博格華納 (BWA) 2004 Q1 法說會逐字稿

Good day everyone, and welcome to today's BERU AG First Quarter Results conference call. For your information this call is being recorded. At this time I would like to turn the call over to Mr. Marco von Maltzan. Please go ahead sir.

Thank you. Dear ladies and gentlemen, thank you very much for joining to our conference call today, as we are right in the middle of most people's holiday season. Let me start by stating that we see ourselves on track to reach our target for 2004/2005, yet we are only a couple of months into the new business year, and some work remains to be done in a demanding market environment.

To begin with, I would like to summarize the highlights of the first quarter. Sales rose 23% to €85.5m. Organic growth topped 12%. Our net income increased by 20%. EBIT increased 22% despite high pre-expenses for product ramp-ups, in addition to current production plant build-up and technology upgrades at Eyquem.

Business is generally speaking all progressing according to plan. The product ramp-up in ISS and PTC heaters is well under way. TSS has remained only stable in the pre-NHTSA rule finalization 'waiting period'. On the positive side we have won new contracts for ISS, PTC, TSS and for ignition coils. Also diesel business in the US is picking up. We had almost doubled sales in the US in the first quarter. We have also been adding to its strong product pipeline with our breakthrough product innovation, the Smart Plug

We have also seen demand pick up, demand for high temperature sensors for diesel particulate filters. Investment in PPE at €9.3m, where it is proportionately high in first quarter, it was 55% year-on-year. Let me now give you an overview of the most important financial figures for the first quarter and future targets.

In the first three months BERU succeeded in growing sales by over 23.2%. Sales increased from €69.4m to €85.5m. The French sub-group acquired in August 2003, BERU Eyquem, made a sales contribution of €7.4m. The high growth in our youngest division of Electronics and Sensor Technology and the positive business trend in our main division of Diesel Cold Start Technology, contributed significantly to the 12.5% organic growth in earnings achieved by the Group.

BERU has succeeded in further increasing our sales revenues in the core division of Diesel Cold Start Technology. The figure of €36.3m for the first quarter represented an increase of 8%. Diesel car registrations in the same period were up approximately 6% on a worldwide basis. Lower than expected was the volume of OES business with spare parts for the manufacturers after-market business. Due to the mild winter weather, the level of existing inventories were not completely depleted by the beginning of the quarter.

Sales of ISS developed positively with the growth rate up, partially a result of new product start-ups at GM/Isuzu's DMAX joint venture in United States, as well as at DaimlerChrysler. The US also started to supply ISS glow-plug for the new Audi A6. BERU achieved sales revenues of €28.2m after €19.7m in the prior year period in the ignition technology field. Despite the fact that new registrations of passenger cars with gasoline engines in Europe decreased by nearly 3%.

But because of sales of spark plugs and state-of-the-art pencil ignition coils, the first half of 2004 we achieved modest organic growth. In total, the Group achieved growth of 43.1% in this division. At present, we also received an order to supply ignition coils to MG Rover, and expect an increasing share with one French OEM.

We also see further growth opportunities for ignition technology in the extension of our international after-market program, and in the penetration of new markets with the Eyquem brand.

The business division of Electronics and Sensor Technology achieved the Group's highest organic growth of 30.4%, with sales revenues of €21m. Growth was driven, among other things, by PTC ramp-up and our sensor business. Sales in tire pressure monitoring systems stagnated at the prior year's level. One of the main reasons is the current uncertainty with regards of the amendment of the Tire Safety Rule.

The acquisition of new projects is developing positively. Furthermore, European consumers are increasingly demanding this crucial safety feature. With 2,672 employees, the number of people employed in this Group was nearly constant. However, compared to June 30 2003, the workforce expanded by 20%, due to the acquisition of Eyquem. Personnel expenses, as a percentage of sales, rose slightly from 31.3% from prior year period to 32.3%, while the proportion of materials was reduced.

The ratio of material expenses were 37.7% compared with 39.3% in the same period of last year. Related to output volume, the ratio was 35.9%, after 36.8% in the prior quarter. High commodity prices and an increasing share in electronic components remain trends we have to face. On the other hand, we are ramping-up and scale effects will contribute positively. Product mix has been supportive too. For the full year, we are planning materials as a percentage of sales to be in the 36.5-37.5% range.

Other operating expenses, that compromise marketing, operating, and administration costs, amounted to €13.6m compared with €11.8m in the same period last year. As a proportion of the Group's sales revenues, they decreased by 1.1 percentage points to 15.9%. EBITDA increased from €15.2m to €17.6m, EBITDA margins increased to 20.6%.

Earning before interest and taxes EBIT grew by nearly 22% to €11.8m in the first quarter. The EBIT margin for the quarter was 13.8%, was almost identical to the 14% of the last year. As you all know, due to a seasonally lower share of the after-market OES business, BERU tends to have disproportionately lower EBIT margins in the first and second quarter, than compared to the third and fourth quarter.

It is necessary to consider the fact that EBIT margin decreased by more than 1 percentage point, due to the restructuring and process modernization at Eyquem, whose first quarter contribution to sales revenues was included for the first time. Additionally, we are ramping-up new products on a large scale and the OES business, with glow-plugs and spark plugs, has definitely been at the low end of our expectations.

Financial income remains at around €1m. Before taxes, the Group earned 21%, €12.8m as compared to €10.6m in the prior year's quarter. The total effective tax rate of 39.1% was a little higher, due also to the tax [co-personnel] at Eyquem - a tax on assets which is independent of earnings. However, the effective income tax rate fell by 2 percentage points to 36.1%.

Net income increased by 20.3% to €7.7m after €6.4m last year. Earnings per share rose by more than 20% to €0.77 compared with €0.64 in the prior year quarter. The net financial position increased to €79.7m, compared with €78.2m on March 31 2004. Our cash position was down slightly from €105m to €104.6m, as a result of high CapEX and the build-up in inventories for the cold quarters.

You are aware of the fact that we are used to building up inventories in first and second quarter for stronger winter quarters, when a-- after-market sales kick in, and when we have to have the products available. With an outstanding deliver ratio of 96%, BERU is clearly fulfilling the after-market customers' requirements, and has a key selling point here.

The operating free cash flow was €4.4m, as opposed to €6.1m in the quarter of last year. Our first quarter expenditure on tangible and intangible assets was above the annual average, taking place primarily at BERU Eyquem. And for the extension of our production capacity for modern slim-line and ISS glow-plugs here in Ludwigsburg. At €9.3m, our capital expenditure was 55% above the prior year quarter. Because of that the operating free cash decreased in the first quarter.

Let us now briefly take a look at the market trends. Our product pipeline that is essential for generating future business and earnings. In our opinion we have positioned the company with good prospects for the year to come. Especially the diesel trend that continues unabated and has even shown signs of increasing dynamics, and is a solid base for growth in the future.

J. D. Power recently released a diesel study reflecting on the latest figure in diesel share in car sales on a worldwide basis. For the very first time ever, every market worldwide has started to show gains in diesel penetrations. Worldwide diesel share of new car sales reached 60% in 2003, following 15% in 2002.

The ongoing increase in crude oil prices, as well as the trend to tax cars according to CO2 output, has proven to be highly supportive for diesel car sales. Following the introduction of CO2 based car taxation, diesel sales UK, for example, has been increasing from below 20% - I think 2 years ago - to last month posted 31%. France has been moving in the same direction with its recent introduction of the CO2 based car tax, in addition to incentives for diesel [catalytic] converters.

Large car market, such as the UK and Germany, are still lagging the European average. The first half of this year, dealers showing new car sales has reached more than 46% in Western Europe, and they do expect that number to go up above 57% by 2009.

Featuring the strong position of the BERU brand in the German-speaking markets, we are planning to organically grow our spare parts business there. Additionally, the acquisition of Eyquem is the basis to grow the after-market business in the highly important French after-market. Where we also see cross-selling potential for our diesel products.

We are setting up the 12mm spark plug technology capacity there. We intend to become one of the top 3 players technologically, as a pre-requisite to exploit the interesting after-market later on. The established international safe channels of Eyquem will also prove to be highly supportive for our goal, to grow the after-market in the-- business in the international market.

Third, we have gotten each and every contract for ISS technology so far, and we are using this technology as carrying [indiscernible], for generic growth in the after-market as well. ISS glow-plug are technologically linked to the tele-control unit that BERU provides as well. This implies that we will, to a much larger extent than before, reap the fruits in the after-market, as it would be difficult and costly to substitute a BERU plug with a competitor's product.

Diesel penetration - just to show an example - in Germany has started to follow-up on the diesel boom in new car registration. As BERU is ranking among the top 2 players in the German after-market, the development of diesel share in the car park is rather important for us. From 1999 until 2003, diesel penetration in existing car park has ramped up from 13.3% to 18.4%, and it is expected to top 20% by the end of the business year.

The increasing diesel car park will increase the-- will form a sound basis for BERUs glow-plug after-market business in the years to come, and we are setting up our strategy accordingly.

Although on a still low basis, the US has started to turn into an increasingly interesting market for diesel engines. Here as well, growing customer revenues and record level pump prices as demand slower. Due to stronger than expected call-offs of ISS system at General Motors/Isuzu, but also from other US customers such as International, we have almost doubled sales in the US market in the first quarter from €5m to €7m.

The J. D. Power chart has shown that diesel shares in light vehicle sales is about to reach 4% at year, posting us a faint upbeat trend from 1999 2% level. Researchers, such as AID, rate their forecast and expect US diesel penetration in light vehicles to reach 18% by 2010. The one thing's that for sure, the mid-term outlook for diesel cars and hybrids in the US seems to offer good prospects. Now with a market share in the US diesel [indiscernible] technology business of around 70%, we will be there.

We have kept on investing more than 8% of sales into new products and new technologies. The PSG Smart Plug system, for example, is a product that offers excellent opportunity. With the successful development of the Smart Pressure Sensor Glow-Plug - featuring the integrated combustion chamber pressure sensor and electronic analysis - we have laid the foundations for product launch in the next generation earlier than originally planned.

The measurement of pressure in the combustion chamber, via a sensor in the glow-plug, is necessary in order to supply data directly from diesel engines combustion chambers, for homogenous and generic measurement. Which in turn will lead to significantly more economical diesel engines with substantially lower [anorex] emissions. Many manufacturers are working in this field.

The goal is, in view of ever stricter upcoming emission legislation in Europe, year 2005, and the United States, the Emissions [indiscernible], to make the cost intensive after-treatment for exhaust emission using anorex catalysts unnecessary. Two customers have already shown strong interest in this new technology, and we will further develop the Smart Plug to production maturity as quickly as possible

We have also already seen a pick-up in demand for premium, high temperature sensors this quarter. Market researchers agree that the market for diesel particulate filters will grow substantially in the upcoming years. In countries such as France, tax incentives have already been passed. Germany is discussing exactly that. We are also well-positioned here.

We will not produce particular [traps] that high temperature measuring in front of, and behind, the particular filters is our competence. We have already received major orders from one Asian and a German manufacturer, and intend to grow that business further.

Sales revenues with electronic tire pressure monitoring systems stagnated at the prior year's level. One of the main reasons for this is the current lack of clarity regarding the amendment to the Tire Safety Rule, recently passed into law in the United States. This stipulates that every car newly registered in the US must be equipped with a tire pressure monitoring system.

Some manufacturers have not increased the percentage of cars for export to the US fitted with such equipment, while one German premium manufacturer has decided to postpone the fitting of these systems for another 9 months. The final decision on the newly formulated systems specifications, and the resulting announcement of the launch scenario in the United States, should trigger a substantial expansion of the market for our tire pressure monitoring systems.

The acquisition of new projects in that field is developing positively. For example, BERU has received an order starting in the 2005/2006 financial year, to equip an additional Audi model with the tire pressure monitoring system. BERU is already supplying the system as an option for the A8 and the new A6 from Audi, and will also supply it for the new facelift of the A4.

VW has awarded BERU a follow-up order extending to the year 2010. Starting in the next financial year, an additional Bentley model will be equipped with TSS as standard equipment. BERU is currently holding discussions with other European manufacturers on the use of the system in several model series. In ISS we have been winning every contract out there so far. Just recently the Mercedes-Benz put it in their engines. Ramp-up is progressing well, supported by increasing diesel penetration - for example, in the Volkswagen Golf platform.

Also in the US demand for DMAX has been good. PTC heating technology is still ramping-up in the Volkswagen Golf platform and also in the Ford C platform. We have also been successful in expanding our customer basis and have won contracts from Hyundai and, for the first time in the US, Ford will equip its F250 platform.

To conclude today's conference call, let me give you a brief outlook on the market and what our plans are for the full financial year. Outlook for Europe - we expect moderate growth in car sales. German market expected to remain weak. We see good growth prospect for BERU diesel business in the United States.

High crude oil prices and CO2 based car taxation are a plus for already solid diesel demand. AID forecast another 7% increase in diesel car sales in Europe in 2004. 2004/2005 is another year of launches for BERU's new products, with significant expansion of production of PCT heating systems and ISS. Focus on core competencies of Diesel Cold Start Technology and Ignition Technology for gasoline engines and integrated electronics. Capital expenditure planned at €35m to €37m, including the capital expenditures for Eyquem.

The efficiency program, PAP, targets to save 3% in costs at Group level is under way. For business year 2004/2005, BERU Group plans to grow sales organically by at least 10%, plus a 3% contribution from first time full year inclusion of Eyquem in scope of consolidation. Operating result is targeted to develop in line with sales growth despite dilution from Eyquem, ramp-ups and higher electronics content in sales mix. We have an increase in orders received at 20%.

Ladies and gentlemen, thank you very much for attending today's conference call. Please feel to go ahead with any follow-up questions you might have. Miss [Bockart], it is up to you now.

Thank you sir. [Operator's instructions] Our first question comes from Tim [Schutz] with DZ Bank. Please go ahead.

Yes, thank you very much. I have two questions at the moment now. One thing is, can you quantify your R&D expenditure in the first quarter, how that changed? And as well, how the activation ratio for the R&D develops? Thank you.

Our R&D expenses in the first quarter were €7m and-- as opposed to €6.9m the year before. Does that answer your question?

Yes but the other question I would have is, how much of that did you activate?

In the actual quarter we capitalized €1.7m, as opposed to €1.6m the year-- the quarter before.

Thank you.

We now move to [Alexei Bundrau] from Landesbank Baden-Wurttemberg. Please go ahead.

Good afternoon. Just a short question on long-term margins. It seems as if the electronic segment gains, well, more and more importance in the sale mix, while increasing pressure on margins. What counter-measures would you like to take in order to stabilize margins at 50%?

Okay. As I point in the presentation, EBIT margin remained almost constant at 30.8% and last year's quarter it was around 14%. You have to take into account that the first two quarters are always the two quarters where [indiscernible] as comparatively lower than the rest of the year. And, also you have to take into account that Eyquem has been consolidated for the first time, and profit contribution was low. So, we have a dilution due to the Eyquem activity right now of approximately 1.1 percentage point.

I think you have to see that as a-- you have to understand our strategy, and let me elaborate a little bit on that. We-- Our strategy was clearly, when we bought Eyquem, that we would like to expand our position in the after-market business, particularly in the spark plug area. In that area, we know when we made the acquisition of Eyquem that we are going to invest in new machinery, in new technology, and we are under way.

And our expectations, I have said at many occasions already before, that in the time range of 2 to 3-- next 2-3 year, we would like to bring that margin-- EBIT margin of Eyquem up to 10%. We were wrong when we made our first [announcement], when we acquired the company, that we expected that in the first year already to have a significant - or have also a margin, I think we said 7%. Most likely we were too ambitious.

On the other hand, we are well under way and-- but we are incurring some additional expenses, due to the fact that we are moving activities from Germany to the South of France. We are optimizing the material production flow which leads to some extra costs which we didn't see at the beginning.

Well, in the report it was said that the improvement of profitability at Eyquem would improve the margin by 1 percent point. Do you think this is enough to off-balance the margin pressure caused by the growth in the electronic segment? Or is that-- are there any other measures there you could take?

Well, I think we have-- that is definitely one positive part. On the other hand, there is pressure in the market - I think you're absolutely right in mentioning that, and we never made a secret out of it. It is the market pressure - it's higher than it has been before but we initiated already at a very early stage our Productivity Action Plan.

And with that plan, as you can see that if you look at already at our costs in the P&L account, that we are quite well under way and that we reap the benefits of this program.

What contribution would be breakeven at the PTC and ISS systems, or what would the contribution on margins be?

Well, first of all, we expect these two - when you referring to PTC and ISS - we expect these two products to break even in the course of this year. And as far as EBIT profit expectations are concerned, we know that is-- that is very difficult to say right now because, as you know, it's-- it depends on call-out numbers and scale effects. So I think it's a little bit too early to come up with a precise figure on that right now but we expect a major contribution, sure.

In case that the new slim-line spark plug was spare-- Well, would make the most [strip] unnecessary. Do you think that you could gain from this, or from the fact that OEMs would save around €800? Do you think you could gain from this during the pricing process of that product?

Let me first correct a little bit your question because we're not talking glow-plugs slim-line, we were talking PSG but the sales of smart glow-plugs. And that is definitely the target of this glow--plug is to meet-- to help to meet the very strong emission regulation in the future. And one of the major objectives is to make an anorex catalytic converter obsolete.

So I think, and knowing what is the cost of such an anorex catalytic converter, that that gives some interesting potential for us. But talking about prices, I think it's much too early.

Okay, thank you very much.

We now have a follow-up question from Tim Schutz with DZ Bank. Please go ahead sir

Yes, thank you. I have actually two questions on your outlook. The first question is on your margin. Your target basically said that you want to have a stable margin in the current year. You made it a little bit more clear now for the top line growth, that actually that has an organic target, so Eyquem is coming on top of that?

You profiting in the current year from the goodwill amortization which is not done anymore. That should save you about €3.2m compared to last year, including the one-time effect we had? So is this included in your profit target as well? That is the first question and the second question is more, a bit more specific on your [indiscernible] new models and your new products. Do you have an updated outlook for how which revenue volumes you will generate in 2004/2005 with the new products? Thank you.

Your first question, we have goodwill, I think we are talking about is €1.7m. There is a counter-impact due to the write-off of hidden reserves, the amortization of hidden reserves. And so, that is actually compensating the goodwill impact. And first quarter there was, relating to the goodwill, that was in €0.4m. However, we had depreciation of hidden reserves of €0.5m. So you see that this goodwill impact has, unfortunately, is over-compensated.

Maybe a quick follow-up from that one. Can you explain in a little bit more detail what is behind this hidden reserves write-down? I think you explained this already a bit during your Analyst's Conference but I must admit I'm still not quite sure what is-- what is this is all about.

Yes, well, it's not that complicated. You know that-- You know we bought Eyquem and then you have to do an evaluation of the assets, and then you find out that there are reserves. And these reserves have to-- have to be [indiscernible].

So the other thing that I think you are referring to, the explanation of year result 2003 and 2003 and 2004. I think then, please contact us afterwards directly, and if you still have question I think. Is that fine with you?

Yes, thank you.

Our next question will come from David Abraham with Titanium Capital. Please go ahead.

Yes, good afternoon everyone. I've four quick questions. Firstly, could you comment perhaps a little bit on pricing pressure. If pricing pressure accelerate above the norm in the last quarter relative to the previous quarter, and just in the sequential quarter? Secondly, I've seen a lot of commodity prices have gone-- [caught up] by quite a bit.

And I was wondering if there was any bigger pressures you're experiencing then that had an impact on your gross margin or so, in terms of the guidances given, which seem to have 100 basis point range on the gross margin? And if you hedge that, or if you just buy a spot or, etcetera?

Thirdly, I have heard some debate in Germany about whether not the diesel price going above €1 is going to maybe hamper growth in diesel legislations a bit. What your comment on that was? And fourthly, just tell us who the client was that postponed the tire pressure monitoring systems or to buy in 9 months? Thanks.

Okay, let me start with that last question. We are not allowed to tell you the name in this case. I think as our customer that we have to get the permission of our customers to tell you it before. We have to get the permission before we can tell you that, that is the first thing.

Yes, last, but one question about diesel price going up above €1, right? Well, the trend we can see right now in the market clearly is that, due to the high crude oil prices, that demand for diesel on the contrary is going up. If you see the diesel penetration in Western Europe and in Germany - Germany was still lagging behind and is still lagging behind the Western Europe average. So we think that it definitely goes in favor because the car park is comparatively old, and not only in Germany.

But definitely so the car park there, people will buy new cars and the high crude oil rice, it will definitely support the diesel. And, we know that order income at the dealers was sometimes close to 60% diesel share, when you take the total. Your other question, please?

Yes, it was on the raw material price increase impact on your gross margin.

Yes, okay. Well, margin in general, I think first of all-- You also have prices-- the supply, our industry has always faced such a situation. On the other hand, there is definitely a trend, this is-- the situation is getting tougher. We have to counteract by being very reluctant about spending. You know we have our Productivity Action Plan, which is quite severe and we continue to think about how where we can save cost.

You know this is our daily business and we have been quite successful to compensate this price pressure by doing so. On the other hand, we will have scale effects by ramping up with the new products, that should give us also an advantage on the cost side. As far as raw material costs are concerned, there is definitely a trend that is clearly now, we've seen that as well. [Inaudible - recording interrupted] But I think we have, for the time being, we are quite well under way.

We are a technology leader and we have to invest a lot in R&D, and we do that. As you know, we put 8% of our sales in R&D in order to be at the top, and in order to propose products which we can ask the higher margin for. So we know, for example, the ISIS. We know where we have won all the contracts which have been outstanding over the last couple of years now, and that gives us a very positive impact and later on in the after-market business. I was alluding to that in my presentation.

Okay. Let me take the three main pressure points on your gross margin. One is being pricing pressure, the second one being the other portion of electronics as a proportion of sales, and thirdly, raw material prices. Which of those three has had the biggest impact on your gross margins?

We-- I cannot answer this question because we have to analyze. It's also a question on product mix. We have to look into that in more detail but we cannot answer this question right now.

Okay, thanks.

You're welcome.

We now move to Tom Borland with ABN AMRO. Please go ahead.

Thank you and good afternoon. I have a few questions on your development pipeline, specifically the Smart Plug system and the HT sensor. First of all on the Smart Plug system, could you say are you specifically aiming at common rail diesel engines now, with the greater flexibility for the number of times you can inject in a cycle? The reason I ask that is that your largest customer basically has very few common rail diesel engines.

Secondly, are you envisaging a different type of diesel fuel here, in terms of bio-diesel or synthetic diesel? Or do you believe that it will be possible to-- using the Smart Plug system, to get rid of the anorex converter which exist in conventional diesel fuel?

And then moving to the sensors, you mentioned having orders from one agent and one German manufacturer. I would be interested to know who they are? If you cannot say that, could you say are they orders for models currently in production or are they for future engines or future models? And when might they-- when will [indiscernible] actually results in these orders?

Okay. As far as Smart Plug Technology is concerned, it is independent of the different types of injection systems. Synthetic diesel is helpful in order to generate low anorex emissions. So, perhaps you are aware, and I think we have been talking about that, that share of synthetic diesel is going up over the last couple of months, so that is definitely helpful to lower anorex. But also it is a very low CO2 emission as well.

As far as high temperature sensors are concerned, I cannot give you the names right now of the customers we won. These products, if I am not mistaken, I think will start in [indiscernible] in the course of business year 2005 or 2006.

Are they then for models or engines not yet in production? Are they for future models?

Yes.

Right, thank you.

You are welcome.

Next we have Thomas [Enni] with Dresdner Bank. Please go ahead.

Hi, good afternoon. I have a-- concerning-- a question concerning US. You said the sales doubles. How much does licensing fees, due to TPMS or TSS systems? Could you detail that? I also have questions, I was hoping you could detail how much in sales you got from ISS, PTC and PPMS in the first quarter? And my last question would be concerning after-market. What are the risks that the after-market situation in Europe stays at this kind of level, to your full year outlook? Thanks.

Well, first of all, there is no license fee from TSF, that's start-- License fee-- We are going to start generating license fee [indiscernible] from here will be at the end of 2005. So, the sales we generated in the US is almost entirely with-- from Diesel Cold Start Technology field.

As far as after-market is concerned, well I mentioned to you that as far as OES sales is concerned, we are-- we were below our expectations because manufacturers start there already. Or we are still not completely [indiscernible], so we are beyond our-- below our original expectation. We are optimistic to recover that in the course of the year, at least to a larger extent.

But there is-- that is a typical area of our business. The after-market is in one some areas dependent on the climate, and we had a rather mild winter, and that automatically is reflected in the after-market results. As far as is PTC is concerned, we have in the first quarter, we have, I think, €4m to €5m in sales ISS but that includes also the electronic sensor unit and the glow-plugs - more in the order of €8m to €9m. Okay?

Yes, thank you. One follow-up question. Your CapEX for the full year - I expect that in the first quarter we've already seen the extra CapEX for Eyquem?

Not only for Eyquem [indiscernible].

And is it going to remain-- And my question then, is it going to remain at this level for the full year or are you expecting it to come down for the rest of the year?

Well, our expectation is that we will have CapEX of approximately €35m to €37m. The first quarter was-- when compared to last year was rather high. It has two main reasons. One reason is Eyquem, that is right, and the other reason is that we extend our capacity in the new glow-plug line here in Ludwigsburg. And so these are the two major impacts. That is sometimes-- It's a question, one quarter to the other quarter, it could be when then, so that a question of how you accrue the whole thing.

Okay, thank you very much.

It appears there are no further question, Mr. Von Maltzan. Therefore, I'd like to turn the call back over to you for any closing remarks.

Yes, thank you very much, ladies and gentlemen for hosting our conference call. I hope maybe we could answer your questions. If you have follow-up questions, please do not hesitate and call Mr. Haas who will be available to answer your questions, and myself as well. Thank you very much, goodbye.

This is conclude today's conference all. Thank you for your participation and have a nice day.