Good morning here in the Novotel and on the webcast. Welcome to Kendrion's Q2 and first half 2022 results presentation. My name is Joep van Beurden, Kendrion CEO. With me here is Jeroen Hemmen, our CFO. This morning's agenda, Jeroen will start and review the Q2 and first half 2022 results. After which I will take over and give you an update of the progress we have made, both strategically and operationally over the past period. This will be a bit more concise than usual as we'll have a more elaborate review during our capital markets day, planned for September 8, so in just over two weeks. After the review, I will discuss the outlook for the remainder of the year and go to Q&A. Now, as to the Q&A, there is the opportunity, of course, to ask questions here in the Novotel, but also for those attending this presentation virtually. You can type your questions through the Q&A icon on the bottom of the webcast, and please state your name and company. Before handing over to Jeroen, I would like to draw your attention to the following. Certain statements contained in this presentation constitute forward-looking statements, and these forward-looking statements rely on several assumptions concerning future events and are subject to uncertainties and other factors, many of which are outside the company's control, that could cause actual results to differ materially from such statements. Jeroen. Yes. Thank you, Joep, and good morning, everyone. I will present the business review for the second quarter and also for the first six months of 2022. Our consolidated revenue for Q2 ended at EUR 126.9 million, which is 6% above the same period last year. Exchange rate translation effects due to the weaker euro contributed 2% to the revenue, and so did the addition of 3T. The estimated impact of the COVID lockdowns in China on total revenue was around EUR 3.5 million or 3% of total revenue in the second quarter. All business groups were affected, but in particular IB's operation in Shanghai. We were successful in passing on the higher raw material prices, and our added value margin increased 0.8% compared to the second quarter of 2021. Implemented sales price increases contributed around 6% to consolidated revenue. Normalized EBITDA decreased 13% to EUR 13.7 million. Profitability was affected by lower production volumes in automotive and a 7.5% organic increase in cost when measured at constant rates of exchange. Increased energy prices, demand and production volatility, and higher staff cost in IB, in line with the increased activity level, contributed to these increased costs. Automotive incurred as well relatively high engineering costs for new projects won last year. Moving to the first six months of the year. Revenue in the first half year increased 5% on an organic basis when measured at constant rates of exchange. The industrial segment reported a further 16% organic revenue increase, while automotive saw their revenue decrease with 2% as global and especially European car production continues to be affected by supply chain shortages. Normalized EBITDA for the first six months ended 4% below the comparably strong first half year of 2021. A strong 28% EBITDA increase in industrial could not fully offset lower profitability in automotive. In automotive, the lower volumes coincided with higher costs due to energy prices, demand volatility and relatively high expenses for engineering for projects won last year, as just mentioned. Our normalized net profit before amortization increased with 3% compared to the same period of last year, as lower finance cost and a slight reduction in the effective tax rate contributed positively to the net profit. Our finance costs were positively affected by currency results, while negative currency results were incurred in the first six months of 2021. In total, in the first six months, EUR 2.4 million operating expenses and EUR 0.6 million finance expenses have been normalized from the reported results. Normalized operating expenses mainly relate to restructuring charges related to the closure of the Austrian automotive plant, while the finance expenses mainly relate to an amortized transaction cost of the previous facility agreement. Switching to cash flow and our financial position. Operating cash flow increased with EUR 3.6 million in comparison to the first six months of last year, but this was offset by a relatively high capital investment program that exceeded depreciation by EUR 5.2 million. EUR 5.2 million of these, of the total EUR 16.5 million capital investments relate to the construction of the new facility in China. Higher investments and seasonal effects around working capital drove the negative Free Cash Flow of EUR 7.6 million compared to negative EUR 4.2 million in the same period last year. Total working capital increased EUR 14.8 million compared to the end of Q2 2021. This increase includes EUR 5 million temporary buffer stocks in relation to the closure of the Austrian automotive plant, and another EUR 5 million relates to the higher revenue level in the first six months of the year. Especially inventory levels are under pressure as supply chain shortages and order volatility affect inventory management. We do expect capital investments to further increase in the remainder of the year when we expect to materially finalize the construction of our new China facility. We do further expect to fund these investments with operating cash flow. Our net debt in Q2 increased with EUR 8.2 million, and this was mainly due to the payout of the cash portion of the dividend. Our leverage ratio increased from 2.4% at the end of Q1 to 2.6% at the end of Q2, well below the agreed financial governance of 3.25%. Switching to the business groups. The industrial groups continued their strong performance and reported a 16% organic revenue increase and 28% higher EBITDA in the first six months. The estimated effect of the China lockdowns on the industrial revenue was 2% of revenue in Industrial. Industrial revenue ended at EUR 136.1 million, and EBITDA ended at EUR 24.4 million. The EBITDA margin further increased with 80 basis points to 17.9%. Industrial Brakes revenue increased 19% and IAC grew with 13% when excluding the contribution of 3T. The added value margin developed favorably in Industrial and in particular in Industrial Brakes, where sales price increases effectuated have now caught up with the rising material prices. Capital investments in Industrial were well below depreciation in the first half year, but are expected to increase in the second half year, driven by various capacity extensions, especially in IB. To Automotive. Low and decreasing global and European car production numbers continue to affect the automotive volumes. Global car production decreased 2%, while production in Europe, Kendrion's most important market, was 12% below the first six months of last year. Our automotive revenue ended 2% below the first six months of 2021, but this was positively affected by the aforementioned currency translation effects and also by price increases. Automotive has successfully protected the added value margin by passing on input price increases to customers. The EBITDA decreased compared to the comparably strong first six months of 2021, is driven by the lower volumes in combination with pressure on cost due to energy demand and production volatility and engineering cost in relation to the high amount of new project wins last year. Normalized EBITDA and EBITDA margin did improve slightly from the second half of 2021, when supply chain shortages and inflation started to significantly impact automotive production. The closure of the Austrian automotive plant is largely finalized with the relocation of a large production line for suspension valves to Villingen. We expect to fully stop operations in the third quarter and cost savings to be fully effective as from the fourth quarter of 2022. Capital investments in the first six months were EUR 13.8 million, including EUR 5.3 million related to the China building, which is recorded in Automotive Business Group. Capital investments in the second half year will increase further as we expect to finalize the construction of our China building. That concludes the business review, and with that, I hand it back to you. Thank you, Jeroen. I will now proceed with an update of the strategic and operational progress we've made so far in 2022. As Jeroen just explained, I think we can look back at a solid first half of 2022, with revenues growing despite a difficult trading environment in automotive and the loss of around EUR 3.5 million in revenue in China due to the COVID-related lockdown. Growth was especially strong on the industrial side of the group. IB grew with 19% year-over-year and IAC with 25% and with 13% excluding 3T. I'm proud of the Kendrion team who have achieved this in a volatile market and with the effects of COVID in China and on the availability of our people, still a significant factor, and I'm excited about the accelerating transition towards clean energy that we believe will benefit our growth areas. In Industrial Brakes, as it boosts demand for wind power, robotics and various other segments, in IAC, where several new products are ramping, in Automotive, where we focus on sound suspension and sensor cleaning, and China, where we see the same transition towards clean energy, providing us opportunity for all business groups. Before I get into a little more detail, let me illustrate the current economic environment with two slides. On this slide, we see the Purchasing Managers Index in several parts of the world as reported by IHS Markit. An index larger than 50 indicates expanding economic activity. An index below 50 signals an expectation of declining activity. Looking at this slide, the global picture is clear. Although the average level is still around 50, it has decreased significantly over the past six months by around 10 points. We have certainly felt this pressure, especially on the automotive side. For our industrial groups, despite the lower index, we see continued strength in both IB and IAC. Next, let's look at the forecasted pace of electrification in automotive. Here we look more in depth at the expected development of the passenger car market, again by IHS Markit. This slide indicates the number of internal combustion engine powered vehicles and the number of battery, electric and plug-in hybrid vehicles between 2018 and 2027. The current forecast for the total number of vehicles over that period is flat. Within that, the growth of both classes of electrified vehicles has been and is projected to remain strong. In fact, the number of electrified vehicles is forecasted to grow from 1 million in 2018 to 30 million by 2027, which is an average annual growth of more than 40%. At the same time, the number of vehicles that has a combustion engine, so ICE vehicles or plug-in hybrids, will shrink from 93 million vehicles in 2018 to 71 million in 2027, which means an average annual growth of -3%. As a proportion of total vehicle production, the share of electrification is expected to raise from less than 2% in 2018 to over 30% in 2027. It's therefore not surprising that all major OEMs and tier one are investing heavily in this. We too, despite the volatile trading, have continued to invest in our product roadmap, our commercial organization, and our software and electronics capabilities to make full use of this important trend. We will elaborate on this during our Capital Markets Day. Talking about our Capital Markets Day, our strategic house is unchanged. The top of the building indicates our strategic intent. We aspire to continuously grow revenue and profitability by investing in opportunities that help society become more sustainable with a lean and focused organization, and to provide a top-quality work environment to our employees. Linked to this are our medium-term strategic objectives, such as our target to grow with at least 5% organically on average between 2019 and 2025. Underpinning this goal are the three pillars of Industrial Brakes, actuators and controls, and the Kendrion Automotive Group. The two industrial pillars, Brakes and IAC, together represented 53% of group revenue in the first half of 2022, and automotive represented therefore 47%. Of course, we have a focus on China, active in all three domains with the same intent and with similar growth opportunities driven by the broad energy transition towards cleaner form of energy like electricity. Now, let me share some of the highlights of the past half year, starting with IB. IB had a great first half of 2022. Organic growth was 19% despite the COVID-related shutdown of the Shanghai brake factory. After a four-week complete shutdown, we operated in so-called closed-loop production at roughly 50% of capacity for another four weeks. In total, around six weeks of production got lost. Closed-loop production means that the colleagues who operate the plant enter the facility and stay there for as long as the closed-loop is maintained. In my view, it speaks to the extraordinary motivation and dedication of our Chinese colleagues that we could operate in this mode for four uninterrupted weeks. With raw material prices increasing, we successfully protected our gross margins as we worked with our customers to reflect the increased cost in the price of our brakes. We've continued, and we will continue the investment in the IB R&D team and in more production capacity as we anticipate further organic growth for the short and medium term. Finally, we continue to enjoy strong traction at both existing and new accounts based on our complete product portfolio and the broad transition towards clean energy. A strong first half for IB with ample opportunity for more growth in the pipeline. Next, IAC. IAC also did well during the first half. Organic growth was 25% and 13% excluding 3T. This was despite shortages in semiconductors and various other raw materials like for instance, certain ball bearings. As in IB, we managed to keep our added value margin stable. We have a strong order book and continued interest in new products like Industrial Locks and Inductive Heating. During our Capital Markets Day, we will be able to show you some of our newly developed products. Next, we look at auto. We faced an extremely difficult trading environment as quite a few market related issues combined. Persistent semiconductor shortages, significant order and call-off volatility, raw material inflation, and OEM delay tactics when it comes to product price increase mechanisms. The semiconductor shortages have put automotive industry production levels under pressure. Jeroen already mentioned it. Analysts assess that global car production fell by 2% in the first six months, with production in Europe, Kendrion's most important market, 12% lower than in the first half of 2021. Volatile order patterns reduce direct labor productivity, as it's hard to respond with mechanisms like Kurzarbeit when demand fluctuates on a weekly and sometimes on a daily basis. We are proud that we have kept our added value margin stable despite the increased raw material pricing. In the first half, we completed the transfer of production lines from our Austrian production facility in Eibiswald to Villingen and CBU. We experience sustained interest in sound suspension and sensor cleaning, and we continue to invest in that. Next, let's look at China. In China, the loss of six production weeks in Shanghai due to the COVID-related shutdown made for a difficult first half. As mentioned, the total impact on group revenue was 3% or EUR 3.5 million. We do believe that most of this revenue will be realized in the second half, though, invariably, some of it will move into 2023. With China's zero COVID policy in place, there is, of course, always the risk of another shutdown, which may directly or indirectly influence our revenue. In China, as in Europe and the U.S., we do continue to see growth opportunities for all business groups. In medical and in automation for IAC, in robotics for IB, and in sound and in suspension for auto. We continue to expect strong growth for the medium term, which is why we are pleased to report that the construction of our manufacturing facility at Suzhou Industrial Park is progressing well and on track to be fully operational in Q1 2023. We will show more at the Capital Markets Day, but here are a few pictures of the state of our building right now. This is an artist's impression of our plant facility located in Suzhou's Industrial Park. SIP is recognized as the most high-tech area in Suzhou and is the premier location for technology and advanced manufacturing companies there. In phase I, we plan to build more than 27,000 square meters with the possibility to later add another 16,000 square meter in phase II. For this project, we've received strong support from the Suzhou local government, who have granted us favorable conditions for 30 years of land use right. As you can see, we are planning photovoltaic panels on the roof and expect to generate 1.1 MWh, which should cover up to 60% of our internal energy requirements. This is the building as it is right now with the warehouse, the building, the production building, the office building, and the space reserved for phase II in view. From another angle, the warehouse will be able to store 6,500 pallets and is over 50% complete. For the production and office building, the frame construction is ready, and we're currently building the internal structures. Finally, a picture taken from the plot of our neighbor, ZEISS. As you can see, substantial progress has been made. Next, let's go to outlook. We've seen a difficult market situation so far this year, and we expect this to continue. This includes the constraints in the supply chain, especially when it comes to semiconductors and upward pressure on raw material prices. At the same time, the broad-based energy transition towards electrification is continuing, which in our view means positive longer-term business fundamentals supporting our main objective, the delivery of sustainable, profitable growth. Therefore, our long-term outlook, longer term outlook is unchanged and remains good for industrial IAC activities, the automotive group, and China. Which brings me to our long-term targets as announced in September 2020. Over the past 24 months since we announced these targets, I believe we have shown resilience, making full use of available cost-saving and cash-preserving instruments when orders were down, and using our operational leverage to grow our profitability when demand improved. We've also kept progressing our strategic agenda, and we therefore reiterate our medium-term targets of average organic growth of at least 5% per year from 2019- 2025, and an EBITDA margin and Return on Invested Capital of at least 25% by 2025. Sorry, the EBITDA margin of 15% and the Return on Invested Capital by 25% by 2025. I have one more point to make. On Thursday, September 8, 2022, at 2:00 P.M. Central European Time, we will be hosting a Capital Markets Day here in the Novotel. The full Kendrion business management team will be present, with Asia President Telly Kuo joining online for obvious reasons. We expect to give a comprehensive update of the progress we've made over the past two years, our route to our ambitious financial targets, and of course, fill you in on our plans for the coming years. We will also have some of our new products on display. For those who cannot join in person, there will be a live audio webcast with playback facilities. We hope to see you all on the eighth of September. Thank you for your attention, and let's go to Q&A. Frank, is there going to be a microphone? Frank traditionally asks the first question. Hi, Frank Claassen, Degroof Petercam. Three questions. First of all, on the revenue impact, you've indicated EUR 3.5 million on the lockdown, the China lockdown. Could you also maybe, yeah, give us a hint how much impact it had on EBITDA or roughly, what that has been? Secondly, a question on the raw materials and the pricing. 6% in the first half, both in Q1 and Q2. Do you expect it to further accelerate? How much more is there to come from the price increases, but also from the raw material, impact? Then finally, probably also for you, Jeroen, the working capital. You've indicated in your story EUR 5 million extra buffer stock for Austria and EUR 5 million from some other effect, which I didn't catch much. Could you elaborate on how much, let's say, is the working capital elevated and how quickly could you see it return to more normal levels? Thank you. Yeah. Frank, Jeroen, if you take the EBITDA, EUR 3.5 million EBITDA and the working capital, then I'll answer the raw material. Yeah, sure. Yeah. On EBITDA, EUR 3.5 million revenue roughly translates to EUR 1 milion EBITDA, just as an order of magnitude. On the working capital, working capital was roughly EUR 15 million higher compared to the same quarter last year. EUR 5 million of that relates to basically higher activity level. We have 9% growth, revenue growth, and even that includes price increases, but that is also reflected in the raw material. EUR 5 million, I think, is justified by the higher activity level. Another EUR 5 million is temporary buffer stocks. We had some major line moves from Eibiswald to Villingen, where we had to build buffer stocks to secure continuation of production. You have a remaining EUR 5 million, which you could attribute to basically pressure, especially on the inventory. I do expect in the second half year that we will be able to reduce those inventory levels, definitely the buffer stocks. The EUR 5 million will basically go automatically. But also, as the raw material situation stabilizes somewhat, we should be able to manage the inventory down a little bit. Not to the levels of last year. It remains volatile, and it's also important to secure revenue, but I'm confident that we will be able to drive it down towards year-end. Maybe Frank, on the raw materials. The short answer, of course, is to 6%, and I don't really know what happens. I can talk to a few trends. One is that for certain materials like steel and copper, the pressure seems to be off a bit, so that's hopeful. Copper and steel actually even went down. Now, the situation, geopolitical situation, we all read the newspapers, is still extremely volatile, so this could reverse, but that's the situation now, so that's good. On semiconductors, we, you know, and together with the analysts, expect the shortages to persist, and this, of course, also has effects on prices. At the same time, we do see now profit warnings or at least revenue warnings from large semiconductor companies like NVIDIA, AMD, Intel, Qualcomm. We could also get a little bit reprieve there. Now, very tentative. I don't know this, but it could be, I'm phrasing this very carefully, as you can tell, that in the second half, this, the pressure is going to be a little bit less than what we saw in the first half. Related to that, do you need to pass on these, let's say, lower raw material prices right away, or can you keep it up for a little while? How does that work in your contracts? It's the same mechanism. Yeah. There's always, it depends. I mean, it's not every percent, so there needs to be a threshold of, you know, X%, and it varies a bit, but let's say 4% or 5%. Then there is a bit of a time lag. If that pressure alleviates, we had, of course, in Q1, when it's on the way up, you have contraction. I think we protected the margin quite well at the end of the day, and then we should get a bit of benefit if this happens in the second half. Okay. Thank you very much. Any more questions? Morning. Tijs Hollestelle, ING. Yeah, I'm also impressed by the way you protected your profitability given all the external factors. A specific question on the labor cost in the second quarter. They were down year-on-year, but also quite down compared to the first quarter. I've seen, yeah, normally I've seen a lot of cost inflation also on the labor cost. What are exactly the dynamics in the second quarter on the labor, on the staff cost? Yeah. Jeroen, you wanna talk a bit about that? Yeah. Nothing really in particular. No. Wage inflation is this year still quite minimal because our most important core country, Germany, we still live under the agreement of two years ago. That means roughly 2.5% wage inflation in Germany. That could obviously change next year based on inflation. Yeah, other than that, no specific things in Q2 compared to the first quarter or compared to last year, with the exception of the addition of 3T. Yeah. Although maybe one remark to add to that is that if you look at the effectiveness and the productivity, I should say, it's a better word, of the direct labor force, specifically in automotive with this volatility, that these are higher than what they were, for instance, in the COVID quarters, because there it was predictable and you could then take measures like Kurzarbeit to make sure that you didn't have the labor force when you didn't need the production. That is now, in today's volatile environment, with daily swings of production demands, is impossible. Yeah. Basically, the first half year levels are a good proxy for the second half? Yeah. Depending, of course, on the. Yeah, yeah. ... actual volumes. Okay. Then on the other operating costs, that indeed, it did increase quite a lot. Yeah. What, for instance, is the exposure of Kendrion to gas prices year-over-year, or any other dynamics there in the first half? Yeah. Total energy prices, roughly in the first half-year, the impact of the energy prices was roughly EUR 1.5 million. Other contributing factors were also, I mentioned in my part of the presentation, that automotive incurred relatively high cost for engineering for projects that we won last year, specifically related to sound projects, for example, but also some suspension projects. They are now in what's called the hot phase. During that hot phase, we also make use of external R&D services, and those are also recorded in other operating expenses. Besides that, yeah, I mean, last year we were still in lockdown, so travel expenses also went up a bit. Those are the most important factors there. Okay, that's clear. On the overall, let's say, client portfolio, were there any major new clients added to the portfolio? Maybe you lost clients in automotive or industry? Any significant? No, we didn't lose any clients, not in automotive, not in industrial. I would say the most activity when it comes to existing, but also some new accounts, as I mentioned also in my remarks, is in IB. Our INTORQ is about two years ago. One of the strategic benefits that we then mentioned, other than just the scale, is that we have a much fuller and much completer product portfolio. We're seeing that, the effect of that, the positive effect on our ability to engage with accounts that eluded us, and INTORQ for that matter, for many years. The cross-selling is going above your expectations. Yes on those acquisitions? Yes. Okay, that's helpful. Yeah. Final question. I think you elaborated quite well on what's happening in the automotive industry. We can read it in the newspapers every day. I know that the impact of supply chain issues and component shortage is less in the industrial space, but it seems that you don't have a problem at all. Can you say something? Maybe you have some clients you have for many years in which you can see that you also missed out a little bit revenue in the first half because of also the shortage and supply chain problems in the industrial side. Is that possible? It's less pronounced, but it is certainly there. For instance, in IAC, where we have also, I mean, we have 3T, of course, is a soft electronics business. We had, when we acquired it was around EUR 12 million. We also then disclosed we have our own controls business in IAC, which was roughly of similar size. Both, by the way, are growing nicely. But there we are definitely exposed to printed circuit boards, all sorts of semiconductors, and not these higher end, you know, semiconductors that end up in gaming machines and laptops and high-end televisions, but simple stuff that never used to be an issue, like MOSFETs and capacitors. So we could have done even a bit more revenue on IAC. It's less pronounced, but certainly there. There is more stranger things like ball bearings, you know, lagers. Who would ever think that was going to be a bottleneck, but now it is. This is very specific kind, and then it's difficult to get. Yes, a bit there, on IAC, as well. Okay. Thank you. Martijn den Drijver, ABN AMRO. Firstly, concerning the organic growth, because it's pretty unclear throughout your press release what is organic, what is at the current, constant currencies, and what does and does not include it in 3T? For example, if you look at Q2, you mentioned organic revenue growth at constant currencies is 2%. Can I conclude from that that 3T is not included in that 2%? Yeah. that implies that organically, without Forex, without acquisitions, you had a small negative result. No, no. Sorry. 6% was nominal, 4% at constant rates of exchange, and 2% organic at constant rates of exchange. 2% growth. Okay. Also when I look at the recorded growth in Industrial Brakes and IAC, that's the same as what you present in the presentation, the same growth. It does imply that within these two segments, there is no currency impact. No, this is the nominal growth without acquisitions. The 19 and the 15. The currency translation effects, we have not broken it out per business unit. Most affected there is Automotive, with sizable operations in the U.S. and also China and IB. Yeah, 2.5% in Automotive and 2.5% roughly in IB, you could say, and a bit in IAC. Then you need to subtract that. Okay. From the numbers you provide, and that's a bit in contradiction to what is just stated, I can more or less conclude that 3T had a sales level of about EUR 6.0 million first half. Is that correct? Yeah. When I also look back to Q4 and part of Q3, then more or less it's still at a run rate of EUR 12 million on an annual basis. Well, as you just stated, that it was nicely growing. According to me, it's more or less at par. Yeah, it's 12%. Of EUR 12 million, it is nicely growing. Now, of course, you always have some fluctuations. I point to the semiconductor shortage that clearly in that part of the business, so on the control side in IAC, but of course also for 3T, impacts their ability. I remain with that statement. I mean, you're doing sort of a rough estimate of around 6%. That's accurate. There is definitely underlying growth there. Maybe also there, to add to that, we have, in the meantime, opened our office in Eindhoven, HTC, because we see the need for more software and electronics engineers, both for 3T's own business in combination, of course, with IAC, and because we see opportunities to strengthen our automotive software and electronics team there. Could you also indicate how much China represents of your total sales level in the first half? Yeah. We have always, so roughly 10% of total revenue is China. I mean, clearly, as you will understand, with the EUR 3.5 million impacting, of course, predominantly China. Yeah. That's a bit distorted. Yes. Lastly, you mentioned that you clearly benefit from the clean energy transition with this automotive group. That's pretty clear. Could you give some examples within IB and IAC whereby you really see transformation in the market, whereby they make this shift towards clean energy, where you are a real beneficiary, that you're really strong position in that segment? Yeah. Within IB, it's relatively straightforward. The brakes that we produce in all various kinds and sizes and technologies are 95% or more integrated with an electric motor. That means that wherever you see electrification, now the big segments are robotics, intralogistics, obviously wind power or wherever these towers go up, a wind tower is full with electric motors and therefore with brakes. We can sell. I mean, we don't usually sell directly. We sell to, for instance, Siemens. Now, their business is on fire because they see the need for electric motors is everywhere, and therefore, integrated as we are with that particular key customer, we then get the benefit to sell more brakes. Now, there's a couple of big segments, but there is also quite a few, I would say, general purpose electro motors that end up in 30, 40, 50 different types of applications. Wherever you see the drive towards more electricity, towards electrification, you automatically get more electro motors. That's the trend that we see, and that's the trend we're investing in. There's no example whereby you do see that from a combustion engine or non-electrical components being transferred into an electrical component where you clearly benefit from? No, not like I mean, in automotive and, you know, lots of people talk about electrification, and then the chart that I also presented indicates very clearly a huge trend in a market that is trillions of size. This is much more fragmented, but at least it's interesting. Jordi Fierlings at Add Value Fund. I have a question regarding the automotive business. Profitability over there came in below last year and below our expectations as well. My understanding, that's mainly because of the volatility and demand from the OEMs and thereby the volatility and production output of your own factories. Now one would think that the OEMs and the tier one suppliers learned from the semiconductor shortage. My question, do you see an increased willingness from the tier one suppliers and the OEMs to hold more buffer stocks and thereby making your factory output less volatile? Yeah. The short answer is no. I mean, it's not to be flippant about it, but I mean, if you look at. This is a more general point. This is not for Kendrion. You look at the state of the automotive industry, the production levels are down. That's indisputable. We talked about that -12% in car produced. What the OEMs do extremely well is they use the shortages or they use the semiconductors that they have to produce the most profitable cars. This is clearly clever. Then everything else, they push down so down the supply chain. This whole volatility and also by the contracts are still the contracts that we've been working with for many years. If there is a call off in the system, you are obliged to deliver, but they have the right to cancel, and they frequently do and then reinstate it. It's highly risky to start playing, say, a game to say, "Well, I count on them canceling this, and I do not have the raw materials, and I do not have the labor to produce it." Because if the call off comes, you have to produce. It's a tricky situation. Now, the question of course then is this going to persist? My answer to that is no. At some points, now don't ask me when, but we'll see a more normalized world, and then this should all, you know, even out a little bit. It's. I mean, they're tough taskmasters, the OEMs, for sure. Fair enough. Ask the other one. Yeah. Bastiaan Rogmans at Add Value Fund. Could you maybe give an update on the sensor cleaning, how that's progressing? I understand it's for the longer term. Yeah maybe there are some updates there. Then, specifically as well, how much or can you give an indication on how much you're spending on the engineering on the, like, the new, the future products? Yeah for ACES? Because- We'll talk in much more detail on this in two weeks. For now, if you look at the three ACES-related products in automotive, Suspension, Sound, and Sensor Cleaning, and I put them in that order on purpose. Suspension is a business that we've had for eight, nine, 10 years almost. It's growing nicely. These Suspension Valves are relevant for combustion engine cars, but specifically for electrified vehicles, as they are much more heavy, and as they want to lower their footprint on the road to basically reduce the drag, the height of the car. Next is Sound. Sound, I mean, we announced in January how much orders we won. You see enormous amount of interest. It's of course a legal requirement. It's beyond just the legal requirement of sound. Well, I need to adhere to the law. It is almost like. I mean, almost, it is like vehicle identity. This is now becoming a way for makers to differentiate their brand to the consumers. A BMW or a Mercedes-Benz or a Tesla will make different noises inside than outside of the cabin as part of that brand. Very interesting. Sensor cleaning, I come to your question, that is related to the push towards autonomous driving. Now, this is not fully autonomous. Of course, ultimately that will happen. My view is that is quite far away before you will see a vehicle without a steering wheel and without a brake, so everything is fully autonomous. It's also relevant for level three, level three and a half, level four autonomous driving. Now, that's a bit longer term. We are investing in it at pace, so that means we're trying not to get ready with a full system three years before there's a real need. Now, of course, that's a bit of a judgment call, if you like. We're doing that actively. Therefore, if you look at the investments that we make in that order, Suspension, Sound, and Sensor Cleaning, Sensor Cleaning is definitely the least on a run rate basis. Over time, of course, there's still substantial investment needed. You're able to give an indication as well on like No, we'd rather not, because it's also hard because we have, you know. It's mostly in software electronics. Not for Suspension, but certainly for Sound and also for Sensor Cleaning. It's hard to split out these teams also because, you know, it's a bit fungible, right? Software guys can work on one project in one quarter and on another project in another, so. Okay. We'll give a bit more, a little bit more insight in two weeks. Okay. Maybe one more question. In the report it says outperformance against the automotive market, of course. They're comparing volume against your revenue, so there's a bit of inflation in there. Yeah. There's different markets, of course. You're more exposed to the weaker market, your European market. If you break down by volume and region, are you still outperforming the market? What's that due to? Is that, I mean, your more exposure to EVs, more high-end cars as well? You mentioned the OEMs are focusing more on the higher selling autos. Yeah. Yeah, also absolutely right. Price increases obviously. You don't need more cars for that part of revenue. It has a significant impact. But also based on volumes, we are outperforming in the first six months, and we were also outperforming in 2021. The driver there mainly is the projects that we have won in 2018, 2019, 2020. They come to the market, albeit at lower volumes than we originally anticipated because of the semiconductor shortages, but that is the main reason for the outperformance. Yeah, it's less than based on nominal numbers. I agree. Axel from Berenberg. So I had a few questions. Actually, a follow-up question with regards to the energy prices. So, we can see of course that energy prices will be at all-time high over the coming two to three years, and not only in the short term. Any actions or plans that you have basically taken already to offset this going forward? Yeah, maybe you can start with the first question, actually. Yeah. The answer is yes. Unfortunately, in most contracts that is not. This was not foreseen. But that of course does not release us from bypassing this on to the customers where we largely succeed. So for example, in IB where they're quite successful, but also in the other units, we also will pass on this effect to prices, as it will probably endure, like you say. Yeah. The other thing, of course, but that's a bit more longer-term. You saw the China building. We have quite an active program as we've had for a long term, not triggered by this energy squeeze, but related to our sustainability program to become a lot more efficient and effective, to electrify there too. That will continue as well. Okay, clear. Thanks. About the churn rate in the automotive sector, have you seen an increase over the last couple of months? Are you still at 50%? Sorry, the churn rate? Of the orders and the customers. Yeah. What do you mean exactly by churn rate? Have you been able to basically keep the same customers in the automotive sector? Yeah. Definitely. Is it still at 15%-16% as it was in the past? Or has this increased significantly over the last, I don't know, three to six months? You mean projects? So, I think that 15% relates to an average project period of eight years. Yeah, exactly. That has not materially changed over the last period, no. Although, Axel, my expectation is specifically when it comes to the older products. We haven't really talked about that, but if you look at the investment that the OEMs and the tier one are making into incremental improvements of the classical actuators for the combustion engine, I mean, for all practical purposes, that's zero. Obviously not quite, but you know what I mean. This means, because you also saw the forecast, we're still talking about 70 million combustion engines that have to be produced in 2027, so these actuators will be needed. We see some of that. We've seen it last year as well, that projects typically run for seven, eight years, they get extended. It's not very pronounced, but my expectation, over the coming years, is that these projects will actually run for quite a bit longer than what we originally anticipated. If that happens, that'd be good because, you know, depreciation, of course, is done and you know very well how to produce this. The yields are good, et cetera. Okay. Two remaining questions. The first one is about the revenue trajectory in each business. I think you had as a goal to reach 30% or 35% of group revenues in the Industrial Brakes business in the medium term. Is this still the case given the strong growth that we basically see today in this business and also in IAC, compared to the automotive growth that you initially, you know, expected, but it's actually slower and lower than expected? Sorry. No, we haven't stated specific sub goals, growth goals for these businesses. We've said on average 5% starting in 2019, by the way, with INTORQ pro forma added. That's actually a bit more than that 5% if you add that. Now, on average, we're on track to get there, and we'll talk a bit more about that in two weeks, of course. The makeup of that growth is different than what we expected ourselves two years ago. That's clear. At the same time, if you look at our order portfolio, the project line of the pipeline that we have in automotive, that we built up over the past four years, now of course, you need production levels to be up for that to materialize. But there's still a lot of pent-up growth potential in the automotive pipeline, that hopefully, and I've been saying this for quite a number of quarters now, at some point is going to materialize, but it's not related to us. It's related to the overall economic situation. Okay. Last question about the medium-term guidance that remains unchanged, despite the market environment. Is this because you were quite conservative when you announced this medium-term guidance in 2019, 2020? I don't remember. Mm. 20. Is it just because you think that the growth will be way higher in 2023, 2024, and 2025 to catch up basically from the lower levels in 2020, 2021? No, we knew when we announced this target, we were actually in a hole because we said it's 2019, which of course when we announced this two years ago, we were in the middle of this pandemic, and revenue levels were quite a bit lower. Then on top of that, we had, in 2019, we added INTORQ, so we knew that. I would say broadly, the trajectory we're on today is in line with our expectations. As I said earlier, the makeup is a bit different. It's more industrial and a bit less automotive. Johan van den Hoven, Edison Group. A few questions. I will do them one by one. You just went through the different product groups in automotive. Can you give an update about the pipeline? Normally do it at the annual results, but what about, is there any change in willingness of customers to involve with you in projects or any delays? Can you- Yeah. No, generically, the answer to that is no. The thing I will mention is that when it comes to the traditional combustion engine, it's all but gone quiet. Now, that is not necessarily bad. I just explained that. On the flip side of it is the activity level when it comes to suspension and sound is excellent, and we're fully engaged as we always are. Of course, we'll update you as we always do when we do full year results. Question for Jeroen. Can you give us an update about the CapEx plan for the full year? Second half will be higher than the first half. Yeah. Of course, in absolute terms, and if China is still on. Yeah. As always, it's tricky because it's some production lines might come in in December, or they might come in in January. It's lumpy by nature. But more than EUR 40 million is currently my assessment of for the full year. That includes more than 10 or 15 for China? Yeah. Other question is, I think, previously you've talked about the profitability of automotive or at least plus. Can you give an indication about a break-even level of automotive revenue-wise? Because of course, year-to-date down, I think the second half last year was EUR 4 million. Yeah. Well Yeah. It's very, I mean, that's extremely difficult. I mean, it's not just operational leverage. It also has to do, of course, as we said, with the volatility. And it also hinges a lot on the investment we do because we are very adamant that, you know, we are in this for the long term, for the medium to long term. We are believing in the ACES, in sound suspension and sensor cleaning, potentially other products that could come later. So it's very important, in our view, if you know, you're building a company for the medium to long term to keep that investment level up. With that, of course, as variables, it's difficult to give you a number. Now, it's clear that if this volatility disappears and if the production levels come back, you know, Jeroen mentioned this, the first half of 2021 from an automotive production perspective was actually very strong, specifically Q1. The comparable there is difficult. In Q2, the semiconductor shortages hit us in Q2 or second half 2021. It's very difficult to give you an absolute level because of the volatility and because of investment we are making, and we will continue to make in the products for electrification. Okay. Clear. Last question. In the past, we've talked about valves for hydrogen applications. Yeah. Can you give an update on that, please? Yeah. We have that technology in-house. We see very little activity. In automotive, it's all but stopped. A little bit on commercial vehicles. This is going to be, in my view, there will be applications for this, but think about remote, somewhere in a remote Australian outback setting where you need to create a way to generate energy without the sun, if the sun is not there. That to me, I can see that. Don't forget that in order to operate a fuel cell at today's technology, you need to store this hydrogen at around 600 bars. That's extremely difficult and extremely dangerous. Thank you. Carlo Bogaart, TTL Company. You're starting up several new production facilities, and can you say anything about the risk of starting up these facilities? Secondly, what about the capacity utilization, where you expect to start? You're talking about specifically about China? China and also in Romania and Villingen. Maybe let's start with China. China, clearly, I mean, you've seen the pictures. It's a sizable investment. It's a sizable building. There's always risks related to that in the sense that we are dealing with COVID, and building projects are notoriously difficult to manage. We're doing very well, but it's also the case that we have made contingency plans. Suppose something happens and this building gets delayed inadvertently, we have our two factories in Suzhou and Shanghai today, and we can keep them a little bit longer. There's always risk related to the move. We've just done one from Eibiswald to Villingen. You need buffer stock. You never know. I feel that we are quite experienced in managing these types of transitions. I'm very confident that we'll be able to do this in China as well. Sibiu is a bit of a different story. We're moving the lines from Eibiswald into existing facilities in Sibiu and in Villingen. Yeah. Now, there's risk related to that. I'll give you an example. There were nine trucks moving from Eibiswald to Villingen. What if one of these trucks with all this equipment gets into an accident? Now you have a problem. Now, typically, that doesn't happen, but who knows? There's risk. That risk, I would say, compared to building, putting up a new building, fitting, outfitting, and then moving the two buildings to two facilities inside is much more manageable. The capacity utilization when they are operational? In China, that factory will be around half full. We built it because we see so much growth opportunities. We do expect strong growth. We look at our product pipeline, and it's our ambition within a reasonable number of years to fill that factory. That current 27,000 square meter factory will support around EUR 100 million in revenue. Okay. We can double in size there, and then there is the possibility for this phase II. We'll first fill phase I. Okay. Thank you. Yeah. Any more questions? Thank you. It's Philip Holter from Monolith. First of all, a short question. Can you remind us of the savings in Austria from the move out of Eibiswald? Yeah. Roughly EUR 4 million on a yearly basis. EUR 4 million. Yeah. Right. My second question is, if I read the press release maybe a little bit between the lines, it sounds a bit like you are ramping up investments in R&D. I understand the CapEx, but it also sounds a bit like you are Increasing or speeding up investments in, I don't know, product development, R&D. Is that the case? Should I read it indeed like that? We do. We do it in IB, and we do it in automotive. Now in automotive, it's related to the products that we won last year. Jeroen already mentioned there it is, we hire people, we try to hire people. Software and electronics engineers are scarce, but we're also using external companies. That is, you know, that fluctuates, and we, of course, have full control over that. In IB, we see so much opportunity for growth that we're investing there, both in the R&D team, but also in more capacity in our European facilities, predominantly in Aerzen and in Villingen, but also in Atlanta, where we're growing fast as well. Hopefully it's not between the lines. It should be right there. If I may then a third one, you just said the CapEx was going to be slightly over, well, over EUR 40 million, but in the press release, you were also saying that you were going to fund it out of operating cash flow. That means that the Free Cash Flow is expected to be positive. Yeah. In the second half year. Martijn den Drijver, you are here. The question is on a full year basis? We'll see. Thanks, Martijn. Like I said, I mean, it's especially on the CapEx, but also on inventory, we have clear targets to drive it down, but we also have to reflect reality, and that it's still quite a volatile environment, and we also need to protect the revenue. But it will not be EUR 10 million plus or something. Okay. To get back to the CapEx, what you said for this year, then more or less for next year, we should expect the regular one of about EUR 20 million and then the last bits and pieces for China adding up to some EUR 25 million? Yeah. I think China will be really almost done, let's say materially done this year. Next year, it will be roughly around depreciation level normally, yeah. Thank you. While the mic is still here, also a few additional questions. The Chinese business is producing local for local, right? right? There was no impact on the currency. There's still some special imports. We have a little bit there. At this moment, we have some tailwind from the currency, but it's relatively minimal. We are investing as we speak. Part of the investments that will ramp up in the second half year will also be for localization of certain brake types in China. There's still some. We have some tailwind currently, but the majority is already local for local. Okay. You basically refinanced in the first half. Yeah. The majority is now well away. Yeah. That's nice. Are there any, let's say, refinancing costs in the first half in the net interest expenses? Not in the interest expenses because those transaction costs you spread out over the years. There were what I mentioned of the EUR 600,000 finance costs that were normalized, the majority of that was the unamortized portion of transaction cost of the last facility. Okay. On the Schuldschein, do you also have bank covenants on that one? Yeah. They mirror completely the facility agreement. Okay. Yeah. Thank you. Any more questions? No, then I thank you for your attention and for the many questions. If you have any follow-up, you know where to find us. Thank you very much. Thanks.