Sulzer AG (SUN) Earnings Call Transcript & Summary

Ladies and gentlemen welcome to the Sulzer's Annual Results 2019 Conference Call and Live Webcast. I'm Alice, the Chorus Call operator. [Operator Instructions] At this time, it's my pleasure to hand over to Mr. Christoph Ladner, Head of Investor Relations. You will now be joined into the conference room.

All right. So we are ready. Ladies and gentlemen, good morning and greetings. Welcome to Sulzer's Annual Results Presentation 2019 here in the Hotel Widder in Zurich. This conference call is also being webcasted. The link to the webcast can be found on our website. As always, I would like to draw your attention to our safe harbor statement, which is shown in your presentation handout on Slide #2. Please note that this statement also applies to any verbal statements in the webcast and on the call. Please also note that we will show so-called alternative performance measures as defined by SIX Swiss Exchange. You find all the bridges on how you can calculate these alternative performance measures from reported figures in the financial sections of our annual report. The participants here in the room have received a printed version of today's press release and the presentation and the memory stick with the digital version of the annual report. All these documents are also available on our homepage. So for today's agenda, we will have the presentation followed by Q&A. Thereafter, we will have an [indiscernible] for the media interviews. Greg and Jill, and also other members probably of the Executive Committee, which are present in the room will be available after the Q&A. For these interviews, we have also separate room at least for some of them and may -- can ask that you address Domenico Truncellito to [indiscernible] sorry, my colleague, so that he can coordinate these interviews. So that's enough for the housekeeping part. The annual results presentation will be held by our CEO, Greg Poux-Guillaume; and our CFO, Jill Lee. And after the presentation, the floor will be open for questions. So Greg, the stage is yours.

Thank you, Christoph. See if this works. Here we go. Okay. Thank you to all of you for being here today. We appreciate your time. We know it's a busy time of the year. We have a little bit of a treat today in terms of people available. As Christoph mentioned, we've got all the members of the Executive Committee of Sulzer present, except for Daniel Bischofberger, who's traveling. There in the front row, Torsten, who runs the Chemtech business. Girts, who runs the Applicator business. Frédéric, who runs the Pumps business. Armand, who's our Head of HR and you know Jill and I. You can grab them afterwards, ask them all the questions you want. You can get into details. Don't hesitate, they'll be available. Let's get into the highlights. In 2019, Sulzer was again able to generate strong organic growth in orders and sales, and we worked hard to improve our profitability. Orders increased by 6.3% organically and sales by 10.8%. Including acquisitions, but excluding a negative currency impact, growth was a strong 8.2% for orders and 13% for sales. Continued positive momentum in most of our end markets and in particular in water and chemicals supported our businesses in 2019 and into 2020. The higher volume saving from SFP and solid execution led to an increase in our operational profitability or operational EBITA, a margin of 40 basis points, and we reached double digits at 10.0%. Despite the strong growth, we had a tight grip on our net working capital and generated in 2020 a record level of free cash flow. Backed by the good results and to reflect the confidence that we have in our future, the Board of Directors of Sulzer is proposing an increased dividend of CHF 4 to the AGM. Previous dividend in last 5 years was CHF 3.5, and we are proposing to go up to CHF 4. We successfully completed our SFP program that was started in 2015. Over the 5 years of SFP, we had cumulative savings of CHF 253 million, whereof CHF 23 million of those in 2019. Although the program is completed, we continue to have a very tight handle on our cost base, and you'll see that we will continue to take aggressive measures whenever they give us the opportunity to be more competitive. In 2019, we made 2 acquisitions, one for Chemtech and one for Rotating Equipment Services. For Chemtech, we bought a business called GTC in May 2019 to expand our portfolio with proprietary processes and systems for the production of aromatics and other petrochemicals. In July, we bought Alba Power for Rotating Equipment Services. Alba is a business based in Scotland that does service for aero-derivative gas turbines, and it allows us to expand our range for these light turbines that are used for things like distributed power, a market that is quite active currently and for the years to come. As I mentioned earlier, we have a new member to the Executive Committee. Girts Cimermans joined us in October and took over as the President of the Applicator business. And as I said, he will be available to take your questions afterwards, if you have specific questions for him. I'll introduce him in more details a little bit later in this presentation. But before I go into the details, let me just start by giving you an overview of Sulzer. Sulzer is a well-balanced business in terms of end markets, in terms of regions and in terms of the proportion of aftermarket, which is about 45% of volumes at Sulzer. As you see on the donut chart on the left, upstream/midstream refineries, you add that together and we're 28% oil and gas. We're about 22% chemicals; 13% water and growing; 12% power; and everything else is different industries, whether for applicators or in areas like pulp and paper, mining, fertilizer, food, in the category that's called others where we sell a lot of specialized pumps to these different industries. We're well balanced also across regions, as you see, 43% EMEA; 34% Americas; and 23% Asia Pacific, knowing that Asia Pacific, the smallest of our 3 regions, is actually the fastest growing. We grew 20% in Asia in 2019. So we're closing the gap. And if you look at the donut on the right, which I've I think presented to you already a few times, Sulzer is 2/3 low cyclical, 1/3 cyclical. I repeat that over and over again because the misconceived ideas about Sulzer is that, oh, it's all oil and gas. Actually, it's 28% of Sulzer. And oh, Sulzer is highly cyclical. And the fact that we've got 45% of our business in spare part and service, so essentially aftermarket, plus 13% in the water business, which is essentially a wastewater business. Wastewater is correlated to population growth and urbanization. It's not a cyclical market. And 11% in applicators, which -- dental, these are low cyclical markets. Beauty also, although you see that we are undergoing from a market perspective quite a high level of changes in the beauty world, but I'll get to that a bit later. And the remaining 1/3, the part in green, is new equipment for things like oil and gas, power and other industries. But once again, 1/3 cyclical, 2/3 low cyclical. Now we'll get into the businesses. What we try to do is, as an introduction to each of the 4 businesses, we -- I wanted to give you a highlight of something interesting that we've achieved in 2019 that may give you a different perspective on the given business. So the first one is our Pumps business, and this is freshwater supply for Riyadh in Saudi Arabia. We won 2 large orders in 2019, both of them in Q1. What you see here is the water pipeline that connects Saudi Arabia's capital Riyadh with desalination plants at the Arabian Gulf. It will deliver 1.2 million cubic meters of potable water every day. The other project was pumps for a desalination plant, also in Saudi Arabia, and the 2 projects together had a value of about CHF 42 million, remember that when you do your Q1 order estimates because these were exceptional in both of them in Q1. What you should know about our water business is that it is the largest segment of our Pumps business. I don't think too many people would guess that, but it's the largest segment of our Pumps business today with more than 30% of volumes. It's got strong franchises in wastewater and in water infrastructure. We offer market-leading products like our pumps, but also products like grinders and aeration compressors, bringing innovative solutions to limit water consumption worldwide. So with this, let's go into the numbers. Pumps Equipment. Thanks to the 2 large orders that I've mentioned, the water business for us was the fastest-growing markets in 2019 in Pumps Equipment, at plus 17% on the year. Even without these 2 large orders, the water business still grew at a healthy 6%, which once again, 6% for a business which is mostly wastewater and kind of GDP correlated is a healthy number. The chemical markets, you've got the split on the right on this donut chart here. The chemical market, which is 13% of our Pumps business, was quite active for us -- buoyant for us, really, at plus 16%. So plus 17% in water, plus 16% in chemicals. Power was up from a low base, and oil and gas was up 4%. But in oil and gas, it's not about volume for us, it's about selectivity. The aim for us is to maintain a certain level of volume and reasonable growth while improving the quality of our backlog. And we do that by being very selective on the orders that we take or we don't take. Doing this, we were able to increase our operating margin in the Pumps Equipment business from 3.2% in 2018 to 4% in 2019. And a significant part of the improvement came from our engineered pumps for things like oil and gas and power. Also, obviously, cost savings and execution, good execution. So repeating it again, the donut on the right shows you that water is 30% of our Pumps business. It's the largest end market. And even if you take upstream, midstream and refineries together, you only get to 25%. So 30% water, 25% oil and gas. Okay. Now let's go into Rotating Equipment Services. Sulzer is recognized by its customers as a leader in the application of additive manufacturing. This slide is really an additive manufacturing slide. It's to try to give you a little bit of flavor on the innovation that goes on in Rotating Equipment Services. We focus our efforts on developing and qualifying proprietary industrial processes for either full additive or hybrid components, spare parts for pumps and turbines or casted parts. Casting the pump in pillar can have a lead time in months. Additive manufacturing can reduce that to days. It can also allow us to manufacture optimized designs that we wouldn't be able to do by traditional methods. Now this is in no way straightforward, by the way, because pumps mostly operate in corrosive environments, and they're made out of complex alloys, which makes additive manufacturing, for what we do, very complex. We're seen as a market leader in terms of the application of additive manufacturing to pumps. Large companies like Chevron and other big oil companies recognize us as one of their leading suppliers on this dimension, and they collaborate with us to make spare parts with additive manufacturing. Now some of those parts are already in operation with our customers as we speak in challenging conditions. This is all about getting the processes qualified so that down the road we can deliver value to our customers and to Sulzer, to our customers essentially by allowing them to have lower inventories because if we reduce the lead times from months to days, they can operate with much lower inventories and therefore it makes their business more efficient and more profitable. And for us, it allows us to reinvent essentially the way we manage our spare parts business. The industrial footprint, the industrial assets that you have to have behind the spare parts business, if we're able to do additive manufacturing widely, it becomes a lot lighter, a lot more cost efficient and a lot more reactive, which would allow us to gain market share in this market. The quality of the parts made by additive manufacturing, by the way, are at least as good, if not better, than the quality of parts that are casted. The reason for that is that the material has the structural forged metal, and you don't have the porosity that you may have in some of the casted solutions where quality can be uneven. Additive manufacturing leads to high-quality parts. And once again, Sulzer is a leading player in this field. Okay. Let's go into the Rotating Equipment Services numbers. The order intake in Rotating Equipment Services increased by 9% and sales by 10% organically, which is quite a feat for an aftermarket business. Turbo Services, if you see the donut on the right, our service business is split in essentially 3 product lines: pump services, which is 55% of the business; Turbo Services, which is 28%; and Electromechanical Services, which is 17%. And in simple terms, pump services is servicing parts -- I'm sorry, servicing pumps, our pumps and other people's pumps. Turbo Services is servicing exclusively other people's equipment, rotating equipment, turbines, compressors, anything that rotates, and that's part of the same infrastructure as our pumps. And Electromechanical Services is mostly servicing other people's motors, drives, generators, anything that's electromechanical. So Turbo Services showed the strongest growth in part because of a low base the previous year, but also because we shifted our focus away from utility gas turbines. Utility gas turbines, as you know, is a depressed market, if you follow GE and Siemens. And we shifted our focus towards other types of equipment like compressors and steam turbines that are part of the industrial value chain, which is doing better today than the utility value chain. Our pump services and parts were up by 7%, and we started to see the benefits of all the new pumps that we sold in the last few years, but we are also seeing the benefits of our strategy on third-party pumps and are reclaiming our installed base, 7% growth once again in 2019. Electrochemical Services grew by 4%. It's a very local business, and it's really kind of a GDP type business. We made an acquisition, as I mentioned earlier, the acquisition of Alba Power, which gives us access to aero-derivative technology. These gas turbines that are light, they're really like jet engines when you think about it, and they're use for distributed power applications, things like offshore remote locations, anything where you need power locally in a place where the grid might not be as accessible. It's synergetic with the rest of our service business, and it's off to a good start. Moving on to -- I didn't even mention profitability. I think I've gone so fast that I forgot profitability, 13.7% in 2018, 14.1% in 2019. You may recall that this business has been flat at around 13.7%, 13.8% for I think 3 or 4 years. And we're starting to trend up now, 14.1%, and I think it will go higher in 2020. As we get the uplift from the rebound of the new equipment sales for engineered pumps that started occurring about 2, 2.5 years ago. Moving on to Chemtech. Chemtech is known for its strong positions in chemicals and refining process technologies. But increasingly, Chemtech offers groundbreaking solutions that contribute to the circular economy, with leading positions in biopolymers, biofuels and the recycling of plastics and emissions. An example on this page, last October, Chemtech announced that it had partnered with a company called Quantafuel to deliver Separation Technology for a full-scale plant that is being built in Denmark. That plant is based on a chemical recycling process that converts plastic polymers back into hydrocarbons. The benefit is twofold: waste is reduced and hydrocarbons can be used to produce new plastic materials, creating a more circular economy. Sulzer was approached because of its leading position in fractionation, an important part of making this process industrially scalable. This is not an isolated case. We developed technology currently being implemented by a steelmaker to turn carbon monoxide emissions into biofuels and a process allowing for the separation of fibers and solvents for a textile recycling company, in which we are an investor with H&M. So really lots of fascinating innovation coming out of Chemtech with more to come. And Torsten is here and can tell you all about it afterwards at the break if you have more interest in this. So moving on to the numbers for Chemtech. After growing 21% in 2018, Chemtech's order intake continued on a robust trajectory at 6.5% organically. The momentum continued into 2020, but you have to keep in mind that Chemtech is -- does 30% of its business domestically in China. And rest assured, our factory is back up and running. We've got a lot of the people that have already returned, and we're ramping up production. But what we're likely to see on Chemtech is a little bit of softness in terms of orders and sales, well, maybe mostly sales, actually in H1 with a catch-up in H2. Our customers continue to be very active. Our pipeline continues to be very full, but it's a big facility that's being ramped back up again. If we listen to our Chinese team, they think they'll be back on -- in fighting shape and have recovered the numbers in H1, we think it's more likely to be in H2. But the Chemtech business, once again, very healthy and on a strong trajectory the last few years and for the years to come. Our sales were up by 12.7% organically, supported by high backlog entering the year and continued favorable market conditions. Profitability was up on higher volumes and on good contract execution, 8.9% in 2018, 9.6% in 2019 and Torsten and his team will certainly be double digit in 2020. The acquisition of GTC in May 2019 strengthens Chemtech's leadership in petrochemical processes and expands its revenue base to process licensing and associated proprietary equipment and chemicals, a very interesting development for this business. Moving on to Applicators. Trying to move on to applicators. Here we go, Applicators. Applicators, the slurries, the liquids of different consistency, so the slurry that our applicators are used to dispense are usually very valuable. It can be dental ingredients. It can be high-end adhesives and the likes. An important part of our value is to minimize their waste, for example, through shorter mixtures where the trapped volume after you finished applying is smaller and therefore there's less waste. So it's important to minimize the waste of the product that we apply, but it's also important to minimize the waste linked to the applicator. And we commit significant resources to making the applicators themselves more sustainable. In September 2019, our Applicator business won the packaging Europe sustainability award for resource efficiency for our ecopaCC product. The ecopaCC is a collapsible cartridge that is used for adhesives and sealants. It's a foldable design that reduces waste by up to 75% versus the rigid cartridges that are prevalent on the markets. And it minimizes the space required for both empty and filled options. Therefore, industrial adhesive manufacturers as well as users, benefit from substantial reduction in shipping and storage costs. ecopaCC also features an improved shelf life and improved leakproof properties. All that leads to massive cost reductions, resource and waste reduction and therefore it's a significant savings across the value chain. Moving on to the numbers for Applicators. Applicator Systems did well in 2019 in all segments, apart from the beauty segment, where it struggled. The decline of orders and sales, which you see here, a 5% decline in orders and sales, is actually solely due to Beauty. As if you take everything else, dental, adhesives and health care, and you lump them together, everything else is 2/3 of APS and everything else grew by 3% collectively. In Beauty, we suffered from different trends that hit us all at once. I've talked about this before. It's the growth in the market that's increasingly being captured by new independent brands while we as the market leader are still very incumbent centric. Within the beauty market, it was an investment shift in 2019 by our customers from color cosmetics to skincare, and there is also an element of premiumization, as L'Oréal guys call it, pulling the market towards the premium end of the segment. So what does that mean for us? We're still the market leader. It's a simple temporary setback that forces us to rethink how we handle this business industrially, and we've already started making inroads with these independent brands and had our first successes in 2019. We're also retooling our Bechhofen factory in Germany, and we're closing our other Beauty factory in Germany, in Bamberg. And what we're going to have in Bechhofen is an industrial setup that will allow us to serve these independent and premium players better and certainly a lot faster. And finally, we're exploring other micro brush applications to other type of end markets beyond cosmetics. Once again, keep in mind that our Beauty business is a micro brush applicator business. With that, we expect our Beauty business to have bottomed out in 2019 at about CHF 150 million a year, and we expect that our beauty business will start growing again in 2020, probably more towards H2 than in H1, but we expect positive growth for Beauty in 2020. If I take Applicator as a whole, profitability has remained stable in 2019 at 21% compared to 2018. And some of that is based on favorable mix, despite missing the Beauty volumes within EPS. You guys may recall that the highest profitability is in dental, then adhesives and then beauty. If you take all the segments individually, the margins on order intake, so essentially reflection of the pricing of the market, has stayed at a very high level. So our volumes are under pressure in Beauty because of the market change, but our margins are not under pressure at order level. So it's really a scale issue that we're fixing and that we'll start recovering from 2020. Moving on to a brief flashback on SFP. SFP was launched in 2015, so their full potential, it's come to an end. Overall, we achieved savings of CHF 253 million, which is a big number for a company of our size. And it's an even bigger number when you remember that it excludes direct procurement savings. So we buy cheaper castings, that's not counted as part of SFP. It is really structural cost savings that are accounted as part of SFP. When we look back at how much SFP cost us, we generated CHF 253 million of savings by investing CHF 308 million of costs. So it's a ratio of about 1.2. If you guys are familiar with these types of programs, that's actually a pretty good ratio. Actually, a really good ratio. And if you see the -- I'm sorry, wrong button, if you see the donut on the right, a lot of the savings come from streamlining our operations. Essentially, we closed factories and we sold or closed foundries and we saved a lot of indirect procurements, and we have reduced our overheads in different parts of the business and across the group functions. Now SFP is behind us, so why did we close the books on SFP? Well, I think these multiyear programs should be exceptional. I don't want to be the company that every year has a new multiyear program. We've closed the books on that just to give you a final tally, but let's be very clear that we'll continue to manage our cost base aggressively, and we think we'll have interesting opportunities to get more competitive in 2020 and beyond. That remains a very important part of our focus. The only difference is that instead of announcing these things as part of multiyear frameworks, we'll announce them individually, and give you all the numbers that you need. So quick look at the leadership team. Everybody is here apart from Daniel Bischofberger, who is traveling. The newest addition to our team is Girts Cimermans. Girts has -- is the head of our Applicator Business, joined us mid-October. Girts has a very interesting background. Last few years, he was the CEO of a business called Vision Care, which is the ophthalmic business of Hoya, the Japanese company. It's a $2 billion business that he ran. Before that, he was the Chief Operating Officer of a large part of Hoya's business in health care. And before that, he was a senior executive in different businesses, the Danaher dental business, Pentax Medical business and GE Healthcare. So if you keep in mind that Applicator Systems today has 60% of its profits in health care, combination of pharma and dental, Girts has certainly the right background, and we're very happy to have him on board. He'll be available to you afterwards if you want to ask him specific questions. Small change in our Board of Directors. As you know, our Board is in the Swiss sense of the term, exclusively composed of independence because nobody is a former company executive. And in terms of the representation of Tiwel, our largest shareholder, we've come to an agreement with Tiwel that they would maintain 2 representatives. Now we're proposing -- the Board is proposing to add a board member, Alexey Moskov. He'll be proposed at the next AGM. The reason for that is that Marco Musetti, who historically had a working relationship with Tiwel, has ceased all activities with Tiwel and has terminated all his mandates and is now completely independent from Tiwel. So in order for Tiwel to maintain that representation of 2 people on the Board, Alexey Moskov is coming on board. So you may recall that we had 8 board members. We went down to 7. We're back up to 8. And once again, 8 board members, 2 of them Tiwel representatives and 6 of them independent from Tiwel. Okay. Financial review, I'll hand over to Jill. Jill?

Thank you. Thanks, Greg, and good morning, everyone. As Greg mentioned at the beginning of the presentation, order intake increased by a solid 6.3% organically, mainly driven by Rotating Equipment Services, it was 8.6%; Pumps Equipment was 8%, and Chemtech was 6.5%. So all 3 divisions grew orders strongly in 2019 as in the previous year. Acquisitions, and here, I'm referring to GTC and Alba Power, added CHF 69 million and currency effects reduced the number by CHF 74 million. The Other gross margin has increased by 30 basis points on higher order selectivity in Pumps Equipment and this despite a negative mix effect. We had continued good momentum in oil and gas, and we were deliberately not taking certain orders when margins were too low. Order backlog remains stable nominally but increased by 2% when you consider the adjustment for currencies. Sales grew by a strong 10.8% organically, once again driven by Pumps Equipment, Rotating Equipment Services and Chemtech. All 3 divisions recorded double-digit organic sales growth rates. Currency effects shed off CHF 72 million from our sales growth. As you know, we have a much stronger Swiss franc, and acquisitions added CHF 73 million. The operational EBITA margin, or opROSA, increased by 40 basis points from 9.6% in 2018 to 10% in 2019 on the back of higher volumes, SFP savings and solid execution that more than offset the once again negative mix effect. We had 17% higher sales in Pumps Equipment where we have a margin of 4%. On the other hand, we have 7% lower sales in Applicator Systems where we have 21%. EBIT increased by 31%, leading to an EBIT margin, or ROS, Return on Sales, of 6.5% compared to 5.5% a year earlier. So it's 100 basis points higher. Our free cash flow increased 18% to CHF 213 million. This is a record level from an already high level in the previous year. Despite higher volumes running through our factories, we kept our net working capital under control. Adoption of the new IFRS 16 standards on leases added CHF 34 million to free cash flow in 2019. On the other hand, if you recall, we reported a one-off positive free cash flow impact of CHF 32 million last year from the sale of our participation in an affordable housing operator. So net-net, it's pretty comparable between the 2 years when you take out the effect of exceptional items in both years. The number of employees is up by 6%, partly due to acquisitions. So now let's take a look at the quarterly order development. For the full year, we had positive trends in almost all of our markets. Water, power and oil and gas were up double digits. And chemicals, high single digit. General industry segments was down, with Beauty within our APS division being the main factor for that. Looking at isolated Q4 order intake, you see that order intake was, again, up 3.2% organically, and 6.2%, including acquisitions, adjusted for ForEx. Growth was driven by Pumps Equipment, which was up 6%, and Rotating Equipment Services and Chemtech, both up by 5%. Chemtech order intake could have been even higher, but some projects got shifted to 2020. So in Q4, acquisitions contributed CHF 25.3 million and ForEx had a negative impact of CHF 19.7 million. Now let me go into the details of our profitability. Our opEBITA was up 15% for the year, driven by higher volumes, higher margins and savings from the SFP program. The volume effect is pretty easy to explain. We had higher sales in Pumps Equipment, Rotating Equipment Services and Chemtech. Well, this led to higher volume impact. You can see here 83 -- CHF 95 million. It also resulted in a negative mix effect as growth was highest in Pumps Equipment. The margin impact is, to a large extent, driven by our Pumps Equipment division where the higher order selectivity starts to become visible. The mix effect comes not only from the higher share of Pumps Equipment and lower share in sales of our APS division but stems also from the fact that under IFRS 15 we had some lower margin, larger orders booked entirely in 2018, whereas, otherwise, they would have been spread over 2 years. So just now you saw from Greg's presentation that we have actually the opROSA rising in all our 3 divisions stayed constant in APS. But despite the fact, we still have a negative mix effect that brought it to 10%. The other costs are mainly related to increased OpEx on the back of higher sales volumes. As a result of sales, however, our OpEx remain unchanged. As a percentage of sales, however, our OpEx remain unchanged. Savings from our SFP program had a positive impact of CHF 23 million and is more than we announced at the beginning of the year. The negative ForEx impact comes from translation, not transaction effects. Finally, acquisition contributed also CHF 7 million of opEBITA. So all in all, opEBITA grew 15% to CHF 371 million and opEBITA margin rose to 10%, up 40 basis points from previous year. Now going down from operational EBITA to EBIT. We had amortization of CHF 65 million, a little bit lower than last year. The Beauty factory consolidation in APS, where we closed the factory in Bamberg and consolidate our operations in the extended Bechhofen factory necessitated CHF 28 million of restructuring and nonoperational costs. The other restructuring and nonoperational items were related to SFP or one-off cost due to results adaptation in the other divisions. EBIT finally was up 31% for the year, rising to CHF 241 million, which corresponds to a margin of 6.5%, a solid 100 basis points up versus last year, 5.5%. Now going further down to net profit. Our financial results was more negative than in the previous year, mostly on fair value changes. And this refers to actually the hedge instruments that we have. And on balance sheet debt, this is the fair value change, but it is the unrealized part of it that goes into financial results. The normalized tax rate was 23.1%, but as some of the nonoperational items are not tax deductible, the effective tax rate was 25.9%. And this is still a lower tax rate -- effective tax rate compared to previous year of 29%. For 2020, we again see a normalized tax effect of 23%. Net income was CHF 158 million, and net income to shareholders CHF 154 million, both 35% higher than in the previous year. Core net income, which is net income excluding all nonoperational items, adjusted for tax was 16% higher at CHF 258 million. Now let's take a look at the free cash flow. When looking at the bridge from net income to free cash flow, you see that despite the higher sales volume, our net working capital did not change, which is really quite an achievement. Deriving from operational and lead time improvement, we generated CHF 83 million of cash flow from lower inventories. Accounts receivable rose only modestly relative to the high sales growth, benefiting from better order to cash management. Contract assets introduced under IFRS 16 reflects the work in progress related to projects in execution. The increase is primarily because of business growth, particularly in the Pumps Equipment. In 2019, cash out for CapEx increased slightly due to our test bid for Pumps Equipment in India as well as the commencement of extension work of our plant in Bechhofen for APS. Overall, net CapEx was CHF 106 million. On the other hand, depreciation and amortization amounted to CHF 171 million, barring is an amount of CHF 34 million arising from the adoption of the new IFRS standard on leases. If you recall, in 2018, there was the one-off positive free cash flow impact of CHF 32 million, which I had mentioned earlier related to the sale of affordable housing. Therefore, when comparing the cash flow over 2 years, the exceptional items actually offset one another. So on the back of that, we achieved a record high free cash flow of CHF 213 million primarily from the better profitability as well as the working capital efficiency, up 18% from previous year. Now balance sheet. Through strong cash generation, our balance sheet continues to be robust and support our strategy of selected acquisitions. What has changed from last year is that under IFRS 16, leases are now also considered debt. As you see on the chart to the left, leases increased our debt by CHF 110 million. So here, we give you all the relevant net debt-to-EBITDA multiples in the table to the right, and you can do your modeling then. Like-for-like, meaning excluding effects from IFRS 16, the multiple has moved to 0.6x in 2019 from 0.7x in 2018. Including IFRS 16 for 2019, we now stand at 0.8x. As you know, technically, the -- meanwhile, CHF 218 million that we hold on behalf of Tiwel is not debt, and it is not interest bearing. It has no maturity, and it's not sequestered. It is essentially a payable. But if you want to, nevertheless, treat it as a debt when computing the net debt-to-EBITDA multiple, we have also put the number as well on the table. And there you can see the contrast, the 0.8x as well as the 1.4x. Dividend. We achieved strong results in 2019. We have a robust balance sheet, and we have good business prospects. So the Board of Directors has therefore decided to propose at the Annual General Meeting an increase of our dividend to CHF 4 a share, up from the CHF 3.50 over the last -- which we have paid over the last 5 years. It is a clear message from our Board about the confidence in Sulzer's future performance, and it is fully supported by Tiwel, despite the fact that this dividend will be due but not paid to them. And with that, I'd like to hand back to Greg for the outlook.

Thanks, Jill. Okay. Almost finished, a few more slides. [ Ops ] guidance. Order intake, up 2% to 4% in 2020; sales up 1% to 3% in 2020; and operational profitability in a range of 10.2% to 10.5% in 2020. How do we think about this? The macroeconomic uncertainties and the geopolitical risks have continued to rise in 2019. We're impacted, as are our customers, by things like trade disputes and tariffs. And now there is the coronavirus, which beyond its catastrophic human toll is disrupting supply chains and affecting production in China, at the very least for a few months and possibly longer. In any case, it's really too early for us to estimate what will be the impact of corona. But as you'll see on the next slide, we'll give you some elements so you can think about this and think about what it means for Sulzer. Still having said that, we're still very confident about the prospects of our business -- for our businesses in 2020. We entered the year with a healthy commercial pipeline, good end market momentum and a solid backlog. We expect continued growth in order intake, as I said, 2% to 4%, and in sales in the range of 1% to 3%. The tail end of acquisitions in 2019 is less than 1%, just so you have an order of magnitude. The order guidance is consistent with the continuing high tendering activity, but also a high baseline, given the previous 2 years where we grew in -- up [ per single ] digits, as you know. And also, the continued focus on selectivity that we have in our engineered pump business. The sales guidance is slightly lower, and it's mostly lower because if you look at the sales that we achieved in 2019, we achieved a very high level of sales, higher than our guidance, even our revised guidance. And actually, orders is equal to sales in 2019, which means that if you take our opening backlog in 2019 and opening backlog in 2020, within CHF 6 million, it's the same. So we are in a situation where we've improved our execution, and we're converting orders into sales really quickly and therefore we don't have a backlog effect of an inflated backlog after a good year of commercial activity because we also had in 2019 a very high level of sales -- of revenue. Operating profitability will be in the range of 10.2% to 10.5%, up from 10% in 2019. And we do not expect any of this to come from market pricing uplift, but from a higher quality opening backlog in engineered pumps and from sound operational execution across the board. So coronavirus, to update you on where we are. We have 5 factories in China. 3 pump factories, an Applicator factory and a Chemtech factory. None of them are in Wuhan. I think the one that's closest to Wuhan is probably 600 or 700 kilometers away. But all of China is being disrupted. Now mostly positive news on our side, the first and foremost positive news is that none of our employees are infected. We have no reported case of infection or symptoms and that's our priority. Our priorities are the safety of our employees and their family, and that's what we spend our time on, supporting them. Now beyond that, the positives are that 4 of our 5 factories started operating again on the 10th of February and the 5th started operating again on the 14th of February. So all 5 of our factories are back up and running. If we take the percentage of our people, our employees that are available, we're at 73% across all 5 factories that are available. Now if we try to give you a little bit more information because people available, the fact that you've got, I don't know, the finance guy available is not something that will allow you to produce pumps or separation equipment. So if you try to look at the core labor, and we define the core labor in terms of the core labor to run the factory, so essentially, it's Sulzer employees and temps that are either on the shop floor, direct labor, anybody who's involved in running the factory from day to day, the percentage of people available on site is 63%. So it's a little bit lower. And it's a little bit lower why? Because blue collar labor in China has a tendency to travel from further away, especially temps. So 73% for all employees, 63% for the employees linked to running the factory. And on the 17th of February, so 2 days ago, that translated across our 5 factories and factories operating at 40% of capacity. Now when we look ahead, we think or our guys think that they'll be at -- they'll be back at full speed at the end of March. What's -- why 1.5 months between 40% capacity and 100%? Well, really 2 things: one, it takes time to get the rest of the people back. And some of the temps, for example, will never return because it's a highly mobile population. And most companies will tell you that after the Chinese New Year, you lose a lot of your temps because they make career, life choices. And so there is an element of disruption from that perspective. And the other element of disruption is our supply chain are -- the people we work with are also back up and running, but the part that's most challenging today in China is the domestic logistics. It's essentially the transport between cities and between regions. Because the transport is not -- it's not a free for all. It's actually being managed by the central government. And therefore companies have to ask for authorization for routes. So we have examples. I'll use an example for our pump factory in Dalian. We are expecting casings, and we're expecting motors. They all -- they both come from the same city, 2 different suppliers in another region. The casing guys, the [ family ] tells us, the castings are ready, but we don't have yet the green light to have a truck go over to you. But the motor guy in the same city, he tells us, we've obtained the authorization to load a truck and send it to you. So then we end up doing matchmaking. Have the casting guys talk to the motor guy and maybe combine the trucks and so on. So it's a lot of scrambling. It's a lot of being creative, all of that in an environment where the priority is for everybody to be safe. But our teams in China are doing a remarkable job. I think 40% of capacity is today, or 2 days ago, is a good number. And as I said, ramping up towards the end of March towards cruising altitude. And if you think about what that means for Sulzer during the year, what we think at this point, if the trend of the coronavirus in terms of the recovery in China, and we -- the resuming of industrial activity, if the trend continues as it is currently, we believe that we'll make up the volume during the year. So that's orders and also sales, which means that we'll probably have a softness in orders and sales in China in H1 and will recover in H2. And we think that in the current situation, we think that it kind of evens out at the end of the year. Order of magnitude of Sulzer in China. China is 12% of our order intake. So it's about a CHF 450 million business domestically. And there's also a supply chain element for facilities around the world, but Sulzer, like most companies, we're rarely single sourced. So usually, we have multiple sources of procurement. And therefore, it's really a question of balancing these things out. There is a short-term impact. But over the course of the year, we believe that it evens out. The thing that will probably not even out over the course of the year is that we've got 73% of our people available, and we're operating at 40% capacity and we were closed for a week or 10 days. That under absorption, because we pay people, that under absorption will not be recovered and will be recovered because as we accelerate to catch up, we'll pay over time. We'll bring in temporary labor. We'll do all these things that also cost money. Whether we'll be able to claim any of that from insurance companies, we'll see. It's spot measure, and we have the certificates that's say it's spot measure. But at this point, it's really too early to say. What I would leave you with as an impression is that our teams are doing a remarkable job. The 5 factories are up and running, 40% capacity, 73% of the people. Volume evens out over the course of the year. A little bit of a deficit in H1. We make up for in H2, and there'll be some under absorption that we'll report as a separate item so that you guys can get a feel for how much it ended up costing us, and we will keep you posted as we report throughout the year. I'll -- I'm happy to take questions on this afterwards. Final slide, 2020 outlook. It's really a summary. So we expect our end markets to remain supportive for orders and for sales in 2020. We expect the water, the chemical and the oil and gas markets as well as our aftermarket activities to continue to grow. Active commercial pipeline, it hasn't changed, and it continues to be at a very high level. We see opportunities in power, despite challenging market conditions. Some of our industry markets, for example, pulp and paper have softened, and we expect Beauty, part of Applicator Systems, about CHF 150 million business, we expect Beauty to start growing again in 2020, and we expect all of APS to grow in 2020. Operational profitability, we expect to improve by 20 to 50 basis points in 2020. The impact from the coronavirus is currently unclear and therefore as I said excluded from our guidance. They'll be under absorption related mostly. We closed SFP in 2019. As I said, that we continue to have ambitious cost actions that we'll undertake in 2020 and beyond. And we'll update you whenever there's something significant to announce. And last but not least, the proposed increase of our dividend reflects our confidence in Sulzer's future performance, and it also reflects the independence of Sulzer from the constraints impacting our large shareholder, Tiwel. And with that, I hand it back to Christoph to launch the Q&A.

Thank you, Greg, and thank you, Jill, for the presentation. So we start on the Q&A. We start with some questions from the room. We'll then take some questions from the call. And also, if there will be questions in the webcast. And we'll also see them and ask them. So first question is, please announce also your name so that the guys on the call know who is...

Jorg Schirmacher, Baader-Helvea. I have a couple of questions. So first one would be on the order intake gross margins, which was up 30 basis points. You've talked a lot in 2019 about selectivity in pumps business. Does this remain to be the case? Do you see pricing power here? Or is it more going to be volume in 2020? And then on the opEBITA margin and PE, is 4.5% realistic on the back of that? Second question would be, are there any further nonoperational costs relevant for the opEBITA calculation in 2020? And then my third question, I think you've answered it already, but just to be sure. So those are businesses generally very back-end loaded, and given the current situation, a slow start into the year and other industries. We've seen the coronavirus potential impact. Is it fair to assume that this year will be even more back-end loaded in terms of top line and also especially bottom line for Sulzer? And that's it from my side.

All right. Thank you. So I'll take it backwards, and Jill will complete if I miss anything. The back-end loaded, yes, Sulzer has a tendency to be back-end loaded. The additional back-end loading aspect of 2020 will be what I said about the coronavirus. Orders and sales a little bit lower in H1, catching up in H2. But if we look before the corona crisis, if we look at our order intake for January, it was at a very high level. So the year started off well from that perspective. We usually start off slower in sales because we deliver so much in November and December in order to get paid that we usually have a little bit of a lull in sales in January and February. But order intake was going strong. And really, the only impact on order intake is corona. And as I said, China is about 12% of Sulzer, which means that it's about 40 million of volume a month. So that allows you to get a little bit of a feel for what the impact could be. But nothing drastic, as I said, a bit softer in H1, making up for it in H2. Non-op in 2020. We've got the tail end of the closure of Bamberg and the ramp-up of Bechhofen. It's really the perfect storm for [ Girts ] and his guys because he's got 2 Beauty factories running in parallel in 2020. One which has been shut down with all that it entails. And the other one, which is the construction site because of the expansion. So there will be some nonop related to that as we ramp-down Bamberg and as we ramp-up Bechhofen. Anything else of significance would be linked to announcements in 2020. And we've got a few things that we're working on, but anything that we do will have -- will be something that has a good payback in terms of cost efficiencies. PE you said, would 4.5% be good number for 2020? We usually don't give guidance, well, we never give guidance on a division per division level. But if Frédéric only gets to 4.5%, I'll look at him with bushy eyebrows. I'd expect the number to be higher, honestly. The gross margin on order intake up 30 basis points. You're right, it is on selectivity. Look gross margin on order intake in Sulzer, there's a mix effect, which means that the more we secured business in pumps, especially engineered pumps, the more dilutive it is. So you can have a situation where all 4 of your businesses are improving in gross margin and Sulzer is still decreasing in gross margin on order intake because of the mix effect. But this year, it turns out that we're actually up 30 basis points because all of the businesses are doing well. As I said, APS, even in Beauty, which is challenging, is still at a high level -- at the normal level of gross margin on order intake. Everything else is doing fine and then Frédéric's business in pumps and engineered pumps, we're really migrating up the profitability of the order intake of end of the backlog in an aggressive manner. And none of that is to [ feed ] price uplift. The only price uplift that has happened is in North America, and it's mostly -- it's done. It hasn't happened in the rest of the world. As I told you, we're not projecting in our numbers for 2020 that it will happen in 2020. If it does, it'll be a positive surprise. And all of it is on selectivity, which means that we're willing to give up volume in order to stick to our guns in terms of what the pricing level should be. If you look at what other peers in our industry are reporting, not everybody is as disciplined. But the guys that reported yesterday or the day before Flowserve, are really doing the same thing. If you read what my counterpart, Scott Rowe is saying, he's saying the exact same thing. He's saying that you'll sacrifice volume in order to improve the margins. And once you have the 2 market leaders that are being open about their strategy from that perspective, it does send a signaling impact in the market. Now if I look at the margin on order intake between where we were at the -- for engineered pumps, where we were, which is a CHF 500 million business. Where we were at the beginning of 2019, '18 and where we were in the middle of 2019. There's probably like a 400 basis point delta between the 2. So it's a significant impact, and January was also good from that perspective. So I'd say so far so good, but it's about so selectivity. Did I answer your questions?

Fabian Haecki from UBS. A question on your profit guidance. It seems, honestly, a bit disappointing. It's a question about this is now a 10% operating EBITA since the end of the story. As we still -- you were talking about backlog margin in engineered pumps that are going up with 12 months delay should particularly impact positively 2020. Maybe you can a bit quantify this impact on pumps and on a group level. And also, you talked about selectivity. We have not seen significant capacity expansion. So I mean your utilization rate is going up. You can be a bit more selective on projects. So that should further improve and pricing is not going down at all. Also not much up, so pretty stable. So is there any other cost drivers we are missing here like wage inflation, is this -- or is it just as impact -- because you're still excluding corona out of this guidance. But is there any other elements we are missing we should be conservative on?

Yes. Corona, once again, it's a one-off. It's under absorption during that ramp-up phase. It really depends how long the ramp-up phase lasts until we get back to cruising altitude. I think it's -- you can't guide for that. I don't think anybody would do that. Now the profitability of 10.2% to 10.5%, essentially, it's a guidance based on limited volume growth because we're guiding on essentially low sales growth, I mean, 1% to 3%. And the reason what we're guiding and the low sales growth is that there's a lot of stuff happening in the market in terms of corona and so on. We said we'll recover the volumes, but, you know, we're early in the year. There's still a lack of understanding worldwide as to what it means for the industry, the supply chains across the world. So I guess we have a tendency to err on the conservative side. If we ended up at higher volumes, last few years, we ended up revising our volume guidance upwards. If we ended up at higher volumes than that that would be -- that would have a positive impact on the profitability. But at slightly up volumes in an environment where we are guiding for margin, which is not linked -- margin uplift, which is not linked to pricing uplift, we said essentially flattish to slightly up volumes in sales. We said flat price environment. And essentially, the guidance that we have on profitability improvement is all operational efficiency. Now if any of these things ends up being more positive, then you'll see a more positive impact. But if you take what I said about the engineered pumps, that 400 basis points of margin delta in the backlog, and you do -- it's kind of like math in high school, like you've got the number of tickets and the number of gaps. Essentially, you straddle that over 2 years, and you say there's a 200 basis point impact to be traded forward, and you apply 200 basis points on the CHF 500 million or CHF 600 million business, which is what our engineered pumps business is. Say -- call it CHF 600 million to make it easy. CHF 600 million, 200 basis points, that's CHF 12 million. CHF 12 million at the scale of Sulzer is like 0.25%. So if you want to think about it that way, you could say that we're essentially -- we're guiding for realizing the margin uplift from the backlog in pumps plus a little bit of improvement across the board. But we're -- I think overall, we're true to normal Sulzer form in terms of not trying to oversell what we see in terms of volume as we start the year. As I said, if we continue on a positive trend of recovery and the coronavirus ends up being something that's manageable, then we continue to have a high level of tendering activity. So volumes could be higher, but this is what we're seeing today. And once again, it's not about overselling at this point. There is -- that's what we think is reasonable. Did I answer your question?

Yes. And then on the backlog, on the pumps backlog margin or backlog improvement that should feed through in 2020. Is there anything -- some granularity you can share with us?

Well, as I said, we take the 400 basis points between early '18 and sort of mid '19. And you apply 200, but not 400 because some of it has already hit the 2019 numbers because we've been trading our backlog very fast. As you saw in 2019, the sales were equal to orders. So you take that CHF 200 million -- 200 basis points, and you apply it to the engineered pumps, which is the CHF 600 million business, you kind of get CHF 12 million of bottom-line impact just through the better quality backlog, which is, as I said, about 0.25% of profitability for Sulzer. So 25 basis points. And we're guiding for profitability improvement from -- of 20 to 50 basis points. So it kind of gives you a little bit of perspective. But as I said, once again, the -- we believe that we'll -- we're confident that we'll improve the profitability of our pumps business. We're confident that the trend in service will continue to be positive also from a profitability perspective. Chemtech will be a little bit disrupted by the Chinese market, which is 30% of Chemtech in the first half. But we believe we'll make up for that and Chemtech continues to be on a positive trend. And in Applicators, it's going to be the volume recovery in 2020. But as I said, Girts is going to be carrying kind of double costs in some areas. So from a profitability perspective, he's going to have -- he's going to fight hard in 2020, and I think you'll see the benefit of that in 2021. That's kind of how I would think about this whole thing. Follow-up, Fabian?

Okay. Yes, yes. Then quick one on capacity. Is there -- I think you got your capacity stable. You're still in a growing market. We have enough kind of leeway into 2020 and '21, and maybe also to give a bit of a CapEx guidance here. What's your view on the cycle, particularly in the CapEx, but also pumps business? Is there something you rather start to say we'd rather err on the side of caution and keep capacity stable and maybe we lose some orders? Or are you moving forward here?

Well, there is no plans whatsoever to increase capacity in the pumps business, let's be clear. We're very good at squeezing more in our existing factories. Really, you get that operational leverage when you do that, and we have no intention of adding capacity anywhere. If anything we'll take out capacity, we'll continue to take out capacity. So if you come back in a year, we'll have a discussion about it going down, not going up, I think. And the reason for that is that the problem with businesses that are tender based businesses, where a customer does an RFQ and people bid is that you'll have 3 to 5 qualified bidders, and it only takes 1. So it's a combination between science and psychology. And this is why I mentioned that both Flowserve and ourselves are being very clear about the fact that market pricing has to go up, and we're willing to suffer the consequences of sending that message clearly to the market, but everybody has to get on board. And it takes a little bit of time, different companies are run in different ways.

And then the last one. Is there any extra costs we can expect for 2020?

Extra cost?

Extra costs, restructuring costs.

As I said in my conclusion statements, we've got the tail end of the Bamberg, Bechhofen shift. And anything else would be linked to 2020 announcements. And if we do make 2020 announcements, they'll be about taking action on our footprint that will have a good payback. So I think that it's -- if we have to do something, it's always socially difficult. But from a purely performance perspective, these will be things that will have a beneficial impact on the bottom line down the road. But there's nothing to disclose at this point. This is more a discussion for later in the year, depending on how things evolve. And we buy businesses. When we buy businesses, we always look at can we rationalize our footprint, can we combine things, can we put more in the best-performing factories and so on. So that continues. It's just -- we won't call it SFP anymore because I don't want you guys to believe that we're hiding behind a multiyear program, I mean, forever. It's -- I think these announcements are better as a one-off, and they're usually easier to explain also because you'll get more details. That's the thinking. Did I answer your question, Fabian? All right, thanks. I think there was another question in the back.

Yes. It's [ Dominic Felchuz ] from [indiscernible]. You've mentioned that you are being still perceived very much as an oil and gas company out there, quite cyclical. Obviously, you need to remain attractive to support the shareholders and also to young -- especially young talent who want to work for a purpose -- a company with a good purpose. And so the question is really, I mean, do you see any need to reposition the company a bit more in the future? Maybe further away from fossil fuels, oil and gas because that's just not so popular anymore. That will be my first question. The second question is about this decline you had in Beauty. I mean have you not been agile there enough? I mean why did you miss out on all these independent brands. And the third question. I know this is ongoing or could ask -- could we ask every year about the relationship with Tiwel, I mean, and [indiscernible] and his companions? I mean how does that still restrict your activities? Or your -- how much it might impact your image?

Okay. Thank you, [ Dominic ]. So I'll take them and -- I'll take them actually in the proper order this time. So attracting young talent like Jill and some of these guys, we're very successful in attracting young talent. And we are because Sulzer is a dynamic environment. It's an entrepreneurial company where people realize once they're exposed to Sulzer that it's a decluttered environment where there's not these multiple levels that you have in a lot of big industrial companies and the dilution of authority because everything is matrix and everything is divided. We have a tendency to delegate, to empower, to make people accountable. And the selling argument of Sulzer is really that if you come on board at Sulzer, you'll be able to measure your impact on the company. And people do, and they see that and then they bring their friends. So in terms of our ability to attract people, it's actually quite high. Now you had a question, which was a slightly different question, which is, is oil and gas a deterrent to attracting people. And I think it's a very valid question. Now Sulzer doesn't need to change its strategy. Sulzer needs to change its perception. We're 28% oil and gas. We are 22% chemical. We're 13% water. Everybody thinks that Chemtech is a business that does stuff in refineries, but most of Chemtech, 60% of it is actually chemicals. And Torsten's business is one of the leaders in the market in bioplastics, biopolymers, emission treatments. Our pumps are the leading pumps in terms of CO2 reinjection. So we have a lot of cool things that are happening in Sulzer that we, I think, historically, haven't done a good enough job of putting out there. But the people in Sulzer see that. They're excited by that. We have innovation awards, which are a lot about sustainability, and there is a lot of competition within Sulzer to have the best ideas from that perspective. So I think the people internally get it. The -- externally, I still have -- we still have to fight this, "Oh, it's all oil and gas." type of perception. Once again, 28%. And really interestingly, there is a large market trend around ESG. And ESG is here to stay. Environmental, social, governance, it's the trend that's agitating the investment community. In my first 4 years at Sulzer, I had exactly 0 questions on ESG from investors. And my last 4 months as the CEO of Sulzer, I think, I've maybe met -- 90% of the investors I've met asked me ESG questions. And the really interesting thing is that the rating bodies, the people that rate companies on ESG criteria that actually get into the details of these things rate Sulzer really highly in ESG, which may not be your perception because people have this image, "Oh, Sulzer oil and gas." But just for fun, if you take MSCI, the big index company, very influential, they rate us as AA ESG leader. If you take DWS, which is the former Deutsche wealth services in Germany, they rate us as an ESG leader. If you take EcoVadis, they gave us the gold medal for ESG. So people see the combination of the strong governance, the social implication and the implication in our community. The fact that we do these employee surveys where -- 85% of our employees take part, 83% say that they recommend Sulzer as a good company to work at with their friends, and 93% of them say that they'd go the extra mile to help Sulzer be successful. And plus all of these new developments that we have in biopolymers, biofuels, efficient pumps and eco packaging in Applicators, the people that actually look at these things in details see it and rank us highly from that perspective. So ESG is a positive for Sulzer, not a negative. Our pipeline of products is a positive for Sulzer, not a negative. Our perception is something that's still evolving. And a lot of it is on my shoulders. I probably should have done a better job preaching the message over the last few years, but better late than never. But the substance is there, the communication probably needs a little bit of work, but this is why we have Domenico -- where is Domenico? Our new Head of External Communications, joining us from ABB where he was the Head of Communications for ABB Switzerland. Sulzer is not a company that communicated very well historically. We're trying to do a better job of it. But the substance is there. So that was the attraction in oil and gas question. The Beauty question, did we fall asleep at the wheel? The honest answer is, a little bit. Look at the end of the day, you kind of have to acknowledge, it's great to talk about our good results and to say we're up 8% here, 12% there, net income is up 35%, but no company is infallible. And frankly, on the Beauty side of things, yes, we fell asleep at the wheel a little bit. And we fell asleep because we're the market leader in brush like applicators for cosmetics. And we're the market leader, and we sell to the big guys. And at the end of the day, if all you do is talk to the big guys, you miss the small guys. And then when it does happen, you sit on your hands a little bit too long. And just for full disclosure, the Applicator business wanted to move ahead with the closure of Bamberg and the retooling of Bechhofen a year before I allowed them to do it because I was -- it was a lot of money. I was reluctant. I wanted to see whether what they said about the market was really true. Well, I wasn't disappointed. But at the end of the day, as we pull the trigger too late, a lot of that is my fault, but we're still the market leader. And we'll be just fine. It's -- but we -- did we waste a little bit of time, did we wait a little bit of performance, the honest answer is, yes. Tiwel, look, the wonderful thing about our dividend increase is that I can tell you stories about Tiwel until I'm blue in the face. That they're not intrusive, that they're great guys that they're easy to work with, all of that. But there's always people that won't believe me saying, "Yes, [ I mean, come on they're Russian." ] Look, the reality is, look at the dividend increase. We're increasing the dividend in a company where we have a shareholder that has 48% or CHF 218 million of his money is sitting on our balance sheet. And we're going to -- the dividend is going to go up from usual CHF 1.20 to CHF 1.37, I think. And he's got 48% of the CHF 1 37, which will be sitting on our balance sheet again. I mean it's almost masochistic from their perspective, right? But still, they're doing it, which tells you that they have the best interest of Sulzer at heart. Whatever constraints that they have are real. And what's the impact on Sulzer? Really the impact on Sulzer is mostly that once in a while, once every month, Jill has somebody from treasury that calls her up saying, there's some obscure bank in Turkmenistan. Well, not a good example. Some obscure bank in Asia or in Latin America that just block the payment because they said, "Oh, you have a weird shareholder. We need to understand what that means." And then she'll have to have her people spend a little bit of time handholding, the old fact filling the license blah, blah, blah. And then it'll get sorted. But all it means is that Jill has to be nice to our treasury departments because they have a little bit more work than they'd have in a normal company. But commercially, it has no impact whatsoever. And hopefully, we see that the governance -- once again, look at the dividend. It's -- at the end of the day, it's all -- money is the best indicator of these things. They're willing to support a dividend increase, despite the fact that they don't get the dividend.

Let me just clear the ESG topic.

Please.