Natuzzi SpA (NTZ) 2017 Q4 法說會逐字稿

Good day, everyone, and welcome to the Natuzzi S.p. A. Fourth Quarter and Full Year 2017 Conference. (Operator Instructions)

Joining us on today's call from Italy are Natuzzi's Chief Executive Officer, Mr. Pasquale Natuzzi; then Mr. Nazzario Pozzi, Chief Officer of Natuzzi Division; Mr. Gianni Tucci, Chief Officer of the Softaly Division; the Chief Financial Officer, Mr. Vittorio Notarpietro; and Piero Direnzo, Investor Relations.

As a reminder, today's call is being recorded.

At this time, I would like to turn the conference over to Piero. Please go ahead.

Good morning to our listeners in the United States, and good afternoon to both of you connected from Europe. Welcome to the Natuzzi's Fourth Quarter and Full Year 2017 Conference Call. After a brief introduction, we will give room for a Q&A session. Mr. Pasquale Natuzzi, together with the top management team, will be glad to answer your questions.

Before proceeding, we would like to advise our listeners that our discussion today could contain certain statements that constitute forward-looking statements under the United States securities laws. Obviously, actual results might differ materially from those in the forward-looking statements because of risks and uncertainties that can affect our results of operations and financial condition. Please refer to our most recent 20-F filed with the SEC for a complete review of those risks. The company assumes no obligation to update or revise any forward-looking matters discussed during this call.

And now, I would like to turn the call over to the Chief Executive Officer, Mr. Natuzzi, who together with officers of the Natuzzi Division, Nazzario Pozzi, and Softaly Division, Gianni Tucci, is now in the USA to take part in the High Point Furniture Market. Please, Mr. Natuzzi?

Thank you very much, Piero. Good morning. I would like to emphasize that despite the disappointing financial results, we are encouraged by the first progresses we see from our investment in the huge transformation of our company from a pure manufacturer to a retailer company.

2017 net core sales were EUR 421.6 million, down 2.3% as compared to 2016, but with different results within our main divisions. In fact, private label experienced declining sales, while the Natuzzi branded division showed positive result, in particular, in the directly operating store.

Our directly managed retailer division, which includes Natuzzi Italia, Natuzzi Editions and Divani & Divani, continues to grow globally, and in 2017, represented 13.4% of our core business compared to 10.4% 2016. And we are continuing to expand this network, having opened 4 new stores already in 2018 with 10 more planned during the year. DOS sales in 2017 increased by 26% to EUR 53.1 million in 2017. Within such numbers, we see Natuzzi Italia in the United States growing the fastest.

Total tickets in our retailer division grew by almost 20% year-over-year. And our average ticket size increased by almost 10%, demonstrating the value of our investment in product merchandising and brands.

Most of our new stores have been opened in North America and Europe. Last month, we announced a joint venture with Jason Furniture, name is KUKA, for the aggressive expansion of our distribution in China, one of the most exciting market of our product and brand, obviously. Together with our partner, we will open significant number of stores over the next year, which we expect will accelerate our growth in the furniture market in China.

2017, our wholesale branded revenue declined its sales by 2.5%. But within the branded division, our Natuzzi Italia wholesale business grew by 8.4%.

2017, Softaly showed declining revenue primarily a result of extremely difficult retailer condition of a few of large customer in North America.

We are putting much effort in recovering this unbranded business. For this reason, we have spent the past 6 months reengineering the Softaly product and price for our Europe-based larger customer. Early indication from the recent Cologne fair have delivered the first encouraging result.

On the basis of the job done for Softaly in EMEA, Europe, Middle East and Africa, we are representing these days a completely new program at the High Point Market.

The final -- the first months of 2018, we see a similar trend in the order flow as experienced last year with a different performance across the 2 division. The group total order flow in the first 13 weeks of 2018 shows a low single-digit decrease under constant exchange rate. Within this picture, Natuzzi division that's better than Softaly and Natuzzi Editions confirmed a positive trend in sales. In December '17, we opened a store with the new generation retailer format in King of Prussia, which is the name of a department store in Philadelphia. Sales performance from this new store are well above the average of the existing store.

We saw almost the same positive sales performance in Costa Mesa, Orange County, close to Los Angeles, in the new store we opened in February 2018, hosting some of the existing store, which already have the new generation format such as the Tottenham Court Road and Finchley Road in London, we are seeing double-digit improvement in sales.

Operating results. Natuzzi operating results were disappointing and frankly embarrassing to me. And I'll ask Mr. Notarpietro Vittorio to provide you with more detailed information. But let me say 2 things. First, significant portion of those losses were the result of extraneous factors such as the labor case judgment we announced last summer. It should be noted that we continued to file the [disclaims] and they've recently won interim rulings, which we hope will bring us a benefit in the future. Second, we will continue to expand our retailer footprint in America to capitalize the investment made so far in that region to build up the retail organization. We'll focus also in United Kingdom and Italy, while increasing the business in China with the recently announced joint venture.

All the above should allow our retail and overall business to recover productivity and profitability. We're very much confident about that.

Finally, we're continuing to look hard at our expense, especially those relating to [overheads]. We will continue to take every step we can to balance our cost to capture the profitability available from our new marketing strategy.

With that, let me introduce Vittorio Notarpietro, our Chief Financial Officer, who will take you through the number. And then I will be available for any questions. Thank you.

Good morning. Thank you, Mr. Natuzzi. 2017 full year net sales were EUR 449.6 million, down 1.7% versus previous year. On the constant exchange rate, net sales would have been flat. It has been a very difficult year with disappointing results. But let's go deeper in those results.

In 2016, the company displayed a small operating loss of EUR 0.4 million. While in the full year 2017, we reported EUR 29.1 million operating losses, of which EUR 9.3 million accrued for legal proceeding risks as a consequence of the Supreme Court judgment. EUR 2 million extra cost for the reemployment of 168 workers, which now are under the subsidized program called solitary deck. EUR 2.6 million in onetime staff reduction costs, which will give at regime an annual saving of about EUR 3 million. EUR 3.4 million from foreign exchange fully recovered with the hedging activity and accounted below the operating margin. EUR 0.6 million for bad debt deriving from financial problems of some of our clients in USA and Italy. And finally, EUR 8.1 million increase in SG&A related to retail, which grew up 25%.

Reporting numbers are what they are, and we are not pleased with that, of course. But excluding all such events, we would have had EUR 3.1 million operating loss from continuing operations. As you can realize, on this pro forma basis, we are not far from breakeven, at the operating level, which the company achieved already in 2016 fiscal year. And again, represents the management goal for 2018.

Let's talk more about SG&A, which in fact, is our operating margin for a total of EUR 11 million in 2017. As you know, the company has been building its growth plan mainly on the expansion of its mono-brand in Natuzzi stores network with a specific focus on those directly operated by the group, let's say DOS. To better explore the potential deriving from the retail operations, the higher margin and the quicker cash flow associated to DOS versus franchised store, we had first of all to build, let's say, the frame, the infrastructure necessary to develop the retail business. Indeed, as you know already, during the last 18 months, we had significantly invested in specific retail marketing organization at both headquarter and regional level, which means hiring skilled people, new people with experience in the retail sector, new regional managers, investments in advertising and digital tools to enhance the customers' retail experience.

We have -- you can say we have almost completed such investments. Therefore, in executing the retail expansion, we will mainly incur in those costs that are strictly related to the opening of a new DOS. I mean, new store staff, new store managers, store utilities, store rent, et cetera, et cetera, and that's it. As the stores opened get more productive, and we estimate it takes 18 months on average for a mono-brand store to get fully productive, our retail and brand investments will be progressively better leveraged and properly returned.

We will concentrate our mono-brand expansion in specific markets where we already have a retail organization in place. This should favor the absorption of fixed SG&A cost. I remind you that the retail business is relatively new for us. Becoming a retailer has not been simple or a quick task. Nowadays, we can certainly affirm that our brand is globally recognized and associated to high-end market positioning. As said, the 2017 acceleration towards the retail expansion caused a significant increase in SG&A with a huge impact on operating profit. This phenomenon was already in the first, second and third 2017 quarters -- quarterly results with increasing SG&A due to the opening and the acquisition of directly operated stores. 7 stores in Florida, 3 stores in Mexico, plus 12 concessions within Palacio de Hierro department store, 5 stores in Italy and 1 store in Spain, calculating personnel cost, restructuring cost for the acquired stores, these costs in all other directly operated stores related expenses in the new business we cumulated EUR 8.1 million out of the EUR 11 million that is total increase in 2017 versus previous year.

But the gap versus previous year, narrowed quarter by quarter. In fact, if we see each of the 2017 quarters, we appreciate the following trends in SG&A expenses. First quarter '17 was up EUR 3.1 million versus first quarter '16. Second quarter was up EUR 4.9 million. Third quarter was up EUR 1.7 million. And finally, fourth quarter has been up EUR 1.3 million versus the same quarter in 2016.

Nazzario will certainly elaborate about that with regard to 2018 DOS results. But let me say, it's already in 2017 we had the very first positive sign. That's why we have clear ideas about the retail expansion for the foreseeable future. As for the moment, we have a specific DOS rollout plan for 2018. In fact, in the rest of this year, we plan to open 10 stores in addition to those 4 DOS already opened in the first part of this year.

Now, let's talk a little about the current year. 2018 is characterized by the strengthening of the euro versus all major currencies, including U.S. dollar and British pound, which are the currencies of our 2 most important markets. So the comparison of 2018 numbers with previous year is challenging.

Currency. The euro currency has been strong, and we do not see any reversal in such trend. For example, in the first quarter of 2018, euro cost versus U.S. dollar got stronger by 15% compared versus first quarter 2017. But if euro will continue to stay where it is today, and today is in the area of $1.22, $1.23, this gap will narrow in the next quarters. I mean, the comparison will be correspondent quarter of previous year.

In this regard, let me briefly underline our hedging policy. We had a negative impact from foreign exchange fluctuation of EUR 3.4 million on the 2017 full year operating margin, totally offset by ForEx hedging activity accounted as the income below the operating margin. You can appreciate that from our press release.

Let's come back to our plans for 2018, which focuses on different activities aimed at supporting sales, enhancing efficiency, quality and service. This year, we will continue to implement the necessary actions to support growth in sales. Nazzario and Gianni will be pleased to answer your question on this matter, but in a nut shell, the priorities for the 2 divisions can be summarized as follows: Natuzzi must capitalize the retail investments done and increase the productivity of the existing stores; secondly, do selected new openings in those geographic areas where we have already an organization in place; third, improve the execution of the brand strategy in the network of franchised stores to improve the productivity of [bad] sales chain, which is still the majority of the today's business.

Softaly must and Softaly will recover the North American business by a more aggressive and new product program we are presenting these days in High Point, North Carolina, furniture exhibition. Gianni Tucci and his team already did a great job in Europe. It starts to recover in North America.

Industrial operations in 2018, we will continue with our lean approach to get farther level of efficiency in our plants, and we have different measures to be implemented. We have been organizing our Italian operations so to reducing balances that may arise between supply chain capacity vis-à-vis the seasonality of the overflow, which is typical in our industry, reducing in this way, the issues occurred in third quarter 2017 and improve the overall efficiency. Then, our production organization will be further revised to reduce the cost of quality.

Most importantly, we have been also simplifying the Softaly collection in order to reduce complexity in our production. We reengineered most of the Softaly models according to the modular platform approach so to benefit from higher economies of scale and production efficiency. We are also revising our Softaly customer portfolio with the aim of focusing on customers having appropriate size and potential.

All the above-mentioned activities should allow the company to better leverage on the current industrial assets and get higher level of efficiency. At the same time, we continue to be focused on the management of the redundant workers at the Italian operation. As you might recall, the company fired, in October 2016, 176 workers, as deemed redundant for its production needs. But in the third quarter 2017, we got an unfavorable judgment by an Italian court according to which the company's had to reemploy 168 workers of the 176 who were initially fired. Although not pleased at all, the company has executed of course such court decision incurring an additional labor cost in the last 12 months of the last year.

In this regard, as anticipated in the press release, in December 2017, we reached an agreement with Italian institution so to extend the scope of the current solidarity agreement also to those workers who have been reemployed. This will have the company limit the impact in the profit and loss for 2018.

We are also streamlining the overhead structure of some trading subsidiaries abroad, where we transform the structure from fixed cost to variable cost.

In addition, SG&A will also benefit from a staff reduction program, for which we accrued EUR 2.6 million in 2017 that involves some of the group's trading subsidiaries in Italy and abroad. This transformation process of our group from a pure manufacturer into a retail-oriented company will continue this year. Therefore, to continue sales transformation, we'll introduce some specific managerial competencies in those positions necessary for a more effective development of the retail business going forward.

As for the Italian white collars, we will maintain a higher degree of utilization of the current solidarity agreement scheme, in Italian, solidarietà, contratto di solidarietà. This means that the employees here in Santeramo will work for less hours to allow higher savings.

2018 is a challenging year, but we stay focused on the transformation of the company. Although the overall order flow is not growing yet this year, as said by Mr. Natuzzi and in spite of unfavorable foreign exchange, we will report stable sales in Q1 -- in the first quarter 2018 versus the first quarter 2017. Why? Thanks to the acceleration of our supply chain that generated faster deliveries.

Let's know discuss about future. In order to capitalize on the brand equity, we got the recent agreement in China. Let's say more about the deal recently reached with KUKA. So their business in China is with the Natuzzi Italia and Natuzzi Editions for a total of about EUR 90 million at a retail level in 2017. The Natuzzi Group started operating in China in 2001 with just a production plant to serve the North American market. In -- only in 2011, we started opening the first directly operated store with the Natuzzi Editions. After a few years, the business became profitable. Today, the Chinese commercial operations are the best retail performance within the group.

The Natuzzi commercial subsidiary in China is named Natuzzi Trading Shanghai Ltd and was established in early 2009. This business in China has grown at a double-digit pace every year since 2009. Natuzzi Italia business in China in 2017 has been about EUR 20 million of sell-in value, entirely made with 2016 dependent partners that operate the mono-brand stores. The most important of those partners operated 20 Natuzzi Italia stores. The Natuzzi Editions Chinese business, which amounted the EUR 17.3 million in 2017 is done by 10 directly operated stores and 90 franchised stores all over the country. Thanks to our Chinese management and retail partners, Natuzzi brand has become the international best-known brand in the Chinese high-end furniture market.

In recent years, we have been contacted by several Chinese players and financial institutions. We have chosen, again, KUKA, because we share with them the vision about the future of Natuzzi brand in China because we think they can, better than others and faster than ourselves, develop the retail network and accelerate sales in that great country. In this venture, we contribute our excellent sales organization, our client portfolio and our 10 DOS Natuzzi Editions, which are profitable along with the perpetual distribution license of Natuzzi brands, of course. Natuzzi will keep the production of the licensed products, we continue to focus on product development, marketing, communication and retail concept. KUKA will lead the commercial development of the 2 brands, leveraging on their expertise in the Chinese territory with commercial partners and landlords. We think that the combination of KUKA and Natuzzi skills and assets will create a new [strong] player in the Chinese retail landscape. We'll discuss soon with KUKA about the e-commerce possibilities, which seems to be very exciting in China.

They recognize the intangible value created by the group in the Natuzzi brand and understood very well the huge potential of this venture. That's why, they will invest EUR 65 million in total in this venture, EUR 20 million will finance the business development, while EUR 45 million will go for tangible and intangible assets such as the perpetual use of the trademarks will go to the Natuzzi S.p. A., of course. They will pay a significant amount of cash flow debt, and we share an aggressive business plan for the next years. The mutual goal is to leverage on this venture to aggressively accelerate stores opening, increased volumes and reach economies of scale in both industrial and commercial organizations.

The plan for (inaudible) some hundreds of new addition stores mainly with franchised partners. Why we think that the Natuzzi Italia stores should be mainly directly operated in Tier 1 and Tier 2 cities. We are currently in the process to get KUKA shareholders and local authorities final approvals.

Nazzario, before the Q&A session, I would much appreciate you to give some highlight about direct retail trend in the first months of 2018. Thank you so much.

Thank you, Vittorio. And good morning, everybody. So as Vittorio said, I would like to give you some details about the key drivers of our growth and profitability, the direct retail, but also our franchise business.

In the first quarter of 2018, the like-for-like sales of Natuzzi Italia direct retail are up 6% against the same period the last year at constant exchange rate. And this growth has been driven by United Kingdom first, 17% up against last year at constant exchange rate, by Switzerland, 13.5% up against last year; and Italy 9% up against last year.

The total sales of all Natuzzi Italia direct stores, including the new openings, are up 16.7% against last year at constant exchange rate. Whereas the total sales of all direct stores, including all brands, the Natuzzi Editions and Divani & Divani, are up 9% against the same period the last year. And this is driven mostly by the United States, which is up 26.2% against last year at constant exchange rate.

With -- our Natuzzi Italia flagship stores are showing a continuous growth. The best performance stores, which is our flagship stores in London, Finchley Road, is up 39% against the same period the last year at constant exchange rate. The second store in London, the second flagship, Tottenham Court Road, is up 31% against last year.

Our flagship store in Milan, Via Durini, in the fashion design district is up 20% against last year. Madrid is up 8% against last year. And also Zürich is up 5% against last year. At the same time, the new Natuzzi Italia openings in the United States with the right locations in our -- and our merchandising concept are proving to be up to speed much faster than expected. In the month of March 2018, the 3 latest openings, which are Philadelphia, King of Prussia, Los Angeles, Costa Mesa and Chicago have ranked amongst the top 6 Natuzzi Italia best performance worldwide in the first month.

And why we push, or say, the growth, we are also financing our margins and profits. In the first quarter of 2018, we have seen the result of our marketing and value-driven promotional strategy, which we have implemented in 2017. And this has led to reduced discounts against the same period last year. Discounts in direct stores were 21% in 2018, in first quarter, against 25% last year. And in particular, in the United States, we have completed the turnaround of the stores that we have acquired in 2016, which went through inventory clearances last year. In the first quarter of 2018, discounts in the United States direct stores are down to 18% against 32% in the same period last year. And now, this is due to continue on a permanent basis.

Let me also comment on our franchised business with Natuzzi Italia. In the first quarter of 2018, we have seen the results of the actions that we have executed last year to translate the success of our retail business model also into the franchise business. On a year-to-date basis, the franchise business of Natuzzi Italia is up 14% against the same period last year at constant exchange rate. And such growth has been achieved in all markets; plus 21% in Asia, plus 10% in North America, plus 8% in EMEA and notably 50% -- plus 53% in the Italian market. And we've already planned the commitment from franchised partners, 4, 5 of new openings, namely in the United States, in United Kingdom and in China as Vittorio has explained to you.

I would like now to introduce my colleague, Gianni Tucci, and then, of course, I'm available for further Q&A later.

Good morning, Thank you, Nazzario. Softaly, our private label business, which is distributed through Natuzzi's worldwide network, has grown in line with our forecast for EMEA and APAC during 2017, but they suffered from adversary sale conditions in North America. The positive experience during the October 2017 market at the High Point Furniture sale as well as at the March premarket 2018 confirms our view that we have introduced the right product at the right price points to help recover our position in this very important market.

Solid business partnerships are continuing to grow with the existing accounts and bringing additional strategic partnerships already in progress with tangible results, which will certainly be confirmed by the quick addition of other targeted key accounts in the next weeks.

The past year has had the main focus to realign our organization and appoint the right people to manage all aspects of this business globally. I need to reiterate the highlights given earlier by my colleague, Vittorio. As we have reviewed our operations and markets and have developed a specific strategy to rebuild these important business. In particular, we are focused to the following actions confirming the competitive sustainability of the Softaly business, through: the rationalization of the collection; the range nearing of our dedicated industrial platform and the appropriate procedures to satisfy the key accounts needs and timings to create and deliver the deserved quality of product and service. The impact of those actions combined with efficiency of realizing our Romanian factory will enable further efficiency for Softaly in EMEA, adding new strategic accounts has already happened during the past Cologne fair 2018. We are expanding the same business approach to the Shanghai plants, serving both the North American and Asia-Pacific market, where we expect to grow double digit this year versus 2017.

We are taking similar actions focused on recapturing our position in North America. We have chosen to redesign our product, offering platform and not compete solely on price. This is in line with the Natuzzi's overall effort to return our company quickly to profitability, confirmed by encouraging results.

Thank you for your attention. And I pass now the word to Mr. Natuzzi, again.

So we're here, all together to listen to any kind of question.

(Operator Instructions) And we'll first hear from David Kanen of Kanen Wealth Management.

Can you make clear for me from the KUKA deal that you signed, what's the total amount of cash that you'll receive at closing?

Okay. This is Vittorio. They are investing EUR 65 million in total. At the end, EUR 45 million out of EUR 65 million will be paid to Natuzzi S.p. A. and EUR 20 million will stay in the JV vehicle in order to finance the development of the business.

Okay. And then in terms of the development of the business, will there -- what will be the effect on your operating expenses going forward? And will there be a transition period where initially your operating expenses will be higher and then in the future the revenues will start to flow? If you can just explain to me what will happen as it's rolled out?

Okay. Just to clarify. Today, the Natuzzi Shanghai vehicle is already profitable. So we don't have today any kind of SG&A problem over there to deleverage it. But we are losing opportunities because the timing and capability to open -- to accelerate the business plan. At the end of the deal, KUKA will control 51% of the JV, while Natuzzi will have 49%. But Natuzzi will continue to provide the JV with its plants and production. So we will have the full impact at the wholesale level 100% in the hands of Natuzzi S.p. A. and the consolidated numbers. And we will have a 49% at the equity level in the JV. So we will get 49% in our equity of the future results of the JV. They will consolidate internally line by line, we will consolidate earnings at the equity level.

Okay. So in terms of your SG&A, there really will not be any impact at all as a -- on the manufacturing level whatever revenues there are in the joint venture you'll capture that. Is that correct?

We have -- no, no, it's not. We have more than 100 fixed cost in our company. The fact that our plants both in Italy and China will be able to produce more products, this will leverage the existing fixed cost, including SG&A of the entire group.

Right. What I'm saying though is in your consolidated results, forget about the joint -- the 49% JV line on your income statement. On your income statement, will there be an increase in SG&A related to the KUKA rollout?

Dave, I understand your question. We will not consolidate the retail sales, okay, the delta sellout.

Okay. So it will benefit your income statement in that whatever sofas and furniture that you produce for the JV will show up there on the industrial level, correct?

Yes, correct. And also the general expenses -- all the other general expenses, including the fixed costs in our industrial platform, which is huge.

Okay, understood. And you made reference to some savings, in particular, I guess, the settlement of the labor agreement. It looks like you took back those employees, but there's some kind of -- there was some kind of a negotiation. Can you quantify for me, in 2018, what the savings is going to be, in particular, from labor? And then if there is any savings in any other line items within SG&A for 2018?

We mentioned an accrual of EUR 2.6 million for labor cost. And we mentioned that at regime, the full impact will be around EUR 3 million, it will be EUR 3.2 million. This year, we will have a portion of that in the region of EUR 2.7 million, EUR 2.8 million. And this is for labor costs that we've already restructured in the company. But then at the same time, we transformed some of our fixed cost in some commercial companies within the group from fixed to variable cost. And this will help the company to leverage on a smaller basis of fixed cost. I've also added that a portion of those savings will be reinvested in those markets in specific managerial positions that we know we need to be reinforced in the coming months.

(Operator Instructions) [Sophia Lee] of [Mus] Asset Management.

I just have two questions regarding the JV. First of all, could you explain the -- how the products are going to be sold with KUKA like? Are there going to be -- is this going to be a store within a store concept or is KUKA going to be selling your products on their website? And then my second question is just, could -- do you have any long-term plans for this JV in terms of number of stores or revenue and margin?

Okay, this is Natuzzi. So as already Nazzario and Vittorio explained, in China, we have 2 companies, in Shanghai -- based in Shanghai. We have Natuzzi China, which is a manufacturer company owned by the company, by Natuzzi. It's almost 1 million square foot factory, and we employee 1,200 people. That factory manufacture product for Natuzzi Editions domestically for China and even for Asia Pacific and for North America. While the factory manufacture also Softaly, for Asia Pacific and for North America. Then we have Natuzzi Trade. It's a company where we have been -- we made the joint venture with KUKA. We sold to the KUKA a 51% of the Natuzzi Trade that employ approximately 120, 130 people to manage the domestic business and even Asia Pacific business. Today, Natuzzi Trade in China, we have 10 DOS Natuzzi Editions, and we have 90 franchisee store Natuzzi Editions. And then we have 50 Natuzzi Italia store franchisee. So the DOS and given the franchised store goes together with the Natuzzi Trade management in the company. We have a plan to have in China really represents a huge opportunity. We are there since now almost 20 years. We have a very good brand, very high brand awareness. We expect to open many, many, many stores. Okay, I mean, we have a significant growth plan for China.

Okay. So...

Did I answer your question or...

Right. So I think, just to clarify, to make sure I really understood. So what you are saying is that you're still going to be producing, but you basically -- all of the management of the sales is going to KUKA. Is that correct?

No -- yes. I mean, yes. 51% goes to KUKA.

(Operator Instructions) And it appears there are no further questions at this time. I'll turn the call back over to our presenters for any additional or closing comments.

So thank you very much to the attendees of this conference call. And for any further question, we will be always available at our headquarter office. Thank you, again. Good day to everyone. Thank you.

That does conclude today's conference. Thank you all for your participation. You may now disconnect.