Morning, welcome to our second quarter investor meeting, broadcast to you live from our headquarters in Iceland. My name is Tinna Molphy, and I will moderate today's meeting. I'm of course joined by CEO Árni Oddur Þórðarson and COO Linda Jónsdóttir, who will go over the financial results and the revised EBIT guidance and some key business highlights. Stacey Katz, our CFO, had a beautiful baby girl in May, and she will be joining us here for Q3 in November. Having said all that, we will of course then conclude with Q&A and, if you would like to ask a question, please do so via the conference call or you can email us at ir@marel.com. Having said that, I would like to hand over to Árni Oddur Þórðarson, CEO. Yeah. Good morning and welcome to this second quarter 2022 results. Our results are mixed this time. We are having, on one hand, a record order intake, even though we raised prices very actively in March, in April and the beginning of the year. Raising the prices there underpin our strong brand position, our pioneering solution, and we have the solutions for the market. However, it as well in the power of hindsight, it shows how late we were last year. That is hurting our operating profits this time. It's unacceptable, the 6% profits in the EBIT, and we have taken already actions to improve the profitability going forward. However, it's as well mixture of good cost and bad cost in this quarter. We have been very proactive in moving us forward. We ramped up the sales and marketing activities, our sales force, our service field force out in all regions. This is costing short- term that our sales and marketing cost is 14%. We will see immediate lowering of sales and marketing cost in the coming quarters. However, we would never have engaged so well with customers out in the field, securing our market position and recurring over 40% service revenues, service and software revenues. That is very, very valuable coming in. EUR 472 million in order intake is skyrocketing in poultry. That's pretty clear, and in fish as well, while it's softer in meat. We are in an inflationary environment. We are talking a lot about sustainability as well, and customers are clearly shifting, dining in instead of dining out, moving into poultry, for instance, that is having a more favorable feed conversion ratios et c. We are in portfolio management as well here in Marel, and we moved into, even though we have had an eye on it from 2016, into the acquisition of Wenger. Plant-based is on the run, and as well the pet food market is a very lucrative, maybe surprisingly as well, how much complementary product portfolio we have there. We are balancing out, and we all need to have the center point of the plate, the proteins, and now we have the full array. Let's dive into as well where we were proactive. It was sales and marketing. We invested as well and decided that maybe you believe it's strange when we saw where we were heading in the gross margin. We decided to invest in poultry, meat and fish in the trade shows and demonstrate our leadership in the industry. We have not been meeting so actively our customers in recent two years. We decided to meet them, explain all our pioneering solutions, and we were displaying 26 new solutions there. We have been having continuous innovation. I'm very proud to see how much we are pumping out despite we had some disruption in the pandemic, 26 new solution, and even proud that we are at strategic level, not above that in the innovation. You know, discussion about the global supply chain. Missing parts or availability of parts is a big matter here. However, I don't want to blame it on the global supply chain, all of them. Every single company, not only our customers, as you see in the order intake by us, need to invest, need to change the flow and the flex in the business. We decided to move forward in this quarter in splitting the warehouses for manufacturing and spare parts in USA. That is approximately up to all of those infrastructure projects, 2% non-recurring. However, we don't want to classify it specially in our accounts because we will be sailing the boat until in next quarters and repairing the boat at the same time and even fishing at the same time. There is a non-recurring element there. Good cost is approximately 3%-4% in this quarter that we are moving forward proactively. If we then go a little bit here, sorry, I flipped two slides, and go here then in the operating profit, and then I will go back to the industries. However, we are not always proactive enough. Like I said, in the pricing, we were too reactive last year. That's with the power of hindsight, we see that clearly, and we see as well when we go to fair prices. I'm not saying that we are overpricing. Fair prices by actively raising it at the beginning of this year, the order intake accelerates. Clearly we should have done it six, nine months earlier. That would have changed the game by 2.5% in this quarter that we are reporting now. There is availability of parts ramping up as well as the volume, and you may be surprised when you see all this increased double-digit, high double-digit increase in revenues that we are not satisfied. If you compare the book-to-bill and our order intake to revenues, you could assume that on average we have in recent three to four quarters order intake. The average of that should be our revenue base. We are missing around EUR 20 million in revenues in this quarter. That coverage, when you have resourced that, you never cover your fixed cost, but the fixed and variable cost is as well, and it's very sensitive when you don't cover it. Some of it is out of our control. Even though it's great suppliers, they missed the beat. We have quite extensive, fully finished standard equipment that is missing one or two semiconductors or screens for delivery. We are seeing some easing here in the market. We are not yet out of the woods, but we are having SWAT teams around those suppliers, and we are seeing like half of them showing much more visibility in delivering in the coming quarters. Let's go through the industry mix. Starting with the poultry, the poultry is clearly exceeding in order intake than we expected last year, and the pipeline is good as well. There are various reasons for that, but the main reason is the convenience. People are, if nothing is new under the sun, and especially if we paint out a recession scenario, going to dine in more. We all knew got acquainted with dining in in the pandemic, and the first thing that people do is dining in. As well do we switch between the proteins, and it's convenient, it is affordable, and it's sustainable. 11% EBIT is clearly below where we are used to. I'm very, very convinced that we will see a gradual ramp up now. We have it in our muscle memory. We have it how to do it. Standardization, modularization is very high in poultry. While we are targeting 50% of recurring revenues, 26% for total Marel, we are pretty much higher than that in poultry, and we will be back on track in 18% EBIT in poultry. Maybe the nice thing for the industry mix is that poultry will be bigger piece of the cake than we previously expected in back end of 2023. Moving on the left side in the fish industry. We are seeing this year order intake at a level that we have not seen before. Convenience and health consciousness is there, and we should not bluff ourselves. There is no import of Russian fish as well, and Iceland, Scotland, Norway is equal in size as Russia. So there is an investment need, but salmon is on the plate again. Sushi is on the plate again, and there is a lot of dynamics there. The operating cost has been very high in fish compared to gross profits. We said we are not going to give this in. We will see order intake increasing. However, now we are as well taking some action to streamline out duplication of cost in back office sales in the regions vis-à-vis the business division. It's a pretty clear path in fish on how we will recover the EBIT. In the meat segment, unfortunately, we are here below zero in EBIT. We are below our expectation, clearly as well. We need to take actions. That's pretty clear. We are having the largest install base in the pork industry. In the primary pork, you have read all in the papers the bottlenecks in the pork industry. We need to get a seamless flow. We need to work closer with our customer and deliver because we have the best solution. However, in our environment now, in the inflationary environment, minced beef, minced meat is on the plate, and we have fabulous solutions that I'm not satisfied with seeing the sales numbers in this quarter. We have the solution, fat-lean ratio, traceability, food safety, and et c. Now we need the customer centricity, and we need to deliver to shareholders the sales and the profits in the meat like in the other industry. To highlight next quarter, we will have the fourth pillar, and to give you the pro forma numbers in Wenger in euros, it's EUR 45 million in revenues and above 40% EBIT, adjusted for PPA. Let's go, and Linda, this is unusual how long I am. Before you go and go into details in the financials, but we discussed that the EBIT bridge should be early on in this meeting. It's not nice to see the 6% EBIT. We are here in the same boat. Employees, team, shareholders, and many of us are as well shareholders. 6% EBIT is unacceptable even though I described that could cost 3%-4%. We took immediate actions to reduce the workforce by 5%. Waste material they already executed and the rest before year-end. I've got a lot of questions from analysts, board members, and investors. How are you going to ramp up revenues by reducing the workforce? Same question does Tesla get, same question get Ford Motor Company get, and same question get Microsoft. However, we have to bear in mind the change in the flow in recent years. We have been building up our infrastructure out in the regions and in the business division. We are building up shared services in Poland. We are when you are in that journey, building up duplication of resources. We are doing this in a structured way. To give you insight in the numbers as well, our salary cost as a percentage of revenues were 41% in first quarter. We have a clear view of taking that below 36% by increasing the volume, increasing the prices, and lowering the cost. It is higher of course EBIT, but as well it's more resilience in businesses. The cost of the middle management is not only salary cost. By having it leaner, we get better constructed discussion and decision. 1.5% will filter in here and be fully visible in first quarter next year. We have taken multiple price increases this year, but notably, we believe based on value-based pricing that we are fairly priced and as well it sounds like our customers believe it in conversation and in order intake. That will filter in 2% increase in EBIT. No effect nearly was in last quarter. Only few days in service. It takes eight weeks for service to filter in. It takes six months for standard equipment to filter in and 12 months for projects. This will filter now in. Maybe you are surprised to see price again. Here is a price cost. We have not yet done the value-based pricing on our unique product, service, and software offering. We have introduced 26 new products here in the market. Value-based pricing is as well we have been co-creating those products. We are now co-creating the service packages, and we have quite a lot to seek here. It's price cost. It's not only price. It is leakages in all companies. The freight leakages, and discounts, and customer not necessarily paying always what we have all agreed on, not due to willingness, it's due to discipline that we are increasing now in our operation. We have been analyzing those things with McKinsey now for eight weeks. We have detailed 10 streams plans to get this, and here we show three buckets where we are getting it. OpEx, productivity and efficiency. Shared services in Poland I mentioned. However, sales and marketing cost 14% to 12%, and our G&A is at 7.5%, and we are clear target to go below 6% there. You could ask now, are we double counting because cost reduction is lowering the OpEx. The OpEx takeout is here as well. No, we are not. We are going to take SG&A from 21% to 18% with volume, with price and cost takeout. We are not double counting here. It's 2% here coming in and straightforward to get the sales and marketing cost from 14% to 12%. Revenue ramp-up may be not the right word. It's revenue ramp-up compared to order book and balancing resources against revenue. Here are 3% in and missing 12% revenues in last quarter is as well missing EUR 12 million EBIT when you do it with so short notice. However, here we see efficiency coming in, and we took out and very difficult decision to take out 5% of the workforce. It's not an easy one, and we are working with the people here. Going forward, we are having 9%-11% turnover rate per year, meaning 15% turnover rate until end of next year. We are going to increase people less than the revenue increase. We need as well to be in portfolio management on our product and our people throughout this. The skill requirements are that we still need field service engineers, we still need more software people and et c. Even though it's difficult decision to reduce 5%, 95% of our people are with us. It's a people business that we are in here in Marel, both toward our customers and ourselves. We put a contingency in the plan. I saw some analyst saying maybe the management is losing the confidence. To underpin it, we are having 16% EBIT target internally in Marel. Experience has shown in a volatile market and et cetera, we have to have contingency. As well, we were missing the beat in meat, but however, this is a bridge from 6%. Missing the beat in meat and having more order intake in poultry has had flip sides as well. We will have bigger proportion from poultry. We will be pretty quick to 18% EBIT in poultry. Gradually can fluctuate between quarters, all the disclaimers. We need to focus on displaying, selling, installing the solutions that are needed in secondary meat. Over to you, Linda. Thank you, Árni, and good morning, everyone. I will go through the financial highlights of Q2 2022. It was like definitely a quarter that caused mixed feelings for us. You can see we have a record order intake of EUR 472 million, and there is clear demand for Marel products and solutions. We see that also in our pipeline, which is very strong both in poultry and fish, and softer in meat. We also see that like in the quarter, we finalized the acquisition of Valka, which will improve our quality of earnings going forward. It will be exciting to see that journey developing. We see revenues here at record levels as well, EUR 397 million. This is also including Valka, and we do see step-up in revenues, and you see that also here in the picture. They are trending up, but not enough, and not according to our plans, because we did have, as you remember, in 2021, we had quite a gap between the order intake growth and the revenue growth that we delivered. That's an area that we need to catch up on. Like, why are revenues not growing as planned? We have the parts availability issues. They are still hampering us in our operations. We have a very high attention on this. We are working with our suppliers. We are also working with our innovation team internally to solve those issues. We also see an imbalance between our own manufacturing sites that is causing inefficiency, impacting the quarter. Could we have done that better? I think it's fair that we also look ourselves in the mirror and think, like, how can we plan better ahead to deliver more stable and balanced results? We are expecting revenues to gradually grow in the coming quarters and we do have high focus on that. That will also mean then better coverage of cost that we have already taken, for example, with increased market coverage that has been returning us a higher order intake, as you see in the trends. Including Valka, we have an order book of EUR 775 million. This is a record level for Marel, the highest that we have had, which should also enable us to plan better ahead. Looking at the gross profit in the quarter, it's at a level of 33.5%, which is low. We have taken necessary pricing actions now, but as Árni pointed out, we did it too late. We saw cost increases at a very high scale, and we took price increases too late in the process. There is a lag between the cost increase and the price increases implemented. We will see this continuing to filter through in the coming quarters. It does impact negatively the gross profit in this quarter. We also have the supply chain inefficiencies that's impacting us negatively. We also have improvement projects ongoing that are going well. For example, that Árni mentioned, the end-to-end spare parts journey. Big milestones in the U.S. in this project this quarter. Again, impacting with some one-off cost on the gross profit side. Meat also negatively impacting the results in the quarter with negative EBIT. Like, we were quite active in the quarter, like, with our customers. We have had, like, limited customer-facing activities now during the pandemic. During the quarter, we came out with, like, very interesting innovative solutions. We had great exhibitions, and that is also impacting our S&M cost in the quarter. You can see that picking up quite a lot. Overall, our focus now is on balancing the operations. I mean, you see that EBIT is at a level of 6.3%. That's clearly below our targets. As you saw in the profit warning last week, it's also below our expectations. There is high focus on getting a better balance here. We are taking actions, cutting part of our workforce in the coming period. That, of course, as Árni pointed out, is a difficult step, but needed at this point in time to get a better balance. We have a revised target of 14%-16% EBIT in end of 2023. Like all steps we will be taking is towards that target. Operating cash flow in the quarter around EUR 18 million. You can see here in the picture that the free cash flow is negative. This impacted overall the cash flow by the results that we see. It's also impacted by continued increase in inventories, and we also continue investing in the business. Leverage at a level of 3.8 x net debt to EBITDA, impacted by the acquisition of Valka, like our targeted capital structure is of course between 2x-3x net debt to EBITDA, so we are above that at the moment. The focus will be on getting to the targeted level in the coming periods, and there we feel just confident about our plans. There are like, as I said, mixed feelings. There are like definitely areas where we can improve. We need to be sharper on the gap between cost increases and price increases. We have continued supply chain disruption. We have low gross profit in the quarter and pressured EBIT with low cash flow and high leverage temporarily. On the flip side, looking at the positives, record order intake, we finalized an acquisition, very strategic acquisition in the quarter. We also came out with innovative solutions. We're having a lot of customer interaction. So like also a lot of positive things taking place. I think very important is that even though we see a short-term dip in the operation, like the long-term journey and the long-term drivers in our industries are very strong. Moving into the revenue base. Here you can see the diversification. As we have highlighted, like very important to have the diversification. You also see it now, like when we have one industry being weak, that we really need the others to perform. We do see that in poultry and fish, that pipeline is good, great orders coming in. We also see that Wenger will have impact on, for example, the revenues by geography, where we are seeing more coming out of the U.S. and this will even be impacted further. Revenue by business mix where aftermarket is around 41%. We have strong order book. We started the year at a level of EUR 569 million. We are now at the level of EUR 775 million. We did acquire order book from Wenger and Sleegers in those acquisitions by around EUR 81 million. The order book as percentage of trailing twelve months revenues is around 53%, and the book-to-bill ratio around 1.19. As we have stated before, like, here we are expecting to see a ramp up on the revenue front, which should bring this into a slightly different balance. Earnings per share, nothing changed here. The target is to grow earnings per share faster than revenues. We are focused on profitability. We are focused on using our balance sheet in a good way. We do realize the gap on the profitability side is wide at the moment, but as was covered in the EBIT bridge, we have a clear plan to get there before end of 2023. On the income statement for Q2, you can see here the revenue growth around 21%. Part of it is from acquisitions, but majority is organic growth. Here you also see that OpEx has been increasing substantially between years, whether it's on the selling and marketing side where we have been ramping up in the front line. We have been active in our market coverage and our sales activities are very active this quarter in exhibitions. You also see G&A going up and the focus here is to get more synergies there. This results in an EBIT of 6.3%. IFRS non-IFRS adjustments around 10.2%. You will see now with the acquisition of Wenger that the PPA will go up in the coming two years. Also on the finance cost, like we are increasing our debts because we were acquiring Wenger, so you will see that impacted here on the finance cost. Not much to add for the first half. Similar trends like here as well, EBIT below plans. The revenue growth of 16%, where roughly 3% is coming from acquired growth. On the balance sheet, the main movements here are from the acquisition of Wenger that's having quite some impact on individual line items here like PPE, intangible assets, etc. For further reference there, we have a note in the financial statements, note fout, that gives the full details of that. The main thing to mention here is on the inventory side. You can see that is growing substantially from beginning of the year, both from acquisition of Wenger, but also from our own growth in inventories. We are still taking steps to secure revenues to ramp up on the inventory front, but of course, this has our high attention and focus to have this in as good balance as we possibly can. On the liability side, the main point here to mention is that we do see the leverage going up. You see borrowings going up now at the level of 3.8x. 3.8x also because we are impacted by the stronger dollar, so that's impacting our loans in the end of the quarter. Like we are here touching the acquisition spike, so that will also increase the interest cost but will give us sufficient flexibility to deleverage in the coming period. The cash flow bridge. Here you can see, I mean, we're coming from a low EBIT. We have on working capital, negative impact from increased inventories. You can see that cash from operating activities at the level of EUR 18.4 million. We continue investing, as stated, like, we don't have any changes in our CapEx plans. They are going to be on higher levels in the coming four years, 4%-5% of revenues. Like, on the KPIs, as stated before, I mean it is around earnings per share where we have high focus on growing that faster than revenues. Revenue growth is around 7.8% from the beginning of the period we are focusing on, so it's clear that we will need to deliver higher growth in the later part of that period, and that's where our focus is. Profitable growth, of course. The free cash flow negative in the quarter, but underlying sentiments for Marel is that we have a strong cash flow model that should allow us to continue investing in the business and in the future. Net debt to EBITDA at a level of 3.8x and as explained because of the acquisition of Wenger, and this is a temporary spike that we expect to come down in the coming quarters. I think it's back to you, Árni. Yeah. Thank you, Linda. Maybe you will ask, with a net debt to EBITDA 3.8x, are you planning on equity issue? No, we are not. You have heard us say as well that we don't adjust for all non-recurring costs here. It blurs the account, and we rather want to show the EBIT and the cash flow as it is. However, as most company adjust for it, in our banking agreements, there are adjustments. Our banking EBITDA is higher, so it's around 3.5x, the leverage in the banking EBITDA. We have to bear in mind what happened in the back end of the quarter. The dollar euro went from $1.20 to parity overnight, nearly. This has not happened since 1987, if I remember correctly. What does this do? It takes the debt overnight up. However, it gives us, well, if you look at our revenues, and Linda said 41% in Americas and quite significant in U.S., our revenue base is higher in U.S. than the cost base counterbalancing in Europe at the moment. There is a tailwind in the coming weeks or quarters in the dollar vis-à-vis the euro, revenue vis-à-vis cost. Even though we put contingency in the EBIT bridge, this shows fluctuation. Tailwind though with us in the coming quarters. Just to show the volatility in the market. Pioneering solution like I touched on, Athena, Spectra, and etc., Nuova-i, you can go into our website and see what those fabulous solution are doing for increasing the yield, increasing the food safety, increasing the sustainability, and moreover, the profitability, efficiency, and seamless flow for our customers. Like I said, sales and marketing cost 14% in the quarter. I know it's high. It's below 12% compared to order intake, but I understand comments that please look at sales and marketing cost in line with revenues. Absolute number of sales and marketing cost will now go down, synergizing the back end and utilizing what we have already ramped up ahead of the growth curve. Stay tuned. We will take the sales and marketing cost down to 12% of revenues. I mentioned as well when we saw the headwind and even the gross margin coming lower than we expected, that we decided to move forward. Splitting the warehouse in U.S. to manufacturing a spare part is the prerequisite so we can go into our dream and make the platform in this industry for spare part distribution handling. We have done the groundbreaking breaking in Eindhoven. That will be our global distribution hub. We will have spare part distribution hubs in USA, in Latam, in Asia, and in China. We will have better lead time to customers, more scalability. What does more scalability mean? We have had record order deliveries in spares in recent three quarters. We needed to have duplication of work. It's more efficiency, more speed, and scale with increasing revenues more than the cost. That is the aim of scalability, and we are going just to recap for 50% service and software in 2026. This is our journey, and we keep track of our journey. Closing on Wenger, diversifying the revenue stream, very attractive and growing market, plant-based aqua feed and pet food. Aftercare revenue is 44% in this company. We believe that we can even become more proactive there and utilizing our global reach, and it's very interesting as well the customer base of Wenger, where we have had limited business, as we have been so much focusing on poultry, meat, and fish. I'm talking about like Mars, Nestlé, and etc., where we have quite a lot of complementary products. We're coming to align concepts. The first one in the plant-based, very, very exciting to go into that journey. EBIT bridge. I've gone through this, but I'm going to keep it here because I would not be surprised to get some questions around it. Brilliant. I think we'd spend time to move into the Q&A session. We will start with the conference call questions, and then we can move into some of the emailed ones that we've received. Handing over to the conference call moderator. Thank you. If you would like to ask a question, please do so by pressing zero- one on your number pad. If you wish to withdraw your question, you may do so by pressing zero- two. There will now be a brief pause while questions are being registered. Thank you. Our first question comes from Klas Bergelind, from Citi. Go ahead. Your line is now open. Thank you. Hi, Árni and Linda. Klas at Citi. Just one follow-up on the pricing. You say, Árni, that you were perhaps a bit late on moving prices here, but on the new order pricing, do you feel that your customers are receptive of your price increases today? You say that poultry should come back to your 18%-ish margin, but I'm thinking about meat. Are you able to raise prices towards your meat customers, or should we be concerned about weaker backlog margin also in meat into 2023? I'll start there. Yeah, it's a good question, Klas. I have been in quite significant contact with our largest customer. Of course, it's a top level talking together about the strategy and the journey we want to go. Just to tell you that finally our dream is coming through. We have been handled by our biggest customers as suppliers when we have said we want to be a real partner. Now they come all at the same time because there is scarcity of engineers and et cetera on the side of our customers and ask, "Now we call your cards and show us how you can become a one-stop shop." We are having the pioneering solution, so there is a full acceptance of the price increase. I believe it's another matter in meat here. Of course, there were headwinds in China, and you have seen that from [Corona] and others. China was not easy in this quarter. Russia, let's just talk about that. 80%+ of our business there were meat, and we have stopped all new selling and etc. However, I'm not satisfied with how we have been balancing geographically. I'm seeing the success of poultry in U.S. I'm seeing the meat market in U.S. We are regaining some market position there, and the opportunity in LATAM is significant, and we should get more. Maybe there is not the same pricing power in primary meat, but we are having fabulous solution to utilize the minced meat better with lean, fat lean, and as well food safety. I think we are underpriced in some of the items, but maybe overall as well, there is less pricing possibilities in the front. We are not trying to get above fair prices. We have seen the margin of our customer at good states and the need for labor replacement and taking the intelligence into our solution. Maybe a long answer, but overall, we are finally on fair prices, and then we want to continue on fair prices. We are innovating 6% per year. We need to get a fair return on that, and it's full acceptance. Okay. No, that's good to hear. My second and final one is on the bridge on slide six. Very helpful to get sort of all the levers and a trajectory, but could you help us with the one-offs? I totally get the volume leverage out of the backlog. I get the cost savings from the 5% headcount reduction. I get the price action. Can you please quantify what the one-offs were for the full year 2022, not only for this quarter, and that will now reverse, such as the warehouse work in North America and so forth? Yeah, maybe I start and then Linda can jump in. There is always some non-recurring. I'm surprised how aggressive many other companies go in classifying non-recurring. However, the magnitude is higher, and it's around 2% in first quarter and quite high as well in first quarter. We don't want to go fully in that. We are not taking the one-offs in the bridge, but it's because you see the OPEX productivity 2% down, and we are going with S&M from 14% to 12%. It's a good buffer that we know that the one-off should be not higher on average basis than 1%. It's a good buffer in some of our step-ups here in the profitability, just to explain it. Yeah. Like, at least touching on, I mean, I think our best estimate is that we are somewhere around 2%, and we would aim to be like in a year where we are moving further with our improvement projects closer to the 1% level. I do think like in the quarter, I mean, we mentioned a few, but like we are of course working with McKinsey on those topics. That's one, of course, we are like taking actions in the U.S. that's creating one, of course. Like the magnitude is fairly high in the quarter. I mean, we are on a journey to improve the organization, so we also just need to be aware that like we will see those things to some degree. But it should go down as we move forward, yeah. Then you have been implementing successfully the shared services in Poland and duplication of work one off and w e are taking the cost out. What I'm trying just to confirm, you said, Árni, it creates a good buffer. The 2% of one-off reversals, are they not part of the OpEx productivity, the contingency? Is that an extra buffer or where does it fit? It's a buffer. It's not part of it. It's a buffer. Okay. No, that's very good. Yeah, that's clear. That's all I wanted. Thank you. Thank you. Our next question comes from Eric Wilmer, from ABN AMRO. Go ahead. Your line is now open. Hi, good morning, everyone. Thanks for taking my questions. I got a few as well. I'll ask them one by one. First on leverage. You indicated that leverage is clearly above your target range at 3.8x at the end of Q2. I was wondering if you could give a ballpark figure of where you see leverage to end up at the end of this year, taking into account anticipated margin improvement and perhaps some working capital reversal. Thank you. Yeah, it is like 3.8x, like towards our banks. It is at the lower levels because then we adjust actually for one-off cost that we're not doing here. We will be walking in the right direction towards our targeted levels, but like, we don't want to time it exactly because like, there are like a lot of moving parts. I do think we have opportunities on the working capital, on inventories, but there I think we need to do it in a very careful way because we have supply chain inefficiencies at the moment and issues. Of course, on the result side, like we are planning to increase revenues and deliver higher profitability, which should also help. I don't want to say an exact level, but like in the direction of towards our targeted levels. Okay, that's very clear. Thanks, Linda. Next question. In the press release, you highlighted a focus on sustainability is impacting demand for meat. I was wondering if you could give examples of specific markets where you see this happening and whether this mainly concerns beef or pork. Can you also highlight how you aim to partially offset this with your plant-based solutions? Thank you. Yes. Thank you for the question. I guess you have been in Albert Heijn recently and see the consumers shopping around, and you have seen the fish back in the shelves out in Albert Heijn. You've seen as well the poultry and as well in the home delivery. The shift is more now in Europe and U.S., where we are having the highest meat consumption per capita. We should not forget, though, that the meat consumption is low outside in the world. We are not predicting that the volume will go down in meat. We are predicting that there will be a shift and balancing shift here as well. We need to utilize the meat that we are consuming much, much better. The feed conversion is not as attractive in the meat industry, and there is a huge shift into the poultry. That is just how it is. We know as well that the plant-based is on the rise. We cannot quantify it. Remember, I said as well in last conversation when we met, we didn't have any data to back it up then. If nothing is new under the sun, meat will be soft going forward in order intake compared to poultry, fish, and plant-based. That is accelerating maybe faster than I and some other I expected. Now we have more and more data to back it up. If you just shop around in Albert Heijn, you see how people are changing the consumer behavior. Thanks. That's very clear, Arni, and I've indeed seen these trends in Albert Heijn. My last question is concerns around China lockdowns. With the risk of them coming back at the end of this year and perhaps early next year, how does this impact your revenues ramp-up docket on the EBITDA bridge slide as well as your OpEx bucket? So basically, I'm looking for to get a sense of your China exposure in your pipeline and your order book, and how this may impact on that bridge. Thank you. We have to remember that our order intake is a little bit different than many other companies. We never book orders unless they are prepaid and financially secured. What we call pipeline, many other companies call it order book. We believe that we are getting better grip on the situation. Linda maybe should answer it because she is controlling the SWAT teams. Maybe I give it just over to you, w hat we are doing to resolve the bottlenecks with that. Yeah, exactly. I mean, of course, this has high attention internally. We have the parts availability issues, like we're having SWAT teams with daily stand-ups, like solving those bottlenecks. I do think in terms of if you would see lockdown as we have seen, for example, in China, of course, that does impact, like, the operations. Like overall, we are seeing the trends in the right direction. Like if we would see this coming again in Europe, it will mean impact on absenteeism. Like, I mean, in our plans, we are aiming for a ramp-up, not assuming that there will be another lockdown around the world. Like if we will see that, it will impact the rate we can increase revenues. On the flip side, I would say we are focusing on what's within our control. I think we also can do things better and smarter, and that's, that can counterbalance then such a situation. It's not without reason that w e put contingency here, but we should not forget, if we get lockdowns and dine-ins, we have our market position and the consumer ready is great. Of course, there will be then some disturbance in the supply chain. What I'm a little bit surprised now about investors and some analysts as well, I'm not saying you, is that people are calling recession and continuous supply chain disruption at the same time. That's only in a lockdown situation, correct but the answer, but you cannot call recession and continuous shortage of semiconductors at the same time. It will counterbalance each other. A mild recession is not at all bad situation for Marel as well, because then people will start once again dining in and moving between the proteins, and I don't know of any other proteins for human consumption that Marel is active in. Plant-based poultry, meat, and fish. That's very helpful color. Thanks. I was indeed mainly interested in the China lockdowns part because I believe it was specifically mentioned at the meat part. Thanks a lot for the color and also on the recession angle. Thanks. Next up, our email question's from, JP Morgan, Akash Gupta, and it reads, "Q2 saw very strong orders, but cash flow was still weak. Can you talk about prepayment terms, if that has changed to explain part of the cash flow weakness? I s it driven by order mix towards spare parts service, which doesn't come with any down payment? And how does the pipeline look for the rest of the year?" Yeah. Like pipeline looks good for fish and poultry. We see like very strong appetite there. Like it is softer for meat. Now we have a new arm, Wenger, coming in that will help us also balance this. Nothing changed in the prepayment terms. There is though an impact, like if you think about geographical split, we don't have the same percentage of down payment in all areas. That impacts the balance there. On the cash flow, the main factors is that we are continue to invest in ramping up on the revenue front, and the rest is like more a timing matter. As well, the payment from customers, it's upfront, no change in the business model, and as well the overdue debts are not going up. The payments are on a very healthy level. That's not the explanation for the cash flow. The business model is unchanged. Okay, and the second question from JP Morgan reads: "Can you please elaborate on your comment that you will see progressive margin improvement in H2? Shall we expect double-digit operating margins at some stage this year? G iven the uncertainty and cost headwinds, double-digit margins won't be seen this year?" I can take it, Linda, we cannot classify what we are talking about. We have seen as well some of the analysts with the same profitability in third or fourth quarter. If you read into the notes that we are saying, we are calling the bottom. Make that absolutely clear. We are talking about gradual improvements. Please bear in mind the wording. We have been careful in analyzing how we see it, and we said gradual build up. We cannot give more comments. Okay. We've also received questions from André Mulder from Kepler Cheuvreux, and his first question reads: "What kind of EBIT margin is now included in the backlog? And what is the EBIT contribution from acquisitions in the quarter? Like on the acquisition, they are having a positive impact on the EBIT in the quarter, but like Valka is of course in for a very short period of time. Like, we did indicate when we acquired that company that they have very interesting profitability levels. That should improve margins going forward. Like on the order book, like we have been taking pricing actions. Like, the orders that we have in the order book are with the new price levels and should return better profitability than we are seeing currently. Maybe a little bit to add to it b ecause Valka is having a positive effect in the quarter. However, to recap, we acquired Valka, and we didn't close it until back end of the year. It's not fully understandable yet why the competition authorities took five months to analyze this. What happened in that period is the order book became empty. When we closed the transaction, the orders started to come in again. Our customers clearly see us stronger together. We are seeing order intake together out in the field. Valka operation as such is having quite significant negative effect on the EBIT result in Fish in first and second quarter because we were not covering revenues, covering costs with the revenues there, because when the orders start to come in in December, January, February, you don't have a lot of revenues from that. Just to highlight, because the question was EBIT contribution from acquisition, and if you look at all acquisition in last 12 months, clearly positive from Wenger. On the fish sector, maybe you think we are strange that we don't classify the non-recurring here. Is it non-recurring that you don't cover the cost by revenues? It's having a negative effect, and now we believe it gradually changes to positive effect. Okay. His second question is, what is the war chest with net debt to EBITDA at 3.8x and no equity issues? Do you feel restricted in any way for potential acquisitions or should we expect a pause? You see it clearly that we need to as well all attention on the operation. I'm not satisfied with the 6% EBIT, nor are you. There will not be a significant acquisition until we don't want to time when we are in the black for the next nine, 12 months, let's say that. We have experience of deleveraging very significantly. We are in discussion and we are in ongoing process on smaller acquisition that we might conclude, just to flag that. We can now utilize the team as well here in the rebuilding the boat compared to the actual EBIT bridge. The EBIT and the cash flow is the prerequisite to fuel our dreams of being a one-stop shop and having service and software as 50%. We use acquisition to accelerate that journey. The focus is to show you higher EBIT, higher revenue growths, and higher cash flow. Okay, great. In the light of the time that we have left, I think I want to pass over to the conference call moderator, where I believe we have a question as well. Thank you. Our next question from the telephone conference line comes from Tijs Hollestelle from ING Bank. Go ahead. The line is now open. Yeah. Thanks, operator. Morning. I also got a follow-up question on the exceptional items. I think it's natural not to disclose these exceptional items, but given the circumstances, is it possible to highlight a bit how much has been taken of that amount in the second quarter? How much in the first and maybe already earlier last year? And also a little bit of a feel, which of the divisions got most of these costs incurred? I guess it is the needs, but I don't know. That is the first question. No, it's crossover in G&A and gross profits. It is just same over all the industries and etc., and we don't want to quantify this more than we would have reported it. The magnitude is 2% is normal level half for one. Who knows? We are seeing, just to recap, in the year 2020, I thought digital would be much more advanced, 2020. Suddenly everything start to accelerate again, and we just need to stay on the forefront. We have to digitalize, we have to automate just like our customers, and this require changes. Is it one-off non-recurring or is it just temporarily for three, four years? It will not be 2% per quarter, so long-term, but is the normal level for some time period 1%? We don't know. Another question for Linda. The actual interest rate you're going to pay since you had the cash outflow for the Wenger acquisition. Yep. It's a few things here. It is increase in the margin ratchet from the current levels we were at. The base rate has been increasing and has been fluctuating quite a lot. It is the acquisition spike that will cause additional cost. Rough calculation per quarter, this will mean around EUR 7.5 million or EUR 8 million in interest on borrowings. Substantially higher than what we have today. Okay. Yeah, that's helpful. Thank you. Yeah, I had a question. It's per quarter, and hopefully we have very few S's, meaning that it will be very few quarters. Yes. That's what I'm like, yeah. That's why it has also on the base rate, like let's see how that develops. Like, the margin ratchet should also then take us down, as we deleverage. Yeah. Yeah. Okay. That's helpful. Yeah, and I also had a question about the EBIT of Wenger, because you included the, I think one month of consolidation of Wenger in the other segment. As of the third quarter, you will report as a separate segment. I also assume that the EBIT contribution is also included in the other EBIT part. Yes. We didn't quite quantify exactly what it was. I mean, it's like 21 days that it's in our books in this quarter. Like you will see it more clearly next quarter. The only comment was that like it is having positive contribution on our EBIT in the quarter. In beginning of the meeting, I gave you as well the pro forma numbers. It was $49 in U.S. dollar, EUR 45 in euros, the revenues. Rough calculation because we have not done the PPA and et cetera, it's slightly above 14%, the EBIT. Yeah. Okay. That's perfect. What else? Oh, yeah. Any remarkable seasonal patterns in the Wenger's revenue or EBITDA in the second half? In general, not. Like many others, the year started slowly in January, February, in Wenger. We have not changed the outlook for $190 million and EUR 32 million, $35 million in EBITDA. We are seeing that management in Wenger stays the course in what they have predicted for the year. January, February, like I think by every single capital goods company, was not an easy one, but then recovery. We in this segment are operating on higher level than the other segments now. In general, we believe the poultry is the most profitable segment. We could have levers in plant-based pet food and et cetera, by cross-selling, upselling in the further processing arena, levers to take the profitability to 14% or 16%. It's a little bit too early to say, and we have to have all the disclaimers, but that is at least the intention that in the 16% EBIT target, that is still our internal target. That Wenger or plant-based and et cetera will be even-steven to that number. Yeah. Okay. Yeah. Thank you very much. Okay, great. Two minutes to go, and I have two questions by email. First one is a follow-up question from André Mulder of Kepler Cheuvreux. The EBIT problem looks largely to be in meat, less so in poultry and fish. While you cut your global workforce by 5%, why is the focus not more on meat? I hope we all read what we said here in the press release. There is a full focus on meat, adjusting the cost levels in the primary meat and full focus on cross-selling and upselling there. There was a little bit more temporary workforce in meat, so we are taking actions there as well to adjust it. We are moving things as well around in our company from one side to another. We are taking meat activities from Boxmeer over to Lichtenvoorde and so on, at least planning to do it in good cooperation with the work council and et cetera. Getting more oxygen into the poultry business, getting more utilization in Lichtenvoorde for the meat business and etc. There is a full attention on it and we have to take it step by step, and we need to pay respect as well to the people. There are many good people in the meat segment. We need just to align execution and strategy. We have invested in a portfolio, and now we have to deliver. The final one is from Rob Skepper from Ashmore. The comments on calling the bottom in the margin and gradual improvement, how would this look like on a like for like, i.e., if Wenger comes in at 14% EBIT margin in second half 2022? Is this the bottom for Marel in a pre-Wenger basis? Let's hope so. That's our conviction that this is the bottom. Bear in mind as well, we had a 3-4% good cost. Once again, maybe it, you could believe that we are a little bit strange that we go forward. However, if we would have been unlisted company and running a unlisted company, we would always have gone forward. We are here in the long- term. We move forward, and we can understand that 6% EBIT is shocking. Let's hope it's the bottom. Let's hope that what we are saying of gradual improvements, third quarter, fourth quarter, and our internal target of 16% EBIT, we have to have contingency 14%-16%. Notably, we are as well looking at absolute revenue increase. There are very, very few capital goods companies now reporting that they still believe that the order intake will be good. A little bit, though, we expect that the order intake will be slightly lower in next quarter and then go up again in the coming quarters. We as well expect that the revenues will be slightly higher than in this quarter or higher. There is a seasonal quarter, though, in third quarter, and then we see a full ramp-up in fourth quarter, first quarter, second quarter. Just to give you the highlights. Okay. On that note, I would like to call the bottom of this session today. Apologies for being a little bit over our allotted time. Again, thank you all for your time and attention and continued support for Marel.