Rockwool A S Ser B

Good day to everyone and welcome to Rockwell AS's conference calls regarding the results for the first half of 2025. My name is Kim Jung Andersen and I'm the CFO of Rockwell AS. Today I am pleased to present CEO Jes Munch Hansen. For the first part of this call, all participants will be in listening-only mode. As a reminder, this conference call is being recorded. First, Jes will go through our presentation and give you an update of the results for the first half and second quarter of 2025. Afterwards, we will be ready to answer all your questions. Before I hand over the word to Jess, I must remind you on slide number two, on the forward-looking statement, and please be aware that this presentation contains uncertainties.

Now we can go to the next slide.

Slide number three. As you all are aware, the construction industry is still very much challenged in the macro context, owing to an increased uncertainty and geopolitical turmoil. And at least from our side, we do not expect that to change for the rest of the year. For us, the revenue in the first half increased by 1%, where the acquisitions we made in October last year contributed with a 2% increase. As expected, the decline in Russian group performance influenced the group, and without Russia, the organic growth would have been stable. Pricing had a neutral impact in the first half year, where inflation and sales prices by large were offsetting each other. As expected, the EBIT margin declined now to 15.8%. However, we think the results are acceptable as it comes on the back of an unusually high performance in both North America and Russia last year. If I go to the Q4 highlights on the next page, you see that in Q2, sales were affected by fewer working days and a continued decline in Russia. Also, the record high performance in North America last year made the comparables to last year very difficult. The construction industry, as I said before, is significantly affected by geographic turmoil, and particularly the related trade and tariff issues we are facing, which has led to a row of delays in projects in the pipeline. And I can come back to that during Q&A, but it's particularly something we see in the USA, where we see strong pipelines and ongoing quotation, but simply not the orders being placed. On the EBIT margin, the Q2 results were affected by three main factors. First of all, provisions for closing down the factory in Trondheim in Norway, and three longer than planned production stoppages. The stoppages in themselves were planned, they were just taking longer to perform. Secondly, we had higher spending in capacity expansion projects and our ongoing digitalization than we had last year. And last but not least, the continued decline in Russia business has also affected our margins. In short, we believe we have navigated well during a very challenging quarter, especially when we compare to the very high Q2 last year. I turn to page number five regarding our first half year revenue. When I look at the insulation business, the insulation segment, the 1% revenue growth was driven by technical insulation and our acquisition in wall systems and also from our North American business. That was on the other side upset with slowdown, primarily in Eastern Europe, as I said, particularly in Russia. And here, just to repeat, acquisitions accounted for 2% of the revenue growth. In our systems segment, the 1% revenue decrease was driven by our Grodan business due to a lower sales in the legal cannabis market in North America. Our Lapinus and rock panel business had single-digit increases, while our acoustic rock phone business was flat compared to last year. When I look at Q2 revenue, it was down 2%, and sales in the beginning of the second quarter of 25 were particularly impacted by the fact that Easter fell in April, which has actually reduced the quarter by 2% working days, so to say. Sales were in general difficult in April and May, but actually improved towards the end of the quarter in important markets such as France, Spain, United Kingdom, and actually a little uptick also in the U.S. In the insulation segment specifically, the 2% revenue decrease was driven by a slowdown in East Europe, as just mentioned, and here mainly Russia. And in the system segment, the 2% revenue decrease in the quarter was again driven by Grodan, as I just mentioned. When I look at the sales or the revenue by regions, you can see that Western Europe was flattish. And in Western Europe, there were actually also some markets that did well with double-digit growth in the UK, Italy and Spain, where we had Germany with a small decline and a double-digit decline in the Nordic countries. In France, the French government has a renovation support scheme that has been temporarily paused, actually due to an overwhelming demand in these funds, although sales picked up again towards the end of the quarter for us. In Eastern Europe and Russia, as I said, we saw a decline, and sales in Poland, on the other hand, started picking up at the end of the quarter. In the United States, we compared to a record high, an unusual high, Q2 last year. Although demands remain strong, there's still a lot of this wait and see, as I briefly alluded to before, in the market. And the hesitations are driven due to the ongoing uncertainties around inflation and around tariffs, with our customers and their customers looking to greater clarity before placing the actual POs or orders on the projects existing in the pipelines. Page 8 is about quarterly profitability, which decreased. And in short, just to take it from the top, the EBITDA is down 10% from €253 million to €227 million, which is resulting in a 2.1 percentage point lower EBITDA margin due to lower operational efficiencies in a couple of factories. and unfavorable country and product mix. If we look at the EBIT margin for the quarter, it landed at 15.5%, a larger decrease than the EBITDA, and that is due to a higher depreciation from our larger investment program and write-downs relating to the closure of the factory I mentioned in Norway, in Trondheim. In total, the restructuring provisions and the write-downs related to the fracture closure amount to around €5 million. Excluding the acquisitions made last year, EBIT margin would have been 15.7%. And all in all, we believe that considering the global uncertainties and macroeconomics, these results are acceptable. I turn to page number 9, where we look at the segments and profit, and looking at the insulation segment, profitability, the EBIT margin in the insulation segment was down 2.9 percentage points compared to Q2 last year, and this is largely impacted by what I said before and the negative country mix. In the system segment, profitability declined compared to last year, and this was driven by lower revenue and decrease of profitability in the Grodan business, as I mentioned. To the next page, 10. which is our investment activities, you will notice that we also now outlook hold onto our investment activities, and this is reflected here, as we believe in the long-term demand for our products, and we remain very optimistic about the future. And that's why we continue to invest in capacity expansion, our own decarbonization, manufacturing technologies to improve productivity, and importantly, digitalization of our business. And our biggest investments here in the last quarter were related to capacity expansions in Romania, where we're currently in a sold-out situation, and in the United States, and electrification of product lines in our large factories in the Netherlands, in Rouman, and in France, in Saint-Gloire. Then I have a piece of good news I just wanted to share with you, and that is that we have gotten the building permit for our new factory in Soissons in France, something that we have been waiting for for quite a while. But now we have the building permits and can also start the construction there. A quick look at the cash flow on page 11, where we had a free cash flow of 84 million euro, which generated a net cash position of 86 million euro. Then, because it's half year, we have one slide just briefly talking to our sustainability goals, all in all here with one slide. Let me start with safety, which is a top priority in Rockwool, where we did not live up to our own expectations and where we regrettably actually had a fatality and a couple of incidences in the first half year. We of course spent quite a lot of resources on investigating what went wrong and share lessons learned among our factories. All in all, the LTI rate has improved over last year, but for the last two quarters we had these incidences. On the sustainability side, we are progressing as planned, actually ahead of plan, both on the SDG-related goals with the baseline 2015, and you see that on the left of the slide, and the SBTI-related targets, Scope 1 and 2, that's of course a baseline 2019, you see on the right side. And we are quite on track here and keep on investing into these targets. We are also on track with the remaining SDG-related goals, although we used more water during the first half of 2025 due to a lower use of recycled and reused water, as well as some timing differences. in cleaning and maintenance activities. But all in all, very well on track with our sustainability efforts. Last but not least, page 14, the outlook for the full year, and I'm sure what you noticed yesterday mostly, and just a few comments to that. While adjusting our outlook to reflect the uncertainties that we see in the market, and that is very much also why we did this adjustment, we do stay committed to investing for the long-term value creation. It's a very varied macroeconomic environment that we operate in, and with the ongoing geopolitical uncertainty that we keep on seeing and expect the near term to be constraining some of our key markets, particularly in North America, we had to make this small adjustment to our outlook. So assuming no major changes in the current conditions and based on the first half year performance in 2025, we expect that our full year revenue will be at level with last year in local currencies compared to the previous outlook where we had an outlook of low single digital revenue growth in local currencies. We of course continue to monitor the market condition and assess the possible impact on performance across our organization and we will adjust capacity and activity level if needed. Based again on the first half year earnings level and the ongoing efforts, we forecast now an EBIT margin below 16 compared to the previous outlook where we had an EBIT margin formulated to be around 16. The large investment projects are on track and the investment level around 450, excluding acquisition, is a target we maintain also in our outlook. These were the main comments to the slides and we will now open up for questions. I don't know if you can hear me, but there's some technical issues, so just stand by as it gets fixed. It's our understanding that you can hear us. We can unfortunately not hear you. So we'll keep on working on resolving this technical issue. So stand by.

Okay, so this is the operator speaking. I will join you back into the conference call.

We should be ready now.

Excuse me, this is the operator again. We have the host line back again.

We are now ready for questions, and I know that Christian from SEB are the first in line. I hope that we can open up your line, Christian.

I can hear you. Can you hear me?

Yes, we can.

Excellent. You dropped out just before you were going to talk about your EBIT margin guidance. So fortunately, that is exactly what I was planning to ask you to begin with. Because I'm a bit puzzled why you have chosen an open-ended guidance. So when you say below 16%, what do you actually mean? Do you mean 15% to 16% or 15.5% to 16%? Because your growth guidance is fairly specific. So can you just elaborate a bit on that? on what you're trying to communicate by saying below 16%?

What we're trying to say, it's closer to 16 than 15.

Okay. That is quite clear. Then to your comments about North America and the slowdown or delay, which you are referring to, Maybe trying to dig a bit deeper into this. So what segments are primarily impacted and what is the reason for these customers sort of delaying projects in these given segments? Is it the direct impact of tariffs? Is it consumer sentiment? I mean, do you have any more details exactly what is driving this?

Yeah, I can elaborate quite a lot on that. And that is the most important vector in us changing our outlook is the market sentiment in Canada. It's very important for me to say Canada and the U.S. So let me elaborate a little bit on that. And it's also important for Kim and I to say that this change has been... quicker and, I don't mind saying, somewhat dramatic here the last few weeks. And that's also why we feel we needed to make these adjustments to the outlook. Let me elaborate. And I've just been to Canada and the US to meet with our teams and meet with large customers. And when I say customers, then it's distributors that I'm talking about, all contractors that we sell to. And the following picture is what we see in Canada and what we see in the US. And it is that the pipelines of projects are very strong. And it's projects, we are mainly in industrial, commercial segments. And the commercial industrial segments have strong pipelines with our customers. There's also still quotation activities going on. And if you take some applications as warehouses or industrial buildings where we, for instance, deliver flat roof products too. But these many products that are in the pipeline, many of them are affected by the end customer being uncertain about the future and hence delaying them. They're not getting canceled as we see it now. They're just getting delayed. And when we ask them why they're getting delayed, it is the uncertainty that they are facing themselves. Tariffs is the big driver, but it's not necessarily the direct tariffs. Sure, steel prices and other things have gone up, also making these projects more expensive. But it's also the end customers of, for instance, warehouses that are concerned about how their businesses are going to be affected by tariffs then there's a couple of other macroeconomics you know the interest rate in the u.s which direction is it going we see particular canada being hard hit i was in toronto the quebec area that has been a growth driver for much industry where it's almost a standstill that has happened but also throughout the U.S. We see the same and hear the same across our distributors. These are very, very large distributors that have activities throughout the U.S. and Canada. So it has been fast and it has been maybe dramatic is not the right word, but significant. And that is unusual. I mean, I've been in the building material industry most of my career, 14 years in the U.S. I've only seen once or twice in financial crises and COVID, such quick growth. a change of sentiment and again i do want to stress that it's not that they are not projects available they are in the pipeline they have been quoted and quotation continues they're just not being put you know they don't put in the pos as we call it they don't cut the pos so it doesn't lead to sales. When that will become released, when that uncertainty gets released, I simply don't know. And that is, of course, the challenge we have now. How long will this last? And to what degree will it continue? I hope that was helpful.

Okay. Thank you. So, yes, definitely helpful. If I may just ask a last situation question, because we've previously been talking about you actually running out of capacity in North America and having to look at importing products. So this slowdown in sales and demand, how is that impacting your capacity? Yes.

But we still assess this to be a temporary situation. The big question is, of course, how long it will last. The good news for us, and that's what we're focusing on, is that we still have a small market share in the U.S., And we hence have a lot of opportunities in developing additional customers, additional applications and additional geographies. And that's what the teams are doing now. But because it has happened fairly fast and because we came from this sold out situation, it takes a little bit of time then to move into these other channels. One area that is actually strong in the U.S. still, that is the, we call it the big box. So that's the lows and the home depots. And there we grow simply because our product is still gaining market share. So it's hard for me to say whether or not big box is doing well. It's simply because we're growing shelf space in the retail arena.

Excellent. That was all for me. Thank you so much.

The next question is from Klaus Almer of Nordea. Please go ahead.

Thank you. Yeah, also a few questions from my side as to the guidance. I'm a little bit unsure what are your assumptions behind the guidance. So you are saying in the report that you don't see any major changes to the current trading environment. Is that compared to what you saw in Q2? Is it what you see in Q3? That would be the first question.

It is what we see now. I mean, we simply don't know when this situation will improve. And I am here talking in particular about the U.S.

So that should mean that you are assuming a... a very difficult North American rest of the year, which is a little bit difficult to get that to match up with a slightly down revenue in second half versus first half.

Yeah, but that is our outlook. And that is what made us make that adjustment to the outlooks.

Okay. And then about the possibility... It seems like you're also assuming still a stable pricing environment. Is that correct?

That's what we've seen so far. I think I told you in one of the previous calls that we have instilled a pricing drumbeat of a couple of percent, and it varies by market, and that we still see that the prices are holding. They're sticking, as we call it. We've had a little bit more than a one percentage point pricing. This is an average number. It's quite different when you look country by country. and that we see sticking?

Oh, yeah, I know. It seems like, you know, pricing is still keeping up pretty healthy. So the reason, you know, a high single-digit price increase you did in the U.S., I guess that has nothing to do with a very short, a strong decline you have observed within a few months.

I did this also takes into account what the competitors are doing. And we see prices go up in the US on building materials. So yes,

And then just my final question, again, staying in the U.S., as you said, you are going to try to penetrate new channels, so to speak. Would that be possible to do at the current pricing level, given how low activity levels you are seeing in the U.S.? ?

In general, yes. We have a very low single-digit market share in the U.S., where in Canada we are around 12%. So there's a lot of space to maneuver on. But the challenge operationally has been that we have been in a sold-out situation, so we didn't want to open up too many new customers and disappoint too many customers. but now in a different situation so we're opening up new customers and also new geographies including the west coast where we get our new factory in valula a jumbo line and then we use this period also to develop the west coast not least the californian market which is very promising to us A market that is not only looking at energy efficiency, but you can imagine that fire and fire protection is something that is of great concern in California. So we simply have so many opportunities in the U.S. that we can keep on developing.

That sounds great. That was all from me. Thank you so much.

The next question is from Pujari Nigosh of Bernstein. Please go ahead.

Hi. Thanks for taking my questions. So one question on Eastern Europe. So can you say that the decline is exclusively driven by Russia or some of the other European countries have also seen some declines? Because you mentioned Romania, Slovenia. and then Poland also returned to growth by the end of the quarter. And my second question, coming back to the EBIT margin guidance, could you talk us through the different moving parts on pricing, which you mentioned was slightly positive, and then raw material costs, wages, energy, and then what led you to the slight decrease in the margin guidance from around 16% to just under 16%. Thank you.

The decline in East Europe, it is Russia that has moved that. Other important markets is Poland, where we so far have had flattish development. We see an uptick in Poland, by the way, also a little bit stronger prices there. And then we have a couple of countries, but not so large that they can fully cater for the russian decline actually having good growth i think romania is one of the ones we've mentioned several times where we actually are growing double digit and actually are in a sold-out situation so we have to bring in products from other regions to to cater for that and then your second question

Yeah, we were just trying to keep track of your question. I think it was about pricing, and as Justin said here, that we have managed to go with the pricing drumbeat most places, and in aggregate for the first half, we have between one and one and a half percent positive pricing for the group. And what was your third question?

No, no. So I was actually trying to get to your margin guidance assumption. So, you know, I wanted to talk about the different moving parts. So pricing has increased, but maybe, you know, some of your costs have decreased, which has led you to decrease the EBIT margin guidance slightly. So can you talk about the cost part?

As I also mentioned here for the first half, pricing and increased input cost more or less offset each other. We have had a higher fixed cost base as we are recruiting in more engineers and digital people to help us to to build more capacity in the coming years. There's nothing here in the second half of the year, neither on pricing or on inflation on our input cost that has any material impact on the guidance, on the EBIT margin. That is, as again, as I said, primarily the uncertainties we have in North America, which today is a a higher profitability region than it used to be. So it is a bit of a negative country mix, a regional mix, if you want to.

Okay, thank you. The next question is from Chase Kovlan of Clempen. Please go ahead.

Thank you. Good morning, all, and thank you for taking my questions. I have two, and to start off, yeah, regarding maintenance capex. So, actually, over the last few years, of course, we've seen your maintenance capex grow, both in absolute terms, but also as a percentage of sales. And I think you mentioned in the press release that your factory maintenance costs were higher than usual in the second quarter. Can you elaborate a bit on what is driving that exactly, and is that sort of a structural change that we could expect to continue going forward? or is this really a one-off?

I'll let Kim also give you more detail, but it's also an operational issue, therefore I'm jumping in. When you have situations where the factories are not running at 100% capacity, then we're also trying to squeeze in more maintenance. So it becomes a timing issue, if you understand what I mean. You don't want to do my maintenance on factories that are at full capacity. So because we have areas that are not utilizing our capacity, it's full, then we have chosen to make some upgrades and cleaning, whatever it takes. So there's a special effect coming in there.

And on the maintenance OPEX part, i.e., the one that is impacting the Q2 results, we have already mentioned that we had three longer than planned factory stoppages that did cost us some money in the second quarter. And I can also quantify that for you. It was about 5, 6 million euros. more than a normal maintenance period. So that happened in quarter two. It amongst others included a fire in a small transformer station in UK, but also a lining shift in one of our cupolas. So there are major sort of breakdowns that we didn't anticipate in quarter two.

Okay, that's very clear. Thank you. And then my second question, just regarding working capital, I think you mentioned it was a bit less favorable in the second quarter. I see as a percentage of sales, it also increased, I think, almost one percentage point. So could you just talk about the expectations for second half here? What should we expect by year end 24? Is there some unwinding? Or what's your internal view there?

Yeah, it is quite a natural seasonal flow. We, as I said, we normally build up in the second quarter capacity, or you can say inventory capacity. And then we use that here in the in the autumn period. So our expectation is that it is going to come down again in the second half the inventory levels. And that's the primary driver behind the working capital increase.

Okay, perfect. Thank you very much, gentlemen.

The next question is from Alexander Kramersh of Kepler Chevrolet. Please go ahead.

Hey, hello. Alexander Kramersh from Kepler Chevrolet here. Yeah, I'm just wondering, with the Russo-Ukraine conflict approaching to a possible end, I was just wondering, like, what the total capacity is that you have in Russia currently, and if The export restrictions would be lifted. How much of that capacity would be possible directed to export markets? And the second question would be also on capacity. I mean, congratulations on the French building permit. That's nice to hear. I was just wondering if that's the original plans and capacity you were talking about. Thank you.

We really hope for peace in Ukraine as quick as possible. What it then means for sanctions or access to assets in Russia, I simply don't want to speculate. I don't know it better than you. I simply don't want to go out and speculate in that. The French factory is going to be one of our modern setups with electric melter, a so-called jumbo line. It's 110, about north of 100,000 tons, so one of the bigger factories.

The next question is from Zain Bikiwa. Bikawa, sorry, from J.P. Morgan. Please go ahead.

Morning. Thanks for taking my questions. The first would just be on Europe. Appreciate there's been a lot of commentary and hesitation in North America. But what are you seeing in the recent trends in Western Europe? And then second, you know, as you grow your capacity expansion projects into next year, Can we see CapEx being materially higher? And how can we think of leverage? Any chance you'll be in a net debt position in the coming years? And maybe if I can squeeze one last one in. Obviously, margins have been quite volatile in recent years. What do you think the normalized margins for Rockwell should be? And do you think there's scope to grow these further with a volume recovery? Thank you.

Let me take the first one. Let's talk a little bit about Europe. And Europe is, like in our last call, a very mixed bag of market situations and performance. However, at large, we can say the more south we look, the better it goes. And the more north we go, the tougher the market is. I don't think there's a built-in logic in that other than that's just how it is. So if we take it from the good news first, We are doing really well in Spain, in Italy, Croatia, Romania, where we actually are in sold-out situations and need to bring in material from our large feeder factories in Germany. Also a very important French market is after a difficult period picking up a little bit again. A place where we did have to be a little bit tactical on some pricing and some projects, but it's starting picking up again. As I said before, Poland has been flat, but also we see a better outlook in Poland. And then we have Germany as, of course, a super important market for us that is very sluggish, flat, a little bit down at times. And there in Germany, I do think I said before, there's a lot of wait and see around the large stimulus packages that Germany has announced, but we have not seen effects of yet. Quite a lot of those funds are directed towards energy efficiency and upgrading infrastructure. But I must say we haven't seen it yet and also don't expect to see any effect of this calendar year. I have no reason to think that it's not going to be activated. It's just not having an effect in the market this year. UK is doing really well. We just were in Cardiff yesterday. And as you know, we are planning for a new factory in Birmingham. And that market is doing really well, very robust, driven by not only energy efficiency discussions, but at large also fire discussions. And then the last but also least attractive market right now is the Nordics, where we see countries like Denmark and Sweden being extremely subdued, particularly in the industrial commercial arena. The flat-roof business that is one of our strongholds is down dramatically. The market is simply – there's no big projects right now. and the volume in those markets are down 30%, 40%. So not our numbers, but the market is down. So I hope that gave you a little bit of flavor. And then we have talked about Russia and Russia's impact on our numbers. So that was a little bit tour de force through Europe.

On the CAPEX and the size of the CAPEX is clear that we have started construction more factories and that of course cost money. We are operating within the boundaries that I think we have previously talked about, that the board is quite conscious about having a very solid balance sheet and they do not want to see an equity ratio below 60. debt, we can operate with debt today, but of course we have been in an unfortunate situation where we have been able to generate more cash in the last three or four years than we have spent, and thereby having a net cash position. We have also, and that is stipulated also in our dividend policies and you can say capital structure policies in the annual report that the board will set sort of a limit that we will operate on a leverage to EBITDA below one. But that, of course, means that in a period we could think about a situation where we are taking in depth to finance the necessary capacity investments.

The next question is from Seda Ekblom of Morgan Stanley. Please go ahead.

Thank you very much, gentlemen. I've got two questions, one on the US and one on Russia. Firstly, on the US, can you talk about where you expect margins for this region to develop to once assets are fully ramped up? I'm appreciating that that's a few years away. It would just be helpful to understand. might change group margins. Do you expect those assets to have a similar level of profitability to your European business, or do you think it might be higher or lower, and for what reasons? That would be helpful for a bit of color. And then secondly, on your Russia business, it really does seem that a lot of the miss in the quarter and the downgrade to the outlook is around Russia. And I understand that you don't have much visibility on this asset, but considering how material this is to earnings and to the stock price, it would be helpful to get a little bit of color on how you see the margin of your business in Russia, how you see the margin in Russia developing at the start of the third quarter, if you have any visibility on that. I'm not sure how often you get reports from the local team there. And then maybe you could give us some color just around how much of the margin cut is Russia linked. And I know in the past you haven't been willing to give a lot of color on this asset. But to be honest, it's really material for your stock price and your earnings at the moment. So a little bit more help would be very much very, very well taken. Thank you.

Let me start with, thank you for the questions, Zita. Let me start with the US. And yes, you're asking to predict something in two, three years from now. But we have above group level profitability and margins in the US and expect to maintain that. Also with the new capacities coming in. So I don't see why a reason that would change.

Can you put some numbers around the gap? Is it a 200 basis point improvement relative to group average? Is it 100 basis points?

No, for competitive reasons, we don't do that. But you can do some desk research by looking at material prices in the U.S. versus Europe, and I think you get a fairly good idea of... the price points Europe versus North America across product categories.

Okay.

About Russia, let me start it and then Kim can help me. I have to explain to this group that it's a passive health asset. We have no interaction with the group over there. We only get a couple of numbers on a regular basis. I have no insight into the market. I don't talk to our leadership over there. I have no idea how the Russian market is developing. That is very, very unusual. But that's just the situation. As you know, they're fully cut off from our IT systems. They don't use our brand. They don't share our IPs. So I have no insight in the Russian market. The decline was expected and has no impact on our outlook. That's not why we made the adjustments.

The last question comes from Pierre Rousseau with Barclays. Please go ahead.

Hello, gentlemen. Thank you for taking my question. On your different capacity additions, there's a lot in the pipeline. So, unfortunately, in Sweden, in the U.S., in the U.K., and then France, and also India. Could you frame a little bit the timing and capex around all of these? Because they are super material, and for the time being, we don't have very precise guidance. The second question would be a small one about systems margins. What are your expectations going forward? Do you have reasonable hopes that margins could start recovering any time soon? Thank you.

For competitive reasons, we don't give very great detail about exactly which factories open when, also not with which product types and at what cost. But the next ones I can say that are going online is Romania, where we're far, and it's India, importantly, where we're also very far with the construction work. So we don't give long-term guidance, so I can't answer that. I only got half of your questions on systems, but I think you asked about the margin improvement in systems. We have a row of activities going on in the systems divisions. It is a very You know, it's a portfolio of products. So the numbers you see are averages across. Some of them are performing really well. Some need an uplift in performance. And we have a performance improvement catalog of activities going with the usual suspects, everything from price to cost outs and other efficiency measures. So we are actively looking at how to improve the system business margins.

Okay, maybe just one follow-up, if I may, on the recruitment and OPEX investment in IT and engineering capacity. Do you think that should continue in the second half, or are you happy with your current capacity now?

No, we are continuing the hiring of engineers and digital personnel. So it will take a take-up process.

Obviously, right now, Pia, as we are recruiting these new people in, they are right now not assigned to a specific project, so they are expensed off in OPEX. But we do, of course, plan to use some of these resources on some of the CAPEX projects, and then they will go into a capitalization of cost instead.

Understood. Thank you.

The next question is a follow-up from Cedar Ekblom of Morgan Stanley. Please go ahead.

Thanks very much, guys. I had a follow-up there. Apologies. Would you consider guiding excluding your Russian business, considering you have no real influence or oversight on that region? And if not, what is the rationale for keeping it as part of the group guidance? Thank you.

We will not guide on Russia alone. We do still get dividends, although we have this passive ownership, we do get dividends from them, and that's why we keep them in the total numbers.

The next question is from Anders Christian Pritzmann. of Danske Bank. Please go ahead.

Thank you very much. And hi, and just one question from my side. You mentioned that the sales have been challenged in the months of April and May, but improved towards the end here in Q2 in important markets such as France and the United States. And I was just wondering if this positive trend has continued into Q3 so far and what you currently see in particular for the U.S. Thank you.

Thank you. That gives me an opportunity to clarify that. Because, yes, the trend has improved for France and a couple of other countries in Europe. It has not in the U.S. So we did see an uptick in the end of Q2. But here the last few weeks we have seen this dramatic stop and slowdown. So, no, the U.S. has not improved. That was temporary in Q2.

This concludes our question and answer session. I would like to turn the conference back over to Hofst for any closing remarks.

Yeah, thank you very much. And first of all, of course, I must apologize for the technical blip that we had in the call today. First time in my time that we have had this, but I hope you all sort of survived this. We'd like to thank you for the earning call today and all the good questions and appreciate your interest in Rokuleis. And if you have further questions, you are free to call me. And you can also find the contact details in the Rockwell Investor Relationship website. Thank you very much. Have a nice day.