Accelleron Inds Ag

and a warm welcome to the Acceleron Full Year Results 2024 Investor and Analyst Conference. We are happy to have you as participants here in the room in Zurich, as well as remotely via webcast. For the in-house participants, please be aware that we don't plan any fire drills today. So in case of an emergency, stay calm, follow those green signs, go down the stairs and gather in front of the hotel entrance. Then please also take note of the safe harbor statement. The presentation today contains forward-looking information that naturally comes with uncertainties. Furthermore, figures in the presentation are in US dollars and were prepared according to the US GAAP accounting standard. After the presentation by Daniel and Adrian, there will be a Q&A session where you have the possibility to ask questions. If you're in the room, it's very simple. Just raise your hand. If you're joining remotely, please use the chat tool. I will now hand over to our CEO, Daniel Bischofberger.

Thank you, Michael.

You're welcome.

So also from my side, welcome. Happy to have you here in the room. And besides Michael, you already know. As usual, I have also my CFO with me because he knows the financials better than I know. And that's also the task of him. So happy to have you here. And let's now go through the agenda. So I will start with the key highlights. of 24 and then Adrian will then take over for the financial review of the full year. And I will conclude with a deep dive into the marine and energy markets and the outlook for 25, including our guidance. Besides the financials, the decarbonisation of the marine industry will be a focus of today. And of course, we will have the usual Q&A session and at the end of our presentation, As already mentioned by Michael, for those here in the room, you are most welcome to join us afterwards for a networking lunch outside this room. So I would say it's now time to start. 2024 was a landmark year for Acceleron as we celebrated the 100-year anniversary of the turbocharger. It was also the year in which we concluded all build-up activities related to our operation as an independent and listed company. And what a successful year it was. We broke through the US$1 billion revenue mark with key figures improving across the board. Revenues reached in 2024 1 billion and 23 million US dollar increasing by almost 12% year on year. The operational EBITDA was up by by 17% to $262 million. The operational EBITDA margin increased by 1.2 percentage points to 25.6%. Net income grew by 63% to $179 million, and free cash flow conversion stood at 99%. Looking at the big picture, we have established in 2024 the Foundation for Sustainable Growth and the baseline for future profitability. When you look at revenues, operational EBITDA and net income from 2022 to 2024, you can see that the figures went up year after year. The only exception was a dip in net income in 23, a result of higher non-operational costs in 23 versus 22. From 110 million US dollars in 23, net income went up to 179 million US dollars in 24. How can this be explained? Well, as I mentioned, we concluded all our build-up activities in 24 incurring non-operational costs of under $16 million, down from $77 million in 2023. The higher net income enables a dividend increase of 47%. The Board of Directors will propose a dividend payment of 1 Swiss franc to the Annual General Meeting this May 6. Let us now look at some other highlights in 2024. Last year, we celebrated our legacy and invested in our future. Besides the 100th anniversary of the world's first industrial turbocharger production, we could also be proud of our first bond issuance with proceeds of 180 million US Swiss francs. It was several times oversubscribed. The highly successful bond issuance reflected the capital market's confidence in us. And then, after OMT in 23, we made another two bolt-on acquisitions. By acquiring Italy's OMC2 and Canada's True North Marine, in short TNM, in 24, we expanded our capacity in fuel injection and capabilities in the marine digital solutions. We took over all 70 employees from OMC2 and all 50 from T&M. Let's move on to the next slide. We also grew market shares and created new revenues. The ship you see on the far left was the first cruise ship in the world that could be operated on purely liquefied natural gas, in short, LNG. The cruise ship was equipped with our turbochargers in 2018. Fast forward six years now, and our market chain, all LNG-fueled low-speed engines built in 2014, was roughly two-thirds. And around four out of five LNG-fueled medium-speed engines built in 24 were equipped with accelerant turbochargers. Those are impressive market share figures. And in fact, we now have a market share of over 90% with LNG carriers. In a few minutes, I will also explain to you why LNG is becoming the fuel of choice for the transition period in the maritime decarbonization. Another highlight last year was also the signing of 60 full-cover service agreements. This achievement demonstrates our continued evolution in service from classic transactional service business to a model that we call availability as a service. In general, there's a clear trend to keep ships running as reliably and efficiently as possible. Ship owners invest more in the servicing of their fleet. They invest more in retrofits and upgrades to improve efficiency and reduce emissions. By selling engine part load optimization, here on the slide, in short, EPLO, and flexibly integrated turbocharging system for two-stroke engine in short, FITS2, we already showed that in the half year of last year, we could further grow our service business. These solutions provide tangible fuel savings and emission reductions for marine engines operating at varying loads and speeds. Finally, what you see on the far right of the slide is a TPX high-speed turbocharger. We sold 2,600 units of this model in 24, double the amount of 23. Where did the demand come from? From data centers, of course. I think you will all agree that today, more than ever, having a resilient and global value chain is crucial. We always have acted with foresight when it comes to this topic, meaning that already today we are set up in key markets to meet growing demand and be close to our customers and suppliers. The four examples on this slide demonstrate this. The strategic contract manufacturing agreement that we signed with Hyundai in South Korea in 2024 gives us greater operational flexibility and reduces trade complexity. Thanks to investments in manufacturing capacity in people in Italy, we achieved a close to 20% increase in OMT output in 2024. Fuel injection plays a key role. in decarbonizing the marine industry, and we are seeing high demand for advanced dual fuel systems. In the US, we are continuously expanding our capacity for the remanufacturing of high-speed turbochargers. Last year, we were halfway through a five-year, US$5 million investment program. This is to meet the growing demand in gas compression and decentralized gas-fueled power generation in the US. The number of reworked units were up by 10% in 2024, compared to 2023. In China last year, we also invested in 1 million US dollars in a new machine to enhance compressor wheel production. The resulting increased capacity and flexibility supports our business expansion in the various strategic countries. Same as in the US or South Korea, being close to customers and anticipating demand is a key consideration for local presence and investment. With those remarks, I conclude my first part and I will now hand over to Adrian for financial review. Adrian, the stage is yours. Thank you, Daniel.

Let us now take a closer look at our 24 financials, starting with the group performance. We saw a positive market momentum throughout the entire year. Especially the strong demand for merchant marine products and the extraordinary demand for merchant marine services supported us in breaking through the 1 billion USD revenue mark. What an accomplishment! In the energy industry, high demand for emergency power solutions for data centers compensated for a temporary slowdown in the gas compression market. Overall, our revenues grew by 11.8% to 1 billion and 23 million US dollars for the full year 2024. In constant currency, we grew by 12.9%, exceeding the latest guidance. Overall growth was driven organically as well as inorganically. Consequently, on an organic basis, we recorded the growth of 7.3%. Moving to the operational EBITDA, which was up by 38.8 million US dollars or 17.4% to 261.9 million US dollars. The operational EBITDA margin increased by 120 basis points to 25.6%, which is slightly higher than our latest guidance. We delivered this attractive margin, again on the back of a healthy operating leverage and effective cost management. Finally, the ongoing moderate cost inflation, namely for labour, was largely offset by price increases and continued productivity initiatives. The next slide depicts the performance of the medium-low speed segment. We saw a strong demand in the merchant marine business across the entire lifecycle. Strong shipping demand paired with geopolitical tensions led to high ship utilization. Hence, we further grew our service business, supplemented by the selling of retrofit solutions. We also capitalized on opportunities in new fuel applications. In the medium speed power plant market, new build activities remained subdued in 2024 while services performed well. The segment's revenues increased by 108.6 million US dollars or 16.3% to 773.5 million US dollars. On an organic basis, we grew by 10.1%. The incremental revenue contribution by OMT, OMC2 and TNM amounted to 52.9 million USD in 2024. The operational EBITDA margin increased by 110 basis points, which was again mainly driven by operating leverage and effective cost management along the value chain. Lastly, our supply chain, respectively throughput, fully normalized in 2024. Let us have now a look at the high-speed segment. While the turbocharger demand in the US gas compression market temporarily slowed as customers reduced their inventories, demand for turbocharged emergency generators continued to grow in 2024. our high-speed turbochargers were highly thought after, especially among customers looking to protect data centers and other critical infrastructure with emergency power solutions. On the one hand, revenues in the high-speed segment decreased by $1 million or 0.4% to $249 million compared to the previous year. On the other hand, the operational EBITDA margin increased substantially by 150 basis points. The operational EBITDA increase of 3.5 million USD resulted from effective cost management and a beneficial product mix. And it more than compensated the lower index base pricing. Now, on the next slide, let us go through the bridge from operational EBITDA to net income to highlight a few specific effects in 2024. Starting on the left, operational EBITDA amounted to 262 million US dollars. Next to it, you can see the one-off and non-operational cost, which amounted to 19 million US dollars compared to 80 million US dollars in 2023. About 16 million US dollars were linked to the residual build-up activities where we were well within our guidance of 20 million US dollars. As Daniel already pointed out, these costs came down from 77 million US dollars in 2023. Moving on, we had acquisition related amortization costs of 5.4 million US dollars. As a consequence, income from operations amounted to 238 million US dollars. Going to the next item, the interest and finance expense. This mainly comprises of interest payments, pension income and fair value changes of FX instruments used to hedge non-operational foreign exchange risks. In total, it amounts up to 12.1 million US dollars. One further to the right, we can see the income tax expense, which amounted to 46 million US dollars. The effective tax rate for 2024 stood at 20.6%, which was higher than the year before due to a change in profit mix, namely resulting from the newly acquired entities. And with all of that, you get to a net income of 179 million US dollars, 63.1% higher than in 2023. Next, let's look at the free cash flow a bit more in detail. A very strong cash conversion in the second half of 2024 of more than 160% again propelled the full year conversion to a very healthy 99%. Firstly, the strong cash collection kept working capital stable despite significant volume growth. Secondly, the aforementioned normalized throughput resulted in lower purchasing volumes, respectively a decrease of payables. And thirdly, inventories were slightly up versus prior year, driven by the shift of transportation mode from air to sea for a portion of our new business, resulting in lower cost and emissions. The slightly increased capital expenditure reflected our continued investment in the Swiss, Italian, and Chinese factories to optimize and expand our production capacities. So, in spite of accelerant strong growth, free cash flow generation increased by 69 million US dollars to 178 million US dollars in 2024. Let me conclude the financial review by providing some color on the capital structure and our dividend on the next slide. Due to the high cash generation, we managed to close the year with a leverage of around 0.7 times operational EBITDA, despite M&A related investments for two Bolton acquisitions of 56 million US dollars. In light of the strong financial results and healthy balance sheet, the Board of Directors will propose a dividend payment of 1.25 CHF per share to the Annual General Meeting on May 6, 2025. As already mentioned by Daniel, this corresponds to a dividend increase of 47%. The resulting payout ratio of 76% of reported net income after minority interests underscores our commitment to return excess cash to our shareholders. With the proposed dividend and the executed M&A, we will return, respectively, half invested, roughly what we earned in 2024. This is fully aligned with our capital framework. Thank you. Let me now hand back to Daniel.

Thank you, Adrian, for going a bit more into the details of the, I would say, strong financials. So now let's take a look forward and let's see how we see the market trends, the opportunities and the outlook for 2025. First, I would like to give you a high-level overview of the decarbonization paths in the maritime industry. You all read the news, so you might be asking, where do we stand on that topic? Let me reassure you that the maritime industry is sticking to its path to decarbonization, driven by regulation of the International Maritime Organization and the EU. The big question is, will the new fuels arrive on time? Nobody really knows. What we do know is that transition fuels, new fuels, onboard carbon capture and efficiency measures are a must to reach net zero. The challenge is that it's unclear when exactly new fuels, especially e-fuels, will be available at scale. If they arrive at scale between 35 and 40, net zero by 2050 might still be possible. If they arrive later, reaching net zero will be pushed back. Since e-fuel availability is uncertain, LNG is becoming the temporary fuel of choice. LNG in combination with efficiency measures at least allow for limited reduction of CO2 emissions until new fuels arrive. You might also have picked up the term stronger for longer in the news. The reality is that we have a situation where LNG will be here stronger for longer than previously thought. On the next slide, I would like to give you some insights on why LNG is becoming the temporary fuel of choice. Why today are LNG dual fuel engines clearly favored over methanol or ammonia dual fuel engines? It has to do with fuel costs. fuel availability scale and the fuel potentials for decarbonization in the short and long term. As you can see, energy doesn't cost much and it's widely available already today. It also supports further decarbonization and ensures compliance at least until 2035. In the long term, however, LNG requires technically and commercially viable onboard carbon capture and storage. An alternative for carbon capture and storage on ships would be to retrofit the ships for new fuels such as e-methanol or e-armonia. Now, when you look at the new fuels and the different types of methanol and ammonia, you see that the costs are high, too very high. Only limited biomethanol is currently available and biomethanol is hardly scalable. And to make things even more challenging, at the same time various industries, including aviation, are fighting for the same feedstock for biomethanol production. So sufficient availability of either e-methanol or e-harmonia is unlikely in the short term and most likely in medium term. And in the long term, the potential of e-methanol and e-harmonia depends on the speed of the required massive infrastructure ramp up, including hydrogen ecosystem. Remember, e-fuels are produced from green hydrogen. And green hydrogen is produced through the electrolysis of water using zero carbon electricity generated from wind, solar, hydro or nuclear. You can see, for e-fuels to become available at scale, a lot of puzzle pieces must fall in place first. In a nutshell, new fuels are costly and they require massive infrastructure investments. For these investments to happen, we need international cooperation, regulation, incentives, innovation and coordination across all hard-to-abate industries. For ship owners who build assets today that will be around for three decades or more, it means that there is no silver bullet when it comes to fuel selection to transition to net zero. So unfortunately, a silver bullet that works today, tomorrow, and after tomorrow does not exist, which makes the decision to be taken by the ship owners quite challenging. However, dual-fuel ship engines can serve as a bridge through the transition. Which brings me to the next slide. How can the marine industry decarbonize and how can Exelon support? I will start on the right. As just mentioned, dual-fuel engines can serve as a bridge through the transition. We offer future-ready turbochargers and fuel injection systems. Improving the technical efficiency of a ship is another way to decarbonize. Further, we offer retrofits like turbochargers, EPLO, as well as FITS2, and service agreements to achieve that. And finally, there's operational efficiency, which includes optimizing for ship speeds and routing. And for this, we offer digital solutions. Of course, our recent acquisitions play to operational efficiency and new fuels. The acquisitions are strategically aligned with our goals of enhancing efficiency and supporting the transition to new, more sustainable fuels. Next, let us look at the market trends and opportunities we see in the marine industry. They are unsurprisingly closely linked to decarbonisation. Let's start with ship new-build activity. We clearly see that decarbonisation drives fleet renewal. In merchant marine, the order books of shipyards are full for the coming years. And the share of new builds for dual-fuel capable vessels is high. And the backlog will not disappear quickly, because shipyard capacity is only expected to increase moderately, and this mainly in China. We see an opportunity to further increase our market-gen dual-fuel-capable vessels. Decarbonisation also increases market interest in retrofits and upgrades. Overall service activity is healthy and we expect a continuation of this positive dynamic for services in the marine market. Having said that, shipping scrapping could increase if Red Sea traffic normalizes. Overall, we see our retrofit solutions for decarbonization and full cover service agreements as the main growth driver for us. Let us now switch the industry and look at the market trends and opportunities in the energy market. There is a clear trend towards more flexibility and resilience. On the one hand, there are opportunities in decentralized power generation. The underlying market trends are increasing electricity demand and electricity grids at the limit. We see this predominantly in countries with weak grid infrastructure. Opportunities therefore lie in fixed on-site power generation or mobile rental power. Turbocharged gas fuel combustion engines are one possible technical solution. On the other hand, there are opportunities in backup power, specifically for growing number of data centers as critical infrastructure for AI and streaming. The more data centers you have, the more building security you need in case of power failures. High-speed diesel-fueled combustion engines with turbochargers can offer that security and provide emergency power if and when needed. Demand from data centers will likely stay strong. And of course, the data centers themselves will need more power too, which could again increase the demand for decentralized power generation, including power behind the meter. An analysis by the US Department of Energy in December 24 found that the data center energy demand in the US doubled from 17 to 23, ultimately accounting for more than 4% of the nation's electricity consumption. This number, according to the analysis, could rise to 7 to 12% of the energy consumed in the US. But let us now focus on the immediate future. What is the outlook for 2025 and our business? As we look ahead to 2025, we are optimistic about the positive market momentum driven by growing demand in the marine and energy industry. We are ideally set up to strengthen our market position in new fuel applications, turbocharger services, fuel injection systems and reliable energy supply. We will also leverage our unique service network and customer relationship to offer additional digital services. As you can see, all the arrows for different marine and energy market segments are either pointing up or sideways. Let's look at the top row first, marine, which makes up more than 50% of our revenues. I already mentioned the full order books of shipyards in the merchant marine. They're already fully booked until 29. Some are even fully booked until 2030. And the order demand is still high. And as you can see, all errors in marine are pointing up. There's only one exception, cruise ship. Your significant growth may only occur in the next one to two years. The tanker market is streamed by a rising global energy trade by sea instead of pipeline. Regarding the bottom row energy, which is more than 40% of our revenues, I already mentioned the expected strong demand for backup power related to data centers. The gas compression market will remain volatile, but greater energy carrier capacity, which are coming now online almost month by month, could drive demand in export business for US gas. We continue to see good momentum for high speed power generation in gas application too. In the power plant market, we expect new build activity for medium speed power generation to remain subdued. So in summary, Our outlook for 2025 is positive. Where then do we set priorities for 2025? To begin with, we will continue to invest substantially in R&D, particularly in solutions for new fuel applications. Our unparalleled investment in research and development ensures that we remain at the forefront of the industry's advancements. The OMC2 production capacity will support OMT in addressing the significantly increasing demand for advanced fuel injection systems, while TNM Digital Solutions will complement Acceleron's Tecoma Digital Solutions. The OMC2 and TNM acquisitions have demonstrated our ability to identify, successfully integrate and develop companies in adjacent markets. Importantly, the acquisitions have shifted the market perception of Exxon as a technology leader beyond turbocharging, providing a long-term growth perspective linked to decarbonisation. But we are also aware that decarbonisation is a demanding, complex and costly effort that cannot be managed by individual industries or even one player alone. While we are reducing our Scope 1 and 2 CO2 emissions, Scope 3 emissions from transport and supplied goods are harder to abate. They account for 90% of our CO2 footprint. The key question is how companies can achieve sustainability goals while maintaining international competitiveness. Consequently, we are also testing to the extent to which regions, segments, customers are willing to pay for products and services with a lower CO2 footprint. We'll be setting sustainability goals aligned with science-based targets initiatives that are ambitious yet achievable, market-appropriate and commercially viable. The big topic for 2025 is striking a balance between ESG criteria, the geopolitical climate and trade complexity. These factors will determine how we can further strengthen our supply chains and footprints. This brings me to my final slide. So what is our guidance for 2025? Of course, the geopolitical uncertainties and their potential impact on our markets and business make any forecast even more challenging and difficult. But with build-up costs a thing of the past, we are confident that we have established a solid baseline for growth and future profitability. We forecast constant currency revenue growth of 4% to 6% in 2025 and an operational EBITDA margin of 25% to 26%. The capital framework remains unchanged. We reaffirm our commitment to delivering shareholder value through attractive dividends and selective and disciplined M&A activities that align with our value creation strategy. If no M&A opportunities materialize, the return of excess cash via share buybacks remains an option. So with that, I close my presentation. Thank you for your kind attention. And now we are happy to take your question both in the room via audio and virtually via chat. So Michael, I think that's your turn now.

Yes. Thank you, Daniel, and welcome to the Q&A session. Please note that if we receive similar questions, especially by the Q&A tool in writing, we may combine them into one. If you're asking a question, especially here in the room, please kindly make sure that you state your name and the organization you're affiliated with also here. So I think we would start with the questions from the room.

First question about the fuel injection business. Now with the acquisition of OMC2, you have increased your capacity significantly. So just to give us a rough number, with the current capacity, what do you think, what kind of revenue you can make in that business within the next two or three years? That's the first question. And the second question is towards those alternative fuels. Because in the end, you still make 75% of your revenue comes from services. And my question is then in the medium-long term, do those alternative fuels need the same service intensity like, for example, sheep diesel and also ammonia, methanol and LNG?

Okay, first fuel injection, valid point. So, I mean, we have now an investment plan In execution, we expect to invest around up to 50 million to increase the capacity of OMT and OMC2 to 150 million. Just that, you remember, OMT at the time when we acquired was around 50 million. So we want to triple that, let's say, timeframe. Not everything in our hand, we need permits and so on, but we expect to reach that at around 2029. And your second question again, that was about Janik.

Service intensity from alternative fuels.

Yeah, I mean, synthetic fuel tend to be cleaner. That's clear. But we don't, I mean, the big shift was already when shipping moved from heavy fuel to diesel and now natural gas. We don't expect the intensity to change significantly. Thank you.

Yes. Perhaps I would take a question from the chat while in the room you can find other questions. One question from Uma Samlin from Bank of America. Can you give us some update on the integration of OMC2 and OMT and what are the growth and margin assumptions you have for fuel injection?

So as I already mentioned, I mean, the integration is really working well. I mean, they are part of AXERON. We are careful not destroying the business by trying to get all the cost synergies. We have a light integration. The focus on OMT and OMC2 is now just to grow, grow, grow, grow, and 150 million might not be enough. We are looking for other possibility to grow. So integration runs perfectly and they get all the support they need from AXERON. Then the second question was, we don't give guidance on fuel injection, but we have the ambition that any of our business are similar to the group. Good.

Stefan?

Yeah.

Stefan Sola, Sola Capital. Maybe just trying to find the smallest negative. You speak about the temporary slowdown in the gas compression business, temporary slowdown. Your outlook obviously reflects that this reduction in inventories is already behind us. Do I understand that correctly?

Thank you. Stefan, probably again, let's turn back to 23. At that time, one of our customers was so positive that they ordered too many turbochargers at that time. They finally realized at the end of 2023 that there would be too many turbochargers. So the end market didn't go down. The end market was slightly growing up. So he was adjusting, I would say it was last year, between Q2 and Q3. That's over now, and the demand now from the customer is in sync with the end customer demand. You're welcome.

Thank you. I remember last year especially we learned that your visibility of the order book is rather short and that's why we saw those trading updates from time to time regarding the revised guidance. Were you able to improve it, this visibility, or are we going to see in June another trading update?

What we have given as a guidance is what we truly believe as of today with all the information, with all these geopolitical changes. I mean, we're always trying to improve whatever we can do. And I think so far, to be honest, second half was pretty well. So, I mean, we guided more or less than we were within the upper end of the guidance, but fully in line with what we... I mean, it still remains that... We have definitely good visibility when it comes to ship new buildings, but here we have to accept it's about 15% of our business. And the service business, we have more or less an order book of three to six months. And also service is not much fluctuating, but since it's 75%, it will have an impact when service is fluctuating by three or 4%. So that's why we do our best. We don't want a surprise. We want a guide, but as I said, sometimes it happens that the market are more positive than what we expected. Good.

I would like to have a question on M&A strategy. You acquired a year ago one company, last year two companies. Does this mean you are going now this year to consolidate these three companies and look that you bring up the capacity and that you are not looking for M&A transaction or do you look at it as opportunistic?

I mean, first of all, it's clear we have a very strong business already. And the focus is on organic growth. And as I said, we have for our fuel injection a clear organic growth strategy to get 250 million. So also 50 million needs some time to invest and a lot of effort. So that's definitely a focus. But as I said already, we believe we should have more capacity because customers are asking even for more. But this is not only our challenge, it's also the whole industry is just ramping up. So also here we are looking for further expansion, and this could be organic or inorganic, but mainly it will be in Asia. So again, we are looking around, but again, the focus is on organic growth. And integration is already working well.

I would take a couple of questions from the chat. One question from Adrian Pell from OdoBHF. What is your CapEx budget for 2025? Would you be able to grow free cash flow in line with profits in 2025?

That's a good question indeed. I think in the past we have roughly spent between 3% to 4% of global revenues on capital expenditures. Now with the additional capacity needs, especially on the fuel injection side, but as well as optimization initiatives on the turbocharger side, We see that potentially a little bit higher, more between 4 to 5%. But again, fundamentally, this will not impact the conversion to materially extend in that sense. It's maybe 5, 10 million more of investments need annually. Therefore, we remain confident to turn continuously profit into cash, as we have demonstrated as well in the past.

Okay, another question from Mehan Young from Goldman Sachs, which is combining also similar question. What's your positioning in terms of potential US tariffs impact?

Yeah, I wish I have a crystal ball or I would have a direct contact to this person, but probably that might not help either. No, number one, we have about 10% of our revenues are really related to what we call onshore US business. So around 100 million. We have a very strong position, and the main delivery to the US is coming from Switzerland. So for the time being, a good position because there are no tariffs on it. What has to be said is that our products cannot be easily replaced by the engine builders. So that normally takes one to two years to replace ours with someone else. And that's why we expect that we have a strong position, but we have quite a strong relationship to our customer. If further tariffs would increase, we would sit together with our customer and find solutions. that are acceptable for both. I mean, if the customer is willing to pass on all the tariffs because he's also in a strong position, we definitely would do the same. And again, we did that already during the high inflation. We were not the one telling that we took advantage of inflation. We increased our margin. We wanted to be fair, and we do the same here. And we are confident that we, with this partnership, will go through whatever comes to us.

Good. Perhaps one more question from the chat and then we move back. One question from Sebastian Vogel from UBS. How would an open up of the Red Sea impact your business in marine?

Yeah, I mean, as I already said, there will be more scrapping. But you have heard that the shipyards are so full. There are so many new ships coming online that even if the scrapping increases, the fleet will still grow. It might not grow just what comes in now as new. There will be some ships taken out, but the fleet will grow for the next three to four years. No question. There's not even enough capacity to scrap the same amount of ships that are coming now newly online. So... fleet will grow.

Adrian Knoblauch, ZKB, but the fixed income side. I have a question on your capital framework. And you're stating that you have a stable to growing dividend policy. But now it has increased by, I think, over 40% your payout. So I think it's rather fast growing than stable or growing. And my question is, where is your threshold that starts you to shift from paying dividends and starting the share buyback?

I think first and foremost, we need to see that in the past years, and that's why we consciously as well guided on these build up activities, and this is of the path has impacted basically our profitability, right? We see now a normalized new reference point in terms of profit as outlined by Daniel and consequently then as well for the dividend. On this basis now, that framework will really work in the sense of stable to growing. So it is a new reference point with having the one-offs of the past, basically, or the build-up activities to say.

Okay, so the new reference, that is 80% payout of net income.

I think the new reference is the absolute dividend, we would say. We have never said anymore that there is a specific payout as such. But yes, we have said we want to continue to provide an attractive and pay an attractive dividend.

Yannick, just to add on the capital allocation policy. I mean, last year now you paid roughly 60 million for both acquisition, OMC2 and TNM. Is it roughly a good figure going forward for your flexible capital allocation, let's say between 50, 60 million, either M&A or if you don't find M&A and don't have any large capex, then that goes maybe to share buybacks. This is roughly fair to say.

I can start and you can complement. Ultimately, right, with M&A, you do not exactly know then what's to come. So is that a budget? No, it is not. We look what fits to us selectively and disciplined. But consequently, we have a new reference point for the dividend. And from there, we will continue to work.

But I can confirm more or less your assumption that this is a level where we feel comfortable that we can always, as we said, we want to keep the dividend at least stable or growing. So even if there's some strong headwinds, we can keep that one. It gives us enough leeway for acquisition and it gives us enough leeway if no acquisition that we can have a good share buyback package.

Perhaps one follow-up question from the chat here from Sebastian Vogel, UBS, what size you need to have in mind to make a share buyback worthwhile?

I think we have already stated that in previous conferences, if I'm not mistaken, we said roughly around 100 million potentially. Far below would be potentially too small. Above would be potentially too big in light of a potential share buyback within two years.

Good. Then another question with regards to the growth guidance from Georgi Tevzadze from MAN. What M&A contribution are you assuming in your 4% to 6% constant currency guidance? And as things stand today, was the estimated ethics impact.

I think on the latter, we do not have that crystal ball, so we do not guide on this specifically. We set constant. On the constant side, 4% to 6% includes roughly 1% point of inorganic, maybe roughly 1% each point of price, the rest volume, if we take the 6% to reconcile to. But again, roughly, huh?

Okay, then another question from John Kim from Deutsche Bank. Should we expect more balanced revenue growth between the divisions in 2025? What's the current visibility on your marine new product order book now, given the yard constraints? Is it three months? Is it longer?

Well, first of all, I mean, the division have to toss together whatever it's out there in the market to capture. So we have no guidance that one is not allowed to grow more than the other one. So if one is growing more, then they shall grow more. No, I mean, on what we have in the order book on the shipping, that's normally we get them normally one year or before they deliver the ship, we get the order and then we deliver it. So that's in line. So the three to six months will not change, especially since the the capacity of the shipyards are really not moderately growing. I just had a talk with a shipyard owner in Japan and Korea. They are struggling to keep the capacity. For example, in Korea, they are saying our people want to go to Samsung, which is sexier for mobile and semiconductors. We are struggling to keep the people and to keep the capacity. So the only... that it's growing in capacity is China, but also they are only moderately growing. So we don't expect there to be changes. We have seen over the last three years a kind of 3% growth from the capacity, from the shipyards capacity.

Good. If no questions from here, we'll continue with the chat. Another question from Uma Samlin from Bank of America. On capital allocation, how do you think, should we think about CapEx planning versus M&A?

I mean, in the end, I probably didn't compliment Adrian if you have more information. I mean, as I said, organic and inorganic both have their pros and cons. I mean, inorganic, it goes faster. But as I'm always saying, it needs to tangle. So you can't buy something when someone doesn't want to sell. And you also want to buy at the reasonable price, not at the crazy price. So the good thing, it happens fast. You get an existing business, you get existing infrastructure assets, and you get people. Organic, everything is in your hand. You don't need to tango. You just need to decide. But it takes longer because, again, you need to build a factory. You need to buy assets. But the biggest challenge is then to get the people in. And as I said, when you go to Asia, it's not that they're unemployed. They're also running at full steam. And so we follow both together. And if you see, as we have seen in the past, good opportunities in them when they're at good price, we'll capture them. If there's nothing available, not at good price, then we go the organic way.

Another question from the chat from Adrian Pail from AutoBHF. Would you please be so kind to speak about the service share in your segments and how developments were moving versus 2023? In more detail, what is the share of retrofits in low and medium speed?

Good. First of all, we all know that in average we have about three-quarters of our service business. I mean, we don't go into detail on the segments, but it's clear that the share of service is bigger the longer the assets are running. And it doesn't need a PhD on shipping. The lifetime of a ship is 30 to 40 years, while sometimes the power plants are 20 years. So we definitely have a slightly lower share in the high speed for service, and especially now with the TPX, which is a for emergency power, and the emergency power by definition, rarely runs. So that means we sell them and there's never service behind. So definitely on the high speed, we have a bit more, less service business, while on the low and medium speed, we have more. But that doesn't make a difference for the targets. We have for all our business, the target to get a good margin for those business. And that means where we have more product business, we have to make sure that we make the margin already with new business because we can't rely on the service business. Retrofit is a growing business. I mean, auto intake, it's in the mid double digit million dollar business, but it's growing.

Good. Another question from from Goldman Sachs. What's the revenue contribution from data center now and what's the outlook for 2025 growth?

So these are again the TPX. We already said in 23 we had 6 million. Now we are going to 12 million and we expect this business also to double in this year. So to get above 20 million.

Good. If no questions come from the room, I'll continue with questions from the chat. One question from Sebastian Vogel from UBS. Can you clarify your sales growth guidance in the press release, your wide local currency? In the PowerPoint, you mentioned total revenue growth. I think we guided four to six in terms of total revenue growth. Then another question from Sebastian Vogel on data centers. Do you see demand coming with regards to data centers, baseload energy demand?

Yeah, there's two opportunities when it comes to data center. One is about emergency transats and they are normally coming with diesel engines because diesel is something you can store on site. While if you would have a gas engine, you're always relying on the gas pipelines that they bring more. data center always comes with a diesel engine. In addition, now in the U.S., they have realized that it's probably easier to get a pipeline, a gas pipeline, to the data center than to get the grid connected to the data center. So what we see is now more decentralized power. So they are building, besides the data center, power plant, power generation units. Because, again, it's speed and... That's the only way to run now. Also, they have renewables energy, it's clear. But, you know, if you have a data center 500 megawatt, you need good grid connection. And they are building now the power plants where there's not a strong grid connection in the Midwest. And so they are struggling, and that's why we see more and more decentralized power, or what we even call behind the meter. That means these are power plants built by the data center, mainly producing the power for their own needs, and they might export power to the grid. So we see in both directions good opportunities with data centers.

Good. Question from Adrian Pehl from OloBHF again. On regional developments, the US was down in H2 2024 and also revenues in Switzerland were heavily down. As regards to letters, should we just assume a change of how revenues were recognized versus other regions? And in the US, why the decline versus the growth in high speed? I think to the Swiss part,

We are a truly global player. Sometimes our customers demand us to deliver through the Swiss channel, sometimes through another channel. There have been no fundamental changes in terms of the underlying customer mix. To the first one, It really depends then on the sequence of deliveries. Usually, we look year on year, and year on year, fundamentally, the Americas have, I think, decreased by roughly 100 basis points. So it's not the fundamental shift as such. But for us, the focus is really on a year on year basis as opposed to taking each half a year because that then again depends on deliveries, how much have we put on the vessel, the throughput, and so forth. So when we talk about growth, then it's usually a year on year view, which is the most comprehensive one.

Okay, another follow-up question from John Kim on the margin guidance for 2025. It looks conservative given 2024 results. Is this a function of investment and additional OPEX or more a function of revenue mix?

I think it's first and foremost a function of the investment side. We said we continue to invest in R&D, continue to invest in artificial intelligence, 3D printing. But as well, as we ramp up new capacity, initially you are not as effective. Consequently, you feel that, especially in the ramp-up phase in the first six, 12 months. And under this assumption, the guidance has been formulated.

I mean, just imagine we have last year hired 50 people in OMT. There were 250, now there are 300. Until you get them up to speed and productive, first you have costs. We call it investments. And that hits slightly your bottom line. go ahead. I mean, we already had with several investors the discussion that said we have high margin, but we want to have a long-term high margin. We could easily increase short-term the margin, but we believe it's better to invest today that we are ready also to deliver the high margin in two, three, four, five years. And that's the long-term strategy we have. Good. Yes, Stefan?

Just going back to that remark from before, conservative guidance on the margin. I mean, you probably also have to be a bit careful what you show because you've got clients that say, look, the guys are running on 25, 26% margin. So it's probably a bit better to invest into growth or...

do you get that sort of pushback sometimes not directly we definitely have sometimes a bit of tougher discussion when we talk about price pricing uh yeah that's life i mean so be it but in the end they already knew when we were on the abb that they pay us a quite a nice premium And they paid us a nice premium because they were not aware of probably the good business we do. Because they appreciate our service, support, our competence on new products. And again, we will not keep the margin low, not just to show to the customers. Then we will have to talk again. There's alternative to us in the market. It's not they are relying on us. We don't have not at all any monopoly. And nevertheless, there's still order from us. Because again, I've shown you the figures on the LNG fueled engine. I mean, 65% on the low speed, 80% on the medium speed, and above 90% for LNG carrier. And there's a reason behind it. It's our close relationship to all the customers. I mean, Katagas, the famous one, we have close relations with Katagas. They define the specification of the ships and their chartering. We know all the ship owners. Some are in favor from us and some are not. But Katagas is making sure that they prefer us. Then all the shipyards like Hyundai, and so they also favor us. So we have quite a good network with everybody. And if someone doesn't like us too much, then at least there's someone left and right who tells him that he should prefer us. And again, it's our technology and it's our service support we have. That makes the big difference. And I mean, we have excellent competitors, but they can't offer the same in that respect. They have good technology, but they have to compensate with lower prices. And that's a model that was built up over 100 years, continuous investment. And it's a lot of money and a relationship you don't build overnight.

Good. Perhaps still a follow-up question from the chat or from Adrian Pail, AutoBHF. Please quantify the amount you expect of one-offs and acquisition-related amortization in 2025.

i think to the first one we have only guided on build-up activities this was something we knew right usually you do not guide on that element but we can assume that this becomes immaterial in light of the non-existing or the closed-out topic on the build-up side in terms of amortization i think we stood somewhere around 5 million and i would assume that this stays roughly in that part of Obviously, assuming that we have D3 companies we have acquired, amortized. So plus minus around the 5 million for 25, I think this is a fair assumption.

Then a follow-up question from Sebastian Vogel on the answer on the sales guidance. In the slide deck, the written total revenues growth guidance is then the same as the local currency sales growth from the press release because total growth sounds like reported sales growth.

I think the guidance is not reported as such. It's the constant currency growth, which is 4% to 6%. Organic, thereof would be then 5%, as I stated. One percentage point is inorganic. I hope this clarifies.

Good. I have one more question actually here from the chat, also from Adrian Pell on onboard carbon capture solutions. Do you consider to invest in onboard carbon capture solutions? Do you consider it a transition technology as well or rather long-term solution?

Yeah, I mean, I think everybody originally thought everything is going to synthetic fuel, and that's why nobody invested in carbon capture. I mean, carbon capture was in power generation 20 years ago, and that was already a topic, but never materialized. I mean, we'll see, but the longer it takes until we really decarbonize all the industry, not only shipping, also car and whatever, The longer it takes, the better it would be that we have carbon capture, because it's still better to fight the symptoms than not fight anything. Are we looking at technologies? Yes, we are looking at technologies. Is carbon capture the right one? The ones which are established are not the right one. There are other interesting technologies, but very often these companies have a high margin, but unfortunately with the wrong sign in front, so they are minus. We are watching them and then the question is, is it the right technology that fits into our portfolio and when is the right time? And again, so we are looking at the good thing on decarbonization. There's a lot of new technology now popping up, not only on new fuel. And again, we are scouting them and we don't know whether there's something and when is the right time.

Okay. I think in the chat there is some more questions, but I believe they have been answered in a way or asked by someone else and answered. If someone from the chat feels differently, I think I'm happy to answer them bilaterally. You can always call me. So is there still a question from the room?

Apologies, but I still have one small question. Obviously one USP that you have is your service network. And as I understand, the biggest competitor is not set up like that. Is there the optionality that you could service their product through your service network? Because I'm still impressed about that video that we saw at the IPO where you deliver it within 48 hours. Obviously the competitor can't do that. So can you help him out for something?

Also here it needs to tango because we have a clear strategy. We do service competitor products but we want to have OEM parts. Also, because the variety is so big, we would never be able to deliver within 48 hours because we can't have the whole portfolio of our competitors. Just that our warehouse in Baden has a value of 100 million Swiss francs already. And this is just to cover our installed base. So I'm not saying that for each and every competitor, we'll have another 100 million. So we only serve competitors' product when we get OEM parts. That means it's a collaboration. It's not a direct competition. I mean, he still tries to service his own turbocharger, but a lot of our customers, they have the biggest fleet. What they have is a Xelon turbocharger. They said it would just be great if you could also do those. And if the competitor is providing us the parts, we'll deliver the services on site. So we do it.

Good. Good. So there's now been additional questions in the chat. Anyone wants to take the last chance to ask a question in the room?

No. So then I would like to thank you for your attention and also for your time. Now we close it. And the question probably you have, where do you get the food? It's outside through the raw. And I'm happy to have further discussion with you. Thank you for your attention. Thank you.