博格華納 (BWA) 2003 Q3 法說會逐字稿

Good day, everyone, and welcome to today's BERU AG nine months results conference call. This call is being recorded.

At this time, I would like to turn the call over to your host today, Mr. Marco von Maltzan. Please go ahead, sir.

Thank you very much. Ladies and gentlemen, welcome. How are you doing today, thank you for joining us on our conference call on BERU's nine months results today.

As you are used to, let me start by providing you with a brief overview on the first nine months 2003/'04 and the beginning of 2004.

Sales went up by 15.9% to 248 million euro. And we managed to increase our net income by almost 2% to 27.4 million euro. We managed to improve the quality of our earnings - EBIT increased by 22%. The EBIT margin once again topped 15% minimum threshold, and was at 16.8% -- for third quarter, EBIT margin amounted to 18.2%.

We continue to have high pre (ph) expenses for the third generation of our electronic tire pressure monitoring system, as well as for the PTC heating systems and the ISS ramp ups.

We had 0.5 euro capital gain sale of shares in Inco (ph) technologies. Actually, in the third quarter, in the amount of zero. As you are most likely aware that we are decided to transfer our German spark plug production from Milhaus (ph) to our site (inaudible) in the south of France.

We therefore will reduce workforce at Milhaus (ph) plant, approximately 50 people. And at February 9th, we announced changes in the supervisory board to announce to Dr. Gerhard Wacker, which was (inaudible) to retire by the end of March, David Bon (ph) from the Carlyle Group (inaudible). So they (ph) were both as interim candidates.

I'd like to start with the key financial figures. Billed sales continued to grow in a difficult market environment, mainly driven by good diesel sales and the commencing ramp-ups of our new products, as well as by 15.9% from 240 (ph) million to 248 million.

Sales of diesel cold start technology increased by 6% from 108.5 million euro to 115.2 million euro. Sales were not very positively in Asia and Europe, but we achieved a higher share with the French manufacturers. I say that in this respect to a recent acquisition has been helpful too.

The sales -- ramp-up of the Gold Five (ph) platform where we eclipsed all diesel versions, including Audi and Fiat, Scoda (ph) and also the turnaround featuring a close to 80% diesel share (inaudible). In December 2003, we started with our first deliveries of ISS to the United States. We supplied DMAX, the Isuzu and General Motors diesel engine joint venture at (inaudible). The ISS startup with DaimlerChrysler for the Mercedes Benz six-cylinder engine in the fourth quarter will contribute to the ongoing increase in sales in our core business position in diesel cold start technology.

Starting (ph) with the business area ignition technology increased by almost 20% from 62.4 million euro to 74.6 million euro, although in Western Europe alone, new registration of cars with the gavaline (ph) engine decreased by 7% in 2003.

Reasons for the rise in sales were first the acquisition of BERU Eyquem, which contributed 11 million euro to this division. We started to supply Renault with ignition coils, and overall, the aftermarket business developed with our expectations, bearing in mind that new registrations of petrol cars were quite weak, we managed to develop better than the market.

Electronic and sensor technology went up by 34.8% from 43.4 million euro to 58.5 million euro. The increase was due to the production startup of PTC heaters, which are equally (ph) to the new gold five (ph) platforms diesel version, and also in the Ford Focus.

TSS (ph) contributed approximately 22 million euro to sales, up more than 60%. Take rates in the premium and ethia (ph) re (ph) segment that we are predominately supplying are increasing. The finalization of the U.S. legislation in the months to come could spur additional interest, as we haven't seen that yet and are careful to draw any premature conclusions.

The share of the OEM business decreased. As a percentage of sales, the OEM side amounted to 62.7% as compared to 63.% last year. Normally that (ph) has been the inclusion of BERU Eyquem in the scope of consolidation. BERU Eyquem, as you know, has 90% of its sales originating in the spare parts business. Therefore, the aftermarket share on sales has gone up to 30.5%.

(inaudible) general industry, which was mainly visible (ph) with the oil and gas burner industry and industrial electronics also improved. Sales were up from 15.4 million euro to 17 million euro. When we (ph) started with funds (ph) group sales split by regions, overall our sales volume originating in Europe, excluding Germany for a moment, has gone up 36% of our business new (ph) module in that region.

This reflects the strong position that diesel has put up in Europe and there was market position in diesel cold start technology and the ignition technology field. Because of the bill rate from acquisition located in France and the higher share with French OEMs.

The U.S. market was weak. Under the ramp-up of ISS at Isuzu (ph) GM and GM's (inaudible) we are confident that this trend would change. The number of group employees fell to 2,690 employees at the end of the period, after 2,718 three months earlier. This raw expenses as a percentage of sales decreased from 31.9% to 30.5%.

The reduction was partially due to restructuring measures at such (inaudible) and efficiency-boosting activities in the group. Right now we are in the process of installing a highly efficient specialized automatic production system at the French start-up (ph) factory in Chasso (ph).

The U.S. spark plug product line is being transferred to Chiso (ph) so that (inaudible) and the ignition technology business field will be reduced by 50, out of which 40 are temporaries.

(inaudible) the - I would say a rather moderate rate settlement in Germany today, but actually that has 2% increase from March 1st onwards, and I think this could be beneficial to BERU, which has one of the highest shares of staff located in Germany.

Material expenses as a percentage of sales remained nearly constant at 34.9%. Gross margin actually reached 66.9% in the third quarter. Product mix to the - due to the solid increase of the diesel field (ph) developed favorably. Thus we have reached breakeven in tire pressure monitoring systems.

It's the general trend that the increasing output of electronically controlled systems, TSS, ISS and PTC, also implies a higher share of material expenses as a percentage of sales (inaudible). We tried to counter that with optimized design and purchasing measures, plus economies of scale.

Our (ph) operating expenses in the first nine months of the financial year totaled 38.8 million euro. As a percentage of sales, expenses fell from 16.7% to 15.6%. EBITDA and EBITDA margin - EBITDA increased from 50 million to 58.3 million. Margin came in at 23.5%, slightly higher than last year.

EBIT excluding 0.5 million capital gain from the sale of shares in (inaudible) technology increased by 22% to 41.6 million. This represents an EBIT margin of 16.8%.

Sales (ph) for the third quarter 2004 reached 17.2 million, up 26%. This EBIT (ph) margin adjusted for one-offs such as the sale of shares came in at 18.2% in the third quarter, as compared to 18.5% a year ago, despite the higher electronics share and a slightly dilutive effect from the Eyquem acquisition.

Company achieved pre-tax profit of 44 million euro, up from 40.2 million euro. This is 9.5% more than in the prior year. Net income increased by 1.9% from 26.9 million to 27.4 million due to a significant increase in the effective tax rate to 37.7%, up from 33.1%.

You are most likely aware that utility (ph) there's an acquisition of Texas Engine (ph) for one seventh (ph) of the company's dividend payment. The (inaudible) of the adjusted earnings per share, these went up by 21.3% to 2068 (ph) up from two euro 21 euro cents.

How did the cash flow develop? We once again demonstrated our financial strength with an increase in the cash flow, which rose from 43 million to 44.4 million. Our cap ex was up at 22.2 million and 18.5 million last year. Operating free cash flow in the nine months totaled 21.7 million euro.

In third quarter, we have generated 10.3 million euro in free cash flow from operating activities. What about our net cash and cash position? During the third quarter, the group's net cash position decreased slightly to 57.6 million. The reason for that begin cap ex. Cash the company has available now amounts to 85.5 million euro.

Ladies and gentlemen, the Diesel (inaudible) has been one of the major drivers for our business activities. We would like to give you an update on recent market developments. (inaudible) recent analogies (ph) from the German Automobile Manufacturers Association entitled Diesel Rise up (ph). Ramp-up production of diesel vehicles, light trucks plus passenger cars is forecasted to increase 70% from the year 2002 to the year 2010, and is manual (ph) increase of approximately 7%.

Once the sales forecast has remained rather cautious on the U.S. side of the diesel business. By the way, we are at almost every diesel engine manufacturer already in the (inaudible) plug. The (inaudible) diesel engines has continued at least throughout Western Europe. Diesel's share of new car registrations in the region was up to 43.7%. I remind you that last year we were at 40.3%.

In its (ph) most important domestic market Germany reached a dealer share of 39.9% in 2003, lagging behind the European average. Very interesting at the moment, the growing public discussions about the potential of bio-diesel and synthetic diesel. Bio-diesel is extended (ph) from fuel types in Germany. Allied and BP and Shell have started to ask 5%. The industry experts assume that the price of diesel fuel is likely to rise at a slower rate than gasoline in the future. That could be a positive for diesel penetration in Germany.

Now I would like to explain how we are going to be running our business in the future. Besides integrating the recent acquisitions, the company and management are focusing on ramping up some new product, TSS, ISS and PTC. Two-thousand-four will be year of start-ups. We have been preparing for eight product production startups. The slide gives you an impression of the product launches in the upcoming quarters. The (inaudible) of the ramp-up curves we cannot influence, yet the OEM for profitability reasons usually undertakes everything to assure its ramp-up is on time and proceeding as planned.

You have a close (ph) our presentation?

OK, let me summarize and give you the outlook of the full business year 2003 and 2004. OK, I think we have in general in Western Europe a weaker than expected new car registration and in Western Europe in general and worse in Germany. We expect diesel penetration to continue to grow in Germany since diesel penetration in Germany is still lagging behind Western Europe average. We discussed the bio-diesel impact on price (ph) situation.

Our sales and earnings, our trends, are predominantly depending on ramp up of the OEM platforms, diesel penetration, take (ph) rate of TSS and aftermarket performance. We expect increasing sales and earnings dynamics based upon new product ramp ups and new products just (inaudible).

We see ourselves for business year '03/'04 right on track to grow sales by 15%, including the (inaudible) acquisition at a minimum 50% EBIT margin. Full-year cap ex is planned at 35 million euro, including 5 million euro for BERU Eyquem and one-off cap ex for the new logistics center, which is the 7 million euro.

Our internal efficiency program is well on the way to cut costs at 3%, and we expect the operating free cash flow to top 28 million euro.

To sum it up, I think we are well positioned to reach our sales and EBIT margin goal of 50%, and despite weak new car registrations in Western Europe in general.

Ladies and gentlemen, thank you very much for your time and attention. Please feel free to ask questions now.

Thank you, sir. Ladies and gentlemen, the question and answer session will be conducted electronically. If you wish to ask a question at this time, please press star, one on your telephone keypad. If you find that your question has been already answered and you would like to remove yourself from the queue, please press star, two.

Once again, please press star, one on your telephone keypad to ask a question.

Our first question comes from Mr. Thomas Besson with Citigroup Smith Barney. Please go ahead, sir.

Hi, good afternoon. It's Thomas Besson at Citigroup Smith Barney. First, congratulations for this very good set of figures. I have three questions. If I may, I will give them one by one to let you answer between the questions.

The first one is on the mid-term prospects in terms of growth for the diesel field. You have mentioned the fact that in some countries in Europe, we still have a few years where there's a need for capture, like Germany, but basically we have an area at 44% penetration. We are likely going to go to 50%. It gives you maybe three years of nice growth, and then you need to have a kind of relay (ph). Can you make us - elaborate on your views with the various countries in Asia and also as well in the U.S.?

Where do you think we could be in terms of penetrations by 2010 in some of these areas.

Sure, let me start with Europe. To begin with, I think to 43% almost 44% right now, and Germany is still lagging around, and it is the most important market in Germany. The second-most important market in Europe is the U.K., which is also still lagging behind, but has a very high increase in diesel penetration up from (ph) from a very low level.

As far as Western Europe is concerned, there are forecasts showing that the diesel penetration in Western Europe could go up to 55%. Just to remind you (inaudible) right now is about 70%. If I recall it correctly, I think in France we are around 60%, 62%, something like that. So I think we are far off our - off (inaudible) at the level which we can say is sort of where we (inaudible). I think there's a high potential to go up to 55%. And the level three (ph), which is going for that, is the increase in share of SUVs in Europe, which are actually more - diesel propulsion (ph) system is the ideal engine for such a vehicle, since it's a very heavy vehicle. And a diesel engine in that area can lead to fuel consumption of up to 30% to 40%.

As far as the United States is concerned, diesel penetration is somewhere between 2% to 3%. Analysts expect that to go up to 15% by the year 2010, 2012. Mr. Fehrenbach, the CEO of Bosh the other day was quoted saying that this could go up to 20%. And if you take the total amount of cars and light trucks produced, which is close to 70 million euro, I think that is a very interesting potential.

As far as Asia is concerned, when you take the situation with South Korea and diesel is becoming more and more popular. However, penetration for us in Japan is still comparatively low. As far as China is concerned, I feel in the long run there is definitely potential for diesel as well. But as I said before, if you take it on a worldwide scale, we expect diesel production to go up by 7% annually.

Is that first for Germany or in general terms?

On a worldwide basis.

On a worldwide basis, you expect growth of 7%.

(inaudible).

OK, I didn't catch that. Second question is basically on your aftermarket (inaudible) is ...

Hello, I cannot hear you.

Hello, Mr. Besson? I am afraid Mr. Besson may have a problem with his line. Shall we take the next question, sir?

Yes, please.

In the meantime, Mr. Besson, if you wish to ask a question, you can of course hit star, one once again and we will take your question.

Our next question comes from Mr. Craig Abbott Commerce Bank Securities. Please go ahead.

Yes, good afternoon. I have two questions to begin with. First of all, just a little bit more light on your sales breakdown. You gave us the sales figure for the TSS, the tire pressure monitoring system. That was one, and you also showed us a slide where you give us an indication where you expect the combined sale for the TSS, the PTC and ISS.

I was wondering, first of all, if you could give us a breakdown of the sales for ISS and PTC. And the second question I had please was you managed to reduce your headcount, this despite obviously the first-time consolidation this year of Eyquem. And I just wondered if you could give us a bit more detail on where headcount reductions were made, and if this already includes the reductions related to the transfer of spark plug production in Chissel (ph) in France. Thank you.

Let me start with the second question. The - the figure does not include yet the decision to move our plug production from Meinhaus (ph) to Chissel (ph), because that will most likely be finished August/September this year. On the other hand, we are modernizing our plant in Chissel (ph), and we have reduced personnel there.

The other thing is, to be honest (ph), we reduced personnel in our Hungarian facility. I think this was a major - OK, coming back to the first question. If I understand you correctly, you asked whether we are in line with our assumptions for ISS.

We said, I think, this (ph) would be around 25 million euro in business year 2003/'04. I can confirm this figure.

In PTC?

In PTC, we have - I think we indicated in our formal presentation, if I have it right in my head, around 20 to 30 million. I think we are slightly behind. OK?

OK, thank you.

Thank you, sir. Our next question comes from Mr. Thomas Besson with Citigroup. Please go ahead, sir.

Hello again, sorry. I don't know what happened. I have been cut.

It was not our fault

So I have a few other quick questions. I was speaking about aftermarket and effectively we have seen aftermarket rising slightly thanks to the integration of Eyquem as a percentage of sales, but when did you expect a real pickup in aftermarket sales to be rising from (ph) rising pack (ph) in diesel engines? So basically I think it's largely an aftermarket which is related to spark plugs.

When do you think rising diesel pack (ph) will lead to higher sales in glow (ph) plugs in aftermarket.

I think - well, we haven't got this chart in the presentation, but we can see if you look at the diesel part in Germany that some four to five years, the diesel penetration at least in car parts (ph) was slightly going up, which will be - which will be an acceleration of this trend in the upcoming years. So we think in two to three years, most likely this will have a major impact on our aftermarket business.

Two other very quick questions. You mentioned in your quarterly report that you're still spending money on (inaudible) you have been working on since now quite a while. Could you tell us where you stand on this. Could we hope to see a product in 2004 or in 2005 or in 2006? Where are you and what are your hopes on that?

Well, you are right. We are developing on the system, which is an auxiliary (ph) detail which (inaudible). To be honest, I will not give you an exact figure for reasons also of competition.

OK. Final question will be on Carlyle. Is there anything new we should know? We have seen since nearly (ph) two days ago that Carlyle will now have two seats on the board. Does it have any meaning in terms of their intention going forward. Has there been no change at all in your relations and your view of their intentions?

No, there has been no change as far as that is concerned (inaudible) from supervisory board and Carlyle now having two seats on the supervisory board out of a supervisory board which consists of six people, so I think that as they have 31.7% share. At least it's a figure that will be lower at the general assembly, but I think that is not abnormal that they have two seats on the supervisory board.

Thank you. Thanks a lot.

Thank you, sir. Our next question comes from Mr. Thorsten Zimmerman from HSBC. Please go ahead, sir.

Yes, good afternoon, gentlemen. I have two questions. The first one relates to diesel cold start technology sales. If I (inaudible) correctly, in the third quarter, there was a tremendous increase year on year. Maybe you can elaborate where this comes from. Should we expect the same growth rate also for the fourth quarter. I was a bit surprised by this high growth as the winter wasn't very cold so far. Yes.

OK, I think you have to take into account that we have the ramp up situation with the ISS, starting actually with the first-line (ph) growth platform, and when we talk about the first-line (ph) growth platform, that means also we supply our products to the variants like Turan, like Audi, like (inaudible), et cetera.

And we definitely have higher share with the French OEMs. And that is definitely also due to our acquisition we made in France, which was very positively accepted by the French manufacturers. As far as the aftermarket is concerned, we are overall in line.

You are right, the weather was not very cold, which normally helps definitely to increase our sales in (inaudible). Nevertheless, we continue to be in line, and now in the fourth quarter, we started the delivery of the ISS system to the General Motors/Isuzu joint venture, DMAX, which will represent (ph) once really ramp up has finished I think about 100,000 units per year.

So a growth rate - well, about the same growth rate we could apply for the fourth quarter for that segment.

Well, I think the diesel market grew by 5% to 6%, and we grew overall by 6%, and I think we are in line with the market. And I'm pretty positive that will be also the case in the last quarter.

Another question relates to full year figures that will be presented to IRFS for the first time. While comparing year on year according to HGB and/or IRFS, what were the figures according to the same accounting rules I think will produce similar cross numbers and similar earnings numbers. The question is comparing IRFS to HGB for the full year. Do you expect margins to differ significantly between the two sets of figures, or do you expect them to be very close together.

I think to be quite honest, it's too early to comment on this change to IS (ph), and please understand that I cannot make any comment on this right now.

All right. Thank you.

Thank you, sir. Our next question comes from Mr. Patrick Juchemich with Sal. Oppenheim. Please go ahead, sir.

Hello, can you understand me?

Yes, sure, hello.

Hello - Patrick Juchemich of Oppenheim. I'd like to touch the issue of your breakeven scenarios for the engine starting systems, tire pressure monitoring and PTC. You stress that you have already reached breakeven in tire pressure monitoring and you're heading for breakeven in ISS and PTC in the upcoming two quarters.

Next year.

Next year. Taking into consideration that your EBIT margin was ever strong in the fourth quarter, is it right to assume that the diluting effect is not that significant as you might have hinted on in earlier times? Are you (ph) - reference to the material cost aspect?

And the second question on the sustainability of the profitability level of the third quarter.

Well, I think we see ourselves well positioned to have an EBIT margin at the end of the year minimum 15%. We still not forget there are actually - as I said before, the material contract will go up, but I think we have to face it since due to the ramp of our products, the electronics (ph) contract will definitely go up.

The other thing is that (inaudible) price pressure on us, and so I think, and as I just said, we think that we are - we will manage to at least achieve our objectives, but I cannot say more right now. It's too earl.

And on the breakeven scenarios, can you supply us with a requested number of units?

No.

OK. Thank you.

Thank you, sir. As a reminder, if you wish to ask a question, please press star, one on your telephone keypad at this time.

Our next question will come from Christian Breitsprecher with Deutsche Bank. Please go ahead, sir.

Good afternoon, it's Christian Breitsprecher from Deutsche Bank. One question relating to the fourth quarter. When we look at it historically, we see the fourth quarter as the strongest in terms of revenue and (inaudible) margin. Is there any reason why that precedent (ph) should break this year?

Yes, I think generally the third and fourth quarter are the strong quarters in terms of sale and in terms of margin, but as I said before, there is - let's say two months to go, and so from this point of view, I'm a little bit cautious. But once again, I'll repeat our estimate that as final objective is concerned, first to reach an increase of sales including (inaudible) of 15%, even very (ph) positive to achieve that, and as far as EBIT margin is concerned, at minimum EBIT of 15%, I can confirm that.

Thank you.

You're welcome.

Thank you, sir. Our next question will come from Craig Abbott with Commerce Bank Securities. Please go ahead, sir.

Yes, thank you. I just have one quick follow up question. You stuck with your forecast for capital spending for this year of 35 million, which includes 5 million which appear to be one-off at Eyquem for refitting the factory there, and another 7 million which you also stated would be one-off for the expansion of a new logistics center. I was just wondering if you could already give us an indication at this stage of where you expect the investments to be for the coming fiscal year, '04/'05?

Well, we said that when we acquired Eyquem that we will invest over the next couple of years at a rate of 5 million euro. And so normally the second year might have - the investment in cap ex will be slightly higher, because in the first year, you order the machinery and it takes a couple months to deliveries up (ph). So I expect that to be at around between 5 and 7 million euro for Eyquem in the south of France.

As far as total cap ex is concerned, we think that should be around somewhere between 35% to 37% -- 35 to 37 million. But we also expect that sales will go up (inaudible) 10%. And so I think in terms of the relation of total sales, I think that cap ex will decline, go down.

Thank you .

Thank you, sir. Our next question will come from Rolf Woller with HVB. Please go ahead, sir.

Hi, Rolf Woller from HVB. Just two questions. The first one is, do you speak to sales for your target that Eyquem will contribute roughly 20 million in this fiscal year, and just second question, your forecast for the organic growth which you say will be in the double-digit range, and does this include the additional 10 million we can expect from Eyquem because it was only consolidated for nine months this year?

With regard to the first question, it's a turnover of (inaudible) Eyquem in this actual business year. We think that we'll be somewhere between 19 and 20 million.

So you stick to your target?

I'm trying to stick to that.

OK, and the organic growth next year? Is this related, because you mention in your quarterly report that you expect double-digit growth for the next year. Does this include the additional 10 million we can expect for Eyquem because you only compared it for the nine months.

Yes, based on the acquisition as well.

OK. Would you say that this is then - because you mentioned one week ago that it might be only 10%. Is this a cautious assumption, or is this bullish?

Well, I think we haven't finished our actual business year yet, so we know - we expect the market, the total market, to pick up (inaudible) speaking on a worldwide scale. We are in the situation that we are not up (ph) our systems and so I think saying today with our - by being cautious we think that we will manage to have 9% to 10% in sales next year.

Thanks very much.

You're welcome.

Thank you, sir. Our next question will come from Gerhard Schilling (ph) with Anismore (ph). Please go ahead, sir.

Yes, good afternoon. I have two questions. The first one is could you - maybe I missed that. Could you say what the organic growth was in the first quarter, and what exactly the impact of the Eyquem acquisition was. And the second question was, you mentioned price pressure in your outlook, and we know from several other component suppliers, and also from the OEMs, that the OEMs face quite a tough operating environment and they have gone into a lot of suppliers in the last few months and started a new round of negotiations for further reductions.

I think in the past, you've always said that annual price pressure on existing product was in the region of, from memory, 2% to 3%. To what degree has that changed? If you could just tell us about your recent experience on that topic, please. Thanks.

Well, first off, as far as the turnover we had with Eyquem, in the second quarter, we had 3.7 million euros. I think in the third quarter that was 7.4 million euro.

Seven-point-four?

Seven-point-four, yes. As far as the price pressure is concerned, I think you can read that every day in the press. There is price pressure from the OEMs. I think that is nothing to - I think we have to face it, and we are by pursuing our productivity/efficiency program, we are trying to counterbalance the strength. And on the other hand, I think we will also in the future manage to try to escape this trend.

So, I mean, what I was saying is - we all know that price pressure is a totally normal feature of your industry. But really getting at - let's say if you compare your expectation of budget for the next fiscal year from six months ago to your expectation now, given what has happened over the last few months, can you just tell us how it has impacted your expectation for prices compared to what they were six months ago?

Well, it's really I think there always has been price pressure, and we are trying to - we are investing a lot in R&D and trying to always be in the lead in technology. And that gives us the possibility to counter this trend. I think price pressure is not new to us.

No, we all know that.

We have the maturity (ph) to our special products, which you know are sort of adapted to engines on - regularly. And we are not offering product that remains the same to put it in very simple words so that you know over the years you supply the same product, you know, for eight to 10 years. But it's different and our products all the time are re-adjusted to engines. Engines change, which gives us a possibility to redefine the price situation.

OK, thanks.

Thank you.

Thank you, sir, our next question will come from Thorsten Zimmerman with HSBC. Please go ahead, sir.

Yes, I have a follow up on the previous discussion on pricing pressure. Rumors are that a very important customers approach (inaudible) for your retroactive discounts on 2003 sales. The question is, has there been such demand and has BERU paid any discounts in the last quarter, or should we expect any payments to accrue (ph) in the fourth quarter?

No, but first of all, I think you know you can read every day in the press what is actually some habits going on in the industry. But the situation has always been tremendous price pressure. There are moments where it gets a little bit tougher, but we do not expect anything - any surprises in that - you put your question.

All right, thank you.

Thank you, sir. Our next question will come from Aleksej Wunrau from LBBW. Please go ahead.

Good afternoon.

Good afternoon.

Aleksj Wunrau with LBBW. Do you have any information regarding raising the CAFE - the average fuel economy standards in the U.S.? Do you have any information about what happened in December when the Congressional Budget Board suggested instead of raising the CAFE tripling the fuel tax in the U.S.?

You're referring to the energy bill, I assume.

Not quite. The Congressional Budget Board prepared a study where it said that tripling the fuel tax in the U.S. would be much more effective than raising the CAFE standards, the fuel economy standards.

Yes, I have to ask you to come back to us. I do not have this particulate (ph) information. And that seems to go (ph) that's something we should discuss in a different situation.

All right. Thank you very much.

Thank you, sir.

As a reminder, if you wish to ask a question, please press star, one at this time.

Mr. Maltzan, it appears that there is no further question at this time. I would like to turn the call back over to you for any other comments or closing remarks. Thank you.

Ladies and gentlemen, thank you very much for listening (ph) to our conference call. I wish you a good afternoon and good day for those of you who are attending this conference call from overseas.

Thank you very much.

Ladies and gentlemen, this will conclude today's conference call. We thank you for your participation, and have a good day.