Bystronic AG (BYS) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the First Half 2021 Results Conference Call and Live Webcast. I am Alice the Chorus Call operator. [Operator Instructions] At this time, it's my pleasure to hand over to Alex Waser, CEO of Bystronic Group. Please go ahead, sir.

Thank you very much, Alice. Good morning, ladies and gentlemen, and thank you very much for joining our half year 2021 report of Bystronic. I'm here together with Beat Neukom, our CFO, and we're looking forward to give you an update today. I go to the next page. Before I do go into the details, let me remind you of the usual disclaimer statement. As you can see on Slide #2. I will refrain from reading it out loud and move quickly into the agenda for today's call. As you can see, we're going to start with the transformation milestones. We've actually accomplished quite a lot of milestones this half of the year. Following by the name change approval by the General Assembly, we're actually going to then talk about the 2025 execution, the 2021 highlights and the financial review. By that moment, I will hand over to Beat. Following the financial review, I will give an outlook for 2021, and then we will open the Q&A session. Good. Let's go to our first party. The transformation is concluded. We have really accomplished many milestones in the first half of 2021. Following the name change approval by the General Assembly, Bystronic has been listed on the SIX since May. This was a magic moment for all of us. In terms of discontinued operations. As you probably heard, FoamPartner was closed in Q1 and Mammut in the second quarter. And Beat will provide you with more detailed review on the discontinued operations in his part, in the financial part. Moving to Bystronic as a stand-alone company since January this year, we have our regional structure in place. And that, by the way, gives us a lot more and direct customer feedback. We hired great leaders into new important roles and have executed on many strategic priorities. We delivered strong service growth, and you can see this great demand for automation, and we see progress on the smart factory software suite, but also we see great demand coming on the Smart Factory Solutions. You will see the numbers of our strategy soon, and you will see that they are serving us well. I go to the next page. What you can see here on the next page is for those that are not familiar, you can see the cornerstones of our growth strategy, 2025 on the left-hand side, as I said, it's really in the core of everything is our customer focus, the regionalization as we have done. And that brings us a lot closer to our customers and gives us the voice of the customer directly into the core of Bystronic. The top of it, you can see the portfolio expansion, not only by applications, but also into what we call market segments is one of the top priorities. Followed on the right-hand side, by building up software as a business and the results you can see actually soon. And then software and solutions on the left-hand side, as you can see, a part of us has become to be a software house and a solutions provider, and they get into this a little bit. On the right-hand side, I would like to highlight maybe only 3 elements: the Brand Experience Center in Hoffman Estates in the U.S. has really started off very, very well. It's the first brand experience center that is showing our smart factory concepts. But also, we have a lot of production that gives us additional capacities for production. In this case, for currently lasers, 2D lasers as well as automation in the future. In addition to that, we have also done quite a bit around software and smart factory software suite. We acquired Kurago, as you can see, this year, which is really helping us to accelerate the launch of our Smart Factory Solutions. We are really proud also to say that on the service side, we have been able to really make great progress, and we are about halfway through by hiring a significant amount of service technicians. In an environment that is quite difficult to get new service technicians because it looks like the whole world is looking for service technicians currently. Before we go into the numbers, let me also highlight some of our major accomplishments in the field of ESG. We have an aggressive road map in place that is not only targeting the reporting aspects, but it's also trying to achieve true impact of what we do. In H1, we have conducted our alignment with the sustainable development goals, as you can see. We brushed up our materiality matrix in line with the 2025 agenda or strategy, so that we can address future material topics already today. We used the S&P 500 Corporate Sustainability Assessment as a checklist for a GAAP analysis and are on track to define KPIs on all identified topics. In addition, in the second half, we will plan for a leadership meeting to set our targets for the years to come. Based on those, we plan also to link compensation to our ESG execution in the future. In the first half, we have conducted our carbon footprint for Scope 1 and 2 for all of our operations. And for the first time, we have reported a Carbon Disclosure Project, CDP, at Bystronic. And lastly, we are on track to publish our first Sustainability Report in 2021, it's probably going to be July 2021. I go to the next page to the numbers. So now let's talk numbers. As you can see from the left to the right, it made quite a bit of progress in order intake. We have seen this already starting in October, November, December last year, and it continues. Maybe you can talk in one of my last slides on the outlook a little bit what we have seen in July as well. But basically, order intake is up over 60% from last year. And what's even more important is actually up against what we call our benchmark 2019. And it's really broad-based in all regions. I have a slide prepared to talk about the regions, and you will see the Americas is really leading the pack here. We also see very clearly that the pandemic has been a catalyst for main customers to think about automation and smart factory solutions. And we see that in our order entry as well. In terms of net sales, we are about 19% above last year and as we said, about 4.4% above 2019. And that's really important because we always said that we wanted to take 2019 as our benchmark because the pandemic year is very hard to take as a start point in a way. What we also see is that we still have supply chain constraint and that's a challenge. We do have other challenges, maybe going to talk in the Q&A session a little bit about freight and price increases and things like that. But that is really what's going on. We are happy to see where we are right now, and we are even more happy to see significant backlog that is going well into 2022. On the EBIT side, you see that we are currently at about 6.9%. If we were to adjust that to some of the onetime costs, it would be around 8%. We do see, obviously, a higher PEX that is hitting us, but we wanted to do this. We are investing in that, and that's what we said all the way before. Also, of course, the higher volume has helped us to get there. We see transportation expenses are obviously not helping in this environment. But all in all, we see that we are underway, the first 6 months of our 5-year plan, about 60 months, the first 6 months, we think with these numbers, we are actually on track. I will go to the next page, where we talk a little bit about our regions. And what we would like to share with you is really the regional growth. And as you can see that sales is more or less in line with about 15%, 20% everywhere. China was early, was the earliest region to come back again after pandemic, and hence, the net sales are a bit higher there. And order intake is strong everywhere, particularly, as you can see, in EMEA, China and Americas. We see significant growth of large systems in Americas that are helping us with this order intake number. Maybe on the right-hand side, interesting for you. We always said, we would like to get from about 19% or 19.9% in 2019 of service revenue to about 26% in 2025. And now half year into our execution of our growth strategy you can see that we have like at almost 20%, 23%. So we're moving in the right direction. However, this also has to do partially that the first half year might be a little bit smaller than the second half of the year. But all in all, the trend is very clear. We are growing significantly on the service side, and that makes us happy because that was a very significant plan of ours. With this, I would like to hand over to Beat Neukom that is going into quite a bit of details on the numbers. Beat, Please go ahead.

Yes. Thank you very much, Alex. Ladies and gentlemen, also a very good morning from my side. As Alex said, I will walk you through the financial for the first semester. The group's numbers are somewhat convoluted because of the transformation that was initiated in December 2019, and there is a loss of sales, profitability and balance sheet positions from the discontinued businesses. And secondly, there is -- there are significant effects on the balance sheet and on the financial statements from the divestments proceeds of those business units. In our consolidated profit and loss statements, we are showing the divested activities in the column discontinued operation, and it includes these 2 effects. As Alex mentioned, the Group's transformation is now completed, and we're operating as a stand-alone entity as Bystronic. So Schmid Rhyner was sold in February 2020. And therefore, the 2020 figures include 2 months of sales and costs as well as the transaction gain. The FoamPartner and Mammut businesses were divested on March 31, 2021 and June 30, respectively. Therefore, for 2020, both these businesses are fully included in the P&L and on the balance sheet. And then for this year, 3 months of FoamPartner operations is included in the P&L. And as a result of the goodwill recycling as required by Swiss GAAP FER, the FoamPartner transaction created a significant negative noncash impact on the consolidated results. Mammut was divested on June 30, and therefore, the H1 2021 numbers include 6 months of Mammut operations. However, since deconsolidation happened on June 30 this year, the balance sheet positions are no longer included at the end of H1. The Bystronic business unit that was historically called Sheet Metal Processing is now shown under continuing operations. The continuing operations also include the transformation costs, mentioned already by Alex and certain corporate center and stewardship costs, which historically have been incurred by Conzzeta and have not been allocated to the business units. Now looking at some of the key figures. In the first half of 2021, net sales for the group increased by CHF 48.1 million from CHF 576.2 to CHF 624.3 million. The net sales from the continuing operations, you heard it from Alex, has increased by 18.3% to CHF 440.7 million. This increase of CHF 68.2 million includes an unfavorable foreign currency translation effect of CHF 3.4 million, which is driven by the weakening of the U.S. dollar versus the Swiss francs, but partially offset mainly by the stronger euro and the Swedish krona. The operating and the net results for the group on the right-hand side on this chart have been significantly impacted by the effects of the transformation mentioned before. The operating results of the continuing operations have increased by almost 30% compared to the same period last year. Please note that excluding the transformation cost for the group of CHF 5.1 million, the EBIT margin for H1 2021 would be 8% compared to the reported number of 6.9%. The net result of CHF 23.3 million for the continuing operation increased by 40% compared to H1 2020. The earnings per Class A share on a pro forma basis are CHF 11.19 compared to CHF 7.45 last year. And as a result of our asset-light and efficient business model, the return on net operating assets reached 20% for the first 6 months this year. And the equity ratio remains very solid at 69% on June 30, 2021. Looking at the profitability. As I mentioned, the year-over-year consolidated financials are significantly impacted by the transformation of the group. In 2020, the operating result of CHF 49.9 million includes the transaction gain from the Schmid Rhyner and disposal of CHF 48.1 million. So the adjusted EBIT figure of CHF 1.8 million can be split in an operating loss for the discontinued operation of CHF 21.6 million and an EBIT of CHF 23.4 million for the Bystronic continuing operations. For H1 2021, a consolidated operating loss for the group of CHF 55.2 million at the bottom of this page, is being reported. This is mainly driven by the transaction loss of CHF 78.5 million for FoamPartner, which includes the recycling of the goodwill of CHF 152.2 million. The divestment of Mammut resulted in a small provision of profit. Excluding the effects for the divestment and operating profit for the group of CHF 22.8 million has been achieved in H1 2021, a loss of CHF 7.5 million for the discontinued operations, Mammut and FoamPartner and a profit of CHF 30.3 million for Bystronic's continuing operations. Now looking at the continuing operations. For those, the increase in profitability of almost CHF 7 million is driven by volume and product mix of almost CHF 41 million, offset by higher personnel expenses of CHF 14.4 million and operating expenses, other income and depreciation of CHF 18.5 million. Both for the operating expenses as well as the operating expenses, there is a lower base last year as a result of some cost containment measures that have been taken during the COVID-19 pandemic. Additional effects in the personnel expenses are the investments in the service technicians as part of our 2025 strategy and a team of around 60 software specialists that came to us with the acquisition of Kurago. The operating expenses also increased because of higher warranty provisions that have been booked in H1, cost for exhibition and fares that didn't happen last year, higher transportation costs and the onetime costs associated with the transformation of the group. With regards to our cash flow statement. So before we have a look at the balance sheet, I will walk you through the cash flow for the first half of 2021. Compared to a negative CHF 24.4 million last year in the same period the continuing operation created a positive free cash flow from operating activities of almost CHF 20 million this year. The other position of negative CHF 10.7 million, mainly results from the operating performance of the discontinued operation. After a deduction of the dividends of CHF 124 million and the proceeds from the 2 divestments FoamPartner and Mammut of CHF 323 million Bystronic closed the first half of 2021 with cash, cash equivalents and securities of almost CHF 480 million. So what are the highlights of our strong balance sheet. The change in cash, cash equivalents and securities has just been mentioned, but I want to make one additional important comment. The Board of Directors proposes not to distribute an interim dividend in 2021 and will state its position in the context of the Annual Report in spring 2022. Now looking at the operating -- net operating assets. With the deconsolidation of the FoamPartner activities on March 31st and the Mammut activities on June 30th, the net operating assets for these 2 businesses have been taken off our balance sheet. A deferred purchase price payment for FoamPartner of CHF 20.3 million due in January 2022, is recognized in the position other receivables on the balance sheet. With regards to Mammut, the parties have agreed on an interest-bearing vendor loan of CHF 60 million, which will be repaid by the buyer by January 2027 at the latest and is included in the position, financial assets. The transaction with Mammut also includes an earn-out structure of up to CHF 45 million. Due to the current operating results and the estimation of the earn-out relevant impact until December 31, 2021, no fair value for this earn-out is included in the provisional gain on the sale. For the continuing operation, the change in net operating assets is minimal. Given the strong order intake, there has been an inventory build-up of CHF 56 million and trade and other receivables have increased by CHF 22 million. On the other hand, we do have a policy that at the time of the order intake up to 4 payments have to be made by our customers. And therefore, we do see an increase in this advance payments from customers by CHF 39 million at the end of June. Trade payables, accrued expenses and other short-term liabilities have increased by CHF 32 million and consequently reduced the net operating assets. With this, I'm happy to hand back to Alex.

Thank you very much, Beat. I'm going now to Page #16 to talk about the outlook 2021. To summarize our first half of '21 results in view of our 2025 financial aspirations, which are mentioned on the right-hand side, that is 5% growth or over 5% growth in mid sales. And please keep in mind that, that is based on 2019. As well as profitability of over 12% and the capital efficiency of over 25%. Now you have seen actually all of the metrics. We've already talked through those. But being 6 months out of 60 months of our strategic journey, we feel that we have gotten a good start into that, and we are on track to get to those aspirations. I change now to Page 17. And Page 17 talks about our outlook for the full year. As you can see, we expect a sales growth or net sales growth of about 50%, and we continue on the EBIT margin to see 8% to 9% for 2021. Obviously, that has to do with certain elements, for instance, the procurement situation or inflation situation and other things that really shouldn't change. But based on what we're seeing now, being in August of 2021, that's currently what we think is a very fair view of what we see for this year. At this point in time, I would like to hand over to the Q&A session, to Alice. Alice, Please go ahead with the first question.

[Operator Instructions] The first question from the telephone comes from the line of Charlie Fehrenbach with awp Finanznachrichten AG.

I'd like to ask you for a bit more clarity on this, your sales guidance is plus 15%. I'm not quite sure. Is the assumption correct that this will bring you back to the pre-pandemic level of CHF 935 million or in the area, at least, this is question one. Second was a question is that, could you give us more light with the bottlenecks in the supply chain and how you're affected there? If there is no problem at all, or you don't seem to be too worried. And the last question is the how do raw material and logistic costs, how easy can you give them to your clients?

Well, thank you very much, Mr. Fehrenbach. We have -- we are very happy to go to those 3 questions. Well, the first question was in regards to the 15%. That would bring us currently at about CHF 920 million CHF 921 million type of region, which technically is not at 2019 level at the current currency, but it's in that region. So that's the first question. The second one, in terms of bottleneck, maybe we should show to be more worried about bottlenecks. But I can tell you where our optics currently are. The bottlenecks, in the past, we didn't have really bottlenecks in production. We start to see them in 2 plants, at least, and we do have action plans for them. We think we can actually -- we actually work and get capacity in as we meet them after the current increase of order entry. But in some of our plants, we have order increases of certain products of over 100%. So we are working to get them really done. So the capacity increase in terms of plants, I think, we can manage that. And that worries us a little bit, but I think we have really good people on that. The second part, that's even more important, we think, is we have currently a double effect, if that's the right word, in when you have an increase -- such a strong increase as we have now, our service technicians not only have to do all of the installations, but we also have a very strong increase on the service side, which basically means the same people have to do 2 jobs at the same time. And that varies actually more, and we have done a lot of work to get more service technicians on board and find different ways to serve our valuable customers. So that would be my -- sorry, long answer to the bottlenecks. And the third question, I think, was in regard to, I think, freight, is that correct?

Raw material freight costs, yes.

Raw material, well, we see what -- I think we see what the whole world is seeing is that many of our partners, our suppliers are trying to get us -- hit us with higher material costs with price increases. And obviously, some of it, we can fight away and some of it, we can't. We have done a lot of work to see how we're going to either absorb it or to work with price increases towards our customers, and we have done actually, we have been successful in quite a few of those. We have started that already beginning of the year, and you had another round just in Q2. But this is obviously a very hard battle to increase prices in this. Our typical strategy in this is we do that wherever that is possible, and we think that's the right thing to do, and we have done it. On the other hand, with an innovation rate of in the high 30%, close to 40%, what we are seeing is the best way to increase your product margin in the mix is actually to introduce new products. And we have a lot of new products coming this second half of the year. So as you can see, it's a mixed strategy of introduction of new innovative products and solutions and software, obviously. And on the other side, find good ways to put freight increases and product increases or cost increases into the customers. Did I answer your question, Mr. Fehrenbach?

Mostly. Summary is, you don't have any delays in delivery to your customers?

I wouldn't call it delays right now in products, but due to a high order backlog, we have longer lead times for new products, and that's starting to worry us. And that's one end of it. And the other end of it is transportation capacity isn't really favorable right now as well. So even if we have products, often, we run into issues to get transportation organized in time. So clearly, clearly, an element of -- worrying us, but we have really excellent teams in working on that.

Next question comes from the line of Serge Rotzer with Credit Suisse.

I have also questions on orders. You already mentioned that the lead times increased, you mentioned that Americas, you have larger machines in your backlog. Can you give us more detail about the lead times and when revenue recognition will take place? So -- and what this mean then really for the second half in sales and also for last year? Because you are guiding a sales decline from the momentum, isn't it? You have been growing 20% in the first half or the first 6 months. And now you guide for a plus 12% for the second half. So this is a clear slowdown of the momentum. So can you put this in relation, please?

Yes. Thank you very much. Why don't we divide this question, Beat, for the revenue recognition, maybe going to do it from your side. And why not answer the first part of it, that is around orders. So just to be clear, when I said longer lead times, I didn't mean this for all product lines. It's actually just for one product line. For most of our standard products for laser products and press brake products, we have our standard lead time, and we're able to hold it. And that's around about 12 weeks. Where lead time has increased and is sort of against us right now is in larger projects, where complex automation has to be -- being installed. And usually, the time pressure isn't that large on it because often, either a new plant has to be built or a new space has to be getting ready. But if there was something in the way of longer lead times, clearly, that's with automation [ in ] what you call -- in the gold segment. What we have done just for information to counteract on that is our brand-new plant in the U.S., the assembly plant in Hoffman Estates, will actually start to assemble exactly the same products early next year. So that will increase capacity and will reduce also delivery time quite significantly, actually. So that's maybe from my side. And with that, I think I will hand over to Beat for revenue recognition.

Yes. Thank you, Alex. So the revenue recognition happens so -- when we deliver a machine, it will be installed. And then there is a training organized. And then at the end, there is testing. And the revenue recognition happens at that moment. So not after installation, but after installation, training and testing by the customer. When we have a solution where there's more than 1 machine automation solution, the revenue recognition happens step by step. So once the -- once 1 machine is installed to test it and trained.

Can you give me a share of the larger projects of the existing backlog of CHF 440 million?

Yes, we can. Yes and no. So I would love to give you this, but it's a question of what do you define as a system in the case, the very large and very complex system are probably from a revenue side, a smaller part of it, but the middle large, very large part, which is over 2/3 of everything really has to do with systems that are standardized systems, standardized system means we use 2 or 3 modules, laser module or press brake module and an automation module. And those tend to be much easier in terms of delivery time and installation and everything else. So that's what I would say. So if I had to guess, I would need to look it up in exact details, maybe 10%, maybe 60% for standard, 10% for a very complex system, about 60% for standardized systems. And the rest is really single machines. But don't hold me accountable for these numbers, but I can look it up if you want to have an exact...

But what's about in the margin quality, what you have now in your books? So can you tell us something about that in general, but secondly, also on how much of these awards have service share? Is this higher as you have reported of this 23%?

Let me try to answer this one as well. Well, the margin quality, to be honest, hasn't really changed from Q1 to -- sorry, from what we have invoiced to the current order book in large terms. What we see is that we have more systems coming. And usually, that is not a negative impact. Let's put it that way. In terms of service and service contracts, since the beginning of the year, we have started significant initiatives around maintenance packages, service packages. And we have been able to increase the amount of service packages per order up to 80%, 90% currently. Actually, it's right now at the higher end of this. And this is really driving the -- our journey to go from 19 point something to 26% in 2025. We are quite confident in that, and we see that, that's working.

But then let's come back again on Slide 12 you showed the volume of the product mix, it's huge impact. And now you are telling me that you don't really see a change of quality in your order book regarding margin, 0.1% and 0.2%. You are guiding for lower sales growth in second half. So I'm a little bit questioned and further positive impact from volume and product mix in the second half. Is this correct?

So maybe we go -- we look at the first half and then to jump into the second half. So when we look at the material quote as a percent to net sales compared to 2020. Yes, there's a significant increase from 50.6% to 53.6%, a 3% increase, but that has mainly to do with the pent up of inventory. So if we exclude that effect, there is about a 0.5% increase, and that has mainly to do with increased material costs as we mentioned. So that is driven by that. What we also do see is there is more demand on solutions, so -- which have a higher or a healthier margin. And then also the gold segment is coming back, which also have a higher margin, especially in the U.S., there is a higher demand on the gold segment.

[Operator Instructions] Next question comes from the line of Daniel Koenig with Mirabaud Securities.

I have 2 questions. A, I was wondering in terms of personnel expenses. You're one of the few companies which have higher personnel expenses. Can you elaborate a little bit why that's the case? And then I was wondering, some companies have lower marketing and travel expenses in the H1. Can you also spend some thoughts on there? And then finally, I had one question. You mentioned about sustainability and the work you're doing there. Is there a carbon emission target plan? Like I want to lower -- I want to be carbon neutral by 2030? Or is there anything planned like this?

Thank you for the question. So with regard to personnel expenses. So I've shown the increase between 2000 and 2020 on the chart. So the -- you basically can split it into 3 main buckets. The first one is an increase in personnel expenses due to some cost containment measures in the last year, and that accounts for about CHF 6 million in the first half. And then the second one is the investment in the service technicians, they had -- the additional hiring. Which is -- which accounts for about CHF 2 million. And then there is the additional software engineers and software engineers that came from Kurago, which accounts for about CHF 1 million. And then there's some other elements with regards to variable pay, et cetera, and some build-up of capacities, mainly in our D&E plants in China. And then with regards to the travel expenses. So the travel expenses basically stayed flat compared to -- they went up by CHF 200,000. So compared to H1 2020, it is more or less flat. So that is not the driver of the additional operating expenses. Does that answer the question with regards to the cost bridge. And then I would hand over to Alex for the sustainability question.

Well, I understood the question around net 0, but this is what we want to do. Now I think what we do very early in this journey. And what we said in our communication here is that we have in H2, a target setting, including carbon emission. And that, of course, that target setting will then drive the further steps of it. In case you would like to get more of that, we can give you more detail, but that would be probably be outside of this call without ESG expert Nicole Progin. But that is basically the short answer to your question.

I have actually an additional question. I noticed that Armatec today came out with results as well, and they increased their guidance. I was just wondering, in general, how the market share between you and Armatec have developed over the -- over H1?

Yes. We have just quickly, quickly looked at the results this morning. We haven't really analyzed it. So I can't really give you a professional answer at this point in time. But I'm happy in the next communications to elaborate a little bit about that, if that's okay with you.

Your next question comes from the line of Andy Schnyder with zCapital.

I would have 3 questions. First, can you talk about the profitability of the service business in H1? I guess the run rate margins usually here are quite high, probably around 20% to 30% somewhere in there. But now during the ramp-up, was it even a margin drag? Or where does it stand? I am trying to get a handle on that once the ramp-up is done, how much that could help the margin compared to where we stand today.

Yes. I'll take that. Yes. So you're absolutely right. And good morning, Mr. Schnyder. So the -- usually, we would expect a higher contribution margin from the service business. But at the moment, it stands exactly at the same level that we have with the machine business as well. And that's why the service business did not yet help. This has to do with the recruitment of the additional service technicians.

And usually, it's double of that of the machine business or triple or...

I'm not sure we want to say that specific. But for sure, this is accretive -- really accretive to our business.

And then on wage cost inflation, what can you tell us on that topic in the different regions? What kind of inflation are you seeing here if you had to check up your wage offers for new hires? And how does it compare to the normal situation over the past few years? What can you tell us about that?

Yes. Very happy to get into that a little bit. So in the region, it has developed somewhat differently throughout, let's say, the different job levels and the regions itself. What we clearly see is that in the U.S., things are a bit heated or overheated when it comes to service technicians. I mean we have seen examples where service technicians are being offered a 50%, 60%, 70% higher salaries. That's an exception. But all in all, we see that, for instance, for service technicians, there is a pressure offer. Clearly, that would be the main element of it. On the sales side, we have seen it less like that because a lot of that has to do with incentives. But in average, we see probably, on a worldwide basis, we see that service is something that's going up. I see it less in Asia. I see it partially in China, clearly. The highest element of that probably is in the United States, where I see that. We do have some [indiscernible] in Australia, for instance, where you see that or in South Africa, Brazil, for instance. So it's not everywhere, but we see the tendency of wage costs in inflation in a way, clearly, the way I explained it.

But that would mean that usually, you have, over the past few years, you had probably 2% a year wage inflation. And now we are rather talking, with the mix shifting and the pressure in service that it's probably around 3%, 4% or even higher, just to get a simple number on it?

Right. Well, what we have seen in the first half, maybe Beat, you can talk to that. It's actually in the mix. It isn't that thick at all.

Yes. So for continuing employees with regards to salary increases and the inflation adjustment, we do see a 0.7% increase compared to H1 2020. So it is not significant. We're talking less than CHF 1 million cost increase.

And you also think that this 1% increase that will not change going forward? Or do you expect more pressure to come when you look into 2H and probably next year?

I think it has to do with the hiring, as Alex has pointed out, right, when we get new people on board, new service technicians on board, that's going to be, especially in the U.S., where inflation rates are higher than 5%. There will be a pressure there. And what is the inflation on the one side, but also just a competitive situation that everybody wants to hire service technicians, it looks like.

But clearly, that's going to go [ off ] in the second half. That would be our expectation. That is what you see.

And then the last time we were talking, you mentioned that raw materials aren't a big problem right now. There's the cost inflation we've seen there, but that you fear that it could become a problem for your clients and they could delay orders and just wait. What do you see here? Is that becoming a problem? Or is it already less of a problem because prices peaked a few months ago? What do you see here?