Alleima AB (publ)

Hi everyone and welcome to the presentation of the third quarter 2024 for Alema. My name is Emelie Alm and I am Head of Investor Relations. I'm joined by Göran Björkman, President and CEO, and Olof Bengtsson, CFO. So Göran and Olof will take you through our results and then we will have a Q&A session. You can ask your questions through the conference call and you can also write them in the field in the webcast. So the presentation can be downloaded from aleima.com. And as always, safety is a top priority for us. And I trust that you know the safety routines of where you are located. So with that, I would like to hand over to you, Göran.

Thank you, Emily. And hello, everyone, and thank you for listening. So let's start with the highlights for the third quarter. which normally is our seasonal softer quarter due to summer shutdowns in our production. Rolling 12-month organic order intake growth declined 8% price volume. This is mainly impacted by the oil and gas segment, where we grew backlog a year ago. but also the timing of orders. So the segment with the largest negative impact on road in 12 months is actually one of the segments we continue to view strong, oil and gas. But also softer market in some segments like industrial heating, still soft. While market activity in, for instance, nuclear is solid and also our medical business remains strong. Overall, we see a mixed market sentiment, and the macro environment is continued uncertain, I would say a little bit difficult to foresee. Continued positive development in some segments, stable in some others, and negative in others. Our backlog remains solid with a good product mix, and our visibility of near-term deliveries remains high. And when the market will bounce back eventually in the segments where we see weakness, we are well positioned. Revenues grew organically by 3%. The quarter was damped by currency headwind affecting both revenue and earnings. And we still manage an adjusted EBIT of 314 million and a margin of 7%. I think this is a strong number. This margin level is high looking at historical levels for a third quarter. We made the decision to increase our capacity of steam generated tubes to the again growing nuclear market as demand for fossil free base load is increasing, as well as a footprint expansion for a medical segment that we announced today. Look at sustainability. I mean, we are generating positive impact both through our operations and our product offering. And we'll start with our own operations. And I'll start with safety. Safety is always a top priority. Continuously and actively implementing measures to maintain safety is a top priority. Long-term trend heading in the right direction. Our share of recycled steel remains high at about 81%, both on a rolling 12-month basis and year-over-year. Good figure given the product mix. Our CO2 emissions are decreasing. We stay below 100,000 tons for the combination of scope one and two over a rolling 12 month period. We note the reduction of 2%. And the proportion of female managers amount to 23%. And I think it's important to recognize this is only one aspect of our broader diversity inclusion initiatives. Another highlight from the quarter is that Elema was awarded the gold medal by Ecovades. Ecovades is a leading provider of corporate sustainability ratings. And I think this prestigious recognition places us among the top 5% among 130,000 companies assessed worldwide. And we are among the top two among iron and steel companies. Given the obvious security requirements and high quality standards necessary for nuclear power plants, Alema has been one of the leading suppliers to the nuclear sector for more than 50 years now. We steam generated tubes as our flagship product. With the recent years' focus on energy self-efficiency, nuclear power has again gained traction as it provides fossil-free base load power. During the quarter, we decided to expand our steam-generated tubing facilities in Sandviken through the reopening and refurbishment of one of our tube mills, which was mothballed after the Fukushima accident. I think this gives us a unique opportunity to increase our capacity relatively quickly and meet the increasing demand from our customers in the nuclear segment. We recently delivered the first commercial order of steam-generated tubes for SMRs, which is a technology we expect to grow as the need of fossil-free energy continues to increase. Through 2068, we will be able to serve both conventional nuclear power plants as well as the emerging technologies like SMRs. I mean, we've been quite open with that we potentially would reopen the multiple tube mill. I think in the end decision In a way, it kind of came natural. We view the nuclear market as positive, both for conventional water-cooled reactors as for SMRs, and projections show that there will be a lack of capacity going forward. Steam-generated tubes is a premium product with good profitability. We have a strong market position, and we want to continue to grow this business. And since we have a mothballed factory, CapEx needed to add capacities considerably lower than building a new plant, meaning that the business case looks good. So in the end, I'd say this decision was not so much about if we would revamp the old factory more, when we should do it. And we have come to the conclusion that we have more to win being early adding capacity than the risk of being too early. And we have a very good order backlog. And of course, that helps us with this conclusion. And on that theme of capacity increases, we're happy to announce that our decision to establish a production footprint for our medical business within Kantal in Asia. We will open a new facility in Penang, Malaysia. which is a growing hub for medical companies. This will further strengthen the medical wire manufacturing capacity as demand for our products is growing at high pace and the new footprint will allow us to better collaborate and serve both new and existing customers in this region. Site preparations will start at the end of this year with the first commercial deliveries in 2026. Antalya's medical business grew about 60% 2023 over 2022 to approximately 1 billion SEC. And I think this capacity expansion will add significant top line and margin contribution over time. And this is a high importance in our portfolio growth strategy. And I'm very pleased with this investment. Look at the market development. Overall, we see a mixed market sentiment and the macro environment is continued uncertainty. We do see continued recovery and positive development in some segments, stable in others, and negative in some. Our broad segment exposure reduces volatility. I think this is the strength of our roadmap. Now I'll walk you through each segment. Oil and gas. The underlying demand is still on high levels. The project list of upcoming tenders and potential future order is strong. As we booked several significant orders last year and filled our backlog for orders to come, we are meeting high comparables and therefore not growing the order intake year over year in the rolling 12-month period. Again, the backlog is solid. In industrial, we noticed stable year-on-year demand in the industrial segment. And by the look of things, we think this market has troughed. But demand did not increase in the quarter. In addition, and this, of course, due to capacity prioritization, we are being selective in booking orders in the industrial segment. Chem and Petrochem continued solid demand in Asia on good levels. The sentiment in North America is still hesitant. And to some extent, we see somewhat weaker in Europe. Industrial heating continued weaker demand year over year, and some hesitance from customers in placing orders at the moment. Dialogue with customers continue at a good level, but there is a hesitation in the market, and decisions are not taking the pace we would like. This refers mainly to CapEx-related business, which is visible especially for customers in the metals and solar industry. For the solar segment especially, we also have high comparables from last year. However, note that this is not related to the discussions around our megawatt solution, Brutal, but the ERI solutions, where we are developing in partnership with Daniele. Consumer, still a soft market, but with continuous signs of recovery, mainly driven by the white goods industry in the strip division. Mining construction, flat demand year over year, solid mining, but construction is softer. And medical continues to be a very strong market with several drivers. Momentum is strong across the product portfolio. With the footprint expansion, we will be able to capture the growing demand in Asia in an even better way. Remember that nuclear business has a naturally long lead times, but the high activity in the growing demand continues. Transportation demand grew year over year, and it's a high activity for aerospace titanium tubing. Under renewable energy, we see a bit mixed at the moment and some slowdown in the green transition in general. For example, we see some slowdown in activity related to hydrogen fuel cells. This is mainly related to delays in production scale up at customers. We expect this to remain a bit slow throughout the year. But this is a wide segment and we see good momentum in other areas, like, for example, tubes to be used in production biofuels. This remains one of our top priority segments over the longer time. So we summarize order intake and revenue order. Intake growth was minus 8% for the rolling 12-month period, and it's mostly due to the aforementioned softer industrial heating market and the oil and gas backlog built up during last year. On absolute levels, order intake is just below 20 billion, which is an okay level overall. Backlog remains solid in several key segments. In terms of rolling 12-month order intake, the nuclear and mining and construction, medical and consumer segment grew while the rest declined. Portable revenues amounted to 4.5 billion with a 3% organic growth. And even though we are in an uncertain macroeconomic environment, we are growing in 8 or 10 segments with medical, nuclear and transportation as the main drivers. Even though industrial-industrial heating declines, we still manage to execute on a solid order backlog and growing revenues year-over-year. Rolling 12-month bookability of 100%. Earnings. I mean, our diversified exposure to customer segment at different stages in the business cycle, as well as a strategy to grow in more profitable and less cyclical niches, have proven to be successful. Adjusted EBIT amounted to 340 million SEK, and the adjusted EBIT margin was 7.0%, which included a significant currency headwind. This is a strong result in the third quarter, which are seasonal week due to planned summer and maintenance shutdowns. This shows how we, in the longer term, have been driving a positive product mix shift and also maintained our order booking and price discipline in a weaker market condition and thus able us to maintain profitability. Pre-operating cash flow of 400 million SEC. So overall, I think this is a solid delivery. And we can look at our historical quarter three performance. Quarter three, as I said, seasonally weaker quarter, and the average adjusted EBIT margin from 19 to 22 amounted to 4.6%. But as you can see, the long-term product mix shift we are driving is giving results, and we've been at or above 7% now for two consecutive third quarters, which also happens to be our first third quarters as a standalone company. And if you zoom out, this trend is applicable to Lehman in general, that we, despite macroeconomic uncertainties, manage to maintain profitability at higher levels. Let's look at the divisions, starting with tube. Tube noted an organic order growth of minus 90% for the rolling 12-month period. And this was, of course, as I already said, impacted by a weaker intake in the oil and gas segment and the North American chemical and petrochemical industrial segment. This is partially offset by the mining construction nuclear segment and a positive development in chemical and petrochemical in Asia. But even though order intake in oil and gas has been declining for some time, there's still a strong underlying momentum in this sector. And we'll continue to capitalize on this going forward. For instance, for OCDG, we're booking orders now into 2026. And we have roughly three quarters backlog within Ambelicus. But also order flexibility, meaning we can book orders with deliveries in first half year for Ambelicus. Book the bill on 103% rolling 12 months with a solid backlog. Organic revenue growth of 3%, mainly driven by nuclear transportation segments. And the positive product mix margin increased to 6.6%. So even stronger than Q3 last year, and we are on better levels than the years before. With a currency headwind of 15 million compared to last year. Look at Cantal. Both order intake and revenue noted negative organic growth. Minus 8% rolling 12-month on order intake and minus 3 in the quarter on revenue. This is driven by the softer industrial heating segment and is affecting Cantal's order intake and revenues. And one should also keep in mind that comparables are high as Cantal had a very strong 2023. Medical segments is maintaining a strong momentum growing both order intake and revenues. Book the bill, 93%, which means that we continue to consume a bit of a backlog, but Cantal's ability to adjust capacity, reduce cost, and improve the mix from growing the medical business makes me stand firm with my previously made comment, and that is that Cantal has established a new margin level compared to the historical levels. Just the DB margin was 16.6% in the quarter, and considering it contains a quite strong negative currents ahead when it has a strong result, given the lower volumes in industrial heating, and especially in the solar segment, which is highly profitable. If we would take out the negative effects, the effect actually can totally grow its margin year over year. So strong performance. Moving to STRIP, after a couple of tough quarters where STRIP was heavily affected by the weak consumer-related demand, we note a rebound from Q2 is continuing. But volumes are still, I would say, on the low side. Organic ore intake grew 11% on a rolling 12-month basis due to growth in all segments except for industrial and hydrogen renewables, where the market is still slow for our coated strip steel due to delays in our customers' ramp-up. In the quarter, revenue grew organically by 16% from low levels, book to build on 96%. Earnings Earnings is always weak in quarter three for Strip, with major effects from the summer shutdowns. Just the demon margin declined to minus 1.9% from last year's minus 1.3%. This is due to negative currency effects and a one of six million related to scrapping of obsolete material due to a product exit related to the low margin business within Coty Strip Steel. With that, Olof, I'll hand over to you.

Thank you, Göran. Let's go to the numbers then. In the slide here, look at the table to the right. The rolling 12-month order intake comes out at 19.6. That's an organic development of minus eight. That comes mainly from the lower order intake in industrial heating and in the oil and gas segment. where the latter had a substantial backlog build up in the third quarter last year. And we still view this segment as very attractive. We are impacted by currencies. If we move down further in the table, with the strongest Swedish krona this quarter, impacting with negative 1% on the oil intake. And there's also an effect of Alloy surcharges, a negative effect of minus four. So that is the order intake development. If we then look further to the right, to the revenues in the quarter, they come out at 4.5 billion. Also impacted by the lower metal prices, the lower alloy surcharge, minus two. And then the currency headwind of minus three. But organically, we are up to 3% organic price volume growth, and that is a sequential improvement if we look at the first and second quarters this year, where we were at minus 2 and 0% organic development, respectively. If we compare the 12-month rolling order intake to the 12-month rolling revenues, they are at the same level, 19.6, so that means a a good book to bill of 100% in the quarter on a rolling basis. Just as a note, if we look into the fourth quarter, we expect a neutral effect from the alloy surcharges, both order intake and revenues. This number can, of course, change with the metal prices. Adjusted EBIT, if we look at the big table, then comes out at 340 million. Then as a result of, which is lower than last year at 350, as a result of lower revenues in some segments. And then the currency headwind, which actually amounts to 51 millions in the quarter. So a substantial impact from currencies there. But the adjusted EBIT margin continues to show resilience and reached 7%, which is obviously a good level if we look back a few years. Reported EBIT that then contains the metal effect actually increased to 6.5 compared to 4.5 last year. And this is then the change in the metal price effect. We had a negative 24 millions in this quarter compared to a negative 144 millions last year. Net financial items for the quarter amounted to zero compared to minus 15 same quarter last year. And the improvement here comes mainly from a better interest net, which is obviously a positive number. This is obviously what we expected. interest income on our cash position. But then also we have other financial costs like, for example, costs for leasing, bank charges and interest costs on the pension liabilities that is offsetting this positive interest net. So coming out at zero, but still an improvement compared to last year. Normalized tax rate year-to-date, and I prefer to look at the year-to-date numbers, that comes out at 23.7%. in the full nine month period. That is slightly below our guidance and lower than last year, which came out at 24.4. And the low tax rate this year comes from a tax relief in the US and a good tax mix in our taxable result. So profits made in lower tax environments. The reported tax rate comes out lower at closer to 23%. And for the full year, I think you should expect us to come out close to that number for the reported rate. And for the normalized rate, I expect us to be in the lower part of the guidance range, 24 to 26, for the full year normalized rate. Free operating cash flow at 411 million. I'll get back to that in a minute. And then further down in the table, adjusted earnings per share increased to 1.02 Swedish kronor per share compared to 0.99 last year, helped by the improved finance net and the lower reported tax rate, which also goes for the year-to-date number, which is very close to last year's number. Going to the bridge then for the adjusted EBIT, We see that the adjusted EBIT then decreased by 36 million to 340 million, 14 million. This is the main impact here, as you can see on the slide, cuts on the currency headwind, offsetting the organic development. And just short on the divisions again, TUBE performed an overall solid quarter, increasing both earnings and margin. Cantal facing really tough comparables due to a very strong third quarter last year. And considering the lower volumes in industrial heating and a significant currency headwind, we think the result is actually quite strong. Excluding currencies, it's actually an improvement, again, which showcases a very good development on the medical side. Strip is also a little bit better than the figure might suggest. The underlying business is improving, but because of the aforementioned 6 million costs related to scrapping of obsolete material, the quoted strip side, earnings and margins are down year on year. And they also had a significant currency headwind in the script numbers. And the currency, the explanation behind the currency then is, of course, the strengthening of the Swedish krona, then mainly against the US dollar and the euro compared to last year. And this is the transaction and translation related effects in our books, recalculating the foreign profits to Swedish krona. There are no acquisitions affecting the numbers in the quarter, so zero there, and we come out with a 12% operating leverage in the quarter. Looking then at the balance sheet, the net working capital lower than last year. year over year. It's lower metal prices impacting the numbers as they affect most parts of the networking capital. But of course also a strong Swedish krona has also some impact when translating the foreign networking capital to Swedish krona. As we have Previous to state in the quarters, all our divisions are working on optimizing their physical inventories in each part of the supply chain. However, we think that there is more to do here. I think that we can reduce our inventories more than we've done so far. We see more potential here. And as a percentage of revenues, networking capital came out of 38.8%. That's a bit low than a year ago when we were at 14.2%. Then looking to the right, capital employed increased slightly to 15.7 billion to 15.6, so overall fairly stable. And rose then, return on capital employed, and we measure excluding cash. And that is then based on the operating profit, including the metal effect. And it came out at 9.9%. on a rolling 12-month basis. That's a decrease from last year. And that's, again, metal prices impacting here. And this metric is very sensitive to changes in metal prices affecting both the operating, which is the unadjusted result, and the networking capital. Going on to the cash flow, it amounted to 411 million. That is lower than last year. But last year, we had a very strong cash flow in the quarter. And that came from a very strong invoicing in the late second quarter last year. In all divisions, we actually had an 18% organic revenue growth in the second quarter last year. And that, in turn, resulted in a large cash inflow in the third quarter 2023. And we have a good inflow on our receivables this quarter, but not in the same magnitude as last year. And looking at the parts then, the EBITDA, which is the unadjusted EBITDA, that's higher than last year, coming from the lower metal price impact already mentioned. And we have some what we call non-cash items, that is more or less coming from provisions made in the income statement and then reversed when calculating the cash flow, as there are some provisions normally not cash flow impacting. We have... A positive change in working capital is normal in the third quarter, but as I mentioned, not the same magnitude as last year. CapEx is higher, coming down from our higher growth CapEx in both Tube and Cantal. These liabilities amortizations are slightly higher, but all in all, a solid 411 million of cash flow in the quarter. And if you look to the right in the slide, that's a graph showing the quarterly developments of the free operating cash flow. And the third quarter is somewhat volatile over the past couple of years. One important factor is metal prices. Of course, in 2022, inventories were greatly affected by the spike in the nickel during the second quarter. And that impacted the cash negatively in the next quarter, that is the third quarter then. And last year then, as I mentioned, the third quarter was heavily impacted by the strong invoicing in the second quarter. And this quarter, I guess, is more normal, if there is a normal third quarter. And if we look at the cash flow year to date, then it's at 1.1 billion approximately, and that is about 200 million below last year, and the difference constantly from the increase in the growth capex. Then looking at our financial position, which is a continued strong position, we are well below our financial targets of a net debt to equity to be below 0.3 times. At the quarter, we were actually at a negative 0.03 times. If you prefer the other metrics, net debt to EBITDA, adjusted EBITDA came in at minus 0.14 times. I would say the main change in the net debt is the increase of the net pension liabilities. They increased to 938 millions from 449 millions last year. And that comes mainly from lower long-term discount rates that is applied when discounting the Swedish pension liability. That's the main impact. And in addition to that, we have improved our cash position. We have improved it by approximately 500 millions from a year ago. That means that we have a net debt or financial cash position of close to 1.8 billion. And the net debt position or net cash position comes out at 410 millions versus 293 a year ago. And considering also that we have a $3 billion unutilized revolving credit facility, our financial position is very strong. And this, of course, gives us the muscle to continue to execute on our strategy of profitable growth, both through growth investments, capital capex, and through acquisitions. Then let's look at how well did our guidance from the last quarter come out. CapEx increased to 249 millions from 187 in the quarter and if you look at the year-to-date number 602 compared to 453 we guided for 950 million for the full year so so so far we can say that we are in line with that guidance but we are normally a little bit more capex intense in the second half of the year and considering our announced growth projects we will be raising our full year guidance i'll come back to that in a minute Looking at currency translation and transaction effects, coming out at 52 millions versus a guidance of 15, so a little bit more negative there. And that, of course, had an impact on our EBIT, as I've already explained. And looking at the total currency effect, including the hedges and so on, we are at negative 51. Metal prices, 24 million negative. We guided for 50, and that, of course, is a difficult one. And then tax rate at the lower, just below the lower part of the guidance range. And if we should look into the fourth quarter then, which has already started, we are raising our CapEx guidance to 1.5 billion for the full year. That comes mainly then from the announced investment in the nuclear capacity in Sandviken, the new tube mill expansion there, taking the bottom of the tube mill out. And then of course, we have other projects going on as well, but that's the main explanation. And we're still at 400 million for maintenance capex. Currency effects, approximately 40 million negative, we think, with a current strong Swedish krona. Metal prices, negative 200 million. The nickel prices have continued to go down. We see negative development there. And then tax, we are keeping our guidance for the normalized rate. I think it will come down, as I said before, around the lower part. And for the reported rate, that's the rate that goes into the income statement, we are probably closer to 33%. And by that, I would like to hand back to Joran for the outlook.

Thank you, Olof. So let's look at the outlook for the fourth quarter. I will start by saying that market conditions are slightly more difficult to assess at the close of the third quarter. And at the same time, we take a positive view on the development in several of our customer segments where the underlying megatrends are expected to continue to support the development, but still in a somewhat more cautious economic environment. Backlog is solid in several of our key segments, and we have a good visibility in our near-term deliveries. Product mix is expected to be similar to the one of the third quarter. And cash flow is normally higher in the second half of the year compared with the first half. So let me summarize. Overall, we see a mixed market sentiment and the macro environment is continued uncertain. And I would say a little bit difficult to foresee with some of our Some markets are softer, and some are stable, and it's positive in others. However, as said, backlog remains solid with a good product mix, and our visibility in neutron deliveries remains high. Revenues grew organically in the quarter, driven by growth in eight of our 10 segments. I think our diversified exposure to customer segments has different stages of the business cycle, as well as our strategy to grow within more profitable and less cyclical segments have proven to be successful. I think we had a solid adjusted EBIT margin of 7.0%. And despite significant currency headwinds, I think this is a strong result. I think it shows how we have long-term driven a positive product mix and maintain our order booking discipline in a weaker market condition. And by that, maintaining profitability. Our financial position remains strong, which will enable us to continue to execute on our strategic agenda. And in the quarter, we announced two strategic important organic growth opportunities, although we also have several others ongoing. One is, of course, the reopening of the Mothball steam generated tube factory and one footprint expansion for medical. And with that, I'd like to hand it back to you, Emily.

Thank you, Göran. Thank you, Olof. So it's now time to start the Q&A session. And again, if you want to, you can ask questions through the webcast, and you can also ask them on the conference call. So operator, please go ahead.

Anyone wish to ask a question may press star 1 on the telephone. If you wish to remove yourself from the question queue, you may press star 2. The first question is from Adrian Gilani with ADG. Please go ahead.

Yes, hello. A couple of questions from my end. First of all, on the separate press release regarding the new medical facility in Malaysia, can you give us some rough indication on the size of the investment, so the capex and how much it could add to sales when ramped up fully?

We've decided not to share that, but I can share so much, saying that medical has a couple of advantages. First of all, it's profitable. Second, capex in medical is lower than in many of other operations with LLMA. So, payback is roughly halfway. other investments, but we have decided not to share the investment level.

But it's a good way back. And I guess, can you just reiterate a bit about the near-term outlook on order intake for industrial heating? Is there any indication that the CapEx business is improving there? Because with 93% book-to-bill in Cantal, There looks to be some further downside on sales if orders don't improve soon.

Yeah. I'll try to do that. We are, of course, working close with other customers. And in previous quarter, we have indicated that they view sort of a positive end of the year scenario. They are not so sure about that anymore, so I think the upturn is probably pushed into 2025. There is a lot of potential investments at the customers, but they are sort of not pushing that button. Part of that is... general industrial economic environment. And other is, I mean, take for instance, the solar business that was very strong last year. I mean, solar energy built out this continued high pace, but there is an overcapacity in the value chain that affects us negatively. So in summary, I think we're pushing the upturn a little bit into 2025.

Okay. And then I guess follow up on that in the order book now. Do you have enough orders for Q4 to have okay utilization at least if orders aren't going to improve until next year? So for Q4...

Of course, utilization goes down if the backlog is thinner and we produce less. But I think Cantal has proven its flexibility. So we have adjusted costs, and I think that is proven by the result that Cantal is still doing even that. at the level where revenues price volume is down. Of course, that is also held by the strong medical. That should be said as well.

Perfect. And then a final one. Are you able to specify how much of a working capital release you expect for Q4?

No. Inventory should go down, but I don't think I can share a number on that.

Okay, perfect. And I guess that's all for me, so thanks.

The next question is from Fredrik Agart with SEB. Please go ahead.

Thank you very much. I have a few questions. Firstly, starting on the industrial side, if I heard you correctly, and maybe I heard you wrong here, but I heard you say that you think that industrial has troughed or is on the verge of troughing here. And at the same time, you say that transparency is less now than it was a few weeks ago. And when we look through the general industrial complex, demand overall seems a bit weak here. So if you could square that comment on saying that it's troughing here, and perhaps why you see that and where, would be helpful.

I mean, it's a relevant question. I think to some extent, It is a little bit difficult sometimes to judge industrial because ourselves are impacting the order intake. At least as much as the market sometimes, because this is the segment where if we want to sort of down prioritize something, it is in the industrial sector. It has been weak in North America for some while. Maybe a little bit weaker in Europe, but Asia is still strong. We believe it has troughed, but it's a little bit difficult to judge because we are not selling as much as we actually could sell if we wanted to.

I guess the follow-up question to that is the utilization in Sandvik, because if this deteriorate significantly then? Is there a margin downside or are you saying that you could fill it up with more volumes just by taking what's out there and available for you? I guess, is there a major margin risk in tube?

No, I would say it's not. If the cycle turns slower? No, it's not. And I think, I mean, our... bottleneck as such is in hot working and we always prioritize products with high added value meaning normally cold work tubes so the business that has low prioritization is billets it's to some extent also extruded not hot work tubes And I don't see us in the short term fill up with a lot of that. We are prioritizing the cold work. Okay. All right. Thank you. Actually, volumes are a little bit higher than before as well.

Okay. You don't want to share the capacity utilization, I assume. No, we don't do that.

But in the hot working part, we're running at high utilization. Steel plant, a little bit higher than before, but not at maximum at all. Okay.

All right. You're asking nuclear then. You're expanding your capacity there. I guess you're seeing what most others see, and you seem confident that you'll have your share at least. What do you expect that to do? as a share of revenue, call it five years out, how big is nuclear going to be? And you say it's a niche product, and is this the same magnitude of profitability as umbilical, or is it something else? Any guidance there would be, I guess, helpful.

I'd say historically umbilicals has been higher. I think also if we look at steam-generated tubes, I think there's no reason to believe that it should be much lower than umbilicals. But I mean, if we go back quite a number of years after the Fukushima accident, we closed the old mill. The new mill was still in operation. We did book at lower prices, and we're still washing those prices out. Going forward, I think this is a highly profitable part of the business.

And as I said, we're at 60% capacity with the old new mill. Okay.

Oh, thanks. Just finally on the CapEx guidance, should we roll that forward into next year? You seem to have a few organic projects in pipeline. Should we use a billion plus ahead or more or anything else?

I think there are many projects good prospects ahead. So you should probably see it around that level. Yes. That we have guided for, for this year. Yeah. Around a billion plus.

Yeah. All right. Okay. Thanks. Thank you.

As a reminder, if you wish to register for a question, you may press that one. The next question is from Igor too. Please go ahead.

Thank you, operator, and thank you, Joram and the team. I just have some questions. I just wonder, you mentioned that the organic water intake growth that was down 8% organically in Q3 was primarily related to industrial heating and oil and gas. Do you know what the number would be if we would adjust for the oil and gas part? Thank you.

Yes, I do. And Victor, it's a very good question.

I mean, oil and gas has the largest impact on the minus 8%. And that's a little bit ironic in a way, because that's still a segment that we view positively going forward. If we would exclude oil and gas, it would be totally slightly positive, counting all the others.

Okay, great, thank you. And the next question relates also to the oil and glass and nuclear as well. If I remember it correctly, you had a couple of major orders in Q4 last year. Are you planning to disclose any major orders going forward as well, or what should we expect in terms of guidance and expectations for Q4?

We will communicate. If they're above 300 million, we will communicate. And then we might communicate something else if it's a very interesting order from a market point of view, of course. But if we book orders above 300, we will communicate that.

Okay, thank you. And a final question, just wondering in terms of margins of Cantal, they were a little bit weaker this quarter. Are you still confident that 18% are still relevant going forward as well, or should we expect anything else there? Thank you.

Have you picked a number 18%? I think Cantal is... We look at Cantal this quarter and actually adjusted for currency, and they were better than last year, but I think quite an achievement considering the downturn in industrial heating. I mean, in industrial heating, I mean, the solar business we had on a rather high level last year was highly profitable. So I think Cantal has really done an excellent work on adjusting. And of course, the fast-growing medical is helping Cantal a lot. So I will not use the number 18, but they are clearly on a higher level, even with a little bit softer industrial heating at the moment, that I can say.

Okay, thank you. That's all from me.

So operators, do we have any? Sorry to interrupt you. At the moment, there are no more questions from the phone. If you want to register, you may press star one. There are no more questions from the phone.

Thank you, operator. So with that, thank you for all your questions and for joining the call. And I hope to see you again soon. Thank you. Goodbye.