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Executives

Claus Ehrenbeck - Head, Corporate IR

Heinrich Hiesinger - Chairman and CEO

Guido Kerkhoff - Chief Financial Officer

Analysts

Michael Shillaker - Credit Suisse

Neil Sampat - Nomura

Carsten Riek – UBS

Jeff Largey - Macquarie

Rochus Brauneiser - Kepler

Hermann Reith - BHF-Bank

Bastian Synagowitz - Deutsche Bank

Sylain Brunet – Exane BNP Paribas

Alexander Hauenstein - MainFirst Bank

Cedar Ekblom - Bank of America

Tim Huff - RBC

Christian Obst - Baader Bank

ThyssenKrupp AG (OTC:TYEKY) F3Q 2013 Results - Earnings Call Transcript August 13, 2013 12:30 PM ET

Operator

Thank you for standing by and welcome to ThyssenKrupp’s Q3 earnings call. At this time, all participants are in a listen-only mode. There will be a presentation followed by question-and-answer session. (Operator Instructions).

I would now turn the conference over to your host today, Dr. Claus Ehrenbeck. Please go ahead, sir.

Claus Ehrenbeck

Thank you very much, operator. Welcome everybody else here for our Q3 conference call this evening. Also on behalf of the entire IR team, I would like to wish you a very warm welcome to our tonight’s call. And just as a housekeeping remark, all the documents for this call that we released about an hour ago, you can find on the IR section of our website. If you might have questions after the call, myself and the IR team is more than happy to receive your questions and to discuss the issues with you. But for now, I would like to hand over to Heinrich Hiesinger to start with the presentation.

Heinrich Hiesinger

Thank you very much and welcome to our Q3 call. I can really reassure that the top priority for the entire ThyssenKrupp leadership team is the transformation of the company along the elements of our strategically forward, which are portfolio optimization, change management and high performance orientation and we do regularly give you an update on each of our earnings call.

On today’s update on the portfolio side, we were able to close the deal with Tailored Blanks on July 31, which would give some positive effects on net financial debts and equity in Q4.

For Steel America, we're in intensive and very advanced negotiations with the leading bidder on the sale of two Steel America plant. In addition, we're also in talk with other interested parties. For the change management side compliance and corporate governance are really key elements. In order to accelerate the clean up on the compliance side has really move forward with our new understanding and zero tolerance. We opened an amnesty program which came to an end on June 15 without major findings.

In addition and here you can see some of the figures be streamlined and simplified our organization. Most important in a weak market environment, we lift up our performance, we’re targeting cost saving of 2 billion until 2015 and one important contribution comes from higher efficiency in our G&A functions.

We have recently announced other so called ex-program, achieved change at ThyssenKrupp. As a consequence of the reduction in our G&A function, we reduced our work force from around 15,000 to 12,000, but most important is that [all the activity really show] impact which is the name of the program. So we can really measure a consistent ramp up on the savings with positive corrections both on EBIT and free cash flow side.

Coming to Q3, Q3 shows further important progress in improving performance across the entire group. We’ve again achieved our operational milestones and delivered on the profit and the cash targets in Q3.

EBIT adjusted from continued operations came out at $332 million which is well in line with the target of larger than 253 and well ahead of the preceding quarter and also the consensus.

All the areas provide positive contributions and (inaudible) area could sequentially increase contribution compared to Q3, the only exception is [IAS] where we had temporary billing related big results, but still on a high double-digit margin.

Again our capital goods business generated the vast majority of our earnings and to head up the contribution of the three quarters we now achieved accumulated EBIT adjusted figure of 802. So we are well on track to achieve our full year target of around 1 billion.

Free cash flow before positive effect from divestments in Q3 came out at plus 375, better than promised and well ahead of the preceding quarters. Again all business areas contributed positively and again the overwhelming part was coming from our capital goods side.

Free cash flow before divestment in the first nine months came out at plus 97, the year-on-year improvement is 1.1 billion. So here we are well on track for our full year target which we committed shows a significant improvement and target around breakeven.

As a consequence the net debt of the group remains broadly flat at around 5.3 billion. In the first nine months net debt came down by roughly 0.5 billion and this should be compared with an increase of more than 2 billion in the prior year period.

The traction of [Olympic] program become very well heard in our performance in the first three quarters. After the first nine months we could achieve savings level of 410 billion. So here we are well on track to deliver on our 500 million target.

On the order intake side quarter-on-quarter orders came down by 8% to 8.9 billion in Q3. This can mainly be explained by lower orders at Steel Europe where we saw quarter-on-quarter reduction by 12% and some lumpy order profile which is quite normal for this type of business for the project business.

On the other side of our elevator business they could increase order intake further to new record level and this was really driven by an extremely strong demand for new installations from Asia Pacific, especially in China, where again we could grow by more than 20%.

Our components are notified, orders at our components business went up on a quarter-on-quarter basis and this we adjusted figures for divestments. This is all true on a year-on-year comparison. The positive thing is that we see some positive momentum, some increase in all parts of our components technology business.

If you look on some of the end segment, the (inaudible) market, the growth has been driven by U.S., China and Brazil, but the Western European markets remain still weak. We benefit from the fact that our customer base is very much towards the premium [constitutes].

On the truck side the momentum of the market still on a very low level. However also here we receive some signal that the market might come back with some higher demand.

Industrial component side still a very challenging business environment, this is also especially true for the weak market.

For material services business quarter-on-quarter intake material service has been slightly up in a very difficult market environment. On a year-on-year basis definitely you could see that it’s been down virtually across all areas. There is one exception, this is our aerospace business, last time we were positive we could renew contracts with Boeing, this time we can report that we could renew our contracts with Cessna and Bombardier and as the business is developing so nicely, we owned new locations, this was contributed further growth in the aerospace segment.

So our (Inaudible) of increasing disposal, because the more attractive capital goods business is really confirmed by the continuous strong top line growth out of those businesses.

So if you add up the first nine months, the orders from those businesses came up at 28.3 billion, which is down 8% on a year over year basis. But we saw significant case of plus 8% in the elevator business, which is really a new record level in each of the last three quarter and also in our project business also we had this lumpy quarter three which I said is normal for project business, but if you look on the accumulated nine months they are up by plus 8%.

So our elevator and industrial solutions business are clearly the key pillars which support our top line growth in our top line and first nine months and really drive our orders backlog up plus 11% on a year-on-year basis and they do represent 80% of our 24 billion also in hand.

The year-on-year comparison really reveals the growth potential of course businesses of elevator and industrial solutions and the growth momentum in Elevators has really driven by strong new installation demand from emerging markets especially China and Brazil. We see good modernization demand virtually across all regions and can trust and rely on a variable relied and growing maintenance market.

On our industrial solutions side, we see significant potential on our naval business, especially in Asia pacific and in order to be prepared for these opportunities, we have completed the AMT acquisition in Australia in Q2.

On our process technology side, we are seeing ongoing demand for fertilizer plants and other petrochemical technologies in U.S. driven by a shale gas boom.

We saw technologies and side, the picture is a little bit mix. On the cement side, we continue to profit from an infrastructure growth in Southeast Asia and also some additional opportunities in the U.S. where older plants are required to be modernized to follow, more strict, CO2 emission standards.

On the mining side it's a little more flattery. We see weaker growth on new inflation as the CapEx of our customers is reduced but we expect that we can cushion this by an increased share of our service and repair business.

We prepare for the future in those businesses, therefore we do also intensified our R&D activities. One example of this, we've recently opened Europe’s first multi-purpose fermentation plant to explore new growth objectives in the area of biochemicals, which are based on renewable raw materials.

Similar to [orders] but definitely even more important is EBIT side. The quarter’s good activities has stronger support to group's earnings performance and they do represent the mass majority of gross adjusted to EBIT. Nonetheless, if you look on the pillars, all business areas of the continued operations were consistently able to provide positive contributions in an all challenging environments.

And if you really listen to recent announcements then also our Steel Europe business had quite and if you compare it to our competition, quite successful Q3.

Quarter-on-quarter overall, EBIT adjusted from continued operations came out as plus €332 million, this as I said before on a sequentially improved performance as virtually all businesses.

On a year-on-year basis, EBIT adjust declined from €334 million to €332 million this was mainly driven by divestment effects and weaker markets as our main component business and on a difficult trading conditions at material service, but this is debt against this elevate the technology could again improve its EBIT adjusted and the margins on a year-on-year basis in the first nine months. But also in each of the three quarters and in Q3 they achieved the margin of 11%.

So to the outlook as mentioned result in first three quarters are in line with our full year target, therefore we confirm our EBIT adjusted as around €1 billion. We control our CapEx also CapEx guidance remains unchanged as €1.4 billion with a deal commitment that the CapEx invested in (inaudible) goods is higher than the CapEx from material business.

But most important our commitment is attract and achieve a significant improvement on our free cash flow towards around breakeven before divestments. So and clearly our (inaudible) shows that cash and close performance has been and will be supported by a further ramp up in our cost saving programs.

And with that I would like to turn over to Guido.

Guido Kerkhoff

Thank you very much. I’d like to welcome you as well from my side and continue with the breakdown off the business as under EBIT. As mentioned we delivered on our targets in Q3, with an EBIT adjusted from continued operations at €332 million.

Components technologies quarter-on-quarter was up from €63 million to €81 million based on broad based sales and earnings improvements across virtually all operating units are also already benefiting from the successful structuring as things been stabilizes. Year-on-year EBIT was lower mainly due to the sale of Waupaca last year that was around €31 million.

Elevator, EBIT margin quarter-on-quarter and year-on-year up to €172 million and 11% in Q3 top-line and earnings growth being most pronounced in Asia Pacific margin improvement was backed by continuous implementation of performance measures in Q3 you might have seen with further restructuring expenses in Southern Europe so we saw with that €17 million of adjustments.

Industrial Solutions, quarter-on-quarter EBIT and margin temporarily down, however it was well in line with our target of above 10% and close to prior year quarter the effect was caused by Marine Systems while we had in Q2 a benefit from positive and periodic items due to the release of provisions for warranties and insurance.

So Q2 was slightly higher than expected because of these periodic effect the underlying [rate] was good and especially quarter-on-quarter EBIT adjusted and margin at resource technologies and process technologies went up.

Material services EBIT adjusted in a difficult environment year-on-year reflecting the lower prices and volumes however quarter-on-quarter we are slightly up to €62 million and higher volumes and management gains could compensate our price cost [raise] and thinking the current environment these are really strong figures here for material services.

Steel Europe quarter-on-quarter EBIT adjusted is up to 62 reflecting higher volumes shipments plus 1% production plus 4% and slightly higher average revenue per tonne increasing by 1% as well as slightly lower raw material cost. So we are clearly improving over Q2.

Corporate, quarter-on-quarter we improved by €27 million and especially due to sales tax repayment that was accounting for the vast majority of business unit. Steel Americas disclosed as discontinued operations, quarter-on-quarter and the EBIT we have higher that the growth is reflecting to a certain degree already temporary technical problems at blast furnace number 2 at CSA, but on the other hand we have to see that comparative on quarter the un-periodic tax effect that was benefiting Q2 where we had ICMS sales tax credits of around €100 million is (inaudible) the picture on the quarter-on-quarter operation.

Overall, if we take a look at the underlying performance throughout the last three quarters, we have to say that it's mainly operational on the same level slightly improving.

On CSA, blast furnace number two has gone back into operation and is currently in the ramp up phase with the temporarily increased fuel rate as specific coal assumption. So we are currently production level is already up to 5000 tons per day but still we have to further work on the ramp up to centralize it and get the PCI rate [down].

Steel USA it’s a continued challenging environment above all in the service center businesses, however we think pricing is troughed and over exposure is increasing. The performance in Q3 and in the first nine months was backed for our efficiency gains from our impact program 2015.

The nine months we have already realized €410 million savings, €140 of that are level in Q3, so we're well in line about full year targeted around €500 million. Consequent implementation of performance improvement measures continues across business areas, which is also reflected by further restructuring charges we've booked in Q3, it is an elevated further increasing restructuring assets in Southern Europe.

At Steel Europe we're progressing with a big reloaded program and the provisioning for the closure of Galmed, the galvanizing site in Spain has been realized in Q3.

With that I've come to the net loss that we had to report in our Q3 effect and let me start with a clear explanation, because that might surprise some of you, the income from continued operations is a negative, although we had an EBIT adjusted of €300 million and I would like to clearly state in the beginning that on normal terms, where we don't have our un-periodic items like I will explain now in detail the €332 run rate normally gets into -- translated into a positive income from continued operations. So to start with that one, what was the effect that really made it that loss on continued operations.

Special items at €103 million I already explained the components technologies, we had some impairments of lines that we have to close €37 million, Elevator Technology the restructuring was €17 million and on Steel Europe, the closing of Galmed was €37 million.

So mainly it was impairments taking place that and that has not led pretty cash payments. So cash performance was not distorted by that.

EBIT reported therefore comes in a €229 million, interest was €250 is a rather high number but you have to recognize that within interest figure, we include the out Outokumpu pro rata losses, we have to realize.

Outokumpu had a pretty bad quarter and the second quarter with €249 million loss in total and we have an equity pickup of €70 million in that order out of that due to our 29.9% stake that was double as much as in the previous quarter.

On taxes, we had a bit of a strange effect that we had to recognize 232 million expenses of taxes. As you might probably be aware, the first two quarters were positive on taxes at 66 million and the result, while we had to put 232 million in Q3 is related to the IAS 34 specific application method of the tax rate, you have to use for the full-year to do your calculation for the quarterly results. That means we have now for the nine month accumulated payments that we had realize or tax expenses of 166 million, and that net figure is your much more and better assumption of what can be expected for full-year figures.

As you can see out of the cumulative figure, 166, the appropriate portion for this quarter would have been something like 55 million, 60 million out of that, and we had to recognize 232. How does that come? If you have a pre-tax income for a group that is close to zero as it is in our assumptions and in our forecast internally but fluctuation of your tax rate is your change from positive to negative, changes dramatically and you definitely cannot distribute your expected yearly tax payments over the quarter, but IAS 34 requires that you use your tax rate to really input your tax expenses and therefore have highly volatile figures. This happened to other companies as well, but I can clearly assure you more than 108 million out of these 232 are really at very [early] effects. So you better can save for your models the nine months accumulated figure of 166 to predict what would be the outcome.

If we were to stay at the same tax expectations and forecast for the full year, Q4 would even be a positive tax income again. So this is really a distorted figure driven by IAS. Sorry for that, but normally 330 million, let me clearly highlight that one, as an EBIT figure leads us to positive income from continued operations. On some of that in the taxes 40 million includes with impairments of deferred tax assets we had to realize.

The equity on the other hand had two mainly negative effects; one was the net loss driven again as I already said by the strange tax accounting that we have to do and the higher other (inaudible) losses we had to realize and FOREX due to the Euro that was appreciating against U.S. dollar and Brazilian real, we had an FOREX losses of 325, but please keep in mind that not only equity went down, the balance sheet total and the net debt went down accordingly.

So the effect on the equity ratio was not as bad as on a first glance it look like. If you take the net loss and FOREX expenses in total, and just see that how much that effect would normally be on the balance sheet total, you would see an equity ratio that would have to go down by 2%-2.5%, overall it just went down to 1.5% that shows that this FOREX loss and equity has to be judged on a different way because the whole balance sheet in the currency changed as well. Unfortunately gearing well that went up to 185.7% and that means for the first time, we were breaking our gearing covenant, which I will come to later on.

Net financial debt stayed more or less on the same level, so it was just the equity driving up our gearing. We could keep the level at 5.3 billion and the strong [feeling] here was the free cash flow from continued operations before tax from divestments where we came out at 375 million positive in Q3 and that was such good number and we ahead of Q1 and Q2 that even the nine months for overall came out positive at 97 million overall. This was based on a solid positive cash flow contribution from all business areas and was supported by continued tight networking capital and CapEx management, CapEx was even below prior year figure.

Overall quarter-on-quarter therefore including free cash flow from discontinued operations where net financial debt stayed at the same. Regarding the negative free cash flow from discontinued operations, I would like to clearly highlight that the major part of the 197 negative free cash flow comes from the shortening of payment terms towards wireless or iron ore material in that quarter.

Given virtually flat net debt, we had a temporary increase as I already said of the gearing to 186%. Looking at the nine months 2013, net debt is reduced now by [4.5 billion] to 5.3 billion. This represents a major swing compared to more than 2 billion increase we had last year and reflects our structural optimization as well as a significantly reduced cash burn at our discontinued operations given the divestment of (inaudible) and overall decreasing cash-outs at Steel Americas.

With our stringent quarter-by-quarter cash management approach, we have successfully moved away from disproportionate year end optimization and we have not only eliminated the volatility but also continuously increase our efficiency. We have seen in fiscal Q1 virtually no build up on inventory and no reversal of receivables and payables. Therefore we have a continuous progress over the last six quarters which was reinforced by further improvement of operating networking capital in Q3.

If we take a bit more look into what we really did at our inventory management with the examples of our materials businesses. We see in [steel] inventories and the days of inventories, as well the steel product as well as the raw materials have gone down in days that we really need. Quarter-on-quarter inventories are now close historical low levels of Q4, ‘11 and ‘12 and they are year-on-year at $1.1 million tons. Same is true if we take a look at material services inventories. Throughout this year we have seen a further reduction in the DIOs, so the relative figure not only that absolute amount went down as the volumes overall slightly declined.

Even in Steel Americas, we could get our inventories is usually down by a 100,000 tons which was reflecting reduced flat inventory and production CSA, as well as still a better management of the inventories. Then I would like to come to the financial situations; liquidity of the group is well secured and the transformation of the group is based on solid financial grounds. We have available liquidity that is well above 7 billion which includes the 2.5 million syndicated loan facility, which has a covenant of maximum 150% net debt-to-total equity at fiscal year end, which we have now exceeded and let me clearly highlight this specify matures next year is currently renegotiated and so far, it is an undrawn and not used line.

In the closing of steel use, the Steel Americas and further pending M&A transaction, we expect the cash, the cash into significantly reduce our net debt and our gearing. Even with that our available liquidity even excluding cash end from M&A offers enough scope to cover all debt maturities, and if you compare to previous quarter, but let me say if you have seen that our $7.2 billion are lower than previous quarter, please do see that we had a debt repayment for 2012-‘13 of around 1 billion, where we now have store open maturities for this year of only 300; last quarter it was 1.3 billion.

Furthermore, please let me remind you to consider in your models that our 29.9% stake out in (Inaudible) as well as the 1.2 billion loan note are currently and have not been reflected in these figures. They are not deducted from our availabilities here. With our expectations for the full year 2012-‘13 as already mentioned, the nine months result of 802 million EBIT adjusted we are well in line to achieve our full year outlook of around 1 billion. This discounts for Q4, but at Components Technologies we expect a slight sequential decrease at Elevator and Industrial Solutions a sequential sales and earnings improvement; at Material Services, stable sales and earnings; at Steel Europe, slightly lower volumes and slightly lower average revenues performed. This is also affected by the increasing traction from our closure ramp up of our impacted 2014 program. So finally to sum it up, beyond Steel Americas, there is enough value upside and increased strategic flexibility for the company.

Claus Ehrenbeck

Thank you very much Heinrich and Guido. And operator, please take over for the Q&A session.

Question-and-Answer Session

Operator

(Operator Instructions). The first question comes from Michael Shillaker from Credit Suisse.

Michael Shillaker - Credit Suisse

A couple of questions for me if I may. Firstly, I guess, on Steel Americas, you are trying to sell the asset in an incredibly difficult time in the steel market. It is clearly in some more or less a steel market recession. And I guess there are two things. First of all, it's clearly a buyers market and I think that is making it difficult for you. So how long do you go on negotiating with one guy who clearly I think looks as though is making it difficult for you before you turn around and say actually it's not the sale and we're going to wait?

And the second thing is, how are you actually looking at the steel market itself in terms of the underlying value of the asset because you tried to sell asset in ‘02 or ‘03, you had no luck. If you tried to sell those asset in ‘04, ‘05 you’d had a lot of luck and maybe, just maybe, at this similar situation where the board should be discussing potentially just waiting and seeing and is that a discussion that’s going on at the moment?

The second question I got as it looks like Americas is delayed further. Obviously, the equity ratio has come down further and you talked several times about the sort of risk to the equity ratio and the need for capital increase. Are these two things still dependent on each other? Can you only do a capital increase with the sale of Americas and if you decided to go for capital increase without the sale of Americas, what I guess would be the fundamental equity story because it clearly would have changed a hell of a lot from we’ve sold Americas, this is the story. So actually we haven’t sold it, we’re not sure if and when we are going to sell it, but this is the story. So those I guess the three key questions.

Guido Kerkhoff

Yeah. Mike let me start with the Americas. As we have clearly stated, we are not just talking to one guy, we are entertaining discussion with other parties as well in our negotiations. And yes, what is clearly important for us is that we keep track of the interest of the company and the diligence in this project and not do a fire sale. We have always said we are not in a fire sale mode and we won't do that. We will always thought we are aiming for a solution for both plans and we are still on a good track and we are working on it very diligently and when it get it done.

The steel market overall clearly is not in the best situation, it could be in. On the other hand, you see in certain areas that we probably have seen the trust and you see some signals that could at least as you performed that further deterioration might not be there. So let us continue on that one, and do our work diligently and then we see what we got.

Heinrich Hiesinger

Yeah, Mike, going forward definitely capital increases still an option which we keep and also the sale of Steel Americas is an important element of strategy fit forward, it’s not the only element and the one I think that we have demonstrated strongly is the operating performance in Q3. But one is clear for the success of transformation strategically forward, this transformation depends ultimately on the confidence of our key stakeholder groups, which has found financial position of the company is a key requirement.

So (inaudible) signal that the reinforcement of our positional strength included an undisputed excessive capital market would be required than we would really take an appropriate approach anything interesting of our shareholders and those of our key stakeholders success particularly important customers. And I do believe that definitely as is there if we can combine those measures it would be an easier but also the success, the upward trend on all operational indicators in all business areas is a convincing story which does not necessary means that both decisions need to be coupled.

Michael Shillaker - Credit Suisse

Okay, that’s great. And sorry just back to the first question, I understand you are absolutely your unwillingness to fix deadlines around reporting dates which is absolutely clear enough, but have you set formal deadline facility in the Americas because it does feel as though as going from quarter-to-quarter and we are nearly there but we are not quite there and we are nearly there. So is there a deadline that you actually feel where you have to get this done or walk away?

Heinrich Hiesinger

No, it doesn’t make sense to set a deadline. I think for us and we do not expect anything but for us it’s more do we see progress, as long as we see progress towards the successful end we are ready to invest, so it’s not a time frame, it’s really we just decide on that progress is visible or not.

Michael Shillaker - Credit Suisse

Okay. Thanks very much for the answers. Thank you.

Operator

Your next question comes from Alexander (inaudible) from JPMorgan.

Unidentified Speaker

Good afternoon. Just a couple of questions. First one is still of course on Steel Americas, you are basically expecting that the disposal of Steel America will significantly reduce the level of gearing at the moment, I mean these of course are going to place the cash component, I mean toward this kind of idea you might be having some kind of data and at the moment that you feel basically saying that you expect a significant decrease of the level of debt. So you should get at least the number to make this kind of statement?

Then I mean interest partially, I mean is that going to be intriguing situation because of course you have the leading [EBIT], but then I mean you are exploiting all the potential outcome and just to got out of the business at the moment. Is on the table of your idea, I mean the consideration that you might be keeping these assets for example because if you just go back to a couple of months ago and we see basically underlying signs on the economy strengthening further, I mean there is a significant improvement in terms EBIT perform, this of course is not something that I am expecting you to do, but I mean to see U.S. price is $100 a tonne and also some advantage in terms of export from Brazil because of the valuation of the currency, then they are going to have the kind of the negative impact in translation effect.

How does this whole play, I mean in terms of your consideration and in terms of your possibility to the side for example for the partial sale or maybe going to kind of joint ventures in Brazil and basically start kind of supply agreement, offtake agreement with one of the potential partners involved because my question is how you can actually make a statement where you see the cash component significant reducing your level of gearing if at the end you basically feel going to impact negotiation?

And the second the question is of course is on the automotive market in European space, if you see any sign or recall very basically from the draft in H1 kind of 2013, what kind of expectation you have towards year end in terms of underlying demand come up?

Guido Kerkhoff

Yeah, let me take it Alexander, on the Americas the cash improvement is definitely important for the gearing and this is what we are heading for and this is what we are going for. This is what we have constantly stated throughout the whole process so far. And therefore, I mean, all the details and all the updates we gave, yes Brazilian real was devalued. So therefore that is helpful in parts of the field, this all will be reflected in the transactions and higher considerations and what we do.

But again, we cannot comment them all the details and clearly like to highlight it when very advance negotiations and not talking to just one party with dealing better. We have also talks, I mean we are in talks with other interested parties and we remain confident on the deal overall and get it on. You had to wait for the time unfortunately, but you can be sure that we are watching out for everything that's happening. The automotive market in Europe is flattish, what we see but on lower levels.

Unidentified Analyst

Okay. Thank you very much.

Operator

Your next question comes from Neil Sampat from Nomura.

Neil Sampat - Nomura

I got a couple of questions. Firstly on the CapEx, it's looking like for the full year it will be more like a €1billion rather than the maximum 1.4 that you set out, could you just kind of form assist to what capital – it’s a CapEx you basically postponed. And which divisions those are falling and also if earnings rebound next year. It is a fair assumption that the CapEx will grow and along with that or is just any approach to cash flow management going forward?

Secondly on the dividend, I guess you made a decision on the full year result, but could you give kind of give us (inaudible) as to what require for instatement of the dividend?

Thirdly, on the CSA outage, I guess could you update us to whether that's impacted the specification process at all over the last couple of months. And then finally also on the CSA outage, I guess you've made the active decision not to take any further write-downs on the asset. Are you effectively saying that the outage hasn’t had any impact on value in terms of the negotiations you're having?

Heinrich Hiesinger

Let me start with the CapEx. Yes we have seen throughout the first three quarters, just slightly above $700 million but this is well in line with what you've seen in the previous year where we were more or less on the same level and you will see more or less same pattern as last year.

So Q4 is always bit more CapEx heavy than the other quarters. So you will see that again. Therefore I think the €1 billion Guesstimate is a bit too low. That's going to be higher and we will stay with a maximum of €1.4. We haven't really postponed things. We've clearly watched it, what can we do and how much do we really have to spend, how much can we get more efficiency out of it. So there is not a huge volume that we have postponed out of that. So pattern is like last year.

For next year, it's a bit too early. We haven't given out any guidance for next year. So far we will do it here but tight CapEx management will continue financial situation. It's not that strong. Same is true more or less of a dividend, we will not give any signal on the dividend right now. Dividend overall, you will always just in light of your cash flow and your cash position and your equity position and your income position that you will do, that will be the factors we will take a look in to when we have to decide for year-end.

Guido Kerkhoff

On blast furnace number 2 and on CSA, as you have seen there was not impairment overall. There are some cost related to it but it's a lower middle double-digit figure we see that we need to spend so far on the repair work of blast furnace number 2 and the lower effort that we have seen so far.

Heinrich Hiesinger

And the outage of blast furnace number 2 is not an [ordinary] the solidification process, because we have still by far enough volume out of last year and its number one, so it’s no distortion at that end.

Operator

Your next question comes from Carsten Riek from UBS. Please ask your question.

Carsten Riek - UBS

First question is on industrial solutions on the order intake you mentioned that it's just a normal pattern in the business, but could you just give us some kind of feeling, where could the orders come, go forward because it was quite at steep slump in order intake from roughly €1600 million to €780 million. At least is there anything to worry that we actually see order intake coming in lower also in the next quarter as compared to say of because that's the only thing I'm worried here.

On the Steel America, as you mentioned, the outage of blast furnace number two, could you give us a figure how much of this actually impacted, the third quarter results?

And finally over the weekend HKM, there was an accident I heard in one of the blast furnaces, was involved what is the current status there and could we expect an impact for ThyssenKrupp or is it actually nothing really serious? Thank you.

Heinrich Hiesinger

We are not concerned about let's say the most likely (inaudible) because you really need to understand that on accumulated figure, we really should could see a growth of 8% and if this is the nature of the business we had these outstanding orders driven by our fertilizer business in Q1 and also accumulation of a numbers of cement projects in Q2, which unfortunately could not see in Q3 and about the order background was definitely growing so the concern you do have that we really with the sales which we are right now let’s say reporting, we are diminishing and let’s say decreasing our backlog is not affected. So it’s on a contrary our backlog is growing especially in industrial solutions.

Carsten Riek - UBS

Thank you.

Heinrich Hiesinger

And maybe to add to that one, we had to do one correct in correlation with the Q2 effect as well. So the overall quarter-on-quarter change was not that big.

Carsten Riek - UBS

Okay. That makes it clear. Thank you.

Heinrich Hiesinger

So therefore we underline it was not that bad. On Americas so far in the third quarter we have not seen the lower middle double-digit figure the biggest part of it maybe one third of that has already occurred two thirds will come in the fourth quarter.

On HKM yes there were some thing we would lose something like 35,000 tonnes of production but the blast furnace was not affected it was just that something else broke down, it was not the blast furnace there's nothing wrong with the blast furnace. We just have 35,000 tonnes less production overall and it's a single digit effect for us.

Carsten Riek - UBS

Okay. Thank you very much.

Operator

Your next question comes from Jeff Largey from Macquarie. Please ask your question.

Jeff Largey - Macquarie

Yeah, hi good evening. My first question is just on the covenant I recognize it applies to a facility that’s been undrawn but I just wanted to clarify there will be a waiver negotiated or there has been a waiver negotiated and if maybe you could give a sense of what this waiver would look like in terms of timeframe or would bank simply just basically remove it from the facility itself?

Heinrich Hiesinger

Yeah on the covenant. The covenant itself a calculation within our syndicated loan, it’s just done one yearend figures as we cannot exclude then we will break it for year end as well. We will now contract to banks this €2.5 billion line is undrawn as you clearly said, and it ends next year. So we are already in negotiations with the banks on a renewal of it and that will be ongoing, we the outcome will be remains to be seen.

Jeff Largey - Macquarie

Okay, thanks. And just second question, it's on components technology and I think you have did little bit about to the conditions of the European auto market but I wanted to go to one of your comments you made on the mining business and the impact of decline in mining CapEx, were you saying that basically the aftermarket would be able to offset the decline and say new installations or just kind of soften it and really do you think we've seen in that business in particular the worse of the CapEx mining CapEx slowdown come through?

Heinrich Hiesinger

When I made my statement, I was just describing the business of industrial solutions, we do not expect as let's say our component technology does and have a significant service business that to say the construction and mining sector is decrease in our component technology can be offset after sales business though it can only be softened. So statement was definitely true for industrial solutions and was not reflecting the let's say components technology.

Jeff Largey - Macquarie

Sorry, I misspoke I meant the industrial solution, and that is great, thanks for the clarification?

Operator

Your next question comes from Rochus Brauneiser from Kepler.

Rochus Brauneiser - Kepler

Hello, everybody. And one question on the Steel Americas impairment and could you elaborate how this breaks up the two assets in brazil and Alabama? And just for clarification, at the point where you're standing in terms of negotiations and of your negotiation and would you still accept on the further impairment on to asset to make a deal work or was that the definitely the last cut in terms of the devaluation of the asset.

And based on what we could read in the press over the last couple of days and weeks and this was is intend [to shine] and is there any realistic change that you are splitting up the as obviously the devaluation of the CSA as it seems to be more problematic as of today and maybe carrying on with it and developing might return fair value than executing this now?

And in terms of the [economic speech], are there any, is there any different personnel on the talks and maybe because of pressure from banks, is there any changing on the view on the Steel Europe as they had several discussions in the phrase that it could be probably the package which is now being build. I know this $500 million is on the way and as you benefit from this only be visible in the next three years and we are probably at the trough of the steel cycle. So is there any changing at all or the change in the view in the euro we look at Steel Europe as (inaudible).

And thirdly on the working capital, you were still working very effectively and optimizing your working capital there, what is your view on the Steel Europe business right now, what is the order backlog doing in for the third quarter, how this is comparing to previous year and how do you see demand on all distributors they're shorting stock levels, because some of been betting on further fall in steel prices over the summer.

Is there any risk that you might miss any opportunity if the volumes are picking up in the next quarters?

Heinrich Hiesinger

Let me just start with the let's say the media rumors about a possible consideration of Steel Europe [nonsense]. We do not have any intentional plan and just look on the performance. You know, still it's not where we want it to be, but if you look on the competitive landscape with our 62 million and the cash performance which is a strongly positive one, this is in a competitive environment still delivering on a better end and before Guido goes in the details, in the last four to five months, every week you could read rumors about what is the situation and what is the concept and the deal structure of Steel America. We did never comment and we will not comment until we really are at a solution. I hope you will understand this because this is definitely partly media and partly tactics, lets say, we work on content and not on rumors via media.

Guido Kerkhoff

Jason, coming to the impairment question you had, this quarter there was not impairment on the Americas. We had one on the second quarter of 680 million a bit more, which was broken down then and we had no impairment which clearly shows that we obviously could demonstrates to our orders is that the current values that we do have on our hand is €3.3 billion is something that is realizable and that is the value that can be used. On our covenant breach of Steel Europe, Heinrich was already mentioning, there is no further pressure from the covenant breach on transaction that we had to do. Networking capital, yes, we reduced and we increased performance within Steel Europe, but we won't miss because out of that, on an increasing demand that might be up there, yes, inventory levels are low. Currently everybody was very cautious on that one. So there is no risk in inventory levels but we will not miss opportunities, definitely not.

Operator

Next question comes from Hermann Reith from BHF-Bank. Please ask your question.

Hermann Reith - BHF-Bank

So you indicated that to the post decision that means the sale of Steel Americas and potential capital increase are not decoupled. Can you assume that you now follow both decisions independently? And the second question is regarding the performance of steel in Europe in the fourth quarter, can we assume that despite a slightly lower volumes and average revenues, will their business area would at least be even?

Heinrich Hiesinger

Definitely, we know that the combination of sale of Americas and the decision on equity let say is the easy way of doing, but as I said correctly, we also need to understand that also the other elements of the strategic way forward really requires the trust and the confidence of our key stakeholder. So in parallel on forcing the completion of the deals in Steel Americas we really need to watch carefully those stakeholders, and really if we were to receive a signal that they are raising doubts on our financial position and our capability to have undisputed access to the capital market, then we would really take appropriate steps independent of Americas, but even if we are doing those steps we will always consider a balanced approach between the interest of our shareholders and other stakeholders like customers and bank.

Hermann Reith - BHF-Bank

And did you receive such a mistrust?

Heinrich Hiesinger

We had been certain (inaudible) selected in our order intake or our third party, definitely our customers have automatic running risk system, they just take the figure as they are from our balance sheet and naturally there is picking up yellow light. So far we went to discussion we could really explain and the most convincing story was our comprehensive strategic way forward and the progress we could show on the operative side and also our investments in R&D and in CapEx supporting our customers’ project. So and then they were convinced and said okay let’s say from a pure mechanics thing, your figures are definitely in yellow, but with the full understanding on what you are doing, cleaning up the past and driving into the future, we trust you and we give you the orders. But definitely we had to go into personal talks, but so far no negative impact at all on our order intake side.

Hermann Reith - BHF-Bank

If I could follow-up on that item. After the changes Mr. Beitz is dead now and Mr. Cromme had to leave the supervisory board. Have the conviction that the supervisory board and the foundation made up their minds regarding the potential capital increase?

Heinrich Hiesinger

No first of all I think it’s up to the management board to make up the mind and go with the proposal to the supervisory board, and so far in all the elements of the strategic way forward we had substance and content and this allowed the supervisory board based on facts to support our proposal. So far we did not go in with the proposal and therefore I believe the supervisory board did not have content to derive to a specific let’s say opinion.

Guido Kerkhoff

Yeah. And let me add on Steel Europe, what were the targets for Q4. As we clearly said and if you take a look back at the last three quarters within this difficult cycle we haven’t been negative on EBIT adjusted so far and with that you can see what our intention definitely for Q4 is.

Hermann Reith - BHF-Bank

Okay, so the guidance is really articulate?

Heinrich Hiesinger

The guidance is secured.

Operator

Your next question comes from Bastian Synagowitz from Deutsche Bank. Please ask your question.

Bastian Synagowitz - Deutsche Bank

Just one question less from my side, and that falls on the cash flow of Steel Americas. So I was a little bit surprised because I saw and I think you mentioned that the CapEx which are required for (inaudible) is over into the last quarter but the operating cash flow was quite negative and I understood that the FX from last [years’] number towards the mid two digit negative impact, and I guess you mentioned also in the chart, the chart shows that the working capital has been lowered. So why has the operating cash flow actually gone up so much and what would be good underlying estimate for the fourth quarter piece, thank you?

Guido Kerkhoff

A big effect was that the payment to (inaudible) for the iron ore shortened. We had for a pretty long period of time, we had an extension of payment terms and throughout this year they are reduced so therefore they down and therefore we have either 197 you see there a little of three digit number out of that so almost half of it, a bit more than half of it was due to that effect, so therefore it was a much lower figure. You will see a smaller figure in Q4 with that as well, and that’s it.

Operator

Your next question comes from Sylvain Brunet from Exane BNP Paribas. Please ask your question.

Sylain Brunet – Exane BNP Paribas

First one on Steel Americas, could you give us the latest update on the book value we should use at the ThyssenKrupp share level and my second question relates to the (Inaudible) terms. Is there any circumstance under which the current terms impacting potentially the loan note also could be renegotiated given the tough market situation in Stainless and issues to (inaudible). And my last question was really to get to some sort of the contribution of the marine business in Q3. Thank you

Guido Kerkhoff

Let me start on the book value, a 100% is 3.3 billion that we currently have for the Americas. The loan notes Stainless Steel market is difficult yet, but we currently do not see any indication why we should renegotiate it and we haven't been approached on that one. So, (inaudible) or whoever is just imputing our interest and adding that up to the loan note it's probably they don’t have to pay that.

Heinrich Hiesinger

Yeah. On the contribution on the EBIT side in our marine business was around 20 million out of the total.

Sylain Brunet – Exane BNP Paribas

On the guidance just finally as you were commenting that you feel pretty confident there, because at kind of Q4 this would imply a 30%-40% decline sequentially. This is not what you will describe so far that’s the right way to redo guidance

Heinrich Hiesinger

I think quite a number of companies are outright now and reduce the guidance. I think for us, it's good enough if we just confirm them and they are well on track.

Operator

Your next question comes from Alexander Hauenstein from MainFirst Bank. Please ask your question.

Alexander Hauenstein - MainFirst Bank

Two questions mainly, first of all regarding the auto cartel issue and the investigation seems to be ongoing, but given that they didn’t find anything, how high are the chances in your view that there won't be any issue at all at the end?

And the second question, I am just assuming you would not be able to sell Steel America and you will need to reallocate that from discontinued line in to EBIT again, and I understand you would also need to add expected depreciation, right. So my question is, A, would such a move be done respectively for the past quarters as well, and B, would additional depreciation hit in to equity? Thank you.

Heinrich Hiesinger

Let me just think the issue of the cartel. I think our statement was that out of the amnesty program, we did not get any findings or hint which would support the allegation made in the order cartel, but you still need to consider that investigation of the cartel authority is let’s say uncompleted and therefore we stated in our report that out of these non-completed investigation of the cartel (inaudible) significant risk for the company out of their allegation can still not be denied.

Guido Kerkhoff

On Steel Americas, let me start with, we're engaged in very advanced negotiations with a leading bidder for the sale and in addition we're in talks with other interested parties. On your technical questions, once and then just to talk, therefore in general, if you go back from discontinued operations to continued operations, yes you take the whole asset back, including depreciation.

On the other hand, what you have to be take in to account is that we already did significant impairments over the last quarters. And if you go back you then have to compare the value of your discounted cash flow, what you see in the upcoming years compared to the book value that you have and therefore it does not have automatically to these to a write-down of the depreciation you have not allocated over the past. So therefore this doesn’t have to be a hit in your equity just theoretically, so be clear on that one.

Alexander Hauenstein - MainFirst Bank

Yeah. Okay, thank you, that’s very helpful.

Operator

Your next question comes from Cedar Ekblom from Bank of America.

Cedar Ekblom - Bank of America

Thanks very much. A few follow-up questions. Firstly, is there a timeframe within which you need to sale Steel Americas for it not to be classified as a continuing operation again, so do you have 12 months or 24 months or whatever, or is it an open ended situation as long as you are having discussions with the potential buyer if it’s discontinued business? That’s number one.

Number two we obviously saw quite a big negative free cash flow number for this business this year so far we are on over €600 million, can you give us an understanding of what needs to be done for this business to actually turn free cash flow positive and waiting for the market to improve I think is fine, but is a CapEx that needs to be invested in these business in order for seems to be a viable model going forward?

Then thirdly, you had a quarter-on-quarter weaker earnings performance for Steel Americas we know why because of the blast furnace in Brazil, in terms of the fuel rates you had problems in Brazil with the fuel rates for sometime even before we have those outage of blast furnace too, so I’d like to get an understanding of when you actually think fuel rates in Brazil will be improving?

And then a technical question in terms of why you haven’t had an impairment, I understand that say you’ve had discussion with your auditors and they're happy with your fair value. I assume the auditors are [purvey] to the [bids] that have been put on the table. The fact that the deal hasn’t been done based on those bids put on the table makes me think that that’s maybe not an estimate of fair value just at face value?

So can you just sort of discuss the conversation that you had with an auditor you haven’t done deal, bids are on the table, why is there no more impairment? Thank you.

Heinrich Hiesinger

Let me just start with the simple friendly equation I think we had quite a stable PCI rate also on our blast furnace member 2 of 100 kilogram before we came in these unstable consideration. So it was actually running quite stable for a number of months. So not a general issue, it’s not now an issue in the ramp up of the blast furnace but we do believe that we can come back quite soon in a rate of above 100 kilogram.

Guido Kerkhoff

And let me come back to the free cash flow question you had on the Americas, yes we are at around $600 but as I said the volume impact was pretty strong in the second quarter and third quarter. We already had an impact in the second and we will have in the third. So overall out of 600 you see there is more than 200 coming out of shortening of the payment terms there.

On the other hand what we see is the improvement for Brazil and for the overall business case that has already been mentioned here on the call as well is that forex so the Brazilian real is going down which is helpful in the case overall the cost base over there in Brazil is reducing its outflow for the asset in Brazil overall to be more competitive landing flat to the U.S.

In the U.S., on the other hand to improve the case is as well we're in the older and in the premium sector not as much as we intend to be but it has to come overtime that’s what we always said but if we going along with moving into higher grades auto industry, parts and chips, having higher volumes in there, there is upside in the case overall and on the cost factors as you had seen on the (PCI) rate. There is things that can be done together and overall free cash flow positive.

And the timeframe for having something and discontinued operation and IFRS, you have the general assumption that you can do it for about a years but can be extended and you can extend it as well as you are confident negotiations have bids on the table and are entertaining discussions that can be successful as long then you can extend the period which clearly as we demonstrated, there is a way to get it done.

And the auditors have to definitely disclose whatever you have and where the current standing of your negotiations is and then you talk what you think you can achieve and everything that has to be considered and the contract has to be taken into account. They do definitely ask detailed questions and they do have experts on such deals.

Operator

Your next question comes from (inaudible) please ask your question.

Unidentified Analyst

Good evening, gentlemen. I have a quick question regarding Q3 as of the date actually, guess it is back to me because it was a significant bit that we are on guidance, what you gave in May, I was just wondering what (inaudible) prices, (inaudible) strongly considering?

Claus Ehrenbeck

Hello, this is Claus speaking, could you please repeat the beginning of your question, it was something difficult to understand here, there's a problem with connection properly.

Unidentified Analyst

All right, if you just to understand were you have been taken by surprise that you have the (inaudible) guidance because you gave it mid May? And the business is quite significant, so just wanted to understand what's the division that's of in very good compared with your own predictions?

Guido Kerkhoff

Yeah. As you can see Steel Europe was definitely in a weaker environment overall in the market and the 62 as we have clearly said it's a strong figure. We have seen the margin improvement to 11% on Elevator which is strong as well. So we have seen a material services they could keep the level and even increase EBITDA result in a weaker environment as well.

So once you get the guidance and when we said the yes the second half has to be a bit stronger than the first half, we already saw. And one of the barrier, by the end of the day we have to say that throughout the business areas, all of them and the some I mentioned here is specifically we have to high and what we expected. So overall it was a good quarter and we do see that the performance orientation in this company is really moving forward.

Operator

Your next question comes from Tim Huff from RBC. Please ask your question.

Tim Huff - RBC

Yes, thank you. Just one question, sort of on the back of that, your cost savings in the quarter seem to come in a little bit ahead of our expectations which is good news, much in Steel Europe. Are you finding is you are digging into the cost measures across the different divisions that you're able to deliver more in the near term consistently going into next year or you can still stake with the frame work of 500, 750 for the next couple of years.

Guido Kerkhoff

The more we move along with our cost saving potentials and to more we dig into the details, we find enough opportunity so far. So and we knew that really see within the divisions and in the business areas that the idea of doing it and getting the projects done, doing benchmarking and use the methodologies we were introducing here, not really I guess, across through all the business areas and they are looking for on their own and doing. So we have positive momentum in it.

So therefore we do see, as you see, the full ten, close to the 500 that we want to achieve this year. We're confident that we can find a way to the 750, 750.

I think one important step also here is that from the year, we were really trying also our team leaders is that in this significant cost savings or restructuring programs which you could have so far, we could always find an agreement with the unions in all the countries we're doing and I think this is also one of the reasons with these, let's say, solutions capability that different stakeholders while we are slightly ahead of our original plan.

Operator

The next question comes from Christian Obst from Baader Bank. Please ask your question.

Christian Obst - Baader Bank

Thank you. First, on portfolio management, can you give us the give other guidance concerning the ongoing negotiations that you currently have, not for Steel Americas but for any other plants you are selling and what you intend to sell in the coming quarters. Then the impact on from Tailored Blanks if you can expect in the first quarter. Then considering the rail cartel, can you give us from kind of a timeframe for the end of the negotiations for Deutsche Bank and some other companies there?

And what is your currently your worst case or is the upper end of what can you expect, what you have to pay.

Then considering cost of impact, for the impact, what is the timeframe for the negotiations with the unions and when can we hear, say more from that and what is then the upper end for the cost you are expecting there and the last one is on elevator; so the margin is slipping up as well step by step a bit. Are we on a way to the 15% or is that some kind of slow hanging fruit and further improvement will be much more difficult? Thank you.

Guido Kerkhoff

Let me start may be with your portfolio questions, as we have fairly outlined on page number two, the projects that are ongoing and then we have on our, than we’ve officially stated here is [Brokers], Steel Americas, Electric Steel and railway and construction. But we are starting electrical steel grain oriented on the Taylor plants transaction we have now disclosed the figures move until here, so you probably may be able to recognize in Q4, what the impacts were but we clearly will not state the figures here, but it was positive on the cash flow and the equity…

Heinrich Hiesinger

Coming on to capitalization engagement with Deutsche Bank and first of all as far as the [cartel] authority is concerned let say the issue is settled now. When we made the announcement on our compliance issues on 27th of July, we made reference to (inaudible) a lot of others, and we also made a reference on the negotiation with the Deutsche Bank and the sentence which we used was agreed prior to our announcement at Deutsche Bank where it was said, we are in very constructive discussions to finding the appropriate solutions. We will not give any more hints on what might be the range of the settlement. As both parties have the understanding that we are on lets a way which makes sense.

Guido Kerkhoff

On the impact program overall the timeframe for agreements with the union, there are several agreements that has to be done, so overtime they will come in. We are good in constructed negotiations but this is not only a program but is affecting certain parts of the company in Germany; the big part is Germany but it’s different parts there as well and international parts as well. So there is not the one big thing with the unions that will come. There are bigger parts in Germany that will come later on and then we will publish accordingly what the cost base on that will be for it.

Heinrich Hiesinger

I think (inaudible) very helpful here and this is different to other companies. We never give a figure what is the target to reduce workforce, because we are not interested here to achieve a figure in workforce reduction, we are interested to achieve a figure on savings and we tackle it let’s say business by business and therefore we negotiated business by business and we found out that these content driven way also allows to be in a constructive – not in an easy but in a constructive dialog with the union.

Christian Obst - Baader Bank

Yeah of course and they haven’t asked for the workforce, because the amount of the workforce maybe has got for the cost for the related cost and maybe it’s more interesting to bring this cost into the next business year and to wait a little bit longer because of the currently spread balance sheet and the same is true then for the negotiations with Deutsche Bank?

Guido Kerkhoff

What we definitely want to do is as we clearly have said here, we want to continue with our strategy way forward and get it done. And I think in the past really the company has reduced programs whenever financial constraints were there and therefore we want to continue with that one and we really want to get it done. Yes the financial situation is not that easy, so we will have to find a way of balancing it the right way, but we definitely want to continue and not to slow down on our strategic way forward that is very clear let me clearly highlight that. We want to continue and that has to be done, that has been part of the consideration timing that’s given on the question of capital increases as well. We clearly have the target to continue on that one.

Heinrich Hiesinger

And that’s actually necessary because also we see some tremendous progress in Q3, we are not at the level where we want to be, so waiting doesn’t make it’s not an option.

Christian Obst - Baader Bank

Yes, of course.

Guido Kerkhoff

We now reach the level of 11% and we are seeing continuous improvements through the quarter in this year, so we are on our way. As I always said from the beginning, the 15% is good but what I want to see this continuous improvement, and as you will see that or just getting it very tough for the next quarter. So I think continuous improvement like we are seeing so far and continue and will continue.

Claus Ehrenbeck

Hey, this is again Claus speaking. I think with these comments from Guido and Heinrich we have reached the end of the conference call, and we would like to thank you very much for participating in the call and for asking all the interesting questions. If you might have any further question after the conference call. As I mentioned already the entire IR team and myself, we are extremely happy and more than happy to discuss things further with you today or tomorrow or in the following days, and we look very much forward to speaking with you again and wishing now a nice evening. Thank you very much and bye-bye.

Operator

That concludes our conference for today. Thank you for participating. You may all disconnect.

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