OC Oerlikon Corporation AG (OERL.SW) Earnings Call Transcript & Summary

Thank you. And I will stay remain seated for a moment because first after I have done my introduction, which will be very short, good afternoon, and I'm pleased to have you here today for our annual press and Capital Market conference. I would like to introduce our new COO, who will join us by 1st April, replacing Markus Tacke, it's Dirk Linzmeier. And I would like to give Dirk a chance to introduce himself. He will start officially 1st of April, but having you all together, I wanted to give you the opportunity to go in touch directly with him. Dirk is one step of the, let's say, not refreshing as the wrong word, but to make our management team a little bit younger. You know that we have a lot of people, some people like myself in the 60s or in the early 60s or 50s, and one of my jobs is to make the management ready for the next 10, 15 years and to do it somehow on generation change, and Dirk is one of these very important steps. And by that, Dirk, maybe you take the opportunity to introduce yourself. Thank you.

Thank you very much, Michael, for the kind introduction. Dear ladies and gentlemen, I'm thrilled to join Oerlikon April 1. For me, Oerlikon is a true high-tech player actually, combining technology, innovation, and in the future, even more digitalization. So I see there a great potential also in the next phase. And I think what has Michael driven so far towards the pure play, I see a big chance for Oerlikon. A few words to myself. So I'm still the CEO of TTTech Auto, Timetigger Technology. It's an Austrian company, where I have been in the last 3 years, transformed this company, 20% growth each year, doubled each year the profitability, and we have been acquired by NXP Semiconductors beginning of the year. So we announced it in Las Vegas this year at the CES that NXP Semiconductors will acquire TTTech Auto. So the closing will happen in the next weeks and months. And that is definitely one of my highlights from the last 3 years. Before that, I was the CEO of ams OSRAM Intelligent Lighting and OSRAM Continental, a joint venture between OSRAM and Continental at that time, driving the change from traditional lighting to matrix lighting to digital lighting. So one of the highlights there were doing the light carpets around BMW 7 Series or also the light carpet in a MINI on the dashboard next to traditional matrix lighting in the headlamp. Before that, I was 11 years at Bosch in various positions. I've been in China for 3 years. My daughter was born in China in Shanghai. So she's proud being Shanghainese. And before that, I was at DaimlerChrysler, where I started my career in the research center. Actually, I'm really looking forward together with Michael and the great team of Oerlikon, driving the transformation and pushing growth, and I'm happy to start then April 1 officially. Thank you very much.

Thank you, Dirk. And with Dirk and his expertise in some markets where we have just embarked to bring our capabilities in coating and 3D printing, we look forward for the next chapter in our operational tasks. And at that point, I have to thank Markus Tacke very much. He was running at the CEO position in a division and from beginning of that year, the CEO position in the new Oerlikon. Before the question is coming, with Markus, we agreed a year ago, myself and him to make this step because he's 1 year younger than myself, and I have still to take care about the transition phase and to have then a potential successor, which is a year younger than yourself is the wrong choice. So in line with that, we will do some exchange with the next 12 to 24 months in management to get the management younger, not less dedicated, not less focused, but simply prepared for the next 10 years and probably not only 3 or 5 years. And in line with that, but with a different perspective, maybe more with the outlook and with the refreshing of a Board, I want to announce as well that with the AGM of April 1, 3 of our Board members will resign and not stay for a revote. That's Irina Matveeva, that's Yangzhou, and that's Gerhard Pegam. The 3 will not stay in the Board, and they will be replaced by Stefan Brupbacher, who is Director of Swissmem; by Eveline Steinberger. She is a Swiss entrepreneur mainly in the energy area and in the finance sector. She is a board member of Bank Austria. And last but not least, another Swiss citizen, Marco Musetti. The 3 will join us. The other 3 will leave us. We will do some reallocations in the Boards and in the group, but that you will see with an invitation. But to have you all here, I would simply like to inform you up now that these are the people changes we have in mind. And by saying that, I would like to go now in [indiscernible], talk about the '24 year. Markus Richter will go deeper then in the numbers and to give a certain outlook for '25. And as you all remember, I made that announcement a year ago, and we have done our mission. The company is ready for separation. We have done all our task, which was a lot of work, parallel work to prepare either for a spin or for a sell. And why we have done that, I want to remind you again about the rationale. The rationale was that in 2013, our Surface Solutions business was part of a conglomerate where we had 5 divisions. The one was already on the way out that was Advanced Technologies and the 4 others. We did that until now to focus the company clearly on the 2 main market leaders, but it was as well clear from the beginning that we have to separate the 2 businesses. There are good reasons. We will touch that again why these 2 businesses are not in common under one umbrella. The 2 divisions, nevertheless, since 2019 have shown a strong performance and the company as a whole has done divestments of EUR 1.2 billion pursuits. We have paid dividends of EUR 1.6 billion. We have invested EUR 2 billion in R&D and CapEx, and we have invested another EUR 2 billion for acquisitions of assets. So this is a massive transition of the company. We did that very successfully, and now we are on the edge to make the last step. And some people may believe it or not, that was clear from the first 10 years onwards that this will be the journey. The journey was sometimes a little bit hard. In 2016, we had a first down cycle in polymers in the filament story, and you cannot do anything when you have a negative number. Then there was COVID. Meanwhile, we have overcome all that, and we are on a good way forward. When we look now in the 2 businesses, then you can see that there was a massive change in Surface Solutions from 2018 to 2024. On the technology side, from mainly PVD technology to the full box of PVD, physical vaporizing, chemical vaporizing, thermal spray technology, and additive manufacturing. From the markets, 3/4 of our market was tooling. And if you would have sticked with tooling, would have been a great story from profitability, but in a shrinking market because cutting tools and molds are massively impacted by ICE and ICE cars, even if they see -- it seems that they stay a little longer, that definitely will not grow. There's a grow, which is in the automotive industry, but it's driven by new technologies, and there is a remaining strength, and we are covering both sectors in both fields, but to stick with only one technology would not give you the tailwind and the diversity and the resilience that a company like ours needs that we are able to celebrate next year our 150 years. You have to challenge yourself, you have to reposition yourself, you have to stay curious, and to have to do the necessary steps that you can stay another 50 years in business and not get phased out. The strength is now that within the last 10 years, we go from maybe 2 businesses, automotive and tooling into 6, including luxury, energy, aviation. Within aviation, you have to see there is a small but very interesting are part of space. There are some businesses which we are not showing yet as a business like the semiconductor industry, like the green hydrogen industry, and the defense industry, which are fields where we're stretching more and more in with our capabilities. And this is the part in common. It's always about the same capabilities in different applications and in different use cases. And this has driven to a tripling of our revenue from 2013 to 2024 from EUR 500 million to EUR 1.5 billion. And since we have the regional responsibility, we see as well a very strong drive forward in our Asia Pacific region and in the Americas. Last but not least, sometimes people say, how why not have the 20% as you had in 2013 or '14? Because for sure, the profit line of our metal materials business or of a luxury business or aviation business or from a tooling business is different. And PVD tooling service has a very high profitability, but others have as well a good profitability. The transition phase as well took some effort. There is no free lunch in life. You cannot say, okay, now we dream about something, and then tomorrow, it happens. You have to do that with a team who is dedicated for a continuous journey, and you have to have a Board and a shareholder structure, which is allowing that. Otherwise, you have to change every 1 or 2 years' direction because someone is losing patience. And this is not the way how to develop a high-tech company. It's a way to develop a high-tech company as we have done in a very consistent way. and covering now 6 businesses, maybe we'll cover 7 or 8, but we will always look for what is the strength of our capability, what's in for us, what is the USP we have, what is the competitive advantage we do have. And this turned in the combination of a very strong operational performance that turned in a direction that we could in a market environment, we could achieve 18% EBITDA margin, which is by the way, not a bad margin. ABB is celebrated for 18%. We are in the same range. And that's a good reason to say and in between, we will go even higher, but this is not first and above priority to be 19% or 20%. The first and above priority is to grow our business in the different industries and to use our strength to be in that range. If it's 18%, 19%, 20%, 21%, all great. I'm pretty sure we'll do the 20% or the 21%, but if it's a 19%, and then do the right business volume, it's the same quality, and this is important for us to see that we are fully dedicated for the 20% goal but it's not a single goal. There are more goals to go for, and one of that goals is that we are focusing as an indispensable player in this industry with our technologies. And if you look into that, we are clearly market leader since years. We have a technology forefront. We are since more than 70 years in this world of PVD active. We have a highly scalable global footprint, which you will see when we talk about not only taxation but tariffs and all these other questions about boundaries and borderlines where you can do business and where you cannot do business. We are truly global but we are also truly local, especially with our service business. We have applications across the industries and a saying there is not a single day without Oerlikon is a true saying. Even today, whatever you have, you will find it on Oerlikon coatings or Oerlikon [indiscernible] which has been done on our machines within your environment. The core of our business model and I have always reiterated that because you have to cover so much industries and so much companies. It's on us to remind you why Oerlikon is something special. We are contributing with a high impact to the product and the cost of our contribution is pretty small. If you take a 40,000 milling head, EUR 40,000, and you have a coating of a couple of hundred euros on this milling head, then this milling head will last 3x longer than uncoated. So you're saving EUR 80,000 of investment. If you take a regular miller, it's 160x life prolongation. If you take a SUMEBore coating in a Volkswagen engine, you're saving 80% of the oil and 4% of the fuel. There's a lot of sustainable effort in what we are doing. And the contribution is huge, but the cost is small. And that's why the companies want to work with us. And to do that, you need a strong credibility. We've been just recently chosen by one of the biggest U.S. military companies as a strategic partner for 3D printing parts. When we asked them why they have chosen us and they don't choose very often strategic partners, and unfortunately, we are not allowed to disclose the name, they said because you do a very credible way and that's what you're doing. You have very good governance and you do that what you do in a very consistent and credible way. That's why we work with you. And this is reflected as well that we're growing the last 10 years average in 4% the last 4 years or 3 years EBITDA with 6%. Only '24, and you will see that was more flat, but the years before was 6% or 10% or whatever you will have or 7% in flat markets. It's not that these markets actually are really providing you tailwind. So it's with headwind, you're sailing and improving your margins. And with a headwind, you're improving your tech positions. And that's the technology, the performance of our people, and the market closeness, which allows that and which gives us the chance to reach out to that what we have done. And to say, I thank a lot to my people, and I'm really proud to be the Executive Chair of such a fantastic company. Some examples. ALCRONA EVO is the next generation of anyway already a market-leading product in coating of tools. And then [ tequila ] is more than 20% energy-efficient new technology offering coder for toolings and aviation industry. Matrix materials components. We have a world record done with SKUs of more than 6 kilometers drilling with the same drill head through the hardest conditions and almost no impact on the surface of this drill head of the coatings. That's a fantastic product. It's only the peak of the iceberg, which I wanted to give you a little bit of flavor of the different industries and the different technologies, which we are doing. And it's not only about the service business, it's about the materials development, it's about the equipment which we are building. And by the way, we are building this equipment mainly in Switzerland. We are investing in canton of Aargau, and Reichhold and bringing our Wohlen, Dottikon, and Winterthur facilities together there despite the fact that the Swiss franc was eating up more than CHF 400 million of our revenue in the last 3 years. So top line would be simply CHF 400 million higher if you would report in euro or in dollar because we do our billings mainly in euro-dollar or in Ben or whatever. And then we translate it into Swiss franc, and we have costs in Switzerland. Why? Because we're dedicated to that country. We're dedicated to contribute. We're dedicated to the workforce we have. We have our R&D people here. We have production here. And for sure, we are global. We are in 37 countries on this planet. We have 110 service centers and all in, maybe 150 sites, not super big, but we are very present, but it comes out of Switzerland. And if a tech company is not capable to do that anymore, then we have a really difficult situation here in Switzerland. And we stick to that. And on the other side, we have a business, Polymer Processing Solutions, which has a completely different scope. While we have in our surface technology 35,000 customers and you deal with $100 or $500 or $5,000, here, we're dealing with a $50 million, $150 million, or $300 million project size. Here, we're having 15 customers in 2 or 3 countries mainly, while we have 37 different countries with 35,000 customers in our other business. The great part of that business is that throughout a cycle, if you take the last cycle '16 to '23, we made an average more than EUR 1 billion in revenue, more than EUR 140 million year-on-year EBITDA, and corresponding to that, a high amount of EBIT and cash. Let's say, the caveat is you're growing by 2.5%. The main driver for that business is population, dress, construction because a lot of that yarns, which we produced on our machines are used in construction business as well and not only in textile applications. We drove attractive returns and cost efficiency, and we drove very much on sustainability. And some examples here as well, market leader, tech forefront inside even more than 100 years. We have a really high sustainability and efficiency in our customers. By the way, the textile industry only in China is about EUR 70 billion. The total market of the textile machinery industry is probably globally, not only China is EUR 2 billion. But the enabler for the productivity of this industry is the textile machinery. So they are core and key. Similar situation, why I mentioned that, the overall cost position, if you spend EUR 100 million in project by us, that's typically part of a EUR 1 billion or EUR 1.5 billion project overall, but it makes a difference. The rationale was, by repeating what I was saying, market difference, business difference, business model difference. There's so much different that it makes a lot of sense to separate the 2 businesses. And we have done that successfully in that year. So there's only one cut necessary. We have even in headquarters, the cost allocation done in the right way. There is no cost overrun after separation. It's now the time, and we said that, and I heard that, and I will hear it by questions, definitely, 12 to 24 months, can you give us more guidance? Can you give us more about when and what they are doing? There is a significant interest. The point is that we are not ready to deal on a point level, let's say, cheap, but only about the cycle. For the cycle, there is as well a lot of interest. But in a cycle discussion, you have to dispute how you evaluate the cycle in the future based on the past. If you ask, is it more a spin IPO or a sell, there's a preference on a sell. There a second preference on a spin, there's a much lower preference on an IPO. And staying here since 10 years, I'm proud to say that we always told you what we have thought about, and we always have done what we have told you. And who is long enough with us, he can prove that, that on any cases, we have delivered in the way how we have promised, but we have always delivered under our conditions and nobody was squeezing us, forcing us, or moving us. It was with drives, where I got a lot of questions, why are not selling it cheap, why are not doing this or that? It was the same response. And we always came with a very good solution. And to our investors, we will come with a very good solution as well in this story for both for Oerlikon and the company which is leaving because this is the other part of the responsibility. It's not only about the investors, it's as well about the people who are in that company serving and they have to have a decent good future. And by that, I would love to hand over to Markus Rita. This is more as an information for you that the general industry in tooling, automotive, luxury, and aviation as filament and non-filament are all showing more a flat situation. On the filament side, we see more projects to be discussed. So we are pretty clear about that. We have seen the trough on the order intake side. And please, in a business where you always told us that's an 8 or 9-year cycle, don't judge on a quarterly jump if one order intake goes higher and the next order intake goes a little bit lower. There is a remaining business coming. We are prepared for that business. And we have shown in this year in the filament that we could provide even if we take the Manmade Fibers out we could provide a double-digit EBITDA and a high single-digit EBIT and this will stay as well in the future. The difference is that in 2016 when we have seen a trough and we have a manager trough that we became negative. And the promise is that in this business, we don't show negative again. The rest is a little bit more information. Markus, now it's about you, sorry. Sorry. One word missing about sustainability. I was too fast, before I go to the numbers. I was too much engaged about the performance of our business. We are on sustainability, we are meanwhile, and this we have achieved in a very short period and that's why the business per se is sustainable and you don't have too much show around it. We are within the top 20 players of global industrial sector as Oerlikon. More than 80% of our R&D spending goes in sustainable products. And we are fully on track with our 2013 ESG targets. Here are some examples. If you would take the -- as I mentioned, the lifetime extension of metal, what we are doing, you would save 20% almost 30% of the Swiss carbon emissions of 1 year. If you take the efficiency with our coatings, we do have in our jet engines, delivered. That would be an equivalent of 88% of the whole Swiss carbon emissions. So only those 2 technologies would make Switzerland carbon emission-free if you would count it that way. There is massively waste return and massively effect in our Scope 1, 2, and 3. And if I conclude now and that's why I was too fast, maybe driven a little bit by the morning of our interaction with the press where we haven't touched that sustainability story that much. There are 2 attractive position businesses, which on the term forward doesn't have to be under one umbrella. We are on track with our pure-play execution, clearly on track. We have shown a very strong profitability in 2024. Polymer Processing Solutions will transit to their markets and the Surface Solutions resilience will be even further improved, expanded. And with a little tailwind of the markets, we will see even more profitability. Always be aware, besides aero and maybe defense, all of our markets have been flat or shrinking in the last 12 months. And the outlook for that market, general industry, automotive, luxury for the next 12 months is not that there is big growth. But we are taking market share because our customers are shrinking and we maintain our market. That means we take market share from the competition, which is again a result of our strong execution performance in line with a very strong technology position and this is what has to work together. You have to have a good technology pipeline. Otherwise, you could execute proper, but you don't have the right offering or you have a wonderful offering, but you don't perform in a proper way. Both is together in Oerlikon and both was not falling out of the blue sky, but was a work of hard work of years to get to that position and to improve that position in the future. Now we're really going to the financial outlook. Thank you so much for the moment.

Thank you, Michael. Good afternoon, everyone, and welcome to our full-year results presentation also from my side. I will start with the group results, then provide more details on our strategic priorities and the divisions. I will finish with the outlook for 2025. At the group level, orders were CHF 2.4 billion, roughly stable year-over-year when adjusting for FX. This was supported by stabilization in Polymer Processing Solutions and continued execution in Surface Solutions. It represents a strong performance given industrial production and consumer spending continued to be subdued. 2024 sales were CHF 2.4 billion, a decrease of 9% at constant exchange rates. This includes a 1% contribution from our acquisition of Riri. While Polymer Processing Solutions sales were impacted by customers having delayed their orders in 2023, Surface Solutions achieved stable sales in challenging end markets. Operational EBITDA was CHF 393 million, an EBITDA margin of 16.6%. This represents a year-over-year increase of 10 basis points despite lower sales. We see a solid margin increase in Surface Solutions and a significantly higher margin in Polymer Processing Solutions compared to prior downturns. With that, let me provide you an update on our actions to drive profitability. Our focus on strengthening our company's profitability is unchanged. In addition to growing our business organically, we have put a specific focus working with the right structural cost base and optimizing the portfolio of products and technologies. We have reduced overhead expenses by 33% since 2019 despite making 3 acquisitions during that time. Additionally, we took proactive cost actions ahead of the filament downturn and optimized the footprint of our coating centers in Germany. As with regards to our pure-play strategy, we have a very solid action plan in place. It will allow us to adjust corporate costs to a smaller company setup and ensure future cost efficiency. Our additive manufacturing business reached breakeven on EBITDA level in the fourth quarter of 2024, supported by last year's realignment. We are also focusing our R&D much stronger on commercialization. This allows us to price upcoming innovation at a significantly higher gross margin than our existing portfolio. We are further streamlining our product offering, eliminating subscale and dilutive items. For example, we have reduced the number of material codes by 53% since 2022. Overall, we are future-proofing our company to sustainably improve profitability and capital returns going forward. With that, let me go through some more details on our Surface Solutions division. 2024 sales were roughly stable organically at CHF 1.5 billion. In light of a challenging industrial production environment, this is a very strong result. 2024 was supported by sales growth in general industries and Aviation, compensating for lower organic sales in automotive, tooling, and luxury. In parallel, Americas continued to outperform, benefiting from our new geographical organization introduced in 2022. As a reminder, the division generated 6% organic growth in 2021, 10% in '22, 7% in 2023, and now stable sales in 2024 despite macro headwinds. Operational EBITDA in 2024 improved 3% to CHF 270 million. This was driven by a margin expansion of 90 basis points. Our profitability was supported by innovation, pricing, and efficiency. Going forward, the pricing, cost, and growth actions we are taking will allow us to bring the Surface Solutions margin back to our midterm ambition of over 20%. Now next on Polymer Processing Solutions. Orders in Polymer Processing Solutions stabilized at CHF 896 million. This represents a 2% year-over-year decrease at constant FX compared to a 36% decrease in 2023 due to last year's order postponements. Filament orders were up 11% year-over-year and came in line with the expected seasonality pattern in H2. We see continued signs of momentum in small and midsized filament orders. When it comes to non-filament, we saw significantly softening order momentum in the second half of 2024, driven by fading PMIs. Overall, government stimulus, and improving price/cost spreads for our filament customers make us confident that we have seen the trough in the market in 2024. We note that all long-term growth drivers for the business are well intact. Polymer Processing Solutions sales were CHF 875 million, down 23% at constant FX. Sales stabilized, however, throughout the year, turning into an improvement of 5% at constant FX in the last quarter. Operational EBITDA decreased to CHF 112 million. This represents a margin of 12.8%. Considering the significant reduction of our sales, this is an excellent achievement. With that, let me move on to cash flow. 2024 operating free cash flow more than doubled year-over-year and came in at CHF 162 million. The improvement was supported by net working capital, which was exposed to significantly less headwinds than last year given the recent stabilization in Polymer Processing Solutions orders and customer advances. We expect limited further cash outflows from here on out with significant upside once the recovery gains traction. Next, on return on capital employed. ROCE was 5.8% when we looked at the operational performance of the company and at 5.1% reported. ROCE is currently depressed, which is mainly related to the filament downturn transitorily impacting EBITDA, lower customer, and lower customer advanced payments. Future upside to ROCE will come from filament market recovery, continued cost containment, and disciplined execution of our capital allocation strategy. Furthermore, continued footprint optimization and digitalization in Service Solutions will result in better quota utilization, reducing capital employed. With that, let's move to the balance sheet on the next slide. Our net debt EBITDA ratio was at 2.8x compared to 2.6x a year ago. This mainly includes the filament downturn transitorily affecting EBITDA, while net debt slightly improved year-over-year, supported by strict cash management. We expect a stable leverage ratio by year-end 2025. During 2024, we repaid a CHF 150 million bond. At the end of 2024, we had access to CHF 920 million of cash. In terms of the dividend, we will propose CHF 20 per share, which is stable year-over-year. Next, on our ESG rating improvement. In ESG, we had continued positive momentum with several rating upgrades in past years. External partners and agencies recognize our leadership in sustainability and innovation. They rank us as part of the top 20% of global companies within the industrial space. Our solutions improve the efficiency, performance, and sustainability of our customers significantly. Let's conclude the presentation with our 2025 guidance. We expect organic group sales in 2025 to be stable or to grow by a low single-digit percentage at constant FX. This is supported by both divisions. Our group's operational EBITDA margin is expected to be at approximately 15.5%. This reflects continued innovation, pricing, and efficiency in Surface Solutions, which is offset by the transitory impact of Manmade Fibers price concessions to maintain order volume in 2024. Let's look at the divisional outlook in a bit more detail. In Surface Solutions, which will include HRSflow from 2025, we are expecting organic sales to be flat or to grow by a low single-digit percentage at constant FX. Despite slight momentum in some PMIs towards the end of 2024 and in January, we expect the market environment to remain challenging in 2025. Growth in Aviation is expected to continue but at a lower rate. At the same time, Market Intelligence expects headwinds in automotive, tooling, and luxury to be alleviated. On profitability, we are expecting operational EBITDA margins in the range of 18.5% to 19%. Innovation, pricing, and cost actions will support margins counteracting the difficult environment. In Barmag Manmade Fibers, we are expecting organic sales to be flat or to grow by a low single-digit percentage at constant FX. The operational EBITDA margin is expected at approximately 7.5%. As previously indicated, we provided our customers price concessions in 2024 to maintain order volume. This is impacting our 2025 EBITDA margin. It is a transitory effect. We expect recovering pricing levels and innovation to support margins beyond 2025. Furthermore, we are about to implement ongoing manufacturing footprint optimizations. This will benefit Barmag Manmade Fibers' profitability beyond 2025. We are confident to have seen the trough in 2024. We specifically look at the improved economics of our filament customers and government stimulus. With that, let me hand over back to Stefan for the Q&A.

[Operator Instructions].

Michael Foeth, Vontobel. 2 questions. The first one is on gross margin. The gross margin increased quite a bit in 2024. And I was wondering if you could comment on what is driving that, if that's a business mix, or if that's really a lower production cost or pricing that impacted the gross margin. The second question is you mentioned on the press return on capital employed that was mainly driven by the lower profitability and volume processing. I was wondering if you can comment on the current return capital employed and the Surface Solutions business how that is evolving.

As for the gross margin, here we have done some reclassification and this is how the numbers are then made up. On the second question on the return on capital employed, we have shown you the numbers. We are right now at 5.1% reported and 5.8% operational. We're a little higher at 6.1%.

Alessandro Foletti, Octavian. Maybe I would like to ask one to Mr. Suess for the management changes. Last year, when we were here, you said that after the spin-off or disposal or divestment of Barmag basically, then you would probably retire from the double role position. A, is this still valid? And B, do we have here already your successor as CEO?

Let's start with the second question. If it performs properly in the next 2 years, probably yes. If you ask about the timeline, there are 3 elements, spin-off, sell, transition, and stable environment. So as I said last year, when this transition is closed, I will step down from this Executive Chair. Most probably that will be in AGM '27. I have no intention to go longer. If there is a need for whatever reasons, I will do it, but the intention is to have these transitions done and then to come back to the business model you like more. By the way, I like the Executive Chair model pretty well. We have a strong governance and it works pretty well. But if there is a different view, and we have one of the candidates you have seen today, but first, it has to perform.

Thank you for this transparency. Can I ask you a question maybe on the guidance, more operationally speaking, in particular for the Surface Solutions margin, you had 18.6% and now you guide for 18.5% to 19%, meaning there might be some expansion, but if things go wrong, not, maybe even a decline. Can you give a color on what must happen for you to be higher, and what will happen for you to be lower? And then I have a follow-up.

I will do the first part because he comes in with the numbers. It's about the mix and the performance of the markets, as we have said, there is different profitability in materials than there is in service, then there is in equipment, and there is even a different profitability within Europe, Asia Pacific, and others. We don't disclose all that stuff. But there is a mixed element. There is a pricing power and there is a performance point. And to keep in this difficult market environment, to keep the performance and having 0.1%, 0.2%, 0.3% up, that's somehow what we are looking for. If we expect a 1% up next year, I wouldn't say that will happen simply because of the market. If the market is turning faster, let's say there is an agreement on Ukraine and everything comes differently. We have seen so many changes in the last 6 to 12 months in one or the other direction, that's sometimes a little difficult to predict. But what we have always done, as you remember, when we have seen something, we have communicated that. We have communicated even in late '22 that there is a downturn in '23 and '24 in polymer as we have seen from the order intakes, and this will be maintained. So we'll be as transparent as possible, but even we do not have a glass ball.

And can I please follow up on this margin? We have 2 separate elements in it. Obviously, Additive Manufacturing, you said it's breakeven. Can we assume it will stay breakeven maybe for the full year going forward? That would be follow-up number one. And follow-up number 2, HRSflow has a very good margin. In this guidance, there is no -- or can I assume that there is no sort of decline of that margin going forward?

So number one, on AM, the development has been positive quarter-over-quarter, and we expect a continuation of that as for the moment. As for HRSflow inclusion in the Surface Solutions, we keep our guidance. As you see, HRSflow is adding 0.6 or 60 basis points to the Surface Solutions profitability but is in line with our overall guidance. So we don't extend the range at this stage.

The fixed income side. I have a couple of questions. The first one, trying to understand your debt maturity profile. So you have roughly EUR 1 billion of redemptions coming up in the next 2 years. You said you have liquidity of around EUR 900 million. So what are your refinancing plans? And what is the minimum operational cash you would need to have on your balance sheet?

Yes. So the refine, obviously, we have refinancing discussions are starting. We will do this in Q2 on a 2-track. One track is without a sale and the other track is with the sale. What we -- is our preferred solution to have the sales track in place, use proceeds partially for the deleveraging, and then look at the refinancing needs at that time.

But what's important, I like to add, that even without of the cash performance we have shown, there would be a further deleveraging only out of cash position as well. There is the sales process and we go for that, but there is no need if there would be not a sales process that we say we cannot refinance. I think that's for me important. It was your question because the bonds we have today will be replaced by somehow bonds. And then there is the free capital we have a revolving credit line of more than EUR 600 million not even touched. So with the cash position we have and the performance we have, I would say it would be the completely wrong impression and sometimes maybe some of you have that, there is a liquidity issue or some finance issue in Oerlikon. It's simply not. And there is the other assets, and I said it very clear, there will be a differentiation or not a differentiation, a takeout of OMF at the right timing, that's why we said this 12 to 24 months. We do that as soon as is it in line with what we think about we want to generate. There is midterm INglass, as you said, a very profitable company, mid-to-long term. Long-term is the wrong, midterm, because INglass is no core business. It fits very well into what we're doing because we're serving the tooling industry with 2 angles, but it's not a coating business. So there's plenty of headroom for anything to come. But on top of that, there is a very strong cash performance out of the operational business. And with that, I would like to be maybe as my treasurer, a little bit more offensive. This is not what keeps me up at night. What keeps me up at night is the geopolitical questions and when are the markets coming back and we can turn headwinds into tailwinds because with our cost performance, we are massively prepared for tailwinds, and we would like to use it.

So are you alluding to that HRSflow that at the moment that it is part of Service Solutions that is only a temporary solution? So noncore means you're also intending to sell that?

Long call is not -- I would be -- because otherwise, these 2 people getting very crazy. It's not core business.

Then I have a question on your -- can you remind us on your general dividend policy that you have? I guess, at the moment, you have a bit of an unsustainable payout policy with 100% of your net profit.

No, we're not paying 100% net profit, but you're more the experts on that. We are paying 20%, which is somehow out of our policy is 50% cash.

We are paying within our Oerlikon policy. We -- having seen the trough in OPP, we suggest to continue with the 20% as we have done last year to be stable on this year-over-year.

Then I have a question on your footnote in the annual report on the compensation of the Executive Committee. That has doubled in the last year. So my question is, did any KPIs change or the overall structure of the compensation scheme that we should be aware of? Or what is the principal reason for it?

Maybe I don't understand your question properly. There has nothing doubled. Probably that's because Markus Tacke is still is on EC. Someone will join the EC. There is an in-and-out facing, but otherwise, nothing has changed. There are no salary changes, nothing.

I think the overall number has gone up for the entire committee from 9 to 16. And I think for the Executive Chairman from 3.2% to 7.6.

No way. I can give you my tax declaration, but it would be nice to have that, but probably we can sort that out, but there is a complete misunderstanding on your side.

Yes. Maybe -- I think that's what it says in the annual report.

We have to look if there is a mistake, we have checked it 5 times, but I can assure you, there is no 7 or nothing and there's no doubling.

Then last question is, can you remind the minorities that you have in the net profit? Where do they come from? Or who is that?

What do you mean with minorities?

I think you have EUR 6 million that you paid to noncontrolling parts. I'm wondering what that is.

See me with a big question mark. I don't see any minority spending of EUR 6 million. Do you have any clue about that?

Well, it says noncontrolling interest shareholders of the parent. Yes, I was wondering what it is. EUR 10 million last year, EUR 6 million this year.

So last year, it included something related to Teknoweb, which we closed down at that point in time. And this year, this is just noncontrolling shareholders where part of that we have to, from an accounting point of view, allocate it to them.

But there is not a part of another company that you don't 100% own?

I would need to double-check. We can get back to you on that one.

Thank you for taking my follow-up. Maybe on Barmag, I would like to ask. I have the impression that the trend has been kind of bottoming and improving and then sort of kind of slowing down again. When I look at your chart on the input-output prices, the polymer filaments, and the input prices of your clients, it seems to me that the margin is kind of reducing. So at the same time, you're sort of calling the bottom. So maybe you can give us a little bit more of an indication of what you really see in the market there? And what's the confidence also that this margin decline is temporary? Like meaning only for '25, I would imagine.