Klöckner & Co - Full Year 2008 Results
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Transcript of Klöckner & Co - Full Year 2008 Results
KlKlööckner & Co SEckner & Co SEA Leading Multi Metal DistributorA Leading Multi Metal Distributor
March 31, 2009March 31, 2009
Gisbert RGisbert RüühlhlCFOCFO
Full Year 2008 ResultsFull Year 2008 ResultsAnalystsAnalysts‘‘
and Investorsand Investors‘‘
ConferenceConference
Dr. Thomas LudwigDr. Thomas LudwigCEOCEO
2
Agenda
1.
Highlights Q4/FY 2008, market and strategy Dr. Thomas Ludwig, CEO
2.
Financials Q4/FY 2008 and outlook Gisbert Rühl, CFO
Appendix
3
Portfolio optimization succeeded, strict and fast adjustments to
current conditions adopted
Highlights FY 2008
Delivery on growth strategy
Acquisition of Temtco (USA) and Multitubes (UK)
Concentration on core business
Sale of Canadian Namasco and Swiss KVT
Transformation into an SE
Immediate action program in response to negative economic developments
Significant reduction of net debt
STAR fully on track
4
Revenue and EBITDA at all time highs despite hit in Q4
Financial highlights FY 2008
Revenues 7.6% up to €6.7bn
Reported EBITDA increased by 62% to €600m
Operating EBITDA increased by 27% to €420m, negatively impacted by year-end inventory write-downs of approx. €60m
Underlying EBITDA margin at 6.4% with €435m
Significant reduction of net debt to €571m, almost halved since Q2 2008
Tonnage decreased by 7.8% to 6.0m tons in 2008, mainly driven by shortfall in Q4 and deconsolidation of Namasco Ltd.
5
Results Q4/FY 2008
(€m) Q4 2008
Q4 2007 Δ% FY
2008FY
2007 Δ%
Volume (Ttons)
1,151 1,585 -27.3 5,974 6,478 -7.8
Sales 1,394 1,492 -6.5 6,750 6,274 7.6
EBITDA -134 83 -262.1 600 371 62.0
EBIT -152 65 -334.6 533 307 73.7
6
Demand and stock risks are dominating steel market outlook in Europe
137.474.4 63.8 75.2 70 78.6 88.2113.2 89.9 100.965.165.1109.1
62.3
111 112.8
96.6
115.9
98.7109.1
99.9
75.1
98.690.9
72
56.4
0
20
40
60
80
100
120
140
160
Dec07
Jan 08
Feb08
Mar08
Apr 08
May08
Jun 08
Jul 08
Aug08
Sept08
Oct08
Nov08
Dec08
Stocks Sales index
Source: Eurometal, Q1 2007 = 100%
137,474,4 63,8 75,2 70 78,6 88,2113,2 89,9 100,965,165,1109,1
96,8 99,9 104,3 106,3 101,7109,2 107,6 110,6 111,5 110,1 107,9
101,295,4
0
20
40
60
80
100
120
140
160
Dec07
Jan 08
Feb08
Mar08
Apr 08
May08
Jun 08
Jul 08
Aug08
Sept08
Oct08
Nov08
Dec08
Stocks Stock index
Sales volumes
compared to stockholding
daysStocks compared
to stockholding days
7
US
In the US demand and stock situation is the same
10,66410,026
9,1388,642 8,481 8,308
-1.5%
-29.3%-32.7%
-42.7%
-22.8%
-7.6%
-43.3%
-20.3%
-52.3%
-42.7%
-51.7%-52.8%0
2,000
4,000
6,000
8,000
10,000
12,000
Sept 08 Oct 08 Nov 08 Dec 08 Jan 09 Feb 09
Ser
vice
cen
ter i
nven
tory
(000
tons
)
-60%
-50%
-40%
-30%
-20%
-10%
0%
Y-O
-Y c
hang
e in
mill
pro
duct
ion
& se
rvic
e ce
nter
shi
pmen
ts
Inventory Steel production Shipments
Stocks compared
to stock to shipment
ratios Steel mills have cut production drastically
Source: MSCI, American Iron and Steel Institute
Low demand leads to increasing stock to shipment ratios despite significant production cuts
1,5
2
2,5
3
3,5
4
Jan-98 May-99 Jun-00 Jul-01 Aug-02 Sep-03 Oct-04 Nov-05 Dec-06 Jan-08 Feb-09
Mon
ths'
sup
ply
on h
and
7000
8000
9000
10000
11000
12000
13000
14000
15000
Mon
thly
inve
ntor
ies
('000
tons
)
Inventory Months' supply
Source: Metal Service Center Institute Source: Metal Service Center Institute, American Iron and Steel Institute
8
Prices are decreasing further after sharp decline in Q4 2008Significant global production cuts and destocking have not stabilized prices so farIf demand stays weak falling raw material contract prices could again pressure prices in Q2Government stimulus programs are expected to support steel demand but with limited effect in 2009
Price risks are ongoing due to demand/stock situation
EU domestic prices in EUR/to
300
400
500
600
700
800
900
1000
Jan 0
6Mar
06May
06Ju
l 06
Sep 06
Nov 06
Jan 0
7Mar
07May
06Ju
l 07
Sep 07
Nov 07
Jan 0
8Mar
08May
08Ju
ly 08
Sep 08
Nov 08
Jan 0
9Mar
09HRC Medium sections
NA domestic prices FOB US Midwest mill in USD/to
400
500
600
700
800
900
1000
1100
1200
Jan 0
6Mar
06May
06Ju
l 06
Sep 06
Nov 06
Jan 0
7Mar
07May
07Ju
l 07
Sep 07
Nov 07
Jan 0
8Mar
08May
08Ju
l 08
Sep 08
Nov 08
Jan 0
9Mar
09
HRC WF Beams
9
Executed immediate action programs and STAR
Immediate action programs(started in Oct. 2008, upgraded in March 2009)
Reduction of around 1500 jobs or 15% of total workforceKey priority is liquidity and NWC managementStock and inventory as key lever for debt reductionAcquisitions are postponed for the time beingNon-essential investments postponedFull impact (€ 130 million) can only be seen from 2010 onwards
STAR Phase I + II
Focus:European sourcingOngoing improvement of distribution networkMain areas of savings: sales, supply chain, purchasing
Further upside potential
2006
~ €20 million2007
~ €40 million2008
~ €30 million2009
~ €30 million2010
~ €20 million~ €140 million
Net savings of ~ €100m for 2009 targeted
Program I ~ €25 millionProgram II
~ €40 million~ €65 million
10
STAR measuresSalesSourcing Warehousing / Distribution
Centralization of sourcing functionSupplier concentrationThird country sourcing
Warehouse network optimization (incl. site closure)Concentration of stock in single locationsOptimization of internal and external logistics
Customer segmentation by size and tradeProfitability oriented pricing and service offeringReigniting dormant accounts
Product Portfolio / Service Offering
Product portfolio optimization (profitability / capital requirements)Increasing share of value added services
Sharing of products within GroupEliminating slow/no movers
Processes / IT Systems (Enabler)
Standardizing processesIntroduction of standardized SAP suit and data model (article codes, inventory management, etc.)
Shared servicesActivity based costing (ProDacapo)
11
Cash flow goes up in a downturn market
1
1999 to 2005 unaudited
pro-forma
figures, Cash flow
adjusted
for
M&A-activities;
Sales in €
bn1
EBITDA in €
million1
Year
FCF in €
million1
201 65 211 69 112 80 147 126 86
4.5
5.3
4.2 4.0 3.8
4.85.0
1999 2000 2001 2002 2003 2004 2005
151 220 150 156 140 349 197
5.5
2006
395
6.3
2007
371
6.7
2008
600
147
12
Strong cash flow generation leads to net debt of currently €358m
Business model works also under extreme conditions
Net working capital Net debt
In €
millionIn €
billion
Q3/2008 Q4/2008
-18%
1.71.4
currently Q3/2008 Q4/2008
-17%690
571
Currently*
358-37%
*as of March
20, 2009
13
Resume
Record results 2008
Early anticipation of market downturn allowed us to react quicker and stricter to the market downturn than most competitors
Strong balance sheet and financial solidity gives us enough headroom
Market still dominated by destocking, but currently demand seems to stabilize at low levels
We will take part in opportunities for consolidation arising in this crisis
We are prepared to weather the storm in this downturn
14
Agenda
1.
Highlights Q4/FY 2008, market and strategy Dr. Thomas Ludwig, CEO
2.
Financials Q4/FY 2008 and outlook Gisbert Rühl, CFO
Appendix
15
Summary income statement Q4/FY 2008
(€m) Q42008
Q42007 Δ% FY
2008FY
2007 Δ%
Volume
(Ttons) 1,151 1,585 -27.3 5,974 6,478 -7.8Sales 1,394 1,492 -6.5 6,750 6,274 7.6Gross profit% margin
173 12.4
30020.1
-42.3-38.3
1,366 20.2
1,22119.5
11.93.6
EBITDA% margin
-134 -9.6
835.5
-262.1 -274.5
600 8.9
3715.9
62.0 50.8
EBITFinancial result
-152 -18
65-17
-334.6
6.2533
-70307-97
73.7
-28.2
Income before
taxes -171 48 -458.4 463 210 121.0Income taxes 29 -6 -559.7 -79 -54 47.9
Minority interests -15 4 -466.7 -14 23 -162.5
Net income -126 37 -439.4 398 133 198.5EPS € -2.72 0.80 -440.0 8.56 2.87 198.4Diluted EPS
€ -2.44 0.80 -405.0 8.11 2.87 182.9
16
Underlying EBITDA again improved
Underlying EBITDA FY 2008
(€m) Q42008
Q42007 Δ FY
2008FY
2007 Δ
EBITDA as reported●
One-off items●
Cartel fine France
-134
-579
83-6
-217
1
600-259
79
371-40
229
-219
Operating EBITDA●
Windfall effects●
Exchange rate effects●
Special expense effects
-60
93
-14
63
7773
-6
-137
86
-17
69
420
-40
352
331209
12
89
-60
-6
40
Underlying EBITDA 81 81 0 435 372 63
●
Acquisitions (LTM*) 5 -6 11 -48 -24 -24
Underlying EBITDA excluding Acquisitions 86 75 11 387 349 38
* LTM: Last twelve months
17
Includes acquisition-related sales of €99m for 2008* in Europe and sales of €338m for 2008* in North America
EBITDA in Europe includes €259.5m net disposal gains
Segment performance FY 2008
(€m) Europe North America
HQ/Consol. Total
Volume
(Ttons)2008 4,317 1.657 - 5,9742007 4,612 1,866 - 6,478Δ
% -6.4 -11.2 -7.8Sales
2008 5,374 1,376 - 6,7502007 5,197 1,077 - 6,274Δ
% 3.4 27.8 7.6EBITDA
2008 377 148 75 600% margin 7.0 10.8 - 8.92007 326 65 -20 371% margin 6.3 6.0 - 5.9Δ
% EBITDA 15.5 130.4 n.a. 62.0* Sales of acquired companies for the first
twelve months of their consolidation
Comments
18
Balance sheet as of Dec. 31, 2008
(€m) December 31, 2008
December 31, 2007
Long-term assets 803 735Inventories 1,001 956Trade receivables 799 930Cash & Cash equivalents* 297 154Other assets 175 191Total assets 3,075 2,966Equity 1,074 845Total long-term liabilities 1,175 1,152
-
thereof financial liabilities 813 813Total short-term liabilities 826 969
-
thereof trade payables 392 610Total equity and liabilities 3,075 2,966Net working capital 1,407 1,323Net financial debt 571 746
Comments
Shareholders’
equity:Increased from 28% to 35%
Financial debt:Leverage reduced from 2.0x to 0.95x EBITDAGearing reduced from 88% to 53%
Net Working Capital:Increase is price-driven
* Including restricted cash of €3m
19
Statement of cash flow
(€m) FY2008
FY2007
Operating CF 386 328
Changes in net working capital -87 -105
Others -112 -114
Cash flow from operating activities 187 109
Inflow from disposals of fixed assets/others 388 38
Outflow from investments in fixed assets -316 -416
Cash flow from investing activities 72 -378
Proceeds from capital increase 0 62
Changes in financial liabilities -46 357
Net interest payments -37 -77
Dividends -40 -47
Cash flow from financing activities -123 295
Total cash flow 136 25
Operating CF covered the investments in net working capital
Investing CF mainly impacted by increased stake in Swiss Holding and acquisition of Temtco and Multitubes against the divestments of our Canadian subsidiary Namasco Ltd. and our Swiss subsidiary KVT
Comments
20
Three updated scenarios for 2009
On the following three slides we provide a framework of how our business can be impacted by volume and price declines in general
Three different scenarios are shown:
A: -12% in volumes, 3%-points gross margin contraction
B: -15% in volumes, 3%-points gross margin contraction
C: -18% in volumes, 3%-points gross margin contraction
The scenarios do not necessarily reflect management's expectation about future development
Since the visibility for 2009 is limited we cannot provide guidance at this point in time
The scenarios cannot be taken as a guidance
21
EBITDA
Leverage
Scenario A (-12% volume and 3%p gross margin contraction)
Net Debt
Credit facilities
€1.8bn
Convert.€325m
Bilaterals€380m
ABS€505m
Syn-Loan€600m
Operational
EBITDA 2008
Net debt
YE
2008
420 -40 380 -195
-155+95 100-25
570-40
1.4
<+100
420 380 -195
-155
570 -240
<390
<3.9
EBITDA scenario
AImpact
acquisitions
LTM / Divestments
Variable cost
reductions, action
program
and STAR
12% volume
reduction3% margin
contractionOperational
EBITDA starting
point w/o windfalls
Windfalls 2008
Net debt
scenario
ACash out
cartel
penaltyAdditional cash
flow
w/o change
NWC
17% NWC
reduction
Leverage
scenario
ALeverage
YE
2008
22
Scenario B (-15% volume and 3%p gross margin contraction)
EBITDA
Leverage
Net DebtCredit
facilities
€1.8bn
21%
Convert.€325m
Bilaterals€380m
ABS€505m
Syn-Loan€600m
Operational
EBITDA 2008
Net debt
YE
2008
Leverage
YE
2008
-40+105 70-25
-10
1.4
<+100
420 380 -195
570
<380
<5.4
EBITDA scenario
BImpact
acquisitions
LTM / Divestments
15% volume
reductionOperational
EBITDA starting
point w/o windfalls
Windfalls 2008
Net debt
scenario
BCash out
cartel
penaltyAdditional cash
flow
w/o change
NWC
20% NWC
reduction
Leverage
scenario
B
-280
-195
3% margin
contractionVariable cost
reductions, action
program
and STAR
23
Scenario C (-18% volume and 3%p gross margin contraction)
EBITDA
Leverage
Net Debt
Credit facilities
€1.8bn
Operational
EBITDA 2008
Net debt
YE
2008
Leverage
YE
2008
+11035-25
+20
1.4
<+100
-40420 380 -195
-235
<365
<10
EBITDA scenario
CImpact
acquisitions
LTM / Divestments
18% volume
reduction3% margin
contractionOperational
EBITDA starting
point w/o windfalls
Windfalls 2008
Net debt
scenario
CCash out
cartel
penaltyAdditional cash
flow
w/o change
NWC
20% NWC
reduction
Leverage
scenario
C
-325570
Variable cost
reductions, action
program
and STAR21%
Convert.€325m
Bilaterals€380m
ABS€505m
Syn-Loan€600m
24
Current Capitalization
Facility Committed Current drawn amount*
Currently drawn % Margin Maturity Covenants
Bilateral Facilities €380m €65m 17%EU: 50-100 bp
US: 175-225 bpN/A N/A
ABS €505m €157m 31%EU: 75 bp
US: 55 bp
EU: 2010
US: June 2012
5x EBITDA
Interest coverage ratio:
2* net interest expense
Syndicated Loan €600m €231m 39%60–130 bp,
currently 75 bpMay 2011 3x EBITDA
Interest coverage ratio: 4 * net interest expense
Total Senior Debt €1,485m €453m 31%
Convertible €325m €328m 100% Coupon 1.5% July 2012
Total Debts €1,810m €781m 43%
IFRS adj. €45m
Cash €378m
Total net
debt €358m
*as of March
20, 2009
Net indebtedness currently reduced to €358m
25
Partial restructuring of current facilities to extend financial flexibility
Planned changes in capital structure
Increased volatility and much more challenging debt markets require changes of current capital structure
Reduction of reliance on bank debt
Non-performance covenants structures
Clear differentiation between financing of NWC and acquisitions
Further diversification of financing sources
26
Changing debt markets require adjustment of capital structure
Target
financial structure
Bank Debt Securitized Debt
Capital MarketDebt
NWC
Acquisitions
BilateralFacilities ABS Convertible
SyndicatedLoan
600
380
505
325
54%
28%
18%
Bank Debt Securitized Debt
Capital MarketDebt
NWC
Acquisitions
Current financial structure
Sources
Usage
Facilities
No dependence on performance covenants
Perfo
rman
ce C
oven
ants
Perfo
rman
ce C
oven
ants
27
Outlook 2009
Ongoing tough market environment will lead to negative Q1 results:
Prices still haven't reached bottom line
Destocking delayed because of low apparent demand
Prepared for higher volume declines than expected by our clients sectors
Early and strict cost cutting measures already implemented
Strong liquidity position to bridge the recessionary gap
Creating financial headroom to take growth opportunities emerged during the crises
Business model works: strong cash flow generation in difficult times
Well prepared for a challenging year ahead!
28
Agenda
1.
Highlights Q4/FY 2008, market and strategy Dr. Thomas Ludwig, CEO
2.
Financials Q4/FY 2008 and outlook Gisbert Rühl, CFO
Appendix
29
Appendix
Table of contents
Financial calendar 2009 and contact details
Largest independent multi metal distributor
Quarterly results and FY results 2008/2007/2006/2005
Current shareholder structure
Acquisitions 2007/2008
Klöckner & Co at a glance
Steel cycle and EBITDA/cash flow relationship
30
May 14: Q1 Interim ReportMay 26: Annual General MeetingAugust 13: Q2/H1 Interim ReportNovember 13: Q3 Interim Report
Financial calendar 2009 and contact details
Financial calendar 2009
Contact details Investor Relations Dr. Thilo
Theilen, Head of IR
Phone: +49 203 307 2050Fax: +49 203 307 5025E-mail: [email protected]: www.kloeckner.de
31
Klöckner & Co at a glance
Klöckner & Co
Leading producer-independent steel and metal distributor in the European and North American markets combined
Network with 260 distribution locations in Europe and North America
More than 10,000 employees
GB
24%
21%
14%8%
6%
8%
19%Germany
France Spain
Nether-lands
Switzerland
Sales split by markets
As of December 2008
Steel-flat Products
Steel-long Products
Special and
Quality Steel
Aluminum
Other Products
31%
31%
10%
8%
6%
14%
Sales split by product
As of December 2008
Other
Machinery/Manufacturing
Auto-
motive
42%
24%
5%
29%
Sales split by industry
As of December 2008
Construction USA
Tubes
32
Largest independent multi metal distributor
Europe (2007)
Source:
company reports, own estimates
ArcelorMittal
(Distribution approx. 5%)
ThyssenKrupp
BE Group
Other
mill-tied
and independent distributors
11.1%
9.8%
6.4%
1.0%71.7%
Klöckner & Co
Source:
Purchasing Magazine (May 2008), own estimates
North America (2007)
Steel Technologies
Namasco (Klöckner & Co)
Ryerson Reliance Steel
Samuel, Son & Co
ThyssenKrupp Materials NA
Worthington Steel
Carpenter Technology
McJunkin
O'Neal Steel
Mac-Steel
A.M. Castle
4.2%
2.8%
2.2%
2.2%
1.0%1.0%0.9%
1.3%
1.2%1.1%
1.3%
1.8%
1.7%
1.0%
5.1%
Other
71.2%
Russel
Metals
Metals USA
Structure: 67% through distribution, service centersSize in value: ~€71–91bnCompanies: ~3,000 few mill-tied, most independent
PNA Group
Structure: 50-60% through distribution, service centersSize in value: ~€100bnCompanies: ~1,300 only independent distributors
33
(€m) Q4 2008
Q3
2008
Q22008
Q12008
Q42007
Q32007
Q22007
Q12007
FY2008
FY2007
FY2006
FY2005*
Volume (Ttons) 1,151 1,348 1,755 1,720 1,585 1,601 1,663 1,629 5,974 6,478 6,127 5,868
Sales 1,394 1.773 1,922 1,660 1,492 1,583 1,650 1,550 6,750 6,274 5,532 4,964
Gross profit 173 390 462 340 300 286 328 307 1,366 1,221 1,208 987
% margin 12.4 22.0 24.0 20.5 20.1 18.0 19.8 19.8 20.2 19.5 21.8 19.9
EBITDA -134 413 212 109 83 93 103 92 600 371 395 197
% margin -9.6 23.3 11.0 6.6 5.6 5.9 6.2 5.9 8.9 5.9 7.1 4.0
EBIT -152 395 197 93 65 76 87 78 533 307 337 135
Financial result -18 -18 -17 -17 -17 -17 -52 -10 -70 -97 -64 -54
Income before taxes -171 378 180 76 48 59 35 68 463 210 273 81
Income taxes 29 -30 -55 -24 -6 -14 -12 -22 -79 -54 -39 -29
Minority interests -15 -4 3 2 4 8 4 6 -14 23 28 16
Net income -126 351 122 51 37 37 19 40 398 133 206 36
EPS basic (€) -2.72 7.56 2.63 1.09 0.80 0.79 0.41 0.86 8.56 2.87 4.44 -
EPS diluted (in €) -2.44 7.01 2.48 1.06 0.80 0.78 0.41 0.86 8.11 2.87 4.44 -
Quarterly results and FY results 2008/2007/2006/2005
*
Pro-forma consolidated figures for FY 2005, without release of negative goodwill of €139 million and without transaction costs of €39 million, without restructuring expenses of €17 million (incurred Q4) and without activity disposal of €1,9 million (incurred Q4).
34
Steel cycle and EBITDA/cash flow relationship
Comments
Klöckner & Co buys and sells products at spot prices generallySales increase as a function of the steel price inflation environmentCosts of material are based on historical average cost method for inventory and therefore lag the steel price increaseThis time lag creates accounting windfall profits (windfall losses in a decreasing steel price environment) inflating (deflating) EBITDAAssuming stable inventory volume cash flow is impacted by higher NWC needsThe windfall profits (losses) are mirrored by inventory book value increases (decreases)
Theoretical relationship*
Windfall
profits
Windfall losses
(€m)
Margin
Margin
12
3
4
4
5
6 6
*Assuming stable inventory volumes
Steel price SalesCost of material EBITDACash flow
35
Geographical breakdown of identified institutional investors
Current shareholder structure
Comments
Identified institutional investors account for 66%
UK based investors dominate (Franklin previously accounted for US share)
Top 10 individual shareholdings represent around 31%
100% Free floatRest of Europe
US
United Kingdom
Germany
France
Source: Survey
Thomson Financial (as of Feb. 09)
22%
4%
31%
21%
10%
11%
SwitzerlandRest of World
1%
36
Country Acquired Company Sales (FY)
Mar 2008 Temtco €226 millionJan 2008 Multitubes €5 million
2008 2 acquisitions €231 millionSep 2007 Lehner
& Tonossi €9 millionSep 2007 Interpipe €14 millionSep 2007 ScanSteel €7 millionAug 2007 Metalsnab €36 millionJun
2007 Westok €26 millionMay 2007 Premier Steel €23 millionApr
2007 Zweygart €11 millionApr 2007 Max Carl €15 millionApr 2007 Edelstahlservice €17 millionApr 2007 Primary Steel €360 millionApr 2007 Teuling €14 millionJan 2007 Tournier €35 million
2007 12 acquisitions €567 million2006 4 acquisitions €108 million
€141 million
€567 million
Acquisitions 2007/2008
12
42
2005 2006 2007
Acquisitions Sales
€231 million
2008
€108 million
2
37
Our symbol
the earsattentive to customer needs
the eyeslooking forward to new developments
the nosesniffing out opportunities
to improve performance
the ballsymbolic of our role to fetch
and carry for our customers
the legsalways moving fast to keep up with
the demands of the customers
38
Disclaimer
This presentation contains forward-looking statements. These statements use words like "believes, "assumes," "expects" or similar formulations. Various known and unknown risks, uncertainties and other factors could lead to material differences between the actual future results, financial situation, development or performance of our company and those either expressed or implied by these statements. These factors include, among other things:
o
Downturns in the business cycle of the industries in which we compete;o
Increases in the prices of our raw materials, especially if we are unable to pass these costs along to customers;
o
Fluctuation in international currency exchange rates as well as changes in the general economic climate
and other factors identified in this presentation.In view of these uncertainties, we caution you not to place undue reliance on these forward-looking statements. We assume no liability whatsoever to update these forward-looking statements or to conform them to future events or developments.