BELIMO Holding AG

We are delighted to have you join us today, both in person in Zurich as well as via the webcast. Thank you for taking the time to be with us as we review our results and provide outlook for the future. Before we begin, let me take you through a few housekeeping notes. We will start with a series of presentations from our leadership team, followed by one Q&A session at the end. The way to ask a question depends on how you joined us today. If you are with us here in Zurich in person, please wait until the designated time and simply raise your hand. Please wait for the microphone to be provided that the people on the webcast can also hear you. For those joining us via the webcast, you can submit your questions at any time during the presentation. For those joining us via the call, you will be provided instructions via the call operator. Our webcast concludes after the Q&A session. For those joining us in person, we kindly invite you to lunch. Now, let's get started. It's my pleasure to pass on to Lars van der Hagen, the CEO of Belimo.

Thank you, Martha. Welcome also from my side here to the wither and of course, everybody who is remote here. It's a great pleasure that we introduce A great set of new numbers in the Belimo history, the 2024 results in this year that we are celebrating 50 years of Belimo and you have also those here in the room, a little gift that reflects that together to the top for 50 years with the Matterhorn on your table. For me personally also, I celebrated at the end of last year 25 years per Limo, and I'm here in my role as a CEO since 10 years. It's the 10th press conference here, so it's really nice to look back at these great numbers, these results that, of course, are possible because of our stakeholders. In particular, our more than 2,300 employees who are highly engaged and make this happen along with other stakeholders and of course all of you investors, analysts who ask tough questions so that you keep us up on our toes so that we think about our strategy, we reflect our strategy. That's also a very important aspect for the success of Belimo. After my introduction, we will move on to a deep dive into financials with us here for Markus Schur. Then we have this year a deep dive into our product platforms with Elena Cortona, our CTO. And towards the end, Markus will then give you our outlook into 2025, what we think will be happening this year. Then, of course, the Q&A sessions starts. It was a special year. Last year, we were talking and deep diving on six elements. One, of course, the strong demand in the Americas, but also the challenging situation in Germany. We did actually leverage this momentum, and this is reflected in our revenues, profits, and cash flow. Then the accelerating growth in data centers, and this was also reflected from the Belimo side in starting a specific initiative data centers. And then the demand in existing buildings to make existing buildings more energy efficient, and also the skilled labor shortage accentuated also over the last year again. But also this, what we, of course, react to being a role model as Perlimo regarding ESG, and also we have been upgraded with the MSCI rating to a triple A rating, and we also submitted, filed the science-based targets initiative last year, defining clearly our 2030 and 2050 emissions targets. This is important. I know some companies, they altered their targets or do not have specific emissions targets anymore all of a sudden. But that wouldn't be Belimo, right? We know... And we are a role model in our industry. We know that, of course, when we think long term and make us in particular, for instance, for the emissions, make us more independent of energy prices, this makes us also more successful financially in the long run. And of course, also from a cultural standpoint and so on, we are fully dedicated to these targets. Looking at the financials, they have been strong. The net sales, you know, since January with 13.2% growth. The EBIT also very nice. You have been reading this morning 19.2% EBIT margin and the 19.8% increase in free cash flow adjusted. Then successful strategy execution. So all these numbers can relate to one of our strategic initiatives. So it also demonstrates or proves that our long-term strategy works. And regarding outlook, we see this year as a positive year. Markus will go into details later about the outlook. And we continue also with our capacity expansion. Like, for instance, we did complete at the beginning of this year this – headquarters in China that's located in the Minhang district in Shanghai. That's one of the most important economic areas, the Minhang district in the world. And this building is reflecting our market leadership in China and also what we have strategies in China to expand our market leading position. It is mainly an automatic storage and retrieval system and logistics and customization building, but also has a large training center for our customers, so it's a great location to represent Belimo. Of course, it's also a sustainable building. It's a LEED Platinum, will be LEED Platinum rated building, and it's completely equipped with solar on the roof, but also with this Very innovative double facade with this glass that you see is 60% shading and is also a solar cell. So all this glass is at the same time transparent solar and makes this building together with all the Belimo field devices highly energy efficient and flagship building in the world of efficiency. Then we have also informed this morning that on our board of directors, we present at the General Assembly for election a new member, Tom Hallam. This is because Martin Zwisik decided to resign from the board next year. And most of you know him. He's our financial expert on the board. And we, therefore, we're looking for a new expert who can also succeed Martin Zwissig next year as leading, being the chair of the audit committee here with Tom Hallam. And Tom Hallam, with 16 years at Givaudan and being the CFO for a long time at Givaudan, has a very strong background in finances and can fill the big shoes, I think, that Martin Swisik will leave. So we're looking forward to that election, of course, then at the General Assembly. Then always I like to look back a little bit in history at Perlimo, the last 20 years, because things take time. And it's always nice to reflect on the sales development over the years, but also, for instance, the profitability development over the years. So we had... In the beginning of this phase, EBIT corridor of 14% to 16% beginning 2004 in these years. We then in the mid section here of the chart, we increased that to 16% to 18%. Last year, we put that to 18 to 20, that range. So you see all this long-term improvement of EBIT margin over the years and, of course, a very consistent development of this organic annual growth rate that has been 9.7% over the last 20 years in local currencies. Our foundation... is built on three megatrends, urbanization, this is a long-term trend that will be lasting for decades, climate change as well, and digitalization where we're gonna deep dive a bit today. Looking at our strategic growth strategies, we've always talked about these growth strategies over the last years. We started with a specific growth strategy in 2016. That was because 2011 to 2016, we've seen a growth rate of only 5.6%. That was... Also, because the economic environment, that was still the aftermath of the financial crisis 2008. Remember, that took quite a long time, about seven, eight years to recover, really. And then we said we have to really make sure that we grow at Belimo, and we implemented the growth strategy, the first phase, until 21, where we had then an average growth of 8.8%. We implemented the second phase in 22, and there now we have the three years on record, so 11.9, 7.2, and 13.1% annual growth rate in local currencies. So really nice demonstration or confirmation that this strategy works. Our six strategic initiatives listed on the right of the slide, there we have two that focus on digitalization. One is that of the data centers, and the second one is that of digital ecosystem. I'd like now to talk a bit about the digital ecosystem, where actually then Elena Cortona will deep dive afterwards. So I now basically talk about the icing of the cake. and then Elena will talk about how she was baking the cake. We have over the last years developed also many products that will be introduced into the market this year. This year we have a firework of new products that will be introduced and I want to show you some of these products and how they relate to our platform. Let's start again with the main purpose of Belimo that is having good indoor air quality. We are more than 90% of the time in buildings. And we eat about one kilogram of food every day. Chocolate, for instance. Two liters of water we drink, or whatever you drink, and we breathe 12,000 liters of air, 12,000 liters of air per day. So the air is absolutely crucial that we have good air. And slowly, legislation also follows. For instance, now in California, the new California energy codes, they require public spaces to be ventilated with a demand control ventilation system that means a variable air volume system that needs palimo actuators and sensors but also to control it by the indoor air quality the co2 levels And for that, we have upgraded our sensor range of room sensors with a new software that allows the tracing of CO2 that's required, that now CO2 is not only controlled for, that's a requirement, but also that you can trace it, that you can look back, was there the right CO2 level, for instance, two weeks back or three weeks back. So that's a new requirement. in California, but that probably is pioneering building codes in the whole world. It's a great thing. And the beauty is we just had to upgrade our software, our firmware of the product and the app so that this can be made happen and can be made available to our customers. our competition likely has to change the product, redesign the product, also from a hardware standpoint, which is a good example of the digital platform. This, of course, is not only in schools and public spaces, but also where we are focused in the non-residential building space, so laboratories, hospitals, pharma environments, and so on. Another great sensor innovation is the new Delta P sensor on the new platform that's more accurate, more precise, and part of a new platform fully integrated into actuator and valve platforms. So it's the second generation of Delta P sensors. So as we launched sensors in 2018 for the first time, this is now the second generation that helps us to increase our market share in sensors. This one also we are planning high volumes. We also have a cost advantage with this new product and we're going to offer it actually at a very attractive price into the market to really gain volume in the sensors business. For this important application that's often used for filter monitoring in air handling units like here, where it's important to know when you have to replace a filter, not too early, because then you have costs for the filters and for the labor to replace filters, but also not too late, because otherwise you have higher energy costs. Another sensor innovation is expansion of our product range from our toxic gas sensors. That is a product range that comes from the acquisition of Opera a couple years ago in Montreal, the company. This is to measure refrigeration gases, for instance, in chiller applications or split-unit applications. We have to make sure that if refrigeration gas leaks, that it can be detected. We have a complete range of UL-certified refrigeration gas sensors that we introduced this year into the market. GM actuator, a 40-newton-meter actuator. That's the third generation of this product at Belimo. It's the first damper actuator in the new platform. It's an amazing product. It's more quiet and more energy efficient. This product today, the current version, requires four and a half watts of energy consumption during operations. The new one, two, so that's less than half. And when it stands still, the current one is 2 watts and the new one is 0.5 watts. So it's unbelievably matching. Compare it to your bedside table lamp. In the past, you had a light bulb with 40 watts. Today, you have an LED with 8 watts. And this requires, when running, 2 watts. So a quarter of your lamp. And that's 40 newton meters. So... You use it on dampers like this, large dampers, couple square meters large, and equipment like this air handling unit, for instance. So quite amazing. So this low power consumption is not only an advantage that it consumes less energy, but it also requires smaller wires for the installation, smaller... fuses and so on has several advantages in the industry and it's leading in the industry actually the current actuator is already the best in class so this is then basically overtaking our own standard and making it even better with the gm actuator then on the butterfly valve and the small one here the gr actuator you see the similarities the modularity then We last year introduced, with a little movie you've seen, our JR butterfly valve actuator. Here now we expand the big valve on the right side. QR and YR range, these are large valves, DN450, so for plant applications. Also very energy efficient, about 25 watts of power consumption has this product versus competition, about 150 to 200 watts. Unbelievable. energy efficient and in these big sizes dn450 in a cooling application for instance in florida that would be about six megawatt of thermal energy that goes through such a valve that's about two million of energy costs per year that's controlled by such a valve very important application and absolutely market leading product range that we have with this Also, the QR and the wire, they will be made in the U.S. in our plant in Danbury, Connecticut, for the whole world. So we manufacture it in Danbury, Connecticut. So some lucky politicians there in the U.S. Then the application here of these products, typically on chillers, for instance, like here on a rooftop. Then another innovation in the market, we talked about it in the last years, we have, with Belimo Innovation, started up Bereva, Belimo refrigeration valve, startup for electronic expansion valves. We have now integrated the company fully into Belimo, and we have the Belimo expansion valve range now, and we have first successes here in the application of a heat pump from Carrier Fisman that's a mid-size heat pump, 40 kilowatts. It's the best in class, actually, in the market now. And we are proud, of course, that the Carrier Group is using our electronic expansion valve for refrigeration since Willys Carrier 1902 invented the air conditioning circuit. And nice when the inventor, of course, and still one of the market-leading companies in chiller and heat pump design in the world, using Belimo expansion valves in the refrigeration circuit. Then data center specific product range of characterized control valves. We developed stainless steel application. It was a requirement in China, so we developed it fast with our Chinese R&D team over the last nine months. It's used on the secondary loop where we cool actually the service, the direct chip cooling typically. And another innovation, it does not stop The BF high torque damper actuator for fire and smoke applications. This as well, fire and smoke applications with our new M600 chip and more direct digital interface into the product. It's an important product range. Fire and smoke damper actuators accounts for more than 100 million in sales for Belimo worldwide. And finally, a retrofit product with our initiative Retrofit Plus. We developed a small valve actuator where we can retrofit short stroke valves from the competition. There are tens of millions of these valves installed and they can be now retrofitted and improved easily with the Belimo actuator. And these are all modular, all a modular platform. And therefore, we can use our app on the components and have a really consistent range. And that's the uniqueness, being consistent across the range, so not having all these single products. If you look at our... competitors it's typically a product range that's made up of many different components that are not consistent regarding interfaces and regarding the use of these products so we are very proud introducing these products this year and we look forward to that again gaining and continuing on the momentum so now With this, I would like to leave the stage to Markus Schuch. He will deep dive into the finances.

Please, Markus. Okay. Thanks a lot, Lars. And a warm welcome also from my side. It's a great honor and pleasure to present the financials and give some more insights into the results of 2024. 2024 was a highly successful year for Belimo, despite some challenges in some of our key markets. We achieved a sales growth of 13.1% in local currency or almost 10% in Swiss francs. This gives a total amount then of 943.9 million Swiss francs. Americas developed into the largest region and generated 46% of net sales, followed by EMEA with about 41% and Asia-Pacific with about 13%. From a business line perspective, Control Valve has become our largest business line with close to 50% of turnover, followed by Damper Actuator with 46% and Sensormeter, our youngest business line, already contributing with 5% to our global turnover. If you have a closer look into the composition of growth, we can see that last year, volume and mix contributed was 9.8% towards the growth. And then price increases elevated sales by about 2.9%, which gives them together with the others, a total sales growth of 13.1% organic in local currency. FX had a negative impact of 3.2%, and this gives then the reported sales growth of 9.9% in our reporting currency in Swiss francs. Let's have a closer look into the development of our various business line. So we can see that damper actuator showed a growth of 9.7%. This is significantly up from last year. And there also data center projects had an important aspect into this strong growth. Control valve grew by 15.4% and this further increased the importance of this business line and is accounting now for 50% of our global turnover. Sensormeter, it's our youngest business line. They generated the highest growth rate of 25% and that shows a steady adoption at our customers and the success of our penetration and cross-selling strategy. Let's have a closer look into the regional development. So EMEA achieved organic growth of 5.9% in local currency or 3.7% in Swiss franc. This is a very strong performance given the difficult market situation in EMEA and especially in Germany, the largest market in EMEA. This success was possible by strong focus on the renovation and retrofit market, and this could compensate the missing projects on the new construction. A further contribution came from the data center projects and the end of this docking in the OEM channel. Looking at the Americas, Americas generated exceptional strong growth of 19.8% in local currency, or 16.1% in Swiss Franc, and becoming with this the largest region of Belimo. This very strong result was possible due to a generally favorable economy and high focus on attractive and high growth segments. pharmaceutical production, semiconductor industry, renovation, and above all, obviously, data centers. Data centers accounted for about one-third of the growth in America. We are extremely well positioned in the data center segment, both in the traditional air-based cooling as well as in the emerging liquid cooling application. Lastly, Asia-Pacific generated growth of 14.6% in local currency or 10.2% in Swiss francs. All our key markets contributed to this strong performance. We achieved double-digit growth in China despite an overall very challenging market situation. Again, this was possible by focusing on the attractive segments. And India developed extremely well, improving there our market position and further also positioning central HVAC as the standards for high-end building. Moving further down the profit and loss statement, driven by the extremely strong top line performance, we were also able to further expand our operational profitability and increase EBIT by 19% to 181.1 million Swiss francs. This corresponds to an EBIT margin of 19.2%, a strong up from last year's 17.8%. We were able to compensate the negative FX development and also absorb the significant investment into our growth strategy. Looking at our personnel cost, so if the personnel cost increased by 9.3%, that's in line with our top line growth. The higher cost was driven by the increase of headcount and some salary increases. In the reporting period, we added an incremental 102 full-time equivalents to our workforce and increased the employee base to 2,361 full-time equivalents. From a regional split, 58% of our employees work in EMEA, 25% in the Americas, and 17% in Asia Pacific. And from a functional split, 41% of the employee base work in sales and marketing, 38% in production, 13% in innovation, and 8% in administration and general management. From a functional currency point of view, 53% of the personnel costs are denominated in Swiss francs and 47% in all other currencies. Our R&D expenses amounted to 73 million in the reporting period, and that corresponds to about 7.7% of turnover. This shows a normalization of our innovation investments towards the long-term target level. Moving to the net profit, so our net income increased by 7.2% to 146.7 million Swiss francs, or 15.5% of net sales. If we normalize for the one-time tax effect of 17 million we were able to book last year, the increase is actually 22.6%. This increase was driven by the strong operational performance and an improved financial result. Last year, we had to absorb FX losses of 8.6 million, while this year the FX results were slightly positive. On the tax side, we had income taxes of 29.4 million, and this corresponds to an effective tax rate of 16.7%. This is slightly below our long-term expected effective tax rate of slightly ahead of 17%. This was due to some favorable effects in the U.S. And lastly, earnings per share increased to 11 Swiss francs and 94 cents per share. From a cash flow perspective, cash flow from operating activities increased to 195 million. And this was driven by the strong performance and the normalization of the working capital level. Free cash flow normalized for the term deposit increased by 20 million Swiss francs to 133 million. And this is despite an elevated cap expense of 63 million. That's in conjunction with our capacity expansion projects. We're growing heavily, therefore we also need to increase our capacity, and at the moment we're doubling the mainly logistics and customizing capacity across all our main sites, and therefore there are buildings and additional capacity to also support the growth there. Looking at our two half years, we see a stable development of sales across the two half years, despite a shorter second half year due to the short December and some FX headwind. And this shows the strong sales momentum we enjoy and the development of the sales. Profit-wise, the second half year is always a bit lower, and that is in line with the steady buildup of resources throughout the year. Balance sheet. So the balance sheet remains extremely stable. So we have got a reassuring equity ratio of 76%. Regarding working capital, the working capital is 251 million. That's up 9 million from last year. And with this year, we were adding another set of strong numbers with a free cash flow of 14.1% of net sales and impressive capital returns. The return on invested capital is 25.7% and the return on equity even 26.4%, despite the missing support from the tax effects from last year, higher than last year. Driven by this very strong performance, the Board of Directors is proposing an increased dividend of 9.5 Swiss francs per share. This is a continuation of our dividend policy and corresponds to a payout ratio of close to 80% or a total of 117 million Swiss francs. Regarding dividend yield, this is 1.6% based on the year-end closing of 599.5 Swiss francs per ordinary share. Lastly, this table highlights the attractive long-term performance of the Belimo share. Total shareholder return over the last five years was 75.6%. Out of this, 11% was due to the dividend and 65% due to the strong share price development. With this, I'm at the end of the financial part, and I will hand over to Elena for a deep dive into our digital ecosystem.

Thank you very much, Markus. Come. So, ladies and gentlemen, also from my side, welcome. And so I'm thrilled to be able to give you some details of the recipe that Erundi uses to... bake the cake or to make sure that we have good products that allow us to be very successful in the market. Talking about the digital ecosystem, we heard before about global trends and we also heard that these are very important in leading our strategic We see here that more in detail related to the digital ecosystem, we know that we have an increasing demand of automatization in buildings. And we respond to this with our performance devices and with the fact that we have more and more intelligent devices that need software. And on the other side, we also see that in the construction industry, there is more and more demand deterioration of the skills of people that install our devices. Therefore, it is really important that we have a full-fledged set of tools that can interact with our variety of products. Also, we see an increased dynamic of specific markets. data center is one of them, but not the only one. Therefore, we have to make sure that we are flexible and more fast in responding to the need of our customer. And for this, we work a lot on platforms and on the topic of modularity. So let's show a little bit how, what does it mean, digital ecosystem? What does it mean for our product? As you know, we are working on three different business lines, control valves, temperature actuator and sensors. Typically, these products are connected to a so-called building management system that is not from Belimo. So it means that all these products have to talk with the building management system of various customers in various regions. So you can imagine these products talk different languages, so they have different protocols. Therefore, since ever, Belimo has been very strong on the topic of connectivity. being able to bring a series of products that are able to talk different protocols. Now, what we introduced already a couple of years ago are the so-called performance devices. So, like the energy valve that you see here on the screen, this is nothing else that you take the actuator, in this case a valve, and you put the sensor that is needed to make sure that the actuator is working properly at the peripheral level together, all together, and in order to have them working properly, you need also a set of software that is integrated in this product. So we come from single devices that are able to give information and be managed by the building management system to devices that are able by themselves to have a level of intelligence by themselves. Therefore, they need a software setup and they need a digital ecosystem. They are still connected, of course, to the building management system, but on top, they are also able to deliver us data that we can use for different activity related to analytics or also to feedback the performance of our product. in the field. So in this context, then we just don't have only the topic of connectivity. We also have the topic of how do we develop the different software capabilities on the different product, how we can make sure that we scale the activities that we do to different products. So coming back to what makes our digital ecosystem unique. We were already understanding, already from the past, we had a lot of effort putting on the consistent connectivity. Now on the digital capabilities, we have on one side enhanced performance at the peripheral levels with devices that are more intelligent, that are connecting sensor, actuator, and the related software in the device itself. Increasing, of course, the customer value because the performance of the products are better. And also, in order to interact with the people that use our products, they can be the installation and commissioning person, but also during usage, our customers or ourselves, So we also have a really very consistent digital tool suite that we launched in 2024. We are able to interact with products that are since 20 years in the field and with 40 different families of our product with one single app and As Lars already said before, this is really unique in our market. It also facilitates massively the work of people. And in order to do this also, we develop our own operating system, the so-called BELOS, BELIM operating system, which we are targeting to bring to all our products in the years to come. How do we do this? In relation to this, it's really important to work in platforms and to have a very consistent topic of modularity on the table this allow us to be able to scale our performance from one product to others to be faster in the market responding for example to requests from our customer but not only there can also be legislation requirements for example, cybersecurity requests that allow us also to be able to respond faster, to be more flexible. And since we also include in the topic of modularity, the capability of assembly, assembling the products also in different countries, this could also give us an advantage in terms of sustainability, sustainable supply chain, but not only. Now, let me show what What does it mean for us in R&D to think about this topic of modularity? We have here our current products and let me make an analogy to something that probably everybody of you knows. These are some small Lego pieces, Lego products that probably you have already worked on with your kids or probably you also use your kids as an excuse to do it by yourself. And so the question is really, what is the optimal set of pieces that you need in order to assemble very diverse final products? And also very important, what is the right level of rules that you need to go or the level of instruction that you need to give together with the pieces so that you are able to produce these different parts. And this is exactly what we were working on very intensively in the last years. So we were putting together different people to make sure that we have an optimal set of modules, optimal set of elements, and a very strong set of rules that allow us to combine different elements to give a very various and variegated portfolio of products. So Lars was already showing you before this picture. In this picture you see tangible what does it mean to work as a platform. You see, for example, all the cables and all the plugs are identical. And this is, of course, for us an incredible but also the different pieces are combinable, come together. What you don't see is that this is not only for hardware parts, so not only for something which is tangible, but also for the digital part. So also our software is built up in the same way, our tools are built up in the same way, and the way we work is really driven by this topic of architecture, modules and rules so that we are really enhancing even more the performance. so much effort in bringing apps that are serving in industrial purpose for the work of people in the field. So perhaps you know our SESIM logo. This is like we want a guiding philosophy and it's a trademarked element of our and the support our strategy. And you see that also for the digital ecosystem, we really work, walk along the different elements of the SESIM. So regarding the comfort, we are able to bring comfort and health because we are able to better control the performance of our devices, so control better their results, which of course also give us a better energy efficiency in the buildings. We can also work in terms of safety by protecting lives with fire and smoke application, but also liabilities, assets, sorry, assets, for example, with cybersecurity, and also enhancing and simplifying life of people when they are installing and maintaining our products that are in any case characterized by very long-lasting performance, high durability, and elevated level of quality. So I hope that I was able to give you a little bit of a flavor of what means platforms and the combination of the Belimo digital ecosystem that we were really truthfully developing as a platform and as well hardware platforms deliver really a unique market position for Belimo and a long-lasting competitive advantage for our product in the field. so with this i am at the end and my deep dive and i would like to give back to marcus for the outlook thanks a lot so lastly we'll dive into the the outlook now it's coming

So overall, we're expecting a continuation of the 2024 dynamics into 2025. So that means we expect a strong development in the Americas with also continued support from data center investment. Equally, the dynamics is expected to be high in Asia-Pacific, driven by the overall economic growth, data center investment, and potentially some upside also from effects from Chinese stimulus investments. Overall EMEA will remain the most difficult challenging region and we expect low new construction also in 2025 and the pickup probably only as of 26. So therefore, again, renovation and retrofit will remain the main growth driver in Europe, with also some upside from a destocking supply chain ramp up on the OEM segment. That means overall, we expect the sales growth slightly above our five-year average, or that's at the upper end of our medium-term growth targets of 9% to 11%. EBIT-wise, we expect performance in our mid-term corridor of 18% to 20%, with the strong sales performance also there in the upper third of this corridor. Obviously, I don't need to tell you there are significant uncertainties in the current economic development. I mean, we don't know how also trade war will affect the global economy and also how trade wars may affect also FX rates. Currently, FX rates are favorable for Belimo, but that may change very quickly depending also on the introduction of certain policies. When we look at the data centers, we see very limited risks for the short term development. So we expect there in the short term the investments to continue both in the traditional data centers and in the CAPEX for liquid cooling. There is more uncertainties regarding the medium term outlook also on the data center. equipment, but that is below our control and heavily depends also on the development of artificial intelligence and the requirements on the hardware from this side. So despite all this uncertainty, we maintain our priorities and investments unchanged. So we focus on the deployment of the digital ecosystem, also on capturing the market opportunities and expanding our workforce mainly on the sales and marketing side. On the other hand, we also continue to invest into our facilities. We need to upgrade our capacity in order to also be able to deliver the increased demand. And therefore, we also see elevated capex level in this year and in the next one, two years to come. This is the end of the official part of our presentation, and we are happy now to open for questions. Please, Marta.

Thank you. Thank you, Markus. Thank you, everybody. We now begin the Q&A session. We start first with taking the questions from the room, then we move to the call, and then finally we move to the webcast. If you have a question, please raise your hand now and wait for the microphone. Annabelle and Timothy will bring it to you. It's very important to start speaking only when you have the microphone so that our colleagues on the webcast can also hear you. Do you have any questions, please?

Thank you. I have two questions. First, about your margin guidance, you say 18 to 20 percent, maybe in the upper third, if I understood correctly. What would you say is the biggest risk that you might not match the 24 EBIT margin? That's the first question. Maybe the second one. I saw in the annual report that in Germany you had a slight decrease, as you were alluding to. However, in France, for example, you showed a certain growth. I'm surprised by that. Maybe talking about Germany, can you give us... some idea on how the split retrofit and new construction is roughly about for Belimo and what's your view for Germany overall for this year?

Okay. Thanks, Martin, for the question. So regarding the downside risk for the EBIT guidance is obviously the FX rate, especially the U.S. dollar. So we are exposed to the U.S. dollar as we have got much more revenue than costs in U.S. dollar. And therefore, the FX rate will remain the highest risk on the EBIT margin. Now, with regards to the development in EMEA, I think that's always interesting. So, I mean, EMEA is a combination of a lot of countries, and we saw a lot more dynamic in the southern part of Europe of EMEA, including France, and there certainly also the investment around the Olympic Games helped deploy the investments and the sales in France. Regarding Germany, generally we have got roughly half-harvest new construction and renovation retrofit, that's across the cycle, and this time certainly the split was much more geared towards renovation and retrofit. Now also very special in Germany is we have got a very high share also of OEM business in Germany and they obviously are then more geared towards new construction and there also the uncertainties around the heating law was impacting there also the sales of our OEM customers further burdening the sales in Germany. Now, our estimation for Germany is obviously in line with the overall market, so we don't expect a huge change of the market dynamics and therefore low new construction activities also in this year. Obviously, we hope that the new government will be able to change also the sentiment in Germany and potentially also lift their investment climate, and that may provide also certain upside for this year.

Please. If I may ask you, please, just to state your name, last name, and the company name, please.

Hello. Thank you. About the growth investments, I mean, if you go back one year, you were a bit more cautious on the outlook compared to how it turned out. So the year was – you were surprised yourself how well it went. Now it looks like this momentum is continuing. Has this changed your capex plans? I mean, you were already in a high investment phase, but do you need to step up your capex in terms of capacities compared to one year ago in order to keep up with this very strong growth? Or is that still within, you know, manageable within the old plans?

Well, it's generally manageable within the old plans, but we've accelerated part of the investment part. We also got lucky with how quickly we also got the construction permits and therefore were able to start the construction a bit earlier than we anticipated. Okay. And what is the utilization, the capacity utilization right now? The capacity utilization is extremely high at the moment, especially when it comes to logistic capacity. So we at the moment have external warehousing space that we need, that gives inefficiency in the operation. So a lot more transportation routes are required. And therefore then the integrated warehousing will again lead to more efficiency in the production process. Now, from a manufacturing point of view, we have got still ample capacity to meet the demand. So it's mainly coming now at the moment from the logistics and customization side. Okay.

That means that you don't foresee kind of step-up costs, you know, like that from one day to the other you have fixed costs going up because of production, because it's rather logistic, so not that bad. You know, the thing is, if your growth would come down to the usual level of 8% to 9%, and at the same time you have new capacities coming into work at the same time, then there might be a margin issue. But that is at the moment not foreseeable. No, it's not foreseeable.

We also have to see what the investments is mainly in buildings and logistics infrastructure. They also have a very long depreciation period, and therefore the impact on an individual year is relatively low. and then the individual lines, and especially then also the workforce that are working at the line, there's a lot more flexibility to then dynamically adjust to the demand on the market side. Okay, great, thank you.

I think there was a question from Lothar in the back.

It's Lothar from Octavian. I was wondering whether we can talk a little bit more about data centers. You said that roughly one-third of the growth in the U.S. last year was contributed by data centers. Can you give us a picture about the rest, the other two regions and also what it meant for the group? And more importantly, these things are not built overnight. So, of course, when we ask you, you always said you have a relatively short period where you deliver, but at least you know the plans of your customers. So what should we expect in terms of growth driver from data centers in 2025 and 2026? It could be, let's say, if in 2025 you are guiding for a little bit more than the average of the last five years, which was 9.8%. So let's round that between 10 and 11. How much of that could be data centers?

I mean, overall, we have got data centers accounting for about 10% of our turnover, significantly higher in the U.S., with about 12% to 15% of sales on data center. And as mentioned, the growth was about a third was driven by data centers in the Americas. It was a significant contributor in the other two regions as well, but at a bit of a lower spice. Now, you mentioned we expect the data center investments to continue on both ends, so both building new data centers, and that has mainly then also an air site effect of it, but also an upgrading of existing data centers with the installation of liquid-cooled equipment that is installed in existing buildings and upgrading there the capacity.

Historically, data centers were around 10% now because there is over-proportional growth and also yourself are targeting these data centers as one of the key growth drivers. So the relative importance should grow. So again, the question is looking at 25, how much of the expected roughly 10% plus growth could become from that?

I mean, it's probably about the same like this year, but also a third is coming from data center that is driving also data growth, obviously heavily depending also how quickly those data centers get installed and how quickly also it's possible to install the new data centers, given also the power restriction that many of those installations are facing.

Just to clarify, Markus, you meant the same with relation to the growth share that is expected, not the same revenue contribution?

Yeah, absolutely, yeah, the same. Maybe what can be added, maybe you alluded to it, of course, these data center investments, they take time as well, right? So these are investments, they need to have the building permits, so it takes... a couple, maybe one, two years at least to get the permits for data centers, then to build it and to commission it, it takes another two, three years. So this becomes longer, of course. Many of these projects have been started in the past, so they will be equipped this year. But this whole market, I would say, it's not as fast as we maybe perceive it but it's it takes time in particular what what marcus alluded to this uh to get all the the power aligned to and to make sure that that that they can be powered and uh secondly maybe to mention regarding data centers what we have done last year we had also the deep dive in our capital markets then september on data centers but we have established an organization dedicated to data centers from the sales and marketing side, where we really are very close with the various end customers as well, the hyperscalers, the co-locators, but also the corporate data centers. And of course, with all the... Agents in between. Each data center, of course, has to be built as a single project where there are consulting engineers, contractors involved, and these data center by data center. So it's quite a complex industry in a sense. We have the big hyperscales, but then every data center has to be built individually. But this is, of course, a market that is, as mentioned, a lot of investments go in. and it's very broad in the whole world, and we continue to position ourselves there as the market leader and also looking at technologies that are possibly changes in the future. So it's a very crucial element for us to increase the energy efficiency in this space.

Please, Martin.

Yeah, thanks. Martin from . Just regarding the U.S. geographically, how scattered are you across the U.S.? So do you have any main focus areas, be it East Coast, West Coast, whatever? Just wondering, because the outlook for the U.S. is quite different depending on the region. That would be my first question. The second question is on raw material and component prices. COULD YOU ELABORATE, MARCUS, HOW MUCH, YOU KNOW, WHETHER THEY WERE FLAT, SLIGHTLY DOWN OR SLIGHTLY UP IN 2024 AND WHAT YOU'RE EXPECTING FOR 2025? THEN MY FINAL AND THIRD QUESTION IS ON YOUR STRATEGIC GROWTH INITIATIVES AND THE IMPACT ON YOUR P&L. I WAS CURIOUS ABOUT THE IMPACT IN TERMS OF COST. incremental impact in terms of costs in 2024 and what you're expecting for this year. Thanks.

Okay, so I will take the second two questions and then hand over to Lars for the America question. So with regards to the impact of the investments, you've seen we have increased our personnel cost in line with top line, and that's also our general plan that we also increase the HEAD COUNTS IN LINE WITH SALES GROWTH, AND THAT ALLOWS US TO PROACTIVELY ALSO INVEST INTO THOSE GROWTH INITIATIVES, BOTH ON THE INTERNAL PART, BE IT ON R&D OR ALSO ON BUILD-UP OF THIS DATA CENTER INITIATIVE, AND ON THE SALES AND MARKETING SIDE. THEN WITH REGARDS TO INPUT COSTS, SO WE SAW A ROUGHLY FLAT MATERIAL PRICE DEVELOPMENT IN 2024, AND THAT'S ALSO OUR EXPECTATION GOING FORWARD.

Maybe regarding the U.S. So we are headquartered in Connecticut with Perlimo. We have a strong footprint, manufacturing and so on. And then we have also a logistics center in Sparks, Reno, Nevada for the West Coast. And then, of course, we have our sales organization there everywhere. And they're covering all the United States. And in their projects, basically all over the United States. Of course, they're always like the large metropolitan areas that draw the biggest sales, but also second-tier cities that are developing very, very nicely. And then, of course, data centers that can be everywhere. more larger projects. So there's some very large projects. I was just a couple of weeks in Florida visiting the largest theme park that's being inaugurated in May in Florida, in the world, and that's fully equipped with Belimo energy valves and 75 buildings slash attractions, a huge, unbelievable size. But we also see manufacturing projects where investments of $2 billion in a project and very, very large projects that we haven't seen in the past. So this goes across industries.

If there are no more questions from the room, I would now ask Emily to open up the line for the questions from the call, please.

Thank you. Our first question comes from Bridgesia with HSBC. Please go ahead. Your line is now open.

Hi. Good afternoon, Joanne. I have a couple of three. The first one is on the EMEA market. You talk about kind of a big outline for this year as well. I'm just trying to understand, given your slightly late cycle in the new construction cycle, when you're saying that it's potentially recovers towards end of this year, does that mean you have already seen some improvement in new construction, i.e. in Germany, France, or other key markets? So if you can just give a little bit of color on that. And within that, if you could just speak broadly in here, how the renovation is at this point in time. I recollect at a group level, it used to be 20%, whether that number had changed recently, given you're much more focusing towards retrofit. So that's my first one. And the second one is on data center. So obviously watching strong growth as of now, but looking at what the kind of your end customers are demanding at this point in time, you talk about medium-term outlook to be maybe slightly hazy, but the near term looks stronger. Between H1 and H2 this year, how do you see the overall revenue trajectory moving? Is it a slow start to H1 or you see the acceleration continuing H1 and similar momentum continuing to H2? So that's my second one. And thirdly, on the margin side, if I understand your reasoning around margin, it sounds like your costs are flat. Labor might be going up in line with sales. and you have more volume on your outlook. So that, and with price makes, that suggests to me that there's further margin upside potential, excluding the FX impact. So if Mark, you can comment on that. Thank you.

Thank you. Maybe take the first one. Did I understand you when you were asking about the Indian market development, right?

No, I was asking about the European retrofit market. Sorry, I was asking you the European market, how the underlying new build is developing there, because you're talking about some improvement potentially happening towards the end of this year, whether the new construction already started improving or it's about to start.

Sorry, I misunderstood. It was difficult to understand. So the European retrofit market... The European retrofit market, it's obviously Europe has a lot of existing buildings. Oftentimes also they are in cities where it's difficult to rebuild and it's more costly to rebuild than to renovate or you have to renovate on the one hand. Secondly, of course, we have then opportunities because of higher energy costs that we have often to really have a very interesting payback with retrofit measures in buildings, energy conservation measures that have short paybacks of two years, three years, and therefore there's a lot of potential there in Europe. pretty much in every country to do so. And we also have seen that in many markets, also larger companies that, of course, still have initiatives to make building energy efficient. For instance, we had a large German car manufacturer that is in process of making their manufacturing plants more energy efficient all over the world today. using, for instance, the Belimo energy valve. And they still continue to do so because, obviously, it's beneficial. It has a very short payback and makes them less dependent on energy. So overall, I think this retrofit market is really very interesting for us to continue to work on with our initiative, Retrofit Plus, strategic initiative.

Lars, if I may just perhaps, I think the question was also a little bit about the new build and actually how do we see the new build if I understand you British correctly. So if you could just please give a little bit. Yeah, thank you. And the new build. Thank you.

Well, the new building market, as Markus alluded to before, it's different in Europe. We see some, of course, countries such as France, Spain, where there is a lot of development. And then, of course, depending on the economic development, you see less new buildings. In Germany, but there is still, of course, always a building market, even if the economy is in a recession, right? There are still, of course, companies that do well and build. So we focus, of course, on that, on these vertical markets as well that are active in Europe. But overall, of course, there is not so much new build. There is more retrofit potential. Thank you.

Maybe I can also remind the second question that was with regard to British, if I understood you correctly, with regard to the outlook on the views we initially have on the operating leverage into 2025 with the sales growth slightly above the five years average and the personal expenses growing a bit in line in the second half with the growth in the second half. So whether we will see perhaps, you know, a certain margin pressure from that, what I understood from British. Is that correct, British?

Yeah, yeah. I think, I mean, what we saw is always in the second half here, so I mean, that's slightly shorter, and therefore the revenues are usually a bit lower this year, we're on the same level, and we're constantly building up the resources, and therefore in the second half here, we always have a lower operational leverage as we've already built up the resources. And that's just the continuous employment and taking of new employees. And that will also continue this year with always a slightly lower cost base in the first half year and then a higher one in the second half year. And consequently, a high profitability in the first half year than in the second half year. We don't expect there any changes also in 2025 from this usual pattern what we always had in the past.

Fair enough. Thank you very much.

Thank you. Our next question from the phone lines comes from Fabian Piasta with Jefferies. Please go ahead.

Good morning, everyone. Thanks for taking my question. I got three questions. So the first one would be on retrofit. So given that you are anticipating a further shift towards renovation in MIR, are you expecting a further start to it out, or is that already baked in your strategy? The second one, and I don't know whether this has been answered already, but could you give a rough split of what your new B210 renovation split is on a global basis, or how this has changed? And the third one is on CapEx, whether we should expect for 25, 26 more at the upper end, which is like 6% of sales, or whether this is going to normalize. Thank you. Yeah.

Thank you for your question regarding the retrofit market. Yes, I mean, as mentioned before, it's a big opportunity. Of course, also initially we said there is, of course, one caveat, that's the skilled labor shortage that we have all over the world in that field. And, of course, if there was more skilled labor, more retrofit could be done. So that has a dampening effect on the growth there. That's basically the... main issue what we can do to mitigate is to introduce products that are easier to install to design and support of course our customers with tools and and helping them in particular with these easy retrofits that that can be done with berlimos so we explained that also in the past that our components building automation retrofits is relatively low invasive, so replacing energy versus replacing all the windows or the facade of a building. So I think we promote that as well, even to building operators, facility managers, that the option of upgrading building automation system is one of the first things one should do in that. The market for retrofit is global. I mean, we see actually all over the world, of course, these retrofit opportunities, even also in markets such as India or China or Southeast Asia, where some of the buildings have been built but of average quality and have a lot of potential to optimize and making sure that they're energy efficient because, of course, the energy costs can be quite high in particular. or in markets, like, for instance, hotels, where you have relatively low operating margins. So it's very crucial, of course, to optimize the costs, the operating costs in a hotel, as an example. So we have opportunities there all over the world, and we continue to focus on this initiative, Retrofit+.

I then can take the other two questions. So the question was whether or not the investments into the retrofit initiative in EMEA will impact the margin and say they are mainly the build up of resources are obviously in the sector of retrofit. And there's also a shift of the focus of the sales and marketing employees towards the retrofit project. So we don't expect there a massive negative effect from the from the build up of the retrofit dynamics in our company. Then with regards to CapEx, we expect for this year again higher CapEx than our usual rates, and this is also in conjunction with the build-up. We are investing in all our main facilities, and it's probably no surprise that Switzerland is the most expensive building of all of them that we're building, and that's at the moment where we predominantly invest this year, and therefore the CapEx is again at the upper end of the indication.

Thank you. Those are all the questions we have from the phone lines. And I will hand back to the room.

Thank you very much, Emily. Since there are no more questions from the call, we now turn to the webcast. The first question from the webcast comes from Axel Stasser from Morgan Stanley. Sorry, Axel. So what is the risk on your group profitability if we see less liquid cooling application needed?

On the data centers, so that's a data center question, as we have, I think, explained at the capital market. For those capital markets, for those who attended, we have the investments in data centers that is increased, but also the shift or the additional requirement to have liquid cooling in addition to the air cooling. And the question is, how fast will this be adopted? Today, about 98% of the data centers are still air-cooled, and the liquid cooling is now mainly built in many of the data centers that are being built now, so liquid cooling will be built in. This is necessary. I mean, all these new processors, the GPUs, They have power requirements that cannot be cooled only with air, so they require liquid cooling. So there is, of course, the question on how fast, how this adoption happens, but there is kind of the increased growth rate from the data center build, but then also the shift, or shift is not a shift, it's an additional business of liquid cooling, where we, of course, benefit quite a lot because now we not only sell damper actuators and sensors but also the control valves and the sensors required to perform these liquid cooling applications.

Thank you, Lars. The next question comes from Rainer Weyhofer from Finanz- und Wirtschaft. In fact, these are two questions. I will take them one by one. Can you give us some details about the capacity expansions in Switzerland and in the USA? That's the first question.

Yeah, I can give that. So in Switzerland, we are investing in Hindville into new logistics and customization building. It's just opposite the streets and will be connected with a bridge. And we communicated that earlier in the local news. So we'll invest roughly 80 million in the whole building and the infrastructure associated with it.

Thank you. That's all the questions from the remote participants, actually. And we now turn to the room for any final questions and clarifications you may have here in Zurich in the room. If that is not the case, then we have addressed all the questions. Thank you very much for your engaging and insightful discussions. And we conclude the webcast now. For those attending in person, we invite you to join us for lunch. Thank you again for being with us today. We appreciate your time and interest in Belimo.

Thank you, everybody, as well. Thank you.