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Edited Transcript of ZAG.VA earnings conference call or presentation 3-Sep-19 6:30am GMT

Q1 2020 Zumtobel Group AG Earnings Call

Dornbirn Sep 17, 2019 (Thomson StreetEvents) -- Edited Transcript of Zumtobel Group AG earnings conference call or presentation Tuesday, September 3, 2019 at 6:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Alfred Felder

Zumtobel Group AG - President of the Management Board & CEO

* Emanuel Hagspiel

Zumtobel Group AG - Head of IR

* Thomas Tschol

Zumtobel Group AG - CFO & Member of Management Board

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Conference Call Participants

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* Charlotte Friedrichs

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

* Lucie Anne Lise Carrier

Morgan Stanley, Research Division - Executive Director

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Presentation

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Operator [1]

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Ladies and gentlemen, thank you for standing by. I am Emma, your Chorus Call operator. Welcome and thank you for joining the Zumtobel Group's AG Q1 Results Full Year 2019-'20. (Operator Instructions)

I would now like to turn the conference over to Emanuel Hagspiel, Head of Investor Relations. Please go ahead.

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Emanuel Hagspiel, Zumtobel Group AG - Head of IR [2]

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Good morning, everybody, and welcome to our conference call on the first quarter results of the new financial year. I trust you all were able to download the management presentation from our website. Today's call will be hosted by Mr. Alfred Felder, CEO of the Zumtobel Group; as well as Mr. Thomas Tschol, our CFO.

As always, Thomas will start the call and talk you through the financial -- the key financials of the results, and then Alfred will take over to give you a brief overview on the regional sales development.

May I now hand over to Thomas and ask him to start his financial part.

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Thomas Tschol, Zumtobel Group AG - CFO & Member of Management Board [3]

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Good morning, ladies and gentlemen. Like always, we want to start with giving you a brief overview on the major developments in the first 3 months of this financial year. So we start with H2. The first quarter result shows that we are back on the right track. We successfully continued the growth course which began in the first quarter of the past financial year, and we have also been able to close the first 3 months of this financial year with a solid improvement in earnings.

Anyway, group revenues are up by 1.1%. Adjusted for foreign exchange, revenues would be at 0.9% plus. The top line growth is mainly driven by the Lighting Segment. Lighting Segment is up by 1.4%, whereby we have seen a very promising development in DACH region with a growth of almost 7%. Revenue growth was also supported by Asia and the U.S. as well as countries of Eastern Europe.

The Components Segment is on previous year level. It shows, after adjustment for FX, even a slight growth of 0.6%. Given the challenging price pressure of 6% to 7%, this is expected for us. Anyway, the first quarter shows the second continuing quarterly growth after 13 quarters of decline. Obviously, the business is to a certain extent due to the base line effect as we are comparing ourselves now with more previous year revenues. Nevertheless, this is a positive trend and a good start into the new financial year.

The group adjusted EBIT increased from EUR 10 million to EUR 15.8 million, and this is driven by 2 main impacts: one is slight increase in gross profit of EUR 2.3 million, including R&D, despite the continuing price pressure that we are facing; and the improvement of the cost base, selling and admin were EUR 3.4 million down compared to previous year period.

The good news here is that corrective actions initiated in the past financial year are now clearly visible in the P&L, and we could substantially adjust our cost base, particularly in admin and selling expense. However, needless to say, that we will need to continue this effort, and that's why we are telling it through that selective adjustment also in the business year of 2019-'20.

The group's -- the Zumtobel Group recorded a net profit of EUR 10.9 million, and we have recorded one-off costs for restructuring measures of EUR 0.4 million. We also confirm the guidance for this financial year. We expect a slight increase in revenues as well as an improvement in EBIT-adjusted margin to 3% to 5% for the full of 2019 and '20 financial year. We have a total goal to generate an EBIT margin of roughly 6%, but 2020-'21 financial year remains intact.

Let me now move to the next chart to give you more details of the development of each segment.

Let's start with the Lighting Segment. As usual, you can see the revenue development of the quarter on the left-hand side and the adjusted EBIT development of the quarter on the right side. As mentioned before, revenues in the first quarter increased by 1.4%. After adjustment for foreign exchange effect, the increase in Lighting Segment was still 0.9%. This is, for us, a very satisfactory development on the revenue side.

Increase in revenues of EUR 3.1 million was mainly driven by a good development of the DACH region, but also U.S. and Eastern European countries performed well. Nevertheless, the industry environment remains very challenging, which is also reflected in many segments from our peer companies, particularly in terms of ongoing intense price competition in the lighting business.

On the right-hand side, you can see the adjusted EBIT development. As a result of the improved top line, which increased EUR 222.6 million, as well as improved cost base, the adjusted EBIT in the first quarter increased to EUR 13.5 million versus EUR 8.1 million in the previous year.

Let's move on to the Components Segment. The revenues in the Components Segment were flat in the first quarter of 2019-'20, but after adjustments for FX, the segment was slightly growing by 0.6% as mentioned before. The main challenge for the Tridonic top line is still continuing price pressure, which decreased slightly. However, price pressure is still at 6% to 7%, and adjusted EBITDA and the profitability fell to 7.2% as a result of the price pressure. Just keep in mind, Tridonic is selling approximately 4% more volumes compared to previous year but has not seen revenue growth. This obviously puts pressure on the margins.

Now let's see the combined result on the Zumtobel Group level. You can see, of course, the combined results of the Components Segment and the Lighting Segment. And I think there is not much more to add, and we can move to Page #6, showing the main building blocks of the EBIT-adjusted development.

Starting with the prior year adjusted EBIT for the first quarter of EUR 10 million on the -- this is the block on the left of the slide. The absolute gross profit of the group before R&D increased slightly by EUR 0.7 million. Thereby, the Lighting Segment is above previous year, and the Components Segment, due to the margin pressure, slightly below. R&D expenses decreased by EUR 1.6 million, which is the result of lower personnel expenses and increased own work capitalized, mainly in the Components Segment. And in the functional areas, selling as well as admin, we can see additional cost savings versus prior year. And the efficiency improvement and cost-reduction has resulted in a little bit decrease in the selling and admin expenses of EUR 3.4 million despite of several increases required by collective bargaining agreements. Especially, the streamlining in the management structures and strict cost control contributed to this improvement. Other operating results, excluding special effects, were basically on the previous year level. This brings us altogether to an adjusted EBIT of EUR 15.8 million in the first quarter of this financial year.

Let's have a look at the income statement on Slide #9 (sic) [Slide #7]. Here, you see the full P&L statement. This is -- generally not much to add as we already spoke about the main building blocks of our result. The special effects decreased from EUR 2.7 million to EUR 0.4 million, and these are related primarily to cost for the adjustment of the global plant network. And the financial result improved by EUR 1 million to minus EUR 1.8 million. This brings us to an improved bottom line of EUR 0.9 million in the net income.

Let's move to the cash flow statement on Slide #7 (sic) [Slide #8]. We were all -- also able to further optimize our working capital during the important periods. And in comparison with the prior year, the working capital decreased from 16.7% to 15.1% of rolling 12-months revenues. Investment from operating activities therefore increased from EUR 8.3 million to EUR 19.6 million, and the cash flow from investing activities was lower than the comparable prior year period at EUR 10.4 million in the first quarter 2019-'20. Included here are investments for capitalized development costs of EUR 3.9 million in this figure. The increase in the cash flow from operating activities and the low-investment activities led to an improvement in free cash flow, which is now at plus EUR 9.9 million versus minus EUR 6.2 million in the previous year.

On Slide #8 (sic) [Slide #9], a quick look at the balance sheet data on, particularly, our liquidity position. The net debt totaled EUR 199.1 million as of end of July 2019. This is EUR 50.4 million above the value as per end of April 2019, and this increase is due to the first-time application of the IFRS 16 requirements. And we will provide you with more details on the effect on the next slide.

Coming back to the liquidity situation, this is backed by a consortium credit agreement with the term ending in November '22, the maximum volume of EUR 200 million, whereof EUR 50 million were drawn end of July; a short-term bilateral credit agreement with a volume of EUR 40 million, and there is a bullet repayment in January 2020 which is fully drawn; and 2 long-term credit agreements of EUR 40 million each with the European Investment Bank. And here also, we have bullet repayments in September 2024, respectively, February 2025, and both were fully drawn end of July 2019. On top of that, we have uncommitted lines of credit totaling EUR 62.6 million.

As you all know, there are 2 financial covenants attached to the financing agreement, mainly a debt coverage ratio of less than 3.5% -- 3.5, sorry, and equity ratio of more than 25%. These financial covenants are tested on end of October and the end of April. And please note that due to the effect of IFRS 16, these covenants will be adjusted as of end of October, mainly the DCR, lower than 3.55; and equity ratio, bigger than 30 -- sorry, 23.5%.

Let's have a closer look to the effect of IFRS 16 on the next slide. As mentioned before, the Zumtobel Group applied the new standard of IFRS 16 for the first time in Q1 2019-'20. I'm sure that you all know the general effects of IFRS 16 implementation, and therefore, I will just focus on the specific effects for Zumtobel Group.

Effects are as follows: First, we have an extension of balance sheet due to the recognition of the right-of-use asset as well of lease liability. The balance sheet was extended by EUR 50.1 million. And we have net impact on the income statement. The EBITDA increased by EUR 4 million as there are no more expenses for rent and leasing. And the EBIT increased by EUR 0.4 million, which is the net impact of expenses from rent and leasing minus the depreciation from the right-of-use asset. The decrease of interest result by EUR 0.5 million. And so we have a front-loading -- or a so-called front-loading impact in the net income of minus EUR 0.1 million in the first quarter, which is the difference of depreciation and interest minus the expenses for rent and leasing. Just to add, the change in the accounting standard has no impact on the underlying cash flows.

This is all with respect to the financial development in the first quarter. I think we made a very good progress on the cost base and handling our liquidity situation. Obviously, this is not the end of the journey, but it's, anyway, a good start for reestablishing a stable financial foundation.

May I now hand over to Alfred to provide you with a brief update on regional sales developments and the outlook for the full financial year.

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Alfred Felder, Zumtobel Group AG - President of the Management Board & CEO [4]

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Yes. Good morning, everybody. Warm welcome also from my side. Alfred Felder speaking.

If you have a look at Page #11, you will see the quarterly distribution of our growth, or better to say, the shrinkage what we have compared to the evaluations started in Q4 '15-'16, peaking then in the previous, previous year of quarter 4 with minus 12.7%. And apart from that, what Thomas has mentioned on the cost base, I think we have also been able then to stabilize the business still -- let me say, still able to reduce the shrinkage with a first-time growth in quarter 4, and currently now, second quarter in a row in a slight growth.

If you look into the Page #12, on the regional distribution. That's down at the group level. I would like to explain a little bit more in detail where this is coming from. Obviously, based on our focus strategy, we have been putting a lot of effort in our core countries, which are the Central European countries, obviously, the DACH region, France and Italy and U.K. And we are seeing now the first impact and the positive impact on that one. Switzerland was, over the last year, performing well. They continue to perform well, even to exceed the expectations. But also now in both markets of Germany and Austria, they have been able to get back on track, not there where we had been previously, but we have been able to win market shares in a slight shrinking market, leading to a quarter 1 of 90 -- almost EUR 93 million and the growth of 5.6%.

Which is a little bit different in Northern Europe, which is, for us, the combination of the Nordic countries, U.K. and Ireland. Here we have, in U.K., a more or less stabilization of the business, which obviously, with all the -- yes, and that's -- what we have in U.K. on the Brexit is already a positive sign that we have reached the end of the tunnel. It's a little bit different in Nordics, where we have last year a huge project, the so-called Oslo Museum, which basically came to an end. And basically -- and we have not been able to completely compensate it in Q1. But there is more in the pipeline for the quarters to come.

Thomas mentioned it already, the combination of Benelux and Eastern Europe also shows a growth, where the growth in Eastern Europe is more significant than in Benelux. But also here, we're beginning to set up with the management team what we have been installing there. We are back on track here with a slight growth of 2.1%, leading to 50 -- EUR 46 million of revenue.

Which has changed a little bit in Southern Europe consisting of 3 countries: Spain, Italy, and France. Spain, from a smaller volume, still significantly growing double-digit; France, stabilizing; and Italy, unfortunately, we see a little bit the impact of the price because of the growth of the economy, where we are struggling to basically operate in a shrinking market. And especially, this was weak in quarter 1, leading our total to a shrinkage of 3% and a EUR 47.3 million revenue.

Stable business in Asia. And Pacific, I think, we mentioned this already, that we also had to do a reshuffling completely, especially of our Pacific market. But it's now running very stable here on that. And struggling a little bit in China, especially, I think Thomas mentioned it, we have been -- we have decided not to go for each and every project and what basically is not giving us the necessary margins here.

Middle East, healthy market. And the reason for the shrinkage of 13% is simply this effect: a phasing of 2 huge projects from our small company, acdc, was basically this year coming in the second half of the year. So we are confident that we are able to reach -- meet the budget, but the quarter 1 was not a really strong one last year. It's a little bit weaker.

And last but not least, in Americas, I think I mentioned this already, we have been going through a major restructuring there, taking out 40% of the fixed costs and basically focusing on key projects and key products and key customers. And we are taking quarter 1 similar to quarter 4 last year. We are back on track with a solid growth of -- in the range of almost 30%, leading to EUR 7 million. But we have -- as we mentioned also, we have been coming from a quarter number more in the range of EUR 9 million to EUR 10 million. We are still operating from that. So that leaves us, on a group level, to EUR 296.4 million or EUR 1.1 million -- 1.1% growth.

One -- a few words about Tridonic. Basically, the big impact -- negative impact in Tridonic was Turkey, where we are suffering significantly from the devaluation of the lira. Here in Tridonic, it's a significant business in Turkey. But more or less, the rest is similar, solid growth in DACH and stabilization in U.K. and basically stable our business also in Asia Pacific.

So moving on to Page #13. This is the outlook. Basically, what Thomas already confirmed, that we stick with a target of 6% EBIT in '19 and '20, with all the measures that we have. There's still a long way to go even though we are at 5% EBIT right now after quarter 1. But we even know all, the first 2 quarters of the fiscal year seasonally are the strongest ones, and basically the second half is a weaker one. And we expect a slight increase of revenues.

Obviously, as the market indications are not really showing in our favor. You could see that what's going on now with the car industry in Europe, especially in Germany, it's a little bit of a concern on our end. And obviously, the investments most likely will go down or not increase anymore. But we believe that we can still reach the EBIT margin of our guidance, the adjusted one. between 3% and 5%.

And basically, you see it on the chart down there. Still, we have to work on our cost measures, also get leaner compared to our peers. I think we are still -- we have made significant improvement, but still we are not benchmarked as we wanted to be benchmarked. And with that, I think we will be able to reach a 6% growth by 2020.

And that basically brings us to the end of the presentation. Now we can start and we are open for the Q&A session.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question is from the line of Annabel Asquith with Morgan Stanley.

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Lucie Anne Lise Carrier, Morgan Stanley, Research Division - Executive Director [2]

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This is actually Lucie. I have a couple. I will go one at a time. First of all, I wanted to start on the components division, if it is possible. I understand the price pressure is stable but still very high. The business, as a result of that, is really struggling to grow. And at the same time, we also see now a strong compression in terms of the profitability. How should we think about the future of this business? I mean do you see reason why this pricing pressure would go away?

And I remember, in the past, you were quite selective in this business to try to maintain the profitability, but despite that, we are seeing a very strong compression. So can you give us maybe some pointers in how you want to manage this business going forward in that type of condition, which seems to be extremely competitive?

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Alfred Felder, Zumtobel Group AG - President of the Management Board & CEO [3]

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Okay. Should -- Lucie, should I answer this one? Or would you like to ask all the questions first?

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Lucie Anne Lise Carrier, Morgan Stanley, Research Division - Executive Director [4]

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No. Please go ahead. I'll ask the other after.

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Alfred Felder, Zumtobel Group AG - President of the Management Board & CEO [5]

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Okay. Yes. Thank you for your question. Yes. I think -- and Thomas mentioned it already, we have on one side a 4% volume growth, and which obviously indicates that we are -- our portfolio on the right track. We are basically, volume-wise, in terms of installed light points, we are gaining market share. Obviously, with 6% average or 6.5% price decline, it is not nice. And basically, you see it in the results.

Operationally, we have already done a bit the corrective actions. We have our factory in Niš. That's in full-blown ramp-up right now. As you know, we have basically last year done the restructuring of the plant in Austria and moved all the production into Serbia. Similarly, all the products what we are selling in Europe and what originally we did in Shenzhen in China, we have moved to our factory in Serbia. It's obviously -- that is more cost-effective, which basically helps us, I think, in the second half of this year. And we will see also the impact on the cost flow.

Nevertheless, the market is going towards commoditization. And we see it also from our peer competitors, that we are struggling. And we are seeing that in the market. We have a couple of, let me say, plans on -- for growth: one is that we have, 2 years ago, decided to go into America, which basically is now in a ramp-up phase; number two, on the components level, that we have a focus on the auto, what basically was not existent. So far, the only thing where we see a very, very nice growth, and we believe that we will -- we can grow this.

More on the strategic points. And obviously, there will be a consolidation in the market of the components business. I'm not, I think, disclosing any secrets. You read it every day in the newspaper about the situation in and around Osram. And basically, we believe that we need -- and that's the plan for this fiscal year, to look into all the options how to reposition the business as a global player with a reasonable volume so that we are also getting in the economy of scale.

And the third one, and I think I'm proud that Tridonic is part of the group, that the competence, what we have there when it comes to new technologies: driving IoT, sensor technologies, the software center what we have which is under roof of Tridonic, basically the enabler of our service and solution business. And we believe Tridonic is the best home for driving this also for the group.

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Lucie Anne Lise Carrier, Morgan Stanley, Research Division - Executive Director [6]

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Just as a follow on, on that one. You're talking about consolidation in the market. Would you be a potential consolidator in this market?

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Alfred Felder, Zumtobel Group AG - President of the Management Board & CEO [7]

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We are looking into this option, but that's not the only option. And obviously, we believe that components is an integral part of our luminaire solution. And consolidation is one. Volume is, of course, a key driver. But as you may know and you are basically analyzing also our peers, and necessary volume alone does not mean profitability. And we basically have been able over the last years and what we say, decades to -- also as a medium-sized player, I think we believe that we are the #2 in Europe given the market indicator in a good position. But to answer your question, yes, we think we could be potentially part of one of the consolidators.

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Lucie Anne Lise Carrier, Morgan Stanley, Research Division - Executive Director [8]

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My second question was around some of the regional trend we've seen in the Lighting business. And my first question was on the DACH region. I was hoping you could -- because you've spoken now several times about the impact of the auto industry on your business. I remember back in the days, it was the retail industry in the U.K. which had a big impact. So can you maybe help us to understand how big for the DACH region the automotive customers in terms of importance?

And then just more generally, I mean, the organic growth from what I can see in the presentation in DACH but also in Southern Europe have picked up quite nicely. I understand there is some market share gain. But how do you -- can you maybe help us to understand where the markets are per se, i.e, the underlying market demand? And then how you see your outperformance continuing, or is there sufficient leg for the level of outperformance to continue here?

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Alfred Felder, Zumtobel Group AG - President of the Management Board & CEO [9]

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Not sure if I understand your question completely, but let me try. So basically, as you know, Lucie, when it comes to lighting brands, we have, yes, maybe 3 or 4 major segments. One is the retail segment. The retail segment is basically under pressure simply because of the e-commerce and the Internet. And so there are less shops closed -- or being partly also then the shops close. So that's basically a market that we believe across Europe is not really growing anymore.

Then we have a very fast-growing industrial market, which is basically everything that has to do with warehouses. Obviously, with more Internet sales, there is more storage space. So this is basically all refurbishment of millions of square meters in the industry. That also covers, let me say, plants for automotive or whatever. But I think this is basically not a shrinking one. When we see automotive, I see it more in a bigger picture. Less cars built means less business for suppliers, less business for Tier 1, Tier 2, who basically then are hesitant of doing the retail refurbishment also. So we are not seeing it as we are -- yes, late in this cycle right now, but I'm not expecting a huge growth anymore.

And then number three is the whole office, education and hospital, where I think we see a lot of initiatives, including the U.K., where we see some impacts on the efforts of your former Prime Minister based on education where we are seeing the goal.

So organically, retail, let me say, flat or slightly shrinking; industry, growing; and also office, education, and let me say, hospital, growing in our market. I'm not sure whether this answers your question.

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Lucie Anne Lise Carrier, Morgan Stanley, Research Division - Executive Director [10]

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Yes. Thanks for the color on kind of the breakdown. Just -- do you -- I mean can you -- are you able to tell us how big is the auto exposure for the DACH region?

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Alfred Felder, Zumtobel Group AG - President of the Management Board & CEO [11]

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The auto what?

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Lucie Anne Lise Carrier, Morgan Stanley, Research Division - Executive Director [12]

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No. Automotive. Automotive, the car industry.

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Alfred Felder, Zumtobel Group AG - President of the Management Board & CEO [13]

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It's not that big. What we are doing is showrooms for car dealers, warehouse for car dealers and industry, particularly, this is all built and it's basically -- next, now our refurbishment replacing conventional technology with LED. But all in all, the exposure is not that big. My point is more if in Germany, the main industry which is called automotive is struggling, or they're struggling right now, yes, then all the suppliers are struggling. And also they have a need for light. So basically, we are not seeing it right now, but my expectation would be then, if they have to reduce their investments, they might postpone then our refurbishment of lights a year or 2, which basically will give us an impact. But the exposure is not that big. But generally, I think if such an industry like automotive is struggling, the impact of the rest of the industry is there. And that's a little bit of a concern that I have.

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Lucie Anne Lise Carrier, Morgan Stanley, Research Division - Executive Director [14]

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Okay. And then just final question maybe around kind of current trading and the visibility you have on your business. Can you just maybe give us some indication in terms of whether you are seeing tendering the activity, slowing, stable or slightly increasing from here? Because if I look at the trend in terms of your growth, I mean, you start the year with a relatively modest growth, I mean, positive but relatively modest. You are expecting a full year slight growth. But of course, as we go towards the end of the year, especially the fourth quarter, the comp base is a little bit more difficult. So just curious of your visibility and comments on the current trading.

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Alfred Felder, Zumtobel Group AG - President of the Management Board & CEO [15]

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Yes. The visibility remains low obviously since quarter is not as same as last, let me say, 2 years. Projects and the pipeline reach is -- has been getting shorter. There's a lot of short-term business, what comes in. On the other hand, as it is not mentioned in the presentation, part of our program of reestablishing the confidence was also to basically gain projects that basically are not anymore 1 project/1 building, but having framed contracts with larger companies. And if you talk to a big logistic company who operates worldwide, we have now been able to sign a couple of contracts where we say we have a frame contract, similar what we do with the big retailers. And basically, over the next 3 to 5 years, there's a certain volume what we plan to get up with them, what is in our pipeline.

Yes, the visibility has been getting better. But on the different and smaller projects on office buildings, on schools and stuff like this, this remains very volatile. And I'm not expecting a big change on that one. Obviously, in U.K., we hope that by end of October, we have a solution for your country and in the other -- or in a hard or in a soft Brexit solution. But then we are also expecting that we can get back to normalized as all the companies are having a base top line.

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Operator [16]

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The next question is from the line of Charlotte Friedrichs with Berenberg.

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Charlotte Friedrichs, Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst [17]

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My first question would be around Niš, and if you could give us an update on where you are right now in terms of how much revenue is coming out of that facility and where the capacity utilization is right now.

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Alfred Felder, Zumtobel Group AG - President of the Management Board & CEO [18]

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Okay. So with Niš, we are having -- basically, as you know, we opened the factory end of September last year into 2018. And we are currently in the following situation, that we have for the Lighting Segment roughly 8 products singularly produced already there with something like 30,000 to 35,000 luminaires per month, which is equal to something like EUR 40 million what comes out there. And then we have the Components Segment, where we have currently 8 product lines there with roughly 1 million pieces already, which is in the range of EUR 30 million factory output what is coming out of Niš. So in total, we are talking about EUR 70 million.

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Charlotte Friedrichs, Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst [19]

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Okay. Total EUR 17 million (sic) [EUR 70 million]. And if we look at your margin expectations, quite a bit of the SG&A improvement. Is that coming from a further shift to Niš then? Is that the correct way to think about it?

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Thomas Tschol, Zumtobel Group AG - CFO & Member of Management Board [20]

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Yes. Niš is part of that because, of course, in the last financial year, we just had a couple of million euro coming out of Niš, especially in Lighting business due to the rent upgrades. And we started producing in Niš only in October/November last year. So you will see that we have a much, much more volume, roughly 8x the volume from last year. So of course, we have positive effects coming out of this -- in this financial year compared to last financial year. And also, I think it's important to add that, of course, its the volume of this year that's still in the ramp-up phase. And so there is -- the plan is to -- all in all, to roughly double the volume of this financial year in the next -- or within the next 3 years now.

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Charlotte Friedrichs, Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst [21]

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Okay. And in terms of ramp-up cost? How much did you have last year roughly? And how much do you think you're going to have this year for Niš?

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Thomas Tschol, Zumtobel Group AG - CFO & Member of Management Board [22]

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Difficult to say. A little bit difficult to say because, of course, we have some fixed costs there, especially connected to the plant and the machinery there. But we hire people alongside the ramp-up. We do not have heavily underutilized capacity there in terms of manpower. But I cannot give you really a precise figure on this.

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Charlotte Friedrichs, Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst [23]

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Okay. Cool. And I think during the prepared remarks, you said that you see a slight stabilization or evening of pricing pressure in the Components Segment. Did I hear that correctly? And do you think that's sustainable?

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Thomas Tschol, Zumtobel Group AG - CFO & Member of Management Board [24]

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Well, we're talking about 6% to 7% compared to 7% to 8% before, so this is really a flight.

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Charlotte Friedrichs, Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst [25]

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Okay. Okay. And do you see any kind of change in behavior from your competitors? I mean we talked about it last time as well, and you continue to expect consolidation. And is there anything that you've seen over the past months where your competitors have maybe become more aggressive, less aggressive on pricing? Or is it sort of similar to last quarter?

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Alfred Felder, Zumtobel Group AG - President of the Management Board & CEO [26]

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It's similar to last quarter. And well, basically, it's accelerating a little bit. We are seeing that those competitors who basically are focusing on really importing standard reasonable quality products from China, selling it into the trade channels are basically reaching a peak. I'm talking here about last month, for example. We have seen generally a climb, that some of the volume, what is imported from Far East is growing, what basically also drives partly the price down. And then we are seeing in larger projects, obviously, that the price is remaining an issue. But it's not, let me say, accelerating in a negative direction, that we are saying we are seeing a much stronger spiral downwards. But the price erosion remains critical.

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Charlotte Friedrichs, Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst [27]

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Okay. And the final question would be, picking up from Lucie around automotive sector and also automotive supplier business. Roughly how much is that? You said it's not a lot. But can you quantify it a bit?

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Alfred Felder, Zumtobel Group AG - President of the Management Board & CEO [28]

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I just need to look it up because this falls, for us, into industry. And roughly the 3 segments: retail, industry and office, are pretty much 1/3, 1/3, 1/3. Pretty much, plus/minus. While retail is flat or slightly shrinking, industry is growing and office and education is growing. When we are talking about industry, the main driver is definitely this whole warehousing illumination and factory illumination. And we think factories, and let me say, showrooms or whatever, automotive is one part. The best case would be in the range of 10%, 15% max.

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Charlotte Friedrichs, Joh. Berenberg, Gossler & Co. KG, Research Division - Analyst [29]

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Of industrial or of the group?

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Alfred Felder, Zumtobel Group AG - President of the Management Board & CEO [30]

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Of industrial. So maximum 10%, 1/3.

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Operator [31]

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(Operator Instructions) At this moment, it appears there are no further questions. I hand back to the Zumtobel Group management team for closing comments.

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Alfred Felder, Zumtobel Group AG - President of the Management Board & CEO [32]

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All right. Well then, thank you very much for listening. Thank you very much for your questions. If there are no further questions, we would like to thank you all for attending. And now we are closing the Q1 fiscal year '19-'20 call. Thank you very much.

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Thomas Tschol, Zumtobel Group AG - CFO & Member of Management Board [33]

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Thank you.

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Emanuel Hagspiel, Zumtobel Group AG - Head of IR [34]

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Thank you.

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Operator [35]

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Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for joining and have a pleasant day. Goodbye.