Christian Reinaudo - President and CEO Kris Hoornaert - Chief Financial Officer Stefaan Vanhooren - President Agfa Graphics

Emmanuel Carlier - ING Guy Sips - KBC Securities Stefaan Genoe - Petercam

[Starts Abruptly] question-and-answer session [Operator Instructions] I will now turn the meeting over to your host Mr. Christian Reinaudo, CEO of AGFA-Gevaert. Sir, you may begin.

Thank you, operator. Good morning, everyone. So we're going to talk about the Q2 2015 results. I would say as an introduction that this quarter confirmed the upward trends that we've seen in the first quarter in terms of sales and revenues, obviously helped by the relative weakness of euro compared to a year ago, but not only by far because what we call our growth engines have performed very well, being the inkjet, Agfa Graphics being the - what I call the Digital Radiography for healthcare and of course the HealthCare IT. So this is a source of satisfaction. The second clear good results, I think that we have achieved in this quarter was the improvement of our gross margin, which is not due to raw materials, it's clearly the results of our efficiency programs which are kicking up. And of course, we have for the first time I think in five years reached 33% mark which is a decent level. So that makes me confident that the two targets we set short term close to 10% EBITDA and sales, and medium-term top line growth to 3 billion, of course, reported by reasonable conditions. These two targets are achievable. Now if I move to the slides. Starting with the numbers of the Group on slide two and comment a little bit more on the high level view that I just gave. First of all, you see that we have been able to deliver a growth of 6%, which is minus 3 if you exclude the currency exchange rates, but the currency exchange rates to some extent it's not just the mathematical translation there, because again, the business if you compare to most of our big competitors, our top line is growing. And also the good news is that the trend is improving, because if you look at the first half of the year, which is combining - compounding of course the first quarter and the second quarter, you see that we are at minus 5, we move to minus 3 and we are plus 3 and we move to plus 6, so the trend is upwards. The second number I want to comment is the gross margin. You see that we have achieved a 33.1% in the quarter and the compounded first half of the year is 32.4. So, we are still in an improvement mode. And we will see later that this comes mainly from the Healthcare business, which is performing well in terms of achieving the gross margin improvement, while Graphics to some extent still suffers from the cost of aluminum which has been a bit higher this year than it was a year before. The SG&A level is another source of satisfaction, we have well container cost at 19.2% of sales, while in the first quarter there was a little bit of a shift, but the two groups have reacted strongly in Q4 and Q1 to some shift in terms of costs, mainly due to the increase of the currencies outside of Europe, and this is well connected. The R&D numbers are flat as we always said, we will keep the R&D constant. And the EBITDA of the quarter is above the mark of 10%. Is it a signal? I don't know, but it's a good achievement in the first half it's at 8.8% showing compared to last year 1.2 point improvement in the first half of the year. So, this is basically the numbers. What I would like to comment on these numbers is that, in fact, we will see later that our Graphics business is a good sense of the - what I call the real economy. And what we read these days about the Chinese growth and last year it was about Brazil. This is not news for us, in fact, the business of Graphics suffers and it suffers with everybody in the world. Why? Because the traditional business of Agfa, in particular, the prepress business of Graphics suffer from the fact that this emerging markets are not the growth engines, the growth power that they used to be. This is the macro explanation for the reason why the Graphics numbers are at this stage, I would say less good than the Healthcare business, which is less suffering from that. The other comment I would like to make is that, it is not a surprise if our growth engines, Inject, Healthcare IT, in particular, which are - I mean, products which are more adapted in terms of evolution to digitization and activation to the mature markets are performing strongly. While the traditional businesses which are more dedicated to the emerging markets are performing a bit less. So this is not rocket science, but it is - I think a good macro explanation of the results of the two business groups as well as the results of the Group. Below EBIT, no major surprise, we have announced this quarter that we're going to close the factory in Korea in Banwol, that explains part of the minus 8 million of restructuring as non-recurring. The other numbers I believe are well in line with the guidance we have given and we maintain, and the net results are at 25 million, it's a good result considering the restructuring of Banwol. If I move to the next slide, I'm on the slide four. The debt level is basically constant at around 100 million in the quarter two. You know that there is a little bit of seasonality in our cash flow delivery. So there is not major comments I believe to make on this front. We are still at a very good level of net financial debt and this is due to, of course, the EBITDA result, which has been strong in the quarter, but it's also due to the fact that we continue our efforts to reduce the working capital. The working capital, as I said, it's today is overall 27% of our sales, and you see that in particular on the receivables, we've been able to achieve a significant reduction of our DSOs to a level of 48 days compared to 55 a quarter before and compared to 55 a year ago. Inventories are basically flattish, and the trade payables are also to some extent largely flat. So in a nut shell, Q2 2015 for the Group an upward trend in terms of revenues, mainly due to our growth engines and mainly due to the matured market performance. The gross profit margin which has improved to 33.1%. A solid net profit of 25 million and a net debt which is stable at around EUR100 million. If I move to Graphics, on slide eight. You will see that the trend is clear now, the prepress analog business is now only 12% of the business and going down in the repartition of our sales, while the inkjet, software and services is going above the mark of 20% - 21%. So, again, good news. If we look at the long term evolution of this business group, the Inkjet has to play the role of growth engine like the Healthcare IT is playing on the healthcare side. The Digital Prepress stays at about two third of our business in Graphics. The numbers of Graphics are in terms of trends similar to the numbers of the Group, a bit below the average of the Group and we will see that healthcare is clearly above the average. The trends are that Graphics is now showing a growth including currency exchange rates of close to 3% when it was negative on the first quarter, and therefore the first half is a just a bit above zero. And excluding currency exchange rates we are minus 6.6%, but the first half is at minus 8, so it means also an improvement in terms of growth rate quarter two compared to quarter one. The problem of Graphics, I would say this quarter has mainly been the non-delivery of the improvement of the gross profit. As I said, this is largely due to - I mean largely the number of - the delta of number of its lot due to the cost of raw materials, which is not playing in favor of Graphics this year for the time being at least, so 28.1%, you see the first half is at 28.7, so we have a little improvement in the first half of the year, but this is not significantly enough. SG&A were under control, there was a shift in the first quarter but it has been corrected in the second quarter. R&D is constant in the level we are targeting, close to EUR45 million, EUR50 million a year. And the recurring EBITDA is at 5.7%, so below the one-off last year and the equivalent quarter. The first half is also slightly below but it's a lot due to the relative deterioration of the gross margin in the quarter. So that's the Graphics numbers. If I go to the main drivers behind these numbers, of course, we have been able to show including currency exchange rates and some kind of growth, which is due to the euro weakness, but we should highlight the good performance of our engine business. And the two machines which are here at the bottom of the slide are the Jeti Mira and Jeti Tauro printers which are new printers, based on the new platform that we have developed over the last three years are performing well. Well adopted by the market as well as the ink portfolio for industrial applications, which is now starting to contribute to the top line. So the Inkjet performance has to be noticed. The analog prepress business, as I said, as well as the digital prepress continue to suffer and we suffer from, of course, competitive pressure, but this competitive pressure is to some extent largely due to the fact that these businesses are mainly oriented to developing countries or unmature markets where the situation is not improving, it's an obvious statement. I think the rest was commented. A few awards in the software domain and the new machines which is well received 3.2 meter roll-to-roll printer from - in the low and medium and it's part of our portfolio Anapurna. And also some new platesetters, which are very high speed platesetters in the quarter. In Healthcare, Healthcare is obviously the group of bringing satisfaction in the second quarter, you might remember that we suffered a little bit in the Healthcare in the last two years, obviously, because of the global economic environment, but also because we had a serious problem to adapt our product portfolio in the Healthcare IT in the U.S. And I must say that finally we have a strong belief now that we have resolved the problem and the numbers clearly showing that. So if I move to the slide 12, where is the pie chart, we see that the Classic Radiology is lower number in the percentage of our business, while the Hardcopy resist pretty well, which is obviously good news from the Group, considering the cash flow that we've derived from this business group to fuel the growth and the investment in the IT domain. Our CR/Modality business is, as I said, benefiting from the top line growth due to our DR portfolio, while the CR is more and more moving to very low-end products in the emerging markets. And the Healthcare IT at 41% is now clearly playing, it's one of growth engine. So, the picture which is, I think, well in line with our overall strategy for Healthcare. Numbers on slide 13, as I said also very similar to the trend of the Group, but above the average. The first half shows basically flat growth of revenues compared to last year, if you exclude currency exchange rates, but a good growth of 2.4% in the second quarter. And including currency exchange, we have almost 12% growth on the quarter and 8% on the first half. The gross profit is close now in the quarter of 40%, above 38% in the first half, so back to good numbers. SG&A well under control at 19.4%, when the first quarter was also showing here that's a kind of shift compared to the target, which is to limit our SG&A below the 20% mark, and of course a strong recurring EBITDA because of all these numbers at 15.5% in the quarter and 12% in the first half. So strong numbers from the Healthcare side. On slide 14, the main drivers behind that, of course, currency effect again but solid double-digit growth, which is largely due to the good behavior of our Direct Radiography business, which continue to grow and the Hardcopy business, which has been resisting pretty well. The IT segment posted a considerable revenue growth. Imaging IT Solutions in particular for the U.S. are now well adapted to the market. And our - all these product portfolio is delivering as expected. The gross margins are improving, clearly, here we benefit from a little bit favorable raw material effect, because silver is going in the good direction, but silver as you know is less and less critical from Healthcare business, as considering the size of the film business in particular the screen film. But the profit is also coming from the clear improvement of our operations in the Healthcare side. Business highlights, as I said, Imaging contracts in the U.S., but we also have Imaging IT solutions which are performing reasonably well globally and well in Russia, Austria, UK. I mean, a lot of this is in the EMEA region. And the order intake for office in DACH, that is Germany, Austria, Switzerland is a good signal also in the second quarter. So, a set of good news, I would say coming from Healthcare. On specialty, top line is rather flat minus 2% excluding currency exchange rate, it is minus 5 on this semester, minus 6% excluding currency exchange rates it was - and it is minus 9. So the trend is the same. The gross profit - solid gross profit, but these numbers are influenced by different things, so we should not concentrate too much on the percentage of these numbers, but overall business which is improving in terms of operation here also. The SG&A, be careful with the roundings, because in fact the SG&A are not increasing. In specialty, the population for selling and the cost of administrating this business group are reasonably constant and under control. R&D, we are still in line with what we keep saying that we spend somewhere between EUR8 million and EUR10 million a year to develop the new activities and the recurring EBITDA at 7.3 million, it's a good number for the quarter, 10 million for the first half, which compares pretty well to the EBITDA of 5 million of last year after six months. Behind these numbers, the growth of Orgacon, which is the electronic products, the security domain and the PCB are performing well, but they have almost counterbalanced the decline of the most additional frames pretty well what it means. That basically it. So in a nut shell, solid performance of the Group in terms of revenue growth, but we should not hide ourselves behind, the reality, the weakness of euro helps, but it's not only the euro, it's also a good performance in the growth engines, which is performing, which is helping a lot. A strong performance in terms of gross margin above 33% and of course a good containment of all the other cost which makes an EBITDA above 10% in the quarter. I'm ready to answer questions from the room first. Q - Emmanuel Carlier: Emmanuel Carlier, ING. Two questions, one on China, one on the guidance on China. So you elaborate it a little bit on Graphics, could you maybe give a little bit more explanation also on the Healthcare and also on how you see the trends, Q2 versus Q1. Do you see an accelerated slowdown or more or less the same trend as the last couple of quarters? And then on the guidance, you guide for EBITDA margin around 10% or close to 10%. First half it's at 8.8%. How do you expect to get there? Healthcare, we have seen already massive improvements, I guess it should rather come from Graphics and - yeah, if that's the case, from where should it come? Should it come from improving top line, I guess it does not really include any tailwinds from lower raw material prices. So is it SG&A? Is it efficiency gains on the gross profit margin or improving top line? Thank you.

Okay. In China, of course, China it's - in the news in the last two weeks because of the devaluation of the Yuan and because of the stock exchange performance in Shanghai, in particular, but I would say the real economy is not changing. The real economy is not changing in two weeks, I mean the trends are still the same. That means where are the trends? The trends are that the Chinese players in Graphics are pretty aggressive. In China, we contain them outside of China with our patents, but in China it's their turf. The market in China for Graphics is growing. The competition is pretty tough on the pricing. But there is nothing new, I would say in terms of trend. Stefaan, contradict me if you have different opinion. And for Healthcare, you know that China for us is mainly a film territory, a hardcopy film territory. And we see no major changes in the trend. So, I would say the storm in the glass of water that we see in the last two weeks is not significant in terms of business. I've been saying that for already one year now, and almost a good year that we see clearly a deterioration of the growth rates in Latin America, in Russia, in China, we see improvement of performance in India, in particular, because the new government I think is doing the right things. And we see Middle East, there are kind of devastated situation in terms of geopolitical issues and nothing is new. So for us the - what we observed that suddenly we say the growth in China is 7%, when compared to 10 or maybe 5 because the numbers are still - okay, we know that it's what we see every day. So there is nothing more to comment I would say on the business, business wise. The second question was the evolution of the EBITDA towards 10%, so I'm still cautious, close to 10% is not 10%, but close to 10% means normally that we should be in the vicinity of this number. If you look at the numbers of Agfa, additionally, we have slightly better EBITDA in the second half of the year compared to the first half, in particular because of our Q4. Our Q4 is highly influenced by a certain number of habits of our customers to close their budget to order and to deliver by the end of the year. So, I would say, I'm expecting the same kind of things to happen. So if you look at the natural evolution of the EBITDA seasonally along the year, you see that we are improving if you compare every quarter to the previous one. We improve the quarter two of last year was not a 10%, but that makes me reasonably considered by extrapolation of the order intake and the business as we see it developing that we should get at the end of the year somewhere close to 10%. But of course, all that is depending on the economic situation which has to - which is very fragile as we all know, you never know what could happen, every day there are events which are surprising and we will see but if things stays as they are, that means euro which is today is fluctuating between 1.07 and 1.15, what we have seen in the first half of the year. If we have the economy which is performing as we expect that means continue recovery of growth in Western Europe and the U.S. performing decently well and the Chinese crisis not spreading massively in the rest of the world, we should be close to what we said. That is basically what I mean.

Guy Sips, KBC Securities. I have three questions. First one is, I'll start by saying that the gross margin was not impacted by the raw mats, I think that the raw mats were even influencing the margin negatively. Can you quantify that a little bit? I think I was using EUR3 million positive for silver and 6 million negative for aluminum. Can you give some color on that? And also you stated that the second quarter is always impacted by cash flow seasonality, can you give some color on that as well, because it's not what I saw last year and the year before. If you go back to 2012 to see a shift in second quarter - free cash flow in the second quarter. And the third is not - you're stating that in Graphics they are not delivering in gross profits. You hinted to the global economy, but are there actions taken in that field as well? Thank you.

Okay. Raw materials, I think you have enough. And I do every quarter the same as you should do and your numbers are in the ballpark of what you should all have, silver is basically $3 or $2.5 or $3 less than it was equivalent quarter. We have three to four month difference, so you can measure that. And aluminum, you also know that it is somewhere between six or nine months of the difference, so [indiscernible] and I, we do the same number of calculation and you should have the right numbers. And basically you understand that it is slightly negative overall. Cash flow, I'm not going to give any prediction of cash flow but -

Can I answer?

Yeah. If you want.

For the cash flow generation, the working capital is always improving at the year end, because our stocks naturally are going down for a number of reasons. So, basically working capital generation in the second half of the year is a normal trend, of course, if there are big variations in silver prices - of aluminum, that is something different, but there is a normal pattern.

Restrictively the cash flow of the second half is helped by the stronger EBITDA of the first quarter and by the reduction of working capital in the end of the year. So, again, normally that should happen the same way. But of course, we have done so much efforts, we have put so much pressure on this company in terms of cash flow generation in the last five years, that sometimes you don't see the normal seasonality, because you have efforts which are bringing more to certain time or the silver price or the aluminum price have been varying also but, overall, you can expect the same kind of pattern. And the gross margin of Agfa Graphics, I would say what we say for the Group, it's also applied to Graphics that means Graphics has to work very strongly on - Graphics has eight factories in the world. So they have to make sure this factory efficiency is at the right level. If there is problem, pressure on the volumes to fill up this factory, they have to react that explain, by the way, why we closed, we decided to close the Banwol factory, which was not a big one, but which is a bit remote compared to the core of manufacturing activities. So, Banwol will be closed in this year. Graphics has to put under pressure their suppliers, because the procurement is also a significant part of the gross margin. So the trend of on aluminum these days is good and that of course there will be a delay in this kind of improvement. And the trend is silver is good also, so that's raw materials, but the rest of the procurement has also to be under pressure and we do it every day. The service business of Graphics suffers, of course, when it comes to prepress, because the overall prepress is under pressure, but then there is Inkjet, inkjet is about selling machines and solutions. So we also - when the installed base is growing, we have to harvest the fruit on this growth of the Inkjet business and software is also an element of improvement of the gross margin. And in the end if the market is not solid enough we need to adapt our product portfolio and to adapt our activity. So I would say that the pressure on Graphics is probably a little bit higher than the rest of the group these days, because Graphics is under pressure by the market, but the same apply and the gross margin should not go down. So we need to find solutions to improve the picture here also.

Yes. Thank you. Stefaan Genoe from Petercam. On the Graphics follow-up. I would say, quarter-after-quarter when we read the press release we see the statement, business continue to be difficult due to competitive pressure in computer-to-plates. Could you elaborate a bit on how these capacities in this business, I would say not only in emerging markets, but for example, in Europe, U.S. and then how is price pressure and competitive environment evolving? And second in Healthcare, also for some quarters now we see that Direct Radiography is doing very well. How important is it becoming in terms of profitability. And could you elaborate a bit on profitability in Hardcopy, it looks like Hardcopy continues to be major cash generator, profit generator in Healthcare, although it's perhaps not the real sales driver.

Pressure on Graphics, I think I explained already significant amounts of things. The prepress business is highly sensitive to the evolution of the economy, because our customers are printing flyers, they are printing newspapers and the newspapers thickness depends on how many information they have to put, it depends on the advertisement, which is in these kind of things, and it's about printing books and magazines. So this prepress business is historically - historical trend to the emerging markets. It's declining in volume clearly in the mature markets, but it is normally supposed to continue to grow for sometime in the emerging markets. But this is normally also supported by some factors which is - which are, I would say sociologic factors like teenagers being more educated and reading more things like magazines and colorful magazines, these kind of stuff, but it is also driven by the growth in the economy. And what we see today is obviously that this growth rates which used to be a 7%, 10% for China, 5% in Brazil, now probably five points below that. So, it's not a surprise. The second thing, which is obvious when it comes to China and the Graphics business, that the Chinese market is significantly important. And in the Chinese market, it's not a secret, you have the Chinese players which are there. So, the world is split in three, when it comes to outside of China between Fuji, Kodak and Agfa, but when you come to China you split with more. So, that's obviously an element of the pressure. And the competitive price pressure, it's also linked to the fact that when you have a global volume which is shrinking, the players are also fighting to maintain their positions in there. And our customers being also under pressure, this is the whole game, which is continuing the pressure. So is it going to stop? I see no reason why it should stop as it is. Is it going to deteriorate further? Honestly, I don't believe it will deteriorate further in terms of price pressure or whatever. But the only way for us to sustain that is to resist on the quality of our product, innovation to make sure that we have the best place and the best offer in total. We have a strong argument in our hands, which is our workflow software. So it's a good thing. And we need to fight. On the DR hardcopy, I would not split too much details, but, yes, the DR is performing well, in terms of growth, DR is performing well. But you know that we come from zero, six years ago, so it's obviously a growth rate, which is impressive, but now in terms of numbers, it becomes significant. You see the CR, DR and I think you can make your own model to understand the way the 20% of the business, which is in this CR, DR is evolving in this domain. But in terms of profitability, DR is still at an investment, as you may see through the press releases that we deliver every quarter. We have new equipment which are coming to the market, so we still spend a significant amount of research and development. So I would say DR is not yet business unit, which is very profitable to say the least, but it will come. Hardcopy, nothing new, I mean it's a business, which is globally slightly declining. We performed well, of course, the fact that we manufacture Hardcopy here in Europe which cost, which are European cost in euro. It is currently helping us when it was not helping us a few - two years ago. And when you see the announcement and the results of the people, which are involved in this domain, you can detect that we perform better than everyone. Well, I'm not shy of saying that a significant part of the cash flow of this company is coming from a Hardcopy, this is the rule of the game of Agfa. We have businesses which are growing over time, structurally to disappear. But for the time being there are the cash cows and we extract the cash from these businesses to fuel the growth of the rest. So the question is to make sure that the rest is going to be successful in growing, which we show in this quarter clearly, but I'm not shy of saying that there is a good cash flow coming for the Hardcopy film. This is the model of Healthcare.

Perhaps also on Graphics, some inkjet printing. Could you update us on - of course, it's still a large part equipment business. But what's - how the relative importance inkjet sales and profitability of the unit?

The sales are growing, you can deduct that from the pie chart. The profitability of inkjet, you know that we have been tough in getting to this breakeven point in 2013. Since then, the business has been slightly profitable and the rule of the game here is that we need to invest in technology to make sure that in this market which is going to be over time consolidated in the hands of three or four players, we are one of these three or four players. So, it means that we have spent three years to develop a platform, which is more efficient on this platform now we deliver machines, the Tauro and the Mira are two examples. We continue to fit with the needs of our customers in terms of facility of the machines, roll-to-roll, flatbed with applications. And - so, this to some extent cost money in terms of investment. So that's why today we put the pressure more on making sure we grab market share and we grow the top line of this business as opposed to strong profitability. The other issue, the other element of the strategy and this is what we do through the ink in particular application of the ink, sophisticated inks in the UV domain for these sort of applications is that we believe that over time we are able to broaden the scope of activity in inkjet, which is today for wide format printing on different media, which are all related to sign in this plate to some extent. There are other domains that we believe we can address overtime and we start to address them with an ink and this why I'm somewhat satisfied to see the ink business developing reasonably well. And the other domains are so-called industrial applications, it could be the textile business, it could be - so these are different domains where today we are starting to develop, reflecting a lot to make sure we don't make the mistake in the future that we have done in the past, going too fast to markets without knowing exactly the profitability we can derive from these markets. But overall the problem of inkjet today is to make sure that we continue to grow with the plan.

Yeah. And you mentioned consolidation if you look at some of the players, it's still relatively fragmented market, probably if you want to consolidate you're talking about targets for about 200 - I don't know EUR200 million, EUR300 million. Is that the kind of amount you would like to spend to consolidate the segment or do you not want to spend such an amount on one particular product within the Agfa Group?

I will not comment on this kind of numbers because the firepower of Agfa is what it is, so I will not spend EUR300 million into an acquisition, for sure not. But consolidation is more sophisticates than just doing acquisitions. Consolidation is about, first of all the market, the end market, which is consolidating, we see more and more our customers and they visit lot of them, where the big guys, which are successful in the profitability raise developing where the other ones are not. We see more and more an evolution to guide by the technology in the supply side where we are. And we see some of our competitors struggling more and more with the delivery of a good solution for inkjet, that's why we believe we can be part of that. And after that the consolidation it's - it's also a game, it's a multi-dimension games. So it's not only the wide format printing itself, it's a consolidation of which are going to be the inks, which are going to be used in the future. What are the main applications which are going to develop so, this is globally what I call the overall consolidation of a market which is fragment not only in terms of number of players, but in the vision of - to some extent the IT HealthCare is the same. You have so many applications, so many possibilities that today we are still - I would say at the beginning of an era of the roping of inkjet technology and we don't know yet what are the domains in which the inkjet will be the strong performer. That's what I call consolidation. But the main target we should not forget that, the main target of Agfa is to be one of this three big players with a significant market share in the wide format printing business where we are today. Playing with everything we have in our hands, the ink, the service, the software and the equipment.

[indiscernible]. I have a question on the new UV inks, can you disclose any customers, how big is it today? And how big is the potential for Agfa?

No. We don't disclose customers, but maybe I speak under the control of Stefaan. This UV ink is, first of all, you have UV ink different complexity. There was a lot of noise last year about our patents and innovation for the low migration ink, which is addressing a niche market of food printing, packaging, but you have UV inks in different applications. And what is important for Agfa, I think is first of all to serve well, there are customers where we deliver machines and to make sure that we have a strong connection in terms of know-how our applications which they had manufacturers on one side and delivering inks, and there are IP to potential customers, which are using our ink on their own machines. So, I would not disclose any kind of customers. But the trend in terms of evolution of the UV ink and our business in this UV ink is good. Stefaan, if you want to add anything?

No, it's our basically industrial parties that are interested in our inks, which buy the inks in pretty large volumes and for specific application as Christian said, and that is one of our core competencies that we can adjust the type of ink according to an application, which is the know-how that you have in the company. And that brings quite some potential.

Emmanuel Carlier, ING. Two additional questions, one on specialty products, is that profitability level specialty products, is profitability there sustainable? And then the second one on M&A, I think since the couple of quarters, you are looking for M&A, could you maybe disclose the reasons why you have not made any acquisition yet. Is that's mainly due to a lot of competition from private equity, too high valuation levels or anything else? Thank you.

So specialty, I think specialty delivers according to the plan. So the specialty overall high level view is very simple, is that we have a certain number films which are disappearing and we must make sure that through our innovation capabilities and IP and know-how. We develop other activities, which are more positioned under growth markets where we can do, I would say three things, one is be profitable, two is compensate for the erosion of the traditional business, and three keep in good shape the factory of Mortsel where we have talents and know-how and everything. And I would say that if I look at the past years, the specialty has been able to do that reasonably well. So the Orgacon was not existing some years ago, and it is now business, which is in the big hand, the size Agfa, we undertake every big things. But you see that it helps compensating for the erosion of the other activities. As we said here, the security business is performing also well. So you know that we have this contact with GM and the NDT that I cannot comment, because it's a contract regime. But it is also an activity which is reasonably stable I would say, so, specialty is doing their job that means they have 8 million to 10 million to spend in terms of R&D basically every year and they've managed to deliver with that an EBITDA, which is somewhere between EUR10 million, EUR15 million a year. So but they absorb a significant part of the cost of the factory if Mortsel also on the same time. So, I would say in terms of strategy for specialty there is nothing new, but there is no sign of - I mean no sign of different perspective for the future of specialty. M&A, I would not comment on M&A frankly because we have files, we look at that, I don't want to be stupid in terms of pricing of acquisitions. We have some flexibility, but when it is time then we'll announce what we do. You know where we're looking forward. Okay.

Any question from anybody? Showing there are no questions, we will close this conference call. Thank you all and I see you in three months. Bye-bye.