Sulzer AG (SUN) Earnings Call Transcript & Summary

Good morning. It's a pleasure to be with you today. I'm Grégoire Poux-Guillaume, I'm the CEO of Sulzer. And my colleagues and I will walk you through today, a pretty full day. We'll start with a morning session on Medmix starting now. And we'll follow up this afternoon by 1:30 session on Sulzer where we'll talk about the prospects for the Sulzer flow control business. With no further ado, the disclaimer and let me walk you through a few slides before I hand over to Girts Cimermans and his team to talk about Medmix. Sulzer's been around since 1834. We've been a technology incubators for 200 years, and what you can see on this page is that we have pioneered a number of very exciting, very differentiated and very technical businesses over 200 years. And our modus operandi has usually been to innovate, to launch businesses, to take them to a certain level where they become especially self-sufficient. And we either continue with them if we feel that we're the best owner or we spin them out or sell them or do IPOs so that they can continue their own development. And as you can see on this page, pretty much everything that we have started has been successful and all these businesses are still around today. If I try to -- I'm sorry, I went back. If I try to walk you through the transaction rationale, we have 2 businesses within Sulzer. We have a very large flow control business that we'll call Sulzer in this presentation and it's an industrial flow control specialist that's focused on water, chemicals, industry and energy. We're the global leader in many of these markets. We're shifting progressively our portfolio towards water and industrial applications and pumps. We're a leader in chemical operation, but we are increasingly growing in biopolymers and recycling technologies. And we have a wonderful service business that is actually 50% or more of the company and highly resilient and high margin. That's Sulzer in a nutshell. Now Medmix, which is part of Sulzer today, is what we will now call our applicator systems division. And Medmix is a highly innovative, high-precision delivery device business. We have leading positions in dental, in pharma, in adhesives and beauty. More than 50% of our sales are backed by Sulzer-owned IP. So we're not a contract manufacturer. We're really an innovator. And that business capitalizes on attractive megatrends and operates in markets that are usually niche markets that have high barriers to entry, and therefore, lower price sensitivity. The business is today 40% health care and is increasingly shifting towards health care. The midterm will be about 50% health care. Now why you do the spin-off of Medmix now? Well, those of you who've followed Sulzer -- or who have followed Sulzer for the last few years know that it's always been part of our strategy to make applicator systems independent at one point or another. We've been very explicit about that. And we decided that this moment is now. The reasons are very simple. We had 3 conditions that we wanted to fill before we took the applicator business separate before we made it independent. The first one is we wanted to have a strong platform for growth in health care. And we did that through the acquisition of Haselmeier last year, and that's going really well. And we believe we have very strong prospectives in that business, and Girts will talk more about that in this presentation. We wanted to have the operational transformation of beauty completed. As you know, we were closing a factory in Germany. We were expanding another one and bringing in a number of capabilities in-house. And Jenny will walk you through that in the presentation a little bit later. We wanted to have strong recovery in all the Medmix segments, and actually we've achieved that. The business has been going really strong since the low of the second quarter in 2020 where dentists were closed and retailers were closed and the business was operating at a reduced rate. But ever since the summer, it's been going very strongly, and we'll show you some numbers to back that. And finally, there was a Sulzer reason, too. We felt that it was the right time to increase our capital allocation towards the vectors of growth that we have in our flow control business, the Water business, the industry pump business and the renewable technologies segment in Chemtech. We are very excited about all these opportunities. And capital is needed and now is the time to essentially make these businesses separate so they can continue the life of their own, and I would say, a successful life of their own. So how does the transaction work? Well, it's quite simple. It's a symmetrical split. It's a symmetrical split, which is combined with a capital increase within Medmix, not within Sulzer, within Medmix. So what we'll do essentially is investors will wake up one morning and in their custodian account, instead of having the Sulzer share, they'll have a Sulzer share and a Medmix share. It's essentially a split where we split the balance sheet and it goes to the same shareholders. So it's really important for everybody to understand that there's no residual ownership of Sulzer in Medmix. We don't retain, as Sulzer, an ownership in Medmix. This is not a fleet-of-ship strategy. This is really a split where Sulzer shareholders at a moment of time are shareholders of Sulzer and they're shareholders of applicator systems, which becomes Medmix. And it's only a moment of time because we combine that with a capital increase in Medmix, which we're calibrating for CHF 200 million to CHF 300 million. And that capital increase is open to everybody, obviously, but does not come with preferential subscription rights, which means that we're bringing in new investors, some of the old investors, too, but we will have this open to new investors. And the aim is to diversify the investor base in Medmix towards health care investors also and to essentially extend the free float. What you'll have is 2 businesses, Sulzer and Medmix, both of them publicly traded, both of them on the Swiss Stock Exchange, SIX. And the transaction will happen a little bit later in the year as I'll show you in a second. So the capital increase, the transaction rationale of the capital increase. We need a capital increase to fund growth initiatives. We believe that we have a good potential for continuing our small- to medium-sized acquisition strategy. And Medmix, yes, we'll talk about that. We also believe that it's the right moment to increase the free float and trading liquidity as the business will be, I think, a very exciting business and deserves a larger free float to generate investor interest. And as I said earlier, we want to provide an opportunity for health care-focused investors to come in at the time of the listing. Our largest shareholder in Sulzer, Tiwel, which has 48.8% of Sulzer, will not participate in the capital increase, and therefore, this will increase the free float of Medmix. Let's talk timing now. Well, timing is we've got a next step, which is our first half results on the 22nd of July. Then we will call for an extraordinary shareholder meeting sometime in August. And the extraordinary shareholder meeting will be held sometime in September probably. So we're talking mid- to late September. And then this will be followed up by the spin-off and the capital increase and the first day of trading of Medmix we say in the second half of the year, but it's likely to be in the last weeks of September, first weeks of October. That's the timing. I believe it's a really exciting opportunity for Sulzer and an exciting opportunity for Medmix. And I will now hand over to Girts Cimermans, the CEO of Medmix, and his team to walk you through the business. Thank you. Girts, over to you.

Thanks, Greg. Good morning, everybody, and welcome to the Medmix part of the Capital Markets Day. Thank you all for joining and your interest in Medmix. My name is Girts Cimermans and I am running the Medmix business. Before joining Sulzer, I had several roles with HOYA Corporation, including leading their largest division, Vision Care. I also worked within Danaher Dental business, and before that, over 10 years in various positions in GE Healthcare. As I joined the business 1.5 years ago, I found the business and products fascinating, especially what amazing impacts Medmix devices have on the performance of the final product. I also found appealing the opportunity to take Medmix to the next level. Today, speaking here with you, I'm more enthused and excited about the business and its opportunities as ever. In the coming 2 hours or so, we will give you insights on Medmix. We hope you will share the enthusiasm of my team and myself. Medmix is the technology leader in markets we serve with a strong growth potential and an attractive financial profile. And most importantly, we have an engaged and motivated team committed to our success. At this year's employee engagement survey, 93% of respondents told us that they understood how their work contributes to our business objectives. So in summary, we have the technology, we have identified profitable growth opportunities and we have a strong and aligned team to make our growth happen. Let me give you a brief overview of Medmix. We have 1,900 employees. 12 manufacturing sites globally means that no matter where a customer is based, we will have a site within reach ready to serve them. We ship over 2.5 billion products per year. So there's a very high probability you all encounter our devices or things made with our devices every day. We are a global leader in high-precision delivery devices. We pride ourselves in our ability to instill confidence in our end-users that whatever the application, whether it's drug administration, aircraft assembly or makeup, the end outcome will be of consistent high quality. Our core competencies lie in high-precision mixing, dispensing and delivery devices. There are really 3 key things to remember about our competencies: we are an innovator with a strong IP portfolio and innovation pipeline; quality is in our DNA as we work across several highly regulated industries; and our speed to market is fast, thanks to our digital enablers. Over to our business overview. We design and market precision devices that deliver liquid material to the point of application in a precise and reliable manner. Our devices and systems make up for a small part of the cost of a finished product, but they have a very high impact on how the final product performs. Why that matters? Well, we all certainly want to receive an accurate dosage of medication. We prefer to avoid having air bubbles in dental fillings or see a smartphone falling apart after a few days' use. This is the expertise will take pride in and this is the reason our customers stay with us for years and keep coming back to us. We serve B2B customers across 5 segments in health care, consumer and industrial markets. Health care makes up 40% of our revenue today and delivers over 50% of profit. We have an attractive, strategic setup across all segments. On one hand, we have separate customer-facing organizations for our different markets. Our brands are well known and recognized among our customers for innovation and reliability. We're leaders in niche markets with exciting macro growth trends. There are high entry barriers due to IP and regulatory requirements. Our partnership with customers spans the lifetime of a product and extends to new product development. On the other hand, segments share joint industrial DNA with expertise in injection molding and high-volume assembly. Teams share technologies and operations, creating synergies and scale. So what this means is that while we serve diverse markets with separate commercial resources, we leverage innovation and operational resources across Medmix. Medmix is a business built with the help of skillfully integrated and scaled acquisitions. The origins of Medmix dated back to 1996 as a start-up within Sulzer Chemtech. In 2006, we acquired Mixpac. This acquisition laid foundations of the company as we know it today. In the subsequent years, we acquired, successfully integrated and scaled several businesses with innovative products. We built a balanced portfolio. By 2017, the business had reached the critical mass and was carved out to a separate division in Sulzer. In subsequent years, we broadened our presence in health care by acquiring and integrating 4 businesses. All the integration activities have been completed according to our business model, separate commercial teams and joint operations and innovation backbone. So what this slide shows is that we have a solid track record in acquiring, integrating and scaling companies with good technological fit. When it comes to innovation, we have around 900 active patents. We have been on the technological forefront in many segments transforming the market, and we continue to innovate. A good example of that is 2-component mixing we introduced in dentistry. It eliminated the need to mix components for impression material by hand at the chair side. It revolutionized the dental consumables industry, and we've been subsequently expanding our mix of portfolio to other areas in the dental clinic. So the key message on this slide is that we have a track record of transforming our markets. And today, we have more than half of revenue based on IP-protected products. We also lead in ESG across our markets. The power behind Medmix portfolio is that we are exposed to diverse markets. Some markets experience trends ahead of others. This helps us to spot key trends and be ahead of the curve. In cosmetics, consumers have been very early drivers of sustainability, demanding products that address this. Hence, our Beauty segment puts us to the forefront in sustainable business practices. We have been recognized as #1 makeup supplier when it comes to sustainability by one of the largest global cosmetic companies. Our Bechhofen production site is platinum rated by EcoVadis, placing it among top 1% of the industry. Our common innovation and operations backbone leverages these learnings across the segment, thus, eco-design principles are embedded in our innovation philosophy. The proof is the sustainability award we received already in 2019 for our ecopaCC collapsible cartridge in the industrial segment. You can see that our sustainability leadership in Beauty has helped us build a sustainability culture across the whole company. We have 12 manufacturing sites, 6 are serving multiple segments and 6 have clean room capabilities. That means that we can serve our customers efficiently no matter where they're based. Allow me to introduce you to today's presenters who will join me in telling me the Medmix story. Our CFO, Jenny Dean, held several senior finance positions in Alstom and GE before joining Sulzer. Today, we would like to give you a deeper insight in our health care business area. This is why we ask the segment leaders in health care to join us. Holger Arens and I worked together at Danaher, where he was leading EMEA sales of the KaVo, the dental business. Marco Linari joined Haselmeier about a year ago before we acquired the business, and he brings many years of pharma experience. Dominik Vonier was leading the M&A function of Sulzer prior to joining the Medmix team to run surgery. Dominik also oversees the strategy function of Medmix. This concludes my introduction of Medmix. Let me now give you some insights why we are so excited about this business and why we believe Medmix is an excellent investment opportunity. We lead the market in several attractive niches. In certain areas within those markets, we have significant share. For example, our trademarked candy color mixing tips are used every day in most dental offices worldwide. And in Beauty, 1 in 5 mascara micro brushes on the market are made by us. Our gross profit margins in health care are 62%; in consumer and industry, 40%. This means that our niche leadership position provides us with high profit margins. The markets that we serve have attractive underlying trends, and we are well positioned to benefit from them. Aging population and outpatient care, for example, benefit our health care segment. urbanization and the growing middle class in many countries means both better access to health care and more disposable income for housing, consumer electronics, personal care, travel. Therefore, we see our underlying markets growing very healthily in the coming years. Let me now talk about how we tap into these trends through our technological innovation. A key growth driver in all our markets is our own IP. We have around 900 patents. And there are 2 ways we lead in innovation. First, we transform the industry practices through own innovation. For example, the ecopaCC collapsible cartridge for industry that reduces waste and optimizes transportation or ErgoSyringe in surgery that makes operating room procedures more efficient, eliminating hand-mixing. Second, we also co-create with our customers. Our deep know-how in liquid mixing and handling makes us the ideal partner. We work together to find the perfect delivery solution for their product innovations. A good example here is the magnetic mascara and micro brush with magnetized core, which is a co-creation project with Benefit. We spend 5% to 6% of our revenue on R&D annually to keep this innovation pipeline flowing. Let me explain to you how our markets were impacted by COVID and how they are recovering. Like many companies, the COVID crisis last year was a resilient test for Medmix. Lockdown impact was significant in second quarter last year. Our world essentially slowed down to near stop: factory furloughs, closed dental offices and stores, people staying at home, elective treatments in health care were canceled or postponed. Most end markets shrank by double digits in 2020. The recovery started in Q3 last year led by industrial markets. Not all end markets have recovered fully. Dental offices in some countries still operate at 80% to 90% of pre-COVID capacity. Beauty still experience lockdowns in '21. Surgery recovery is limited by operating room capacity. So in summary, the recovery is underway. We expect most of our markets to recover by end of '21. And we expect Beauty and surgery to recover through '22. Let's look at our performance in a COVID context. Following the lockdown in Q2 last year, Medmix business started to recover strongly in Q3. Our end markets have not fully recovered yet as you saw in the previous slide. Despite that, Medmix orders and revenue exceeded prepandemic level in Q1 this year. We see Q2 develop in a similarly strong pattern. And by the way, our April orders reached all-time high. Profitability remained resilient during 2020. Our gross profit margin was stable at pre-pandemic levels throughout last year. It increased this year to above pre-COVID levels. We have a track record of 25% adjusted EBITDA margins. And as the individual markets recover, We expect to return to over 26% adjusted EBITDA profit margin in '22. We're still in market recovery and see high growth rates. but also midterm, we aim to grow at 8% CAGR. And there are 3 key points supporting our ambition. First, we have had attractive growth rates in pre-COVID time. We were growing at 5% already. So essentially, we would just need to accelerate historical growth pace. Second, health care end markets are growing faster and we aim to grow faster in the markets in health care. That will change our revenue mix to over 50% in health care midterm. And third, Beauty was not growing before COVID. We have finished the transformational Beauty business to better address the fast-growing segments, and we have put Beauty back on growth path. Therefore, we believe our organic growth ambition of 8% midterm is achievable. I already talked about the engaged and committed Medmix. team. Our business is led by a seasoned leadership team. Most of them have over 20 years of relevant industry or functional experience. We have a balanced composition of the team with half of my direct reports appointed in the past 18 months. This concludes the investment proposition overview. We will now move to the segment presentation, starting with health care. I hand over the floor to Holger Arens, who took the helm of the Dental segment a little over a year ago.

Thanks, Girts. Good morning. When I was first introduced to Mixpac dental, I did not know the business. Now this would not be noteworthy, but after I spent more than 25 years in the dental industry with leading brands, it came as a very positive surprise to discover the dental business at Sulzer. My name is Holger Arens. And today, I'm delighted to share with you a great success story of a hidden champion in the dental industry. I will give you some details and insight into our recent strategic initiatives and how we maintain our healthy position and how we will accelerate our organic growth trajectory. I want to start with the map of the environment we are playing in. Our core products are application and delivery systems for the dental consumable industry. All components of these systems are integral for the clinical application and the success of our customers and users, the dental professionals. All modules can easily be assembled or disassembled, there are no tools required. All our products are used during dental education for nurses and dentists, and that is what every dental professional is familiar using our delivery system. You see here a number of clinical routine applications with our products in use, and I'm certain every dental patient was exposed to our products one way or the other at some point in time. We serve the dental consumable industry, and each and every player is our customer. These customers use a variety of recipes for their paste and liquids like adhesives, cements or silicones. Because we go through a strict validation process, we can guarantee a smooth user experience as well as reliable clinic results for all the different recipes that our customers offer. Our main competitors are, in fact, our own customers as the dental industry is traditionally highly vertically integrated. We believe there's a trend towards key competencies and focus amongst our customers where we will have opportunities to grow. Our customers value our co-creation approach to identify opportunities together very early in the development cycle. We have a significant market share in all prosthetic applications and are a key supplier for our OEM customers. We're a niche specialist serving the dental consumable industry broadly. All relevant established players as well as any new player or start-ups are our customers. Our core business is in the prosthetics application and packaging segment, and with the acquisition of Transcodent in 2017, we strengthened our portfolio in the restorative segment, serving the same customer base. Our clients are mainly OEM, but we also do serve private label customers as well as dental distributors. Our products, especially our mixers, are the established industry gold standard globally. Basically, every dental practice uses one of our products on a daily basis. Dental prosthetics is our core segment, and that is mainly taking impressions or registering a bite for crowns, bridges and implants. Our restorative products are used for applying and dispensing adhesives, etching gels or fitting materials. These liquids are applied and dispensed in bottles, capsules and syringes and this is where we believe to have an excellent opportunity to grow. I have 3 products to share with you in more detail. First, our second-generation multi-component delivery system that can be used for a variety of prosthetic applications. Our customers can mix and match from a wide choice of cartridges, dispensers, mixers and application tips to design their own product feature set. We ship the whole system to our customers, they fill the cartridges and the finished product is ready to use. All our mixers are compatible with our cartridge and dispenser systems. This is the established delivery system in all dental clinics, and you certainly have seen it in action during one of your visits at a dentist. The delivery system has modules with different lifespan from dispensers to application tips. So it's important to note that the mixers -- or rather the mixing tips are used are using our trademark candy colors and are considered a consumable and are used for 1 patient application only. You keep the dispenser for long the cartridge until it is empty, and you will use a fresh mixer and a mixing tip for every new patient. With our industry standard delivery system, we have created a versatile ecosystem for mixers, making it convenient both for our customers and the dental professionals. And our high Swiss quality standard secures the most reliable clinical results. We have evolved our patented mixers from the original helix mixers to the T-Mixers and the Colibri Plus mixers with a breakable tip. All of these mixers are compatible with our existing systems to make it easy for both our OEM customers and the dental professionals to work seamlessly with our delivery systems. Our Colibri mixer, we recently launched an updated version, breakable, allows multiple applications with one mixer through economic and versatile design. As a general note, in dentistry, very small details and features can make a big difference. As one example, during one of Girt's recent dentist appointments, the doctor complained about our product performance. What we quickly found out was that the doctor was using a competitor's tip with a differently bent angle. Then after using our Swiss-made quality tip, the application was hassle-free again and the team was satisfied. So this [ $0.01 ] item can make the difference between a failure and the success. We are focused on prosthetics and restoratives. The dental consumable market has decreased between 15% to 20% in 2020 as dental practices were closed for 1 quarter or even longer. Hence, we saw a decline of about 35% because we suffered from additional negative pipeline and warehouse effects. Since August 2020, we do see markets coming back to 2019 levels, our record year, and we anticipate demand to grow at a 4% CAGR going forward. You see the main trends for the dental consumable market here. I would call out especially the aging population with more elderly people without teeth at all and an increasing prosperity as the most important drivers for sustainable baseline growth in the dental industry. Although there's a trend towards making digital impressions that has been around for more than a decade, our customers continue to see robust demand from fast-growing markets in Asia offsetting the digital trend in investor markets. The growth in the restorative segment is well supported by the macro trends to keep your teeth for life, if possible, and offers an opportunity for growth with our advanced application and delivery solutions. We understand that our OEM customers compete in highly competitive markets. Oftentimes, the cements or liquids in general are commoditized items with little differentiation. We can support our customers to better distinguish with our unique and smart primary packaging and application solutions. In all the recent discussions with our key customers, we took away the need that our mission is to design and develop new and smart primary packaging ideas. Now here, we have the dental market by application as we expect them to evolve. I have 3 examples to share with you on how we have and will evolve our product portfolio in the main applications, prosthetics, restoratives and anesthetics. So we have enhanced our core mixing tips to versatile tips for multiple applications, as you see on the top. And then we've seen increased demand and an opportunity for ergonomic and hygienic applications. In the middle and at the bottom, we have the commercial opportunity overall to take our anesthetics business from regional to a global level. Our strategy is to become the full-service provider for the dental consumable industry. Putting this strategy into work and translating our ideas into initiatives, we have identified 4 growth vectors where we have implemented 5 strategic initiatives to maintain and grow our core business while expanding our portfolio into adjacent growth opportunities. As we evolve and expand our product portfolio, we are closely working together with our customers from early stages of the development process onwards to make sure we address common problems. I want to highlight 1 initiative here, the expansion of our value-added services portfolio. These are services like filling, packaging, labeling and other value-added products. We do have a small existing business and believe there's a lot more growth opportunity out there. We are already close to the manufacturing processes of our OEM customers. Expanding the services business will bring us even closer, which is another aspect why we focus on this opportunity. One example I want to share with you our logistics and warehousing capabilities that we have in Brazil, China, Germany, the U.S. and here in Switzerland where we deliver finished goods ready to sell where our customers need it. Our journey from a specialist to a full-service provider. The foundation for this expansion is our deep understanding of our customers' value chain, the established working relationships and the challenges of our customers in a commoditized market. We will continue to serve as a very healthy and focused niche player while addressing adjacent market segments where we can capture growth. All the strategic initiatives addressing products, existing customers, geographies, channel and services will expand our addressable market by a significant margin. We have a steady consumable business. We can build on our healthy core, and we feel great in the unique niche that we have created over the years. In summary, we are serving all global dental customers in a resilient growth market and will accelerate our growth into adjacent markets with the new products and services, building on our core capabilities. Our robust business model and team of dedicated specialists make me very confident that we will have great results going forward and continue to deliver. And with this, I hand over to Marco Linari running the Drug Delivery business.

Thank you, Holger. So good morning. My name is Marco Linari and I'm leading the Drug Delivery business of Medmix. I'm in the pharmaceutical industry for 20 years, most of the time in leadership roles with Merck. During this time, I became aware of one key supplier, Haselmeier, which received the prestigious Red Dot Design Award for the fantastic Axis-D pen in 2014. This is the backbone for Merck's fertility franchise, which has changed the life of millions of couples wanting to have a child. You can see a patient using this device in the picture. In 2020, I was delighted to join this business and to lead the transaction to Sulzer. And I joined because I firmly believe that this business is an exciting foundation for the Medmix Drug Delivery segment. It is an unpolished diamond. So my part today will be on how to polish this gem, and I would like you to understand 3 points. We have a complete pen portfolio with 100% of revenues from IP-protected devices. We have innovations in our pipeline that resonate with customers. And we are executing a sound strategy to scale up the Drug Delivery business to CHF 100 million by 2025. Let me tell you first about how this business came together. Until closing of the transaction in October 2020, Haselmeier was well known for its strength in the design and in the customization of pens for subcutaneous self-injection. Bringing the business into Medmix opened up greater commercial resources and high-volume manufacturing that were previously not available. We have a complete and competitive pen portfolio with the reusable pen platforms, i-pen and i-pen^2; and the disposable platforms, Axis-D and D-Flex. There are different features such as number of dosing steps or dose size provide capability for many different drugs and indications, including fertility, diabetes, osteoporosis and growth hormones. Further projects in our pipeline includes metabolic disorders and rare diseases as well. Since many customers are in project stages, we cannot share their names. You will understand that we are working with some well-known pharmaceutical companies. Haselmeier brand is resonating in the market, and customers now appreciate the evolution into Medmix bringing better commercial coverage and larger scale production. So why my opening analogy to an unpolished diamond? Our strong pen portfolio is a fantastic base with underutilized potential. This potential can be unlocked through commercialization and large-scale manufacturing. All our revenues come from patent-protected devices with opportunities to grow, in particular, in the United States and in Asia. I'm proud that we recently signed a deal with a well-known U.S. biotech. The first order is worth around CHF 10 million. Currently, 2/3 of our revenues are coming from the Axis-D platform, the majority from fertility. With the ramp-up of our D-Flex technology, we start to balance our sales. And we see that D-Flex is resonating well with customers for 2 reasons: reduction of time to market and freedom to operate due to our strong IP portfolio. That means customers can be sure that their drug-device combination product is not infringing any intellectual property on the market. A central element for our scale-up strategy is portfolio expansion. We currently work on developing an auto-injector, providing us with access into the very attractive auto-injector market that grows double digit and on launching a digital ecosystem bringing us into clinical trials. Accordingly, we can start to work with customers much earlier in the process. So the unpolished diamond stands for having already competitive edges that require some further polishing to become a true gem. And this is actually the essence of our strategy. Let me share with you on how our innovation leadership actually translates into tangible results for customers and for patients. So the D-Flex platform translates simplicity in design into significant benefits. D-Flex helps customers reducing time to market and cost. Let me give you one example of what that means. A customer recently approached us, who decided last minute to launch a biosimilar in a drug-device combination product instead of using a standard prefilled syringe. D-Flex allowed us to shorten the device customization time to 15 months so that the customer is still able to meet the patent expiry of the originator drug. Time to market is a critical differentiator. Patients and customers can further benefit by pairing the D-Flex technology with our digital cap, building a true digital ecosystem that includes a proprietary mobile app and the cloud data platform as well. Data integrity and patients following up the intended dose regimen are critical points in critical trials. This ecosystem allows customers to capture data accurately and monitor patient adherence in clinical trials, improving speed and accuracy of data analysis while reducing trial costs. Furthermore, the app can improve on how patient and doctors are interacting. A physician can better understood how and when patients are taking medication, which increases therapy outcome and supports health care cost management as well. In osteoporosis, for example, we are discussing with customers how this ecosystem can support the daily work of home care nurses by simply reducing their need to complete paper records. This success story is reflected also by receiving the reputable Red Dot and GOOD DESIGN Awards for both devices last year. Scaling up our commercial approach will provide us with more opportunities in the pen market, currently worth CHF 900 million that has an attractive growth rate. Three megatrends will fuel our growth in this market. The trend to home care and self-injection, reducing health care costs and increasing quality of life; the increasing prevalence of infertility and the postponed wish to conceive a child; and the dramatically increasing prevalence of diabetes and related metabolic disorders. We are confident to outpace market growth and increase our share in diabetes-related diseases such as adipositas in osteoporosis and in rare diseases. A closer look into the subsegments of the pen market shows the attractive growth rate across all indications. Our strategy will allow us to seize opportunities in all these segments. Here is what makes me confident that we can upsize drug delivery to CHF 100 million until 2025. In the short term, we will roll out the D-Flex model to new indications with a focus on rare diseases, metabolic disorders and biosimilars. We will also benefit from several key drug patent expiries in the next 4 years. Our new auto-injector platform will capitalize on these patent expiries as well, but even more important, is the impressive number of new biologicals and development that will use this technology. Accordingly, the auto-injector market shows an impressive CAGR of 13%, which our new devices will capitalize on. Our strategic road map is the recipe to polish the diamond. To outpace market growth and to scale the business to CHF 100 million, we defined a clear scale-up strategy along 3 growth vectors: product development, geographic expansion and growing our customer base. And derived from these vectors, we are executing 5 strategic priorities. We are scaling up manufacturing to address mid- to high production volumes where we see tremendous opportunities for our IP. We are leveraging the full potential of our devices through a better commercialization and manufacturing approach. We are expanding our offering with the auto-injector interconnected cap. That means we will tap on the double-digit growth of the auto-injector market and we can increase the throughput of D-Flex with the connected cap as a differentiator in clinical trials. We are increasing the commercial coverage in the United States and in Asia. And lastly, we are gaining a stronger foothold in indications like autoimmune, inflammatory and oncology with the highest number of candidates in pharmaceutical pipelines. With these steps, we are confident to outpace pen market growth of 7% significantly to upsize the Drug Delivery business, leaving our legacy niche far behind and opening up significant part of the attractive CHF 900 million market. Global reach and manufacturing capabilities are critical to achieve this. The addition of the emerging auto-injector platform will open up a much bigger market that is valued today CHF 1.6 billion. I want you to remember 3 points on how we polish the diamond to turn it into a true gem. We benefit from a complete pen portfolio with all revenues coming from IP-protected devices, we have innovations in our pipeline that resonate with customers and we are executing a sound strategy to scale up the drug delivery business to CHF 100 million in 2025. Drug Delivery is the second pillar of Medmix health care. Now it's my pleasure to hand over to Dominik Vonier, who will explain the growth strategy of the third pillar, the Surgery business.

Thanks, Marco. It's a pleasure for me to be here today. When Girts asked me about a year ago to take over the Surgery business, I said yes immediately because it's a field I am passionate about. The reason is that more than 20 years ago, I did my civil service in an operating theater. And it really is like a theater, a close team working hand-in-hand in a small room with constant stress. Everyone is focused on the best outcome for the patient, and so are we at Medmix surgery. Let's have a look at how we help surgeons to take care of their patients and why this makes Surgery an attractive business. When thinking about Surgery business, I want you to take away 3 key points. First, it's a highly attractive business with strong customer relationships. Second, we are well positioned in this exciting market, which is driven by long-term growth trends. And third, our know-how and innovation will power us to outgrow the market. Let me start by giving you an overview of the business. We are one of the leading specialized developers and providers of delivery devices for biomaterials. All of our devices are being used in an operating theater. There are 2 different types of applications based on the biomaterial: first, bone cement; and second, tissue treatment. There are many subcategories beyond this, but let's stick to those 2 definitions. Within bone cement, there are 2 areas: trauma, or in plain English, bone fractures; and joint replacements like a hip or knee implant. So far, we only play in trauma, but we have plans to expand more into bone cement devices for implants as well. On tissue treatment, the biomaterial is applied to help wound healing. Our devices are mostly used in cardiovascular procedures, that means heart or blood vessels operations. They support the healing and improve patient outcomes. We have a large variety of different delivery devices, and we are known in the industry to have the largest portfolio for nearly all relevant procedures. We are proud to support some of the most innovative customers in the surgical space. In the past, we had our biggest successes with fast-growing small to midsized players, but we also have many of the major biomaterial OEMs as our customers, and we continue to grow the space. A special customer group is tissue banks. Tissue banks are not-for-profit organizations that collect donated human bodies, process their organs to repurpose tissue material like bones or blood. There's a big trend for U.S. tissue banks to professionalize as they become larger. This is an opportunity for us as they switch from simple standard syringes to our made-for-surgery devices. A quick look at our competitors. I just want to point out that the largest group of our competitors are also potential customers. By that, I mean biomaterial OEMs that develop and/or produce their own devices. I will come back to these so-called captive OEMs later. By the way, this is a similar characteristic shared with the Dental business, as Holger pointed out earlier. I want to give some further insights why we have close and sticky relationships with our customers, which I will explain now. Our Surgery business shares the same heritage as our Dental and industry businesses. We acquired it in 2018, and since then, we nearly doubled revenue. How did we do this? A combination of existing customers having increasing confidence in our scale, new products experienced strong growth and new customers trusting our devices. As you can imagine, devices for surgeries have high requirements for quality, functionality and documentation. These days, you cannot differentiate much on quality. It's a given. So we differentiate ourselves by offering the widest and most specialized product portfolio for the largest range of surgical procedures. We not only offer the highest functionality combined with ergonomic design, our customers come to us with the most challenging biomaterial to deliver and mix because we have longstanding history of technical know-how and innovation in mixing and delivering the most complicated biomaterials. In short, our customers are the experts in creating biomaterial and we help them to deliver it. This is one reason why we are convinced that we will increase our share of large OEMs that are currently captive. On documentation and regulation. We are not a legal manufacturer of medical devices, but we are providing the documentation as if. Our devices and documentation are part of our customers' medical device file. Switching a device would always incur a lot of cost and effort on our customer side, in some cases, even new clinical studies. So it is obvious that the willingness to switch devices is extremely low. These are 2 reasons for attractiveness of our business, our know-how and medical device experience adding value to our customers' biomaterial and both creating close, sticky and long-term customer relationships. Looking at our revenues split by customer segment, I would like to highlight 2 points. We have currently a larger share in bone cement, which is where we traditionally used to focus. But these days, we are intensifying our efforts in the faster-growing tissue treatment area. Secondly, tissue banks are growing rapidly and already nearly 20% of our revenues. Let me now show you 2 of our most successful product stories in bone cement and one in tissue treatment. In high-growth tissue treatment, our prefilled double syringe system is one of the most used devices for cardiovascular wound closure. This material delivered by our device has been clinically proven to improve patient outcomes. Our device has been used in more than 2 million cardiovascular procedures, which is something we are extremely proud of. The bone putty system is another success story. Our customer chose our device from the start of this development about 10 years ago. Revenues with this device have grown more than 5x in 2018. So far, I hope I was able to convey why Surgery is an attractive business with strong customer relationships, part of the key takeaways I mentioned at the beginning. I also mentioned that we are in a growing market. So let's have a look at this now. Let me talk about the key growth drivers in our markets. In general, this is already a mid- to high single-digit growth market as people become older and the growing middle class is becoming more active. This will result in more operations, trauma as well as joint replacements and procedures for tissue treatment. On top of that market growth, some of our focus areas like tissue banks are growing even faster. Like one of the trends in Holger's Dental business, there are some commoditization ongoing, especially in bone cement. And if biomaterial becomes commoditized, the device is the differentiating factor. This is obviously good for our business. And on the tissue treatment side, we still -- there's still room to grow for existing and new biomaterials. This is because they have a positive impact on post-operation performance, fewer infections and comorbidities reducing patient suffering. This also helps to reduce costs for hospitals and insurers. Any new biomaterial is an opportunity for us to grow into the captive OEM share. So we will benefit from all these points above as we have: a, the right devices for our customers to differentiate the current biomaterial; and b, we have the know-how to deliver the most challenging new biomaterials. On the next page, you will see how our markets are growing and how we will capture this growth. As you can see, our wide product range already covers most of the trauma bone cement and tissue treatment markets. The key point on this page, we are moving into the joint replacement market with a new product under development as we speak. We have a lead customer on this product who is strongly supporting us in the development. This is how our close customer relationships and our technical know-how enable us to capture a larger share of the market. I want to talk more about our growth potential on the next page. As you have already seen, we have a lot of growth in front of us coming from a strong innovation mindset and know-how base. We have set key strategic priorities to capture this growth. I want to talk about the top 2. First, we aim to grow our share of wallet by turning captive OEMs into our customers. As some of their biomaterial becomes more commoditized, our tailor-made devices offer differentiation from their competition. For others, our high-value products enhance their latest innovations and support a great market launch. As an example, we are currently in discussion with a large OEM to provide a tailor-made device for completely new tissue treatment material. They have come to us because of our well-known experience in mixing biomaterial with the most functional design. The customer repeated how impressed he was with our R&D colleagues several times unprompted. Secondly, we are currently developing a product with innovative features to move into joint replacement market. We have past experience here and already have several lead customers supporting us. Let me summarize the key messages from my presentation. We are one of the leaders in a strong growing market, and we are known for having the largest product portfolio as well as create technical know-how of mixing biomaterials. Our basis for continued high growth is our focus on winning large customers, the fast-growing tissue treatment market and even faster-growing tissue banks. The expansion with new products into joint replacement and other growth initiatives unlocks a large addressable market worldwide. This will bring long-term growth opportunities. In conclusion, I hope that I was able to convey to 3 key takeaways: first, Surgery is a highly attractive business with strong customer relationships; second, we are well positioned in this exciting market, which is driven by long-term growth; and third, our know-how and innovation will power us to outgrow the market. Thank you very much for your attention, and back to Girts.

Thanks, Dominik. All right. So Surgery presentation concludes the section on health care, and we move on to consumer, industrial business area. I will walk through -- walk you through the industrial segment and after me, Jenny Dean will talk about the Beauty. Our industry segment covers a very broad range of applications across many industries. In short, wherever there's need for adhesives or coatings, we are there. Our daily lives are surrounded by items produced with the help of Medmix delivery devices. iPhones, electric cars and airplanes are assembled with the help of adhesives. If you have ever had the windshield of your car replaced, the new windshield is glued in with the adhesive applied with the help of Medmix devices. Chemical bonding and surface coating are becoming more and more common in construction. Even hooves of horses and cattle are increasingly repaired with the help of chemical bonding materials. These are just some examples of how our products are in use every day. We design and manufacture cartridges, mixers and dispensers for adhesives and coating material. We have many of the world's largest adhesive makers as our customers. Their adhesive or coating components are filled in our 2 component cartridges, mixed together at the point of application by our mixers and dispensed to the help of the dispenser guns. So we really are omnipresent, thanks to the increased use of industrial adhesives. Over half of our revenue is generated with Europe, Middle East and Africa customers selling worldwide. From products, the highest revenue contributors are the consumables, cartridges and mixers, followed by dispensing devices. We go to market with Mixpac, COX and MK brands that are very well-known names in the industry. Also in industry segment, we lead with broad IP protection and innovative solutions like ecopaCC and Mixpeel. ecopaCC is our award-winning innovation for industry. It is a collapsible cartridge delivered in a collapsed state to filling location. It saves space and weight and transport, and thus, reduces CO2 emissions. Similarly, it is compressed when the material is applied, reducing waste. Let me give you a deeper insight in 2 application areas of our products. The phones and other electronic devices we all use are getting more compact whilst the screens are getting larger. Therefore, precision adhesive bonding is the preferred assembly method for high-end devices like the iPhone. The manufacturing process of Foxconn uses Medmix cartridges and mixing tips. The tips enable delivery of a precise dose of adhesive material. It bonds the screen as well as the backside glass cover to the frame. And just a fun fact. Every year, late summer, the sales out of our Shanghai plant spike and this is how we know it's soon release time for a new iPhone model. We also provide cartridges and mixers for the electric vehicle battery manufacturing process. Adhesives are widely used for assembly of electric vehicle batteries. And subsequently, adhesives are also used in a manufacturing process of the electric vehicles themselves to affix the batteries. The key message to take away from this slide is our end-users trust the consistent high quality of Medmix devices in industries where precision matters. Although our devices are used across a very wide spectrum of industries, there is one common trend: this is the accelerated shift from mechanical fastening to chemical bonding. It is also showcased by the revenue growth of our customers. Chemical bonding is perceived to be more efficient, longer-lasting and more reliable. Another trend is automotive. Adhesives are increasingly used in the assembly of electrical vehicles and their batteries. And the automotive market is shifting from internal combustion engine to electric. So a key takeaway here is that there are favorable trends in the industry that drive high long-term growth rates for our business. Let me share with you a growth path for industry to take advantage of these market growth trends, the 3 main opportunities. Firstly, growing with core and new products as new chemical formulations enter the market. Second, we have launched several innovative products in the past couple of years. It can take several years for innovations to get foothold in these markets, and we're starting to see sales ramping up now. And third, in particular, in the tile grout application in China, we have only recently entered this segment in construction in China and we see strong potential there. Our 2 strategic growth vectors for the industry segment are, firstly, expanding into new products as new formulations or applications emerge. And second, expanding geographically to increase our share with chemical manufacturers and fillers outside of Europe and North America. Among the 5 strategic priorities is to grow share in general industry and construction markets. We will also continue to lead in sustainable solutions, reducing waste and CO2 emissions. To summarize, industry markets enjoy very appealing growth rates as the world moves from mechanical to chemical bonding. We are able to sustain high organic growth rates through expansion into construction, fast-growing markets and adjacencies like precision dosing. The 3 key points you should take away regarding industry segment are as follows: we are present wherever adhesives and surface coatings are applied; our customers choose us for our know-how of precise and high consistent quality application of material; and lastly, we lead the way on sustainable solutions for industries, helping reduce waste and save CO2 emissions. And with this, I'll hand over to Jenny to present the Beauty segment.

Thanks, Girts. I'm really delighted to present to you our Beauty and micro brush business. I genuinely see this business as a great contributor to our Medmix portfolio. This is a high-precision and technically innovative business with high customization and extremely demanding customers. It has a lot to offer our other segments as an early adopter in areas such as sustainability. Through our brand, Geka, we develop and design innovative micro brushes and applicators and offer everything from individual products to full-service solutions. We are active in the area of color cosmetics, skin care, hair care and accessories, so we can offer a platform approach to our customers. We also develop micro brushes that can be used for cleaners in nonbeauty applications in dental and industrial segments. Our competitors are fairly fragmented, providing us a competitive advantage. Our customer base includes global icons in the beauty market as well as independents and regional players. While there appear to be a myriad of beauty players in the press, the ultimate parents are actually quite consolidated, holding very broad portfolios, and this provides us with multiple opportunities to serve them as partner of choice. New entrants and influencers are often snapped up as soon as they start to be successful. And this -- addressing these new players also helps us enter the more established players in the long run. In addition to these points on the beauty market and important for Medmix is that due to consumer influence, the beauty market is an early adopter in many areas that we can leverage to strengthen our positioning and portfolio in other areas of Medmix. Firstly, defining and communicating ESG commitments where a clear road map and audits are no longer a competitive advantage in Beauty, they're merely a ticket to the game in submitting RFQs. Our Beauty business has attained the exclusive EcoVadis Platinum status, meaning they're in the top 1% of the field. Second is sustainable and recyclable materials for injection molding like the Holy Grail of completely transparent recycled vessels. Third is 3D printing where we are developing micro brushes and applicators. And finally, tamper-evident and mechanisms in single hygiene use products. We tend to segment our Beauty business in 3 ways. The first is customer offer type. And you can see here masstige and prestige defined in terms of the selling price. And while this is important, it's also driven by the quality, look and feel and exclusivity of the product. Important to highlight is that all our products are customized in Beauty. You will never see an identical product sold by 2 unrelated parties. Also important is that each of these effects and offers requires us to demonstrate innovation, quality, agility and design thinking. The trend is more and more towards premiumization, hence, our recent investments in, in-sourcing and expanding our decoration capabilities in our facility in Bechhofen in Germany. Second is a regional dimension. And this is not the end consumer, this is our B2B customer location. Clear here is the preeminence of the traditional players in Europe, primarily the French: L'Oreal, Chanel, LVMH and so on. These customers still prefer their supply chains internal and external to be close to their headquarters, and this is another reason why we chose to reinvest in our facility in Germany where our core technical and innovation teams are also based. There are big players, of course, outside Europe, in the U.S., for example, Estee Lauder, but many of these players are actually subsidiaries of the Europeans. There are growing regional players, and in some large regional markets like LatAm, a local presence is clearly mandatory. The third way that we segment our business is by product type, and here are 3 case studies for you. The first 2, not surprisingly, are in mascara for this is the majority of our revenues and the majority of our 150-plus patents. The impact of the brush is immense. It's the brush that determines the look and the effect of the mascara and the success of the product, and therefore, secures our future volumes. The first case study is a twisted wide brush. There are a myriad of shapes and bristle designs possible to drive effects and performance. For example, short bristles tend towards volume and long bristles support separation and combing. These variations allow us not only to deliver the customers' vision but to tailor our products to different geographies, for example, in Asia, where genetically the lashes tend to be shorter. The second case study is the bi-material injection-molded brush. We hold many patents in this area and are seen as a leader in the field. This specific innovation is 2 differing materials, so we have a more solid core that supports the application of the mascara and a softer material used for the bristles for comfort. Our most recent commercial success is a great example of why we are the partner of choice in mascara innovation. We were chosen by Benefit to partner with them for the latest product in their real mascara range. Benefit's marketing is fun and quirky. You may have seen their retro packaging in the duty free halls. But they also have great innovative products, and this is the latest, a magnetic mascara. Both the injection molded brush and the mascara are charged so that they attract and this helps with the lift and the look of the mascara effect. Developing the technical solution for this product was pretty intense and could not have been achieved by all. And the launch despite being -- during the pandemic has been extremely successful. The third case study is an insight into our future, a noncolor cosmetics application in skin care, where we have made exciting progress. Skin care is the fastest-growing beauty segment, driven by trends of pampering and self-care during lockdown, skin protection against pollution and macroeconomic trends like the aging population. The need here is for precise, hygienic and smooth application of often very expensive formulations, and developments here have a very broad potential for us in the future. The color cosmetics market we address is around CHF 800 million with a CAGR of 5.6%. Our market share is around 15% with, by far, our higher share at around 20% in mascara. We have products across the complete product portfolio and this ensures we can address not only our technical traditional global customers, but also midsized and regional players. And the recent disruptors in the beauty market, the indies and the influencers, who have no access to manufacturing backbone, are in start-up mode and for whom speed is key. Through our online configurator, we offer a predefined set of sizes, shapes and colors, our building block system for the components of our products, which the customers can pick and mix to design one product or a platform, lip, eyes, concealer, for example, and then further differentiate their product by choosing from our broad range of innovative decoration capabilities. This is an area we have invested in heavily through our in-sourcing and expanded decoration capabilities in the beauty transformation project in Germany. The BBS system has several benefits for us and our customers. Firstly, it reduces the number of physical samples, which significantly shortens the development cycle, great for the indies, and limits the disruption to plant productivity caused by sample runs, great for us. Second, it reduces the capital investment and lead times required during the commercialization phase. Again, great for the indies and influencers to be fast with their product on the shelf. And there's no expensive bespoke mold or tooling required as we use our predefined set of product components. And thirdly, it helps us to build a better value proposition for our customers by demonstrating the different levels of customization in the products they choose. This online configurator has clear benefits for our other segments, especially in the industrial space and there's further potential for this to be extended to an online sales platform. In our addressed color cosmetics market above CHF 800 million you see on the left, mascara is our core product. All segments are growing in relatively stable relation to the others, between 5% and 7%, and there's an overall CAGR of 5.6%. Medmix share is around 15%. Moving beyond mascara is key to our strategy. In color cosmetics, we're intensifying our growth in lip, brows and concealer, for example. In beauty beyond color cosmetics, we have had first successes in beard, hair coloration and skin care applications with skincare, as I mentioned, being the fastest-growing segment in the beauty market. Beyond beauty, we have had success in the past with cleaner applications where micro brushes of high precision in varying materials are critical. Example, cleaners in high-end electronic devices. We have 3 strategic growth vectors in our Beauty and micro brush business to help us better navigate our addressed color cosmetics market and chart our strategy to expand to markets beyond. First is the product expansion, as I just explained, beyond mascara, beyond color cosmetics and micro bushes beyond beauty. Second is geographic expansion. First, China, local for local and beyond. Then China into Southeast Asia and from Europe into the Middle East. And finally, grow our customer base, new entrants, indies and influencers, midsized and regional players all through the online configurator and BBS system and a faster, broader offering. We have strong fundamentals in our business and through our brand, Geka. We have deep domain expertise, acknowledged innovation and technical leadership and proprietary products and processes. Our recently completed investment in Germany takes us to the next level, ensuring that through expanded decoration capabilities, shortened lead times and automation and technology, we can successfully move from our traditional core of mascara for global players to a diverse range of beauty and other micro brush applications for customers of all sizes, business models and geographies. We are not only a leader in high-precision delivery devices for beauty, but a leading edge in many fields applicable to our other markets addressed by Medmix and core to our strategy like sustainability. That concludes the product segment part of our presentation where we have provided insights into our Medmix portfolio and our strategic priorities for the future. So let me now switch hats from beauty champion to CFO where I have been the CFO of Medmix since I joined Sulzer in 2017 at the inception of this fantastic business and present to you our financial highlights. In the midterm, our Medmix expectation is to deliver revenue growth of around 8% CAGR, more than 50% of our revenue from health care; and an adjusted EBITDA margin of around 30%. This year, we expect to deliver CHF 450 million of revenue at an adjusted EBITDA margin of around 25%. We expect our leverage at the split post capital increase to be 1 to 2x net debt-to-EBITDA. We are seeing revenue growth across all our segments of Medmix and with an increasing shift towards health care. This year, we expect our overall revenue to be higher than pre-pandemic 2019. In 2019, consumer, industrial revenue dropped due to, firstly, new trends and the rise of the influencers in the beauty color cosmetics market; and secondly, an abrupt halt to the micro bush product by our customer PMI. Despite the volume drop, our adjusted EBITDA margin improved versus 2018 on the back of strong execution. In 2020, we had a strong start. The COVID-19 interrupted this from March. And by quarter 2, we had completely stalled the beauty and dental markets because of the retail outlets and dental offices were closed. This was only a matter of temporary closure, however. Underlying demand has remained unchanged. And since the end of summer, we have seen a steep return in our volumes, some from restocking and pent-up demand, but also some market share gain and underlying market growth. In quarter 1 this year, both businesses had revenues already growing above pre-pandemic levels. There is still some weakness in the market, for example, Beauty and some geographies in the Americas. But our full year 2021 revenue is expected to be around CHF 450 million, back to pre-pandemic levels in most markets and with a much higher portion in the mix from health care. Going into 2022, we expect high single-digit revenue growth. Medmix has demonstrated resilient business margins of around 45%. In 2019, Medmix business area gross margin improved 200 basis points due to, firstly, operational improvements, driven by post-acquisition strategies and synergies in dental, surgery and industry and the opening of our new facility in Poland; and secondly, through the growth of health care in the mix. In 2020, we demonstrated the robustness of our portfolio. We experienced unprecedented volume impact due to COVID-19 and turbulence in the markets. However, resilient pricing and continued upsides from operations projects such as automation and Phase 2 of our Poland facility ensured that we maintained our business area gross margin. In 2021, our expectation is the stable business area gross margins to continue. This has been confirmed in quarter 1 and to date in quarter 2. We have robust adjusted EBITDA margins, which will be further strengthened as health care grows in volume and within our mix. In 2019, stable pricing, growth in health care and operational improvements led to a 100 basis points increase in adjusted EBITDA margin to 26%. In 2020, the Q2 collapse in demand due to COVID-19 led to negative volume and mix impacts. We were able to protect our adjusted EBITDA margins, however, due to resilient business area gross margins and through swift cost-out actions, including reduction in temps, short-time working and minimizing controllable spend. Due to this fast and comprehensive response, we did not have to resort to structural actions that may have damaged our ability to rebound as fast and as effectively as we did. In 2021 and 2022, adjusted EBITDA margins are expected to revert to 2018 and '19 levels of 25% and then 26% based on higher volumes in the mix from health care, strong post-COVID recovery in industry and commercialization of new products in Drug Delivery and Beauty. In the midterm, we expect our EBITDA margin to rise to 30% on the back of, firstly, revenue growth with a CAGR of 8%; second, favorable segment mix with health care growing faster and with a nice profitable margin; and third, operational leverage through better plant utilization due to higher volume, the impact of the transformation in our beauty factories and SG&A growing at a slower pace than revenue. In 2019 and 2020, we implemented actions to consolidate our 2 beauty factories in Germany and to retool the main plant to address the new trends in the beauty market. Spend here was close to CHF 30 million, and this project is now complete. Excluding this project, the CapEx in these 2 years was around 6% of revenue. In 2021, we are activating some delayed investments from last year and we also have some investments to support our new product introductions, so CapEx is slightly higher than a normalized level, but lower than 2020. Over the midterm, we expect CapEx of 7% to 8% revenue, and this is considering both CapEx for growth, especially in Haselmeier and health care and replacement CapEx. We expect to return closer to depreciation levels in the longer term. In terms of leverage and capital increase considerations, Medmix is expected to have around CHF 400 million of net debt at the split, comprising an intercompany loan of around CHF 400 million and a small amount of lease liabilities and cash. After a capital increase of targeted CHF 200 million to CHF 300 million, Medmix is expected to have net debt of CHF 100 million to CHF 200 million. This translates to a leverage of around 1 to 2 net debt EBITDA, in line with our sector peers and provides a capital structure that will support our growth. After the split, Medmix will refinance the intercompany loan with external financing. Our Medmix portfolio has proved itself robust both during the pandemic and in the subsequent rebound. In quarter 1 2021, we saw orders at a historic high with orders and sales sequentially and year-on-year up on an organic basis. All markets, except Beauty, are expected to return to pre-pandemic levels during 2021 and our Q2 expectations support this outlook. We grew our adjusted EBITDA margin 100 basis points year-on-year in quarter 1 2021, strong growth in dental and industrial and continued good cost management contributed to the increased profitability. With further market recovery expected during the year, we are well placed to achieve our 2021 targets of CHF 450 million in revenue and adjusted EBITDA of 25%. Now I'll hand back to you, Girts, for the conclusion and outlook.

Thanks, Jenny. All right. So let me take a few minutes to summarize the investment opportunity for you. Since I joined the business 1.5 years ago, I have been laying the foundations of the stand-alone Medmix business, building a balanced and resilient business model that is geared to deliver sustainable profitable growth. We have achieved a lot despite the COVID lockdowns and remote work. We entered Drug Delivery segment with Haselmeier acquisition, we finished transformation of Beauty to be able to better address the fast-growing independent segment, we've strengthened the leadership team with strong leaders with long tenure in their markets and functions and with the foundations we laid, we have positioned ourselves for strong performance in our next chapter as a public company. For the coming 5 years, we have set 5 priorities to continue our leadership as a lean, innovative and customer-centric company. We will further grow in health care organically and through acquisitions; we aim to become a significant local player in China, and we'll grow our customer base with Chinese customers; and we will continue to leverage our sustainability advantage provided by Beauty to deliver on our midterm ESG commitments. We will continue with disciplined approach with regards to our M&A. We have an active pipeline of opportunities. In health care, we're looking at small to midsized adjacencies with strong IP that fit to our established business model. In China, we are looking at small to midsized players with strong local customer base. With this, let me summarize the financial outlook. We see Medmix revenue growing high single digit next year. Midterm, we have 8% CAGR organic growth ambition, driven by 3 factors: the trends driving growth in underlying markets; in health care, growing faster than the market; and accelerating our historical growth through focused growth initiatives. We expect to return to our pre-COVID profitability of 26% adjusted EBITDA next year. Midterm, we aim to grow adjusted EBITDA to 30% through 2 drivers: favorable segment mix, with health care having higher profitability and growing faster than industry and consumer and through operational leverage by improved plant utilization and fixed costs growing at a slower pace than sales. We expect CapEx to stay around 7% to 8% of revenue as we adjust our manufacturing base by health care and be lower thereafter. We expect other KPIs to remain at the same level from '22 onwards. And although we look at Medmix as a growth play rather than a dividend play, we aim to pay dividends no lower than [ CHF 0.50 ] per share. To conclude, this is why I believe Medmix is a fantastic investment opportunity, and these are the 3 things you really should remember about Medmix: high growth, high margins, powered by technology. And as we know, business is conducted by people, and the Medmix team is highly engaged and motivated, committed to our success and to our growth plan. With this, I would like to wrap up today's presentation and open the floor for questions.

[Operator Instructions] Gentlemen, so far there are no questions from the phone. The first question comes from Patrick Rafaisz from UBS.

Sorry, I was on mute. The first question would be on your CapEx guidance. So it seems, if I assume something like 4% to 5% maintenance CapEx, you're spending about [ 1 Swiss ] of Capex -- expansion CapEx for 2 Swiss of incremental revenues. But if you guide for a normalization of CapEx to sales towards D&A, does that mean you expect to get even more revenues out of your CapEx? It just doesn't seem to tie in with the midterm growth ambition. And then the second question is on what you described on your customer base in Dental with main competitors also acting as customers. What is the share of revenues you generate with customers or also competitors? And the same for Surgery, it would be interesting. And that's it now.

All right. Thank you, Patrick. So I'll hand the answers over to our subject matter experts. So Jenny, would you like to take the CapEx question? And then Holger and Dominik will take the respective Surgery and Dental.

Okay. So in terms of our depreciation, we are generally at 6% of our revenue. And in fact, because of our growth proposition, we have a premium of the CapEx of around 2 percentage points on top of that. We expect, as I mentioned, to have a higher CapEx as a percentage of revenue this year due to some activated assets from last year and because we're investing in our product development. But we expect to move back towards 7% to 8% in the future as a percentage of revenue.

All right. Thank you. Holger, a word on Dental?

Yes. So Patrick, I understand, the question is about how many of our customers are also our competitors. I would say about, roughly speaking, about 1/3. It depends on the level of integration that they have. So that means, for us, this -- 30% of our customer base is an opportunity for us as well.

Okay. Understood. Maybe just one additional question. Have you decided on the reporting structure for Medmix as a stand-alone entity? What kind of segment details do you plan to disclose?

Right. So yes, Patrick, we're going to be organized -- or we are organized in 2 business areas. So health care on one hand that shares, let's say, higher growth aspirations, also higher organic market growth. And then we have consumer industrial, so those -- that business area is closer actually to the consumers themselves. So that's essentially how we're going to be organized. My leadership team will consist of -- besides Jenny, our CFO, and operations, HR of all the segment leaders is going to be reporting to me.

Okay. And will you be disclosing gross margin spend on that level? Or do you go further down?

We're going to be disclosing gross margins on the business area level.

The next question comes from Aurelio Calderon from Morgan Stanley.

I guess going through your slide deck, one thing that kind of caught my eye is if I look at the growth that you're expecting, and basically, your kind of core areas of competence or where you have a, let's say, stronger position or larger market share, it seems like the growth that you're expecting is lower than in adjacent areas. Like, for example, if I look at the drug delivery business, you're expecting more growth in diabetes than you're expecting in infertility, which is kind of your core business. And I guess the same applies to the other divisions. Do you see this as a risk or as an opportunity in terms of being able to gain market share in a market that is growing? I'm asking because, obviously, your growth numbers that you're targeting, that 8% CAGR is quite impressive. But I'm just wondering how much of that 8% you think is going to come from new markets and how much is going to come from the core markets that you're currently serving?

Right. Thanks, Aurelio. Well, let me start answering that question. And then probably since Drug Delivery was brought up, I'll hand over to Marco. Really, the way we are looking at the market growth is more kind of what opportunities and what indications can we enter with our product portfolio. And so we look more at kind of -- say, we launched D-Flex, D-Flex as a pen, what indications they can address and what is our growth opportunity there. Similarly on Dental, for example, if we look at growth in Dental, we look at growth outside of the prosthetics and restorative into other areas where we have, let's say -- we already have a very strong established brand name in dental area. We already have proven quality, consistent quality time after time. No bubbles in the final material being applied. And it's very easy to leverage that reputation that you have to enter into other markets. So Marco, would you like to add something about how you look at the indications?

I mean, first, we have to keep in mind that we have a business that has been traditionally underserved, yes? So -- and with our capabilities now, we will make sure that we will outpace the market since we're investing into commercialization and into large-scale manufacturing, and this should bring us above the CAGR of the market. And secondly, we have the D-Flex and the D-Flex will help to gain market share. And we see, in particular, in areas like the noninsulin diabetes where it resonates. It resonates in osteoporosis and in rare diseases. And keep in mind, we already have one significant order secured in the United States from a U.S. biotech, which is project revenue only. So that has the potential to help to outpace market growth.

And as I said in the beginning, I think D-Flex has a really powerful value proposition for the pharma companies just because it can shorten the time to market. And actually, I believe, not only we have secured an order, an agreement with a U.S. biotech, I think we have built also in the past 12 months a very significant project pipeline for that product. Does that answer your question, Aurelio?

Yes, that's helpful. And maybe I can squeeze in one more. It's around your kind of expectations in terms of cash conversion. And obviously, I think you are targeting quite a significant CapEx increase over the next couple of years, but would be obviously being a very short cycle business, I think, the cash conversion should be relatively good. Any indications that you are able to share with us in terms of cash conversion expectations or free cash flow? What are you thinking in terms of cash?

Right. Thank you. I think Jenny is in excellent position to provide insight on that.

Thanks, Girts. So pre-COVID, we were traditionally in Medmix at a free cash flow percentage of revenue mid-teens. Clearly with the COVID impact on our volumes and an unprecedented decrease there, plus, as we've mentioned, the beauty transformation project and some investment in new product introduction. Currently, our free cash flow is not at the expectations for the future, but we see a move back towards mid-teens as a percentage of revenue.

Next question comes from Arnold Christian (sic) [ Christian Arnold ] from Stifel Schweiz AG.

Actually, one. In the past, there was not much of a difference between orders and sales for the APS business, so very short lead time here. So taking your orders of Q1, Q2, of roughly CHF 250 million. That would more lead to a CHF 500 million sales for 2021. You're guiding for CHF 450 million. So there is a gap within orders and sales. And I wonder if something has changed in terms of seasonality or product mix effect, that in the future, we will have a bigger gap between sales and orders? Or is that just a temporary effect in '21?

Right. Christian, Jenny will take that. But initially, just to give you kind of insight what's happening as we get out of COVID. During the lockdown and after -- also in Q3 and the rebound months following the exit of lockdown, to a large extent, all the value chain, all the inventories were largely emptied. So what's happening now is stock replenishment on top of underlying market growth, on top of also us taking a little bit share. So that kind of drives the gap that we have between orders and sales. Jenny, you want to add something?

Yes. Girts, I think it's a completely normal phenomena. We saw the exact mirror image where we saw our orders finish before our sales during the close or during the collapse in quarter 2 last year. What we see in addition, and this is clearly in the press everywhere, is there are raw material shortages everywhere. There are logistics challenges, whether it's containers from China or berth on a ship everywhere. And so what we've seen is that some of our customers are trying to put longer-term orders than they would normally place and tell us because we have a good forecast process with them. So they're telling us, "These are not the normal 6 weeks orders. These are 3 and 6-month orders," in a hope that they will reserve their portion of our supply chain and secure their deliveries because they see their ramp-up and they know that they need us to be successful in that reentry into the market. I think it's a temporary phenomena, and we do see that over the end of this year, we'll revert to normal orders equal sales type behavior again.

The next question comes from Christoph Gretler from Credit Suisse.

I have a few questions, actually. So maybe starting on the strategic side. I mean looking at the portfolio of the businesses you presented, they looked fairly heterogeneous with little coherence [indiscernible]. So could you maybe elaborate where you see kind of the midterm outlook and whether all in all these businesses are of the same core to the company? So I understand, obviously, kind of the health care angle and growth angle, but -- your comments on M&A. But basically, could you elaborate a bit on the portfolio development over time you expect?

All right. Thank you, Christoph. It's a very easy question to answer. We like all our segments. And as I mentioned earlier in the business -- in the introductory part, the way we organize is that, yes, we do serve very diverse markets. So this is why we have separate front end organizations. And then there's lots of commonalities going on the innovation sharing, on the technology. Our back-end resources and operations, procurement and finance, they're all integrated. And this is where we really can get the economies of scale. We also learn a lot from each of these segments. Let's say, Beauty has helped us a lot because they have been exposed to sustainability focus for a very long time. They had started to work on post-consumer recycled materials, on bio-based materials for a very long time, actually way before our other industries that we serve even became aware of the need. So thanks to having Beauty in our portfolio, we've been able to capitalize on that and we are actually a few steps ahead of our competition and then being able to offer a sustainable products. We also share innovation across our segments. One additional, let's say, innovation that COVID situation brought us and also coming by accident from the consumer and the cosmetics market is tamper-evident packaging. So also with that patented now innovation, we're able to offer tamper-evident packaging and the tamper-evident solutions for Dentistry, tamper-evident solutions for Drug Delivery that significantly reduces cross-contamination. So there's lots of synergies, lots of similarities related to technology, related to operations. Six manufacturing sites we have today are multi-segment sites worldwide. Does that answer your question a little bit, Christoph?

Well, maybe I can just add something, Girts. I mean in terms of the sizing of the portfolio, what we showed is at quarter 1 this year, we're 40-60, 40% sales out of health care, 60% from consumer and industrial, and our midterm target is that we will have revenue of at least 50% from health care.

Yes. And as a father, I can understand that you like all your children the same way. Yes, fair enough. Maybe continuing, I mean, looking at from a different prospective on a capital investment side, could you maybe kind of indicate what percent of your kind of operating capital is invested in these kind of businesses? Or maybe at least also going forward, give an indication of the CapEx to sales ratio for these individual business units?

Right. Thanks. I'm not sure to what extent we have those data available.

Well, I think it's actually irrelevant to a large extent. As Girts has explained, then we have a mutualized backbone, whether it's in R&D and innovation, in our operations, facilities and our transverse functions, whether it's in operational excellence, for example. So the predominant capital investment we have is transverse in nature and not specifically attributable to any one segment.

Okay. I guess -- for us, it makes a bit of a difference, I guess, to know the higher margins you get in health care, and the higher margins you would expect a bit different in a return profile, then kind of -- but anyway...

That's what I [ mean ] to say. You're right. But we have a very robust process. We've been extremely disciplined in our capital allocation methodology in the past. We take each opportunity based on its value-accretive status for our business, and we'll continue to deploy our capital in the same way in the future.

I guess the return profile on kind of your innovation portfolio, it's probably kind of not quite different across different businesses. But anyway, I mean -- so maybe if I can go quickly into the Drug Delivery business. I understand it's very heavily geared to fertility. Maybe could you discuss the customer concentration in this business? And particularly also your contract situation with Merck there, how long that contract is? Kind of what are kind of the safety net, so to say?

Right. Thanks, Christoph. So I'll hand it over to Marco to give you insight on that.

Yes. So I mean,Merck is an important customer, and we really take pride on being the supplier of the market leader. Merck is locked in with us since -- I mean our product is a drug-device combination product. So it is in the dossier, and accordingly, we have very good opportunities. Going forward, and I think this is also clear, we are starting to balance our pipeline further with D-Flex, which is part of the strategy, so that the share of Merck will continue to go down since we are growing in other areas. Does this answer your question, Christoph?

Yes, but not very kind of extensively. But yes, I guess, not more you want to say. Maybe kind of moving on then to some other financial questions. What's actually the interest rate on the intercompany loan that you pay?

Right. Jenny?

The interest rate today is not one single interest rate. We've had various loans during the process of building and then growing APS. So I can't give you one answer to that question, I'm sorry.

Okay. Maybe could you discuss kind of net working capital? Could you...

I think going forward, it's irrelevant, as we've said. Post capital increase, then we will restructure or convert our loan to external financing, and then it will be at the general market rates.

Yes, I guess, for us, it could mean quite a boost to earnings since you are likely be able to refund much cheaper. But again, I don't know the base. We don't know.

Understood. And I'll pass it to our treasury team.

And maybe net working capital, could you give kind of some indication where we stand, let's say, on inventory-to-sales receivable to sales ratio right now? And how you see that trend over time?

I think for -- in terms of net working capital, we're relatively similar to our peers. We have a very stable set of customers. We have a stable set of suppliers. So important for your modeling is that there's no significant variation. Even during the pandemic, the percentage of revenue was relatively stable. And this we expect to continue for the future.

The next question comes from Alessandro Foletti from Octavian.

Can you hear me well?

Yes, Alessandro.

Okay. I have a couple. If you don't mind, I would like to take them one by one because they are sort of differ in nature. Maybe sticking with the financials a little bit. I have the impression, but this is really an outsider impression, but your business is relatively capital-intensive with 8% CapEx to sales. Can you give an indication of your ROIC or return on invested capital?

Right. Thanks, Alessandro. Jenny, would you like to?

Our capital intensity, excluding the large growth projects we invested in, is relatively in line with our peers. And as we've mentioned, this year, our CapEx will be still slightly elevated at 9% of revenue based on some carry forward CapEx from last year and our continuing product investment, and we expect in the future to return to levels of 7% to 8% of revenue.

And with respect to return on invested capital?

I think at this point, we don't expect radical change to that. Under Sulzer terminology, then we had return on capitals that were more or less in line with the industry standards. So I don't think you could take your model anything different.

Can you remind me the industry standard? Sorry, I don't know that.

Mid-teens.

Right. And one maybe question related to that. On the Sulzer, all the targets, et cetera, were based on operational EBITA, you seem to go towards EBITDA. Can you tell us why that's the better number?

Simply because we want to be more relevant and more comparative to our peers, and they tend to be using adjusted EBITDA. Operational or adjusted is more or less the same definition. Yes.

Right. And then I have a final question. I don't know who will answer it. It's more related to the business and your growth strategy. I don't remember who it was, but one of your -- maybe the guy who spoke about drug injection, made a comment that switching costs can be very high for your clients because you have a product and device certification. And hence, your clients are very sticky. Now I was wondering if this -- of course, when you present it like this, it sounds very, very, very positive, and I'm sure it is for the clients you have. But isn't it also an obstacle to grow if you want to gain market share? It means taking the client away from somebody else. How do you do that?

Right. Thank you, Alessandro. Well, I will start answering the question, then maybe Marco and Holger, because the business model is similar actually for Drug Delivery and Dental, they can complement. But I think customer stickiness is something that probably all of our segments experience. Same is valid for Beauty, where we launched a product with one customer and we work through the lifetime of the product. And that does not disturb us also to bid for other products being launched by that customer or other products being launched by different customers. So -- but in general, in these industries, you stay throughout the lifetime of our product because switching costs out of regulation or out of convenience or quality concerns is too high. That having said, you can still bid for new products coming up and see that you can get the piece of slice of new products being launched. Would you like to -- did I cover it more or less completely? Or you guys want to add something?

I can add 2 things. Alessandro, I mean, for us, the main source of growth is either having biosimilars coming onto the market, or on the other side, new molecules coming onto the market. So that means we have 2 sources fueling the growth going forward. And accordingly, we see tremendous opportunities.

The next question comes from Sebastian Vogel from UBS.

Hello, can you hear me?

Yes, Sebastian.

Perfect. I have a couple questions, I would like to go through them one by one. First one would be on raw materials that I'm just on the right page. It's pretty much just plastic, right? And if that's the case, how quickly you are affected by price changes by your raw materials? There was some hedging, some inventory. How could I think in that context?

Right. It's predominantly resin, you're right, and then to some extent, also steel. And essentially, last year, when the pricing was low, we actually used the opportunity to stock up. Now with the economies, pretty much, you can say that economies are overheating. So the prices are going up again. Then again, our business model allows us to go back to our customers and pass on the price increase partially or sometimes fully to our customers. And so far, we've been doing that pretty successfully. And what helps us is that our customers also are using the same resin, so they are exposed exactly to the same market trends. I hope that answers your question.

So that means your contracts have normally some sort of pass-on clause with a sort of a half year delay or something? Is that the way of thinking in that context?

Yes, yes.

Perfect. Second question on customer concentration overall. Is there any customer that is sort of representing 5% or 10% of your overall sales exposure?

I do not believe so, no. We have some customers that we share across the segments, but nobody is like 10% or more actually off of the Medmix revenue. It is pretty diversified.

Understood. With regard to the underlying financials sort of a full sort of balance sheet, cash flow and so on, will that provided be later in the process? Or what are the plans there?

Jenny, do you want to give some info on that?

If I understand you correctly, so there will be, of course, a full prospectus issued with 3 years of financials, historically 2016 -- sorry, 2018, '19 and '20. And then we will release our half year accounts as well.

And within your half year account, we will see all balance sheet, cash flow calculation and so on for Medmix?

Yes.

Perfect. And then with regard to transitional service agreements, can you elaborate a little bit more what are the sort of costs that you will need to bear in the beginning? And what sort of costs you will be thereafter once the transitional service agreements expire?

So we will have transitional service level agreements for 18 to 24 months with Sulzer. We've already agreed that, that will be on the same basis that we pay today, so no change. And then we'll use the opportunity of that period to either take some of the staff over or to build our own services up. So there'll be a very smooth impact on both Sulzer and on Medmix.

And today's level is around like?

On the appropriate level required for the services we receive from Sulzer.

Okay. Understood. With regard to the management incentivation, is there any sort of change likely or how it is -- how is the management overall incentivize going forward? Are some ESG angles reflected in that? Is the incentivation linked to the spin-off success? Can you give a little bit more detail in this context?

Right. I think it's a good question for Greg to answer, for Greg and Jill on the incentivization of the management team.

I think Jill wanted to -- Jill, we're going to share a table. Jill wanted to complete the answer on the services provided by Sulzer, just an amount -- an order of magnitude so you guys know what we're talking about here.

Exactly. So in case you're modeling, I mean, we are talking about a magnitude of close to CHF 10 million. So it's not really much because Medmix has been set up right from the beginning to be very self-sufficient. We had the idea to have a stand-alone over time, and we have always expressed that as part of our strategy. So from that perspective, it's really very core services, which, over time, during the time of 18 to 24 months, will be smoothly transferred. And it is an amount that is really not going to affect the profitability of both sides at all.

All right. Thank you, Jill. I think the question for me was what are the incentives that we'll put in place?

Yes.

We're actually in the process of building those. We did a benchmarking exercise to see what the Medmix peers do because we want to make sure that we just don't transpose the Sulzer model. At the end of the day, it's a very different business, a very different business model, and we want to make sure that whatever we come up with supports the success of the business model of Medmix. So as I said, it'll be pretty similar to what you're seeing in comparable peers, but I'll give you an answer on that a little bit later in the summer.

Understood. It's most likely there also some sort of incentive regarded to a successful spin-off also being part of that? Or really underlying operations only?

No, no, no, we're talking about long-term incentives as a stand-alone business. We're not talking here about incentives for the spinoff of the business. The spinoff of the business is -- it's our job. That's part of what we're doing at Sulzer. Once again, it's more the what are the KPIs? Are we going with restricted shares or other instruments for long-term incentives? What will be the indicators that we'll base that on? What would be the peer group that we compare ourselves to? These are the things that we're trying to build currently. And we're making good progress, but I just don't have a definitive answer to give you at this point. I'll have that later in the summer.

Understood. And I don't want to take too much of your time. Just very quick last one. With regard to the cost that are likely being borne by -- or that were caused by the Sulzer transaction. Will that be staying with Sulzer? Or will that be staying with Medmix?

Jill, do you want to talk transaction costs? I'll leave the table to you.

Yes. Well, most of the transaction costs are actually related to the capital increase. So it will be actually offset against the proceeds of the capital increase. And we will have around CHF 6 million to CHF 8 million on the -- which will be treated as one-off. About CHF 2 million will stay with Sulzer, and the balance will be in Medmix.

All right. And if you guys are worried about proximity, both Jill and I are fully vaccinated.

Yes. So a lot of what you're concerned about in terms of the rounding the cost of capital as well as the TSA is really a rounding error in your modeling.

[Operator Instructions] The next question is a follow-up question from Christoph Gretler from Credit Suisse.

Yes, to give it to you last. Actually, do you have kind of a history of capitalizing R&D costs by term?

You're asking whether we -- capitalizing R&D costs, is that the question?

Exactly. What -- how to know? I mean, I guess, some do, some don't.

Jenny?

Traditionally, we have not capitalized significant amounts of R&D in our balance sheet, and we don't expect that going forward.

Yes. That sounds good. And then on China, you called that out as the main growth market. And I thought that actually, the Head of China is the only geographical head on your leadership team. Is -- what percentage of sales represents China? And in what business is it the most prominent?

I did not get the second part of your question, Christian (sic) [ Christoph ]. The line was breaking up.

What percent of sales is China and basically -- yes.

Right. Okay. The China sales to Chinese customers today is a very small amount. And this is the reason why we're actually looking into M&A opportunities to turn that around. So we have indeed hired a very seasoned leader in China. He joined us a couple of months ago. We do have active pipeline opportunities because today, really, whether it is in Beauty or whether it is in Industry, we are selling to Western companies affiliates in China. And in order for us to access the local Chinese chemical or adhesive companies, in order for us to access the cosmetic players, and there's a huge cosmetics market in China, you need to be Chinese, you need to be local. And this is why we're looking into acquisitions.

Girts, if I may add. China is not new for us. Girts' business, Medmix, has a significant factory in China. But as Girts said, until you've got boots on the ground and people serving local customers and part of the industrial tissue in China, you'll end up serving mostly international customers out of China, and that's what we aim to change.

Okay. And then the last question I have on the Board of Directors. Actually, could you discuss some of what is the likely intention over that Board, particularly kind of the size, the capabilities you're looking at, and obviously, kind of what is the likely representation by the main shareholder of Sulzer, which will, I guess, will be the main shareholder at Medmix?

Sure. The Board of Directors of Medmix, as part of the demerger process in Switzerland, we had to communicate Board member names to launch the process as part of the report that's publicly available to you guys. And so we went with the minimal version, which is 3 people at this point, but with the stated intention as part of the report, it's announced in there, to have a Board of anywhere between 5 and 7 people. Our aim in the medium-term is to start with the 3 people that are listed and to add 2 independents and to be able to have by the first AGM in, probably in April 2022, have a Board of Directors with 5 members, including, as I said, these 2 independents that we will look for in the market with a focus on dental and health care backgrounds, probably. And the 3 initial Board members that are already announced are myself as Chairman, or I should -- really I'm being impolite, Jill Lee as a Director, myself as Chairman, and Marco Musetti, who used to be a Sulzer Board member, but dropped off the Sulzer Board at the last AGM so that he could come on to the Applicator Systems Board, the Medmix Board, will be the third member. And the other 2 that we are anticipating, as I said, will be independents and probably both from a health care background. We reserve the right to expand that to 7. But I think if we're able to be at 5 by the first AGM, which is -- which, tentatively in April 2022, I think that would be a good start.

There won't be any representation from the main shareholder, I understand correctly.

In my discussions with them, they're not insisting on that. They understand that they're playing a smaller role in this thing. They accepted the dilution, as you saw, the capital increase in which they can't take part. So they accepted the dilution and they accept that they'll have a smaller role. And once again, they're not insisting at this point on having Board representation.

The next question comes from [ Arvin Hasani ] from Vontobel.

So I would just have a short question. So could you specify in your sales growth targets, what share will be inorganic? Can you give a ballpark number?

Right. The 8% midterm CAGR that we show throughout the presentation is organic aspiration.

We have a follow-up question from Christian Arnold from Stifel Schweiz AG.

You gave us some information about selected customers per end market, thank you for that. I believe Merck is by far the most important customer on the Drug Delivery part. And it happened that it was at the very top of this box you showed. So can I read the other boxes in the same way that, for example, in the industrial end market the most important customers for you are Sika, Henkel, 3M?

That's a very good observation. Honestly, when composing the chart, we did not think about that way. But also, yes, Merck is a significant customer, Drug Delivery. Sika and Henkel are our big customers for adhesives, but there's not necessarily a correlation on where they are in that box.

Okay. But it's not wrong, my observation?

Those are big customers. Whether they are the biggest ones, I'm really not sure.

Okay. Okay. Do you want to say something about the selected competitors' boxes? Or they happen to be structured in the same way?

Right. Well, the easiest way how to answer that, I think the peer or the competitor that is closer to -- or closest to Medmix in terms of how the portfolio looks like is probably Nordson. Then again, if you compare Medmix and Nordson, we have a higher proportion of consumables in our portfolio, while Nordson also has some capital equipment. Medmix is also bigger on health care. And then you have as you go into the different segments, you have some more segment-specific competitors. So Beauty has, for example, [ Aptar ], that also has a little bit medical devices, but we are much bigger in health care there. You have Ypsomed, for example, in Drug Delivery. dental, I believe, is a little bit more fragmented. So yes, that's kind of the picture.

The next question comes from Patrick Rafaisz from UBS.

First, on your FX exposure. Is there any transactional exposure we should be aware of? I mean you have 12 sites and you are globally set up. But is there any transaction risk we should be aware of also with regards to your base of currencies versus sales currencies, et cetera?

All right. Thanks, Patrick. Jenny?

Actually, on a transactional basis, we're relatively well naturally hedged. Our core FX currencies are euros, Swiss francs and U.S. dollars.

Okay. So no material transactional hedge risk. And then a quick one on Dental. I think you talked about -- sorry, Drug Delivery, where you talked about the CHF 100 million sales ambition by 2025. Is it correct that I assume that this is an organic sales ambition and that acquisitions would come on top?

Yes, Patrick, that's organic. The time to market in Drug Delivery is 3 to 5 years. So when we, last year, went out and said that our ambition is CHF 100 million, that's -- a very large part of that is substantiated by pipeline that we have. Do you want to add something, Marco, on top?

I think that's spot on.

Very good. And then the last one, just quickly on the tax rate, what are you expecting here for Medmix?

That's a question for Jenny, I believe.

Yes. We gave some guidance in the midterm outlook there. It's this year around 12% to 15% and going forward, mid-teens.

We have a follow-up question, Christoph Gretler from Credit Suisse.

Actually kind of on the drug delivery business. Could you comment on your development project pipeline? How large that is and in what stages of development and maybe a split into biosimilars and new chemical entities? And also on the auto-injector kind of business, do you actually have a lead customer for product franchise, yes?

Okay. Thanks, Christoph. Marco, can you take it?

Yes. I mean good question, actually. I think we have a pipeline build-up now that is robust, and given our size, I would call it super competitive. Some of the projects are already in the works. And we mentioned earlier on that we have secured a significant order already from a U.S. biotech customer. So this will translate into further sales going forward. So that said, I mean, the CHF 100 million that we have as our target are organic. And with the pipeline we have, we are confident really to achieve it.

And for quantity, you can share also? We are all numeric people.

I mean, actually, I'm reluctant to share -- I mean the pipeline buildup, I mean, because -- I mean we have competitors that would be also highly interested going forward.

I mean it's a small industry. Everybody talks to each other. I understand. But anyway, I wanted to try. And then maybe on the auto-injector part, is there a lead customer there?

This is a project in development. And I mean, Girts mentioned earlier on that we have this 2 to 3-year horizon for customers coming into the commercialization phase, and this would also apply for this platform.

Okay. Good. And then basically, on the manufacturing footprint, I mean, can I read this -- your comments that historically, you invested like kind of, I think, if I remember right, 5% to 6% CapEx to sales. And now you tend to do CHF 7 million to CHF 8 million. Is this a reflection of past underinvestment? Or is the markup poorly kind of incremental growth Capex?

Right. Jenny, do you want to?

Absolutely. Incremental growth CapEx in the short to medium term, especially as we bring our drug delivery and other health care product innovations to market, and then we'll revert back towards a more normalized level in the future.

Okay. And based on your growth plans, kind of the foot print, is it sufficient? Or is there necessities to build additional plans as all you present well in Latin America and Asia already so -- but just wondering also from a cost point of view, you seem to be a bit [indiscernible], but not kind of would be required at place. Is there any thought around that?

Of course that will be under assessment over time at the moment. We have capacity and as Girts mentioned, we have multimodal factories that share across our commercial facing platforms. So for now, no intent to build new plans. And then as the new product introduction happens, as the volume grows, especially in Drug Delivery, then we'll continually reassess.

Yes. Actually, what we need to do is we need to do catch up on Drug Delivery to be able to accommodate order intake of the new customers that we get now with D-Flex. But apart from that, there is nothing else in the horizon.

We have a follow-up question from Sebastian Vogel from UBS.

Yes. Can you hear me now?

Yes.

Yes. Sorry for that. I have 2 quick follow-up questions, one regarding to the customer concentration I was asking before. I didn't understand it correctly from your customer about 5% on the group sales cover -- group sales exposure, right?

I don't have the exact numbers, but as I said before, I think we're very well diversified in terms of customers.

Understood. And then a quick question on IFRS 16 in that regard. Do you make much use of leased assets? And what sort of investments you are taking in new assets? Is that something of a size of a number that I should keep in mind on top of your sort of guided CapEx investments that will treat [ MS ] sort of CapEx?

Right. Jenny?

So to date, we haven't had a material portion of our assets in lease liabilities. There is a small portion, predominantly through Switzerland.

Ladies and gentlemen, so far there are no more questions from the phone.

All right. So in that case, we're going to wrap up today's session. So thank you very much for your participation. Thank you very much for your interest, asking so many questions. All of us really here are super excited, super motivated by the future ahead of us. And just to summarize, why invest in Medmix, there are really 3 things: high growth, high margins, powered by technology. And I hope you are as excited as we are about our future. And now we're going to take a break, and we're going to be back at 1:30 this afternoon with the Sulzer presentation. Thank you. [Break]

Hello again, everybody. My name is Grégoire Poux-Guillaume. I'm the CEO of Sulzer, and it's a pleasure to have you with us this afternoon to talk about these Sulzer flow control businesses. Some of you were maybe part of our morning session. It will follow pretty much the same format, presentation followed by Q&A with a full executive team of Sulzer. No further ado, let me get through the presentation. Disclaimer, the agenda, short introduction from me, Armand Sohet, our Chief Sustainability Officer and Chief Human Resources Officer, will talk about our ESG framework and targets. Then the 3 division presidents will talk about their respective businesses. And Jill will walk you through our financials and targets, and I will wrap up before we take questions. So Sulzer, a pro forma post-spin off. So it doesn't mention Applicator Systems because this presentation describes Sulzer without Applicator Systems. So Sulzer refocused on its flow control scope. And as you know, Sulzer is one of the leaders in flow control with an attractive portfolio of technologies that cover many applications that go to the heart of sustainability. We have 3 businesses, our pumps business, which is actually pumps and other equipment, as you'll see in the presentation. We've got compressors and grinders and other things, but it's mostly pumps and other things. Our Pumps business, which is about CHF 1.3 billion, was about CHF 1.3 billion in 2020 and 4.3% profitability. This year, you'll see that the profitability in 2021 will be above 5%. And that business covers pumps from highly engineered to highly standardized, from applications that go all the way from water to energy. The Rotating Equipment Services, about CHF 1.1 million in 2020, 13.9% op EBIT on margin. As you'll see, that will go to 14% this year. And that business is the market leader in service for rotating equipment. Some of it is pumps, including our pumps, but also other people's pumps and other people's compressors, turbines, motors and the likes. Everything that's part of our customers' value chain and that rotates. And our Chemtech business, which is the market leader in separation technology for the chemical industry. About 70% of the business is addressing the needs of chemical customers. Also about 15% in refining, and it has an emerging position in biopolymers and recycling that we call our renewable technologies and that we're very excited about. And it's about a CHF 600 million business, 9.6% margin last year. And as you'll see this year, it will go to 10%. We will give you, in this presentation, midterm targets also. So we'll be very descriptive as to where we see these businesses going. We believe we've got an exciting story to tell. Moving on to the next slide. Sulzer pro forma, without Applicator Systems, is about 13,000 employees, 180 production and service locations, presence in 100 countries and a business that's about CHF 3 billion of sales in 2021, estimate. And we'll be around 9% operational profitability, op EBIT for 2021. And keep in mind that 50% of our business is aftermarket, so that goes to resilience. Sulzer has a very experienced senior leadership team. All the people on the slide are also present today, and they will all be presenting. Jill has been our CFO for the last 3 years. She was a Board member and the Chair of our Audit Committee for 6 years before that. Armand been our Head of HR for a bit more than 5 years, and he's been our Sustainability Officer for a year. Frédéric Lalanne has been running our Pumps business for probably almost 2.5 years now, and before that, he was the Head of Sales and marketing for the company. Daniel Bischofberger has been running our service business for the last 5 years almost, joining us at that time from ABB. And Torsten Wintergerste has been running our Chemtech business for almost 5 years now. And he's a long-term Sulzer guy. He was with Chemtech for many years before that. So an experienced team, a cohesive team, and you'll hear from all of these people today. We have very simple, straightforward priorities of things that we will focus on as Sulzer flow control. so Sulzer without the applicator business, refocus on flow control. We're essentially focusing on 4 things. We're focusing our -- on growing our pumps business in water in an industry. Water is a particular focus for us. You saw that we've made acquisitions over the last few years. We have a very good portfolio, and we're making headways and we're excited about the prospects of that business because, once again, a lot of what we do is around wastewater. It's a major sustainability topic, and we think we've got great solutions to bring to the market. We will leverage our unique service proposition with digital and additive manufacturing to build an even stronger service business. Daniel Bischofberger will walk you through the major progress that we've made on both the digital and the additive side and how that contributes to reinventing our service model, making us more competitive from a cost perspective, making us faster and allowing us to deliver operational models, business models to customers that are closer to their needs today and tomorrow. And then in Chemtech, our ambition is to not only defend our chemical leadership. And as you know, the chemical spending is projected to continue to go up for the foreseeable future. The world is growing and the products are getting more complex, so we want to defend our chemical leadership. But we also want to boost our biopolymers and recycling offering in Chemtech. We think that's exciting. We are growing fast in that area, and we've got great technologies that Torsten will tell you about. And then finally, the phrasing of the fourth point is important. It's not we want to focus on ESG and we want to have good results. It's -- we want to use ESG as the key to strong sustainable financial performance. Sulzer has always been about the S and the G, the social responsibility at Sulzer is ingrained. We work with our people closely. We treat people well. We are active in our communities, and we try to make the world a better place. From a governance perspective, we've always been committed to best practice governance principles. But what we really want to stress and what we really want to show people and get people excited about is everything that we're doing on the E side, not only reducing our emissions and our water usage and all these classical things that we've been doing for many years, but how our products contribute to finding solutions to some of the world's most pressing issues in terms of sustainability. Armand will walk you through that. So with no further ado, I'll hand over to Armand, who will walk you through our sustainability framework and explain to you what our targets are. Armand?

Thank you, Greg. Good afternoon. My name is Armand Sohet, and I'm the Chief Sustainability Officer for Sulzer. My responsibilities also include human resources, real estate, communications and health and safety. This combination of critical functions shows our commitment to embedding our ESG drivers in everything we do. Having previously worked for companies like Novartis, Peugeot and G, I can say that the best 5 years of my professional life have been with Sulzer. And why? Simply because at Sulzer, we are making a real impact for the world. Today, I want to leave you with 3 key messages on ESG. One, we have a solid framework in place and a strong ESG position; two, we have proven expertise in areas critical to address the pressing challenges of the planet; and three, we have an engaged workforce ready to go the extra mile and make our ambitious objectives a reality, objectives, which I will now talk you through. Sustainability at Sulzer can be summarized in 3 main objectives: minimize, enable and engage. Let's have a closer look at these 3 objectives. We have set ourselves an ambitious target: to minimize our environmental impact, committing to reducing our carbon footprint by 30% by 2030 and become carbon neutral by 2050. We have identified the key measures of our carbon footprint across all critical areas: water consumption, waste, energy and greenhouse gas emissions. And we have monitoring and measurements in place today plus a proven track record of addressing these topics. In particular, greenhouse gases are a critical topic for our internal measurements. You can see that electricity represents 65% of our total greenhouse gas emissions. The switch to renewable energies in several locations at Sulzer, along with other actions, has reflected in the drop of our greenhouse gas emissions by 6.4% in 2020. We have a plan to roll out these measures across our global locations, giving us confidence in our ability to achieve our overall target of [ 30 by '30 ], neutral by '50. That is our internal story, but here is why I'm truly excited. When I said earlier, at Sulzer you can make an impact, I meant the authority, you have in your job to make decisions. But above all, I meant the expertise we have at Sulzer to address the most pressing environmental challenges of the planet. You will hear through the afternoon, many examples of technologies driving secularity, improved efficiency and low-carbon substitution. I would like to focus for a moment on water, which is, of course, vital for life. According to world water.org, a nonprofit organization aimed at raising the awareness of water scarcity, we have today 2.4 billion human beings living in water-scarce areas, and this number will increase to 3 billion in 2030. Through our water business line and with our expertise in water transformation, desalination and water treatment, we have the tools to help fight water shortage. Let me now take you through 3 examples, which further demonstrates how we're using our technical expertise. Firstly, textile recycling. Today, 85% of used textile ends up in landfills, and only 1% of the textile production is made of recycled materials. It has a huge negative impact on the planet. We are partnering with H&M and Worn Again to recycle all textiles into new, shifting into a circular economy. And who knows, maybe the next shirts you'll buy will be engineered by Sulzer technology. Secondly, plastic substitution. I have a compost in my garden, and I made a simple experience. I put one of our biopolymer spoons in my compost. And after 2 months, the spoon was gone. With a traditional spoon, this would have taken 200 years. That's the impact that Sulzer technology can have in the world. Thirdly, efficiency through artificial intelligence. BLUE BOX is a product we develop based on machine learning, which makes predictive maintenance possible to gain insight and anomalies and present imminent failures. With BLUE BOX, we're like a doctor taking the pulse, vibrations, temperature and prevent the next heart attack. This increases product life, saving our customers' money and helping the planet. These are all fantastic projects, but only committed people can make them happen. To achieve our ambitious plan, we need engaged employees. We need them to feel they are safe, they are heard and that they live in an inclusive environment. We need them to be connected to the local communities, and we want them to be fully mobilized. In 2017, we started in health and well-being initiative called Sulzer in Motion. We had 100 participants for the first edition. I was particularly pleased to see that 400 employees signed up for this initiative in May 2021 and even more because each time an employee participates, we make a donation to UNICEF. I said 4,000 employees or 400? I'm really sorry, 4,000 employees, 400 would be minimal. I'm really, really sorry for that. Talking of engagement, these are the last results. All [ green ], and we are both norm across all categories for manufacturing, something we will continue to aim for. And overall, on ESG, we are proud to be rated by MSCI with AA rating -- sorry, no, it's okay. I was on the slide. That's in your -- sorry, sorry. So -- and yes, that was for the Sulzer employee opinion survey. And that's when I said we're all green and we're above the manufacturing norm, and we aim to continue in that direction. And the next slide, probably, because that's the one we have there, which is on the MSCI rating, yes. And overall, on ESG, we are proud to be rated by MSCI with a AA rating. We are clearly ahead of our industry benchmark, and our firm intention is to continue building on these strong foundations. In conclusion, my key messages today are that, one, we have a solid framework in place and a strong ESG position. Two, we have proven experience in areas crucial to address the challenges of the planet. And three, we have an engaged workforce ready to make ambitious objectives a reality. As I said at the beginning, at Sulzer, we're making a real impact for the world, and I am positive that the years to come will be even more exciting. Thank you.

Good afternoon. I am Frédéric Lalanne, the Head of the Pump Division. And I'm extremely happy today to present that division and its prospects. Together with the management, we are proud to lead this activity. That carries a very long history, more than 150 years of Swiss engineering and innovation but is also very well-positioned to capture future growth opportunities. A few words about me. Following an international carrier of 25 years in the energy sector, both in EPC and equipment companies, I joined Sulzer in 2016 as Chief Commercial Officer for the group, and I've been running the pump division since January 2019. Let me describe our business. The division provides a full range of pumping solutions from a standard off-the-shelf product sold via distributors to highly engineered tailor-made solutions from the energy sector. The division grew over the years, thanks to a unique combination of technologies, process expertise, sector-specific knowledge and customer proximity. We are organized to serve our customers in 3 businesses, water being now our first market with 40% of our orders, industrial applications and energy at 30% each. Let's have a look at the trends across these markets. All of our markets are expected to grow steadily in the next years. The wastewater segment is supported by investment stimulus packages and the need to replace or upgrade aging infrastructure in Europe and North America. The desalination market is also expanding quickly, thanks to large new projects in the Middle East and in North Africa. In industrial application, this segment is recovering swiftly after the COVID downturn, and our pulp and paper activities are supported by the booming demand for board and tissues. In oil and gas, the market bottomed in 2021, but the recovery is already expected next year, supported by large upstream and downstream investment plans of the national oil companies such as Aramco, Petrobras or Qatargas. In the power sector, the steep decline of coal-based generation will be compensated by the transition towards renewables, gas and nuclear. Let's focus now on the water market, which becomes, in 2021, our largest segment. Sulzer is present throughout the entire ecosystem with one of the broadest portfolio of products and solutions. Water intake, clean water processing, including desalination and wastewater management, water pipeline, we offer a full range of products and solutions for all segments. We are not only selling pumps, but we are offering an extending range of products, including grinders, screens, filters, compressors and monitoring solutions. You drink today a glass of water from the tap. If it had not touched a Sulzer product on the way in, it will most likely go through one of our equipment on the way out. Water overview. Let me explain how we will drive our growth beyond pumps. The 2 companies acquired by Sulzer, JWC, Nordic Water, developed unique technologies and products, well-recognized in their regional markets: grinders, screens and solid removal in North American for JWC; filtration, sedimentation, XXXXXXXXXXXXXXX management in Europe for Nordic Water. Thanks to our global sales network, we will deploy this solution on a much larger scale in North America, Europe and Asia. The magnetic -- sorry, I have some -- the magnetic-bearing turbocompressor technology developed by Sulzer is already a worldwide success. That lowers our maintenance free, at least for the first 10 years of operation and are highly efficient in term of water consumption. In wastewater treatment, the cost of energy represent around 50% of the operation and the operating expenses. Our solution offers a reduction of more than 50% on energy cost compared to traditional technologies. This compressor are manufactured in Finland and in operation in more than 40 countries worldwide. I would like to come back to the previous slide just to highlight the growth drivers in this market. Growth drivers is growing population and urbanization towards sustainability and natural -- scarcity of natural resources and rapidly changing industrialization. Overall, the water market is a CHF 12 billion business, growing at 4% per annum. And we expect, thanks to our technology, to grow more than the market, targeting 5% to 7%. Our EBITA is approaching 10%, a little bit behind the market leader. But we do see, thanks to our product and large portfolio, an improvement or midterm improvement between 150 to 300 basis points. Water success stories. To complement my presentation about the magnetic-bearing compressors, I would like to highlight our contribution to one of the biggest treatment plants in Europe in Vienna in Austria. This plant has a treatment capacity of 15,000 liters of wastewater per second and is able to fill the equivalent of 25 Olympic swimming pools per hour. And by deploying our HST range of blowers, in combination with high-efficiency agitator, Sulzer helped the operator to reach its goal of carbon neutrality for the plant, avoiding the emission of 40,000 tons of CO2 per year. Similarly to wastewater, the energy consumption represents more than 50% of the operating expenses in a desalination plant. Reliability and energy efficiency were the key differentiators for Sulzer to be selected in Saudi Arabia for one of the largest plant in the Kingdom. It will supply the daily consumption of 2 million people. Market dynamics. The last slide of our water presentation is about the market dynamics. Sulzer enjoys a solid #2 position in this segment and in the largest segment, wastewater, which is also one of the most complex in terms of technology. This overall market is highly fragmented and offer growth opportunity in every segment to deploy our portfolio of solutions. One of our growth priority will be to reenter into the clean market segment with a focus on North America. So desalination is a niche market, driven by large products in the Middle East and Africa. Sulzer enjoys over the years, a leadership position, thanks to our recognized technology and proven reliability. Industry solution. Let's move to the presentation of the business industry, which is a multi-segment market, a lot of focused players and where process expertise is a key differentiator. Sulzer offers a complete portfolio of pumping solutions, agitators, mixers and compressors developed for process critical applications in our targeted segments: pulp and paper, fertilizer, biofuels, metals and mining. Overview. Similarly to the water business, the industrial markets are expected to grow steadily at 3% per year, thanks to long-term drivers: sustainability, growing population and tightening of the legislation for industrial effluent treatment. our priorities. Sulzer is highly-positioned to capture these growth opportunities. We will capitalize on our technological and market leadership in pulp and paper to develop new solutions for wood fiber-based textiles. Our R&D teams also developed large slurry pumps, which have been sold in Europe and the Middle East, generating profitable aftermarket opportunities for parts replacement due to high abrasive and demanding operating conditions. Magnetic-bearing compressors, developed internally in Finland, offer a growth potential beyond pumping solutions, especially in the food and beverage segment, where all 3 equipments are mandatory. We are leveraging our deep application knowledge to generate profitable growth of our activity to 4% to 5% per year. Our operating profitability is at par with market leaders at mid-teen levels. We do expect some midterm upside around 100 basis points, mainly thanks to product mix optimization. A little bit about pulp and paper industry transformation. This industry is transforming itself very quickly. The slowdown due to COVID-19 is behind us, and large investment plans are deployed worldwide in order to increase production capacities for board and tissues, but also to become more environmental-friendly. Less carbon footprint, energy-efficient equipment, reduction of effluents, development of wood fiber applications, bioplastic and recycling of raw materials are the key topics. With its comprehensive portfolio of solutions, Sulzer is readily-positioned to support this new wood fiber economy. And being a key member in the pulp and paper ecosystem, built around partnership between OEM, technology providers and end users, Sulzer is a company of choice for mixing and pumping Solutions. And this unique expertise has been recognized by Metsä Fibers, the world leader for wood-based bioproducts. More than 500 pumps and agitators will be supplied by Sulzer for a new plant currently under construction in Finland. At completion, it will be the largest production facility of wood bioproduct, so-called biorefinery, in the Northern Hemisphere. Another example to illustrate the technology leadership of Sulzer is the fertilizer market. Sulzer Alström wear-resistant pumps have been designed to operate in harsh and abrasive environment. And following major successes in Europe and the Middle East, we will deploy this technology in North America. Our positioning. #1 in pulp and paper and biofuels, #2 in fertilizers, Sulzer is ideally positioned to gain share in adjacent markets and especially mining and metal. It's a highly fragmented market with focused players active in specific segments and driven by process expertise. I will now complete the presentation of the pump division by highlighting our references and the strong technological position in the energy sector. In the oil and gas segment, our products, highly engineered, designed to order, are present along the entire value chain: extraction, upstream, onshore, offshore, transportation, midstream pipelines, downstream, processing activities, refineries and petrochemical applications. In power generation, we offer a wide variety of solutions for gas, nuclear and renewables, tailor-made to the needs of the operators. An example. Sulzer is a worldwide leader to supply pumps for critical applications in the nuclear industry for more than 60 years. And all 58 reactors in operation in France are equipped with Sulzer pumps, generating recurrent revenues for our service department. Let me describe now the 3 main growth drivers in the energy sector. The daily consumption of oil, which was above 100 million barrels per day. During the peak of the crisis, the consumption went down to 80 million barrels a day. Consequently, most of the projects in exploration production have been put on hold. Today, the consumption recovers close to 95 million barrels per day and even exceeding prepandemic levels in USA and China. National oil companies such as Aramco, Petrobras, Sinopec keep on investing and have recently confirmed their ambitious plans, both for upstream and downstream project. And of course, the last main growth driver for our division in the energy transition: the need to develop low CO2 applications, carbon capture solutions and deploy more renewable technologies in power generation. Sulzer is well-positioned to grasp the opportunities and benefit from the market rebound, thanks to its global network of factories and service centers close to our customers. We intend to grow in line with the market, 2% to 3% per year, and we remain selective in our bidding activities. Our gross margin is expected to stay at mid-teens level at par with the competition, but we expect some leverage with a strong focus on operational excellence during project execution. Let me present now 3 stories highlighting our technological leadership in the energy sector. Sulzer was selected 2 years ago by QatarGas to supply pumps to reinject liquid CO2 in order to improve the recovery of oil in reservoirs. The CO2 coming from the process is captured, liquefied and reinjected into the well. This liquid CO2 replaces water, which is generally the fluid reinjected mainly coming in the Middle East from desalination plant. This technology avoids the cost and the environmental impact of desalination while capturing CO2. Sulzer research department in Winterthur, Switzerland designed the complete system, which was later manufactured in Germany. For FPSO vessels, floating production storage and offloading, Sulzer is an undisputed global leader for the supply of water injection pumps, thanks to a unique combination of technical expertise, manufacturing networks, Brazil, United Kingdom, Asia and local capabilities not only to design, produce, but also install and maintain these pumps during their lifetime. No one built an FPSO today without calling Sulzer for the pumping systems. And in the power generation, in United States, again a new application for CO2 has been developed for a 300-megawatt gas plant. Liquid CO2 will be utilized in the plant as the working fluid into the generation cycle. And Sulzer, we have been selected to design and deliver the pumping system for this application, a recognition of our unique expertise in the liquid CO2. The market dynamics. In this market, we are #2. We are very well-positioned to capture opportunities during the market rebound, especially following the projects of the national oil companies I explained before. This is a highly fragmented market with a lot of regional or segment-focused player. Growing the installed base of Sulzer will generate recurrent revenues noncyclical for our service activity, both in oil and gas and in power segments. Let me explain now how all these stories are translated into financials. The pump division presents a well-balanced profile, both from market segment and geographical point of view. In the last years, the management focused its efforts on improving the profitability of operations from negative territories in 2017 up to 4.3% in 2020 despite the COVID crisis, thus showing the resilience of our business model. In 2021, we will be able to compensate the expected slowdown of orders in the energy sector by grasping more opportunities in the water and industrial segments. We expect our revenues to grow in the range 8% to 10% versus 2020, generating an operating profitability above 5%. Midterm, the shift towards water and industry creates a path to an improved profitability in the range of 7% to 8% while growing our revenues at a steady 3%, 4% per year. Here is the end of my presentation, and I would like to conclude by highlighting our key messages: unique positioning in the market, in the flow control activity, broad portfolio of technology beyond pumps, proximity to customers, solid growth drivers in all segments, all these points being now translated for the division into profitable growth. Thanks for your attention, and I will hand over the presentation to Daniel for Rotating Equipment Services.

Thank you, Frédéric. So hi, good afternoon, and welcome also on my behalf. It's a pleasure to be with you today and to walk you through the exciting developments in our service division, a business with a unique combination of technical competence and geographical proximity. I'm Daniel Bischofberger. I've been at the helm of areas for the last 5 years. My background is in capital equipment service. In my career, I ran several large aftermarket business, most notably at ABB and Alstrom. Our service division is CHF 1.1 billion to CHF 1.2 billion, roughly half is pump service, where we are an original equipment manufacturer and the market leader. The other half is service of other rotating equipment like turbines, compressors, electric motors or generators, where we are an independent service provider but with a skill set of an OEM. On both sides of the businesses, our differentiation is based on 2 unique qualities: unrivaled technology expertise and the ability to serve our customers locally everywhere around the world on their full product range. These products are all part of the same industrial value chain. Our ability to service all our customers' equipment under one roof and for highly technical applications allows us to maximize our asset utilization and makes us the most complete player on the market. So we are broad in what we cover. We are technically advanced and we are local. And we are an early mover and technology leader in additive manufacturing and advanced data analytics. As I will explain to you later in this presentation, these 2 fields are enabling us to reinvent the service business, creating not only a cost advantage, but also significant growth opportunity through new business models. In the next few slides, I will mainly address 2 important topics: one, how can we mine the installed base, our installed base and the installed base of our competitors; and two, how the transition towards a more sustainable industrial base is creating significant opportunities for us based on our unique skill set across all segments and continents. So let's start with the installed base. 15% of the installed base worldwide are Sulzer pump. That's a good start, but we only cover 50% of it today. And overall, we only have a 30% share of customers' wallet. Some things, the customer do themselves. Some things, they rely on others, sometimes due to historical lack of focus by Sulzer. This has changed, and we have been engaged for the last few years in a very dynamic and impactful drive to reclaim our installed base. In addition, the 85% of the installed base, not Sulzer pumps, is also a great opportunity. We are unique amongst pumps OEMs because we have a third-party turbine service business in which we reengineer and improve GE and Siemens' high-tech gas turbine. By applying the same skill set to pumps, we have been eating now into our competition installed base. Today, we generate close to CHF 200 million of revenue on non-Sulzer pumps. So the message here is clear. We can deliver growth even when the market for new pumps is not growing. And as you will see later in our numbers, that's exactly what we have been doing. You might ask how we capture our competitors' installed base. Simply by turning their pumps into Sulzer pumps. Up to 70% of the life cycle cost of a pump is energy consumption. In a world driven by sustainability, our customers cannot afford to be complacent. We offer them the full refurbishment. We keep the original casing, the metal shell, avoiding material waste as well as minimizing disruption on customer side caused by piping and/or foundation changes. But everything inside the casing is changed to the latest Sulzer design, optimizing the hydraulics, and by that, generating very significant efficiency gains. This is highly technical task for which we have a unique set of competencies. The payback to customers is great, and it goes to the heart of our sustainability, minimizing waste, maximizing efficiency. Let's now discuss why the energy transition is a growth and value driver for our service business. Our customers must adapt their facility to make them more efficient, and hence, reducing their carbon footprint, but also to shift their product mix towards more sustainable product. An example of that is the shift towards green refineries. Where traditional refineries are modified to shift the output from fossil to biofuel, whenever you have to modify any existing facility, you need Sulzer. And for us, the more complex, the better. We are also benefiting from the trend towards distributed power, the hey days of the big power plants are over, distribute the power is what is needed to stabilize the power grid so that you can cope with the intermittent nature of renewables. Battery storage alone will not fix it. Our strong position in narrow derivative service, essentially turbines that are derived from jet engines, positions us ideally for this market trend. So here are 3 success stories that encapsulate our service mentality and uniqueness. Let's start with the example on the left side. The customer had a serious vibration issues with the non-Sulzer pumps and corresponding electric motors. Furthermore, he wanted to increase the chemical plant output, but the pumps were the limiting factors. We fix the vibration behavior on the shaft line and retrofitted 32 pumps, minimizing disruption while greatly improving plant output. The middle one, we repaired a geothermal steam turbine high up in the mountains of Indonesia. The steam turbine faced serious cracks in the shaft. The original equipment manufacturer advised the customer, get a crane, put the turbine on the truck, drive the truck down the valley to the airport, fly the end to [ north ] to Thailand, repair the turbine. And then do it again, just reverse. You can imagine that it takes forever. And I don't want to talk about the CO2 emission. Sulzer proposed, specialized tooling, unique technical skills and everything done on customer side, even if it's in the remote area and up in the mountain, minimizing downtime, maximizing sustainability. So no wonder the customer has chosen Sulzer over the OEM. So the final example I would like to show here is on the right side. It's about business model agility. Big, big mining trucks, 400 tonnes when fully loaded, are more and more driven by electric motors. The electric motors are in each wheel. In the picture on the right, the yellow pieces are the wheel hubs, where the electric motors are installed. And when one of these wheels fails, the truck is down. The OEM proposed 52-week turnaround, 1 year to this customer. Sulzer proposed wheel swaps and retrofit completed in 8 weeks, so that means less than 2 months. Guests who got the job? I could add many more similar examples, but I would say the message here is clear. Being technical is great, being technical and agile is even better. I would now like to take a moment to explain how we are reinventing the service business model through technology. I'll start with the impact of digital. Many of you know -- might know our advanced data analytics platform, BLUE BOX, an artificial intelligence-based system that uses machine learning to create the digital twin of our customers' pumps. It won an Industry 4.0 Award in 2018 and was a finalist of Microsoft Digital Transformation competition last year. We use it for predictive maintenance, allowing our customers to anticipate failure events and maximize availability. It also enables an outcome-based business model where are increasingly sell availability XXXXXXXXXXXXXXX rather than just a pump. Additive manufacturing also plays a very important role. It is reinventing how we do business. We were one of the first movers in using additive to make pump parts. It's not straightforward as the type of pumps we make operate in difficult environments and are often made of complex alloys. So we are breaking new ground here. Some big customers that you would recognize, this does is their preferred partner for additive. Parts business today run with part centers that are kind of manufacturing plants, which keep patterns tools for casting parts. It's a complicated setup. But we are getting closer to a better way of doing business. Our parts are digitized. They are 3D-printed whenever feasible, and we are enabling a new business model, much closer to the customer and much more reactive. Our customers increasingly ask us to manage their spares for them for Sulzer and non-Sulzer pump. This has been long on our customers' wish list, and additive technology finally makes it a reality. I'll show you now a short 40-second video about additive manufacturing made by Sulzer. [Presentation]

Our business is high-margin and incredibly resilient. You can see that in our numbers. Over the last 5 years, we had 2 oil crisis and 1 pandemic. And every year, RES delivers growth, a good year, above 10%; a challenging year, at least 2%. As explained, our penetration of the installed base allows us to grow even when the market doesn't. And every year, RES delivers an EBITA margin of around 14%. But is that the ceiling? We believe our business can deliver midterm growth of 3% to 5% per year and that profitability can trend towards 15%. Without the pandemic, we would have been on our way already in 2020. And the impacts of the pandemic are still visible this year, but the evolution of our mix towards high-margin business, like retrofit as well as the cost reduction stemming from our digital strategy, make us confident that we can reach this step -- this next step in our development. Let me conclude by summarizing what is at the heart of our success. We are technically advanced more than anyone else out there. We cover the full value chain of our customer under one roof. We have a lot of runway in front of us by mining the installed base for growth. We are early adopters of digital and additive, opening up new horizons for our business. Thank you for your attention. We'll now hand over to Torsten, Division President, Chemtech.

Thank you, Daniel. Good afternoon. I'm delighted today to present you the beauty of the Chemtech business. It has always been a combination of great innovations and strict operational excellence. My name is Torsten Wintergerste. I have been with Sulzer in various functions for 23 years and leading the Chemtech business since 5 years. I'm proud to be part of this business as we are a constant innovator, contributing to the solutions, which matter today. My presentation will focus on the 3 main points. First, the Chemtech business is based on technology, innovation and intense know-how about the applications of our customers. Secondly, our global customer proximity, especially in China and Asia, where the chemical markets are shifting to. Here, we can perfectly leverage our global footprint. And thirdly, our unique solutions in renewables, which are needed to solve some of the global problems of our planet. Chemtech's focus has always been to bring industrial chemical process solutions for world-scale plants on the market. This is our core expertise, and this is the reason why our customers love us so much. We help them to produce high-value products. For the separation of purification of chemicals, we developed and we sell proprietary components and proprietary processes. But let me first explain who are our customers. These are, on one side, the bigger and smaller chemical and polymer manufacturers and the energy companies; but on the other side, we also serve the innovative entrepreneurs and universities with excellent ideas, which are first implemented in smaller demonstration scale and only in a second step, developed to bulk scale sizes. Our customers produce all kinds of premium chemicals, pharmaceuticals, plastics, bioplastics or cleaner and efficient fuels. A chemical process consists always of 2 different steps: the chemical reaction and the following separation or purification. It's very much like cooking in the kitchen when you add different ingredients into the pan or pot. In a chemical process, it's a feed, independently, whether it's a fossil, bio-based or recycled feed. When you cook the different ingredients, it will give a tasty meal. But in the pan, there will stay also some impurities like the old oil, et cetera. Same in chemical processes after the reaction. Then we are required to clean the product and to separate the impurities from the desired final product. The value of the end products are defined by the performance in the separation and purification, and we have the right product portfolio for that. When you pass buy on a highway, a chemical plant, you can see the tall towers. Hidden inside of these towers, the separation and purification is taking place. And you have always to remember then that Sulzer is inside 30% to 50% of all these columns. In this sketch, you see the inside of the tower, which is typically fully packed with our internals. These internals are the high-tech part. Remember, we only deliver the intelligence stuff inside, not the column shelf itself, which is normally a piece with lower margin. We focus on technology. We delivered the internals for more than 100,000 columns for more than 500 different chemical applications. With that, we have a vast experience in distillation, which gives us and our customers the trust that we equip huge columns working on high performance. I will show you some examples later on. Crystallization is a purification technology, which is used for very high purities and which is extremely efficient when it is combined in a hybrid system with distillation columns. We have a big database of the columns we delivered and how they perform for various chemical processes. With that, we learn and can further optimize our technology and our know-how. Diapers are very illustrative example how we help to make babies happy. And when the babies are happy, that parents are happy. The gel, which absorbs the liquid in a diaper is called super absorbent and is polymerized using acrylic acid. For this application, acrylic acid must be of very high purity, about 99.9%. We call it glacial acrylic acid. Our proprietary crystallization technology is the ideal technology for that. 80% of the total world production of 1.8 million tonnes per year is manufactured using this type of Sulzer technology, and the importance of acrylic acid and the super absorbents is further increasing. We are market leader because of 3 different elements. First, we have a unique world-class technologies, which are used in smaller and bigger facilities. We are constantly innovating and continuously improving our products and our processes. We have a huge application know-how, which is for a close cooperation with our clients of enormous importance. Second, we invest in future and protect our know-how by filing many patents. Our annual rate of filing patents has been doubled the last years. And we already have a significant number of important patents or patent applications in the biobased segment. Third, we have a fully global setup, close to our customer base. Here, our setup and our presence in China and Asia Pacific is specifically very important. The chemical markets are shifting to these regions, and we have been present there for decades with excellent relationships to our clients. And with the growth of China, also our columns have become bigger and bigger. This is also in our DNA. We think big, and with that, we help our clients to increase the size of the plants and reduce the OpEx and CapEx costs per ton of the final end product. The components business is a part where technology plays a crucial role. Here, 2 companies dominate the world where the others follow. The service part is a lower-margin business. There is no need to grow for the sake of it. We are in the business to support our customers in the supervision or the installation of our equipment. Historically, Sulzer has been in the business of the delivery of the technology components. We have now started to enter into the licensing business for specific processes in the chemicals or renewables business, which opens up for us an attractive market at higher margins with high growth. Also here, patents protect our know-how and ensure that we will get the profit for the ideas of our engineers and scientists. For the performance of a distillation tower, the design and the choice of the right internals is key for success. While they look simple, they affect -- they are, in fact, full of high technology. The tower is filled with the internals when the column is being installed. When the tower is closed and the plant has been started, everything has to work as it has been planned. The stakes -- cost too much money for the plant owner. Therefore, markets in Asia, like China, have typically higher margins in other regions in the world. Chinese customers know the worth of the technology. They always go to bigger scales, stretching the limits. And for that, they are willing to pay for the highest quality. Some examples for such big columns in important chemical production plants. Sadara in Saudi Arabia is a joint venture between Saudi Aramco and Dow. It is one of the biggest chemical complexes, which was built in a single construction phase and consists of 26 single world-class manufacturing units. With our unique application know-how, we helped them to unlock the potential of their columns. We also make the change into their plant with our own service people in record time. For such a job, hundreds of people need to be coordinated. Hengli is one of the biggest producers of polyester fibers, and they are constantly investing upstream of the fiber process. PTA is one of the raw materials for that. In the north of China, in Dalian, they constructed a new fully integrated plant, for which we delivered the internals for the biggest PTA columns in the world. For such size of columns, extensive experience is needed. The design cannot be made only by design tools. Chemical engineers with long-standing experience are essential. Wanhua is the biggest MDI producer in the world. Wanhua is a chemical, which is used in the automotive industry, in polyurethane and many other applications. Wanhua has 30% market share globally and 65% market share in China. Wanhua and Sulzer established a strategic partnership, and we support them to continuously improve their production plans. On the picture, you see their main location in Yantai. There, more than 300 columns are filled with Sulzer technology. Chemtech has 60% of our business in the chemicals and renewables markets. These are the segments, which are growing fastest. The chemical market is forecasted to grow annually with 5%, which is higher than GDP growth. China alone will grow 6.6%, which shows also the continuous shift to the East. With our global setup in China and Asia, we are well-positioned to participate in this trend and to capture market share. The renewables segment was last year 8% of our order intake. This segment is only in the early stages. It will significantly grow in the future, and we are well-positioned here. We have a long history of innovations and milestones in our industry. But it's important to understand that Sulzer's transition to renewable technologies started long time ago. Let me share a few examples. For the biopolymer polylactic acid, PLA, we had our first pilot plant already in 2007. The first large-scale plant of up to 100,000 tonnes has been delivered in 2017. In between, we delivered equipment for medium-sized plants to further improve the technology. Another example. In 2008, we delivered our patented products for the big Sask power carbon capture plant in Canada. We are seeing now a significant increase in carbon capture projects around the globe, which is one element for the decarbonization of the world. Our products and engineers are ready to participate in that journey. Ethanol production is a topic on which we work for many years and delivered hundreds of columns. The Steelanol project with ArcelorMital in 2019 is the first example where the off gas of the steel mill is converted by a bioprocess to ethanol. The European Union classified this project as biobased. Our purification technology is essential for such a project. All these examples show how our investments in the past have paid off and demonstrate the potential as our current investments come to the market. These new investments are especially required in the renewables area. Our industry is transforming. We go from fossil-based feedstock to a bio-based and recycled feedstock, and decarbonization plays an essential role to minimize the global warming. All these trends are supported by the consumers, the big brand owners and governmental regulations. We have unique Sulzer technologies for all these areas available, and we focus our R&D development on these areas. The production of PLA, the biopolymer, which I mentioned before, is expected to double in the next 5 years. With our products, we contribute from the advantages of chemical recycling versus mechanical recycling. Yesterday, we announced our partnership with Blue Planet, a California-based technology company, in developing solutions for carbon capture in limestones, which can be used in the cement industry. Polylactic acid, PLA, is a polymer which can be used in many applications. And with that, we place many fossil-based plastics. PLA is a biopolymer which can be reduced on world-scale plants and is most industrialized. It is biodegradable. We are a leader in this space. Almost all PLA plants in the world use Sulzer technology. The market demand is asking for more supply and recently new world-scale plants have been already announced. We have additional projects around the globe, from South America to Siberia, in our desks. A few examples. For the Total Corbion plant in Thailand, we have been involved since the early stages of the project. The close interaction of the teams on both sides ensures the quality of the plant, the quality of PLA as the end product and the efficiency of the production process in terms of use of energy or raw materials. NatureWorks, a joint venture between Cargill and the Thai company, PTT, operates the biggest PLA plant of 150,000 tons in the USA. We help them with our proprietary purification technology to debottleneck the existing facilities. For such project, it's helpful that we have known the customer for many years and that we know what is technically possible. Teamwork with customers is essential. China is one of the regions with the biggest demand for PLA. It is part of their national sustainability program. A recent example is the delivery of our technologies and equipment for a fully integrated sugar-to-PLA plant in Bengbu in China. I told you before that our journey in PLA started already in 2007, but we also work on other biopolymers. PEF is a fructose-based polymer. It has unique properties. It is more stable, and it has much better barrier properties against oxygen and carbon dioxide. With that, it makes it ideal for beer in PET bottles or carbonated soft drinks. Other applications could also be monolayer films. PEF is recyclable. Sulzer used its proprietary technology in a pilot plant. Now we are working on the design of the demonstration plant, which enables us to deliver higher amount of PEF, with which we can develop together with interested clients, to final applications. The development of the applications, together with the optimization of the polymerization, is a complex stuff. This can only be done by a team of experts with different skill sets. We are prepared for that. Chemical recycling is key to solve one of the problems of our planet, and Sulzer has technologies which are important. PE, PP is by far the biggest amount of waste plastics. We developed special purification technologies, which can be used for upgrading the waste stream. Our published project with frontier fuel is one example. For polystyrene, we have a special technology in use which can purify the styrene from a waste stream to a level of 99.95%, which means that the recycled products can be used for food packaging again. With that, we could create a fully circular system for recycling polystyrene. Together with our partner, H&M, we are developing a closed-loop for mixed textiles, textiles which consist of PET and cellulose fibers. The process allows the return of virgin-like fibers at cost of the fossil-based polymers. In our common company, Worn Again, we have created much interest by brand owners, retailers, future plant operators, base collectors and many others. Having you told about the business over the last slides, I will explain you now how it translates to the financial numbers. China and South-East Asia Pacific contribute to 50% of our order intake. These are regions which are growing faster than the rest of the world, and where the clients value the worth of technology and paid a premium for it. Our order intake grew consistently from CHF 472 million in 2016 to CHF 670 million in 2019, similar for the sales numbers. We doubled our operation profitability from 2016 to 2019. We expect it to cross the level of 10% in 2020, but the pandemic crisis delayed that. We are confident that we will reach that level this year. Over this presentation, I explained to you the Chemtech business. Let me summarize it again. First, Chemtech is a high-technology business based on quality and purity. Continuous investments in our technologies and use of our application know-how helps us to move to adjacent areas beyond our traditional markets. Secondly, with the shift of the chemical markets to China and Asia Pacific, we are well positioned to grow faster and increase profitability. Third, we have solutions in our portfolio which matter today and which contributes to solve global problems. We will continue to go this way and have an ambitious target that the renewables segment will grow to become more than 20% of Chemtech's overall business. What I said leads to the midterm targets for Chemtech. We expect to grow midterm with 5% to 7% per annum and to reach a profitability level of 11% to 12%. Thank you very much for your attention. It has been a pleasure for me to present you the business today. And now I hand over to Jill.

Thank you, Torsten. So good afternoon, everyone. Pleased to be going through our key financials with you as a solid set of numbers, which demonstrates the success of our strategy and our execution. So first, the highlights on our orders. Our orders have grown steadily over the years on the back of our unique technologies, process know-how and presence in all key markets. Growth is seen across all divisions. Even during 2020, we were able to achieve a limited impact from the pandemic. For 2021, we are expecting to return to growth around 2% to 3% compared to the previous year. However, excluding oil and gas new equipment orders, which have meanwhile reduced to about 12% of total order intake, the expected growth for 2021 generated by all businesses -- all the other businesses is, in fact, really 7%. So much higher than 2% to 3%, and it's really masked by the drop in the energy market. Our portfolio has an increasing share of higher-growth and higher-margin businesses like water and aftermarkets, which, together, form around 62% of our order intake in 2020. We are also expanding our industry segments and adding new segments like renewables in Chemtech, as you have just heard from Torsten, thereby further enhancing our -- the profile of our portfolio. And geographically, our order intake is well spread across all regions, as you can see from the doughnut, made possible through our strong global setup. Now moving on to sales. Our robust growth is also mirrored in the sales development, which has seen growth percentages rising to teens, only slightly dropping in 2020 due to site access restrictions and project delays arising from the pandemic. This year, we began our year with a solid order backlog of close to CHF 1.7 billion, an all-time high when adjusted for FX impact. On the back of this solid backlog plus a good start, which we have shared with you in Q1, we are expecting sales to grow by 6% to 8% for the year. Now let me talk about the operational profitability. Our operational profitability has been rising across all divisions through economic cycles, which, of course, make us, yes, all very happy to share. This underscores the results from our portfolio mix, our operating leverage from the growth you've heard and the quality of our execution. In 2020, we acted fast and early to drive cost squeeze and to take decisive structural actions to counter the impact of COVID-19 and the consequent drop in the energy markets. So we were able to keep our operational profitability stable in 2020. On top of this, the structural actions we took last year are expected to generate another CHF 40 million of cost savings in this year and a further CHF 20 million next year. And to date, we are well on track. For 2021, we are expecting to grow our operational profitability to 9% of sales. Moving on, let me speak on the balance sheet. As you can see here, our net debt-to-EBITDA ratios have evolved robustly across the years. This highlights the strength of our balance sheet and our solid cash generation. On the reported level, our net debt-to-EBITDA ratios have been maintained within 1x and only increased marginally to 1.3x in 2020, which had really been an unprecedented year. Even when excluding the cash that we hold on behalf of Tiwel, the ratios have stayed within 1.5x and rose only marginally in 2020. Let me remind you that the CHF 261 million of Tiwel's cash is not segregated and is accessible for business use. It's not interest-bearing and does not have a maturity. It will be in our possession until the U.S. government gives Tiwel a license to receive it. And even if, and when it does, we have no obligation to pay it out until we have the necessary financing available. And post spin of Medmix, Sulzer expects to deleverage by 0.6 turns in net debt-to-EBITDA, with Medmix assuming an intercompany loan from Sulzer. So with this very healthy capital structure, we are well positioned to support the exciting growth that you've heard from my colleagues just now. Now let me move on to speak on our midterm targets. And this is really a summary of what you have heard from my colleagues. Our divisions have shown you the exciting growth opportunities in their businesses and the strategic growth levers. All divisions are well placed to organically grow above our risk market. So altogether, we expect to generate an average of 4% to 5% of growth per year for Sulzer over the long-term -- over the midterm. On operational profitability, we expect our upward trajectory to continue. You have seen our track record of executing to our plans over economic cycles. Over midterm, all divisions expect to improve their profitability, with overall Sulzer to reach operational profitability of 10% to 11% of sales. And with that, let me now hand over to Greg for his overall summary. Thank you.

Thanks, Jill. All right. So 2 slides, and just to wrap up, and then we'll open it up for questions. Okay. The first one is a reminder of our strategy. As I said, 4 strategic access: to grow the water and industry part of our Pumps business, with a particular focus on Water. But as we highlighted, as Frédéric highlighted, an industry, we have a lot of interesting plays such as the support of the fiber-based economy through our Pumps business. The second point is to essentially boost our Service business by implementing the breakthroughs that we've made in digital and additive, to make the business even more competitive than it is today. We're winning on our market's installed base. We're winning on our competitors' installed base, and we intend to accelerate that. And as explained by Daniel, we think we can continue to generate growth even when the market is not growing, just by reclaiming the installed base and eating into other people's installed base. And Chemtech, as eloquently explained by Torsten, we aim to defend our chemical leadership. You saw the major implementations that you have in China and the rest of Asia, but in other the parts of the world, too. But we aim to do that while we boost our Biopolymer and Recycling business. These are technologies of the future, but also of the present. There are implementations every year and sources at the forefront of that. And finally, Armand explained why ESG exposure are only possible because our people are highly committed to Sulzer. 92% of people in Sulzer say that they go the extra mile to help Sulzer succeed, might even be 94%. I'm not even sure of the exact number. It works because we share the same values, and the values that we share are based on strong positions in growing markets. We combine a highly resilient portfolio, as Jill explained, as aftermarket is more than 50% of our business, but also an attractive exposure to macro trends, water, bio-based. These are significant macro trends that are pulling part of our business forward. We're a record leader business that delivers growth and a very steady, slightly increasing every year level of margin, come rain or shine or hell or high water. So really, if you have to focus on the oil and gas risk within Sulzer, the relevant metric is the 12% of new projects, new products for oil and gas, notice on-time, and we've been delivering steady improvements every year, rain or shine. We're Sulzer. We've been around for 200 years, and we've remained relevant for 200 years, and we've done that through technology-based innovation. I think you can rely on us for that to continue. And keep in mind that our next business...

[Operator Instructions] The first question comes from Patrick Rafaisz from UBS.

Yes. Thanks for all these presentations, really insightful. 3 questions. The first, cost of the process, what you're seeing here. What will be the cost per ton of carbon capture of this project?

Our cooperation with Blue Planet is -- Blue Planet is the -- responsible for part of the chemistry. And we are responsible to build everything in big scales to capture the carbon and then to -- that they apply the chemistry to the technology. And now we are going in the big scales, and the target is that we are at cost-competitive prices. And what I can say is also there, Blue Planet, by themselves, they are in discussion also with all these cement companies. So it will be highly effective.

Yes. The industry needs solutions. And these are market-leading solutions. We're happy to play a significant role in them. It's -- Patrick, probably what Torsten is trying to tell you is it's a bit early to disclose the cost once the technology will have scaled, but we believe this will be competitive.

Okay. And then the second question is on tax by recycling. Just wondering, what's your view on the commercialization road map here for this project? What are the key challenges you're facing? Is it cost? Is it technology? And any color that would be super interesting.

We are -- it's not that because it's -- we are at the development. The PET part of the process is already developed. We are now finalizing also the cellulose part of the technology. And in the second half of the year, we are going for the planning for the demonstration plant. We are currently reviewing potential locations in Europe for the demonstration plant so that the demonstration plant will come up then in 2022.

And Patrick, a little bit of an understanding on Worn Again. Worn Again is an independent company. We're the largest shareholder, but we, together with H&M, control the company. We, together with H&M, have more than 50%. Oerlikon also came in for the fiber spinning aspect of it, and there's a number of other textile retailers that have an interest -- that have shown a strong interest in taking a stake in the company. So it's a technology that has market pool, which is exciting, because it's -- what it's telling us is that the customers, the people that will implement this technology, the H&Ms of this world, actually believed in it enough to be an investor with us. And by the way, H&M brought us in initially. This is something that they had identified, and they had also identified that Sulzer was an important part of making the technology scalable. Other questions, Patrick?

Okay. Yes. And one more, please. In Water, you talked about the North American clean water opportunity as one of the main growth drivers. Can you elaborate a bit more on that? What is exactly the strategy to capture more of the North American clean water opportunity?

I'll hand over to Frédéric on this. But keep in mind that our Water business is mostly a wastewater business today, and our focus has been wastewater and industrial wastewater applications. And clean water is a natural extension, we're already present. Frédéric?

Yes, absolutely. And the focus was on the waste, as explained. And in fact, we will leverage our strong position with these utilities, can be very large operators or municipalities. We have also deployed a network of service provider there, and they were asking us to supply not only the wastewater, but also the clean water equipment. So in fact, we had a hidden gem in our portfolio of products, named Johnston Pump. And this company was acquired 25 years ago. And in fact, now, we are relaunching the Johnston Pump brand in North America, which are supplying vertical pumps for the clean water. We relaunched it last September. And after less than a year, it's a massive success because that was the reference in clean water in North America.

So sometimes, you just happen to have already the right brand and the right references in your portfolio. And I think that being able to identify that is important. I would add that the U.S. market is a market that is, in large part, goes through distributors and the secret to having -- to have the most complete product range. I think we have that in wastewater. And clean water is a natural extension of that, and we can sell that through the same channels. Other questions, patrick? Is that okay?

Yes. Yes, that's all.

Thank you. I think we've got Aurelio waiting to ask a question.

The next question comes from Aurelio Calderon from Morgan Stanley.

I have 3. I'll take them one at a time, if possible.

Sure.

The first one is on, basically, the installed base that you are servicing in Rotating Equipment Services. One, I guess, attached to that question is, why would a third party -- or why would you be able to service a third-party pump better than the OEM?

Good. First of all, you have to understand, we have 17,000 end-user sites, and we have not really systematically approached those customers. Now we have this -- why do we believe we could get more out of it? And not from each and every customer, but we see a lot of customer not happy. And we are just close by there, and we have a good footprint. We have shown already with our additive manufacturing, we are making leaps there. And yes, I'm confident we get more business based on our technology.

If I can also jump in on that. The -- why do we only have 50% coverage of our installed base? Because that's what a lot of the OEMs in this industry ended up with, 50% or less. And the reason for that is we were all technology-driven. We're all run by engineers. And everybody is excited about the new pump, the new big project. And historically, people and businesses like ours were not really paying a lot of attention to the installed base. I think the systematic mining of the installed base is something that has really only come of age in the last decades. So a lot of it, you just have to reclaim. And you reclaim it by offering better service and better solutions that the people that are currently servicing customers. Now if you have a look at our competitors' installed base, Daniel is not talking about disassembling, repairing and putting things back together, I mean, we'll do that. But the most exciting opportunities are the retrofit opportunities, where, essentially, you take somebody else's pump, and you make it a better pump. You keep the metal shell, the casing, because, frankly, it's a lot of metal, and it's not a whole lot of added value. You change all the hydraulics inside. You change the impellers. You change the seals. You change the full path, essentially. And you build a pump that is sitting in the same shell, in the same footprint, that has better performance than the previous pump that has lower energy intensity. And for the customer, it's a big win. So those are the technical solutions we're bringing to the market. We're not a low-end player. We're a high-end player. And there's really not a whole lot of solutions like ours out there. Aurelio, you have 2 other questions, I think.

Yes. I guess the next one is on capital allocation and gaps. Any obvious gaps in your portfolio given your growth in Water over the last couple of years? And do you see any obvious gaps in the Water portfolio that you would like to feel as you are trying to grow in clean water and/or just moving away from Water? Any obvious areas in the portfolio that will benefit from bolt-on acquisitions, especially given how fragmented some of your markets are still?

Well, we've been fairly explicit in the last few years that, if you exclude Applicator Systems, our 2 big areas of investment are our Water business and the renewable technologies in Chemtech, where we see also opportunities, too. We'll develop some of the Process Technologies, but sometimes, we'll be the guys identifying the winners and making them scalable when they're not able to do that by themselves. But if you take the Water business, yes, there continue to be opportunities for acquisitions. The market is very fragmented. At any point in time, we're probably talking to a few companies. And these are acquisitions that range in -- from enterprise value, let's say, from CHF 100 million to a few hundred millions of enterprise value. So they're a good size for us. These are things that we know how to integrate. And Frédéric will work on making our portfolio stronger. Did I cover that, Frédéric? Or do you have anything to add?

Yes, absolutely. And we have a solid track record of integration of companies in the Water segment. The last 2 acquisitions were really successful, JWC in 2018, both in California. And as I just explained, we scaled up from a U.S.-based company to the rest of the world, thanks to Sulzer network. And the second acquisition is very recent, is Nordic Water based in Sweden. And entering not only some geographies but, for sure, new technologies like filtration and sedimentation and flood management, which were not in our portfolio and complementary. And this Nordic Water, by the name, was based in Sweden. And now we are scaling up that company to mainly rest -- North America, rest of Europe and Asia.

Thank you, Frédéric. And Jill, we've got the balance sheet for.

Yes. I have shown you how we have developed in the past. And I think, really, if you look at where we stand and compare that to our peers in the industry, I think we're in a good place.

Good. Aurelio, I think you had a third question.

Yes. And this, I think, is the last one. I think this is going to be more for Torsten. I was a bit surprised when, flicking through the slide deck, and why do you think the Service business in Chemtech is not a key area of growth going ahead? I wouldn't know that, but...

He doesn't. He knows.

Yes. No, exactly. Yes.

Torsten is going.

Yes. The Service business is -- the Chemtech equipment is static equipment. It's not rotating equipment, where you always need to make service parts. So our service part is mainly installation, supervision and replacement, and then support in replacement of services. So it's the replacement work, what we call as Service business, and therefore, it's a low-margin business. It's a low-margin business, which you only need to do for the projects where we have to work with our customers. It's not to grow by itself.

Yes. If I can, it's a lower-margin business, i.e., it's a Service business. It still has good margins, but it's a lower-margin business than the Components business. And as Torsten said, it's a lot of field installation. Field service is always lower margin than service that involves repairing or replacing components.

So it's a service part, as I said, the replacement. So what we replace, if, for example, a column after 7, 8 years, 9 years needs to be replaced, the internals, because the old internals are corroded, this is in the Component business. This is not in the Service business. Service business, for us, is really the installation, supervision, this type of work, not the equipment.

All right. I think we've got Caroline on the line.

The next question comes from Caroline Price from Fargo Management.

I'm sorry if I missed it, but I was wondering about the central costs that are currently are sort of charged out to the divisions. And what incremental costs there might be from the spin-off of Medmix? And I mean will they continue to use some of Sulzer's central functions and Sulzer will charge them? Or how does that -- how does the marginal cost get affected?

Sure. So Caroline, that's a very politely phrased question. Because I've done this enough to know that when an investor says, "I may have missed it," it means, "Why the hell wasn't it in your presentation?" We mentioned it this morning, the total sum of the functional support given to Applicator Systems is less than CHF 10 million. And it's stuff like treasury, legal, communication. A lot of these services will be internalized much way before the 2-year service period that we've established with Applicator Systems. And it will be done by some people transfer. We just are giving ourselves the time to do that, and are supporting the Medmix people as they branch out into their own by continuing to support them. We don't expect stranded costs. The functional services will either be transferred through people transfer to Medmix, or they'll be redimensioned to a size that corresponds to whatever the size of Sulzer is at that time. But you have to keep in mind that Sulzer has continued to grow, and we're continuing to make acquisitions. So I wouldn't necessarily assume that Sulzer is going to be smaller. Jill, anything you want to add?

No. I think that covers all.

All right. I don't know if there's -- Caroline, was that okay as an answer? Or do you have anything else?

Yes. No, I actually -- I only was able to join for the Sulzer part from 1:30, so...

All right. So the Medmix presentation is on our website, too. So don't hesitate and to also reach out to us with questions. Do we have any other questions before we wrap up? I think that's it for today. We really thank you as a team, the people here today, this afternoon, but also our colleagues from Medmix this morning. We thank you for your attention and your interest in Sulzer and in Medmix. We believe both companies are really compelling investment opportunities for different reasons, they're very different businesses. Sulzer is a flow control leader. Sulzer is about water. Sulzer is about industry. Sulzer is about biopolymers and recycling. It's about solving some of the world's big sustainability issues, anything related to fluid. And we think it's compelling because of our track record, because of the market positions that we have today, and because of the demonstrated ability that we've had for 200 years to essentially develop the right technology to continue to stay relevant and at the forefront of our markets. And Medmix, Medmix is a high-precision delivery device business. It serves 40% of revenues, health care, soon to be 50%, but also some really interesting positions in consumers and industrials. And it's highly protected because it's IP-based, a lot of customer stickiness, and it operates in market niches that make the relationship between the supplier, Medmix and the customer, much more co-dependent relationship rather than an adversarial relationship. And it's based on technology. It's an exciting business. We encourage you to consider being an investor in both. On those words, thank you again for your time, and have a great day.