dormakaba Holding AG (DOKA) Earnings Call Transcript & Summary

[Presentation] Good morning, everybody. This is Switzerland. So we're starting on time. Gives me enormous pleasure to welcome you to dormakaba Capital Markets Day 2024 in our headquarter here in Rumlang. Many thanks for traveling to be with us today or for joining us online. I'm going to waste no time and quickly taking you through the agenda of today. Very shortly, we'll begin with the presentation of our CEO, Till Reuter. Straight after, we continue with a series of breakout sessions. Today, you have a great chance to deep dive into our commercial and operations topics as well as a unique opportunity to experience our products in our innovation showroom. For that, we will split into 3 groups. You have a name tag with a color sticker, which indicates the group you're belonging to for the respective breakout sessions. We'll ramp up the day -- the morning session with a Q&A at 11:30 here back on stage. I'll skip important parts such as coffee breaks and lunch. This will take place just outside of the room, here in front. Afterwards, in the afternoon, we have a great pleasure to welcome one of our valid customers here in Rumlang. It's going to be Andres Stierli from the Airport Zurich. We will start with the customer testimonial here in our offices, and we follow with the customer trip on site. We'll close the day at around 4:00 p.m. With that, I have to say it remains to be said that I hope you'll enjoy the presentations and find the opportunity to interact with our leaders today. Now I would like to hand over to you, Till. The stage is yours.

Thank you, Swetlana, and welcome, everybody, to Rumlang. Welcome to our offices. A big pleasure to have so many people here and to see the interest in dormakaba, which is really great. And I think many of you know the dorma and the kaba story for a long, long time, longer than me. And I'm also excited to get your questions later because having met many of you on the one-on-ones, it's great today. I think today it's about having more an intense dialogue. We can go in much more detail. We can talk about the update on strategy. And I think most important, you have more time to meet the -- more of the team, not only Swetlana and me and Hendrik on the Investor Relations and on the strategy side, but also have a more intense dialogue on what's happening on the market side, what's happening in operations and what's happening on the technical side with the team here. Welcoming you in Rumlang is great because many companies are discussing also the home office topic. And you see, we have here a very nice office. So people like to come to Rumlang. It's a great atmosphere. I think it's very important this time to have an office space and a place where people feel well and that people can do their best. And I think we have here a great place, and you also have today the chance to see this. Today presenting together with me, you have Rene Peter, who is our interim CFO, very safe pair of hands, great to have him. We can have -- we can talk about question on Christina. She is focusing on us. It's very important that she gets fit again. But I'm very happy to have Rene to take over the task and helping us to really steer the company on the financial side. Rene is with the company for -- since 2013, so more than 10 years, very experienced leader. So very good to have him also today here. Carsten, our new COO, one of the changes we had at the beginning of the year when Jim-Heng left and also Alex Housten left. Alex was the COO and focusing on Americas in the past. So I was very happy to meet Carsten and to convince him to join dormakaba. We know that because of the structure in the past, because of the merger, there are many things on the operations side, where Carsten can give much more detail. Carsten joined in August. It feels like you have been here for a long time, but it's only a couple of months. Steve, Steve is since 2008, so 15, 16 years at dormakaba. He runs the commercial side, a great partner. He knows the market inside out. So it's really good -- a great partner in the team, having a big piece of the business running the commercial side and can give you details about the market, Americas, Germany and other markets, also very happy to have him. And also Magin. Magin is since 2000 with the company. So I think what you see, you have a mix of people who are longer with the company, who know the legacy, who know the company, who know the pros and cons and some new characters. I believe we have a good mix of know-how, of experience, of knowing the company, also getting some new questions and new topics in the company. And with this one, we are welcoming you together in the name of the Holy See to our Capital Markets Day and have more details on what we want to do and what we -- where the future goes for dormakaba. You heard a lot about we want to shape the company, and I told many of you that when I joined in January 1st at the dormakaba, there was already the Shape4Growth, not the Shape to Growth, a Shape4Growth program. And there are many CEOs, when they join a company, what they do, they first engage in consultant, have like a benchmark and redo and stop the organization and have kind of where are we today, what we are going to do. I had the pleasure to be 3 months in the Board of Directors. So worth looking at the Shape4Growth, and I thought it was most important to continue the path and not to stop again because what I learned in the first 3 months, but also in the first 10 or 11 months that we know lots of things. Dormakaba knows more about dormakaba than you believe. It's much more about execution. And when I looked at the Shape4Growth program, my view was that more than 80% are right, and that's worth to continue and not have a different consult, a new consultant with new benchmarks, it's just about executing. Today, on the agenda, what I want to go through is I think it is -- and some of you know that my past was more in automation and automotive. So what's very important here in this industry, the construction, the building industry is a very attractive industry with less volatility, with good planning, good ways to plan. And also, I think it's very important for me to come later, it's -- we have a great installed bases, which is also like the fundament for service for the future, and then we'll focus on why this market is so attractive, why also this market is clearly a market for the future. Secondly, there is a great market, and we are well positioned. So Dorma, Kaba went to dormakaba, so we are #3 globally. The global 3 players are the guys who are consolidating into the market. And I think we are well positioned with our positioning today with the products, with our structure, with our vision to take really a big stake in this market and to be also part in the consolidation of the future. The third part, when you shape the company and then you have to start to grow again. It's a little bit like a balance. On the one hand, we are executing on the cost program, which is very important to getting the cost measures done. But the same part is very important that you -- once the organization is in a cost efficiency mode, you have to come to efficiency and growth again. And I think that's we are in the middle of, where we still have to execute on the cost program, but it's more important -- it's same important, sorry, it's same important to also look in the future, what do we have to do to grow 3% to 5%, to grow further, to work on the margin because we all know that scale is very important also for the bottom line and that we'll talk in the third part. And then clearly, we have many financial analysts here. It's about financial profile, the midterm targets, where we want to go. And clearly, I have to look -- always look at Swetlana because on the timekeeping, she will remind me even when I'm too slow. Attractive industry. You know the topics. I think it is the 2 topics, which I want to touch on today, is the high resilience and the high entry barriers. So I think one is very important that the -- on the one hand, the market is attractive with good margin. And it's important that 2/3 of the market are refurbishment. And what we see today, even if you have own house or our apartments or buildings, we see that once you have refurbishment, you're starting to have higher quality, more tech involved. And I think that's really helping us, that is really a market, which is growing based on this installed bases and the new products, which are coming, have higher value-added, more technology in sight. The second point, which really helps us and which is also, if you look about who is coming as new competitors, they are, in principle, high barriers to enter. So why? Because there are many country-specific regulations and requirements and also very robust sales channels. And if I look today, I think that's very important. If I look about who is popping up at competitors, you will never find any hardware company. What you find, you have software companies, which are working on the front end. But I think we haven't seen in the -- I'm now here for one year, but I look back with our partners, our strategic department, they are only a few, maybe no one really coming up with a full portfolio of products. You see people popping up with kind of a user interface for customers. But I think that's really something where you don't see companies, who have hardware, software and the digital aspect, which we're in, which is very important, which I think is clearly for us value-added and a big advantage. It's a big market, a huge market, CHF 40 billion. So once -- it's difficult to get in, there are barriers, it's a big market, and it's a big growing market. So if you look back in the last year, the market on an average was growing 4%. And as I mentioned already, the increase of higher value-added products through automation, digitization is very important. But I think that also is that government spend. This is, again, like, market big and the market is growing. Besides the topics, which you all see in the little film, urbanization, sustainability, what I see today on this page, very important is that safety and security. Sometimes, we are shy to talk about because you don't want to mention how secure or safe you are because this is something you should not market too much. But what we see is from the outside that really the impact by safety and security is getting bigger and bigger. And I think what's most important, if you're in a hotel, if you're at home, you want to be safe and secure. I think this is driving really our products and security and safety have to be embedded in our products. So it's very important to look on this. And also the companies we talk to, I think they all have this on their play that they have to talk about how can this be part of our product. And I will later talk a little bit about the customer journey impacted. If you look at the trends, and we know urbanization, so it's getting more dense. Sustainability is important about the carbon footprint. Digitization is, on the one hand, a big topic, AI. But with digitalization, you can have a cost down, but at the same time, also have more applications. And I think that's really the trends, which where we are in the middle of this trend and whereas on us, how are we going to shape it, what's most important, and I think how can we benefit from this 2 for these trends. Two topics, which are important here. One is clearly especially for our industry. The building modernization, 4% to 5% CAGR. So it's a installed bases, modernization of installed bases, modernization of buildings, it gives us really a good tailwind. And I think the second part, energy efficiencies. Energy efficiency on the one hand on the whole building, and then it can maybe controlled the energy efficiency by having different speed of opening door, closing doors. But then also like most of the locks needs the battery. So how can you be more efficient on battery lifetime to have overall this topic addressed, and this is going to be also shown in products when you talk to Magin, how are you going to bring this trend, these topics in our products? What's the time line? Where are we -- where are we compared to competition? And I really believe that in some are, we're really leading this discussion. In some areas, we have to be faster in following it. But I think it's really like it shows that the industry is very good for us. And that here, we are also seeing that the growth is part of this business. If you talk, and I think that's important when we talk to our customers. So in the past, and if you look back in many industries, you talk about selling door closers. You're selling about automatic doors, you talk about selling maybe a software solution. Today it's much more talking about customers, what is changing in their offices, in their buildings. It's about people flow. How many people at -- at what time can enter the building? Do I know how many people are in the building? Visitor management. So it's more like people are coming in the office. Is it own people? Is it visitors? How can I control it? Which areas are semipublic, semiprivate, and how I cannot control the space and how I can control the flow. When I had a couple of discussions with in [ Zurich ] with the banks or other commercial entities. It was about like, how can I have a good utilization of building? So is the building really full? Do I know by sensors? My meeting rooms used? A big meeting room. Is this space really used a couple of times? Can -- can I split into 4 buildings? How is the usage? How can you do more? And the second part, if it is not used, facility management, do I have to clean it? Do I have to think about refurbishment? Do I have to have maintenance? I think everything comes with how can I manage the building more efficient? And here, we are part of it, besides the people flow, the management of the building and then also about the protection of people, I think that's really where -- when we talk to our customers, it's very important to touch on this topic and how can we help on this. What's our products, which have been in the past, maybe purely a mechanical product. How can we help you to work on the people flow? How can we have with more data, intelligent products to, on the one hand, very clearly, selling door closers, selling automatic doors, selling software, but on top, think about what else can we do on top because I think it is also very important that we have a stable industry, working on the distribution channels, but there's more to offer to our customers. This comes to employee with the access point, accessibility for all lobby control. And the topics which are important here is connectivity and cloud. So I was talking about mobile and how can I connect to the cloud. It's interoperability that's topic which is not only in our industry, which is very important. So interoperability means that you're coming in a new site, you're coming through a customer, where some of your products are in and some of the competition, which is not so good. But then the question is how easy can our products be brought in a system, where the partner is in, our competitors in. And this means our products have to be more open, more easy to also integrate into other systems because we want to sell door closers, readers, different products, and this interoperability is important to in some one, if a customer is with a competitor, how can I get in step by step? And I think that's very important that once you see this one, it's about an ecosystem. An ecosystem of products, which is you're getting more partners in. So 2 weeks ago, I was meeting Alcatraz, it's a face recognition company. So they are partnering -- could be partnered with us. How can we use their skills to have an easy access. Some topics are more sensitive on the safety, security side. But really, we're working in ecosystem, and we are adding partners to our products, to have new solutions. Another example in respect is when you talk -- when you see [indiscernible], self-security check, which we have seen in Las Vegas, same like you have products, you're adding sensors, you're adding new features. And then I think the idea is that in this ecosystem, our products are part, and we have connected, and we have to make our products smarter products and then really decide that we don't do all on our own. So we will never do any face recognition at all. We will have partners. We will not have some controls. So I think it's very important is ecosystem that it's -- we have an important -- a very important part because, as I showed you, hardware is a product, which the new companies, the new competitors are mainly on the software side. And we have to choose how to -- whom to use for the next go-to market for the next customer journey. So the customer has new requirements. We have more features. We have more products. We have to think with partners in ecosystems. And then we have to think of a lifetime. So there's more to sell. And then over the lifetime of the customer, it's very important, it's clearly that it must be -- and it is something where it's a journey. And you will ask me, okay, is it new? It is a journey, and we are on the journey. Are we in some aspects good? In some, we are good and in some we are not as good. So here you see that, for example, you have the very early -- you talk to a customer, you talk in a project, you want to be specified and then you want to come in the end in the execution, in the operation and maintenance. So specification, getting to the customer and then having the maintenance and service business, which is something where in some areas, mainly in the German-speaking areas, we are very good. We are very engineering Swiss German heavy engineering. So our products are -- had a tendency to be more complex than others. And we have to -- getting the work, which is on the lower end, ease of planning, ease of installation, ease of use is very important. And sometimes, we see software players, which are popping up earlier later than we are more focused, and we can -- we have to learn here and we are working on the project to really have a seamless integration of the customer from the beginning from specification. Then once our partners are installing the products that you're having also maybe on your iPad, you're having the right recipe, the right way to do it. And really, most important that we also stick to the customers because of maintenance. And I think also here, with EntriWorX, we have products, which are on the way. We have to really refocus on what was planned, how good are we here, what can we -- what do we have to adjust. But I think it's important to understand there's more business, and it's over lifetime. And the installed base is a very important aspect for us also for future service business to look at. I think that's, again, like a little bit of the technologies, when I think today, you will also not have only -- not people, but you also have some products. And you will see that electromechanical transition, AI life cycle, when you see the products really ask the question, what is changing? How do you get these topics into the product? What time is required to do it. I think that's really the topic where we have to take something, but where we have to get better because in the past, many systems have been closed systems. So you have one software solution, including hardware. You have your own product, your own firmware, but it only connects within this channel. It's important like in the future, you have to have your product, but you have to be open also to connect with others to really get into other customers and to be more flexible in this industry. I think that is the first part. So a good industry, growing, good trends. And who are we? How are we positioned? So that you know, 80% of access hardware solutions, door closers, automatic hardware, then excess automation with the sliding doors, revolving doors, access control solutions, service and then [indiscernible] solution, I think, that you know. And that means we have a broad set of products. And I expect one question from you because did the merger really happen, because the hardware products or some more -- the automatic Dorma, access control solution is Kaba. And I can tell you, it happens where we have good leadership and it's not happening where we have not as good leadership. And you will see markets in Asia, where one company was then leading the market and the other more or less disappeared. But you will see good and bad examples. And I think that's something where we have a journey, where we still see today after 10 years or 9 years, still there's a potential that we can use products from 1 of the 2, [indiscernible], where we have to push harder and where we see the potential in the market and that it's ongoing. I think here, it's -- if I look in the future, and I don't want to talk too much about the past, why didn't -- what happened? Why have you [indiscernible] speed? Why did this not happen? That is something where we can ask something to write a book about. It's about how we shape the future. And I think that's our role here. How we shape the future with the know-how we have and what we want to do. And here it is clear. We have more potential with the existing product offering. As I mentioned, it's a journey and mechanical, electromechanical, digital. So you will see some example, there's a door closer, purely mechanical, you put a small motor, which is only supporting a big motor, which will be automatic door and then you put a sensor on top. And the sensor on top will tell you, is the door open or door closed? If it's a fire door, it's very important information because the fire door should be closed. And this means really like that it's not digital like everybody's digital, it's more -- it is something it makes sense to connect our products to have more features. So digital comes only with asset management. I know how many doors I have, there's a functionality, which is really helping to have more -- to more for the customer, and it's really like helping the customer to manage the building safer, securer and also more sustainable. We have a 90% commercial, nonresidential share. Sometime I asked, okay, what do you think about should we attack residential? I think, first of all, the commercial piece is a business, which is very suiting to our DNA, our profile. Commercial is more complex. Commercial has more requests. So I think today, the commercial is really the market where we belong to and also market which is more resilient and where we have the right product for commercial. Residential is for me more change also towards the technical trends of Google, Apple and Microsoft. So I think we should rethink the topic once there are new technical opportunities. Today, I'm very happy to have the high focus on commercial and some residential, where it makes sense, and that's today I'll share. 60% refurbishment. So if you look about our growth rates in Germany, for example, in the last year and also the trend has not changed really. You saw a difficult environment. You didn't see any new projects, but we were growing 10%, which really is something that, okay, some new products, but it shows that we have also the new project business is not as good as we would like to have. So some clouds at the sky. This refurbishment share, we really managed to grow Germany, for example, very well. And it's also like based on strong projects, but also on this refurbishment business. Then clearly, 60% product business, strong channel management. And this strong channel management is through -- of the product is our really strength in Europe, where we have #1 and 2 position. And then if you go across the Atlantic, we see that we don't have the #1 and #2 position. And I will look at this later, and Steve will have more detail that the strength we have of our business partners on the go-to-market, that's you can turn the coin, that we have to work harder in the U.S. because here we are much more #3, #4 and #5. Good projects, good business, commercial and the commercial ecosystem, where we're working is full of opportunities. Hospitality, we have a share of 10%. Hospitality, today, we are strong in the U.S. with a higher market share. We have potential globally. So we are working, Steve, working with the team, how can we do this go-to-market, how can we strengthen us to have a higher global share to go in the countries? We're working with some big accounts in important market and a very good market where our products are really perfect for this market. Other topic, data centers, different gates, how you're getting to in the end to the heart of a data center. And you can see many of the verticals, which, on the one hand, give us resilience. And one vertical, which is very important, is airport. So in hospitality, just to go back, hospitality, hotels, we saw post-COVID, nice development that was growing. Currently, we still see that the airport business is really booming and the products we have are also, I think here, we have a good advantage over the competition and more for the future data centers. Data centers is one of the topics where our products, reliable products are very well suited to serve this vertical. And we can see that we have a variety of options to grow the market. And for us, it will be important. If you took to verticals, we have to think about product changes will hopefully serve more verticals. So on the one hand, it's specific, but also to try to develop products, which then suit maybe 2 or 3 verticals, then we would be much more efficient and placed for the future. Installed bases, we have over the last 15 years, CHF 20 billion of installed bases in the market. This is the basis for service. And when I talk with Rene and the team about, this is really a good -- a very good go-to-market -- a good basis with the customers. Customer knows us for long term, good reliability and how can we do more out of it, spare parts, but also more service. And I think that's really important to work on the service for the future to have more service. All of our -- what we are doing is based on sustainability. So we want to be more efficient with our customers. It means this is part of our DNA, part of our products. We do not see a trade-off between sustainability and making profit. I think it's very important that sustainability is part of our product, of our future products, so more energy efficient. Why? Not only because sustainable, because also you have to exchange the battery every year. So it means like it's also helping the customer to be more efficient. I think for us, it's -- I think it's very good that we continue on this one. However, it must be clear that there is no trade-off and that this has to be part of our products. So great market, great positioning. So what are we going to do? What are we going to maybe do different, faster? We showed you this slide, which has 3 areas. One is about elevate the performance, continue executing our cost program, adding some cost efforts. Then the more midterm reducing complexity, and I will talk for each a little bit more about why and where are we here. And then thirdly, grow, because clearly, we want to grow the company. You're looking at also the competition. Growth is helping and the scale is helping on the top line and the bottom line. Elevate performance. So what you've seen is that we announced last year, CHF 170 million. We already delivered CHF 84 million in the first year, which means close to 50% and is mainly driven by procurement, G&A, product development, operation efficiency, HR, finance, IT and operations. And here, we are on a good path to execute. And you have seen yesterday, on Monday night, we have announced that Christian Bauer is joining the C team. He has 2 roles, one is focusing on the further transformation and the second role is the leadership of the KWO business. I know Chris, he was came from Alvarez, Marsal, from a transformation adviser to KUKA as in transformation consultant, and then he was running Swisslog for 5 years. So he's joining January 1. And he will in a program over 2 or more years, it's important to keep up his team. Now CHF 84 million we have reached. So it's very important to keep up the speed, to keep up momentum. So I think we are totally convinced that we are going to execute on the CHF 170 million as planned. And with Chris Bauer power, we have 1 partner in the EC, which is going to support and focus purely on the execution, whilst we focus on operational growth, but have someone in our team to really do this full time, together with the KWO job. So CHF 170 million. I taught finance, HR, IT and operation. And I think that is something today, which is new information. So hopefully, some more new information today until now, but it's very important. We are adding on the CHF 170 million, another CHF 40 million savings for the commercial transformation. And commercially, it's important. Commercial is the muscle of the organization. It's a go-to-market, and dormakaba is about developing and designing a sample great product, but then I think it's really most important to have this go-to-market and to be very good in this broad reach across the world and the global setup. So Steve will talk more about this. We're increasing from CHF 170 million to plus CHF 40 million. And in the breakout session, you will hear more about the go-to-market, the long-tail countries, how can we digitize, what can we do? And I think that's an important part, the next step that we increase our cost program here of the CHF 40 million. Besides on the cost side, the cost is something we had in the first half of the year, the negotiation and the agreements with the works council, though we have to invest in the people who stay. At the same time, we have to be fair, people who are leaving, and we have to work on this performance culture to really make dormakaba the company want to be, focusing global performance, having the right incentive, having the right structure to get this cost topic done. This is really the execution of our Shape4Growth, the cost topic. Second topic is reduce complexity. So what happened at dormakaba in the past. Two topics. So on the one hand, dormakaba was geographic. So we have many focus in the region. It was a different setup and was a merger. And then there was a shift from regional to functional. It means like in the past, America, Europe, Asia, with some -- each have their muscle, each could ask for product. And we have many things, which are too complex, which are double and triple. And I think this is very important that having a merger, having change in the functions in the, call it, setup of the organization and more focus on the function. It's very important that we still are aware of the complexity. So we are taking part not only onetime then, we move it 3 times. We are sending parts around different sites. And it's something where we really want to get better where we have to reduce complexity in each function. Steve, Carsten, Magin, Rene, and also in Chris' function, it's very important that we continue to reduce complexity. The first topic of this is, which is already ongoing, so we are global. But in some markets, the tail-end markets, we are too small and we have to get more efficient. Some markets, we are going to change from direct distribution over partners. That means we don't lose on the top line too much, maybe couple of percent points, but it's really very important that we're getting more efficient and reduce here the go-to-market with new models. And it' ongoing. We have already divested South Africa. We were waiting for the closing. We have exited this year in the last months, the unprofitable service business in the U.K., service import, but the right service. And I think that we are going to continue. There will be more in Southeast Europe, where we want to more consolidate and have a more focused go-to-market. Second part, the access control solution and the door closer portfolio. So we have a high number. Once you have business in America, Europe and Asia in parallel, you have many software platforms, which has been developed in parallel. In parallel means, you have a new go-to cloud, a new security protocol. What you have to do? You have to do 40-plus security protocols. Maintenance, you have to do everything in parallel, maybe it's done by one, which is very important, where we have a clear goal how we want to do this. It's not overnight. And I can tell you, I think the cost is something, which we have in plan for this year for maybe a little bit of next year in this commercial. The work on the complexity reduction takes 2 to 4 years and some might even take longer because with the convergence of the software solutions, you need migration path with the customers. So I think that's the path, which we go, I'll show you more, one of the goals we have to do. The second part, which is more visible, because software is always like you see -- you don't see software, you just think about it, it's more like, it's okay, what does it mean? Because software, you have the user interface, you don't know what's behind. On a door closer, you see it much more crisp. It's easier if you know from the past, you have 10,000 products, you're going to 4,000. You see a difference. On the software side, you do not see it as clear on the hardware side. And I think with this one, I will show you, we want to release, free up resources for innovation, but also you see some cost efforts. On the software, the goal is to reduce the software platform more than 50%. I think that is a big number. Over the next 4 years, we want to halve their software platforms, which means we only have to have new security protocols of half of the software. It's about having then the people who are released or we can use for more innovation in the software side because it's very important to innovate and to invest into the software side. On the second hand, once you have the software platform. It comes with firmware hardware, which means the installation in the building, which we also have to align and have to be mobile-ready and be, call it, more agnostic and more standardized. So I think this is really happening. And the team -- Magin and the team are working on the strategy to fine-tune the migration plan, how can -- which products are stopped at what point in time? What is migrated? Which features do we require? Where are we on the time line? And then the consequent execution of the migration. The second part, when I joined, I had my first talk on dormakaba 2003 -- 2023, sorry not 20 years ago, last summer. And I was talking about this high door closer complexity. And I heard it, honestly, I heard it in June. I heard in October, I heard in January when I became CEO. And I think it was very important that we know many things that it's a question about priorities, what we want to do and then taking action. And at dormakaba, it's not like one silver bullet, everything has changed. It's many, many small steps, which we have to prioritize, where we all in the EC have to agree, what are we doing first, what are we doing second. But you see this streamline of the hardware portfolio, and we have 1.4 billion hardware. It's only a part of 300 million. And what we saw is with less than 3% of the SKUs, we're generating 80% of the profit. So there means like there are many products, which are maybe not really efficient, many products, which are on shelf, many products where we have one or two. And here, the goal is we have someone, and I have done this before in the part where when I looked at KUKA, the nonautomotive business, how do we get less products, but a better market offering. And what we saw and what the analysis shows up, what we are now doing is we want to reduce the number of variance by 80%. It doesn't mean we have to reduce the number, the SKUs because in the end, the question is more, how many are the same parts do we have to come up with a variety of products? And what we see that and that's -- I only show this you because there's an analysis. It's based on facts. We believe we can get at least CHF 20 million of costs down on the CHF 300 million revenue. And there's only a fraction of the hardware. And I think also here, this is a journey, we took out the door closer as one product, which is highly complex, which may be the highest complexity. But it should be also like a path, an idea for the rest of the hardware, we might not have the same cost savings. But we are starting here, we see on CHF 300 million, CHF 20 million savings. It takes time. It takes 3 to 4 years. But I think it's the right step to do. And once we have done this one, we are going to do the next complexity reduction because it shows like we have too many products and too many products, what does it mean? It means like, for example, I make now one comment. We have 80 different housings, so where the door closers are 80, 8-0. That means on Carsten's assembly of Carsten first, he has suppliers for 80 housings. Then he has assembly to change assembly for the housing. So that really shows that this is not only changing the number of SKUs, but changing the process of procurement, less parts, more power. It means assembly, supply chains could be more efficient. I think that really shows how we are tackling this one, but it's taking time. We must be really here patient and consistent in reducing the number and getting that in the people's minds and heads. Please continue on doing this. First, global R&D road map. And next year as a second road map, but this is a first global road map and come back to where we came from regional, not global, not functional, now we have one global road map. And we can talk really about the go-to-market. We are aligning with the markets with the big markets, the big 5 markets with the rest of the world. What's most important next year? What's the time line? What product when to be launched? And then we have to align the resources. And you can -- for sure, it's clear that we have wishes for CHF 500 million, but we only have CHF 120 million of R&D resources. It's really about choosing the right products, the right developments from the market side and then also think about which technology is helping up in the future. So it's a mix of market driven and innovation-driven. But I'm very happy to have the first global R&D road map, which is most important to steer a company. If I don't know which product in the next year or 2 years, I cannot know. I cannot push these like you get this product in 2 years, what is the market? What's your sales behind it? And then we can really challenge was it the right product from the market or where are we? And I think that is very important that we are using this road map. We are working with it and updating every 4 weeks about are we in time and how are we continuing. On product, R&D, then coming to the operations side. You know that we have always set up in America, with Mexico, Nogales. So we have a high-cost country, best cost country. We have established Sofia, where we also have the shared service center and some operations, where already 150 people are working in Sofia in the shared service center, and we have Malacca in Malaysia close to Singapore to be used as a best cost country. What's for me important and here with Carsten will talk more about it, on the one hand, it's important to send less products around. So we have some maybe big size, big operations, where we do the majority of products, but in principle it's important to do local for local Americas for America, Europe for Europe and Asia for Asia, China for China, even more. But then think about how can we reduce the number of parts traveling, which means come up with less cost for sending products around, but being much more resilient. And here, you see some numbers, where clearly it's important on the upper part to increase the local-for-local stake that we are trying to be maximum local and then shift between local and the high-cost countries in the best cost countries, and work on this and getting them more efficient, and here Carsten will tell you more about. Complexity. Complexity, 2, 4 years, ongoing task, which you have to do. And now we are shifting gears. Now we're coming up to innovate and grow. Looking at the competition and look at some, some are always like it's about we tell you 3% to 5% growth organically. I think it's right to have a number organically, but also sometimes tell you 3% to 5% plus unorganically. And then I think here 3 parts: innovative ecosystem products, America and then external growth. And I think, first of all, it's important that we understand it's not only door closers, it's door closers, but it's also connected, and it's an IoT device that we are using the power, that we are not starting to do our own cloud, our own stuff. We are using that. We are working in ecosystems, and we can -- we have intelligent products, which we sometimes can make intelligent our own and sometimes with partners. And I think it's important that it's the door closer, the automatic door, software is speaking on its own that we change and that we getting from mechanical stand-alone connected with data, digital. And I think also, we will see some products, how are we connecting hardware products, how are we connecting automatic products and then access control solution. And I think the benefits are clear that we want to be connected, intelligent and digital to use AI with the products and also in our process internally. These are examples. I think it's much more interesting if you talk to Magin about the example, the go-to-market, what does it mean? What's the impact? What's the feedback on the customer side? How can we be more efficient, and I think that is one important part for me how do I want to grow the company. The second part is with EntriWorX, how can I get the customers closer. So we have the channels, our partners, and our partners are somewhat in planning, installation operations. And we have some tools established. We're testing them and we have to get more precise and more consistent about what are the benefits of these tools, what are they helping our customers to be more efficient, and it's mainly about in planning cost down, installation cost down. And then also if you do operations with our products, it should be less of maintenance costs. Hopefully, some of our products, some of our, call it, service products, but it's important that the customer knows that the operation costs go down. Combining physical and digital, we talked about. Now America. Being #1 and 2 in Europe, we are strong, strong product. The products are built up in Europe. [ PD ] is very much feed it out of Europe and German-speaking engineering. And we have got a good portfolio in Asia, but we have the biggest market, the biggest potential in America. And therefore, the focus for the strategy must be besides keeping #1 position, being more efficient to grow America. Here, Steve will give you more detail. The goal will be to grow GDP plus 2% per annum in the next 3 years, and we did already start in working on the hardware portfolio to have working on the go-to-market and also on the commercial productivity. I think here, it's clear that Steve will give you more details, and then we can follow up in Q&A about how to get this done. And the whole you see, we are all focused on this one. So I think that's clear also that we are aligned, that we want to get America great again for us and benefit from the American market. Vertical approach. Here, airport, utilities, currently, we are mainly focusing in the U.S. We want to go to Europe, hand-in-hand with the customer journey. I think that's something we talked about. And then the other topic is external growth. It shows the big 3 players and how the industry is consolidated or not consolidated. And here, we -- there's lots of room to grow inorganically. And I want to come up with someone where we grow organically, but also have a target for inorganic, maybe for the next business year. But you also know that we are already looking for external growth also in this business here. When you look about external growth, some people are questioning, okay, your legacy, your past experience is not the best one. So this is also -- this is a new management. So you have to give the new management a chance to do the right acquisitions and the right priorities. So it's about strategic fit. Convincing USP, critical mass. And the question more like it should not add today too much complexity. But in the end, it has to be accretive to the business, to be clear here. This is reiterating everything is based on sustainability, performance, complexity and then grow the company in the future. To use some of my last minutes for the financials because you can have more discussion on financials, clearly also with Rene. Where are we today? We're getting traction. So we have seen good growth in the last years. EBITDA margin, 21%, 22% in the 2 years, flat but in line with expectations. We had a good '23, '24. These numbers you know, as good as I, but we are on track also for the future that we want to grow 3% to 5% that we had the 16% to 18%, which we have mentioned, '23 on target, on plan. You've seen the return on capital employed should be above 30%. The numbers for '23, '24 was 40.7% and 29% adjusted. So we are on the right journey here. And we do have an attractive profile. So not balanced business profile, commercial, refurbishment, limited volatility because the market is growing. Low capital intensity and a nice profitability, high cash generation. And we do have, after some years a stronger balance sheet, which I think is a great profile. And I think clearly, market and balance sheet are working together. And what's important, we want to maintain this strong balance sheet, we want to fund organic growth, we want to do value-accretive acquisitions. And clearly, we want to give good shareholder return, which is our principles, we're clearly also we'll have more questions about -- to more detail about what does it mean to have an accretive acquisition. Coming up now some initiatives, how are they fitting together? So 3% to 5% organic growth for the business year. America should support this. So we want to grow further, will grow more in the vertical America to support this. Then we have the 16% to 18% for '25, '26, which we keep on. We are adding the commercial transformation of CHF 40 million. And clearly, what you saw we have more numbers. The software is more difficult to grab and to explain, but you have seen complex reduction only the door closer reduced cost by CHF 20 million. So we have things which are on our plan, where we are already start to execute top line and also efficiency. And with this, we clearly reconfirm our guidance for this year. But also for the coming year, the shape for growth in the program will allow us to be in '25, '26 at 16% to 18% and the new measures will allow us to further progress in our plan. And clearly, we have the plan to go to 16% to 18%. And clearly, we have more ambition, but it's very important, dormakaba did never deliver 16%. So before asking about something else for us, for all of us, it's very -- they're all trained to not tell anything else 16% to 18%. All the measures are helping supporting. I see some smiling faces. But it's not overpromising. So it's really about the 16% to 18% and then we do the next. And I'm confident that we're going to do this. And thank you for your time. Very happy to -- I think no questions now, Swetlana. No question. Thank you for your time. Thank you for listening. Looking forward to have this day together with you and hope to have many interactions later. Thank you. [Presentation]

Welcome back, everybody. I hope you enjoyed the breakout sessions and learn something new. So right now, we're going to start the Q&A session. A few logistic comments from my side, once you are -- once it's your turn to raise the questions, please wait for the microphone to hand it over to you. State your name, institution and try, please, to limit yourself to 2 questions to give everybody a fair chance to raise questions. That's it from my side. Let's start with the Q&A session. Martin Hüsler?

Martin Hüsler, Zürcher Kantonalbank. I have a question on the -- your efforts to increase your footprint in the U.S. maybe by acquisition as well. Can you maybe give us a bit more details on maybe in which areas you are looking for targets? And maybe what size limitations that you see to go over an acquisition without going for, let's say, a capital increase, for example.

Let me start, and I think it is on the U.S. market. It's -- I think it's twofold. One, it's very important that we continue to work on the organic and our operational topic. I think Steve told you that we have started also with the hardware business to look at the go-to-market. We see that on the automatic store, we also have an advantage over the competition because our products are well suited for the market. And here we are today only talking to a limited number of customers. So I think here, we have also a better go-to-market. So I think we have lots to do organically to work on the different go-to-market strategies. If I talk about the opportunities in the U.S., clearly, as I already talked before is, we see ourselves as a company which has good engineering know-how, good product know-how. So if we would continue to go to continue to buy in the go-to-market, so we get more market share to have a bigger stake. So it's not going to be in a technology-driven start-up company much more. There could be some ideas where we work on the technology. But in principle, it is really go to market that with our acquisitions, we have higher market shares. As if you -- and I think today would be not good to talk about -- we're looking at some companies already because it's part of our job here to look at companies. What we see under the radar, there are many companies with [indiscernible] succession topics, but they are much smaller. If you look about like the market, which can be consolidated, you have seen that the big 3, including us only have 30%, 35% market share, which means there are many other small companies which may easier to digest. So I think it's something we have to do every day. And then I think it has to be a market share, less technology. It has to strengthen the core. It has to be accretive. And I think that is today the main topics to talk about. Me being here now for 10 months, I think we -- looking in the U.S. also about what can we do different with our existing portfolio. So I think that is something where today's status is on looking how to grow in the U.S.

This is Rizk Maidi from Jefferies. Just -- I'll start with the question on the margins, really, I'll stick to that. So if I understood the message today, so basically a reiteration of the midterm margin target. It looks like you're stepping up the savings through commercial transformation. So some of that will fall into the full year, 25%, 26%. Is my understanding that you're still reiterating the margin with a little bit more savings here on top of what you initially sort of planned? And how should we think about that basically? That's the first one. And then the second one, maybe for Rene. We saw from Carsten's presentation quite a big step-up in the FTE numbers when it comes to the shared service centers. My understanding is those are all be logged as non one-offs, if I could say so. Can you just help us quantify sort of the cost for this year, please?

Let me first talk on the structure of the cost program and then maybe Steve can talk about the CHF 40 million commercial. I think it is very clear that the CHF 170 million was on finance, IT, HR operations. On this one, we are -- have CHF 84 million already, I'll call it, done executed. So the other 50% are still open, and we are working on them in this fiscal year in this business year. And then we have already started the commercial transformation, and they will come in 2 to 3 years. It means like there's kind of a, I think, the last page which you see on my slides were that the cost program is to deliver the 16% to 18%, '25, '26. And the commercial is maybe going a little bit longer, but I think it is still confirming the 16% to 18% for '25, '26. But I think also what mentioned like there are more measures and 16% to 18% is also like a 2% potential. So I think our ambition is first. And again, I like to reiterate doing 16%. And then we talk the next. And we are very confident that we will reach the 16% with a program in hand and what we will start.

I think it's one -- Okay. Sorry. Yes. Just really to confirm what Till has just said. I mean, the -- certainly in the early phase of some of the commercial transformation, for example, the shared service center, there will be dual costs as we move services from Europe -- the European countries into Sofia. So a lot of the real benefits come further downstream. So we confirm the 16% to 18%, it just gives us a longer-term opportunity.

That's maybe the question to the shared service center risk. We have seen a buildup of about [ 225 ] positions in the shared service center. As mentioned by Steve, our experience with the shared service center in finance, it takes about 2 years to really realize those savings and actually comes up with an upfront investment due to work shadowing. So that means our experience is actually it will create some additional burden on the operating expense because we will not read that as items affecting comparability. These are investments into the future. And we are confirming, despite this additional cost, our market guidance as mentioned, above 50% for this financial year and 16% to 18% for next financial year.

Remo Rosenau from Helvetische Bank. You mentioned within simplifying access control solutions that you want or need to reduce software platforms by more than 50%. Sounds like a huge number. I mean -- because every solution with a known software system or I mean 50% -- more than 50% down that yes...

I think it's also in the -- I had also a couple of discussions in between when you had the breakout. So I think first important that -- you want the second question first, and we take out the mic, or otherwise, you will have a -- maybe what's the second question though? I won't like people having the mic all times, though.

Just you got on. It's not directly related to that...

Please, first to the question and we deal with that later...

Okay. So the second one is about your internal IT situation. I mean, are your internal ERP systems between all [indiscernible] are really all integrated into one platform. is your ERP system now state-of-the-art? Or is there still also some work to be done?

Okay. Two questions related to software, but totally different. The one is the go-to-market. And as you know, the go-to-market, our products, margin can give more input maybe. But as you know, we have been active in the region, U.S., Europe and Asia in parallel. And even in Europe, we have had some subregion, which means, for example, for hospitality, for hotels, you have different software platforms only for this vertical. The same, if you look, for example, multi-housing or the commercial, you have some options, some software version, which are primarily for the German market, heavy engineered or Swiss market, and then you have other versions for U.S. And this is, in the end, this go-to-market software platform. It is a mid-double-digit number, which is today active and where we have to talk about the maintenance and some of the platforms have been popping up because there was no alignment. And now the question is really for Martin and the team. How do you align? What can you migrate? What can you migrate, how easy? And this is a journey of 3 to 5 years that the customer in the end doesn't have any friction because in the end, it's about features. Some software version have same features, but not all the same because the hardware is different. And here, that is the front end or the go-to-market software where we have this high number, which came from history or from legacy, which we have to work on. The second part is the IT ERP infrastructure. I think everybody of you knows that we are a user of SAP, so many, many SAP users we have in dormakaba. And here, they have been programmed in the part IT programs and still the landscape is very heterogeneous. So it means like we have different software SRP numbers, different software SAP systems. We have in the U.S. is sometimes much more closer to other providers. We have some smaller in Europe and same like in Asia, where we have double and triple versions of ERP. As you know, we had a program reside, and we are restarting it. And I think that is, on the one hand, an IT project, but much more important, and I think that was also in the session I had in my break is it's about the underlying processes. And this is what did not happen after the merger. So operationally, you kept the old processes, which means like you can only grow as fast as the process allows and the process are different. And this is where we are going. It will be a project for 3 years plus, going to be restarted in January. And this is -- it's a benefit of if you want to really grow efficiently. So today, if we grow above market and then you look about how much of the scale ends in the bottom line. If you have an efficient process, your gross margin should end up in the bottom line. If you have to -- if you're not efficient, you need more people, it is -- you don't see the result of the scale. And I think that's exactly why we're working on the ERP system, where it will be a 3-year program, is going country by country, company by company to work on these IT platforms. But Magin, maybe you tell something more about the software migration, how long it takes and what is the -- where it comes from and how to solve it?

Well, when we took the exercise to transform and reduce the complexity of software, the first approach was we were in front of legacy systems. And we first took with Steve the approach, let's see what are the customer segments that we want to address with that software. We have defined 4 core customer segments. And we then identified the different needs, whether there were some needs for America specific. But basically, what we have done is we have had several smaller softwares under-critical that were just kept on maintenance and that were just adding complexity to the market, to the sales and disorientation to what had to be sold. So in that sense, I think also with Steve, we have reached clear orientation on what are the products that are in the basket of the salespeople to sell and which ones are the ones that we are going to migrate or if the critical mass is so small, we're just going to golden freeze and leave under zero maintenance for the customer to opt for another better solution without a complicated migration.

I think just to reiterate, we now have the target architecture, which platforms are the platforms which are long term to invest in.

My name is [indiscernible]. I work for [Beta] Asset Management here in Zurich. I have two questions on the M&A side. Given that your two biggest competitors also have quite an appetite and then assuming all the pipeline of opportunities out there has been approached by one or the other at some point. How do you compete on M&A going forward without entering bidding wars? How do you convince one of those smaller shops to come with you and not with them? So that's my first question on the M&A dynamic, knowing that everyone wants the same thing. Second question in the Americas for having spoken with distributors of products in the U.S. One comment that I heard about the perception of your company at least at that point in time, that was earlier in the year, was that your lead times in the U.S. were worse than your competitors, and that made a difference sometimes to decide to go with the other two. Is this accurate? Or is this -- and if so -- is what are you doing to change that?

On the M&A topic, and I think we always give a guidance or we gave a guidance this year for the organic growth. And as we believe together that the market is very interesting and we want to go inorganic, so the 3 plus 5 plus the inorganic part in the future. I think you have to -- some criteria how we want to look at it. And what you mentioned is if there is a hot asset, people will bid for it. So I think that's something where we should expect when there's one asset really in the focus. What we see today is there are many succession topics where companies in the smaller area, be it CHF 5 million, CHF 10 million, CHF 20 million were you talk to people, you know for a long time, your company knows and they are much more aligned to us and to the competition. And here, it will be not the public situation. And clearly, here, we have the benefit of not ending up in a very competitive process. I assume, also like then we want to go for market share. And I think market share, as you know, that the other two are -- someone have acquired already a lot. So there could be some limitation that we have more room to maneuver just to be very, I call it, in a neutral positive way, I think maybe we have the more ways and can look differently and the others might have more limitations, which could be beneficial for us. And clearly, if something is really everybody wants to have, it will be something where the biggest synergies to have a good plan how to look at it. And I think that's how I can answer today. It's very important to look early on which companies if you really want them, engage early to avoid to be in a competitive process as possible as try to be as early as possible. On the U.S. lead time, maybe, Steve, you want to talk about the U.S., the topic in the last year?

Yes. So I mean I would say that as we've grown and we've grown with volume in North America, clearly, that gives us a pleasant challenge, which is to try and keep up with the deliveries that, that demand creates. I would say many product clusters in North America were strong, if not better, than the competition. So hospitality solutions, we have really good on-time delivery market needs. In some of the other areas, as we increased in volumes, we saw lead times extended. We've worked with our colleagues in operations and specifically, let's say, in automation, access automation to reduce those lead times down to market acceptable levels and beyond as we've seen in recent weeks. And that really is just down to the collaboration between the operations colleagues and the marketing colleagues. We need to make sure that our S&OP planning is refined to match our growth aspirations. And -- but whilst acknowledging that we can improve, we need to work out how we can improve. So it's probably a fair criticism, but I would say in recent months, recent weeks, we've made really good inroads into improving that reliability just through good collaboration internally.

Delphine Brault, ODDO BHF. So you said that more than 80% of the Shape4Growth program was right. I'm curious to listen what was wrong in your view in this program? And second question, can you be a bit more specific on your North American market? You decided to refocus on some verticals? What drove your choice? Was it a question of market penetration? Or market prospects? And what could be the breakdown of verticals in 5 or 10 years from now as compared to your split presented on Page 19?

I will try to answer the first question and then Steve will go to the North American market. No, I have been the -- I was elected to the Board of Directors last year in October when I joined the Board. And I got to know about the Shape4Growth program as a Board member. So you see the colleagues were presenting what they want to do and together with a consultant. And I mentioned it in the earlier conversation today that some CEOs when they start new in the company, they want to have like what is the baseline I'm starting off. So they take -- now we have Baig, we have BCG, maybe go McKinsey, we like them all so they show us then our R&D costs are 4.4% instead of 4.5%, and the benchmark is 3.9% or 4.0%. Which means like I think the company knows a lot about where we are and the Shape4Growth. The starting point was accurate, but not 99%. I think lots of the topics we have to make decision in an imperfect world. And then you are starting. And over the process, you're getting to learn more about what is important. And I think here what I decide on to start on with 80%, but then you have to filter what is noise, what is information. So we changed some of the topics. For example, one side in Germany was not closed. We kept it. We have a different model. So I was -- the idea was together with the team we keep on with the Shape4Growth. We know not that some head count numbers are whatever and now overdue, 439 people in this site. So maybe it's 420 or 450. So it's more like let's continue, and let's more -- get more the closer you go, the clearer you are on really the process. It was me like -- so I felt something the program is somewhat accurate, and it's the right basis to continue, because not to lose speed in execution. Instead of having maybe 85% or 95% accuracy and then start 1 year later. And this was a trade-off between time and maybe what I had enough in also having colleagues here -- enough jobs that we're doing the right things. And if it's not right to adjust. It was more like the starting point to know everything, German engineering, 120%.

I think to answer the vertical question, specifically in North America and then probably extend it to generally. I'd say North America, where we will still try and build upon our strengths. So sports and entertainment, we hold a very strong position, and we'll continue to invest there, working with our partners such as Ticketmaster, as I mentioned in the presentation. In the airport sector, we're starting to see greater acceptance of our solutions and the innovation of our solutions across the American infrastructure and air transportation. They're investing heavily in airports such as [Dulles], for example. We're highly engaged with them and that's on the security side, but also the airline partners who work on their own hospitality rooms, they're fast tracks, we're well engaged there. So I would expect to see an improvement -- continued improvement in the airport sector. And again, specifically in North America, our multi-housing offering has really improved over the recent years. I think you will have seen the EVO lock in the demonstration room there, the American form factor very well received by the customers are much sleeker and more modern design compared to our competitors. And that's supported by a really adaptive software suite behind it. So I'd expect us to see continued growth there. And that's where we're strong, where there's real opportunity for growth, and we're starting to see that with selected partners again, in North America is data centers, and we've got good offerings and good solutions and working with the right partners, the right route to market. So I would like to see that improve. Probably the final one in North America is utilities as well -- sorry, is education. We have a strong offering in education. This is really boosted by the extension on the Cormax and patent and also the introduction of the 5-pound (2.25 kilogram) exit device, which will cement our specifications. Globally, when it comes to verticals, utilities, is a real clear opportunity for us. It's traditionally been a slow market to adapt to technology because of the physical nature of the offering. And as you saw today with [indiscernible], we have a very good offering that I think will enable us to take part in European initiatives such as critics, critical infrastructure. And also, again, our form factors are reliable and robust. So they pass like the loss prevention tests and the physical attack tests. So there's a good opportunity. And while sometimes that element of a sale is quite small, it pulls through elements, a broader portfolio. And the same in multi-housing in multi-housing where we've seen successes it pulls through other parts of our offering. So I think we're well placed to develop in those particular verticals.

[indiscernible]. I have a question regarding the American market as well. You mentioned that it's one of your biggest markets, and you also want to grow there. How do you view the influence of political changes like we've seen with the election of President Trump? Do you think that will have an impact on your industry and in the markets, for example, with the infrastructure industry? Or do you think it can even benefit you?

I mean I'll go first. I've always been -- don't comment on politics. So it's my first statement. But I think when you look at inside North America, there were opportunities -- there are investment opportunities whichever administration took office. So I don't think that changes our anticipation or affects our growth plans. I think our growth plans will be independent of which administration came in, and that's what we -- it's one of the things that we considered when we launched it. I mean I think I'll pass when it comes to what impact does it have in North America, it's probably more external trade import and export, which is where we'll see the potential biggest impact. So maybe Carsten can take that one.

Can add to this as well. You'll see in principle, we've already started utilizing principally our Nogales factory principle to moving product out of China into the factory. This is a big opportunity. And this we're speeding up quite fast. I think the decision was done a couple of months ago, we're already starting now here. So acceleration of this activity started as well, which is good here. Further opportunity looking at this point of time. And then what we need to evaluate more in details the principle, what does it mean principle in the full supply chain here when it comes to component topics. But here also, we have good footprint, local footprint. So I don't think that we have big issues from this perspective. We have -- we were looking into this in more details here and we're looking at the risk mitigation overall. So we have a task force team for sure on this as well because tariffs could impact us here, financial operations as well. We're looking principal and with legal organization in North America. We were looking at this day by day. What could be the opportunities how we can act on this as well yes. But I see principally limited effect from our perspective.

Just maybe to look at from our joint perspective. We have seen that in the last years, interest came back, cost of transport changed. And also that this convergence of the world changed. So I think our role must be that we independent of any political direction in countries, we want to be in more local. So we do more in Americas together with Mexico, we want to be more in Europe for Europe. And then in Asia, we also talk about like China for China. So I think we have to -- when we are going in one market, we have to want to win in the market. And I think this is something which is really local. And I think we globally have to support the local company, local entity to win in the countries, which might change. But independent of any changes. I think our business stays local, and we have to do the best to win locally.

Patrick Rafaisz, UBS. Can we stay on this topic, Carsten, you showed that slide, right, that Till also showed with the local for local production. Can you just remind us the 50% in Asia that's not local for local. What are the flows internally here or what kinds of products, whether the destination markets? And related to that, the second question. You mentioned also Carsten, the expansion of Bulgaria, adding another -- adding more capacity by 26%. How big do you think Bulgaria could become as a production hub long-term? Share of production?

Yes. Two topics. The first question about the local for local in Asia Pacific. So we have a big facility in Singapore, where we are principally producing door closures principally for the world, yes. So this is a big -- this is a principle driving the 50%, yes. And the Singapore facilities where we are concentrating those activities for door closures here. And this is driving these main topics from this perspective, which gives us the opportunity to bundle, to scale it. And also, you see at this point of time the first automatic lines in Singapore, yes. So it's scaling up here, consolidation gives us the opportunity as well, yes. The second topic about the further opportunities in low-cost countries. It is, in principle, in Nogales, Mexico, but also Bulgaria. So first of all, the extension expansion, what we're doing at this point of time has 2 effects. First of all, what we already communicated. Moving out from Germany, from Buell, those kind of products into Sofia. We also take the advantage to go out of the current facility, which is in the middle of the city surrounded by housing so it's a nice area. So also moving out as well, take advantage as well. So this is what we are already doing at this point of time. What I can tell you, principally, there are further opportunities coming. And the new facility is built up in the also in building, you can do in a modular concept at the end of the day. So the building is built up in a modular concept so that if we see more opportunities coming up here, further grow, we can expand it step by step, yes. So furthermore, then we communicate. I think opportunities coming up. And I think it's something we need to work on and furthermore, but it's with go.

In addition, I think you have seen that Nogales, I think is 15% and Sofia is 5% which shows the potential. So I think Nogales already more move for Indianapolis to Nogales, which we can extend and also on the supply chain. And I think Sofia just tells you the big potential. And I think it's on us and Carsten to come up in the next months, maybe for next year with a target, what do we believe? How much of the European workload can we do out of Sofia. I think it's too early. It just shows the potential and where we are starting and we are investing in the plant. And clearly, 5% is not the number you want to end up. We'll tell you maybe next year, what should we target here.

Holger Frisch, Zürcher Kantonalbank. Two questions on the saving initiatives. So the targeted CHF 40 million savings from the commercial transformation, I understood that a major part will come from further workforce reduction. Where is this supposed to happen? And can you talk a bit about the phasing or the time line of the costs and the savings? Or will the cost be more front-end loaded and in the savings back-end loaded? And then on the additional CHF 10 million plus CHF 10 million savings from the streamlining of the Harbor portfolio, are there any additional costs related to these initiatives?

So we made a conscious decision not to communicate the number of affected employees today. We have a process to go through, which we follow. We've got governance in each of these countries when it comes to entering in negotiations or information with the employees. So we took the decision not to do that. There is a clear plan. It's just not something that we're able to communicate at this stage. In terms of the phasing of the costs, the cost will be phased over the duration of the 3-year period. I wouldn't say they were necessarily front-end loaded when it comes to the termination costs. We have a clear country-by-country plan, and that will be communicated individually country by country. Some of the transformation costs such as involving product and involving digital tools will be more front-end loaded, but the majority of the costs are restructuring termination expenses, which will be phased over the time period.

Maybe the question regarding the cost about complexity reduction or closure. This is a normal operating expense so that this will be part of the normal P&L structure.

Just a question generally on the electromechanical part of the business. I probably missed this in the slides. Can you just give us a sense of how big it is today? And what has been the growth that you've been seeing there? And then from an R&D perspective, I think, Till, one of the criticism before at dormakaba was perhaps the company has been overinvested in electromechanical locks at -- or electromechanical solutions at a time when the market has not matured enough at the expense of the more hardware, bread and butter, for example, door closures, which is one of the most, if not the most profitable product that you're selling. How do you think about sort of that priority between the electromechanical part and then the innovation amongst the hardware business is number one? And then number two, just on the modernization opportunity. I think a peer industry, namely the elevator industry, has been quite vocal about the potential here over the next coming years. Just thinking about how you think about the opportunity here? And more specifically, in terms of how do you see or how the access control industry sits when it comes to electricity consumption within the building? Is it a case of commercial building just getting away with it by just replacing lighting, heating and elevators and then maybe access control does not consume a lot of electricity. So you can get away with that. Just if you could just help us understand there.

Okay. I would like to answer your question regarding the electromechanical part, you said there was a criticism in the past that we had invested too much on the electromechanical part. I would like maybe to rename, so the electromechanical is the access control solution, so the electronic access control solution. Electromechanical, we consider also the access automation and all the others. So focusing on that particular topic. The reality was that these software platforms that we are now trying to reduce these software platforms were intended to be platformed into one solution. And the big investment that dormakaba had done was to build on a platform that the decentralized structure of R&D did not benefit from. So there was like dormakaba digital entity, which was developing a platform base, which the other regional development centers did not exploit. And this, let's say, was an organizational structural topic that we are now addressing. So that now there is no choice when we are migrating a software into a new path, then we follow the platform business. So this is, again, scaling global, which is my main light motive other than innovation the product type shown and the solutions. But the day-to-day work of me is still strongly related to transforming the legacy into a healthy platform, global scaled business. and then being able to reduce the legacy costs that we have in the R&D department and being able then to invest more in innovative products.

Maybe in addition to Magin, when I joined dormakaba last year as a Board and then as CEO. I think many companies between 2017 and '18 was we're investing heavily in digital, but it is was really -- sometimes not really focused. And that then you have the many platforms, many whatever security protocols, safety protocol whatever. And what -- I think it's very important that dormakaba stands for mechanical, electromechanical, software and digital. And that once you develop a product, it starts in mechanical, it's getting add-on and add on and then it starts to be a connected product, which can get more intelligent. And if I have an intelligent product, I will work on a starting point where the product was already mechanical. So it's a family and the family is the one guy who doesn't need connectivity, but the same guy, and then I put a sensor and get connected. So it is seamless. And that's a journey. And I think much of it in the past. And if I now look in some buildings, we still have a mechanic -- mechanical. And now we offer the customer, you can have mechanical, you can have electromechanical or you can have a sensing, yes. And there will be more sensing coming and we can just decide how much sensing we want. And I think that's the journey and we want to offer customers the whole journey. And then we talk about which features, which customer journey you can get with this. And I think that is happening on the door closer. It's happening on the automatic doors, including motion IO. And I think here, it's important that it's not that mechanical and electromechanical it's -- in the end, it's the same family, but you add on the next one and you don't do a parallel, which happen in the past. So I think here, we have to align that we have always like a family which start mechanical and then adds on features and gets more complex and you decide how much -- how big of a complex product you want because of features. If I think about the bigger change. And you talked about this, how is access control in the future. I think one is very important, which is going mobile. So key card mobile phone, which is important like that we have a seamless flow at home in the office. We have to at one point this time decide on do we want to have camera and then door opens or not. I think it's also like your own -- look at appetite, how tacky you want to be. Or you still need a key for -- we talked about the key for the card. So I think there are lots of things which there's a clear key card mobile. And then the other topic is on premise and cloud. There will be more cloud, because cloud and print is more safe. I think this topic, interoperability is a very much important topic that you can also -- your systems can work with others, so the standards. And I think then clearly about features and one topic would be controller-free access. So doing controllers, you should think about energy. Do we need batteries? Or does the energy harvesting be enough, I think same like heat cooperation in electric vehicles. So lots of things where we can talk 2 hours. We have to decide where we are today. I believe -- I'm sure we have good engineering capability. So we know a lot, and we have to find the right time and what's coming, which appetite, which comes on the market, what's required. I think [indiscernible] is great because it helps the customer on the journey. So I think we are in the middle of this development and believe that we have lots of the ingredients in our own hand.

I think I'd just add to that when you talk about the energy consumption of an access control system, it's relatively modest compared to the energy consumption for heating and ventilation. So the benefits of our solutions are confirming that doors are closed. Confirming that we reduced the door closing time so that we can actually save energy in other parts of the building. So it's -- it can be beneficial even just with simple door monitoring to same energy costs.

I think we've got time maybe for 1 or 2 final questions from the room.

Sorry, me again. I have another one. A quick one, just you're saying you have a task force in place to examine the whole tariff situation. Did you get any comfort that Mexico and Canada could not be impacted by new tariff rules or it's still open? As far as I know it's still open, but maybe you have more confidence.

We do not have more information than you. We also can follow what is public. And I think today, it's -- we follow what is being discussed in the forum, but it's not only press, but it's also what's behind, what's happening on the regulation side. And I think here, we should have the same basis.

One final question Yes in front.

[indiscernible]. From a longer-term perspective, with visionary, could you maybe allude where you see the industry and Kaba such in the frame of maybe 5 to 10 years in terms of capital intensity, footprint, the vertical integration, monetization of services where you only make 15% today, data is the new goal. So is there a potential there that is substantial?

It will be a good crit to do then the financial model, but I can tell you we want to do more in the U.S., we want to grow, GDP plus 2, which means like we want to increase our market share in the U.S., U.S. should grow. We want to benefit from more service. You have CHF 20 billion of asset installed and you have CHF 450 million of service. We want to do more service. I think Asia is someone where we are strong, where we can do more. From the priority, I think America is more important towards the markets where we are already in. We want to do more in the best cost countries, which is another potential. And -- but the DNA of dormakaba should be that we are talking about how can we work on the customer journey. So what I just mentioned is the structure though, more invest costs, focusing on regions. But then the topic is like which products we want to show. And I think here, it's important that dormakaba is a company of product and people. We want to attract the right talent to work on the future of the industry, be it controller free, be it more -- even more mobile, how can we work on the ecosystems. We have this Las Vegas experience where we can about self-service security check. Many more options will come. And I think on asset that we are part of this ecosystem decide where we want to be strong. I think security is clearly one of the key drivers. But we should be seeing that we can be part of many solutions with a system which is, I call it, where we can deliver what dormakaba as a whole company and not as a -- I call it as a bouquet of different flowers, but one dormakaba, which then it's part of the wallet and part of the solution of the customer.

All right. On that note, I would just close our session -- Q&A session and would like to -- first of all, thank you very much for your active contribution for your great questions. Please join us for lunch. Use also the opportunity to maybe raise any further remaining questions right now and interact with our senior leaders. We expect you to be back here at 1 p.m. for the customer testimonial session. All right? Thank you, and enjoy the lunch.