Ladies and gentlemen, thank you for standing by. Welcome and thank you for joining the SMA Solar Technology AG Analyst and Investor Presentation Quarterly Statement January to September 2023. Throughout today's recorded call, all participants will be in a listen-only mode. A presentation will be followed by question-and-answer session. [Operator Instructions] I would now like to turn the conference over to Barbara Gregor, CFO. Please go ahead.

Thank you very much, operator and welcome everyone. We very much appreciate that you are taking the time for this investor and analyst call on our nine months results. You can find our today's presentation on our Investor Relations website. This conference call is scheduled for 60 minutes and will be recorded. The replay will be available for seven working days. After the presentation, I will be happy to answer your questions. Our agenda for today. First, I will start with an overview with some key financial highlights. After that, I will walk you through the figures of the first nine months as well as our full-year outlook 2023. I expect my presentation to last about 30 minutes. After the presentation, I'm happy to answer your questions. I'll refer to our disclaimer on Page 2. So, let's move to Page 4, financial highlights for first nine months, 2023. Summary of key financials. After a strong first half year, we successfully have continued our growth cost in Q3 2023. Group sales in the first nine months increased by 85% to €1.3 million. Especially the segment, Large Scale and Project Solutions showed a very positive development. I will come back to the individual segments later. EBITDA also increased significantly after nine months and was more than four times higher than last year, reaching €231 million after €50 million in the first three quarters of 2022. Free cash flow was also very strong again with about €79 million and order backlog is still on a very high level of about €2 billion despite the high revenue volume. So, let's go to Page 5, sales by regions and segments. Sales by regions and sales by segments. On the left-hand side, you can see that EMEA, our biggest region again increased from 60% to 72% end of Q3 2023. 50% of the EMEA sales derived from the Home Solutions segment. Revenue share in America decreased from 26% to 22% due to the much stronger growth in the EMEA region. However, America is still the second strongest region and increased revenues by 60% compared to the first nine months of 2022. The region showed a good development, especially over the last three months. More than 80% of the America's sales are in Large Scale segments. In our APAC region, we continue to face challenging Asian competition. As such, the share of this region decreased from 16 -- from 13% to 6%. Now, let me walk you through the sales per segment on the right side of the slide. In our Home segment, revenues more than doubled from €20 million, €29 million last year to €486 million growth in the first nine months of 2023 with EMEA is the strongest region again. The segment's share of total sales was 36% compared to 32% last financial year. Reasons for this extraordinary revenue growth are the normalization of the supply chain, which helped us to further process the order backlog as well as an ongoing high demand in EMEA. C&I achieved €334 million compared to €191 million last year, a plus of 74% and already a very strong Q2. Back in the Home Segment, reasons are the normalization of the supply chain, which helped us to further process the order backlog, the order backlog. EMEA was the strongest region with 81% for this segment, too. Large Scale revenues also increased strongly by 71% from €304 million to €517 million after nine months. And with America again the strongest region, making up roughly half of the segment's sales. Especially in Q3, the project pipeline could be proceeded as planned, and we faced no considerable postponements. Now, let me provide you with more information on the nine months' profitability for the group has grown substantially and reaching €106 million of EBITDA in the third quarter alone. Thus, we achieved a group EBITDA of €231 million after the first nine months of the year compared to €50 million in the previous year. This positive development was driven by both the increase in revenue as a result of the improved material supply and the associated fixed cost digression in production as well as in continued high margin product mix. EBITDA margin came in at 17% compared to 7% in the first nine months of 2022. The Large Scale segment posted outstanding earning developments in the third quarter and significantly contributed to this improved profitability in the period under review. And as already explained in our H1 call, we did receive approximately €5 million of other income from customer cancellation fees in the first half of this year. In comparison, our EBITDA for the first nine months of 2022 included positive one-time FX of €28 million from the sale of property as well as customer cancellation fees. With €30 million, depreciation was slightly above last year's level. Gross margin for the group improved significantly to 30% after 21% last year. This improvement was preliminarily driven by strong sales growth in all three segments, positive capacity utilization effects from production and improved fixed cost coverage across all functions. Now, let's have a look at the segments in detail. Home Solutions again, the most profitable segment also in Q3. This substantially grew its EBIT to €137 million after nine months. There's €35 million in 2022. This was mainly driven by triple-digit sales growth, higher productivity, and fixed cost decision. This led to an EBIT margin of 28% compared to 15% last year. And we are very happy that both segments, C&I and Large Scale continued their dynamic sales and earnings growth also in the third quarter as expected by us. In the nine months period, C&I increased its EBIT from minus €17 million last year to positive €16 million this year, which is a positive earnings swing of €33 million. Main drivers were higher revenues and increased production utilization. EBIT margin, therefore, came in at about 5% compared to minus 9% last year. Our Large Scale segment also improved significantly after nine months, reaching €47 million compared to minus €50 million in 2022, an improvement of plus €62 million. The significant sales increase led to improved production utilization with fixed cost digression. And therefore, EBIT margin amounted to 9% compared to minus 5% in 2022. So, all three segments are clearly in black as expected. Now, I will move on to the balance sheet and the net working capital development on the next slide. Net working capital, cash and balance sheet. Our net working capital, which is shown on the top left of the page, reached €353 million, and is well above the year-end figure of €239 million. This resulted in a ratio of 21%, and this is still in the middle of the management target corridor for this year of 19% to 23%. So, let me explain how net working capital developed in the period under review. Inventories end of September 2023 were at €528 million and increased compared to year-end 2022 with €309 million, necessary in order to ensure the forecasted dynamic revenue growth. We consistently invest into higher stocks on critical components to ensure delivery capability and to better steer our supply chain. Trade receivables, which increased due to the high sales in the first nine months were offset by increase in trade payables, which is related to the higher inventories purchased. Furthermore, advanced payments received from our customers also increased significantly, driven by our strong Large Scale product pipeline. Net cash increased by 38% from €220 million at the end of last year to €303 million, driven by significantly improved profitability compared to last year. Now, let's have a look on the group's balance sheet on the right side of the page. And as I have already explained, the changes in net working capital positions, I will now focus on the significant changes in the other balance sheet position. Our non-current assets increased to €426 million, mainly reflecting investments into our product pipeline in the form of capitalized R&D project costs as well as an increase of our deferred tax assets. Shareholders' equity increased to €642 million, supported by the positive result of the first nine months. Provision increased to €187 million, mainly as a result of increased warranty provisions in the line with a higher level of sales. And other liabilities grew to €464 million, mainly from the strong uptake of advanced customer payments, which are considered in the net working capital. That concludes my explanation of the balance sheet. And let me now have a look at our summary of cash flows on the next slide. In the reporting period, SMA generated a gross cash flow of €253 million compared to €21 million the year before, driven by the strong positive results in the first nine months of this year. Given our positive gross cash flow and a solid net working capital ratio, cash flow from operating activities were 13x higher than last year, reaching €130 million end of September 2023. The group invested €51 million in net CapEx in the first nine months, which mainly composed of investments in our product portfolio, including capitalized R&D project costs and investments in fixed assets, such as the extension of our production capacity. Considering all these effects, our free cash flow for the first nine months 2023 significantly increased from minus €32 million last year to plus €79 million this year. On the next slide, I would like to show you the quarterly operating development per segment for sales and EBIT for Q3 and -- Q1 to Q3 2022 -- 2023. As you can see, we continued our growth path on both top and bottom line for all segments since Q4 2022 as expected and communicated. As you all remember, we have emphasized since the beginning of this year that we will foresee a change in our product mix over the year 2023. As such, we will expect more normalized growth rates in Home and higher revenue and earnings contribution from C&I and Large Scale over the next quarter. Business shown on the sales and EBIT chart of this slide. And we expect this trend also to continue in Q4, as communicated in our last call. This will result in a change of our product mix towards C&I and Large Scale, but both segments will continue to strengthen their margin profile driven by higher sales volumes. That brings me to the -- our order backlog and the outlook for the full year 2023. Looking at the right side of the slide, you see that order backlog end of September remains on a very high level of about €2 billion, which is the same level at the beginning of this financial year. Product order backlog is also on a high level of €1.6 billion. On the left side of the page, you can see that our Large Scale segment product order backlog remains very strong with more than €930 million, followed by C&I was about €400 million and Home Solution was €320 million. The stable order backlog for the group after nine months shows that the high order intake as of today, combined with the existing order backlog offset the high revenue volume in the period under review. Thus even with currently lower order intake compared to H1 2023, our existing order backlog is robust to cover revenues also in the upcoming months. This means for Home about six months and about seven months of C&I and Large Scale is about 40 months of revenue coverage. Let me say some words to order intake that this was intensively discussed the last couple of months. Since last year, we faced an extraordinary situation with incoming orders on the fast higher level than normal. Additionally, since Q1, we have communicated that order intake at SMR will increase during the year as we have asked our customers to place their orders for the full year 2023 already end of Q1. Now, since end of Q2, the market environment has changed and has become more challenging due to high inventory levels at distributors, which affected mainly the Home and partly the C&I segment. However, we do not see this as a structural issue. It's far more an imbalance between supply and demand after two years of heavy supply constraints when distributors were forced to build up their stocks beyond normal levels to be able to deliver. Depending on how fast the distributor stocks can be reduced. We expect new normal inventory levels and restart of order intake for Home and C&I Q2 of next year. With this, let's turn to the last page, our guidance for 2023. As communicated on October 4, we once again raised our 2023 full-year guidance for sales and EBITDA. This was the third guidance upgrade this year. The guidance increase is based on our strong Q3 performance due to a very positive revenue and earnings development, preliminarily driven by Large Scale and C&I. Against the backdrop we published an adjusted 2023 guidance with sales of €1.8 billion to €1.9 billion and EBITDA of €285 million to €325 million, which we can confirm today. Let me summarize why we believe SMA is more resilient, even in more challenging markets. SMA is the leading global specialist for photovoltaic and storage systems technology with more than 40 years of market experiences and a brand which is well-known in all relevant markets. SMA has a broadly diverse product portfolio covering three key segments; Home, C&I and Large Scale. SMA has the global footprint and the strong customer base in both the distribution business and with EPCs, enabling us to cover all business dynamics Today, SMA inverter with a total output of more than 135 gigawatts have been installed in more than 200 countries worldwide. SMA products are known for high quality, durability, and reliability. And with doubling of our manufacturing capacities beginning in 2025, we enhance our flexibility and expand our offering in the coming years. SMA is financially well-equipped with a healthy capital structure and adept free balance sheet. SMA is truly sustainable with the state-of-the-art CO2-neutral production in Germany and outstanding ESG ratings. And all this together is more important than ever to defend our value proposition, particularly in uncertain economic times as is currently the case. This is why we believe in SMA's resilience. Last but not least, a note on our upcoming events. Preliminary full-year figures for 2023 and the guidance for 2024 will be published at the end of February 2024. Our annual report will be published on March 27, 2024. And for your diary, please be informed that our next Capital Markets Day will be held in 2025. With this, I conclude my presentation and happy to take your questions.

Ladies and gentlemen, at this time, we will begin the question-and-answer session. [Operator Instructions] Our first question comes from the line of Sebastian Growe with BNP Paribas. Please go ahead.

Yes, hello. Good afternoon everyone. Thanks. The first one would be on LSPS. As you said on prior occasions that you were sold out for the next year, 2024 segment. At the same time, we have now seen the backlog declining by more than €100 million to €930 million roughly at the end of the quarter three. So, first question here is then can you help us understand what the capacity limits at LSPS is when looking into 2024? And related to this, am I right to assume that the terms are fixed, so volumes and pricing, so that any cancellations that might occur would trigger penalty payments for the customer? I could start there, please.

Thank you very much Mr. Growe for the first question. First of all, currently, we are still at a capacity utilization of around about 85% in our overall capacity possibilities. That means that we are currently working to ship a week from Monday to Friday and sometimes also adding weekend shifts where necessary and where profitable. For the Large Scale segment, we also see significant growth possibilities for next year. And therefore, we will try a little bit to renew and also to shift some capacities from the C&I and Home segment where possible. Overall, our production lines are well prepared, especially for one or the other segments, but there are possibilities also to shift a little bit in between. So, we are very confident that we will grow ourselves -- our revenues in 2024 overall, and the main portion of the growth will come out of our Large Scale segment. And coming to the question of the current order backlog in the Large Scale segment, there was a shorter dip into the Q3. But overall, we see that there are growing possibilities, and this is only a temporary dip where we have a clear order backlog, which is serving currently our overall sales expectation in Large Scale for more than 12 months. So, this gives us the confidence to increase our overall sales expectation for Large Scale also for next financial year.

In regards to the cancellation fee question. So, if the customer wanted to cancel the contract, then it would automatically then trigger penalties on behalf of the customer, right? So, there is, in a way, full protection, if you want so, from the order backlog at LSPS. That's the right way to look at it.

We have cancellations seen from customers, especially in Home and C&I over the last weeks as seen in the whole industry due to the overstocking at the distributor. And however, we were able to increase our full-year guidance. So, if there are cancellations, there are also some negotiations on penalties also depending on the different contracts. So, there is no one-to-one regulation. This is always also found negotiation. First of all, we try not to accept any cancellations, but to postpone orders then into next financial year 2024, which gives us then a more stable view on the next year. And our order backlog is still covering. In Home segment, currently six months roundabout and in C&I seven months. So, therefore, we feel confident with our sales and revenue expectations from [Indiscernible].

Okay. Thank you for this. If we can then quickly move on to the more sort of trading business, and I might call it this way. So, Home Solutions and C&I, you've made a couple of comments earlier on and then also in response to my earlier question. It's a bit the crystal ball. But nonetheless, obviously, your commentary is very similar, I think, to that from SolarEdge, which has been pointing to expect a destocking of around two to three quarters. So, my question here is simply -- and although, obviously, the distributors are unwilling to place an order as we speak. Do you have the impression by what you hear from your sales people and also key accounts that 2024 volumes overall should exceed those of 2023 and related to this year on pricing and how difficult that is to answer at this point? And how do you view the risk that even when volumes were slow that one or the other competitor might try to attract demand by lowering prices? So, any comment on this would be much appreciated.

Mr. Growe, I think this were more than 10 questions only in one question. I will try to answer as fast as I can. First of all, as we said, yes, we see currently some cancellation, but this has not any effect on our 2023 guidance. We increased our guidance again on 4th October and we are confident and really to match it. And so we are sticking on our growth targets also for 2024. So, we do not see the current decline in incoming all orders of cancellation as a really structural decline in demand. We see that it is a temporary decline in demand due to overstocking and distributors and we are convinced that this will disappear latest in Q2 of the next year. So, latest in Q2, order intake will come back. And our order backlog is still covering our sales expectation until this date. So, therefore, we will feel very confident with our overall guidance, and we stick on our target to increase our overall sales volume for 2024 for the for the volume. And what competitors comment, we do not comment on the competitors' development.

Understand. The very, very last one for me, it's a very simple one and not 10 questions in one. You made now, I think, two, three times reference that you do expect growth in 2024. So, on the last call, you said 20% sales growth and you also said 10% EBIT margin, would you repeat confirm that framework given the current uncertainties?

So, we are currently in the planning process, and I cannot answer any details, but I'm pleased to repeat what I said at the Capital Markets Day and also in our conference call in August. We are targeting a positive double-digit EBIT margin for the group for next year. And also, we are targeting a sales increase above the market overall. That means 20% is reachable and the clear guidance for 2024 will be published end of February next year.

That’s encouraging. Thank you so much.

You're welcome.

The next question comes from the line of Anis Zgaya with ODDO BHF. Please go ahead.

Yes, no, sorry, my question have been answered. My question were mainly on order intakes and on the short-term nature of the deep order intakes. So, you confirm this short-term nature. And on 2024, so you confirm the growth for 2024. So, thank you very much.

No problem. You're welcome. Thank you for your comments.

The next question comes from the line of Lasse Stueben with Berenberg. Please go ahead.

Hi, good afternoon. You mentioned you had some cancellations in the order backlog. Your previous kind of comments were more around that you wouldn't be accepting those cancellations. So, I'm just wondering sort of how did those conversations with those customers go? What changed your mind to start accepting cancellations? And would it be able to just give an idea of the scale of the cancellations? And then the second question I would have would be on your own working capital position. You mentioned that you're expecting that working capital to normalize. I'm just wondering how that kind of works given it might be difficult just given you're not expecting many orders until Q2. So, it would be good to know how you're thinking about your own inventory levels and how you manage that in the face of lower order intake? Thank you.

Thank you very much for questions Mr. Stueben. We had some cancellations from customers, especially in Home and C&I over the last weeks as it has been seen for the whole industry. So, we were very long, very resilient against this and also negotiate postponement for next year. But at some point, you are in a partnership, especially with long-term relationship customers and to come to a point where negotiations come to come some of compromises also for this financial year because we want to do exceptionally sales growth and exceptionally good business also for next year with our customers. So, therefore, we accepted some cancellation, but always after very strong and intensive negotiation for postponement and other possibilities. So, -- but last but not least, we have also to follow the overall market development, but more resilient and lower and not as fast as maybe others. However, we were able, therefore, still to increase the full-year guidance. And we also show that we were more resilient by our diverse product portfolio and our regional footprint that may be out of par. Coming to our net working capital development. Currently, we see that there is a necessity also to improve our net working capital by investing in critical material as we see that there could be always -- come up any sustainable or any critical restrictions in the supply chain. So, therefore, we have the possibility, as we have the cash, and we have the momentum to invest currently in net working capital to be stable and then to cover our upcoming sales and growth expectations for our next financial year. So, we secured our sales expectation by investing in net working capital currently as long as it's necessary and as long as it is on a profitable basis. We still stick on our net working capital ratio. We are currently at 21% and our ratio which has been communicated between 19% and 23%. We still stick on our targets. So, we do everything not to -- not to get above this ratio because this is our absolutely upper limit, but in between with the possibility to do some investments to secure the upcoming sales development. We do some investments in networking capital. And if it is net working capital, it will -- it will also be used at short notice.

Understood. And one more follow-up, if I may. Just on the sort of your expectation that orders come back in Q2. Is that sort of an expectation of -- or you're based on expectations that distributors have to start restocking? Or is this on the basis of underlying demand in the market picking up again because that seems to be a bit weaker, at least in Q3, according to other players in the market? Thank you.

Both, it's a mixture of both. First of all, there will be a willingness and also a necessity to start restocking at the distributor side when their stocks are going down. This is for sure. So, there is a temporary overstocking, which will disappear by not coming additional orders in. On the other hand, we do not see really a decline in demand. So, there is still a stable demand from the market in our products, in our regions in discussion also with the market provider, we see that there is still stable demand on C&I, for Home, and also for Large Scale, especially. And from this side, we are very convinced that this temporary overstocking will come to an end, latest in Q2, and therefore, the order intake will come accordingly. And a decline in demand, we do not see in our regions, in our products and in our specific markets we are well established.

Great. Thank you very much.

You're welcome.

[Operator Instructions] Our next question comes from the line of Jeff Osborne with TD Cowen. Please go ahead.

Hey good afternoon. Just a couple of questions on my side. I wanted to better appreciate Barbara, how when in 2024, the revenue will shift to the utility-scale segment, what the implications are for margins? Can you just maybe at a high level, talk about the differentials in margins that you saw in 2023, given the strength in residential relative to what we should expect in 2024 with the strength in utility scale?

Thank you very much Mr. Osborne for your question. And -- yes, first of all, based on our market estimation and our internal outlook, the Large Scale segment is expected to maintain double-digit growth over the next five years. So, our capacity expansion is necessary to keep up with this growth and to enable us to launch our new solutions into the market. And for sure, as usual, in margins may fluctuate over the first quarter as we ramp up production in 2024. But overall, we expect margins to remain at a very good level for the segment. And the margins for this segment are also part of our overall EBIT margin expectations, which we still confirm our target is to achieve a two-digit positive EPS margin for next year. So, also Large Scale has to contribute to this overall target. But for sure, if you ramp up the capacity for the time of the ramp-up, there will be some fluctuation which you will have to cover.

Got it. I mean just on -- if you were 100% residential versus 100% utility-scale, is it safe to say that the gross margin difference between the two would be, give or take, 10 points? I'm just trying to understand the mix at the gross margin level, in particular.

At 10% points I would not confirm but what we have seen from the beginning of the financial year and what we have also always mentioned from the beginning of the financial year is that, especially in Q1, we were dominated from the Home Solutions segment sales wise and also EBIT-wise. And for sure, this segment is our margin highest segment, therefore, by also increasing production from C&I in Large Scale, it's absolutely in line with our expectation that the overall margin during the year decreased a little bit compared to Q1, Q2, Q3. So, this is in line with our expectation, but all three segments are contributing positively. And we are not focused only on short-term margin development. We are more focused on long-term sales and growth development. And therefore, we absolutely stick on our decision to invest high into the Large Scale segments here at our German factory, where we doubled our capacities from 20 to 40 gigawatts. So, the short-term margin content was very high for Home for the first quarter. And then due to the mix in our portfolio, which was absolutely foreseen and which was patently also indicated by us, that is the kind of erosion, but the overall sales expectation and growth expectations in the PV market and in our overall market is absolutely convincing us that our strategy to install additional capacities for Large Scale otherwise decision.

Perfect. Then just a couple of other quick housekeeping ones. I typically ask you what the storage and third-party trading revenue was for switchgear and other equipment that you don't manufacture but record low margin revenue? Is that something you could share?

Yes. It's one-digit percentage. So, it's a minor portion with one-digit percentage

For both storage and trading?

And for hybrid, so we are -- we do not count our hybrid, our smart energy solution into the storage software hybrid solution, our portion or percentage was around about 20% year-to-date and also in Q2 -- Q3.

Excellent. My last question is just I think in the past, you've talked about potentially building a factory in America for Utility scale, given your strong position. Is that something that you're still considering?

Yes, absolutely. And we are -- the picture is getting more and more clear. And we have announced to make -- we have no currently no announcement to make, but we are still in the process of investigating -- so decision will be between contract manufacturing, collaborating with manufacturing partners, establishing an own dedicated manufacturing facilities. So, there are so many different scenarios. We are currently still calculating, but we are planning to come to a decision with the Supervisory Board end of this year and afterwards, we will communicate accordingly.

Excellent. Thank you. That’s all I had. Appreciate your comments Barbara.

Thank you very much for your questions.

Next question comes from the line of Guido Hoymann with Metzler. Please go ahead.

Yes, thank you for taking my questions. Actually, most tough than have been asked well about two left. The one -- the first one is on the capacity expansion again in particular in Kassel. Here, again, the question, does the destocking situation as we are experiencing at the moment, does it have any consequences on the expansion plans, i.e., can you, for example, slow down the building process? I guess you won't change it, of course, the plans, but can it be maybe slowed down, postponed maybe also into 2025 or so? That's the first one. And the second one, maybe a more market and general question is on the EU Net-Zero Industry Act. I think this is meant to protect also the European producers or to support them. So, how do you assess the plans in this Net-Zero Industry Act? And shouldn't that be pretty supportive for a European producer as you are? Thank you.

Thank you for your questions Mr. Hoymann. First of all, concerning the capacity increase in Kassel. We are investing currently mainly to increase the capacity for the Large Scale business. So, this additional 20 gigawatts, we will produce in the new factory are mainly used for the Large Scale business. And in this business, we currently do not have these challenges due to overstocking at suppliers at the distributor side. So, it's a different segment, and it's a different market view where we have still already an order backlog, which covers more than one year sales expectation in large scale. So, the order backlog is there. There is a growth expectation and our additional capacity will be mainly used for large scale mainly means that then in the original fabrication, there will be open spaces, which can be also then used for C&I and Home if needed and if necessary. So, the opportunity to grow is also there for home and C&I by installing the new capacities for Large Scale. But the decision to increase production in Large Scale is not affected by any overstocking at the distributor side currently. And coming to the net 0 plans from Europe. For us, it's still not very -- a little bit frustrating that the European decisions take so long. So, Germany was the first to really step into this issue and made a lot of additional announcements. For example, the debate about the resilience bonus, there's still something which we are covering. So, SMR is actively involved in the development of the resilient bonus, which has been proposed by the Deutsche Stiftung Weltbevölkerung, DSW and resilient auctions and resilient bonuses and support these measures to establish a framework for building a resilient solar value chain. So, there are still a lot of questions open to be clarified end of November and the timeline foreseen that this will come into force on January 1st, but we do not expect the schedule to be met. and SMA is still -- is still well established, and we have made all our planning for next financial year and the upcoming years without this resilience bonus. So, we are not dependent on the short-term implementation, but we are working on the best solution for SMA as the entire portfolio would benefit from this. So, our growth expectations, our revenue and also EBIT expectation are done without any stimulation from governmental sites, currently, and there we stick on our growth and our expectation also without this benefit.

All right. perfect. Thank you for explanation. Thank you.

You're welcome Mr. Hoymann. Thank you.

The next question comes from the line of Mengxian Sun with Deutsche Bank. Please go ahead.

Hi, thank you very much for taking my question. So, apologies for going back to the Large Scale segment. Can you confirm that your comments of expecting a normalizing of order intake in the Q2 next year? This comment also apply for the Large Scale that we should expect to see the order intake to decline in the next few quarters and stabilize in the Q2? Do I understand it correctly? And the second question is on the profitability on the Large Scale. So Q3 has been exceptionally for the Large Scale segment. Is this profitability should be a run rate that we are expecting for the next few quarters? And the last question is on the ramp-up cost that you just mentioned. Do you have a full figure for us? What do you expect for ramp-up costs for next year and also for 2025? Thank you very much.

Thank you, Ms. Sun for your questions. Currently, order intake for large scale will increase in Q4 and also in Q1. So this is what we absolutely see. And this is a project business where order intake and order intake development is not driven by overstocking at any distributor side, it's really project-by-project. We are well-established in the market. We are known in the market since decades. We have an order book, which is very well prepared and highly booked. So, therefore, there is no question about increasing order intake also for the next month. But what we currently see is that we had also there an extraordinary long order backlog covering more than more than 12, more than 14 months in advance. And in the past before any constraints in the supply chain occurs, the normal order backlog also in large scale was around about six months. So if there will be a new normal between 12 and six months, we have to see, but this is only driven by the project development, and it's not driven by overstocking at any distributor side. So, the profitability, which increased significantly in Q3 is driven by the fact that we have now a utilization rate also in large scale driven by the high sales volume that covers the fixed cost more efficiently. And therefore, due to fixed cost digression, we see that the profitability is on a very good and stable basis. So, we do not see that there is any reduction by taking this overall sales development for the next months. But for the last capacity expansion, for sure, as I have already explained, its usual that margins will fluctuate over the first quarter where the ramp-up of the production will take part. Only to give you an example, we have to hire additional employees to increasing our capacities and these employees will come into the -- our P&L before production starts and before any additional sales volume be cured. So, this is normal by investing in new fabrication that you have, first of all, increasing some cost and then additional sales and margin will occur. We will start working and producing out of the new production line beginning of 2025, and will be a ramp-up. But the ramp-up will also depend on how long our existing products will be demanded because with this new fabrication, there's also a new baseline and a new product line included. So, also, our existing product lines will be used and also the platform, the current platform will also be booked. And then there will be a ramp-up in a switch over the year where we increase the capacity out of the new fabrication. We do not give any detailed information currently because we are still investigating how fast can we do this ramp-up. And what is the demand, which then it cures out of our backlog to serve this additional platform for 2025.

Thank you very much. This has been very helpful. And just a follow-up question on the order intake, I guess, sorry, on the Large Scale. So, it's encouraging to hear that you said that the order intake is going to increase next quarter, but that we have already seen that in this quarter, in Q3. The order intake in the Large Scale and Project segment has been declining. So, any reason for that?

This is only driven by really the project-depending order intake. So, the order book overall is very well booked. But depending on how different projects are then to be realized, then it depends how much the order intake will increase and will come back again. So, that it's not structural, and there is no lack in demand. It's only depending on the different projects and the realization items and realization timeframes to secure

Okay. Thank you very much.

You're welcome.

There are no further questions at this time. I hand back to Barbara Gregor for closing comments.

Yes, thank you very much for taking part and your interest, and please do not hesitate to contact us in case of any open or further questions. Good bye and [Indiscernible].

Ladies and gentlemen, the conference is now concluded and you may disconnect your telephone. Thank you for joining and have a pleasant day. Good bye.