Outokumpu (OUT1V.HE), a leading stainless steel manufacturer, has reported a rise in adjusted EBITDA to EUR 86 million in the third quarter of 2024, up from EUR 56 million in the previous quarter. The increase is attributed to strong performances in Europe and the Ferrochrome segment, as well as improved profitability from recovery after a political strike.
However, stainless steel deliveries decreased by 2%, and the Americas segment faced challenges due to poor market conditions. The company's sustainability initiatives remain a key focus, with a recycled material content of 95% and a goal for carbon neutrality at its Finnish chrome mine by 2025. Despite a projected decline in stainless steel deliveries and adjusted EBITDA for Q4, Outokumpu is on track to achieve a EUR 350 million EBITDA run rate improvement by the end of 2025.
Key Takeaways
- Adjusted EBITDA for Q3 2024 increased to EUR 86 million, up from EUR 56 million in Q2.
- Stainless steel deliveries fell by 2% from the previous quarter.
- The company maintained a strong market share despite an 8% volume decrease in the Americas.
- Market conditions include weak demand, high imports in the U.S., and falling nickel prices.
- Sustainability efforts are leading the industry, aiming for carbon neutrality at the Finnish chrome mine by 2025.
- Q4 forecast suggests a decline in stainless steel deliveries and adjusted EBITDA.
- Outokumpu aims to improve the EBITDA run rate by EUR 350 million by the end of 2025.
Company Outlook
- Outokumpu anticipates a 0-10% decrease in stainless steel deliveries for Q4 2024.
- The company expects a lower adjusted EBITDA in Q4 compared to Q3 due to market deterioration and maintenance shutdown costs.
- A focus on cash flow generation is crucial to maintain a healthy balance sheet.
Bearish Highlights
- Poor market conditions in the Americas segment.
- Increased imports and weak market sentiment, especially in the U.S. manufacturing sector.
- Energy costs in Europe expected to rise by EUR 5 million in Q4.
Bullish Highlights
- Strong market share maintained in Europe.
- Profitability improved through effective margin management and cost absorption.
- The company leads in sustainability, with a high recycled material content and carbon neutrality goals.
Misses
- Stainless steel deliveries decreased by 2% in Q3.
- The Americas segment struggled with an 8% volume decrease and poor market conditions.
- Q4 adjusted EBITDA expected to decline due to maintenance shutdown costs.
Q&A Highlights
- The flooding in Mexico had a minimal impact on Q3 results.
- Stable ferrochrome production expected in Q4 without extra inventory buildup.
- Stainless steel lead times remain at about two months, with order intake recovering slowly.
- No significant expansion in underlying gross margins for Q4 anticipated.
- In the Americas, margins are pressured by weak demand and high import levels, despite a protected market.
Outokumpu's Q3 2024 results indicate resilience in the face of challenging market conditions. The company's strategic targets, particularly in sustainability, and its commitment to shareholder value, position it to navigate current market softness with confidence. As the new CEO, Kati ter Horst, and CFO Marc-Simon Schaar, lead the company, Outokumpu remains focused on achieving its long-term financial goals while maintaining a strong cash position and a healthy balance sheet.
Full transcript - None (OUTFF) Q3 2024:
Linda Hakkila: Hello all and welcome to Outokumpu's Q3 2024 Results Webcast. My name is Linda Hakkila, I'm the Head of Investor Relations here at Outokumpu. Today, as our main speakers, we have our new CEO, Kati ter Horst; and our CFO, Marc-Simon Schaar. As per usual, we will first start with our presentations and after that, we are happy to take your questions. Before we start with the presentation, I would like to remind you about the disclaimer as we might be making forward-looking statements. But now without any further comments, I would like to hand over to our CEO.
Kati ter Horst: Thank you, Linda, very much and good afternoon to everyone. I am Kati ter Horst and I started as Outokumpu's President and CEO on the first of October. I'm honored to have this opportunity to lead Outokumpu through its next strategy phase and having been part of Outokumpu's Board for eight years has given me valuable insights from the Board perspective. And then prior to joining Outokumpu, I have served as a divisional CEO for EMEA at the Belgian family-owned company Aliaxis. And Aliaxis is the global leader for advanced fluid management solutions, which enables access to water and energy. But then most of my career I have spent and worked in different countries for Stora Enso (OTC:SEOAY), which is a leading provider of renewable materials, and my latest position at Stora Enso was as Executive Vice President of the Paper division. Then turning to Outokumpu. One of my first priorities is to ensure smooth CEO transition and to build the future strategy of the company together with the leadership team. While doing this, we will ensure the delivery of our set targets in the strategy's Phase 2 by the end of 2025. I'm very proud of the fact that Outokumpu is the undisputed leader in sustainability in the stainless-steel and this is the position we definitely aim to keep. And last, but not least, our focus will be on delivering total shareholder value. Let's now then move to discuss Outokumpu's performance during the third quarter. We reported solid adjusted EBITDA and this was driven by good result especially in business areas Europe and Ferrochrome. Then taking a little bit closer look at the result. Our adjusted EBITDA increased to EUR 86 million from EUR 56 million in Q2. I will come back a bit later in more detail on the drivers behind this improvement. Then on a group level, our stainless-steel deliveries were 2% lower than in Q2 so basically stable and in line with our guidance. Our business area Americas result reflects the deteriorated market conditions in North America. On the other hand, business area Europe's profitability clearly improved supported by good margin management. I was also very happy to see that business area Ferrochrome delivered solid operational performance. Further, I can say that we are very well on track to deliver on our EBITDA improvement program. We are also making firm progress towards our 2030 SBTi target on carbon-di-oxide reductions. Then why don't we continue discussing the market situation a little bit. The graph on the left side shows the stainless-steel transaction price development reported by CRU. We can see that stainless-steel market prices have been under pressure during the quarter especially in the US. and this is very much the result of a very low market demand coupled with increasing imports from Asia. In Europe, the share of cold-rolled stainless-steel imports rose to 27% in Q3 while the share of imports in the US. was 28% and in North America, including Mexico, even 37%. Then on the right side of the graph, nickel price has decreased during Q3, which is a reflection of the current weak global economic situation resulting in an oversupply of nickel. However, we observed nickel price resistant levels somewhere between USD 15,000, USD 16,000 per tonne before any adjustment or bigger changes on the supply side. Let's now then come back in a bit more detail on the Q3 adjusted EBITDA development. As already stated earlier, the EUR 30 million profitability improvement versus Q2 was very much thanks to the good performance in business areas Europe and Ferrochrome. Compared to Q2, our stainless-steel deliveries were stable in business area Europe while they decreased by 8% in business area Americas. Our overall deliveries were on historically low level due to the weak market environment, even lower than in the COVID year of 2020. At the same time, we have been able to maintain our market shares with a leading position in Europe and being clearly the strong number two in North America. The political strike in Finland earlier this year did not impact our result in Q3. Therefore, the production volumes both in business area Europe and Ferrochrome clearly increased during the quarter. Also, during the quarter, our realized prices for stainless-steel remained stable both in Europe and Americas, but the production mix in Europe was slightly weaker. Then good margin management including positive raw material impacts in business area Europe as well as good operational performance in business area Ferrochrome really contributed to the quarter's profitability and business area Americas suffered from lower volumes and a clear margin squeeze. Then net of timing and hedging gains for the third quarter were EUR 10 million compared to losses of EUR 8 million in the second quarter. Moving then to sustainability. I'm very honored to say that Outokumpu is the undisputed sustainability leader in stainless-steel and I'm especially happy with a good progress towards our emission reduction target and that our recycled material content has remained at 95%, which is the highest in the industry. We are also on track to make our chrome mine in Finland carbon neutral by 2025. In addition, our safety performance is at world-class level and we work very hard every day to make sure that everybody gets home safe. In September, Outokumpu also attended the United Nations General Assembly in New York and we partnered with Climate Week to advocate the role of stainless-steel in green transition. We were pleased about the attention we got for our Siemens and the white paper that we launched during that week. And Marc-Simon will now then continue in more detail to discuss our financial position and the key developments in our 3 business areas. Please go ahead, Marc-Simon.
Marc-Simon Schaar: Thank you, Kati. And good morning, good afternoon, dear ladies and gentlemen. Also welcome from my side to our Q3 webcast. Given the challenging market environment, our cash and liquidity position remained healthy in line with our financial target of net debt-to-EBITDA below 1x during normal market conditions. The increase in net debt during the third quarter is driven by a temporary increase in working capital. I will come back to more details on the development at the end of my presentation. Our planned CapEx for this year is expected to be somewhat lower at EUR 210 million compared to the earlier communicated level of EUR 220 million. For strategy Phase 2, we remain committed to our CapEx frame of maximum EUR 600 million, but of course we continue to take future market developments into account when managing prudently our capital expenditures. Overall, total shareholder returns remain a high priority. Now looking at our Phase 2 EBITDA run rate savings. We continued to make good progress during the third quarter in which we increased our run rate improvements by EUR 24 million predominantly in business area Europe. Year-to-date approximately half of the impact comes from cost savings and half from commercial initiatives. Main contributors were improved raw material efficiency, the geographical expansion of our advanced materials' business to the Asia Pacific region and the optimization of our product mix. With a cumulative gross annualized EBITDA run rate improvement of EUR 265 million by the end of Q3, we are very well on track to achieve our overall target of EUR 350 million by the end of 2025. But now let's have a look at the performance of our business areas and starting with business area Europe. Given the challenging market conditions and typical seasonality, the financial performance of the business area was very solid with a significant improvement in profitability after the recovery from the political strike earlier this year. Despite seasonally lower demand in Q3, our deliveries remained flat quarter-on-quarter. Stable prices and a somewhat weaker mix were offset by improved raw material cost performance. While the scrap market remained tight most of the quarter, we were able to offset the negative impact by our continued efficient raw material procurement initiatives. During Q3, the business area was benefiting from hedging gains related to the decrease in nickel price quarter-on-quarter and these positive impacts were partly offset by higher fixed costs due to the annual planned maintenance shutdown in Avesta in Sweden. Overall, the market environment started to deteriorate during the third quarter and according to third-party data, industrial production is shrinking and the Purchasing Manager Index continue to be below 50 indicating a market contraction. As such, order intake started slow after the end of the summer holiday period. Supported by low supply availability in Europe during the first half of this year as well as a very weak demand situation in China, imports into Europe continued to increase. Distributor levels also slightly increased against a weak and historically low demand situation. From an industry perspective, the demand from appliances, construction, pulp and paper, heavy industries and automotive remained subdued whereas a positive trend in the marine, aerospace, defense and energy sector could be observed. Let's now move over to business area Americas where the market continued softening. While the overall US. economy seems to be resilient and supported by the services industry, the manufacturing sector relevant for our stainless-steel demand has weakened notably. On top, cold-rolled stainless-steel imports into the US. market increased to the highest level in the last 4 years while at the same time, we were able to keep our market share stable. Nonetheless, continued focus on trade policy especially on circumvention is needed going forward. Out of the 13 kilotonnes reduction in volumes from quarter-2 to quarter-3; four kilotonnes relates to the flooding in our mill in Mexico, which resulted in postponement of customer deliveries into Q4. The challenging market situation driven by lower demand and increased import penetration together with higher raw material costs had a negative impact on our margins. From a segment perspective, only oil and gas is performing somewhat better, all else being weak. Looking at distributor inventory levels in the US., they remained below historical averages and no restocking has taken place yet. One of the reasons could be the restrained and wait-and-see attitude regarding the outcome of the presidential elections in the US. Well, overall, a market recovery might depend on the completion of the US. election in early November and for sure on further interest rate cuts as well as an improved economic situation in China. Now looking at our Ferrochrome business. The business area delivered again a very solid result. While the overall ferrochrome market is weak with significant overcapacity in China, the demand for our low emission ferrochrome with European origin remained resilient. The main drivers for the profitability improvement quarter-on-quarter are an improved fixed cost absorption after the recovery from the political strike; and b, lower variable cost supported by lower electricity prices and improved mine efficiency. From an operational perspective and in line with our earlier communication, we ramped up our temporarily closed third furnace during October not necessarily to produce more volumes, but to take advantage of optimizing our electricity usage given the price volatility in the market. Now my final comments relate to our cash flow development in the third quarter. As you can see from the graph on the left, our cash flow and hence the increase in our net debt during the third quarter is driven by a temporary increase in working capital, which was driven by the recovery from the political strike as well as the preparation for the annual planned maintenance shutdown in our Tornio operations during the fourth quarter. Given the weak market environment and our aim to maintain a healthy balance sheet, we will focus on reducing working capital during the fourth quarter to improve our net debt level accordingly. With this financial update, I'd like to thank you for your attention and hand over back to you, Kati.
Kati ter Horst: Thank you, Marc-Simon. So let's continue then. Before we go to the guidance, I would very much like to highlight that we now have a strong foundation to create value over the cycle. And then about the outlook. So our outlook for Q4 2025 is that the group stainless-steel deliveries in the fourth quarter are expected to decrease 0% to 10% compared to the third quarter driven by deteriorating markets for both business areas Europe and Americas. The planned maintenance break in Tornio, Finland is expected to have approximately EUR 10 million negative impact on business area Europe's adjusted EBITDA. And energy costs for business area Europe are expected to increase by approximately EUR 5 million. And then with the current raw material prices, some raw material-related inventory and metal derivative losses are forecasted to be realized in the fourth quarter. And then the guidance for the Q4. So adjusted EBITDA in the fourth quarter of 2024 is expected to be lower compared to the third quarter. Let me now then recap some of the highlights of the third quarter and some of the short- and long-term priorities we are having. I'm currently ensuring a smooth CEO transition and having had the possibility to discuss with Heikki and the leadership team upfront has really been valuable to me. We delivered a solid result in Q3 in difficult market conditions. As Marc-Simon showed, we are on track to deliver the EUR 350 million EBITDA run rate improvement by the end of 2025. I'm pleased that we have started these actions early and we are now more resilient to face the market headwinds. During the times like this, I think our full focus has to be on cash flow generation in order to be able to continue to invest in our future, preserve our healthy balance sheet and create total shareholder value. I believe that our sustainable leadership and strong balance sheet provide a very good foundation for us to build on our future success in the next strategy phase. Then I would like to, in the end, add a bit more personal flavor. I would like to shortly comment on some of the key building blocks I see important for us going forward. First of all, in this kind of a business -- in our type of business, good operational performance and cost competitiveness is a key. And personally, I am very committed to building a strong safety culture and I expect the same from leaders and managers at different levels. In production, I promote lean principles, delivering good product quality in every step and being a reliable supplier to our customers. Throughout my career, I have been in tough market environments and learned the power of continuous improvement mentality. Then because of my commercial background, I have worked a lot with commercial excellence and I believe that in today's marketplace, one has to understand the evolving needs of customers even more profoundly. And let's not forget that Outokumpu is the pioneer in stainless-steel and it's time we use again our technical expertise and innovation capability to explore new growth opportunities for the future. Together with our customers, our suppliers and our important stakeholders; we can make even a greater impact for a world that lasts forever. I thank you all for listening to our presentation today and let's now open for the Q&A session. So operator, we are ready to start.
Operator: [Operator Instructions] The next question comes from Tristan Gresser from BNP Paribas (OTC:BNPQY) Exane. Please go ahead.
Tristan Gresser: Yes, hi. Thank you for the presentation and the questions. I have two. I'll start with the US. Could you quantify the flooding impact in Mexico on a million-euro basis and could you give us an update on the situation there; if it has improved, any cost impact in Q4 as well or everything has been sold? And just excluding maybe this one-off, the level you're having in the US. in terms of margins, is that a margin level you feel comfortable defending into Q4 despite lower volumes?
Marc-Simon Schaar: On the US. flooding, maybe to start with how we have done operationally. I think the team in Mexico did a fantastic job and the mill was up and running back again after two weeks. When it comes to the impact in Q3, we had no significant impact here, some marginal costs in the third quarter. However, at the same time, we had to, as I mentioned in my part of the presentation, also postponing some of the customer deliveries, 4 kilotonnes from Q3 to Q4. But at the same time of course in the fourth quarter, we also face some costs in relation to the flooding. But overall, the impact when I take the postponement of the deliveries and the costs which have been occurred into consideration, it's not a significant impact on our Q4 result.
Tristan Gresser: That's helpful. But on Q3, how much is that?
Marc-Simon Schaar: Very immaterial, below EUR 1 million.
Tristan Gresser: Okay. So if the impact was negligible or just market driven then let's push EBITDA to EUR 5 million; but the US. stainless prices are still above Europe, you still have a premium. So I'm just wondering what has been driving the underperformance. It looks like you're doing better margin in Europe than in the US. on an underlying basis. So why is that? And if you can touch a little bit on the market environment. You talked about the US. election uncertainty. How much of a driver do you think that is and how optimistic you are that once we get past the election, you'll get some type of recovery?
Marc-Simon Schaar: Coming back to your margin question. So if I look a bit back into the history and compare price levels last year to price levels this year, then we certainly have seen during the time a decrease on the price level. At the same time, I also mentioned that we have been also facing vis-a-vis the sales price and particularly the drop on the nickel side, relatively speaking higher raw material costs, which then at the end led to a margin squeeze over here. That is all I can say at the moment explaining the margin and then also vis-a-vis Europe. On the election side, do you want to take that?
Kati ter Horst: Yes, maybe a couple of words. First of all, I think what we see a bit in the US. market that there is a bit of this wait-and-see environment currently, which means that actually our customers or, let's say, the distribution has not really started buying and the delivery times are quite short. So that stocking still needs to happen. And the hope is a bit that when the election is over, who then wins that maybe doesn't matter so much to our industry, that's our analysis; but it's more about that we get going again and then hopefully there is also some good news on the interest rate side, which might give a bit of a boost to the economy.
Tristan Gresser: Okay. That's very clear. And maybe one last quick follow-up. If there is a change of ownership at Calvert, I mean we've seen reports that Nippon Steel may sell its stake; does it have any implications for your supply agreement or there's nothing really there?
Kati ter Horst: No, it does not have an impact on the long-term agreement we have. And I think it's also fair to mention that our business partner with the daily or weekly discussions has really been ArcelorMittal (NYSE:MT) and that would stay the same. So I don't see any impact on that.
Operator: The next question comes from Anssi Raussi from SEB. Please go ahead.
Anssi Raussi: Yes, hi all and thank you for the presentation. I have a couple of questions and I start with cash flow. So how much you could reduce working capital in Q4 and how should we think about H1 next year seasonality because the dynamics were a bit changed this year? And also your CapEx was around EUR 130 million year-to-date. So I guess this means that Q4 CapEx will be close to EUR 80 million.
Marc-Simon Schaar: On the cash flow side while we're not forecasting the cash flow for the next quarter, I think I mentioned that we are aiming and looking into net working capital reductions over here and as such also to reduce our net debt level accordingly. I think what you should -- given the current market environment price levels we see and the business situation, I would expect a mid-double-digit number in terms of working capital reduction. You talked about then quarter 1 and certainly also here, we're not giving yet a guidance on our Q1. But typically then quarter 1 is seasonally somewhat stronger than the fourth quarter. However, at the very same time, I would like to remind us that we are still working in a weak market environment also to take that into consideration when thinking into Q1 of next year. Then on CapEx, yes, you're absolutely right. It is close to EUR 80 million, which is currently being forecasted.
Anssi Raussi: That's clear. And then about ferrochrome, your ferrochrome production was above deliveries in Q3. So do you think that you will continue to build up ferrochrome inventories in Q4 and is it so that we should expect stable production in Q4 Q-on-Q basis?
Kati ter Horst: On ferrochrome, so we obviously increased production quite a lot in Q3 coming from the political strike impacted situation in Finland and we now have of course the opportunity to even produce more if we need to. But like Marc-Simon said earlier in the presentation, the main reason that we ramped up the third furnace was to be able to optimize with energy cost and currently we think that our production levels would be about the same as in Q3. But should we have more demand, we can produce more.
Marc-Simon Schaar: But we're not expecting to build up extra working capital here on the ferrochrome side.
Kati ter Horst: No. Indeed. Good addition.
Anssi Raussi: Okay. Got it. And lastly, about your lead times in stainless-steel, are we looking at two months or how is it in Europe and Americas?
Marc-Simon Schaar: Well, reflecting the market environment which we described, Anssi, I think what we can say at the moment is that we are booking Q4 more towards the end of Q4. Basically in here what we have seen is basically after the summer holiday period season that the order intake has only slowly recovered and this is as much as we can say at the moment.
Operator: The next question comes from Bastian Synagowitz from Deutsche Bank. Please go ahead.
Bastian Synagowitz: Yeah, hi, good afternoon, all. I've got a couple of questions as well. I'm going to start with Europe and I think your performance here was pretty good, particularly also even when we consider that even when exing out the metal and hedging effect, I think your underlying margin was relatively decent in the given environment. So I'm wondering like can you maybe give us a bit of a split between how that performance actually separates between your standard business and your advanced materials just to get an idea? And maybe can you also give us some color on the underlying gross margin trends into the fourth quarter? From what I understand, you're talking about falling scrap prices and the market is easing here a little bit, but then I think transaction prices are more or less stable. So are you seeing expanding margins and then possibly lower volumes against that as an offset? Obviously I'm ignoring hedging effects and the maintenance break here as well, but I'm really just curious about the underlying margin trends into the fourth quarter. That's my first question.
Marc-Simon Schaar: Okay. Bastian, on the first question relating to Europe and then basically stainless Europe and advanced materials, we are not reporting, we're not guiding on the split of BA Europe in here and the advanced materials business and the commodity business. But I think what should give you an idea is when we think about the volumes. then around 15% is on the Advanced Materials side -- around 15% to 20% and the remainder being on the commodity business over here. Then your second question was on, please?
Bastian Synagowitz: Gross margins into the fourth quarter?
Marc-Simon Schaar: Into the fourth quarter and I think you referred to the scrap situation. Yes, absolutely right. As we're reporting, we see that the scrap market has eased somewhat towards the end of the third quarter and the real impact of that one is not yet fully visible in Q4. First of all, it takes time to go through the machinery. We have and we will reduce our working capital, our inventories, as I mentioned before. So that takes a bit of time.
Bastian Synagowitz: Okay. Got it. But you basically see expanding gross margins into the fourth quarter?
Marc-Simon Schaar: I wouldn't say that.
Bastian Synagowitz: Okay. And then secondly, just coming back to Americas and sorry to let you not get away on that business as easily, but I still find the performance hard to reconcile. I guess I understand that volume is obviously low, demand is very weak; but then still obviously it's one of the most protected markets. You're basically almost in a duopoly. Yes, imports have been going up. But when we look at your margins, you're basically making USD 30 to USD 40 EBITDA per tonne despite like standard or benchmark transaction prices obviously being higher. And the scrap series I'm following, they're not really explaining the delta. So can you help us to get to the bottom of the issues here? Is there a structural problem, a structural productivity or cost problem? What are you doing to tackle the issue? And other than a market recovery, is there anything which will help you in Q4 or in 2025?
Marc-Simon Schaar: So to answer your question, there is no structural topic underlying issue or whatsoever in the business. I mentioned the main drivers, which you correctly reflected as well. And particularly when we look into the US. market and, as I mentioned before, into the manufacturing industry and the performance basically and the demand situation over there, then I think that is pretty much explaining here also given the production volumes we are having where the margin squeeze is really coming from.
Kati ter Horst: Maybe to add also a little bit to what Marc-Simon said is that of course if you look at also the CRU data, you can see that the difference between European realized prices and Americas realized prices has gotten much smaller. So the US. prices have come down more in that sense in the past. And then I think that we have been able to get better scrap prices actually in Europe overall and managing that than in the US. So I think that has helped the margin more in Europe than in the US. And then of course that volume drop that we are now having and the weak market, yes, it's a better protected market; but 28% share of Asian imports currently, it's the highest number in 4 years. So it does impact the pricing in the market.
Bastian Synagowitz: Then my last question is on the strategy and your role as a new team and obviously both of you are very familiar with the company, have literally been with it before taking over. But what are your initial thoughts in terms of what has to change in terms of strategy and what are the obvious tweaks here? You talked obviously about what you like about the company and the strength, some priorities. But are there any obvious tweaks and changes to strategy? And I'm thinking particularly about growth, which I guess has been emphasized quite a bit in the last couple of quarters.
Kati ter Horst: Yes. I would first say that in the short term and in this kind of market environment, the full focus is now delivering on the Phase 2 targets that we have set for ourselves. So ensuring that we really get the EUR 350 million run rate impact on EBITDA by end of next year. We're continuing our decarbonization agenda, fully committed to that and ensuring now at least shorter term that we really keep a strong cash position, have a healthy balance sheet and are able to ensure our shareholder returns. So I think that's the priority. And then of course when we start working on the next phase of strategy together with the management team, we will be also looking where our best growth opportunities could be. And maybe I'm talking here more about EBIT growth than growth of the top line as it varies quite a lot from cycle to another.
Operator: The next question comes from Tommaso from Jefferies. Please go ahead.
Tommaso Castello: Katia and Mark Simon, thanks for the presentation and thank you. So my question is on Americas and sorry to insist on that. But I was wondering given the current softness in the market and the deteriorating environment that you forecast into Q4, which is likely to have an impact also in Q1, do you still retain your EUR 170 million by 2025?
Marc-Simon Schaar: Yes. On a normalized level, absolutely yes. We're still committed to that number.
Kati ter Horst: And I would like to also add from my perspective now as the new CEO that longer term, we see the Americas market very interesting for us. So nothing changed in that area.
Tommaso Castello: Okay. And maybe just to follow up on Europe. So Q3 is usually the seasonal trough and we see some slowness there and the holiday season as well impacting. So where is the deteriorating condition coming from into Q4? Is it like more pricing? Is it more volumes?
Marc-Simon Schaar: Well, on the one hand side, we have seen and we talked about imports. Also talking about the distributor levels, which have increased and on a higher level above historical average I would say. The very weak market sentiment in the various segments as mentioned already before. We do see from public available data that the manufacturing industry is shrinking and, as said, also the sentiment looking at the PMI at the moment. Those are these factors, which I would take into consideration and then driving.
Operator: [Operator Instructions] There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.
Kati ter Horst: So thank you, everyone, for your active participation. My message for the future is one of continuity and confidence. We have a strong foundation and we have a lot of good potential ahead. So I would like to thank you for today once more. Wish you a nice day and a successful end of the year.
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