ManpowerGroup Inc. (MAN) Q3 2010 Earnings Report, Transcript and Summary

Good afternoon, ladies and gentlemen and welcome to MAN SE conference call regarding the q3 results 2010. Today's representatives of MAN are Dr. Georg Pachta-Reyhofen, CEO; Frank Lutz, CFO; and Silke Glitza-Stamberger, Head of Investor Relations. At this time, all participants are placed in a listen-only mode. The floor will be open for questions following the short introduction of MAN CEO, Dr. Georg Pachta-Reyhofen. Let me now hand the floor over to Dr. Pachta-Reyhofen.

Yes. Hello and welcome, ladies and gentlemen, to our conference call of MAN Group. I assume that you have got the report, the Q3 report and that you have read the figures, and I think the best is immediately to start with the questions. So, please when – if you start with the questions, we are now open.

(Operator instructions) The first question comes from Fredric Stahl of UBS. Fredric Stahl – UBS: Yes, good afternoon, gentlemen. I would like to ask a question about your profit – of the profitability in the Commercial Vehicles business, I mean, trucks in particular. Is there any reason to believe that your operating leverage will change in the Q4, when I think your production levels take another step up because, well, at least from where I see it, comparing to your other peers in Europe you are still not showing the same type of leverage on the revenue increases. So I was wondering if you could provide a bit more color of how – what that looks like going into the fourth quarter of the year.

Fredric, it's Frank speaking. We have communicated in the past and you can see that also very clearly in the third quarter that we are approximately a quarter behind our competitors, given that we saw our weakest quarters in terms of order intake in Q3 and Q4 last year where most of the others already recovered. And you can now see that in our – in the production capacity utilization, you can see that in revenues coming back, et cetera. We expect the positive trend that we have seen starting with Q2 continuing to Q3. Also, we could expect this trend to continue in Q4, i.e. we will have better production capacity utilization and therefore, operating leverage should be increasing quarter-over-quarter. Fredric Stahl – UBS: Very good. And then if I can follow up on turbo and diesel, you are flagging slightly lower capacity utilization in the fourth quarter compared to the third quarter. Can you maybe comment on what it looks like going into 2011, how well covered are you in – during the year?

Yes, you are right. This is also a reflection of the cyclicality of the power engineering business where we have longer cycles and have a relatively weak order intake going into 2009 that is now turning into revenues during the next year. As we indicated before, next year will be our weakest year in terms of revenues in the power engineering business. Nevertheless, clear statement also, we expect this business to be double digit in terms of profitability. What it will mean is that we will have some capacity underutilization to our 2011 and that will also mean that we'll use short-term work where it's justified. Fredric Stahl – UBS: Excellent. Thank you very much.

The next question comes from Alexander Haissl from Cheuvreux. Alexander Haissl – Cheuvreux: Good afternoon. It's Alexander Haissl from Cheuvreux speaking. I have few questions on the Truck business, can you just provide more color on the individual regions if Russia, Eastern Europe is picking up and if we can expect better operating result if these higher orders turn into revenues in the coming quarters? The other point is in terms of pricing, can you just confirm that prices are still stable, that there is no pressure in Europe on prices? And also, can you give us an indication on the used vehicle prices, what's going on there? And lastly, also on the marine business, can you give us some indication of the after-market business, if you see any pickup there? Thank you.

Yes, concerning the growth in the different areas and you can see that in all European areas, we see upturn, in all of them. In Germany, we sold roughly 56% more. In Eastern Europe, it's even more; it's 170% for example. Middle East is coming back with more than 100% plus. So, we see an increase everywhere. In Europe, East, West, North and South and therefore we are convinced that also next year will be a good year for the trucks business; for order intake as well as turnover, because there is only a lead time of three months in between those two factors.

In terms of prices, the prices for new vehicles are stable. We have seen the decrease in 2009, but the price level is now stable. And on the used vehicle prices, we can already see that prices are recovering and increasing. Again, this is also due to the fact that pretty much everybody is virtually sold out on used vehicles. Finally, after-sales on the power engineering side, after-sales account at the moment for about 36% of revenues. Clear statement from our side, we want this number to grow. There is potential, this is also an area where we invest, where we buy workshops or make sure that we are close to our customers. So, certainly an area for growth, even in a year like 2011 where the new business will be slightly weaker. Alexander Haissl – Cheuvreux: Thank you. Just one quick follow-up on the mix in the trucks. Can you give us indication on heavy trucks, light, semi, medium trucks, how they have developed or has it been pretty much the same direction for all of this?

I mean, the drop in the medium and light sector was less than in the heavy sector last year and in 2009. And then it's the other way around now concerning the growth. So the heavy range growth was so far the biggest one. Corresponding to – order – yes, something like, yes, 29%, 30% plus. And I think the problem is not the order intake in buses, but at the moment, the revenue in buses, because last year there were – in city buses especially, there were some subsidy programs and therefore there were a lot of additional money for the commonalities for city buses, which is not the case now. But we see an increasing order intake in buses now. But we are now suffering from the order intake of last year concerning the turnover. But in the trucks business, in all areas there is a plus, the strongest one in the heavy range. Alexander Haissl – Cheuvreux: Perfect. Many thanks.

Next question comes from Jochen Gehrke from Deutsche Bank. Please go ahead. Jochen Gehrke – Deutsche Bank: Yes, good afternoon. Three questions, if I may. First of all, a very quick one, your Swedish competitors have tried to quantify their – at least on preliminary, their market outlook for 2011. What are you expecting? Should we expect market recovery of low-double – like around 10% or are you going for a faster European market recovery? Secondly, with regards to the Scania Corporation, you stated earlier on that by the end of the year you would be in a position to quantify the synergy potential. You quantified those – or MAN quantified those synergy potentials in the past when you were bidding for Scania as a whole. Should we expect that number, EUR500 million, to still be valid? Could you at least qualitatively say it will be lower than that number, or is this the realistic benchmark? And then thirdly, with regards to your major shareholder, yesterday, in their telephone conference Volkswagen stated that they are now setting up their trucks group with Mr. Heizmann heading it. And they also stated in there that they think Volkswagen can add automotive technological competence into the truck groups, so talking about Scania and you obviously. Could you just quickly comment on that, where you see fields where this does make sense? And secondly, could you just on that point quickly outline how the managerial work is happening, if it's getting coordinated by this guy or should we just think about this as in reporting lines? Thank you very much.

Okay. First question concerning the European markets, yes, there are some estimations. This year, it will be 220,000 registrations in Europe for heavy truck. They believe in all this questionnaire that it will be around 240, 250, so, yes, 10% I would say. That is – but this is only a very rough estimation for the overall market. And then of course, it depends on in which area you are, heavy, medium or light and market share-wise what will be then the outcome. I think it will be stronger than that. I see it more in the direction of 15% than on 10%. But okay, we have to wait to see, end of the year maybe we can then have a clearer picture. Concerning Scania, I don't want to comment the overall – let's say some of what we are able to gain because we are now looking in details in all areas. And I expect that we will see the first result end of the year and then we can add at the end of day together and see the overall potential. And concerning VW, I don't want to comment what they are now planning concerning their truck, whoever over there. I think this is – you have to ask to Volkswagen. There are of course always potential synergies we can also achieve, including Volkswagen in – also areas which we have already investigated, especially purchasing and also some areas in development. But organizational-wise, I don't want to comment it. Jochen Gehrke – Deutsche Bank: Okay. Thank you very much.

Next question comes from Nico Dil of J.P. Morgan. Please go ahead. Nico Dil – J.P. Morgan: Good afternoon, gentlemen. I like to ask three questions, please. First of all, a rather simple question, what were the orders in the truck business in the old commercial vehicle business like in September and in October? So, I saw an overall figure here of 15 – 7,000 trucks, wondering sort of what that was for September and October. Second question is, looking at the guidance you've provided in the power business, down a little bit on the revenue side compared to 2009, whether – wonder whether you could quantify that a little bit further. And the last question is really sort of a – a bit more of an inside question. I look at the revenues year-to-date, it's about EUR3.5 billion a quarter. The last quarter seems to be at the minimum, about EUR4 billion, still the profit margin is expected to be the same as we've had on average for the first three quarters, that means very little operational leverage. Wonder why we should get less operational leverage in the fourth quarter. That's the last question. Thank you.

First on the orders, on the – in the what you call old commercial vehicles business, we are now steadily above 5,000 units a month and that's true for September and October. On the question about revenues for diesel turbo for the full year, it will be in the same ballpark as we are after nine months. So, a minus 2% or 3%, something like that compared to last year. And then finally, in terms of operational leverage or margins going down, we will – as described before, we will enter a time where we have some capacity underutilization on the power engineering side and that will mildly effect the margin, not dramatically as described before because we still – we will say in double-digit profitability, but nevertheless, it will have some small effect and that's why the margin will go down. Nico Dil – J.P. Morgan: Okay. Thank you.

Next question comes from Yann Benhamou of Exane. Please go ahead. Yann Benhamou – Exane: Hi, good afternoon. Two questions, please. First, can you give us a bit of insight about what will be your orders in Q4 compared to Q3 in terms of rates? And second question with regards to Lat Am, how do you explain the small erosion of margins in Q3 compared to Q2 despite the higher deliveries? Is it a question of cost, is it a question of pricing, or is it just a question of seasonality? Thank you.

In terms of the production program for the fourth quarter, it will be more or less the same as in the third quarter. We gave the indication that we will sell between 115,000 and 120,000 trucks worldwide this year, and that will also be the overall production. We currently stand at about 91,000 trucks after nine months. And the split will be more or less even, about 15,000 in old commercial vehicles business and about 15,000 in Latin America, roughly. Yann Benhamou – Exane: Thank you.

Now, the question on the margin in Latin America in the third quarter, this was mainly logistic costs. This is nothing dramatic. We also are in the process of introducing this new production line, we have described that before. So there's a couple of minor cost effects that brought down the margin slightly. But no currency effect or anything like that that would bring that down. Yann Benhamou – Exane: And do you expect those effects to continue going forward?

No, I don't see any reason why they should continue. Yann Benhamou – Exane: So, now the one-off costs for the additional line are over?

Sorry? Yann Benhamou – Exane: So, additional costs that you had for the new line you are implementing are behind us?

Yes. Yann Benhamou – Exane: Thank you.

Next question comes from Alexis Albert of Nomura. Please go ahead. Alexis Albert – Nomura: Yes, good afternoon. Alexis Albert, Nomura. I have two questions. The first one is regarding Sinotruk and Scania. We saw quite a nice contribution from those two businesses in the Q3. I guess you don't want to comment about Scania, that I fully understand. But can you help us understand how Sinotruk is going to contribute in the EBITDA from – of MAN going forward? So this is the first question. Second question is regarding power plants. So you were committed to be black in – to be back in the black at the power plants business, you did it, you had EUR6 million in the Q3. I like to understand if this EUR6 million is the low point going forward or if we can still see some slight burden in the Q4 and beginning of 2011. I guess that you will remain positive, but my question is more is EUR6 million the minimum or are we going to stay in that range.

If we – on your second question first, if we want to stay profitable, we don't have a lot of flexibility between zero and 6 now. But seriously, we – as you said, we committed ourselves to being profitable starting with Q3 and this is not a one-time situation. The same will be true for Q4. We are ramping it up, we had to pay some learning costs at the beginning, as described before. We have built up, however, now some competence. We are basically one of the very few, if not the only one, who at the – on the one hand, produces the engines and on the other hand has the capability of building turkey power plants. And we will bank on that capabilities and on that knowledge going forward. So therefore, clearly the message is there is much more profitability potentially in the future. Sinotruk, yes. Sinotruk, you have to keep in mind that this is a nine-month effect that we are showing here, given that Sinotruk is only reporting half yearly and there is also some time lag this time, you see nine-month figures and our equity stake in the profits of Sinotruk in there. So therefore, as we don't do it quarter-on-quarter, don't expect another Sinotruk effect like that in the next quarter. Alexis Albert – Nomura: Okay, that's very clear. But are we going to get an additional effect for the full year or are we – or are you just going to – are you going to stay with that? I'm just trying to understand how you are going to consolidate it.

No, you will get the next effect only next year, most likely when we announce our Q1 results, because of the time lag that I described. Alexis Albert – Nomura: Okay, so – yes, but I understand the time lag. I know that some of the companies such as – I mean, some of the companies, they have a time lag in consolidation. But why would you only get nine months of earnings in your full year results? So that – that's just – I don't understand this.

Well, this is due to the fact we bought the business in – well, finally in December of last year. So we have the results of nine months in there and they only report twice a year. So basically, only when they report numbers we can show them the next time we report in our numbers. So, we have done it this time so the next time we can report the next set of numbers in our numbers. It's two quarters from now, that's Q1 2011. Alexis Albert – Nomura: Okay, that's – okay, that's clear. Thank you very much.

(Operator instructions) Next question comes from Nico Dil of J.P. Morgan. Nico Dil – J.P. Morgan: Good afternoon again, gentlemen. I'd like to ask one follow-up question. Just trying to do a little bit of math here at my desk. Looking at the Diesel & Turbo division, down 2% to 3% for the year implies that we are going to have a revenue number which is roughly in line, perhaps slightly above what we reported in Q3 and don't really see the negative impact on the margin there very evidently. And secondly, to your question that – or to the question that Fred asked a little bit earlier on the call, you highlighted positive margin improvement on the back of better truck revenues going forward and sort of would like to understand where the negative margin implication comes from in Q4 a little bit better.

Well, on your first question, we are in the POC business as well – so – percentage of completion. So, you will see some revenues in a quarter even if we have production underutilization. And we will go into a production underutilization in the fourth quarter. So that will have an impact on our margin. And at the same time, you still see a revenue which is only going down by 1 – by a minor amount of percentage points, because we still bring products and also in the top line business, our power plant to revenues, because of the percentage of completion calculation and accounting. Then the other one was – truck, oh yes, truck. On the truck side, there is no indication that we will see a deterioration in margins on the truck business. We think that the truck business will continue. We have more and more production capacity utilization the more we increase our production. In Brazil, the business is continuing extremely well. So therefore, we don't have any fears at the moment that the margin will go down. Nico Dil – J.P. Morgan: Thank you.

Next question comes from Ben Maslen of Merrill Lynch. Please go ahead.

Ben Maslen – Merrill Lynch: Yes, good afternoon everyone. It's Ben from Merrill Lynch. A couple of questions, please. Firstly on Brazil, one of your major competitors saw a weak sequential order development during the third quarter. I know you don't report orders, but do you see anything that suggests the market is rolling over on what you expect for the fourth quarter? That's the first question. Secondly, on the European truck business, I just want to clarify, from your statement, it looks like you had no benefit from short-term work in the third quarter, is that correct? And if so, to what extent has the short-term work has unraveled over the last three to four quarters or has become less and less? Has that been a drag on your operational leverage as volumes have picked up? Thank you.

Well, on short-term work first, we have ended short-term work in two of our factories in Steyr and in our Nuremberg engine factory at the end of the second quarter. We still have some short-term work in our Munich and Salzgitter production facilities. On average, we have had 33 short-term works during the first nine months of this year. Clearly, the effect of short-term work is decreasing the more we produce. But be assured or rest assured that we very carefully look at the profitability of the vehicles that we produce compared to what we could save in employee costs if we went into short-term work and clearly, the effect is always positive. So there is clearly a trend that we will continue in Q4. On the order intake, we can clearly say – yes, it's correct that we don't give the exact numbers, but we can clearly say that order intake in terms of units increased from Q2 to Q3 both in Europe, as well as in Latin America. Ben Maslen – Merrill Lynch: Okay, great. Thanks. And maybe just on the short-term work, can you say if you had 33 days in the first nine months what it was in Q3 and then what would you expect in the final quarter of the year?

It was significantly less in Q3 and the bulk of it will be in the – well, was in the first half of this year and it will decrease more and more during this fourth quarter. Ben Maslen – Merrill Lynch: Okay. Thank you.

Next question comes from Chris Youl of MainFirst Bank. Please go ahead. Chris Youl – MainFirst Bank: Hi, good afternoon. It's Chris Youl here from MainFirst in London. Just had a few follow-up questions on Sinotruk. First of all, I wondered if you could just provide a comment on the demand environment as you understand it in China at the moment and if – whether we are seeing any signs of a slowdown. Secondly, if possible, could you remind me of the timing of when the introduction of the mid-priced vehicle in China is happening and update us on the progress there? And thirdly, am I right in saying that China switches to Euro 5 technology in 2012? And as a follow-up to that, will MAN be passing on this technology under similar license agreement? Thank you.

Yes, Sinotruk, they had a tremendous growth this year – or they will see a tremendous growth this year. Last year, they produced 125,000 trucks – heavy trucks. This year, we expect that they will come up to 190,000. So, they are still on a growth path and I don't see at the moment that it is really cooling down, maybe a little bit, but they will see an additional growth the coming year. The coming year, we want to introduce the new products in 2011, the – which as you know, a TGA-based heavy truck which will be then sold under a new brand, we'll start next year in China and then we will see if you continue then end of the year or 2012 in export. So that is the plan and this plan is still on time, on track. The – concerning the Euro 5, I only know that 2012 limit for this date for Brazil. In Brazil, they definitely will start with Euro 5 in 2012. That is why we are introducing our MAN engine in Euro 5 technology in Brazil in the Constellation truck. For China, I only know that some cities plan to introduce Euro 4, maybe later on Euro 5. But it's not in the overall country in 2012. Chris Youl – MainFirst Bank: Okay. Thanks very much.

Next question comes from Roddy Bridge from Societe Generale. Roddy Bridge – Societe Generale: Good afternoon, gentlemen. I have just a few little housekeeping questions left. The first thing is on PPA, I noticed the rise in the quarter from about, I think it was EUR25 million or so last quarter to EUR35 million, I was just wondering if you could tell us why this was and give us a little guidance going forwards. The other thing was the deconsolidation of manroland. I mean, I gather you've written it down to zero now. Did you take some charge straight to equity on that, and if so, how much? And thirdly, the joint venture with Rheinmetall, how do we see this impacting sales and profitability going forwards?

The question on PPA, you mean the purchase price allocation? Roddy Bridge – Societe Generale: Yes.

Okay, yes. Well, here we have the effect that for the first time in the purchase price allocation you don't only see our purchase price allocation in Brazil, but also the purchase price allocation for the Sinotruk business and that was in effect of roughly EUR10 million. Roddy Bridge – Societe Generale: So that EUR35 million, we should treat as the number going forwards?

Yes, yes, exactly. Now, on manroland, what happened here is that because we report manroland at equity, we decrease the book value with every loss that they make. And they have now made an additional loss, which brought us to zero and that is why manroland is reported with a book value of zero. So there is no further hit that we took or anything like that and that's also no deconsolidation. It is just that we have reached zero with the book value. Roddy Bridge – Societe Generale: So, we should expect no effects going forwards, but – I mean, you still own the business. Are you going to have to bail it out again at some time?

No, no. If we had to bail it out, then we would have to show it in our books. Given that we don't have an obligation to bail it out, we will not show any further effect in our P&L. Roddy Bridge – Societe Generale: Okay. Thank you.

And then – Roddy Bridge – Societe Generale: And Rheinmetall.

So Rheinmetall, we have planned two steps. Step one is pretty complete, so the closing is done. The company is a joint venture now of 49% MAN, 51% Rheinmetall. The sales and the engineering people are already combined. They are sitting in Munich and parts-wise in Vienna and roughly 370 people. And the next, step two, will be then end of 2011 when we want to bring the two big plants, Kassel and Vienna. Then they will have an overall headcount of roughly 1,300 to 1,400 people and so sales is still valid, the sales plan turnover of – in 2012 of EUR1 billion. Roddy Bridge – Societe Generale: But presumably you will be taking some sales out because it's going into a joint venture. I was just trying to work out whether there is some sales coming out of Nutzfahrzeuge and profit coming out of Nutzfahrzeuge because of that.

What was the exact question now? Roddy Bridge – Societe Generale: Well, if you are creating a joint venture, presumably putting some of your sales into it.

Yes. Roddy Bridge – Societe Generale: So, we will see that move out to the sales of Nutzfahrzeuge.

Of course, we will have transfer prices, because we are delivering out of Nutzfahrzeuge to the joint venture, the trucks. And then they are built up there and they are armored there and then they are sold as a complete armored vehicle with an additional value of cost. Roddy Bridge – Societe Generale: So, it won't have actually an effect on your sales out of Nutzfahrzeuge?

Yes, yes. Roddy Bridge – Societe Generale: Thank you.

Next question comes from Frank Biller of LBBW. Please go ahead. Frank Biller – LBBW: Yes, good afternoon. It's Frank Biller from LBBW. Three quick questions. The one thing is maybe you can give us some sort of an update in Ferrostaal. There is something mentioned in your quarterly report. I was more interested in the timing frame here when we will receive some burdens or no burdens at all. The other thing is guidance in margins for Latin America. Are you still targeting double-digit margins for Q4 and also the years to come? And the other thing is, again on PPA at Sinotruk. If I understand it right, the EUR10 million was for nine months period, was it? And, therefore, the EUR35 million shouldn't be a run rate?

Well, first one, no, it's absolutely clear that the EUR35 million is not a run rate. But we will now have a stable situation and going forward, we will have an annual figure for the Brazilian business where we do purchase price allocation and we will have a figure for Sinotruk. Now, those figures obviously will fluctuate, because there are different amortization periods for the assets. So, we will have the largest amortization this year and in the next two or three years to come and then some of the assets will be amortized and then you will see that amortization and therefore, the PPA effect going down. Frank Biller – LBBW: So fourth quarter below EUR30 million then, because the effect of Sinotruk was for nine months period, was it?

Yes. But – yes, just to make sure that there is no misunderstanding, in the EUR35 million, you have both Latin America and Sinotruk. Frank Biller – LBBW: Yes, sure.

Yes? Okay. So, roughly EUR9 million, EUR10 million coming out of Sinotruk, the rest being Latin America. In the next quarter, in the Q4, you will have Latin America again and then a minor effect coming out of Sinotruk that might be around EUR3 million or so. On Ferrostaal, we have constructive discussions at the moment, and it's really too early to say whether we will have any effect at all or whether it will be this year or next year. We will see how that contuse continues. There is obviously several parties involved and therefore, we will see how that continues. But the construct – the discussions so far are quite constructive. Frank Biller – LBBW: So, no special date to look at?

No special date to look at. No, certainly. We have not put ourselves under any time pressure. Frank Biller – LBBW: And margin in Brazil?

Margin in Brazil, we are – we see no reason why the margin in Brazil from today's perspective should go down significantly. As we say, the business is continuing positively. We have seen higher order intake. There might be some year-end effect, as there are always. We will see how that develops. Now – and you also know that there are currently presidential elections in Brazil. There might be some uncertainty around that. But so far, we haven’t – we see no effect at all and therefore, I would say from today's perspective also, no worry about the margin. Frank Biller – LBBW: Thank you.

Next question comes from Michael Punzet of DZ Bank. Please go ahead. Michael Punzet – DZ Bank: Yes, Michael Punzet, good afternoon – DZ Bank. I have three questions, if I may. The first two are related to your statements in the press conference. According to Reuters, you have said that you expect only a slight increase with regard to 2011 compared to 2010. Maybe you can give some comments. Is that related to – as I expect that this is related to the revenue side? Maybe you can give also some comments with regard to the operational profit. Then you were quoted saying that you can reach – the level of 2006-2007 by year 2012-2013. Is that related to also operating level or only to the truck sales? And the last one is on your Scania stake. I think you have booked a huge loss from the impairment test or write down your assets at Scania at year-end. Now taking into account that the share price has performed very well, how likely it is that you have to book the other way round at the end of this year? Thanks.

With 2011, I have not read that quote. We have not given a clear indication of 2011. We said we will continue to improve the overall business we see, the truck business in Europe to continue to improve. And as we said before, most likely a 10% increase in terms of number of registered vehicles for 2011 compared to 2010 is probably a good assumption. So – but that's as far as we can see as well. In terms of profitability, again, we should – as a group, we should improve our profitability in 2011 compared to 2010 by the fact that Power Engineering will be slightly weaker. Michael Punzet – DZ Bank: Okay.

On Scania, I would say, yes, your observation is right. If by the end of this year the share price is where it currently is, we might have to adjust our book value again. Michael Punzet – DZ Bank: Okay. Thanks.

Concerning the figures of the level 2012 compared to 2006, it was in relation to the truck sales. Michael Punzet – DZ Bank: Okay.

So the level of truck sales 2006, I think we will see in 2012. Michael Punzet – DZ Bank: Okay. Thank you.

Next question, please?

Next question comes from José Asumendi of RBS. Please go ahead. José Asumendi – RBS: Thank you very much. Just going back to power plant, please. Looking at your order bank, I'm trying to figure out what kind of – if you could give us some indication of what kind of revenue growth does these order banks report over the next quarters. Is it more in line with Q3 or should we expect a substantial improvement as we go forward? And second, in terms of the profitability, I understand you have taken some measures to make the business profitable or at least break-even. What is the next step? Is it – do you need – can you do something operationally or do you need to improve the pricing within your – within the upcoming contracts? And then last on Latin America Commercial Vehicles, how many months of visibility have you got right now in the business? How many weeks does it take to deliver a truck from when you get the order? And if you would – just looking into the first quarter of '11 – of 2011, which is not very far away, do you expect a slowdown in order intake or is it still – you are still feeling confident on this end?

To answer your last question first, we are very confident also about 2011. In Latin America, the time between the order and the delivery varies, but we – usually, we try to keep it below three months. It is not easy at the moment, because we are at more or less full production capacity. We have introduced the third shift. We work on Saturdays. On Tuesday, it's a national holiday in Brazil, we will work on the national holiday. So we will do whatever we can to get the trucks out of the factory. But given that there is high demand and as I described it before, it's even increased from Q2 to Q3, well, there is – our customers, unfortunately, have to wait some time until they get the vehicles. In terms of profitability in the power plant business, I would describe it the other way round. We didn't have to take any measures to make it profitable. It was profitable. Unfortunately, we had to pay some learning costs on turnkey side, which affected the profitability over the last two quarters. But given that we have these things under control now, we are getting back into the territory where you can see the true profitability more and more for the power plant business. The visibility on the power plant side, i.e. the order backlog, given that there is some big orders that we have – this is the Brazil order, there are some other turnkey projects for electricity reforms that you know about. The visibility in itself is quite good nevertheless. It is a lump business, so as soon as you get a new order – and we are currently negotiating a couple of new orders, then you will see a huge order intake as a one-time event. José Asumendi – RBS: Okay. Thank you very much.

Next question comes from Hermann Reith of BHF-Bank. Please go ahead. Hermann Reith – BHF-Bank: Yes, hello. I have some questions regarding order intake, first, Latin America. You indicated the run rate per month of 5,000 units there. That's significantly below the 5,800 in the third quarter and especially compared to the July and August figures which were much higher. Do you see some first order intake decline there? And should we expect this 5,000 also in the near term? That means in the first, second quarter of 2011. Second, order intake in Russia; could you please quantify order intake in the three first quarters of 2010? And at last, regard to order intake in turbo machines, it was a very high figure in the third quarter. Should we expect that as a sustained level or was it boosted by some one – bigger orders then? Thank you.

On your first question, I think there was a misunderstanding. When I was talking about the 5,000, I was talking about the old commercial vehicles business, i.e. the European commercial vehicles business where we have a run rate of about 5,000 per month. Hermann Reith – BHF-Bank: I understood. Sorry, I understood that it is equally split – the 30,000 equally split between Nutzfahrzeuge and Kassel.

I said more or less. Hermann Reith – BHF-Bank: Yes.

(inaudible). As I said before, in Latin America, our order intake even increased compared to Q2. So there was an increase from Q2 to Q3 and therefore, the run rate numbers that you have mentioned are still in tact. Hermann Reith – BHF-Bank: Okay, fine.

What was the next question? Hermann Reith – BHF-Bank: Order intake Russia.

Order intake Russia, about – so far about 2,000 vehicles this year. Hermann Reith – BHF-Bank: And is there a gain of momentum during the –?

There is a clear gain of momentum, yes. The year had a very slow start in Russia. It was certainly one of our problem areas in the first quarter and also in the second quarter. But towards the second quarter, things improved and it's certainly positive momentum that was in here.

I think we are expecting 3,000 end of the year.

Yes. 3,000 is the goal for the end of the year. Hermann Reith – BHF-Bank: Okay.

And it was a few hundred last year, so it's – there is really a momentum in it. You can see that. Hermann Reith – BHF-Bank: And then turbo machines, the EUR350 million order intake in Q3?

Yes. Well, well, Turbomachinery as well is a little bit of a lumpy business if you got a large order in. So there is some – maybe some cutoff and time effects, but nothing where we see any extraordinary situations. What we can see though is that the business in itself will benefit from the very good business that we took in 12 months, 18 months ago with a very high margin. Hermann Reith – BHF-Bank: Okay, fine. Thank you.

We have one more question of Fredric Stahl of UBS. Please go ahead. Fredric Stahl – UBS: Yes, hi, gentlemen. It's Fredric here again. Just a quick question on the – I think you mentioned that you – I'm going back to the production in commercial vehicles, the old core business there. Did I hear you correct that you said you expect it to produce roughly 15,000 units in Q4? Can I ask you then why it is not higher? Do you – I mean, I think there would – there should normally be a step-up given seasonality. If you can explain that, please?

Well, you can – it's question to which quarter do you compare that. Certainly the second half production in 2010 is significantly higher than the first half production in 2010. Fredric Stahl – UBS: I'm comparing Q4 over Q3.

Q4 over Q3? Well, I mean, as of the middle of December, there is not much production going on anymore. And that effect is certainly something which will – which you can see in the number, but – and in the third quarter, we had some holidays there – in there as well. So it's more or less comparable and we certainly don't want to produce too many trucks at the moment in the old commercial vehicles business so that we need to put them on stock. Fredric Stahl – UBS: No, I understand that. I thought – well, I was under – of the understanding that you still – you had a backlog given that your orders have been running over above production and sales for quite a few – quite a while. Maybe I'm mistaken there.

The – we have – we do have some order backlog, but not that big and we don't want to ramp up production too quickly. Yes, we certainly do that – as I mentioned before, we are reducing short-term work and that will obviously have an effect on our overall production. But it will not be significant, that effect. We will do that gradually. Fredric Stahl – UBS: That's clear. Thank you very much.

Last question comes from Alexis Albert of Nomura. Please go ahead. Alexis Albert – Nomura: Hi, good afternoon. Alexis Albert once again. I have just one follow-up question. If I'm not mistaken, during the Capital Day in Brazil, you mentioned that you were targeting to be, I would say, debt free in the industrial business or close to debt-free. Is it still a target for you?

Absolutely. That is still a target. We will most likely be below EUR2 billion of overall net debt within the Group. And then if you look at the indebtedness of the financial services business, which is around EUR2 billion, that would mean that the industrial business is debt-free. That – so give or take, we will be debt-free at the end of this year. Alexis Albert – Nomura: Thank you very much.

Ladies and gentlemen, thank you for attending this call.

Okay. If there are no further questions, then thank you very much for joining us, and have a nice day. Thank you. Good-bye.

Bye-bye.