Bystronic AG (BYS) Earnings Call Transcript & Summary

So good morning, everybody. My name is Michael Stäheli, I'm the Head of Investor Relations and Corporate Communications of Conzzeta. Thank you for joining our Capital Markets Day. It's virtual for obvious reasons. We currently have approximately 100 people, a little bit above, on the line. I'm joined here by our Chairman, Ernst Bärtschi; Group CEO, Michael Willome; and Alex Waser, the CEO of Bystronic, together with part of his management team. They're going to present the strategy of Bystronic. You've seen the news flow this morning regarding the divestment of home partner. I draw your attention to our disclaimer on slide -- sorry, on slide -- the first slide. And with this, I already hand over to Ernst. Please.

Well, let us recall our decision as per December last year. We decided to focus the Conzzeta activities on Bystronic, which contributed most of the net sales and EBIT at Conzzeta, and we decided to divest all the other businesses in 2020 or early '21. These are good companies, but too small for a long-term independence. And they add value to the buyers, what we see now within the negotiations. With regard to the divestments and the current result situation, our CEO, Michael Willome, will inform you right at the beginning. The key presentation will be the new strategy of Bystronic by Alex Waser and his team. We will not talk about the group structure. The machine industry is one of the not too many businesses where Europe and Japan still have a global leadership position. This includes technical leadership and market leadership. China has already now, at least in some segments, the cost leadership, and Bystronic can take advantage of the situation. You will hear more about this today. We have an important chance to defend our leadership position if we can meet the future market expectations, which are digitalization, automation, system integration and Industry 4.0 solutions for our customers. Bystronic can present, today, a comprehensive Industry 4.0 solution for own and third-party platforms for the entire sheet metal industry. Such solutions need also an improved service behavior and cybersecurity solutions, and it needs more decentralized decision-making processes not only due to coronaviruses right now. All these topics are covered in the Bystronic presentation. So let us go now and listen to Michael Willome about the Conzzeta performance and the divestment. Please, Michael.

Thank you very much, Ernst. Good morning, everybody. I would like to go back into December of 2019 when we took the decision to make this big, massive transformation of Conzzeta. We looked at 3 reasons. Number one, the progress we have made over the last 5 years. We have made progress in all 3 business units. We have announced in September 2016, financial aspiration in terms of sales, EBIT and RONOA. We can say that in the years 2018 and 2019, all business units could contribute that we have achieved these targets. But that's not enough. We look then into the second step, the resources required to get into leading positions. A third analysis was done on the market potential. That's the market where we are playing in, provide evaluations that these businesses really deserve. After all these 3 analysis, we came to the conclusion that we will want to allocate all our resources on to Bystronic, which has the critical size as CHF 1 billion turnover business in 2018 and that we'll divest all the other, at this time, 3 business units. We will then go into the framework, which we have established in 2016 and which serve Conzzeta pretty well over the last 5 years. During the presentation this morning of Bystronic, you will see a lot of elements reappear, resurface of what I'm talking right now. If you look at the competencies, entrepreneurship is definitely one of the core competencies of Bystronic. I think Bystronic has an excellent outstanding entrepreneurial spirit, which they have since a long time, but which will give them another boost in terms of speed and reaction when they are an independent company. A second one is innovation, which also is a competence at Conzzeta, but in Bystronic, I would even call it, is kind of the lifeblood of the business model of Bystronic. A third one and the ones who know me, it's always very close to my heart, and that is collaboration and diversity. Collaboration and diversity is especially needed in the new Bystronic strategy, which will be announced immediately afterwards, especially also that you have a more regional focus, you have more regional capabilities. And definitely, when you have the different regions of the world involved on a higher decision-making level, you need a lot of collaboration and exactly diversity. The last one I would like to draw your attention to is delivered to promise. I think it was our ambition, and I think we usually achieved it, that we promised something to the investors -- to you, investors, or to the public, and we also delivered on it afterwards. I think this is a mindset, which is also deeply instilled into the Bystronic culture, and I think you can look forward that deliver to promise will also a core value against you in the future. I don't go into detail into market orientation. I think that is something, which you will feel afterwards. Bystronic is always relying to as a core asset, a ruthless and really absolutely stringent market orientation, no compromises there. Internationalization, Nicole Progin, will talk about people development and business excellence. All 4 of those priorities, definitely also key for Bystronic. If I go then to the next slide, which you have in front of you, that's an update on the divestment process. And I'm happy to announce, actually, today, that we reached an agreement with Recticel to divest our FoamPartner business. I think Recticel is, again, like after the disposal of the glass business and of Schmid Rhyner. Recticel is an ideal buyer. Industrial logic is compelling. It's a player in Europe, Belgium, Brussels-based global player, but with a strong position in Europe. And I would think it's very complementary situation afterwards the combination of Home Partner and Recticel. They have announced that we sold the business at an enterprise value of CHF 270 million, which represents a 10.5% EBITDA reported 2019 multiple, which I believe is very reasonable, especially in these difficult times as we have it now. The closing is expected after all the antitrust procedures. The closing is expected in Q1 of next year. The second project where we are still working on is the divestment of Mammut. I can give you the update here. We have now finalized the information memorandum. We have sent it out to potential buyers. I can tell you that the interest remains very high. I cannot tell you what are the valuations because we simply don't know yet. We will find this out when we come more towards the nonbinding offers, which will be shortly before Christmas. And then in the first quarter of 2021, we will find a proper solution also for Mammut. The future of Bystronic will be presented today. You see the strategy day-to-day, which coincides with the signing of the FoamPartner deal. And over this whole process, of course, also the transition from our corporate headquarter function into Bystronic, and Alex will elaborate more on this. But it is very clear that Bystronic, early next year, will be ready to be an independent company. I think this is the update of the transformation. Obviously, we are afterwards open for further questions. My last point today before I hand over to Alex for the strategy is a little update on the trading. You have seen our results after 9 months. We were at minus 11.8% sales growth. Definitely, we do have the ambition to make the single digit. That is clear. I think we are on a good track to achieving this. The business over the last couple of months is pretty much on the level of previous year. I can say this is valid for all business unit, and it's valid in terms of sales and in terms of order entry, very close to previous year levels, which have much stronger performance in Asia with the U.S. that is about stable and with the European business that is slightly below previous year levels. We have also decided to keep the outlook unchanged. I think it is clear that the current unpredictable and volatile situation does not call for upgrades on outlooks. Even so, definitely, I would like to mention that our target of mid-double-digit million EBIT, definitely, here, we look at the higher end of such an outlook. With this, I would like to hand over to Alex Waser, the main purpose of today, the presentation of the Bystronic strategy. Alex, please.

Good morning, ladies and gentlemen, and welcome to the Bystronic Capital Markets Day 2020 here in Niederönz. My name is Alex Waser, and I'm the CEO of Bystronic. We are very excited to introduce you to the strategic initiatives that we have prepared. We actually have 6 agenda items that we have hand selected for you and will be presented by my team members. The slides are published this morning on the website of Conzzeta and are available for download. Ladies and gentlemen, please bear in mind, we are industry folks in sheet metal industry. However, we will do our best to create an interesting morning with Bystronic insight. By the way, the building that you see on the picture here is where we currently are. This is the main facility of Bystronic head office in Niederönz. We originally planned to invite you for this event here locally in Niederönz for a site visit. But for obvious reasons, we are not able to do this. With this, I go to my next slide. As a part of Conzzeta, Bystronic did not get too much visibility to the capital market in the past. And therefore, we are excited to share our vision of our business in the sheet metal processing. We see us as a pioneer in sheet metal processing as we were an early adopter of laser technology back in 1982. We started with single-laser cutting machines and added, at some point, bending to the portfolio, the next logical step in the process. Since then, Bystronic went a long way and many new innovations were introduced. Now we see a continued trend towards smart factory solutions with integrated single assets to an interconnected production system. For those of you that are new in this industry, we have produced a short video that shows our newest generation of smart factory integration. This solution was presented and introduced to our customers during our in-house Competence Days 2020 a few weeks ago. Special on this solution is that it's an open platform and can integrate and does integrate third-party brands. [ Rasheev ], play the movie. [Presentation]

Well, ladies and gentlemen, we hope you got your attention with this video into the real life of our business. Let me take one step back and review our past achievements. I think it is fair to say that over the past 5 years, we have performed well in this market. With a slowing economy in 2019, our annual growth rate from 2015 to '19 was still at approximately 13%. Our EBIT levels were probably higher than the industry average, and the same goes for the returns from the asset-light business model. With this performance, we are closing the gap to our competitors, driven by product innovation, market development, business excellence and by an experienced team of which some of my members you'll actually see today. We also did some complementary M&A to broaden our application offering such as automation and tube laser or to enter into new client segments in China with DNE Laser. Let me give you an idea about our business profile in the context of the overall market. On the left, you see the Bystronic revenue split 2019 by product and by region. As you know, we are offering laser-cutting systems in several market segments, which includes service, spare parts, software. This accounts for approximately 20%. In the lower part, you can see our geographical footprint and, therefore, the opportunity for Asia and China to represent this at a higher level. Let's briefly look at the overall market here on the bar chart. This is our best estimate of last year. We estimate the global cutting market, including 2D tube automation, to be about CHF 6 billion. Bending is about CHF 1.6 billion and related service is estimated to be about 20%. So our served market in total is about CHF 9 billion. So depending on how you count, we have a global market share of between 10% to 12% with regional differences. The other columns on this chart of around CHF 5.5 billion are applications within the sheet metal processing, which are currently not offered in our portfolio. This includes welding, panel bending, punching, all other applications, some of which present interesting M&A opportunities to complete our portfolio. The total sheet metal processing market we estimate to be around CHF 14 billion is a sizable market and leaves us with sufficient development opportunities to grow. Having said that, as part of our strategy process, we confirm that we clearly focus on the sheet metal processing at our core. We are and we remain a pioneer in sheet metal processing with the mission to expand our market share over the years to come. Now let me start to talk about our strategy. This slide is kind of familiar to you. Michael Willome just showed that in his presentation or he showed actually the Conzzeta version of it. Bystronic can really build on the same mission-critical competencies. Within Conzzeta, we identified those competencies as being most important to succeed going forward. We rolled our talent development programs on this basis, and Bystronic can now build on it further and strengthen it. What is new, however, on this chart is the middle part, with 6 strategic themes or must-win battles or priorities for Bystronic. In order to achieve our aspiration to outgrow the market with an industry-leading margin, we need to succeed in these areas. Let me have a look into that in a bit more detail. The customers and the customer value proposition are in the center of everything we do. What you will see during the next few minutes, half an hour or hour, are examples of commercial excellence. And as Ernst Bärtschi said, we want to go closer to the markets and we want to have much more specific offers to our segments. What you also will see is we continue our very strong innovation leadership. About every 10th employee at Bystronic is in R&D, and we'll continue to build this strong street. Now the next 2 elements are really new, and that will be very interesting for you to see. We're going to build a separate service as a business. And Eamon Doherty will talk about this very soon in one of the presentations you will see. Also, solutions as a business is the industry-leading solutions with fully integrated software and automation, an example you have just seen. And that example, you've actually seen is actually live very close here running. The last one you're going to see today is employer of choice. At the end of the day, we see a linear correlation between talent and business performance, and we work very hard to become an employer of choice. Not covering today -- not covered today is basically operational excellence because that is an area we have done for many years, and we will continue to build on that. As we run our business and implement our strategy, we also strive for good conduct of business and the consideration of our responsibilities in society. We are fully aware of the importance of ESG. It matters for you, as investors, for our customers and for our employees, for all of us. During 2020, we updated the ESG materiality assessment for Bystronic on a stand-alone basis. We developed, as you can see here on the chart, 3 areas in economic environment and social topics. For each of them, we reflected an aspiration level shown on the right-hand side of this slide. During the next chapter of innovation, you will hear about some exciting examples how ESG topics are already today represented in our business. In Bystronic, we aim to integrate these ESG topics into our management processes because we are an integral part of our business, and we also do plan to report them transparently. As a final example of our commitment, please note that we are currently working on our carbon footprint assessment for our lead site here in Niederönz. We have completed Level 1 and 2 analysis and currently work on Level 3. We plan to disclose these results of this analysis already in the 2020 annual report of Conzzeta. This concludes my introduction, and I would like to turn now to the agenda of the day. As you can see, after me, we have 6 speakers that will cover the areas that I just explained. Three of them will come now followed by the first Q&A session, then we'll continue with 3 other examples, then with the conclusions and then the second Q&A session. For now, I welcome here on the stage, Christoph Rüttimann, our CTO of Bystronic with Green Technologies. Christoph, please.

Good morning, everyone. My name is Christoph Rüttimann, and I'm the Chief Technology Officer of Bystronic. Bystronic strives for innovation leadership. As a globally acting Swiss company, we aim to be at the forefront of technology. And as you have just heard from Alex Waser, almost every 10th employee of Bystronic is engaged within R&D to develop the products and solutions of tomorrow. We have global development teams acting from Switzerland, from China, from Germany and from Italy. Thanks to our strong internal and external partnership -- partner network, we are able to keep a high pace of new innovations every year. The renewal rate of our products is very high. More than every third machine we sell has been launched to the market no longer than 3 years ago. This fact leads to a high number of new patents that we file every year to protect our innovations. And thanks to our corporate venturing program, we invest in start-up companies to co-innovate in the field of emerging technologies. With the following short videos, I want to give you a glimpse into our 2 core technologies, laser cutting and bending. Allow me to explain why those technologies are not only fascinating, but also help our clients to reduce their footprint onto the environment significantly. Let's start with our biggest business, the flat sheet cutting. Our high-end laser machines offer world-leading productivity and cutting precision. Thanks to these 2 properties and the combination with intelligent software features, we allow our customers to use their metal sheets in the most efficient way. We enable our customers to maximize the output and the number of parts, which can be cut from one metal sheet, and therefore, the scrap material is minimized and less waste is produced. Bystronic laser machines are able to cut almost any metal from steel to copper or aluminum and thickness is from below 1 millimeter to above 50 millimeters. And the major driver for this high versatility is the fiber laser technology. A big advantage of fiber laser technology is its improved energy efficiency. Compared to the old CO2 laser technology, the energy consumption is more than halved at up to 5x higher cutting speed. Furthermore, fiber technology is an enabler to cut ultra-thick materials with laser machines. In the past, this type of cutting was only possible with other technologies that are slow and high energy consuming. Fiber technology is not only used for our flat cutting machines, but also for our tube cutting machines. In this case, instead of metal sheets, tubes and profiles can be automatically loaded, cut and unloaded. One of the main consumables in laser cutting being it flat or tube is this gas, like oxygen or nitrogen. The cost for our customers to buy new bundles of nitrogen is substantial. But thanks to strategic partnerships, Bystronic is able to offer so-called nitrogen generators. And therefore, customers can produce their own nitrogen for their individual purposes, and therefore, reduce consumables and their impact to the environment, very similar to solar energy production on your own rooftop, are tailored for your own needs. By the use of compressed air instead of pure nitrogen, the cost for consumables are even more reduced. Compressed air cutting is most likely the greenest cutting technology so far. And of course, Bystronic is a pioneer and at the forefront of the development of this cutting technology as well. The same arguments as for cutting are valid for our bending technology. Bending with Bystronic press brakes is outstandingly precise. Parts can be bent to an accuracy of below 1/10th of a degree, ensured by Bystronic's unique real-time compensation system. And again, this results in less wasted material and no need for post-processing of the bended parts. Thanks to highly standardized components, user-friendliness software and other high-tech features, the set-up time to bend new parts is kept to a minimum and bending results are achieved very fast. In particular, I would like to highlight the certified so-called energy-saver option available on Bystronic press brakes since more than 10 years. The energy saver turns the press break into a special mode so that the energy consumption is reduced by no less than 30% compared to conventional bending machines in the market. This option is very similar to the start-stop function of your car, where the motor is only on when needed. Ladies and gentlemen, I hope I was able to provide you with some insights to Bystronic's fascinating core technologies. Our products are not only high end, but also green and friendly to the environment. That said, I'm finished with my talk, and I would like to hand over to our Chief Digital Officer, Alberto Martinez, who will explain you how single machines can be combined to smart factory solutions. Thank you very much.

Good morning, everyone. My name is Alberto Martinez, and I am the Chief Digital Officer of Bystronic. As our CTO has just explained to us, Bystronic provides standardized production cells and innovative cloud software solutions. These solutions can be fully customized to meet our customer requirement and to help them to increase the productivity of their sheet metal operations. From small junk shops to big large metal equipment producers, and thanks to the latest technologies available in the market, Bystronic solutions are -- provides significant benefits to our customers. But which are those benefits? Let me introduce you some of them. First one would be openness. We are building an open ecosystem to be able to integrate third-party products. But which third-party products? We will be able to integrate different machine-producers machines, different branches of machines. We will be able also to integrate different processes, not only cutting and bending, but also welding, punching, grinding, some others. Also, we will be able to integrate different devices like robots, AGVs, storage systems. And of course, we will be able also to integrate software solutions from the market like external ERPs, PLMs, CRMs. And Bystronic connects all the processes and the departments of a company to create one single unique integrated and seamless solution for them. Our solutions will be fully modular and truly scalable. That means that if we partner with our customers and our customers partner with us, we will be able to provide and to help them to grow from a single machine to reach the highest degrees of digitalization in the factories. But how can I show all this? Let me introduce you a short video where our customers' challenges, as with the main pain points, and we try to explain them how we would like to solve it with our solutions. [Presentation]

Thank you very much, Alberto. That was very interesting. I have to ask you a question. How do you feel about being a part of Bystronic on the cutting-edge of smart factory software development?

I feel really excited because with the latest technologies that we have in the market now, we have been able to create a unique software solution for the sheet metal market. And this is really, really excited. And this is something that we need to be proud of. That's really exciting.

Very good. Thank you very much, Alberto.

Thank you. Thank you.

Well, for now, we go to the next presentation, and I'm very happy to welcome here on stage, Johan Elster. He's the head of market reach in EMEA, and he will talk about how we want to drive growth in Europe. Johan, please, enter the stage. Thank you very much.

Thank you, Alex. Well, ever since I saw laser cutting live for the first time back in 1996, actually, that was the year I started at Bystronic, I have been blown away by this fascinating technology, light-cutting metal. And I remember very clearly, I said to myself, wow, this technology will have a great future. And you know what, after 25 years in the market, seeing different technologies, I would still say the same today. Laser cutting still has a great future. Today, I would like to present the 2D laser-cutting market, our opportunity to grow in this market, how we want to grow in this market, who are our customers, what are their characteristics, needs, digital maturity. And then I would like to share with you our portfolio strategy, are we staying with laser cutting and bending or are we expanding into new technologies? And finally, I would like to share with you how are we going to organize ourselves to execute our growth strategy, but most importantly, how are we going to create value for our customers. Okay. So let's go. As you heard in the beginning in the introduction of Alex Waser, laser cutting is the main portion of the sheet metal market. The 2D laser-cutting market is a CHF 4 billion market. Today, Bystronic participate in CHF 1.6 billion of this market. That means 39% participation rate. That means, however, that we have upside potential of 61%. That's significant. If we look at the CHF 1.6 billion market where we are in today, we have a win rate of 32%. That means every third project we are in, we win. So we have a decent win rate. And as you know, participation rate times win rate gives you your market share, and in this case, it's 12%. We have a big opportunity to grow in this market. And now how are we going to grow in this market? We need to get involved in more deals. So in the last 6 months, we have defined a high number of growth levers or initiatives, how we want to increase our awareness, but in particular, how we want to increase our participation rate and also some initiatives how to maintain our high win rate. And these initiatives, they go from key account management to increasing coverage, to vertical targeted digital marketing, to exchange business, et cetera, et cetera. But the beauty with this concept is that for each specific region or even for each specific country and market, which we choose the right and the most effective initiatives to grow, and we will execute this locally and support it from headquarters. Who are our customers? Well, as you can see on the chart, there are in many different industries. And there is one particular common point, and that's the lot size. It varies from small lot size to medium-sized lot size, let's say, thousands of parts. That's where we will focus. That's where laser cutting and bending are the leading technologies. But we will go one step further. We will go into each of these industries and find out what are the needs of the end users, what are their specific processes. And when we have identified those needs and pain points, we will compose attractive solutions and offer to them. Our portfolio strategy. Are we going to stay with 2D laser cutting and bending supported by automation, software and aftersales? Or are we going to expand into new technologies? Well, the answer is yes and no. Yes, because these technologies will still be our core businesses in the future. We'll grow them organically, but we will also look into the whole process of our customers. And sometimes they use punching, sometimes they also use panel bending or welding, so we need these technologies to be able to offer the whole solution. And we will do this if the opportunity is there through M&A or with strong partnerships. Software. Software is one of our main focus areas, because focus -- because software is the glue. It's the glue to connect machines together. It's the glue to connect machines with the office of our customers, but even to connect the office of our customers with their customers. So it's the backbone of the process chain of our customers. Service. Well service is, for me, the differentiator. With service, you create trust and you create customer satisfaction, but it also allows you to grow your company and to grow your margins. What are we not going to do? Well, we're not going into additive manufacturing, micro laser machining or laser marking. Why? Because these are not typical processes for our customers. We will stay where we have the market access. So how are we going to organize ourselves to execute our growth strategy in the very best way? Well, we are going to give the regions more responsibility. Today, they are responsible for sales and service. And tomorrow, they will be responsible for even manufacturing because we are manufacturing now in 3 -- on 3 continents. But even for R&D and for partnership, local partnerships, we want to stay closer or get closer to our customers and also to the end users to understand their pain points and their needs and to create attractive solutions locally. In summary, we have great opportunity to grow, we have a great growth strategy and most importantly, we have great and committed people. Thank you very much.

Thank you, Johan. Very interesting. Thank you very much. So ladies and gentlemen, now we are preparing to take questions. Operator, we are ready to get questions. Do we have the first question coming in?

There are no questions from the phone at the moment.

Michael, do you want to comment?

I suggest we continue with the...

Gentlemen, no questions from the phone so far.

Okay. Thank you. Okay. Then we suggest that we skip this session. We'll have a second session for sure, and we'll continue directly with our next presentation. And that is input from Dr. Song You from our President of Bystronic China, which obviously is not physically here, but we have taken the liberty to take a short video from him. So Song, please go ahead.

Good morning, everybody. I'm Song You, the Head of Market Region, Bystronic China. I'm now sending you this message from the Bystronic China, Shanghai office. Today, I'm very excited to briefly talk to you about 5 topics, what we achieved over the last 5 years, where we are and how we are set up in China, how we see the Chinese market with competitive landscape and how we want to grow the business and develop organization. And last but not least, I want to give you a flavor of the current trading environment and some of our main initiatives in China. First slide, please. As you can see on the left-hand side of my presentation, we grew the business disproportionately with a net sales CAGR around 36% over the past 5 years. Well, the market average growth rate is around 10%. We grew organically with the traditional Bystronic business, which mainly includes laser-cutting machines and price breaks in the middle level product segment for the domestic as well as export markets. Part of the growth is also M&A-driven. The acquisition of DNE Laser in 2016, which operates in the entry-level market for cutting machines, mainly for the domestic market. Through this acquisition, we more than doubled our headcount in China to close to 1,000 employees, as our Chief HR Officer, Nicole, will show you in more detail later today in her presentation. The recent growth of Bystronic in China also reflects the strategic view of Conzzeta, our holding company, on the Chinese market and its willingness to invest in China to position Bystronic for future growth. This is also the reason why we did not reduce our capacities in the softening of the investment cycle and became apparent here in China in 2019 and after the peak year in 2018, meanwhile even the more recently throughout the pandemic period. In regard to locations, we have 3 main sites in China. Under the last 20 years development, Bystronic have well-established manufacturing and R&D basis in Tianjin and Shenzhen. Meanwhile, in Shanghai and Shenzhen, we also set up national sales and service organizations to cover Chinese North, East, West and South territories. We highlighted those 4 territories by different colors in the map. From a market perspective, we cover all 3 segments. For high-end market, which we call it gold segment, we promote our imported Swiss- and the German-based products. For medium-level market, which we call it silver segment, we promote Tianjin-made Bystronic brand products. And for entry-level markets, which we call a bronze segment, we use Shenzhen-made D&E brand products to compete with local Chinese players. That is a new brand strategy we named and was proved working very well in China markets. Well, earlier, as for many other companies, China was seen also at Bystronic as a location for chip manufacturing of cost-efficient products. This has significantly changed. Today, we still work for the export markets, but we increasingly focus on the domestic market, which, by the way, is the world's largest-single market in our industry. The needs of Chinese customers are often different from those in other geographic regions. We have notable good enough mentality and look for cost-efficient solutions. Therefore, we at Bystronic also started to look at China increasingly under the aspect China for China. Here, the acquisition of DNE was particularly helpful. We, at Bystronic, learned a lot from DNE over the past years. China-developed technology and products are now serving Bystronic worldwide as well. For example, BySmart Fiber products, which was developed by China R&D team and is manufactured in Bystronic China is now a key product in Bystronic global product offering. Let's move to my next slide, and let me talk on the Chinese market. At the macro level, unlike the western world, we expect some GDP growth in China for 2020 with robust outlook into 2025. The Chinese government is pursuing its economic policies with rigor and promote the manufacturing sectors and the development of digital capabilities. This is a solid background for our industry with economic growth, with a quickly developing manufacturing sector and with quickly evolving needs of our existing and potential clients. The recent formulated China 14th 5 years plan has identified intelligent manufacturing 2025 as the key strategy for China business development. This trend is exactly same with our Bystronic Solution business, digitalization and smart factory initiatives. We believe there is a huge opportunity for Bystronic Solution and smart factory business in China. Other than that, I do not want to spend too much time on macro environment. Let's focus on the sheet metal processing industry in China. As I already mentioned, it's the world's largest market with estimated growth rate around 10%. As in other geographic regions and typical for the industry, customers are broadly diversified across the end markets and industries ranging from white and green goods to infrastructure, from automotive to shipyard or from the building industry to housing groups, you name it. Different to other geographies is the size and importance of the entry-level market segment. We estimate our served machinery market to be around CHF 2.6 billion, with 60% of it in the entry level, bronze segment, which we serve through DNE brand. Bystronic, together with DNE, today, has a market share in China of approximately 7% and is only larger international player across the product segments and in -- from the entry-level with DNE up to silver and gold Bystronic segments with automation solutions. What you should also know is a fierce competition in entry-level segment with a large number of established and new players. While we see emerging new and good competitors, we can still state that, overall, the market is pretty fragmented. With our setup in China, the fragmented market and the emerging customers' needs, we see great opportunities for Bystronic and DNE to grow or even outgrow the Chinese market over the next years. Let's move to my next slide and discuss how we want to realize our potentials for profitable growth. Our strategy is fully embedded in Bystronic growth plans, but obviously with specific adoptions and calibrations of initiatives to meet our needs in China. First of all, as Johan mentioned in his presentation, we have to strengthen the coverage of Chinese market. We will improve market coverage from sales and service, strengthen R&D and local engineering capabilities, also set up regional software and solution centers. We will also learn from DNE for entry-level market and keep developing DNE as international hub for cost-effective solutions. Secondly, as we run large operations in China, business excellence is an important topic for us. We made good progress over the recent years and are actually at a pretty good level already. We will continue work the top on world-class manufacturing for our own operations in Tianjin and Shenzhen, implement Lean 6 Sigma and business excellence projects to continuously enhance our manufacturing and supply chain capabilities. Third, we need to work our HR managers because people are always key for our success. We will further develop a co-create mine site in China to attract and retain the best talents. In addition to our global leadership program, we will also develop local leadership programs to better fit in Chinese culture and language needs. All these measures together in marketing, in sales, service, technology, operations and people management, which we will deliver value-creating organic growth against the backdrop of the expected strong operating environment. In addition, we have clear ideas on how to develop our business through collaboration and M&A. We see opportunities to expand both our initiatives to grow our existing applications and broaden our scope. Also, it would be great if we can expand our market coverage with additional salespeople and service technicians. I truly think that we have the building blocks for a great success story in place, and it's my job now together with my teams to make it happen. Let me conclude my presentation with some snapshots on our current activities. On the next slide, I want to give you some more concrete impression on who we are and what we do in China to share some highlights for fab. On the upper left corner, you see the Tianjin facility located in Tianjin Binhai economic development zone. With the COVID-19 situation getting better in China, we were able to hold 4 days China Competence Days in our Tianjin plant from July 28 to 31. We hosted more than 300 customers in our facility and more than 3,000 online visitors in the online live session. The output of the event was excellent from both customer feedbacks and order intake perspective. After acquiring the additional 30% equity of DNE in October last month in Shenzhen, Bystronic now own 100% DNE. This picture on the bottom-left corner shows you the new DNE building located in Shenzhen Bao'an avenue. We're working on the declaration of this 60,000 square meter facility today. To better use backlog synergies with Bystronic, we will combine our Bystronic soft regional team into this building as well. The facility will serve new brand of Bystronic and DNE. It will have 2 independent sales and service organizations and separate demo centers of Bystronic and DNE, respectively. The picture on the bottom-right corner shows you how the seventh-generation DNE new product will look like. The new product is still under development and will be launched in Shenzhen International Machine Tool Exhibition in March next year. The next-generation DNE product will supply not only China market, but also the whole Asian market. Take a look. It looks good, doesn't it? Well, it's at the end of my session. So I would like to thank you for your attention in Bystronic Group and Bystronic China region. Stay safe and take care, please. Have a good day. Bye-bye.

Well, Song, thank you very much. We highly appreciate your input live -- almost live from China. Before we get to the new -- to the next session, let me just remind you, we have about 120 listeners on the phone right now. We have skipped the break, so we'll just continue on and then come after 2 sessions now to the Q&A session. Having said that, I would like to welcome on the stage, Eamon Doherty. He is the global Head of Services of our brand-new business unit. Please go ahead, and thank you very much.

Thank you. I appreciate it. Good morning, everyone. As Alex said, I'm Eamon Doherty, Global Head of Service. And what I would like to do is take a short few minutes to share with you the opportunity that service will provide to enhance the sales of our company. So let's take a short look at our current state. So if we look at the chart on the top left side, you can see here the trend over the last 5 years. The pillars are our installed base for 2D cutting. But more importantly, from our perspective, is the orange trend line of our sales of service. And as you can see, it's been outperforming over the last few years where it's been driving additional sales. When we look at the last 5 years, we can see a CAGR of just under 10%. And currently, as has mentioned earlier, service makes up about 20% of our total business. So our objective now in service is to accelerate that orange trend line. And in order to do that, we have identified 55 independent sales levers that will allow us to drive that sales growth, both now and long into the future. We also want to transition from what we would see today of a reactive business to a proactive sales organization. We want to do that by putting in place a blended aftersales model, which will include hunters, people physically calling on our customers and seeing how we can better support them going forward. We also want to leverage our farmers, our service technicians that we have right across the world. We do in excess of 60,000 service visits every year, and we want to use those face-to-face opportunities to identify ways in which we can better support our customers. We also want to develop a sales back office to take advantage of those opportunities that are identified. And what we want to do is we want to centrally support our businesses right across the world so that their primary focus is on execution. And we believe that between now and 2025, we will come close to doubling the business that we have today. I mentioned earlier that we have identified 55 different sales levers. We don't have the time this morning to go through all 55, but what we have done is we've taken a few to maybe give you some insights into what that might look like. So if we take the first one and you look at the chart on the top left, you will see our penetration on maintenance contracts. And you can see how that penetration evolves over the length of the -- over the age of the machine. The green line is our -- or the green side is our penetration. The orange is the opportunity that is open to us. And you can see it's significant. And you might ask yourself a question, why is it we are where we are? Well, the reality is that Bystronic, historically, has been a machine provider. And so how we look at our customers is from the machine perspective, how big are they, what industry do they work in, what do they cutter, what do they bend? But in reality, when we look at our customers from an aftersales perspective, that doesn't fit. So what we've done is we've analyzed our customers, and we've identified 8 matrix. And that matrix looks at the willingness to outsource versus the operational maturity. And we find 4 types of customers, and it's really their personalities. And when we look deeper at that, we see that our maintenance that we offer today greatly ticks the box of those customers in the top right-hand corner. So what we want to do now is we want to support all our customers. So by the end of this year, we will deploy the Bystronic Care Program. That Bystronic Care Program will do 2 things. The first thing is it will support all of our customer segmentations. And the second thing is it will support our customers and their products right through it the product life cycle. The second example I'd give you is that of customer development. Through our analytical tools, we have now identified that 20% of our customers generate 80% of our aftersales. But of course, if you flip that to the opportunity, what you find is that 80% of our customers only generate 20% of our sales. So the opportunity that we have there is significant. Our analytical tools have been able to help us now identify where those customers are, which geographies they operate in, what they're purchasing from us today, but more importantly, what they're not purchasing from us and the gaps that offer us the opportunity. And then the third and final example that I would give you is that of invoiceable hours. Our service technicians provide us with hours that we can use to support our customers and drive sales. Today, globally, when we look at those hours available to us, we're able to convert about 58% of those on a global scale. But when we look deeper into that, we find that we have some companies around the world that are in the 80s and we have others that are in the 30s. So by targeting those geographies, we feel that we can move from being 58% globally today to 81% over the next few years. So in summary, what I would say is customer satisfaction for Bystronic is our backbone. It will always be our backbone. We want to develop an aligned organization that will allow us to drive focus. We want to be very consistent, aligned and have a standardized approach, and by doing that, that will allow us to drive effective execution. We want to have a business model that moves from being transactional to being proactive. Talent, as has been mentioned on a few occasions today, is critically important to us. Over the last period, we have been looking at our talent pipeline, we have been looking at our succession plans and we have been looking at upgrading in key roles. And of course, as mentioned, we want to have a blended aftersales model. What I would say to you is that this is no longer a strategy on paper, rather execution. From a talent perspective, we've already been filling that talent pipeline and indeed upgrading in key roles. We have been developing our analytical tools that have now been deployed and are enabling our business to build their specific action plans. And finally, the sales initiatives that we talked about are currently at execution all around the world. I hope these few minutes have given you a flavor or taste of what we in service are doing and what the future holds for us. Thank you very much.

Thank you, Eamon. Can I ask you a question that's burning on my tongue?

Sure.

Having enormous experience in another industry in service, turning that into Bystronic, into our business, how does that feel?

For me, it's a wonderful evolution for our company. It just shows, first of all, the opportunity that's available to us, but also the maturity that's going on within our business. And I feel that we are very keenly set up to take advantage of that opportunity.

Thank you very much, Eamon. Now ladies and gentlemen, before we go to the last -- 6th presentation, just one reminder. After 6th presentation, I will have a conclusion session and then Q&A. Please make sure you dial in into the phone line that you got provided for the Q&A session. So the questions will come via phone line, okay? So for this, I would like to welcome Nicole Progin, Chief HR Officer of Bystronic, with our 6th and probably one of most important sessions. Thank you, Nicole.

Thank you, Alex. Good morning, ladies and gentlemen. My name is Nicole Progin, and I am the Head of Global Human Resources at Bystronic. My mission is to support the implementation of Bystronic Strategy 2025 from a HR perspective, together with my team and for sure, in close cooperation with my colleagues in business roles. I have 3 key elements on my HR agenda. This is fostering a learning organization, enhancing employee engagement and creating an outstanding employee experience. I will talk about these elements a bit later in my speech. I would like to start with giving you an overview about the actual situation where we're standing, what we have done in the last few years and where we're aiming to be in 5 years as an employer of choice. By end of October, we were counting 3,000-plus employees worldwide. The biggest portion of our employees, we have in EMEA, followed by China and then Americas and Asia. We speak 30 languages at Bystronic. And in our management team, 6 nationalities are represented. I'm very proud that we are 3 out of 12 management team members, female, which I think is a very good result for our industry. Overall, we have a proportion of females at Bystronic around 16%. Looking at the graph, left on the bottom, we can see the headcount development over a circle -- cycle of 5 years. So we were facing mainly 2 regions of headcount increase. The biggest increase we have in China, you heard from Song, due to organic and nonorganic growth, so the acquisition of DNE. And also in EMEA where we have acquired 2 companies in Italy, tube and automation until. Furthermore, we were also growing in the service area. Allocating the staff according to functional areas, we can see half of our staff is in a client-facing role. 1/3 is in the manufacturing and logistics area, and as you already heard from Christoph, every 10th employee is in an R&D role. Hiring and bringing people onboard, this is one thing. Developing, enabling them to reach a high productivity into very good performance, this is another thing. So let me flash back a bit and tell you what we have done in the last few years. Here, I would like to mention that we had the chance to build up everything because there was no global HR function in place before I have started. So all initiatives aimed at strengthening our 7 competencies. You already heard from Michael Willome and Alex Waser this morning about that. In my explanations, I will focus mainly on 3 competencies. This is collaboration, diversity, performance orientation and deliver to promise. So we have very lean set-up in HR at Bystronic. What means, we only have HR representative in the bigger countries. In the other countries, finance or even the Managing Director are representing the HROs. So our aim was to support the business in finding the best fitting people for their subsidiary. Therefore, we were setting up a talent acquisition strategy and appropriate processes as well toolboxes. So this was very basic. We were drafting job description competency profiles and so on. For sure, we were also training managers, for example, in competency-based into new techniques. We also have a detailed tailor-made onboarding program and progress in place in order to help our new employees to get much faster on speed. A few years ago, we have introduced a global performance management process in order to get a common understanding of performance at Bystronic and fostering a high-performance culture. This is quite a standard process, which is based on annual targets and 2 check-ins per year. This, we're going to transform. In the future, I will talk later about it. We also have started building up several leadership programs. I'm happy that we have 3 programs in place today, which are targeting on different leadership levels. So there is one for frontline managers in the business available for junior leaders and mid and senior leaders. The goal is to fill in a significant part of our leadership roles with internal successors. Doing the business in the right way and deliver what we promise, this is absolutely key for Bystronic. That's why we have introduced a set of compliance guidelines. And in this topic, we regularly train our employees and support them with e-learning programs. The foundation of our people strategy is Bystronic strategy and our company values, openness, innovation and commitment. Those values describe how we, at Bystronic, as a company, and all our employees act and behave in their daily work. I'm not going too much in details and explaining what this values mean. I prefer let talking the pictures. So openness, we want to respect each other. We want to act and think as a global company, one Bystronic, and we want to communicate open and honest. In order to be innovative, we need to have a good cross-functional collaboration, an open mindset and also the freedom to act. And commitment, this is a picture I really love. I only would like to have employees like those 2 people in there. So they have their heart with Bystronic. They're passionate. They are ready to go the extra mile and deliver what they have promised. So in the last few years, we had many workshops all over the globe in order to get a common understanding of what this values mean for Bystronic. For sure, we also have included them in all our HR processes. So we aim, too, to create and sustain a high employee engagement. This already starts with our 100 apprentice we have all over the world. So in order to be able to learn more about the well-being and the needs of our employees, we have launched in 2019 an engagement -- an employee survey. We're going to repeat this survey from now -- from then on every second year. So the next one will be next year. We follow-up the actions in all countries. So to summarize, considering where we were starting and where we are today, I think it's a very good basis to further build on. Let me round up now my speech with giving you an outlook on our priorities, which are all targeting on shaping a positive employee experience. So we want to create an engaging working environment. But how? Who else can better give us an answer on that question? So in the future, we want to focus much more on a qualitative automatic feedback from our employees, not only every second year with the surveys. It must be much more on a continuous basis. So we want to feel the pulse of our employees. We also continue working on the learning and development landscape, which is impactful and powerful. Learning shall become a continuous process at Bystronic. We want to go away from a push to a pull approach where people love to learn new things, where they love to have new challenges. This learning culture, we want to support with our performance management process. So this annual process is somehow outdated. We want to go in a much more actual flexible process, a process where we have check-ins, continuous feedback and where we coach our employees. No retention without growth opportunities. So I think we can build on a very good groundwork from Conzzeta, which had offered a talent development program. We're going to customize this program in order to target it much more on the needs we have at Bystronic. This, I'm sure, will help us to fill our talent and successor pipeline. On top, we would like to open career path, whether in people leadership, project management or specialist functions. A positive employee experience, I mentioned it several times before, is supported by accessible and attractive HR tools and processes. So we made a good progress already in digitalizing our HR processes, but there's still more to go. We want to be complex and make it more simple for our employees. We definitely want to focus much more on HR analytics in the future in order to drive decisions and being able to predict employees' behavior. So I am convinced that with putting the focus on these 4 areas, we will be able to create an outstanding employee experience and create a culture where people feel heard, valued and appreciated. Ladies and gentlemen, I hope I was able to give you a taste, a flavor, how our journey looks like to become an employee of choice. Thank you.

Thank you very much, Nicole. Very interesting.

Thank you.

So ladies and gentlemen, let me conclude. Before I do this, just a quick reminder, please make sure, after this session, we have the second Q&A session. You have time to ask questions. For that, please register via the phone, the phone number that you got in the webcast. Ladies and gentlemen, you've just experienced 6 examples of how we are focusing our key initiatives or how we're going to turn this growth strategy into reality. These initiatives are simply our must-win battles, and we are convinced they are the right ones. However, to turn them into reality, it takes time, investment, efforts and probably most important, very experienced teams. We think we have actually what is needed to turn this into reality during the next years. That's why we are so excited about this time. We have already embarked on this journey. And yes, we are at the beginning of this implementation or transformation, and we'll make steps ahead. As an example, we have started over the 2 years -- over 2 years ago with our smart factory offering that you have seen or presented by Alberto Martinez, which just was presented at our Competence Days and raised a lot of interest. We also strengthened the setup in China since 2016 with a long-term strategic perspective. Our service strategy presented by Eamon Doherty, for example, was developed with significant internal involvement as well as the other strategies. And ladies and gentlemen, it's done by the people that will implement it. In addition, we are at this point in time where we are actively and targeted looking into recruiting new talents to meet our future demand in growing areas. We are very committed to measure, analyze reporting our progress of these key initiatives internally and in an adequate manner, also externally to shareholders. Now let me turn to the next slide and discuss what this all means in terms of financial aspiration. As you can see, we aim to outgrow the market in all regions, which will expand our market share and strengthen our market position. In order to be closer to our 4 regions, we have set up all regions with more responsibilities and the complete P&L. For the first time, for Bystronic by 2025, we'll have more than 50% of our business outside of EMEA. Investing in our accretive service business will base our business with less volatility and more recurring sales. We aim to grow service from 19% to 26% in 2025, as you can see in the chart. The improved scale, the enhanced market position and the more balanced geographic diversification will result in a more stable business and improve earnings quality. Now let's turn to our financial aspirations. I already mentioned that we strive industry-leading performance, but what does this mean in terms of Bystronic? Well, the aspiration is really on the upper right-hand box. We aspire to grow on a cocker above 5%. We aspire to get back to our 12-plus percent EBIT over the cycle and RONOA of over 25%. But now let me comment on the initial phase. Maybe for the next 2 to 3 years, where we will see the impact of the implementation cost and obviously from COVID. It's important to understand that we will reinvest some earnings to extend these new initiatives and also look into CapEx investments. The exact OpEx and CapEx investments are currently subject to the finalization of our plans and also depend, to some extent, from the sales proceeds. Thank you very much, Michael, by the way. And dividend strategy that Conzzeta Board will assess at the appropriate point in time. But you can assume that Bystronic has and will have sufficient means to drive the strategy implementation forward. And at the same time, of course, we'll be diligent with our resources. You're obviously aware about the current pandemic environment. We expect that the full recovery could take 2 to 3 years, obviously, with different areas of development in the regions. Taking strategy implementation cost into account as well as our current pandemic environment, we expect for the initial phase, an average EBIT margin of 8% to 10% and a return on net operating assets of 15% to 20%. Let me close with a quick update on the current business trends. You probably note that our entry in the third quarter was still affected by the environment. However, after summer, we saw an improving trend towards the end of the third quarter, which so far lasted into the fourth quarter. And September and October, as Michael already said, was about at the level of prior year. Now we have to say how much the setback from the second wave, the pandemic could be. All in all, we expect to close the year broadly consistent with the financial guidance on which our group CEO, Michael Willome, commented at the beginning of this event. This concludes my presentation, and we can prepare now for the Q&A session. For this, I ask Michael here on the stage, please. Operator, we are ready for questions.

The first question from the telephone comes from Andy Schnyder from zCapital.

Gentlemen, thank you very much for the presentation. I would have a few questions, 3. First would be on the 2D cutting market you showed. Out of this EUR 4 billion, you have EUR 2.4 billion of the market, which is not that currently. What are the necessary steps to tap into that market? Is it accessible just by organic measures and by -- so by expanding geographic reach or developing just new machines for different segments? Or is this part of the market only accessible via acquisitions, completely new technologies? That would be the first question. I will ask the other questions afterwards.

Okay. Michael, if you agree, I will answer that question.