Volvo Car AB (publ.) (VOLCARB) Earnings Call Transcript

Good morning, and a very warm welcome to the presentation of Volvo Cars third quarter financial results. I'm Ron in Communications, and as always, this morning, I'm joined by President and Chief Executive, Hakan Samuelsson; our CFO, Fredrik Hansson; and our Chief Commercial Officer, Erik Severinson. Like we do, should be quite familiar to you by now. Hakan, Erik and Fredrik will walk up and take us through our performance during the third quarter and the road ahead. Thereafter, we will open it up for a question and answer round. How you participate. I'll come back on the other side. But for now, I give the word to you, Hakan.

So good morning, and welcome to this quarterly report. And we start -- this was, of course, a very negative result of quarter 3. And I think conclusion is the business environment have turned worse than we anticipate. I think that is really a conclusion you could draw now. And compared with what we saw 12 or maybe 6 months ago, it has gone faster and that's affected us more. And in China, the market is rapidly declining and especially for the Western premium manufacturers. So our revenues are more or less down with 50%, and that's, of course, the major reason for our results in the quarter. United State is also, of course, very challenging. We were strong in electrified cars, and then the incentive systems was discontinued, and that is, of course, has influenced our possibility to sell our plug-in hybrids. And the profitability was also impacted by the tariffs. And that's, of course, serious for us, which import basically all our cars and have a very limited production locally. And here is also not to expect any tailwind in the near term, very low consumer sentiment. So Europe is now where we still contribute to profitability. It's a relative stable market, and we also see something very positive, is that the electrification is now really speeding up, and we are in the lead here in the premium segment. And we already have a BEV share of 45% in the quarter, and that is class leading. So that's very positive for us. And we, of course, also will bring out more electric cars on the market, and we see also a strong order intake for our BEV cars in Europe. So Europe is now holding the business up for us. And in this critical situation, what should you do? And I think the only thing we can do is to do things which you can control and influence. And that means we need to look at the cost side again. So we will be reinforcing our turnaround plan, which we are successfully implementing and we need additional cost actions of over SEK 5 billion on the direct and indirect cost side. And this will also mean a [ 2,500 ] reduction of number of jobs. And this we will do in the overhead side. So I mean, we have 2 things really driving this. One is the empowering of our regions, which means that we, of course, need to do, in the same time, a reduction and have a more corporate -- leaner corporate structure here in Sweden. And of course, also on the R&D side, we are now through very intense development projects with development of the SPA3 platform, the Hug core central compute that we will not do in the future. So that means also we need to reduce to come down to affordable levels here on the corporate overhead. On the variable cost, we think there is further possibilities to bring down the bomb cost of our car by utilizing Geely synergies. We can use more common hardware components in our car with our Chinese colleagues. So that will also help us as part of the program, the SEK 5 billion, and we also need to concentrate our production. We have had 7 plants globally. I think that's too much for us. So we really need 5 plants, 2 in Europe, 1 in U.S., 2 in China, which will be 100% Volvo dedicated. And then we have the plant in Gent and Chengdu, where we're looking into solutions where we could use those plants together with Geely and other brands. And this means a reduction of 2,500 people, as I said, we will take out temporary jobs as what we call consultants. We really need to use natural attrition and not backfill those positions as we might normally do, really be creative, look into job rotations and really get a reduction from the natural attrition. And we will also have a directed exit packages to some people. We believe we can reach this 2,500 around mid next year. And -- but we can today also not exclude that we might need to take additional actions here in February. If this does not work according to the plan, we are now saying, but I'm relatively hopeful that it should work with these measures I just said. And of course, we will also have to adapt our blue collar workforce to the current volumes. And that's, of course, maybe basically more in China than in Europe. But of course, we always do that. And all of this -- the package is to lower our breakeven volumes and to improve cash flows. And in this situation, I think it's also important to believe there will be no short-term tailwind from the market, we don't believe that. So the improvement of the company in the midterm, near term has to come from this cost package and improvements internally. But of course, the company will never be successful long term only with cost cutting. So we need also a future-oriented strategy, which is really how we will make the company successful long term. And that was something that we presented some months ago, and I think we now all see that it's really good that we have this now, so what we not only have to talk about cost cutting. Now it is to wait for this strategy really to take effect and then give contribution to better performance. And the strategy is really a regional strategy. We need to have regional products. Global products won't work in China anymore, and we need to localize more products to U.S., and we need absolutely complete all electric product offering for Europe. So one-size-fit-all will not work in the future. We need much more regional approach. And the second part of the strategy is mainly grow through electrification will help us grow. And that is, of course, obvious when you see already today, we are leaders, 4% to 5% of the cars are all electric already today in Europe. And the total market is now really going electric, going in our way, I would say. So we will also have now our second generation [indiscernible] that will start this year, and then we will also have a longer range plug-in hybrid, fulfilling all the requirements on the market that will help us. We will localize to Charleston, the very first car now in -- already in the beginning of next year. And in China, we will have 2 new China-tailored cars. I will say absolutely fully competitive cars for China, including Chinese software Chinese ADAS solutions and of course, a cost level that is also fully competitive on the market. And then in Europe and globally, we will also have the next BEV on this SPA3 platform, which, of course, helping us to lower our production and product cost, and the first deliveries will happen here after summer next year. So keep our strategy on track in parallel is very important as we do the short-term cost cutting. So next chart, I see is -- for you, Erik.

It is. Thank you. Hello, everyone, and let me talk through a little bit on what we're doing then also on the commercial side. And as Hakan talked about, it is a very difficult market out there. But I start in China, total market is down around 20%. Premium Western market is down more than that, and so are we. So the focus for us in China now is to stabilize and rebuild the competitiveness at the level we are right now. That means reducing inventory, commercial costs and adapting to a lower demand. It's also -- we're working very actively in China now to improve profitability for our retailers because they're also suffering as we are doing and also trying to find that balance at a lower volume is important in China right now to protect your margins and not get drawn into 2 aggressive price wars. The strategy in China, as Hakan talked about, is to localize with a local product offer. And we have 1 product, which is the XC70, which is already built on that strategy. And we're seeing market share wise that is performing very well in its segment, plug-in hybrid for premiums. And we are now seeing how we can expand that product into specific cities, especially with the new variant, which is the front-wheel drive variant, which is important to address a bigger part of the market in the lower price segment. But also adding 2 new cars as the first part now of the strategy to come, and this will be hugely important on how we win in China over time. So right now, China is about stabilization. It's about improving the retailer network, and preparing for the new cars coming where we are capitalizing on our strategy. Now U.S., we saw positive trends in U.S. in Q2 in terms of volume. U.S. has proven to be a difficult market to find profitability on. The consumer sentiment in U.S. right now is at a 50-year low, which impacts, of course, the car business as well. And on top of that, you have tariffs. On top of that, you also have changes in regulations and electrification. We are seeing now that we are -- we will need to focus our strategy in U.S. around profitability rather than volume and growth. So we're targeting now specific regions with updated portfolio, which is very important for U.S., our plug-in hybrids and our XC90 and XC60-mile hybrids. New technology, new phase on the XC60, which will be very important. We're also changing the way we are steering U.S., segmenting it into 4 very independent and mandated regions closer to the local markets and running a focused strategy within those regions. For example, a boost plan around California, which is a part of U.S., which is actually quite highly electrified and fits very well to our electrification strategy. optimizing our sales channels, of course, part of protecting our margins. That's very important. We are hit by tariffs, so we need to be very selective where we compete and compete only where we have a healthy underlying business. And then we're localizing early next year, the XC60, which will be very important because there is the big seller in U.S. right now, and then we're getting inside the tariff barrier of viewers. Now, as we talked about before, Europe is right now holding the fort when it comes to profitability of the company. And Europe is doing what we want Europe to do, if you put it that way. It's electrifying. And for us, it's very much now in Europe, how do we capitalize on that electrification momentum. And it's not only about BEVs. We're also adding long-range plug-in hybrids with emissions well below 50 grams, which is very important in certain markets with certain taxation rules where electrification are slower. We're expanding our BEV lineup early next year or deliveries after summer with a new car based on [indiscernible] and we're then also, of course, building on the EX60. And let me talk a bit about the EX60. Now the EX60 is a great success in the market. We have now -- we're not even selling it in all markets in Europe yet. But in the markets we're selling it, we have achieved over 50,000 orders. It is a fantastic car, which is appreciated by our customers and our retailers already now. It's also a car with a lot of innovations. In today's industry, our way to compete is to have a better product. And those innovations are, to some extent, difficult for us to start the production as we want. If I take the example of the battery in the car. It's a unique battery concept, gives the car unique capabilities in terms of weight, costs, drivability, silence in the cabin, but that process is slightly more difficult for us to start the production ramp-up. We now roughly have around 5,000 cars, which are either at the retailers or customers, or on their way to our customers. We're seeing improvements every week in the battery plant, and we are learning how to produce these great cars. But most importantly, we're seeing great reception of those cars at the retailers and our customers. So we're very confident about the product. It takes longer time for us to wrap it up because it has innovations, which makes the car great. And that is something we're working very focused on right now. How do we get this car out at pace to our customers. With that, Fredrik, I'll hand over to you.

Thanks, Erik. So let's go into our financials. In Q3, I think it's easy to see that this was a very challenging quarter, both operationally, but also from external events. It's also important to note that when we compare it to last Q3, there was also a record high. But retail sales were down 11%. Wholesale was actually down even more, and that's largely due to China and us trying to help dealers manage inventory, not pushing wholesale revenue, further down 23%. So we end up with a core result, if you will, at minus SEK 3.7 billion. The full group result if we include Davis & Associates and items affecting comparability was at a full SEK 5.6 billion loss. And there's really 2 big drags on a group level. Firstly, it's a SEK 900 million accounting effect from our share of Polestar's Q2 losses that we take in. And secondly, it's a SEK 1.1 billion write-down linked to CAFIA emission credits. And here, CAFIA credits in the U.S. is something where the regulation has recently changed, and there was a regulation change enacted late September. This includes a retroactive change basically reducing CO2 emission requirements all the way back to model year '22, which reduces the need for credits for all OEMs. We have already contracted to sell our surplus credits. We have very sustainable cars. But given the lower need with our counterparties, we cannot fully defend the value of this. So that hits us in the accounting results. Cash flow is also negative in part due to seasonality, production is closed 4 weeks over summer, and we had very high production before summer, which we now have paid off. And of course, the underlying result is contributing to the cash flow. Going into some of the details and starting with revenue. So as you can see, volumes is, of course, severely taking down revenue with SEK 10.7 billion. Sales mix and pricing, SEK 3.5 billion. And then we have a very large other category, and this is a year-on-year work. So to keep in mind there is that last year, we had large positives. We had high used car sales. We had a big one-off sale in terms of licenses. And this year, we instead have negative. So here, especially the CAFIA write-down impacts revenue. So net it becomes a big year-on-year swing. If we then turn to EBIT development and focus, excluding JVs and items affecting comparability, we had a very strong and tough comparison quarter last year with SEK 5.8 billion in EBIT. That was also elevated by positive one-off last year. This year, it is the opposite. It's negative with a loss of SEK 3.7 billion. Volumes, of course, had a negative impact, SEK 1.9 billion, reflecting especially lower sales in China, which had a drastic decrease. Sales mix and pricing is hitting us SEK 2.5 billion primarily driven by less favorable mix and continued price pressure, especially in China, but also U.S. Variable costs negative, which is a new, and this is due to the known raw material increases that are now coming in. So we're seeing raw material cost increases more than offsetting the cost reductions we are achieving. Indirect spend is still contributing positively. Last year, we had -- we're well on the way with our cost program. And we see that we have further progressed here with the SEK 1.9 billion contribution, but it's not enough to offset the headwinds have lower capitalization. We have higher D&A combined impact of SEK 1.1 billion and then FX is hitting us negatively SEK 1.2 billion, driven largely by a stronger CNY. Finally, we have a very big other category of SEK 4 billion. And this is, again, a big swing from a year-on-year perspective. So last year, this was very positive, including large license fee profits and this year instead negative, in part driven by accounting effects on our lithium hedges, where lithium has moved quite a lot, which is hitting down on the number. So all in all, minus SEK 3.7 billion, or 5.6%. And maybe putting this a bit in perspective, if we compare to the second quarter we are really seeing a sort of sequential deterioration in volumes and margins in China. We see the raw material increases and then this adverse effect on FX. So it puts a lot of pressure on our profitability. And despite the cost reductions we're doing, we are very far from where we want to be profit-wise, of course. Turning to cash flow and liquidity. So we had a weak cash flow performance. Worth noting though underlying operations is still cash contributing despite quite heavy accounting EBIT losses. So EBITDA is positive. Investments come in at a relatively low level of SEK 5 billion. Then we have Other items, tax payments, et cetera, of minus 4 and the net working capital of minus 1, so largely flat. We are reducing inventories, but we're also paying off a big production we had just before summer. So in total, free cash flow of minus 8.9 million. Despite that liquidity is very, very solid, SEK 32 billion in cash and SEK 55 billion total liquidity. But we need to improve. And I think to improve cash flow, we are working to both improve margins and lower the breakeven point. And as Hakan mentioned, part of this is reinforcing our ongoing turnaround plan with an additional SEK 5 billion. And we really do this by both finding structural efficiencies and further automations in reducing SG&A by lowering R&D spend, we have now set the technology base for the future in the Western world with SPA3 and Hugen core. That means we can take down investment levels. In China, it's really about weathering the storm. We see that the global products need to become regional. That is our strategy, and we have the right direction and the leverage of Geely in that. But awaiting those products, we need to really focus on cost efficiency. The good news is mid next year, 2 of the 6 products announced will come. We're also working harder to get more commonalities on individual parts together with Geely. So these actions we talked about, they will be implemented before summer. That is the ambition. It means reducing 2,500 jobs. And that means at suppliers and at Volvo Cars. So this is both what services, consultants and for the Volvo employees, we expect to do this from natural attrition and voluntary exits. The financial benefit of the SEK 5 billion we measure on the full year, and we will incur a restructuring cost of about SEK 600 million that will be recognized in Q4 due to this. If we then look ahead, we see that these external challenges are likely to continue as Hakan said. The short-term volumes will be severely challenged. The very tough market environment remains, and we see a China where we continue to see weakness or even further deterioration. We've talked about the EX60 hugely in demand car, very profitable car the financial contribution of that will, of course, be delayed as we are not ramping up according to fully the plan we had before. U.S. recovery is also coming in slower than expected. For cash flow and in the very near term, that means we will have support from normal seasonality if you look at the fourth quarter, but it's also, of course, impacted by the volume challenge we see. Restructuring costs are coming in the financials, and we have quite low visibility. But I think the good thing is, if there is a good thing, the headwinds we're seeing now from tariffs from regionalized products, providing tough competition, those are exactly the points we are addressing with the strategy we've set. And as Erik and Hakan alluded to, we have some of the stepping stone on this strategy coming online mid next year. which should provide a contribution into the second half. So with that, Hakan, do you want to summarize?

Yes. To conclude, the business environment has turned much tougher than expected and planned. I think that has to be 1 conclusion. And then, of course, what do you do in a situation like that, you need to do what you can influence. You cannot complain about the external environment doesn't help us, and also very important because hoping for a really short-term improvement from outside, I think it's also not realistic. So short-term performance improvement must come from our turnaround plan, which we can steer. And that is we need to lower our breakeven volumes, and we need to secure positive cash flow as fast as possible. That is really what's the purpose of this action package. But I think it's also very important to remember that will not make our company successful. So now we really need a long-term answer. How will we meet the challenges our industry is now facing. So deglobalization, the climate change and the hyper competition from the Chinese, what is our answer? And I think we're very good now to have a very clear and solid answer to those challenges. We will have a regional structure, and we will grow with electrification. And we will, of course, utilize synergies to bring down our cost. Stay on course with that strategy is also very important to do now. And I think I'm very glad to see that we are delivering on that also in the short term. First to regionalized car already next year, next car on this SPA3 platform also next year. And all of this, of course, should be very dangerous to do if we could not do it at the same time as we keep investments on an affordable level, so these new cars will not jeopardize our cash flow. They will be done in a smart way, utilizing synergies, utilizing investments already done. So we will also secure here where we are down now on a CapEx investment level that is affordable, and that is around 30% down compared to 2024 when I think it was very high in the midst of this investment phase. So to conclude, we are working hard to get performance from our turnaround program and we are securing a long-term success with the company, with our strategy. So with that, I think we are ready to go into questions and answers, and that's -- Ron, you will lead us.

Yes. Thank you very much, Hakan.

So let me just again walk through how you can participate in the Q&A round. So either you simply use the phone lines. [Operator Instructions] But let's get started then. Let's take the first question that's coming in via the chat. Hakan, maybe I'll turn to you for this one. Given the deep decline in China, what is Volvo Cars planning to reverse the China performance.

It's basically we will not be successful in China. I think nobody will be successful with the old recipe where you had global cars developed in Europe and sold them to a premium price. That is gone. Those times are gone. Now you need to regionalize, you need to have a low-cost hardware platform, number one. And that we have, of course, utilizing common platform with Geely, but then you also need totally adapted localized software, including ADAS tools, which is coming very fast. And that, we are doing. And if you would not do that, I think you would be -- it would not be possible to stay in China. Anybody will have a huge problem. But we have a solid strategy to maintain a strong global brand by being really regional in China, and that will happen. It will be a tough couple of years, but then we will have a totally regionalized approach with an empowered region and fully competitive cars.

Right. The next question coming in from a journalist. Could you please again explain the 2,500 jobs reduction? Will this be mostly Volvo full-time employees we are talking about? Or is it mostly consultants? Anything we can, again, clarify.

No. I think there, of course, is the easy part, it's the temporary consultant. So that is a big part, but it will also influence our own employees, and especially on corporate overhead size. I mean we need to be leaner on the corporate central side when we empower regions. And R&D, of course, very natural after this huge investments. Of course, we need to come to a more normal level. And that, we're doing. So natural attrition is another possibility and really not backfilling immediately with rehiring. So we have a hiring freeze to really trigger internal solutions. And then also last, the tool, we have our targeted voluntary packages for some people to leave. And we see now that, that should bring us this reduction to 2,500 until midyear. But I think it's too early to also exclude that we maybe need to take other actions here. In the beginning of next year, if this does not work as we now see it. I really hope we can avoid that. But we need to reach 2,500 in reduction.

Okay. All right. Clear. Next question is from Matthias Schmidt, maybe I'll turn to you for this one, Erik. Can you provide some more clarity on the X60 production ramp up? And when do you expect this to be rectified?

But as I said, it is, of course, a concept, especially around the battery, which takes more time for us to learn how to produce. We know that of course, when they are reaching the market are very well appreciated by the dealers and the retailers. I will not comment on an exact number, but I can say that we have now produced around 5,000 cars. We are constantly increasing production week by week in the batteries, and we're getting better of fixing the problems we find faster in the battery plant. So I expect it to have an impact in the short term, but over time, over the course of next year, we will get to the invested production pace.

Okay. All right. Let's get in a few callers then, who have been patiently waiting for us. So maybe I give you the first word then, Pushkar, from HSBC. So good morning, Pushkar, and please go ahead with your question.

I hope I'm audible. My first 1 is just on the profitability and the restructuring that you're putting through. It's SEK 5 billion by year end '27 sort of run rate. So that will probably -- if I look at what Q3 was SEK 4 billion of losses, it will put you just above breakeven that sort of restructuring and there's more pain to come in terms of raw material costs. So what happens in between what you can do to improve the profitability from the current levels in Q4 and in 2027? That's my first question. The second 1 is on the liquidity side. It's -- now the net cash is at just SEK 1 billion. What sort of to liquidity do you require? And how are you going to bridge that gap?

Yes. Fredrik, if you will take the first 1 on.

Yes. So I think in the near term, as stated, I mean, we see a very heavy volume challenge, right? And we are as Erik is saying, improving the executive ramp-up. But previously, we have communicated strong financial contributions coming from in Q4. We're seeing that, that is delayed. Of course, as we ramp up EX60 will support more and more. Then towards next year, I mean, we have low visibility. We know that some of the stepping stones on our very clear strategy will happen in terms of localization in the U.S. in terms of 2 new cars in China. And that will, of course, support. But it is a tough market. And we are -- with the actions we're taking today, aiming to reduce the breakeven point and not bet on the market returning. I think on cash, I mean, we have SEK 32 billion in cash on our accounts, SEK 55 billion total liquidity, and that is well above the liquidity ratios we need.

A question here now is we keep talking about weathering the storm in China. What do we mean by that?

It means really what I tried to explain. I mean in the next -- you need to have a regional developed product program to be successful with Chinese software. And until we have that out on the market, the first 2 will come out. But of the 13 cars we said we will launch 6 of them are Chinese cars to really have this full program regionally, and that is in the pipeline. Before you have that, I really don't see any realistic possibility to improve in China. So that is -- you need to work on the cost side and bring down and see what you can do. Can you do more together with Geely and so on? And then the long-term success will come from our strategy, which I think is really important because if you don't have this strong credible strategy, I think you would have a very weak future perspective in China. And I think it's relatively in the business. I think we have 1 of the absolute best answer to the challenges you -- everybody is seeing now in China.

Another question. With the SEK 3.7 billion adjusted operating loss and another 2,500 job reduction, how much of this crisis is caused by Volvo's own decisions versus how much is caused by market conditions. Could we have done something differently, I guess, is apart from the market perspective.

You could, of course, I think it would be not correct to blame external factors only. But of course, you could say we should maybe have realized earlier that we need to be more regional in China. Maybe it should also realized earlier that tariffs might come, so we need to localize more in the U.S. That's a weakness right now, which we are addressing. And of course, I think it's, of course -- or decisions that is why we are where we are. But I mean, the big external thing. I think everybody underestimated the impact from the Chinese car industry expanding very rapidly, taking over the Chinese market and, of course, now ready to expand further into the world that is new.

Let's take a few more callers then, and this is Jose Asumendi from JPMorgan. Go ahead.

Thank you, Ron. Jose from JPMorgan. Hakan, just a couple of questions. And obviously, you came back into the group from my perspective, to stabilize earnings momentum and the balance sheet, which I have a lot of respect for that. That shows the strong trade record you have. Having said this, you're facing obviously more difficulties in the market. I wanted to understand as you think about 2027, before you hand over the company to the next CEO, and obviously, the great reinforcement you're bringing on the Board as well. From here, how much do you see need to take fixed cost down to end of '26? What is the fixed cost reduction big picture you're thinking about on fixed costs, on unit sales and on CapEx, '27 versus '26 to stabilize the cash flow momentum? And then second, on the EX60. So I don't want to do anything to like what is to change and so on. But -- and I take the point of very, I think, honest assessment that you are learning to produce the vehicle. But we could put [indiscernible] that this have been done before, right? So the changes in technology just on the mega casting software, et cetera, et cetera, have complicated probably the final assembly of the car. We're a little bit lesser learned for the future car generations? Because we've seen this with EX90, we've seen with EX60, and at some point, this learning curve will come through for the rest of the cars, and we'll have a more stable production schedules on the company.

No, I think you need to, of course, realize if you want to have class-leading new technology, it means a higher risk to implement and continuing the more conventional technology and in this new car. It's -- mega costing has caused us no headaches. It is really the assembly of batteries directly into the underbody of the car, which is a highly automated process, but it is not really new technology, but is, of course, putting in how many cells do we have close to 100. I mean, that cannot be done manually. It has to be done in an automated line. So it is highly complex and mechanical assembly line, which I'm quite confident we will, of course, master. It's not anything new, but it is a new assembly line, which does not exist anywhere else in the world. We will master that. We were maybe optimistic in the ramp-up, but we are improving, as Erik said. So that the learning is, I will still say not to avoid really breakthrough technology. We need to do that, but it will be -- you need -- it's a higher risk. You can take the central compute. We have had a lot of problems with introducing a central compute, but I think we are very glad now that we have that because now we are future ready to really make a software-defined car. It would be more challenging if you would have the intelligence spread in 150 boxes bought from suppliers. Now we have the means to really control software development, which is absolutely fundamental step, which is not easy, but we did it and I'm still convinced also the battery. So long answer to a good question. You cannot avoid new technology. We can always, of course, learn and master it and do it better next time. And that, I think, is learning. But once you have introduced central compute, when you introduce Zelto, then that will work in future cars as well when it comes to the cost level, or maybe Erik...

If I just can chime in, and you're absolutely right because your question was also about learnings from SPA2 and EX90 and EX60. Two very different problems, as you're saying, Hakan, the EX90 was the first step into the software-defined car. We learned a lot about that. And that also impacted the car once it was built. EX60 problem is a mechanical production problem. The cars out in the market are received in a great way and have very good quality. So we are seeing a very stable product once it's built, but it's taking a little bit longer time to build it.

That's good. And the cost levels, I think, Fredrik, you're better.

Yes. I think on cost, we're launching this SEK 5 billion program. And of course, a big part of that is indirect spend, which ties to fixed cost not going into a detailed breakdown of it. But on the highest level, you can say, in the end of '27, we're targeting a level which is roughly 25% lower than what we had in 2024. So it's quite massive steps we've taken already and continue to take as we become more efficient.