Siemens Aktiengesellschaft
Q2 2020 Earnings Call Transcript

Published: 8 May 2020

[Operator:]

Good morning, ladies and gentlemen, and welcome to the Siemens 2020 Second Quarter Conference Call. As a reminder, this call is being recorded. Before we begin, I would like to draw your attention to the safe harbor statement on Page 2 of the Siemens presentation. This conference call may include forward-looking statements. These statements are based on the company's current expectations and certain assumptions and are therefore subject to certain risks and uncertainties. At this time, I would like to turn the call over to your host today, Mrs. Sabine Reichel, Head of Investor Relations. Please go ahead, madam.

[Sabine Reichel:]

Good morning, ladies and gentlemen, and welcome to our Q2 conference call. All Q2 documents were released at 7

[Roland Busch:]

Thank you, Sabine. Good morning, everyone, and especially, thank you for joining us to discuss our second quarter results on this U.K. public holiday. Today, we remember the 75th anniversary of the Allies victory over the National socialistic regime in Germany and ending of the Second World War in Europe. We all companies, societies and individuals have a responsibility that this will never repeat. We need to stand up for peace, freedom and tolerance now and in the future. So let's move on with our agenda. First, I will give you my take on the current COVID-19 situation, followed by an update on our progress in executing Vision 2020+. Ralf will then follow with further details on fiscal Q2 financials. Siemens has three priorities during this unprecedented time. First and foremost, we implement all necessary precautions to secure employee health and safety in factories, labs and nowadays mostly home offices. Secondly, our crisis-proven leadership teams ensure business continuity, together with our very hard-working and dedicated employees, at Siemens as well as for mission-critical operations and infrastructure at customer sites. On group level, a senior management corporate crisis team prepares overarching decisions and empowers local teams to take appropriate actions. In crisis times, it becomes obvious who is a financial strong and reliable partner able to deliver. Our investments in digital services are now paying off with a significant ramp-up in areas such as virtual commissioning, remote maintenance and data-driven services. We have been very successful to keep our own operations up and running. Factory closures occur mainly in cases when required by authorities and not by disruptions to the supply chain. Our supply chain team monitors more than 6,000 mission-critical suppliers on a daily basis. And at this time, we have 24 factory sites closed, mostly in India, but all main factories are operating at sufficient capacity levels. We use all instruments to flexibly adjust capacities to very volatile demand situation and short-cycle product businesses. In addition, also project and service businesses are strongly affected due to the restricted customer site access and availability. Currently, around 7,400 employees are in short time work in Germany, and we are prepared to flexibly adjust this number as required. Contingency measures are in place to safeguard cash and protect margins. And third, we are fully committed to support the fight against COVID-19 and its consequences. Just to mention a few examples out of many where we take social responsibility

[Ralf Thomas:]

Thank you, Roland. And good morning, ladies and gentlemen, also from my side. As Roland mentioned, the financials reflect the new Siemens reporting Gas and Power and Siemens Gamesa in DO. We provided you this morning with comparable key figures in the same format for fiscal '19, for your reference, on our Investor Relations website. Now let me walk you through the businesses. Digital Industries faced an increasingly tough environment in the second quarter, which is reflected in top and bottom line. Increasingly, interestingly enough, order growth of 2% showed a strong diverging trend in the quarter for specific reasons. Main driver were material customer-driven safety stocking effects in automation businesses and several large solution and software orders mainly in the semiconductor space. Order growth was led by China, up by 10%, also due to a bounce back in demand in March after a sharp decrease in February. In contrast, revenue was significantly down in discrete automation on broad-based lower demand led by automotive and machine building. Process automation was clearly down, also suffering from lower investment in upstream oil and gas due to the drop in oil prices. Our software business was down by 3% on tough comps in the Mentor business due to a large deal in the prior year quarter. Against this backdrop, Digital Industries margin of 15.9% and impressive 16.9% without severance held up well, also due to stringent execution of structural and discretionary cost measures. The impacts from cloud invest and Mentor integration costs totaled to €68 million in the quarter, equaling around 180 basis points. Cash conversion was very satisfying. We are pleased by the good results from the ongoing working capital initiatives that have been initiated there, in time. This page gives you some more color on the regional perspective on top line. The widespread corona impact in automation across our key countries and key industries is clearly visible. We anticipate for the third quarter heavy headwinds from COVID-19 related shutdowns and supply chain disruptions at customers over a broad range of our industries. Hence, we expect double-digit revenue decline year-over-year, with corresponding impact on the bottom line. Main drivers will be the short-cycle businesses here. Smart Infrastructure was also impacted in all businesses by COVID-19 effects such as a further cooldown in short-cycle industrial product demand and restrictions to access customer sites. Projects in verticals such as hospitality and public educations are quite often delayed by customers, while health care and critical infrastructure verticals show continued demand. Book-to-bill was solid at 1.08, with weaker orders mainly in solutions and service businesses, while the product businesses showed modest growth driven by low voltage. Revenue was slightly down by 1%, driven by softer revenue in the product businesses. And as expected and indicated before, Smart Infrastructure put - has been booking severance charges of €103 million after agreeing terms with the workers' council. Hence, adjusted EBITA margin was clearly down year-over-year, impacted by 300 basis points for severance. In addition, continued investments in grid edge applications such as storage, e-mobility and the like continued weighing on margins. We expect for Smart Infrastructure a more intense impact of COVID-19 in the third quarter, resulting in double-digit top line decline and corresponding impact on profitability. After two softer quarters related to orders, Siemens Mobility returned to a book-to-bill above one, driven by commuter rail wins in Germany even though the high prior year level with several large orders could not be reached again yet. However, as guided before, the sales funnel is still strong for the second half of fiscal 2020 even though we must expect some project shifts into fiscal '21. The Mobility team again performed very well in keeping operations running and diligent project execution. As a result, revenue growth reached 6%, including the ramp-up of large rolling stock projects. Margin performance was solid with 9.3%, again within the target margin corridor. And as expected, free cash flow was weak due to timing of milestone payments and lower large new orders. We anticipate a significant improvement in the second half. Let me point out a few topics below industrial business, where we saw in parts considerable structural changes due to the Siemens Energy's reclassification. Portfolio companies include now certain regional assets from Gas and Power which were not carved out to Siemens Energy, mainly due to regulatory matters, totaling around €900 million in revenue. PPA in continued operations, i.e., without Siemens Energy, were around €180 million in the first 2 quarters, respectively. So expect this level to be indicative for the second half year. In discontinued operations, we recorded a loss of €317 million. While Gas and Power contributed a positive adjusted EBITA, Siemens Gamesa Renewable Energy recorded a loss, as you know from their disclosures. Further effects, including PPA, for the entire quarter of €116 million since the reclassification took place on March 31. Other items were spin-off costs and material, mainly carve-out related taxes. Carve-out related tax effects will continue to materialize in the second half of fiscal 2020, as indicated before. For this reason, the tax rate for full fiscal year 2020 for continuing operations is now expected to be in the range between 22% and 25%. Now as promised before, let me give you a brief deep dive on SFS. Siemens Financial Services was materially impacted by the increase of COVID-19 related credit hits by €52 million. We do not expect credit hit ratios in coming quarters to be on the same level as in the second quarter. Looking at a long-term perspective, Siemens Financial Services has an excellent track record of strong performance and prudent professional risk management. SFS is focused on supporting the Siemens companies and has a highly diversified business mix across industries, products and geographies. Since the financial crisis in 2008, Siemens Financial Services has increased its portfolio share of project and structured debt business. Today, it has less exposure to higher-risk commercial finance and leasing businesses. SFS' footprint is around 80% to North America and Europe and less than 5% in non-investment-grade countries. As Roland already pointed out, one of Siemens' towering strengths is our healthy financial position, with a net available liquidity of €11.4 billion. We expanded our undrawn credit lines and secured even more flexible access to liquidity. Our refinancing volume for the remainder of fiscal 2020 is rather limited with USD 1.4 billion only. Please allow me one important remark regarding our current share buyback program. Until now, we have bought back shares with a volume of around €2.4 billion. Due to the upcoming spin-off of Siemens Energy, we have stopped the buyback in order to keep the number of treasury shares constant. However, we will implement a technical share buyback to compensate for share-based remuneration and employee share programs. After executing the spin, it is intended to continue with the share buyback. Let me finally summarize our assumptions for fiscal 2020. Siemens performed solidly in the second quarter of fiscal 2020 even as the economic consequences of COVID-19 pandemic began to impact our operations and our financial results. We expect even stronger impacts from the pandemic on business development in our fiscal third quarter to come. Beyond the third quarter of fiscal 2020, macroeconomic developments and their influence on Siemens currently cannot be reliably assessed. Therefore, we can no longer confirm our original guidance for fiscal 2020. We now expect a moderate decline in comparable revenue for fiscal 2020, net of currency translation and portfolio effects, with the book-to-bill ratio remaining above 1. The decline in demand most strongly affects our operating companies Digital Industries and Smart Infrastructure. We adhere to our plan to complete the spin-off and public listing of Siemens Energy before the end of our fiscal year 2020. We expect to record a spin-off gain within discontinued operations, the amount of which cannot be reliably forecast. We continue to expect material impacts on net income from spin-off costs and tax expenses related to the carve-out and subgroup creation of Siemens Energy's. Given the abovementioned circumstances, we currently refrain from giving guidance for basic EPS from net income for fiscal 2020. Let me conclude in a nutshell. We build on our core strengths in this crisis; a dedicated and experienced team that continues to serve our customers very well; a healthy balance sheet with financial flexibility to act from a position of strength; a sound strategy with Vision 2020+, which we implement in a very stringent way, shaping a more focused and resilient portfolio. We will come out of this crisis stronger by driving structural improvements and adjusting the cost base to mitigate the financial impact. Finally, we build on our leading capabilities in automation and digitalization to drive midterm opportunities arising from the crisis. With that, Roland and I are going to be happy to take your questions. And I return the mic back to Sabine.

[Sabine Reichel:]

Thank you, Roland and Ralf. Now we start with the Q&A. Operator, please take the first question.

[Operator:]

[Operator Instructions]. And our first question comes from Ben Uglow from Morgan Stanley.

[Benedict Uglow:]

I was hoping that we could get a little bit of a deep dive or more color around software. The first point was just a clarification on the order growth. I may have misheard over the line, but did you say that it was down a couple of percent? Because my impression from the press release was it was the other way. So just a clarification. Secondly, could you talk about the industries and the end markets that you are seeing particular software demand? So in terms of the contract wins that you're getting at the moment, can you just give us a bit more feeling, qualitative sense on what's driving that? And where are you seeing a change in terms of that demand? And then final point is you mentioned in the remarks about recurring revenue stream being 60-odd percent in software. Just in broad terms, I realize you can't give a forecast, but how do we think about software margins over the balance of the year? Obviously, we understand the operational leverage in factory automation, but how should software trend in principle?

[Ralf Thomas:]

Ben, thank you for your questions. I mean, with regard to software and order growth, I hope I didn't confuse anyone here. What I said is that we saw in the second quarter for DI a growth in new orders, yes, of 2%, which was mainly driven by restocking effects. And in particular, in China, in March, we saw quite some upswing, but that was for DI and product business in general. On the software end, we have been seeing quite some good momentum coming from the semiconductor business. I also mentioned that in the press call that this is certainly not a reaction to the COVID circumstances, but these projects are looked into, negotiated and discussed for many, many quarters. Sometimes, it takes years to come to that point to have then a potential customer changing their software backbone. So this is long-term negotiation ahead before, and therefore it's hard to predict when they will finally materialize. That had impacts, in particular in prior year second quarter. So the growth momentum on new orders was a bit positive but very modestly in the first quarter for software business. We do, however, expect in the third quarter some of these major projects, larger orders to materialize. And for the full fiscal year, as we said, we intend to outgrow the market. So it means north of 8% is continuing to be our target. With regard to revenues on the software side, the second quarter was rather soft. We had a moderate decline. So that has been the point you have been addressing, but also there, for the third quarter, we have scheduled clearly visible elements in our portfolio that are going to be materializing on the revenue side. So for the full fiscal year, modest growth momentum, catch-up in the third quarter. And with regards to profitability in that field, I would expect that for the full fiscal year we will continue constantly, after the given circumstances, what we have been accomplishing in the first half of the year, give or take 1% or 2% volatility, which is always our revenue recognition is taking place in that field. With regards to the industries and the end markets, I would like to hand over to Roland. He can, by far better than I, give you some color on that.

[Roland Busch:]

To be honest - you touched - so I mean it's a mixed bag. Maybe on the highlights

[Operator:]

We'll take our next question from Andreas Willi from JPMorgan.

[Andreas Willi:]

Thank you also for the update on SFS that you provided. Maybe you can talk a little bit how this is going to work going forward with the spin-off of the SFS works, at arm's lengths policies with the divisions, but in terms of the funding which is provided by Siemens and then, in the future, kind of different shareholders that benefit and carry the risks. So what's the framework for how SFS is going to finance projects in energy markets? And maybe in that sense also, what's going to change in terms of the bid and performance bonds that Siemens AG historically has provided or SFS has provided for the energy business?

[Ralf Thomas:]

Yes. Thank you, Andreas, for the questions. For SFS, as promised, we wanted to give you a bit more color on SFS. And also, I mean, before I start entering into answering the center of your questions, maybe I should add a bit more on the SFS performance. I mean, first of all, I would like to repeat that the current level of return on equity they have been performing on is still remarkable with 13%. You'll remember prior year's quarter was heavily positively impacted by an extraordinary gain from an equity divestment, which of course didn't repeat itself. And as I mentioned in my presentation, the declined COVID-driven credit hit impact was about €52 million, mainly from small-ticket leasing activities, which is typical for a downturn of that size. And we also are quite happy that we have been grooming SFS' portfolio into the direction of more diversity of their assets, in particular getting down the high - relatively high share they used to have back in the - post Lehman crisis in leasing activities. So therefore, the portfolio shift has been helping them. And also, indicating for the way forward, the second quarter's level of credit hits, we do not expect to continue on that level and see positive signs for that confirming our assumption already in April. So talking about the spin-off and the way of interaction between Siemens Financial Services and Siemens Energy to be

[Andreas Willi:]

Yes. That is helpful. Maybe you could indicate what kind of balance sheet energy will have. Obviously, we have seen some cash disappear in that sense in the balance sheet that has been presented, but it's quite hard to figure out what it actually means for the opening balance sheet. I mean you have given the pension, €1 billion, that goes, but what goes on the cash side?

[Ralf Thomas:]

Yes, I can't share numbers today, but let me put it that way. Compared to other spins that had to be canceled, there will be a very solid structure on Siemens Energy's balance sheet to be and enough cash to cater for the needs and volatility of the markets as we see them developing. So 26th of May is going to be the day of further transparency. Apologies, Andreas.

[Operator:]

We will take our next question from Simon Toennessen from Jefferies.

[Simon Toennessen:]

My first question, Roland, could you talk a bit more about the Mobility performance and how you see this developing through the downturn? Competitors of yours have been highlighting severe revenue impact from lack of rolling stock production; and also IFRS 15 impact from not being able to book revenues in line with costs; and also lack of, I guess, service business due to trains being service based on mileage. It seems there was no impact at all for you in this quarter given the revenue growth performance, but maybe a bit more color how you could see this developing going forward. And then the second question, on cost measures, Ralf. You gave an update on the overall time line and what's changed, but is there any way to give us a bit more guidance on the path of those savings maybe even in the second half versus the first half of next year? And particular color on DI and SI would be appreciated. I was a bit surprised that DI - or positively surprised, I guess, that the DI drop-through margin was only 36% in Q2, which was much lower than I had expected. Is it fair to assume that some savings have already come through in Q2 there?

[Roland Busch:]

So let me start with your question on Mobility. So what we see in term - in revenue, we have a very good performance in the revenue in Q2, blend of strong performance in rolling stock. This is now projects which we are shifting to the pipeline as expected but also very, very strong service, what we are very happy about. There is, of course, a problem in getting access to sites regarding service. We do that using technologies. We have people running with classes. And they get instructions, for example, but that will be a problem if it takes longer. So at - so but at - and on the top line, the order intake, that's here we definitely see a shift of projects, of decisions, where it's hard to judge now how that will go through the fiscal year. The revenue performance, we see still quite okay for the - also for the rest of the year. So we - this is now out of the backlog, so to speak. And from the order intake, it's really hard to say. It's more back-end loaded now for the fiscal year, again depending on projects and how they pull it through also through the crisis. In the midterm, we see a problem regarding the operators. They have to operate at sometimes full capacity or 78% capacity, but they are loaded only very limited. So there's the cash constraints for many operators. And we'll tell how that works.

[Ralf Thomas:]

Yes. And I think there's nothing to add with regard to Mobility, except maybe one topic. I mean we have been indicating before, when we have been guiding you for fiscal 2020 last year, in November, that Mobility will be a bit back-end loaded with their new orders. That was foreseeable, so to speak. And with regards to the ramp-up of the projects on the train side in particular, they have now been initiating momentum and are doing very well, 6% growth. And that's going to be continuing for the second half of the year as the momentum. However, we, of course, have to acknowledge the fact that in some areas customer site access is restricted, and therefore POC milestones may not be officially be reached. So from our performance side, we are absolutely on track. Customer site access is something beyond our reach, so therefore - there is uncertainty out there, but that will sooner or later be catching up then as the mechanics of POC are kicking in then. With regard to the cost measures, we are really proud that there is additional momentum created, has been created at DI at a very early stage already. And the incremental additional savings and the acceleration delivering already by '21 incremental €130 million roughly, that's quite an accomplishment. That couldn't be accomplished if they were not already up and running, with those measures building up in - we measure that by degree of implementation. We have quite an elaborated system in place that gives us transparency. And we have been benefiting also in the second quarter already. So the lion's share of that incremental increase in savings, however, we won't see before the beginning of fiscal '21, but we have been putting in place additional discretionary savings that are supporting the bottom line both in DI and SI and also in Mobility, by the way. And that is going to help out stabilizing margins as good as it is possible. Top line decline in factory automation with a high-margin conversion, as you know, will definitely have impact also on the bottom line in the third quarter, but the initiatives that we have been taking to soften that as much as we can, I think they are quite effective. And one of the most tangible proof points for you probably is also the strong free cash flow and conversion rate DI had in the second quarter. We have a very experienced team in place. I know most of them in person from my time as industry CFO back then after Lehman, and they are just doing what they have been doing before and are clearly having a firm grip in the driver seat.

[Operator:]

We'll now take our next question from Alexander Virgo from Bank of America.

[Alexander Virgo:]

A couple of, I guess, small clarifications really. I wondered, on the power side or energy side, if you could just tell us the - talk a little bit about the SEA assets and why you've kept them. What is it that has meant that you need to keep those in the portfolio? And on Flender, the announcement there on the spin, is the intention for that to be a 100% spin? Or will you likely retain a stake as you are planning on doing at some level with energy? And then the second question was just around SI. And I wondered if you could talk a little bit about customer behavior in respect of construction projects and decisions around solutions and services you flagged as impeding some of the order intake in the quarter. I'm just wondering what that might mean for the prognosis over the next 12 to 24 months or so.

[Ralf Thomas:]

Thanks, Alex, for your questions. Before Roland is talking about Flender and the customer aspects of the SI business, let me try to give you a bit more color on the Siemens Energy assets, we call that, and the way forwards. I mean we have a clear time plan out there. We have been sharing that with you in the presentation before. We are fully committed. And due to the change in legislation in Germany, we now are in a position to have the Extraordinary General Meeting early in July, not only feasible but confirmed also in terms of technical preparation and so on. So we will do that. And therefore, we are highly confident, as mentioned before, that we will complete getting the assets into the market before the end of our fiscal year. It means late in September. We still can't share more than what we shared with you at that point in time about how much of Siemens Energy shares we are going to keep. What we said from the very beginning and what we will do and will execute on, we may start with a bit higher portion of shareholding, but we are committed to dilute that over the course of time, making sure that everyone understands that we are in the process of stepping down from ownership there. But we do that in a prudent and well-planned way to also make sure that the flowback management is decently done and well prepared from our end. So unfortunately, you do know I cannot talk about the KPIs of GP at that point in time and of Siemens Energy to be, and this is a legal restriction we have. We will share with you in the spin-off report on the 26th of May more details. And therefore, I apologize for that, but if I had to fill your models, I would consider, of course, the performance of Siemens Gamesa as disclosed. And for GP, I would probably put in double-digit increase in new orders for the second quarter, which is quite positive. I think mid-single-digit revenue increase, also not a bad thing to have, and profitability at the lower end of the guidance we gave for the full fiscal year between 2% and 5%. So more details are subject to the spin-off report. On top of that, of course, you may ask yourself what else is discontinued operations implicitly disclosing. And there are 3 components. I mean, one, I talked about. That is the operational piece, where we have year-over-year clear decline obviously. Then there is spin-off costs. If you had to put a figure into your models in that regard, it would be low-double-digit million for the DO part, but also of course, there is a cost component remaining at Siemens AG, certain costs supposed to be borne by the Siemens AG mother company, so to speak. So I would put pretty much the same amount into my model in that area. And then a big topic, of course, is taxes, which has 2 categories obviously, 1 for operations and 1 for just spinning off and carving out the activities. And so we said that there would probably mid-triple million amount for the full exercise. And we have been starting to see the impact in the area slightly above €100 million in the second quarter, on top of operational taxes that had to be paid, of course. So another thing you may consider for your models is that the second quarter did not have any impact from quitting depreciation yet, but the third quarter and quarters to come will have an impact from that. And we will, of course, then inform you as we go about the actuals in that field. I hope that is helping you out a bit with modeling. As I said, if I was in your shoes, I would probably do it that way. With that, I would like to hand over to Roland talking about Flender and SI.

[Roland Busch:]

Yes. On Flender, we didn't decide it yet, but the likelihood that we retain a share in Flender after the spin is quite high. It makes sense because then we have a positive impact on our P&L. We would have anchor shareholder from the beginning and skin in the game, so I think it's a scenario which is quite likely, but we are open regarding the decision we took to go in a range, even to 100%. On SI, so what I am saying, having in mind there's a lot of volatility in the market, it's not like compared to any other crisis before. We know that the cycle for construction is a little bit later cycle, so 9 months delay normally, but in this time it's somewhat different what we see. If you talk about on a GDP projection, the nonresidential construction market is supposed to go down by 1.6% in the year 2020. That's at least the prediction of IHS. And we see - we had some good progress, very good progress, in United States in revenue. And order intake in our solution and service business was down moderate in Q2. So we see it's hard to predict. Tight access is a problem on the one side, and delayed CapEx spending obviously is another one, yet on the other side, on the upside, we see that a lot of critical infrastructure needs to run, also demand from our service business. It's hospitals, data center or any kind of critical infrastructure, where still the investment will go. And that will keep on running. So I hope that answers your question. China

[Ralf Thomas:]

So maybe one last hint with regards to how to deal with DO matters in modeling. I'm sure you didn't have the time yet to look into all the documents that are - which are issued today, but the interim report will definitely be also a valuable source of incremental information for that.

[Sabine Reichel:]

Okay, I think we have time for one more question. Of course, the team will be available then. Also I know there are more questions in the line, but unfortunately, we have to finish on time, so last question, please.

[Operator:]

We'll now take our last question from Guillermo Peigneux from UBS.

[Guillermo Peigneux:]

I guess, two additional incremental questions. One is regarding Mobility. And thanks for the comments before, but I wanted to ask whether most of your sites, if not all of your sites, have been open throughout your fiscal third quarter; and whether you will be able to meet milestone payments, critical milestone payments, thanks to that activity. That's the first question. And the second question is regarding China. I guess, sharp decline and then a recovery that was as sharp, if not sharper, which ended up with China growth in the quarter. I was wondering whether you could give us any information about how China is doing for you as we speak.

[Ralf Thomas:]

Yes. Thank you, Guillermo. And I mean, first of all, as I said, Mobility, it's of course hard to predict to what extent we can accomplish site access for those projects, where this is crucial to - then to the documentation and all the customer acceptance procedures that finally take you to the milestone accomplishment then triggering payments, but it's a delay of, I would say, weeks, not quarters. So therefore, we expect a substantial strengthening of the free cash flow for Mobility in the third quarter and in particular in the fourth quarter then, but you can predict that site by site, so to speak, so I - we have been looking into that also from a statistical perspective. And that is giving us quite some confidence that we will see a pickup there in the second half of fiscal year already. And also new orders coming in, being signed are also bringing the opportunities to collect advanced payments then on higher levels again. And therefore, the second half of the year will be substantially improving the picture with regard to free cash flow in Mobility. Assessing China is hard to do these days, of course. And we need to do that industry by industry, vertical by vertical, so to speak. Automotive and machine building, as Jo has been commenting before in the press call, they have been picking up activities. There are also programs the government has been initiating. They are mainly directed into midsize companies, so therefore I would expect a maybe 6 months delay before we are benefiting from that with our offering in the market. And the March - the month of March in the short-cycle environment was quite favorable in China, but we also had a very steep decline before that in February. So it's all kind of correlated to the timing of the shutdowns in the different geographies, and China and also South Korea are clear front-runners in that regard. The April picture is quite promising. But I mean, after we see literally every day several different views from pandemic experts how that is going to develop and whether or not a second wave is going to be expected later in the year, whether temperature has an impact on infection rates or not, there are too many question marks out there to build or anticipate a trend from a 1-month or 2 months development. So as I said before, we are driving on site. We are carefully watching the different market segments in China and also in other geographies. And thanks god we have very stable supply chains on our end, so we don't see restrictions neither in our factory setup nor in our logistic chains. So everything that we can contribute is well prepared and ready for execution.

[Roland Busch:]

Let me add on this Mobility just on our own operations. Out of all of our sites, we had only 2 closed. One is in India. One is in South Africa; India rolling stock, South Africa on rail infrastructure. And our - overall, our factories are running at 81% capacity.

[Sabine Reichel:]

All right. So with that, we are now at the end of our call. Thank you for joining us again. We very much appreciate, as I said at the beginning, your time. And I wish you now a nice, long weekend. And the team is around for further questions.

[Ralf Thomas:]

Stay healthy. Thanks from our end. Bye-bye.

[Sabine Reichel:]

Stay healthy, everyone. Bye. Bye-bye.

[Roland Busch:]

Stay healthy. Bye-bye.

[Operator:]

Thank you. That will conclude today's conference call. Thank you for your participation, ladies and gentlemen. Once again, let me repeat the instant replay numbers. Participants in Germany, please call the replay number [phone], access code 5971618#. Participants in Europe, please call the replay number [phone], access code 5971618#. Participants from the United States, please call the replay number [phone], access code 5971618#. This replay service will be available until tomorrow night. A recording of the conference call will also be available on the Investor Relations section on the Siemens website. The website address is www.siemens.com/investorrelations.