Huber+Suhner AG

Good morning, ladies and gentlemen, and welcome to Hoover Sooners Media and Analyst Conference 2021. We will follow for today's session our proof and screenplay of previous years, and I'm going to give you first an overview of our performance during the business year 2020. Our CFO, Ivo Wetzler, will then do a deep dive into the financial results, and I will close the session with an outlook and an analysis of our key markets you will then have at the end a chance to ask questions i will start with the overview and to be very precise and clear and to start with We rate 2020 as a difficult year, but many companies would use the same attribute for 2020, and difficult means in some cases minus 50%, and in others it means minus 5%. On our top line orders and sales, we had to accept a decline of business volume by about 10%. This was mainly due to two main drivers in two of our key markets. In the mobile communication market, the network expansion was slowed down by COVID. And the same reason is also the basis for lower volume in our second wave. largest market which is the railway market where it was difficult for our customers to commission and deliver their rolling stock to their customers which has slowed down the dynamics in the railway market considerably. The order increase was evenly spread. F4 decreased just slightly, and there we had some inorganic effect due to the acquisition of Beacontel, but also the data center basis performed above 2019 levels, which supported the F4 basis on the top line. The other two technology segments, RF and LF, were clearly behind. There was also a shift in net sales when it comes to our regional distribution with EMEA up and almost on previous year's levels where we had to accept considerable decline of our sales in Asia and the Americas. The three strategic growth initiatives overall contributed again positively, and we were able to grow. For those that are not so familiar with HuberSUNO, our three growth initiatives are aerospace and defense, data center, and electric vehicle automotive. The reason why we consider 2020 as a solid year is that we achieved still an EBIT margin in our mid-term range of 8% to 10%. And the year turned out to be at 8.3%. It didn't look like this when we presented the half-year figures in August, when we stood at 6.7% on EBIT. So we needed really a very strong second semester with a 10% EBIT for the last six months of last year, which brought us up back into our mid-term target range. The improved margin was due to a better business mix and also was attributable to a very tight and stringent cost management throughout the year. We also implemented quite early and quite severely temporary and structural measures which have cushioned the economic effects of the COVID crisis. In August, our free operating cash flow was not very strong. That has changed completely in the second half, so that now we can say also during 2020, Hooper Sooner was able to generate cash and increase the net cash position again. When we have a very brief look at the markets, we can say that the markets, they have stabilized on a lower level after the first lockdown. But we have at some point in May, June, still hoped for a V-shaped recovery which didn't materialize. So we have seen a return of the market, but not to the level which we were used to before COVID. And when I will share the outlook, I'm going to explain to you that the recovery of the market will not be fast, but more of a step-type nature. The communication and the transportation market showed significant improvements towards the end of the year, but we were not able to compensate for the shortfall of the first six months. The automotive market has seen two different patterns on the conventional driven cars with combustion engine. We have seen a difficult year throughout 2020. while the demand for electric vehicles have sharply picked up, which has driven our growth initiative in EV automotive. The industrial market suffered broadly, and we have seen a decline in order intake and net sales across all key applications that we serve in this main market. And as if COVID year was not enough, we had at the end of last year, in the middle of December, when we were about to close the year and we were in the final spurt, we were hit by a successful cyber attack. And there were several things which came together which made this attack successful in the beginning. Luckily, we could rely on our crisis management, on a data recovery process, and on very actual data, so we were able to restore all our servers within days. with the latest data so that we were up and running and basically helped ourselves out of this difficult moment. Nevertheless, some working days were lost in December, which have had a minor impact on our top line. When we look at the figures at a glance, we can see that orders were down 6.6% to now $748 million, while sales declined by 11.2% to $738 million. We still managed to achieve a result in the 8% to 10% midterm target range at 8.3%, which wasn't a surprise this morning because we already announced that when we disclosed the top line figures end of January. that 8.3% represents 61 million EBIT. A positive surprise and some hard work from our financial staff is seen on the net income line where we have basically just lost 50 basis points. And we declined only by half a percent to 7.1%, which is a span to the EBIT of just 120 basis points. When we look at the EBIT performance of Ubersuner over the last five years, you can see that with the exception of 2017, we have been in this 8% to 10% range and also following two strong years with EBIT above the $80 million in absolute terms. And in the 9% range, we had a year with a decline of 1.4%, now to the 8.3%, which under the circumstances we consider solid. And of course, it's not what we wanted, but still at six months, it looked good. Differently, and thanks to a strong recovery and also due to the fact that our measures have shown effect, we could save the year towards the end and still make it to the 8.3%. When we look at the three technology segments, we start with RF. The RF business has been our strongest contributor to the bottom line in the past years and also has seen nice growth year on year over the last three to four years. We had to accept a steep decline of our top line in the RF business with minus 14% on sales. Nevertheless, we managed to keep the operating profit in the double-digit percentage range. The decline in business is broad, as we have in the RF business, the dominant markets are coming from the industrial sector. In the past, our growth initiative A&D has been a strong contributor. This last year, we were not able to grow the A&D business anew. On the other side, we have some positive news which do not contribute to our business performance yet, which were significant investments, but which result now in nominations in the area of automotive sensors, or to be precise, in the area of distance radars for autonomous driving. where we have been able to secure, after two to three years of investment, our first nominations from key customers and for key platforms. There were also other areas that performed comparably well. One is in the communication field with RF over fiber solutions, so analog optical signals over fiber. And in general, despite the decline in top line and profitability, I'm not worried about the outlook in this segment as we are well positioned here and particularly in the markets that we are present with the RF technology. There is a structurally sound and solid business environment. And we will also see this technology growing again in future years. Then the positive surprise last year was the fiber optic technology segment. If I say surprise, many people asked me in the past what the plan is with fiber and when we will be back to the double-digit EBIT margins in this technology segment. I was always quite positive and clearly stated that I see the potential for this technology segment to return to WGD bit margins, and I think we made a good step towards that objective. Nevertheless, we also had a decline in the top line despite the acquisition of BKTel towards the end of 2019. And the fact also, despite the fact that the data center business, which is one of the three growth initiatives, has contributed with growth. Nevertheless, we believe that the slowdown in top line is of temporary nature and that we are ideally positioned to benefit from the two main trends in the communication market, which is the investments in the mobile infrastructure towards 5G, and also the investments into the backbones to be able to cope with the higher data rates in the fixed net infrastructure. The LF technology segment, which is our technology segment with the highest fixed cost, is usually a hotspot when volumes decline. And also here, we see similar patterns as in RF, and the decline is of a similar magnitude with 14%. Nevertheless, despite the high fixed cost structure in this segment, thanks to operational agility and very tight cost management, we were able to limit the damage on the bottom line, and we ended the year at 6.7%, which we consider under those circumstances as a bit more than acceptable. I already mentioned that the railway market suffered somewhat as our customers were not able to deliver their rolling stock to the railway operators. In the automotive sub-markets, we have seen, as I mentioned, two different patterns as our exposure to the conventionally driven cars is not so big. we could basically compensate the decline in this business with a steep growth in the EV automotive area. And last but not least, our initiative in the area of high power charging for those electric vehicles has also contributed nicely and we were able to defend our very strong market position in this rapidly growing field. When we have a look at the other dimension of our business and we look at the main markets, we see that we had to accept the decline across the three main market segments with communication holding up against the previous year best with minus 8.8%. However, the PKTel acquisition has supported here the volume, while in transportation and industry there was a double-digit decline. Just to remind you, as of half-year 2021, we will discontinue to report in the technology segments. and we will provide you the detailed P&L figures in those three market segments. The third and last main dimension of our business is the regional split and what sticks out here is that Our business in EMEA, including Switzerland, has suffered least during last year. And if we take into account that there was a disfavorable currency situation here, you could say that we have been organically almost flat in EMEA and we were able to keep stable. the level of business. We suffered more in the Americas with minus 20% and in Asia with minus 18%. And with that, I conclude the first part of our presentation and I would like to hand over to our CFO, Ivo Wexler, who will share with you the details of our financial results.

Thank you also, ladies and gentlemen, also a warm welcome from my side. I would like to share some more financial information with respect to the business year 2020 with you. And I start with the order intake. You can see from this slide that we had an equal amount of organic decline And also, compared also to the currency in copper, both are down 42 million. This is in the magnitude of minus 5%.

On the other side, we had the portfolio effect.

We have heard it's mainly the acquired Becatel business, which we acquired in December of 2019. And to a smaller extent, also the Katain antenna business, which we acquired in the middle of 2019. So overall, we ended up in the order intake with minus 53 million, which is equivalent to minus 6.6%. On the net sales bridge, you can see that organic decline is the double of the currency and copper impact. So minus 10% is organic decline with 83 million, currency 42 million minus 5%, and the portfolio effect is similar than in the order intake. Overall, this is a decline of 11.2% or 93 million. Out of the organic, about one quarter, so about 20 million plus, was due to this end of the 4G rollout in India with Samsung. I hope this is now the last time I have to mention it. If you look at the net sales development by technology segment, you can see that on organic level, we had a similar decline between 9% and minus 10%. However, reported-wise, there's a big difference between radio frequency and low frequency minus 14, and fiber optics benefited from the portfolio effect because the entire BKT acquisition is reported in this segment, so that's why it's only down by 6%. The cost margin came under pressure due to the low volumes. And actually, because there were not enough fixed cost absorption, also the inventory turn was lower, and we experienced very high transportation costs during the COVID crisis. On the other side, I think we managed to also have some lower purchasing pricing. And also due to, let's say, the general cost savings were also partly, let's say, partly have an effect on the gross margin. On the other side, we had also in particular in the second half of the year a better business mix. So we ended up the year above the 35 percentage threshold with 35.4% gross margin. On the cost side, we had heard it before, we started the year very fast after we saw that there will be a significant decline with proactive cost management. We introduced first temporary measures, such as short-time work, holiday reduction, but also a temporary salary slip for the top management. Obviously, there was no travel possible anymore. We had also lower marketing costs. But we didn't really save on the R&D because you can see now on our annual report, the R&D cost increased by 5 million. Yeah, it's mainly coming from the portfolio. It's mainly due to the Becadel acquisition. But nevertheless, it's in percentage of sales now 6.4%. And it's the highest level of R&D in the past years because we want to stay innovative. And then we actually replaced, we announced that in October, we replaced temporary measures with structural measures. We announced that we have to reduce our workforce by about 250 positions, and that we also had decided to close down the production facility in Brazil, which is currently now close to be finalized. So overall, there was based on due to all these impacts, there was a reduction of the SG&R of 17 million. When it comes to the EBIT per technology segment, It has to be mentioned that profitability in the second half here of the radio frequency segment and also the lower frequency segment was more or less the same as in the first half here. So we ended up radio frequency with still a reduced but still double digit margin of 12.5% and the low frequency also still with a solid margin of 6.7%. Fiber optics, yeah, we had a very strong second half of the year. I have to mention there is a one-off transaction included in this number because we had a positive litigation cash settlement of 4.6 million. However, also without this special impact, the operational profitability of the fiber optics segment was double-digit in the second half of the year. So we were overall able to increase the margin in fiber optics again to a level of 8.3%. The corporate costs were also slightly lower because also there the cost savings had a certain positive impact. We ended up, as we heard before, with 61.2 million EBIT, which is corresponding to an 8.3% margin. One comment to the currencies here. Currently, we have a nice hiccup in the FX market, but last year it was totally different because the Swiss francs appreciated against all different currencies between minus four or plus four to plus 24%. So on the EBIT level, the FX development last year compared to the previous year cost us approximately half a percentage point on the EBIT margin. On the net financial result, I think the FX was well managed, so there was a similar amount of negative currency impact. And on the other side, the other financial result was positive due to more interest rate income, so we ended up with the net financial result almost a million lower than the previous year. On the tax rate, we also had a very positive development. Our tax rate, our effective tax rate was very low with 13.7%. This was due to three major positive contributions. Two of them are of sustainable nature. One of them is only a one-off. I start with the two sustainable impacts. First of all, we could the first time apply the R&D special deduction in Switzerland due to the new tax law. And as we had a very strong R&D base in Switzerland, we can really benefit from this impact. On the other side, for the first time, we achieved that we have a high tax status in our production in China. That means for the years 2020 to 2022, The income generated in the production in China is only taxed with 15% instead of 25%. And that also helped to reduce the tax rate. Then we had one positive effect which had to do with the close of the production site in Brazil. It was on group level. We could release some deferred tax liabilities in the magnitude of 3.4 million. Without this impact, our effective tax rate would be around 19%. Going forward, I expect a tax rate of around 20%. Obviously, it depends then also on the profit mix, country by country. And on the other side, I expect that taxes will generally rise due to the high COVID spending of the governments. Just the UK government announced the tax increase only applicable for 2023, but also the US and other places. I would not be surprised when we see higher taxes in the years to come. So on the net income bridge, you can see that due to this low tax rate and also the slight improved financial result, we could limit the reduction on the bottom line to 10.5 million or 17%. On the investment side, we invested the same amount in 2020 as we did already in 2019, with 38 million, which is corresponding to 5.1% of the total net sales. And this is 10 million more than our current depreciation rate. So we really continue to invest in all strategic projects. And going forward in the year 2021, this number will be significantly higher because we approve class year internally significant large projects. I would like to mention two of them. First one, the one cable plant in Pfeffikon. We have just started to build up a new building in our Witzberg site because we want to focus the whole production in Pfeffikon in the Witzberg area. And this will be, let's say, the main impact will be this year. And secondly, we have heard we will also invest significantly in new production equipment for the RF antenna business, which we will also see in the years to come. So I expect for this year then an investment level of between 50 and 60 million. On the cash flow side, yes, in August, we were not happy in the half year result to present you a low cash flow development. However, we really improved in the second half of the year and generated a lot of cash. We made a lot of progress in the cash generation. So we ended up the year with 50 million on the level three operating cash flow. But also on the free cash flow, we had a positive number with 17.4 million. On the balance sheet, the overall total is only reduced by 1%. But thanks to this good cash flow generation, we jumped over in the net liquidity over the 200 million threshold, which leaves us with a lot of options also going forward. In general, the equity ratio remains very high with 80%. The main reduction in the balance sheet came through to the reduction of the net working capital position, which was due to actually the lower business level. So that's the dividend proposal from the board of directors to the general meeting. They proposed 1.3 francs per share, which is equivalent to 25 million, or a dividend payout ratio of 49%. This is in line with our earning-oriented dividend policy, where we distribute 40% to 50% of our net income on a yearly basis. So then I'm already at the summary of my presentation. First of all, I have to say it was really a turbulent year last year. And what sometimes gets forgotten is, but the most important thing for us, let's say, was to protect the health of all our employees. And I think there we did also a very good job. When it comes to financials, you can see on this slide the summary. Yes, we had a decline proposed on order intake and net sales. However, at least we managed on a yearly basis to end up with a positive book to build. And due to the very strong cost management early in the year, we were able to still end up with our medium range from 8 to 10%. At the lower end, yes, but 8.3% we consider as very solid. We benefited from a very low tax rate due to one-offs, but also to sustainable impacts. And as I just commented before, we managed the cash conversion much better in the second half year, and so we ended up with a full year operating cash flow generation of 50 million. By that, I have concluded my part of the presentation and hand over back to Urs for the outlook.

Thank you, Ivo. Before I share our outlook with you, let me highlight a few milestones. From Ivo's explanation, it became obvious that despite a very tight cost regime in the company, throughout the whole year we kept investing in key areas, and that included CAPEX, but also included business initiatives where we try to address key trends. Those four milestones, they highlight such examples, and I start with an obvious one. As you all know, ESG is on the radar of all stakeholders, and also Hubert Sooner is actively engaged in this area. So we have been able with the CDP to get an A- rating. We, for the first time, participated in that contest and we already finished up with an A- rating, which we consider to be a very good result. Furthermore, we have also committed ourselves to reduce the CO2. emissions by 50% by the year 2025. And last, but by no means least, we have also committed ourselves for the first time to publish a full-fledged and comprehensive sustainability report to address this important topic and make a broader public aware of what we are doing in this area. In the area of autonomous driving, I've already mentioned that we were able to now win first nominations for distance radars of the next generation. So with that success, there are also considerable investments in production facilities connected. And it means that our automotive business is now consisting of some specialty applications that go into conventionally driven cars. We have our growth initiative centered around the EV mobility. We have now also business that goes into sensors. And last but not least, we are also in communication equipment that goes into the car with those board-to-board connectors and with those four applications. we are extremely well positioned to capitalize on future growth area in the automotive market. The next example has to do with an important trend, which becomes even more important with the transition of mobile network towards the new 5G technology, as a very exact timestamp of the different cells in the network becomes more important. because latency is coming down and the synchronization between the different cells in the mobile network depends largely on this very accurate timestamp. There was a key milestone achieved by Hugo Sooner to be able to change this application to an all-optical direct GPS over fiber solution, which means that we have in the cell, in the mobile network, a GPS antenna which receives the exact timestamp from the satellite and without converting that signal and without being, without... a power connection to the antenna, we can feed that signal back into the network to make sure that there is this precision timing achieved. The last milestone deals with the ever increasing data rates in the network. So the 400 gigabit connections are the future, while we are still implementing 100 gigabit links in some areas, but the trend goes towards 200 gigabit. links and 400 gigabit links. And the most effective way to ensure this very fast and performant connection is by using WDM, wavelength multiplexing devices, which are included in the sending unit and the receiving unit. And by using these little devices from our CubeOptics acquisition, we can achieve a 400 gigabit link by sending four times a 100 gigabit signal through the same fiber. And by that, we get the costs of the equipment down and we can use existing fiber capacities more effectively. And we are working on the next generation wavelength multiplexing devices that go into sending and receiving unit to be able to deploy 200 gigabit links and 400 gigabit links into the network. Those were four milestones. And with those four milestones, I would like to highlight another key topic. And that has to do with our structural change, which I already announced in my first session. You can see on this picture basically the three main dimensions of our business and along those three dimensions we could theoretically structure our company. In the past we have reported according to technology segments our structure was based on those three technologies and hence we have had a very strong technology push into the market which has helped to achieve a leading technology position in the fields of connectivity. We have looked at the situation and we have come to the conclusion that it's time to change the organization and introduce a more market-oriented organization and implement more market focus in our structure. So as of 2021, we will start to report the business figures along the three main markets, communication, transportation and industry. And we have restructured our organization accordingly. The objective of this reorganization is, as I said, twofold. First of all, it's to increase market focus in the organization and make sure that we are even closer to the customers and the markets that we have been in the past. And the second objective is to reduce complexity and simplify our structure. This is a thing that I have heard quite often from the outside that it's difficult to understand Huber sooner as we have those technologies and these technologies, they're going into different markets. So we simplified our structures. We are now all aligned according to the market segments. And we have at the same time also eliminated our matrix structure. That picture just highlights what we will do. So instead of reporting along the three technology segments, we will report along the three main markets. And we have included the dominant technology in those market segments to achieve a maximum alignment within our organization. With other words, in the industry segment, the RF technology is embedded, the communication technology is in charge of the fiber optic, the communication market is in charge of the fiber optic technology, and the transportation segment is responsible for the LF products and technology. That's how we go forward. The solutions remain the same. We expect that we can capitalize on our technological expertise and excellence. I think we can also leverage our customer access through WOM technology even better. And by bundling our offering, we can have now a broader approach to our key customers and into our key markets. The solutions for the industrial market, they consist of our growth initiative, aerospace and defense, but there are also energy application, wind energy, the high power charging application is going into that sub-segment, and there are applications in the power transmission and distribution grid. There is an important market for us in the area of test and measurement, which is a market that demands very high quality product and allows us to differentiate with our high performance RF product. But there is also a basket of different applications which consists on medical and various other things, which is summarized under the general industrial header. Here in this market, we have typically small to medium batches. Volumes are not reaching the level of a communication market. On the other side, it's quite often very customized and tailor-made solutions, which allow us to achieve the highest margin across all our main market segments and which give us a high differentiation ratio. towards our competition. In the communication market we address the mobile communication market as well as the fixed network market. There is an application which is going across the communication market which is the data center which could be a neutral host or an enterprise customer could also be a telecom operator or a data center company. We have then also the whole area of in-building coverage and specialty antennas. In principle, our positioning in the communication market is on layer one, which is called the physical layer. It's basically where the bits travel in the infrastructure and where there is a physical product, a cable, a connector you can touch and which is always needed to have bits traveling from A to B. The layers in the network include several network administrative layers up to the actual application which a content provider is usually bringing to its customers. The positioning in the transportation market consists of a leading position for rolling stock cabling and solution, including the whole communication equipment on trains, but it includes also everything around the train, be it in stations or along the track. And then the second strong pillar here in the transportation area is the automotive market, which I have already explained that we focus still on very high-end specialty applications in the conventional car business. But our main focus is on the electrification and there on utility vehicles. There is then also the whole autonomous driving trend, which is the basis for our communication product going into cars and buses and trucks. Then I'm already coming to the end, not without giving you some important insights into our main markets, going a bit more into the details here and summarizing it in a way that we strongly believe that structurally our key focal markets are still very healthy despite the decline during the COVID year 2020, the basic trends and the prospects remain intact. In the industry, we suffered during 2020 broadly, but we believe that the basic trends, they are still in our favor. So there is a growing desire for security, but there is also a need for increased communication in industrial applications. And I think I'm not too brave if I say that in a few years from now there will be no devices sold whatsoever that are not connected somehow and somewhere into a communication network. There is a continued strong dynamic for the high power charging, which is a bit a niche application, but since we have such a strong position and the technology leadership in this area are still highlighted, The test and measurement business, it's a strong pillar. It's a high margin, high-end application that has the cycles very much synchronized with the network build-outs. And as we are now about to see a good cycle in mobile communication network investments, also the outlook for the test and measurement market remains quite positive. There is also hopefully and quite surely growth coming back in our aerospace and defense applications. And last but not least, there are a wide range of other applications from medical to others that we serve and which offer potential for us to grow in these industrial areas. In the communication, it has become very obvious during the last year that without the functioning communication infrastructure, the economic impact of such a crisis that we have just gone through would be much more dramatic. And it's thanks to the communication networks and the communication means that we in Hooper Sooner could hold our business together and all other companies could do the same. And you all know that being locked out in a home office somewhere remote you largely depend on these means and those facilities. Hence, we see that during the last year, the focus was on securing quality of the services, but definitely our customers in the communication area, they have suffered less than other industries, and they have now the basis to continue to invest, and we are strongly of the opinion that this will also happen. So we will see the mobile networks being expanded, densified, and there will be more capacity coming and faster services with a 5G service that is just rolled out as a basic service. There is still an evolution taking place on those fast G network. Despite the fact that you may see still the 5G signal or already see the 5G signal on your mobile phone, there will be an evolution of speed now over the next years as we have seen it with 4G as well. and also the fixed net infrastructure will have to cope with the higher data rates coming out of the mobile network but also the streams that go through those fixed nets they are ever increasing and we will have to continue with the investments in this basic infrastructure in order to be able to deal with similar situations as we have just seen last year. In the transportation area, we see a bit of a dip in transportation, mainly due to the fact that our large business in railways suffered last year. We don't believe that the railway business will immediately come back. The cycles there are a bit longer. But we are clearly of the opinion that there is not a structural crisis in the railway sector. There are a lot of projects in the pipeline. They will be reactivated and there is very high commercial activity. So we are quite busy with quoting to large projects, which gives us a feeling of where the market will go. The strong demand will continue to increase for EV vehicles or electric vehicles, be it on the passenger cars, but also on the trucks and buses and also in the area of utility vehicles. And many people, they say, yeah, this battery driven or this battery electric driven trucks, they are just an intermediate phase. There, I say, could be. Nevertheless, there will be. always trucks and buses which have defined routes where you can easily rely on a battery and for long-haul vehicles or for long-haul transportation you take Antwerp and Genoa or whatever, there many people see that hydrogen-fueled trucks will be the future. And I can only say I believe in that, but nevertheless also a hydrogen-fueled truck has a small battery and has an electric drive which needs our cables and solutions. So I'm not so worried about that. And then last but not least, the trend towards autonomous driving cars will continue and our sensors and radars will hopefully play a key role in enabling the next level of autonomous cars. With that, I'm coming to the outlook and the guidance and I I do not want to do that without sharing with you also a bit how we have started the year. There is a little note in our press release and I can confirm basically that Hubersuhne has had a good start into 2021. with a good order level and we are now ramping up our capacities to be able to cope with the higher demand. So I'm quite positive. It still remains difficult to say how long these higher volumes will prevail and how long we will be able to continue. on this higher business level. There is always a chance that it's just a small catch-up effect. It could also be a basic trend. We are anyway ready to cope with both. I think the company has proven to be resistant against those up and downs again last year and we will stay vigilant and be on our toes to cope with whatever the markets have for us in the future. But from today's perspective and assuming a comparable currency situation, we expect growth in the mid-single-digit range. And with that, we expect that our operating margin is also, again, within the mid-term EBIT range of 8% to 10%. With that, I'm at the end of our presentation. I would like to hand over to the moderator to the last part of our session today, which is the question and answer session.

The first question comes from Charlie Fehrenbach from AWP. Please go ahead.

Good morning, gentlemen. One question to your sales guidance of middle single digit growth. Is the assumption reasonable that there's a positive Forex impact of two percentage points? And given that, if this would be like that, isn't your guidance quite defensive given the strong recovery you had in the second half? And the second question concerns the cyber attack. You said it had a minor impact on sales, but did it have maybe any other consequences, maybe on IT or costs? Maybe you could give us some more light there. Thank you very much.

Yes, with regards to the ethics, I think, as I mentioned before, I mean, there is now an uptick, so the Swiss francs appreciated recently but we shouldn't be getting let's say too positive too fast because we don't know how long this will last and secondly The current spot rates are, let's say, in the range of the average rates from 2019. And for example, the dollar is still behind. So we all don't know what will be the FX impact on the top line. But obviously, now we have a positive momentum also from the FX side. And we expect that might contribute also a little bit, but we don't know yet. So it's really hard to say how much this will be. So that's why we said... based on the current FX rates, we'll see a growth in the mid-term range of, no, no, in the mid-term range, in the middle single-digit range of 5%, so around 5%. But that includes, hopefully, some positive FX impact as well.

Good, and I will answer your question, Mr. Febenbach, regarding the cyber attack. So we have been hit by a cyber attack attack in the night of the 13th of December. And it's not so that... Any hacker just can walk into our systems. We have considered our infrastructure to be quite well protected. We have also external companies that review the security of our IT systems and infrastructure regularly that try to penetrate. In this case, it was a combination of very unfortunate circumstances and a very capable group of people that were able to take advantage of these special circumstances. There was an impact on our business. We were not able to work in our production for two to three days. In the office we were blocked, depending on the application, a bit longer. We have had a very effective and stringent recovery process and crisis management, which has helped to protect our company from further damage. There are two things. First of all, we have recorded basically all the things and the incidents, and we are still discussing with the insurance what the impact is. is and how much will be covered by this policy. On the other side, we will make sure that a similar, even though it's a combination of unfortunate circumstances, a similar situation will not happen again at Huber soon. And for that, we are now advancing planned upgrade of our security measures And we complement those planned upgrades with additional. And so there will be some investments that are done, but that will not have an impact on our outlook and our results.

The next question comes from Thomas Grise from St. Galler Tatblad. Please go ahead.

Thank you. Good morning, gentlemen. I have a question concerning your workforce. On December 22nd last year, you announced that you would reduce the workforce from 4,700 to 4,450 employees by mid-2021. But now it's already down to 4,410 people. So does that mean there's no further reduction. And on the other hand, in Switzerland, you announced a reduction from 1,250 to 1,150 people. But here you still have 1,225. So it's maybe in Switzerland more to come. Thank you.

The workforce will have to follow the business development and currently, as I said, we are already ramping up in some production sites globally the capacity. On the other side, we have been quite successful in reducing our exposure and our cost structure during the last year. This is not so much applicable to Switzerland where we are a bit on the slower track because we try to implement those reductions in a social manner and the majority of the reduction is done by natural fluctuation and early retirement and it's true that there the process isn't fully completed.

Thank you. The next question comes from Richard Frey from ZKB. Please go ahead.

Good morning, gentlemen. Two questions from my side. First of all, regarding the potential lower marketing saves and traveling costs, which probably also help to boost the margin in the second half towards 10%. What is your budgeting regarding those? So we will see quite a big uptake in that respect again as the dynamics come back into business or are you convinced that you are on a sustainable cost level in that respect? And then the second question is regarding the outlook. So in the press release, you've mentioned that some industries will will have much longer than others to recover and reach the stage before COVID. And now in the presentation, you mainly pointed out railway in the transportation sector. Is that the only thing we need to focus on when it comes to a bit slower recovery or are there other major business areas, industries we need to focus as well? Thank you.

As to the first question, yes, some costs will come back. In particular, the one you mentioned, traveling, and I mean, our sales guys are waiting for that they can visit customers again also physically, but we don't know when it will come back, because so far we can't really travel, but as soon as we can, there will be some traveling and also some more marketing costs, because I mean, now it's... The focus, I mean, all the exhibitions are more or less the physical exhibition. We don't participate, but there will be now online marketing and so. And that's why we expect some sales and marketing coming back. Also, when we see higher volumes, we will have higher transportation costs. So the outbound costs are also part of sales and marketing. But on the other side, we will only leave the cost break when we also see that we have higher volumes. So I think the cost management is still going on, but certain costs will come back. That's true.

With regards to the outlook, your second question, it's true that there are markets which have a bit longer cycles and where recovery and an uptick naturally takes a bit longer. I won't consider the railway sector to be one of those markets, as you have rightly pointed out. From what we see today is that the communication market, mainly also in the US, but also in some European countries, is coming back quite strongly. And we see also at the moment good volumes from most industrial applications where, as you know, we have a very wide range of activities.

Okay, thank you.

The next question comes from Rolf Rehrenders from Helvea. Please go ahead.

Good morning, gentlemen. Thank you for taking my questions. Maybe I can point them one by one. That's probably easiest. You have your guidance on EBIT for 8-10% now for a while already. Now with the refocus of the organization, what kind of benefits do you expect for that quantified? Or is this just necessary to keep between the 8 and 10%. Thank you.

You know, the 8 to 10% range is a mid-term guidance. And the five-year comparison of our EBIT shows that it has been the right range defined for the time being. It doesn't mean that we will always have to stick to this 8 to 10% forever. As far as our reorganization is concerned, these are things which you cannot do on a regular basis. It's quite a big change, and we have to follow up on this change process also with supporting action. The effect we expect in two areas, as we have pointed out. One is that there is more market focus, which means that Hubert Sulner is more driven by the markets and more driven by the key customers, ultimately. And the other one is a reduced complexity, so higher simplicity, which means results in less alignment and less administrative non-productive work. Both effects, I don't expect to have an impact already this year, as we are in the midst of this process, and this is really a long-term thing, particularly the market focus, you know, this is part of a company culture or not, where in the past we have been very technology-focused, This will take some time, and hence we cannot expect immediate effect, but we are all very enthusiastic about this change. We are also quite convinced that this is the right thing at the right time for HuberSUN, and it will give additional impulse for innovation. the R&D activity but also our presence in the markets and also last but not least when it comes to M&A we expect that through this market focus there could be additional ideas coming on our tables.

Probably one comment from my side to your question Mr. Wenders is that This reorganization is not a cost exercise, so it's really an exercise to be more market-focused and to bring us in a position that we can sustainably grow over the next years. And as you know from the past, we need to see growth again also to have higher EBIT margins because, I mean, we have done a good job in the cost management, but going forward, we need growth, and by that, hopefully, can also improve the EBIT margins.

Thank you for that. Continuing on what you mentioned for acquisitions, in what kind of magnitude can you foresee that you will find or bump into acquisitions? Are these more bold or do you try to achieve something larger?

I think we are open for both types because you can't fully plan acquisitions. As you know, we are actively looking around and I As Urs said, we also hopefully with a more market focus will probably also come across some other targets, but we are open for bold on acquisition. We also would be able to also digest also from a financing point of view a larger acquisition, but then it must be a very good fit, so we can't really tell, but we are open in different directions.

Thank you. And then maybe on the rising from commodity prices and what you phase from suppliers. I mean, copper is prices raising very quickly and high. What are your expectations for that in the coming year?

The increased prices are a fact. And if you look at the price development of key commodities in the market, it is quite dramatic what has happened slowly during last year and it's now happening in a more accelerated way. We are paying attention to that. We try to put in place mitigation measures, and we will not stop from passing on these higher prices also to our customers. I would assume that many companies in our region situation are currently watching the development of the commodity prices quite carefully and if we are not able to pass on some of those increases to our customers it will lead into our margin and we will not allow that to happen.

Currently in some specific commodities or so it's not only a question of pricing or rising prices it's also a question of availability and the due to some force measure of some, let's say, some of our suppliers, they claim. So, I mean, we have really also to work very hard to get the full availability of these products to make sure that we can continue to produce and to, let's say, to support the ramp-up.

Okay, thanks. And is it possible to quantify that a bit further in percentage or impact or what kind of delays? you have based upon previous years where something like that happened.

We have, of course, an idea what the maximum impact would be, and then we have all the actions in place to mitigate that impact. We will see what's going to happen.

All right. Thank you for that. No more questions?

The next question comes from Mark Dieter from Vontobel. Please go ahead.

Thank you. Good morning, gentlemen. I have just two questions, please. The first one, again, when talking about corporate ethics, so when you say about the meeting on digit growth for this year, so I can assume you mean it largely organically because, again, ethics would have a positive impact and corporate price developments recently or on average compared to last year would have already reversed almost the impact from last year's minus 5% impact on revenues. And the second one is about profitability. You just talked about maybe the longer-term impact of the reorganization and the new market focus. My question was more related to the structural cost measures initiated last year in the exit from Brazil. Can you assume that the full effect on profitability margins will only be visible next and not yet this year? Thank you.

Well, as I said on the top line, I think definitely copper will have a positive impact. I mean, on the current level, that's definitely for sure, which will be mainly seen in the LF technology. However, on the FX side, we have to see how long this really holds, and then it might be that it's also a positive contribution. But overall, we say so that... The corporate definitely will be on top of it. The FX is part of our guidance, but we have to see there and hopefully we make this 5% organic growth, but it's really too early to already call it secured.

Second one.

impact of reorganization. Yeah, that's true.

I mean, we always said that it will be completed by mid of 2021 and so we see still people leaving and the reorganizational impact will show its full effect only in 2022. Thank you.

The next question comes from Reto Huber from Research Partners. Please go ahead.

Yes, good morning, everyone. Thanks for taking my questions. I have three remaining ones. The first one is, again, on the railway situation. I mean, I was down to delays and high bidding activities. I was wondering whether you could differentiate a bit between the situation in Europe with China and the situation, let's say, in both markets, or do you see some differences in the cycles in these two geographies. Then the second one is on the double-digit margin in fiber optics we have achieved in the second half, which is really good news. I was wondering if it's more sort of a cyclical recovery or is there something more structural maybe related to the BKTel acquisition going on in your portfolio. And then the last one is on the good news on the nominations for distance radars. You mentioned before that there are going to be antennas for board-to-board connectors and also distance radars, and I was wondering How many antennas are you likely going to deliver into one car? Is it all going to be covered by one antenna, or will there be multiple antennas? In addition, I was wondering whether you're going to be part of a double or multiple sourcing situation there, or are you going to be in a single sourcing situation?

Yeah, so your first question concerned the railway sector and the difference between Europe and China. I mean, we see a decline in both geographical regions, and we believe that they will both come back, but not in the first half of this year. Particularly in China, where the government has a strong impact on the railway sector, we see that the forecasts have been modestly reduced, mainly on the high-speed side, and that will have an impact on the Chinese market. The European market is more fragmented there. You don't get so clear indications, but from what we can say is that at the moment we don't see the 2018 levels. We see a pickup earliest in the second half of 2021. The second question concerned the recovery of F4 and the double-digit second semester. And you were wondering if BKTEL had an impact there, which is not the case. So it's not due to the BKTEL acquisition. We see the F4 technology on a good path. We see first progress also fueled by this one time acquisition. effect out of a contract where a customer has stepped out. Obviously, it was a very good contract for Hubert Sooner and a very large contract, but we would expect the F4 technology to continue its recovery in the next time to happen. Your last question concerned the distance radar situation. I mean, we have now nominations with one large tier one system vendor into the automotive industry. There are several nominations with that customer. There are other discussions with additional Tier 1 system houses in the automotive sector. So far, we are a single source on those platforms. We don't expect that to be forever, but at the moment, we still have a very strong technological position, which allows us to be in a single source position in this early phase. When volumes pick up, and here we talk about millions, clearly, because it depends whether we talk about long-distance radar or short-distance radar. Usually there is a smaller number of long-distance radars in the cars, where there is a number between, I would say, 8 to 12 short-distance radars in a car. But you should also not count on a... on a 10 15 swiss franc value per per radar on in the business i mean here we talk about millions and the the respective sales price is also not in a in the 10 to 15 million swiss franc range despite the fact that the volumes are very high We expect, I mean, not the figures going through the roof. On the other side, it's quite predictable business. Usually those platforms last for six to eight years. There is a ramp-up phase, and then there is a peak after three, four years, and then there is usually a ramp-down phase. And we are now in the midst of ramping up the first products, which will give very small sales till this year, but then a bit of a better contribution in 2020 and onwards.

Okay, very helpful. Many thanks.

Gentlemen, this was the last question.

Then I would like, on behalf of Ivo and myself, I would like to thank you for participating in this conference and also for asking lively and interesting questions. And I hope to see you in person soon in one of our next events. Thank you and goodbye.