Bystronic AG (BYS) Earnings Call Transcript & Summary

Welcome, ladies and gentlemen, to our full year results 2022. We are pleased to welcome you here in the merit in Zurich as well as virtually in our webcast. I'm here with our CFO, Beat Neukom, and we will present you our performance of the financial year 2022. Also here is Heinz Baumgartner, our Chairman over there, who will be happy to answer our questions in the Q&A session. Before we get started, kindly take note of our disclaimer. Let me go through the agenda for today. Firstly, I will kick off with the business update and the progress we made in line with our strategy. Then Bert will explain our financial performance in more detail and to wrap up, I will elaborate on our outlook, and we'll then take your questions from the room and afterwards from the conference call. So let's get started with the overview of the key figures. In 2022, we grew our net sales by 8.1% or 13% at concentrate to slightly above CHF 1 billion. Our EBIT amounted to CHF 48 million, which translates an EBIT to 4.7%. And -- our order intake in 2021 was exceptionally high due to the catch-up effects. Therefore, it declined by 14% or 10% constant rate to a little over CHF 1 billion in 2022. Our return on net operating assets was 15%, and we will explain you the reasons for the decline in just a few minutes. Our Board of Directors proposes a dividend of CHF 12 per Class A registered share. This represents more than 2/3 of our group's results and takes both our optimistic outlook for the future as well as a very solid liquidity position into account -- as a part of our strategy, we want to grow across all 3 pillars: system, service and software. Let me share the key highlights from each pillar with you and the progress we made last year. We will achieve further growth in the pillar systems by expanding our product portfolio. This means new product innovations for cutting, bending and automation in all 3 market segments: gold, silver and entry level. In line with this strategy, we have, for example, launched a new cutting system, which is based on a new platform. This makes our offering even more modular and more production efficient. Furthermore, we have presented a new cutting head up to 30 kilowatts. This enables -- this enables our customers actually to cut faster and thicker materials. Our industry is characterized with a trend towards automation. Our customers want their production to run 24/7 and with less manual work. So far, automation solutions within Bystronic have been mainly in the gold segment. As we want to offer these products also in the silver segment, we have opened a competency center automation also in China, actually in January. Ritualization is also a key part of our strategy. We want to be close to our customers, offer local solution and strengthen the local supply chain where possible. As one of the elements of this, we have opened a new brand experience center here on the below slide in Korea. Korea is an important and large market for us in APAC, and we can now showcase total systems and solutions. On the software side, the second pillar, we launched our new modular software solution that we call BySoft Suite. It's a suite of products. A few years ago, as you know, we acquired a company called Kurago and have since then jointly developed a modular software package to digitize the workflow of our customers in the sheet metal processing. Today, we employ more than 100 software specialists, of which 75 at Kurago and more than 30 sales specialists. We have set up a sales organization for the software business in Europe, in Korea, for Asia and in the Americas. We have tested the software at 12 customers during '21 and '22. And after the successful test, we launched it at the Europe in October last year. We are very proud that we even won an award, as you can see here in the middle in the exhibition for that product. We will sell the software on a subscription-based model. Hence, it will generate recurring revenues for us, actually, a few million Swiss francs for the coming years. It is an entry point for us to connect even closer with customers and eventually generate also system sales. With our current capacity in that area, we can implement 40 to 50 projects a year. And for a successful project, the customer chooses the modules that are relevant for him and then we parametrize the solution for his needs. And obviously, the customer pays for the setup and then the subscription fee. Let us talk a little bit about the service side, the third part of it, the third pillar. By 2025, we are targeting sales of more than CHF 300 million from this business. Last year alone, the business grew by 16.5% to CHF 227 million. This represents a little over 22% of our group sales. We are still expanding our capacity in this area. Hence, we hired another 60 service technicians. As you know, originally, we plan to hire over 100 technicians in '21 and '22. And with this, the service organization actually is at a reasonable size. And as you might remember, we couldn't fully recruit all of these specialists last year, and therefore, the plan this year is to close this gap with additional hires. In October last year, we also presented a new service feature, a cybersecurity solution for our systems, which a customer can buy as an additional option to the service contracts. The future protects our systems against malware and cyber-attacks. And as you remember, we sell more than 95% of our new systems in the gold and silver segment with a service contract. This means a customer buys into the contract for several thousand Swiss francs a year and gets a certain number of visits and service level depending on the package. With our fifth and latest package that we call advanced, we further extended the service level. Of course, the revenue from this contract is relatively small on the service business, the largest part of that actually comes from the sale of spare parts and service hours that comes with it. At the next level, I really want to point out a few highlights around sustainability. As you know, in October 22, we have published our first sustainability report as a stand-alone company. This underlines our commitment to the topic, and we have clearly accelerated our efforts. Let me just mention a few milestones. We are reporting according to the global reporting initiative, the GRI standards to make our performance comparable to the players. As required, we conducted a comprehensive materiality assessment. And according to the identified material topics, we are providing the relevant data sets for the first time. Furthermore, we also have included ESG criteria in the management compensation in '22 already. To drive ESG initiatives going forward, we have established a Sustainability Council, including all relevant functions. We can create the largest positive environmental impact when we improve the energy efficiency of our products, i.e. when they are used by our customers. And therefore, we have dedicated a new function to this topic, and we call it sustainability engineering. This is actually in line with our strategy, and you can see that all of our efforts are based on the 3 pillars: empowered people, sustainable solution and a responsive business. As a next step, we will set up targets in line with these pillars and our material topics this year. And with this, I would like to hand over to Beat for the financial review.

Thank you very much, Alex, and a very good -- very well -- welcome from my sanction. I will walk you now through the financials of 2022. And as Alex has indicated, our order intake declined by 14% or 10% on a constant exchange rate to a little over CHF 1 billion, and our net sales reached CHF 1.16. This represents a growth of 13% at the constant exchange rate. Our service business grew by 17% and shows that our investment into that area are demonstrating success and the growth in the systems business was 12%, all at constant exchange rates. Revenue recognition is still slightly delayed due to some supply chain constraints, and I will elaborate on this further on a later slide. On the top line, we had an unfavorable FX effect, translation effect of CHF 46 million, which mainly comes from the weakening of the euro, the Swedish krona and the Korean one, partially offset by the stronger U.S. dollar. Our EBIT was CHF 48 million, with a margin for the full year of 4.7% and also we'll elaborate on the driving factors behind that in a minute. Our operating free cash flow was negative because of the inventory buildup and the phasing impact from the advanced payments from our customers. Also this impact our -- due to this impact our Ono has declined to 15%. Let's take a closer look at our order intake. In 2022, our order intake declined by 10.2%. And as you can see on the chart on the left-hand side, especially the second half of 2021 was strongly impacted by the positive catch-up effect from COVID. This explains a large part of the decline. In addition, customer became more cautious in the second half of 2022 because of the economic uncertainties. -- when it comes to our customers, mode, the picture is a little mixed. What we hear from our customers is that they still have a full order book and they're very busy. But on the other hand, they're also reading the newspapers and are somewhat concerned about the potential weaker economy development this year. However, excluding these effects, order intake in 2022 was higher than the pre-covid level back in 2019. Because of the strong orders in 2021 and the continued demand in 2022, we finished the year with a high order backlog of more than CHF 400 million. This provides us resilience for the year 2023. We -- and for this year, however, we expect a lower order intake in the systems business, but on the other hand, a growing demand on the systems -- sorry, on the service and software business. This, in total, however, will end up in a small decline in total order intake for this year. Let's have a look at our net sales. As I said, net sales grew by 13% on a constant FX basis to a little over CHF 1 billion. Given the ongoing component shortages, this is a solid growth, especially in the first half of 2022, key components weren't available and we couldn't finish installing our systems. We have reported about this in our half year results. And without delivery and installation and a final handover protocol to the customer, we don't recognize the sale. The situation has fortunately improved in the second half of this year. This is also due to the measures we have taken, a, on the supply chain, on the R&D side, and they both have done a fantastic and outstanding job to redesign components and onboard new suppliers and interact with key suppliers even closer. So this resulted then in a strong sales growth of 19% in the second half of the year, as you can see on the chart on the right-hand side. This helped us to better absorb our fixed costs and therefore, we achieved a significantly higher EBIT and profitability in the second half of 2022. I will now take you through the P&L details. We've already discussed about our sales growth of 8.1% to above CHF 1 billion. Our material quote, so the ratio from material expenses net of the change of inventory increased from 44.9% in 2021 to 46.2% in 2022. On the one hand, we experienced a slightly positive mix from stronger sales in the service business as well as the positive contribution from the price increases we have taken last year. On the other hand, the cost of several components rose significantly. And in addition, we experienced a significant increase in transportation costs, especially towards the end of last year, where we had to air freight some of the missing components to finish the installation of the systems. Our personnel costs increased by 7.2% to CHF 260 million. Around 2% of this is a result of higher wage inflation. The largest share, however, is the buildup of personnel. This is in line with our strategy to strengthen the service organization and the production capacities. In the second half of 2022, we have taken some cost containment measures and personnel expenses were lower than in H1 2022. Operating expenses increased by 14% to CHF 222 million, some CHF 19 million are variable and volume-related costs. And we also had an unfavorable effect from higher transportation costs to ship the products to our customers and higher external installation capacities prior to the year-end, again, to finish the installation and the handover to our customers. In addition, we had higher costs compared to 2021 for sales activities resumed travel, representation and costs for some major trade fairs as the Eurobase that happened in the fall last year. Overall, this resulted in an EBIT of CHF 48.1 million and a 4.7% margin. While this is a substantial improvement versus the first half of -- the first half of 2022, we have nevertheless taken countermeasures to protect our profitability for the current year 2023. We have implemented and continue to execute on a strict headcount approval process, reduced travel and other operating expenses. Our net profit last year was CHF 36.6 billion. We are very pleased with our strong balance sheet and an equity ratio. Alex was mentioning it of 63%. Well, let me point out a few key changes last year. Firstly, we paid out the dividend in May last year of CHF 124 million to our shareholders. This is the main driver for the reduction in the cash position. I will elaborate on the inventory impact later, but you see an increase of CHF 39 million, therefore, CHF 14 million are because of a strategic decision to increase inventory levels for key components. But the larger part, however, relates to CHF 25 million increase in finished products. Working capital management continues to be a focus, and we consistently apply our down payment policy with our customers despite the longer delivery times. The advanced payments from customers continue to be at a sizable level of almost CHF 160 million. In sum, our net operating asset increased by CHF 69 million to CHF 288 million, and the Renova stands at 15%. We have mentioned the inventory built out now a few times. Let me illustrate this. As I said, according to our accounting policies, we recognize our sales once the systems are installed and handed over to our customers. With the missing components, we decided to deliver the quasi finished systems to the customers, but the final handover has, of course, not yet taken place. And as a consequence, the systems are still in our balance sheet. By June 30, our finished product inventory increased by about CHF 50 million, which would translate into about CHF 100 million in sales value. The delivery situation has clearly improved in the second half of the year and about half of these systems have been installed and recognized as revenues. Nevertheless, we still have about CHF 25 million of finished products on stock. This would translate into about CHF 50 million in sales, which we will realize this year now. The inventory built up was the first significant impact on our cash flow. Secondly, we take advance payments from our customers up on order intake. This is, in general, is then followed by another 3 payments until final delivery of the machine. And with our high order intake in 2021, we had an increase in 2021 of CHF 107 million. The collection of such advanced payments slowed in 2022. Therefore, we couldn't offset the change in the working capital. Hence, the cash flow from operating activities declined from CHF 92 million in 2021 to minus CHF 17 million in 2022. Our usual CapEx to sales ratio is around 3% and to protect our cash in the current environment, we reduced CapEx spending in 2022, and this resulted in a CapEx expenditure of CHF 23 million or 2.3% of sales. Our operating free cash flow was minus CHF 40.6 million compared to the very strong CHF 64.8 million in 2021. And with this, I'm handing back to Alex to talk about the outlook.

Thank you, Bert. Well, before we take your questions, I would like to provide you with a bit more details of our expectations in 2023 and actually beyond -- we are convinced of our business model, and we feel well positioned in our markets, and we believe that we generate value for our customers with our approach to offer systems, service and software solutions out of one hand. Therefore, we confirm the values of our existing targets, namely annual organic sales growth of around 5%. EBIT margins above 12% and Reno above 25%. And Bystronic expects to reach these midterm targets subject to the recovery of the economy, reflecting a delay versus your original strategy cycle 2025. Let me quickly remind you of the drivers of these targets. Our sales growth is driven by expansion in all market segments and regions and in addition, by larger service and software business. Our profitability improvement will mainly come from volume impacts and further price increases. In addition, the higher share of service business has a margin accretive effect. And thirdly, our more automated and complex solutions. Let's move on to our outlook for this year. We have a resilient, strong business model, which will help to balance potential recessionary impacts. We serve customers across various industries and sectors. Hence, we have a strong customer diversification. We benefit from a solid background of more than CHF 400 million. In addition, we have strongly expanded the share of recurring service business in the past 2 years. In sum for 2023, order intake could be impacted by cautious customer behavior in the current economic environment. On the other hand, we expect continuous growth in the service business and the high demand for automated and smart factory solutions. In addition, we have to offset several headwinds, of course, namely higher energy cost, wage inflation, high component costs and FX impacts. Therefore, we put saving measures in place to overcompensate these headwinds. Hence, for 2023, we expect a higher operating result at a slightly lower sales level. And with this, let's move on to the Q&A session. We will start with the questions from the room here.

Could you put some color on the regional development, particular of interest is the U.S. where you have expanded your manufacturing footprint and China, where we see the end of the lockdowns and probably in connection also with how did you the current year starting.

You want me to do that? Yes, absolutely. The U.S. last year has developed very strong. As we expected it, actually, the whole environment is actually exceptionally robust. We have had many interviews with customers, and we feel we shouldn't feel what we feel. So it's really going well, not only from a system standpoint, but also from a customer attitude standpoint. So we haven't seen that much of a reduction of order entry or very overcautious customers. we see systems coming through. And while we have seen in January, sort of a seasonal effect like every year, we see that there are orders for systems building up. So. we are actually -- what the U.S. or the Americas is concerned, quite happy about that. China, as you all know, just coming out -- is waking up after Chinese New Year or after the spring festival. And what we can see is actually a different picture than when we went into the Covid situation, that's almost like 3 years ago now, where we were very strong on the entry-level side and less strong on the, let's say, system side. Coming out of it, we see that the market is waking up. And we see that we get a lot of inquiries for systems that we haven't really got in the past. So we now see that not only like the entry level is coming back. It's also the systems business like in Europe is really coming away and we got very interesting projects going on. And that's a bit new for us in China. So I hope I've answered your question.

You had the intention to employ about 100 service manicures per year. Is that go, I guess now you employed 60 last year. So you all know the situation, the labor market is quite difficult. What -- how is the situation there? What are you expect expectations? I mean it's not that easy. Have you a certain number you want to employ?.

Yes, absolutely. So the target hasn't really changed. The whole service business depends basically on the capacity of the service technician. And so there's a linear correlation to it. So the missing around about 60%, I would say, from both years, technicians will be brought on board this year. We have changed the approach a little bit in how you find these people and how you engage the people, how you train the people. It's difficult. The whole industry seems to search service technicians. So it's not just a package itself, but there are other factors that are important to it. But we feel we are in a position to get the remaining part of that on board this year, and that will have an effect going forward in our ability to service our customers...

Is the margin level of the second half of last year. Is this about the base for this year? Can we like this expect -- can that be expected? Or is there a chance that it will be higher?

So the second half still had high costs for the components, right? And it depends a little bit on what the component prices are doing. That's why we're a little bit uncertain exactly how it will develop, right? Where we definitely benefit from is the mix change, right? There's going to be a positive mix change. The service business will continue to grow. That's our expectation as a result of the investment we have done. On the other hand, then the systems business will decline. So yes, so the second half is kind of the area that we're targeting for…

The whole year next year? Or is the first half maybe better than the second at?

the first half of 2023, you mean, potentially, yes, because we still have some of the systems that will come through that are basically blocked in the channel, right? And then depending on the economic development and the order intake we're taking now in the first quarter and potentially also going into the second quarter, then how much we will be able to realize in 2023 of that.

Maybe a more general question. I mean, what's the reason that you have so many problems with these logistic things. If you look at other industrial companies with their results, they are presenting now that that's almost everywhere much better. What's the reason?

So a key focus for us was one of the strategic goals was return on net operating asset, right? And for us, it's basically 3 layers, right? One is accounts receivable management. The second one where we have a really high focus on is advanced payments from the customers. And then the third one is inventory levels. So we have really managed inventory levels to a low level and really are just manufacturing on order, right? We don't manufacture on stock and then deliver -- this clearly has hit us, right, as a result of that.

Change something on this...

Well, as I pointed out, right, next to the CHF 25 million increase on the finished goods, right? We have also taken some increase on certain stock levels on key components. That's number one. And then the localization of manufacturing, right? We invested in the manufacturing facility, the assembly facility in the United States, a, to be closer to the customer, but also the supply chain then will be localized and we will buy the products and buy the components from there.

So maybe one sentence to that. We had always been proud to optimize our lean flow manufacturing lines. And that hit us at the wrong moment. Looking back, it would have been good to build up black crazy inventory, but the laser system has about 5,000 components. So the question is which one you're going to source. So we have been thinking about is how to make this more solid on the other hand. But that was one of the reasons for sure.

Tobias Fahrenholz from Stifel. On the general cash topic, you still have more than CHF 300 million net cash. You didn't pay a special dividend or something like this. Are you actively looking at targets in this environment? What kind of size would that be? And what kind of target areas?

The first? So maybe the first part to that, maybe the dividend question is more one for our Chairman. Yes, we have been looking at several targets last year. It seems like there's not a lot of activities that goes to the outside, but we have been looking at targets and so do we this year. We feel that there are targets out there and there are targets available. In 2022, we didn't feel it was the right moment for those targets that we've been looking for. So we are in the same position. We feel very happy to have a cash position that gives us the opportunity to organically grow mainly on the system side of it. And the size typically is -- it's like midsized type of company that we're looking for. It's not the very -- basically, we look at applications. applications is something that you typically get inorganic into your company and then integrate. And that could be service companies. Typically, that fit really well to us. That could be parts companies that fit really well to us or tools companies that fit really well to us or it could be other components or applications actually that fit very well to us. So we do have a radar in place where we look at that. And this year as well, we know which candidates we look at. We've actually declined to last year that would have had a very nice impact to our company. But of course, I cannot elaborate too much on that. At the end of the day, we are not desperate to do everything that's possible. We really want to make sure it makes sense for us. So so much maybe to the M&A side of it. If there's a dividend question, maybe that's you want to talk to Heinz.

Thank you very much for the question regarding the dividend. It's a valid question, and it allows me to give you, hopefully, a valid answer. I quickly would like to outline a bit how we have come to the CHF 12 per share. Originally, we have given as a general guideline, a payout ratio between 30% and 50% of the annual income. Now given the fact that we have close to CHF 18 per share, earnings per share. And if we go to the upper limit, this would boil down to a dividend of around CHF 9. We have discussed in the Board that in line with the positive outlook you got from the management, we also would like to give a positive sign regarding the dividend and therefore, have decided to propose instead of CHF 912. Now just in brackets, I think these 12 ranks are pretty much in line with the overall average of the consensus estimates financial community has indicated for the dividend. Now another question regarding the dividend could be why did we not propose even a higher dividend, given the significant cash position we still have. And there, I also would like to share a bit the consideration we have taken in the Board. If you decide on the dividends, apart from the general guidelines, you also have to take into consideration other aspects such as financial stability and also future cash needs for organic and inorganic growth. And I take it as a positive sign that some of our major shareholders feel very confident in keeping a significant portion of the cash still in the company rather than just paying it out as a dividend. The management has some ideas for future organic and inorganic growth. We have heard that we would like to do further organic investments in after sales in smart factory solution -- and hopefully, we also are able in the future to execute one or more projects when it comes to M&A. This is not a promise, but we have ideas, we have plans. And at the end, it's a question of availability, price, timing whatsoever, whether these projects will materialize or not. And as long as we believe in the company that we can wisely use the cash to the benefit of our shareholders, we rather prefer for the time being to keep the cash. If for whatever reasons within a reasonable time frame, we do not need the cash. Then of course, before we unwisely use it. We always will pay it back to our shareholders. So that was a long answer to a short question. But to summarize it, I rather take it or design we wanted to give first positive outlook. Second, a sign of confidence and trust also from some of our main shareholders that the management has ideas for a reasonable further future use of that cash position. Thank you.

Are there any more questions?

Another question on that, Mr. Baumgartner. Probably you can say something about the reasonable time frame you just mentioned what is a reasonable time frame. If we haven't found anything in the next 2 years? Is it then, again, time to give some cash back to the shareholders. That's one. And then the second one would be you and the Board's view on smaller add-on acquisitions versus larger transformational yields.

In my previous life as CEO, I always got that question, what is a reasonable time frame. And the unreasonable answer is that's only portionally within our hands. If you want to have a general guidelines again, then I would say a reasonable time frame is probably 2 to 3 years. depending on the overall situation, and I outlined the factors. But as a general guideline, I would say 2 to 3 years probably I would request if I would be in an executive position, I would request such a period to be able to, let's say, development, hopefully, execute the transaction. When it comes then what kind of transaction and so on, I would like to hand over this question then to the management because they bring up and show up with the ideas and the targets.

So 2 more add-on questions on that. Is there not a reasonable time frame, but the reasonable MAX cash level? You see -- so I mean, we're expecting more positive cash flows. And if the cash pile gets bigger and bigger, do you see some kind of level there where you would stop and give the extra cash back because you think CHF 300 million is enough? Or can it grow higher? That's first. And then yes, that answer that.

Yes. I would give this back this question then to the CFO.

I think just my thinking, then you can correct me if I'm wrong. The question is how much cash you need to finance the operating activities. And I would say, given the business we are in and the cycle, I would say, probably around, I don't know, CHF 100 million or maybe slightly less. And what is in excess of that, we can we can use for, let's say, organic and organic projects. And then, of course, you could have also a decent level of additional financing capabilities to leverage the balance sheet and so on. But here, I also would like to make a clear point and that was also clearly said during the Board discussions, having a sound and healthy balance sheet, especially, let's say, in these times, we are in will always be one of our key priorities. So we would never leverage the balance sheet in an undecent way for whatever reasons.

And did I get that correctly regarding smaller and larger acquisitions, the Board is indifferent as long as the business case and price and everything is right.

I think it's less a question of the size. The key question is always, does it fit to our existing business? And can we unlock synergies where we can create additional shareholder value.

Do we have any other questions here? If that's not the case, I think we're going to go to questions from the conference call, please.

There are no questions from the phone at the moment.

Then we have -- I just saw that we have questions in the room here. We go back to the room, please.

I have the mandatory power question that one has gone down quite a bit reasonably, but that's in [indiscernible] was just wondering how the power price, what we can expect for this year more. And then I had a question like how much -- how many FTEs you have more by the end of '23? Is it 2% or 3% or...

So what was -- the power question, I don't get...

Liking on the wholesale level, on the wholesale level, the power prices are going down and they're going down big time like on the stock exchange. But maybe that will be reflected in the 24 million number?

Yes. So -- you're talking about... Energy prices. Yes. So what we have done is we have in the fall kind of in the November time frame, October, November time frame, we have in Switzerland and in Germany, we have bought energy in for Q1 and Q4 2024. So that is kind of hedged, which is slightly higher than this -- than the year 2022. What is still open is Q2 and Q3. So overall, as Alex was pointing out, this means for us a single million impact for 2023. And then the second question was, with the personnel. So what we have done is -- so we are giving you 2 numbers or an average FTE number, and it's in the annual report, and we give you the year-end number. So if you look at the year-end number for 2022 were at 3,609. And at the end of 2021, we were at 3,543. So that is an increase of about 50 or 60 FTEs, which would represent about 2%, right? So as I said, if you then look at the average number, right, there is an increase, right? First of all, in 2021, right, we started to increase, right? And then also going further into 2022, but we have taken these headcount measures that we announced in the middle of 2022. And as a result of that, you can see that on the P&L, our personnel expenses have decreased in H2 compared to H1. Some of it just to be a little bit more transparent about some of it is related to our operations in China, where we just have more flexibility with regards to the labor law. So taking out FTEs and being more flexible there is an opportunity that we have taken.

Okay. This is Walter Bamert from Zürcher. We have 3 follow-up questions. You mentioned the lower CapEx you had last year. Did you really stop it? Or was it just delays of your digital deliveries being received? And why don't you use the cash to step up organic growth also underlined with CapEx.

No, it was a delay. I mean we -- clearly, right, we looked at what are the important CapEx that we want to do. If we look at our reinvestment rate, right? So it's still above 1. So if you look at the ratio between CapEx and depreciation. So it's not something that we would do or I would allow to do is underinvesting on the CapEx side, right? Because it just catches you up in the future, right? But it still was above 1. And then the -- we wanted to protect our cash flow, right, and just use the cash for CapEx is not what we wanted to do. If that was the question.

So we go back 2 years for the level for the current year?

Or you mean for the current year, for example. Yes. Well, we still give the guidance of about 3% of sales.

Okay. So what's your view on the steel price? How does that affect the behavior of your clients? Are they excited that they need less working capital or they have to write down their inventories to they spend more or less on your machines based on the swings in steel prices?

I actually asked that question many times to my customers. And there are 2 groups of customers. One that are very happy because they bought it cheap and sell it expensive, and then they're very happy about that fact. And there are others, they have bought expensive and they sell it expensive and they are not that don't happy either. So you see a certain correlation in that. But so far, I see that most of our customers have been able to deal with that situation. Because think about a lot of our customers, they have an order entry of a couple of weeks. So it sort of washes through quite fast. I don't think that's the major part of it. I think when you look at why are our customers buying systems, then it always comes down to 2 major reasons. Either they buy capacity. So they have, let's say, a major order that they are offering for makes sense. -- or they're buying productivity. So they want to take what they have and make it more productive. And then usually, it comes down to software, it comes down to automation, optimizing workflow and things like that. So what I think has a bigger impact than sort of the obvious steel price is what are the needs? How do they look into their customers are the big orders. There is a lot -- for instance, I'll give you an example. A lot of the U.S. customers see a significant amount of near shoring. So orders that were done in the past, let's say, in China or in Vietnam or in Indonesia is coming back for all the reasons we know for delivery time for input charges, for transportation, for insecurity on the quality side of it. And because automated systems, you can run that also with, let's say, less educated workforce to a large extent simply because that's the way they are built. -- it makes it interesting again. I -- we were more worried about the point on interest rates. So if interest rates are hiking up in the U.S., to what extent is that putting our customers in the U.S. to a different situation. And we have seen certain hesitations but no cancellations at all. So because usually, the return on investment is quite reasonable for them. So maybe that did answer your question?

Yes, just about breakdown. So you're now a supply chain, especially when it comes to electronics, can you share with us in more detail. Who are your suppliers? You don't have to mention the names, but are there several? Is there one? Is there one per machine or component? Or are you very flexible by now?

That's the most painful chapter in the life. -- it has been... No, it switched off... Okay. So basically, we have done a lot of work in reengineering components that were hard to get during the time. In general, it's coming back. It's getting better. The availability is better, but it's still sort of erratic sometimes. So we have done -- we have around about 20 to 50 key components that were a big, big issue. Usually, that comes down to drive motors, electronics, cables, harnesses, things that we all heard that were an issue. And of course, we were looking for second source. We did reengineering of that. We went to different OEMs, like everybody else did. So we had a significant amount of projects going on. It's getting better. It's not over. It's my personal opinion. And yes, it has hit us hard for that reason that I explained before. I think I think it will take us at least another 6 months until sort of we are on the other side of that situation. But we see clearly that now it's less about the availability of those components. It's more about can we get the right delivery time from all -- some of those components are up to 18 months, 12 to 18 months. And they were 3 months before. So it's -- the availability comes more and more back, but it's also a question of delivery times. We produce only to order. We don't produce to just put the systems into a corner. So maybe that.

Torsten Sauter from Kepler Cheuvreux. I have 2 quick questions. Firstly, theoretically speaking, if we were to end up with a constant revenue in the tune of CHF 900 million to CHF 1 billion, could you still get to and sustain your margin and returns targets on such lower revenue figures? Could you cut back the company's scope and cost base? -- sorry, second question maybe, the supply chain issues, have they weighed on your perception in the market and, for example, your capability of realizing price increases?

First one, maybe... I'll take the first one. So your question was, could we maintain margin if sales were at CHF 900 million. Yes, as long as our service business continues to grow, right? Because there we -- if the mix is changing and we benefit from higher proportion on the sales side -- sorry, on the service side, right? There we would -- that's the -- because you get the leverage effect out of that and the higher margin out of that.

Maybe the question was more -- sorry, the question was more, can you size the company in a way, structurally the cost base in a way that you can generate a 12% EBIT margin on CHF 900 million revenues.

Yes, we could do that. We could do that. We would need to rebuild certain things, but it comes down to continue to grow our service business, which it is, and it's working and the software side of it. But yes, we could. If that's what we would want to do, we would need to rebuild certain elements of our company and take us, but we could, yes. But it would be a major -- taking cost out in a major way, right? Because getting to the 12% comes from the better absorption of some of the fixed costs, some of the mix change, right, and also getting some cost out, the components cost coming back to reasonable levels, right, that we didn't experience in the last 18 months.

There was a second question. I think it was in relation the perception in the market on price increases, was that... Your supply chain issues... The supply chain.

I should have kept this -- next time I answer yes, anyway, you had incurred these supply chain issues, yes. You had revenues that actually didn't happen because you have at this issue with the stock revenues, has this weighed on your sentiment comparatively to [ Trumphant and Namada ] and other peers? And has it helped back your business, for example, price increases?

It didn't help. Let's put it that way. Has it had an impact relative to some of the companies? That's hard to say. I mean basically, with what happened last year and actually the year before, you create issues by not completing systems. That's not helping for customer sentiment. And -- but at the same time, many of our customers -- and we all have experienced that with -- got knows everything else from cars to anything else. So I think it certainly didn't help. I don't think it's catastrophic or anything like that. There are things that you sort of fix. That's what I would say on that. So delivery times from our main competitors, right, are about the same, right? They've also increased, right? So that's what we have seen...

Are there any questions? There's a question here?

What are the main industries that you are delivering? And how did this develop in the last, say, 6 or 7 years? Or has this changed since the very good years '18, '17 where you had already 12% margin... Yes.

Well, I think I think the end markets have not really changed. I think what's happening is you have the end market sort of going through cycles, like agricultural right now, construction, a lot of industrial markets are very, very on the high right now and that sort of comes and goes. I think what we have seen in '18 was that our China business was stronger than it is today because it went through a 3-year through a horrible story the last 3 years, of course, and we still made up for most of that actually. So I think that would be the biggest difference from a geographical standpoint, I think right now, U.S. is much stronger, and China is more in the background as maybe 5 years ago, it was more balanced to that. But now you can -- we can see that China is coming back. U.S. is still strong. Service part is actually growing as it should. The software part comes into it, but we see some reluctance on the customer side. And so it's sort of the same elements, but they come out with a different side of the cycle. But I don't think there are significant new markets that we are -- that our customers are actually serving. I mean, clean room customers that build clean rooms have clearly grown, but we had them also before. storage buildings, which is sheet metal, have boomed during the covid times because of a lot of what was going on with the Amazons and all of the other things. So it sort of comes in waves, but I don't think fundamentally that there are other markets that our customers are serving.

But how important is the car industry now? And how important was it in, say, '17 or '18? It's…

I mean from a number standpoint, it's almost irrelevant to what we are doing for the automotive side of our business. I mean we do have certain German OEMs where we are in the battery side of it, but it's very, very small. That's not necessarily a typical market for our end customers. What is an end market is, for instance, trailers trucks, trailers, construction vehicles, tractors and all sorts of things like that. But when you need cars, that's less a target market. Thank you.

I think we have one more question there.

Steve from [indiscernible] Capital. I have a quick question regarding the installed base that will be replaced potentially over the next few years, those CO2 lasers with fiber in my last visit in the end. I saw that or we discussed that 40,000 to 50,000 machines are in the market. Is there a sort of over the next couple of years? -- certain driver coming from that side, that there is an upscaling or revamping of those machines. I guess is that a reasonable impact for Bystronic care?

First of all, I instructed my people not to share numbers with visitors. But you're right. There is still a large installed base of CO2 machines out there, and this will be replaced automatically because the efficiency of a CO2 machine and the cost to drive that is significantly higher and also the power consumption, like 2.5x higher. So it's sort of a natural change. And it didn't happen yet. So there is still a process going on. There is almost no market for used machine anymore for CO2 machines because the first fiber lasers, the used one come back now. So I think this is going to go on, just as natural, and it comes back to why are our customers buying systems and it's either capacity and the fiber systems compared to the old Tier 2 are significantly faster or it is productivity and then also you always -- I mean CO2 machines are always replaced. There's no exception other than a customer says have paid for it and they still want to have it for emotional reasons, but not industrial reasons. Let's put it that way. So yes, that's a driver that has been here for many years and sort of will get there very naturally over the next years and will help us as well. I think we've almost exhausted this Q&A session is there the very, very, very, very last one. That's not the case. With this, I would like to thank you very much for your time and your attendance. And with this, I would like to close the conference today and wish you a very successful day and stay healthy, and thank you very much. Have a good day. We are offering to you a -- how we call it a light lunch. Lunch... I don't... Lake store, it's actually down here, not for those on the conference call, obviously, but for everybody else, we'd be happy to see you over there and have a bit of a bite with you. Thank you very much. Have a good day. Bye.