Georg Fischer AG (GF) Earnings Call Transcript & Summary

Ladies and gentlemen, it's a great pleasure to welcome you to our joint conference for analysts and media here in the Metropol in Zurich. Present from GF side are our CEO, Andreas Muller; our CFO, Mads Joergensen; our Head of Investor Relations, Nadine Gruber; and myself, Beat Romer, Head of Corporate Communications. CEO, Andreas Muller; and CFO, Mads Joergensen, will provide you with detailed insights regarding our financial year 2024, and outlook for the current year. And in addition to our usual agenda, we will also offer you a first glimpse into our new strategy 2030 with the key pillars and also the main targets. Following the presentations, we will have planned a 30 minutes Q&A, which will be moderated by my colleague, Nadine. First, we will take then questions from the audience here in the room, and afterwards, the questions from the webcast. Afterwards, of course, you are warmly invited to join our lunch in the room adjacent. With that, I would like now to hand over to Andreas to start the presentation. Thank you.

Thank you very much, Beat. Also from my side, a warm welcome, and thank you for joining our annual conference. Let's turn to Slide #3. Highlights of the year 2024. Thanks to our strong global presence in attractive markets as well as the proactive cost measures, GF delivered a solid performance in a challenging environment. Our comparable EBIT margin came in at 9.4%, a tad below the record level of the 2 previous years. Through strategic acquisitions, GF was able to strengthen its presence in the attractive American market and builds on a diversified European presence. In 2024, GF announced the most significant transformation in its corporate history, paving the way to become a global leader in flow solutions. The integration of Uponor has increased traction and is well on track. Key milestones were, on the one hand, the divestment of GF Machining Solutions. We expect the closing of this transaction in the first half of the year, and on the other hand, the evaluation of divestment options for GF Casting Solutions, a process which is ongoing. To underscore our strong ambition for the flow solutions business, we will be sharing first signposts of our midterm targets today. Upon completion of its transformation, GF has the ambition to grow organically 4% to 6% per year, reflected in a gradually increasing profitability, reaching a 16% to 18% EBITDA margin by 2030. We will further introduce the free cash flow conversion as a key metric for value creation and target a conversion rate of more than 50%. The detailed strategy 2030, we will launch later this year on our Capital Market Day. Let's take a look at the key performance indicators on Slide 4. Sales decreased organically by 2.6%. On the one hand side, we saw an ongoing subdued European construction sector and challenges in the automotive industry. On the other side, our industrial water treatment and microelectronics business in Asia Pacific and Europe has been affected by delays in industrial projects. Negative currency effects affected both top and bottom line. Amidst these changes, GF delivered a solid EBIT margin of 9.4%, excluding items affecting comparability. Including these effects, the reported EBIT margin stood at 8.1%. The comparable EBITDA margin came in at 12.9%. Free cash flow before acquisitions reached CHF 184 million, even accounting for the adverse cash impact of acquisition-related financing costs and certain items affecting comparability in the range of approximately CHF 80 million. Financing costs are expected to decrease substantially following the company's successful refinancing through corporate bonds and the completion of the announced divestment of GF Machining Solutions. At the upcoming Annual Shareholders' Meeting, the Board of Directors will propose a dividend of CHF 1.35 per share. This represents an increase of CHF 0.05 versus the previous year. Let's turn to Slide 5, where the chart illustrates GF sales split in 2020, 2024 and the projected outlook for 2030, highlighting our strategic transformation and ambition to become the global leader in flow solutions. Our transformation gained significant momentum in 2023 with the acquisition of Uponor and accelerated further in 2024 with the announced divestment of GF Machining Solutions to UGG and the evaluation of the divestment options in regard to GF Casting Solutions. Going forward, GF will focus on its 3 business areas: industry, infrastructure and buildings, leveraging attractive megatrends to drive profitable growth. GF strives for a well-balanced portfolio of flow solutions doubling down on one common denominator excellence in flow. Slide 6. Global presence of flow solutions. With CHF 1 billion in sales, GF flow solutions has reached a critical scale in the attractive but also competitive American market. Their size is a key success factor. With a comparable footprint to our operations in Europe, our activities in this region are set to become increasingly relevant in the years ahead. Beyond the Americas, we have strengthened and diversified our presence across Europe, balancing our position in Central Europe with a significant foothold in the Nordics and Baltic countries. Also, our expansion in the MENA region, reported on the rest of world, has been accelerated by the 2023 acquisition of Corys Piping Systems. Asia Pacific remains an important driver of growth, albeit with a reduced exposure to China, reflecting a strategic shift towards diversified regional opportunities. Our global footprint offers great opportunities and allows a strong localization while maintaining world-class standards in brand, quality and innovation. On average, we expect only 15% of our products across regions. Slide 7. The swift integration of Uponor is well on track with realized synergies already exceeding our initial target of CHF 5 million to CHF 7 million for 2024, aligning with our increased ambitions. A key driver has been leveraging procurement synergies as the 2 flow solutions divisions collectively manage a CHF 1.5 billion procurement budget. Notably, only 30% of the current supplier portfolio overlaps, presenting significant consolidation opportunities for common parts. Initiating commercial integration activities, our teams are actively working to bring the combined product and solutions portfolio to market, unlocking new growth opportunities. Slide 8. The operational footprint optimization in Europe is well on track. In Poland, we are in the process of consolidating for legacy Uponor production facilities into a state-of-the-art cost-efficient manufacturing site. This new facility is designed with sufficient capacity to accommodate future product line expansions for industry and infrastructure flow solutions. In Turkey, GF has successfully completed the consolidation of production facilities by closing the plant in Urfa near the Syrian border. This move streamlines resources and enhances operational efficiency in the region. In Italy, we are progressing with the closure of a GF Piping Systems building technology plant, integrating PEX and multi-layer composite pipe production into our Building Flow Solutions facilities in Sweden and Germany. These prominent examples of our footprint adjustments will serve as a key driver of operational synergies, further optimizing our cost structure, efficiency and production capabilities across the region. Slide 9. In 2024, we achieved further important milestones to reach our sustainability targets 2025, and taking a leading role. For the second time, GF achieved an A rating in CDP, an outstanding achievement. In addition, GF is part of Dow Jones' best-in-class Europe Index. The share of products with social or environmental benefits in the group's total sales has increased to 76%, surpassing the consolidated target for GF and Uponor of 74%. This achievement underscores the strong integration of sustainability within our business model. CO2 equivalent emissions were significantly reduced by a further 14%, thanks to various measures such as more renewable electricity, efficient production processes and newly installed photovoltaic systems. Our accident rate further decreased to an LTIFR of 6.5, reflecting GF's commitment to highest safety at work. Let us now take a closer look at the divisions on Slide 10. GF Piping Systems sales decreased organically by 3.7%. Sales totaled close to CHF 2 billion. The division experienced a temporary slowdown in industrial projects, which led to reduced demand for ultra-pure water applications, water reclamation and treatment as well as chemical processing in Europe. Additionally, persistent challenges in the building technology sector had a negative impact on results. In contrast, the marine business continued its strong growth trajectory with both new build and retrofit activities surpassing pre-COVID levels. Civil engineering investments in Europe remained stable, allowing GF Piping Systems to expand its market share in the water distribution business, particularly in Eastern Europe. To pave the way for future growth in the Middle East, GF expanded its presence and fabrication capability in Abu Dhabi and opened a new sales office in the region. Additionally, in North Africa, GF inaugurated a new production facility in Cairo, Egypt, further strengthening its regional presence. With a comparable EBIT margin of 12.7% and a comparable EBIT of CHF 250 million in 2024, GF Piping Systems demonstrated its resilience despite a challenging second half. This is even more remarkable as we have been affected by a significant negative currency impact of CHF 20 million on the divisional EBIT. Let's now turn to Slide 11, which highlights GF's capability in the growing retrofit market. In 2024, GF retrofitted one of the largest desalination plants in Dubai, a region where desalination is essential and where nearly 50% of the world's desalinated drinking water is produced. Desalination plants typically require a retrofit every 10 to 15 years due to the high intensity of chemical processes. At this stage, they often face severe infrastructure deterioration and original construction plans are frequently missing. Typically, the market relies on a manual documentation and mapping process of the existing infrastructure. We have put up here in the room an installation. This is a scanner from the company Leica from Switzerland, where we have an exclusive partnership, which we offer this kind of service around the world. With this scanner, you will be able to scan a typical installation after 10 years, as you can see here, the deterioration of the installation. We have, with this kind of concept, which is seamlessly integrated with a pad, an app to a CAD drawing or high-precision model, which we then automatically can forward to one of our off-site manufacturing centers where we have some 16 around the world to produce then ultimately the skid, as you can see, symbolized and illustrated on the picture here in the room. This end-to-end offering not only streamlines retrofit, but also creates long-term opportunities for new businesses. By providing accurate digital models, GF builds strong customer relationships, often securing further projects that are 2 to 3x the size of the original. Let me move to the second business area of Piping Systems, Slide 12, infrastructure. With global attention increasingly focused on resource conservation, water utilities play a crucial role in maintaining reliable water supply and infrastructure. They face growing challenges such as severe weather events and aging infrastructure and shorter asset life cycles. GF is at the forefront of innovation, providing sustainable water solutions that ensure efficiency and reliability. Our field engineers and installers offer on-site project support, enabling owners and planners to focus on their daily operations without disruption. A prime example of GF's expertise in our recent retrofit project at Berlin's largest wastewater treatment plant. In the project, an outdated 50-year-old concrete infrastructure was replaced with a state-of-the-art solution. A highlight of this project was the installation of a large diameter repair coupler as well as the integration of Uponor pipes produced in Poland. In the image, you can see 1 of 3 cascades being replaced, while the plant remained fully operational. Initially, we thought we're going to bring in one of these couplers with us. You're going to see it on the roll up on the left. This is the original dimension of this WAGA coupler. WAGA is a GF company in the Netherlands. It's the quality leader in repair couplings in Europe. The coupler over there is a 400-kilogram part. So therefore, we have refrained to bring it along with us. What is to mention here throughout this entire high-pressure project, our technical manager for infrastructure played a pivotal role providing expertise, guidance as well as on-site support to ensure a smooth and an efficient installation. Slide 13. In 2024, GF Building Flow Solutions reached sales of CHF 1.1 billion, reflecting an organic decline of 6.7% on a full year basis. For the second consecutive year, the division showed strong resilience in profitability despite ongoing subdued European construction markets. Despite the continuing uncertainty in the market, we saw a regional stabilization towards the end of the year. Driven by the political uncertainty and the decreasing affordability for housing, the U.S. saw a softness in the residential markets in the last quarters. However, worth mentioning is that since December housing starts have been improving again. The comparable EBIT reached CHF 112 million. The comparable EBIT margin under Swiss GAAP FER stood at 10.3%, reflecting the benefits of its margin resilience initiatives and the transformation of the operating model. Important to mention is that excluding the acquisition-related [ PPR ] step-up depreciation on property, plant and equipment, the comparable profitability is roughly 100 basis points higher. Aligned with our transformation strategy, the division has streamlined its operational footprint by launching a new complementary offering and joint innovations, paving the way for enhanced commercial synergies. Let's turn to Slide 14, which highlights a compelling example of how GF is leveraging commercial synergies to expand in the attractive U.S. commercial portable water market. GF creates synergies by combining Building Flow Solutions, strong sales force, comprising over 400 sales professionals focused on potable water distributors and contractors, with Piping Systems industry and infrastructure expertise in PVC to bring chlorinated water into buildings. Together with the Uponor brand, our solution portfolio includes now the rigid ChlorFIT system, which brings water into the building and distributes across floors, the flexible AquaPEX system, which distributes water to kitchens and bathrooms as well as a newly developed transition fitting, enabling seamless connections between the 2 systems even in tight spaces. And this may sound very easy and simple, and I have been asked why does it take that long to develop something like that. I can tell you, developing a fitting like the new adapter fitting, which is an embedded plus item in a plastic injection process is not something which happens overnight, it needs to last for at least 20 to 25 years. Therefore, you're going to have to simulate a lot of tests before you can release such kind of a product to the market, and it didn't exist before. The typical new adapter replaces approximately 5 individual fittings, which have been glued together in the installation on site. You can just simply imagine the risk for failures by combining 5 fittings on site. You see it here, the reduction on a T like that one here. And then you have this brass element here, which is over pressed and by a PEX system allows a quick, fast and super safe installation. It's pretty unique. Market launch will be in April. We have released it on one of the biggest installer exhibitions in Florida in January. We got a very positive market response. And here also on this piping system on this installation, you see the advantages of the PEX system. If you would have a copper system, you would have to implement here a fitting, whereas our PEX's flexible systems can be branded with a support. And therefore, you're going to save 2 connections. Now one on the left and one on the right. As less connections as safe for the installation, there's more peace of mind you will have in a leak-free installation in an apartment. This is very unique, and we are the only one offering now the rigid system, which is used for the vertical convenience of the water in big office commercial buildings versus you have here the floor distribution for the water, for the restrooms, but also for the kitchens, which goes then normally that way. So it's unique. It's a one-stop shop with one solution provided by the market leader for this kind of installations. Now to GF Casting Solutions, Slide 15. After a very promising start in the year, GF Casting Solutions faced major challenges in the European automotive industry in the second half of the year. Organic sales declined by 5.6%. Mainly supported by the ongoing accelerated demand in the aerospace sector, the division's comparable EBIT for the year stood at CHF 56 million, resulting in a robust comparable EBIT margin of 6.7%. In line with the disruption of the European e-mobility transition, GF Casting Solutions results was impacted by the closure of e-mobility related operations in Werdohl, Germany, which led to a negative onetime effect of CHF 14 million. The evaluation process to identify the best strategic options for GF Casting Solutions is progressing. In the meantime, GF Casting Solutions remains fully committed to maintaining all operations and pursuing its Strategy 2025 targets. Let us now turn to GF Machining Solutions, Slide 16. After a slow start, the division saw a recovery towards the year-end and mainly driven by the U.S. and China, especially the aerospace industry and the continued strength of the energy segment contributed to the good momentum in the second half. Sales for the year 2024 amounted to CHF 885 million, reflecting an organic growth of 2.4%. Comparable EBIT for 2024 was CHF 52 million with a margin of 5.9%. The divestment process of GF Machining Solutions is well on track. The transaction is expected to close in Q2 2025, pending regulatory approvals. With that, I will hand over to our CFO, Mads Joergensen, for a detailed look at our financials.

Thank you very much, Andy, and good morning, everybody. Welcome. Let me now take you through the financials. As you've heard from our CEO, we had certain changes last year that also triggered a review on how we present our income statement. So you see for the course of transparency that we'll be presenting our income statement in discontinued and continuing business. The discontinued business is, of course, GF Machining Solutions. Let me now start with an overview of our net sales on Slide #18. In 2024, net sales for GF Corporation were up by 19% year-over-year. The increase was driven by the full year consolidation of GF Building Solutions. Organically, that's without acquisitions and currencies. The net sales of GF Corporations declined by 2.6% to CHF 4.8 billion. Net sales of GF Piping Systems declined by 3.7% organically, with all 3 segments: industry, utility and building technology being subdued. Net sales of GF building solutions -- Building Flow Solutions came in at CHF 1.1 billion. As when we compare the period, November, December 2024, with the same period of 2023, net sales was up organically 1%. However, if we compare the full year of the division, the sales of Uponor reported in 2023. We see a decline of 6.7% on a pro forma basis. Please note that the financial results of GF Piping Systems and Building Flow Solutions still reflect the original structure at the time of the acquisition. This means that the figures of GF Piping Systems contains industry, utility and the building technology, whereas the Building Flow Solutions contain also the numbers from infra. Net sales of GF Casting Solutions dropped by 5.6% organically. While we recorded a positive development in the first half, the second half was a decline of 12%. It was driven by automotive and industrial applications, whereas as you see in the aerospace continued its very positive momentum. Finally, GF Machining Solutions net sales increased by 2.4% organically, after a relatively weak H1, net sales organically declining by 5%. The division saw a very strong recovery in the second half with net sales up more than 10% on a year-over-year basis and growth across all segments. Looking at net sales again, from the corporation on Slide #19, you see first an organic decline of CHF 105 million, a currency effect of a negative CHF 128 million, then the effects of the acquisition of Uponor and the Dubai-based Corys. It lifted our net sales with a combined CHF 983 million for the additional 10 months from January to October 2024. On Slide 20, we present the details to the income statement. Please note that while we highlight the split between continuing and discontinuing operations, which was the Machining Solutions business, the percentage changes on the right-hand side of the table only refers to the total at corporate level. You will see that the gross value added increased by 18%, almost in line with sales growth. Personnel expenses increased by 20%, close to the growth of net sales. Net reduction of approximately 800 employees curbed the personnel cost during the year. Moving to the financial results of minus CHF 102 million. It was impacted by the interest expenses from the Uponor acquisition, and these interest expenses were expected to decline in 2025 due to repayment of the debt as well as the refinancing. I'll present more details hereto later in the presentation. Income taxes have increased by CHF 7 million, and our corporate income tax rate increased from 22.7% to 26.1%. This was the result of a changed geographical mix towards higher income tax countries as well as the limited deductibility on our transaction-related finance expenses in 2024. Finally, our net profit and our earnings per share declined by 9%, including all items affecting comparability. If you only look at the continuing business, the net profit decline was only minus 3%. Turning to Slide #21. The comparable EBIT margin for the corporation declined by 30 basis points from 9.7% to 9.4%. While we're enjoying the positive effects from the full year consolidation of Building Flow Solutions, margins in the other divisions declined, mirroring the adverse market effects, as we've seen earlier. Turning to Slide #22, which provides details of items affecting comparability, or IAC in short. First, we have the final effects of the inventory step-up from the Building Flow Solutions purchase price allocation. Secondly, we have the items relating to the value creation program which refers to the post-merger integration of Uponor. And finally, we incurred significant IACs relating to the performance improvement program that was announced by midyear 2024. Besides effects from reductions in headcount, the performance improvement program also includes one-off effects from the closure of the Werdohl casting facility of GF Casting Solutions. In total, these items affecting comparability amounted to CHF 60 million in 2024. For the current year, we expect a substantial reduction in the number of IACs compared to this year. Let's take a closer look at the EBITDA bridge on Slide #23, starting from 2023 with a comparable EBIT margin of 12.7%. As you can see, the organic profitability level was kept constant. Despite decline in sales, our implementation of the performance improvement program enabled us to retain a high level of profitability. This year, the EBITDA suffered from negative CHF 30 million impact from foreign currencies. Acquisitions, mainly relating to Uponor, contributed positively with CHF 138 million. In total, the comparable EBIT margin increased by 20 basis points from 12.7% to 12.9%. Deducting the EBITDA relevant items affecting comparability to the amount of CHF 58 million, brings us to a reported EBITDA of CHF 560 million and a corresponding reported EBITDA margin of 11.7%. Now moving to Slide 24. 2024 was another year with significant adverse currency effects. Almost all major currencies developed negatively against the strong Swiss franc. The total effect on sales was minus CHF 128 million. The reason for the relatively small effect on Building Flow Solutions is that we only compare the consolidation period, November, December from '23 to '24. On the EBIT level, the effect was negative CHF 24.7 million. Please note that the positive effect on the Turkish lira of TRY 2.4 million is because of the situation of GF Hakan which was negatively impacted by the closure of the plant in Urfa, as explained by Andy earlier in the presentation. Moving on to the asset side of the balance sheet on Slide #25. Our cash and cash equivalents was improved by CHF 115 million, reflecting the positive free cash flow. Trade accounts receivable and inventories decreased as a result of our net working capital initiatives. New in this reporting period is the reclassification of CHF 130 million of noncurrent assets of the division, GF Machining Solutions to current assets, as you can see. And overall, the total assets increased by CHF 165 million to CHF 4,284 million. Slide #26 shows the liability and equity side of our balance sheet. Although liabilities in total are almost unchanged versus prior year, there were some significant changes caused by the refinancing of the transaction-related bridge and term loans. In November 2024, we placed CHF 650 million of straight corporate bonds at very attractive conditions. The proceeds were used to repay the lion's share of the acquisition-related bridge loan. Finally, you can see that our equity increased from CHF 22 million to CHF 168 million. Now to free cash flow on Slide #27. Starting with the reported EBITDA, it was CHF 74 million higher compared to previous year. Our focus on net working capital management has yielded an improvement to the tune of CHF 71 million. The increase in interest paid stemmed from the interest payments for the acquisition-related bridge and term loans. Cash flow from operating activities, therefore, improved by CHF 55 million to CHF 393 million. As you can see, we continue to invest in our operations, hereby additions to property, plant and equipment were CHF 202 million in 2024. CHF 72 million outflow from acquisitions relates to the squeeze out of the remaining shareholders of Uponor. And overall, the free cash flow before our acquisitions increased by CHF 50 million to CHF 184 million. On Slide 28, we provide additional details on the expected transaction-related financing costs going forward. To finance the acquisition of Uponor, we relied on a bridge and a term loan, both with variable interest rates, the placement of the 2 bonds in November. We refinanced the bridge loan. The projected proceeds from the sale of Machining Solutions as well as the issuance of additional bonds in -- by mid-2025 -- latest by mid-2025 will be used to repay the term loan. And with these measures, we expect the interest rates relating to the transaction to decrease by approximately CHF 30 million to an estimated CHF 25 million for the full year of 2025. Moving to the key figures on Slide #29. Net debt was only reduced slightly, but as our EBITDA is higher, net debt to EBITDA decreased from approximately 3.9 at the end of 2023 to 3.4 at the end of 2024. Assuming no acquisitions, we would expect the net debt-to-EBITDA to come down well below 3x at the end of 2025. The equity ratio was also improved from 0.5% to 3.9%. The comparable return on investor capital of GF Corporation decreased from 21.5% to 19.9%, while comparable declining for Piping Systems, Casting Solutions, Machining Solutions, Building Flow Solutions contributed positively. As mentioned earlier, the effective corporate tax rate increased from 22.7% to 26.1%. Turning to my final slide here on #30, the dividend proposal based on an earnings per share of CHF 2.61, our Board proposes to the general assembly to increase the dividend by CHF 0.05 to CHF 1.35. This implies a payout ratio of 52%, slightly above previous year. With these final comments, I hand back to Andy for the outlook and some additional interest information.

Thank you very much, Mads. Let's move to Slide 32, outlook. In line with our new strategic focus, GF's guidance on the outlook for 2025 applies only to the 2 flow solutions businesses. Despite persisting short-term global challenges, GF is well positioned to capture growth and seize the opportunities offered by providing innovative and sustainable flow solutions for the industrial, infrastructure and building sectors. For 2025, a year of transition, GF expects a flat to low single-digit organic growth and an underlying profitability before items affecting comparability in the magnitude of 10.5% to 12.5% for the EBIT margin. As said, these figures apply only for the flow solutions business, excluding the divisions identified for divestment or under strategic review. Slide 33. It is my pleasure to share with you a first insight into our vision for the years to come, driving our Strategy 2030. On Slide 34, going forward, GF will focus on its 3 core business areas: flow solutions for industry, infrastructure and building, leveraging key megatrends to drive sustainable and profitable growth. With its comprehensive portfolio, GF delivers mission-critical solutions for industrial flow processes, sustainable water management in urban areas and energy-efficient building systems enduring long-term value and impact. Slide 35. What does excellence in flow mean? It is the common denominator of 4 competitive advantages. GF ensures process quality at the highest level by providing advanced process automation solutions, enabling precise control over operations and increasing operational efficiency. With our tailored solution portfolio and services from design to installation and maintenance, GF becomes the peace of mind for its customers. Our holistic approach includes custom product design, prefabrication and engineering assistance as well as ensuring that each system meets specific customer requirements. GF's product portfolio consists of high-quality flow solutions designed to create seamless and reliable connections, minimizing the risk of leaks and enhancing the longevity of these solutions. With our innovative products and technology, GF enhances installation efficiency, ease of installation for our customers and reduces ongoing maintenance needs by providing durable flow solutions. Slide 36. Upon completion of its transformation, GF expects an average organic growth range of 4% to 6% per year over the new 2026 to 2030 strategy period to reach our sales target of CHF 4.5 billion to CHF 5 billion, including acquisitions. Our EBITDA margin has to gradually increase towards 16% to 18%. Our target is to reach a free cash flow EBITDA conversion rate of more than 50% and an ROIC between 21% to 26%. These ambitious targets are built on a strong foundation of 4 strategic thrusts. Maximizing the core business means accelerating the growth of our core operation and expanding our customer base through superior solutions, end-to-end services and execution excellence. Additionally, we aim to expand in high-potential regions, segments and applications, supported by a strong business development strategy. Further growth should stem from value-adding M&A activities as well. In line with our company history, innovation remains a key enabler in achieving our ambition to become the leader in flow solutions. Equally important is our corporate culture, which is a critical pillar of our new strategy. We will focus on fostering a one GF culture and enhancing collaboration and synergies across all business areas. Let me move to Slide 37. To achieve our ambitious targets, it is key to align our organizational structure with our strategic vision. We will establish a streamlined flow solutions organization led and defined by our 3 business segments. This includes 2 divisions: industry and infrastructure flow solutions, spanning of these 2 segments and formerly known as the GF Piping Systems division and the Building Flow Solutions division. Both divisions will operate within a corporate-wide standardized framework that ensures consistency in processes, governance and strategic oversight. This process will be enabled by leadership boards focused on sales effectiveness, innovation and operational excellence. Additionally, streamlined and centralized corporate functions will ensure best-in-class services. Slide 38. With the new strategic cycle, GF manifests its new ambition explicitly in its vision. We strive to become the leader in flow solutions. Let me conclude my presentation with Slide 39. With that, GF is embarking on a promising journey over the years ahead. However, our core purpose remains unchanged, becoming better every day since 1802. Thank you very much for your attention. And I will now hand over to Nadine to start our Q&A sessions.

Thank you, Andy. Before we start now our Q&A session, I would like to highlight one -- some of our upcoming events for the year 2025 for your information. So we will have our Annual Shareholder Meeting in April. We will publish our half year results as usual in July 18 and important for you to mention is November 4, where we will have our Capital Market Day, we will launch there the full set of our Strategy 2030, which Andy just gave a glimpse on. As mentioned earlier, we will first answer the questions in the room and then the questions in the webcast. [Operator Instructions] All right. Valeria and Sarah will support us with questions. So right here, I would go with your question first.

Walter Bamert from Zürcher Kantonalbank. Can we have a deep dive on the U.S., because this is at the critical point in time and you certainly reflected a lot about what Trump could mean to the company, if you say it's not really relevant, then perhaps you say why and in which areas, which products are flowing into the U.S. from other regions? And also a second question regarding the U.S., what's your assessment of the economy there? Do you see an acceleration or a slowdown? I think the press release today was showing a mixed picture there.

Thank you much, Mr. Bamert. I think it's a very good question. GF producers in the region, for the region. Approximately 92% of the products sold in the U.S. are produced in the U.S. We have 11 production facilities across North Americas or across the U.S. When you consider also Canada, we have even 13 production facilities there. So we believe the minor import we do out of Switzerland will not be substantially affecting that business also due to the fact that the other supplier of that kind of solutions are all based in Europe. So there is no none of that orders being produced at this point of time in the U.S. So we rather consider a strong resilience when it comes to tariffs and all that sort of which might affect the U.S. business. Nevertheless, also to mention we don't support any tariffs at all because we're going to believe that global trade without having tariffs is most likely the better one. Looking at the industry in the U.S., we see a strong development in industrial projects. So we have seen them already in the year 2024. Going forward, I think this is an unbroken development, also due to the fact that many of these large-scale industrial plants, planning spends and realization spends of more than 12 months normally in the size of 24 to 36 months. So it starts from large chemical plants, but it also continues with further announced semiconductor projects, as you may all being aware about.

Okay. Mr. Foletti.

Alessandro Foletti, Octavian. Just understanding question on your outlook for '25, if I understand you correctly, you are pointing to a margin of 10.5% to 12.5% for the flow solution. This is basically GF Piping and the previous Uponor. If I add the numbers for '24, that margin was 12.2%. So the impression you're pointing towards a decline in that margin, and I would like to understand why.

I think, first of all, thank you very much for your question. It is also considering all the remnant costs of the corporate functions, which is normally being distributed in a consolidated way. So at this forecast, we have taken the conservative assumption that all uncovered corporate costs would be part of the flow solutions business going forward.

Okay. That's really the only one driver then.

That's the one driver, yes.

Okay. And then maybe just very quickly, I ask you this question. Are you changing the reporting structure now this year, for shifting the infra business on the left and the construction on the right?

Yes. Yes. We are -- the reporting structure by midyear 2025 will reflect BF, Building Flow Solutions only being building but having the legacy GF business in there and the infrastructure and the industrial in this newly renamed division, so infra will be shifted into that one. You will see the new structure by mid-2025.

It would be great if you can provide some pro forma ahead of that.

We can look into that, yes.

Maybe my last question then on casting. You mentioned it is on strategic review. I wonder if the divestment process is sort of improving or, let's say, the interest from potential buyers or not? I understand that at the beginning when you announced there was interest, then it sort of faded away, and I wonder if now...

I think this is a good question. And obviously, we have been expecting this question. We're currently entertaining discussions with 3 potential interested parties. And we hope to strike a deal towards the end of this year. But nevertheless, it's as usually in M&A businesses, you're going to need 2 parties to agree.

Mr. Rosenau.

Remo Rosenau, Helvetische Bank. Just to come back on Alessandro's question to precise a little bit. So the midpoint of your guidance is 11.5%. As Alessandro pointed out, 2024 was roughly 12.2%. So if you assume kind of an underlying flat margin development, the corporate costs, you would incorporate is then around 0.7% of sales, that is the [ Makino ] more or less.

Correct.

Okay. Then on Building Flow Solutions, last year, you provided a pro forma figure for '23, which I found in my notes, you said that was 12.3%, the EBIT margin. Of course, I guess, without PPA and stuff. This year, it was 10.3%. Then you said without PPA, it would have been 11.3%. So the margin decline in building flow underlying was around minus 100 basis points. Is that the right way to look at it?

Building Flow Solutions?

Yes. Yes.

Okay. So the decline in the market.

So the underlying operating declined around 100 basis points.

Yes. That's why it's important to reflect, that's why we're showing the minus 6.7% really on a full year basis. Then you understand why there is a margin.

Yes, that makes sense then. Yes, absolutely. But it's not 200, it's 100 basically.

Mr. Iffert.

Jörn from UBS. I would take the questions one by one. The first one is, I'm glad to see that you're introducing cash flow guidance. However, I think CapEx is remaining materially above D&A going forward. Can you maybe share where are your investment priorities, which end markets, which regions, what kind of products in the next 3 to 4 years to start with the first question?

I can take that. Only talking about flow solutions, we're probably going to be in the area of around CHF 120 million investment. The investment last year was unusually low in Building Flow Solutions. They have a lot of catching up in Apple Valley in the U.S. And we also have a number of construction in Europe. In Poland, for instance, we're building a consolidated new facility in Poland. We will be focusing our investments in Europe and North America in the near future for sure. But expect the CapEx to be around CHF 120 million -- CHF 100 million to CHF 130 million going forward for the flow solutions business.

And the second question is when I look on your EBIT margin target of 13% to 15%, and I think underlying when I combine the businesses the best was around 12%, 12.5% so far. So there is certainly support from the synergies going forward. And can you share with us what is your target for the next 5 years? How much is coming from putting production sites together of Uponor and GF Piping, having better scalability, strengthening the key hubs. Is this adding 100, 150 basis points to come to this range? Is this how I should think about it?

Thank you very much. I think we have presented the value creation program with our targets going forward. And they are definitely in the time spent until the year 2027 should contribute with approximately 100 basis points to our profitability. There's a bit of a part we have been already realized in the year 2024.

Okay. And then the last question, if I may, just technical one. Can you give us a rough guidance about interest costs in total for 2025 tax rate, how you see it going forward and also one-off costs in cash?

Yes. Thank you very much. Let me start with the last one. We expect items affecting comparability to be roughly half of what they were last year. So in the area of CHF 25 million to CHF 30 million for this area. Going forward, the tax rate this year should still be in the area of 25% to 26%. And unless Mr. Trump is going to lower the taxes in the U.S., we would expect it to be there at the same level. We are not being fine tax-wise from Pillar 2. We are paying above 15% everywhere in the world. But we don't see right now in terms of where we're making the profits that we see a declining tax rate going forward. And interest expenses probably in total, could come in around CHF 50 million to CHF 60 million this year.

And just to follow up on the one-off cost, the CHF 30 million or CHF 25 million to CHF 30 million, how much of this is cash? And is this the last year of really cash costs, one-off costs?

We cannot completely exclude that we will have something some IACs also for 2026. But definitely, when it comes to restructuring of production plants, we've done most of the work this year. There's a significant portion in the current year 2025, which relates to a plant closure in Europe.

Yes, we go to the left.

[ Ingo Stössel ] also from UBS, but the credit side. Regarding leverage, you were at 3.4x now. I believe you guided for below 3x at the half year results. Can you maybe provide us some guidance going forward? I think last year, you had some midterm guidance of getting somewhere below 1.5x. I'm trying to get there. I mean, I see you're going to divest 2 potentially divisions, but you also need to acquire quite a bit in the coming years. Can you maybe give us some kind of idea of where we'll land in the next 2, 3, maybe 5 years?

I will do that right away. Just to be precise, it wasn't a guidance on 1.5%, question was, what would you -- where would you like to be long term? And I said 1.5x. So assuming that we would not close the casting solutions hypothetically by the year -- the year-end will probably be 2.5x at the end 2025. And if we close Casting Solutions, then by end of 2026, we should be nicely below 2x. And all the proceeds from the sale would be used to draw down debt further. Replacing a new bond that's announced. Some of you will then come to the conclusion, I place too much. But we have to refinance next year our CHF 225 million bond, so that will probably be used partly to settle that bond as well.

Okay. It seems that there are no further questions in the room. So are there any questions from our online participants? No. Okay. Ladies and gentlemen, with that, we close our Q&A and invite our participants here in Zurich, also for lunch, which will be served next door. On behalf of GF, I would like to thank you for your time and wish you a wonderful day. Thank you.