Bossard Holding AG (BOSN) Earnings Call Transcript & Summary

Welcome to our Annual Financial Analyst and Media Conference 2024. We are streaming this event, and we'll make it available later this afternoon. Bossard is a strategic partner for fastening technology and Smart Factory solutions to OEM customers globally. As a family business in its seventh generation with over 30 business locations on 3 continents and close to 3,000 employees, we for the second time after 2022 achieved over CHF 1 billion in sales. Our global and diverse customer base is a key element of business resilience. We are not dependent on single industries, but benefit from those that are growing such as electromobility or railway. Our international spread of customers as well as our global supply chain network with over 4,000 key suppliers contribute further to our global resilience. With a global market share of approximately 3%, we still see vast potential for growth in most industrial markets. Besides Switzerland, Denmark and Austria, where we have a double-digit market share in percent, Bossard has low single-digit market share in most other markets with large potential in U.S.A., Germany, Poland, India and China. After this short introduction of will start, Stephan Zehnder, our CFO and I would like to guide you through the following agenda. I will start with our key achievements 2023. Stephan Zehnder will then navigate you through the financials before I will close with a follow-up on the development of our strategic services namely our Smart Factory Solutions, the current activities in artificial intelligence and our focus for 2024. So let me start with the key achievements 2023. The Bossard Group has proven to be resilient in a very challenging environment with recession starting from the second quarter of 2023, inflation and the strong Swiss franc. The focus on Sunrise Industries, namely electromobility and railway as well as the further implementation of Smart Factory solutions paid off. Following our Strategy 200, which is not a 200-year strategy, but an ambition which follow by 2031 when Bossard turns 200 years old. We successfully rolled out our new ERP system Microsoft Dynamic 365 in Singapore, Thailand and Malaysia. We continued our cultural transformation journey with talent and leadership development programs to ensure employee retention and traction. We set up targets and initiatives for zero-CO2 emissions by 2040, Scope 1 and 2, and we introduced new, more sales-focused organizations in the U.S.A. and in Germany. With this, our organizations became more customer-centric, more focused on industrial verticals and more aligned on business growth and pipeline conversion. Stephan Zehnder, our CFO, will now navigate you to the financial review. Stephan, please.

Thank you. Good afternoon, ladies and gentlemen. In an increasingly demanding economic and geopolitical environment, the positive business momentum of 2022 continued into the first quarter of 2023 though normalizing over the course of the year. Less incoming orders as a consequence of customer inventory reductions seamlessly transitioned to weaker customer demand in 2023, in line with the economic indicators, which continued to decline as the year progressed. Despite the strong Swiss franc and thanks to stable demand in several of our growth industries, Bossard achieved satisfactory results. Thanks to the gratifying performance of Smart Factory Services, Bossard was still able to strengthen its market position in all 3 market regions. The Bossard Group achieved sales of CHF 1.069 billion in 2023, a decrease of 7.4% compared to the prior year whereas 4.8% was attributable to the market appreciation of the Swiss franc. Shorter delivery times and higher availability drove the stock level normalization and therefore impacted the demand globally. Also the normalization of the demand from sectors that benefited from the pandemic as well as the general softening of the economy had an impact on Bossard sales performance. The growth industries such as electromobility and railway reached again gratifying growth rates. Other focus industries like consumer goods and Electronic Industries as well as medical technology recorded not only the normalization of demand, but also suffered from saturated markets and high stock levels. All these factors added up to a negative organic growth of 4.3% in 2023. The acquisition of Bossard Ontario in Canada, formerly PennEngineering, which is consolidated since December 2022 contributed 1.7% to the group's sales performance. Due to the supply chain challenges experienced during the pandemic inflation, but also the trends toward near-shoring increase the demand for Smart Factory solutions, which had a positive impact on our business development. Daniel will talk about this later in his presentation. The slowdown in demand as well as the higher cost basis impacted the results negatively. EBIT decreased by CHF 28.4 million to CHF 131.1 million. The EBIT margin declined from prior year's 12.3% to 10.6%, which nonetheless reflects solid profitability in a challenging environment. Let me briefly comment on the income statement. Despite the change in market conditions, the gross profit margin of 31.7% was above prior year's 31.2%. The increase was mainly due to the well-maintained price levels, but also a consequence of the regional and product mix. Compared to the prior year, selling expenses increased by 5.4% to CHF 144.6 million. The rising cost is partly due to the inflationary market environment, which primarily manifested in rising labor costs. In addition, the number of FTEs increased slightly on a year-on-year basis. Increase in costs also resulted from our targeted investments in the organization and the digitalization initiatives in course of our Strategy 200. Noticeably was also the significant increase in the financial results, which amounted to CHF 12.7 million compared to CHF 5 million in the prior year. There is negative currency impact due to the appreciation of the Swiss franc contributed to the increase. Major impact was attributable to higher interest rates paid in 2023. Compared to prior year, net income decreased from CHF 105.6 million to CHF 76.8 million. The net profit margin amounted to 7.2% after 9.2% in 2022. To look at the sales development in the individual market regions shows that demand softened throughout the year, resulting in lower sales in all 3 market regions. After a phase of double-digit growth rates, demand in America also began to normalize over the course of the year. On top, the strong Swiss franc had an additional negative impact on the sales development. While sales increased by 3.6% in local currency, sales in Swiss franc declined by 2.6% to CHF 301.5 million. The successful expansion of the customer base and the growth in existing customer over the last years were particularly evident in the positive development of the focus industry electromobility. Bossard, Ontario in Canada, as mentioned, consolidated since December 2022, contributed to the overall sales performance in America. Sales in Europe decreased by 6.1% to CHF 586.4 million, whereas in local currency sales only fell by 3.5%. The considerable drop in sales is a consequence of the economic slowdown and normalization of demand as well as the strongest Swiss franc. Despite the economic headwinds, the electromobility and railway sector showed encouraging signs. In an environment marked by inflation and shortage of skilled labor, Bossard Smart Factory Services drew even more attention from customers. Sales in Asia declined by 17.8% to CHF 181.1 million or by 9% in local currency, showing that, particularly in this market region, the appreciation of the Swiss franc was significant. Apart from the gratifying development in India, we were also benefited from near-shoring trends, a dynamic start-up landscape and infrastructure projects in the focus industry of railway, demand momentum in Asia was restrained. Especially in China, where on this slight growth momentum was felt of the COVID-19 restrictions were lifted. The change of the economic environment also influence the development of our balance sheet. After a substantial rise in 2022, up to CHF 910 million total assets decreased by 11.3% to CHF 807 million. Whereas in 2022, the increase resulted mainly from higher accounts receivables caused by the significant increase in sales and the above-average growth in inventory to cope with the supply chain challenges we had experienced opposite developments in 2023. The decrease was mainly driven by the normalization of the supply chains and the slowdown of demand caused by the economic cycle, both having a positive impact on the capital employed. Thanks to the continued solid profitability and the lower capital commitment, the equity ratio increased from 41.7% in the prior year to 46.2%. The operating net working capital decreased year-on-year by 16.4% to CHF 464 million, mainly driven by the lower accounts receivable as a result of the lower sales in 2023 on the one hand and by the lower inventory levels due to the normalization of supply chains and therefore shorter lead times on the other hand. In relation to net sales, the operating net working capital decreased noticeably from 48.1% in the prior year to 43.4%. After a marked increase from '21 to '22, the capital intensity started to normalize over the course of the year, reaching the level of 2021 again. As a result of the lower net working capital and the still solid profitability, net debt decreased from CHF 319 million in 2022 to CHF 241 million. The gearing net debt measured against equity recorded a decrease to 0.6% versus 0.8% in the prior year. Net debt in relation to EBITDA decreased due to the lower capital employed to [ 1.7 ] of the 1.9x in the prior period. Thereby, Bossard continues to have solid balance sheet ratios, which are within the long-term balance sheet range of a gearing of less than 1.3 and net debt-to-EBITDA ratio of less than 2. This underlines the group's solid financial position and its ability for further investments. Independent of the challenging environment, we have continued to invest in our various areas in line with our operational and strategic goals. In total, we invested CHF 38.3 million, which is slightly less compared to last year. There of CHF 9 million were related to 2 infrastructure projects in France and Taiwan, which we completed now in 2023. In France, we expanded our existing capacities and in Taiwan invested in a completely new office and warehouse building. Thereby, we more than doubled our logistic capacities in both cases. We invested around CHF 12 million in digitalization. The biggest share of this investment was dedicated to our new group-wide ERP system. After successful rollouts in Denmark and Sweden in 2022, we have completed successfully the rollouts in Singapore, Thailand and Malaysia in 2023. In total, we'll invest about CHF 70 million in the new ERP system and its global rollout over a period of 5 to 6 years. CHF 10.4 million were spent for replacements, investments in ongoing operations. Also last year, we spent a sizable amount for our proven productivity solutions. We invested CHF 7.1 million into smart devices, which we installed at our customer premises as part of our Smart Factory and Logistics solutions. This means that we were able to further solidify our partnership with our customers and contributed to their efficiency and productivity. Having a look at the cash flow statement, it can be noted that the lower sales and profitability had a negative impact on our cash flow from operating activities before changes of the net working capital, which decreased from CHF 137.7 million in the prior year to CHF 104.2 million. In contrast, the cash flow from operating activities after changes in net working capital increased markedly from only CHF 6 million in the prior year to CHF 157.7 million. As already mentioned, this is mainly due to the lower operating net working capital, particularly caused by the decrease of the inventory. Cash flow from operating -- cash flow from investing activities decreased from CHF 68.1 million in 2022 to CHF 36.3 million. On the one hand, this is owing to the lower outflow of funds for business acquisitions compared to 2022 on the one hand, due to lower investments in property and intangible assets, as I already mentioned. Mainly due to the consistently solid profitability and the significant decrease in operating net working capital, Bossard recorded an above-average free cash flow of CHF 121.4 million in 2023 after a negative free cash flow of CHF 62.1 million in the prior year. As always, finally, a word on the dividend. As you know, our dividend policy provides for a 40% payout of net income to shareholders. Accordingly, the Board of Directors will propose a gross dividend of CHF 4 per registered A share at the 2024 General Annual Meeting of Shareholders, after CHF 5.50 in the prior year. Ladies and gentlemen, with this brief review, I conclude my remarks on the financial year 2023. Thank you very much for your attention and this pleasure and over again to you Daniel. Thank you.

Thank you, Stephan. I would now like to provide you with a short update on the importance of our strategic services and an update on the progress of Smart Factory implementations last year. Maybe you remember the headline news in January, where in Alaska Airlines, Boeing 737 MAX aircraft reportedly lost an exit door 10 minutes after takeoff and the reason for that being so missing bolts. Notably not from Bossard. Boeing is not our customer yet. So let's work on that. The market capitalization of Boeing dropped by around USD 10 billion within 2 days and Boeing faced a claim from Alaska Airlines of about USD 150 million just because of some missing or wrongly tightened bolts with a cost price of about $3. You wonder how this could happen, particularly in the well-regulated aerospace environment. By choosing the right fasteners from the beginning and by ensuring the right assembly, it could have been avoided. This shows again the strategic importance of fastening related services. Product Solutions still make the foundation of our sales volumes, yet it's the services around Smart Factory and fastening technology, which creates value and peace of mind for customers. So our goal is to sell Smart Factory Services to production and logistic specialists and fastening technology solutions to designers and developers with the aim to increase customers' productivity and thereby create value. In the area of Smart Factory Logistics, we have grown the number of customers to 1,172, which is a growth of 3.9%. Similarly, we have been able to grow the number of smart devices, scales and electronic labels to 455,000, which represents a growth of slightly over 4%. A good example for a Smart Factory Logistics installation is ABB Transformers in Turgi, Switzerland. The main challenges were to streamline the material handling to the assembly workstations to ensure a very high material availability to reduce process costs and to do an implementation without interrupting the ongoing production. The solution were 3,800 SmartBins, 13,000 SmartLabels and the last mile management intralogistics service to manage the internal logistics flows, resulting in more than 13% reduction of walking distance for assembly personnel, 25% process cost savings in C-parts handling and as desired, 0 production interruptions during installation. In the area of Smart Factory assembly, where the aim is to support customers with electronic work instructions for fastener assembly, we have grown the number of customers to 72, which is a growth of 84.6%. At the same time, the number of installed assembly stations grew by 58.9%. An exemplary Smart Factory assembly customer is Schaffner in Thailand, an electronic component manufacturer. Their challenge was that they worked with paperwork constructions, causing variations in product assembly because workers didn't follow the instructions. On top, they were manually filling in traceability forms. To address these challenges, we installed 20 workstations with digitalized work instructions, scanners to ensure correct work orders and a single digital transaction platform to consolidate production data. The benefits were 70% less document preparation time, 30% less product rework as well as 100% transparency and traceability in the entire assembly process. Besides helping customers to reduce total costs, we also looked into solutions which can make us more efficient, and artificial intelligence offers great opportunities for that. With increasing numbers of technical customer inquiries towards our nontechnical sales staff, we experimented with the public ChatGPT, trying to find quick answers to technical questions. We found that the quality of responses the system would provide us were not good enough. So we decided to create our own dedicated ChatGPT with the public tax logic but our proprietary technical fastener data. The Bossard ChatGPT acts like an experienced Bossard engineer. It helps nontechnical sales staff to answer technical questions in a speedy and accurate manner. Another challenge was a high number of customer inquiries to our sales staff. For example, on open orders, items, delivery dates, investigation and answering e-mails kept a salesperson busy for minutes, if not hours. So we developed the Bossard e-mail helper bot or robot, which can understand customer e-mails and reply to a range of e-mail types by collecting data in the relevant system and formulating an appropriate response to the customer. This creates more space for salespeople to acquire new projects, develop customers instead of answering e-mails. Besides these dedicated generative AI tools, we will introduce the Microsoft copilot from next month, from March into the Bossard world. This to make our office work more efficient by creating automated tax summaries, by consolidating e-mail traffic, for example, from a customer over a period of time outlining the important new action points or by enabling users to generate creative PowerPoint slides with customer-dedicated content within seconds. Finally, I'd like to close with an overview of our focus areas for 2024. Profitable sales development in a continuously challenging environment will be key. Extra cost saving measures, which were taken end of last year will help us to deliver. We'll continue our focus on sales growth, particularly in Sunrise Industries and by emphasizing Smart Factory Solutions to help our customers to reduce total cost and increase productivity. We'll use AI for further service and efficiency development. And will also continue with the further implementation of our Strategy 200 with the rollout of our new ERP system, Microsoft Dynamics 365 in France and U.S.A. We continue our cultural transformation journey with talent and leadership development programs to ensure employee retention and attraction. We implement regional initiatives for zero-CO2 emissions by 2040 Scope 1 and 2. And this year, we'll have a strong focus on digital marketing initiatives, lead generation and conversion. This should enable us to become more efficient in creating business opportunities and converting them into sales. Mid-term, these activities should result in organic sales growth of above 5%, and operating profit margin EBIT of 12% to 15%, and an equity ratio of above 40% and the dividend payout ratio of 40% of net income. With this, I'd like to thank you for your attention and gladly open up for questions. Now questions in the room will be answered first, I was instructed, and then those of the dial-in audience. So please stay online if you have questions and are dialed in. Thank you.

Mike from Baader-Helvea. Just on -- I would say, my first question is specifically looking at the regional development, and this is for full year 2024, but also on the cost structure. What would you say makes you more or less nervous with regards to these 2 areas, let's say? And maybe nervous is being a bit too pushy, but maybe more cautious or hesitant with regards to 2024? Just to understand the question right. So is it about geographic regions that you say regional and costs. So on region, are you more comfortable with Europe, more comfortable with the Americas, Asia and then on cost side? Are you a little bit let's say, on cost of materials, does that make you..

Tell me what will happen geopolitically, and I will tell you my level of comfort. There's a lot of uncertainty, of course. But I think in general, if there is no like war breakout or anything, we would expect that second half year overall would probably relax. What is really is still not coming back well is China. They haven't come out of the woods really since the beginning of last year. And with the geopolitical discussions, that's a big question, Mike, of course, China is probably something which can keep your awake, and you just don't know what's happening. We're focusing on local Chinese customers more and more because we think China for China makes sense. And from a sourcing perspective, we have started to shift away from China and Taiwan to Vietnam and other countries. Yet, we still have to see that from a supply perspective, China and Taiwan are still some of the biggest supply markets for fasteners in the industry. So you cannot just go away completely because then you wouldn't be competitive, you wouldn't have the parts and so on. So from a supply perspective, I would say it's probably China/Taiwan, which is a bit a question. But we've discussed some mitigations in what we can do. But of course, if there is war and anything like that, then I guess everybody will be troubled. So and the others, Europe and U.S., quite honestly, I'm not so much worried about the -- I'm worried about the election, of course, but not -- I don't think the economic impact will be huge depending on the outcome. I just think we'll have to manage some cycles as well. And the electromobility is still going strong and will probably go strong in the next years. So I don't know if that answers.

And then maybe on the cost side, just is it more cost of materials that you're a little bit more nervous about -- if you want to talk about the core 2024 or wage inflation? Or are you expecting these to pull down a little bit?

I think what we can influence besides the top line, which you can influence is definitely the cost and that's where we have a strong focus on it right now, like many other companies as well. So that's what we can influence to manage the result depending on what the top line does. I think from a material perspective, yes, we have seen of the cycle that also raw material prices, finished goods came down you all know from that perspective. But we also -- you see from the results that we were able to manage the gross profit margin level quite well from that perspective. Right now, we can see that raw material prices are quite stable. The rather go sidewards expect for the next 3 to 6 months. There was a slight pickup from the stainless deal due to nickel, which rebounded a bit, but doesn't really change the big picture. I think what really drives it if demand would pick up. So that means usually lead times get any longer capacities are more booked at the manufacturers from that perspective. And also current to the lead times are pretty, 3 to 6 months, which we call normal from that perspective. What's a bit disturbing from a cost side that you all know with the Middle East. So if the vessels going by South Africa, which takes about a week longer, but which is not really an issue in terms of availability. It's impacts a bit the cost that rate costs have tripled since it was lower after the COVID but the overall impact on freight cost on our total COGS is about somewhere 2% to 3%. So I wouldn't say [indiscernible], but we need to manage also from that side. And again, at the end of the day, it's all about availability.

Just to add to that, I think the wage inflation is that also my biggest headache, I would say, this year because it's hard to find good people. You're in kind of a recession yet. You still don't find the people. So that's quite funny. So wages, we plan wages to increase the double amount of the last years just because of the market as it is. So this is definitely beginning, but personnel costs being the biggest cost block in our P&L.

And then maybe just a small one on the working capital. You obviously did a really good job in 2023. Have you still got a little bit of room there? Or would you say that you're -- that's kind of hit the ceiling, so to speak?

It's a question of -- but as I mentioned, it's from the destocking going seamlessly to demand. And I think it's more now demand that influences a bit from that perspective. The question is really where the demand is going. If it's softened further, so we will have a depletion further also the way we buy. So there is a bit -- might be lower inventory. And of course, accounts receivable would go down as well. But I think if you assume that things start to bottom a bit. So we see the curve a little bit going faster. But -- so that means the question of when we start to replenish or our customers start to replenish we need to consider that as well. So it's a bit the judgment. So it might have a positive impact, but it can also flatten throughout the year.

[indiscernible] Just to get it right, why are you trying to switch to suppliers or build up new suppliers outside of China and Taiwan? Is it just because of political risks or..

It's political risks because Taiwan is one of the largest sourcing markets for special fasteners globally. And with the discussions about invasion of China into Taiwan, we've started 2 years ago to look at sources outside Taiwan to make sure we have 2 legs. So that's geopolitical reasons only just to mitigate.

Okay. And maybe a second question, if I may. Last time we had a conversation, you mentioned that you are seeing more and more smaller peers, suppliers, especially in Germany, which are up for sale because they want to go out of the business because of a change in generation, et cetera. Are you considering bolt-on acquisitions, again, more actively? Do you see more..

So I mean M&A is part of the strategy from that perspective, and we always look for opportunities. I think right now, what we see in Germany, especially in Germany, is that, yes, there is opportunities around, but it's more on the manufacturing side. So it's rather the smaller C&C specialized. And of course, they're hit kind of the automotive part of it and softening but yes, of course, we're looking for opportunities and being also actively from that perspective.

I think Germany. Well, obviously, the economy is not doing that well, and we could expect that some of those manufacturers or distributors would be up for sale. We have started like the scanning of the markets more proactively this year. And we do have the list of distributors, which we would look at. And so some conversations are happening already on a, I would say, informal base. But we will see what comes out of that. So there might be more opportunities there.

But one thing is also we are keen on, but they really fit. So we are not just acquiring per se to run the top line. it's really the need to fit to the strategy to make us not just bigger to make us better. I think that's one of the basic conditions which we look for.

What is, again, your definition of Sunrise Industries? And can you remind us again, If you still have the same definition last year to 2 years ago because today, just our railway and electric vehicle. So health care, electronics, is this still something you believe in -- or is just like short term?

No, no, it hasn't changed. We still see mid- to long-term the railway electromobility, as we mentioned, the health care and the electronics, robotics, automation industry growing strongly. We have had customers like VAT, you know yourself, they were in a cycle, so long term, we still believe this is going to grow like same ASML in Holland, which is where we're the key supplier. So they have a little bit, but now it's coming back. So electronic, semicon, robotics, health care, railway and electromobility, those are the Sunrise Industries. Now some of them have seen a bit sunset last year maybe. So -- but in general, we believe mid to long term, this is the way to go. There are others which are on the off-price, it's the renewable energies, although I have to say this is a bit flickering light because as you know, I mean, some incentives on solar panels have stopped, and there's companies like [indiscernible] going down. Chinese are flooding the market with cheap solar panels and yet, it's still not invested in Europe. And so this is a bit strange to see what's coming. So those could be the next, but it basically not changed, but we have seen some swings in like electronics, semicon, up and down. But midterm, we still believe in it.

And how much is your exposure currently to the Sunrise Industries?

39%.

Approximately 39%-- so roughly 40%.

Maybe a last question to this industry, which one in the short term, would you see to pick up like 2024?

It's still -- it's -- well, railway is very strong. We know when that's public, Alstom has an order book of EUR 126 billion, Stadler has an order book of EUR 26 billion, which is also public, and we're 1 of 3 main suppliers and growing and gaining market share there. So I mean that's a very strong industry segment, which is growing sustainably in Asia, in Europe but also in United States. So it's a railway for sure, electromobility still is a very important segment for us. Germany is a bit slow right now. But if we look over to China and U.S. still very strong this year.

I've got 3 questions. I would ask them one by one. The first one would be on the current trading since we're already by the end of February. If you can sort of shed any light into January and February, how that was developing for you? That would be much appreciated.

We'll come up with a trading update mid of April.

Maybe just one comment. As I said, we have started some restructuring measures end of last year, and we have seen some fruit in the beginning of the year. That's what all I can say. And we're confident that we're on a good track, but that's all.

Got it. And the second question on the cost side. You mentioned in the presentation that you have started with some restructuring measures, and you just mentioned as well. Are these sort of in size sufficient to offset the likely labor cost inflation that you were also alluding to? Or will there be more needed essentially to offset that?

Well, we have also started, and I wanted to add that to Michael's question on the wage inflation. The AI initiatives are really aimed at becoming more efficient and not spending time on writing summaries or searching for customer orders or even quoting standard items which can go electronically. So really to make us more efficient there and not -- so we don't need more people to -- with more activities going on. So this is basically using tools to become more efficient. And the other part, definitely, it will help us recover some of those additional wage costs, but not all of them.

Maybe to your question before, not just to let you be with that simple answer. I think if you look in the environment, there is no acceleration right now which you see. And I think it's also if you look at other industries, I think that's -- that's the environment right now. And that's what I can say.

Got it. And then the last third question, a quick one on the CapEx side. If I'm not mistaken, you were mentioning before that you were sort of aiming for CHF 50 million of CapEx in 2023. It was now something [ 30-something ]. Is there something meaning the delta will be just switched over into 2024, will be switched over somewhere in the next few years? Or how should we think about that?

Now of course, we have been cautious on the cycle to work on that one. There is always this wishlist what I call it. And so we kind of maneuver a bit. Some of them [indiscernible] over. So from today, again, the wish list is about CHF 45 million. Out of that is about CHF 16 million CapEx is related to digitalization. The biggest part is the ERP system. Positively, we expect another investment in smart devices of CHF 5 million to CHF 6 million. We're going to have replenishment, as I said, an ongoing operation is somewhere CHF 15 to CHF 16 million. Again, that has maneuver and as per maneuver. And then we have, I would say, about CHF 5 million, CHF 6 million to come in infrastructure as part of our ESG initiatives. So some renovations, which we can do proactively, of course, all solar panel is always a topic from that perspective. So that's kind of the overall setting at the moment. So from that, it's about CHF 45 million. But again, we're managing the cash flow. We look at the priority of the CapEx. So it can be that it can be also less this year at the end of the day.

Could we come back to the ERP launch? Have there been any integration issues or delays in the last quarters? And could you remind us what overall left from this CHF 70 million and yes, maybe then also in the broader context, I mean, these are kind of growth investments. When you look at your midterm targets, you always speak about phase of investments. When is it done? Should it be end [ '25 ] Or what are we looking at?

So to the first question, so far, hard to believe, but we've had Denmark and Sweden, which was the first rollout, which were a bit tough. So there, it took a bit longer in the beginning. But last year, the rollout of Thailand, Malaysia, Singapore, we're on track actually pretty much on plan. Those were smaller business units. This year, we will have France and U.S.A. We will go live with France actually, this weekend tomorrow, 1st of March, so 1st of March. And U.S.A. will come later this year. So this is still on track. So, so far, no delays. And with every system that we start to implement, we also learn and the people, the way we're organized is that people from the former rollout, they will join the next rollout and vice versa. So those for the next rollout already joined the previous one. So we tried to really mix people from the beginning. So with every rollout, we're training more people on supporting the project. And with that, we also need less external support, and we learn as we go. So this is the procedure. And so far, so far so good.

So we have spent CHF 45 million so far, CHF 33 million is CapEx and CHF 12 million of this OpEx from that perspective. Now going forward, we will see a slowdown in the CapEx because we're getting closer to template besides -- now with the next rollout, U.S. is a bit special with the customer base in the localization and then in Switzerland. But otherwise, for the other implementation, it's pretty much the process is as given. Of course, there's always the local requirements for taxes and so forth. So that will slow down and there will be OpEx as it has been about. So last year, it was about CHF 6 million OpEx in the P&L in 2023.

Does that answer your question or any add-on?

Yes. I mean maybe the other one with the midterm guidance, or is it from '26 on -- or what does the phase of investment mean?

Yes. We said the majority of the -- it's 5 to 6 years. So we start in 2022. So I would say it's kind of end of '26. That's the plan. We should have the majority of the companies on the system. And of course, if there is an acquisition, I mean, there is always probably will never be finished kind of. But I think the end of '26 would have about 85% of sales and assets. So we should also see the benefits because the system is also long term, it's -- we can use much more the new technology, we can abide the new technology. It's much more flexible. With the standardization, again, we're getting more transparency, we are becoming more efficient. So that's the expectation. But also that what we have seen going through the last cycle of the -- of implementing the system.

So as soon as we have the majority on the same system, it's also easier to manage verticals, global verticals. Global account management becomes more and more important. But today, we have fragmented visibility. So that makes it really not so easy today. And we're confident that this will help us to create much better transparency and efficiency. So we saw it by the way, last time when we introduced [ fact ] our old season from 20-plus years ago. Okay. We have questions from the online as well or -- or is there any, yes, sorry.

[Operator Instructions] We have no questions from the phone.

Good. Any other questions from anybody?

You said at the start of the Q&A that maybe in the second half of the year, the situation on the turnover might relax a little bit? What do you think could drive that?

In general, we see a lot of industries now, which budgeted lower CapEx for the first quarter, second quarter. And we know with manufacturers, at some point, they need to reinvest in new machines. So this and they're still producing. So that cycle will come. And so we know some of the industries where we're almost sure that after some time, they will need to reinvest and also accordingly buy fastners. So we're -- it's a feeling. And again, I mean, you asked me about the future here now. Whatever happens geopolitically, it can destroy everything. So we don't know, but there are some indications that the industries have used up their inventory. They need to reinvest in machines and capacity at some point because overall, the economy is still growing. And that means at some point, they will also buy fasteners again. So that's just our assumption.

Just trying another question on the margin again or on the costs. I mean you said you have still substantial increases in wages. So how can these be compensated if you don't have a lot of leverage, a lot of volume leverage to kind of in a stable environment. Are material prices coming back? And is there some room for price increases or what?

Maybe on the wage side, one thing that we put in place now is higher freeze. So we're not adding people now. B, we're not replacing people. And with the natural fluctuations now over the months, you would naturally see a drop. So we need to become more efficient using tools like I just mentioned. So that combined should help us to support that. On the material cost side, we see rather prices -- they reach the trough here coming up again. And yes, I think it's important that we manage the price levels well. We have managed to keep our margins very nicely actually, and now prices are going up again. So we hope we can keep that level. So hopefully, we'll not see a drop due to the price -- to any price reductions. So does that fully cover for any increase in wage. Yes, we don't know exactly, but it helps.

In the presentation, you identified India as a relative bright spot within Asia. I was wondering is this bright spot mostly driven by demand from Western subsidiaries in India or rather by local players?

Both -- clearly both. Both of us, we were in India in November for a week, and we visited both local customers and international customers. We met even with the local ministries on the Make in India campaign. There is a super strong drive from the Indian government to boost local industries, to incentivize local industries, but also to attract FDI or foreign direct investments as well. So it's really both. And we see customers that produced in China that now move over to India. An example is [ Foxconn ]. I mean, they just send us quotes like, okay, can you quote in India because we want to move from China to India. So that's just happening. But also local companies like the Mahindra and they produce these 2-wheelers, 3-wheelers, electric vehicles, Ather is one of the big ones as well. So it's both. That was a long answer for a short question. Anything else? Yes.

You talked about India, maybe another country which is currently benefiting from French shoring, reshoring is Mexico. Is Mexico, a market where you are considering opportunities or where you are able to benefit from this pretty strong development of the Mexican economy?

We have benefited quite well in the last 2 years. So we have been growing quite nicely. Mexico benefited from that reshoring trend. It's ongoing. So Mexico will stay important. I think within the Middle America, it's one of the biggest markets, potential market for us to grow. So yes, absolutely. Okay. One last question. If not, we'll move over to the drinks, maybe we're open for questions furthermore. Thank you very much.