U.S. Markets closed

Edited Transcript of DUE.DE earnings conference call or presentation 7-Nov-19 2:00pm GMT

Nine Months 2019 Duerr AG Earnings Call

Stuttgart - Zuffenhausen Nov 9, 2019 (Thomson StreetEvents) -- Edited Transcript of Duerr AG earnings conference call or presentation Thursday, November 7, 2019 at 2:00:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Carlo Crosetto

Dürr Aktiengesellschaft - CFO & Member of Management Board

* Ralf W. Dieter

Dürr Aktiengesellschaft - Chairman of Management Board & CEO

================================================================================

Conference Call Participants

================================================================================

* Alexander Hauenstein

DZ Bank AG, Research Division - Analyst

* Christian Cohrs

Warburg Research GmbH - Analyst

* Daniel Gleim

MainFirst Bank AG, Research Division - Director

* Ingo-Martin Schachel

Commerzbank AG, Research Division - Head of Equity Reseach

* Peter Rothenaicher

Baader-Helvea Equity Research - Analyst

* Philippe Lorrain

Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst

* Sven Weier

UBS Investment Bank, Research Division - Executive Director and Analyst

* Tim Rokossa

Deutsche Bank AG, Research Division - Research Analyst

* William Turner

Goldman Sachs Group Inc., Research Division - Research Analyst

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Welcome to the Durr conference call. Ralf Dieter, CEO; and Carlo Crosetto, CFO, of Durr AG will present the Durr group's figures for the 9 -- first 9 months of 2019, followed by a Q&A session. At our customers' request, this conference will be recorded. I will now hand over to Mr. Dieter, CEO of Durr AG.

--------------------------------------------------------------------------------

Ralf W. Dieter, Dürr Aktiengesellschaft - Chairman of Management Board & CEO [2]

--------------------------------------------------------------------------------

Yes, thank you very much, and good afternoon or good morning, ladies and gentlemen, thanks for joining us here today. And Carlo and myself will now go through the presentation, which we have sent out. We would like to start on Page #3 with a summary of about the third quarter. So there is increase in order intake sales and EBIT. Our sales was up 5%, and the incoming orders up 4% in 9 months. And I think that's pretty good in terms of the challenging market environment we have. And [HOMAG's] incoming orders in the third quarter were also above the relatively weak second quarter level. We won a large system order in China, which was the first sign that in China, the downturn of order intake seems to stabilize now, still on a much lower level than 2 years ago, but it seems to be that's the bottom of that development.

Book-to-bill at 1. The order backlog is EUR 2.6 billion, unchanged and is a very good high level to give us visibility on sales in 2020. Very good was the service business, 12% up and well on track, which is very important for our margin, as you know. And EBIT and net profit, unchanged year-over-year. The cash flow improved in the third quarter, and it was also better than the third quarter, for itself, in last year, and we expect that it will further progress in the fourth quarter. Paint and Final Assembly Systems, Application Technology, Clean Technology and Measuring and Process Systems are well on track to reach their 2019 targets. We expect a stronger quarter in all divisions. So fourth quarter. We announced yesterday measures for structural adjustments, efficiency program at Walmart, which will need EUR 37 million one-offs in the fourth quarter to improve the cost base, but also the efficiencies, and we expect from 2021 onwards. Here, I believe, on the cost base is about EUR 15 million. And we have no change of the operating earnings guidance for the group in 2019.

On Page 4, we have, as always, the key figures in 1 picture, incoming order sales and EBIT and the net profit, I think I commented that already in the summary.

Page #5, we look into the regions. Just check whether the presentation here on the screen is the same. So in China, we still have a decline compared to 9 months last year. For the HOMAG side, we are on the same level like last year after we got these big orders, it's about EUR 100 million is HOMAG of this number here. And we have a very strong pipeline in China for paint shops, which moves into fourth quarter and also maybe first quarter, second quarter next year.

In Americas, we had a very strong order intake, mainly driven by 3 larger orders for the paint shop business for EV car manufacturers. So that's a very good development. And here also further projects. So for example, Americas looked in the first quarter, we were not sure about this year in America, we thought it would be very weak in order intake. And now it's just the opposite. That's why I obviously -- to look at the quarter is very difficult in this business.

Germany, a little bit down compared to last year. I think we have here some less revamp jobs, but there's nothing to worry about. Europe, quite stable. And what I think is a good sign of our strategy also in Southeast Asia to increase our business is Japanese OEMs and in Southeast Asia, overall, we have an increase of 13%. But it's mainly fueled by a larger order we got in India already in the second quarter, and I mentioned that already.

So then I would like to hand over to my colleague Carlo to go through more numbers here.

--------------------------------------------------------------------------------

Carlo Crosetto, Dürr Aktiengesellschaft - CFO & Member of Management Board [3]

--------------------------------------------------------------------------------

Yes, good morning, and good evening also from my side. If we now move to Page 6 in your handout, I'm pleased to announce that our Q3 numbers were pretty good, and we have the strongest quarter so far for the year. Gross profit was up nearly 7%. Also, the margin was up over 120 basis points, EBITDA, et cetera, which led to a strong EBIT development. What is probably worth highlighting is the fact that we had a pretty big differences in extraordinary effects last year versus this year. As you may recall, last year, we had the adjustments in the Clean Technology Systems division with the termination of the micro gas turbine and other adjustment, whereas this year, extraordinary effects really are mainly related to purchase price allocation. So that's probably the big explanation why the EBIT before extraordinary effects and the EBIT margin after [so many effect of the swing]. What is also worth mentioning for the first 9 months of this year, that with the integration of MEGTEC, of course, our expenses, especially also our selling expenses were obviously not very comparable to previous years, and they were up also because of various exhibitions that we had last year, like Ligna or open house. We do expect, especially selling expense, to start normalizing in the final quarter. Obviously, we didn't have such a strong start in the first half of the year. So we still have a way to go, but what is promising is that we are seeing a positive trend in the third quarter, which should continue also in the fourth quarter.

If we move now to Page 7, so away from EBIT to cash evolution. I'm also very pleased to see that the third quarter cash development was also improving. You see on the top right side of the chart, the comparison of Q3 '18 to Q3 '19, and you see operating cash flow and free cash flow was also not just positive, but also slightly better than the year before, which is, again, another sign that the financials are moving in the right direction. Clearly, we're coming from a very weak start with regards to cash development in the first 6 months of the year, and it will obviously take some time to reach the territory that we are obviously striving for. So in any case, we do expect a strong fourth quarter development, which would bring us to the guidelines that you will see later. On the work itself, I think what is most of these delta so deviations are pretty normal. The only 1 that sort of strikes out, obviously, is the deterioration in net working capital, which shows a deterioration of about EUR 200 million compared to the net financial status that we had at the end of 2018. So that's something that is still a focus area, concern area, that we are making sure that we improve and that we have really our most attention on all the other deviations from CapEx, dividends and taxes are somehow in line with what we had the previous year or what we were expecting to achieve for this year. IFRS 16 also plays a role in these numbers, like every company that is reporting according to IFRS. And we have already communicated this impact to be about EUR 100 million in terms of impact on the NFS curve.

If we now move to Page 8, we can see that basically development on the net working capital. And while we see slight improvements on inventories compared to the same period last year. The big focus areas, obviously, the development of total contract liabilities, which is -- that's EUR 558 million, significantly lower than what it was at the end of the year of what it was for the same period in the previous year. That is something that is obviously a little bit impacting the work in progress balance.

If we move now to Page 9, you can see that our total balance, basically, the difference between contract liabilities and work in progress in contract assets. You see that we have per September 2019, a positive number, and we have given ourselves a goal for the end of the year to be between 0 and minus EUR 100 million. Standing in front of you or being part of this conference call, I would say that today, we mostly -- we, let's say, we feel more comfortable to be more close to 0 than to the minus EUR 100 million. We still have a long way to go in the fourth quarter based on some of the projects that we are concluding and some of the agreed advanced payments and expected payment schedule, we should have a strong fourth quarter in terms of cash. This is why we are confident that we can bring this number down. But as I said, at this stage, we're probably more comfortable with to be close to 0 than to minus EUR 100 million.

If we now move to Page 10 of the handout, you will see that basically, there has been hardly not much change in the way we handle factoring and forfeiting we've actually dropped about EUR 4 million compared to the end of the year or, let's say, EUR 7 million compared to the same period last year. So it's staying basically in what we call normal ranges, and let's put it this way. There's not been any window dressing in terms of adjusting the cash flow numbers.

If we now move to Page 11, which is somehow addressing the equity and gearing and return on capital employed numbers. We are very happy to see that our equity value has increased over the EUR 1 billion mark, exactly EUR 1.031 billion. And the equity ratio is still solid at 27%, but, let's say, 0.4% lower than the previous year. This has got to do basically with the fact that our balance sheet has obviously got bigger with IFRS 16 or the inclusion of the leasing contract. And we have also issued a shoeshine of about EUR 200 million. So obviously, this has increased the total balance sheet side. So even though equity has improved, the ratio has basically stayed at 27% and -- or has dropped 0.4%. Net financial status, I just explained it in my previous slide. And gearing is still pretty low and return on capital employed is obviously at a level which we need to work on improving. And we do expect, given the measures that we have announced, to be at a different range than what we had indicated before, but we'll get to the guidance later. But obviously, these measures affect the return on capital employed.

I'll pass back to you, Ralf.

--------------------------------------------------------------------------------

Ralf W. Dieter, Dürr Aktiengesellschaft - Chairman of Management Board & CEO [4]

--------------------------------------------------------------------------------

Yes. Thank you, Carlo, and I would like to continue on Page #12, with the look on our service business, we had a 12% increase already, as already mentioned, although in the APT service business, we have a decline. I will come back to that in a second. We are now at a 28.3% level of contribution to the group sales. And remember always, is that 30% should be the long-term goal. We are pretty close to that. And I think in this market condition, that's a very good sign, but we do also a lot of things to improve and to grow the service business by new offerings. We are working and we have improved our spare part process and delivery process. And we also now have started the first sales of our digital products, that [gives] us more numbers in the 1-digit million area, but for us, it's quite a good success because we are pretty early on that. And so that's a whole mix of activities here. And we expect by the activities around the globe, also in Revamp business that this service business development will continue.

Now on Page 13, we have a look at Paint and Final Assembly Systems, strong order intake increased nearly 9% to EUR 831 million. Also, sales increase of 5%. The EBIT is at the level of last year, and the EBIT margin is at 4.3% in the first half, I think it was at 4.1%, roughly. So we saw -- we see now what we said in the last call that we should have reached the bottom of carrying through older orders with low margins now improving, and we see further improving here coming. And in the third quarter, for itself, the EBIT margin was already 4.8%. I think we can see here the upward trend, as promised and as guided in the past. And also, the Q4 here should be strong. We have some large orders ahead of us. This is also a question about do we get in time down payments that, as Carlo mentioned, has an impact on our -- that were in cable, but also the question of the timing, maybe some of them will flip into next year, we will see, but very promising, which is surprising, as you know, when you read the newspapers about the automotive industry.

The next page is Application Technology. Here, we see a decline in order intake and sales. And this order intake decline is mainly due to a lower level of spare part order intake and sales. Why? Because this spare part business here is very much linked to the production utilization. So the more the equipment is used, the more they need spare parts. And then the reduced shifts from 3 to 2 shifts, whatever, they need spare parts less, and that's what our customers do, and particularly China, where we have a downturn in production. But this is a temporary effect. I think should be next year better than the -- hopefully, the utilization of the plant is increasing. But as you can see from the EBIT, in particular from the EBIT margin, we could keep the 10% level, although we are missing by significant sales on the spare part business, which is highly profitable margin. And the reason is that we see that the measures we have taken in those areas like industrial products, including, which were loss making, we have the turnaround is working, and we have quite decreased that [lowest] a situation that, overall, it neutralizes a loss in margin in spare parts.

On Page #15, the Clean Technology Systems, the numbers are not comparable to last year, as you know, for the reason Carlo already mentioned, MEGTEC/Universal is in the numbers not fully. But also in the, let's call it, old business, we see a very nice increase in order intake. This business is very much driven by the, in particular, in countries like Asia, but also in Europe for stronger regulations, environmental protection and also the combination of the MEGTEC technology with our technology has given us opportunities which we had not before. And it's resulting in some larger orders. Also, for example, battery production area, where we have also air polluted, which has to be cleaned. The EBIT is now at EUR 4.4 million alone in the quarter 3, we made 3.7%. So we are on good track here. And we also see here good Q4 coming ahead of us.

Measuring and Process Systems on Page 16. After we had a weaker start in order intake. And you remember the first quarter, not even in the first half, we have now an increase -- we are above last year, 7%. The sales is still below last year. The reason, in the last conference call, already mentioned, is that in the second half of 2018, we had a very weak order intake, which that does not give us enough backlog for turning that into sales. But anyway, it's now only minus 10%. The gap was bigger in the first half. EBIT has strongly increased in the quarter alone at EUR 11 million. And the total margin is now at 8.2% in the quarter. It was already 10.7%. So we are very confident that by year-end, we reached the targeted level of 10% for this division here.

Now coming to Woodworking Machinery and Systems or better known as HOMAG on Page 17. In HOMAG, you can see that the incoming orders is now minus 12%. So that has kind of stabilized. The sales revenue is still above last year due to the backlog we had. The EBIT is 11% less than last year. Reasons are various. First of all, that the higher-margin business, China is about 50% less than last year, so that we have to swallow. But also, we had here a stronger competition because the market has a little bit a decline. Also some underutilization, which has also led to the measure we will talk about in a minute. And so overall, we see here an EBIT margin decreased from EUR 6.3 million last year, now to EUR 5.4 million. But also here for the outlook for 2009 and year-end, we see an unchanged outlook for orders, sales and EBIT before extraordinary effects. So talking about that, we have taken several measures on the HOMAG side, which are basically measures we knew already since -- basically since we bought the company because we knew that we have a little bit too many plants in Germany. And that was then not possible to execute in 2015, '16, because as you remember, we had strong, strong order increase, 30%, I think, only in '16, and we were so fully utilized that there was no way to think about changing the production structure at that point in time, without damaging the ability to deliver the orders. So we had the priority to take the business and to deliver the orders. And I think the development of HOMAG in '16, '17 and also '18 has underlined that. But now it's the time we are using in a position of strength, the opportunity of lower utilization to do now those homework stuff we already had in mind some time ago. The whole package is about EUR 37 million affecting 2019 and another EUR 3 million next year, and we expect out of those measures about -- cost savings about another EUR 15 million from 2021 onwards. Why '21? Because the measures we take, for example, the plant closure. This will not take place before end of 2020 due to the preparation of it and still the work we have in there. And also the capacity reduction program in other German locations is something which needs time to negotiate with the social parties and to get the right solutions here. And therefore, the effects will be then more in '21 than in '20 to see. Also, we've merged 2 business units, Systems and Automation because the downturn in the HOMAG order intake is mainly on the system business side. So the complex orders, which are some millions and sometimes even EUR 20 million, EUR 30 million. That's where the main downturn is. And the normal standard machinery business is not so much. And we use the same opportunity also to reorganize our sales. We have, for the reason of the upturn in the market also increased the sales infrastructure, also headcount wise, which we have now to adopt and to streamline a little bit, spare part logistics, another subject, which is part of that measure. I think to -- also, besides that, we are working on HOMAG on a major change in how the company works in the order fulfillment process. And this is also an opportunity, a huge opportunity for the company for the years to come, but it will take time. And I also want to say here to you all that we have to give HOMAG the next 1.5, 2 years to do this all to really then develop the opportunity and the EBIT margins, what this company can deliver. And our plan is, and I say here again that we have 8% to 10% EBIT in 2023. That's our goal.

When I'm saying we changed the process, it's very complicated to explain, I try to do it in some words. We have from history of HOMAG over many, many years, we have a very silo wise working in the company. So we have the sales teams, they bring in an order, then they give it to the other engineering group, which is a different -- other different wording and different part numbers. And then we, out of that, we bring it to the production plants. And then we have another, let's say, world there, and they don't have a seamless -- that backbone is an ERP system, in our case, into its SAP. Also there, we have some parts SAP, but basically, we will now introduce into hallmark the same process as we have in Durr, how to work efficiently in a modern machinery company of today. And this was a lot of convincing work for the people to change 20 years and more working style and way of working. And it will -- when this will be implemented, and this will take 2 years because, first of all, we have to implement. We have to prioritize the implementation of that system will be '21, starting, '21. And I think the real gains will happen then '22 onwards. By the way, the same we did, 2005, '06 and '07 in APT.

Application Technology has the same problem in that days. And though we are using our expertise out of this change to do it now in HOMAG. And in my opinion, it is difficult to calculate, but I think that would really give us a big boost in terms of efficiency or also to be prepared because we expect the market to become stronger again in '21, but all the [sites] we have, that we are prepared to be much faster in order executing shorter delivery times, lower costs as well. To also not just to be in the market with our market share. Now my expectation we want to grow our market share. And for that, we are preparing. That's the goal here. Beside of that, we're still working tentatively on product standardization. We have a very complex product portfolio in HOMAG, thousands of machines, many hundreds of different types and we have maybe 50% of that standardization work is gone through. And we need the next 2 years to do the rest. And then we have also a very competitive modular product portfolio in that group.

For the German manufacturing footprint, we have this -- we have now announced to close the plant in (inaudible) which is producing automation components, which are mainly for (inaudible), which is really stuff, something we should not do anymore in Germany, so that's a no brainer more or less to do now, but still it's not also like public. And we are also reorganizing the whole, let's say, the whole cooperation between the plants, who does what in future, we call it production strategy and we will announce that next year. It's basically optimizing the factories to their strengths and not that we have too many mixed products in that factory is today working on that. And we're also introducing at the moment, the HOMAG production system, which is the way how to produce machines from the old-fashioned way of putting a machine in 1 spot and then start to assemble it in a low production, which is a modern way of doing machines introduced already in some parts of factories, and this will continue in the next 2 years as well. So the next 2 years is the time for a lot of homework in HOMAG, which we want to take the opportunity of this. I don't call it downturn, but decline in the market to do that. It's really -- now is e time to do it. Good. That's about HOMAG.

The targets for 2019 on Page '19. More or less unchanged. What has changed is, for sure, the EBIT margin, as reported, including the special effect of this special costs. We are now taking the fourth quarter. So we are now from 4.4% to 4.9% as a new target and the earnings after tax is also changing. But you can see that on page 19. But the operating numbers are unchanged in the guidance. Good. That would be the presentation, we would like to share with you and just get information, we should ask first in the room, and then we ask you on the phone, is that okay? So about (inaudible)? Yes, please.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Ingo-Martin Schachel, Commerzbank AG, Research Division - Head of Equity Reseach [1]

--------------------------------------------------------------------------------

Ingo-Martin Schachel, I would have 2 questions on your HOMAG performance program. I think, first of all, you spoke about a certain market expansion for next year and the expectation of market recovery in 2021. I was just wondering, I'm sure you've discussed market scenarios and what market scenario you need to adjust to what is really the underlying revenue volume of HOMAG for which this program is right-sized as it is EUR 1.1 billion, EUR 1.2 billion or was it still rather growth model?

--------------------------------------------------------------------------------

Ralf W. Dieter, Dürr Aktiengesellschaft - Chairman of Management Board & CEO [2]

--------------------------------------------------------------------------------

At the moment the size is 1.15 for next year.

--------------------------------------------------------------------------------

Ingo-Martin Schachel, Commerzbank AG, Research Division - Head of Equity Reseach [3]

--------------------------------------------------------------------------------

Okay, got it. And also after the plant closures and so on, you don't need growth in 2021 to achieve the targets that you set yourselves for HOMAG?

--------------------------------------------------------------------------------

Ralf W. Dieter, Dürr Aktiengesellschaft - Chairman of Management Board & CEO [4]

--------------------------------------------------------------------------------

To get to 8% to 10%? Yes.

--------------------------------------------------------------------------------

Ingo-Martin Schachel, Commerzbank AG, Research Division - Head of Equity Reseach [5]

--------------------------------------------------------------------------------

No, go ahead. Not just to get to a higher performance level or margin expansion (inaudible) the 8% to 10%?

--------------------------------------------------------------------------------

Ralf W. Dieter, Dürr Aktiengesellschaft - Chairman of Management Board & CEO [6]

--------------------------------------------------------------------------------

No, let's assume (inaudible) market would not grow, for sure, we should -- these measures are mainly to keep the level we had before, because to stop a down -- decrease of margin level. But we are preparing, because the market will not stay there if the market has a very good growth opportunity next year. We are preparing to do more volume with the same kind of fever, same amount of fever, then the margin will also increase.

--------------------------------------------------------------------------------

Ingo-Martin Schachel, Commerzbank AG, Research Division - Head of Equity Reseach [7]

--------------------------------------------------------------------------------

Okay. And I think you were talking about a lot of hard cost-cutting measures, headcount reduction in Germany and so on. I think on the slide format, you are still showing very modern rebranded ATVs and the very, very modern product portfolio. So is it right to say that sort of on the growth investments you've done, marketing, sales, digitalization, you're not cutting costs. So what should we also think that those expenses are a bit lower next year than this year.

--------------------------------------------------------------------------------

Ralf W. Dieter, Dürr Aktiengesellschaft - Chairman of Management Board & CEO [8]

--------------------------------------------------------------------------------

This is a very good point. We don't stop expenditures on new products and R&D. We have decreased R&D a little bit in areas where we thought this is maybe at the moment, not to focus about digital and so on, we continue. That's absolutely monitored. You saw in the picture, HOMAG is a market leader, is a technology leader, is a leader in digitization. That's what the market says, and we don't want to lose that. Okay, at the moment, we don't have a question in the room, then we give you a break and we ask on the phone, Mr. Bernecker, are there questions on the telephone.

--------------------------------------------------------------------------------

Operator [9]

--------------------------------------------------------------------------------

(Operator Instructions) And we received the first question is from Philippe Lorrain from Berenberg.

--------------------------------------------------------------------------------

Philippe Lorrain, Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst [10]

--------------------------------------------------------------------------------

Just a quick follow-up. Did I get that right that you are implicitly guiding for EUR 1.15 billion of sales at HOMAG in 2020?

--------------------------------------------------------------------------------

Ralf W. Dieter, Dürr Aktiengesellschaft - Chairman of Management Board & CEO [11]

--------------------------------------------------------------------------------

That's correct, yes.

--------------------------------------------------------------------------------

Philippe Lorrain, Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst [12]

--------------------------------------------------------------------------------

Okay. Is it the midpoint of the range, I guess, or?

--------------------------------------------------------------------------------

Ralf W. Dieter, Dürr Aktiengesellschaft - Chairman of Management Board & CEO [13]

--------------------------------------------------------------------------------

What's that?

--------------------------------------------------------------------------------

Philippe Lorrain, Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst [14]

--------------------------------------------------------------------------------

Is that the midpoint of the rent?

--------------------------------------------------------------------------------

Ralf W. Dieter, Dürr Aktiengesellschaft - Chairman of Management Board & CEO [15]

--------------------------------------------------------------------------------

So the middle point, I would know that in detail. I think that is (inaudible) minimum. I think it will be more, but at (inaudible), it's a minimum.

--------------------------------------------------------------------------------

Philippe Lorrain, Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst [16]

--------------------------------------------------------------------------------

Okay, okay. So more of a low end. Great. And then the second question was, in what part of the measures that you want to implement at HOMAG are actually part of the focus program versus what is the completely new?

--------------------------------------------------------------------------------

Ralf W. Dieter, Dürr Aktiengesellschaft - Chairman of Management Board & CEO [17]

--------------------------------------------------------------------------------

The focus program we had for the Paint and Final Assembly Systems division, HOMAG had several programs, which are still (inaudible). And the closure of a plant, there has no name. We call it future securing activities. I don't like so many program names.

--------------------------------------------------------------------------------

Philippe Lorrain, Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst [18]

--------------------------------------------------------------------------------

Okay, yes. But versus the integration plan then? I mean, it's just like the closure of the plant that comes on top?

--------------------------------------------------------------------------------

Ralf W. Dieter, Dürr Aktiengesellschaft - Chairman of Management Board & CEO [19]

--------------------------------------------------------------------------------

Sorry, if you could just understand here in the room.

--------------------------------------------------------------------------------

Philippe Lorrain, Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst [20]

--------------------------------------------------------------------------------

No, I was just asking what was compared to this integration plan that you were setting up when you -- at the time you put HOMAG and that you needed to stop what was actually really incremental now.

--------------------------------------------------------------------------------

Ralf W. Dieter, Dürr Aktiengesellschaft - Chairman of Management Board & CEO [21]

--------------------------------------------------------------------------------

Okay, that's good that you asked that, because you have to clarify. The integration project we had when we bought HOMAG was mainly 1 on the financial reporting side, purchasing, some technical exchange. The whole plant structure stuff, we knew that we had too many capacity in Germany, but that was then obsolete because we got so many orders that these plants were more than utilized, and there was no way to think about changing your structure without killing the business. And now we took the tax opportunity was a little bit less business that we can do that now. It's still a very risky and difficult operation, to be honest, but that has to be done now. But it's not part of the original integration program.

--------------------------------------------------------------------------------

Philippe Lorrain, Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst [22]

--------------------------------------------------------------------------------

Okay, great. Yes, but that would have been something that you would have done then further down the road. I understand.

--------------------------------------------------------------------------------

Ralf W. Dieter, Dürr Aktiengesellschaft - Chairman of Management Board & CEO [23]

--------------------------------------------------------------------------------

Yes, yes. I mean, we knew it, but we just had to find the right time for it.

--------------------------------------------------------------------------------

Philippe Lorrain, Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst [24]

--------------------------------------------------------------------------------

Okay, perfect. And then the last one is just like, because you were touching on the reporting and financial system. Do you believe that the reporting system between HOMAG and Durr, I'm not speaking about what happens now at HOMAG, it needs to be improved because the path to profit warnings are triggered by HOMAG, and it seems like you've had like a very, very good control over the rest of the group, but perhaps take the information flow between HOMAG and Durr are just taking some more time to actually come through?

--------------------------------------------------------------------------------

Ralf W. Dieter, Dürr Aktiengesellschaft - Chairman of Management Board & CEO [25]

--------------------------------------------------------------------------------

I answer that before my colleague, Carlo, gets too much blood pressure, the reporting system in Durr is very good. The problem on the HOMAG side is the complexity, which is difficult to explain here on the phone. But HOMAG is really complex in its inner structures. And I think for them, it's very difficult to gather their information about all the plans and products of the world by basis. And so their visibility what's going on was -- is not as good as we have it in the Durr Aktiengesellschaft side. That was mainly the reason. And second, that's part of the process. When I talk about new ERP system on top of everything, not only all the fulfillment, we're also working on the financial side to have a better size. I think that will be fixed in 2 years, and we will be as good as everybody else in Durr and in Durr we have a pretty good compared to the companies, I know.

--------------------------------------------------------------------------------

Philippe Lorrain, Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst [26]

--------------------------------------------------------------------------------

Yes. Yes, I would agree on that anyway. But that kind of strengthens my view.

--------------------------------------------------------------------------------

Ralf W. Dieter, Dürr Aktiengesellschaft - Chairman of Management Board & CEO [27]

--------------------------------------------------------------------------------

Thank you very much for your question.

--------------------------------------------------------------------------------

Operator [28]

--------------------------------------------------------------------------------

The next question received via the phone is from Christian Cohrs from Warburg Research.

--------------------------------------------------------------------------------

Christian Cohrs, Warburg Research GmbH - Analyst [29]

--------------------------------------------------------------------------------

First, on -- also on HOMAG. And in combination with the outlook you have provided. The guidance for the net financial status, 2019 has not changed despite the EUR 37 million of one-off expenses you have mentioned. Does this mean that this EUR 37 million will be all noncash? And the cash out will then be next year? And can you also maybe provide the EUR 40 million restructuring cost in total? How much of that is actually cash effective, like severance payments, et cetera? Or are there any -- also any noncash effects like impairment for the [hemo] side or something like that. Secondly, just a clarification point also in the -- in your new guidance, you have slightly increased the CapEx budget. Can you shed some light on it? And what is your feeling about the CapEx, the CapEx budget going into 2020, 2021? Is this going to come down a bit? And lastly, your rival Eisenmann has filed for insolvency. Have you noticed any material change in the -- in your paint shop business, especially with a -- with regards to pricing, with regards to being awarded with orders? And have you been able to pick up some Eisenmann pieces of incomplete product, et cetera? Some answers here would be helpful.

--------------------------------------------------------------------------------

Ralf W. Dieter, Dürr Aktiengesellschaft - Chairman of Management Board & CEO [30]

--------------------------------------------------------------------------------

Okay. Many questions, please also for the others on the phone, too, we would like to go back to the idea to have only 1 question at the same time because we can't write so fast, and it's the acoustic here is not easy. So I'll start with the last question, then Carlo can share a few other financial ones. So Eisenmann is at the moment in the process to be sold, whether this will materialize and go through, we have to see, but I think we will know in the next weeks. Yes, we have a short-term benefit. We got an order, 1 in America, which was already, let's say, (inaudible) and because you can't fulfill. We got the order, and that's another one. So we have a benefit of 2 projects, and we're supporting in some projects or helping the customers to finalize things, which have been started and not finished from Eisenmann, yes.

--------------------------------------------------------------------------------

Carlo Crosetto, Dürr Aktiengesellschaft - CFO & Member of Management Board [31]

--------------------------------------------------------------------------------

I'll answer the other, I think, 2 or 3 questions at the beginning, if I forget to answer one, please remind me again. You correctly noticed that the net financial status outlook has not changed, and that is because we don't expect that these measures will have a cash flow impact in '19. They are just basically provisions for things that we're going to start doing mainly in 2020. So the cash impact will be EUR 1 million, maximum EUR 2 million, if at all. So it's all going to be in 2020 or let's say, the majority of it. How much of that is going to be a cash impact of this EUR 40 million? We think it's going to be in the range of about EUR 32 million, EUR 35 million. So not all of these measures that we have announced will have a cash flow impact. Of course, most of it will, but not all of them, not the whole amount. Then you asked a question, why have we changed our CapEx. Basically, there is a small reason, which is more R&D investment in IoT. We did mention about measuring process system. But to be honest with you, the major reason for this change is because we have included the impact of IFRS, so that's about EUR 20 million, which you may argue, we should have probably done at the time we announced the old targets, but this is an adjustment that we felt we had to make to be more precise. So again, apologies for that. So the fundamental CapEx investment of the group has not really changed in terms of our expectation for the year. So it's mainly IFRS.

--------------------------------------------------------------------------------

Christian Cohrs, Warburg Research GmbH - Analyst [32]

--------------------------------------------------------------------------------

Okay. And just CapEx going to be flattish in the years to come is going upwards? Or are you peaking actually?

--------------------------------------------------------------------------------

Carlo Crosetto, Dürr Aktiengesellschaft - CFO & Member of Management Board [33]

--------------------------------------------------------------------------------

Yes. We don't talk about 2020 following years right now, but we do expect to stay roughly the same level as this year. So we're not expecting as I said, I don't want to say what I will be saying in February next year, but the assumption you should be using now is that they will stay flat.

--------------------------------------------------------------------------------

Ralf W. Dieter, Dürr Aktiengesellschaft - Chairman of Management Board & CEO [34]

--------------------------------------------------------------------------------

So we have now a question in the room again.

--------------------------------------------------------------------------------

Tim Rokossa, Deutsche Bank AG, Research Division - Research Analyst [35]

--------------------------------------------------------------------------------

Tim Rokossa, Deutsche Bank. I have a couple of questions. I will do it one by one now. If we come back to Eisenmann maybe. Why do you think it has only been 2 projects? "Only," and I put those in quotation marks, right? Because obviously, that can be quite big already, and it's probably very solid. Why don't all your customers. Why don't all the Eisenmann customers just drop Eisenmann and go with you? And what are your OEM customers actually think about losing someone like Eisenmann potentially as a means to compete on pricing in contract?

--------------------------------------------------------------------------------

Ralf W. Dieter, Dürr Aktiengesellschaft - Chairman of Management Board & CEO [36]

--------------------------------------------------------------------------------

I try to make it short. First of all, there have been projects where Eisenmann was close to be finished, and this would not make sense to give to somebody else. And some of them is finishing. We see also projects which were 75% finished, like 1 even in Stuttgart. And here, there are smaller competitors of us are just doing fine, commissioning and stuff, which is, let's say, not a very good business. It is for us, that would not make so much sense. The risk is much higher than some EUR 1 million or EUR 2 million or EUR 3 million to get this revenue. And there were -- so in all projects where he was not yet started to execute, and where he declared not to execute because he has a choice. It's very complicated with the insolvency law those projects where nothing has happened yet, then they basically went to us. You could have come back to the market, but because those projects, we were #2 in terms of price. Yes. So they came back to us. And because also the time pressure was high for those customers now to start. It was an opportunity for us to jump on. And they are not -- Eisenmann had not so many projects. And, for example, 1 or 2 of them, which they were taking on a low-margin even with (inaudible). So there are not so many to take, and we didn't touch smaller ones. So mainly, the bigger ones.

--------------------------------------------------------------------------------

William Turner, Goldman Sachs Group Inc., Research Division - Research Analyst [37]

--------------------------------------------------------------------------------

And are your customers trying to intervene in the selling process? Is that your impression so that they can still keep (inaudible)?

--------------------------------------------------------------------------------

Ralf W. Dieter, Dürr Aktiengesellschaft - Chairman of Management Board & CEO [38]

--------------------------------------------------------------------------------

As far as we know, is 2 of our customers are sitting even in this insolvency board because they have claims against Eisenmann, so they have been interested in what's coming out of it. Your second part of the question is, for sure, our customers are automotive customers, they love competition and they don't like if it's too little. They always think that we are monopoly, which is [bullshit] because we are not -- we have a lot of competition. But at the same time, Eisenmann has become weak, other competitors in particular, international ones have been given the opportunity to also show their capabilities, let's say. And so overall, the competitive level is the same. There's no change.

--------------------------------------------------------------------------------

Tim Rokossa, Deutsche Bank AG, Research Division - Research Analyst [39]

--------------------------------------------------------------------------------

Do you think if a Chinese company would buy Eisenmann that your OEM customer on the automotive side would have some hesitations to actually work with them? Would that be to your benefit?

--------------------------------------------------------------------------------

Ralf W. Dieter, Dürr Aktiengesellschaft - Chairman of Management Board & CEO [40]

--------------------------------------------------------------------------------

There is -- we have a very strong Chinese company now, which is now starting to expand worldwide. It Has already done in some cases, a little bit. And I think they're pretty advanced. We know them since 15 years. The question is what would Eisenmann bring them that they do not already have. And I think this question maybe they are asking themselves. So that's what we have to see the outcome. But our customers, most of them are less and less hesitating to give them back. Obviously, this [is the case]. And we should test if they have proved, they can do it, why not just.

--------------------------------------------------------------------------------

Tim Rokossa, Deutsche Bank AG, Research Division - Research Analyst [41]

--------------------------------------------------------------------------------

When we think about HOMAG, you make it sound as if you had those plans already on the table for quite some time. Now the order intake of HOMAG wasn't just bad in Q2, right? It was also now a string of disappointment for a couple of quarters already. If you had it on the table already, why didn't we have this conversation already in Q1 or the very latest during the summer.

--------------------------------------------------------------------------------

Ralf W. Dieter, Dürr Aktiengesellschaft - Chairman of Management Board & CEO [42]

--------------------------------------------------------------------------------

Before we started here, I was asked the question, it must be difficult to tell the HOMAG people that we do those measures in times when things are still looking at EUR 18 million EBIT. That's the answer a little bit. And I can, only say when we bought HOMAG, to me, this was a paradise of opportunities, this company. But people said, this is a problem, this company, a lot of problem. Every problem HOMAG has is, for me, a big opportunity. And I always said, this will take 5, 6 years to exploit this all. And then we will find new ones. But I think HOMAG has many areas to catch up to the modern machinery business. And we fixed a lot of them already. We have now 1 HOMAG, and we bought the company, it was different brands even competing. This was the first big, big change in the company. And this working together also creates, let's say, process constraints because before they each were working for themselves. Now they have to work together to make it simple and to work together without the right infrastructure of working together is a complicated thing. So -- and we do it 1 after the next. And I think this is what we are doing now in the next 2 years are the major key points. And after that, it's optimization, which we do every day and do and track every day we do something better, which we find to improve but the major change is to change the way how HOMAG is working, I call it the DNA of the company. And I can later after -- I can explain a bit more. I think there's a [fundamental energy].

--------------------------------------------------------------------------------

Tim Rokossa, Deutsche Bank AG, Research Division - Research Analyst [43]

--------------------------------------------------------------------------------

I have 2 more questions, if that's okay. Already took up a lot of time. Okay. Then when we talk about the order intake. As you said, when one reads the press, could be very surprised how strong that actually is. I think the press is way too negative, but that's clearly a very strong result that you're showing here in terms of order intake after 9 months. Can you split it a little bit into green and brownfield. Are we still continuing to see CapEx expansion among your OEM customer? Or is most of that actually a bit of maintenance refurbishment?

--------------------------------------------------------------------------------

Ralf W. Dieter, Dürr Aktiengesellschaft - Chairman of Management Board & CEO [44]

--------------------------------------------------------------------------------

Without having the detail numbers, just for my cap calculation, I would say, it's still a strong part of greenfield and some greenfield is a brown touch. But what I mean is here, for example, the projects where we've built part of the page of an existing building that we call brownfield, and we built a new process part of the (inaudible) in a new building. So it's difficult to say. But I would say we have a lot of opportunities of greenfield or capacity expansion, let's call it, maybe that's easier to differentiate between branches, probably (inaudible) long-term thing. And Mr. Dielmann tries to find the number, but I would say maybe more greenfield than 1 year ago. That's my -- and he's nodding because he knows everything. I was right, thank you very much. I'm fully right. Good.

--------------------------------------------------------------------------------

Tim Rokossa, Deutsche Bank AG, Research Division - Research Analyst [45]

--------------------------------------------------------------------------------

Carlo, maybe for you. I had the opportunity to present at your previous employer to the board level here, time a couple of weeks ago. And I can tell you this company is shifting its focus completely on free cash flow generation. BMW is already doing the same for 2 years now. BMW has traditionally anyway been more free cash flow focused than the other guys. Your payment terms are still quite generous. You still get quite a bit of down payments when you do the [paint] shops. Is that something you really see materially changing because I know that, for example, for part suppliers, German OEMs are thinking about stretching the payment terms. We're not just talking about 2 or 3 days, right? We're talking about a month to 2 months. I've even heard 1 company saying that they were requested if they could do it for 12 months, not be paid for 1 year, which is obviously complete nonsense, but do you see these changes in your payment terms as well?

--------------------------------------------------------------------------------

Carlo Crosetto, Dürr Aktiengesellschaft - CFO & Member of Management Board [46]

--------------------------------------------------------------------------------

Yes. Unfortunately, the big changes we see are with the bigger customers. Say, the [handbag] or the normal mom-and-pop shop, they'll buy the HOMAG machine, honestly, they're pretty solid. They pay when you say -- so it's really the big significant changes with the big OEMs that you are probably referring to. And as you know, they have a massive investment plan ahead of them, and they are looking at all possible measures to improve their own cash flow in order to make those investment plans. Obviously, they are talking to their suppliers, they're talking to Durr. And the discussions, to be honest with you, in the last few years have not been easy. And honestly, I don't see how this will change in the next months to come. So I think this is going to be pressure on Durr still to come. It doesn't mean that we can just sit there and do nothing. Obviously, we're looking at all possible ways of improving the cash flow and the payment terms. We're also now dealing with the traditional EMS with new customers there. We tend to have better opportunities. We tend to have a much stricter project management focus. Remember, we -- it's not just about advanced payment. It's also about collecting progress payments, and you always have the game that all the checklist has to be completed before you get the improvement. This is something that we also need to put pressure. I think what is significantly different today at Durr is that there is much more awareness within the organization, in dealing with the customer negotiating with the customers, to making sure that cash flows are as a priority, I would say, as EBIT. But I don't want to paint a positive picture that everything is fine, everything is going to be great. I think the reality is we are dealing with gorillas and King Kongs and the smaller supplier in a way. And even though we have a decent market share, we have to somehow work with our customer, make sure that they can meet their goals, so that they can keep using us and we can somehow do business together in the future. So it's always a bit of a trade-off. And before you get no deal, you sometimes accept maybe conditions that you don't necessarily always like.

--------------------------------------------------------------------------------

Ralf W. Dieter, Dürr Aktiengesellschaft - Chairman of Management Board & CEO [47]

--------------------------------------------------------------------------------

But sometimes, we also turned down, we turned down 2 trucks because they're so unfavorable is the payment conditions that we said no way, is too much risk.

--------------------------------------------------------------------------------

Carlo Crosetto, Dürr Aktiengesellschaft - CFO & Member of Management Board [48]

--------------------------------------------------------------------------------

Yes. And also, we have had a situation, and I won't mention the name of customers in China, where they tried to not to pay us and we have decided for the first time, maybe a long time to start suing our customers. And that is something that we don't do lightheartedly, obviously, because it has long-term repercussions. But there is a change in mind shift and with the social scoring system in China. Also, our customers don't like it if we treat them to do that. So we've seen some positive impact (inaudible) but yes, as I said, it's something which has been a priority. And of course, you have seen the numbers. You could say, well, the numbers don't show that, but in the last few years (inaudible).

But we can see that because our networking capital discussion we have since 18 months, that's the effect what you just mentioned there. It's now at that level now. Because we don't see it intensifying. It's just what I think I -- no, I think that should be the how you call it, the bottom line of development.

I mean, intensify, we mean that we would have to start financing the factories of our customers. And I don't think we're in that situation. So I think it's going to be very tight and the gap of advance payment is going to stay between 0 and minus EUR 100 million. Hopefully, more close to minus EUR 100 million in the future than we are indicating now, but that would be a significant change. And also you have to understand that we're becoming also more of a machinery company which, obviously, there's a different payment pattern in terms of how to deal with advanced payment, and let's say, when you're building a paint shop.

--------------------------------------------------------------------------------

Ralf W. Dieter, Dürr Aktiengesellschaft - Chairman of Management Board & CEO [49]

--------------------------------------------------------------------------------

So I don't know, can I -- should I, yes. I asked Mr. Bernecker are questions on the phone. I think I have to decide how you're doing. I have to? I'd like to say.

--------------------------------------------------------------------------------

Operator [50]

--------------------------------------------------------------------------------

We have some further questions on the phone. The next one is from Daniel Gleim from MainFirst.

--------------------------------------------------------------------------------

Daniel Gleim, MainFirst Bank AG, Research Division - Director [51]

--------------------------------------------------------------------------------

So the first question would be on your HOMAG sales outlook for 2020, if I understood you correctly, with the revenues at the lower end at EUR 1.15 billion. My question would be, what is the corresponding margin to that level? You mentioned you're implementing the measures now to protect the margins. Is it the right way to think that the underlying margin in 2020 should be flat year-over-year? And what I mean is flat is the old ballpark guidance of 5.5% to 6.3%? Or are there any inefficiencies as a result of the measures that you are implementing that should lead the underlying margin go down '20 over '19? That is question number one.

--------------------------------------------------------------------------------

Ralf W. Dieter, Dürr Aktiengesellschaft - Chairman of Management Board & CEO [52]

--------------------------------------------------------------------------------

I think we step into territory which we didn't want to -- we didn't want to give guidance for 2020 today. Our objective is to do that in February. And then also, we would guide you for the divisions. And please give us the opportunity because of the margin development, in particular, we have to see how these measures will take place, and we would be, let's say, more confident to give this to you in February if you understand that.

--------------------------------------------------------------------------------

Daniel Gleim, MainFirst Bank AG, Research Division - Director [53]

--------------------------------------------------------------------------------

But then maybe on the qualitative side, do you expect any inefficiencies from these ongoing processes? Or would you expect business as usual because you are implementing them in a very cautious, let me put it this way, (inaudible).

--------------------------------------------------------------------------------

Ralf W. Dieter, Dürr Aktiengesellschaft - Chairman of Management Board & CEO [54]

--------------------------------------------------------------------------------

Let me answer like that because it's -- we try to avoid inefficiencies out of that and can't promise yet because it'd be also the opposite. But normally, when you change complicated changes in such a company in a machinery company that does not avoid, let's say, inefficiencies. And I also close a plant is -- which you don't close like tomorrow, we have a bunch of those. And people have been informed today that it will be closed end of next year. So we expect them to work another year in a motivation level, which is just that the output is coming out. So that could be also inefficiencies if they don't do this. It's really complicated and not so easy. But I would say, from the trend I would either expect some inefficiencies.

--------------------------------------------------------------------------------

Daniel Gleim, MainFirst Bank AG, Research Division - Director [55]

--------------------------------------------------------------------------------

Very clear. If I understood you correctly on your elaboration on the PFS segment, you are expecting some stronger order momentum entering into the fourth quarter. Could you share with us if there was already something major signs in the months October and maybe in November? And whether there's something coming up you expect in the very short period?

--------------------------------------------------------------------------------

Ralf W. Dieter, Dürr Aktiengesellschaft - Chairman of Management Board & CEO [56]

--------------------------------------------------------------------------------

I think we had already a strong order momentum so far in PFS, and I'm just saying that it will hopefully continue into (inaudible) continue and the answer is yes, we have signed 2 major orders in -- what is now, November? In November. So it will be in Q4. And some of them will be moved pretty close to Christmas, and maybe they are (inaudible) or new year, but it's just good momentum there. And the others, yes, 2 larger ones we have booked just recently.

--------------------------------------------------------------------------------

Daniel Gleim, MainFirst Bank AG, Research Division - Director [57]

--------------------------------------------------------------------------------

Very clear. And maybe on the bigger scheme, how do you see the AV transition going into 2020? Are these the first time that this transition also on the plant CapEx side is getting momentum? I know I asked this question, I think, 12 months ago already, but I just want to -- I'm curious to learn what your sense of the situation is going to sustain or to accelerate what is your gut feeling after discussions with customers.

--------------------------------------------------------------------------------

Ralf W. Dieter, Dürr Aktiengesellschaft - Chairman of Management Board & CEO [58]

--------------------------------------------------------------------------------

It's not so easy to answer it, but I'll try to share my thoughts here. First of all, we have this category of new OEMs, let's call them, we have in America, in fact, mostly in China, where we also have got a lot of orders from and continue to collect orders. Hopefully, the next 6 months. And I think that is a trend, which then comes next year to some saturation because they first have to be built and use that produce cars and sell the cars. And not all of them will be successful for sure. I think would be a shakeout process in the next step. And then you have the traditional, let's call it, traditional OEMs also either preparing plans to have mixed production of normal vehicles additional ones and electric vehicles and those transformation in those plants is business for us. It's not a huge business, but EUR 10 million, EUR 15 million, EUR 20 million, EUR 30 million. And so that we will see both. And we will see some maybe additional plants such as (inaudible). But I think everybody at the moment is looking at how the market is taking those products and is consuming. I think we have to wait for next year to have better picture when also the western OEMs come with the new products out there, how the demand will be. I think that will massively steer their expectation, what will happen in 3 years from now because when they give us next year in order it reflects the expectations they have for the year 2023 onwards.

--------------------------------------------------------------------------------

Operator [59]

--------------------------------------------------------------------------------

And the next question we received is from Sven Weier from UBS.

--------------------------------------------------------------------------------

Sven Weier, UBS Investment Bank, Research Division - Executive Director and Analyst [60]

--------------------------------------------------------------------------------

Would be 2. The first one is on your prepared remarks, you said you expect a stronger Q4 in all divisions. I was just wondering, did that refer to order intake? And was that kind of order intake year-on-year? Just maybe some more color on that one.

--------------------------------------------------------------------------------

Ralf W. Dieter, Dürr Aktiengesellschaft - Chairman of Management Board & CEO [61]

--------------------------------------------------------------------------------

So we -- the order intake, I think we expect to continue to be strong in the fourth quarter, whether it's much stronger or less stronger. One deal can make a difference or difficult to say. But year-over-year because last year, I think we had a very strong fourth quarter. So if you like to compare to others where I don't like. But if you do it. So I think, maybe not the same level like last year, fourth quarter. But yes, that's what we see today. But as I said, it's 1 order is EUR 100 million less or more, that makes a big difference in the numbers. But it doesn't change anything for Durr because as it's coming in December or January, no difference there. Also, I think the margin improvement of the EBIT if we continue to show the upward trend.

--------------------------------------------------------------------------------

Sven Weier, UBS Investment Bank, Research Division - Executive Director and Analyst [62]

--------------------------------------------------------------------------------

So stronger than Q3 this year, but maybe a bit below Q4 last year?

--------------------------------------------------------------------------------

Ralf W. Dieter, Dürr Aktiengesellschaft - Chairman of Management Board & CEO [63]

--------------------------------------------------------------------------------

That's a good summary, yes.

--------------------------------------------------------------------------------

Sven Weier, UBS Investment Bank, Research Division - Executive Director and Analyst [64]

--------------------------------------------------------------------------------

Okay. And the second question is also on Eisenmann because I remember you said that part of your intention was to hire key people from the company. And I was just wondering how that has worked out so far?

--------------------------------------------------------------------------------

Ralf W. Dieter, Dürr Aktiengesellschaft - Chairman of Management Board & CEO [65]

--------------------------------------------------------------------------------

We did hire from Eisenmann in the last years, I would say, roughly 150 people worldwide. And we -- it's the latest, how should I say, when Eisenmann came into final trouble, most of the good people were gone already anyway. So we took some people recently in special -- not in management, but in special technical skills. And we are also -- because Eisenmann has not only they sell the automotive business, but they have also sales process has started for business they had in addition. And 1 of them, we're also participating in a smaller business, but an interesting one.

--------------------------------------------------------------------------------

Sven Weier, UBS Investment Bank, Research Division - Executive Director and Analyst [66]

--------------------------------------------------------------------------------

You said that you expect the sales process to be concluded in the coming weeks. And I have to say, we hear little about that at the moment, and in terms of a short list of buyers. I guess, you must be a bit closer to that and what you are hearing? Can you share that with us?

--------------------------------------------------------------------------------

Ralf W. Dieter, Dürr Aktiengesellschaft - Chairman of Management Board & CEO [67]

--------------------------------------------------------------------------------

I know more than I can share with you, but I can only say that it's not clear yet how that process will end and we take it or if somebody will take it.

--------------------------------------------------------------------------------

Operator [68]

--------------------------------------------------------------------------------

And the next question received is from Peter Rothenaicher of Baader Bank.

--------------------------------------------------------------------------------

Peter Rothenaicher, Baader-Helvea Equity Research - Analyst [69]

--------------------------------------------------------------------------------

Mr. Dieter, coming more towards a longer-term outlook for your Paint and Final Assembly Systems business. You mentioned you were close to closing some more orders. You have already been successful, obviously, in recent months, but what is your view about now new project requests, is this slowing down to some extent? Or do you see here no slowdown in business?

--------------------------------------------------------------------------------

Ralf W. Dieter, Dürr Aktiengesellschaft - Chairman of Management Board & CEO [70]

--------------------------------------------------------------------------------

That's a good question. And if I would have all the answer, I would be more happy about that. We can always look at the pipeline of projects, which is a few of 1 year roughly because sometimes, projects start very fast and very sudden. But when we look at the, let's say, until mid of next year, we have a good pipeline which would give us a nice order intake in business to continue the level we have at the moment. For the second half of next year, I can't have not been, let's say, a sufficient look never had also in the past. My first inner person gut feel is that there will be a slowdown of this new EV OEMs because there are many out there. I think this will not continue like that. And the question is how optimistic the existing OEMs or traditional OEMs, let's call them, are about the success and future of their (inaudible) of their [E] cars. They are not just launching this year but mainly next year and the future of that. I think that we will know better next year. So it can be -- it can be stable, it can be less and it could be also more, but that's difficult today.

--------------------------------------------------------------------------------

Peter Rothenaicher, Baader-Helvea Equity Research - Analyst [71]

--------------------------------------------------------------------------------

Okay. Then M&A in this environment, I think it might be easier to find some targets, particularly, I think smaller players are getting into trouble. Do you see here now some new opportunities for M&A?

--------------------------------------------------------------------------------

Ralf W. Dieter, Dürr Aktiengesellschaft - Chairman of Management Board & CEO [72]

--------------------------------------------------------------------------------

Yes. Well, not for a HOMAG kind of opportunity in that size, but we are working on several smaller ones. And we will let's say, we have some results, whether we are successful. They are not in the next 3 months. But also wasn't the HOMAG area as well, where we are working on.

--------------------------------------------------------------------------------

Peter Rothenaicher, Baader-Helvea Equity Research - Analyst [73]

--------------------------------------------------------------------------------

Okay. And my last question on NPS. So you had, let's say, tougher time with weaker order intake, particularly in second half last year. Now it's somewhat improving. What is your view here? So it's here to fear that the weakness in the automotive industry will impact demand in 2020? Or do you have here support from new products, which is fuel?

--------------------------------------------------------------------------------

Ralf W. Dieter, Dürr Aktiengesellschaft - Chairman of Management Board & CEO [74]

--------------------------------------------------------------------------------

Yes. Somewhat improvement is nearly EUR 25 million to us last year, and this is a small machine. So that's quite a lot of machines. I think it's promising. I can tell you what I see. We had a very strong business in order intake and testing and in automotive filling. On the balancing side. We have a mixed picture up to the second -- the first half of this year. I told you last time that the powertrain part of that balancing business is really missing EUR 30 million, EUR 40 million of order intake to overcharge crankshafts and stuff like that. This has changed recently, not in the third quarter, it will be booked in the fourth quarter. So we've got orders again, even in the turbocharger business, so that's quite nice to see that we are, let's say, recovering a little bit on the powertrain side. But we have a very strong demand on the aerospace or the engine -- that engine part, balancing of trade engines, particularly in China because China has a program to develop their own engine. Jet engine. They don't have today, and they are working on that heavily, and they need a lot of machines. So that basically is the overall business as an overall business, repair business of trade engines is strong demand. And so here, we have very positive things. So we are pretty confident and pretty strong for next year as well in NPS. Stable, stable at a high level.

--------------------------------------------------------------------------------

Operator [75]

--------------------------------------------------------------------------------

And we received the last question from Alexander Hauenstein of DZ Bank.

--------------------------------------------------------------------------------

Alexander Hauenstein, DZ Bank AG, Research Division - Analyst [76]

--------------------------------------------------------------------------------

I come back a bit into the topic, one of my former colleagues already. I'm wondering mean, if uncertainty in the other industry is further increasing. And I mean, what's the risk for your classic order related paint business for '20 and '21 this by your divestiture the order book and you talked already about the conventional and the [E] car players, but also looking at maybe into the different regions. And especially, my question is, what is the risk that OEMs delay projects and our margins will get down due to more aggressive negotiations or even renegotiations. Maybe you could comment a bit more on this margin impact here eventually.

--------------------------------------------------------------------------------

Ralf W. Dieter, Dürr Aktiengesellschaft - Chairman of Management Board & CEO [77]

--------------------------------------------------------------------------------

Yes. So renegotiations, we don't know. This only for part suppliers. I think they has this, but we don't. We have order, renegotiating that start. I think...

--------------------------------------------------------------------------------

Alexander Hauenstein, DZ Bank AG, Research Division - Analyst [78]

--------------------------------------------------------------------------------

So there's no risk of devaluation in order book at some consolidation?

--------------------------------------------------------------------------------

Ralf W. Dieter, Dürr Aktiengesellschaft - Chairman of Management Board & CEO [79]

--------------------------------------------------------------------------------

Sorry?

--------------------------------------------------------------------------------

Alexander Hauenstein, DZ Bank AG, Research Division - Analyst [80]

--------------------------------------------------------------------------------

So there is no risk of a potential, let's say, revaluation of the order book? Well, this is another part and maybe some cancellations, maybe some deferrals, but also maybe some, let's say, that customers are coming back to you and try to renegotiate the overall margin level.

--------------------------------------------------------------------------------

Ralf W. Dieter, Dürr Aktiengesellschaft - Chairman of Management Board & CEO [81]

--------------------------------------------------------------------------------

No, never. I do these jobs as many years, never have, and we would not do it. I mean they can try, but we would not talk about it.

--------------------------------------------------------------------------------

Alexander Hauenstein, DZ Bank AG, Research Division - Analyst [82]

--------------------------------------------------------------------------------

Okay.

--------------------------------------------------------------------------------

Ralf W. Dieter, Dürr Aktiengesellschaft - Chairman of Management Board & CEO [83]

--------------------------------------------------------------------------------

Contract is contract. No. This -- I mean, maybe that's the next step or next level of negotiation prices. But at the moment, it has not (inaudible) that yet. I understand that there are no more questions on the phone. Is that correct, Mr. Bernecker? Mr. Bernecker?

--------------------------------------------------------------------------------

Operator [84]

--------------------------------------------------------------------------------

Yes, we received 1 last question, it's from [Andreas Roof].

--------------------------------------------------------------------------------

Unidentified Participant, [85]

--------------------------------------------------------------------------------

I would have another question regarding HOMAG. You announced that you are going to eliminate 350 positions in the HOMAG group, 150 positions will be at the [hemo] side due to the closure or the closing of the production there. How is the split of the remaining 200 position in the HOMAG group to the other side or to the other companies within the HOMAG group?

--------------------------------------------------------------------------------

Ralf W. Dieter, Dürr Aktiengesellschaft - Chairman of Management Board & CEO [86]

--------------------------------------------------------------------------------

They are very -- at various locations there is the shop floor, there are some people affected of it. And where do you come from Mr. [Roof]? I've not understood.

--------------------------------------------------------------------------------

Unidentified Participant, [87]

--------------------------------------------------------------------------------

From (inaudible).

--------------------------------------------------------------------------------

Ralf W. Dieter, Dürr Aktiengesellschaft - Chairman of Management Board & CEO [88]

--------------------------------------------------------------------------------

Sorry, from where?

--------------------------------------------------------------------------------

Unidentified Participant, [89]

--------------------------------------------------------------------------------

(inaudible). We are publishing a newsletter. (inaudible).

--------------------------------------------------------------------------------

Ralf W. Dieter, Dürr Aktiengesellschaft - Chairman of Management Board & CEO [90]

--------------------------------------------------------------------------------

Okay. Understood. But yes, this is no, but it's not -- I think we -- I don't -- we have more of the details here to share now, but I think you know the plans, but it's mainly [hemo] and it's parts of shop floor and maybe in 1 of the other locations, but it's quite split over.

--------------------------------------------------------------------------------

Unidentified Participant, [91]

--------------------------------------------------------------------------------

Okay. And 1 question regarding investments in the HOMAG group, how are the investments? Or is the CapEx affected by this restructuring?

--------------------------------------------------------------------------------

Ralf W. Dieter, Dürr Aktiengesellschaft - Chairman of Management Board & CEO [92]

--------------------------------------------------------------------------------

The CapEx is not already. We continue to invest in the future of the company.

--------------------------------------------------------------------------------

Unidentified Participant, [93]

--------------------------------------------------------------------------------

Okay. You mentioned that you are negotiating 1 acquisition in the HOMAG -- within the HOMAG sector. Could you give more details on that?

--------------------------------------------------------------------------------

Ralf W. Dieter, Dürr Aktiengesellschaft - Chairman of Management Board & CEO [94]

--------------------------------------------------------------------------------

No. Sorry, I can't, because the process is quite, quite confidential and -- but you have not to be too long patient, maybe in 2 months.

--------------------------------------------------------------------------------

Operator [95]

--------------------------------------------------------------------------------

As there are no further questions. I hand back to the speakers.

--------------------------------------------------------------------------------

Ralf W. Dieter, Dürr Aktiengesellschaft - Chairman of Management Board & CEO [96]

--------------------------------------------------------------------------------

Yes. Thank you very much for everybody to join on the phone and here in the room, we stay for a moment. And again, thank you very much for joining. I think the next conference call, we have middle of -- end of February, 28th of February, where we then finally give you the guidance, which you are expecting and waiting for 2020, and look forward to that. Thanks, again, for your interest today and for this moment. Goodbye. Good afternoon. Thank you.

--------------------------------------------------------------------------------

Operator [97]

--------------------------------------------------------------------------------

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