Burckhardt Compression Holding AG (BCHN) Earnings Call Transcript & Summary

Good afternoon or good morning, good evening, wherever you are. Welcome to the second part of our Capital Market Day. Starting with the Systems Division. My name is Fabrice Billard. I joined the company 4 years ago in this position. Before this, I was 12 years at Sulzer, different positions in Switzerland, in Singapore. Before that, I was 5 years in strategy consulting, in Paris and Switzerland, and my background is aeronautics and space technologies. Now coming to our topic. The objective number one, of our midrange plan, which we introduced 2 years ago, was to find our way back to profitability. Our strategy to get there was to improve operational excellence and to defend our stronghold in the market. In the next 30 minutes, I will highlight where we stand versus our strategic goals and give a number of examples for that. And I will communicate actions and priorities going forward, which, in a nutshell, are to continue what we have started and to start capture new opportunities beyond the midrange plan. Let me start where we left it at the last Capital Market Day. And a number of you will remember the 6 strategic priorities, which we communicated 2 years ago. It was clearly about keeping leading market positions, entering new larger markets by driving operational excellence and competitiveness. On the left side, we made good progress to defend our positions. I'll go into more details later on, until COVID hit us really in January, February in China. We strengthened differentiation with new products, for instance, in the marine area, I'll come back to it, and with advanced sealing and material technology, which will become even more important in the future. In general, operational excellence was our focus. And the key to our new retrieved profitability. In particular, we had our program, Pulling Systems Together with about 30 initiatives, which would start in 2016 and completed last year. It brought us about CHF 10 million recurring bottom line impact which we still have. Now comparing this progress with the targets, which we communicated. Basically, we are on track, Marcel showed it before. Starting with volume after a very low order intake in 2016, clearly below CHF 300 million. We had a strong growth, and we've seen this number for 2018. And it continued actually until December last year when then the COVID hit us. And with the strong growth, the dip in sales, which we had anticipated in the midrange plan in 2018 did not materialize. And we remain above that target of CHF 350 million, actually closer to CHF 400 million than to CHF 350 million. As you could see, in the half year results, we had a 20% hit due to the COVID in order intake. Now if you multiply our half year number by 2, you just come exactly to this number of CHF 340 million. Hopefully, the markets will recover, and we will come again closer to CHF 400 million in the next couple of years. This is a topic of mix, which Marcel highlighted before. I'll come back to the 3 arrows in middle a bit later, which were for us the key driver to return to profitability. On the EBIT margin side, we had, you've seen, a very good half year. Clearly above the range based on our product mix, based on very loaded -- very well loaded factories and margin improvements and also compared to last year, not having the LNG cost -- LNGM costs anymore. And here, also, we were not so sure in April, May, June, how it will develop. After a few quite difficult weeks, I must say the teams have done a fantastic job and I want to thank you if they listen, to manage the supply chain. We have a lot of suppliers in Italy, for instance. Getting them under control was critical. They've done that very well. And with this, we could deliver all projects but one for the half year, and this explains the volume that we have. Now you can't assume that it was a representative half year. We still aim for the same range of 0% to 5% for this year and for the coming ones, and the positioning within the range will depend on mix and volume, and volume will also depend on COVID for this year. Now let's go into the 3 middle arrows in more details, starting with the market. You see here the development of our market share in our different applications between 2016 and '19, and we see that we could defend pretty well our positions in PCI, in transportation and storage and even in the first half year, these markets were still strong, and we had a good position. The exception is LNGM here where you know we have some technical issues. And later on, the market switched from 100% high-pressure technology to 90% low-pressure technology, which today, doesn't use piston compressors. That was, to a certain extent, expected in our numbers, in our midrange plan, but not that fast, not to that extent. Now interesting to see what happens in the market. Some ship owners have both technologies, low-pressure and the high-pressure where we sell our compressors. And they enjoy, on the one hand, the CapEx, the slight CapEx advantage on the low-pressure technology, but they also enjoy a lot of the operational flexibility that they get from the high pressure. So we could probably see the balance coming more back in our direction and starting with the Qatar orders that will be probably placed next year where we see that the proportion will be different coming back a bit more in our direction. On refinery, we gained market share, thanks to product cost reductions, I'll show it later. Previously, typically, on large refinery projects, we will just go to the budget phase, but not pass that round. Today, we see it, we are always here for the final negotiations. We don't always win, but we won a few, and these projects brought us some of the volume that you've seen and will be later also very interesting for the spare parts because in refinery, gases are usually dirty, and they create a lot of wear. I'll come back to high-speed and H2 mobility and energy, which are newer markets for us, which we entered last year, which presents some opportunities in the short term, but a lot more beyond the midrange plan period. Now highlighting this market share by applications raises the question, why does that matter looking at this by application? And let me explain this and how the mechanics work, how the market share gives us competitive positions and also market power by application. First, it helps us develop competitive solutions. The more you build up the same compressor, we have a scale effect, we have procurement effects. And then the more we sell, the more our salespeople, especially in the regions, become familiar with the application. They can explain to the customers the very technical USPs, which we have. And with this, they become more competent. They are seen as more competent. They get involved by the customers earlier in the project to a point that they can help the customer optimize the whole plant, making sure that our compressors are used at their best operating point at the same time. So they increase their chances to sell more. Selling more, we increase our depth of engineering know-how, technology. We increase the number of references in the field; for a certain application, a certain product type, even a certain capacity. This is what customers will be looking for when they buy new compressors. We also have more service people taking care of these compressors. The service technical people become also more specialized. They understand that application, was this tricky, what -- where we need to pay attention. And with these customers become, again, more comfortable placing orders with us because they know we'll do a good service. These applications being more numerous, having our sales -- our service people, brings us more feedback from the field. And with this, we can drive market-oriented innovation. And with that, again, more competitive solutions, and we can start again the virtual cycle. So this is why we look at market share really by application. Let's move now to a second strategic goal, to illustrate how SYCC acquisition is offering for us brand-new possibilities, both on the cost side and on the market side. And we have with SYCC team since the beginning at a personal level, great relationships, but they have different products. They have different processes. Probably 90%, at least from them don't speak English, like probably 99% of us don't speak Chinese. So it took time at an operational level to find the right way to cooperate. But now after a few successes, which convinced everyone, we see that it's really moving, and we start to get real benefits. Now from the systems perspective, viewed from a global perspective, what is SYCC? First, this is a highly committed team. This is also our largest factory, which is brand new. We've discussed it before, and we have a new picture here. And this is also a factory with a lot of value added. Meaning they can become supplier for us, and we have seen already clear benefits from that. From Burckhardt, we use them already as supplier for cast parts, for instance, because they had a foundry for frames, for cylinders. They also have very good capabilities for crank shafts, and we order already some crankshafts from them, and we can do more, but we've started and we see the benefits. And we also understand the -- they also understand more and more the BC quality specifications, and we can expand on this. On the SYCC side, on the local markets, they already see the benefit almost right away because being part of Burckhardt group means a lot in China. The brand Burckhardt means a lot, and they use that very, very subtly, and they use that to show to the customer that they have a high quality. They're part of a big group. They're very serious people with very good compressors. And also for Burckhardt and SYCC, we see the benefits. We see it already because we were 2 big competitors, and this is one less on the local markets. And we see it as well because we can -- they have products that we don't have, and we can start to export them. And here, I will show now 2 examples of projects that we have won in the past 12 months where we could sell their compressors. For this, we have introduced a new product brand name, it's called BCS Compressors. And this is the -- let's say the market name of what I called the capital -- the M line at the Capital Market Day 2 years ago. Now it has a brand name, it's called BCS Compressors. So here, you see the 2 examples. The one on the left is for the first ever high-speed compressor, which Burckhardt has sold and it's also the first ever high-speed compressor which SYCC has exported to Europe. So here, we could combine a very competitive product, good product from SYCC with the customer relationships from BC. And by doing that, we enter a completely new market for Burckhardt. The example on the right is for a customer in the PCI segment, which called us to get a Laby compressor basically. And our salespeople identified that in the same project, there was a need for 2 rather basic process gas compressors, which -- for which Burckhardt would not stand a chance and 2 diaphragm from compressors, which we didn't have before. And here, the idea was to make a package deal. And by doing this, we could sell 4 SYCC compressors, which will add up to the installed base, which my colleague, Rainer will be able to enjoy later on. So getting our sales force knowledgeable to sell these SYCC compressors took some time, also to be comfortable, took some time. Now they have seen the successes, and they get more and more excited, and we see that by the number of quotes that we do for SYCC. And SYCC is currently ramping up the team, doing offers for Burckhardt because we see a lot of opportunities. Let's move now to the next strategic priority, operational excellence. And here, as part of the Pulling Systems Together program, we had the 30 initiatives. It was about energy -- sorry, engineering, efficiency, about factory efficiency, about shipping processes, about strategic procurements. And here, I'll show 2 examples, which brought us benefits, both on the cost side and on the market side. The first one on the left is showing the application of value engineering. I introduced value engineering here 2 years ago as one of the top 5 initiatives. And here, this is how we've applied it here. What is value engineering? This is the systematic product cost reduction in a very cross-functional way. And here, we had a team of 15 people from quality, procurement, manufacturing, sales, having 3x a 1-week workshop, 100% time, 1 -- sorry, 100% for a week at 3x. And they identified a few hundreds possibilities to reduce the cost. And maybe you see the picture, there is a lot of red tags on the picture. Every red tag is one idea how to reduce the cost. They really went on the site and see how we could reduce costs, but there were a few hundreds of these ideas. And some of them are engineering ideas, which you don't see here. In the end, they decided to implement 40 of them. And with this, they could reduce -- and there, the numbers I'll mention here. And with this, they we could reduce the cost of the package by 10%. They also identified how to improve this product, to make it oil free. And by doing that, removing a number of equipment and to reduce the cost by 35%. So we've done that on a few more product lines, but it's really most effective for such standardized products, which we sell again and again and again. And that's the case for LNGM product. On the right, you see the examples of process gas compressors. This is the whole product range, process gas compressors, where we had to apply many more levers because typically, and especially for large projects, we had to sell these compressors at a loss if we wanted to have a chance. So we started with pricing discipline, stopping with this last project. Strategic procurement was involved. Making in India, there, we have more and more parts, which come from our India factory, even for compressors manufactured here. And we have extended the range of compressors that we can do in India. We've also done value engineering on one specific size of these compressors. We also have our global support center, which is one of the top 5 initiatives I mentioned 2 years ago. We have now in the city center of Pune, about 100 people on -- 100 colleagues who support us to make offers, to make engineering for R&D, for IT, and that makes us more competitive. In the end, the result, you see it here. You see the evolution of the volume in the bars of these process gas compressors. Initially, we clearly lost market share because of the pricing discipline. We started not to take some projects, but then we regain it later on with a significantly higher margin. You don't have the scale here, but we are talking about a 25 percentage point increase between 2015 and 2019 for the whole product range, having all these measures built in. With this, I'm closing the first part of the presentation, which was reviewing our progress to date and now we will look ahead. Here, on our way forward, the key objectives are to ensure resilience of our organization and to drive sustainable profitable growth. The 2 pillars at the bottom remain: operational excellence; and differentiating capabilities. On the operational excellence side, we will continue the initiatives already started, and we'll activate some of the new levers which Marcel highlighted, to become more agile, more digital and to remain flexible in the current environment. We will build on scale and leadership to continue to develop our strategic capabilities, differentiating capabilities and we'll make them stronger also with digitalization and with technology. I'll come to it in a minute. On top of it, in the triangle at the top, we are now profitable, so we can and we will capture new market opportunities also beyond the midrange plan. And they will bring us operational leverage. They will also help balance the cycles of the other applications. And again, they will bring new installed base for the service organization. Now starting with operational excellence, we are committed to continue to optimize our organization. These 9 initiatives are running today. They will continue to run during the midrange plan period, to continue because they are not yet finished. One, which is at the bottom, is new. And I'd like to go more into details because it has the potential to accelerate all other initiatives. This is modularization and standardization. We started it 6 months ago. And here, the topic is the following: due to our history of selling completely tailor-made solutions to our customers, we tend to have every project being completely new, new engineering, new products, and it creates a lot of complexity in our systems. And also later on in the service organization, it becomes also very complex to identify which part was built in which version, in which compressor, et cetera. So here, we're developing a new approach based on modules and standards, which will keep, let's say, 90%, 95% of the flexibility for the customers, but will be built on internal modules, which are much easier to handle. It's basically similar to what Volkswagen would do having the same platforms, the same plot parts between an Audi A4, a Seat whatever, a Volkswagen Passat. So we can't do it certainly to the same extent as the automotive industry but we can do it to a certain extent, and then we have started. We've started to look at, for instance, in the first 6 months, the Laby compressors. And here, we've seen that looking at the whole family of Laby compressors, we can reduce the number of parts, the total number of parts, let's say, in a certain category, by up to 70%. So we're working now on that. It needs a lot of thinking, what are the compressors we keep, which one we don't keep, how we put that in our systems. That's -- it's quite a major undertaking. It will take years to get to the results. And by the way, you start -- it's also part of the higher R&D costs, but it will -- when we have this platform and all the other initiatives for operational improvements, will become much easier with standardization. Let it be for procurements for engineering, acceleration, we'll be able to make offers much quicker, et cetera. Now moving to the second block of activities. We will continue to build internal capabilities as the basis for differentiation, and we'll do that at multiple levels. And starting with engineering skill sets, engineering excellence globally, there, we'll continue to build what we call competence centers. For instance, Italy, we developed, as a competence center, for the high-speed business, for the SYCC compressors. In China, we developed a competent center for certain PCI applications, which are very important for China, et cetera. We'll continue to develop unique products with strong references to maintain our leadership. And in particular, here, we will continue to invest in sealing technologies and materials because here, it's a strong differentiating factor for us. We own everything, R&D of this sealing technology. R&D of materials, polymer materials, and we do the production of the sealing elements. We do the production of the polymers, and maybe we see it later in the factory, and it gives us a very quick iteration for R&D and to differentiate ourselves, and I'll show later with hydrogen, why it's important. We'll work to make this product digital, service-ready in different ways. One way is to try to sell remote monitoring already in the new projects. If not possible, then we want to make it as a plug-and-play for the service organization later on. We're also working on our systems, our data models, to make them -- to link them more in a seamless way so that we can offer things like digital twins that some of our customers are already asking for. Finally, the BC spirit, which Marcel referenced before, is something that we really cherish, and we have specific programs for that. The one that we have this year and next year in the Systems Division is called Strong & Sustainable. There, the objectives are to empower employees to increase customer satisfaction and to support sustainable growth. The way -- what we do there is we look, again, at every single function and at the borders of every function to make it clear, to ensure clear accountabilities, but at the same time, to give a lot of freedom for people to move in their function and make improvements in their functions. Moving on to the third and last block of activities. I will highlight 3 examples of markets, which will help balance other cycles and drive profitable growth. The first one is the launch of new marine applications, which, if you remember, was one of the top 5 initiatives again from the last Capital Market Day. And here, results starts to be visible. We have introduced these 4 new marine applications in the past couple of years for cleaner propulsion systems as we see customers more and more wanting to reduce CO2 emissions, to reduce particle emissions, to reduce sulfur emissions. Especially since this year, we have this IMO regulation which forces customers to reduce especially sulfur emissions. And here, we talk about 2 different markets. The LNG tankers market is the one that we know, that you know, we are there since 2013. These are the big compressors, which we have upgraded. I mentioned it before, to make them oil free, and they're also now cheaper for customers. We know CapEx is a big issue there. They are more efficient. And they save the customers the process equipment and the hassle of removing the oil after the compression. So here, we talk about maybe 10, 20 compressors per year. Then we have the other markets, which is, for us, newer, which is the many merchant ships, container ships, cruise ships, ferries and all the bunker ships that are used as fuel stations to feed them. And there, the order of magnitude is in the 100-plus ships per year, which are built. And what we see is really interesting in terms of development. For container ships, this year, 30% of the new ships ordered are with LNG propulsion. It compares to 15% just 1 year ago. So we see a huge acceleration of LNG propulsion in Marine. And here, they require just like the tankers, either high-pressure or low-pressure solutions and we have both. You see, for instance, the #2, Marine high-pressure solutions, which is already in operations, which is based on one of our Indian standard high-pressure compressors. You see #3 for us, very exciting, a brand-new generation of Laby compressors, which has been developed especially for that application. And by the way, also explains the higher R&D cost. We've launched it in September, and in October, we already have an order for 4 of them and the request for more. There is a demand. This is a low-pressure solution. And finally, we have some special packages, for instance, for a cruise ship. You can imagine there, the requirements for vibrations, for noise at a completely different level, and we have some solutions for this. So with this, that will contribute to reinforce our position, clearly, in this market applications in this marine market. Now coming back to an opportunity, which I mentioned before, the high-speed market. The high-speed market is -- I mean it's very cyclical, but on average, it's even larger than the CHF 1.2 billion market that Marcel presented earlier. And we've entered it thanks to SYCC. So what is a high-speed compressor? Basically, it's a simple process gas compressor, which runs at a much higher rotational speed with shorter stroke. It has the advantage of being smaller, so requiring less footprint being also cheaper, but it has the disadvantage of requiring more maintenance and having clearly shorter lifetime. Typically, it's used for natural gas production, natural gas transport, also industrial gases. Here we have the full range of compressors from 160-kilowatt to 7.5 megawatts. You see you see here a few applications and references from SYCC, also in CNG, they are applied these compressors. And now we export these compressors under the brand name BCS Compressors. And we have a differentiated market approach. We can either sell the bare shaft compressor to a packager, a local packager, which is well entrenched in the markets. We have the example I showed before was for Hungary. They know the markets, they know the customer. They buy from us the bare shaft compressor and they have even the price list for all the range because these are quite standard compressors. Or, in certain cases, we can add value-added with our engineering, and we can deliver the full -- the full package. And you see here the compressor is this orange thing. This is a small thing, we can deliver -- engineer and deliver the whole thing. And here, we have different market approaches depending on the country. In the U.S., we have the great advantage that we have Arkos. I mean Arkos, they know these compressors in and out. This is their main business. So they know the customers. They can service these compressors, and they have become our front organization to distribute these high-speed compressors, and that started a few weeks ago to do so. Finally, I'm coming to the last market opportunity, which Marcel has already mentioned, which is for me also the most exciting. And from the questions from earlier this morning, also it seems exciting for you. This is hydrogen mobility and energy. I mean, compressing hydrogen is really nothing new for us. I mean, we do that at least since 1972 with our first refinery compressors. And Marcel showed this morning that this refinery market, which is mostly hydrogen, is the biggest market in the biggest part of our market. What is new is the order of magnitude and the highly demanding requirements of that application, which will help us to differentiate ourself much more than in refinery. I mean starting with a few numbers. Here, the numbers from the U.S. Department of Energy, expecting that the hydrogen production will be multiplied by 10 in the next 30 years. And if you think that these largest refinery markets that we mentioned today, is contained in the left bar and that all the hydrogen on the right bar, at some point, has to be compressed even if it gets liquids, then you understand why we're excited about it. And to -- you see here as well that transportation should get the lion's share of that market. Now how does that translate to get to that vision? I mean, it's a vision, the timing of it is a visionary timing, but if we see how it could look like for the transportation. One year ago, in Tokyo, 30 governments have committed to the agenda 10, 10, 10. 10: building 10 million vehicles supported by 10,000 fuel stations in the next 10 years. And this is how it could look like for the U.S., moving from a few dozen fuel stations today to a few thousands in 10 years. And interesting for us as well, not only the number will grow, but the size of these fuel stations will grow because today, typical fuel station is for 300 kilograms per day. That's what we see typically. When you think about it, you can only fuel 1 truck every 4 hours with this. Meaning going into the scale-up, we'll need completely different size of fuel stations, and this is where our industrial compressors come into play. The second topic is an enabler to get there, is the compression technology. For a car to -- or truck to get similar autonomy than a diesel car, let's say, today, you need about 6 kilograms of hydrogen in the tank or 50 kilograms in a truck. And for this, so that it doesn't take the whole space in the car, you need very high-pressure, 700, 900 bars, that's what is being worked on. And on top of it, the fuel cell doesn't like oil at all. It's quite delicate. So here, we're talking about high-pressure oil-free hydrogen compression. And this is really a technical challenge. We have a number of solutions here. We don't have all the solutions that will still need to be developed for these large compressors in the future. So let me get into more details about the challenges and how we can help. Compressors, and here, I'm talking about transportation first, compressors is clearly a big cost factor for the H2 infrastructure and also a constraint. It's also a big headache in terms of maintenance today. So you see it represents about 30% to 40% of total cost for the infrastructure. And knowing that the -- that cost for hydrogen will have to get divided by a factor of 3 about, to be competitive with diesel, the compressor has to show the way here. And we see that scale-up will be the solution. Interesting study from McKinsey, simulating in the south of Germany, the cost of hydrogen at the pump now, in an early adopter situation, and later, with the high penetration, they get exactly to this factor 3 and here, the scale effect is everything. And especially in the compressor, we have big scale effects. We see it here, for instance, already today with the graph on the right. This is a study, which we did for one of our customers. They want to build a fuel station based on the 10-megawatt electrolyzer. And on the one hand, they looked at today's technologies, which are used for small fuel stations, typically diaphragm compressors. And here, they would need 6 of them for that fuel station. Now with our compressors, you only need 1 large compressor. And you see the impact on CapEx, also the impact on electric consumption because piston compressors just by construction are more efficient than diaphragm compressors, and you see especially the effect on maintenance because compressors from -- which are built with API 618 norm are built to be very maintenance -- with low maintenance. So this was an example on the large fuel station. You see below, we have products for this. We have a couple of references in Germany, in China. We have an ongoing project for California at the moment. We also have products for smaller fuel stations, 0.2 to 1.5 tons per day, especially from Shenyang with the diaphragm compressors. We also had orders from Chinese customers for our Indian compressors. So we have some products here. Also interesting before the hydrogen comes to the fuel station, it has to be produced. It has to be distributed. And here, you need typically lower pressures, but much higher volumes, let it be in a liquefier or for a pipeline. And here, we also have the compressors. These are the refinery compressors, which we can deliver. We also have reference this year for pipelines. We have -- we are currently delivering a big compressor for a liquefier, H2 liquefier for the U.S. and we have some part of the solutions. What we don't have yet, and nobody in the industry has this, this is even higher pressure. If we go above 400, 500, 600, 700 bar compression, today, nobody can do that with a piston compressor. Here, this is where the sealing technology, the material technology is everything. And this is where we're very happy to have that in-house, and that's why we're investing in it. With this, I'm closing the second part of my presentation and would like to summarize by coming back to the MRP framework. To summarize, in the next years, we will build on the progress to date, as shown in the first part of the presentation, which means continuing to focus on operational excellence, which includes product cost reductions, modularization. Number two, we'll continue to invest in differentiating capabilities; that includes our people, our sealing technology, digitalization, sorry; and number 3, we will continue to enter these larger markets step by step. We'll have to do this while navigating currently challenging operating environment where we need to remain flexible, and we are watching market signals, early warnings very carefully to be able to react. In terms of figures, the top line progression in the short-term will depend on coronavirus and on the timing of these new applications. We hope that the markets will recover so that we can come closer again to CHF 400 million. We are on track for our profitability targets, but the margin level, in particular, in the short term, will be influenced by volume and by mix. And here, the minus 20% order intake in the first half year will have a clear negative impact in the second half year. On balance, and to conclude, we are confident that we can reach the midrange plan targets, but we certainly don't want to be carried away with our recent successes because we know where we come from. With this, I would like to close and hand over to my colleague, Rainer. Thank you for your attention.

Thank you, Fabrice, and welcome to the SERV update. My name is Rainer Dübi. I'm President of the Service Division since February 2019, and I would start in Burckhardt Compression 2003. Before, I was working for Alstom and for ABB. My starting of my business life was an apprenticeship with [indiscernible] and then followed by engineering study here in Winterthur. And this is my lifespan. In my whole life, I was always doing service if I was working for SYST Division or Service Division, the mindset was always service, to serve our customer and therefore, it's fitting to me this division. When we're going back to the -- what we have said in the priorities for the strategic directions, we are fully aligned with these, and I can give you a short update. We have these 5 priorities, which we have defined: to develop the brand; to be more speed in the market, to bring this up; think customer is a very important topic; develop service setups and service offerings; and develop also service brand. We have done tremendous improvement in the last 2 years since start of this midrange plan, which I only have here some highlights mentioned here. We have done more than 50 revamp projects, upgrade project, these engineering solutions, which was before really a challenge to do in the organization. With this dedicated organization, we can handle that now quite easily. And we are doing also in critical times like now also these more complex jobs. But we have also grown on organic and inorganic way. We have completed the acquisition of the JSW business and also the Arkos, which we have integrated now and also smaller acquisitions around the world. But we have also grown inorganic with our own organization, with building up service setup, service centers and bring this to life. But also our progress was on the understanding what it means the service organization in terms of operation, in terms of working together, our credo is we have to be fast. We have to be fast for our customer. When they need something, we have to run. We have not to say, "Oh, we have first to think about and we can then offer something in 2 weeks. That's not our solution, and we have to deliver fast solution to our customer because often there is something behind where we need a fast response with. And this longer-term direction are following by our goals, what we have given. So the -- we have seen the first half year of this year was really a challenge. COVID also struck us at the starting point, it was really so that we could not utilize fully our field service people, our engineering, but we have also seen that some of our shops have been closed by government rules. So they closed our shops in the Middle East, for example, only because they said we have to close every business. And then we had nobody in our shops, repair shops were not operating, but we could maintain to serve our customer demands all the time, if you are using other resources in our division, or if we are talking with our customer. But we have also seen starting point of this COVID situation that our customer closing also the doors. In some areas, they really, as I said, we don't accept anything. We have stopped now spending immediately, but this has released since summertime. August, September was a perfect month also in order intake and also gaining back the utilization of our jobs. Now we are seeing 2, 3, 4 months, really good progress in order intake, developing on these. But the critical is still there. COVID is still there, and I will come to that at the end of my presentation. This is still a challenge for a service organization which is working with local organizations. Becoming a leading service provider is something which is really essential to understand our customer. And that is coming also what Marcel already mentioned, we are not talking anymore of spare parts. We sell spare parts that -- we like that. We do that every day. That's not the intention. But our customer is sometimes talking about an overhaul. And before it was like, oh, when you place an order on us, you have to do a spare parts order, an engineering order and the field service order. And then we can do an overhaul. But our customer is talking about, no, I want to have one place in one order to you, the full complexity and you have to execute it. Therefore, we changed our mindset. We changed also our offering to more reflect our customer needs. The organic goal and also in BC, I mean we have a brilliant Systems division, which is doing great by selling new products, really on a higher level than we have anticipated, but that's beautiful for us because this generates business for us. Not immediately, with some time lag. But it will generate because we have a coverage of our own base with 80 percentage. So when we sell a compressor, if it's SYCC and Burckhardt product or an Indian product, we will do the service for it in 80 percentage of the cases. Some customer, they do not like to go with us. Okay. We're working on that to get liked by the customer, that's clear. But the most growth we see in the OBC. OBC have already reached 30 percentage, nearly 30 percentage of our sales is done with other brand compressors. In service, we hate to talk about BC and OBC. For us, it's a compressor. It doesn't matter. We do that, and we are going for all these compressors, for these BC compressors. Further, though, around OBC is also done with new offering of new service products. And I will come to that. I will explain to that to enter that. But we're also using our acquisition there. JSW is perfect for us for entering in the Japanese market with them. Arkos is giving us the opportunity to grow in an area in the upstream business, which we have really great trends to also do on other compressor services and learn about that. And I can confirm also for this year that we are keeping in the range of the 20 to 25 percentage so what Rolf and Marcel already announced this morning that we are seeing a much stronger second half year. I can confirm from the figures today that we see a strange second half year on our division. So first of all, it's the customer perception. How we do that? We are doing yearly request forms. We're sending that around to our customer. And when you see this arrows in the middle, the red one is these from last year, which you see an improvement from the year before in 11 percentage. So we are by 80% are seen as a service provider. And this is our main target to seen from our customers as a service provider. These we are doing by clearly local talk with the customer about it. I clearly show them that we improved from the last survey, what we did a year before to these -- to last year. So that we improve our service offering at the customer, we can improve in the headquarter much dramatically, but this will not help to feel that our customer is seeing us as a service provider. This is a clear structured approach, which we are going there. Also, these service solutions is a very essential part, only a spare part supply, only a field service supply is not the way how it's done by our customer. They look for all the solutions, they look for help for operating the compressor, not only for a part, maybe also some long-term service agreement, maybe it's a remote service what we are doing there. Maybe it's a learning session, what we're doing with him. This is very important that we understand the requirement from the customer and therefore, I'm coming to this slide here, the world of our customer is changing. So they're talking not of a calculated planned intervention, every year shutdown. They would like to run these compressors longer, the plant longer. So they're going in the direction of proactive maintenance, so that they say "tell us when we have to maintain, tell us not every year tell us when we run the compressor, is it in the half year? Is it in a 3 quarters of a year? Or can we run for 2 years longer?" That's our -- that's the uptime, what they want to increase. They have the problem with less skilled people on their side. So the old really good trained people, they're getting out of the business. They want to outsource their -- these to us. They were talking with us on long-term service agreements, they're talking of service agreements, also in land-based installation because they see the need to do this work with us, and they really look for help there. And in these also together, they want to share the risk, but also the benefit with us. And this is a very important topic also. To understand what this means. This is not that we are taking more risk over, yes, sometimes a little bit, but we can handle that. We know the product, but also that we get the benefit of their profit, what they do there inside, and this is a very important step. This gives opportunity for us for new offerings. And this was -- now is the way how we are communicating and starting to communicate in the language of our customers. So we do not talk -- we do talk about the spare parts for sure, if our customer and some they still order and they will order spare parts and a lot of these service cases like an overhaul and revamp, there are spare parts inside in this order inside. We have to deliver a part, an engineering solution and the field service to do that. But for the customer, it's not important. For the customer, they want to overhaul a compressor, complete train, and this we are doing with our offering, what we are doing there. When we go into these, we are seeing also that we have still the 3 growth areas, which we have defined also in MRP. The localization is a very important step. The service solutions, the new offerings, what we are doing here is a growth area, which we can elaborate not only on our spare parts business and on our engineering business, on our field service business and repair business but we can offer also complete solutions to our market and the other brand compressor because of the pure installed base. We have about 6,000, 7,000 compressors installed sold from Burckhardt, whereas Shenyang has about 2,000 compressors installed. Global world, low slow speed is about 70,000. So this is the capacity what we can go for and we see that when we look at the local business building up, we are doing already 60 percentage of our turnover. We do with purely local business. These are repair jobs, field service jobs, on-site task what we are doing for our customer and 40 percentage is really a global business, which we are supplying spare parts and more complex engineering jobs to it. On the other brand comparison, we have done some new offerings. I will come to that. I will explain that also how we enter this market. And on the service solution, we're seeing increasing demands there. We're seeing also long-term service agreement like with BW, for example, which I will also show how we have done that. First, I would like to go to the global and local, how we do that. Our service business is very determined on the local base. The account management is a local task. So the account management has to talk in the language of our customer. And if it's Chinese, Hindi or any other language, it has to be a local language which we talk about. The management of project has to be also local. So the customer needs the feeling that this is taken care on a local base, repairs for material, a piston rod, some motor repairs has to be done. The valve repairs to be done locally in our facilities. And for example, especially the field service task, our representative to the customer, which is always accepted at the customer side to come into the plant is a very important task, which we are doing with a local organization. We have then a region, which is the clear target for the region is to support, to help the local organization with more complex job and also do the equalization when there is more in one country and one location than in the other one, so they can equalize the capacity. And then we have global organization like the parts production, the spare parts production, which we are doing on a global scale coordinated so that we have an efficient production and can supply that to also our local organization and also the technical support for the complex cases, I will come to that also, is a global task. And then we have some customer, which, for sure, would like to talk with a global organization, especially in the marine organization. I will come to that also. This is supported by an IT platform, which is consist of CRM, which is consisting of a customer portal. That the customer need the access to us when he wants to order or something on us, he can place it there inside and is based on a common master database so that we can also go in a digitalization. We can use these datas also for us and also for our customer needs to improve the situation. For sure, also the execution will then be coming out of this IT platform so that we have a request route through the platform directly to the production places, that we can produce in a fast in a speedy way these parts and giving that to our customer. First, I would like to come to the local organization. We have heard before a bolt-on acquisition. Yes, this is something what we are doing, not that we are doing smaller one, but we have this local organization buildup is very important. We do this in 3 ways: through collaboration, like in the Nordics. We have to have a partner which we see a certain working together. This is fitting to us. So we are going in a collaboration with them. And we are placing there our knowledge in servicing and doing that, and we are working with him together. Then we have greenfield approach, like in India, in Guwahati, where we have seen that we need something in this area. And the distance to our service center and the rest of India is too far away. We have too long to go there. So we have built up a service center in Guwahati, on a greenfield base. And then we have to go with our customer together, also we've established service partners. In Malaysia, for example, we have a service partner together to serve our customer. How we justify that, that we are going local: so there has to be a certain installed base in this country or in this area, that we are going there. And it has to be also a request from a customer there that he wants to ask us to help us to [ build all these ]. And the situation is driven by from our customer sites, often that they're saying like in Malaysia, we have a sanction, we would like to have you localized. When you want to be a service partner, you need to be 50 kilometers away from our plant, not more. And this is sanctions. This is, for sure, target also to localize some of the service job, especially in Africa, in the Middle East. These are the typical ways how they want to generate business also, especially this government organization or how the government organization are pushing for this. And with the service, we can do that with service partner with a very low investment volume. We can run such localization targets and also serve our customer. But we cannot do everything on a local base. And this is something which we are really doing then on a global base in regions, yes. And we are basing that on the Swiss network also. So the production of this, this a very important step also to do that. When we are producing parts for our compressor, we can produce their parts, their valves, rings, and everything we can produce by ourselves, yes, this is the job of the service division. But when it's coming to capital power cylinders, pistons and so on, we are working closely together with our Swiss though. Our factories are based on the Swiss factories. We are living with that. We are going in this direction. We are talking about speed every day with Swiss, but this is normal. But when you look at the region, what we have here, we have the U.S., which we have a large base of installed field service people by Arkos and also connection there. And we have in Canada also production for parts, for replacement for wear parts. And can also produce and repair larger cylinders and doing that. This is for the American market, really a good entrance. In Switzerland, Europe, we have several opportunities especially here, the factory in Switzerland is a very good place for wear and tear parts, for capital parts based on that, but also engineering solution, more complex solution we can handle out of Europe also. And in APAC, we are also using these opportunities from Shanghai, from Shenyang, also from India, the production places, but also these larger and larger getting increasing installed field service people, which we are training, which we are getting up to speed, which we're utilizing also. We are building also there up the engineering capabilities in -- around APAC and we will also go behind the OBC offers also based on the SYCC offering with the foundry, with the manufacturing together, and this gives us great opportunity. When I come now to the engineering solution, the second core area I will highlight here something from the marine market. So the marine market is a very -- for us, also a new market in the service inside with the Laby-GI with this insulation on the LNGM, it was starting. So in 2013, when Swiss sold the first package, in 2006 into 2020, we get these packages now in operation. So we see they started to operate. We have still a warranty time inside. And already then, we started to offer them service agreements to this customer because they requested to us. They were coming to us. Now in September, we could sign now the first really long-term service agreement with BW for 9 ships. And this contract was signed, not because of only adjusting the rates and defining some of the key points. It was designed -- and when you look at this, what is inside in this contract, it's the single point of contact. It's the problem solving in a fast way. It's the -- doing the service work on demand, giving the global support organization also the life to go with it. And the customer would really like to have their solution, which is important. The life cycle cost, our operational efficiency and preventive maintenance is a key issue there inside. So we have integrated the monitoring into this offering. We have integrated the field service in this offering, the spare parts, but also the problem solving. And -- I will come to that -- also a newer organization setup, which is integrated now also in there 24/7. To do this, we have to understand this business. This is not a land-based business. So a ship is normally moving. This is a target for a ship. So a moving compressor to service is a challenge. It's clear. I mean we cannot tell where the ship is going in 2 weeks, normally. We call the captain and he says, I don't know. I'm going now out of the port and then the dispatcher is telling me on which harbor I have to go for. And in these conditions, we have to do a service. So you see the world map is really a world map. So we have to be ready as a service organization to do service everywhere, every time, 24/7 on the whole world, wherever the ship is. This we are doing with a dedicated organization. This is a technical support center, which is helping our customer to get contact to us. We have a fleet manager there inside which is taking care for this BW fleet. So he is only here to take care about this fleet. And he's talking with the fleet manager from the customer side. This technical support center is also consisting with a 24/7 hotline. This is the contact point. They can solve also larger problems by themselves. So really dedicate the problems, they can solve it, can initiate and also actions. And initiate also the organization to get up to speed, get the parts there, and they can also do technical improvement succession also in a smaller scale also by themselves. But this is not good enough. We have also to live with a global organization. And this we have already also in our map. So you see here our global organization, which we see really -- we are there where our customer are passing by with the ships. And there we need field service people, which are trained to go on board of a ship, these need special training. We are needing parts perhaps to send there. And we need this all in the time slot inside of 2 to 3 hours. When we are not there in 2 to 3 hours in this time slot, the ship is gone, and then we're running behind the next port, which we have to go for. And you can imagine this was a little bit challenging in the COVID time, but I can tell you, every job what was appointed to us, we could complete in time and with the satisfaction of our customer. This we cannot do without any digitalization. This is very important to understand. So for us, the speed is essential in the digitalization. Not how fast we execute the digitalization, but that the customer has a faster way he can do his business. This is, for sure, with the digital customer portal, 1 step. Before it was like the customer had to write an e-mail, had to take out the manual from his shelf, had to look about the parts number, send the e-mail to somebody. Nowadays, he can go into this customer portal. Get to live there, push his compressor, get the part and can place an order to us. And it's going through all lines and is already available at the production place, and we can produce the part. Remote monitoring. Yes, we do monitoring since many years, we've prognosed. Yes, this is right. But what is new, we have a cloud solution now. The cloud solution gives us following perfect example, to run the business. With the cloud solution, we are saving the data in the cloud inside. We have not to get direct access to the compressor when we do that with the monitoring. We have it in the cloud inside. When something happened, we can go also to the same database in the cloud inside, and it's also more secure because we have now then a direct link to the compressor or to the instrumentation at the site. So we are running that. And the ship also is a very perfect way how we do that. So we see all the compressors on board, how they operate, what is the problem, and this is already in the cloud inside, and we can do every time we can access the cloud when the customer is accessing us. And we can analyze the data and can give him some recommendation. If it's -- we need the spare parts to be produced or a service intervention has to be planned for so that we can really go in the next step. And then this one which was most requested now in the last half year, the remote assistance. With cargoes, with pets with everything with a screen. You can see here, this is a real picture from BW, where we had really a training with their crew over goggles over the screen. To exchange a shafting system on a ship because the ship was sailing, and we could not enter the ship because of COVID. It was restricted. So we instructed over this remote assistance, our field service crew installed the field service or the engineering people of our customer. And I can tell you, we already sell this service. That's perfect. In Brazil, we already sell that, and this is a great achievement, what we are doing there. Now we're coming to the OBC. How we entered the OBC market? And below you see a typical example of a land-based installation. The small figures are the years after installation. And the red bars are the sales volume what you generate per year. And you see that in starting first 80 years, the sales volume is very low. This has following reasons in our market, systems is selling the compressor, also with spare parts for the first 2 years. That's standard in our market. So what we see then there is in the first 4 years, 6 years, 8 years, we have less spare part sales. We have maybe also only small interventions, what we're doing, we're replacing a part. Normally, the compressor of the warranty time has not a big issue. It's gone. It's operating. So this is a normal situation. Then it's increasing. So the life is getting older. So the wear parts are increasing, maybe have to exchange some parts. So the bubbles are getting bigger. Maybe you have also some issues, which were not -- unplanned. So this can happen on our equipment, that something break, then you have to repair it. But then it's very important. Then we're coming to the situation that we need a system overhaul. What is the system overhaul? That can be that we have a large -- really large rig [ intervention ] that we have to disassemble the whole compressor, including the crank gear, everything, to refurbishing of all the parts and putting in together in the same condition as before and getting running. So this is this larger intervention but after a few years, 4, 5 years later, maybe a modernization revamp of the whole plant is fitting place. The process is changing. And then it's maybe also all the cylinders. It's maybe rebuild of part of the compressor adjusting to the new operating scheme. And this we see on land-based installation very regularly. So that we have years which we have very low turnover because our compressors are running for 1 year before we do something, or 2 years. So when we know the end of that, and we see years which is going up. When we have done then this revamp, it's going then in a normal way, again, that we have very low turnover for the first years. So now we -- how we enter this other brand compressor market? There are 2 ways. One is case study one, which is also there. Something is -- customer is not happy with a small part above ceiling element. We all have the chance to enter that with a very small volume, a valve, for example, perhaps CHF 5,000 to show him that our part is performing better. And this helps us to convince him that we are saying, yes, for the next intervention, I will take you because you have shown me that you are expert in this business. And then the next intervention, maybe in a year later or 2 years later, we are doing then the full-service and everything. And then it's really changing over that he is placing the parts supply also to us because he's convinced with the service what we are doing and also the parts what we can provide. The second point is he has a problem. Compressor broke, he needs a revamp, he needs an upgrade, he needs a repair. And then it's a perfect entrance for us. First of all, when it's a revamp, maybe the local part supplier cannot do that. He is able to provide a part, but not a complete engineering solution like revamp, then we can start to enter that. That is service case 2, which we're really then offering a complete revamp with our parts, with everything. He is asking for that. And when we're then inside there, we have done the revamp. We're also getting the spare parts in the following year. So the development of the volume is starting with the higher and then followed in the next year with the lower volume, which is a complete normal situation because not every year, we have this high revamp turnover for the plants. And this is a big chance also for the U.S. We have seen before, the U.S. is the largest installed base of slow speed, reciprocating compressors. So we're talking of 16,000 compressors installed there. And here, you see the red dots are the Arkos service centers and the blue dots are the PCI places where most of these compressors are installed. The rationale for the acquisition of Arkos was really to enter this U.S. by a service organization, which is already there because when we tried to do that with offering out of Switzerland with implementing that, it was quite hard because the service mentality in the U.S. is the way that you need a local service with a truck, with a screwdriver going around repairing the compressor when he is not operating. And this is very important to understand. So our costs from this point of view, with this service setup is very well fitted to our organization. And I can tell you the refinery are at the same places. So they are not quite different. But we also entered there a new market, upstream market with Arkos. It's a very important step also for us to learn what is there inside in a compressor train with a gas engine to connect it to a compressor. What is the business they're doing, how it's acting? And this is very interesting market also for us to get there inside. And now with the offering also from the systems side with the new -- what we have heard before from Fabrice, this BCS compressor is a perfect solution also which we can enter this market really softly over Arkos. Short term, we have challenges. Yes, it started with the oil price in January, that we had a drop there and the upstream market was really severely hit. So a lot of this gas gathering and transport and fracking situation was going not out of operation, but was slowing down and the compressor was getting out of operation. He wasn't replaced because I said at the moment, the prices are not there that we really repair it, so Arkos was suffered already there, then COVID was coming. We heard that already. So having a field service crew which is going to quarantine and it's passing over a state and that has to wait for 10 days, they can't go for work. And then they can go for work and going back, they have to go again for quarantine is not something which is really generating business. So it's more having this round. And then the 7 hurricanes which are passing over this area, you see mainly there in the South. There, we have the most installations. And every time when a hurricane was coming, the whole people fled from this area going inland. The hurricane was passing over, then they were coming back. So this situation were reducing our business, but we have also seen that our downstream business is doing quite well. In Arkos, we have a really good order intake and also execution, more stable, more resilient than the upstream business. Out of these, there are 2 really directions which we want to improve the Arkos business there inside. One is the action plan on the downstream. The downstream, we really see that this is more resilient, it's -- we have a detailed action plan in place to increase the capabilities there, to increase also the service offerings there with larger offerings, also the repair capabilities we have said about the Hyper repair center. This is full up to speed. It's full now also. And we will expand that also to other facilities so that we do more now also in repair on the other facilities of Arkos for our downstream business. And these plan are in place, they are in rollout. So we see -- we will see this year a much better figure on the downstream business than anticipated starting of the year. On the gas gathering, we have taken now with Bill Sayre as new President of Arkos full responsibility. We have adjusted the company to the new requirements from the market. And we have also gone into new offering for this situation like the BCS compressors like also this replication of parts which we are doing there to support our more, at the moment, field service-related, offerings, we are extending that with our parts also with the parts also for the upstream market. And this is a great achievement what we are going there. Coming back to the targets for the MRP, when I'm asked, can I confirm, I mean, we have seen that COVID is hitting us more than anticipated starting of the half year. The situation is not over. We are sitting here with masks, some of us, and we are seeing more restriction now in Europe also coming up with the latest situation, but it's completely different. We see a positive movement on the business side because the companies are not closing the door at the moment. They're still keeping it open. So we have to go on with the business. We cannot afford that what we have seen in May and in June, where the companies had closed the door and said we don't want to talk with you. We don't want to do an intervention. We don't want to do a service. I only order some spare parts because I have to fill up my stock. Now they're going on with ordering us, but what the restriction, what COVID is doing to us is not -- is very hard to predict on the service side. And it can be that we see both sides, much better improvement of the situation. At the moment, it's very positive, but it can also be that we see a lockdown again. And then some of the facilities we have really to look into that, how we do that. The rest of the strategical, we are online. We are going in this direction. We will use the momentum. We will use also digitalization. We will use also the customer coming to us and asking for more service, long-term service agreement. These we are doing. The H2 market from SYST is really great, and we are doing that together because without the service offering, we will not enter this market. We have to combine the 2 division there. And we especially confirm the EBIT margin range also for this year that we are in the range in the service division between 20 and 25 percentage, that it's confirmed. And you have seen that this is also valid. When we are looking on these leading service provider, the strategic direction, yes, we are going in enhancing the differentiating capabilities. We are going this direction that we are doing these service offerings to our customer. We are able to do that. We have a lot of competition on local base, which only can do parts. And this is, for sure, something which we can offer to our customer on a more holistic base. Improved speed to market is an essential part from us. And the new digitalization and also the utilization of SYCC, our new production and also the way how we do that will increase the speed with full integration. Think customer service is essential. We -- every year, we do a request to our customer, we will increase that, but we adjusted also our speech to the customer need. We're talking of an overhaul, monitoring and not anymore of spare parts in the engineering shop. But also there, new offerings will come up, and this is, for sure, something which we have to follow our customer, develop service setups and offerings. Offering we have already talked about, but we set up, we will first stabilize now the situation before we are going entering new service setup a new smaller acquisition. Let us give us some healthier time to get this really stable now, what we are seeing here, and then we can enter that also in a new market inside. We see some areas which we are really going into. We are looking into that, but this is now the target. And developed service brand. I think we're on a good track. We have reached already 80 percentage that we are seen as a service organization. For me, the target is 90 percentage And with this, I would like to close. [Break]

Good afternoon. Good morning for those of you participating in the U.S. My name is Rolf Brändli. I'm the CFO with the company since 2008. And over the next couple of minutes, I will lead you through the financial review. I would like to start with the macro assumptions that we did when we launched our mid-range plan. You can see the assumptions to the left side. And on the right side, you see a status update, that changes obviously every day. But generally speaking, we can say the overall macro assumptions for our midrange plan 2022, they remain valid. Both inflation and also interest rates, they have remained at a very low level worldwide basically. In the U.S. even came further down. We, of course, have seen a trade war between the U.S. and China. Let's see how that will proceed over the next couple of months. Then we have assumed no new sanctions nor the lifting of any existing sanctions. However, there have been sanctions imposed or new sanctions to Iran that hurts us. Iran, as you know, produces a lot of gas. So the whole service business has broken off. Rainer and his group tried to compensate that with another revenue flow, but this has changed currencies. They have been fluctuating actually quite a lot more recently. And we have seen swings in other metrics, such as the oil price, of course, the gas price is fluctuating. This plays a role in the short term, definitely, in some of our applications in some of our markets, but from an overall point of view, the framework remains still largely unchanged. However, what we did not see coming is, of course, the coronavirus. This has disrupted our world and the operating environment, as we have seen now in several presentations with a clear impact on the global economies. Some countries like China affected less or getting out faster than others and how we are mitigating this coronavirus crisis, our situation has already been presented earlier by Marcel. Now having said that, and clearly, from a 2-day standpoint, we remain committed to our MRP ambitions. From a group level, we see that the MRP ambition is still valid. If we look at the record level in order intake on the system side, especially over the years '18 and '19, as you can see on the upper graph here, the gray bars, that helps a lot to drive sales and give us some good visibility down the road for 12, 18 months; in some projects, even for a longer time. While we are already at the currently high level in system sales, the further progress will depend, to a certain degree, from the duration of the coronavirus impact, timing of applications. We spoke about that. Fabrice has explained what that means on the service side, the further top line growth depends more on local, also macroeconomic, but local developments in the specific countries. There are other dynamics there. What will help is the strong system sales. This, however, we have seen the project life schedule or lifetime schedule, how such a typical project goes on. Still that might help towards the end of the mid-range plan or then also beyond. But this consistent high level on the system side, sooner or later, will show a growth momentum on the services side with a leverage, let's make it 3 years after installation of an equipment, first, larger service orders kicking in. Where do we see the development on the EBIT level? While we could resolve the open LNG issues, the LNG marine business are topics that we had until last year. Now another topic came across with the coronavirus situation. That impacted also our EBIT level, definitely. Nevertheless, the target range for the mid-range plan, we still see that at 10% to 15% margin level. On the system side, H1, we spoke about this is definitely not a run rate. We will see an impact from corona in the second half, but also there, the 0% to 5%. And likewise, the targets on the service side 20 to 25 are definitely within reach in the remainder of the midrange plan. SG&A expenses, we have spent over-proportional SG&A these were some upfront investments on the services side to build up the global sales network. We had a quite stable SG&A situation on the systems side. And I think we can say we continue with a lean corporate structure so SG&A, there's no major development there other than that we can benefit from the economy of scales later on when we further grow organically the services business. R&D expenses will continue in the range of about CHF 10 million to CHF 12 million. We never fixed a percentage of sales, makes no sense in our case. But in this range, this is what we intend to spend during this mid-range plan period for projects, specifically hydrogen mobility, energy, marine applications among a lot of other developments. Then looking at the Systems Division. In the Systems Division, it is all about maintaining margin levels as we clearly indicated at the beginning of our mid- range plan to maintain margin levels within the target range, the MRP target range while, of course, at the same time, taking our chances for profitable growth. If that comes around, we go for growth, but it has to be profitable. As mentioned before, the current top line is strongly supported by the high order backlog, 2018, '19. So that's a good starting point. We did have a drop last yea,r, we talked about that, that impacts on profitability level in H2, but that's something that should then level out again. At the same time, financial discipline is key in the Systems Division, and we are not leaving any stone unturned when it comes to further driving operational efficiency. Fabrice mentioned all those projects and activities and actions going on. Just to mention a few of them. We have the global support center in India, global procurement, strategic procurement, also Swiss factory efficiency, value engineering standardization, he named them all among others. Then on the services side, we have certainly set ourselves ambitious top line targets, growth targets. These targets are including Arkos, which we had in mind when we draw our midrange plan, we always said that's included, probably at a different level than we might expect these days for Arkos, but Arkos is included and obviously also the further growth in Other Brand Compressor services. One of our key priorities, and we don't have to repeat that in more details, is the recovery of the profitability of Arkos, driving more profitable downstream business. We also see further opportunities to drive sales to top line with more long-term supply agreements and offerings, engineering offerings specifically, for Other Brand Compressors. On an EBIT level, focus remains 20% to 25% range, including Arkos, with clear actions defined besides the day-to-day actions, the day-to-day service business, just to mention a few of them again, the Arkos improvements, materialize additional business coming from the JSW acquisition, in and outside Japan. On the services side, digitalization processes and ultimately products, digitalization products and services. And last but not least, touched it before, economies of scale that we can benefit from our global footprint that we have in place today to support further organic growth. Then for modeling purpose, we thought it would be helpful to outline also the various cash flow drivers and how we see them evolving over time. EBITDA is clearly the key driver to generate value down the road. We want to achieve the EBIT targets that we have set ourselves in the mid-range plan and beyond. With a stable depreciation level, we don't see any major CapEx around the corner. We spoke about the new plants, the new factory in China, which is CapEx-neutral. Then the net working capital, changes in net working capital. There is definitely -- or definitely more upside potential than downside risks, we have looked at the China receivables. Cash collection is key. We have frequent meetings. There are local meetings. Top management is involved. There's a lot of customer relationship involved in collecting money from local Chinese business. That's different than if you export something into China, you work with LCs and so on, but there is a lot of efforts going on, on that side. We have also set ourselves general annual improvement targets at a legal entity level, for days of sales outstanding, DSO, days of payments outstanding, DPO, clear targets defined that's implemented into the leadership cycle to work on that side as well. And also -- and here I have to say, except for public bids, and I wouldn't even say unfortunately, it's just the way it is in China. A lot of those bids are public bids. They are mostly the conditions amongst other payment conditions are fixed, take it or leave it. We continue to push also more favorable balances between customer advanced payments and the work in progress. Obviously, there's sometimes a trade-off in countries with a high interest margin you might go for a high gross margin in the project and negotiate something on the payment side. But in general, we have a clear focus on that as well to balance that better off. Then CapEx is another driver. I mentioned, we see a stable CapEx. We do have to replace production machining centers and so on over time, but nothing outside the range of depreciation levels. Cost of debt with the recent financing, respectively, refinancing of our acquisitions with a bond issue, we have now a stable interest rate, 1.5% was this bond on the price tag. And this gives stability also at a slightly higher level than we had before, with bilateral credit line agreements with our house banks. It has to be mentioned, we had a tremendously or very cheap financing opportunity also in Switzerland with U.S. dollar financing on a hedged base to break through the 0 floor that you have on the Swiss franc, this is obviously gone with the interest rate that has come down also in the U.S. So this, combined with the actual environment, looking at coronavirus and so on, we felt this bond is certainly good thing to go for. And last but least, we expect an overall tax rate somewhere in the range of about 20%. This is slightly lower than we assumed when we launched the MRP. What helps to a certain degree here is the Swiss tax reform that we have seen here in our main manufacturing plant,, that has an impact, a positive impact, but also in other places where we have favorable tax rates. This slide is to illustrate the cash flow drivers that I just mentioned over the past couple of years. What you need to consider, looking at the lowest or the bottom line, the bottom fields 2018 and 2019, those CHF 25 million and CHF 34 million. They include these temporary investments or CapEx for the plant at Shenyang. This will then somewhere level out the CapEx investments between CHF 20 million and CHF 25 million. Then let's have a look at a couple of balance sheet topics. Since Burckhardt discloses its financial statements on the Swiss GAAP FER, all goodwill from any acquisitions is offset fully against the equity at the point in time when we do the purchase price allocation. This is true now for Shenyang, Arkos, JSW, and we still have another 40% of Shenyang, where we signed the memorandum of understanding to be completed but long story short, that had an impact to the equity ratio on the Swiss GAAP FER, which is currently at those 34%. We are committed towards the end of the midrange plan to reach a range including all those goodwill offsets and including the remaining 40% of SYCC, Shenyang to reach 35% to 40%. The 4-year bonds that we have just placed, combined with adequate bank credit lines, might be a more conservative approach in financing. I mentioned that but we have also sufficient liquidity in place to support all the strategic initiatives. This opportunity with the dollar, as I mentioned before, is gone. And in the medium term, still, we have no intention to push our leverage further up, maybe that could be 2x or slightly above, but there is no intention whatsoever to leverage the company. Return on net operating assets measured against our weighted average capital cost has become a key metric in the group. When it comes to capital discipline, the key driver within that is certainly EBIT as our main value creator and value driver. Working capital management is another priority to also sustainably improve working capital to improve our net operating assets. For this, I mentioned that before, we work with target setting on DSO, DPO levels. We are looking more, let's say, on the payment conditions, there's always a trade-off in the negotiation then with margins, but we balance that off. And also when it comes to CapEx applications, of course, then always RONOA, which has to be above our VACC, has become a key criteria for any kind of CapEx applications. Now you might ask what is the VACC. You can do the math. Take our balance sheet and see the profitability figures, if you look at the -- depending on the assumptions you take and so on, if you look at our analysts, you come to a range between 7% or 9%, probably somewhere in the middle. Where we will see our VACC and the RONOA has to be above the VACC for CapEx application to make sense financially. Of course, there are always applications where you have to go for legal reasons or whatsoever. But this is the financial criteria. Looking at M&A transactions, we have defined quite stringent and selective approach. I would divide that into 3 areas. We have, and you heard that, those of you who participated since the beginning, our Chairman, Ton Buechner, made a strong point on this as well. The top priority is certainly strategic rationale. And here, clearly, we focus still on reciprocating business. This is what we know. This is what we're good in. That's what -- where we can create value. Then strengthening local presence, regional expansion, these are strategic topics we look at and adding capabilities, product range, whatsoever, typically also a strategic rationale that could make sense. On the financial side, obviously, adequate market and competitive dynamics, be it growth, entry barriers, the JSW acquisition, for example, the Japanese market is a very closed market for systems business. And now we have an entry door to get into Japan as an example, then financial performance in general, midterm, we should be able to achieve a return on sales somewhere at a group level, maybe not initially, but through the value-added that we can bring in as a group, that should land somewhere there midterm. Midterm means 3 to 5 years. And another metric, which also the Chairman mentioned earlier, is enterprise value ROCE where we take acquisition price. So EBIT or acquisition price has to be somewhere above the pretax weighted average cost of capital over a midterm period, also make it 3 years, make it 4 years. Then further M&A criteria. Obviously, we need committed management. We need people that we -- that are integratable, ability to integrate is a criteria, kind of a similar culture and values of BC. Otherwise, you go into an uphill battle, which definitely makes no sense in an acquisition. So this just in a nutshell. And to sum it up before I hand over back to Marcel. I would like to share this slide with our clear capital allocation framework. And I would just start on the top right side. M&A, we spoke about, stringent selective approach when it comes to acquisitions, then also strategic fit, management profile, all those financial measures or thresholds that we keep in mind when it comes to M&A before we spend money. On the rating - leverage side, an equity ratio of 35% to 40% by the end of the mid-range plan. We are certainly driving for the upper level. Again, the goodwill topic is something that kicks in here that needs to be considered. Nevertheless, in the long term, we just launched a bond. We had a bond issue in September. We were not investment graded, that did not come as a big surprise, obviously. But over the long term, we are committed also to become -- or to get an investment grade, should it be necessary down in the future, probably in the next mid-range plan, that we need to get more in the capital market again. Then on the dividend side, we are committed to redistribute part of the profit. We have set this range actually, since the beginning of the mid-range plan or even before, 50% to 70% of our net income is, of course, that's decided by the general assembly, but that's what we see as a target payout ratio. In terms of organic investments, though major CapEx above depreciation level. I think we did a couple of investments. We -- a longer time ago, but we built up our plant in South Korea. We built up an assembly plant in the U.S., both investments in the range of about USD 10 billion to USD 11 billion. We have invested not on the CapEx side, but in the footprint, in some cases, of course, also minor CapEx to build up service centers and so on, but I think we have now good footprint to get it to the next level. Definitely, within this mid-range plan period and RONOA as a target level to get above weighted average cost of capital as a key criteria for CapEx applications. This is how we see this clear capital allocation framework. And I see personally this framework as one of the key roles within finance, both on an operational and strategic point of view or standpoint in order to provide the business with adequate tools also then the discipline to execute. [Break]

So now slowly but surely, we are coming to an end. And with this, review again our guidance for the fiscal year 2020 as well as for MRP 2022. As you can still see as we have already mentioned a couple of times, we still feel comfortable with sales greater or equal CHF 650 million. And similar EBIT level for 2020, like we had in 2019 and a payout ratio of 50% to 70%. And as we have also already indicated during the day, we also hold onto the CHF 700 million MRP 2020, most likely with a slightly different mix between SYST and SERV, slightly higher SYST, slightly lower SERV. But also with an EBIT margin of 10% to 15%. Of course, and we had it here in the audience and I also all of you in front of the screen, you cannot hear it anymore corona, corona, corona. I apologize for that. We still, of course, have to say that this is on the current condition. That the situation is improving, who have -- who would have forecast that 9 months ago in the situation we are in there, but we are quite positive that we will reach in both areas, the results. The last slide, again, reviewed the 5 key messages. The scale benefits from our global positioning and the large customer base we have, I think -- I hope we brought that across. We gave you some more detailed information, also how projects work, what is the time frame on projects. The overall stability, of course, we are in cyclical businesses, especially on the Swiss side. But we are in many applications, different applications who do not follow the same cycle, so we can leverage this and also the system to serve business together, of course, gives us a lot of leverage in the overall business. The benefit from a changing energy mix. I think we also touched on this one. We showed you what our future new applications. Of course, there is a certain excitement. We have to take a look what the numbers will be, how much business we can do. But I think the good thing is that, from a technical perspective, we are very well positioned that we do not need a lot of additional R&D as one of the questions was just before to Rolf, that we can work with the products we have, just further develop these products. And as Fabrice said, of course, we need 700, 800 bar non-lubrication. This is still something we have to develop, but at least, we already have a base compressor where we can develop. Then the MRP 2020 and the targets and I also hope that we showed you that our world does not stop with 2022, that the world goes beyond. We have laid the ground that the world goes beyond. We have laid the ground for further growth. For further growth, more than CHF 700 million. And I think this is will then be part of the next MRP. And I think last but not least, also, Rolf showed that we have a disciplined approach when it comes to capital allocation. And this is something we really will do. And as Rolf also mentioned on the M&A part. M&A will always be a corporate part that will never be in the divisions, that will be part of the corporate responsibility. And then at the end, of course, the corporate also has to still present that to the Board, and the Board has to accept it or not. With this, we come to the end [Audio Gap]