Siegfried Holding AG (SFZN) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the analyst conference for the business year of 2020, which will last until 3:00 this afternoon. 3:00, our government will also begin with a presentation. Some of you might want to switch to this channel. We regret to operate this conference on a virtual basis. But on the other hand, we all got used in the last 12 months to this format. I'm together with Wolfgang Wienand, our CEO; and Reto Suter, our CFO. They will take you through our presentation, which you find on our website, too, under Investor Relations. There, you can find it. For questions, please scroll down. You will find a form there where you can enter your question. And I will, after the presentation, present your questions to the audience here. Now let's start. May I ask Wolfgang?

Thank you very much, Peter, and also a warm welcome from my side, unfortunately, in virtual format. I actually love to be in closer contact with you as we did it so far, but we will make the best out of that situation. I'm actually very happy to report about what we did as a company, what we achieved as a global team in the last business year, 2020. As always, we try to actually summarize the highlights in the title of our presentation. This time, it's Evolving in Challenging Times, Siegfried Rises to the Next Level. So evolving, for those of you following us since quite some time, might be able to relate that to the name of our corporate strategy, which has evolved. Challenging times, it's easy to understand. It's obviously about this detrimental coronavirus pandemic. But still, I think that's a key message of today. Siegfried stayed on track during these challenging times and even managed to rise to the next level as a company and getting closer to its vision of becoming one of the leading companies in our space. So let's start. As always, safe harbor statement, please read it carefully, be aware of it with regard to forward-looking statements that either myself or Reto or Peter will make during our meeting here. So a brief look at the agenda. Executive summary, that's going to be me talking about status, where we are and also where we are heading as a company. Then I will actually hand over to Reto, our CFO, and he will then, together with you, look back on what happened in 2020 in terms of facts and figures, guiding through the financials of the last year. Then it's going to be me again, looking ahead, strategy for 2021 and beyond. And in the end, you will have the opportunity to ask questions, and we will do our best to provide answers. So executive summary, successful as a global team in challenging time. I think the key message here is that we have been able, despite adverse circumstances, to actually continue on our path of profitable growth and, at the same time, executing on our strategic ambitions. So Siegfried has shown a high degree of resilience in 2020 and delivered both growth and higher margins. What does it mean, specifically? Net sales up to CHF 845 million, which is a plus of 1.4% in swiss francs and with the heavy headwind from the depreciating euro and U.S. dollar. In local currencies, we saw a good growth of 4.5% as compared to previous year. So I said profitable growth. So what happened on the different margin aggregates in our company? We will look at that in more detail later together with Reto. But for now, let's look at the core EBITDA, which is close to CHF 150 million, which is up more than 6% at an expanded margin of 17.7% as compared to 16.9% in the good year 2019. Core net profit up as well. And important, in general, but also looking at what we want to do with our company going forward, we again saw a strong operating cash flow of almost CHF 115 million as compared to CHF 66 million last year. Based on this, our Board will propose to the Annual General Meeting in April 2021, a cash distribution of CHF 3 per share, which is up CHF 0.20 per share. So these are figures, financials, but what was behind that? And how did we manage as a company and as a global team to deliver that growth and to deliver this profitability expansion? So despite the challenging times in 2020, we have been successful in relevant dimensions. The first one, actually, the most important one, is adhering to our duty of care with regard to both our own employees, keeping them safe, but of course, also for the customers of our customers, the patients, millions of patients worldwide, who actually depend on the capability of companies like Siegfried, which are important sources of active pharmaceutical ingredients and also drug products for them to be able to continuously deliver vital APIs and vital pharmaceutical drugs. What we also did is -- and that is, of course, interesting, I mean, of course, in terms of business potential. But it's also equally important in terms of proving that we take our mission actually serious, which is Siegfried has been able to enter into a cooperation agreement with BioNTech, an innovative German pharmaceutical company, actually having been able to develop, together with Pfizer, the first approved COVID-19 vaccine. And we will be among the few companies actually supplying BioNTech with significant commercial volumes of fill and finish services for the vaccine itself. And that's going to start in the mid of 2021 and has been and will continue to be a huge effort for the whole company, but specifically for our team on the Hameln side, which is really doing everything they can to actually ramp up capacities and prepare themselves to then manufacture, fill-finish as much vaccine as possible starting mid of this year. As if this wasn't enough, we also have been brave enough in an M&A environment, which almost came to a standstill last year, to execute upon our strategic ambitions and acquire 2 large drug product manufacturing sites from Novartis, close to Barcelona, with signing on 28th of September. And we had a successful closing, as planned, on January 1 this year. Quite an important step mid to long term in terms of taking our company forward and building a leading company in the CDMO space. Last but not least, we, of course, had to operate our existing business, our existing network. And we did that by continuously investing into our people, references made to the Siegfried Academy, about which we talked during our last meetings, and also a new leadership development program which we call LEAP, which successfully started last year and helped to actually further build our human capital in a way within the company. The same holds true for continuous investments into technology and additional capacity at all our sites so that we are able to actually take in new business and continue to grow. This all translate into the guidance for this year, 2021, which is, with expected sales well above CHF 1 billion and a further expansion of profitability, Siegfried rises to the next level and further advances to its vision of being one of the leaders in our industry. So let's take a brief look at what I believe, what we believe have been the prerequisites to also be successful in such an extraordinary year like 2020. And that actually relates back to things on which we have spent as a management team, as a global team a lot of time in 2018, also 2019, which was discussing and getting clarity about the why, the what and the how we want to run our company. So why is about the mission and the vision. Mission is mastery in science and technology for the manufacture of safe drugs for patients worldwide. I mean while this always has been important and has always been our duty as a company, it became even clearer, even more obvious last year how important that is and how important it is what we at Siegfried do and that we do it right. The vision is about further advancing as a company in terms of competitiveness and building a greater company and being the strongest team in running the most competitive network. That relates to what we did together with Novartis. So that is really further building on our vision as a company. The how values, 5 core values: excellence, passion, integrity, quality, sustainability. Also on these topics, we have spent a lot of time. And when we are discussing internally, why it actually worked well and why our people kept on working, coming to work, staying focused, staying concentrated and continue to do their job. It was probably also about knowing how we want to operate and being able to refrain to these core values that characterize our global teamwork. So that is probably the point in time when I -- before getting to more details from a financial perspective, strategy and so on. And I want to thank all the Siegfried employees actually for what they achieved last year and how they helped us to keep our company, Siegfried, well on track. So thank you very much for this. At this point in time, I'm going to hand over to Reto, who will then guide us through some figures and giving background on the P&L and balance sheet.

A very warm welcome also from my end, and I'm really happy to take you through this very good and robust set of numbers, which clearly show the resilience that Wolfgang has just alluded to. 2020 was the COVID year for us, and COVID obviously has left its marks also in the set of numbers which I'm going to present to you. However, these marks have been limited, and they have been limited to the first half of 2020, indeed. In the first half of 2020, we have alluded to that, we have seen delays in the supply chain, higher raw material prices. We have seen lost production time in our Nantong facility, and we have seen higher absentee rates in all of the year of 2020. However, despite this, we have been able to grow, and we have been able to grow profitably. So the year 2020, we have grown net sales by 4.5% in local currencies. Both the U.S. dollar as well as the euro have depreciated against the Swiss franc, which means that the growth in Swiss franc has been 1.4%. Obviously, COVID has enhanced and augmented the seasonality that we usually have between H1 and H2, especially now in 2020. And just a forward-looking statement, we will see an enhanced seasonality as well in the year of 2021, not due to COVID, but due to the vaccine business that Wolfgang will be alluding to in just a few minutes. Now one of the reasons why the business of Siegfried is resilient is a highly diversified business portfolio both across products as well as customers. This is a slide which we regularly show you each year. And frankly, there's no news to tell you here, which, in this instance, is actually very good news because still highly diversified in both elements. So speaking about customers quickly. The first 10 customers account for 37% of revenues, the largest customer for 6%. Speaking about products, the first 10 products account for only 31% of revenues, the largest product accounting for 5%. So this is basically unchanged against the last year. A brief recap and reconciliation from reported numbers, so EBITDA on the Swiss GAAP FER and the core numbers, core EBITDA, core EBIT and core net profit. We have introduced these metrics in the middle of 2019. And we believe that core EBITDA numbers are well suited to reflect the real operational performance of our group, which is why we also use these measures for internal purposes. Core measures split out extraordinary effects, which are not normal to the period. Speaking about the 2020 reconciliation, some effects are known. We have seen them all already in 2019, some of which are specific to 2020. Let me quickly run through. We have 2 items, 2 topics related to foreign pension plans. On the one hand side, we re-class the current net interest, the CHF 1.1 million. We re-classed that to financial expenses where it actually belongs. So it increases core EBITDA, it decreases core net profit. Then we split out noncash P&L effects due to changes in the technical discount rate to value these foreign pension liabilities, CHF 9.9 million increase in core EBITDA. Then we have 2 special things which are specific to the 2020 year. First, we have decided to pay out COVID-19-related bonus to parts of our valued employees. For the avoidance of doubt, this group did obviously not include management. The amount that we will be paying out shortly amounts to a bit over CHF 3 million. It has been our employees who have done a fantastic job, who have kept the factories, the plants open, allowing us to keeping on delivering very important products to our clients. And then we had a smaller effect due to a transaction which we did where we incurred costs, but which did ultimately not materialize, which brings us to a core EBITDA of CHF 149.4 million. This slide looks very similar to the last few years. So we have increased net sales. We have increased, in absolute terms, gross profit, core EBITDA, core EBIT, also core net profit. And obviously, that said, also in a relative view, the margins do increase quite a bit. However, this year, and you see it from the numbers, the increase is slightly less pronounced than in the years before. Obviously, when we speak about core gross profit, this directly reflects the fact that the cost of doing business, especially in the first half, has been higher than in just a normal year. On the next slide, this is the core P&L statement. You see that a bit in a different format. So gross profit -- core gross profit has increased, not as much as without this additional cost of doing business. But we have been able to contain the cost in the SG&A part, so in the overhead part, quite well, actually dropping these costs, which has then helped to maintain the margins on core EBIT and even increased then on core EBITDA. One thing which I would like to point out specifically on this slide is the financial result. The financial expenses have dropped significantly between '19 and '20 despite the fact that we have used the credit facility actually to a larger extent, which is a direct result of the much more efficient revolving credit facility that we have entered into at the beginning of '19. This is my -- and those of you who know me a bit should know this is my favorite statement. It's also a very important statement for the Siegfried Group. This is our lifeline. It's the cash generation. And a lot of focus actually goes into maintaining that cash generation on high levels. That said, I'm totally happy to report a strong cash-generative year of 2020. It started at the top. So we increased the raw operating cash flow prior to changes in net working capital simply by increasing sales by increasing profitability. But we have also been able to shape the net working capital in a way very favorable to us. So in a result, the operating cash flow has almost doubled to CHF 114 million. In the net working capital, if you analyze it a bit closer, the most prominent factor there was the -- that we have invested less into inventory than as we did in 2019 despite the fact that we have built up some safety stock in order to derisk the supply chain due to -- in order to avoid disruptions due to COVID. Purchase of PPE, as guided, a shade higher than incurred -- what we incurred in 2019. So free cash flow actually increased quite a bit to over CHF 45 million. Cash flow from financing activities looks unspectacular here on this slide, almost the same as last year. However, please be aware that a lot of things happened. So we have called and redeemed the first hybrid bond, over CHF 100 million in October. And we actually have funded the Spain acquisition with Novartis already this -- at the back end of 2020, so that's included in these numbers here. But all in all, a very good cash flow statement, very happy about that. This slide answers the question how we spend the marginal Swiss franc that we generate. And I mentioned the importance of cash generation for our business model. And it's clear that the main 2 purposes actually for the cash that we generate is to support our current strategy segment EVOLVE. This comes in 2 elements. The first is we need to maintain the production infrastructure that we currently have as good as we can. And then secondly, as we are growing and actually growing significantly, we will also need to invest into the expansion of that manufacturing infrastructure. Secondly, as demonstrated with the transaction with Novartis, obviously, also M&A in line with strategy needs to be supported, which is why a strong balance sheet and the availability of funds is actually important to us. Topics number 3 and 4, we just continue to do. Number three, we will use every opportunity, on the one hand side, to delever and, on the other hand side, also to optimize funding costs. The next opportunity is coming up in Q3, Q4 2021. The second hybrid bond, over CHF 160 million, comes to its first call date in October 2021. From today's perspective, we will call that instrument. We will redeem that instrument and replace it with something easier and something which obviously comes at a lower cost to us and to you as shareholders. Payout policy continues to be disciplined with a step-by-step growth in absolute terms. Now the question that I got a lot is, obviously, how much firepower do you have available? And obviously, that's a number which is changing. Obviously, as we increase profitability, as we increase sales, as we increase cash generation, that number becomes bigger quarter by quarter by quarter. But a snapshot at the end of the year, let's assume a leverage ratio of 3.5 and core EBITDA of CHF 150 million leads me to over CHF 500 million of, let's say, raw debt capacity, deducting net debt, I arrive at something like CHF 400 million. And then out of that CHF 400 million, I have CHF 250 million readily available to be deployed actually at a very, very short notice. Which brings me to the payout proposal. As Wolfgang has mentioned, the Board of Directors will propose to the shareholders an increase of the payout from CHF 2.80 last year to CHF 3 this year. The distribution, the wealth transfer will be done again, as last year, in the form of a reduction of capital, which is a structure which is tax-exempt for natural persons in Switzerland. And with that, I would like to hand back to Wolfgang on the outlook for 2021.

Yes. Thank you very much, Reto. And now let's have a joint look ahead, what we want to do in 2021 and beyond and what you can expect from us in the future. That is a slide that some of you might know. It's an important slide. And as an investor, you probably -- I mean you want to have answers for all these 4 topics or questions raised: low cyclicality in the market, hopefully low volatility, resilient growth, structural profitability. I mean you all want to have that. And I mean we have that as a company. I think we have proven that in the past. And let's briefly go through and then briefly contemplate on what it meant in 2020 that we adhere to all these criteria. First of all, low cyclicality, that refers to our target market of pharmaceuticals. And here, you see, if you go back 10, 20, 30 years, that the health care spending are continuously growing in a very stable fashion year-on-year. So check the box. Low volatility, which is a good thing, kind of translates into low risk. That is carried by probably 3 facts altogether, the first one being long product life cycles of pharmaceutical drugs, probably 20, 30 years or even longer, which is good. If you're supplying a certain drug, if you do it the right way, if you are cost competitive, you've got the chance that a product stays with you for quite a long time. Also investment cycles in terms of erecting a new plant to add capacity also is a very tedious long-term and expensive process. So that also adds to lower volatility. And on top of that, the CDMO business model also is, in the end, a portfolio business. So as a large CDMO at Siegfried, you actually build a large portfolio of many, many customers, many, many different products. And that, as you know, translates into risk diversification of that portfolio. And we saw it before, when Reto shared insights on how our customer concentration or not concentration looks like and how our product concentration or not product concentration looks like. Resilient growth, that is based on, again, our target market pharmaceuticals continuously growing. And on top of that, let's say, structural incremental growth dynamic, which comes from reshuffling of activities within the pharmaceutical value creation, from captive manufacturing of pharmaceutical companies to companies like us who take over this responsibility and take care of substantial part of the value creation for the pharmaceutical company. Last but not least, as quality standards are very high as technology is very demanding in cases, you also, if you do it the right way, have a good chance to actually have a high structural profitability. So all very important criteria when making an investment decision. While this always has been true, I think 2020 has shown how true it actually is. And if you look at the sector and also at the CDMO sector, but also at Siegfried, we have proven that all this is actually true. While we had some products which suffered from COVID because certain treatments which were not vital, not life-saving, have been postponed, sometimes even life-saving treatments had to be postponed because the whole focus of the health care system actually was on COVID-19, rightfully so. But on the other hand, we had products which helped in the treatment of COVID-19, for example, in pain management. And also the business with BioNTech, which will actually start this year, is another example how the portfolio effect within a large portfolio like the one of Siegfried works in our favor. So has always been true, 2020 even made it obvious beyond what we knew before. So next slide is actually what we took from what we just discussed about our own market and the market of our customers and what we used as insights to build our corporate strategy, EVOLVE, on 5 trends. The first one being that we see since probably 5, maybe even 10 years, that pharmaceutical companies, our customers, more and more invest all their funds in innovation, so the development, research and development of new molecular entities for new therapeutic uses and, of course, also on distribution, marketing and sales, but not so much anymore on manufacturing. Of course, they need the product, they need security of supply. But if you have partners like Siegfried, you don't have to have full control over your total manufacturing activities anymore. And actually, investors expect pharmaceutical companies to invest their limited funds on the true value driver of a pharmaceutical company, which is research and development and distribution, marketing and sales. So that is the core driver, the main reason for this growth increment I was just talking about, which is probably 1.5% more than what our underlying markets, the pharmaceutical market is growing, 4.5% versus probably around 6% year-on-year. Second trend of high relevance and, actually, positive relevance for companies like Siegfried is the increased cost awareness at pharmaceutical companies. I mean they amounted a huge complexity in their supply chains. And now with companies like Siegfried at hand, integrated large CDMOs with broad capabilities in terms of technology and also manufacturing with flexibility and capacity, they can actually outsource quite an amount of that complexity to strategic partners like ourselves. Good thing for us. Third trend, breakthrough innovations are not necessarily happening at the big pharmaceutical companies anymore, and BioNTech might serve as an example. They invented the thing and then partnered with Pfizer, but with smaller start-up companies or midsized pharmaceutical companies. And they, by definition, based on their own history, they just don't have own manufacturing capacities, which is why from the very start, they need to go to reliable partners like Siegfried. Again, a good thing for the CDMO business model and a good thing for a company like Siegfried, who is actually among the leaders within that space. Fourth, trend has increased complexity, which is a technological dimension. So it's about how complex do the chemical molecules look like, how complex are the delivery platforms that need to be applied. And here, there's, of course, the potential for companies like us to differentiate and to actually ask for profitability. So that's quite useful as well. Last point is that also large pharmaceutical -- innovative pharmaceutical company, case by case, decide not to give up a certain product after patent expiry, but rather trying to defend it. And as a company who is able to also offer very cost-competitive services, manufacturing services, you can benefit from that as well. And for those of you who know us, I mean, that relates to the strategic decision to actually invest the plant in Nantong, China 7 or 8 years ago. So all very favorable trends. The answer -- or the question is, I mean, how to benefit from it? What is necessary so that we, as Siegfried, can make use of this beneficial trends? And the simple answer or the common denominator of all these trends is actually, you need scale. You need size. And while this is a very general statement, I would like to take a shortcut at that point and just look at some analytics. Some of you might know that, but it's still a great slide because it gives one answer to many, many important questions. And let's have a look at the slide. On the X-axis, we actually see the revenues of CDMO companies at 2 points in time. The first point in time being 2012 and the second point in time, I think in this case, it's either 2017 or '18. And on the left-hand side, we actually see the profitability in the sense of an EBITDA margin of these companies at these 2 different points in time. And then you see a trajectory for each of the companies shown here. And what becomes clear, there is a corridor going from bottom left to top right, which means there is a positive correlation between scale, size, in terms of revenues and profitability. In other words, those companies who have been able to grow the fastest in that period of time have also been those companies who have been able to increase profitability the most. And that relates to things like, I mean, how broad is your technology base? And what technology base can you actually finance? How much flexibility can you offer for your strategic partners? Are you able to hold capacity idle, ready to make use of short-term market opportunities or to help your customers in case of heavily fluctuating demands? There's also a scale effect in terms of integrating activities within the value chain, meaning, in our case, doing the drug substances and the drug product, which takes out more complexity out of the responsibility of the pharmaceutical company on to us. And that all plays in favor of those companies who actually have been able to grow, have been able to create scale. So when you are with us since quite some time, we always talk about profitable growth, which means, of course, we want to grow, making use of the market opportunities available to a company like Siegfried, which are good. At the same time, we want to increase and actually have been able to increase our profitability over the past years, and we'll continue to do so. And the answer to the question, how we did it in the past and how we will do it going forward is actually on this slide. There are 4 key measures, very tangible and actually proven key measures, which helped us and will help us going forward in terms of margin expansion as well, first one being economy of scale. I mean this is a kind of an operating leverage that Reto referred to, which means, of course, with more manufacturing activities, you need to add resources, capacity, i.e., costs. But first of all, you can -- you still have a certain economy of scale effect in that space. But for sure, you have it in areas like indirect labor or SG&A. So structurally, if you are cost-sensitive and if you are able to manage your cost in the right way, you have operating leverage, meaning additional business leads to superior margins. Second measure that we are applying is critical size. So that relates to -- I mean what kind of flexibility can you offer? Are you able to hold capacity idle, ready for short-term opportunities, and that relates to scale. As a CHF 200 million, CHF 300 million company, you just can't do that. You can't afford to have a certain fixed cost block sitting there not being used to generate profits. As a larger company with a larger network, much more capacity, we're actually able to offer more flexibility and hold a certain amount of capacity idle and ready for your partners. Third is portfolio mix effect. I mean if you look at Siegfried in the last year, as throughout the past years, there is a ratio of 75% to 25%, maybe in favor of our Drug Substances business. There, we have the largest and probably most competitive CDMO manufacturing network in the space, in the whole industry, which is, I mean, paying off quite well for us. However, the Drug Products part is still too small with 23% revenues last year. These are good sites, good business, but actually, it is too small and prevents us from becoming a truly strategic partner of pharmaceutical companies as we are able to do and as we are able to be in the drug substances space. And I mean kind of getting ahead of myself, the acquisition of the Novartis Drug Products sites, of course, was driven exactly by that idea, creating a global, scalable Drug Products business as well. And that will help margin because structurally, the Drug Product business is somewhat more profitable than the Drug Substances business. Last but not least, continuous work within our portfolio and our network, allocating products ideally always to the best site possible, which means sometimes the product started for good reasons at a certain site. But maybe 5 years down the road, that site might not be the most appropriate, the most competitive anymore. That means by transferring products within our network to the more appropriate site, we create additional potential in terms of life span of the product with Siegfried and, of course, also profitability. So these are the 4 measures that we are actually using to improve and expand our margin. Having now guided you through our thought process about what is relevant, what trends are important and how we have built a strategy and what we used to build our strategy, here is the answer: strategy EVOLVE, something which is in place since 2018, so quite some time. And actually, for those of you asking themselves the question, if now, after the big step, the acquisition of the Novartis site in Spain, EVOLVE is done and history? The answer is no. It's still valid, still true and will remain the guiding principle for our strategic actions in the next years. So let's have a brief look at what strategy EVOLVE in our case means. Three areas of activity. First one, continuous investments in our technology base and the existing networks, organic investments. And here, this is really about strengthening our technology base for the reasons just discussed before in both areas, Drug Substances and Drug Products. Also organic expansion into large molecules, biologics. And that was a kind of a no-regret move that we made 2 or 3 years ago in Hameln and also in Irvine, where we had the capabilities to aseptically fill not only small molecules but also biologics, antibodies, proteins. And actually, this investment 2 or 3 years ago helped us to build up the competencies, the capabilities that helped us to win the business with BioNTech, August last year. So that was an organic step which paid off before already, but, of course, helped us also now to be able to enter and contribute to the global fight against COVID-19. Last part is building new plants might be fun, but it's, of course, a lot of money always involved, and we will have to spend that money if we really fully want to capture our growth potential. But the cheaper version always is to debottleneck, so trying to get more out of the facilities and the capacities you have, which includes always targeted investments. And that's something what we continuously do, I mean, every year on all our sites. So that's the organic part. Second part is acquisition in the field of drug products, and that has been actually our priority in the past years for the very reason that actually, we couldn't play our network game. We couldn't really fully leverage our network in the drug product because it wasn't in the network. But now with the new sites in Barcelona, and I will get to that in more detail later, we can really start to build a true network as we did for the drug substances in the past. Is that now over? No. There would be great things that I would like to have more of in our network, for example, aseptic/sterile fulfilling capacities in Europe, the U.S., but also innovative technology platforms and manufacturing capacities in the solid dosage forms space. So there is still room for us to make smart and value-adding acquisitions. Last but not least, acquisitions in the drug substances space. While we have a great network, it could always be interesting to add certain technologies, for example, highly potent API manufacturing Class IV. But also depending on opportunity, it would -- could also be attractive for Siegfried to enter the biological drug substances space after having built up capabilities and also business in the biological drug products space. So these are the areas of activity which will actually continue to be our guiding principles strategically going forward. So now some, I mean, details on the acquisition of the Novartis sites in Spain, and that's going to happen actually in 3 parts. First part being really looking at rationale, financial profile, so very much fact-based, explaining to you why we did it, why it makes sense, and what it will do to the company also in terms of value creation going forward. The second and the third brief sections I'm going to be talking about, first of all, a very practical question, which is, I mean, having signed contracts and having successfully negotiated and creating a win-win situation together with Novartis is one thing. It's important. It's important that you do it right. But there's a second step, which is make it happen, take over the sites on day 1 without interruption and so on. I will give you some flavor how that worked out on January 1 this year. And last part is really touch and feel because, yes, you are acquiring assets via brick-and-mortar. But in the end, integration and really, I mean, taking out the full potential of the assets that you acquired actually needs the people, needs team building, needs the right mindset of new colleagues that are actually joining your family. And here, I will share some impressions, some thoughts and also some pictures. But back to facts and figures, strategic rationale. So as you know, we signed the deal on 28th of September in [ Turre ], and the closing happened as planned on January 1 this year. We didn't only acquire assets, property and people. We also, as part of the transaction, entered with Novartis into a multiyear manufacturing supply contract for important products, which have been important for Novartis, are important for Novartis today and continue to be important to Novartis going forward. And Novartis actually made a strong commitment in terms of further needing to be supplied by Siegfried and also gave us the status of a preferred supplier of Novartis. Strategic rationale, kind of alluded to that already, really adding to our drug products manufacturing network, creating scale, creating further potential for profitable growth. Why Barberà des Vallès and El Masnou specifically? Why are we so happy about these 2 sites specifically? First of all, we're really doing due diligence and confirmed now in the real life, met great people, strong technological skills on the site and high quality of assets. But also, if you look at who we have been so far and what they are adding to Siegfried, you will see it's a great fit. Let's take Barberà. We had Malta, an OSD site, good site, profitable, but actually too small, I mean, less than 1.5 billion units a year. Barberà del Vallès is essentially similar to Malta. It's broader in terms of technologies. It is much larger in terms of capacity. But they will, together, will create a great offering for our customers and will make us an attractive vendor in that space as well. On top of that combination, there are 2 things which are also special about Barberà del Vallès, one being the ability to handle highly potent APIs, Class IV, Class V APIs, and manufacture drug products off it. That is a rare capability which not so many companies can actually offer, and that's going to be very interesting in terms of technological differentiation of Siegfried. Another great technology relates to inhalation products, very versatile technology, difficult to make. And actually, this site is great, and this has great capabilities and capacities that's going to be very interesting for us at Siegfried going forward. And we didn't have that capabilities or capacity so far. So let's now jump to El Masnou. Why is that a great fit to what we have been before at Siegfried? You might remember that in 2012, we acquired Irvine, which used to be, until the early 2000s, a Bausch & Lomb site, an ophthalmology pharmaceutical company. And we bought it in 2012 and still have a good footprint in that market segment, still manufacture ophthalmic products and have a good entry with these kind of pharmaceutical companies. And El Masnou actually is one of the large sources globally for ophthalmics. And they, together with Irvine, will also create a very attractive offering to our customers. So it's really spot-on what we have been looking for, for quite some time. Financial profile, also good news, I believe. Additional business from the sites is expected to be core EPS accretive immediately, so this year, and not to dilute Siegfried's core EBITDA margin in 2021, possibly even contributing to margin expansion, depending on product mix development in the year and also how fast we are able to actually carve out, integrate and transform the 2 sites. The intake of new third-party business, as said before, is expected from 2023 or 2024 onwards. After we have successfully finalized the carve-out, the integration and the transformation towards customer-facing CDMO operations, that's just the amount of time that you need to develop new business and take it on and implement it technically. So that's what we are looking at in terms of financial impact on Siegfried. So that's the new global footprint of Siegfried, 11 sites now, well distributed with main focus on Europe, however, well positioned in all relevant regions in our market. Here, you see some pictures. Left-hand side is Barberà del Vallès, a significant site, 600 employees, approximately 20 kilometers away from Barcelona downtown and also 20, 25 kilometers away from the other site, El Masnou, which you see on the right-hand side. Actually, I mean, close to the beach, which, I mean, it's a beautiful place. And all the rest of the area is actually, I mean, filled with private residencies, but we have been there before. Family Cusí has been here before, more than 100 years ago. So 400 employees, and that is the site -- the sterile manufacturing site for ophthalmic products. So day 1, I mean that's -- many things can go wrong on day 1, which interrupt your ability to manufacture and continue the business. It all went smoothly. And that is due to the fact that actually the 3 parties, Novartis, the teams on the site and, of course, old Siegfried teams started to work together already in September, hard work, very focused, very concentrated and have been ready on the 31st of December to really start and to continue the business on January 1. So that really is a success -- a first success story. It's not yet the whole way, but however, a very important milestone, which is not there for granted. One important message here is, and you might be interested, always, I mean, if you do a transaction, and we did quite some in the past, is always kind of exciting to, on day 1 and going forward, to check if your assumptions actually turn out to be true. I mean whatever you assumed in your business case, what you found out in due diligence, I mean, does it hold true with what you then actually find in reality. And here, the answer is we didn't have any significant surprises. We look at strong capable teams. We have taken over high-quality assets, which are operated with state-of-the-art standards in terms of quality and also management processes. So really all on green in this regard as well. So some color, give you some touch and feel. What happened in week 1, how we called it, because we couldn't go there in the first week of January. However, I myself, together with senior management of Siegfried, we spent a whole week starting on 11th of January on the 2 sites with town hall meetings, really took the time to explain who we are, talk about our vision, talk about our mission and values, how we want to operate, not only Siegfried old version, but including the new members of the family, explaining why the business model works, what they need to do to transform themselves into successful CDMO operations. And I really -- I mean, even though the meetings have been virtually, I mean, some of the colleagues, you see it on the picture, have been in the room adhering to the COVID measures, of course. But I mean, the level of energy, naturalness and openness that I experienced there really excited me. And I mean even more than before, I'm convinced that -- I mean with hard work and time, we will turn this acquisition to an important success for our company. You also see, I mean, us doing plant tours. And we're looking at the things and meeting people also on the shop floor. You see, I mean, great equipment. And in the end, also a happy team with a thumbs up, and that also holds true for the El Masnou site. And one remarkable thing, and we did acquisitions before and went through similar exercises, but I mean already on day 11 of the year 2021, you could see the Siegfried logo everywhere. Yes? So here, it's on the glass wall. And that's nothing you can just do by top-down ordering. Of course, I mean, you will create some reach, but the people really appreciate it and really are willing to onboard to Siegfried. That actually was great, great to see. I talked about network. It's a complex slide. And don't worry, I won't spend too much time on it. What it essentially says, left-hand side, small. That's our drug substances global network is already managed today, which is having central R&D hubs taking care of development activities for the whole network and a network of sites which truly cooperate where appropriate, which means sharing tasks, transferring products, sharing best practices. So a very good, useful and kind of a blueprint for what we will do with a now-available drug products network. Very briefly, we will establish an R&D center of excellence in the Barcelona region, which then also takes responsibility, not only for Barcelona, but also Malta, Irvine and maybe even Hameln. And how the teamwork between the sites with the existing sites of Siegfried will work going forward already explained, Barberà del Vallès, Malta and El Masnou, Irvine. So I mean very -- I mean, great slide. You know that, but it tells you almost everything at first sight. A message here is CDMO market actually is a young market. It's a young business model, only 30 years old, invented by companies like Siegfried, Lonza, others in the '90s, which is the reason why it's still very fragmented. And depending on the criteria that you apply, you can easily say the market has -- or the competitive landscape has 200, 300, maybe even 400 vendors. So many people, many companies. And I explained why scale is important. So I mean, naturally, but also specifically, in our case, it's better to be on the top than on the bottom. Where has Siegfried been 2012? Around CHF 300 million revenues, transformed with the acquisitions in '12, '14, '15, took us close to where we have been last year, CHF 845 million. And EVOLVE is now bringing us to the top tier, to the top of the pyramid in the CDMO space with revenues above CHF 1 billion. Of course, there are other companies which are still significantly larger than us, but that is the right place to be. That's where you can actually create great business opportunities by being a strategic partner to your customers. And we do have the ambition to not only establish ourselves in that group, but also to further advance. Critical size. I would make that slide rather short, but briefly talk about 2 things. First of all, this wheel on the left-hand side, I mean how does the growing work at Siegfried? And what is necessary so that it continues to work? First of all, we need to use our capacity in an optimal way, which will lead to profitability. When we take in new business into idle capacity, we apply operating leverage, which will lead to increasing profitability. Increasing profitability leads to cash. Cash we can invest into additional capacity, and the additional capacity we will use to take on new business, which, again, operating leverage and so on is profitable, increasing margin, bringing cash that we then can further invest into either organic capacities or M&A. So that's a growth cycle that we are continuously going through in a market which is growing. On the right-hand side, you see in 2 financial KPIs, how that worked out in the past. In 2016, when we achieved critical size in the drug substances space after the acquisition of the BASF CDMO business in 2015, we have been able to deliver continuous growth and continuously increased our profitability. And with now having achieved the critical size in the drug products space as well, we expect that to continue going forward. That leads me to actually the last slide, very useful slide because it really summarizes the business case of Siegfried as an investment, as an asset and for investors and financial markets. On the right -- left-hand side, you see where Siegfried has been last year, in one figure, CHF 845 million in terms of revenue. On the right-hand side, you see where we want to take our company, which is be a global leader in the CDMO space. Now with the acquisition of Novartis and our organic growth, we will be top 5 already in 2021. Then we want to continue to build or to become the most trusted partner, having the strongest team running the most competitive network, have critical size in all relevant segments and be able to master all relevant technologies that you need to be successful in our space. And in the middle, you see how that's going to happen. On the top -- I mean, on the bottom part, you see our base case, robust organic growth through investments, growth in line with the CDMO market with the ambition to outgrow. In the next few years, I think that's an important piece of information. We will see some top line fluctuations from variability in the COVID vaccine demand, which is just difficult to predict for the next 2 or 3 years and due to some phasing of old versus new business in the 2 manufacturing sites in Barcelona. On the way, we will see a step-wise expansion of our core EBITDA margin into the 20% target range. And we will continue to invest into technologies and capacity in our deeply integrated global site network. So on top on that -- of that base case, we will continue to also look out for accelerated growth through M&A, so value-accretive acquisitions in core areas or acquisitive entry to new areas within the CDMO business model. And that all then summarized in our outlook for 2021, where we expect to see a significant jump in sales to well beyond CHF 1 billion, with profitability further expanding towards our target range of 20% core EBITDA margin. The whole thing, I think that just needs to be said for obvious reason. COVID-19, of course, still is a source of uncertainty. However, in 2020, we at Siegfried have been able to prove that we are resilient and that we can also cope with unprecedented challenges like the coronavirus pandemic. That's the point in time when I would actually stop the presentation and hand over to Peter so that we can take questions of you and provide answers. Thank you.

Thank you, Wolfgang.

There are a couple of questions came in. [ Carlo Balmetlo ] asked, you mentioned [Technical Difficulty]