SIG Group AG (1YQA.F) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. I'm Ingrid McMahon, Director of Investor Relations, and welcome to SIG's investor update. We're delighted to see so many of you here in the audience today, and we have a very large audience participating online. So thank you all for joining. Before we start with the presentation, please note our disclaimers. And also in case of an emergency, the access are directly behind you, and please switch off your mobile phones. So coming to the agenda for today. We will start with an introduction from our Chair, Ola Rollen. He will summarize his insights and expectations since joining the company in April. Ann Erkens, our CFO and Interim CEO, will follow with strategy and execution. Christoph Wegener, our Chief Market Officer, will talk us through our exciting growth opportunities; and Gavin Steiner, our Chief Technology Officer, will detail how we are setting the standards for packaging with our aseptic technology. Ann Erkens will then follow with and talk us through our financial framework and guidance. Thereafter, we will have time for Q&A, followed by a light lunch. And with that, I'm delighted to hand over to Ola.

[Foreign Language] and good morning, everybody. So my name is, you can say, Ola Rollen, or [indiscernible]. I'm Swedish. And I spent most of my career with a company called Hexagon, started as CEO in 2000, stepped down in 2022. I'm now the Chairman of the Board of that company, and I also run my own private equity company on the side. And then as of April of this year, I assumed the role as Chair of the SIG Group. And SIG is slightly different from what I do normally. You can see a picture here of me and my brother. I'm to the right, just pointing out. And -- but I find this company quite interesting. First of all, think of the mission. You've been following this company much longer than I have. But what you can do with an aseptic technology is just amazing for people and consumers around the world. I have a passion for Swiss-German engineering as well. Think of everything from watches to precision machinery. And I think I learned that in 2005 when we were the first company to launch a hostile takeover here in Switzerland on a company called Leica Geosystems, which is very similar to what SIG stands for. The system's model, I don't need to talk about the razor-razorblade model. For me, it looks like almost a software company with ARR and you build the base and then you harvest what you sow. Management team and Board, great people and the Swiss business culture is really nice, too. So I think it was an easy yes, to say yes to join the Board of SIG. Now you could ask yourselves why am I standing here today. The Chairman should not be in a capital markets event. I've done my fair share. I've actually calculated. I've done 100 interim reports, so I've had my fair share of you guys. But we -- Samuel Sigrist stepped down in August, and we've been running a search. We're now very close. Unfortunately, we can't give you the details, but I can talk about the profile. So our next CEO will have CEO experience, has run a company of sufficient scale, global experience, been exposed to engineering because the engineering [ capital ] goods is very different from like consumer goods. Execution experience, successful turnarounds and profitable expansion, that is what we're looking for and obviously, capital markets experience as well. I think we're in a situation where we [indiscernible]. But now I want to talk a bit about SIG, my experience over these past 6 months. So let's do the good and the bad and the ugly. What's good about SIG? Why are you all interested in this company? Well, what I found was we have the saying in Sweden, which is don't spit against the wind. You're going to get wet. So if you can spit with the wind, i.e., follow the megatrends that we see in the economy, you're far better off than if you try to fight these megatrends. And if we look at SIG, what we actually can do with aseptic packaging on a growing consumer base, the need for sustainable packaging and the shift towards protein-rich foods, which is like a 2 billion consumer problem, growing demand for dairy and specifically in the bag-in-the-box segment, we see a demand for foodservice automation. And I've been studying this a lot about the demographic shift in the economies of Europe, America and Asia. And that's why Hexagon launched that robot that you saw and why people are talking about humanoids. Now we're already faced with that problem in foodservice. So zooming in on the aseptic technology, the fact that you can store a product for up to 18 months without cooling is in itself a miracle. That means that you can reduce your energy consumption. You can reduce the CO2 footprint, and we're all going to have to do that eventually. And we know we talk about recycling and building a sustainable ecosystem where our economies are using the waste to create new products, and we believe that we can reduce the waste by up to 10% by using the aseptic technologies. So there are some really strong factors why this industry is moving towards aseptic. And then if you look at SIG itself, there are only 2 companies on this planet, 1 Swedish-based that we won't mention and then it's SIG that can do a carton with an aseptic barrier. And how we win in this market is, for me, it was brilliant when I looked at the technology. We have sleeve-fed system, which creates flexibility for the consumer instead of a roll-fed system. The total cost of ownership doesn't go up in spite of having the sleeves. We're actually competitive on that as well. Sustainability leadership. You will hear later today us talking about how we're now taking decisive steps to make all our products recyclable, and the aseptic innovation we've talked about, that is at our core. So really exciting growth opportunities as a newcomer. I believe we can continue to gain share in the carton business through differentiated offering because when you're 2 major players, it's very hard to fight on price. We have a huge opportunity that we will discuss today, and you've probably heard about it, but now it's for real, and that is launching an aseptic spouted pouch. That opportunity could be almost as great as the carton business. Leading transformation towards automated recyclable aseptic foodservice systems in fast food chains, that is another great opportunity that we are going to explore. So this is what I've learned. There are really positives about the 3 substrate strategy, and we're going to discuss that a little further. The other thing I've learned is we got great management talent. We have 150 years of experience between these 8 individuals in relevant industries. And that's a great starting point. But it wouldn't be a story without challenges, right? So the share price is down 50%. Then everything can't be hunky-dory, right? So what went wrong? And what are we trying to address? Well, I think I can paint a picture in one slide. SIG has spent EUR 3.4 billion in CapEx investments either buying companies or investing in equipment over the past 4 years. Now that has generated a free cash flow increase of EUR 57 million. It's really painful, but I know you know math. If you divide EUR 57 million by 3.4, you get 1.7% return. And this is at the core of the problem, and this is what we need to resolve. So if we just look at the acquisitions, bag-in-the-box, we see gaps in the product offering. We see gaps in our go-to-market capabilities. We have invested, but we need to focus much more on automating the workflow to bring down the cost of goods sold and improve the return on these investments. So it's really an operational reset for us to focus on profitable segments and then methodically working through the workflow and address costs that we can take out and make this a very competitive business. When it comes to spouted pouch, you could say non-aseptic spouted pouch doesn't make sense for a company like SIG. It lacks the characteristics that we're looking for, system sales, aseptic, sticky product. But with the help of SIG's R&D and 2 years of relentless innovation into the spouted pouch segment, we now have a product that is recyclable. It's aseptic and it's a systems product. So now suddenly, aseptic spouted pouch is a core business. When it comes to chilled carton, that does not fit the agenda for a company like SIG either. We are not differentiated enough. We can't command a high enough price on the chilled carton to make the returns we are looking for. And on top of that, in '25, we've seen macro uncertainty. All industries are now faced with macro uncertainty. And you only need to go to the German automotive industry, and you know what we're talking about. It's political. It's geopolitical. It's new competition from Asia that everyone needs to get acquainted with. And that leads to cautious consumer spending, which in turn has led to muted growth across the packaging industry, and we've especially seen that in the second half. So if I am to summarize my first 6 months with this company, I would summarize it like this: great products, great people, great technology. The foundation is here to create a super successful company. Yes, we have the past EUR 3.4 billion in investments on top of that EUR 600 million in dividends, so think EUR 4 billion with EUR 57 million return. That's not good enough in my books. Weak end market demand. But you know what, life is like this. And this, if you change it around and you say, this is a great opportunity for a reset and that's exactly what you're going to do. And if you reset the company near the trough of the business cycle, you're going to make a lot of money when demand comes back. So there is a strong future for SIG. And what are we going to focus on? Well, we will use the core advantages that we see from the carton business. And just to repeat those, system solutions, you need a sticky business. You can't just sell machines or packaging. The system is what makes the nice returns. We already have a global sales platform. We're present everywhere where it matters. We have a broad service offering. It's not just selling sleeves. You need to have the service organization to back up an installation. We do have the aseptic technology. We are literally an innovation engine, and we will not stop innovate, as you will hear from Gavin later. And the sustainability expertise in the packaging industry is second to none. Now if you take all this, you have a really good foundation for continuous growth in aseptic carton. But what we can do is we can take this, transfer it into aseptic spouted pouch and aseptic recyclable bag-in-the-box products for foodservice. So it's a very, very dedicated effort in bag-in-the-box. So when it comes to execution because you can stand here and show nice slides, but now the proof is in the pudding, as the English say. And we're going to move to EBIT because we think this company hasn't focused enough on the cost of capital. So when you start measuring internally and externally on EBIT, you put a price on CapEx, and that is absolutely important. Capital allocation discipline will be an outcome from that, and we will focus on returns. There are no M&A ideas on the horizon. This is very hard for me to say with my history, but it's absolutely true. This company, it's not on top of our agenda to do any M&A. Improved cash conversion and reinstate the dividend, that is our promise, and that is what we're going to focus on. So if I am to summarizing my first 6 months with this company, I would say we have a fantastic opportunity to drive value, and SIG will become a leader in aseptic sustainable packaging systems. We tried to capture everything we do in one line, and that will drive world-class products and margins. Proprietary technology will defend us and create high barriers to entry. We can offer the lowest total cost of ownership for our customers in spite of might -- we might not be -- the upfront price might not be the cheapest. But over time, we can prove that if you work with us and you work long term, you're going to make money as a customer, too. And at the end of the day, all of this will generate attractive growth and returns for our shareholders, and that is the ultimate target with a listed company. So with that, I'm going to leave over to Ann, and she will take us through the strategy execution. Thank you.

I'll spend a couple of minutes on strategy execution, especially for the next 18 to 24 months. Just as a reminder, on our strong global platform that we operate, that positions us super well for long-term value creation. Ola mentioned already, we are facing attractive end market trends. We have a unique solution system that we operate, and we differentiate with aseptic technology. And all of this positions us very well to operate also very profitably in the future. I would like to spend a couple of minutes on how we operate our system solution because it's important that we all understand this and are on the same page here. First, let's look at the separation of revenues into the different streams. For 2024, we had 7% of our revenues with equipment; 87% with packaging material. That's, of course, the core of everything that we are doing; and 6% with services. Services is also an attractive business for us, and we look to build out this even further. You can imagine that this is also a margin-accretive opportunity. When we think about our system, we differentiate by using a sleeve-fed system compared to roll fed with competition. And why is this actually great? And why does this help to create also a barrier to entry. With the sleeve-fed approach, we do 4 production steps in-house for our customers. So we do that at scale for all customers, means we do this very, very well. And we have optimized this over several decades. There's lots of IP involved and lots of trade secrets. So -- and that's something that you can't copy so easily even if you tried. And if you tried and wanted to do it, I mean, not only that will take you lots of time to catch up with the excellence that we have in-house when we run those processes, you will also need lots of CapEx, which creates an additional entry barrier. So I would say the sleeve-fed system really differentiates us from competition. And it's very flexible also. As long as the footprint of the package is the same, you can run with a very short change over time exactly on the same machine. And you know in this industry, it's all about the output that you generate in a given time frame. So the more you get out, the less time you need to spend on changeover, the better for your total cost of ownership. And with the inflation environment that we are currently in and probably also continue to be in for the next coming years, when customers want to respond to this with shrinkflation, they are super well equipped with our flexible systems. And talking about flexibility, an additional important angle, of course, is on our systems without any retrofit, you can operate the classical packaging sleeve, but you can also operate the up and coming. And we are very proud about the growth rates also in this segment, the non-alu sleeves, which Gavin will also talk about later a bit, so no additional retrofit, you can run this over the installed base, whatever any legislation will put you up for. And it's also important to take note that the net CapEx that we have to invest into filler placements, you know that we always co-invest with customers, has been decreased quite a bit over the last couple of years. It was a little more than 1% of revenue last year. And that is because we are more successful in negotiating upfront cash contributions also from our customers. And you remember probably we discussed last year also that we have put this in place even more stringently so that we get this cash also even earlier. Now this all helps to entertain long-term customer partnerships, and we're very proud about really those long-term partnerships that we have with customers. And that goes across the portfolio. Our top 10 customers are with us for more than 30 years, and that is across substrates, both on the aseptic carton but also in bag-in-box and spouted pouch. And you see that we partner really with all the relevant players, be them global customers or regional champions or also local champions. You know that we lock in our relationship by placing the system solutions for typically 6 to 7 years on the aseptic carton side, and more than 90% of the customers also renew those contracts into a second cycle. On the other substrates, we are still developing the systems approach, but we see that this is really getting traction. And you can calculate that on bag-in-box, spouted pouch, where we have a system solution in place, the current contract time line is about 3 to 4 years already. All of this delivers us more than 90% customer retention, so we hardly ever lose a customer. And there's numerous examples of how we support our customers, and I don't want to run you through now a lot of them but at least 2 small examples. When you think about, for example, Almarai, which is a leading dairy player in the EMEA region, they have partnered with us now for their asset renewal cycle over the next 5 years, and they were the first to place our new Neo filler, which gives you 15,000 liters output in an hour. And that is 25% more than the old machines. Also in the bag-in-box side, we partner with customers and drive innovation with Coca-Cola. We have been driving, especially in America South but also in Asia, mono material -- or monolayer material, which is good for recycling. And with this, we also support Coke in their initiative on the sustainability side, which is called A World Without Waste. Now Ola has outlined a lot of challenges that we have ahead of us, but we have also done a couple of things pretty well in the last couple of years, which has helped us building a strong foundation. We have continuously grown our market share to around 25% now, and with this, we are the clear #2 globally. And we are very confident that we can also continue this journey over the next couple of years and continue to grow our market share every year. We have expanded over categories and channels. So you find us now with a global #1 position also in bag-in-box and foodservice. And in spouted pouch, we hold the #2 position. Over the years, we have also improved our regional footprint from being very Europe and Asia centric to now being well distributed across the globe with around 30% in Europe, in Asia and in the Americas and a little more than 10% in IMEA. So our multi-substrate strategy positions us for further growth. So we're not only limited to aseptic carton, but we have created now avenues where we can serve also more consumer occasions and more categories and also different channels. And those channels also will give us access to structurally higher growth markets because any outlook for foodservice will position us at a higher growth rate than the classical retail business where you have the carton business running. Now I wanted to talk also about how we want to drive value creation going forward. Three big pillars: number one, portfolio optimization, performance improvement and rigorous capital discipline. When we think about portfolio optimization, this is all about focusing our portfolios and investments on the best opportunities and which we typically find in our aseptic applications. Aseptic is complicated, as Gavin will explain also later one more time, and of course, any problem -- any complicated problem that you solve, you can command better margins than for easy things. We will also continue to optimize our noncore segments for value, which doesn't mean that we don't like them or that we're not going to continue them. But naturally, the opportunities are more prominent in the aseptic space, so over time, the noncore parts will lose share. On the performance improvement side, we're going to address a comprehensive cost program, and I will go through the detailed pillars on the next slide. But this is all about adjusting our structures to the current market environment and optimizing how we run operations and supply chain. And last but not least, we have defined a very clear and also very disciplined framework for capital allocation and adjusted a couple of internal processes also to make sure that we really invest into the earnings accretive opportunities that we have on the table. And last but not least, we have already started to change KPIs over the last 12 months, but we're going to take an additional step now moving on the bottom line from EBITDA to EBIT and also focusing more on return KPIs. Now let's look at some details for each of them. Here's how we're going to optimize the portfolio. No surprise, you will find us with the strongest part in our aseptic core, which we expect in the midterm to be 90% of our portfolio. And that includes, of course, the aseptic carton business but also aseptic spouted pouch and bag-in-box. Nevertheless, we will also continue to keep running non-aseptic businesses as core because part of the business is synergistic, and that can be basically twofold. Number one, those categories can be entry categories into customers that can later then open up more aseptic business; or number two, you would run it over the same assets, and we want to sweat our assets, of course, in the best possible way. And that is why it makes sense to also keep a couple of non-aseptic businesses. We will also have still a very small share of other solutions in our portfolio, and that share will naturally decrease over time simply because the growth rates will be much slower in those segments. And then last but not least, we're looking at finding a strategic partner for the chilled carton business because, as Ola has described before, there is not too much synergies with the business, and we can't really capture the margins that we seek for this business. To give you a feel for how big this business is, it's around EUR 120 million to EUR 130 million in revenues. And we basically operate it in China, Taiwan and in Korea and also in those 3 countries have own factories to produce the respective material. And it's about 300 people that are employed in that business. Now performance improvement program. We have launched the performance improvement program already a couple of weeks ago, and that will include or is including SG&A and R&D cost reduction on the back of really driving more automation in what we do and more standardizations into processes. And I mean, no surprise, and we're not the only company, but in light of the current market environment, of course, we need to adjust our structures and also work on making our R&D work even more effective. To give you a flavor for what we're talking about, so we're taking out about 5% of our employees in that population, and that translates into a low 3-digit number of colleagues or positions that we will make redundant. On the procurement optimization side, we have started already this year by driving a new governance and a new operating model for procurement on a global basis, and we are also specifically addressing all our indirect spend, which is a significant basket also of cost. We're using category buyers now to make sure that we really do the best deals in a structured way across the world. And also here to give you a feeling of the magnitude, already this year, we have addressed freight cost that way, and we have optimized our freight costs quite a bit, which also has contributed, by the way, to the margin stability that we still see despite the lower volumes that we have had this year. And we believe, on average, we will take out in that basket also 3% to 6%. And we have used things like e-tenders and auctions, new tenders where we were very successful and just more digital tools also to compare cost better. And last but not least, on the manufacturing side. So we have defined now clear road maps for every plant with a 3-year rolling horizon for conversion cost optimization to basically balance out inflation. And as Ola has mentioned it before, especially on the bag-in-box side, there is room for further operational improvement also through automation. We are also optimizing our supply footprint further. A couple of weeks ago, we have announced the closure of a Dutch site in the bag-in-box space, which will take out cost also for next year in the mid-single-digit million euro amount. And we continue to look at further opportunities also. All of this together will give us 150 basis points margin uplift, so our EBITDA margin without nonrecurring items will be above 24%, so 24% to 24.5% for this year. And we target to achieve this 150 basis points net uplift after inflation so that we reach more than 25.5% adjusted EBITDA in the midterm. But now let me translate this from EBITDA also into EBIT. Our depreciation and amortization is around 9% points at the moment, so the starting point would be above 15%. And then if you add back the 150, you come to 16.5%. Why do we do this? I think very clear, we need to increase the visibility of capital allocation decisions externally but also internally to our teams. And we have done so also in the past. I mean, every project had postmortem calculations done in a very disciplined way, and we can also say, I believe, with pride, we always hit time lines when we did CapEx and we hit the budgets. But of course, that's always only a snapshot in a given moment, and if then utilization doesn't land where it should or is temporarily down, that's not so much in sight of the teams anymore, and that needs to clearly change also to generate learnings for future investments. I believe using EBIT has also the additional advantage that it includes both the deferred revenue portion of our lease accounting but also the corresponding depreciation of the filling lines so that basically, that is all equaled out in the bottom line. We have introduced this already internally in January, and our STIs for 2025 are already sitting on EBIT because we really believe this will make a difference. Now in summary, we have a strong global platform, and we have defined a very clear path forward. And now I would like to invite Christoph to the stage to give us more detail on how we're going to drive growth and how the market opportunities look like.

All the exciting market opportunities for SIG that Ola already mentioned. I will first give you an overview of the broader packaging market and then zoom into our 3 strategic substrates, aseptic carton, aseptic spouted pouch and bag-in-a-box. And then I will also talk, and more importantly, about our plan to win in these respective segments. So let's talk about the wider packaging market. I mean, undoubtedly, the packaging market has faced significant headwinds in the recent past, raw material cost inflation, food price inflation, macroeconomic uncertainty that certainly affects consumer confidence and holds them back from splurging and it holds back our customers from investing. But nevertheless, even if the waters are choppy, one should not forget the strong undercurrent of the packaging market, population growth, GDP growth and with that, ultimately, a higher demand for protein. And that protein needs to be packed, and that's where packaging comes in. Now SIG and with our core portfolio, we are playing in geographies like emerging markets, in technologies like aseptic and channels like foodservice that are forecasted to outgrow the wider market. And that will be an important driver for us to show above-market growth. I will take you through each one of these substrates in a minute, but before we get there, let me also share with you how we deploy our multi-substrate portfolio at our customers and how we create value for our customers and for us with it. Now if we shift perspective and look at the food and beverage market from our customers' perspective, they have one objective, and that is to sell as much product as possible. And they think in 2 dimensions: number one, channel coverage, so the more sales channels I can sell my product through, the more product I can sell; and number two is channel penetration. I will talk -- I will first talk about channel coverage. Essentially, if you think about channels, I mean, they're all targeting 3 basic consumption occasions: number one, in-home; number two, on the go; and the three -- the third one is out-of-home dining. And you have 40 channels that serve these different occasions. Now we are the only player globally that has aseptic packaging systems that can address all of these 40 channels, and we can do that on a global scale. And that's a significant value that we can bring to our customers to unlock their growth strategies. And to give it an example, so Tirol is a dairy customer, typical SIG customer. 2/3 of our revenue is in dairy. It's a Brazilian dairy, and for your perspective, Brazil is the second largest UHT market in the world after China, so a very important market for us. Tirol is the fourth biggest player in that market, so what we call a regional champion. Now up and until 2024, Tirol was only playing in the in-home occasion served through retail and predominantly focusing on white milk. So if you think of this matrix of channels and categories, they really only played in 25% of that chessboard. After a couple of strategy workshops with them, and that's really the customer intimacy that we have with our customers, we defined with them their strategies. They decided to venture into foodservice, a new and growing category in Brazil. They installed an aseptic bag-in-a-box filler from SIG, packing ice cream mix, a growing category and serving that to McDonald's. So they're widening their channel coverage. They also decided to venture into new categories, cheese spread, yogurt spreads. Those are consumed at home. So they're increasing their channel penetration, and they're using our spouted pouch solution for that. And with these 2 investments, they are now playing on 50% of that chessboard. But that is only half of it, so there's a lot more to gain. And there are a lot more customers like Tirol. But that gives you a bit of an example of how we deploy our substrate portfolio and how it really, at our customer base, unlocks value for them and for us. But let's take a look -- closer look at aseptic carton, 75% of our revenue as shared. Now also aseptic carton had its fair share of headwinds, so we are coming out of a period of growth, decline, growth, decline driven by what I mentioned before, cost inflation. But we see a more normalizing inflationary environment, and we see that demand is coming back in the midterm. So we do see it returning back to its structural growth that we've seen before, which is 3%. But we will outgrow that market, and we are confident to do so. And why is that? Because we are deploying a very exciting innovation pipeline and that will really strengthen our positioning as the total cost of ownership champion, the sustainability leader and the aseptic innovator. But let me take you through that step by step. So we are now launching what we call the Neo series of equipment. It's a Neo series of filling equipment that has the highest output per square meter in the industry. We've deployed our first machine this year at Almarai, 25% higher output. And why is it so important, output per square meter? Because we can't build huge machinery and put that into shiny, big new plants. You can do that, but you're only serving a part of the market. We want to replace equipment, competitor equipment, and a lot of that is in brownfield plants. And when you replace equipment, you want to drive up efficiency. You want to drive up output, and that is where our Neo series comes in, 25% higher output, same footprint. We have started to do that with Almarai on our slim format, which is the biggest selling format in 1 liter. We're rolling that now out next year to Brazil, to our square format, and we don't stop there. The next step is to roll it out to portion pack, which is most of our Asian market. So we're really bringing a solution to the market that will give a boost to total cost of ownership and help us to win more deals, gain share. Second, sustainability leadership. We've been, for quite a while, the leader in alu-free carton. Why is it important to remove aluminum? That is 25% of the carton CO2 footprint, so it really offers a more sustainable alternative. Now what held us back is the barrier. So the solution that we had didn't have exactly the same light oxygen and water vapor loss barrier as alu has. Now thanks to our R&D, we've cracked that. We now have a full barrier solution, and that means we can unlock new categories like juices, which are oxygen sensitive. But even more importantly, we can go into new geographic regions of the world, hot climates where our previous barrier was not good enough. We started to launch it in China. We've brought it to South Korea this year. It's the only aseptic carton in the market that is labeled as recycling easy, thanks to our -- to the fact that we remove aluminum. We brought it to Southern Europe, and we are opening up the juice category. So with that innovation, we can really increase the momentum of alu-free deployment. And last but not least, aseptic innovation. So we have a set of unique shapes, of unique carton shapes that are IP protected and that really help our customers to stand out on the shelf. One example is our DomeMini, the carton bottle. I mean, the bottle is a perfect shape, extremely convenient. That's why it's been around for centuries. We've brought it to the carton. That plays really on the premium end. But we also have formats like our XSlim, where you can run 9 different volume sizes from 90 milliliter up to 200 on the same machine, and that really caters to affordability. It caters to shrinkflation. It really helps customers to weather that storm to offer competitive price points on the shelf and to grow their market share. And in reality, 1/3 or every third machine in the last years has been 1 of those innovative shapes, which you can only buy from SIG, and that's really a testimony to the strength of our packaging portfolio. Let's go to aseptic spouted pouch. So that's a technology and a market opportunity that I'm personally very excited about but more importantly, our customers are very excited about. Now to explain a little bit the market opportunity, I'm going to get a little bit more technical. You don't need a food science degree for that. I also don't have one, so I'm going to keep it quite simple. But basically, food and beverage categories, you can segment in 2 key segments, low acid and high acid. High acid means that products are very robust. They have preservatives by nature, which are the acids. Think about lemon juice. Lemon juice doesn't go bad as quickly as milk. Milk is low acid, no preservatives, perfect environment for microorganisms to grow. Now treating a high-acid product and making it shelf stable is, therefore, simpler, technologies like hot fill where you bring the temperature of the product up to 95 degrees centigrade and you fill the product and the product actually sterilizes the pack, very simple. It's very different for low acid. And the fact that 90% in the spouted pouch market is high-acid product, it's not because of the consumer preference. It's not because 90% of all consumers prefer Apple puree, which is high acid over yogurts or banana puree, which is low acid. There simply is no technology yet available at industrial scale that can bring aseptic to the spouted pouch. And that's really the code that we cracked. So treating it at high temperatures only for seconds and then pre-sterilizing the pack, just like we do it with carton and thus, extending the shelf life also for low-acid products. And this is a significant market opportunity. So we can, for our customers, really open up this space of highly nutritious, dairy-based, vitamin-rich products. And we're going to do that in 2 steps -- 3 steps, apologies. Number one was really the -- what I would call the technical proof of concept. We've done that in the last 2 years. We placed our first-generation aseptic spouted pouch filler, still a very costly technology, and therefore, we focused on more the nutraceutical space, but it established that the technology works and that there's a market for it. The second step, which we have started just this year, we've brought our second generation to the market. That uses in-line sterilization, which brings down the cost of the system significantly, but it's still low speed. The third step really is to bring a high-speed solution to market, which we will do post '27. And with that, we can really unlock the mass market. We can deliver aseptic technology at a competitive cost and really unlock that low-acid space of products. Last but not least, bag-in-the-box. And undoubtedly, also this segment of our market has had its fair share of headwinds. But it's very important if we want to also understand the future trajectory and the growth potential that we unpack that box. And I'm going to start at the bottom of the list. So basically, bag-in-the-box plays in 3 market segments. It starts with industrial. Industrial are very large bags, 220 liter, 1,000 liter, and they're basically used to fill agricultural produce. Think about tomato. And they are sold to the agri business, so very different from where SIG traditionally plays. Now this segment, we see growing with a wider packaging market but definitely not outgrowing it. Then we go to retail. Retail bag-in-a-box is mostly used for wine. Now wine has 2 problems: number one, people do consume less wine; and number two, it has a demographic problem. The younger generations are even consuming less. And if wine is bought, it's rather bought on the premium end, which typically is filled in bottles. So this segment, we see stagnating, maybe even declining. But where we are really excited, and that's where we will focus our investments and our efforts on, is foodservice. Now foodservice is -- growth is driven by 3 factors: number one, QSR growth. And if you follow McDonald's a bit 4 weeks back, they announced that they will actually increase their global store count from 40,000 to 50,000, so they're adding 25% more stores. All of those serve Coke. All of those have bag-in-a-box. So there is an organic growth in that market. But there are also additional growth accelerators. So we see dairy and also new categories like lemonades, ready-to-drink coffees moving into dispensers for speed of service, and also they require aseptic. And that really is our strong point. And that's where we believe we can bring an edge to the market and unlock a significant share gain opportunity. And I'm going to walk you through how we want to do that. So basically, we have a great filling platform, the SureFill 42. It's, in the industry, the fastest. It brings the strongest aseptic performance. But we had a couple of problems to roll it out globally. It was mostly sold in the U.S. Number one, cost, we brought that down, thanks to our assembly capabilities and reengineering capabilities in China. Number two, we had to do a technology upgrade to get CE Certification so we can also sell it in Europe. And number three, our customers, especially new customers, they simply expect a service offering around it. It's a different thing if you already have 10 bag-in-a-box fillers in the U.S. and you're buying the 11th one. Then, it's the first bag-in-the-box filler like at Tirol. They expect the same technical service offering that we also have in carton. And we've built that technical service offering around that. So we can really -- and we have started to really roll out that platform as a system, so packaging, equipment and technical service across the world. And you see here a couple of logos. I mean we can now say we actually have on each continent in Asia, in the Middle East, Africa, in Europe aseptic SureFill platforms up and running. But it's not just the TCO and the aseptic innovation that we bring. We're also the leader in the transition of bag-in-the-box to mono-materials, so bags that are designed for recycling. And the sustainability discussion in the last years has been a bit more colorful, let's say. But I can tell you, when we talk to our customers, they don't slow down. And together with Coke, who is the largest player in bag-in-the-box, we are spearheading that transition to sustainable structures, which are products that are IP protected and which we are rolling out with Coke now in Asia as well as in Europe. So in a way, we are really recreating the winning formula that has been the source of our success in aseptic carton, systems that are leading in TCO, leading in sustainability and in aseptic performance. So let me summarize. When it comes to the market, the fundamentals are still intact. Population will continue to grow. GDP will continue to grow. Demand for protein will continue to grow. And we have, with aseptic, a solution that can address that. In aseptic carton, we are very, very convinced to continue gaining market share based on the innovation pipeline that we are deploying, the new platform, fastest machines in the market, the Terra program, alu-free, full barrier only solution in the market. With spouted pouch, with aseptic spouted pouch, we can create an entirely new market, a blue ocean for SIG, where we are the only player with an industrialized solution. And in bag-in-a-box, we will focus on where growth really is, and that is in foodservice, and we will focus on applications and categories like dairy where aseptic really matters and where we can deliver a competitive edge. Now I will hand over to my colleague, Gavin. He will share more about the value of aseptic and why it really matters as well as the exciting technologies that will be unlocking these market opportunities.

Science behind the nuts and bolts and the material. It's a pleasure to be here with you this morning, and I'm Gavin Steiner, heading up as the CTO for SIG. So first of all, if you allow me, I'd like to start with a quiz because my colleagues have already shared with you a lot of the technology and the science. You don't need to answer the quiz, but the thought is what does aseptic filling technology bring to our customer, our consumer and the environment. What does aseptic filling technologies bring? You've heard a lot of it today. So just to consider that, I'll highlight 4 areas for you. And those 4 areas are extremely important. The first one is around quality. Aseptic filling technology is a gentle technology, and that gentle technology allows us to maintain up to 5x the nutritional value if you're comparing to other conventional technologies, 5x the nutritional value. For example, it is able to protect or less impact on vitamin A and vitamin C, which are heat sensitive. Those can be retained at 90% in the pack. Color, for example, if you ever leave a banana out after you've cut it open, it probably goes brown within a few hours. As Ola and Christoph mentioned, we get a shelf life of 12 to 18 months, keeping that wonderful color yellow alive. So it has a very important aspect around the maintenance of fresh-like appearance. That's a differentiator for aseptic filling technology. Sustainability, as you get a 12- to 18-month shelf life, you also get a value chain -- significant value chain improvement, which is around the logistics going from refrigeration to ambient. You can just do the maths there. We're talking about 60% CO2 reduction. Looking at the shelf life itself, another wonderful value of it is the preservation of food, less food waste. Now looking at our technology in SIG, we spoke many times this morning about the flexibility, the total cost of ownership, the sleeve-fed system. Those are all very unique items that I'm quite proud of in the R&D area of the nuts and bolts as how that all comes together. And that obviously offers us a point of differentiation. But now let me build this into so what. How does R&D look when you look at this ecosystem of bag-in-box, spouted pouch and beverage cartons? I've been asked many times what are the synergies that we have between them. Let me bring this to life for you. We have 1 R&D in excess of 450 scientists, both engineers and polymer scientists, so the nuts and bolts again and material, bringing to life this carton, aseptic, spouted pouch and bag-in-box environment as one group where we share the technologies of sterile, of processing, of efficiencies and of filling and of sealing. There's obviously a synergy there. Now looking at that synergy, the flexible sleeve system in aseptic beverage cartons, as we spoke about many times, if you look at that, there, we have the unique opportunity of interchanging on the go, within a few minutes, different format sizes. That is unique, and that is one of our differentiators. Now the science of that is applicable to the spouted pouch and a little bit less to the beverage -- to the bag-in-box. Okay? But looking at that, we have, in all of these, sealing technologies. And there, we are innovating actively because the sealing technology actually is a breakthrough because we are able to put new materials, sustainable materials into the current machine base, new sustainable materials into the current machine base with minimal investment, programming changes. I think that is really incredible. And looking at that cutting edge allows us to deploy what both Ola, Ann and Chris have mentioned around this new barrier technology, alu-free packaging. It goes on to the current machine base. Competition are not so lucky. So ours works with our sealing technology development. So we have a full barrier property. I'm going to touch on the full barrier in a second again. Now in this ecosystem, we also have a connectivity opportunity, digitalization. Beverage carton, as you can see there, already, 60% of the machines are connected. The connection on spouted pouch as it's in its infancy and in bag-in-box is an obvious one for us. And that science, the OT, the IT infrastructure, is something which we will be leveraging going forward. Now all of this is underpinned by a strong IP. There's 270-plus families in the SIG portfolio. That is a fair number of intellectual properties that we have on the cards. However, ladies and gentlemen, IP is only one part. That's the public part. The more important part is the trade secrets. For a system, how do we do all of the different steps? And for me, that is extremely valuable. So we have both. It's a good portfolio, but at the same time, we also have a strength of intellectual property that is not declared, so the trade secrets. Taking this into a little bit of more practical solution. Christoph was talking about the spouted pouch. Let me just bring this to life quickly. This is actually on a Generation 2 machine. This is a banana puree that if you were to look at it, it is yellow. Generation 1 started out in a very simple way, leveraging the knowledge of the bag-in-box business, off-line sterilization. It was a quick introduction to test the theory. So you take the material. You sterilize it. You transport it to the factory. You fill it, leveraging the bag-in-box knowledge into the first part. The second step, Generation 2, which we just -- this is one of them, that was taking the aseptic in-line sterilization technology that we have and bringing that into the Generation 2, logistics improvement, transport improvement, efficiency improvement, everything into the Generation 2 machine, which you see in the middle there. Generation 3 coming in 2027 is where we leverage again the aseptic technology of multilane filling capped application and advanced sterilization technology at higher speed. So this is just showing you the question, are there synergies. Do we leverage in R&D? Absolutely. And the team have done a great job on that. Okay. Christoph mentioned this, so I can go quite quickly. But I like the picture. If you look, this is -- we're talking about the material back to the beverage carton, this one here, taking the aluminum out. Again, aluminum is an amazing barrier. If you hold up a piece of aluminum foil, no light goes through it, no moisture and no oxygen. Take it out and you have a permeable piece of paper. Okay? It doesn't really work. Christoph said we have a breakthrough. We have the equivalent barrier properties now in this pack that is equal to aluminum without the aluminum. So you get all the benefits of it. That, ladies and gentlemen, was step 1 in the R&D. I spoke about this a few -- 2 years ago in terms of our step 2, which I'm going to talk about now. But look at the difference there. We get a 60% lower CO2 footprint of this generation. I call it Generation 1, so the alu-free. Looking at the deployment, Christoph already mentioned, we've gone live. So this is not just theory. This is actually working. But what I want to share with you -- you can read this slide. This is not the alu-free version. This one in my hands, ladies and gentlemen, is the 85% fiber content. So alu-free was a precursor. Now 85% fiber content. Why? Why would you ask me, would we take the paper content by reducing the polymers up? Because the model of SIG is to fit into the current systems, whether it's our machines. I also extend this into the recycling industry. If we can fit into what exists today, we don't need to educate or train or change behaviors. That is the easiest way. If we had to create a new behavior on recycling, I think you all know what that means at home. You've got to try and tell your better half where to put a new piece of packaging, it doesn't work so well. Put it into the paper recycling is what the journey is about. 85% was Step 1 -- sorry, it was Step 2. Step 1 was alu-free. Here is an 85%, and there are 2 comments on the slide there. I'll ask you to read them. So from ECOPAPER, we've done an industrial trial, super impressive. This is recyclable in their facilities, and we're working with FrieslandCampina. We also had an amazing feedback to us. Okay. So that was Step 2. And then as we promised, we needed that in the science world to unlock Step 3, 90%. Now 90% includes the fitment. That has to be total fiber content of 90% in our pack. And that unlocks -- the dream is that we get into the paper stream. So you can see the full value chain as we move, Step 1 alu-free, Step 2, 85%. We needed the science. We've got it. Now Step 3 will be to finalize that, and we said that was by 2030. I hope you followed that journey, okay? So that was a quick one of where we're going now. But you might say, so what about the bag-in-box and spouted pouch? Here, the mono-polyolefin journey has also -- it's been ongoing. We're accelerating not only the pouch materials are all recyclable. Mono-materials is the drive, and we have a whole lot of options available already on mono-materials. Also for the aseptic filling. This includes the cap. The cap and the pack are all of the same material. And therefore, that certification to fit into the plastic recycling facilities where they exist. We can debate that one. At least we've opened up the opportunity that this is recyclable and the materials are recyclable. So ladies and gentlemen, we know that we have the industrial or the industry pressure to move. We have the consumers' requirement to move this. We have the right pipeline within the R&D coming forward. So future-proofing what we need for the business. Not all the science is there. I'm not going to stand up here and say, I have everything. The 90% paper content, there's still some challenges, and that's what we paid for and why we get up in the mornings. But that journey is really -- it's going well. Looking at the environment, the regulations that are coming at us, we are preparing and we have prepared the ground for the future. So based on that, I'm going to now hand back over to Ann, and she will see and present the implications of all of these R&D as well as the financial points. So thank you very much.

Let me summarize the financial framework and the guidance for the next coming years. So -- but before we get there, we have now defined a very clear and disciplined capital allocation framework. And really, we're going to continue to invest into the business organically with CapEx, but focusing on earnings-accretive growth. We are also very committed to a strong balance sheet and to a shareholder-friendly capital policy with prioritizing in the near-term deleveraging. Now what does this mean in numbers? On the revenue growth side, and this is organic revenue growth with what we have, for 2026, we expect a growth range of flat to 2%, reflecting the continuously still subdued markets, but assuming and being very confident about SIG's capability to outperform the market. In the medium term, we look at getting back to a 3% to 5% growth corridor with markets normalizing in the medium term as well. Looking at the margin development for the adjusted EBIT margin, we expect for next year to be above 2025 without the nonrecurring items, of course, and in the medium term to achieve more than 16.5% EBIT margin, which, just as a reminder, translates into more than 25.5% EBITDA. On CapEx -- net CapEx, including lease payments, we look at the corridor between 6% to 8% going forward. And all of the above should result or is expected to result into a leverage path, which should get us below 2.5x by the end of 2027. And we target to come to around 2x beyond. On the dividend side, we are pausing the dividend for 1 -- or we're proposing to pause the dividend for 1 year. So '26 payout for 2025. And after that, we see us coming back into a corridor of 30% to 50% payout ratio of adjusted net income of the year before, committed to returning cash to shareholders also. I would also like to remind us that, of course, the interests of management, Board and shareholders are well aligned with the incentive systems that we have in place. And you see the graph. So the Board receives 40% of their compensation in equity. And for management, the variable portion is between 55% and 70% and of course, consists of a short-term incentive and a long-term incentive, very much focused on total shareholder return development and on bottom line and growth. I would also like to highlight because we've had the one or the other time, the question that what you find in the compensation report shown under LTI is, of course, the amount at target, so at 100%. You need to read the text to see that already for the last cycle ending in '24, the achievement was 46% on that front. And you can imagine that for the next 2 cycles, that will be a very low number probably. So in summary, we are well set up with market trends that should support us also going forward. There's multiple growth drivers across different markets, across different substrates and categories. The business does have a very attractive margin profile and has further room to grow the margins, and we have a clear plan in place how to do that, and we're going to drive robust returns with the business. And with this, we come to the end of the presentation, and I would invite all my colleagues here back to the stage for Q&A. And yes, we would like to use, of course, the time most efficiently, but also we will be around at selected conferences in the next couple of weeks, and we look very much forward to continuing also this discussion on a one-on-one basis with everyone. Please, guys come back. Ingrid, do you take the questions with the mic? Wonderful.

It's Jorn from UBS. I would start with 2 questions and then go back in the queue. The first one would be, please, the cash conversion target. You said you want to improve cash conversion. This is part of the plan for the next 2 to 3 years. With all the securitization on net working capital, with the accrued liabilities, is anything changing? And is there a path or can you give us more details if there's a path to a EUR 250 million plus equity free cash flow over the next 2 to 3 years? Because the leverage targets would imply the equity cash is more staying around EUR 200 million for the next 2 to 3 years. This would be the first question.

That's for you, Ann.

Yes. Thank you. So I'm not sure that I come to exactly the same math than you. So I wouldn't see that this means you stay at a free cash flow level of around EUR 200 million, but of course, bring it significantly above the EUR 200 million and with this also improve the conversion rate -- cash conversion, sorry. So yes. So EUR 200 million sounds a bit too low for me over the next years.

Just for '26, can you give us -- you gave a guidance of top line on margins? What does it mean roughly for 2026 on the equity free cash flow before the one-off cash costs?

Yes. So if we -- sorry, look again here at the specific guidance that we tried to already put in place now for 2026. And of course, we will detail it further, as always, when we publish our full year earnings early March. But -- so we see in the market environment, a growth that will be positive. But in that corridor 0% to 2%, we will have a margin that will be above 2025 levels. And of course, considering all of the above and also considering that 2025's free cash flow is impacted quite a bit by the volume payments that we have this year for the significant growth of 2024. We would see, of course, free cash flow for '26 also being above '25, absolutely.

Then maybe going to the second question, in terms of execution, which you want to improve in general, what do you do with the structure of the company, the regional management, the regional reporting lines, the regional setups, the regional processes? Is there any material changes happening here?

I can take that. So we -- I think the regional structure works really well for aseptic carton. When it comes to bag in the box and the spouted pouch, that is yet to be determined.

I mean can you give us more details about execution improvements on the regional structures? What exactly is top management doing now here that things are improving versus the previous?

One of our top priorities is obviously to get productivity out of the North American footprint for bag in the box. So that is one of the areas.

And you do this with the same people you had before? Or is there anything changing? You have plans to change things?

That would obviously not be something we discuss here.

Alessandro?

Alessandro Foletti, Octavian. Actually, I have only one for now. On the capital allocation, I'm not sure I understood really well what you mentioned because it sounds like the EUR 3.4 billion investments over the last few years were like all wasted. I would like to understand how much of that you would have done anyway because you are still having to grow your Combibloc business with your fillers, et cetera, plus you opened a factory in China. I'm not sure that one is completely impaired because it was wasted money. You have opened a factory in India and in Mexico, same thing. So can you put that EUR 3.4 billion figure in context, what will generate returns in the future of that? And then what will not be necessary going forward, which maybe comes into cash flow then afterwards?

Do you want to take that?

Yes. No, absolutely. I think if you recall the slide, the large portion out of the EUR 3.4 billion was relating to M&A. So -- and that, of course, needs to be taken separately. If I look at the CapEx that was put in place, I totally agree. There is -- you always have CapEx when you want to continue to run a business. And if you want to grow the business, of course, you also have additional CapEx. And if I look back over the last couple of years, I would summarize that, for example, the plant that we have built in Mexico was an outstanding investment. It's already full now, and we have to extend it, and that's a good thing that we extend it. And of course, that's part of or included in the guidance going forward as well. We have discussed 2 days ago that we had a couple of impairments looking at the current market development and also looking at how demand has picked up specifically in the one or the other geographies. And in hindsight, you would probably have approached one of those growth markets with a slightly smaller investment than what we have done -- or what we have put in place already. And also if you look at China, I mean, we are super well set up for growth bouncing back in China. But at the moment, probably we are slightly over-dimensioned there. That's probably the 2 things that I would discuss specifically on CapEx. I think the filler CapExes that we have put into the market, by and large, have demonstrated the value that they should have demonstrated. And you know that we do this in a very diligent way with very clear business cases for each and everyone. And also here, the impairments that we have discussed on Tuesday, which were really on a minor part on the filler end, this is relating again to a soft market environment right now where we have pulled back fillers from customers that are underutilized. And for us, internally, the rule is if we don't place them within 12 months again with a new customer, we would, of course, take the hit. And in the current market environment, it's a little more difficult to place fillers, and that's why the smaller impairment also on that side. But bigger picture, I would be very happy with the fillers that we have placed.

Thank you for this clarification. Maybe on the EUR 1 billion then CapEx, is there a way to tell us how much of that maybe was a little bit too [ over-hausted ] or too quick, et cetera? And let's say, maybe 80-20 rule, maybe it was EUR 200 million out of EUR 1 billion. Does it mean that over the next 3, 4 years, actually this EUR 200 million would come kind of on top with normal free cash flow generation?

No, absolutely. And that's what you see reflected in the new guidance that we move from 7% to 9% to 6% to 8%. I think that's a good proxy for it.

Ioannis Masvoulas from Morgan Stanley. Just a couple of questions from my side. The first, if we look at the filler placements for this year, the 60 to 70, it's, I guess, the lowest since COVID. Going into next year, what should we expect given the weak market backdrop and the fact that you mentioned some of your customers have machines that are underutilized? And then the second question, you addressed a lot of topics today, and that's very much appreciated. One topic you haven't discussed about is the lawsuit from Mr. Laurens Last. Now given the management changes, given that you're reviewing many parts of your strategy, is there any way you could potentially readdress this topic and potentially find a way forward without us having to wait an extra year for a resolution?

I think if you take the filler question, I can take the lawsuit.

No, absolutely. And I would ask for a little more patience before we give a concrete guidance for 2026. I think it's fair to say that we have a robust pipeline that we look at. But we, of course, also during the budgeting phase, now need to make up a bit of a risk perspective or risk profile on what we see for next year, and we will communicate then on that specific detail also with the earnings release for '25.

Yes. And when it comes to the lawsuit, it's an arbitration actually. And in an arbitration process, there are 2 things. It's secret and you enter that process with one idea. And over time, you massage your ideas to come closer and closer and closer. And I think that's where we are at in that process. And that's pretty much as much as I can say.

Pallav Mittal from Barclays. A couple of questions. So coming to the very first point, Ola, that you were making in terms of a new CEO search and it being very close. Very clear that you guys have laid down the medium-term guidance, but how should we think about any risk in terms of reset of expectations by the new incoming CEO? That's the first one. And then secondly, in terms of your filler placements, are you seeing any risk from the nonsystem suppliers? We have heard a couple of names like Lamipak in India, then Hansin Pack in China. Is it something which is impacting your growth in the number of new fillers that you're placing every year?

I'm going to take the first question, and then I'm going to pass to Christoph and Ann to answer about NSS. I would be greatly disappointed if the new incoming CEO isn't changing something about the company, right? So we should expect him or her to put their personal touch to this. What we've been doing for the past 6 months is following a logical decision tree. When you enter into an organization, there are some really obvious low-hanging fruit that we have addressed, and that is regardless of what management you would put in place. So I think that is what we present to you today, and that will lead to a 1.5% EBIT improvement. Beyond that, we obviously need to ask the future management at Capital Markets Days like these, what is your vision? How are you going to outgrow the market? How are you going to make it even better? So I think that is for the future CEO to answer. And now to NSS.

Yes. On the NSS side, I mean, that has -- that part of the market has been established years or even decades ago. So and you see people coming in, people leaving the space again. And I don't want to say that we are complacent or anything. But -- and of course, we monitor the space very carefully, but we feel very comfortable that the system solution and the tech service and the material that we bring to the party at the total cost of ownership that we can deliver to customers is appreciated and will not impact us significantly going forward also. I don't know whether you have anything to add there.

Yes, maybe one point. I mean we talked a lot about innovation, and it's noteworthy that, for example, the alu-free structure is a proprietary IP-protected structure. And as we transition to more mono-material, recyclable, more complex structures, that is a technology shift that those companies can hardly replicate because they don't have the same R&D and experience in the system as we do. And that, by the way, applies also to all other substrates, and you see that in other areas of the packaging industry as well.

Christian Arnold from ODDO BHF. Looking at this chart here, the dividend payout, you're going to target the 30% to 50% based on adjusted net income. And these adjustments on net income, will that be the same nature, what we have seen in the past? What has changed here?

No change to the adjustments. So I mean, on the net -- so between EBIT and net income, I mean, it's mainly the PPA that is still between the 2. So no changes. And I think we have detailed that also quite a lot in the Q3 call 2 days ago on how we think about adjustments that, of course, everything where we hold ourselves accountable or the regional management that is not being adjusted. But if we take larger decisions to optimize the company like footprint decisions or also severances, we take that below the line because we want people also to take those initiatives promptly and on time and in full and not think about, then I don't hit my target for the year. So that's why we take that below the line, but very transparent also, of course. And the other below-the-line adjustments that we had before and we continue to have are the noncash items on the derivatives and so on, as always, no change in structure here.

And the second question would be on the noncore bag-in-box business, which I understand is linked to your clients in the industrial space and retail space. What's the end game here? Is it a downsizing? I mean you are talking about optimizing the value. Is it a rightsizing, a downsizing? Is it actually a disposal at the end of the day?

I would say we, of course, evaluate all different paths here. But what you should take away from the slides as we have discussed it, the growth will always be below average, as Christoph has shown, and that is why naturally, the weight of that part of the portfolio will become smaller over time. That, for sure, you should take away. And then, of course, you want to run those businesses as efficient as possible. I think that makes all the sense of the word.

So it could be that in 10 years' time, you still have actually these clients in your portfolio?

Yes. I would leave that open for the time being. But yes, let's see.

This is Ben from Berenberg. A follow-up on Christian's question on the bag-in-box business. I understand you guys like the aseptic business more than a non-aseptic one, I agree. But what is really the plan with the non-aseptic bag-in-boxes? Could you really divest it if you find a buyer? I mean, there's plenty of packaging companies that do these non-aseptic bag-in-boxes. How does it work in terms of like footprint? Would it be easy for you guys to divest the non-aseptic bag-in-box business? Or is that really difficult thing to do because of the footprint overlap between the aseptic and non-aseptic?

I would like to clarify one more time. So not necessarily non-aseptic is not interesting because there is angles to non-aseptic that you would want in any case to have in the portfolio. And again, number one, this is where you create an entry point to customers to then later upsell to aseptic. And number two, where you use the same assets to produce the bags, whether they go for aseptic or non-aseptic because that gives you better utilization, and that always makes sense. And a very prominent business, for example, is the post-mix syrup business. So that is long-established customer relationships that is profitable, and you like to have that business. So it's not black and white, non-aseptic and aseptic on the bag-in-box side. I think Christoph has described the 2 categories that are below our target ambitions. But again, we need to really see what makes sense, whether -- and you can also argue that you like to have parts of that portfolio because also there, you have very profitable pockets in it. It's really a case-by-case assessment. And then you need to, of course, take into consideration how entangled your manufacturing footprint is or whether anyone would want to take that over without a manufacturing and so on and so. But I think we should think broad over the next months on that front, but it's not a clear-cut black and white case.

Perfect. Follow-up question would be on 2 to -- the 0% to 2% organic revenue growth that you expect in 2026. We have seen in Q3 just a couple of days ago that some markets really struggle under destocking. There is lower demand. The fillers are running on lower utilization rates. What is the 0% to 2% growth rate next year based on? Is it assuming that destocking across the markets that is taking place right now is mostly solved? Or how could we read it, the guidance for '26?

I mean it's difficult to estimate when this is perfectly 100% solved. But in any case, we believe it will be less of an impact in 2026. And then we, of course, also look at our strength and our opportunities to outperform the market, and we're going to continue placing fillers. And also the fillers that we placed this year, I think, is not a bad number even in a difficult environment. So that's why we believe we can make it into that range.

Okay. And then maybe one last question, if I may, then I give back to my peers, would be on capacity expansion. You mentioned that you placed a lot of fillers. I remember last 2 years, we have seen on a gross basis, 91 fillers and 91 fillers again. Is there the risk that this ramp-up in capacity that we have seen over the last couple of years, not only on a gross basis, but also on a net basis with softer market demand that could last longer than 12 months, let's say, that we could see a bigger gap between capacity and actual demand that supply and demand is going to be somewhat in an imbalance over the next 1.5 to maybe 2 years. Or do you have the visibility that, okay, utilization rates for the fillers sooner or later are going to pick up again based on how the cycle developed in the past years?

Yes. So I think we clearly expect that the utilization rates will come up again on fillers. And we also absolutely expect that we're going to continue to place fillers. So there we don't have any doubt at all. When we think about our own in-house capacities to manufacture sleeves, I mentioned before that we are extending the plant in Mexico even with 2 lines because it's full, and we see really good traction in the Americas region. So also here, we see that some more investments, and they are, of course, part of the guidance, are needed then while on the other hand, more towards the Eastern geographies, if you want, we have ample capacities. And also that's why we have really took the impairment that have taken the impairment that we had to take because there, we have a bit of a misalignment.

Yes. Again, Alessandro Foletti of Octavian. Maybe on this BIB noncore, can you put a percentage number how big that is in terms of sales, just to have a view?

It's a low double-digit percent of the bag-in-box portfolio.

Right. So you said 2 days ago that the BIB aseptic is 30%. Obviously, that would be all in the blue part that and then we have the syrup, which is the remaining non-aseptic part, right? And then the rest is grays that you're...

The small gray ones, yes.

Okay. And my second question is on the in-line aseptic third-generation machine, I'm a little bit surprised. I thought it would have come to the market a little bit earlier. Now you said -- basically you have it, so you have to increase the capacity. And I'm thinking very stupidly just add a couple of lines beside each other. Why is it so difficult?

So it's -- there's a bit of science required in terms of that line speed and the application of the different filling or fitments into it. The aseptic technology is there. But when you scale it up, we don't -- we're not only putting multiple lines next to each other. That's the easy way. It's integrating it into one. So we're still in the R&D. So there's some required knowledge that is being built as well as then we need to do the prototype testing because we go out with something which is robust and that would be meeting all the quality standards that we have. And that requires a cycle of testing, proof of concepts, make sure -- so we're confident it's going to work, and we start all of that work in the next 3 to 4 months in terms of exposure of the machine in its running conditions, and we build that up. And then we do the serial rollout. So it's a process that is required. Otherwise, we go with something that doesn't work.

Okay. And the Gen 2, it's just one prototype in the market? Or are you going to sell it? I mean even if it's lower, it's already providing some value to the clients.

Christoph?

So as Gavin said, we follow that structured process of prototype and then rollout. So the Generation 2 is now 0 series, and we are selling it in Europe, and we'll have multiple placements in Europe.

Thank you. I think, operator, if we can open the lines to the analysts on the phone, please, and then we'll come back to questions in the audience. Just aware that many analysts couldn't make it today because of earnings season.

The first question comes from Cole Hathorn from Jefferies.

I'd like to just start on better understanding how you sell the sleeves to your customers annually. Would you mind just giving us an overview of how you negotiate and how SIG thinks about the correct price point when you price your sleeves every single year? And then relating to that, from the outside looking in, you have placed a lot of fillers. Is there not an argument for pulling back more on your CapEx short term? Because my perception is, are your negotiations annually on the price points of the fillers impacted by the low levels of utilization? Or am I misunderstanding that point? It's not impacted by the low levels of utilization?

No, let me start maybe. And definitely, the price negotiations are not impacted by the level of the utilization of a filler, but much more by the value that we deliver to the customer. And also, I would like to clarify that really the investment or the CapEx allocated to fillers has been 1-point-something in 2024. So it's not really a major portion anymore like it used to be years ago, 3% to 4%. So just this as a clarification on the CapEx. And then Christoph, how about you explain how the pricing...

Yes, on the pricing side. So we follow a philosophy of value-based pricing. So we have a very good understanding of each customer, what is their current asset base, what is the speed of the machine and what we bring, and that's why we call ourselves TCO champion. We bring higher speed, for example, twice as fast as competition and lower waste rates, which are typically half those of competition, and that's a value, and we can actually quantify that value. And that's a value that we share with the customer, but it also at the same time, allows us a premium pricing. So there's a very structured approach of how we price and how we price competitively, but at the same time, also monetize the value that we bring to customers.

Maybe if I just follow up on that, just to understand the pricing. So you would know at the beginning of every single year, a rough idea of your liquid paperboard costs, an estimate of your aluminum and polymer, even though that will change. And then you'll have a specific price point, I imagine, per region, per carton that you'll need to price. And you will tell your sales team to target that level.

Absolutely. And that is a well-established process also, which is very rigorously executed. And we prepare for this, of course, always within Q4. And that's basically the part where we have now visibility of how material costs also will develop going into next year. And just as a reminder, our 3 major categories of raw materials, number one, the LPB, so the paper. There we have multiyear contracts with our suppliers. So we have good visibility on how this big bucket will develop already now in Q4. And then for aluminum and polymers, you know that we apply a hedge policy where we hedge around 50% to 80% of a given year's demand. And that gives us already now a lot of visibility how prices -- how input costs will develop into '26. And of course, that is also what we need to know if we want to have the price discussions with the customer, which typically take place in the first quarter of the year because also our customers on the carton side selling into retail, you only have basically once a year pricing discussion with your retail clients. So we need to have basically a fixed pricing horizon with a good visibility for a full year on the carton side. And that is well established and works very well, I would say. On the bag-in-box and spouted pouch side, it's slightly different because here, and you have seen that since a couple of years, we always state our revenue growth at constant currency and constant resin. Here in bag-in-box and spouted pouch, we pass through the resin price increases or decreases with automated clauses that are defined in the contracts with a lead time of 6 weeks to 3 months. And there, the pricing works a bit differently, but basically similar approach. We look at the value that we deliver, and that's what we price for, absolutely.

Very clear. And then just finally, as a follow-up on free cash flow. Why did you decide not to give any medium-term targets on free cash flow? And if you're not willing to give medium-term targets on free cash flow, maybe you could just give us some color of how you think about it. What do you think is a normalized free cash flow level for SIG's business? And can you call out that you plan to grow that in line with kind of EBIT medium term?

Yes. No, I think the parameters that we spell out here in the financial guidance already give you quite an indication on where we see free cash flow developing. The probably only moving component that you still need to consider in addition is fluctuations in the volume discounts that we are paying out, and that has been quite a substantial fluctuation between '24 and '25. If we look at a picture where this is in a closer corridor of 1 or 2 points difference in growth between 2 years, you wouldn't even feel anything on that one. What you should also take into account, and you know that from history that our working capital overall is always negative. So we don't have to invest a lot of working capital into growing further. And I think that should give you enough of an algorithm to deduct free cash flow development based on the guidance here. And I think that's where I would like to leave it also.

Any further questions from the phone lines?

Yes. the next question comes from Manuel Lang from Vontobel.

I have 2 questions. First one on the dividend. I think it's pretty clear in terms of the payout ratio. But I see that you did not reiterate the commitment to a steadily increasing dividend. And I'm just wondering if you could confirm that you're not actually pursuing an increase in every year? And then secondly, on the midterm guidance, also there, I'm wondering if you could put some number in years on the midterm targets, meaning by when are you planning to realize the targeted growth and profitability increase? And then maybe as a part of that, how big of a onetime arguably margin accretive impact do you expect from the disposal of the chilled carton business? I mean on the chart, you showed it looks like an almost 1 percentage point increase related to that, probably realized next year? Or how should we look at that?

Yes. So let me start from the back of the question. So our guidance that we have given is, of course, within the current portfolio framework. If we would divest or if we divested the chilled business, we need to update that. And you can imagine that it would be positive for the overall group margin. Otherwise, we wouldn't look at such a venture, of course. And then you had asked about progressive dividend payouts. So I think we want to keep a little flexibility here with the 30% to 50% corridor. In the ideal world, of course, this growth year-on-year on year-on-year with also the profit expansion that we target. But then I think we have maneuvered ourselves into a more difficult space with the old guidance. That's why I think overall, the Board and management, we have decided to be a bit more open on this one here. Anything else? And then how long midterm is, I mean, we all know midterm can be 3 years, 5 years, something in between. But the target is, of course, to achieve it rather faster than later.

Any further questions from the phone lines?

No, madam. There are no further questions.

Great. I will read a few from the webcast and then we can return to the room. So from Charlie Muir-Sands from BNP. He asks, do you expect any major changes in the working capital model in 2026 and the coming years?

Clear answer, no, we continue to optimize our inventory profile and that there is still potential, especially in the acquired businesses, but I wouldn't say there's a change in the algorithm.

And he has a follow-up. Are your cartons considered multi-material or paper and the Extended Producer Responsibility schemes in major markets where this exists? Is EU PPWR actually going to shift demand to more easily recyclable plastic packaging?

I can take that one. So to be clear, our aseptic carton is 100% recyclable. It is, of course, paper, plastic and aluminum. But already today, 100% recyclable. It is PPWR compliant. So it can be or it is considered as recyclable also under PPWR. But it's an important question to decomplexify the structure. And that's what Gavin has really talked about. So the sandwich structure, we eliminate one layer, we take the alu out. It already makes it easier to recycle. And that's what you could see from the recycling mill that has confirmed that increasing that fiber share increases also the value of the recycling. So the journey is very, very clear. I mean, carton is good but we're taking it as SIG to great.

We have one from Mengxian Sun at Deutsche Bank. Could you please clarify whether of your current 2026 or midterm guidance includes any proceeds, specifically positive cash flow generation and margin contribution from the divestiture of the noncore business assets? If yes, to which extent?

Yes. We have taken, of course, a small assumption for divestment proceeds in here, and that's why I gave you a little details on how big the business is in the beginning. But again, the margin parameter, we would update in case the divestment is successful.

Returning to the room then.

[indiscernible] I'm happy to hear that you changed the focus on your KPIs on EBIT. I think it's probably a cleaner number. I was just as a remark, a little bit bothered in the last years, the focus on adjusted figures. I always had a little bit of impression that also with this GAAP unadjusted, adjusted figures, yes, that probably in the communication with the investors, you tried probably to -- you had to focus too much on the adjusted figures. And so I hope that will change also a little bit in the future. So my question, another topic is, we see a strong shift in the food and beverage market to non-label products. And I'd like to hear what your position is with non-label products? How much of your revenues is generated with packaging for non-label products? And what kind of customers you have, like a big player in the market is ALDI, very big player, gaining market share a lot. Is that a customer of you? Or you have other customers to mention in this market?

So ALDI, of course, is not our customer, but the people that supply ALDI. But Christoph, you go and explain.

Sorry, what is that?

Private label.

Private label. Okay. Yes. So very good question, very good observation. There is clearly a shift towards private label products. These are typically packed at what we call co-packers. So companies that pack for multiple retail brands. We not only, by the way, see that in Europe, but also in China, interestingly. We see that actually as a positive trend because what these co-packers offer is production capacity. And typically, one size is not the size that everybody uses. So they appreciate flexibility. And that's really where we can -- where we have a strong point. We actually have a very good market share in private label because they also -- I mean, the co-packers appreciate the TCO because what they make, their margin is basically that conversion cost. And the more they can churn out of their filling lines and the more flexibility they have in their filling lines, the more they can fill, it's all their margin. So it's a trend that actually favors our technology as such.

And how big is the portion of revenues from total revenues you generate with these non-label products?

I think that's also category by category different, to be honest. So in white milk in Germany, as an example, I would probably venture to say 70% of the market is private label, and we are a market leader in that segment. But it's very, very hard to say to give a global answer to that. That's really difficult.

But as a conclusion, so it's not a bad thing. So private label different to many other companies. Private label for us is not a problem.

Can I have a follow-up? In aseptic packaging, how looks the competition landscape in Asia, what kind of competitors you have in this market? Because you just mentioned that there is strong competition in chilled carton, but how does it look, yes, in aseptic?

Do you want to take it?

Yes, I can take it. So I can -- it's not just Asia, but I can give a global answer to that. There's 2 big companies globally that offer aseptic systems for carton, and that is Tetra Pak and SIG. Now you have these what's called nonsystem supplies. And yes, their share is a little larger in China, for example. But also to be clear, their key focus is on the largest installed base, which are Tetra Pak machines.

Ioannis Masvoulas from Morgan Stanley again. A couple of follow-ups. First on the net leverage target. First question here is that 2.5x or under 2.5x by 2027, you mentioned that includes some divestment proceeds. Does it also include a dividend assumption payment during that year? That's the first part. And the second part, several of your more diversified packaging peers are very comfortable running at 2.5x, even 3x net leverage. Why do you think 2x is sort of the right level for SIG over the medium term?

Yes. I think many of our packaging peers are not Swiss companies. So I think that explains the difference in perspective here. And again, so we are really optimistic with our algorithm that we have laid out here on the guidance slide that we're going to be below the 2.5x by the end of 2027.

And that assumes a dividend payment during that year?

Yes, it assumes a dividend payment, of course, in '27 for '26. Yes.

Perfect. And the second question on the revenue growth target for 2026. Is there any assumption of incremental destocking during next year? Or do you take the view that destocking run its course in '25 and '26, the 0% to 2% is underlying demand growth?

Yes. So as I already tried to lay out in the call on Thursday -- on Tuesday in Q3, I mean, it's not perfectly easy to say this part of the sales development in the third quarter was destocking and this was other market categories or whatever. So -- but again, so we believe that destocking will decelerate as the year progresses or as next year starts. So will '26, of course, still see difficult market environment? Absolutely. I mean just read the newspaper. So I think there's not much to believe it would change come January 1, and that's what we have taken into consideration with this more conservative guidance of 0% to 2%. And I would also probably like to come back one more time to 2025 because, yes, we have seen a supersoft Q3. But this supersoft Q3 was also a function of a more optimistic start into the year where we were seeing growth rates that were even ahead of our expectations. If you look at the 9 months period, we were still basically flat, although it's a difficult market environment. So just that we all take this into consideration also and not just purely look at the third quarter here.

[indiscernible] Asset Management. I have maybe a question to Ola coming from outside with a fresh perspective. What makes the business model a bit special from an outside and also a bit of black box is they don't sell the fillers, they lease them out. They keep it on the balance sheet, write it down. So it matters a lot about this discipline to make the full economics of a filler of a lifetime. And obviously, this is the difficulty. Did you have a bit of feeling that the whole model was a bit skewed to growth because you had to take down the growth target by a bit, you switch from EBITDA to EBIT. So what was your view? Was there anything too aggressive on the filler installation? Or is it just to get a bit of feeling?

I've been strongly advised to not comment on the past. So let's focus on the future. And it's absolutely our target within the Board to make the adjustments to the EBIT that we measure as small as possible going forward. And as a politician, I stop there.

I'm [ Samuel Weber ]. I'm an independent wealth manager. And last time I was sitting in this room, I was listening to [indiscernible] explaining how he changed the incentives of the subsidiary managers. And I want to ask you, you're not as decentralized, but can you perhaps give me a bit of an explanation how deeply this incentive change penetrates the organization? Or how this is set up? Does it just affect the top management? And the second question to the new President. You mentioned you're also an investor on the side. And given the potential you just explained, I expect that you put a big position also privately in SIG stock. So maybe you can also answer this.

I'll start with that. If everyone here in the room share your positions and what you're going to do in the next couple of weeks, I'm happy to share mine. But obviously, I come from something we call the pilot school in Sweden. And that is if you're in the cockpit, you should know the gears and you should invest along with your passengers. So that's about what I'm going to say about that.

And then let me take the incentive question probably. So yes, we have changed the incentive system for 2025, reflecting EBIT instead of EBITDA for everyone in the targets, and that goes across the entire organization. So everybody who is on an STI, and that is now I have to lie, I think about 400 people globally, but maybe it's even a higher number. So I don't have that in my head. So -- but it's a large crowd and everybody is, of course, synchronized that the targets that we have at the top also are cascaded to managers at the lower level. And even to a degree that you would find sales targets in the individual targets that are, of course, building up the total that we have as a target.

Miro Zuzak, JMS. I have a question regarding basically your financial targets. In the past, you often failed to meet them, especially on the margin side. Midterm guidance was always corrected down. Also current year guidance typically not met, especially on the EBITDA margin target. Now you could mention many other communication-wise mistakes or I could argue mistakes, which have been made in the past and as we want to talk about the future now, and I have a question. Have you also basically accounted for this systematic overestimation by giving new lower targets now that you have a buffer in terms of targets that you communicate? And also within this context, you have an inflation buffer on the Slide 31. Could you comment on what you exactly mean by this inflation buffer?

Yes. So I mean, it would not be prudent, I believe, if you build up your midterm target by just looking at all the positives that you work on and looking at everything happens 100% as you have laid it out, I think then you are set to fail. And that is probably also some of the explanations why some of the targets haven't been met earlier. We need to take into consideration that the world keeps turning and that inflation will be there, and we need to, of course, define enough measures so that we compensate inflation and on top, drive our margins further. And I think that's what we have done in a very diligent way, and this is what you see reflected here. And I don't want to now comment whether this is more conservative than before, but maybe it's always wise to take learnings from the past, I would agree.

Thanks. Just conscious of time. So I think if we take 1 or 2 more questions, and then we follow into lunch.

Just a quick one. Christian Arnold from ODDO BHF again. About the potential disposal of the chilled carton business. You mentioned you would then adjust the margin target. You have not mentioned the growth target or the net leverage target. Would that be just insignificant for these 2 or...

Yes. I would rather consider it's not a meaningful parameter change in that regard. But on the margin, I think it would make sense to reflect the additional uplift.

And last question with Ben.

Yes. This is Ben from Berenberg again. I'm going to be quick so we can have lunch on time. First question would be on Gavin actually. If I would buy a SIG filler today, let's say, for aseptic cartons, how many cartons per hour could I do compared to how many cartons could I do 5 years ago from today? Like how did it change or how did the innovation change in the last couple of years in terms of output?

In multiple ways. So the -- we actually presented today that we've gone with the new Neo platform, which is a speed up platform. We've basically taken the current machines with new technology built into it and it's a 25% improvement in the current running rate of that machine. So all of that knowledge and science has been built over time. And there's new technology, new digital tools, everything that we leverage into it to do a speed up program. And it's on the footprint, the size of the machine stays the same and the speeds are going up.

And maybe if I can add to that one, that's why we are always also focusing more on the gross filler placements that we do instead of on the net number because new machines typically have a significantly higher output than the ones that are coming back technically already. But then, of course, also utilization-wise, it makes all the difference in the world if you take out fillers that are not really utilized and place them, place new ones with customers who have high ambitions to drive it further, just as an additional comment.

And one additional one on that is we also have kits where relevant that we can retrofit on the current invested base to speed them up with customers. And there is a couple of examples that have been really successful.

Okay. Perfect. Maybe one very quick one on the midterm targets. I mean you're now guiding for 3% to 5% organic revenue growth on a like-for-like basis. The previous targets were like 4% to 6%. You always said, hey, it's probably going to be the upper end of that. So it was basically 5% to 6%. What is the difference? Like what has changed over the last few years that you say those 5% to 6% are not realistic anymore, but 3% to 5%, is it -- there was always India being a big market that has a big share of chilled or fresh milk that is slowly but steady moving towards aseptic milk or aseptic packaging. Maybe just some quick words on why is it 3% to 5% and no longer 5% to 6%?

So I would say it was for me, at least always 4% to 6%. And with the target at one point, probably it lends in the higher end of the range. And if you look back a couple of the last couple of years since the IPO, also in most years, we have hit that range or even exceeded the range. Now the 3% to 5%, I would understand them also as a reflection of learnings from the past. And should we return to a normal market environment, I think that's a wonderful target to have, and it shouldn't take too long to achieve it.

Thank you, ladies and gentlemen. I think that concludes today, and I invite you to move out of the room to lunch.

Thank you.

Thank you.

Thank you, everyone.