

Okay. Maybe it follows up on those supply chain issues. I'd like to ask you a bit about the gas crisis in Europe. Can you share with us what percentage of group products are sourced from Germany and maybe what percentage of group sales are in Germany? And then more broadly, if we do get in the future into production curtailments from chemical producers in Europe, how worried are you this is going to lead to a significant decline in profitability for the company? Or does it actually present opportunities in a supply shock to help customers find alternative products or suppliers?

Perhaps I'll try to answer that question because it's a very difficult one. Let's say the percentage of products sourced from German companies is a number that I don't have now. for you to produce, because it's also difficult to say. I mean, we have, of course, relations with a lot of German companies. As you know, Germany is a major producer of chemicals. But some of these chemicals are also produced outside of Germany. So it's a very difficult question, but it's obvious. And I think you can also read that in the report of, for example, BASF, what they are doing to mitigate any risk with respect to natural gas shortages. And Germany as a percentage of sales, it's a significant company, but it's not, let's say, percentage-wise, it's below double digits, far below, I would say. So, yes, if Germany as a chemical producing country is affected by the gas crisis, I think it will affect worldwide supply chains. So also us, in what way we have to see. I would like to point out that we are also quite strong in our life science. segments, very strong on the pharma side and they're not dependent so much on German production. Far more relationships with American suppliers. We have very strong food service business and we have a very strong personal care business as well. So I would say that's again testimony to the resilience of our model. that we are quite spread. Our risk is quite spread. But again, I don't think that we can estimate all of us the effect of a major crisis in natural gas in Germany. So I wouldn't consider that as an opportunity if something drastic happens there. So let's hope that it doesn't come to that, Matthew.

Thank you, guys.

Next question comes from the line of David Kirsten from Jefferies. Please go ahead.

Good morning, gentlemen. Thank you for the presentation. I've got two questions, please. First of all, clearly no sign of a slowdown in momentum in the second quarter in contrast to the chemical sector and particularly in the overall economy. I was wondering if you can please comment on the momentum during the quarter and what you're currently seeing at the start of the second half in terms of organic growth and particularly volume growth. And then the second question, what is driving the strong growth in demand? Is it fair to assume that volume growth is still roughly half of organic growth? And you highlighted the extended corporation leading suppliers. Do you see outsourcing trends materially picking up in the current economic environment in the second quarter? Thank you very much.

Thank you, David. I think all... let's say the signs of and I think Hans also indicated that for the next period we see still very strong demands and so also going forward in the next quarter and not really slow down so also in this quarter I didn't see a significant difference between let's say the different months of the quarter so It's the trend that we saw is still going on. But as you know me, predicting the farther future is not very easy. Our growth is a mix of volume and price. We're not able to specifically say if it's 50-50. I would say it's a bit more price than volume. It's in itself not bad because if we hope, if we can hang on to this higher prices, then it would of course be good for the group. Outsourcing. Again, I mean, that's the difficulty of our business to quantify that totally is not easy. I would say though, again, that larger chemical distributors like IMCD also focused very much on specialties have an advantage and I would say that let's say the consolidation of on the supplier side with companies like ours is increasing and we benefit from that and I would say that where we in the past spoke about regional alliances we also see more let's say traction for more global corporations so I would say that The benefit is there for bigger focused chemical groups, chemical distribution groups like ours. I hope this answers your question, David.

Thank you very much.

Next question comes from the line of Chetan Udashi from JPMorgan. Please go ahead.

Hi, thanks. You know, a few questions. First, I was just wondering, you know, historically, you guys never gave us organic EBITDA growth. So I think I'm hearing for the first time from you guys organic EBITDA growth, which is great. But I'm just curious, why did you decide to give that number now when historically you did not? The second question was, I mean, I'm just looking at the contingent consideration. That number seems to be going up almost every period. You know, it was 194, I think, at the end of 2020. Now it's 325. I think there was already an increase last year as well. I'm just trying to understand, is this associated with Cignet, or is there additional amount associated with recent acquisitions? That would be the second question. And third question, maybe this is for Pete. Is there a way you can, you know, isolate the impact from, you know, new or additional supply relationships that you might have got in the last 12 months in terms of growth contributions? Because I guess that should be a bit more easier to isolate even than that would be completing new business. Thank you.

Shall I take the first two ones? Yes, please. So organic EBITDA reporting, we started with that last year. And basically what we try to do is show organic EBITDA growth twice a year, in the half year and in the full year figures. The contingent consideration growth, it's a combination of, on the one hand, the result of recent acquisitions. When we acquired Megasatia in Indonesia, it was also a 70-30 transaction, so the remaining 30% is included in the contingent consideration. At year-end last year, we had to increase the amount of contingent consideration because of the very healthy performance of Cygnet. We did make a change there in the half year figures. And other than that, what we also need to do is we need to show the discounted value of the contingent consideration. And what you see happening there is that every year you need to add a bid to compensate for interest costs on that contingent consideration. And as a result of that, it also grows. And then there was a bit of currency impact in there. But that is, I think, six, seven million, as you could see in the press release. And that drives the amount that we have on the balance sheet there.

Okay. Yeah, Horacio, on your last question. I'm sorry that I can't give you that. Because, I mean... The new supply relations are, of course, part of the organic growth that we have, and we're not going to split that now also. Also, often because our suppliers don't want to publish it or be in the process of implementing deals, so that's a number that we're not going to give.

Okay, thank you.

Next question comes from the line of Henk Veerman from Kempen & Co. Please go ahead.

Hi, good morning all. Thank you for taking my questions. I have two for today. So you already mentioned that a large part of the organic growth is driven by prices, and this is also visible in the gross profit margins, which are now standing above 25% year to date. So the question is, is it logical to assume that this sort of pricing effect will somewhat normalize if global supply chain issues fade and then price inflation of chemicals normalizes? Or is also anything being done within the organization to lock up the higher markups that are currently being realized?

Yeah, uh, that is of course the, uh, that's of course the, let's say the, the, the goal and the attention and a tool of, uh, whether or not we will succeed, uh, depends also on the product range as we talking about, uh, also the market segments, uh, there'll be easier in market segments like pharma and, and, and, uh, probably food then, uh, then it's a lot of their segments. I think if you look historically, Henk, then we have been pretty good at, let's say, keeping this level of pricing. I hesitate to predict because, of course, part of this increase also related to energy because our producers use, of course, a lot of energy. So it could also mean in the future some sort of erosion. I would say that we will do everything to keep this level and normalize it, so to say, in the market. And we don't see any signs at this moment for most of our product lines that a reverse trend has been started. So in that sense, we are pretty confident for the near future.

Okay. That's great to hear. Second question is on the conversion margins, which in recent years always showed sort of a difference between the first half and second half, a difference of about four percentage points. But would it be logical to assume that this year, because of the very strong performance in the first half, that the seasonal pattern of the conversion margins, like the difference between the first and second half, would be somewhat higher because of

example employee bonuses and other factors related to the strong performance here today yeah i think what we of course do we during the year we accrue for expected bonus costs but i think the the main driver of uh of of a bit of an erosion of the conversion margin in the second half of the year basically has to do with the fact that December typically is a slower month in our industry, in all industries, because all the factories shut down somewhere half December and then reopen in January. So if you look at the revenue split and as a result also the margin split over the year, we always make a bit more than 50% in the first half of the year and a bit less in the second half of the year. And that leads then automatically, because most of the cost base is fixed, we accrue for bonuses and so on and so forth on a monthly basis. And that leads then that you typically talk about more or less a similar cost structure and a slightly lower margin profile, resulting in a slightly lower conversion ratio.

Okay, so no significant changes to the historical seasonal patterns as far as you can predict?

Yeah, as far as we can predict. Because of course, what will be the gross margin profile in the coming months?

Yes, very clear. Thank you very much.

Next question comes from the line of Suasini Varanasi from Goldman Sachs. Please go ahead.

Hi, good morning. Thank you for taking my questions. I have three, please. The first one is one of the components of gross margins is probably the requirement for or the need for customers for reformulation services. I'd love to know if you can give some color on how the seasonal or sequential trend on demand for reformulation services has been and if there are any trends to point out by geography.

It's a good question, an interesting question, but we do not... So we charge a margin for the products that we sell, but we do not separate, let's say, service components leading to that price. So you should see our formulation services our labs, our technical centers, our technical people as an integral part of our selling efforts. And also to, let's say, make the relationships with our customers sticky. So we don't really separate and we can't separate and we don't charge separately part of the margin based on reformulation services.

I understand. Thank you. Sorry, I was just wondering whether the demand for the services, reformulation services, has maybe accelerated into the quarter because of the inflation and the supply chain constraints that you've been seeing this year.

No, I don't think there's a difference. In that sense, there's no difference because of the economic environment.

Got it. Thank you. The second question is China, and probably not so big, but did the lockdown have any impact in your Q2?

Yeah, well, I must say that, yes, it had some impact, but generally our Chinese team has been excellently performing also in the lockdown. So we still saw a very good result in China. Some issues, of course, concerning this lockdown, but I would say that on the whole, admirable performance. And since opening up, in particular Shanghai, we see, of course, acceleration of performance again. So not a major concern, fortunately.

Thank you. The last one is on the order book, please. I think you mentioned a couple of times that you do have a strong order book going into Q3. Can you maybe comment on the sequential trends? I mean, how are the levels today compared to, let's say, at the beginning of Q2 Normally your Q3 gross profit is sequentially stable or slightly down. So any color that would be appreciated. Thank you.

Yes. Normally, of course, it's a little bit down because of the vacation months, particularly in Europe, but also in some other countries. I hesitate almost to say, but I think the trend has been a little bit broken. We see We see a very strong order book also for the third quarter. But let's see. Let's wait for the final outcome of the quarter. But it looks like that we do not see a major difference from the second quarter in terms of our order book.

Thank you very much. That's very clear.

The next question comes from the line of Rikin Patel from BNP Paribas Exam. Please go ahead.

Hi, thanks for taking my questions. Just sort of follow up on your comments on demand. You mentioned momentum is still pretty strong. Can you maybe give a bit more detail on how you're seeing some of the different end markets? Are you seeing any signs of softness materialize in the industrial specialty side, for example? And secondly, on M&A, I suppose the macro environment and the financing environment has changed in the last couple of weeks and months. I know you said the pipeline is still pretty strong, but just curious to know if you've seen any changes there and maybe some deals being pushed back a little bit further. Thank you.

No, on the second question, I would say the answer is no. We don't see, let's say, that deals are pushed back. So I think, let's say, the preparedness to do deals has stayed the same. And the first question was, again, I slipped my mind.

The dynamic around demand, so what you're seeing in some of your different end markets,

Oh, yeah, and markets. Yeah, that is, of course, something that we monitor very closely. But we see, and the first signs could be, let's say, that industrial markets, particularly in coal and construction, advanced materials, would slow down a bit. But we haven't seen that yet. In the other markets, certainly in the life science markets, not yet. I guess that you will see the normal seasonal patterns. There's a little seasonal pattern in farmer, but no. So I don't see a slowdown in particular markets yet.

Okay, thanks a lot.

The next question comes from the line of Quirijn Mulder from ING. Please go ahead.

Yeah, good morning, everyone. Quirijn Mulder from ING. I have two questions. First of all, if I look at your growth, last year organic growth 20%, this year 30%. That is also partly volume. How special is that for your organization to handle that? That's my first question. And has it any impact on, let me say, opportunities with regard to acquisitions? In my view, as people are so busy, they don't have time on the outlook for acquisitions. That's my first question. And the second question is, any risk for a gas crisis? Has it already led clients to build up stock levels in anticipation of what is called a disastrous outlook for the winter? Did you see that in your portfolio?

Yes, clear as is, Piet. Thank you very much.

All the stress of our staff.

I'm sure we have quite stressful moments, in particular in our customer service departments who care and cater for the needs of our customers and must ensure that products are delivered in time. So, yeah, that has been already for quite some time quite a major, let's say, stressful situation. it doesn't take our eye off of any acquisitions because that's let's say on senior management level always a part of the business and the package that everybody has to fulfill so I don't think the stress because of the Delivery and supply chain issues are concerning for our acquisition possibilities to get crisis. Yeah, I must say, certainly, you will see also allows almost all without suppliers. Let's say cautionary measures and contingency programs, etc. Very difficult for us to exactly um know and see what the impact of that is i think it's interesting to to read in this collection the um the different reports of also the chemical producers and and what they do it depends of course where they are we talked about germany and i think this is less relevant for u.s companies so um Let's hope for the best. For us, it's very difficult to plan this because we are, of course, part of the chain. But certainly for all of us, for all industries, this must be a major concern, particularly in Europe.

Thank you. To come back on my first question. Is it still difficult to hire people, et cetera, because it looks like that the labor markets are still, let me say, somewhat scarce?

That's absolutely a yes, and I think that goes also for our peers. Competition for talent has been high always in the past, but that has only increased. that certainly will have also an inflationary impact on our costs. And, uh, I think, uh, we'd be very happy with, uh, let's say the stability of our, our teams, but nevertheless, um, um, you know, to recruit talents that has always been an issue for us, an issue, but, uh, yeah, a challenge because, uh, technical commercial talent is of course, very, uh, very in demand, but that has only increased. So. Yeah, that's a big job for all of us to seek out talents. Thank you.

The next question, it comes from the line of Chetan Udashi from JP Morgan. Please go ahead.

Yeah, hi, thanks. I just had a follow-up. You know, the split or the share of industrial companies has gone up this first half versus last year, which is a big surprise to me, given that, you know, we've seen probably some sort of recovery in the life sciences business as well. So maybe can you talk about that? And more importantly, are you able to give us any sense at all in terms of, you know, today, what is the approximate split by TN markets in life sciences and industrial businesses? And especially how much is the weight of coatings at these specialty construction sort of markets within the group? Thank you.

Perhaps first a bit on what you see in the half-year figures. If we talk about seasonality in our business, there's a bit more seasonality on the industrial side and on the life science side. So it's fair to assume that the split life science industrial will come a bit closer to each other than where we are in the half-year figures. I think what I mentioned in the past that on the life science side, there we have three activities. It's food, pharma, personal care, that food and pharma are the two biggest, while the personal care is slightly smaller. And on the industrial side, the two biggest that we report are five segments. And out of the five, coatings construction and advanced materials are the two biggest ones. And then we don't give a split per individual segment.

OK, thank you.

Next question comes from the line of Dominic Edridge from Deutsche Bank. Please go ahead.

Hi there, just two for myself. Firstly, I did notice that you've created a new industrial solutions division. Can you just maybe discuss how you see, particularly when you create these sort of new divisions, not just industrial solutions, but in general, is this sort of an indication of a focus or is it just bringing in what current capabilities you have and increasing the focus on that? Or is it sort of an indication of you adding new capabilities into the business? And then the second question was on M&A. I know you made the comments earlier on about there being a lot of opportunities out there. I think reading in the industry press, there seems to be an awful lot of M&A in the last, I think, year to date. Can you just say maybe about how much you can say about what you're interested in? I mean, obviously your focus has always been very, very particular. Can you just say what sort of levels of competition you're seeing out there? And maybe in very general terms, any ideas about what prices are doing at the moment because obviously with a lot of companies doing reporting obviously very good profit numbers are you finding and let's say sellers expectations are equally and very high at the moment thank you yes on your first question uh industrial solutions we we used to have a business segment called synthesis which uh

It's focused on chemical intermediates, products that are used, let's say, to produce chemicals. We wanted to focus and refocus some of our, let's say, more niche segments under the heading of industrial solutions, one of which will be these chemical intermediates, but we also have other segments like electronics or, um, water treatment and some of the, uh, other applications under that. And it's in particular to refocus, um, to refocus and focus our efforts. And, uh, so far quite, uh, quite successful. Um, on M&A, um, yes, I think, I think of course, um, sellers, uh, look also at, uh, at valuations of those which are listed and at the same time competition is strong for nice targets so in that sense sellers are in a good position and that will have we will see a little bit of effect on prices on the other hand we remain very disciplined in our strategy and still very focused on the quality of the business that we want and also how it adds and complements the businesses that we have already in the particular regions so in that sense nothing has changed and of course in some cases the competition is stronger in other cases it's a one-on-one negotiation so a mixed picture in this respect.

I'm sorry, just in general terms, and not just for yourself, do you feel that pricing is going up out there, the sort of valuations that are being paid just from what you've seen in the markets?

I tend to think, Hans, I tend to think that valuations go up a bit.

And then, again, that very much depends on the quality of the asset that we talk about, so the quality of the supplier base, basically, and how it fits in a structure, and if it is a one-on-one discussion or a competitive process.

OK. That's very clear. Thank you very much both of you.

There are currently no questions in the queue. So as a reminder, please press star 1 if you'd like to ask a question. There are no further questions in the queue, so I'll hand the call back to your host for some closing remarks.

Yes, well, I just want to thank everybody for the interest in this wonderful vacation season. I wish everybody the best and I hope you enjoy some free days and we see each other back or hear each other back after the third quarter. So thank you very much.

Thank you for joining today's call. You may now disconnect your line.