Schindler Holding AG Bearer Participation Certificates (OTCPK:SHLAF) Q2 2022 Earnings Conference Call July 22, 2022 4:00 AM ET
Company Participants
Marco Knuchel - Head of IR
Silvio Napoli - Chairman and CEO
Urs Scheidegger - CFO
Conference Call Participants
Andre Kukhnin - Credit Suisse
Daniela Costa - Goldman Sachs
Andrew Wilson - JPMorgan
Patrick Rafaisz - UBS
Lars Brorson - Barclays
Alex Virgo - Bank of America
Operator
Ladies and gentlemen, welcome to the Schindler Half Year Results 2022 Conference Call and Live Webcast. I am Alice, the Chorus Call operator. I would like to remind you that participants will be listen-only mode and the conference is being recorded. The presentation will be followed by a Q&A session. [Operator Instructions] The conference must not be recorded for publication or broadcast.
At this time, it's my pleasure to hand over to Marco Knuchel, Head of Investor Relations. Please go ahead, sir.
Marco Knuchel
Good morning, ladies and gentlemen, and welcome to the conference call for results as of June 30, 2022. My name is Marco Knuchel. I'm Head of Investor Relations at Schindler. I'm here together with Silvio Napoli, our Chairman and CEO; and Urs Scheidegger, our CFO. Silvio will, as usual, provide an overview on recent developments and Urs will then lead us through the financials. After the presentation, we are happy to take your questions. We plan to close the call at 11:30 today.
With that, I would like to hand over to Silvio. Silvio, please go ahead.
Silvio Napoli
Thank you, Marco. Good morning, everyone. Thank you for joining our Q2 half year results conference.
Our results since the beginning of the year suffered from a combination of external and internal problems. Since we identified them, we have been working to fix the latter and managing the former.
Now since we last met in Q1, I'm afraid the external factors intensified. And in particular, three elements, I would say, deserve special attention, and I'm sure will be the object of many discussions and questions today, to which we look forward.
The first of them is wage inflation, the second is the second wave of lockdown in China, and the third one is the worsening scarcity in semiconductor supply. The three elements plus the other persisting ones have somehow worsened the old environment and accelerated the impact, but at the same time also added to our resolve and investment to make sure we dealt with them in the right way.
So maybe moving to Slide 3 in the package you have received. I'd like to briefly provide an update on the five issues that we identified as early as February when the new organization was put in place. And I must say, not a question of satisfaction, but one we can say, six months after, they were really the right issues to focus on. The first one was the foreign exchange burden.
Now a lot of it is happening, but perhaps one element is the euro, a very important currency for us, where if you look the evolution year-on-year is minus 6% against the Swiss franc. But then moving on to the, I will say, the next four, which are really affecting our business directly. And by now you realize all four of them relate to our new equipment business. The first is how to regain, i.e., competitive New Installation margins that we have identified, as you know, as the main root cause for the competitiveness gap versus our main competitors. And there already last time we confirmed that the CHF 200 million material cost inflation impact for the year was there and we can further confirm that.
But then, of course, since the round of salaries and negotiation have taken place now across the world with our employees and labor, we now see, as expected, but of course the figure is impressive that we have now, on top of that, a wage inflation of CHF 120 million.
Moving on to the other one, which is a Topic with supply chain. And there, again, we were questioning last time still how the Ukraine war was affecting it. And we can see basically by now, besides energy prices, this is something which we can discuss later, the other way in which this is impacting business is the Topic of logistics and material flows.
And in particular, I wanted to say, of course, because everything coming from China used to be able to, for example, for deliveries to Eastern Europe or to the Baltic countries, there was a passage through Russia. Well, that route is closed, which involves -- that's one example of how the logistics are affected. But the one that we'll discuss more later is the Topic of the semiconductor shortage, which is clearly worsening.
The fourth challenge and the third of our new equipment is then very much an internal one, the one about dealing with our product portfolio complexity. And this is about new equipment complexity. And remember how we explained how we're struggling to produce the backlog of all products.
At the same time, the new modularity platform, which was the bulk of our new order intake, had shown issues that were not identified, amongst other, the far too many options that were offered. And there, in fact, we see that all that's happening has further delayed the backlog execution, therefore, delaying the time that we can clear backlog.
And then something new that we will present later is how this is affecting, in fact, our on-time delivery. And by on-time delivery, of course, it means, first and foremost, our customers, but also how this is affecting our revenue generation. And then fifth and last, but obviously probably the biggest, is the Topic of China.
And then on China, I'd like to make clear upfront, we'll discuss some data points later, there is the impact of the lockdowns, particularly severe in the Shanghai region, where we're based, but also the structural issue in the Chinese market, independent of the lockdown, which has to do with the credit crunch in the property market, which is not getting better at all. And because that affects the Chinese market severely, in turn, that has an impact on the global elevator and escalator market outlook.
Having gone through this initial overview, I suggest now we move to Slide 4. And perhaps, since I mentioned that we started having the first visible impact of what we started at the beginning of the year, the first one here is our commitment to streamline the organization. And as you have read, we announced today two changes. One is the removal of the Supply Chain from the Executive Committee, and the other one is the change of CFO. But first, starting with the supply chain. You can see that as a result of that, our Executive Committee has now been reduced from 14 to 10 members.
In fact, if you have the Chairman and CEO combined, it will even be 9, if you consider that. But nonetheless, and this is important, why? Because we said from the beginning, we needed a streamlined, simpler decision process in order to deal with the situation. And well, on that one, we delivered. And I think it's important that we stress how now the new structure is, in fact, leaner and more impactful.
And I would say, dealing with the situation over the last six months has also been possible thanks to new structure. And now with the latest changes, it will be even more so. Now one question that we may anticipate. What happens then with supply chain? Is that no longer important? Well, absolutely not.
In fact, just as we did with the fuel quality and excellence, that remains of highest importance, while not being on Executive Committee. Here, the decision on supply chain is really one that is intended to do so, because we will now focus on supply chain at regional level, because the issues that you heard, on-time delivery, dealing with suppliers, dealing with clearing the backlog is something which has to be best managed locally.
So the supply chain direct day-to-day management goes back to the individual regions, who then focus on supplies, on our customers; while at global level, for reporting to Chief Operating Officer, Paolo Compagna, the coordination of all actions, including processes is secured. But in question of priorities, we believe now it's important that we manage the Topic where the customers are, therefore, at local level. Then definitely, I would like to say also a few words on the change of CFO, where the Board felt that, looking ahead, but also in dealing with the situation, bringing onboard someone from outside with extensive experience in public listed companies, but also from other industries will be beneficial to the team at this stage.
But of course, it is not an easy decision to be taken to change CFO at this time, but we believe that's also part of our commitment to continue involving the team, including taking people from outside. With that, I'd like to express my gratitude to Urs Scheidegger, who's going to stay, for the tremendous efforts and the very intense teamwork in his position of CFO over the last four-plus years, and, in particular, over the last six months when we were working closer together.
I'm very pleased to say that Urs will continue working with us as Chief Risk Officer, a key position that also we identified as essential in what is a learning from what we experience today, where we realized that having someone, a seasoned professional, is going to help us seeing issues coming at the horizon well and beyond the day-to-day work is absolutely essential. So I do look forward to continue working with Urs in this position.
Moving on to Slide 5. Now I'd like to go into the update. Okay, what do we do now to deal with the situation? And since February, we did say that, in fact, Schindler had sadly fallen behind the curve in terms of pricing -- pricing, per se, but also especially pricing as a way to offset inflation. And now I'm pleased to say that we have had two rounds of price increases. One was in April, the second was in July, which now brings us, maybe not ahead of the curve, but at least in sync with the situation, which means that more price increases are definitely not excluded, to the contrary, more than probable.
So those price increases mainly on New Installations and Modernization have also gained good traction. And you can see here with a chart where we show that in EMEA and APAC, excluding China, we're talking about mid-single-digit impact. While in Americas, both in the U.S.A. and Brazil, for example, that we talk about high single digit or double digit. So this is very positive. Unfortunately, where price increases have not yet proven effective is in China.
And that has to do not only with the competitive Chinese market, which is by far the most competitive, because there are the most players than anywhere else in the world, but of course with the downturn in the market itself, which by basic economic reality, makes that increasing prices is extremely difficult. Nonetheless, as you can read here, I'm not going to go through every bullet, we have put in place a lot of measures to make sure these price increases stick, which go from the contractual from the front line into incentives.
The second element, on our equipment. Now, of course, we talk about top line, how do you offset inflation not only by pricing, but of course, looking at the cost. And the goal here is to regain competitive NI margins.
And so now we're on Slide 6 where, here, there are maybe two major updates. The first one is, as you all know well, that what we had seen in April, I said it started to be an indication of a correction in metals bulk pricing has now been confirmed over the last quarter as a reality. So this is definitely good and welcomed news. At the same time, as I arrived here on this slide, you will see, I just wanted to make clear that, of course, we have a stock in our factories. And the stock is, depending on which regions you're in, a six-month plus.
So of course, now we're buying these metals at this better price, but the impact, the benefit will come only once we have consumed the stock. So we're looking at six months-plus. And of course, this has to do also with the speed at which we can continue producing. But in the meantime, as we had committed last time, we did put in place measures like hedging bulk contracts. And this is all ready, but of course, we've put everything on hold for now because we will not trigger that until the pricing has bottomed out, at which time surely we'll proceed. Now the other element of update is the semiconductor price. And you remember, in February, I showed a chart showing how a single component price had gone up 36x. Now that phenomenon, in fact, has not abated
To the contrary, it has continued to worsen. And you can see with the middle chart here. And there are two elements. One is the price. But the most crucial thing for our supply chain and margins and our ability to deliver is the lead time. Lead times for semiconductors used to be 20 weeks until basically more than six months ago or around there. And now we're talking about 60 plus weeks, which means that you have to now be able to order semiconductors, microchips for orders that are going to be in a year's time, which, of course, is a major challenge itself.
And this affects our on-time delivery, as you would see in a second. So how do you do that? Of course, now as a learning and action, we have to engage more with traditional suppliers, shifting to possibly direct contract as opposed to going through agents, and at the same time building up strategic stocks and reduce dependency on single suppliers.
Moving on to the next slide. I did mention on-time delivery, and that is something which maybe some of you will be surprised that we show openly, but I think, again, in the spirit I tried to establish here since the beginning of the year, it's important that we share with you the situation here. Because here, you can see both due to external and internal issues, we face a challenge. And the key challenge here is how to make sure that we can produce on time according to plan with this mixture of external and internal issues.
And there, the internal one is to do with this modular platform, which I think we have to say, launch the design, which had too many options, which complicates our supply chain further on top of the execution of your backlog. And then combined with a Topic like supply chain and delay by suppliers from China or from outside because of logistics, all of that basically results in an on-time delivery worldwide, which is in the order of 50%. This is a major challenge. Of course, with our customers, there is always a bit of a buffer.
So this doesn't necessarily affect them directly. But for our business, this is an issue, because as long as we cannot plan an on-time delivery correctly, this also results in delay in revenues. And so what are we doing to fix that? We mentioned last time how we are optimizing a sales configurator to offer less options. This is now firm in place all around the world. The product design has been adjusted.
And of course, we are, as I mentioned before, to the extent we can, stocking up on semiconductors. And the other aspect, of course, is how to reduce global supply chain dependence on China because, as you know, we do produce all around the world. However, there are some suppliers or components that come only from China. And that, of course, results in the situation you see on the chart, where we show here two regions. And you can see the tremendous impact of the China lockdown in one of them drawn there in black.
Of course, the other element here is stock with the customers more than ever being as close as ever with them. And I must say, some discussions are difficult, but so far, I'm very impressed and grateful for the understanding that we have had from them in dealing with the situation. Now a lot of talk is about China, and I'd like to stress again, it's not only about that, but it is a reality, so we should talk about it.
And then moving on to Slide 8, you do see how the lockdown affected our three production sites in China. Two of them are the joint ventures, XJ Schindler, which is based in Henan; and Volkslift Schindler, which is in Zhejiang. But of course, the main one, Schindler China, is in Shanghai. And as you all know, Shanghai was the strictest and top first of all lockdowns. And we are within the Shanghai city perimeter. So all in all, when we spoke last in April, I just thought and it looked like it was underway to resolution, it became an even tougher one. And so all in all, we ended up having a lockdown of seven weeks, which is now only towards the end of June fully resolved.
And now of course, we are back to full production, but the impact has been tremendous. But before we speak about business, it has had an impact on our employees. And I'll say a few words on that later. So what have we done is supporting them to the maximum extent way and beyond, I think, any cost consideration. But of course, on the business side, we had to prepare to ramp up capacity as soon as we could.
And the other one, of course, taking into account what is now the reality of a contracted China market, we are working actively to resize our business in China. And this is something which happens today. But as we do that, of course, we have to keep our employees in mind. And maybe if you go to the next slide, I thought, sometimes we speak about numbers and we forget there are people behind, at the core of any business. And I just thought it was important to show what employees had to deal with.
We had more than 200 employees that were locked down in our campus in Zhejiang. And you can see in the pictures how they had to be living, blocked there in the factory and how they organized their life. We had to buy tents, we had to buy stretch beds, we had to buy blankets, we had to buy emergency toiletries and deliver to the factory. And I'm so impressed by the way our employees dealt with that.
And I have to say, the people you see there sleeping in the factory, they even decided to spend the time working, so producing things which supplies are still there in the factory, to be ready for when the factory reopened. You can see that people had meeting rooms with beds on the site. And the ones that actually were allowed to go home then had difficulty to provide food for their families.
And so because we were allowed to a few vans to maintain lifts, actually, we decided to provide food to our employees. And that's on the right-hand side. And actually, sorry at the beginning -- at the bottom, you see this message, thank you, SCF, with some vegetables, which was posted by one of our employees.
SCF stands for Schindler China Field operations, as a testimony of gratitude for helping up them in that point. I just mentioned this to supply some reality behind what may seem as just a lockdown. There is much more to that. And the way our employees dealt with that and now came back to work 200%, I would say, is extremely humbling and definitely a huge pride for all of us here at Schindler.
Now unfortunately, and then moving on to the next slide, the market in China doesn't only suffer from COVID once more, there a structural issue. And the structural issue has to do with this credit crunch in the property sector. And here, you see some data that we obtained from the real estate institute in society in China, which shows how the top developers' activities have been dramatically affected year-on-year, as you can see here.
And you can see this is data as of April. We couldn't find anything more recent. But we see here about land reserves dropping, land purchase being about half, and the sales value of the developers even reducing by half, which, of course, this shows that the credit crunch even from a cash generation point of view on their side, not even talking about their balance sheets, is severe. And that is also reflected, moving on the next chart, on the property element. And you can see that there the floor space sold now has even dropped below the 2014 crisis levels.
But most importantly, the housing inventory, and this is for me, I would say, based on my experience in China, probably the most impactful leading indicator for our industry. There you can see that whether Tier 1, Tier 2 or Tier 3, the excess inventory is moving towards the 2014 crisis level and maybe on a trajectory to even surpass it. And that is extremely concerning for the industry going forward.
So I would say, what we said, could be a market contraction above 15% for the year, is materializing, and one should -- could not assume the fact that the impact for the year for the Chinese market might even be bigger going forward. Now talking about the Chinese market, I think we should also look at the global market.
And now I'd like to move to Slide 12. And you can see that the drop in China is, in fact, in contrast with the relatively healthy situation in the markets in the other parts of the world, whether in APAC, outside China, where actually there's been a strong recovery, India, but progressively also the rest of Southeast Asia; in EMEA, where it remains solid across all segments; and of course, then there is still this strong comeback in the Americas, including, I must say, Brazil, which has a progressive return; and of course, the U.S. where the market remains solid, mainly in the infrastructure, but also in the residential.
Now the big question is how the U.S. economy will evolve, but that's not yet a reality in any case. But so this whole equation, China plus the Rest of the World, as you can see, results in a contraction worldwide because of the impact of China. This, of course, is for New installation. Existing installations remain on a growth path across the world as units sold continue to be converted, and that is very positive, combined with, I must say, a very notable uptake in Modernization as units are modernized and the portfolio aging continues being driven, including in China, this must be said. With that, I'd like to conclude my initial overview. I'll come back to speak about sustainability.
But for now, I'd like to hand over to Urs Scheidegger for the results. Urs, please?
Urs Scheidegger
Thank you very much, Silvio, and good morning, ladies and gentlemen, also from my side.
Let me first briefly summarize the first half year results. I'm on Page 13. The order intake and revenue were strongly affected by the China market contraction and lockdowns. Cost inflation, semiconductor shortage, supply chain issues, exacerbated by China lockdowns, burdened the development of our profits. Given this challenging environment, we have a sharp focus on increasing prices across the business lines to offset the inflation, streamline our product offering, and drive strongly the efficiency. On a positive note, we have a very solid order backlog reaching the CHF 10 billion milestone.
With that, we are moving to Slide 14. In the second quarter of '22, the order intake reached CHF 3.1 billion, corresponding to a decrease of 1.4%, respectively, 0.6% in local currencies. As a result of the economic market downturn and lockdowns in China, the slowing growth momentum in New Installation across the globe and our focus on sales margins.
Strong growth in the existing installation business lines, in particular, Modernization were partly offsetting the negative drivers. In the first six months of '22, order intake reached CHF 6.2 billion, corresponding to an increase of 3%, an equivalent to growth of 4% in local currencies. Organic growth was 3.2%. Acquisition contributed 0.8 percentage points, while FX had a negative impact of one percentage point growth. In this six months period, our existing installation growth was able to overcompensate the impact of China's market cooling and lockdowns.
Slide 15 provides an overview of order intake growth by region and product line compared to the first six months of '21. Order intake represents all product lines, New Installation, Modernization, Repair and Maintenance. As you see, the Americas and EMEA regions generated robust growth, while Asia Pacific was negatively affected by a significant drop in New Installations in China due to the economic downturn and lockdowns.
Strong modernization and maintenance, including repair, turned overall growth into positive. Our portfolio of maintained units increased in a robust way by about five percentage points year-on-year. Order backlog was 7.2% higher, increasing to CHF 10.3 billion. The margins declined further by almost 50 basis points sequentially, reflecting cost inflation, product legacy and portfolio rotation.
I continue with the revenue development on Slide 16. In the second quarter of '22, revenues dropped by 5.6% to CHF 2.7 billion, corresponding to a decrease of 4.6% in local currencies. Weak performance was particularly driven by a significant drop in Chinese New Installation business and continued weak installation and modernization progress at construction sites due to disruptions in global supply chains, leading to delays in project execution. In the first half of '22, revenues reached CHF 5.3 billion, a drop of 2.4%, and 1.5% in local currencies. Organic growth reached a negative 2.4% and acquisitions contributed positively 0.9 percentage points, while FX offset this with a negative impact of 0.9 percentage points.
The increase in the EMEA and Americas region was offset by a decline in the Asia Pacific region, where COVID-related lockdowns in China heavily affected, as I said before, the economy and supply chains. The revenue impact of the China lockdowns in April, May and still in June is about CHF 200 million for Schindler. New installations suffered in all regions, Modernization was weak in Asia Pacific, while repair and maintenance remained solid across all regions.
I'm moving to Slide 17. Persisting inflationary pressure, product legacy, semiconductor shortage, supply chain issues and restructuring costs exacerbated by China lockdowns impacted our profitability in both in the second quarter but also for the half year. The EBIT adjusted in the second quarter of '22 reached CHF 230 million, which is a drop of 31.8%, respectively, 30.3% in local currencies. Same picture in the first half of '22. The EBIT adjusted was CHF 466 million, decreasing 27%, respectively, 25.7% in local currency.
Profits have been burdened in these first six months by high material inflation cost of about CHF 100 million compared to last year same period. Wage and other OpEx inflation was about CHF 80 million. And modularity-related quality costs attributed CHF 40 million to the bottom line negatively. Further, we have an impact of about CHF 50 million due to the China lockdowns in quarter two with much, much less revenues in China.
I'm moving to Slide 18. As a result, net profit in the second quarter has been 37.2% less than in the previous year. In the first six months of '22, net profit reached CHF 296 million, a drop of 34.9%.
Cash flow from operating activities, this is shown on Slide 19, has been heavily impacted by increased net working capital requirements, reflecting the challenges in the supply chain, driving up inventories, also less down payments in China for order intake due to the lockdowns and market cooling. As a result, cash flow from operating activities declined to only CHF 13 million in the second quarter. In the first half year, cash flow from operating activities reached CHF 299 million, a decline of 58%.
With that, I'm now moving to the outlook '22, which is on Page 21. In the remaining months of the year, the business environment will be characterized by a contracting Chinese market and presumably a slowing growth momentum elsewhere in the world; construction site delays, which will continue to hinder project execution; thirdly, inflation pressure and persisting supply chain bottlenecks; and foreign exchange pressure to the Swiss franc. A set of key actions are in place to mitigate the impact from these challenges. However, as said, it will take time for them to materialize.
For the full year '22, we expect revenue growth between negative 2% to positive 2% in local currencies, and net profit between CHF 620 million to CHF 660 million. Please allow me to close with a personal note. This was the last time for me as Group CFO to present the financial results to this audience. I very much treasured the communication and interaction with all of you, and I would like to thank you for your great collaboration and support.
With that, I hand back to Silvio Napoli.
Silvio Napoli
Thank you, Urs.
Normally, we would conclude here and move to Q&A. But this time, I feel strongly we should speak about something else, something which is important for the company, for our investors, but also for society and the planet overall. And that is sustainability.
Last June, I trust you all saw that we published our corporate responsibility report. It is the 10th edition, showing that maybe before it became so fashionable, we have invested in that Topic as a company and one could argue, you can see our history, what we've done, publishing our DNA, and yes, maybe we didn't communicate it as much as we could have. But that's also somewhat part of our culture.
But now one thing which is not included in the corporate responsibility report, because it just happened now, is what we described on Page 23, which is our carbon-neutral road map to 2040, to reach net zero, with now an approach that has been validated, certified by Science-Based Target initiative. That is very important. Those of you who are into the matter know that only few companies really got according to the standard that type of validation, I'm talking about handful; last time we checked, we were 18, but probably every day there are more out of thousands of people that apply. And it's important. As you can imagine, this is something which we've been working for years, contrary to others.
But as part of our culture, we don't make aspirational declarations about reaching something unless we are sure that we've got at least an understanding of what this would mean for us, for the company, and for our employees. And now that we have it, now that we've done it internally, and we got it also validated by a third party, we can talk about it, and we should. So you can see that now we have this net zero commitment both in Scope 1 and 2 and Scope 3, I'd like to stress that, which is now detailed, you can see, on specific areas to focus.
And we are very conscious of this. This is not just a target that you take lightly. This would involve our all rethinking of the way we do business. And perhaps to highlight that in terms of -- the first step will be 2030. And there, clearly, the biggest aspect is our fuel efficiency in terms of our fleet, because of our service business, where in many places people still have to take cars.
At the same time, you can see that in the first element for our Scope 1 and 2, green electricity will play a role. And now no one thought that when we did this, this was going to become also a more urgent element due to the political situation and the scarcity. But definitely, we are very, not pleased, but we are comforted in our choice to have gone this way now more than ever. The other element I wanted to stress here is that if you look at Scope 1 and 2, but also Scope 3, a huge element to reach those targets will be innovation.
And now we have talked less of that over the last few conferences, but maybe I'd like to stress that you will hear more about that from us. And we believe this is important also as a catalyst to differentiate in a market, but also to achieve this target. So I wanted to stress that point. I look forward to discuss more of that when we present our overall strategic plan.
But I thought for today I wanted to stress that point, because that's something which I didn't want to go unnoticed, even though we mentioned this in June. With that, of course, now the hard part starts, which is to deliver, and we are very much resolved to do that. I'd like now to conclude here the formal part of the presentation and hand it over back to Marco.
But before we do that, maybe one final message to summarize what I just described. And it is as follows. So we continue focusing on the key actions that we identified since the beginning of the year. The actions are starting to generate the first impacts. In other words, the ship is starting to head in the right direction. However, once more, it is important to stress that it will take time before the full impact would be visible in our results. And the time horizon is becoming even more uncertain because of all these worsening external factors. The biggest of them all today is China, which is causing a market slowdown. But again, once more, we will get through this, and we believe we already started taking all the right measures.
With that, I'd like to hand over to Marco. Marco, please.
Marco Knuchel
Thank you, Silvio. We are now happy to take your questions. [Operator Instructions] With this, I hand back to the operator to start the Q&A with the first question. Back to Alice.
Question-and-Answer Session
Operator
[Operator Instructions] Our first question comes from the line of Andre Kukhnin with Credit Suisse. Please go ahead, sir.
Andre Kukhnin
Good morning, gentlemen. Thank you very much for taking my questions. I'll limit to two. But just wanted to start with, Urs, best of luck with the new role, and thank you very much for all the support over the last four or five years. Really valued all the interactions we've had. Thank you. In terms of questions, I guess, could we start with the margin and the implied kind of second half run rate in the guidance and how that compares to Q2? If I may run a little bit of math with what you said about China impact of CHF 50 million and assuming about a 40% revenue decline, backing that out, I get to about 9.6% margin for the second quarter, ex-China lockdown impact.
And then working through some math from your net income guidance, it looks like it implies about that run rate, maybe even a bit lower, for the second half of this year. And I just wonder what are the puts and takes within that, that land us at kind of sequentially flat level? I thought we'd have some improvement coming in from the measures you've been undertaking, maybe some of the price actions towards the end of the year, even with the delay. And then you talked about repricing some of the contracts as well. So I just wanted to check through this math if I am being correct and what are the sensitivities around the major moving points there, please? Thank you.
Urs Scheidegger
Andre, thank you very much. Great to hear you today again. And thank you for the question. So when we talk about our net profit guidance for the full year and also the run rate into H2, you need to consider continued headwinds first. These headwinds are coming key from material cost inflation. As also Silvio Napoli explained, we have to lock in cost prices on material for six months in order to safeguard the availability of material, and so we have those costs in our stocks mainly already for H2.
So when I said it's H1 CHF 100 million inflation incremental, you can assume it will be CHF 200 million for the full year. And also wage inflation certainly will continue with a similar run rate. And you have OpEx, and quite a big element are subcontracting cost inflation, which are also continuing to the run rate. Then I mentioned it in my speech, unfortunately, we are burdened with the quality cost of the modularity program, that was about CHF 40 million in H1. We need to assume this will still continue in H2, until all the measures are taking tractions, and we will be in a much better shape with the modularity program.
Finally, another headwind is backlog margins. I said it, we still see sequential margin decline on our backlog, driven by updated recalculations to the backlog due to the high inflation, driven by modularity, which comes with higher costs at the moment, until we have mitigated it. And we have rotation in the backlog. Much better margins from actually much long ago are delivered and much lower margins came in at the end of last year, and now we see finally better margins. So also, this decline of backlog margins has now to be delivered in H2, and then it will be much better.
On the tailwind, you can consider we have a bit more positive revenue growth, assuming that there are no additional lockdowns in China, right? We have now quite a negative revenue drop in Q2. And assuming no lockdowns, of course, this will improve.
Now in the second half here, you see that as well in the guidance midpoint is better than H1. And of course, our measures in efficiency and in the existing installation pricing, you can think about short-cycle products, like repair, will realize certain benefits to the bottom line. What you shouldn't assume are benefits from New Installation pricing to the P&L in H2. This is too early. We can talk about it later. Prices are going up in several regions, and this is good news. But due to very long lead times, even longer than ever due to supply chain disruptions, those benefits will be visible then next year. I hope this helps, Andre.
Andre Kukhnin
Great. Thank you. Yes, very helpful, as always. Thank you. And maybe a broader question, Silvio. It's been six months since you've taken over and came in really with kind of sense of urgency and focus on profitability foremost. Do you think that sort of mentality has now started shifting at Schindler? Or do you see evidence of that really moving in the right direction? I guess the pricing indication that you've given is probably the clear testament to that. But I wonder if there are any other kind of indicators or examples you could share with us of the organization now starting to refocus on that kind of sense of urgency and profitability more firmly?
Silvio Napoli
Sure, Andre. Thank you for the question. Some of the impact really, to some extent, is tremendous, yet not yet in terms of reflecting the results, which, as you can imagine, is a challenge per se, but such is the nature of our business. Let me supply you another example. Together with Paolo Compagna, the COO, we looked at our corporate calendar. And we cut down more than 80 meetings, committees, which involved members of top management. That sends a huge message.
In terms of preparing meetings, we focus only on the priorities identified, which are very much the same we presented today. That also sends a very important message. But rather than patting ourselves on the shoulder, I always say to people, I'm sorry, there is no prize for effort. So maybe, if you don't mind, ask me the question again in six months, and then hopefully the figures or the results will speak for themselves. On a more very candid level, I will say, anyone who doesn't get the message, is no longer -- if you want, an obstacle. And that is, I think, what we're forcing too.
Andre Kukhnin
Got it. Thank you very much to both of you.
Operator
The next question comes from the line of Daniela Costa with Goldman Sachs. Please go ahead.
Daniela Costa
Hi, good morning. Thanks for taking my questions. I will stick to actually one, and I wanted to focus on cash, because cash flow was also quite weak this quarter. I understand there's all the problems in the supply chain, which probably means building up some inventories. But I would like to see how you plan to progress on that in the rest of the year. And also, actually the second part to that question, the focus on cash as well. Given the situation in China that we're seeing with the developers and with sort of like the potential risk around orders and the backlog there, can you talk about sort of how you've been looking at that, and the confidence on the order book, both from a realization point in China as well as from the cash quality of their order book in China? If you can supply us some comments there? Thank you.
Silvio Napoli
Daniela, thank you, Urs, please.
Urs Scheidegger
Thank you, Daniela. The net working capital deterioration, of course, has an impact on our net liquidity, as you also see it on Page 29. And one key element is indeed that we intentionally build up stocks in the supply chain globally. We are taking opportunity to get material when it is available, as I said, in order really to safeguard the running business, in particular, of our NI and existing installations.
The situation globally, I would like to differentiate between China and Rest of the World. In Rest of the World, our net working capital performance, liquidity performance is running well. We have a lot of key actions in place since long, and I'm really confident that receivables, stock, work in progress coverage with down payments, accounts payable is very, very well managed. And here, I don't see a deterioration. It's a bit more demanding in Asia, in particular, let's say, India and the South and Eastern part of it.
But now China, it's good that you point on it. Obviously, with the economic market cool down, and our industry market is severely dropping by more than 15%, the three red lines policy leading to really credit tightening. Yes, we see that it is more demanding on the cash collection side. On the other hand, it is relatively stable, right? It is steadily more demanding. We really need to reach out to the customers in an even more active way.
Cash collection was not very strong now in Q2, but I already see some improvements now into the second half year. And our company is focusing very strictly on strong payment terms with the customers, otherwise, we also blacklist the customers. But of course, the overall picture is disturbing and concerning. Many developers are in real difficulties, and this is also the reason why the whole market is slowing down so much. Cash is getting scarce, I have to say. Final note, you talk about the quality of backlog.
And here, I can say, so far, this is quality in the backlog. We have very strong discipline in reviewing it. And what we have in the backlog is secured. In China, we always have down payments with the first signature of the contract, and then more milestone payments are following for each activity. And from that point, so far, I can say, we will deliver this backlog going forward.
Silvio Napoli
Perhaps to summarize, Daniela, your very clear and important question. There are two elements here that led to where we are today. There is the net working capital requirements and the other one is the EBIT reduction. So in the second half, we definitely hope to have a better EBIT to the extent that we can do the backlog. And the net working capital, as Urs said, will be a question essentially of how China turns out. Yes.
Daniela Costa
Clear. Thank you very much both.
Silvio Napoli
Thank you.
Operator
The next question comes from the line of Andrew Wilson with JPMorgan. Please go ahead.
Andrew Wilson
Hi, good morning. Thanks for taking the questions. I've got two. I'll take it one at a time as a separate. In terms of the on-time delivery numbers that you've given us, clearly, you said that the impact on the customer is perhaps not as severe as that number looks like. But I'm interested as to what that number is in, I guess, normal time, and also whether you think this is an industry phenomenon or something which potentially risks some kind of share loss if you're underperforming some of the peers.
Silvio Napoli
Thank you, Andrew. It is indeed an important question. First of all, on a normal period, our on-TD is above 90%. And actually, you can say, also you see in the chart, where even 100 is always a tough number, but it hovers around 100. And we are very real. And I must say, in most places, we even have very competitive lead times. And in some countries, it plays a role, namely Europe and the U.S. In other countries like Asia, where our on-time is less so, in fact, because construction sites tend to have a less just-in-time type approach. So that is one. Clearly, if that continued, that could become a serious company loss, because at the end, you do compete on that, too.
As you can see, things are coming back to normal, and we have been able to manage. But we definitely resolve to bring it back what it should be. Is it an industry one? I don't want to talk about competitors. I can presume that during the lockdown in China, it was difficult for everyone. And China suppliers, as you know, there is a famous story that in the triangle between Shanghai, Suzhou, and Guangzhou, there was about -- someone made a calculation years ago, one of you I think it was, 80% of the world's global supplies of elevators and escalators components come from there.
So if that was to continue with China, that will affect everyone. And so -- I think that's why the industry, I believe, and actually we are, working on reducing dependency on single-source China suppliers. That could also be addressed. I hope this helps.
Andrew Wilson
Yes, it does. That's very helpful. Secondly, I wanted to ask around the changes in terms of the management structure, and specifically around supply chain, I guess. I'm interested in -- sort of I understand the explanation of dealing with supply chain locally and the specific regional challenges seem to make sense. I guess, do you feel like you need to add more capability on a local level in terms of managing that supply chain? I'm just thinking, unless I misunderstood that if it was primarily being organized centrally and now it's going to be organized more locally, do you have that capability in each region? Or is that something you'll look to build?
Silvio Napoli
Excellent question again. Thank you, Andrew. Definitely, the situation today in supply chain is one that has never been seen before. One of the CEOs told me supply chain people were the ones that people only called to complain when things didn't come on time. Today, supply chain is, again, I think as it should be, as an engineer, at the core of every company. So whatever competencies we had, I think, need to be upgraded. And this is something we are actively working on at central level, but also at local level.
Also, supply chain staff is very much in demand, as they should be. And also post-COVID, when factories were closed, there was a lot of turnaround in this field. So again, your question is very current in that there is a huge effort now to staff and upgrade supply chain around the world, both locally and centrally.
Andrew Wilson
That's very helpful. If I can just, sorry, squeeze in just a quick clarification on a previous comment. I just wanted to make sure that I heard correctly that the margin on new orders in the Q2 was down sequentially 50 basis points on the Q1? Just to check that perhaps with Urs?
Urs Scheidegger
Yes, good morning, Andrew. Yes, I said sequentially 50 basis points on the total backlog.
Andrew Wilson
That's very helpful. Thank you and good luck in the future.
Urs Scheidegger
And just to further clarify, this is because, point one, we have adjusted our pre-calculations to the backlog with the higher material and OpEx inflation to reflect reality. Point two, we also had to reflect some quality costs of modularity to the backlog, so again, to reflect reality.
And last, and interesting, it's also about the rotation in the backlog with these long cycle times in the elevator industry. Some good margins, even back to the year 2020, early '21, have now moved out, and low-margin order intake, in particular the second half of '21, moved in. Latest now in H1, we see improving margins in the order intake. And so the new order intake margins are going up, and that, of course, helps in the rotation of the backlog. In the future. We will see more of that impact. And finally, then next year, we will see it as well in the P&L. I hope this is clear.
Andrew Wilson
Yes. Thank you. That's extremely helpful clarification. I appreciate it.
Urs Scheidegger
Thank you, Andrew.
Operator
The next question comes from the line of Patrick Rafaisz with UBS. Please go ahead.
Patrick Rafaisz
Thank you, and good morning everyone. Two questions. The first one is a follow-up on just the previous one now and also includes a bit of pricing. So you mentioned the price increases in April and July. Are there additional price increases that we should factor in happening in the second half? And by the end of 2022, where would you expect the run rate of price increases to be at going into 2023? So that's the first question. The second one is on your revenue guidance. So let's say, midpoint broadly flat, and we had now H1 with quite dynamic Americas, soft APAC. How do you construct then the, let's say, flattish outlook for the full year? Should I assume a nice recovery for APAC and then maybe a sequential decline in Americas and EMEA sort of flattish? What's your thinking on the revenues here?
Silvio Napoli
Yes. Thank you, Patrick. Let me address the first question. Urs will address the second on revenues. On prices, it's always a delicate subject, because also there are, as you appreciate, some competition, a lot of things about what you can see or not see about prices coming up or not. However, the answer is, it will also depend on how inflation develops.
One of the key elements is operational focus internally. We really say that pricing and efficiency has to be able to offset inflation. And inflation, as you all know well, can no longer be something you plan in your budgeting phase 18 months in advance and then you go with it. Today, we're actually doing that too as part of the action. We actually look at rotating financial planning on a regular basis, including evaluating inflation.
So the answer on pricing is, how will inflation evolve and how will efficiency evolve. The key is that at the end, we have to be able to offset the inflation. So the way this looks today, I wouldn't exclude that there is another price increase in the second half, absolutely not. What could happen, and this is something we are likely discussing with Chief Operating Officer and with the head of the different regions, is we might then decide to do maybe local price actions depending on the wage inflation, because wage inflation is something which is then local, not global. So this also gives you an idea really, Patrick, of how we are really changing the way we work, by really going granular on specific actions and planning. Now Urs, perhaps you want to address the second element on revenues.
Urs Scheidegger
Thank you, Patrick, for the question. You already have pointed it out well where the revenue growth should come in H2, namely from China. I mentioned, only in Q2, we had a revenue impact drop of CHF 200 million due to this harsh China lockdowns of our production facilities. And assuming there are no such additional lockdowns, that's the assumption, in the second half year, then our production will work at full speed.
And this helps not only domestic China, but we also have a very large export business out of China to many other countries. Maybe to have an additional element, we see very strong order intake in repairs in H1, which also now will go into revenue recognition in H2 in regions like EMEA and the Americas. And this could lead to this midpoint assumption, always with the assumption, no China lockdown and no additional supply chain disruptions. Thank you.
Patrick Rafaisz
Thank you, both.
Urs Scheidegger
Thank you.
Operator
The next question comes from the line of Lars Brorson from Barclays. Please go ahead.
Lars Brorson
Hi, good morning. Silvio, I'll just echo the earlier comment, Urs, thanks for your help over the last few years and best of luck in your new role. Can I clarify -- thank you for clarifying actually the orders received margins sequentially better in the first half. I think that's consistent with what we've heard from KONE over the last three quarters. Maybe I could just ask specifically whether China indeed is also seeing OR margins higher sequentially, or whether that's all Rest of World. And related to that, forgive me, if I can just clarify on your Slide 30, which shows us New Installation orders by region by segment. I'm assuming Americas is up 5% to 10%. In other words, the red circle is a mistake, it's not negative. Just want to clarify that, and I'll come back with a couple of questions after that, please.
Silvio Napoli
Sorry, which slide number you referred to? Sorry, Lars, we're just not sure you're talking about Slide 12 or, sorry.
Lars Brorson
No, Slide 30. And sorry, we can take it offline as well. But I look at Slide 30, which shows your Q2, not first half of Q2. And it shows your New Installation orders in Americas, it has both a red dot, I believe, and two black dots. I just want to clarify the red dot is a mistake. And then my more general question was just to get a little more regional color around the improving OR margins in the first half.
Silvio Napoli
Very good. Thank you. So Urs, would you like to maybe address the first point about the Slide 30.
Urs Scheidegger
Right. Well, the Americas are, in quarter two -- you always need to as well assume, even in units, that you can have large orders affecting a bit the business. And so a quarterly view is a bit sensitive thing. I always recommend to leave you a longer period. As you also see in value, the Americas are in good shape or in solid shape, I would say.
Silvio Napoli
I would like just to stress one point here to this point. There is the issue of big projects impact quarter-on-quarter, which, as you can imagine, in America, the U.S., large projects play a big role. And there were a couple of big ones in Q1. But there is also another element. Going back to the other question about impact of what we started doing.
We now look at value of projects, which I said very clearly back in February that we are no longer going for growth at our cost. We're looking at profitable growth because this is the only way in which we're going to fix our profitability. I clearly would like to get everything we can do, provided we have a decent margin. And so part of the impact -- and back to the fact that people start listening and acting upon, most importantly, is that unless the job is well sold with a good margin, we have no hesitation whatsoever to say, no thanks. This is an attitude that, I must say, had been lost over the last few years, and now it's coming back forth as it should be for any sustainable business.
So some of the quarter-on-quarter in particular, of course, notwithstanding what Urs said, might show these kind of surprises because we are no longer prepared to take on jobs that don't have a margin consistent with our ambition here, to close the competitive gap. Of course, we have to work on our cost, on our efficiency, to make sure that we can be profitable and getting all the job we can. But today, as we have candidly said, that's not always the case.
Lars Brorson
Secondly, can I ask to complexity cost. I appreciate it's a bit of a moving picture. I don't feel I've got a very good handle on the level and duration of these complexity costs, the CHF 40 million in the first half. It sounds like there's another step up perhaps in the second half. Can you supply us a sense of what you think will be total product complexity cost associated with sorting out modularity, and how long they might run for, please?
Urs Scheidegger
Lars, these modularity costs are driven, as we also explained in Q1 call, very much by the Topic of a lot of very individual and commissioned orders, which we now trim, and we are standardizing and harmonizing, and the key actions are clearly in place. But the backlog has those complexities of a lot of individual orders and has to be delivered, and that comes at higher costs than it should be.
And I mentioned CHF 40 million for H1. And I do assume, we have to deliver this backlog now, so another CHF 40 million have to come by end of the year. Then all the key actions we have explained earlier of harmonizing, standardizing, getting the configurator in perfect shape will be in much better shape than next year. So I clearly expect much less such costs next year.
Lars Brorson
Can I squeeze a third and final one. And just on the China outlook, I think I heard you, Silvio, say probably quite a lot worse than your more than 50% down. Again, I appreciate it's a moving picture, of course. I wonder whether you would offer a more specified view. could it be down double that perhaps even? And maybe help us with the moving parts. I presume you're seeing a better infrastructure market. Obviously, that's quite small in unit terms, but how bad could resi be this year in your sort of base case for the market outlook. I'll stop there.
Silvio Napoli
Thank you, Lars. It is, of course, a super important question. I believe, by now, 15% contraction is a conservative figure. So when we look at all scenarios, no, we didn't look at anything bigger than 30%, because I cannot imagine even by simple probably basic demand and outstanding tenders, we don't see that going below 30%. But honestly, between 15% and 30%, there is, I think, room for guessing in that. Now what are the moving parts? Property developers is the biggest one. Now that one, and you will, probably through your banks, they've much more than we have, but through our sources in China, through our analysis, we don't see that being fixed in the short term. As a matter of fact, you can see the government is now stepping in, as they have done in the past, with any major campaign to support them.
To the contrary, even bigger ones are let to disappear, trying not to hoard mortgage hoarders. What is concerning, I would say, is that even now state-owned developers are starting to run into trouble. That, for me, was one of the worst developments of the year. So far, there were mainly private ones. But now you see also one with a large government holding start to show difficulties.
So the outlook, I must say, is not good in that regard. Now you're right. The offset come by government infrastructure projects. Though I must say I don't see that compensating for the whole thing, because there is only so much that China can do. There is a lot of them -- by the way, a lot of the order intake is still a lot of projects.
So that is already factored in the project -- in the market so far. And there, too, I think there is an issue of how much can be done, how much is the government prepared to finance it. And of course, which developers can then build the project. And today, that starts being a bit of a virtuous circle. So I hate to paint such a gloomy picture, but I don't see now in the short term any magic card out of the problem.
Operator
The next question comes from the line of [indiscernible] with Jet Capital. Please go ahead.
Unidentified Analyst
Hi gentlemen. I have two questions. First, you mentioned in the past few meetings that you will supply us hard KPIs we can measure you on, probably not over the results day, but in early fall. Any updates on that? When can we expect to see something here? Or can you tell us any details on what kind of KPIs we should expect already today?
And then second question, Mr. Napoli, you talked before about walking away from projects with margin levels that are not satisfactory. Do you have any more insight in what type of clients and projects you lose and how long that correction and market share loss phase will continue? Is it really just a phase to get rid of these most price-conscious clients and that is soon over? Or should we expect Schindler to rather grow less than some of the biggest competitors for a few more quarters or even years?
Silvio Napoli
Thank you for your question. Let me first -- and I'll address them both. Number one, KPIs or more presentation. The idea was indeed to have something together with the Q3 results. Now in the meantime, we're going to have a new CFO joining, and I think it is fair that we ask her what she thinks about it. However, the idea is still -- please allow me to confirm that, but the idea would be, with Q3, we will provide probably, let me say, a wider picture of the way we see the next couple of years developing based on this new approach. I do believe it's important to do it once we have progressed a bit more on fixing the issues we identified. Otherwise, it's like giving a new routing signal out of a storm. That's not the point.
So that would be still planned for the Q3 results date. And hopefully, next year we can do something more extensive with even more information on products, et cetera. Your second question on the market share loss. We don't intend, we don't like, we don't enjoy losing market share. And by the way, so it is not a Topic about global. There are some markets in where we are very strong, where our brand is very strong, where actually we are also very profitable, where we don't lack capabilities. And there, there is no question whatsoever to lose any market share. To the contrary there, we are very much into consolidating getting stronger. You may have seen that we have also smaller acquisitions in the first part of the year, but that is somewhat consistent with that statement.
There are other parts of the world where our business model for a number of reasons is maybe not as solid because of margin sourcing, supply and all of that. There, clearly, we have to be careful. And what are these type of projects? Well, they can change, but usually, typically, just to supply you an example, those super-large projects, typically, we'll see infrastructure or these kind of things, very costly to tender, very costly to realize, a lot of risk.
By the way, Schindler is very strong. But in some parts of the world, we have been stronger than others. And these are the kind of projects where, unless we are sure that we can deliver, that we have a competitive offer, where I would say the market also provides for a price level that is acceptable, then we will be better, yes, not to take it. And that is important. And I always say, the mantra here is, higher margins, equal growth.
So people say, what does it mean? Do we have to grow, or we have to look at margins? No, it's the same. If you want to grow, you have to have healthy margins, because healthy margins allow you to get the job and to grow and prepare for the next one. Otherwise, it becomes a negative spiral, which, I have to say, over the last two years has been dangerously followed. So that is clearly a change going forward.
Unidentified Analyst
Okay. Thank you very much. It's helpful.
Silvio Napoli
Thank you.
Operator
Today's last question comes from the line of [indiscernible] with Bank of America. Please go ahead.
AlexVirgo
Hi, it's Alex Virgo from Bank of America. Thanks for taking my questions, gents. So I guess there are two, if I may. The first one is I'm just wondering if you can supply us some detail on how you're going to or how you're already incentivizing your sales force to not supply up the pricing increases that you've put in place, and I guess, supply discounts to offset it, which I believe may have been part of the problem last year.
And then the second question is just to clarify on the wage inflation, the CHF 120 million for the full year. Did I hear you say correctly that you've seen CHF 80 million in the first half, and just thinking about the implications of a broader wage inflation that we're seeing in the market, or in the world globally about the next year as well? If you could supply us some idea of the percentage increase, maybe that might be helpful.
Silvio Napoli
Thank you, Alex. Let me address the question on sales and also take the one on wage. On sales force, you're absolutely right. What happened in the past was that there was a price list and then there was a real price based on discount. So in a nutshell, the discount authority has been taken away and has been elevated to the top management in small units of the country, but in, let's say, larger operations at regional DP level. That is the simplest. Now there are tools to do that.
One is the way we have our configurators, so the way jobs are sold. People don't see the margin. And you have a price and that's the only one you can put into your cost calculation, and that's it. So we removed away the margin visibility, which is a very classic engineering one. You may argue why it didn't happen before. I can only say, better late than never. And then finally, there is incentive. Now the incentives on the sales has been adjusted in a way that price quality is the key factor in driving salespeople's incentive.
That, as Urs mentioned, is starting to work. And you saw the chart we showed before. Exception there it's China. We also need to consider that in China, in fact, in Q2, there was much less sales activity and people had, frankly, other concerns. But nonetheless, I think it is fair to say China would be a tougher one, also because I think I mentioned last time, China never dealt with inflation. And we have people that never dealt with a deal of increasing prices.
So then China, as this additional element, which I would call almost a cultural training, which I believe is not only us, but in our case, we are taking very seriously, including, in some cases, having to replace some people that say, frankly, I cannot do this. Well, then we need to find someone else that can do it. Hopefully, that helps. Urs, would you like to take the second question?
Urs Scheidegger
Yes. On wage inflation, what I said for H1 was a number of CHF 80 million. And I said this is wage and subcon inflation. So we have 3% wage inflation, which is CHF 60 million for H1, and it will be CHF 120 million for the full year. That's 3%. It won't be a surprise to state, I do assume wage inflation is higher next year. And this, of course, needs to be completely covered by applying our formula, pricing plus efficiencies higher than inflation.
So such impacts need to be covered in our sales price increases we are applying now. But of course, this is a headwind to our results, which we need to work with the key actions Silvio has outlined before.
AlexVirgo
Great, that's very helpful. Thanks very much, gentlemen.
Urs Scheidegger
Thank you, Alex.
Marco Knuchel
Thank you very much for attending this call today. We have to close now. There are still a few people in the queue. Apologies that we are not able to answer all the questions on the call, but please feel free to reach out for any follow-up or any open questions you still might have. The next event is the third quarter results on October 20, 2022. We wish you a nice summer. Take care. Thank you, and goodbye.
Silvio Napoli
Thank you, everyone. Thank you for joining, and thank you for the great questions. See you all speaking in October. Bye-bye.
Operator
Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.
