OC Oerlikon Aktie

Good afternoon, ladies and gentlemen, and welcome to Oerlikon's Full Year Results Presentation. I am Aymeric Jamin, Head of Investor Relations. I have here with me Michael Suess, our Executive Chairman; Marco Freidl, CFO; and Dirk Linzmeier, COO. Michael will start with the strategy update and an overview of 2025. Marco will then highlight our financials and outlook. We will end with a Q&A. With that, I would like to open our presentation and hand over to Michael. Michael, the floor is yours.

Aymeric, thank you. Good afternoon, ladies and gentlemen. Let me give -- take the opportunity to get with you through a little bit to the year '25, what we have done, what we have achieved and give us all the outlook for '26. So as announced in 2024 in February, 2 years ago, we have executed by spring -- not to spring, but February this year with the closing of the sell of Barmag, a longer way to become a pure-play company. A pure-play company means that we are material science engineering company. We're doing PBD, CBD coatings, 3D printing, building the machines for all these procedures and produce our own and develop our own materials.

This out of a widely spread out organization internationally, 37 countries we are covering with a lot of service centers. So this transformation is somehow where the sale of Barmag is done. What's still on the way is where we have started with 3 industries, we are now in 11 industries. We deepen our relation industries, and we're sharpening our setup of the management team by profession and by age in the right way.

We built a pretty resilient value growing from our markets, not all our markets moving in the same direction, as we will show you later on. And everything is built on a strong innovation pipeline where we have, especially in that industry, where we are still remaining, we have always invested 5% or 6%. As a group, you remember maybe before, but the investments we have done in OSS in the past was closer to the 6. Meanwhile, with a more efficient way of R&D, we're somehow in the 5%, but we have not lacked any innovation power.

What is very important is that the strategy to become more agile and leaner as well in administration but not only. We're still working on getting our sales forces leaner and closer to the customers and other areas where we use all kind of technologies which are available from our ERP systems, which we have harmonized the last couple of years, CRM and others. But we have almost half -- but Marco, you will touch that point a little later, we have almost half of the cost for administration since 2019.

So taking that, having a look on where we are and where we want to go. You remember as well that we part mainly tooling or cutting tools and forming tools story, some automotive, but not And we had PVD coating, not really CBD not not that much material science, which we all built in the last years together as a core of a company which is unique. Sometimes it's good to be unique, sometimes is a disadvantage because, especially for you to compare us with someone, it's always difficult because we are the white unicorn with that technology strength with that technology combination, there is no one out there.

There are some people who are playing in the field of material. Others are building machines. Others have some thermal spray services, but the combination of technologies in that way as we are doing it, it's -- if I'm allowed to say, is awesome and there is no one else. And as we have spread out the last couple of years and diversified this competence in more fields. We are today with energy, which stays for oil and gas industry and power generation; tooling, as I mentioned, performing tools and cutting tools.

Automotive; aviation, including aerospace; travel industry, which today as well covers semiconductors, medical and others, we have embarked now to make semiconductor medical more visible better size and better accessibility for us to the markets now. So industry will always cover that industries, which are not big enough yet to show them as on their own.

Luxury, we will touch that a little later in my presentation. And last, but not least, defense. We are still in the defense industry in the past, directly with Oerlikon indirectly over decades as well with the coatings and the powders for the clad engines and for some technologies where we supply powder as well, but not so much directly, which we are now more considering but we have to see where our competencies and our capabilities could contribute in the best way to defense, and I have to reiterate, we're talking about defense and not attack, to defense a society where we are living in or we want to keep it liable.

So to get closer to the customers, we have embarked in 2022. So we started '21 the process; '22, we roll it out. And within Asia Pacific, Americas and Europe, we have the 3 major hemispheres. Europe still is bigger than the other 2. You should consider that for example, revenue is fully in Europe and is not spread out in Asia Pacific and Americas, and as well as a certain proportion in Europe. So if we take more the core of the core business, we are already more comparable between Europe and Asia Pacific.

Americas is still a little smaller. One of the major reasons is we are a long time in Americas with thermal spray. We are probably 20 years now in Americas with the PVD business, and there is more service business to come on PVD. But was never strong in tooling industry, or less than an never, but at least in the last 2 or 3 decades, there are more other areas like semiconductor industry where these competencies and capabilities will play a role in the future.

By that saying, as I mentioned, in the third bullet as introduction, innovation for us and to be leader in innovation is key for everything what we are doing. And you have here some examples on equipment, on components and on coatings. By the way, this is the way how we in future as well want to present the company. But maybe Marco as well we will touch that point later a little bit.

The Equipment and Materials business is mainly driven by thermal spray, equipment as well for PVD, but the most PVD equipment stays in our own service centers. Components, either its aircraft components by or its components for HRSflow or others. And then at coatings -- and the coatings a lot of these coatings are PVD coatings or CVD coatings for our service centers.

With all of that, and in line with the digitalization strategy where we can use new ways of technology to strengthen our footprint, I give you only 2 examples. One example is that we have a virtual coating center program which means we link in real time the coders together, the ones who are not that capable to do that, we have it at least on a daily base, but end of this year, we'll have 200 out of our 450 coders real-time linked and then to use these technologies to optimize utilization, the way of maintenance, the forward-looking planning and to get -- this will have a strong contribute as well in the way how we use our capital.

The other one, total different way. We have in San Diego Scoperta. In 2016, Scoperta was a carve out of the University of San Diego and was at that time, already leading in the AI-based development of materials. Now in our geopolitical days where yttrium, for example, sits on the export control list in China since April, it makes a lot of difference if you have the capabilities as we do actually to develop 16 new alloys per week and to test them and figure out what kind of elements and what kind of alloys could help us to reduce or even to eliminate yttrium is a rare earth material in a lot of our applications.

And why are we talking about yttrium most of you may never heard about that, that's 1 of the 17 rare earth and it's the material which you need in any hot segments of gas turbines. So either gas turbines for power generation or gas turbines or commercial flights or gas turbines for military flights. All the hot sector has thermal barrier coatings and bond coating based for yttrium. And these are life-limited parts. It's not that you have it built once and then it's done forever. You needed them on a consistent base.

And in '25, we had significant issues to get yttrium for our customers, but we could make it. For '26, we're almost assured that we can make it, so we have it covered. But nevertheless, we have now entered away to find different elements and different alloys to either, as I mentioned, to reduce or even to compensate rare earth materials which are today mainly coming from China. And it's not because China is the only place to have these materials, but as well, the China, has last 20, 25 years, took the opportunity to get all the refinery processes into China.

So even if you have yttrium from other countries, that typically walks or moving through China. So I don't want to deepen that more, but it shows you how important this material science competence is and how long term we have thought about that when we already entered that field in 2016, 10 years before people even have thought about that this may have a strategic value to secure our supply change in the future.

And based on this competences, our customers gave us this year. We cannot mention them, but big customers in the U.S. gave us a supplier award. Our customer helped us to come with is the laboratory of the Navy to help us, and it will be financed by the U.S. Navy and U.S. Marine to finance a new group of alloys, high entropy oxide is a coding, which helps to reduce significantly on air falls the erosion and in parallel, you get -- on top of that, you get high turbine intake, which is more power.

So I'll give you some examples. I need to understand because we are a tech-driven company. And a lot of things what we are doing is not very obvious for people. So as a at my office, the flame for the Olympic games, which we have coded but we couldn't talk about otherwise Olympic administration would have take as a huge amount of money, but it's where we behind. So there is not, as we always say, there's not a single day in life without but maybe you're not even aware about.

But that makes our story that's strong. So why we bought in 2023 Riri and why we have bought in 2021 because we are convinced that the luxury coatings, the coatings in luxury products, which are today almost not 100%, but mainly by electroplating is a fantastic field for us to transfer that into PVD technologies or to replace that with PVD technology. And there's 2 major reasons behind. The one reason is a simple one, you need up to 90% less material, which is simply a cost question.

The second one is that these materials are dirty materials. So to get a kilo gold or even a gram of coal, you need 1 ton of gold ore. By the way, in rare earth, it's similar, you have 3% to 5% of rare earths in a tonne. So you need for 30 kilos, you need 1 tonne of ore. That tells you that to avoid these procedures and even to think about to use it in much similar layers, an economic, but is well an environmental effect.

And last, but not least, why we use tungsten today out of recycling is because tungsten as well at least one some of tungsten on the export control list as well from China. And here, we have found solutions to take recycle methodology tungsten from drill heads and to use it to be working. So these are all areas where we are in. So luxury we bought, we had to restructure somehow a little bit because after COVID 2022 and I have to mention, the timing was probably not the most luckiest one because when we bought the company after COVID, everybody was expecting then the luxury market bounces back and comes back strongly.

But unfortunately, the real estate bubble, which is still a big issue in China for the consumers in combination with a lot of small and midsized companies suffered a lot or even disappeared in the way of how China has handling the coverage record funding me. has led to the situation that there is not the highest consumer trust in the market in China yet. So the growth you see in China today is probably by 2/3 driven by infrastructure investments and less by consumer.

This will come back, probably not in '26, but there is a certain indications that in '27-'28 this story comes back and then we are very well positioned and in between, we do our own work. And we typically always have done if markets been not in favor for us, we made our homework. So some markets as aerospace, as energy are in favor for us. Some markets like automotive and some parts of the industry and the tooling are under pressure to one extent, because of the tariff policy is never good because tariffs are not good for trust.

And if there is no trust, it's not good for economy. And as I'm actually convinced that a tariff only helps -- doesn't help nobody. It makes a strong economy weaker and makes the weak economy even more weaker and more dependent. So there will be finally a better understanding that this doesn't help, but it will take a while. In between, we have suffered by that indirectly because the tooling industry, the channel industry, the automotive industry, they are taken by some unsecurity. They don't know where to go.

But this is not only the tariffs, this is as well what's happened in the last 5 years from EU, given total different directions in the way how we want to handle our energy policy, how we want to handle our car policy to get out by 2035 and say we're done driving ICEs anymore is simply its nonsense. I don't say stupid, that would be ready to hard, but it's nonsense and it's not well thought through. And it's harming massively our own industries in Europe and doesn't help anybody. But nevertheless, it's impacting markets.

So the tariffs, this you story in combination then with a question mark, who is with whom in a partnering process in the future? Is it China, Europe, China, U.S., U.S., Europe, who is together in which sense this has an impact on our business. And if there is no trust, people keep their money a little bit more together, that has an impact on luxury, it has no impact on aviation because the aviation is driven by recovery and more demand on aviation and commercial, but as well by aviation and military.

Only Boeing and Airbus wants to go higher amongst the production rate for a narrow-body aircraft that short and midterm range from 60% to 75%. If you sum it up with 1,500 engines additionally per year, which all of them needs coatings, a lot of them. And need equipment, which is driving actually somehow our business on the material side and our equipment side.

Same is for big in industrial turbines. There was the last 10 years, and it was in that industry until 2015. At the peak where the 2008, 300 plus. Then it dropped and in the last 10 years was around 100, 110. Now we are above 200. And this is for several years now. If you talk with GE the if you talk with Mitsubishi with Siemens, that's the big 3 as gas turbine players. They're all from firm. We have 200-plus and this will last for a while because gas-fired power plants, even in a combined cycle or even combined heating power are the best alternative to replace coal and to have a massive impact on carbon emissions because they are not 0, but they are low and they're always available.

So taking all that, it's a mixed picture, but still that's where we see went playing and not up in our sales top line -- on top of that, I would like to hand to say without the strong Swiss franc, we will be CHF 0.5 billion stronger. And some people would say about that control companies in Switzerland, yes, but we are different to some others have even a certain cost position in Switzerland. We still employ in Switzerland and Eastern span more than 1,200 people.

So this is a certain amount of money. We do our R&D mainly in Switzerland. We have a lot of our equipment manufacturing in Switzerland So Swiss franc harms us somehow. On the other hand, it gives us benefit when we do refinancing and other stories. But is it a tailwind for us, it's not. So very often, we've been growing 5%, 10% the last couple of years in certain markets and it was more or less eliminated not because only of dollar weakness, but because of dollar, euro, rupee, RMB, yen and whatever you have, let's face it. They're all somehow even towards the Europe, but especially to the swiss rate, they all have reduced significant under the currency rate.

And this is an effect which we managed. And by that, it can even consider very strong that we kept our top line and sales neutral and we gained 6.5% of order intake, which gives a positive outlook. We're still a little bit careful. That's why we said what we said. But throughout the year, there is a certain optimism that in '26, we maybe start running and in '27, we start even running faster.

By that, the key figures, you will touch them even more. The only important part of that is 6.5% more order intake, almost flat in sales. Leverage ratio comes down from 2.4% to below 2.5 by end of the year. But here, again, Marco Freidl will explain that more and the book-to-bill is with our 1.08 is -- for a given market environment in a very good level.

So ESG-wise, not so much to add. We are a company where ESG is part of our DNA. Why? Because we make products better either less consuming, a softer -- better surface, harder, whatever the case is, whatever we do and we use our products, it drives the sustainability of our customer products. And this is then expressed in the way how we do -- when you compare that, that we're saving only with in an aircraft, we're saving almost 1 year of Swiss carbon emissions.

But as you have significant amount of -- by the tooling industry simply on metal coating is what we do here. But this is sometimes difficult to understand. You should go a little bit deeper in the strong way of our sensor sustainability. Finally, I would like to conclude and then we will have more time for the Q&A. We successfully divested Barmag. After said, probably we could have made it even a little faster, but there was some dispute how to what is the best way to.

But in the end, we did it, and we closed it by February this year. There was a chance even to close it in August, September last year, out of last year and '24, but it did it in a very difficult market environment. for a more than fair value, and we help both for us with a pure play and for retail to get a real future with that technologies because being only in cotton business is not a real future.

So we have another Swiss company, which is important and high traditional, and we help track now on pure-play execution, I think I mentioned a lot we can deepen that when we have the Q&A. The strong '25 is at least a certain -- a little tailwind, whether it's more to come, but with our customer measures with everything what we have driven in the last couple of years, I'm sorry to say there is sometimes some restructuring in some write-offs. When you're in Europe and when you have sites to correct in Europe, in France, as we have closed the site in France, we've closed a site in Germany. This doesn't go in line without spending.

So now we could simply stay with that and live a little lower and leave it to someone else or we discover it and resolve it. And sometimes, maybe it's not seem super nice, but it's necessary. And we have always done that what was necessary in this company in the last 10 years with all the disinvestments and differentiation into different markets with our core technologies, all that didn't came for free. All the engagement and digitalization, that did not came for free.

The 3D printing capabilities where we are now a strategic partner for Northrop Rommel and others are to come in the U.S. where we make money now in the U.S. after learning all that, development in the industry, making mistakes as well. But it is an R&D program, but this is what describes future. If you don't do that, you can harvest, you're going to have nice numbers, but then some when you don't have a future. And we are here to have a historical obligation. We are celebrating this year 150 years of And was up and down in this 150 years, but it was at only surviving, it was always contributing to the Swiss society.

And this is what's our intention as well. That's why we invest in Switzerland despite a strong Swiss franc, that's why we have R&D and machine building in Switzerland. And we are sure that we can afford it, even if sometimes harming. This is always nice? No, it's not. Is it doable? Yes, it is. And if a tech company like us cannot do that, then we can give up Switzerland as an industrial base. We are not ready to do so. That's why we are here. And in the end, we are paying a dividend where some of you may say that's too high. We say, as we have done the last 10 years, when we sell a big asset, we use portion of 2/3 typically stays in the company.

And either it helps to grow with some of the dividends in the past, we not to dividends was one of the -- some of the money at the past of divestments, we bought new stuff and some of the money went into dividends. And I think that's more than fair and unreasonable because as a shareholder, our shareholders own a part of the company. If you sell it out, it doesn't belong to the company anymore.

And they have the right to take a part of that, that we contribute to that. And the logic to give 1/3 to the shareholders and 2/3 in the company was a healthy one in the past and is a very healthy in the future. And that's why we came to the CHF 0.85 for this year, you can say maybe even because of 150 years, but it was maybe insist on, we sold something, it's not ours anymore. Part of that is the shareholders and part of that stays with the company. And Marco, you will deepen that thought as well.

But we have taken almost CHF 500 million of that to dilute or to reduce our debt. And with that, what we have seen, we are in the right way to get by '27 on a 2 to 2.1 -- sorry, 20 EBITDA debt ratio. We are absolutely clear that this is not only achievable that we can make that. And that's why we are as well very convinced that we have to and we want to pay that dividend. So because the company now with the book value we can we made with more equity with a strong cash generation base with a fully filled pipeline on innovation with a strong positioning internationally in the different regions in the growth market in all the industries we are in. This is a very resilient company, and this is why we can pay the dividend.

Thank you so much for now. Now Marco, maybe you go deeper in numbers. And then we are all ready, and Dirk as well. He is here today with us because Dirk is -- since 1 year now on board is COO. COO has to do a lot of these operational stuff. So if you have the one or the other question to him as well, highly welcome. Thank you.

Thank you, Michael. Good afternoon, everyone, and welcome to our full year results presentation also from my side. I will start with our results, then provide more details on our key initiatives to strengthen financial performance, and we'll finish with the outlook for '26.

First, as Michael mentioned, Oerlikon closed the sale of Barmag 2 February '26. Accordingly, Barmag is presented as discontinued operation in our '25 balance sheet and income statement. The cash flow statement remains fully consolidated, meaning it still includes Barmag as of year-end '25. Detailed information on the discontinued operations can be found in Note 2 of our annual report.

In '25, we delivered strong order intake at CHF 1.655 billion, up 6.5% versus prior year at constant FX. We saw momentum improving towards the end of the year, which helped us to close with a book-to-bill ratio at 1.06, driven mainly by strong orders in materials and equipment. Sales remained stable versus '24 at constant FX at CHF 1.568 billion. A slight growth in second half, supported by low comparison base, offset the decline in H1.

This achievement in a weak economic environment proves the resilience of Oerlikon, which has -- was also achieved through the execution of the strategy of end market diversification. Aviation industry dynamics, we're supporting our performance and also in energy we saw a positive trend driven by our industrial gas turbine business, supported by AI data data centers, extensive energy needs. Nevertheless, most of our other end markets remain subdued. The volatility generated by global trade tensions and geopolitical uncertainties weighed on top line growth, in particular, in tooling and automotive.

In luxury, the weak customer purchasing behavior, especially in China continue to impact the sector performance. These industry dynamics required us to take actions and restructure some activities, in particular, in Europe. I will come back on this later in the presentation.

From a regional perspective, APAC outperformed, especially India. Our long-standing presence in industrially developing countries enables us to support global customers as they expand their operations. We are benefiting here from the new geographical organization introduced in '22, which has strengthened local coordination and commercial execution. Our global footprint also helps reducing exposure to trade tensions and ensure optimal service to our customers even in uncertain environments.

Operational EBITDA decreased by 11% to CHF 271 million and a margin of 17.3%. Our profitability was supported by innovation, pricing and efficiency measures, which counterbalance the negative mix impact from our short cyclical service business and from FX headwinds. Our cost-out actions related to headquarters downsizing are on track with more than 50% having shown financial effects already in '25. The remainder is expected in '26 and '27.

Moreover, structural cost-out actions in the business taken in '25 will increasingly produce effects and support return to positive net result in '26.

With the next slide, let me provide you with more details on our continued actions to drive profitability. Our commitment to strengthening the profitability of our businesses remains a clear priority, also with the target to improve capital return. Alongside driving organic growth, we are putting equal emphasis on establishing the right structural cost base and optimizing our portfolio of products and technologies. Since 2019, we have reduced overhead expenses in admin by 45%, representing a substantial improvement. The decrease further accelerated in '24 with the announcement of the divestment of Barmag.

We saved with these cost-out actions more than CHF 60 million in the last 2 years and structured Oerlikon as a smaller, more focused company. Digitalization, automation and footprint optimization of our coating centers are driving operational simplification and efficiency which are key drivers to ultimately improve profitability. For example, we increased our number of coaters, which are real-time collected to around 125 and aim to further extend this year by up to 100 more. This helps to optimize equipment maintenance schedules, utilization rate, which also enables better reallocation of capacity to coating centers with higher demand.

The better data transparency for our operational assets and the optimized asset allocation logic will be a key contributor to further support operating leverage and thereby improve capital returns going forward. The regular review of our portfolio using our capital allocation framework ensures that resources are directed towards profitable and growing businesses. This review resulted in restructurings in H2, primarily affecting our combustion engine-related automotive business in Europe as well as a smaller part of our luxury business.

These actions aim to sustainably improve profitability and ensure that resources are allocated adequately to support profitability in the medium term. We are also sharpening our R&D approach with a much stronger focus on commercialization. Starting in '26, we incorporate the adoption readiness level approach into our processes. This aims to focus more effectively on customers and market adoption of our new products. At the same time, we are streamlining our offering by eliminating subscale and dilutive products and replacing them with more efficient solutions.

This shift enables us to price upcoming innovations at meaningfully higher margins compared with our legacy portfolio. Overall, these actions are future proving our company and position us to deliver sustainably higher profitability and improved capital returns going forward.

With that, let's move to the balance sheet on the next slide. Let me now walk you through the balance sheet and the pro forma impacts of the Barmag divestment. At closing, 2/3 of the paid purchase price of CHF 716 million were used to repay our CHF 475 million term loan, significantly reducing Oerlikon's leverage ratio. The closing also generated a net book gain of CHF 287 million, which will be booked in '26 on the result from discontinued operations.

Pro forma of the proceeds and net of proposed dividend, this reflects a strong improvement of our equity ratio from 25% to 41%. We Leverage at the end of March '26, considering the proceeds of the divestment of Barmag and after the proposed dividend is expected to decline to 2.7x net debt. Looking ahead, we plan to further deleverage in '26 and '27 towards our midterm target of below 2x.

In '25, we also actively managed our debt profile by issuing CHF 350 million bonds in September and repaying CHF 250 million bonds in November. Our liquidity position remains strong with around CHF 960 million of cash and available credit lines at year-end. Going forward, liquidity management will benefit further from the Barmag divestment. Our restricted cash mainly in China has decreased by around CHF 185 million following the closing, improving cash availability and lowering financial costs.

With regards to distribution to shareholders, we are proposing a stable ordinary dividend of CHF 0.20 per share, supplemented by a onetime extraordinary dividend of CHF 0.65 million as a result of the Barmag divestment with the strengthened balance sheet and enhanced financial flexibility, we are well positioned to support strategic execution as markets recover.

Next, on to our ESG ratings improvement. In '25, we maintained or improved our ESG ratings across major agencies, keeping us within the top 20% of the industrial sector. external partners and agencies recognize our leadership in sustainability and innovation. Our MSCI rating remains at the maximum AAA rating, placing us among the leaders in our industry. Our CDP scores for climate change and water security improved to be demonstrating progress in transparency and emissions management. These results validate our long-term commitments to responsible production, energy efficiency and sustainable innovation.

For example, in 25, we invested 85% of our total R&D expenditure in sustainable products. Our solutions significantly improved the efficiency, performance and sustainability of our customers' products and operations. Overall, our BSG performance reinforces trust with customers, employees and investors and supports our competitiveness.

Let's conclude the presentation with our '26 guidance. Turning to our '26 outlook. We expect the year to remain influenced by geopolitical uncertainty and soft end market dynamics. Sales are expected to increase by a low single-digit percentage organically at constant FX, reflecting the expectation of a continued soft food environment in general industries, tooling, automotive and luxury markets. These headwinds will be partially offset by continued strength in aviation and selected energy applications. We also anticipate the continuing negative mix effect, particularly from service activity, which impacts margin in the near term.

Besides this, we expect an operational EBITDA margin of around 17.5% for the full year. This is supported by the structural portfolio and footprint optimization actions initiated in '25, which will increasingly contribute. On this basis, we anticipate a significant improvement in ROCE, advancing in the direction of our weighted average cost of capital. Our '26 guidance reflects both the realities of current demand conditions, and the benefits of the actions we have taken to structurally improve profitability.

With that, let me open for Q&A.

[Operator Instructions] The first question comes from Sebastian Kuenne from RBC Capital.

I have a few, actually. First, I would like to better understand the volume price/mix situation that led to the very strong order intake in Q4. You mentioned some shortage of rare earths and tungsten and the sharp price increases. How much of that growth that you saw in Q4 is actually just a pass-through basically raw materials going in and going out without any effect on profitability, that would be my first question?

Thank you for the question, Sebastian. The strong order intake in Q4 was mainly driven by our Materials & Equipment business. And to the second element of your question, yes, there is an effect of that, but it's also in organic terms, the orders are increasing significantly, so it is not just the price dynamics you were describing.

Thank you very much. Then on the restructuring, can you give us an idea of the scale of it and how the cost savings will come through in Europe in the next 12 to 24 months?

Yes. So looking at the restructurings in H2, they were mainly focused on our combustion automotive business. In Europe means, first and foremost, Germany and France, also some restructuring in that area in the United States. In Luxury, we had a smaller restructuring of one business in Italy. In terms of materialization, we saw first effects coming through in '25, but expect them to further materialize as we finalize the execution measures in '26.

And the scale of the savings? How many staff is involved?

Staff is in '25 in Europe was around about 300 people, and there is some more to follow in '26 when we execute the measures.

Understood. And then finally, can you give us an idea of the current capacity utilization in your service business in the the tooling business in Europe. You have a high automotive exposure here. How much more could you in theory pass through the equipment annually compared to where we are now? Are we talking 50%, 40%, 70%, where are we spending currently?

Maybe I take that. The utilization is different if you take the service centers and if you take equipment materials. In materials actually somehow at least in it's the supply base, which is limiting us how far we can grow. But utilization is meanwhile on a level that we have ordered an additional contract for and we are considering a third one to come because it's a sustainable long-term lasting demand on certain materials what we are doing.

In addition to that, what we do since 2 to 3 years now is that we monitor our fleet of coders which is roughly 500 and where I said 450 of them are monitored easy in real term with time or at least on daily period that we even send them from service centers in one region to others, where the demand is higher. So you don't do that on a weekly base, but we really see -- and you have utilizations in some areas where only 40% and in others you have 70 to 75.

But be careful, even the 40% can be a very high profitable business, it depends then how we can add to this business more to utilize that equipment and what we have decided 2 years ago, 2.5 years ago, that wherever there is equipment is in the system available, we have to consider that first before you build or buy new ones. What I have to mention, we built new diamond coater new graphite coater, which in the past was technology, which we have acquired. We have developed that and introducing that, and this was pushing a little bit the CapEx in the past.

And this year, we have a certain CapEx by Plymouth put together a consortium and to reallocate the 3 sites in Switzerland, where we combine which would start somehow in summer '26 and we finished the end of '26, early '27. So please keep different. Those materials capacity very well utilized, still some headroom in some areas, but next capacity already to come. There is equipment where we can -- we are producing somehow not on the top line, but we can, let's say, do a little more. So there we are almost fully loaded.

And then there is -- this is, by the way, already that we're talking about order intake for '27 and even beyond because there is a pipeline even from our customers that don't need it tomorrow, but they see a consistent growth and they see a consistent growth as well in a way to coat parts. And then there is the service centers where, again, within the service centers, we have different clients, and you can remember what I've shown in different coatings. Not each coating runs on each coater. And here, the digitalization helps us lost a lot to optimize. Does it answer somehow your question?

Yes. It does.

Perfect. Thank you.

The next question comes from Tobias Kl pper from Z rcher Kantonalbank Bank.

Two questions from my side, if I may. I will take them one by one. The first on the margin guidance, is that for an increase of roughly 20 basis points compared to '25, with stabilizing end markets, corporate cost savings and restructuring benefits, which might seem rather conservative, as you already mentioned. Can you give us some more light on why this might seem that way? Is the mix effect expected to be even more negative in '26?

You want to add, Dirk?

You can start.

I'll start and maybe Marco has a better idea than to answer than I have. The 7 5 is that what we see it for the year with that what we have on hand. some indication it could become a little bit stronger, but we are not in a position to do so. Maybe we have to see since half -- when we have the half year results to give let's say, better guidance. We definitely want to avoid that last year, you remember '24 was a very strong year for us.

And we look to markets and so, okay, these markets are doing well that's why we made a budget for '25, which was very aggressive. And then we had to correct the consensus and to correct the guidance in mid of the year because all these turbulence is by tariffs. All these turbulences that in February and April because we first had to react them. When you get told certain alloys in tungsten cannot be explored anymore, blocked, you have to work on that. And you get somehow, some hits.

And we want simply to want to avoid that. So is it conservative? No, I think it's a good base. Could be more in, if it works as we think it works, yes.

I also think of as that we -- on the elements that we have on the food control, we haven't taken our own work again in '25, positions the company very solidly restructure where it was necessary. And now given the geopolitical situation, there remains some uncertainty. Some of our businesses can react quite quickly, but overall, I think that is what we currently see as an outlook.

Yes. And maybe I think we are all in the same boat. We have a Supreme Court decision on tariffs and you have an administration who are completely different than anybody would expect. Typically, you respect the Supreme Court decision and not counter that with violating another law and phrasing new tariffs. So this is the environment given where we are in.

So -- and to touch that and to build that in the business plan, sorry to say, not only for us, for a lot of others. But as we are in certain sensitive areas with the materials with aerospace or all this stuff, it's the case. And that we have main industries still significantly tackled by these tariffs. And here, I really talk about automotive and our automotive supply industry. which is a strong consumer in tooling and coatings. By the way, there is something which will replace partially that because aerospace becomes more and more market for coated tools, which in the past was always a little bit high because there was always the fear that the coatings could have an impact on a surface on -- for the materials where they're working on.

So defense has not embarked fully yet. So defense that we're talking a lot about theoretical orders, but the supply base is not ramped up. The supply base is not there. So these are areas where we position ourselves as well, for example, in coating. If you have to have more how much new to mix to a machine, you need topnotch coatings. If you have to composite to machine, they have to have topnotch coatings. Does that happen already? No, it does not because the supply base is not there yet.

The orders are placed, the willingness is out there. Now that the supply base has to get ramped up and then it has to start the industrial operations. This is the environment we are in. And probably after lessons learned '25 towards '24, we try to do something balanced in '26.

Very helpful. And then to my second question on the leverage, where do you see the primary lever to achieve the leverage ratio of 1.2x by '27. Is it primarily EBITDA growth or debt reduction?

Yes, I can take this one. It's always, right? At the moment, we are operating at at the EBITDA profitability that we certainly don't see as the as a midterm target where we want to adopt. So that is a clear lever there. That is, of course, the cash flows that we expect to generate as we move ahead. And also on the CapEx side, it's further diligence by better using asset reallocation. Martin was describing it before looking into our utilization, how we operationally and see that we can allocate the assets to the markets that really need them. and also innovate based on the existing coater base, right? We don't have to to the new coater during the field for every new product we bring to the market because a lot of our innovation happens in the process itself. I think it's that.

And then last but not least, it's the working capital. I think if you look at the numbers, we already made a good step in the end of 2025. using the working capital in it by the way, optimizing cash from there, and we see also further upside on the working capital from -- as we move ahead.

So there is not a big -- if I may allowed to add that. This is not a big blockbuster the one and only to the story you have to post a lot of stuff until you make CHF 1.6 billion revenue. And you have to optimize. And if sometimes in our business, it's the little things which counts. That's the way how we manage overdues, our payable receivables and even inventory. In inventory, we have achieved the loss in the business. We cleaned up 2,000 material numbers, 2,000. There's still some headroom, but we are still -- we're operating on that. We have a CRM system, which was not there in that quality in the years before. We got it fully operational in '25, we're using it now. We have harmonized continuous improvement systems, 3 different ones in 21, and it gives you very strong transparency where continuous improvement works better than some -- comparable to some other places.

And to have this best practice sharing. So what we are doing, we're using the technology available, together or a highly spread out company virtually like it would sit on 1 place. And this gives a lot of optimization potential, which was not available simply in the years before, and a lot of things had to happen. Cleaning up 21 ERP systems, which we had into 1. And it was -- believe it, it was a very sad and severe operation.

And it costed a significant amount of money to get there. CRM was the same. Continuous improvement, same. Digitalization. The hub, meanwhile, is really paying back that what we have invested because we have systems which we even now from customer -- from competitors and others getting asked if you don't sell that. We have reduced in -- as flow the typical time for an offer of 4 weeks to 2 days by using digital solutions.

We have an early -- was the early Q system developed where now our OEM customers from the aerospace industry are asking to get their systems. So we have a technology position, which is not falling out of the blue sky. It's hard work. consistently over years, not over months to get that. But this gives you then the resilience and the leading position because nobody can follow you because with a finger snap, you don't get there.

You have to go the same hard way as we have done. But this gives me as well the confidence with the team which we have built up with the lean mill. We have an ACO. We have an NBM of 50, including the We have a tough management team of 40, that's it, on 10,000 people. And this is the way that all these small stuff on operations, on inventory, on the sales side, for sure, pricing was as well an issue. We had some issues in 2021 to get the prices on a level. But if you look in, we have done the pricing story pretty good.

Meanwhile, we have to see that we don't overstretch them. It's the combination out of a lot of things. And for sure, if there is in the 2, 3 industries where we are very strong and we have headwinds, if that will turn into a little tailwind, then you see significant additional effects, but even without that, we are convinced that we can improve the company further on and don't nail me in the end is a 20% EBITDA margin or 19.5% or 20.5%. Midterm, we are sure we have 20%, that we go for that. but we go as well as a combination of margin and investments and by the way, top line.

And this combination will drive the company. We slimmed down the company. We have to be aware that now with CHF 1.6 billion. We are not the CHF 3 billion company anymore, which we have shown in our cost positions. We have somehow now to grow. We're growing massively and mainly organic, not too much inorganic, but we would have a way to finance inorganic as well. But we're not looking for that because as I initially explained, we are unique. There is not the 1 and only target which would help us a lot. This is a specific solution.

And what we learned now in this challenge, I would not now we mention a crisis, but in the challenge is around rare earth and critical minerals, our customers unanimously given the feedback that it is covered how dependent and how important Oerlikon is for their key components and for their supply base, which gives us as well a pretty strong position. hopefully, it was not too long, and hopefully, we have touched your point.

The next question comes from Sebastian Vogel from UBS.

My first question is with regard to the organic sales growth guidance for 2026. Can you elaborate what sort of pricing assumption is going into that one?

Dirk?

We don't give further details on the inclusion of price increases, but you can assume that it is not mainly driven by pricing, it's 0%.

Got it. My second question, again, they're not hard numbers, but more of a rough indication, just understand a little bit more the margin effect of business mix. Can you give us the sort of indication where you stand in terms of equipment versus material versus service of your top line there, that is some sort of rough indication?

A rough indication is that service business typically is in the higher double digits than others, but equipment and materials is as well in double digit and we have cleaned up. That material business was 3, 4, 5 years ago, was single digit or even negative. Equipment business, when we got this story in 8 to 9 years ago, was negative as well and it was highly fragmented. Meanwhile, we have with solution 1 and solution 2, 2 modulize systems where we can even do customization in a much better way as in the past. We have -- it was difficult even to figure out how much equipment we have out. We've discovered some 2,500 systems.

But probably there is a dozen more out there, which we don't even know. By this 2,500 systems we -- most of them, we have some service for. But a lot of them are not equal. They are not even something in mind, but they put together. But now with the new setup, we have that for both businesses or, let's say, all these businesses are in double digit now, but it's different quality of double-digit, and that's why the mix of service, cutting through services is still one of the best businesses in quality of earnings. And if you compare that with the mature business, do you have a mix effect in the numbers and I want to disclose it. Do you want to add something?

No. There was a question from Sebastian regarding the sales distribution that was on the Do you want to...

You can take it.

So on the sales distribution, so 1/3 is roughly the coating services and the other 1/3 is the material equipment and the rest of the is the component business in terms of sales.

And Sebastian, 1 thing to add on the margin and we plan to have a CMD later this year as we announced. And one element is that we have communicated mainly on the level of EBITDA. But if you compare the 3 businesses that Michael and Dirk describing, of course, we have different levels of capital intensity in these businesses. And as we want to strengthen our capital return ROCE going forward, there will be certainly internally and potential also externally more focused on that gap and narrowing it to improve returns.

I think it's good that you mentioned the capital market, which is some are planned for the first half of September, where we would definitely fill deeper details as a, let's say, follow-up to the capital market of '22, a lot of things have changed. So I think it's necessary to give you somehow an impact where we are and where we come from. And it's mainly driven by 3 elements. The 1 element is the regionalization, the second element is the field industries. And if you take tooling into and energy then we're serving actually 11 industries, including the defense.

And so the test which we're serving. And then in the end, the segments, that's the surface the coating services, materials equipment and components. And so this is kind of a That's kind of model. And I think after -- let's say, the Capital Market Day we will give you some more insight, we cannot disclose everything today.

Got it. And just one tiny follow-up as my third question. Your a little bit into that direction anyway. On the energy side, you said, right, the turbine business was doing really well. What sort of share is that as part of your energy roughly to have a little bit of a better understanding there?

From energy, how much is power generation? I have to guess because I do not even fully memorized. But I would say that if you take oil and gas and this one, it's 70-30 towards power generation, 30% probably oil and gas. That could shift, by the way, because actually, we are -- when we talking about oil and gas, we are in the upstream. So we are in the drilling business. Actually, only 50% of the drilling rig side operation because oil prices on $60 or $65 if I'm right. So if that goes up, drilling rigs goes up, but this could shift from the 30 to 50-50. But for the moment, it's the big gas turbines which are driving, and it even has started, so it will enlarge. And then it's -- don't forget about there is industrial gas driven to smaller range, so like the SGT-800 of Siemens, which is running very well.

It's an industrialized from GE. Don't forget about there is coming in the market or the big 3 is Mitsubishi is the smallest, then Siemens and GE and then there is Dusan that is in Italy. And there is not really in the market yet, but the United Gas Turbine of China, which had the first fire in '24. These are the 6 more major players. But then there's still a there is a Caterpillar with solar, which is doing in that area.

But the market is very transparent for us because as some people of us worked there, the energy and is and believe me. There's not too much else others can do than we do. So from the equipment side, we have a very strong market-leading position from materials, where we still help some companies are doing better than us, for example, in the AM powers is dimension-wise bigger because the focus more on the material done. We have done more -- we have more focus for applications. They are focused more in the materials. This will not turn, but this will give us more headroom in the in the future, running that material consumption through our own applications, which are mainly suppressors put in place for any mobile data centers.

What I'm saying that, our final is a data center. A big trend is a flying data center like when they do reconnaissance. If you have a radar station, it's a mobile data center. They need all very efficient cooling systems, where we just haven't worked on that, but we have a strategic partnership with Northrop Grummen. I'm convinced there will be more to come with others because we have a technology proven in 3D printing with Airbus for the satellite RF antennas where they have proven that the 50-kilo antenna in the past is now 5-kg antenna.

And so with the concentration of our AM business, we have started to make money on. We could have done a little bit more last year already, but there was certain bigger volumes shifted into '26, but then we see that in '26. So that's the overall picture.

The next question comes from Loius Billon from

My question is about the -- it's a follow-up on the Energy segment. And I'm wondering as you increase your price given the strong demand of the growth is only driven by an increase in volume? And also, could you give us an idea of the of the breakdown by geography geographies? And where do you expect the strong growth maybe in the U.S., but is there other regions?

No, we don't disclose geography, but what we can do by ourselves, the big 3 players in that sequence General Electric GE Siemens Energy and Mitsubishi Energy, they are the top 3, they cover 80% of the market. So -- and they place their service globally. So we sell to them. They make the gas and they ship it. So when you say geography, mainly in the U.S. Siemens is mainly in Europe for the half side in the U.S. and they have site in Saudi Arabia. And Mitsubishi sits mainly in Japan.

And the sales-wise, has twice the amount of running gas treatments above 100-megawatt than Siemens has, and Siemens has probably 3x more than Mitsubishi and this gives you as well as I mentioned. So more I cannot disclose and I will not disclose it. It's mainly driven by volume, something by price but believe that these customers are also price sensitive. They only pay more if you really contribute significantly more in materials, were good in materials, but there are alternative sources as well.

Besides the coatings. But here as well, we cannot that because it's a long-term relation. If you screw them once, they have a long memory. So you try to do a fair deal and going more with volumes and with the growth because that's much better than to squeeze the last drop on pricing. But for sure, we look on our pricing power. I have to say, we have done a lot between '21 and '23, a major position because we've been in some areas to and we have taken out even certain materials where we say, okay, that's interesting to do so. But the volume-wise, it's not worth to do it.

add something?

yes, maybe to add something, Louis. I think as we move ahead, right, we should look at our equipment and materials business much more as one, right? Because with an equipment sale, your number one, you have great opportunity to lock in aftersales business, which is a very important and number 2 our materials run largely also on our equipment. So looking at these businesses in combination is actually a very important element of how we look at that...

And to be fair enough sense, we've been pretty good in locking in the aftersales business. So 50% of our equipment business today is already aftersales. What we haven't done is with the longer or the album machines to see how it's doing is, who is doing it aftersales and this, we started to investigate in to offer packages, which are for the customers more attractive instead of going to some field and field and forest suppliers.

But if there's a translation in a proper way. The other element is the material story. And here, we did not enough because we are selling equipment, but our equipment runs really better with our materials. And this -- we haven't shown the customers in a proper way. We've been very often selling equipment. -- the businesses together now since 2023 under 1 roof, but we have further that strengthened.

And there is more and more now than materials sell wire the equipment. So when you get equipment, you get all the materials and we can prove that it creates additional benefit for the customers -- for us, it's an additional field for future growth, which we have not utilized in the past proper.

Okay. That's very clear. And maybe a last question. Could you give us more details on the competitive landscape in China for the automotive market? And to what extent are you able to shift from your European automotive business towards market in China?

So I will try to answer that and then colleagues you can jump on. First, Chinese automotive market is totally different to the European one. where the mission profile is totally different. In the past, we had the big ICEs, luxury brands because Chinese successful people wanted to show their success. This is still somehow the case, not that strong, but don't underestimate that. But the mission profile in China is to go 30 kilometers and 40 to work and then back home.

They don't have holidays, they don't go out for the weekends, that's why the electrification China took that fast speed. And by the way, it was supported because of very aware to get a place for ICE in China close to $15,000 and to electric car was for free. So it was really a penalty to get an ICE. Now they're coming to the limits with 50%. But why I'm while describing that, a BYD with that, what they're doing today is not a clear target for us because they don't cover their batteries with a good protection system.

There are 6 -- not BYD, but the Chinese electromobility industry they have a couple of hundred, 600, 700 killed people every year but battery burn ups, they don't care. I have to say that's hard, they don't care. So a total different if you go in Europe, and we do for the Q6 and A6 already with system, which is very protective, much better than any mica. We have projects with BMW, with Mercedes, but these companies are still targeting more the premium segment. And we, with our technologies are more focused on the premium segment.

We are not a mass segment player. We've been and we will be on and other stuff. You have in cars, maybe even in Chinese cars where we have some of that. But do we get out with or with BYD for $20,000 car, no, it's not our business. And they will -- they can only maintain that if they still further utilize the low labor costs, low social standards, low environmental standards, low energy costs and now building and other construction obligations. If they would follow that what we have in U.S. or in Europe, the prices would be double or triple.

So by the way, that's -- it is to follow -- this is not the right way to follow them. It's not the way to ignore them, but it's not the right way to follow. We have to position what we do and we have a good market in China with good margins. But we have to stick them to stay with our technology position as more than looking for a higher technology as more they are our customers. But be aware, the mission profile, how people are using a car in China with 5-days holiday and even after 10 years, you have probably 50-days holiday.

They use it for the Moonvest and they use it for the Chinese New Year and it take a same or plan and getting to get it all together. Europe or every longer weekend people getting all their cars and driving across Europe like hell. And in U.S., you will not find that. We have somehow difficulties to see the real electromobility in U.S. because whenever you are in U.S. the distances and the availability of electricity to reload is simply not given. Latin America comparable, Africa comparable. So it's simply how to say a toy story that ICs will disappear, but the trust level is to come back. There is an open technology race, not driven by funds by governments because the governments will not have the funds.

Whatever EU has done in the past, saying I put 5,000 or 10,000 on a car and then you buy it, for sure, you buy it. Why people are buying actually hybrids because they have half fixation in Germany corporate car. That is a small solution to run a car, which has 2.5 tonnes and has 2 engines and 2 electric system, no it's not. But this situation is where we are in, we're playing on the e-mobility side as on the ICE side.

Playing both, but we're not likely going to China and say, all be in China to make money because the solar industry doesn't make money in China since the decade. We have to see how much Chinese outlook manufacturers and especially their supply base will make money because we are part of the supply base. And if only the OEM makes money in supply base doesn't make it. And that's from 1% or 2% EBIT margin. It's not the market to be.

The next question comes from Alessandro Foletti from Octavian.

I would like to also dig in a couple of segments, starting with Tooling, if possible. Is this basically one-to-one exposure to the machine builders and particularly than in Europe. So we need to see, I don't know, the Gildanized the room of this world to have bigger orders for that business to come back?

No. It's not only -- it was very strong driven historically why we have the strong footprint in Switzerland and a of region because a lot of this machine building industry was here. And the tooling industry was a demand how of Central Europe. Now that's weaker, but -- there is a replacement ongoing. When you look into the aerospace industry, as I mentioned it, a lot of tooling in aerospace industry was and is uncoated.

There was always this the thought that it could poisoning the surface or the quality of the material being machined. Now -- more and more of these companies are reconsidering that position and are working on, and we have tests and even already achieved certain coatings in their cutting tools and in the performing tool will that replace completely the demand of ICE? Probably not.

But it has a different quality. It is higher position. But even today, we are not supplying our holdings also beating everybody but more for the sophisticated applications. And this is a market where you would look by far too short, if you look only in the machine building industry. And especially now with a defense sector with a lot of deal with a lot of new trucks, new military trucks, tanks, composite materials even They all have metals, which have to be machined, which was not out there.

So there is somehow and how much that replacement is I cannot answer. If I could, they probably would not, but still cannot. But there is a replacement. And by the way, the cars are not disappearing. So whatever you need in forging, whatever you need in trustee, whatever you need not in the powertrain that stays. So even if you have looked at the base of an electrical, there's a lot of machine parts as well. But there was the unsecurity of the industries where to put the money on. And this still stays, and that's why they have to be hesitant.

I'll give you an example of our is depending a little bit from how much new models are coming to the market. So -- and there was models planned of 180 to 190 in the last 2 or 3 years, in average, that was 150 only because the models are pushed pushed into the future, not knowing will they launch them -- they will want and they want to launch them, but when the right timing to launch them when to bring them and then with which kind of powertrain. And this unsecurity is some are in our business today, wherever it's automotive or tooling. Does that answer your question?

Yes, a little bit, yes. .

expected more?

No, we can discuss that in the -- well, I would like to know what you think about the numbers. We are now sort of below CHF 300 million in tooling and maybe around CHF 300 million in automotive as well, so CHF 600 million the 2 of them, if I calculate correctly, it was much more than that in the past. And I just wonder how much it can go back to what level it can go back to?

I have to check, but I think it was not that much more in the past, but maybe you are more aware than I even -- and there is a recovery definitely -- how much that will be? I cannot say -- I would guess, and I don't want to guess too much around.

No, that's fine. But maybe...

And I've shown there are more areas which have been definitely not there in the past, which will have a significant requirement on tooling. Even if you have 15 Airbus per month and 15 Boeings per month, all the winds getting built out of aluminum. So it's not that there is no -- there are no industries which are not a demand on cutting tools. And when you have cutting tools, the #1 address to build is us.

Okay. Good. The second question would be more in luxury, maybe that one also a bit of a detailed question. I'm referring to your Slide #6, where you showed the number of expected number of pieces with PVD coating. And I'm aware that this is probably still a very low amount part of your business, but it's also as you mentioned, part of your story, why you entered in luxury. So can you give an indication of how relevant the PVD now within luxury is already now?

First question myself if we should disclose, but I think I can give you a direction. We are somehow in a range of 7% to 10% today, and we would -- we see pretty fast getting to 20, 25 then there's a further way to 50. And then they come to big hold point. The question is then, will there be some application, which is simply not worse to go for PVD?

But then is potentially not even our application. And second, we have new developments like deep black, which is there is a scale. Today, the deepest black is a black 32. Don't ask me how to scale it. Our deep black is 22. So significantly more flag. We developed that for the luxury industry -- but now meanwhile, we have requirements or, let's say, potential projects with the of automotive because they look for this black, with designers from what industry they look for more deep black, which is still at luxury and get it or not for surgery instruments because we close most of the surgery instruments today already with black and they don't want to have any light reflections.

And as deeper the black is, less reflections they have and the better the surgery can happen. So you develop something, and this is exactly the way how we want to operate. We developed something for 1 application and then we see where this application makes sense to get further up.

The story is growing, and it's growing because there is a massively move from based electroplated materials to make stainless steel PVD coated materials. By the reason I mentioned, much less mature much, much more sustainability for the customers. If you buy something expensive, you want to have it sustainable. And you don't want to be mixed up with all the things coming out of Asia. So there the drivers for that are our customers, which are the guitar, the old channels from less and so on, but they get driven by their customers to show them that their products are more sustainable and special. People who buy luxury was there something special.

You don't buy an expensive watch to get the time because if you get from the iPhone. You buy it because you want to have something special. And this is with which is, for us, not a market yet because simply the volumes are too small, too much individual. And -- but to the luxury goods where we are on today, this is a story where we see significant growth. It took a while, by the way, and it takes a little longer because the overall rebound of this industry has not taken place yet.

All right. Good. Maybe I can ask my last question, maybe the CFO. Can you give an indication of your CapEx expenditure for this year and maybe next year as well if you already have it?

Yes, sure, Alessandro. We plan with a CapEx envelope of around CHF 100 million overall for '26, this will be higher by round about CHF 30 million because we have an expansion project in Switzerland. Michael was talking about it. It's a technology composing which actually consolidates 3 sites we have in Switzerland and build the technology center for our thermal spray business, and this is currently in construction. So there is a CapEx element a significant one in '26. But in the long run, you can assume it's in

[indiscernible]

Right. And there is a material project in Michigan in the U.S., which also absorbs some of the additional CapEx. But the midterm you can assume around about 100.

Right. And around about CHF 30 million, CHJF 35 million in intangible assets sort of always in the past or...

Yes. I mean if you look at the R&D side, it's around about 25% of our R&D spend, we usually capitalize and then there is some IT on top.

Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Aymeric Jamin for any closing remarks.

Thank you very much for your time today. I hope you enjoy the presentation, and I remain at your disposal in the next days to come more into the details and further answer further questions. Thank you very much.

Thank you. Bye-bye.

Thank you. Bye-bye.

Good morning, ladies and gentlemen, and welcome to the Oerlikon Q2 2025 Results Conference Call and Live Webcast. I am Yusuf, the Chorus Call operator.

[Operator Instructions] This conference is being recorded. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Aymeric Jamin, Head of Investor Relations. Please go ahead.

Good morning, ladies and gentlemen, and welcome to Oerlikon's First Half Year Results Call. My name is Aymeric Jamin, Head of Investor Relations. I have here with me Michael Suess, our Executive Chairman; and Markus Richter, CFO of Oerlikon.

Michael will start the presentation with a strategy update. Markus will then highlight our financial outlook. We will end with a Q&A. With that, I would like to open our presentation and hand over to Michael. Michael, the floor is yours.

Thank you, Aymeric. Hello, everyone, and welcome to our half year 2025 presentation. Before Markus takes us through the financial details, I'd like to start with some reflections on our strategic journey and keep it short only to remind you where we're coming from the past 10 years.

We have fundamentally reshaped Oerlikon from a conglomerate into a focus, which was always requested high-performing pure play company where we are on the, while we are in this transition, we have created a diversification in our marketplaces within the Surface Solutions as a leader in advanced technologies. And on the other hand, Barmag is on a good way to be divested as we have signed in May. All the procedures in between are on track.

So, from our side, there is no doubt that this divestment will work out in time and in quality. And if you talk about in quality, you remember the transaction value was CHF 850 million with an additional earn-out potential of up to CHF 100 million. What's even important is that we have parallel to that, a very strong reduction in our pensions liabilities. Sometimes maybe that's not really perceived in a proper way. But I have to strengthen that because that was a massively deload of pensions liabilities of our company.

What we have done on top of that, we optimized further our portfolio, which unfortunately ended up in an impairment of CHF 46 million. We will go to details in the Q&A if there are some, but 1 or 2 of them are battery development in Europe, green hydrogen development in Europe, where we simply have stopped certain R&D activities and some other stuff in addition.

The structural cost measures are implemented or further on track, and we will see benefits second half year and further on benefit in '26. So cost structural improvements are on a regular base. So, we do that consistently, not as a one wave, but as a consistent further development, the performance quality within the company.

As I said that, I simply will further confirm that the transformation is on track, is on track to be an agile and efficient organization, and we have a distinct brand and a distinct investment case for you and very open to all the Q&As you will have to us. Markus, would you like to take over from my side and go through the financials?

Yes, sure. Thank you, Michael. Good morning, everyone, and welcome to the H1 2025 results presentation also from my side.

In H1, we continued to execute on our strategic priorities to drive efficiency and innovation. We achieved stable orders in a very difficult economic environment as Western industrial production continued to be subdued. In parallel, we noted increased cautiousness among some of our customers driven by ongoing trade tensions and geopolitical uncertainties. And finally, the significant appreciation of the Swiss franc against all major currencies during the period had a negative impact on our financial results.

I will start with an overview of our first 6 months, followed by an update on our end markets, including the results and will conclude with our outlook. At Oerlikon, orders were stable year-over-year at constant FX to CHF 826 million with a book-to-bill ratio over 1. This is a really strong achievement and the confirmation that our strategy to diversify away from automotive and tooling slowly benefits our company.

Group sales decreased 3% at constant FX to CHF 786 million. This was driven by lower activity in our service business in the context of downturn in automotive, luxury and the general industries. Operational EBITDA margin was 16.7% in H1, down year-over-year in the context of difficult end markets, negative mix effect and FX.

We are focusing on managing costs extremely diligently and continue further with our structural cost-out actions to support the margin. These actions across areas offering limited growth potential aim to gain agility and efficiency and expect positive effects in the second half of 2025.

Moreover, as part of our pure play transformation, we optimized our portfolio towards structurally higher profitability. This resulted in the impairment of some R&D projects and assets at our Nitriding and Eldim businesses. Despite the current challenging environment, Oerlikon continues to drive innovation and successfully launched a new PVD equipment platform in [InSpeera] as well as a new thermal spray equipment Surface 2 and new CVD coating, BALDIA VARIA.

With that, let me provide you an update on our end markets. Oerlikon is operating across the Tooling, Automotive, Luxury, Aviation, General Industries end markets. Particularly the General Ind. & Tooling show a close correlation to industrial production. In the first half of the year, the PMIs in the euro area remained in contraction, while U.S. and China stayed around neutral levels.

In addition, the ongoing trade tensions led some of our customers to adopt a wait-and-see approach. And in the first half, our service business was down 5%. This activity is usually early cyclical and have particularly in the General Ind. & Tooling, a close correlation to industrial production.

As such, we were impacted by contracting PMIs in euro area and close to neutral levels in China and U.S. In Automotive, global light vehicle production saw a slight increase in the first half of the year. However, regional disparities persisted with North America and Europe recording declines. Industry agencies forecasts have been recently revised downward but remain roughly stable for the full year. In EU, uncertainties generated by changing industrial policies create a challenging environment for our customers and delay investment decisions.

In Flow Control, our performance is closely related to car model launches. The recent slowing momentum in the automotive production and the trade tensions are weighing on the reacceleration of car launch projects affecting particularly the U.S. We continue to drive innovations to make future mobility more efficient and sustainable, be it in the vehicle body or in the battery, hybrid or combustion powertrain technology.

In Luxury, the market momentum remains relatively low for the time being with customers acting in a wait-and-see mode. This is primarily related to the weakness in the Chinese end market, inflation and some geopolitical uncertainties, which are dragging on spending power of the middle class. Midterm growth drivers for the Luxury segment remain well intact. With product quality, value for money and trend for more sustainable products, Oerlikon with its unique offering is well positioned when the markets pick back up again.

In Aviation, we saw 6% passenger growth year-to-date with industry agencies expecting 8% growth in 2025. Rising flying hours are driving MRO activity and demand for our solutions. We see plane manufacturers reinvesting and upgrading old equipment. Our products are supporting them to develop more efficient and more sustainable aircraft engine technology. The trend had been confirmed at the Paris Air Show in June 2025.

Overall sentiment from the key players is positive and all remain confident in the growth trajectory for the next years. Summing up, we see a continued subdued industrial environment. While PMIs remained in contraction in Europe and close to neutral level in the U.S. and China, trade tensions prompted some customers to adopt a wait-and-see approach. The positive trend observed in Aviation is confirmed.

With that, let's where we are, discuss where we are with the financials. Orders in the first half of 2025 were stable organically year-over-year at CHF 826 million and sales slightly down FX adjusted at CHF 786 million. In light of a challenging industrial production and trade tensions environment, this is a very strong performance with continued market share gain over the period.

Our diversification strategy across end market and geographies has been instrumental in this achievement. The first 6 months of 2025 were supported by organic sales growth in Aviation and Energy, compensating for lower organic sales in Automotive, General Industries, Tooling and Luxury. The book-to-bill ratio remained above 1 throughout the first half year, signaling our resilience despite market headwinds.

Operational EBITDA in the first 6 months of 2025 amounted to CHF 131 million, down year-over-year. The margin had been impacted by transitory negative effect from mix and FX. Ongoing macroeconomic challenges and trade tensions are temporarily weighing on our service business. Although this business typically delivers higher margins, it is also early cyclical by nature.

Oerlikon continued its structural cost-out actions in the first half as part of its pure play journey, which should support margin in the second half and will position us upon market recovery. I will come back on this topic in more detail later in the presentation.

As part of the pure play, Oerlikon is updating its ROCE calculation and removed the effects from amortized acquired intangibles from the formula. This change aims to better reflect the core financial performance of the company. Our operational ROCE was impacted by the lower EBITDA in the first half. Through our strategic initiatives, we are committed to improving our return on capital employed, aiming to restore it to a level that reflects our long-term value creation goals.

With that, next slide on Barmag. Barmag is presented as discounted operations, discontinued operations following the signature of a definitive agreement for its divestiture to Rieter. In H1 2025, orders in Polymer Processing Solutions improved sequentially at CHF 367 million. This represents an 18% increase compared to H2 2024. It is down year-over-year due to different seasonality in line with Barmag expectations.

Filament orders were up 20% sequentially and came in line with the expected seasonality pattern. We see continued signs of momentum in small and midsized filament orders. When it comes to non-filament, we continued to see low order momentum in the first half of 2025, driven by weak PMIs.

Polymer Processing Solutions sales for the first 6 months were CHF 352 million, up 9% year-over-year at constant FX. Operational EBITDA increased to CHF 29 million. This represents a margin of 8.2%; the transitory lower margin is due to the customers' price concessions granted in 2024 to maintain order volume. We expect recovering pricing levels and innovation to support margins beyond 2025.

Furthermore, Barmag is about to implement ongoing manufacturing footprint optimizations. This will benefit Barmag Manmade Fibers profitability beyond 2025. With that, let's move on to our outlook on the next slide, please.

When we presented our full year results back in February, we anticipated 2025 to remain a challenging year. That view was based on a careful assessment of the macroeconomic landscape and early signals of volatility across our markets. Since then, the environment has become even more complex. Tariff tensions and geopolitical uncertainties impacted a certain number of our end markets.

Our diversification effectively helped mitigate the impact. In the face of these headwinds and the subsequent soft start into the year, we update our full year guidance. We now expect organic group sales in 2025 to be stable or to decrease by a low single-digit percentage at constant FX.

In terms of EBITDA, we foresee a group margin between 17.5% to 17% for the full year, whereas the lower end of the margin range would be expected in the event of further escalation in geopolitical tensions. Moreover, our ongoing cost efficiency initiatives are expected to provide structural support to margins with tangible benefits already anticipated in the second half.

Let's now recap for the first half of the year on the next slide. As we reach the midpoint of 2025, we remain focused on navigating a complex environment with resilience, discipline while continuing to execute our pure play strategy. Tariff burden has erupted, adding pressure to already fragile market dynamics and pushing some of our customers to wait-and-see mode. Geopolitical tensions have not only persisted, they are intensified, creating further uncertainty for businesses.

In Europe, evolving industrial policies, while aimed at long-term competitiveness have introduced short-term unpredictability. In the face of these headwinds, we remain focused on what we can control. We are executing our strategy with discipline, maintaining financial resilience.

We are accelerating our structural cost-out measures to enhance agility and efficiency with effects expected to support margins in the second half of 2025. At the same time, we continue to drive innovation, not only to stay ahead of the curve, but to unlock new growth opportunities in emerging technologies and markets. And finally, we are firmly on track with our pure play transformation, including the corporate cost adjustment, reinforcing our commitment to long-term value creation.

Thank you very much. And with that, let's open up for Q&A, I would say.

[Operator Instructions]

Our first question comes from Vogel Sebastian, UBS.

I've got 3 questions. I'll ask them one by one. The first one is on the indicated cost outs that you have mentioned for Surface Solutions. Is that also causing some extra costs in the second half? Or is it just a saving benefit that you expect there? That would be my first question.

So according to that, we expect savings for the second half of the year. We are on track with the execution. Potential additional costs in terms of, for example, severance packages will be part of a restructuring and will be normalized for the operational business.

Got it. Second question is on the trading volume or trading backdrop, so to say. Can you share a little bit your thoughts on order and sales momentum by the end of the second quarter and the beginning of the third quarter in your key end markets, i.e., general industry, automotive, luxury, and what you have seen there?

Is it to Marcus or is it to me?

To both of you.

Okay. Markus, do you want to start, or should I do?

Go ahead.

Okay. So first, before I answer that question, maybe one additional comment. All these tariff discussions, which we see and maybe you have, from sure you have realized that this EU-U.S. trade agreement is not a fully trade agreement yet because it's not formalized. It's the idea about this 15%.

Switzerland actually is struggling with the 39%. So now we have 2 layers. The one layer is what does that impact us directly with our regional setup and organization, I think we can handle that in a proper way despite the fact that, for sure, exports to the U.S. directly out of Switzerland, we will seek to ask for exemptions, because in most cases, we are mission-critical. What is much more difficult to judge on is the indirect effect.

So how does this tariff discussion is impacting the U.S. consumer behavior? How is it impacting the U.S. trade overall and how it is impacting the export capabilities of our customers in Europe. And still, we have 50% of our revenue in Europe, 25% of our revenue in U.S. and Americas and 25% of our revenue in Asia.

So, to predict what the second half of this year and maybe first quarter next year is a little bit difficult. But what we see is that we had, let's say, a weak second half of '24, a weaker '25, and we see some stabilization. So anyway, to go for a 17% guidance, second half will have to be better than the first half, and part of that is the saving, but the other part of that is to stabilize our top line. Has that answered your question?

And a follow-up in that regard, more regarding dedicatedly for general industry, automotive and luxury was the demand that you have seen by, let's say, June, July, was that stronger than the average that you were showing for the first half? Or was it weaker?

As far as I have seen it, but maybe, Markus, you may correct me. Luxury is flat, not really increasing, not really declining. The only thing what we see is there is in our favor, an ongoing process, which was strategy to enter this market to walk away from electrical wiring and to work closer to PVD. So that percentage is on a good track. We have some really new innovations shown them, but they're working actually on how and in which way they want to place them in the market on the luxury side.

On automotive, the picture is much more diverse. As you have seen that the automotive, especially the premier car manufacturers have shown massive reduction of their income situation. This is not changing any new models launched, but maybe that's changing the behavior to launch additional models. This could have an impact. Actually, I do see more fighters for flat and not for further decline. In outer order intake, I have not seen a decline yet.

Got it. And one very last follow-up. Generally, in terms of mix, can you provide us with sort of a rough ballpark of the business mix regarding to equipment versus powder versus services and where you're standing at the moment, if possible?

That's a little difficult, but I can share 2 things probably. 80% of our revenues actually have headwind and 20% have tailwinds. So that's the Aerospace part where we are in, that's running well. There are more orders, especially on the equipment side. Any equipment which we sell is further tracking than our service part. Service on the equipment side is in a pretty good ratio. We don't disclose that because that would go too deep into the reporting structures. And the Service business overall. So, most of our business, as you know, PVD is services. In Equipment, a decent part of that is services. where there's not a real service business that's in the materials business, that's direct sell. But to split that in percentages, I'm not in a position to do that now.

The next question comes from Billon Louis, Alpha Value.

Could you provide more insight on your exposure to the U.S. market? You have previously highlighted that the U.S. was a key growth driver. However, the U.S. sales are currently down year-on-year. Could you help us better understand the dynamics in the U.S. market? And do you expect potential tariff shift to have a positive impact on your U.S. growth? And are you seeing any of your clients, relocating operation or establishing manufacturing sites in the U.S.?

Let's start with the last part. A lot of our clients have U.S. sites, and it's for the moment, not visible for us that they shift massive production towards that site. So, one of our bigger clients, the Volkswagen Group, they have not the biggest exposure into the U.S. Audi has none, Porsche has none. If they plan to do something that would not work short term, that works mid to long term.

Overall, our exposure in the U.S. is a good one. But as I said, it's 25% of our business is U.S. market directly. What is important for us is that a lot of our European customers who are exporting to the U.S. may have an impact, may have a positive or negative impact on the tariff situation. And that's why we are a little careful and cautious because that makes the whole world for us very very difficult to judge on because very often, we coat stuff, which is in a Tier 2 or Tier 1 situation, enters then a car or a product, and we do not know finally, is this product moving towards the U.S. and tackled by tariffs? Or is that moving to India or China and not tackled by tariffs? Or does it stay within the European Union.

The predictability of markets within the last 3 months dropped a lot because we had seen, but I don't tell you anything new, and I don't want to hide behind geopolitics. But it's a matter of fact that the Israel situation is completely unclear. The Iran situation is unclear. Nobody talks about Taiwan anymore. Russia and China have just recently launched a common exercise with the Navy. We have a tariff discussion, which goes radically up and down. So now India is announced to get higher tariffs from the U.S.

The European deal, as I said, in my eyes, is not really fixed because it's a handshake between the European Commission head and U.S. President, but there is not a real deal structure behind. And last but not least, we have to face this 39% threat on the Swiss industry. And here again, we can handle that somehow by our international network and our direct activities. It will have an impact, but it's an impact which we get probably under control. What we cannot handle is and what we can, it's difficult to foresee is that how this tariff situation is impacting our clients situation and overall behavior of customers to buy the equipment where we are getting our coatings on.

Yes. And Michael, thank you. And if I may add to that. So, if we consider the FX headwind and USD depreciation, we are actually flat year-over-year for the U.S. or for the Americas. So here, we have shown some resilience. And going forward, we see some upside in the energy, oil and gas, if the promised drilling activity is coming back. Here, we see a bit of a delay of the uptake of that.

But don't forget, we have the world-leading technology with our new matrix material, a drill head that has set world records in terms of depth and growing through hard rock. So, if the drilling activities for generating new oil sources will come, this will be a great upside for us. On the tariff side, don't forget, and I want to mention this, I'm sure you're aware, but the service business is typically very local.

We have a location in the U.S. and 100 miles around it or 150 kilometers around it is where you have the customers, except for materials and equipment business as we discussed earlier. But I feel we are flat in a very weak environment, which shows our resilience and shows that our customers really appreciate us as part of their partner in there and how valuable we are to their supply chain.

And may I add to what Markus was saying, and I don't want to overwhelm you with all these words and phrases. But when we talk about oil and gas industry, we have as well to differentiate between upstream, midstream and downstream. We have seen a good oil and gas industry in midstream, downstream, but there was no upstream. Upstream was half that. If there is now these activities of higher drilling, that would be in our favor because that's where we are engaged in the oil and gas sector. So, it's always important which part of the sector is moving actually, and this is, I think on one hand, it's on the other hand, it shows the resilience of the company because 80% of our markets are really in headwind.

Despite that, we're still in a very high profitability level. And if then for the half year, and I stated that very often, a business like Oerlikon is very difficult to judge on a quarter base or half year base. When we do some impairments now, then we correct within the pure play story, we correct some developments, which have not either taken place or which have really materialized like in Nitriding, where the market volumes are consistently falling and not developing proper. And there we had to act on.

But this is a correction, which is not talking anything about the operational strength of the company. It's not talking about the innovation pipeline, which we have. The only what we need is a little, little boost from the back in one of the other markets because 20% aerospace is 20% is good, and we will increase our market share there, but it's going over time. All the other industries, even semiconductor first half year was pretty weak. This is a market where we're building actually a position for us. But still that market, even that market is not a strong market.

The next question comes from Michael Foeth, Vontobel

Actually, 2, if you could make some comments on whether your midterm EBITDA margin target of 20% to 22% is still valid at this point? And sort of maybe on the back of your cost savings and streamlining, what the timeline to get there would be? That would be my first question.

So, Markus, I would like to start because; yes, it's intact, and it's massively depending on how our market environment is working. In that market environment where we are in, we are more in the 17% or 18% as we are working actually. But if some of these markets, and they will, by the way, we have not 80% of our markets is, I would say, most of industry because we're covering general industry, automotive industry, luxury, semiconductor industry, tooling, cutting tools, forming tools. This is a huge portion of industry.

If some of that industry is joining, there is a very high opportunity to get on this 20% and further on in a given market environment, so if you ask me on time line, if the market environment next year is the same than this year, we are more in that area where we are actually, maybe a little bit higher because our savings are working and savings doesn't mean that we cut off something nonsense.

We are simply additional drive our performance within the structures, procedures in that very pure organization, which we are now a little bit released of all this stuff, which was more too much corporate heavy. So, by the time line, it depends massively on the markets and depends massively on how the international community is thinking about Open Trade.

And maybe if I may add to that. And currently, we're looking into the possibility of having a Capital Markets Day next year. And with that, because it's really transformative mode for us right now, we can give you much better and much more concrete updates on that. So... Okay.

Okay. And I guess my second question probably gets the same answer. you redefine the way you calculate ROCE. And the question would be you still, it's still pretty pretty low and not in value-generating territory now. The question would then be what timeline you have in order to get value generative, but you will probably answer that at the same time, I guess, or if you want to make any comments on it now.

Sorry, that's the wrong answer. ROCE is something where we simply see that we have done significant investments and activities in the past. By the way, within our depreciation, there is a significant portion out of a very old deal that was the old Metco deal, which is phasing out over the next couple of years, but it was in '21, '22, still significant. There are some other activities where we're working, where we have invested, where we do not need to invest all the time.

As for example, we had no on carbon coater and diamond coaters, which we developed, and we are now on a very good to introduce them into the market. So, there was things to be done where the ROCE was not in favor of that, as you mentioned. I'm not happy about a 4% or 5% ROCE, and there is a clear task to get that on a level, as you said, that we are capital accretive and not capital dilutive.

And the timeline about that, it's in a shorter period over, let's say, over the next 2 years and not over the next 5 years. Market situation, it can be a year, it can be 2, it can be 1.5. Definitely, with the pipeline we have, and this is, and that should sound really encouraging for you with the innovation pipeline we have day by day, we take market share in a flat or even shrinking market environment, we take market shares from our competitors.

So, the technology position of Oerlikon is a super strong one. The only what we need is a little bit more market to grow to strengthen that.

Right. And, but also, you're correct, you get the same answer, a more formulated view on that also as part of a potential CMD in 2026.

The next question comes from Alessandro Foletti, Octavian.

A couple as well, very easy, I think. Is there a way, can you quantify the impact of the business mix in your margin decline?

Markus, can you do that?

As mentioned before... Sorry, as mentioned before, we don't go on that deeper level. But here, the truth that you are aware of are intact. The majority of our business is around the services business. This is where the margin accretion is coming from, for our group, and this is where we have the biggest hit due to our end markets, general industries, tooling and automotive.

So, a good portion of what we see in our results and in our difference in results versus last year is very much coming from a mix. We also have to consider that 0.6% or CHF 5 million is coming from FX. So, but I'm sure you decommissioned that already. And as for the mix, it's the majority of the remainder.

Well still good enough even if it was just qualitative. And then on the pensions effect, you mentioned, Mr. Suess, that you restructured massively the pensions, and I see the liability going down, but I wonder if there was an effect on the P&L as well. And if that also would be nice to hear if you can quantify.

Maybe I didn't got your answer proper -- your question proper. Can you repeat?

You mentioned in your statements, Mr. Suess, that you restructured the pensions. Pensions liability? Or was it just in connection with Barmag?

It's in connection with Barmag. Barmag was carrying a huge liability. And when we have finalized the carve-out of Barmag, the sell of Barmag, then we have a much, much smaller pension liability on the company. So it's not only about the classical debt levels. It's really on the pension side, which gives us a massive release on that because typically by structure, Barmag was a mainly German organized setup. And in Germany, you had a much higher pension liabilities as we have typically in the with the setup we have.

And you alluded to that. So we don't have the effect yet in our books. We will have, we will see the effect only at closing, which we expect to be at Q4. And here, we expect something around CHF 120 million, CHF 130 million effect then at the year-end.

All right. That's great. And then remaining on Barmag maybe, is there also foreign exchange, accumulated foreign exchange recycling through the P&L that has to happen?

Not sure I understand the question, to be honest.

Well, yes, in the past, when you, if I remember correctly, when you sold, I think, the vacuum business or the, what was it, Advanced Technology business, there were accumulated translation differences from foreign exchange that were sitting on your balance sheet that had to be recycled through the P&L once, leading to significant book losses, but noncash, but book losses. This is what happened.

You're talking about CTA and the currency translation. Also here, as you're aware, this will be happening with the closing. Again, this is at Q4. As of June, we can say that we're in the ballpark of around CHF 200 million for that.

Next question comes from Adrian Knoblauch, ZKB

I have 2 and also thanks for the clarification there on the pensions. My first question is you have a rather big discrepancy between the reported and the adjusted EBITDA or operating or how you call it. Can you elaborate there on the nature of your impairments, specifically this Nitriding or Eldim; what are they exactly? And how do I understand one-offs there?

So it's a restructuring. All of them go under restructuring. And obviously, the difference, as you mentioned correctly, is related to these impairments. We have 3 types of impairments. We have the impairment for Nitriding, which is a which is a business that has challenges on the customer side, very connected to the automotive business. And with that, also very under pressure from the market. We don't right now see good way to have an accretive business out of that and that becomes sizable. So this is the impairment for Nitriding.

Also, the next impairment is for Eldim. While we believe and we see strong uptake in the aviation industry, Eldim is a special case. We have a very large contract, long-term contract with the main player in the aviation industry. However, as you are aware, the qualification process and sometimes the setup of the production may take longer than anticipated, and this is the case here. We see a delay of this contract. The contract will come in its full form at the moment, but at a later stage. So we took cautious steps on this one.

And the last one was already mentioned. It's a bunch of R&D projects. that were referred to by Michael before. And maybe one thing is important to me on the Eldim side, don't forget this was a business that we acquired as part of the Metco transaction somewhat 10 years ago. And here, the write-off is mainly on the intangible assets. So the tangible assets are still intact. Does that help?

Yes.

Maybe I'd like to add a little bit because the different, the quality is different. Nitriding is a declining business where we are in touch with other business partners how to how to solve that. It's a small, pretty much small business. Eldim is a story where there is a growth plan behind, but that growth plan is, as Markus was saying, is with a big contract of transferring activities from a customer of us towards us.

And this takes a little longer because his capacities to push for and to do all this verification, qualification work on are sometimes a little bit defocused. So by that, we have to do that. The last one, and it's not a bunch. Maybe Markus, I have to correct it. It's dedicated and was some activities on green hydrogen and stack development for that and batteries on solid-state batteries where we simply have said there is a freeze on now, we stopped that.

We have to write that part of, which we have invested already. It's not, the know-how is not gone. But we have to wait until the markets are really promising and coming back. Green hydrogen is not that market as it was somehow promised 5, 6 years from the European Union. The same is the solid-state battery situation. And the other major part of that was a development for certain titanium powders with the titanium powder development. This was simply obsolete and we had to write it off. So that's an older story out of a couple of years ago.

So that's really, and the last one was a start of a development of a new coater, which we stopped because that coater became too big and not for the right market. So it's really dedicated write-offs, which we do according to the pure play that we say whatever is not fulfilling our requirements we not carry it with us, but we simply take it off.

All right. And then you're receiving the cash proceeds for Barmag later this year. And you stated the priority of usage of these cash proceeds by paying off the term loan in February, then you want to do growth initiatives. And then you were thinking of a special dividend. And I was wondering, do you have any leverage level in mind that you want to reach before you're thinking about paying out a special dividend?

Yes, we do, but we would like to discuss that in the Board when it's the time. First and above all, the major target is to deleverage. And that's what we have announced and what we will do. And then we will see how the situation end of the year looks like, which kind of activities we're doing and what is the let's say, the remaining headroom for a potential special dividend.

Special dividends, as you remember, we paid in the past, always a part of a divestment saying that shareholders will participate in that. As long as we can afford that was always good. We will not do anything which we cannot afford.

But in terms of going forward, there's a clear ambition to be below 2, good, well below 2 for the leverage ratio going forward.

The next question comes from Arnold Christian, ODDO BHF.

I have a question on the balance sheet and there, especially on the prepayment received on orders and trade payables. These were quite lower than half a year ago, and I believe this is mainly due to the fact that, yes, we don't have Barmag in there anymore. So, we only have now CHF 20 million, I think, on prepayments and trade payables only CHF 108 million. Is that the new level we should think about? Or do you think that prepayments will play a bigger role again? Of course, never to the same extent as we, as it used to be because you don't have Barmag anymore. But is this also due to the fact that you face lots of headwinds and therefore, you don't have much prepayments? How shall we think about that?

So, first of all, you're correct. A good portion of the advanced payments that we received were for Barmag business. As you know, as part of the discontinued showing of Barmag, the entire Barmag is shown under assets held for sale in one position.

Going forward, we have also started an initiative to restructure our net working capital by which we want to improve the ratio between receivables and payables. Here, the project has started and is well on track. And knowing that we may not get to the advanced payment levels without Barmag as part of pure play, we have organized to get to a better positioning of our net working capital with that.

But the question, Markus, was a little bit more about the prepayments. And here, structural, definitely, there is a change because in the Barmag business, and you have seen that if you've been following the company, when you have an increasing market, you have always significant prepayments; then on the opposite in the years '23, '24, cash-wise, the company was suffering a lot by these prepayments because then we had to deliver the work, but the payment has been already been done.

So, the very negative cash impact in the years '23, '24 towards the company came from this decline since '25, it's more or less bottoming out. But dimensional-wise, and this was always one of the reasons why we said we had to separate. The business is in its quality totally different. We're talking about CHF 50 million to CHF 300 million order size for single orders versus we're talking a lot of small customers and a lot of small service businesses in [remainful] in Oerlikon. And so structural-wise, there is a change, but that was what Markus was mentioning was even to get a better ratio between, within our net working capital, and there are some significant moves which we can do.

But on the prepayment side, the level, the quality level will decline towards that what you known out of '21, '22, '23, not because there was no prepayments anymore in a dimension. On the other hand, there will be more prepayments again when we do, especially on the equipment side, when we have some more market tailwind again for further growth.

So, in a growing market, for sure, you have higher prepayments than in a shrinking or flat market. But here, again, to be precise, the dimension Barmag was bringing, that's a different dimension because the business there, we do not have in Oerlikon in regular big projects, let's say, above CHF 10 million. Barmag doesn't start projects below CHF 50 million. The typical project size is CHF 150 million, CHF 200 million, sometimes up to CHF 300 million. And there are, and they only start there when there is significant prepayments there, but then they have to finish the project as well when the payments are already taken. That's part of their business model. Was that precise enough?

Yes, very clear. Maybe just a follow-up on the potential restructuring of net working capital. I mean, what kind of potential do you see there? I mean, are we talking about an improvement of CHF 25 million, CHF 50 million, CHF 100 million?

At this stage, I mean, we're going in that direction. But at this stage, we're not yet ready to quantify. I would say give us to year-end to have an announcement here.

Ladies and gentlemen, that was the last question, and this concludes today's conference call. Thank you for choosing Chorus Call and thank you for participating in the conference. You may now disconnect your lines. Goodbye.