Mowi ASA (MHGVY) Q1 2023 Earnings Call Transcript
Mowi ASA (OTCPK:MHGVY) Q1 2023 Earnings Conference Call May 10, 2023 2:00 AM ET
Ivan Vindheim – Chief Executive Officer
Kristian Ellingsen – Chief Financial Officer
Kim Døsvig – Investor Relations Officer
Conference Call Participants
Christian Nordby – Kepler Cheuvreux
Henrik Knutsen – Carnegie
Martin Kaland – ABG
Good morning everyone, and welcome to the Presentation of Mowi’s First Quarter Results of 2023. My name is Ivan Vindheim, and I’m the CEO of Mowi.
With me today to present the financial figures and fundamentals, I have as usual our CFO, Kristian Ellingsen. And after the presentation our IRO, Kim Døsvig will routinely host our Q&A session.
For those who are following the presentation on webcast can submit your questions or comments in advance or as we go along by e-mail. Please refer to our website at mowi.com for the necessary details. Disclaimer, I think, we’ll leave for self-study as usual. Then we are ready for the highlights of the quarter.
It was another record-breaking quarter for Moiwi with an operational revenue of €1.36 billion, an operational profit of €322 million. Both record high and driven by our strong operational performance more or less across the board, I would say, combined with seasonally record high salmon spot prices. So big thank you to my 11,500 colleagues in 25 countries, all across the world for their invaluable efforts in making this happen. It’s of course much appreciated.
For the sake an operational profit of €322 million and is also in line with the trading update of 18th of April. Furthermore, blended farming costs, i.e. weighted farming costs for seven farming countries was €5.54 per kilo in the first quarter and in line with the comments, we gave in connection with the fourth quarter release and somewhat up quarter-over-quarter due to last year’s inflation in addition to seasonally lower dilution of costs due to lower volumes.
Cost-to-stock on the other hand was relatively stable in the first quarter, adjusted for seasonally lower dilution of costs and changing country mix. So cash cost in the quarter was in other words relatively stable.
For the second quarter, we expect a slight increase in realized blended farming costs due to our continued manifestation of last year’s inflation in addition to change in country mix. Important to note, however, feed price which is the most important component in the farming cost seems to have leveled out for now at least measured in euros.
In terms of farming volumes, we harvested 103,000 tonnes in the first quarter, which is somewhat above our guidance of 98,000 tonnes due to first and foremost good growth in feed, but also feed conversion ratio and survival rates improved year-over-year for the quarter. Otherwise a heads up on FX or foreign exchange in the wake of the weakening of the NOK, we have seen over the past few months.
Bear in mind that Mowi is a euro company, so we have hedged away the FX gain our Norwegian peers are benefiting from as we speak. Having said that, in steady state this is neutral when expenses have caught up with revenues timing wise from an FX point of view, and cash wise this goes much quicker than accounting wise due to a relatively long production cycle in this industry and phasing of costs. And on the NOK strengthening it’s the other way around. The law giveth and the law taketh away. So we’re still arguing that we have the right FX strategy in Mowi, as we removed FX fluctuations. And if there is something we have enough of in this industry, it’s risk. Now also political risk.
Historically, euro funding has also been cheaper than NOK funding, which is another greater argument in this. When it comes to other divisions Consumer Products has delivered another set of impressive results in the first quarter, I would say, especially considering the record high raw material prices. This was of course also partly driven by Easter and Lent season.
The Feed division for its part was through low season in the first quarter with all that entails above our feed profit and our feed volume numbers are colored by that. Relatively speaking, however, I would say, that Mowi Feed had another strong quarter and Feed performance was strong in the first quarter, which is of course of utmost importance to us by virtue of being the world’s largest salmon farmer.
So much about operations then over to politics and more specifically the Norwegian, government’s resource rent tax proposal. Since last time we met they have submitted a written proposal to the parliament with as expected disappointingly few changes. From the original proposal, they have reduced extra tax rate from 40% to 35% and that’s pretty much it. So now the tax rate is 57%, including corporate tax versus 62% previously we’re about 75% with Norwegian wealth tax. So the tax level is still totally out of proportion and not sustainable.
Now the political negotiations have started so then it remains to be seen if that can move a needle. The bill is expected to be voted on before the summer.
Last but not the least, the Board of Directors has decided to distribute a quarterly dividend of NOK 2 per share. That I think does it for the highlights of the quarter then over key financials. Kristian will as usual go in-depth on financial figures under his session so do not disrupt the course of events. We will just touch briefly upon the most important ones now. And first turnover, which we already have been through. Mowi recorded an operational revenue of €1.36 billion for the first quarter, which is record high and up by 24% year-over-year on 7% higher farming volumes.
Operational profit of €322 million, we have also already commented on all-time high and up by 56% year-over-year. Cash flow in the quarter was good and net interest-bearing debt came in at €1.64 billion though somewhat above our long-term debt target of €1.4 billion.
As regard to the latter, we will revert to long-term debt target when we know the outcome of the Norwegian tax process.
Otherwise, equity ratio was a healthy 51% at the end of the quarter and underlying earnings per share was €0.33 and annualized return on capital employed was 22%, both adjusted for the proposed resource rent tax, proposal in Norway as it stands today though with a conservative approach. Kristian, will get back to this later.
In terms of EBITDA margin through the value chain, Mowi Norway stood once again out positively whereas, the margins for our Irish and Chilean operations were negatively impacted by low-harvest volumes in the quarter.
We will get back to the explanation shortly when we go through the various business entities, but first, briefly about the prices. As we already have been through, you saw seasonally record high salmon spot prices in the first quarter, driven by a reasonably good demand and a global supply contraction of 4% year-over-year for the quarter.
Compared to the first quarter of 2022, the reference price was up by 18% in Europe and by 6% in Americas for salmon or Canadian origin. For salmon of Chilean origin in American market the reference price was relatively stable in the quarter. Kristian, will elaborate more on prices and supply demand under his session.
Then quickly, about our own relative price performance in the quarter, overall price achievement was 6% below the reference price for Mowi in the quarter, due to their seasonally record high salmon spot prices and our fixed contracts at lower prices.
In addition to that, price achievement was also negatively impacted by quality downgrading for Norwegian volumes due to winter sores. As for winter sores, I think it’s fair to say that we have had more problems with winter sores this year than last year and for those of you who remember, well remember, we said something similar last year.
So, it seems like the main causative agent, [indiscernible] has changed and made the available vaccines less effective. This is something we under pharmaceutical industry are looking into as we speak. So then it remains to be seen for how long a time it will take before we have our solution at hand.
Then briefly about the EBIT waterfall, as you can see from the chart here, operational EBIT increased from €207 million in the first quarter of 2022 to €322 million in this quarter which was mainly driven by increased with farming as a result of higher prices and volumes. But also the other business contributed positively in the quarter with strong operational results across the board.
Then, it’s time to address the various business entities and first one out is as usual Mowi Norway our largest and most important entity by far. Operating EBIT was €245 million for Mowi Norway in the quarter which is record high and up from €151 million in the comparable quarter of last year.
EBIT margin was €3.73 per kilo this quarter versus €2.55 per kilo in the same quarter last year. And as the chart clearly demonstrates this was caused by higher prices and volumes, in the case of the latter, 66,000 tonnes this year versus 59,000 tonnes last year, so, i.e. a growth of 10% year-over-year.
Costs on the other hand was up, in the quarter compared with the same quarter last year, due to last year’s inflation and then first and foremost the feed inflation because biological performance improved year-over-year for Mowi Norway both production, feed conversion ratio and survival rates were better than last year.
Then the breakdown of the margins for the different regions in Norway for the quarter, region South stands out as the margin winner this time around with an impressive margin of €4.48 per kilo on high volumes strong price and cost performance in addition to good timing of harvesting.
But also, Region North and Region West delivered strong margins in the quarter with €3.93 per kilo and €3.72 per kilo, respectively on strong operational performance. Region Mid on the other hand was lagging behind this quarter with a soft margin of €1.91 per kilo, adversely impacted by no harvesting in March when prices were the highest in addition to biological issues.
I think it’s fair to say that we are not satisfied with the operational performance for Region Mid and by extension we have prepared. And we’ll put into action, a turnaround plan for this region.
Then the Norwegian sales contract portfolio. In 2021 and 2022, we kept the contract level for Norwegian volumes low to capitalize on the expected post-pandemic market recovery. In hindsight, I think we can safely say that that strategy served us well.
We have maintained it for 2023, so for the first quarter the contract share was 26% and for the second quarter it’s expected to be around 29% with relatively stable prices quarter-over-quarter. Then it’s time to address the other farming countries and first one out is as usual Mowi Scotland.
As guided in connection with the fourth quarter release, biology improved significantly for Scottish operation in the first quarter on colder waters and decimating of pathogens. This has increased our operational profit for Mowi Scotland by 2.5 times year-over-year from €11 million to €27 million and the margin from €1.02 per kilo to €2.34 per kilo.
And to take advantage of the good biological conditions in the quarter, we prioritized growth over harvesting. So harvest volume of 11,000 tonnes is on the soft side.
Then overseas to Mowi Chile. Mowi Chile was also highly impacted by low harvest volumes in the first quarter as we prioritize growth over harvesting for them as well. On top of that, we harvested out the 2021 year class, which has been a troublesome generation for our part with among other things low average harvest weights.
Against this backdrop, Mowi Chile’s operational profit dropped from €20 million in the first quarter of last year to €16 million this quarter despite the margin increase from €1.26 per kilo to €1.51 per kilo.
On a positive note, however, both underlying production and biology were good for our Chilean operations in the quarter. And now we are harvesting from the 2022 year class only which should prepare the ground for improved KPIs going forward. We are also approaching wintertime in Chile, which normally contributes positively biologically.
Then further north to Mowi Canada. Mowi Canada turned a profit of €16 million in the first quarter against an operational profit of €23 million in the same quarter last year. This drop is explained by a reduction in volumes from 9,000 tonnes to 7,500 tonnes year-over-year in addition to our higher volume share for Canada East, which has affected the margin mix negatively. So, despite somewhat higher prices, the margin was down from €2.56 per kilo last year to €2.17 per kilo this year, also partly driven by inflation because both production feed conversion ratio and survival rates improved for our Canadian operations in the quarter year-over-year.
Then it’s time to address our two smallest farming entities Mowi Ireland and Mowi Faroes. For salmon Irish region, we made an operational profit of €1 million in the first quarter with a margin of €1.68 per kilo. Achieved margin is substantially lower than last year due to our biologically challenging 2022 and by extension, 2023 is expected to be an operational recovery year for Irish operation. Harvest volume was a little below 1,000 tonnes in the quarter and by that relatively stable year-over-year.
In the Faroes operational profit came to €7 million by means of a margin of €3.30 per kilo on 2,000 tonnes harvest volume. The margin was negatively impacted by harvesting 62% of the volumes in January when prices were the lowest. Other than that both biology and production were good in the Faroes in the quarter.
Then the latest addition to the Mowi family, Arctic Fish. In our first reporting quarter for our Atlantic operations, we made an operational profit of €10 million on 5,000 tonnes harvest volume. The margin was €2.12 per kilo and does not reflect in any way the performance in the sea for Arctic Fish as the margin was marked by very high slaughter cost and poor price performance in the quarter. On top of that, only 7% of the harvest volumes were in March when prices, where as I already said the highest.
On a positive note, however, we have already taken measures to resolve this by integrating sales in Mowi going forward and by opening our own processing plant in Bolungarvik over the summer. As for timing of harvesting that will balance out over time. Historically, performance in sea has been good for Arctic Fish, which bodes well for the future.
So, much about Mowi Farming then over to Mowi Consumer Products, our downstream business. Consumer Products made an impressive operational profit of €37 million in the first quarter, which is record high for our first quarter and up from €21 million in the comparable quarter of last year, driven by strong operational performance more or less across the board, I would say, combined with Easter and Lent season.
In terms of overall demand, it was reasonably good in more or less all our markets in the quarter, also of course partly helped by Easter and Lent season. We also see reasonably good development in demand so far in the second quarter despite the economic slowdown we are facing.
Then the time has come for Mowi Feed. I said initially this morning, Mowi Feed was through low season in the first quarter with all that entails, so both our feed profit and our feed volume numbers are colored by that.
Having said that, relatively speaking I would say we have had another strong quarter for Mowi Feed. Operational EBITDA of €6 million is seasonally record high and up from €1 million in the comparable quarter of last year. And sold volumes of 94,000 tonnes versus 88,000 tonnes last year is also record high for our first quarter and confirmed the improved growth for Mowi Farming year-over-year.
As the saying goes the proof of the pudding is in the eating. So, there is no doubt that we are very satisfied that the feed performance at the moment, which is of course, of paramount importance to us as the world’s largest salmon farmer by a wide margin.
Then Kristian the floor is all yours for walking through the financial figures and fundamentals. Thank you so far.
Thank you very much Ivan and good morning. Hope everybody is doing well this morning. As usual, we start with the statement of profit and loss which shows the top line of record high revenues €1.36 billion on increased volumes and a strong market. The good market conditions and strong operational performance in all our units resulted in an all-time high operational EBIT of €322 million. Operational EBIT margin was also improved by approximately five percentage points as the achieved prices increased more than cost.
Cost increased on manifestation of previous inflation, partly offset by cost in biology measures. When it comes to the difference between operational EBIT and financial EBIT, we see that most of the items cancel out. The difference is €59 million and the net fair value adjustment of biomass is the one remaining more or less. That was positive with €54 million in the quarter mainly related to higher prices.
With regards to associated companies, this was mainly related to our associated company Nova Sea where the operational result was €3.27 per kilo that was lower than the regions in Mowi Norway except the Region Mid somewhat impacted by biological issues for Nova Sea in the quarter. Net financial items were negative with €20 million in the quarter. Interest costs were as expected. In the comparable quarter, we see that the low net amount was positively influenced by unrealized currency items.
Cash flow per share was good in the quarter €0.37 on improved operational cash flow. When it comes to Q1 underlying earnings per share of €0.33 and return on capital employed annualized of 22.4%. These are strong metrics. Testament of good operational performance. But the reason for why these metrics are not increasing more is that they have been adjusted by estimated resource rent tax in Norway.
And that brings us to the next slide. Based on the proposition submitted by the government to the Standing Committee on Finance in Parliament, we expect the resource rent tax in Norway with effect from Q1 2023. Until 2023, the components of our integrated value chain in our Norwegian operations have been part of the same tax regime with 22% corporate tax and the proposal is then that it’s only the seawater phase which is in scope for this new resource rent tax taking the tax level up by 35 percentage points to 57% for the seawater phase as also indicated in this figure. The rest of the value chain then remain with 22% corporate tax.
In Farming Norway, we conservatively estimate 80% of earnings to be related to the seawater phase. This was the figure used in our consultation response, submitted back in December. Work is ongoing in Mowi to establish correct transfer prices between the seawater phase and these other components of our value chain. Until now this has not been relevant as you all know because everything has been part of the same tax regime but now it becomes important. It will take some time to conclude on this work. There is a wide range of transactions involved. We need to establish the correct principles prepare robust documentation. We work hard on this with close cooperation with our advisors and we involve all parts of the extensive operation we had in Norway including R&D genetics freshwater feed et cetera.
As the minority government has not yet made a formal agreement with the majority in Parliament, the tax change is not considered substantively enacted according to IFRS. So accordingly the P&L and the balance sheet is not impacted by this tax estimate in the first quarter. But with regards to our operational metrics, we have adjusted underlying earnings per share with the conservatively estimated tax of €57 million based on 80% of earnings related to the scope for the tax and 35% extra tax. And we also adjusted return on capital employed with the same number and then in practice we have considered this effect an extra cost to do salmon farming in Norway.
And then a heads up with regards to the effects of the weakening of the NOK for several reasons including the uncertain macroeconomic environment and the development in interest rates. NOK has recently sustained significant depreciation versus major currencies such as U.S. dollar which is up 10% so far this year and euro which is up 13% this year versus the Norwegian kroner.
Norway is a euro company with its cash flows predominantly in euro and this means that Mowi Norway has hedged away this FX gain related to the timing difference between revenues and expenses as opposed to our Norwegian peers. If you’re a NOK company then the weakening of the NOK impact both revenue and cost, but there is a timing difference with regards to when these effects appear. The positive revenue effect comes immediately.
In cash terms, it takes only some time, approximately six months for the negative cost effect to catch up with a positive revenue effect but then the P&L, this lag is much longer due to the three-year production cycle.
In steady state this is neutral. And when the NOK is strengthening, it’s the inverse effect, i.e., the negative revenue effect comes immediately and then the positive cost effects appears soon in cash and over longer time in the P&L. So in such a situation we would have hedged away this FX loss related to a strengthening of the NOK.
We maintain our view, as also Ivan commented earlier that the FX strategy we have is the right one for the company. It removes FX fluctuations and in addition to that by managing Mowi’s cash flow in euro, we secure cheaper financing over time. So this is more a heads up. We’re pointing out that there is a difference in the setup here and it should not be attributed to operational achievements in either direction.
Then we move over to the balance sheet, where we see that the total assets are stable from year end, 2022 and the covenant equity ratio is solid 54% and Mowi’s financial position is strong. There was a good cash flow in the quarter, driven by strong operational earnings. There was a seasonal working capital release in Q1, which was more than offset by payments of taxes. Net CapEx of €90 million include €14.5 million for Arctic Fish.
Net interest and financial items paid include fee related to exercising part of the accordion option to increase the bank facility by €200 million to €2 billion in the quarter. And furthermore, the amount includes €1.9 million and interest payments in Arctic Fish.
We expect a working capital release in the range of €100 million this year, due to temporary buildup in 2022. With regards to CapEx, the Arctic Fish CapEx estimate in 2023 has been increased by €10 million to €40 million related to the fire at the smolt facility expansion unit. Interest expenses increased by €10 million from the previous guiding to €80 million. Tax payment estimate unchanged. And dividend for Q1 is payable in the second quarter.
In June 2018, €200 million bond is maturing. We successfully increased the bank facility by €200 million in the quarter by exercising part of the accordion option. We have a solid financing in place where the bank syndicate is the backbone in our financing. Then we move over to market fundamentals. We start with the supply from the salmon producing countries where the year-over-year reduction in volume was 4% versus a guiding of 0% to minus 5%. The reduction was driven by Norway, which was 7% down on volumes. The lower-than-expected volume was mainly a result of less fish being harvested, due to reduced growth and inadequate sizes. Harvest weights were lower year-on-year, partly driven by winter sore issues for the industry.
Scotland increased their volumes by 15%, as expected on improved biology. Chile increased by 3%, which was more than expected on increased number of fish harvested. And we see also that Canada is down by 24% compared with Q1 last year.
With regards to consumption, demand continued to improve on higher prices, partly helped by Easter and Lent season. The market value of salmon consumed globally increased by an estimated 8% to set a new record for first quarter. The consumption mix pattern follow their previous quarterly developments with a continued recovery in foodservice, while retail consumption was correspondingly reduced. But having said that, retail consumption in the quarter was still above pre-pandemic levels.
In Europe, there was a 10% decline in consumption, driven by lower available volumes from Norway. In the US, we see that consumption was stable. Demand was generally good and consumption mix changed somewhat in favor of the foodservice segment. The decline from Canada in supply was offset by imports from Chile and Norway.
In Asia, we see that consumption decreased on less available salmon and still higher than normal air freight rates. This was partly offset by strong growth in China on relaxed pandemic-related restrictions, so a net effect of minus 4% for Asia. Reference prices in the quarter were up by 18% in Norway, down 1% in Miami and up 6% in Boston and New York.
And the price development has been driven by a tight supply and demand balance for 2023 we expect a low growth of 1% for the market. In other words limited supply growth this year and really for the next years as well with the usual fluctuations both seasonally within the year and also between individual years. With regards to our own volumes, we maintain the guiding of 484,000 tons we mentioned back in Q4.
So then, it’s over to Ivan for some comments on the outlook.
Thank you, Kristian. Much appreciated. Then, it’s time to conclude with some closing remarks before we wrap it all up with our Q&A session, hosted by our IRO, Kim Døsvig.
As already said a few times, the first quarter goes down in history as the best quarter ever for Mowi financially, on strong operational performance and seasonally record high salmon spot prices. Apart from that, I think it’s fair to say that the second quarter has started off on a good note with strong prices so far on a reasonably good demand and a continued modest supply.
How this will develop further on the demand side? No one really knows of course, including ourselves but normally the salmon fares well in challenging economic times. And the supply side looks supportive with a modest supply growth expected for this year and for the coming years for that matter with seasonal and annual fluctuations as usual. In terms of farming volume guidance for 2023, we have as Kristian just showed us maintained, it at 484,000 tons equivalent to a growth of 4.4% year-over-year more than double of the expected industry supply growth.
Then politics. As far as the Norwegian government’s resource rent tax proposal is concerned, it runs its course in the political system. As said earlier this morning, the final version to the Parliament was, as expected, disappointing as it was almost devoid of any concessions and reliefs. So, much for a real consultation process. Now it remains to be seen if the political negotiations can move the needle, because the tax level of 57% including corporate tax or about 75% with Norwegian wealth tax is still totally out of proportion and not sustainable.
And the tax model as such is not fit for purpose, which was duly documented by several including ourselves in the consultation process. Consequently, as the proposal stands today, it would be hugely detrimental to the Norwegian salmon industry and puts major limitations on future growth and development, if it’s enacted, because there is no such thing as a free lunch not here either.
The additional billions of NOK going to resource rent tax payments going forward will not be replaced by external capital infusions and therefore, deteriorates the investment capacity of the industry and ultimately lead to the demise of Norway’s economy in the salmon farming, our Silicon Valley, the family silver.
Not tomorrow, not next year, but over time. This is, of course, not it. The demand for salmon is still there, so the development will just move out continue unabated with full force in other countries and the technological shift would just be accelerated at the expense of Norway on our watch.
So ladies and gentlemen, this we cannot let happen. It’s far too important for that. The bill is to be voted on before the summer but no matter what we won’t give up before we have secured, the Norwegian salmon industry, feasible framework conditions also going forward. So if anything, this is just the first round. We will fight until a cramp gets us and then we will fight a little more.
So with this little pep talk, Kim, I think we are ready for the Q&A session. So if Kristian, can please join me on the stage?
A – Kim Døsvig
So we have one first question from the web. Alexander Jones, Bank of America. He is asking on volumes. You beat your harvest volume guidance for Q1 and you obviously had growth performance in Norway was first rate. In this context, are there any particular reasons why you haven’t raised your full-year volume guidance or is this more about being conservative early on in the year?
So we like to deliver on forecasts in Mowi. So — and we intend to do it this year as well. So until further notice, we maintain the original forecasts. It’s still early days for — most of you have been around for a long time, you know that the wintertime is not the trickiest one. It’s the summer, not to mention the fall. So let’s wait and see. It’s far too early to conclude.
Christian Nordby, Kepler Cheuvreux. You commented that Canada East, seems to be a little bit better maybe and you’ve had a plan there to turn it around with new people working there. Can you give some more details about, how Canada is doing as it has quite a large volume growth potential for your long-term, if it sort of succeeds?
So, we are progressing. We have made huge organizational changes there. So, that is more or less in place. As you remember, we had no knock on wood, biological accident last year. We have been fine so far, this year. So let’s see where this takes us as — what we said when we took down the prospects for Canada East two years ago was that, we will follow the biology. Biology and biological performance will make the decision for us and that we will stick to.
So, so far, so good, but we are not ready to ramp up, yet. But as you said, there are huge growth opportunities in Canada East and then in particular Newfoundland. So if we get this right, then this can be fantastic. But again, it’s far too early to conclude on that. But knock on wood, we have been fine for the last 1.5 years and we have very good organization in place and good farmers that’s the key in this industry.
Henrik Knutsen, Carnegie. Could you add some flavor to why the superior share in Region Mid was so much lower than the other regions in Norway?
Yes. As we said initially, the superior share is driven by winter sores. It’s just the amount of problems, with the winter sores, and Region Mid has had a challenging biology in the first quarter, but if you look back we have struggled with the performance in Region Mid for a long time, if you ask me. So now, we have prepared and we’ll put into action a turnaround plan for Region Mid because this is more than winter sores.
Martin Kaland, ABG. On that note, could you elaborate a little bit more on the turnaround plan for Region Mid in Norway, and when potentially results could improve or get to the same level as these other regions?
I think one of the tricks in this industry is to keep your cards close to your chest, so let’s instead elaborate in the meeting, we have after this presentation. That was really very few questions Kim. So, everything was crystal clear.
So we have one more question from the web. Alexander Sloane, Barclays. He is asking on return on capital employed. You have delivered above 22%, return on capital employed in Q1 versus your long-term target of 12%. Are you over earning, or is it the long-term target on returns too conservative?
That was a difficult question. I don’t know, if I can give a good answer on it, but if you go back to 2021 and 2020 you will see it wasn’t that great. So let’s not — I think it’s — there is no reason to be carried away. So, we have had good times in this industry before, but we also had bad times. So 12% over time is really decent. There’s also inflation in this.
Bear in mind, that most of those assets were bought long long time ago. And this capital requirement, we also use on new investments. So it’s far too — it was far more difficult, to achieve those returns on new investments than the previous ones, and that’s about accounting. So let’s not be fooled by timing here, and let’s not be carried away either. So after good times, you know what comes.
Okay. So, that concludes the Q&A.