KONE Oyj — Call Transcript 2012

Speaker 7: Good afternoon, welcome to KONE's results review for Q3 2012. As usual, we'll start with a short presentation by our President and CEO, Matti Alahuhta, continue with your questions. Without any further introductions, let's start. Thank you. Please, Matti. Go ahead.

Speaker 6: Thank you, Carla. Yes, welcome to KONE's Quarter 3 conference call. We have again positive news to tell. I have to say that this time, I am most pleased with our very good progress in cash flow. In Quarter 3, cash flow had a growth of more than 40% from an already good level in third quarter last year. I will now first start again with the review of our financial performance in third quarter and in January, September, followed by a brief market view of our market development in Quarter 3, a few comments of how we are developing our competitiveness. Finally, of course, I will give our market outlook and our business outlook. Let's start with the Quarter 3 numbers. The orders received had a growth of 18.3%, in comparable currencies, 10.5%. The conclusion here is that the impact of the favorable changes in exchange rates was quite significant. The order book went up by 27.5% to very close to a record level. I think that we were end of September, about EUR 20, EUR 30 million below the all-time record level. In comparable currencies, the growth was 21.7%. Sales growth was strong at 26%, exceeding EUR 1.6 billion, in comparable rates, the growth was 18.8%. The operating income growth was strong, 18.8%, reached EUR 224.5 million. The relative operating income was great in this quarter, 13.7%. That means that it had a 0.9% point negative difference from the comparable number one year earlier. Later, when I will review and focus on operating income more, I will naturally come back to the reasons behind this deviation. In EBITDA, the gap was smaller. It was 0.6% points, because the impact of GiantKONE amortizations in this quarter was again 0.3% points. Cash flow, as said, went up from EUR 240 million to more than EUR 350 million, I am particularly delighted that this was a result of a positive development in all key factors of cash flow. The operating income improved. Secondly, the inventory rotation improved rather significantly, thanks to the development actions we have been taking, especially in our delivery chain excellence. Thirdly, our teams did a very good job in this weak environment with receivables. In addition to all of these, also the accounts payable, we are at, let's say, at the favorable level. Naturally, in accounts payable we see variations from month to month and quarter to quarter. Overall, very strong progress here. Of course, nine months is much more informative in our kind of business. Let's focus now to January, September development. As you see, the development over this year has been quite solid, and the numbers are rather similar compared to the third quarter numbers. In orders received, the growth has been 24%, in comparable currencies, 17.6%. Of course, the GiantKONE consolidation in December last year has contributed to orders received and sales rather much, but even with that comment, this 17.6% is at a good level. The sales growth has been 21.5%, and in comparable currencies, 15.9%. The operating income growth, excluding the one-time cost that we booked in Q2, has been 15%. The relative operating income over this period has been 12.8% as compared to the 13.5 last year. In EBITDA here in January to September, we have a difference of 0.4%. Cash flow, it is not only a one quarter let's say great performance. As you remember, over last years, we have had a good solid improvement development in cash flow from operations. Now during the first nine months of this year, the cash flow had a growth of more than 30%, from EUR 607 million to EUR 792 million. Overall, I have to say that I am pleased with this development we have had in January to September in our performance, and I would like also here to use this opportunity to say thanks to our people who have done a great job. Let's then focus again on orders, sales, and operating income, and also see how the development has been compared to the same quarter during the previous years. First starting from orders. The growth in orders was fastest in Asia Pacific. In Asia Pacific, it was best in China and in Southeast Asia. Also, we had a slight growth in Europe, Middle East, and Africa. However, Europe is more increasingly different in Southern Europe and Northern Europe, so that in Central and Northern Europe, we had actually good growth in orders received, while the orders received declined in Southern Europe. In Americas, the orders received declined because of a decline in the U.S. As we have communicated all the time, we have been increasing prices actively and especially so in the U.S. from the middle of last year. That development has been necessary, and it has been positive. Again, in the third quarter, the orders received margins improved. Naturally, in this kind of competence development and targeting all the time higher orders margins, we may have lost some opportunities and naturally in other parties' quarterly variations or another reason. That about orders, then sales. In sales, we again were in such a situation that in Q3 we had good growth in both businesses and in all geographical areas. Regarding businesses, the growth in New Equipment business in Q3 in sales was 45%, so very fast growth, and even in comparable currencies, 35%. In the Service business, the growth was more than 9%, and in comparable currencies close to 5%. What comes to different geographical areas, the growth was fastest in Asia Pacific, but also at good levels in Europe, Middle East, and Africa, and in Americas. Then operating income. The growth in operating income that was more than 18% was driven by good growth in sales in Asia Pacific and good development globally in the Maintenance business. As I have now mentioned a couple of times, the changes in the exchange rates have had a positive impact in our business in the third quarter and this year. In the third quarter, the impact coming from positive changes in exchange rates was one-third of the growth in operating income. These changes represented one-third of the operating income growth. These were the key factors driving operating income growth, the factors limiting the growth or being burdens for the growth were the following. First of all, I already mentioned the amortization of the intangible assets of GiantKONE. The second reason is the following. You remember that in 2011, we communicated all the time that the orders margins were going a little bit down. Therefore, we started an active Pricing Excellence Program globally in the spring of last year that did not, as I believe many of you remember, where we did not get benefits yet last year, but have started to get benefits from the beginning of this year. Now this year and up to Roughly middle of next year, we are delivering these orders with a little bit lower margins. Thirdly, the third reason is, of course, that we have had such a high growth in New Equipment business that the business mix has changed quite clearly and in a minute I will come back to that. Of course, it also has had an impact. Here we have the business mix. You'll see that the New Equipment business and service business both represented 50% of our sales in January, September. In quarter three, the share of New Equipment business was even slightly more. Geographically, we have had the fastest growth in Asia Pacific. Now the share of that region went up to 35% from the level of 27% last year. The sales in China represented 25% of our total sales in January, September. This about numbers. Now I will move to give a brief update about how markets have developed. I will start with Europe, Middle East, and Africa, and the New Equipment markets. In Central and North Europe, the market declined somewhat, but remained at a relatively good level. The best development we saw in the markets in Germany, Switzerland, and Austria, and the worst decline happened in the Netherlands, where actually the market decline started later than in many other European countries, in most other European countries, and in Ireland. In South Europe, the markets declined further from an already weak level. This was particularly so in Spain, where the market is at a very low level at the moment of the continuous decline since 2008. This was also the case in Italy, where the decline started first quite a few years, or at least a couple of years, just slightly, weakness has a little bit accelerated. In France, during the first three months of this year, the market developed positively. During quarter three and quarter four, last six months, the market has somewhat declined also there. In the Middle East, on the other hand, we have seen more positive development. The market in Saudi Arabia has been strong. We have continued to see, as already in the spring, positive signs also from some other countries, like from Qatar and from Dubai in Arab Emirates. In Russia and Turkey, the markets have continued to grow. Regarding modernization markets, we see that the continued weakness in the economy has had an impact also here. The markets grew slightly in Central and North Europe, but continued to decline in South Europe. Regarding maintenance markets, the market continued to develop well, although with clear variation between countries. Price competition has intensified in many countries in maintenance, especially so in Southern Europe. The Southern European market is really rather weak overall at the moment as we see it. In the Americas, and in the new equipment markets in the United States, the gradual recovery continued, driven by small and medium-sized projects in the residential and office segments. In Canada, the market has been actually all the time during the last years quite rather good and had a slight growth also now. In Mexico, the markets dropped to a very low level in 2009 and 2010, then have largely recovered, and now the market was rather stable. In modernization, the development in Americas was slightly better than in Europe. The markets grew slightly. In maintenance markets, price competition intensified, particularly in the non-residential segments. Now let's move to review how the Asia Pacific markets developed. The development also here was rather much as we had expected. The markets here continued to grow, but the growth was slower than in the first half. Now a few country-specific comments about the new equipment markets. In China, regarding China, as you remember, in July, we estimated that the market growth in quarter three would be between 0% and 5%. It looks like the growth was somewhat higher than 5%. We said in July about quarter four that we estimate that the market will grow in quarter four by 0% to -5%. Our estimate is that in quarter four, the market in China will grow by 0% to +5%. The trend is very clear. The market growth is slowing down, but this process is happening a little bit more slowly than what we expected. On the other hand, which is positive news, there is also an underlying important trend when we take a look at the statistics of the real estate development in China. The sale of new sales area on sale, practically pretty much the sale of new apartments, had three quarters, nine months, a period of decline. After nine months of declining trend, in quarter three, this trend turned to positive. That in July, September, the growth in new sales area in China was +6%. This is naturally very important news. Also, the new construction development still in quarter three was negative. It is not unexpected at all because as we communicated also in July, the time for new construction start to pick up is typically 1.5 to two quarters after the new sales area starts to pick up on sales in new sales area. This would mean 4.5 to six months from beginning of July. I already said that how we see the estimated development in the Chinese market in quarter four. After that, we estimate that our market, because our market typically starts to pick up then after some delay from the time of picking up of the new construction activity. From the beginning of next year, there will most likely be a period of flat or slightly negative growth in our industry before it also starts to pick up. In China, all segments grew, but the growth was driven by the affordable housing segment. Also, the other residential or the rest of residential activity was growing outside the 40 biggest cities area. In the 40 biggest cities, the restrictions of the government are still in place, and there the developers invested more in the commercial segments like hotels and offices and so on. What also is very important that when we take all China, the vacancy rate or vacancy level had a negative, and this way positive, so declining trend in end of quarter three. Also a very positive sign. In India, the economic growth has been going down quite a lot during the last few months. In our markets, the situation is such that in quarter three, the market was stable or had a very limited growth. There actually is quite a lot of demand for new apartments, but the tightness of financing is constraining growth. In Australia, the market declined significantly because of weak economy and uncertainty in economy. In Southeast Asia, the markets continued to grow, but the growth was more moderate than in the first half. Regarding modernization, the Australian market is the big part of the Asia Pacific market still, and there, the modernization market declined slightly. Regarding maintenance, the maintenance markets really continued to grow throughout the regions well. I would like now to take up three highlights of quarter three. The sales of the new global elevator range that we launched in late May, early June, have started in September. They have started in Europe, Middle East, and Africa and in Asia Pacific. As we said in July, we launched the new product range in a situation when the competitiveness of our current product was and continues to be very good. Therefore, after the very successful launch, we have seen our customers being really, let's say, impressed about what we are bringing to the markets. We are focusing on high quality ramp-up, therefore we are not creating any urgency, as we have said here in the ramp-up speed. This means that the volumes in terms of deliveries the volumes of the new product range will still be rather limited next year. Therefore this new global product range, naturally, will not have yet any essential margin impact next year. That will come then in 2014. As you remember, by the end of 2014, we will have been in the full volume phase and we estimate that in that phase, this new product range will represent about 60% of our deliveries. Naturally next year already, the new product range will have a big impact in our orders, of course. The second highlight that I have here is the move to a new factory in China in Kunshan. What has happened is that the production was moved very smoothly to the new factory by the end of September. The third highlight is that because of our strong cash position and very good development and continuing very good development in cash flow, KONE board decided during quarter three that the board will propose an extra dividend that would be EUR 1.50 for every B share. Actually tomorrow we will have the extra general meeting where this decision will be taken. Or where the decision about this will be done. Regarding our development programs, we have had in all of them very good progress. I would just give couple of comments in two of these five. First of all, employee engagement. In this development program, we have been starting and are starting new development and training programs all the time. Just a couple of examples. We are starting a Manage KONE Business program that is targeted for branch managers and people in similar roles and a service manager program and new sales training programs. We just emphasize these, therefore, so strongly in this kind of phase because the continued weakness in the global economy. In the continued weakness of the global economy, it is so important to continuously develop the leadership skills of our leaders and do everything possible in order to keep up the good spirit we have. Another point is this delivery chain excellence. I wanted to really underline the development in cash flow and the work that we have been doing in this development program has contributed a lot to the improving inventory, significant improvements in the inventory rotation, and hence to the cash flow, among other things. There are other initiatives as well, of course, in this delivery chain excellence program. I would like to complete the presentation by telling our market outlook and our business outlook. Starting from market outlook. In the new equipment market, we estimate that the markets in Asia Pacific are expected to grow slightly in the last quarter of the year. In the markets of Central and Northern Europe, we expect the market to decline somewhat. In the markets of South Europe, we expect that we will see a decline from the already weak levels. On the other hand, we estimate that market in North America will continue to gradually recover from a low level. In modernization, the markets are expected to be stable or decline slightly in the last quarter of the year. In maintenance, we expect that the markets will continue to develop rather well in most countries. Finally, the business outlook, and we have specified both sales and operating income very slightly here. It starts to be a bit more accurate in our guidance from all of the experience and learnings from quarter three. KONE's net sales is now estimated to grow by 13%-17% at comparable exchange rates as compared to last year. The previous outlook was from 12%-17%, and the operating income, excluding the one-time costing in quarter two, is expected to be in the range of EUR 780 million-EUR 820 million. The previous estimate window was from EUR 760 million-EUR 820 million. This was what I wanted to say to start with, and now we have time for your questions, so please.

Speaker 7: Thank you, Matti. We will start with the questions from the people present here at the KONE building. Erkki, go ahead.

Speaker 3: Yes. Hi, it's Erkki Vesa from Swedbank. Coming to order intake in Q3, if we exclude GiantKONE and if we have constant currencies there, your order intake growth decelerated to only just about 1% year-over-year in Q3. What should we read into this? Was it about European weakness? Was it about this temporary slowdown in China? How would you comment that?

Speaker 6: A few factors. First of all, the markets have become bigger, as I mentioned. Secondly, we see here quarterly variation. Third factor is that we have been increasing prices all the time in most markets and, of course, in this kind of process, we always may have been losing some opportunities. Even with that comment, I am very pleased with our pricing excellence program and the activity we have been doing there.

Speaker 3: Thanks.

Speaker 10: Tomi Railo from Sampo. On the pricing, do you see any changes you would need to do in order to regain orders or the momentum? Are you adjusting your prices, in terms of the levels perhaps lower, how would you comment that?

Speaker 6: Well, first of all, it is clear that now during the autumn, it has started to become more and more difficult to increase prices. This kind of situation, of course, but it is very much country by country issue. In some countries, we continue to work in order to try to increase prices. In some other ones, we have to test where exactly the, let's say, the right level is. What is equally important or even more important, that this competence development will continue. That is clear that development work will pay back.

Speaker 10: If I can continue. On the fourth quarter guidance, if we take revenue ranges, earnings ranges it seems a little bit cautious. Is there a purpose you are signaling some sort of uncertainty in terms of fourth quarter? We know that it's always dependent on the deliveries and mixes and so on, any particular you are trying to signal there?

Speaker 6: Well, our guidance as you are well aware, it is typically clearly more accurate than the guidance of many other companies. Our guidance is our, let's say, transparent, most correct guidance that what we can give.

Speaker 10: If I can continue. For example, you could be saying calculating that revenue growth is close to zero or up somewhat 6%, 7%. If I would assume that Asia Pacific continues to grow, do you think or confirm that revenues in Americas and Europe, Middle East and Africa could be coming down?

Speaker 6: Well, I think that always when interpreting the guidance, and there is a window. Quite typically, at least in our case, it is so that the most likely level is the middle of the guidance. Then always there is certain upside and certain downside. As you said, depending on whether there are delays in projects and some projects completions are moving from December to January. Actually, we have had very little delays. Just to give you an example.

Speaker 10: Finally, perhaps, how big was China in terms of orders in the third quarter? If you can comment fourth quarter last year, Asia-Pacific in total.

Speaker 6: Henrik, maybe you remember these numbers even better.

Speaker 4: Yes. As Matti said, the sales in China was a little bit over 25% of our sales in China in Q3. In orders received, it was roughly 35%.

Speaker 10: What was the statement for that?

Speaker 7: That's probably something we would need to check.

Speaker 4: I think it was around, because you have to remember that now we have GiantKONE in here as well. We didn't have GiantKONE, so it was a bit over 25%. I can't remember the exact number, but it was a bit over 25%.

Speaker 7: If my recollection is correct, China alone was roughly 20%. We would need to check.

Speaker 4: Orders received.

Speaker 7: Yes.

Speaker 4: I think it was higher, okay.

Speaker 6: Let's check. Okay.

Speaker 3: Yes, it's Erkki Vesa, Swedbank again. Talking about China, as there is a bit temporary or a little bit more persistent slowdown in growth, do you see any that pricing environment would be tightening? We have seen Otis boasting about their market share increasing again in China. How would you depict the pricing in China?

Speaker 6: Far this year, we have had a positive development in pricing. China is one of the markets where we have been able to do that positively.

Speaker 3: That's not come at the expense of market share?

Speaker 6: In China, our growth in China was very strong in third quarter, even excluding GiantKONE, it was at the good double digit level. You remember that I said that the market growth was in quarter three, somewhat more than 5%.

Speaker 3: Okay. Thank you.

Speaker 8: Pekka Spolander from Pohjola Bank. Could you comment the development of cost side, especially the raw material cost and the labor cost? What was the effect in third quarter, and how do you see the coming months or quarters?

Speaker 6: Okay. First of all, in raw materials the development has been very much as we have communicated all the time. We suffered still in first quarter of this year, a little bit less in second quarter of this year, and now in third quarter, the development has been quite neutral. We don't believe big deviations from this neutral in quarter four either. The background here is that while the spot prices have come down a bit, regarding the comparison point of 2011, as we have also communicated earlier, we made a good longer fixed price contract already in the early autumn of 2010. Therefore, to that favorable comparison point, the development is rather flat. What comes to the inflation in wages and salaries when I mentioned about what factors were burdening, yes, in that area we suffered a bit, but that was not anything major, so I did not mention it.

Speaker 7: Tomi, coming back to your earlier question about Asia-Pacific's share in the last quarter of last year. I don't have the Asia-Pacific figure here, but China's share out of our total orders received for the full year last year, so in 2011, was roughly 25%, and in Q4 it was roughly 20%. Hello. Elena

Speaker 2: Thank you very much. Good afternoon, everybody. Matti, can I just return to an earlier question about your flat organic order growth in the quarter? Can I ask you to elaborate a little bit on what you've seen regionally here in terms of organic growth, i.e., in China, Europe, and in the U.S.?

Speaker 6: Henrik, maybe you answer this.

Speaker 4: Okay. If I start from Asia Pacific, as Matti mentioned that in China, we had strong orders received growth. Also, if we exclude GiantKONE, our growth was clearly in the double digits, clearly higher than the market. Southeast Asia also continued to grow quite well. As we said in the report as well, in Australia in particular, which is a reasonably large market, that market we've clearly seen more weakness and delay in decision-making. Their orders received then declined. Just to highlight a few in Asia-Pacific. If we then look at Central or North Europe, as Matti also mentioned, we had growth in Central and North Europe. A clear decline in the southern parts of Europe. In North America, the reason for our decline in orders received was a decline in orders received in the United States. Hopefully this gives you a bit of a picture, and these were all organic growth rates I was referring to.

Speaker 2: I presume that that implies Europe is declining solid double-digit year-over-year. I'm trying to square that with quite robust commentary this morning from both Schindler and Otis about order growth in Europe. Do you believe you're taking market share in Europe, specifically on the new equipment and modernization side?

Speaker 6: I continue to say the same message that we always give in the middle of the year, that we always want to see the full year before we comment what really is happening in the market shares.

Speaker 2: Right. Okay. Secondly, if I can ask to the commentary on maintenance, the pricing trends that you've seen, and the greater pricing pressure, would you say that these trends are more like we've seen in the second half of 2011, where we talked about greater pricing pressures, particularly on larger projects in Europe? Or would you say that what you've seen in Q3 perhaps is somewhat more pervasive across your markets in Europe, and perhaps more structural in nature as you see it today?

Speaker 6: Yes. There is some kind of difference, the difference is in Southern Europe, where in some countries we have seen this also, let's say, higher pressure on prices, not only in big contracts but overall. Especially in big contracts, but somewhat also overall in non-residential segments.

Speaker 2: That's useful. One final question perhaps to you, Henrik. Just on GiantKONE. It looks like the order intake and absolute numbers are coming down from about EUR 150 million in Q2 to somewhere between EUR 110 million and EUR 120 million in Q3. Perhaps a slightly surprising sequential development, and I know there are obviously quarterly variations, and perhaps there was a slight spillover from the Chinese New Year in Q1 into Q2. Can you comment a little bit on what you're seeing organically within GiantKONE? That'll be useful.

Speaker 4: Well, firstly, I think that it's good to remember that in China, the Q2 is always seasonally clearly the highest orders received quarter during the year. I think that what we have said is that we have commented overall on our China growth figures. What we have said is that GiantKONE is now part of our operations in China, so we have not commented that much more on GiantKONE separately. I think that what we can overall say about the integration of GiantKONE and the development of GiantKONE as a business, since we took control in December last year, is that the overall development has been positive and we are quite pleased with the overall performance with GiantKONE.

Speaker 2: Is there a meaningful difference in terms of organic trends between the legacy KONE business and GiantKONE?

Speaker 4: I would say that GiantKONE has overall developed in a good way.

Speaker 2: Thank you.

Speaker 7: Your next question from the line of Ben Maslen from Bank of America. Please ask your question.

Speaker 2: Yeah. Good afternoon, everyone. It's Ben Maslen from Bank of America. A couple of questions, please. First one, just on the negative margin mix that you seem to have had from more new equipment and less service. I think you gave the rate ratio at 50/50 for the first nine months. Given the very strong pickup this year you've seen in equipment orders, how would you expect that ratio to develop heading through Q4? It's obviously a big delivery quarter. Also into 2013. That's the first question. Thank you.

Speaker 6: Okay. The answer to this first question is that we expect the full year mix to be such that new business will be slightly more than 50% for the full year. What comes to next year, our policy is to inform all of the guidance then in January after we have done our homework very carefully.

Speaker 2: Okay, thank you. The second question, just so I understand it right, it sounds like you say that the orders received margins in Q3 are developing well, but at the same time the pricing environment is getting worse. I think Otis and Schindler said the same thing today. Does that mean that you're walking away from business that is just badly priced, basically being more selective?

Speaker 6: Overall, our objective in this kind of market environment is to learn to understand the markets all the time with a better granularity in order to be able to focus on the most attractive growth opportunities. What comes specifically to your question, walking away, yes, in some cases of big projects, we have come to the conclusion that we don't participate, but there are not many such cases. Not at all.

Speaker 2: Okay. Thank you very much.

Speaker 7: Next question from the line of Austin Arrow from Marshall Wace. Please ask your question.

Speaker 1: Hi, good afternoon. I have three questions, if I could take them one by one. The first is maybe just an understanding question. When you talk about the fact that the slowdown in new equipment is having an effect on the maintenance business, I don't quite understand. If new equipment has been slower, doesn't that mean that there are more old lifts to maintain?

Speaker 6: Well, what we mean is that in some selected countries in Southern Europe, particularly when the economy in those countries has continued to be very weak now for a period of several years, and the new equipment markets have hence continued also to be weak. This has started to have some, I would say, not surprising pressures also in the pricing of the maintenance.

Speaker 1: I don't understand. Are the people, the staff who were involved in new equipment being moved to maintenance, and so it's becoming more competitive? I don't quite understand the dynamic among these two different parts of the business.

Speaker 6: Well, first of all, naturally we have to understand the dynamics. When the new equipment market has been low, the number of conversions is lower, and hence the competition of the maintenance growth quite naturally is tighter. When looking from the customer's point of view, when the economy weakness has continued, it is not so surprising that customers have started to put more pressures on the maintenance prices in some segments.

Speaker 1: Okay, got you. I think I've understood. Thank you. Second question was just when you talk about the effect on EBIT, one of the things you said was negative was that there were lower margins in the 2010 and 2011 backlog. Have those not been worked through yet? When do those all sort of drop out?

Speaker 6: Well, as Henrik already roughly mentioned earlier, the average time globally from order to delivery completion is something like in new equipment like one year. It varies a lot by geographical area, so that in Europe it is typically from nine to 12 months. In Asia, it is from six to 18 months depending on the market. In the Americas it is, let's say typically from 12 months or 15 months to 18 months. Of course in major projects, in big projects, the times are still clearly longer. This means that, for example this year major part of the deliveries we have delivered so far naturally comes from the order book of 2011. Again up to the middle of next year, we still have quite a lot of orders that come from 2011 as well.

Speaker 1: Okay, got you. Thank you. The last question I have was just regarding pricing in China. When you say that it was positive, inflation is quite high in the country, and I just wondered do you think pricing is above inflation? If you don't know what inflation is it above wage growth?

Speaker 6: I will answer in such a way that our orders received margins have been improving in China this year in every quarter.

Speaker 1: Got you. Thank you very much.

Speaker 7: The next question from José Verde from Espírito Santo. Please ask your question.

Speaker 5: Good afternoon, everybody. It's José Verde from Espírito Santo. I was just wondering if you could give me a little bit more color on how you're fairing in the U.S. You say that order intake has decreased clearly in the quarter, and yet one of your competitors this morning said that it was clearly taking market share there through new product launches. Is the fact that you've not launched your new rollout in the U.S. having that impact?

Speaker 6: First of all, when we take the period of January to September, our situation in order to received growth in the U.S. is positive. Secondly, with the new global product range launch in the U.S. will be in the first half of next year, and we'll start to sell that in the second half. The third factor I would like to mention is that, as I said in my presentation, in the U.S., we have been successfully doing good development in the prices of orders and orders margins. That naturally, as I said, may have had some negative impact in losing some opportunities, but still this exercise has been very much worth it. Finally, we have always to remember that the quarter is a very short time and we definitely also have an impact of quarterly deviations here.

Speaker 5: Okay, thank you. It's very clear.

Speaker 6: Thank you.

Speaker 7: There are no further questions. Do we have further questions here in Espoo? In case not, let's just check.

Speaker 6: There is one.

Speaker 7: Oh, okay. Sorry.

Speaker 10: Still Tomi Railo, SEB Enskilda. There was a large financial net income in the third quarter. What was explaining that?

Speaker 4: The two explanations for it, of course, are strong cash position, interest income from that, and also then we had from some of our holdings, particularly Toshiba, their annual dividend was included in that.

Speaker 10: Okay.

Speaker 7: Do we have any further questions on the lines, please? We have a question from Tom Skogman of Handelsbanken. Please ask your question.

Speaker 9: Yes, this is Tom from Handelsbanken. I was wondering about the EBIT margin outlook for next year. We have discussed a lot of topics, how much will, for instance, technical things like amortizations go down and what kind of raw material pricing trend you see for next year? How significant is this price improvement in terms of the margin next year? Could you give some kind of a flavor for that?

Speaker 6: We will give our guidance for next year in January. After very good preparation. This is our policy and it has worked well. We have been able to give rather good guidance when working like this.

Speaker 9: Could you just mention the raw material cost trend, how it looks like? You have commented that many times a couple of quarters ahead. What will happen after Q4?

Speaker 6: Maybe, Henrik, could you want to say something or

Speaker 4: Well, we can say, of course, as you can follow, raw material prices have overall, I would say lately been on a reasonably good trend. Of course, clear variations, deviations between different raw materials. Let's see where they go to. We have selectively started to fix some prices for next year in order to secure some of these prices, but there's still a lot to be done. I would say the general trend has been in a positive direction. I would say, Tom, perhaps the only thing we can say about this year is that as we have said that the impact of the amortization of the intangible assets in GiantKONE has impacted about 0.3 percentage points in our margin, and this amortization will stop now in December.

Speaker 9: Thank you.

Speaker 7: Good. Thank you very much for your questions and as active participation. I think we are ready to close