Dürr Aktiengesellschaft (DUE) Earnings Call Transcript & Summary

Welcome, everybody, to the Durr Analyst Meeting 2021. My name is Andreas Schaller. I'm the Head of Corporate Communications and IR. At Durr, I will be your moderator today. With me in Frankfurt is the complete management Board of Durr, the CEO, Ralf Dieter; the Deputy CEO, Jochen Weyrauch; and the CFO, Dietmar Heinrich. I especially welcome all the analysts that are with us in person today. We appreciate this very much and have taken care to make this a safe event by only allowing vaccinated or recovered participants. I would also like to thank all of you who joined by Zoom for your interest. Before we start, let me make some organizational announcements. We will have a presentation by the management Board, which is followed by a Q&A session. Today's presentation slides and audio will be shared by Zoom, and you will have the opportunity to ask questions. We will not share a live video in order to keep bandwidth utilization low, and you can also turn off your camera while joining. You can also find the presentation slides on our Investor Relations web pages. On Slide 2 of the presentation, we see the disclaimer regarding forward-looking statements. In case you are not familiar with it, please take your time to read it. On Slide 3, you can find instructions how to ask a question at the end of the presentation. I will repeat it before we start. Please be advised that today's meeting will be recorded on November 16, 2021. You will find the recording on our Internet pages after the event, probably tomorrow in the evening. And now without further ado, I hand over to Ralf Dieter for a quick look at today's agenda. Ralf, please.

Yes. Thank you, Andreas, and a warm welcome to everybody in the room. It's nice to see people physically. And -- but also a warm welcome to those who are connected today by their computer to us. I think we have prepared an, hopefully, interesting afternoon about opportunities in the Drr Group. And I would also like to welcome you from the side of my colleagues, Jochen Weyrauch and Dietmar Heinrich. And the agenda for today is my colleague, Dietmar, wanted to give a little bit overview about past, present and future because I'm now part of the past soon.

Almost.

Almost. It's my last analyst meeting here today in Drr. Jochen Weyrauch will then go further into the new climate strategy that's been published today. I think that's a very important topic. Then we talk about HOMAG opportunities there, because everybody is interested what's going on. We would like to give you some more insights here. And also opportunities on the Drr side in the next assembly area in battery production. Jochen will give you an overview because I think that's really good news for our future. Then we'll give you an update on our digital activities and summarizing then by also Q&As, whatever we have to discuss. And the timing, Andreas, is that we should be finished by 6:00. Is that correct?

Yes.

Yes. Andreas has a very tough management here in terms of timing and charts. So we will start. And I hand over, not to lose time, direct to Dietmar.

Yes, Ralf. Thank you very much. As you already indicated, it's up to me, the youngster on the management Board, to look back to the past and then guide to the present and the future and would actually start, and Andreas, please go ahead directly with the next chart. Welcome also the people here in the room, Ms. Werner, but also the other gentlemen and welcome also the people that are online or in the line for today's call. We have been looking back actually, and we look back now to the last 16 years. I think it's a coincidence, not only by accident, then being in line with Ralf being here at the head of the Drr Group, actually being the CEO for a long period of time. And we can see that actually during that time, on one side, Drr started with a very challenging period in 2005 with the intensive restructuring that was necessary. But then the next following years, continuously developed and entered into new markets. Like we can see that we actually went into the Chinese market, laying the ground for a very successful and broad business that we are having today in China, then also repositioning us with the headquarter, the new campus in Bietigheim, where actually the divisions came closer together, the divisions at that time. And then moving forward with development on the technology side, then and Jochen will give more insight how innovation actually is aligned with our activities in regard to sustainability and what we are contributing to the success of our customers. But also, and we had a brief discussion, [ Stefan ] as well during the beginning here, talking about -- or not forgetting the HOMAG acquisition that was done in 2014, which is today a strong pillar actually of our business activities and that will continue then also for the future. And then we see how the digitalization gained more momentum, that the activities surrounding ADAMOS have been established, the digital factories and the Drr with the acquisition of MEGTEC/Universal entered again into the expansion of an existing business field by adding actually new technologies. And you're all aware that we continue this way last year with further acquisitions on the solid wood side on one side, or let's say, HOMAG overall, then to add then capabilities there, but also with the acquisitions that we did this year in regard to production automation and MEGTEC where we did acquisitions, namely Teamtechnik and Hekuma . And on the next chart, actually, you can see how this now broadened our customer base, how this actually helped to accelerate sales development, but also that these initiatives and measures that have been implemented are building our base to be able to accelerate the company, the group even further with the recovery from the COVID-19 situation. On the next chart, you can see what I basically already stressed that with the M&A activities, this is strongly supporting our activities. This enables us to enter new customer segment. But you can also see that basically with M&A activities, we are targeting then to realize benefits in 4 different areas. First of all, it's in regard to the market access, to unlock new growth opportunities in markets with strong fundamental drivers. And we are looking very especially when we talk about fundamental drivers about growth, and we're looking also about profit addition. So high profitability. Second topic for us when we do M&A is looking into synergies, how can we combine our existing activities, possibly also customer access that we are having, like we can see with Teamtechnik on the electromobility side. Then to accelerate sales to improve the supply chain, to bring over know-how, but also to leverage the competency that we are having in our digital factory, then to accelerate again the development in the acquired companies. The third lever that is mentioned here is the know-how transfer. Drr has a lot of experience in carrying out big projects, a lot of excellence in this execution, but also excellence in the way how we are operating our facility, our plants, but also our research and development centers. And this is actually also something that we are targeting to carry over to the acquired companies, to help them to accelerate the development and to actually use the tools, the methods, all the competency that is available within the crew, covering also other areas like cost management, purchasing, engineering or as already stressed, then in conjunction with the synergies, the Digital Factory. And last, but not least, we have a state-of-the-art process landscape that we continue to further develop but that is also important now for the process harmonization with the acquired companies.

Dietmar, may I say something? It's okay, no? This chart here, I would like to emphasize the last sentence, because very often you read about Drr as a diversified company. I was today, again, asked why did you buy HOMAG, a totally different businesses. Not at all. We are totally focused on machinery and equipment. And the principles how to manage the principle of the points on this chart are exactly the same, how I'm engineering balancing machines or in HOMAG machine or equipment from -- from CTS or an equipment from PFS. I think that's very important to understand. So our core competence is machinery and equipment in different customer and market segments. So we are focused, but with a broad customer base.

That was an important addition. It's not about being a conglomerate [ in testing. ] It has nothing that is holding the things together, that's indeed framework that is helping us then or is enabling us to realize the benefits. So when we talk about benefits, we can look to the next chart actually then. And we see on the left side on one, first of all, the drivers to realize growth, not only in top but also on the bottom line as already mentioned, and you will see them later on examples, how sustainability is contributing as a business driver to our development. I will go into the details of the HOMAG side, how we are further developing then the profitability, how we are growing the company. Jochen will talk about the automotive e-mobility activities and the said digital factories. This is also one of the underlying solid basis points that actually then shall lead to what we are outlining here that we are confident that we are a company that can grow in average 2% to 3% organically per year. Maybe looking forward, that needs to be proven. Further acceleration is possible. We target an EBIT margin of more than 8% already for 2023. Our latest 2024, based on the characteristic of our business, we can achieve and return on capital employed of more than 25%. And underlying with our production machinery and plant engineering business, a very strong part of the business is always the service business, and we are targeting to maintain this service share of 30%. We're already a little bit above that level this year. But basically from a long-term perspective, this is the target and still we have further growth opportunities. And that's, yes, for the introduction, looking back to the past and looking forward to the future. And with this, Jochen, I would like to hand over to you.

Yes. Thank you, Dietmar, and welcome also from my side I.n order to facilitate the topic sustainability good, we're going to start with a film. Oh. Hope you still heard me. [Presentation]

So I hope the film was a little bit of a teaser for what comes next. We've launched our climate strategy today, as you've seen in the press release, as we are fully committed to contributing to the 1.5% (sic) ( 1.5 degrees) target. You can see on the left side of the chart, following the calculations based on the 1.5 degrees protocol, we have basically 400 gigatons of CO2 left to spend in the next 10 years until hopefully the world will be CO2 neutral. We've seen a lot of activities. I'm not going into all the details on the right side, pushing the activities around the 1.5% (sic) [ 1.5 degrees ] target. And if we move to the next slide, our company has been committed from the very beginning, actually on energy efficiency. Drr has founded an environmental department already in the 1960s based on our conviction that what we do should impact the environment as little as possible. So all everybody talks about now is something we've been committed to for decades. Actually, when we manifested our activities in an own sustainability department about 2 years ago discussing with our customers, some of the people said, "Look, not sure whether it will work this time because Drr has been pushing on environmental activities for many, many years, but customers have been very reluctant." We, meanwhile, are convinced that what is now happening and fortunately happens is sustainable, if you will, in a way of us needing to contribute to make this world where hopefully, even our kids in decades from now will have a good life. So 5 key objectives. We're committed to the Paris Climate Agreement. We apply the greenhouse gas protocol as a standardized approach. And we will -- basically the foundation for the 1.5% (sic) [ 1.5 degrees ] target will be proven by the activities with the SBTi initiative. And that's very, very important activities that we are setting up or have set up are more investments instead of compensation. Yes, there might be compensation at the end of the day to some amount. But our strategy is really in order to invest, in order to avoid rather than compensate. If we go to the next slide, it's quite interesting how the contribution of the scopes are within our company, because if you look at Scope 1 and 2, of the total emissions that are considered from Scope 1 to 3, only 3% -- 0.3% actually are related to our own direct CO2 emissions of operations and only 0.4% from our energy purchase. So what we directly do ourselves really only contributes very, very little. So even if we say we reduced at 70%, which is following the SBTi initiative, that's important, but the big lever in our business is in the Scope 3. So you can see there's about 11% from upstream activities, which is purchased goods. Have to work on that. And the mass -- the vast majority of where we are involved is actually CO2 emissions from downstream activities, which means that this is the use of our products. And the beauty is, if I may say so, especially the paint shop business we're involved with, painting a car today consumes about half of the CO2 or emits half of the CO2 in the car production overall. So we have a big lever, a big tool in our hand that we are going to use. The target, again, derived from the 1.5% (sic) [ 1.5 degrees ] target, is to reduce our Scope 3 emissions by 15% until the year 2050. I must say, of course, that needs involvement of our customers because we will convince or try to convince customers with new technologies to follow that route. But in the end, they have to invest in order to reduce, and we will be good partners to them in that respect. So if you go to the next slide, what does that mean a bit more specific? There is a number of levers in our hands. And again, let me stress the first one, the products. And as I said, we're working on energy efficient products for many years, and they're part of our daily lives. We introduced, for example, the eco dry scrubber, which is dry way of scrubbing VOCs from the production in a paint shop rather than before in a wet process, that already reduced 90% of the energy in a paint shop. But we are striving, of course, to do more in that respect, and we will talk about more in that respect today. And in a couple of directions. Stress more efficient products. I'll show a few products in the following. Then reduce resources and switch to green sources from the switch from fossil fuel to green energies. We will set our green portfolio. Again, we'll have an example in our portfolio today. So there's a couple of elements that we will drive, logistics based, on the CO2 footprint. We're working on the procurement side to train our suppliers and even through Dietmar's activities, we've put on the road financial incentives for green suppliers to help them to facilitate their business. Talked about energy, which means switch to green energy, but also further to improvements in the energy efficiency, create awareness and also to have a green fleet, which means an electric fleet in Germany by 2030. So to stress a bit more on the examples. On the next page, you see 2 examples on the right side. For example, our products. We've launched as the first company, 100% application, which means we have an applicator in the market. Meanwhile, where we completely avoid overspray in the paint shop. We're the only company that can do that. We're in series production, for example, at Audi now for the black roof. So if you order an Audi A4 or A5 and you have a black roof, the cars are not masked anymore for 2-tone painting. We directly apply with our EcoPaintJet Pro 100% application of the paint. Our paint shop of the future, again, reduces the air flow by more than 30%. So we're constantly striving to make our products more efficient. And finally, the good thing is we see the response in the market. Drr has been pushing this, as I mentioned before, for decades, but now the market is becoming receptive, which is good news. On the right side, just as an example, we are in the industrial air purification. The equipment that we have installed today every year takes about the equivalent of 100 million tonnes CO2 from the exhaust, which is about half of Germany's industrial production created CO2. So a significant amount that is purified from our environmental technology already today. So if you go on the next page, we've been reporting to the capital market that about 40% of the automotive order income is related to e-mobility. And we have an increasing amount of applications that directly goes into the production of batteries or is involved in the production of electric drivetrains, for example, through the acquisition of Teamtechnik. We are involved in the timber construction through our acquisitions of Kallesoe and System TM and our existing business in HOMAG also products that we offer to the market that drive green business. On the next slide. So this basically lays out our sustainability portfolio and strategy. As you can see, the 5 elements we're looking for. And our climate strategy that we've published today, obviously, focuses on the 2 elements on the left side. So this is an introduction on our sustainability strategy. And we're happy to push this business because it's been in our DNA for a long time.

Thank you, Jochen. Let's move on with sustainable business and let's talk about HOMAG. And I see some points to discuss here, some trends in the market that you understand how this goes forward. And our positioning is and we have announced some CapEx spending. I would like to explain for what we want to use that money. Talk about service, which is also a very important business part of HOMAG. And then let's move to the next chart, please. So here, I'm very often asked for this, we have the -- we are lucky as a whole company, as every demand for our products is driven by a basic wish of human mankind: mobility and houses and furniture. Very busy. And that's -- when you look at this chart here, you see we that we have in countries outside of Germany and U.S., a huge catch-up for furniture spending. So that's basically, Poland is EUR 89 per year for furniture. So it's not too much. You are smiling now. You can't see that on the phone. But -- EUR 9 in India. So when you imagine that these countries are also becoming more and more wealthy or Southeast Asia, the furniture business will continue to grow, like we also see that the car business will continue to grow. Just -- and for the next year, that the actual estimate is 4% growth, in average, for the next years. And that's also how the furniture industry sees the way forward. Next chart. I think that's -- the second driver of the business is that there's an interesting thing going on. It's a consolidation starting in that business that larger producers become larger and smaller producers become less relevant. And we have, in particular, this trend is going everywhere in the world. But there's example, China, where you have a lot of furniture manufacturers, very small ones. We call them here [Foreign Language ] or carpenter shops. And even in Germany, those carpenters are bundling the resources to have 1 factory and maybe 6, 7, 8 of them are building an alliance to -- not to produce any more, but have only 1 point of production. So the production technology, the demand is increasing for more automated stuff. And in China, it's very interesting. There are top 50 customers in China who make a big chunk of that business. And we -- since we have acquired our sales arm, Golden Field in China, are totally covering them. Our market share in this top 50 segment is more than 60%. It's very strong. And this is a big, big advantage we have. There are another 2,000 also medium size, which we are looking after. And there are many more small ones. And we can see that the bigger become bigger, the smaller, less -- they decrease in turnover. So that's also the second trend, which drives investments. Next chart please. That's how we -- the industry is seen to develop for the next years. You can see that in '21, we had a very high volume again of EUR 4.1 billion. So it's increasing to EUR 4.3 billion. These charts are nice, but whether it's now EUR 4.3 billion or EUR 4.4 billion, it's not so important. In fact, for us, is we are here in a market which grows. And second, in particular in '21, in HOMAG, we could gain market share. You see -- you have seen our numbers in order intake growth. Our -- also listed competitor has less than us and is half the size. So we are gaining market share in '21, which is our objective to move on. And also our service business has a very strong increase in '21, which will continue. Why? Because every day, we are installing many, many machines out there in the field, which need service. As a next consequence -- and the machines are out there getting older to need even more service. I think that's very 3 important drivers for the HOMAG business. The next chart, you can see this from the marketing in summary. I said it already. Important is also very often we hear this batch size one, but also volume production is continuing to be a big business. Not every furniture will be done in batch size one. Actually, there will be some hybrid forms that you -- [ customer ] more and more try to have a mass production, but still highly batch size one oriented by a very clever way of modular design of the furniture. For HOMAG, we can address this all, I think, perfectly. And therefore, we see that we have really very excellent position for this trends, automation and digitization. There's nobody in the business out there who has such a rich portfolio of software solutions for our customers than HOMAG. In order to support that, we have decided on investments. Kallesoe. Jochen also already mentioned System TM. We bought these companies in a perfect time frame because they had a history of 2, 3 years, which were not so active. And after we bought them, they were exploding in terms of order intake. And system -- Kallesoe and System TM, they both have an order intake this year which is more than double what they normally have. And the same is for WEINMANN, the other one where we need to increase our production. Herzebrock we need to have an additional workshop because we get from a Nordic furniture producer, big orders the next 2, 3 years to increase these capacities. When the orders come to us, it's already [ breed. ] And we need for that additional workshops to build the systems. We have a very important plant in Poland, Sroda, which is producing a lot of components for the HOMAG group, for other factories and also producing machines. This plant, we will double when it's finished. We are just starting the new production -- the new construction. Schopfloch, very important, a lot of many years, not much invested; the offices are very old. We have not a proper customer center, which we need. And the logistics is very bad, even it's the biggest plant, and we need a new logistics center to support better. And out of that concentration, we can also streamline our production again. So I think efficiency is the main driver. And in Shanghai, that's maybe further in 2, 3 years from now, we need a new campus for HOMAG because also Shanghai is becoming too small. Good. The next chart, next chart. So service, I think that's where we're today, I think 26%, Andreas [ went about. ] This must be somewhere in the charts, more than 25% of the sales, highly profitable in HOMAG, and extremely important for customer satisfaction and also for customer relationship. You have here some numbers how many people, we have 1,200 people in service. We hired this year another 100. If I would -- could, I would hire another 200 because there's more business out there that we can cover today, to be very clear. And therefore, we -- in particular, outside of Germany, we will increase the service force because there's potential out there. Our call centers, which are a big differentiator to the competition because we can help customers in 80% of the cases by telephone already to keep them going. And also with new digital tools we have implemented more and more also guided to make some repairs themselves to send the spare part with [ an ] video, how to install it, how to mount it, that works very well. We had a sales record in May, all-time high, but the numbers are every month very strong here. Next chart here. And I think that's a move we are now with all the digital tools we are developing in. So far, in the past, service was reactive. So we were waiting, customer was calling, and they were calling enough, so we were busy all the time, but we want to become more reactive, proactive, that we call the customer say, "Hey, by the way, your tool or this belt is going to break soon. We should arrange a service appointment to change that, or we send you a spare part." And that's basically only possible because we have developed a lot of service tools in the IoT area. Better planning of service activities, we have increased a lot our education program for our customers. So self-service is a little bit here the theme. And this is really driving that business. And the next chart shows it in a different aspect. But basically, as I said, service is a big potential, and we can only get more out of that. That's not a big problem to do. Summary. I think what's important to take away from here now -- this -- one, that the furniture market will continue to grow by just the sheer demand of people every day become more and more wealthy to buy furniture in China. We see the trend: Demand high-quality furniture. That's why the bigger producers are more and more growing. We see the consolidation, which will try for larger factories, more optimization, higher-quality products or machines. Our market share is growing already. Service business will continue to grow. The investments I just explained, there are a lot, to be honest, but I think they will well pay off to bring HOMAG to the potential, still can be exploited, because there's still a lot of potential in HOMAG. And we are not only the #1 industry, we are also demonstrating that every day, and our customers see that as a particular combination with our software and service products, they position us there. So that's summary. Inside HOMAG, we have the solid wood activities, which I think that's an opportunity, which is very difficult to forecast. Because when we have been asked very often how much has the market grown, we give you some ideas how we see it today, but I think fantasy can be a lot around that. I think we go to the next chart. First of all, concrete is in the discussion. When we talk about sustainability, then concrete is not the best material. It's one of the biggest -- the cement industry has a big problem with CO2. Wood, underneath, you can see the CLT boards are replacing more and more concrete walls. The next picture in the middle, that's a typical construction place in America for a private home because they come with lumbers on the ground and start to build the house, and this will be replaced more and more by premanufactured highly industrialized processes also in America now, and that's the business we are in. And the third one is it's not only for private homes. It's also now for hotels or even skyscrapers. I talk about skyscrapers, 80-meter high. Is that a skyscraper? I don't know, Andreas, but higher -- tall building, let's call it, yes. It's getting more and more into the wood. We have -- in Bietigheim even, in Bietigheim, we have a hotel out of wood, but you don't see it from the outside because it hasn't -- the outside walls are looking like a normal house, but it's out of wood and has been fabricated in a factory, room by room. Next page. This is, so far, how we see -- now that statistics, that's not from us. That's from the Holzbau Deutschland. You can see the share of wooden houses in the private sector in Germany, how it will increase to the forecast they have. You see the high penetration in Baden-Wrttemberg, where we come from. Maybe that's because we have a lot of wood. I don't know. Or maybe people are very conscious to live in wooden houses, I don't know. And in Bremen, I don't know why they put Bremen here, but 5.6% Bremen. They have a brick house. They like more the bricks one, but we will change that. On the industrial side, for office space and so on, you see the right statistics, also Baden-Wrttemberg leading, but the average numbers are growing. And when we recently now talked to architects regarding the new buildings in Schopfloch, they are telling us that is really a trend now where everybody jumps on and it's a big business for the architects now really to orientate themselves to what -- wooden house construction. Okay. Next one is that's a picture where you can see a little bit this industrialized house producing. We see in that business, interestingly, new players. Like in the EV field, Jochen will later talk about new startups started to build electric vehicles, we have the same here. So investors who said, that's a great idea, let's do that. And we just got the first one where we got a big order for HOMAG, together with Drr, because we have the competence for project management for those kind of industrial projects where we build for somebody such a factory and give -- deliver the machines for the production. And we are talking 2 more of these potential investors. They have concrete plans to do that. One, you can check if you have time. [ Copious this, why not I ] -- Andreas, don't -- it's not secret. They are making advertising. I think they've even the Drr logo on their web page as a partner. And this is a very interesting concept. Have a look at it. I think the new [ H group ], you will like that, how future living will be everything on the iPad. You can book everything, including your pizza in the evening when you come home, but you live in a wooden house that you have to [indiscernible]. So I think that's a great opportunity. Next one. The construction market, we try to forecast, maybe that's wrong, maybe that's too conservative, maybe that's too positive. We don't know. But we see a huge jump from 2020 to '21. And we think that we have a high level for the years going forward. And as Jochen mentioned, that's really supporting sustainability discussion we have is this kind of [ housing. ] Okay. What does it look for us? You see here in some history for 2017 to '21, that's all our solid wood activities or orders we got. The blue one is STILES. STILES in U.S. is our sales company for HOMAG in the U.S. And they are sales companies, so these blue ones where when they had cooperations with machinery suppliers from solid wood area. Yellow is our System TM and Kallesoe is dark blue. And you can see the yellow one, how big that becomes from 2020 to '21, even it's 1 quarter only, but in average, it was the same [ quarter ] in other quarters before, huge increase. I think we are jumping here from EUR 80 million to EUR 220 million in order intake, these 3 companies, WEINMANN, Kallesoe and System TM, this year. So next one is just underlining that today, we are the only one in the market who can provide a full plan for industrial wooden house building. There's nobody else out there. We have with System TM acquisition and Kallesoe and WEINMANN, a high percentage of the value of, let's say, of the machinery and equipment you need, together with Drr automation, we can even have a higher degree. And I think that's an offer and proposal for the market we have today, which is very unique and finds a lot of interest out there. So opportunity forward? Yes. How big? We don't know, but I think it will be bigger every year. So that's for sure. So that's about solid wood. Back to you, Jochen.

Thanks, Ralf. 2 areas I wanted to talk about as growth opportunities for Drr. First is what we call next assembly. You know Drr probably much more from us being the world market leader in paint shops, then you know Drr being a very relevant player in final assembly. Car production is in 3 pillars: Body in white, where you press the body and weld the body; second is the paint shop; third is final assembly. And we want to be relevant players in 2 of the 3 and actually pretty much are that today. We have, about 2 years ago, bundled all our activities around the final assembly under the title NEXT.assembly. In fact, we've even moved to 2 companies, you'll see on the next page, which are Drr Assembly Products, the second last and the last on the right side here, Somac. We allocated that from MPS, Measuring and Process Systems division, into PFS, paint and final assembly systems, to really build now a one-stop shop around final assembly. And what you can see on this picture on the left that today, we cover all relevant process steps in the final assembly of the vehicle. That's very important. Customers not always order a turnkey final assembly, but they definitely want a partner who can supply based on the overall knowledge of the process, individual steps. You see here the relevant parts of the final assembly like marriage; like the conveying, which is a connection between different assembly steps; the testing, et cetera. So we are -- if you add together all the locations and the companies that we have, we are relevant, if not the relevant player in final assembly, and we're more and more playing that strength today. We go on the next slide. You see this is today roughly a EUR 300 million business. This business grows stronger as a market than the paint business with all the changes in the production that's now happening, with the electrification of the final assembly cars becoming much heavier. So a lot of brownfield but also greenfield activities will happen in the next years, and we want to play a significant role here. You see the business today is still a bit Europe-centric. But more and more, we also get significant orders in South America, in the U.S., in China and other markets as we become more global with this business. You can see on the next slide, some of those production steps. Marriage is, of course, the very important step where you bring body and chassis together of a vehicle process that, by the way, that's changing now big time in e-mobility, where the battery pack becomes an integral part of the chassis. So the whole process is changing and offers us a lot of opportunities to grow the business, which also is a little bit connected to the process that you see on the left bottom, automatic bolt loading systems. Why? If you now mount the batteries in the chassis, you sometimes have more than 100 bolts that you have to screw in, in order to make the battery pack, again, a structural component in the chassis. Conveying, very important. And then as the old process of final assembly, which was a fixed connected process of sometimes chain conveyors, is now more and more going into modules. The production process is connected with AGVs. So for example, we've been very much involved with the production of the new S Class in Sindelfingen, also the new electric vehicle [ ECARUS ] produced. So lots of opportunities here in this business if you do it right, then we more and more do it right. The next page, you see here just a couple of examples also for commercial vehicles. So we're involved in the whole value-adding chain of final assembly, including the testing for e-mobility. We -- but not only e-mobility is a buzzword, also autonomous driving. We are the only company today that can supply test systems to test whether the controls that are needed for an autonomous vehicle are working. So just to give you an idea, we simulate road on a screen and then check whether the vehicle follows that virtual road or not. So a lot of activities going forward where we are playing a significant role. On the next slide, you can see the relevant market. We believe it's actually quite conservative. But the message, the important message here is this market is growing by almost a double-digit amount, which again is, for us, a good platform to significantly grow that business. See a couple of drivers on the right side. Again, just wanted to stress the ones on the bottom, especially the integration of electro- vehicles and much more complex model derivatives gives us a lot of potential for new business. Some customers build complete EV plants, which, of course, is nice because it's greenfield. We participate in that business traditionally not only in China. We will be, for example, building the plant for a producer of vehicles more, let's call it Bavaria, was producing a new facility in Hungary. There, we build the facility. And on the other hand, many of the existing car producers use their old combustion plants and convert them partially or integrate electric vehicles in the production there, which again gives us a lot of brownfield opportunity as well. On the next slide, you can see some of the milestones we have achieved in the last 2 years. We've almost doubled our sales opportunities, our sales pipeline as a result of a much better market coverage. We reduced costs by own designs, but also on the purchasing side, significantly, which again gives us a much better competitive position. To sum up, on the next slide, we have a couple of points going forward. We will continue to cost reduce our offerings in final assembly as this market is very competitive. We see a lot of service business potential in the next years. We will use the existing service tenants that we traditionally have all around the world for the paint business more and more for our final assembly business, and we integrate that business much more again on a global basis in our sales network. And last, but not least, the successful applications that we've meanwhile implemented in the paint business, we will use those also for final assemblies. So far on final assembly. The second opportunity at Drr is battery production. Drr, being a partner along the value chain for battery production, we have analyzed the complete value-adding chain of cell production, but also the module assembly, and have decided that's very important that we are not, by definition, a turnkey supplier here because this market already is covered by a couple of people who come from the former combustion side, now trying to find new markets and act a bit more cutthroat. We focus on the technologies and the individual production steps where we can differentiate. And I'll talk a bit more about that on the following slides. So first one is, here, we use the word turnkey electrode manufacturing, but it's just 1 process step in the cell production, but we're extremely well positioned here. Through the acquisition of Drr MEGTEC 3 years ago, we acquired the unique technology for the coating of electrodes, which are then used in battery cells. And we have also further -- and I'll explain that in a second -- gone into a technology cooperation with Techno Smart, Japanese producers, in order to cover the large-scale production. So what we're doing is we are closely cooperating for the battery production in 3 divisions: PFS, as we are very much involved in battery testing; also through the acquisition of Teamtechnik; APT, where we are very successful traditionally in the application of solids; and we use the same technology that we use for gluing and ceiling now also for the gluing of batteries and the thermal integration of batteries. And again, in CTS, we have the know-how, not only for the electronic coating, but also the following process steps of drying and solvent recovery. You can see on the next slide, the reason why, on top of our own technology, we're also cooperating with Techno Smart. Our own technology is superior, if I may say so, because we are the only company that is able today to coat an electrode in basically 1 production step from the -- not only from the top, but also from the bottom, which technically is quite complicated. The big advantage of that is you only need 1 drying process, which is then a flotation dryer to produce an electrode in basically 1 process step. If you coat 1 side after another, of course, then after 1 coating, you have to go through the dryer, which you can see on the picture below, for the first time, then you wind up and then you coat the other side and dry again. So it's a much less efficient process. However, some customers today still insist on this, if you call, will-proven technology from the past. This is why we are cooperating with Techno Smart. We have a large -- you can go on the next slide. We have a large portfolio of products from small-scale laboratory coating lines into the full-scale lithium iron battery coating lines for big production or energy storage. If we look on the next slide, you can see, and I'm sure you know that how the projections are for the production of BEV vehicles until the year 2030. In fact, interesting is that the numbers for BEV vehicles, the projections actually go up more and more for the year 2030. Normally, when you see new developments in the market, the progression gets delayed. Here, with the trend that we see now, actually the projection is that the share of electric vehicles in 2030 will be higher than we even believed 2 or 5 years ago. So we're sitting on the right trend here. There is a big market potential for us. The easy math is for 1 gigawatt of capacity, there needs to be an investment of about EUR 1 billion, of which about 15% to 20% is the addressable equipment market. And again, as the simple math, 10% of that is what is spent for coating, drying and solvent recovery. This is why when we did our last analyst calls, we said that typically for a 10 gigawatt factory, a large-scale factory, we could -- if we get all 3 elements, coating, drying, solvent recovery, it's about EUR 100-plus million of business potential for us. As the proof that we're working in the right direction, on the next slide, you see that we've said that in the last call as well, we got our first order from Cellforce, which is the Porsche joint venture for the production of high-performance batteries. And here, we have won the order for our own technology, which is the dual-sided coating process, and we are actually in the bidding process for a couple more projects. It's a quite interesting market, which, today, is dominated by Asian players. However, why are we so confident? Because we see that a lot of the upcoming cell producers in Europe now believe that for a variety of reasons, it might be advantageous to also work with the European supplier base. So that would be it and quickly in order to stay within time.

A lot of -- a lot of opportunities in a short time. Andreas, are we, timing-wise, okay? Good. Talk about digitalization. Next chart, please. Just a summary -- we'll try next one. Next one. The strategy, no, no change. The only thing you have to -- not just -- only point I would like to make, Andreas, here is that our goal that we are a leader in digitization in each of our business is unchanged, and I think we are well on track. We have HOMAG already mentioned on the Drr side, Jochen gave some hints already, I'll show you an example. But also on the Schenck side. We are leading, and I will show you that in a minute -- next one. When you talk about Industry 4.0, which is also digitalization, don't forget because that's then the backbone of Industry 4.0 factory is in so-called MES, or manufacturing execution system. That's software which connects all your equipment to collect the data for scheduling the jobs, material and so on. And I think that's important to understand that with Drr and our acquisition of iTAC, which is how many years ago? I forgot. 8 years, 6 years? 6 years ago. Thank you, Mr. Jochen. 6 years ago, we had -- our objective was to capture that fee because that makes you basically inside the customer, with your software backbone in the factory. And here, you can see today, we have now more than 650 installations out there, 650 plants running with our software. Automotive side, nearly 300, that's huge. And this is a business in total here, by the way, they're more than EUR 50 million. There are not many software companies larger than EUR 50 million. And so that's a very important installed base, not only for further upgrades and more business, but to underline our competence, to connect equipment in a factory, to make it run even more productive. So next page. On the same, you have in HOMAG. HOMAG also started early with their MES system to connect all the different machines, not only from HOMAG, but also from the competition. And this is also a EUR 10 million business today, but we only do MES. In fact, you see a lot of names, very small one. The largest kitchen manufacturer in Germany is called nobilia which is on top there. His whole production, order intake process runs on our software since many, many years. And that's very important to understand that we are very strong in that field as well, which gives us access to the top floor and the first digital product we can sell here. Okay. Next one. This is an example now for a new product, newer -- one of the latest products out of our digital factory of HOMAG, where we have the following. I don't need to go in details. The idea is the following. To set the parameters of, in that case, it's a panel dividing machine. It's a little bit complex. You have to know what you do. Or if you don't know so well because it's very difficult to get skilled labor more and more, we tell the machine what is bought here into the machine has to cut and what tool we are using. And this we tell digital by the data we have in tapio, you know our platform in the woodwork industry, where we have the data for the tool as a material. The customer just choose what he wants to use. And then the machine settings are automatically done by that software. It's a fantastic comfortable thing. And this is just one example, and we will produce more of this software because it's for all the machines in HOMAG, very relevant. And Drr also started many years ago to do the same for the paint shop. They're also very complex to set the parameters to make it for the customer easier to come to high-quality production. Next page. HOMAG, the platform of tapio, there's a lot of discussion out there when platform will start to scale. We can see that we started tapio in '17. And when we look at that, we have today connected 3,500 machines. The growth rate is more than 20%. And this is continuing very nicely. It's not much revenue today. It's about EUR 2 million, but it's increasing with a high growth rate in the future because we connect every day more and more machines. We started just a launch of -- every machine is now connected, which we deliver to our customers like an iPhone when you buy or a telephone, the telephone is a wrong word. What is it called? Smartphone. Every smartphone, you have to connect to the cloud. Otherwise, you cannot even say that it's yours. And that's what we do with our machines now. And if we try that business, gives us opportunity to bring all the software to the customers by the digital sales channels and to sell you more. So that's this opportunity, that we are not only doing, but also that it's more and more, let's say, rewarded. You see the left side, where we are very happy. This is already, I think, 2 years ago when we got from the Rheinisch-Westflische Technische Hochschule Aachen University, an award for using artificial intelligence, 2 years ago. The guy who did that is in the middle here, he got just recently the award for Industry 4.0, that's Mr. Alonso from us, who runs the digital factories, together with the group. And lately from China, that the Chinese authorities were giving us here this award because the largest paint shop we have so far built in Shanghai for Shanghai Volkswagen has all our digital products installed and the Chinese government, you can read yourself, gave us an excellent supplier of intelligent equipment management [ solutions ]. So even the Chinese thinks that we are doing -- and the Chinese are very advanced in that. So it's, for us, a very good proof point that we are on the right track. Jochen already mentioned. Next page, our DXQ family you have heard very often. This is only an example. We were the first one who had a product on the digital production platform from Volkswagen, it started here with our fitting application, but we have more now, just for your information. Next one. The plant analytics is a very strong tool to analyze the production process, but also to be able, what Jochen mentioned in the beginning, to tell the customer when maintenance is necessary on a predictive, not on -- what is the opposite of predictive? That's not directive maintenance, but just a normal word for maintenance.

Plant maintenance.

No, no, I come back to this later. It's basically normal schedule to say, okay, every month, you have to clean the field up. This is a normal way. But here, the field that tell us when it needs to be cleaned and maybe it's in 6 weeks or in 2 weeks, depends. Basically, all what it does, it prevents or reduces downtime. And it's much more efficient. And BMW, for example, has totally changed into that model and now the service technicians are only doing software tests. This is a big change for an OEM to work like that and not before scheduled maintenance. That's the word I was missing. Thank you.

You finally have that.

Yes, I must have done.

BMW buys based on frame contracts. So we've now achieved a level of business with the software products where a customer buys based on a frame contract. So it's not one by one, trying to convince a plant to buy the products. We really have, with the purchasing department of BMW now, a price list and a frame agreement, and the plants order on a regular basis. So this business has become a normal part of our business meanwhile.

So not only Schenck -- HOMAG, but also -- sorry, we do on HOMAG, but Schenck also. Next chart, please. We are here developing and the first version comes out in September, October, November. It's out already, it's already -- yes, November. It came out in October with the customer event, the first version of a software for the balancing itself. So when you look at the balancing machine, you have the controller to run the mechanics of the machine. But the core of this machine is quite complex. You can call it metrology software to calculate the imbalance and do -- makes adjustment for the balancing. This normally is installed on the machine. It's a very traditional industry, this balancing industry, no one in this market so far has yet come up with the software, which you can take from the cloud. It's a SaaS software. So the customer doesn't get it installed anymore in the machine. He can, but he can also say I have a basic version of machine. And he can download functions, like on the right side, asset manager or rotor manager, I can explain in detail, but now it's too long, where you can address function. He need to maybe for one balancing task for one week or for one day, and then he can say, okay, I don't need any more. So software on-demand is the first version in that industry, which we have introduced, which we will further roll out and further develop all the functions needed because we just started with a, let's say, kind of basic functionality here. A very interesting business model, new in that industry as well. To summarize it all, I just would like to say our goal to be leading in digitalization, I think we are really demonstrating that. The examples you saw from HOMAG, MES, but also Drr, tapio, these few, I think, is really a success story, and all the analytics. And now Schenck was -- the customer feedback was really enormous when we introduced this SaaS software recently in a digital event. And I think we are very well positioned here further to capture this digital opportunity going forward. So that's now to the summary, which I would like to draw that we have enough time for Q&A, Andreas? This first sentence, I would like to change, I would call it Drr Group is a provider of machines, equipment, automation and digital solutions for diversified industries. We are not diversified, our industries are. HOMAG, I think, has a very good potential going forward to grow and to become even more profitable. You know the numbers we have so far published. But I think that's the potential going forward. Solid Wood, big opportunity. I think what Jochen did with the realigning of the assembly activities under one umbrella shows a lot of positive momentum and a good opportunity going forward, also cross opportunity. Battery cell, I think that's opportunity we don't know yet. It can be even bigger than we think. But at the moment, it's a big opportunity, not in our budget, by the way, not in our guidance, just for viewers, but we tell you more things but there's not too much in the guidance, so that you have more fantasy for your calculations. And digitalization also makes progress also with opportunities forward. So that's the summary. One sentence from my side at the end because Mr. Schachel who always ask questions, asked me, why do you stop now already. And I told him that I think, everybody to understand, I'm doing this stuff now since 16 years. I decided early enough, actually 5 years ago to take in successor on Board, Jochen came 5 years ago. He has demonstrated more than enough that he is capable and the right man to bring this company for the next growth decade. And therefore, I think with the 125th anniversary, was a good timing to change. And I think change obviously is something positive. And I think the situation we are in is a good one. And I'm very convinced that Jochen will do a great job with the team to make you more fun with to our shares, and for me also because I still have a lot of shares. Okay. Andreas, now with that words, I think -- let's...

Since you're leaving soon, we thought we add a couple of pictures here from the last 16 years, and maybe you want to comment a little bit on what you can see there and...

This is embarrassing. This was 2003. Look at Jochen, he looks like his son today looks.

And I'm worn out now.

I showed this photo to my wife, which I have recently married and she said, if I would have known you then, I would have not married you. I don't know why but...

My wife said the same thing. Lack of experience.

But it also shows Jochen and I know each other now since nearly, what is it?

18 years.

Nearly 20 years now, 18 years. This was campus. That's [indiscernible]. This was -- here is the sustainability, the umwelt minister, the Minister of Environmental Protection was on the campus because our campus building was, in that days, a showcase for how to build an energy-efficient building. Do you have more stuff from the past?

Yes.

This is awesome. This was in Shanghai. I've never seen so many people in one room. We had a Chinese New Year party. It was 2,000 people in one room. Can you imagine? And we had here the top performers got gold -- piece of gold. And they asked me to put this dress on because that's the Chinese god of wealth, which means gold. And when I came out of the curtain with this dress, they were laughing their heads off. And this was, I don't know, when 2015, '16, something like that, I don't know.

'13.

Thank you. '13. Yes, this final picture, yes, with Mr. Drr, when he was still the Chairman of the Supervisory Board, it's also some years ago. And I think -- do you have more of this stuff?

More to come.

ADAMOS, okay. That's not too far away. That's '17. And that's recent. Okay. Thank you very much for listening to this and to watch the presentation. Now we are very happy to take all your questions you may have.

Okay. Thank you very much for the presentation. And now we start with the Q&A session. And you can ask your question either here when you're in the room directly or via Zoom. And even if you are dialed in by phone, you can also ask your question. [Operator Instructions] And I think we start first with a round of questions here from the room. And so I'd like to ask here if the analysts who are with us today in person to give a hand sign if they want to ask a question. Okay. We start with Stefan Maichl from LBBW.

Yes, Stefan Maichl from LBBW. I want to dive into your climate strategy at first. Is there any CapEx related to this climate strategy in the next couple of years and probably also a kind of positive P&L impact from CO2 or fossil energy savings related to that? And the second one is on who will check your or calculate your CO2 development? Is it external company? Or do we do it by yourself? And the last one on this topic is assuming you sell machinery to an EV company, is it a zero CO2 emission credit? Or is it -- I don't know, is it also comparable to a fossil company?

Just one request from me. Let's make the sentence -- the questions one by one because I'm getting older and 3 of them one go is too much. But we do have Jochen as overseeing your bridge. Just be so kind, just ask one question after the other, that gives us a chance to answer each question.

So your last question, I probably didn't completely get when you said credit for selling to EV companies versus...

You sell machinery to -- for EV company, their fossil receive application. Will it be a difference in calculation, CO2 calculation?

We reported as sales order income for EV companies. But in terms of the credits, there is not really much of a difference what we are now, but that is not finished yet. We're preparing for EU taxonomy. And there, we are in pretty -- or should I say, detailed and sometimes emotional debates with the auditors in order how to classify our business in green and not green. And honestly, that discussion isn't over yet because the rules that have been put in place for the EU taxonomy is not very logic and not very advantageous for machine-building companies. In terms of the targets from our 1.5 initiative, we do that based on the SBTi, and we, of course, are monitored and we verify the targets and audit them until I think it's by the end of the first quarter of next year, we will have this basically verified by external party, again, committing to the SBTi initiative. CapEx, main CapEx now is for photovoltaic as a first step, where the main -- in the first step, the main German locations will be equipped with solar equipment. And we will also install for the usage of heat into electricity, our own technology, ORC, Organic Rankine Cycle products that we sell in the market, we will also use as a CapEx, if you will, for our own activities. That's the main CapEx we will do. Plus, of course, maybe that's to add the buildings that Ralf was talking about the new investments in HOMAG, for example, of course, some of the CapEx will also be related that we have energy-efficient buildings.

And Mr. Schachel?

I have 2 questions on HOMAG. The first one would be on market volatility and you've shown that the market is growing, but still was also quite volatile in the past. This consolidation trend that you've described, should it also lead to a lesser volatile order intake? Do you have any data to show that, for example, the largest customers were much less volatile in the last downturn than the carpenters? How do you think about this generally?

That's a very good question. I think the business is volatile. But I think it's a plus minus 20% volatility. We have the situation now today that by the backlog we have that we are so loaded that we have work till '23 in many plants. We expect next year also an order intake, which is less than this year, definitely, this level, we will not see. But it's a level which is minimum on the best years in the past and also for the year after, so far, we can look. But there will be a time where it will be a bit lower investment level. But it's not so much important what the market does because it's a EUR 4 billion market. For me, more important is that we have -- and we are working with that and also Daniel Schmitt who is the new COO next year to make HOMAG also much more flexible in terms of this volatility that we can breeze plus/minus 20% without adding or reducing fossils and have enough restructuring and so on. So to be more flexible as a company. And then we can also still, let's say, be in a profitable situation. So that's the task, but it will be volatile. But I think when you look at a 5-, 6-year term, it's growing. It could be that 1 year, a little bit less, but yes, next year a little bit more. Because those decisions about -- when you talk about China as the largest customer, 1 year, it gives EUR 60 million, the next year, EUR 20 million, then again EUR 60 million. So this is a little bit jumpy. But in so many customers we have in so many regions, it's a little bit equalizing.

And on this Solid Wood opportunity, you've shown the business has changed a lot with regards to legal entities doing the business. Can you tell us a bit about the geographic mix of Solid Wood looks like this year? And how you -- or where you see the biggest potential for market share gains? Is it still mainly Europe or elsewhere?

I think there is Europe, one. But in Europe, we talk about also Austria, Germany. We talk about America and we talk also about Australia, Canada. That's the markets where it's most activities. But I think that's just beginning. It will grow into all the other markets as well, also in other countries. But that's why we see at the moment the main focus of investment. The good news is it's only there, but the others will come. They'll come back.

We take the next question from Will from Morgan Stanley.

I had another question more on the sustainability side. You put the paint shop up at 67% more efficient. I guess how should we think about the payback period for a customer on this? And are you seeing maybe a pull forward or replacement cycles on the back of this?

That's actually also a very good question. The big, big discussions with the customers for many years on payback and what we now see is that customers with the pressure they get and obviously now CO2 getting a price, customers are more willing to go into longer payback periods for -- compared to their normal investments because they simply have to. We're discussing, for example, with one biggest German OEM on how to proceed. And the discussion now is not anymore, will they invest in sustainable products and will they invest a lot. The debate that we now have is to rank basically, the calculations they are doing is what is the biggest bang for the buck in terms of CO2 reduction per EUR 1 million CapEx. So they know they have to spend money, and they want to learn from us, how do they best spend the money in order to reduce their CO2 footprint. And that's the big progress that we meanwhile see. So the discussion that we had in the past, everything that's beyond the 3 years payback, we don't even consider. They know that this equation doesn't work. And it will work again more and more as CO2 becomes more expensive, but they're now willing really to extend their payback periods.

Yes, that makes sense. And I guess, on the tapio offering within HOMAG, you said you only have it rolled out in, I think, 3,500 machines so far, which would imply it's kind of roughly EUR 500 per machine. I think on one of the slides, it said you had 1 million HOMAG machines installed globally. So I guess, what are you doing to retrofit the installed base with this software or try and make sure it gets out there? Do you have kind of a tracking of the installed unit or where the installed base is installed and the customers?

The installed base is -- offers limitations because old machines doesn't make sense to connect because they're not connectable. You would need to invest as a customer in new controller, PC and everything and then the whole investment is not feasible. Then it's better to buy a new machine. So the installed base is, let's say, of the last 5 years, is addressable easily and older doesn't make sense. Because the HOMAG machine in average has a lifetime of 10 years and then the customer buys a new one. But this is already a lot. But even going forward, we sell every year and we install every year, 8,000 to 10,000 machines, that's enough work here to go forward and to capture that opportunity. But for the service people, we also go for the installed base, and that's an opportunity, too. Now you want from me how much turnover that is next year.

Okay. Next question comes from Katharina Werner from Deutsche Bank.

So my first one would be on HOMAG. And you said that you gained the market share in China, what do you do better than your competitors in China?

This I can tell you very clearly. We have strong competitors in China, which are competitors on the single machine business in a kind of medium segment. Let me explain it in following way. We can take, what car you like, what brand?

Which car brand?

Brand, yes, what do you like?

Ferrari.

It doesn't work with that. Let's take Audi, okay?

Okay, fine with me.

Our Chinese competitors are selling A1 and till A3, maybe some A4s, and we are starting with the A4 and sell A5, A6 till A8 in terms of quality and complexity. And that's where the top 50 customers need machines for. The mass market is 50,000 carpenters, they buy all the machine for EUR 10,000, we don't address that. But we are -- what is our strength in China is that we have, by far, the largest sales force on this top 50, top 2,000 segment. There's nobody else there who has such a reach out to their customers. So by far, the largest organization in China. The Italian competition we have, they have no factories in China, smaller teams. The Chinese companies are selling more through distributors to the mass market. So the coverage of the key customer, the segment which is growing, we have a unique sales position as well.

So it's the connection to the customer you have?

Connection to the customer, local factory, big factory, which we have to double in the next years and the service. We have 100, in total, we have in China. [indiscernible] maybe 100, another 200, 250 sales people. Nobody else has that. And this is the strength we have there. It's also the success model in the U.S. U.S., we have the best sales force and the largest service force and that's why the customer also buy from us, mainly in U.S., it's mainly sales driven.

And how do you make sure you're not running into overcapacity if you're building so much capacity now in the coming years for HOMAG?

I would love to have this capacity today and that we needed in tomorrow because we don't -- we built a little capacity in Solid Wood. Little means we need to double because this business will continue and we double it. We are building a little capacity in Germany a little bit, in [ Augustenborg ] we saw that. Schopfloch, there's no capacity increase at all. Schopfloch has efficiency. And also the customer center in that business is where the customer comes, where the machines are where you can try out. He comes with his boards to see how it works on our machines, is the main decision factor. So when you bring a customer to your customer center, he buys a machine. And we have very nice one in [ Augustenborg ] and in [indiscernible] area. We have a very nice one in America and a very nice one in China, but we have not a nice one in Schopfloch, and we need to do that because it's really hard. So that's kind of investment. And China is capacity because we are, by far -- we have -- it's a big factory, but it's far too small now. We have already rented other space. By the way, HOMAG is a consolidation because we invest in -- we have 3 warehouses outside of Schopfloch. We bring them all in into a new warehouse in the logistics center. I can talk for hours about it, but we have not enough time. Andreas?

Okay. Then I would like to open up the questions also for the participants from Zoom. [Operator Instructions] But so far, I don't see any hands here on Zoom. So I would go back to the room and ask if there are further questions here from the room. Yes. Stefan Maichl from LBBW.

Why is the service share of HOMAG 25% below the group average of 30%? And which action will you take to increase that to 30% or maybe more in the upcoming years?

Good question. And here you see the potential. It's there because, in my opinion, we could have invested a bit more in service personnel in the past, we do it now more. We had a little bit constrains because you know we had a downturn in HOMAG in 2019, and we were careful. But there's no reason why it cannot be 30%, definitely, which will be difficult to achieve next year because we will have a strong revenue increase out of the backlog, but that's for sure, also a target for HOMAG. Can I ask you a question. I know you have question. Can I ask -- Andreas, can I also ask questions?

Yes, of course.

I would like to understand whether out of what we said today, you see this growth opportunities or where you have doubts or where you have -- I mean can you follow us that we see that as a potential battery, for example, it's a very interesting field. That's on your screen.

I may only want to comment on the service share. I'm following HOMAG since the IPO, I've...

That's long time ago.

'07.

2007, yes.

And the service share was always low due to the fact that the sales and service organization was focused on dealers. So that was one reason. You have taken over China Golden Field. Maybe one step in the right direction. Maybe there are more dealers you want to take over.

We did already.

Have a direct approach to the clients, that could be a...

You're totally right. We did U.S. with a dealer, we took over in 2014 and then try HOMAG. Even in Germany, we took over a dealer and Jochen will do that, don't worry.

Philippe?

Yes, I had one question actually on the vehicle and battery. So if I look at the Slide 51, you show that the battery cell production capacity in Europe should go from 28 gigawatt hour in 2020 to 800 by 2030. That's a step-up of 772 gigawatt hours or per annum, that's 86. If I assume you get 50% market share, and I think the rest of potential business, that's basically 43 gigawatt hour that you would cover per year or 4.3 plants with, let's say, 10-gigawatt hours. Assuming that you get it somewhere between EUR 30 million and EUR 100 million, that gives us between EUR 100 million, EUR 150 million on top in terms of revenue and perhaps up to EUR 400 million, EUR 450 million on top, depending on what size of product it is and the scope, and that's only Europe. So...

How should I want to comment? The 50% would be very ambitious. I follow your math. And the issue is even if we talk about Europe, there is a lot of the Asian producers moving, migrating into Europe with their investments and their supplier base is established. It doesn't mean that we have opportunities to also get some business there. But the 50% is, I would say, is very ambitious. The rest of your equation, even getting somewhere between, say, EUR 30 million or EUR 100 million plus depending on the project, it's also very realistic. And nevertheless, it's very difficult now at this point to really make a firm math, and that's why Ralf said, this is not in our plan. So everything that comes here at this point is an upside opportunity.

Perhaps 2 follow-ups, what you think could be the market share that you reach in that business? And the second thing is if we reach that capacity by 2030, when do you think the hockey stick kind of start is going to come?

Yes. I would say half of what you said would be quite a good share for us. The hockey stick, I mean, we are currently bidding one more project that's similar to the one I've been showing that we have booked. So rather more smaller one. And we're also in the bidding process for actually for 1 to 2 of the larger plants. So the business is happening as we speak. And it's now the question how much of this business can we get in the next 2 to 3 years.

Okay. And final question, what kind of margin could you achieve on that? Is it dilutive to the existing activities or what kind of...

The margin of that business would be more into the area of our machine type business rather than our -- the construction type business that we have.

I think there would be a big success because we are market entrants, and we are new in this business.

Now I have a question actually on Zoom. And this is from Alexander Virgo from Bank of America.

I wanted to come back to your digital offering and I ask a couple of questions with respect to ADAMOS and your MES offering. And those questions would be, one, could you just give us an idea around the dynamics that you're seeing in terms of customer adoption of both ADAMOS and your MES offering. I'm particularly interested in your comments around the proportion of your business that's installed without hardware. And I'm quite keen to understand the various different users of your software on the map that you show on Slide 56. Because obviously, there's an awful lot of names on there, many of whom have their own MES offerings. So I'm wondering what it is that is driving adoption of your capability or software over their own, for example. And I'm thinking of Schneider or Siemens, for example, the names that stick out to me on that list. And then the second question, I'll ask once you've answered that one, if I may.

Thank you. Yes, you have very well looked at these logos. Siemens, for example, you're right, they have their own MES and they try to push it inside, but sometimes their own cooking is not so much liked by the children. And our MES from ITAC is really specialized for the electronic industry, has their foundation there, Hella was the first customer. And therefore, we have benefits and functionality. And you know in such a big company like Siemens, a plant can decide also against the corporate offering maybe they have. And the same is maybe for Schneider, but it's not a strategy behind. I think it's just more suitable for a plant and the plant can decide on such a project because it's in the low one-digit, million-digit area, such a project.

And in general terms, would you say that your adoption rates or your -- the demand for software -- independent software instances, maybe I call them that, where you're selling the software without the hardware, would you say demand for that has accelerated as we come out of COVID?

I would say COVID -- has COVID -- do you mean that the COVID was an accelerator of this...

Yes. I guess because of the implications of sort of virtual working and virtual collaboration, I'm wondering -- I'm just trying to understand the dynamics in your -- demand for your software business.

On the MES side, I would say, no, because MES is not a new thing. It's many years out there and it's -- but it's -- the MES market is accelerating in terms of more and more companies are now considering to install an MES system which they haven't done before. That's definitely the case there. And I mean to say -- without hardware, we also mean without our machines. And Jochen has also examples where we did not want a paint shop, there are a few examples out there already where we didn't want the digital part. This is also maybe in future, more opportunity.

Right. Okay. And ADAMOS? Because that one is an IoT -- an independent IoT platform, always intrigued me with respect to the sort of...

ADAMOS is not part of offering. That's the cooperation we have between the machinery and equipment companies. This is not part of that business. That's basically the...

Sure. It's more just to understand how well that partnership is going and the sort of the impact that, that is having on your ability to, I guess, interact with a wider range of customers.

Yes. I think the ADAMOS is more the -- how should I say, the label and it also gives us -- because it's quite very often enterprise that we are part of that leading machinery and equipment supplier community that's cooperating on that digital path.

Thanks for your question. There is currently no further question on Zoom. So I would look back in the room here. Yes, Ingo Schachel?

For me, just 2 more questions on your green products, green strategy. I think, first of all, on the regulation, do you see any paint shop specific regulation that would accelerate the adoption of greener technologies? Or is it really primarily the CO2 reduction desire of your customers?

Yes. What we see and that already for quite some time and different by geography is emission limits. For example, China has one of -- the interesting enough, one of the most strict regulations for VOC emissions. And the paint shops or especially the exhaust of the paint shop is monitored online by the environmental authorities in Shanghai. So if we would -- if our clean -- if our purification system, the RTOs would not work for an hour at the paint shop in Shanghai at Volkswagen, the one that Ralf was talking about where we won the price, they would shut down the facility. So there's regulations that are different by geography and that we're working on already for a long time. And that's part of actually the normal business, they are tightening, which is good for us. But the driver of the products that I've been describing is really the ambition now of the OEMs to reduce their carbon footprint. And for example -- to give you one example, the customer I was talking about from Bavaria who builds now a complete facility in Hungary purely for electric vehicles, we have just got an additional EUR 10 million order for making the equipment greener than what the customer bought it for like 2 years ago when he first contracted the paint shop. Now also converting, for example, to complete drying from gas-fired to electric because he can get now greener electricity. And the same is for the purification where there was a gas-fired RTO. And now this is also electrically driven and this gives us EUR 10 million more order at a pretty good margin.

One question on pricing. In the past, we've always speculated about the price premium we get for green products and you always strive not so us any guidance or information on that. But just looking at the very volatile input cost of our carbon price environment, gas price environment, do you see a correlation between the price premium you can achieve, an interest in your green products and the input prices like gas and electricity that are currently increasing so much?

Good question, difficult to answer. I would say at best, there's a couple of products that we have today, which have USPs. Our overspray-free painting, the next competition is at least 3 years behind us. So in the end, it's more whether the customer has a budget or doesn't have a budget there. Yes, we probably get a premium on something that's not comparable to anybody else in the market, whatever that premium then would be. On the other hand, for our other products, what we at least have is we are always considered a safe supplier. So when we're getting close to other people's pricing, I would say we typically have an advantage. But I could not tell you that we get 5% more or 10% more for our products. That's not the rule in the automotive industry.

Can we take another one from the room?

HOMAG currently had a very high value added in the past. Is this, in the current situation, supply chain issue is an advantage, a USP for you?

I would not say it's a USP, it's not a disadvantage that you can do some parts ourselves here. But also the competition has a high value add when I look and to the guys in Italy, I would not say that. That is guaranteed because we changed also there a lot in terms of value add.

We take another question from Katharina Werner from Deutsche Bank.

Just to clarify one thing I -- if I got it right. So you don't have the med tech automation and the battery business in your planning for the next years. Did I get this right in your forecast?

Let me try to answer it in a careful way. We don't have the business in our projections to the magnitude that we believe we could achieve. So very little of what's possible. Let me answer it the other way around is what we've worked into our figures because it's still very -- we're at the beginning of this. And we have to prove that we can be successful here. Now the first success with the sales force, the order, which is for us very relevant and people talk about it. But in terms of the larger orders, we still have to prove that the market accepts a new European player.

And the large order, Katharina, could be then more than EUR 100 million project volume, that's in line with what Jochen calculated. And that's volatile. So that's why we don't have this in the guidance and in the outline for next year right now.

Okay. Next question comes from [ Fabian Derer ] from ODDO.

Do you see further upside potential for your service share beyond the 30% based on new service business models, like customer education, consulting, et cetera? And how do you see the Equipment-as-a-Service topic evolving going forward? And is it relevant for you? What do you think it can get relevant for you?

The last question, Equipment-as-a-Service, you're reflecting maybe some of the tooling machinery industry, some first attempts on that. I think the idea is not bad. But it's only, I think, from the financial figures, they are interesting for customer, not full utilization of his machines, which by the way in HOMAG is I think the only field were it could be, to some extent, relevant is HOMAG for the smaller companies where the machines are not running all the time. When you have full production lines running, then it's not financially so feasible. But it's not something which drives more business, I guess. The potential beyond the 30% service, I try to get around that. No, I think it's not a target. I mean, 10%, even this -- I mean, this is all small piece of business, EUR 500 here, EUR 1,000 there. So no, I hope we will not get more than 10% because then we have a top line problem. So we also want to grow. So we're always hunting each other in the realm, when we have more growth in sales and its service share goes down. I think most important is that services continue to grow steadily. I think that's the most important objective. What would you see a number as relevant so much?

No, I just said -- I shouldn't -- I wouldn't say we have to see it completely separate, but if we calculate the share in a year like this year, where we're growing much on the equipment side, then it's, of course, difficult to show the same growth on the service side. But long term, I probably -- yes, we should be in a position to expand. I see also potential on the automotive side, especially in Europe, where -- in the future, we will see much more brownfield activity compared to greenfield activity there. I really believe that we can further build the -- or grow the service share, but still should be seen a bit [Technical Difficulty].

Okay. I have no further questions here on Zoom. So maybe last call for the Zoom participants. [Operator Instructions] I'm looking now also in the room. We have another question from Stefan Maichl from LBBW.

You confirmed your 8% EBIT margin target. Is it more likely in 2023? Or should we wait to 2024, '25, looking at your order book and all your initiatives to improve the profitability?

Let's also see how the headwinds are [Audio Gap]. So that's a couple of headwinds that we do actually see. I think there is expectation that the situation will improve during the next -- during the first half of the year next year, but let's see how it unfolds. So..

Okay. Another question from William Macaulay from Morgan Stanley.

Yes. I have another question on the battery production, so the coating technology. Who is it you're competing with in the sense of are you competing with people just on the coating technology or people just providing that? Or is it people who are providing the whole battery production system? So the packaging of the batteries, et cetera, yes.

So we're -- on the pack side, so the assembly of the battery or the entire cell production, as I mentioned before, you would find companies, for example, like Tucson who cover that or Manz. This is something we're not competing because we don't want to cover the whole production process. In terms of the process steps, coating, drying, solvent recovery, we are -- the bigger part of the competition is on the side because there is the traditional Japanese, Chinese, Korean players who on the back of the producers from Asia who built a base here in Europe, they're coming also to Europe. On the drying and especially, solvent recovery side, we have more experience and I believe, in some projects, where we will not be able to get the whole piece, the probability of getting at least the solvent recovery side where we have very superior equipment, I think, is quite relevant. So we'll not always get everything. And on the coating side, there is significant competition, not saying on the drying and solvent recovery, there's none. But this is where, in some cases, we can probably even differentiate easier with our experience in the footprint that we have in the market compared to coating, where it's going to be very important that we build further references on top of our dual sided project that we won with Cellforce. So each project that we win, of course, creates more momentum for us.

We take another one from the room.

Why is your assembly business comparably weak in the Americas compared to Europe? Is it due to competition or to the product profile? Or are there other reasons for that?

It's mainly technology-driven because in the U.S., there is still in many, many plants, very old-fashioned final assembly systems that are low tech, low quality and also then low cost, where in many cases, it didn't really make sense to compete on a local basis, which is changing now for at least the new players. Just to give you one example. There is one producer in -- out of California, moving now a bit further south in the U.S. and their smallest model that they produce in California is built on our equipment because there, the fine assembly concept is different and much more modern compared to what the traditional players in the U.S. have used so far.

Okay. I'm looking here in the room and Zoom. There are no further questions. There's also none from the telephone. So I think if there are no further questions, then I would hand back to Ralf maybe for some final remarks before we close the call.

I thought you are summarizing. I think the objective of today was to show you some areas where we see potential for us. The calculation really is too easy with the business plan, but it gives us inspiration. But I think otherwise planning would be a very simple task, but there's potential out there for the company in future that we wanted to show. And when you have taken that as a message today with you, then I think we achieved the objective of the meeting. And my final words would be stay with our company and because you will see that we have a good future ahead of us under the leadership of Jochen and Dietmar, we will develop further well. That's all what I need to say. Thank you very much for all the years to be with us. Some of you I know since a long time, some are newer. But the ones who are newer, I hope that you also are around in 10 years. And so stay on our side. And Andreas and his team looks after you. Whatever question you have and information you need, I think Andreas and his team does a very good job in providing information as such that you are consuming them easily. I think that's what we get as feedback. Maybe you can confirm that some of you in the room then. Also, Andreas will be happy today... All right. Thank you very much for joining us today. I think, Andreas, what is now the next step is some...

Yes, no. Thank you very much. And I think this concludes then our virtual and hybrid personal meeting. Thank you very much for your interest and for your participation. You can now disconnect and find the recording probably tomorrow in the evening. Thank you very much and bye-bye.