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Edited Transcript of CON.S earnings conference call or presentation 9-Aug-19 7:00am GMT

Half Year 2019 Conzzeta AG Earnings Call

Zürich Aug 19, 2019 (Thomson StreetEvents) -- Edited Transcript of Conzzeta AG earnings conference call or presentation Friday, August 9, 2019 at 7:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Kaspar W. Kelterborn

Conzzeta AG - Group CFO

* Michael Stäheli

Conzzeta AG - Head of IR & Corporate Communications

* Michael Willome

Conzzeta AG - Group CEO

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Conference Call Participants

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* Daniel Koenig

Mirabaud Securities Limited, Research Division - Analyst

* Torsten Sauter

Kepler Cheuvreux, Research Division - Head of Swiss Equity Research

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Presentation

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Operator [1]

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Ladies and gentlemen, welcome to the Conzzeta Half Year 2019 Earnings Conference Call. At our customers' request, this conference will be recorded. (Operator Instructions) May I now hand you over to Michael Stäheli, Head of Investor Relations, who will lead you through the conference. Please go ahead, sir.

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Michael Stäheli, Conzzeta AG - Head of IR & Corporate Communications [2]

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Yes, good morning. Welcome to our half year analyst call. I'm Michael Stäheli, Head of IR and Corporate Communications at Conzzeta. I'm joined by Kaspar Kelterborn, Group CFO, who will lead you through the results presentation for the first half of 2019. He will also give you a business update and the update on the outlook for 2019. After his presentation, we are available to answer your questions.

I draw your attention to our disclaimer on Slide 2. And with this, over to you, Kaspar.

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Kaspar W. Kelterborn, Conzzeta AG - Group CFO [3]

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Well, thank you, Michael, and good morning, everybody. Also from my side, welcome, and thanks for joining our call. Let me start with the summary of our half year results on Slide #4. Overall, we delivered a performance for the first 6 months of 2019 that was broadly in line with our expectations. Last year, just to remind you, we had a very strong first half year, where we benefited from acquisitions, successful product launches and the recognition of large client orders. This means that the comparison period was high across all segments, and the comparison therefore includes a certain base effect. On the other hand, we experienced, as expected, a more challenging operating environment compared to last year. Actually, in the first half of 2019, we noticed a slowdown of the operating and economic environment, particularly in China, from the direct and indirect consequences of the ongoing trade dispute between the U.S. and China. This was leading to uncertainties within our markets, resulting in adverse impacts on our investment group business in Sheet Metal Processing as well as the automotive business in Chemical Specialties. Also, you are certainly aware of the fact that we divested our Glass Processing business as of April 1, 2019. Our record revenue number reflects the disposal, which, however, came along with a nice divestment gain of CHF 30.6 million.

Now looking at the headline numbers. We generated net revenue of CHF 770.1 million, which is 9.7% below the high previous year. Order entries of Sheet Metal Processing ended at CHF 450.6 million, which is 12.4% below the record level of the comparison period. The development of these 2 numbers, of course, also reflects my earlier comments on the economic environment.

Out of this net revenue, we generated an EBIT of CHF 90.5 million. However, this includes the mentioned onetime gain. The adjusted EBIT therefore was CHF 59.9 million and the adjusted operating margin remained stable at 7.6%. Overall, I think that these results can be summarized as being robust. Also, I would like to mention in my introduction that given the further increase of our cash position, the Board of Directors proposes to return excess cash of CHF 62.1 million to the shareholders through a special dividend during the first -- during the second half of 2019. I will come back on this trend later in my presentation, but let's go now to Slide #5 for a short look at the revenue development by region.

There are a few interesting points on this chart, and the key message is that the decline in Asia and Europe could partly be offset by continuous growth in America. Also, you can see from the upper right side of the chart that we came from strong growth across regions, especially Asia. This was driven by both organic performance as well as M&A in Sheet Metal Processing and Chemical Specialties. Now looking at the revenue split, also on the right side of the chart, you will note that the revenue share in Europe increased to 56.1%, and this is, of course -- and this of course, was driven by the recent decline in Asia but also by the strategic acquisition of Otto Bock and its strong European business. As part of our core strategic priorities, we manage our diverse businesses for leading market position with a strong focus on market orientation and internationalization. Therefore, we continue to seek broadening our geographic footprint through growth opportunities that we see in Asia and America.

Please turn now to Slide #6. Here we show the financial key figures of the first half of 2019. As I will discuss sales EBIT and cash flow in more details on the following slides, I will just make some condensed remarks here. On a comparable basis, that means a stable FX and adjusted for changes in scope of consolidation, our net revenue decreased by 5.6% to CHF 770.1 million. And the adjusted EBIT, means without the onetime gain, decreased on the same basis by 4.3% to CHF 59.9 million, which also reflects operational progress and a good cost management. With the divestment of the Glass business, we enhanced also the structural margin potential of the group and therefore, the EBIT margin of our continued businesses was 7.7%, slightly higher than the adjusted EBIT margin of 7.6%. Now looking at the group results. It ended at CHF 78.2 million, or CHF 47.6 million adjusted by the onetime gain. It is also worthwhile to mention here that the onetime gain of Glass disposal is free of tax.

Two more remarks on this slide. First, the increase of our net operating assets compared to first half 2018 is mainly due to additional net working capital and our CapEx investments into our business units; and second, the previous year cash flow of CHF 39 million included a onetime loan repayment as well as strong collections in the first half of 2018. The comments on [detailed] cash flow will follow in a minute.

With these remarks, I would like to go into some more details on net sales, EBIT and the liquidity. Please turn to Slide #7. On this chart, we show the net revenue bridge with the key elements compared to the previous year. The total decrease of net revenue was CHF 83.2 million, and out of this, CHF 47.7 million or approximately 58% can be attributed to volume and/or price losses. As you will see later, the lower revenue share in Sheet Metal Processing and Chemical Specialties was partly offset by higher revenues in Outdoor. The negative impact of changes in scope and consolidation was CHF 24.4 million or 2.9%, which, of course, was mainly driven by the divestment of the Glass business. And finally, we also had an adverse FX impact of CHF 11 million or 1.2%.

Now let me go over to Slide #8 for some comments on the EBIT. On this chart, we present the EBIT bridge and it is interesting to see that despite the volume loss mentioned before on net revenue, we delivered some good gross margin improvement of 6.9% -- of CHF 6.9 million, mainly in our Sheet Metal Processing and Outdoor segments, but also in FoamPartner business unit. On the other side, personnel expenses increased by CHF 11 million. This is mainly driven by additional FTEs in Sheet Metal Processing as well as in Outdoor. And as this part of this additional staff had been approved in the second half of 2018 or the first quarter of 2019. Given the current environment, we managed this development very closely since March. We have strongly increased the approval hurdles for new positions or even for replacements.

I have no additional comments to the OpEx but last -- but last remarks to the change in scope and FX impact. Of course, this includes the onetime gain of CHF 30.6 million. With this, we leave the EBIT bridge and please turn now to Slide #9.

Here we show the development of our cash position. Overall, our liquid funds remained stable at around CHF 390 million. And it is obvious that we had a strong free cash flow in the first 6 months of 2019. But as you can see, this is, to a great extent, driven by the cash inflow of CHF 75 million, mainly relating to the divestment of our Glass business. The operating free cash flow was negative at minus CHF 10 million, and this was driven by some net investments in fixed assets of CHF 40 million, but mainly driven by the increase of our net working capital of CHF 52 million. Let me add some further explanation to this. As we explained earlier, after pushing down net working capital levels over the last couple of years, our net working capital at end of 2018 was at an extraordinarily low level of [16.5%] of total revenue. We therefore expected an increase in the reporting period to ensure that our supply capabilities remain intact. This led to an increased inventory, especially at Sheet Metal Processing and Outdoor. At the same time, we also did some pre-production for deliveries in the second half of 2019, especially at Sheet Metal Processing and in view of the expected orders resulting from the successful biannual Competence Days. We also observed an increase on our accounts receivable side. However, this was mainly driven by some advances to suppliers in Asia as well as some prepayments on income tax in America. Overall, the net working capital was at 20% of total revenue as of midyear, and we will certainly monitor and manage this development very close in order to ensure that we have an adequate level of net working capital by end of this year.

With this, I would like to continue with Slide #10. Let me comment on the proposed special dividend. As you see on the -- as seen on the previous slide, our cash position remained stable over the last 6 months. Compared to the first half of 2018, the cash position went even up by 7.1%. We evaluated this situation, also taking account of the current interest rate environment, and we concluded to propose the return of CHF 62.1 million of excess cash to our shareholders. This is 16% of the current cash position and in terms of dividend per A share, somewhat less than the EPS for the first half of 2019. This proposal, of course, is subject to the approval of the Extraordinary General Meeting, which will take place on September 27 of this year. Also after the extraordinary dividend, Conzzeta will remain well capitalized. We continue to manage our businesses to a leading market position, push for return to growth across all segments and go on with our more active M&A strategy.

Ladies and gentlemen, this concludes my comments on the group financials, and I would like to discuss now the business in some more details, starting with the Sheet Metal Processing on Slide #12. Reported net revenue on Sheet Metal Processing segment in the first half of 2019 was down by 6%, and comparable net revenue was down by 6.2% to CHF 448.6 million. The impact from the acquisition of TTM Laser [per] April 12, 2018, was basically offset by a broad FX effect. The operating result was down by 7.8% to CHF 57.8 million. The EBIT margin remained stable at a healthy level of 12.5% of total revenue. The resilient result reflects both our continued efforts to push innovation with a focus on measurable client benefits and our good cost control. We have already seen on the introduction slide the order entry being down by 12.4% from a record level in the first half of 2018. The decline was across regions and product categories, with the exception of the non-machine business, where we saw some continued growth. As we generated more client wins compared to previous events at our biannual Competence Days earlier in June, we are confident that we can catch up on the order entry in the second half of the year, at least to some extent. Obviously, we need to see how the operating environment develops, but we certainly feel well-positioned to outgrow the market with our innovative products and client solutions as well as with our enhanced global presence.

On the next slides, we analyze our results in more detail and show some innovations. Please turn to Slide #13. You have seen a similar slide already in the presentation of the full year 2018 results. In the upper left corner of this slide, we showed net sales by region. It shows a noticeable decline in Asia, nice continuous growth in America and net sales in Europe slightly down. The split by product in the upper right corner shows lower sales in cutting, partly offset by strong growth in bending as well as services. From this, one can conclude that the revenue decline was driven by cutting in Asia, and this is true. And this mainly relates to China, which [would be the new laser] business, but also to our Bystronic silver segment business across Asia. In addition, we experienced enhanced competitive pressure in the gold segment in Europe, as competitors have caught up by also launching 10-kilowatt cutting equipment. We already reacted to this by launching a 12-kilowatt laser, which I will discuss on the next slide. One final comment here, consistent with the lower new machinery business and our strategy to push service, the revenue share in service has increased to 23%, up from 20% at end of 2018.

Now let's move and look at Slide #14. Our innovation strategy remains focused on enhancing client productivity. At our recent Competence Days at Bystronic headquarter in Niederönz, we presented a full portfolio of new products, software and solutions for automation. Our ByStar Fiber flagship product for cutting was enhanced by a 12-kilowatt laser, a new beam shaper function, a newly-designed cutting head and additional extra-large cutting format. Already towards the end of 2018, we had launched a completely new BySmart Fiber cutting products for the silver segment. It was well received by the market, as it closed a gap in our product offering. In bending, we launched a new press plate for the gold segment, and new automated solutions for our mobile press plates and for the silver segment. Excellent products remain the core. And by pushing more integrated and automated solutions, we meet the needs of our clients to enhance productivity. This also supports the continuous growth of our more stable revenue share from services. I'll close this up, the business update on Sheet Metal Processing and move over to Chemical Specialties on Slide #15.

Chemical Specialties delivered a revenue decline of 10.5% or 9.3% at stable FX rates, to CHF 181.4 million. While all product segments and regions were weaker, the main drivers were the challenging automotive market in Asia, especially China and Europe. The EBIT declined by 6.4% to CHF 8.6 million, resulting in a slight margin improvement of 20 basis points to 4.8% of total revenue. Our FoamPartner business unit, which accounts for around 85% of the segment revenue, clearly benefited from the decline of input costs and internal operational improvements. However, the Schmid Rhyner business unit was challenged by, again, higher raw material costs as well as by an adverse product and country mix. We made good progress at FoamPartner with the implementation of our measures to unlock growth and margin potential.

Please move to the next slide for some more details on the FoamPartner business unit. The weighted average input costs for FoamPartner declined by approximately 15% from a very high level experienced in the first half of 2018. This helped, in fact, to mitigate the volume losses from the automotive business. The net impact from these 2 developments was around CHF 0.8 million of EBIT improvement. In addition, we had some more benefits coming through from many other operational initiatives. For example, we see improvements in the material usage and mobility or in service and quality at 2 of our converting plants. In addition, our business excellence initiatives led to a greatly improved supplier performance, which was recognized with the Service Award 2018 of an important customer. Last but not least, we are making good progress with our initiatives to optimize the manufacturing footprint in Europe, and started the construction work at the Duderstadt facility in Germany. We mentioned these CapEx initiatives earlier and we will invest around CHF 15 million until 2020, to realize a significant structural margin improvement. To protect and enhance margin, we also push innovation and application development. In the reporting period, we fully launched, for example, the ether-based OBoSky products of the important automotive OE business, which combines highly durable surface quality with low emissions.

Let's look at the automotive business of FoamPartner in more details on Slide #17. The automotive business accounts for somewhat above 50% of the FoamPartner business. This means that the automotive exposure is just over 10% for the entire Conzzeta group. In FoamPartner, we have clustered the bulk of our automotive businesses within the mobility market segment. On the left-hand side of the slide, we show the corresponding activities. We are an established Tier 2 or Tier 3 supplier in close and somewhat even direct collaboration with the OEMs. The largest activity is the automotive growth business for interiors, such as headliners. Here, we have a solid closing leading market position, with a market share of well over 10%. The other 2 areas of activity are more in niches. One is the systems business, that provides customized 2-component polyurethane foam (inaudible) to clients and the other is the business with our Acoustic & Thermal Solutions.

On the right-hand side of the slide, we show the current industry challenges in the global automotive sector. Many of our buyers or indirect clients currently face an [almost detractive] and certainly a difficult global environment. This has, of course, a couple of implications. First, we are, of course, also affected by these challenges and the sector transformation. Second, despite all the headwinds, the production of global lightweight vehicles is expected to grow at ground G2G levels. And third, these challenges also provide opportunities, for example, in lightweight [fit], noise and comfort solutions for future car generations. As a consequence, we decided to [continue] to build on our existing client relationships in order to deliver on innovation meeting new requirements for the future of mobility.

With this, I'll go over to Outdoor segment on Slide #18. We posted revenues of this segment really across regions and channels by 6.2% or by 6.9% at stable FX rate to CHF 117.9 million. We continue to be very pleased with the progressive implementation of our high growth strategy plan. Not only because revenues in the first half 2019 improved notably from a strong previous-year level, but also because we further improved our gross margin. The year-on-year improvement here was around 350 basis points. It shows that our premium strategy seems to work, and that we create tangible value with the renewal of our collection. Once again, innovation pays off. The expected loss in the seasonally weaker first half of the year was reduced to close -- by close to 80% to minus CHF 5.3 million, and the EBIT margin on total revenue increased by 130 basis points to minus 4.5%. We can say that the buildup of critical capabilities in the context of the 5-year plan is now largely completed. For the rest of the program, we need to put our focus on accelerated internal growth to better dilute the cost base, which we will have for the critical capabilities. We are well on track, as I showed on the next slide. So please go to Slide 19 for an update of the 5-year strategy plan.

This chart shows the main element of the strategy program, and we are now in the last third, as indicated by the red marker at the bottom. We made continuous progress across all work streams. We further developed our digital capabilities and strengthened the reach and quality across our channels. This included the further expansion of digital offerings and the optimization of our network of physical stores, including the closure of 6 nonproductive stores out of 20 point of sales in Korea. Similar in the U.S., we appointed a new team and started our own web shop, while developing the network of wholesale partners. Our whole Outdoor team is really pushing this passion and enthusiasm towards a strengthened sellout imperative. We have introduced a KPI tracking system for our initiatives and continue to promote cultural change. Our efforts to strengthen collaboration also helps to manage product innovation, with full involvement of all functional areas. Our product launches have been well received by the market, including winning a number of recent industry awards.

Let's move to Slide 20 to discuss our collection renewals in apparel. With the collection presented at the recent 2019 ISPO industry fair in Munich, we have largely completed a close to 100% collection renewal in apparel for over the last 2 years. More over the same period, we focused our assortment and strongly increased style efficiency. With the premium products and competitive price strategies, we're improving the gross margin, as already mentioned. The recognition by industry awards and more so the good level of preorders from our wholesale partners, which are clearly above level of 2018, gives us the confidence that we are on the right path toward our 8% EBIT margin aspiration by the end of the strategy program. As for mid-2019, revenue in our digital channels were up by 50 -- by over 50%, but still on a relatively low level. We expected above-average margin, accretive growth in these channels should together with a disciplined -- excuse me, we expect above-average and margin accretive growth in these channels and together with the disciplined cost management, which also helps healthy margin development going forward.

Now ladies and gentlemen, this concludes the business update. So let me draw your attention on my final slide, Slide #22. At Conzzeta, we seek to outperform markets for leading position. We consistently drive the implementation of our strategic priorities. We are on track with our key initiatives and expect a broadened margin contribution across segments. Now after the disposal of the Glass Processing business, we seek a further acceleration in our business development. As a consequence, we have decided to introduce a more decentralized management structure, with dedicated teams for the business units, involving members of the Board of Directors and the Group CEO. The goal of these teams is to drive operational and strategic progress by considering all options and to promote enhanced client focus, agility and value creation. In doing so, we seek to replicate the good experience we have over the last 3 years with Mammut -- with the internal core team, Mammut, while we precisely have such a team structure in place, which was closely involved along the strategy progress and in decision-making.

Now to the outlook. For the first half of 2019, the geopolitical and macroeconomic trends were largely in line with our expectations. However, the increased signs of a growing economic slowdown toward the mid-2019, mainly emerging from the continuously escalating trade dispute between the U.S. and China, we now expect for our continued businesses net revenue for 2019 to be slightly below the previous year, but continuously, with the profitability at EBIT level, more broadly distributed across segments and with a slightly improved EBIT margin on this level.

Ladies and gentlemen, this concludes my presentation. And Michael and I are ready to take your questions. Thank you very much for your attention. And with this, I'll give back to the operator.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question is from Torsten Sauter, Kepler Cheuvreux.

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Torsten Sauter, Kepler Cheuvreux, Research Division - Head of Swiss Equity Research [2]

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I would have 2 questions, if I may, mainly on Bystronic. First and foremost, you seem to be having a bit of evidence for running into easier comparables in the second half of the year. What sort of evidence does that actually mean? Like can you give us some highlights, maybe on the order momentum after the in-house trade fair, and on the situation there? It looks a bit like a flattening to me here. And the other question that I would have probably relates to all the business segments. Can you quantify a little bit the ForEx sensitivity of earnings, and specifically with respect to the euro-Swiss franc pair?

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Kaspar W. Kelterborn, Conzzeta AG - Group CFO [3]

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Okay. Now the first question, we see the trading update on Bystronic with the evidence. It is true what you said, we see for the second half year, some sort of a decrease, a flattening out of the decrease. The main challenge is out in the market, there is no change on this. The situation has remained highly challenging and different developments across regions. But we did have very successful Competence Days at end of June at the headquarter in Niederönz. We have launched a very substantial new product offering, a range of very substantial new product ranges. So we do expect from this that the decreasing of order entry is flattening out a little bit. And if I look at the July numbers, I indeed can see that somehow, we have an evidence for these months now as order entries was on a similar level than on previous year's levels. I mean this is just 1 month, it remains to be seen how this further develops, but there is certain more optimism in this. I hope that answered your first question.

Now with respect to the FX, I mean there are 2 sides on the FX. On the one side, we have this transaction -- this translation FX, which you have seen on the half year results. That will go along. That relates to our global setup. On the other hand, we have the transactional currency issues, the transactional effects. And here, I can tell you that, on our business volume on a 12-month basis, we have an exposure of around 180 million comparable in Swiss francs. We have a rolling hedging strategy in place, rolling 12 months of 25% to 80% to be hedged. So for 2019, it's not so much of my concern at this point of time. We have maybe CHF 40 million, CHF 50 million exposure until the end of the year. The question, of course, will be then, what comes in 2020? And in autumn, when we go into the budget, we will have a revision of what kind of shifts we do in the currency basket.

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Torsten Sauter, Kepler Cheuvreux, Research Division - Head of Swiss Equity Research [4]

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Yes. That's very clear. Do you disclose normative sensitivity? I think some companies do that in particular when they report according to IFRS, like a 10% shift in the top line -- so in the currency pair, would induce different change in EPS? Is this something that you want to share?

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Kaspar W. Kelterborn, Conzzeta AG - Group CFO [5]

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No, look, I mean it's maybe not 10%. A 1% shift in our currency basket has maybe an impact of CHF 1.5 million or CHF 2 million EBIT, but that's on a 12-month basis. I just want to say this again, that's only to come on the full exposure. It's not for the full year until the end of 2019. I'm less concerned about that.

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Operator [6]

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As there are no further questions, (Operator Instructions). The next question is from Daniel Koenig, Mirabaud.

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Daniel Koenig, Mirabaud Securities Limited, Research Division - Analyst [7]

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Yes. I have 2 questions. Is there an explanation why Bystronic Americas has grown? What kind of client base is that? I was just wondering in general. And then the second question was, is there a particular reason why you have an EGM in September and we're not waiting for the regular AGM?

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Kaspar W. Kelterborn, Conzzeta AG - Group CFO [8]

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Okay. Maybe on the first one, the growth of Bystronic in Americas. That, to a great extent, goes along with the product offering which we have. And we have customers there with very good sales. The 10-kilowatt laser, even with from -- with some automation and these are good price levels. That is the main drivers of the good growth in the first half of 2019 in the United States. It's more product-related, product-mix related. With respect to the second question, no, there is no special reason why we do an Extraordinary General Meeting. I mean it's for the dividend, which we want to pay out in -- the excess cash dividends, which we want to pay out in the second half of 2019. And for this, we do this extraordinary shareholder meeting. There's no other reason for that.

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Operator [9]

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The next question is from [Andy Sia], Roth Capital.

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Unidentified Analyst, [10]

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I would have 3 questions. First, on net working capital. You said that you were at 20% of sales at the end of H1, and we monitor it closely, that it's on an adequate level at the end of the year. What would be such a level? That would be the first question.

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Kaspar W. Kelterborn, Conzzeta AG - Group CFO [11]

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Okay. I can give you a direct answer to this. We always said that we go for around 18% of net working capital levels. And this is what we look for to manage for the end of the year.

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Unidentified Analyst, [12]

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Okay, perfect. And then on Bystronic, at the full year conference, you showed that you've significantly outgrew the market over the past few years by growing more than 20% versus 7% for the market per annum. Would you have any idea how the market and your competitors -- your main competitors developed in H1? How did the market look versus your minus 6% sales?

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Kaspar W. Kelterborn, Conzzeta AG - Group CFO [13]

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Well, that's a difficult question. It's difficult for me to comment on the performance of our competitors. I mean I can comment on Bystronic, and we had strong growth over the last couple of years, driven on the one side by M&A, but also driven by our internal product offerings, by our innovation, innovation in higher kilowatts, layers of innovation in automation, also on the press plating side. That was driven -- that has been driven our growth. But for me to comment on our competitors is difficult.

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Michael Willome, Conzzeta AG - Group CEO [14]

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Yes. Maybe I can add to that on the -- I mean recently, I mean I think about a week ago or 2 weeks ago, Prima Industrie released their half year numbers. You can look up there, they disclose the order entry. And in addition to that, I mean it's always difficult with these market share and market growth questions because there's no simple generally accepted market statistics out there that really fits our product offering, and the product offering of our peers. So getting to a like-for-like comparison is always a bit hard.

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Unidentified Analyst, [15]

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I understand. I understand. That's fine. And on Mammut, you said that you increased the prices across all categories by roughly 10% and sales were up 6%. Does it mean that your growth mainly came from pricing, not really volumes?

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Kaspar W. Kelterborn, Conzzeta AG - Group CFO [16]

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I wouldn't say so. Certainly, pricing is a big element on it, but also we had some volume increases, especially on the digital channel, but also on the factory outlet channels.

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Unidentified Analyst, [17]

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And do you still believe that for the full year, you will grow double-digit in Mammut?

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Kaspar W. Kelterborn, Conzzeta AG - Group CFO [18]

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Well, for the -- what we see at Mammut, we have -- the preorders for winter '19, '20 are ahead of previous year, around the same size, as we have now sales growth for the first half of 2019. And I would expect we will have a growth on a similar size by end of the year or a little bit higher. Keep in mind that Mammut is a seasonal business, and has a strong -- has a second half year which is winter-dependent. So if the winter is a bit better, then we will have a bit of a higher growth than if the winter is less good.

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Unidentified Analyst, [19]

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And how does the new collection develop? Sorry, are you satisfied with the -- I don't know, this collection, I forgot the name.

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Kaspar W. Kelterborn, Conzzeta AG - Group CFO [20]

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It's the Delta X collection which you're referring to. It's a good question. It's the Delta X collections, the urban collection, as we call it, urban. We follow an industry trend. We have opened that with that additional revenue stream. It's an add-on, it's not our main collection, it's an add-on collection. It was very well received by our business partners when we launched it. We also see, however, that we have to educate the market further with respect to such a new collection offering.

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Unidentified Analyst, [21]

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So rather, a little bit below your expectations in terms of growth for -- or in terms of sales for Delta X?

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Kaspar W. Kelterborn, Conzzeta AG - Group CFO [22]

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Well, not really below the expectations. I mean of course, if you launch a new type of collection, you have enthusiastic expectations. And it really also has to do with market education. But we are confident that we are on the right path with the Delta X collection.

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Operator [23]

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If there are no further questions, I would like to hand back to the speakers of Conzzeta. We have received another question from Daniel Koenig.

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Daniel Koenig, Mirabaud Securities Limited, Research Division - Analyst [24]

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Yes. I have an additional question and it's concerning this increased stake of your Chinese partners. Is there anything to tell or how are the negotiations going on?

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Kaspar W. Kelterborn, Conzzeta AG - Group CFO [25]

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Well, you are right. We have this option to increase the stake by another 19% to 70%. Negotiations are ongoing. We have called these options, negotiations are currently ongoing with our Chinese partners, and we're trying to close this in Q3.

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Michael Stäheli, Conzzeta AG - Head of IR & Corporate Communications [26]

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And it's really the final discussions on the share transfer agreement.

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Kaspar W. Kelterborn, Conzzeta AG - Group CFO [27]

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Correct, thank you. For distributions, yes.

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Michael Stäheli, Conzzeta AG - Head of IR & Corporate Communications [28]

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It's more a technical discussion and not a price discussion.

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Daniel Koenig, Mirabaud Securities Limited, Research Division - Analyst [29]

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Okay. I have an additional question, it's concerning this special dividend, it's a little bit different topic. Because you mentioned in the call that the net -- or the interest on your cash holding made you rethink a little bit the strategy. I was wondering what is your optimal cash holding overall? Has this changed after interest rates have been going down, down, down and have been rather negative? I was just wondering if there has been a rethinking in strategy in terms of the cash holding.

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Kaspar W. Kelterborn, Conzzeta AG - Group CFO [30]

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No. Look, actually, there is no change on our cash strategy in general. What we did really, we have evaluated our cash position. We have evaluated the cash needs to further -- the cash we need to further develop the business, as we have planned to further develop the business. And of course, we also did take into account the interest land -- the interest rate landscape. And putting all these together, we came to a conclusion that we have a level of excess cash of CHF 62 million, which we want -- CHF 62.1 million, which we want to return to our shareholders. I think this is a positive thing, isn't it?

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Daniel Koenig, Mirabaud Securities Limited, Research Division - Analyst [31]

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Yes, of course.

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Operator [32]

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This concludes our question-and-answer session. I would like to hand back to the speakers.

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Michael Stäheli, Conzzeta AG - Head of IR & Corporate Communications [33]

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Okay then. Thank you, everybody, for joining our call and for your continued interest in Conzzeta, and we wish you a successful day. Thank you, everybody.

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Kaspar W. Kelterborn, Conzzeta AG - Group CFO [34]

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Thank you very much, everybody. Goodbye.

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Operator [35]

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Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.