Good day, and thank you for standing by. Welcome to the Kendrion Q3 2023 Results analyst conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Mr. Joep van Beurden, CEO, Kendrion. Please go ahead. Thank you very much, and good morning, everybody. Welcome to Kendrion's Q3 2023 results teleconference. My name is Joep van Beurden, Kendrion's CEO, and with me on the call is Jeroen Hemmen, our CFO. I will start the meeting with some remarks regarding our Q3 results, after which we'll have time for Q&A. We will post a recording of this call and of the Q&A on Kendrion's website as soon as is practicable. I would like to draw your attention to the fact that certain statements contained in my remarks and in the answers to your questions 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. Before reviewing our Q3 2023 results, I would like to reflect a little on the current economic and market environment. Unfortunately, and for many quarters now, the overall trading environment has not been great. We highlighted this at our first half and Q2 2023 presentation in August as well, when we mentioned a slowing Eurozone with a risk of recession. We mentioned that the German manufacturing was slowing down to levels reminiscent of the pandemic period, and we mentioned a lackluster economy in China. We are still in that mode. On the more positive side, order patterns in automotive became more predictable, which helped us in terms of production planning, and our relentless focus on increasing our product prices has helped achieving a better Added Value Margin. In this tough economic environment, we have successfully protected our profitability and cash flow. Looking at our business groups, Industrial Brakes, after 2 years of stellar growth, now encounters a significant revenue slowdown related to the lower economic activity in Germany and China. This is particularly clear in the industrial automation and wind power segments. Industrial Actuators and Controls remained relatively stable, with revenue 3% lower than last year and supported by the strong performance of 3T, the customer-specific electronics and embedded systems company we acquired in 2021. We partially mitigated the decline in industrial revenue through revenue growth in our automotive group. Automotive increased its Added Value Margin as we implemented further sales price increases. The split of automotive into Core and E works well. It provides us with additional transparency, enabling us to enhance the focus on growth in E and on profitability in Core. In China, our new factory is now fully operational, and the six China-based automotive projects are ramping up according to plan. As you may have seen in the press, at the end of August 2023, we were the victim of a ransomware attack. Our IT team and production staff across all locations literally worked day and night, and we managed to resume production within one week. Besides some external consulting costs and a temporary increase in working capital caused by a week-long delay in our invoicing process, we experienced no substantial financial impact from the attack. Importantly, all customer deliveries were made without significant delays. We are currently implementing additional safeguards to further enhance the security of our systems. Now, let's drill down a bit on the financials. Revenue in Q3 2023 was EUR 124.5 million, down 6% from EUR 132.9 million in the same period of last year. As mentioned, the decline was mainly a result of the slowdown in economic activity in Germany and China. When measured at constant exchange rates, the revenue decrease was 5%. Higher average sales prices played a significant role, contributing 5% to group revenue. In automotive, the contribution of sales price increases was 8%, and in IAC, the contribution was 5%. In IB, sales prices remained stable. In automotive, revenue of Automotive Core grew by 8% pro forma year-on-year to EUR 47.2 million, while Automotive EV revenue was EUR 17.6 million, which is a 7% pro forma increase. The growth in Core is entirely attributable to sales price increases, whereas in E, the rise in E resulted mainly from higher volumes. Adding this, the revenues of our automotive group increased by 7%, rising from EUR 36.3 million in Q3 2022 to EUR 64.8 million in Q3 2023. In industrial, and especially in IB, the deterioration of the macroeconomic conditions hit hard. After two years of 20% per year growth, IB saw a sharp year-over-year decrease by 30% to EUR 28.2 million, compared to EUR 40.0 million a year ago. Industrial automation and wind power segments were especially weak. IAC's revenue is less exposed to the Chinese market and is also more diversified, with approximately activities in 30 different market segments. Good growth in control technology, aviation, medical applications, and in 3T, helped to offset weakness in industrial automation. As a result, IAC revenue decreased with 3% to EUR 31.5 million, compared to EUR 32.6 million a year ago. Looking at the year so far, for the first 9 months of 2023, and because of the strong start to 2023, group revenue grew with 2% to EUR 398.2 million. Automotive revenue increased by 9% to EUR 197.44 million, with Core and E growing by 8% and 13% respectively on a pro forma basis. The revenue in IB decreased by 9% to EUR 103.0 million, while revenue in IAC increased by 3% to EUR 97.8 million. One of the positive developments in the quarter was the increase of our Added Value Margin after six quarters of inflation-related pressure. The Added Value Margin saw improvement in all business groups, driven by the combination of the implementation of sales price increases and the positive sales mix. This resulted in an added value as a percentage of revenue for the group of 48.7%, 140 basis points higher than the 47.3% in Q3 2022. Together with our actions on cost, this better Added Value Margin mitigated the profit impact of reduced revenue to some extent. Normalized EBITDA was EUR 13.1 million, compared to EUR 14.9 million in Q3 2022. Depreciation charges decreased by EUR 0.3 million to EUR 5.7 million, leading to a normalized EBITDA, EBITA, of EUR 7.4 million, which is 5.9% as a percentage of revenue. We normalized EUR 0.8 million in operating expenses, and these costs were related to the move to the new facility in China and to one-off advisory costs incurred to deal with the ransomware attack. For the first nine months of 2023, normalized EBITDA was EUR 42.8 million, which means the normalized EBITDA margin of 10.7%. In 2022, this margin was 11.6%. Depreciation so far in the year, slightly increased to EUR 17.3 million, resulting in an EBITA of EUR 25.5 million, which is 10% lower than in the first nine months of the previous year. Normalized net finance costs in the first nine months of 2023 were EUR 7.1 million, which is a significant decrease from EUR 1.9 million of the same period last year, mostly because of the substantial increases in interest rates. Normalized income tax expenses for the first nine months of 2023 were EUR 4.1 million, meaning a normalized effective tax rate of 26% compared to 28.7% in the first nine months of 2022. The normalized net profit before the amortization of intangibles arising from acquisitions decreased to EUR 13.9 million in the first nine months of 2023, down from EUR 19.0 million in the same period of previous years. The total net debt, including IFRS 16 lease liabilities, amounted to EUR 160.2 million at the end of Q3 2023, which is a decrease of EUR 0.7 million compared to Q2 2023. This decrease in net debt was driven by a positive free cash flow, EUR 3.0 million, partially offset by increased lease liabilities. Despite the temporary negative effect from the ransomware attack, which caused a one-week delay in customer invoicing, working capital was reduced by EUR 1.4 million. The year-to-date capital expenditure amounted to EUR 20.9 million, and this figure was above the depreciation level of EUR 17.3 million over the same period, but included EUR 6.3 million for the finalization of the China building. We expect no further costs related to this building. The leverage ratio at the end of Q3 stood at 2.9, compared to 2.8 at the end of Q2, 2023, well below the financial covenant of 3.25. As of the end of the third quarter, Kendrion had EUR 49 million available in liquidity, comprising cash and undrawn credit lines. We remain focused on reducing investments not directly related to revenue, while further reducing the amount of cash absorbed in the working capital, and expect to reduce debt significantly in the final quarter of the year. As to the outlook, we expect trading conditions to remain challenging in Q4 and the first half of 2024. So our focus will continue to be on strengthening cost management, optimizing working capital and prudent investment to safeguard our profitability and to maintain a strong financial position. Our cost saving measures include the implementation of Kurzarbeit in some of our German-based facilities and reductions in discretionary expenses. As we address these short-term challenges, we will remain committed to strategic investments across our business groups to ensure we capitalize on our longer term growth opportunities. We maintain a positive long-term outlook, driven by the global shift towards cleaner energy sources. We are confident that this rapidly advancing trend will create significant organic growth prospects for all our business groups in the coming years. Now, Melody, can you now open the line for the Q&A session? Thank you. As a reminder, to ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. Please stand by while we compile the Q&A queue. Our first question comes from the line of Martijn den Drijver from ABN AMRO - ODDO BHF. Please go ahead. Thank you, operator. ABN AMRO ODDO, but it is, you spelled it right. Good morning, gentlemen. Good morning, Martin. I have three questions, if I may. The first one is with regard to the challenging conditions in the first half of 2024. What causes that cautious statement? Is it RFQs, RFPs, activity levels, talks with customers, or is it actually already visible in the order intake? And the second element to that question is, can you provide a bit of color, as to those developments, per segment? And I'll do them one by one, if I may. Okay. You mean your questions? Yes, please. Yeah, yeah, of course. So, yes. So let's first talk about... So what is visible to us is that the challenging economic environment as we experience, and I think we're not alone in this, is persistent now in Q4. I don't think anything surprising there. You can see that in all newspapers and with many other companies as well. To be honest, in the first half of 2024, of course, we don't know what the situation will be economically, macroeconomically, geopolitically. I would say we all read the same newspapers, and it's certainly not yet apparent in our order book. We do not have that kind of visibility. So I would say we are prepared for this to persist. In our view, if you look at the current state in the world with the recent war that emerged in the Middle East, et cetera, it could well be that these conditions continue on, and we're prepared for that. So we are preparing for this situation. Of course, if we're wrong, and let's hope we are, and the economy in Q1 and Q2 is doing better than what we now see, then we will respond to that accordingly. That's it for- As to the segment? Yeah, you said per segment? Yeah. So, currently what we see is, if you look at industrial, this is where we have the most headwind economically. I- Mm-hmm. Also want to add to that, that we looked extensively if there is also something going on in terms of our market share or position in the market. That is emphatically not the case. So this is an overall demand slowdown, and then specifically, as you heard me say in the prepared remarks in Brakes. Now, to be fair, Brakes has grown with 20% two years in a row, which of course is also not sort of the normal cyclicality that you see. And now we've seen a 30% slowdown year-over-year. So it's a little bit in line with that increased volatility, and it's specifically in the machine building environment, and it's specifically in wind power, which I also think is well documented. If you look at, you know, all the news, the news flow on what's going on in wind power globally. Mm-hmm. At the same time, if you're prepared to take a bit longer view, I think wind power has enormous growth potential because it's one of the key ways to generate cleaner forms of energy, and we're very well positioned, and we continue to be very well positioned to make use of that trend. In IAC, and we expect it exactly the same in the first half. You know, it's more balanced both on the upside in the first 2 years as now on the downside, simply because we're hedged there, because we're active in so many different segments. And automotive, you know, we expect, and this is another trend that will help us in China, and we talked about that too. We are currently ramping six-... automotive, new automotive, projects, all in E. So we are expecting that if the stable trading environment automotive persists, or it could even be a bit better, then into 2024, we, we expect some growth there on the back of these new projects that are currently ramping, according to plan. That's great. Thank you. Moving on to my second question, is more for Jeroen. With regards to working capital, what should we expect in the fourth quarter? Because I was a little bit surprised to see that inventories actually went up in the third quarter, too, relative to the second quarter. So what should we expect for that, fourth quarter, in which you already mentioned you will have strong free cash flow? Yeah. So, and also, when I made that statement, it was also clear, at least to me, that strong cash flow would be tilted also towards Q4. Partially because if you look especially on inventory, in order to reduce that in tandem with activity levels, with revenue levels, it simply takes some time. Initially, if the revenue is not there, you even have some upward pressure on inventory. I think we have succeeded in limiting that upward pressure, but before it goes down, yeah, it simply takes some time. In addition, especially on the receivable side, we had a temporary issue which has cost us a couple of million EUR on working capital, temporarily related to the cyber attack. So we could not send invoices for one week. Mm-hmm. So that means that everything with a payment term of around 30 days is then passed into October, so into Q4. So I think, yeah, for me, basically in line with the expectations and for Q4, yeah, difficult to say an exact number, but yeah, at least EUR 10 million, that reduction should be feasible. Okay. Thank you for that. Then my third and final question. The EBITDA in the second half of this year is likely to be lower than in the first half. Then if you look, especially what you said, Joep, about the challenging market conditions in the first half of 2024, possibly, but, you know, that's what you're, you're mentioning, it's highly likely that that EBITDA will be lower than in the first half of 2023. And it is, if you take that into account and you look at your net debt, and there's also the seasonal cash outflow, usually in the first half, back of the envelope, I come to 3.2, 3.1, excuse me, 3.1 times net debt to EBITDA. So I was wondering, you've already mentioned, Joep, that you're continuing with that strategic investment plan. What other measures can you perhaps think of in order to increase headroom, perhaps even dividends? Yeah, it's a little bit premature to talk about that, but rest assured, as you know from us, and this is true, was true in Q2, it's true in Q3 and Q4, and this will not change. We are very much aware of the dynamics there. So I talked about Kurzarbeit. There is other ways of reducing costs. Working capital is going to be an extremely important tool that we have, and also on investment. So let me be clear, that the investments that we will do are related to revenue and to the long, indeed, and revenue is almost by definition a long-term investment. But other, any other investment, if we can avoid it, if it's more, you know, we can, we can postpone it by a quarter, two quarters, or a year, we will do so. Mm-hmm. So, we have quite a few tools at our disposal that we can and we will use in order to make sure that our financial position is secure and strong. That's it from my side. Thank you very much, gentlemen. Thank you, Martin. Thank you. We'll now move on to our next question. Our next question comes from the line of Timo Ellis from Kepler Cheuvreux. Please go ahead. Yeah. Hey, guys. Good morning. Thanks for taking my questions. Thank you. First question I have is regarding E, so the division that was actually able to grow on volumes. Is there any product category that's standing out and is growing more, or is there some weakness in others? Or is it across the whole subdivision that you've seen some volume growth there? Yeah, Tim, thank you for that. So no, no, it's across the board, and I would like to point out, I mentioned it earlier, so that we have these six projects ramping in, basically, it's starting now. So we see some sample revenue that will help us in Q4, but it's not yet material. But then our expectation is in the course of 2024, that's going to be quite substantial. And that is also basically in all categories. Now, when as 2024 will, we will probably give a bit more color on exactly where the ramp is. But for now, I think for all practical purposes, all three elements of E, it's a very target-rich hunting environment. We're winning projects there. As you know, in February, we're going to also share with all of you how much we've won in 2023, so that is looking, that's looking good. Okay, great. So automotive is doing pretty okay in China then, and what about industrial? I assume it's also there, it's under pressure there as well. How does the utilization of your new facility look like? And with regards also with capacity, do you see some pressure on the margin coming from underutilization there, or is that not an issue at the moment? No, no, that's not an issue. So the whole point of this new factory that we've moved into over the past month is that we basically doubled our capacity, and then capacity is expressed in floor space. So that means we have about half of this factory's floor space now filled with the existing lines that we had when we opened this facility in May. Of course, these six new projects that we talked about for automotive, they're being put in, and they're already in that new facility. So we're now over 50% of that floor space capacity, if you like. And our ambition is, as we mentioned, to fill up this facility over the next three, maybe four years. Depends also, of course, a bit on the economic developments in China. But with these six project ramping in 2024, we're well on our way to actually do that. Now, the overall situation of the existing business in China resembles very much the global picture. So slower in industrial and better in automotive. And of course, then specific to China, with all these new projects ramping, that's where we expect next year, the China-based growth to come from. Okay, clear. But it's not an issue that you now open up this bigger facility, and in the end, I mean, due to the macro situation, that you can't... you have less operational leverage than you were hoping for, so it's not that you have- No. negative mixed effects coming from that side? No, no, not, not in any- Okay ... material way. Other than that, of course, if revenue is down, you know that, but that's the same everywhere. Yeah ... than to take action. So, no, nothing there from a fundamental, if you say, long-term perspective, nothing has changed. We're very, very happy with that facility, very happy with the position that we have in the various markets, and we fully expect this factory to fill up over the next couple of years. Okay, great. Then, last question for now, also with regards to your margins. So the Added Value Margin improved, as you said, on the back of better pricing. Do you also see a relief of input cost inflation, what you can see with some other industrial manufacturers? And do you see further labor cost inflation going forward, or is that also behind you now? Yeah, we do start to see indeed, less pressure and even here and there, some possibilities to negotiate more favorable prices on the input. And you also saw on the price increases, that on the brake side, that there are basically prices were flat, and that literally also had to do indeed, with stabilizing or even decreasing input prices. So yeah, that should support Added Value Margin going forward. And on the wage inflation, yeah, obviously in current economic circumstances, inflation has come down, and so we expect less pressure on that, as from 2024. Yeah, the only element which is still an impact of the wage tariff agreement in Germany of last year is that we have to pay another EUR 1,500 per employee in Germany. So that will happen in Q1. But other than that, yeah, we think it will have a much more moderate impact than it had been the previous year. All right. Thanks a lot. That's it for now. Thank you, Tim. Thank you. We'll now move on to our next question. Our next question comes from the line of Johan van den Hooven from Edison Group. Please go ahead. Good morning, it's Johan from Edison Group. Morning, Johan. I have a few questions. Good morning, Jeroen. I will ask you question one by one. If you look at Industrial Brakes, that is a significant decline. Have you seen any difference in market conditions declines, if you look at the single months in the quarter, July, August, September? Or is it throughout the quarter? Is it getting worse? Is it only August, dramatic? Can you explain a bit more over there? Yeah. And is it you mentioned two market segments, or is it also perhaps a relatively large customer which temporarily orders a bit less? Yeah, I think with declines like that, Johan, we singled out two market segments where it's particularly strong. Yeah. But it's, it's broader than the, than just that. It, it's across, most of our customers, including, of course, the, the larger ones, because it has to do also, if you look, for instance, at the export numbers of the German machine building industry, where lots of these, electromotors and therefore our brakes end up into, you know, hasn't been, just hasn't been, been great. Now, to be fair, you, you, of course, need to compare that to, to, to two years where you saw also, extraordinary growth. Now, as to your, your question, it is... It feels as if we, we are, you know, because, throughout the year, we started off reasonably okay, then Q2- Mm ... we went down, Q3 we are down again. It feels as if we found sort of a more stable level. Initially, there was also some destocking going on, that is clear. Now, you can't destock forever, so we seem to be done with that.... So throughout Q3, I would say it was reasonably stable at this level. But I mean, you know as well as I do, you never know, right? So there wasn't. It's certainly not still, you know, that you say August, September, it's July, August, September, it's going down, down, down, and we're still in that mode. It was at this level effectively throughout the quarter. Okay, thank you. Next question is what we also all read in the paper or hear from other companies, that they expect a question about automotive. That perhaps the plants will be closed a bit longer in comparison to last year. Is that what you hear as well, or hear from your clients? Yeah, it's, it's, I mean, always Q4, you know, this is, this is always the big riddle every year around this time. It's highly unpredictable. Sometimes you get the mood music that it's all gonna shut down a week before Christmas, and then it doesn't. It also happens the other way around. People are bullish, and then all of a sudden they shut down anyway. It's clear that in the current environment, in my view, is that December is going to be seasonably weak, as it always is. But if anything, you know, as I mentioned, there's a stable outlook. If this happens, then it's gonna the revenues are gonna show up in Q1. So I don't see any deterioration of the automotive market anytime soon. And of course, the tailwind we have here is the ramping projects, and that will help us a little bit in Q4, and hopefully a lot more in 2024. Now, just a very detailed question, perhaps. You mentioned 6 new products, and I can remember that I think in the previous meeting you mentioned 7, or I can be mistaken, or does number 7 ramps up later? In Europe, we also have some project ramping, but then I arrive at nine, actually. So, yeah. Ah. It's nothing, we lost nothing. That is at least I was gonna say, it could be that at some point we misspoke a couple of quarters ago, Johan, but it's six, and they are ramping in China, as you just pointed out. Yep. They're ramping as we planned. Okay. Last question for now about the gross margin. You mentioned, of course, the higher, higher pricing levels and also the product mix, that if automotive grew faster than industrial, how does that work? Or is it a mix within industrial? Yeah, it's the latter. And one example is, for example, 3T, which has an exceptionally high Added Value Margin because it has no production, basically. And they had a good quarter, they have a good trajectory, and that actually influenced even the Added Value Margin on group level. So topics like that, and also within Automotive, within Industrial Brakes, the structure was actually quite favorable. Yeah. Okay. Thank you very much. Thank you, Johan. Thank you. We'll now move on to our next question. Our next question comes from the line of Tijs Hollestelle from ING. Please go ahead. Yeah, thank you. Morning, Joep, Jeroen. Good morning. Yeah, I also had some detailed questions on the different cost segments. I think you discussed already with Timo. So if I understand this correctly, on the employee costs, basically what we have seen in the second and third quarter is a good proxy for the fourth quarter. And then there is an one-off makeup in the first quarter of next year because of the EUR 1,500 you have to pay to your German workforce. Yeah, which we have to accrue partially in Q4. So for Q4, I think it's yeah, your expectation is reasonable, but that is then a mixed effect of that accrual for that EUR 1,500, of which the cash flow will be in Q1. But obviously on, as we have also mentioned, in one of the larger factories, we started with Kurzarbeit, so that will have an offsetting effect. So fairly stable is a good assumption. Okay, yeah, that's helpful. And then on the, on the other operating costs, and maybe it's a strange question, but if I look at the past, couple of years, actually, then the, absolute euro amount in the fourth quarter for Kendrion is the highest. And I'm not sure whether that is in, yeah, is that a business trend, or can we assume a similar amount for this year? Or should I look at the other operating costs in the P&L in the fourth quarter? So yeah, there are some lumpy elements in other operating costs. I cannot think of one structural reason why that. So that has to be then, that is a coincidence why in Q4 it tends to be higher. Also, I would say Q3 is a reasonable proxy for Q4. Of course, things can happen, but yeah, I would say it's a fair proxy. Yeah, it is—for me, it's kind of a trend. It's since 2018, every single year, and sometimes the difference in euro, in absolute euro terms, is quite significant. Yeah, but there's nothing in the structure. So if you look at the components there, and I agree with you with this, since 2018, but at least in one of the years, we did an acquisition in Q4. So yeah, there's no structural reason why it should be higher and at least for this Q4, yeah, like I said. Then it’s not a government bond or something else, so stuff can happen, obviously, what influence the cost levels. But yeah, Q3 would be a good proxy for this Q4. Okay. Yeah, the reason I'm asking is, of course, also for the rolling 12-month EBITDA going forward and your net debt levels, so therefore it's a bit more important, right now. Yeah. Yeah. On a kind of headline feeling, if the revenues in the fourth quarter are declining by 7.5%, you're probably gonna report a negative profit before tax. Is that a fair assumption? You know, I don't want to be drawn into these types of, it would be guiding the market, but rest assured that, I mean, as I mentioned various times in the release and also in the prepared remarks, we're very focused on costs, and we're very focused on protecting the profitability, and that is not going to change in Q4, Tijs. Okay. And on the depreciation, it was a little bit lower quarter-on-quarter. Intuitively, I would say that it's increasing because you're, of course, ramping up in China, and the new factories are open. So what are the dynamics? And probably also lower, let's say, utilization on equipment because of the loss in volume. But what is the depreciation level going forward? Yeah. So indeed, with the China building, we have been investing above depreciation. So it will be a little bit up, but not significantly. And utilization rates do not necessarily influence the depreciation. So the depreciation is basically your acquisition cost of the equipment divided by the number of years. And it can also be, yeah, a bit lumpy, yeah, if you have one piece of equipment with economic life of six years, and that runs out of depreciation, and then it can have quite a negative or a positive impact in that sense on depreciation. It's somewhat lumpy, but yeah, for Q4, I would go for slightly higher because of indeed the investments we did in China. Okay. Yeah, that's, that's clear. Yeah, and then, basically moving to the, to the cash flow, because I, I do see the higher, interest expenses, of course, because of the, the rate environment. Is there, let's say, are there material differences in the to-be-paid interest in the cash flow statements? In the to-be-paid interest? Yeah. Sometimes you see a difference. So there can be a, let's say, a deferred impact on the actual cash outflow on the interest expenses- Ah. but also on taxes. Is there, let's say, an yeah, a big chunk of payments to be done in the cash flow in the fourth quarter? No, no. So, no, I would... So in on the tax in Q2, we had quite a significant outflow. Other than that, it's reasonably, yeah, let's say, even through the year, and also with interest. So some of the loans, they have a rollover in at the end of the quarter, some of the beginning of the quarter, so but there's no... It's relatively evenly spread. Okay, Jaap, so basically in detail, in your control are the CapEx and the trade working capital management, which can influence the free cash flow of Cameo in the fourth quarter and probably also in the first quarter next year. Yeah. And in the fourth quarter, it will come down significantly, also due to the lower activity levels in December. And we started early with reducing investments, also to lower the working capital. But as I mentioned before, yeah, that really, you really see that in the numbers. It takes several months or even quarters, because, for example, on investments coming in now are. It's mainly equipment that has been ordered in the beginning of the year or even in the end of last year. So that positive effect will also be seen in the coming quarters, and the same is with inventory. It takes time, but once it comes down, you will see that in the cash flow, yeah, in Q4 and in Q1. Yeah. Okay, that's perfect. Now, one final question: the assets held for sale on the balance sheet, can you remind me what it was, and are you, let's say, close by in transaction on that? That's the building in Austria, and yeah, so far it's still held for sale. So yeah, we have engaged with a real estate agent. We were close to selling it, but yeah, so we need to start that process again. Okay, but it is only showing up on the balance sheet if there is, let's say, genuine interest. That's the accounting rule. Yeah. You said it. There's that. There is, there is definitely genuine interest. Yeah. It's a good building. Yeah. It's a good building, and like I said, so, yeah, we were close with... But for, yeah, for some reason, so that bounced, and then now we start again. But yeah, the idea is to sell that in the coming quarters. This building will be sold. Okay, that's good. So more cash inflow then. Yeah. Yeah. Thanks a lot. Yeah. Thank you, Tijs. Thank you. Once again, to register a question, please press star 1 and 1, and to cancel your question, please press star 1 and 1 again. We'll now move on to our next question. Our next question comes from the line of Timo Ellis from Kepler Cheuvreux. Please go ahead. Yeah, hi. Well, just one last question to wrap it up. Looking at your targets for 2025, especially the margin target seems quite ambitious. Has your view on it changed at all, or are you still optimistic that you will achieve the 15% eventually? Yeah. So Tim, as you saw, we haven't rementioned the targets in this, Yeah ... press release. I'm going to make the same remark as the one I made at the end of Q2 in late August. Yeah. That is, these targets are very much in our grasp, in the sense that the growth is available, and, and if the growth is available, that means also the operational leverage will get us to the 15%. We're very confident of being able to do that. What I will say immediately, we will, at some point, need to have a more benign, favorable economic situation. And I'm not talking about this, a big boom or anything, but, but we've been now in, in, either in the doldrums, moving sideways, or flirting with recession for quite a while. You know, we had the two COVID years, we had the invasion in the Ukraine. Now, again, some people talk about the fact that Europe is already in recession. That is a very difficult environment to achieve the kind of growth that we think is available to us based on the position that we have with the products for the energy transition. So with that disclaimer, you know, if 2024, and at some point in Q2 or Q3, we get more favorable economic conditions, we will absolutely be in a position to hit those targets. Okay, clear. Thanks a lot. Thank you. Thank you. We'll now move on to our next question. Our next question comes from the line of Maarten Verbeek from The Idea. Please go ahead. Morning, it's Maarten Verbeek of The Idea. Firstly- Good morning, Maarten. Morning, morning. Firstly, on China, a couple of questions. First of all, did you still have a major CapEx in China for your new fab? No, EUR 200,000 related to solar. So not major in Q3. First of all, I agree with Johan, and I've just counted the balloons in your presentation of the first half year, because there are seven projects. Okay. Having said that, when you start ramping up on those Chinese projects, will that have a negative impact on your working capital that you have to produce more to service your customers? Always. But on balance, I would say it's positive for the cash flow. So, yeah, you will have to wait until you get your money and you have to pay for the inventory, but on balance, the ramp is such that it will generate positive cash flow. Okay. And then, next to that, also concerning working capital, you said that expect debt reduction of at least EUR 10 million. Historically, Q4 is always a very good quarter for Kendrion- Yeah ... with respect to working capital generation. And on average, a drop of some EUR 20 million, close to EUR 20 million, can be realized. That's again, much more than the EUR 10 million you mentioned. Why such a modest number provided to the market, whilst there is much more to be achieved? Jeroen said, at least, Maarten. So, you know, we are, we don't like to sort of be too specific and guide, but rest assured that this has complete focus, not just by us, by the whole business. And, we will push the working capital and the cash flow in general, as hard as we can. Yeah. Um- The EUR 20 million, you need to show me when that happened, but okay, we can do that offline. And then also concerning working capital, obviously it has been elevated due to market circumstances we have seen lately. When does Kendrion expect to return to a more normal level we have seen in the past, that throughout the year you will be at some 30%-40% of revenues and at year-end, below 10%? That pattern, is it to be expected as of 2024? The percentages you're referring to there are percentages when automotive had a significantly higher share of in the Kendrion Group. Yeah. And so yeah, many things to be said about automotive, but on working capital, it's really much better than industrial. So, just-in-time deliveries, for example, inventory is much lower than in the industrial units. Mm-hmm. So, working capital is normalizing. So what you see now is basically a reflection that stock is a bit, yeah, stubborn to come down when the revenue comes down. So like I mentioned, it takes some time. Receivables and payables responds more directly, but I think the impact from high inflation, from shortages, that is already done. And so as from Q4, Q1, I would expect normal working capital levels. So no excuses from inflation and stuff like that. But yeah, below 10%, I do not think that is in the works anymore with 50% industrial. Okay. Then with respect to the sales development of Industrial Brakes, -30% in the quarter, do you have a feel how much of that decline is related to inventory that your clients have reduced their inventory levels, and how much is related to real market underlying market demand? Yeah, the honest, the honest answer is no. It's very, very difficult, certainly in, I mean, it's hard enough in automotive where you have larger customers, but in brakes, where you have a proliferation of many, a long tail of many smaller clients. Quite a bit of volume goes through distribution, where it's even more difficult. So it's hard to say. My sense is, because we do look at it, obviously, as I mentioned earlier, that initially in the year, some of the slowdown was related to a combination of the market and destocking. We seem to have come to an end of that. Now, the other thing to Mark, to remind you of, and of course you know this, is the 30% is always relative to a year ago. Mm-hmm. We're also internally looking at the trends quarter-over-quarter, just to get a feel for that. So our sense is the market is clearly down from where it was. Now, that's not just us, that's everywhere. There's industrial production, wind power, the export levels in Germany, the export levels even in China are down. There was another news on that today. But we feel that this is now at a level where it's at least not going down further, and that the destocking is behind us. Similar question, more or less for Automotive EV. If I just look at the automotive sales, they have remained fairly stable at a very good, solid level. But still, when I look at the revenue development of Auto EV, it has been pretty volatile, from 6% to 30% back to 7%. Why that big swing? Yeah. Quarter over quarter, Mark, as you well know, there's very little to say. I would point you to the, the first nine months of the year, and I would point you to the fact that we have six projects ramping, in China in 2024. And, you will see then, through the quarters, you will... My, My, our expectation is you will see that EV growth number go up, quite a bit. And then the seventh project will ramp up next year? We'll look for the seventh. We don't, rest assured, we will certainly look for the seventh, and the eighth, and the ninth, et cetera. Okay. Thanks for answering the questions. Thank you. Thanks. Thank you. There are no further questions at this time, so I'll hand the call back to you for closing remarks. Well, thank you all for your interest and your questions. If you have any follow- on, then you know where to find us. Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect. Speakers, please stand by.