Welcome, people in the room and people joining our webcast. The agenda for today is that we go through our full year results, also we want to touch a little bit about Aalberts first. Aalberts, actually, what is very important is the first sentence, it is that you will find Aalberts where technology really matters and where we can really make progress. It sounds like a simple sentence, there's a lot in it. Everywhere where we can make an innovation or can really make progress humanly, environmentally, or financially, we want to be there in our selective end markets. The essential thing of Aalberts is that we engineer mission-critical technologies for several selective industries, combined with a culture where good is never good enough, also where we continuously try to exchange knowledge because greatness is made of shared knowledge.
Continuously, we are pursuing that excellence. Our way of value creation is based on these three pillars, so that we strive for leading niche technology positions, high entry barriers in our markets, pricing power, and also high added value margins and sustainable, profitable growth. Continuously looking for uniqueness. Good is never good enough. Operational excellence, a continuous driver of results and our success. Continuously working on improving our EBITDA margins, focusing on cash conversion, and allocate our capital on the best disciplined way where we can get the highest returns. Greatness is made of shared knowledge. Continuously technology exchange, innovation speed, fast learning, and adaptation to the market changes. There's a lot of change at the moment in the world, and I think our business model is very suitable for that. The Aalberts playbook. We look to how can we create a compelling competitive advantage?
What are the growth drivers? Every time trying to leverage operationally our companies, but also our businesses, and look for margin expansion. We look for margin expansion, we continuously strive for a better cash flow, for a better margin, and also the investments we do, we try to do in a disciplined way there where we can allocate our money the best. It means also that you have continuously optimized your portfolio, which is a continuing process, and by doing that, you create long-term shareholder value. Compounding returns, investing the money where you have the highest returns, and that's a continuous long-term process. Our track record on this, we do that already 40 years of sustainable profitable growth. You can see what is the Aalberts playbook, a proven sustainable business model.
Our shareholder value creation, where you can see the share price over the years and also the earnings per share, dividend per share, and also the long-term shareholders. Nice to mention, we also did that in December, is that our long-term shareholders, more than 3% holdings, is more than 50% of our shareholder base. Our relentless pursuit for excellence drives true shareholder value. It's not that you run a company on a quarter. It's not that you run a company on a half year. It's a long-term strategy, which we have to pursue, and that's what we do. Our key strength are our people, mission-critical people. The Aalberts way, winning with people, is the biggest asset we have. Being an entrepreneur, take ownership, go for excellence, share and learn, act with integrity, winning with people.
Our strategic objectives, as again explained how we want to reach them in December last year, are here also presented. Important is that these financial objectives are presented in 2017 before the IFRS 16. To be very clear, it's before IFRS 16. Also when you look to return on capital or the other objectives is before IFRS 16. Innovation is driving our organic growth. Innovation takes time. Innovation is very important to create uniqueness in your markets. The moment you don't innovate, the moment you don't invest anymore in your markets, you can better step out. Innovation for us is a key thing to become mission-critical, but also to create the unique market positions where you have pricing power. We will continue with doing that.
The situation now is that more than 4% of our total revenue is invested in R&D, which is more than EUR 120 million. I think when we look four, five years ago, it was roughly between 2% and 3%, or close to 3%. Megatrends are shaping our future. Rapid urbanization, climate change, and also Internet of Things are very important for the future markets because these markets will also adapt these kind of trends, as also presented during our Capital Markets Day. There are two things which are very important to be successful in these changes, which in our opinion is globalization and co-development, and connectivity and integration. We have to adapt our organization and company to these two very important drivers for growth.
We made choices the last years, to focus ourselves on five, you could say, niche technologies and four selective end markets, embracing the SDGs, the Sustainable Development Goals, which we support. By doing that, we see more and more in Aalberts growing to less activities, and we also want to allocate the capital to these lesser activities, achieving unique market position with sustainable impact. The highlights of 2019. We reached a revenue, which was 3% higher than last year of EUR 2.8 billion. Very important, and also my colleague will come back to that, is our added value stayed roughly in the same base as 2018, despite a lower activity in, especially Material Technology. As you probably know, we have a high added value. Organically, we were still able to grow despite more difficult market circumstances.
We have to send an invoice to our customer, and in the end, when a customer has lesser volume, we will also see that in certain businesses. Despite, we were able, in our opinion, to deliver a solid and resilient performance in a more difficult market. Operating profit was EUR 363 million, with a margin of 12.8%. Net profit, EUR 267.4, with an earnings per share of EUR 2.42. Where it's important that only the tax rate and the IFRS impact was already EUR 0.05 compared to 2018. When we also see the operating profit, where we had not the benefit of 2018, of roughly EUR 10.6, then you could say that operationally, the company did even better than 2018.
In the CapEx, I think it's very important to notice that roughly EUR 10 million or EUR 15 million of the CapEx of Material Technology was used to replace the equipment because of the fires. When you get a real picture, you should also look really like for like. The return on capital before IFRS is 15.1, of course, is affected by a lower performance of our existing business, especially in Material Technology. Of course, a higher capital employed because we did also two acquisitions by your goodwill. Don't forget that Material Technology business will come back, because also we had this period on a slightly different way in the past, we have a strong position, we think this business will recover gradually during this year. Operational development.
It's a nice sheet because it gives the total overview of let's say all these segments, what has really happened within Aalberts. You could say, and that's only important for the background, that when you look to the right side of the sheet, to the markets, that 44% of the business of Aalberts was in some way affected by the situation in the market environment. Eco-friendly buildings was not affected, was very good level. The other markets, Industrial Niches, but also Sustainable Transportation, but also Semiconductor Efficiency, faced all inventory reductions. They faced all postponement of orders. They faced all uncertainty. Do not forget that the fantastic market of Semiconductor Efficiency, we had a few years where we grew almost 20%, and last year we also grew, but it was roughly 4%. Of course, it's still not so bad, but it's less than 20%.
In the eco-friendly buildings market, we saw a nice growth, also in Climate Technology, also in Industrial Technology, despite the developments which were also taking place in that market. I must say, and that's also what I tried to say at mid-year, most of the growth was driven by own initiatives, new products, better sales, because also in certain markets, in Installation Technology, America, we also saw a softening after the summer, which we did not expect as it came. Organic revenue declined in Material Technology Europe. As I said already, market uncertainty, postponement of orders, inventory reduction. Important is that it also stabilized after a certain period. We see now a stabilized situation in that business. We initiated efficiency and restructuring actions. Additional costs we made, roughly, but also my colleague will guide a little bit more.
We made roughly EUR 3 million, maybe a little bit more, a little bit less of restructuring cost in Material Technology, which is included in the bridge. North American Aerospace did very well. They compensated partly the downturn we faced in Europe, which was mainly in Germany and France, but also in Benelux. It has to do with the uncertainty in the markets. People reduce their inventories, postpone ordering, there's in the end, also inventory reduction and postponement you cannot do forever. We reached a solid and resilient EBITA performance. It showed, therefore, a mixed picture. 3 business segments, we were able to grow organically in EBIT. Our European surface technologies activity, we saw an organic EBIT decline. As said, more in Europe, partly compensated in surface technologies in the U.S. and with our aerospace activities.
The less incidental benefits compared to 2018 was a difference of roughly 10.5 million compared to the EBIT of 2018. As always, we have a roughly holding correction between 10 and 12 million. Last year we had zero. Now we have again a small 12. CapEx increased to 148 million. You should include here or exclude, however you want to calculate, the EUR 10 million- EUR 15 million of fire CapEx related to the equipment which we installed to replace. That is then a real number. Roughly 133, which we added to that. We facilitated mainly with the CapEx organic growth and innovations. Also a lot of efficiency because that goes mostly hand in hand. Also we launched more than 50 new product lines. Most of them were in Climate Technology, but also Industrial Technology. We launched some very nice full flow valves, also other valves, regulators.
In Installation Technology, we launched some nice connection systems in combination with valves. Only to have the right service for a new product line, and it is only one product line, in Installation Technology, which we launched or launched in a bigger way, cost us or was an investment also of EUR 10 million in stock. Also that is important to know when we look to the financial numbers. In the end, our opinion is that we made a solid and resilient performance in a more difficult market environment, which was actually in the course of the year deteriorated further through uncertainty. I said here in the same room that we expect, for example, that the American industrial markets had a good quote offering, and we expected the second half that when these quotes could become order, it could be a nice half year. What happened?
In August, we saw a lot of uncertainty through the China and the U.S. trade disputes, and a lot of orders were postponed. Okay, we did not see that, and that was also one of the things where you saw that we saw more deterioration than we expected. We also try to guide in September, but also during our Capital Markets Day, where we said that we can also have a dip or you have also a market environment which is maybe less where you are not immune for. We look to Installation Technology, we have here a nice example of a new distribution center in Belgium. It's not standing there yet because this is a drawing, but we are expanding in Belgium. A fantastic business we have there. Also there you see a lot of growth potential. It's just one example.
We are actually expanding a lot of buildings at the moment, it will also mean that this year we'll have a pretty high CapEx, I think probably in the range of last year, because we see a lot of growth potential, especially organically. Despite some headwinds, you still have a good future. Installation Technology, good organic growth. Europe, America commercial, good level. U.K., America industrial, challenging. U.K., very volatile. Building up stocks, reducing stocks. Building up stocks, reducing stocks. Why? Don't ask me, because the customers ordered and then they don't order. It had to do something like Brexit.
The portfolio, we further optimized, we improved the quality of the inventory, and I think we made very big steps also in cash generation, with the new management, which we installed in the U.S., and the successful launch of innovation in the press portfolio, and new innovations are coming to be launched this year. We gained several large key accounts, and I must say that we are really positive about the future effects of all these changes we made. I think we get really the business together. A big headache, as I told you many half years and years was our distribution setup in the U.S., but it's really streamlined. We could now, as we also promised in 2019, streamline also the setup.
We could reduce inventories and costs because we knew now what the customer need is in which region, and we will, of course, continue that. As said, our American organization streamlined the organization, overhead was reduced, but also we made their additional redundancy costs, which we did, of course, on purpose because we want to improve the business. Our new European assembly and distribution center is constructed. We are now implementing the operational, let's say, phase. We think we have to move equipment around, that we have all the equipment end of first quarter. We really start up second quarter. Hopefully, we have it fully operational in the second half of 2020. As said, we will integrate roughly seven to eight warehouses in that period, also to streamline the complete setup in Europe, what we did already in America. Efficiency improvements in manufacturing combined with capacity expansion.
Especially in one specific product line, we really expanded heavily. We can't even fulfill completely the demand. We had to invest heavily to facilitate the growth in combination with efficiency. As said, U.K., we streamlined the organization because we had a volatile situation. It's also that we want to invest more in our local manufacturing because we really think that U.K. made is an advantage. We want to, of course, also to streamline the organization, reduce the cost to be in line with the market developments. Also, we have further plans to optimize the factory in combination with other locations in Europe. Further consolidation, we will initiate the coming periods. Capital allocation in Installation Technology. We increased the capacity of the fast-growing product lines combined with higher efficiency. Our European assembly and distribution centers, one is already constructed, the other one we are constructing now in Belgium.
Operational excellence in our innovation projects, we spend a lot of money on, and we will continue in doing that. As we already said, and as already my colleague, André in het Veld said in December, we have a huge potential in growth and operational leverage and excellence in this business segment. Material Technology. A nice example of new technology we added, it's related to additive manufacturing. It's a specialized thermal processing equipment, which we added in Accurate Brazing in our company there. A very nice business. Also here, you first have to invest, and then you get the revenues. Material Technology. Organic growth, innovation. The European business deteriorated gradually. We saw that a little bit in summer, it's really graduated further after summer. I already said what was the reason for that, uncertainty, postponement of orders.
What you see is that due to the new emission ruling, that companies, the OEMs, are looking more what is the right portfolio for their automotive. What we also saw, and also what we said in July, there comes maybe a little bit of tick-up at the end of the year. We saw this tick-up, also because the inventory stabilized, so that really happened. The tick-up was at a smaller rate, let's say, than we hoped for or expected. I'm sure it will come, the tick-up will come, and we think it will come already during this year, probably in the second half, but it's very difficult to predict the speed of this recovery. One thing's for sure, that business will recover because we have a fantastic position.
Last month, our order intake and inventory is already stabilized. Overall, over the year, we face an organic decline, especially in the second half, and mostly in the second half, I should say. Revenue partly compensated, as already said, many new developments in surface treatment. That's very good to see. In electrification of vehicles, we have very, very nice offers where we are in the process to come to quotes and to start up productions. What you see, in our opinion, is that the automotive industry in Germany is more and more making the new models, electrical models, close to their base, and also shifting production to other countries, where we will follow. Also, precision extrusion in combination with the surface treatment did a very nice job. Good progress of the integration of the previous acquisitions. We acquired PPC and Applied.
Important that we also said we should really now leverage also the acquisitions and the business plans which we made for all these companies, and also for North America. That's also why we were in December a little bit more cautious with acquisitions for the coming three years, because we have so much to gain with our existing business. Eastern Europe performed well. Operational excellence and leverage, we took really a lot of actions to reduce the cost already during the year in service locations, but you can only compensate in this business, the low volume partly because when you have a furnace or a surface treatment line, you still have the energy cost, and you still have the personal expense, even when the furnace or the surface treatment facility is working for 60%-70%. You need volume.
Of course, you can reduce costs, but you can only compensate partly. A very nice business, as I said, and it will recover. Additional actions to restructure and streamline the overhead and the group structure, we completely streamlined that. We took out a lot of overhead, and also based on the merger of the former two companies and the acquisition of Impreglon, we took additional steps to do that. In the end, still, we made a margin of 12.6%, which I think in these kind of circumstances is actually pretty good when you look what happened in the market. Capital allocation is invested mainly in growth areas, Eastern Europe and America, new technologies additive manufacturing. It's also fire-related CapEx of EUR 10 million-EUR 15 million, let's say close to EUR 15 million. You always have your maintenance.
We are looking also based on what we said in December to further optimize our service network and footprint because we still have some businesses where we maybe can better say we should divest. That's part of our strategic plan. A solid performance, in our opinion, despite lower order level in Europe. Climate Technology, a very nice example, again, of a new digitalized product, which we also developed together with our digital hubs in the Netherlands and France, realizing a saving of 30% on energy. Climate Technology, good level, in all regions. Many new product lines.
In the end, maybe you could say maybe even a little bit too many product lines, because when you launch a product line in the beginning, you have a minor sales impact, but you have a lot of costs because you have to manufacture it for the first time, you have to put it on stock, you have service issues. We had in beginning of the year 2019, really some service issues because we were overwhelmed also with the orders we got, and we didn't have the equipment in time. That is also what manufacturing is. We solved it towards the end of the year. We could have reached also there high organic growth when we wouldn't have faced these issues. That's also part of launching new products. The point is you have to solve it as quick as possible, what we tried to do.
Connected products, gaining data, new business models. It's starting. It's coming more and more. Talking to the building owner, how can you reduce the efficiency? How can you increase the efficiency of your energy use? How can you connect products so you gain data? It will become a nice business model, more and more, combined with the products we have. That's what we want to do. We have products, we are a manufacturer, we are an innovator, but you have to combine it with digital models. That is our thinking about the future. Additional cost in sales marketing, as already said, we have to streamline further also our manufacturing footprint and supply chain, in this segment. There are also possibilities for that, also after the transformation to go to one cluster in this segment.
Capital allocation, we started the construction of the new facility in Almere, where we will have a production plant for one of our product lines because we need to expand in capacity, and we will combine that also with a distribution center where we will again integrate existing centers which we have in Europe. It will not be seven or eight, but probably it will be four or five. Of course, we can also grow there. It will also be an efficiency improvement in distribution. It will become our new head office of Climate Technology, of hydronic flow control with a fantastic demonstration center, and we hope it will be ready end of this year. We had to facilitate several product lines, and we optimized the portfolio by divesting the company stock. We did that in the last quarter, in actually the last month.
It is a manufacturing location in Germany, which was a non-core location. We need further portfolio optimization here because a big part of our business is doing very nicely in high margins, and other part is doing low margins, where we think it's also not our core business, but also we think we can better focus on the smaller portfolio, as also already presented last year. Good organic growth, many new product lines, further portfolio optimization is the key thing here, but a nice business. Industrial Technology, we launched a new dispensing bar gun, and we can say now we are almost two months in the year 2020, that is successful. It's a new bar gun which we redesigned. It is compatible also with other products, retrofittable, and it looks like a nice success. Industrial Technology, organic growth, innovation, Semicon Efficiency, solid organic growth.
A lot of people ask me, "Semicon will go down?" It didn't go down for us. Only our growth pace was lower, at a lower level than the years before. We are ready because we use the time to streamline our organization. We are ready for the next strong ramp-up, which will come in 2020 and 2021, let's see how it goes after that. Fluid control, market uncertainty, postponement of orders in the industrial area, and inventory reductions in the same end markets as already mentioned. Last months of the year, we saw the inventory reductions stabilize in the order intake. Also for this year, it's still an uncertain situation, but also innovations will bring us further. I think when the situation stabilize more, especially also in niches, we also see a recovery here probably during this year. Operational leverage and excellence.
We streamlined advanced mechatronics. We took advantage of a little bit lower growth year. Actually, you could say it is also good that maybe sometimes happens because you can really optimize your organization, be ready for the next ramp up. Fluid control, we aligned the cost structure in organization. We did it very thorough, quick, and, of course, you have to add on also the full year sales effect of the VAF acquisition. All in all, we made a nice EBIT improvement. We went to 16.7% EBIT, and we had the same capital expenditure. The capital was spent on the new R&D center in Graz, Austria, for our company, Ventirex. We further expanded capacity in Semicon. We are also looking for a plan now for this year again to further expand also this year for the coming years.
Our innovations and related manufacturing assembly equipment for our new innovations, therefore, also we spend capital besides the operational actions initiatives. That is roughly Industrial Technology where innovation is driving our growth, and we also took advantage of early investments, especially one or two years ago in our advanced mechatronics business, but also in certain Fluid Control parts. I give now the word to my colleague, Mr. Monincx.
Thank you, Wim. Welcome everybody, also on my side, also the people in the webcast. I want to take you through the revenue bridge that we presented, where we explain the improvement of EUR 83 million from 2018 to 2019 in different items, of course. First of all, the acquisitions cost and the positive revenue effect of EUR 78 million. The divestments that we did in 2018 and 2019 caused a negative revenue effect of EUR 59 million. The currency impact of the translation of foreign exchange caused an impact of EUR 34.5 million positive this year instead of negative last year. The organic growth of EUR 29.1 million for Aalberts total can be split off, as Wim already explained, in two parts.
Important that we focus on that big difference because as said, we faced a stronger organic decline in our European surface technology businesses, causing a negative revenue effect of EUR 21.2 million. In all the other Aalberts businesses together, we realized an organic revenue growth of EUR 15 million positive. Also in that area, of course, there were markets like already touched the industrial markets that were not running full speed. At the end, we ended the revenue line with EUR 2.841 billion in 2019. The related EBITA bridge from 2018, EUR 365 million, EUR 65.5 million. Of course, the first step is to take you back in the memories of the presentation of last year where we explained that we faced an incidental benefit of EUR 10.6 million.
Of which one of the bigger items was, for instance, the property insurance claim that was compensated by the insurance companies to Aalberts, and where you make a book profit. That is really not operational. That came into our P&L, and that's also the reason why this holding elimination line for full year 2018 was suddenly around zero, - 0.4, where the first half year was still the normal level of around -EUR 6 million. I will come back to that later in the segment reporting to give you also some more, let's say, insight in the half year one, half year two situation. For the full year comparison, it's very important that everybody understands that this is in our numbers, and that is something that should bring the starting point at a lower level.
The acquisitions EBITA, the acquisitions of 2018 and 2019, they drove the EBITA with EUR 14.8 million. The divestments of 2018 and 2019, that caused a negative impact in EBITA of EUR 6.3 million. The currency translation differences for EBITA EUR 2.8 positive. The organic impact of our revenue in relation to the EBITA negative. For Surface Technologies Europe, EUR 17.1 million. As a part of that, of course, also some restructuring costs because we took a lot of actions also to adapt to the market situation. About EUR 3 million of one-off costs is included into that. On the other side, the organic growth of the other Aalberts businesses together, that caused a positive EBITA impact of EUR 13.5 million, which is more than 26% drop-through.
Which looks quite normal and as expected from our businesses, as we also presented in the Capital Markets Day, how we see that with the future organic growth, what the possible impact will be. At the end, we ended up the year with an EBITA of EUR 362 million and EUR 600,000. The condensed consolidated income statement. Of course, the revenue line already explained and the operating profits. What is not mentioned here, what I would like to also stipulate a little bit, is the added value that grew from 62.6%-62.8%. That is quite, I think, a good performance because first of all, maybe you can remember from the first half year figures, we built up, let's say, much more stocks in 2018 than we did in 2019. At the end, we ended 2019 with, let's say, EUR 63 million less stock built as we did in 2018.
The positive added value impact of that, we did not have that advantage this year. Secondly, as you know, and also Wim explained, that the decline, the organic revenue decline of Surface Technologies Europe is a high margin business with a very high added value. Actually in the highest area of our business. Also that decline is going through the added value of Aalberts total. Despite these two big effects, the total added value increased with 0.2%, which proves that the portfolio is further improving and getting stronger, and also the pricing position of the business that we have with the innovation that we bring to the market is, of course, stimulating that. Now IFRS impact also here through depreciations, for instance, but also for the net finance cost. There you also have an IFRS impact.
The income tax expense, also already touched, an ETR, going up from 21.4% as expected, because that is also what we guided last year, that we expect an ETR of between 24% and 25%, it was a little bit less than expected. It went up already to 22.9%, 1.5%, and as said, also that impacted our EPS with about EUR 0.04. Not with about, with exactly EUR 0.04. The non-controlling interest, a little bit higher, and that at the end comes to a net profit before amortization of EUR 267.4 million versus, let's say, EUR 274.9 million last year. EPS, as said, EUR 2.42 versus EUR 2.49, of which EUR 0.04, the ETR impact and another EUR 0.01 for IFRS. The total, let's say, operational decline of EPS is EUR 0.02. We believe it's a very solid and resilient performance in more difficult market environment. The condensed consolidated balance sheet.
There you see some small changes, for instance, in the working capital. Sorry. I'm on the wrong page. The balance sheet where we see that the equity is remaining strong with 53% and that the net debt is going up quite large. Sorry, with EUR 165 million, but big part of that is IFRS, as already mentioned also by Wim. The net debt, excluding the IFRS, went up with only EUR 2 million, despite two acquisitions, despite the increased CapEx. That is, of course, also into that number. The leverage ratio, net debt divided by EBITDA, from 1.3 it went up to 1.5, including IFRS. Excluding IFRS, it remained on the same level. Net working capital increased, but also there, we believe that the balance is much better than last year, and that is also what we already saw in the first half year.
We built up much less stocks, which of course, had a positive impact on the cash. On the other side, we also receive more receivables in the same period, and we paid more to our suppliers. The net effect of the mutation of working capital is quite small, but the balance, we believe, is much better than last year. Days working capital went up with one day at the end. The big takeaway, I believe also from this slide, is that IFRS 16 has a big impact, mainly on net debt and ROCE, of course, which is a very important KPI for us. The condensed cash flow statement, consolidated cash flow statement, where we see the differences in the working capital. I already mentioned only 0.9, let's say, difference between 2018 and 2019, but in a very different substance.
We paid less in income tax than last year because we had to take a compensation with the tax obligation in 2018 and 2019. That was an advantage for us in this year. The acquisition disposal of subsidiaries is EUR 110 million versus EUR 131 million last year. At the end, the net increase in cash or decrease in cash is EUR 9.5 million. It's a strong cash flow from ops with a net working capital more in balance, like I said. Revenue and CapEx. The segment reporting as you are used to that from our side, also here you see, of course, the different developments per segment again, like already also was taken care of by Wim per segment.
I believe that what is interesting to see is that you see that we are really investing in our organic growth plans and the equipment that we need to realize that. That you, of course, also see a big plus in Material Technology, although the market was, of course, lower. For a big part, about EUR 50 million, that has to do with the replacement of lost equipment from the fires of last year. Total CapEx EUR 148 million versus EUR 133.9 million last year, an increase of 11%. Operating profit and EBITDA margin. Here's the split. You can see the split per segment, where you can see the, of course, the increase of the three segments that are also growing organically and the decrease in Material Technology. That is, I think, what we already have discussed.
What is very important in this overview is the holding elimination line, because there you see what happened last year. We had a EUR 0.4 full year holding elimination line where a normal level, as we have always guided, is between EUR 11 million and EUR 12 million negative, because that is the holding cost and some other costs that are booked into that line. Last year, in 2018, the first half year showed a normal picture. Then we had these fires, and we had a lot of incidental topics. At the end, the full year effect was EUR 0.4 negative. That meant that we had about EUR 11 million incidental benefit what was booked in that line. For a big part, again, that was done because we had this property insurance return, which caused a book profit. We had to administer that in that line.
If you see, going a little bit more into the depth, also maybe later for the questions, what impact it has on the second half-year, that's also quite a big impact, because the first half-year, as said, was EUR -6.1, a normal level. The second half of 2018, it was booked as a positive EUR 5.7. In this year, we presented already to you the holding elimination line of the first half-year 2019 as EUR -3.9 because we had some benefit from a divestment, a smaller divestment. The full year is EUR -11.7. The second half-year correction is EUR -7.8. The EUR -7.8 in relation to the plus EUR 5.7 of 2018 is a difference of EUR 13.5 million entering in our second half-year numbers.
You should take that into account when you look into our performance of 2019, and in particular, second half year. At the end, the main takeaway, of course, is that we increased the EBITDA margin in three segments and that we face a decline in Material Technology. Here we have a complete table as also in the press announcement with the adaptation impact of IFRS 16, which we are also not really happy with it, of course. It's confusing a lot, at the end, we have to deal with it. This is the table, for next year, at least in the comparison, it becomes a little bit more easier. For EBITDA, it has quite a substantial impact. EBITA, only a little, EUR 0.7 million. You know the table.
Of course, big impact in net debt, capital employed. That has impact again on the ROCE. That is what we should take into account analyzing our figures. The dividend proposal, as it was also communicated, we propose a cash dividend of EUR 0.80 per share, which is a 7% increase. Also there, we believe we invest a lot in our organic growth plans. It's a nice increase, of course, a 7% increase. It brings us to the review of the financial objectives 2018-2022. That is all presented, if applicable, before IFRS 16, because that is where we set our goals at, and that is also where we are focusing on.
The organic revenue growth overview of an average of five years, you see that of 2009, that is including the four years before 2009, 2014, including the four years before 2014, et cetera, 2019, where you see that including the four years before 2019, we are on an average now of 3%. Our objective is for the full period of 2018 to 2022, these five years, more than 3%. EBITDA margin in the same way, let's say in 2019 it was 7%, in 2014 it was 11.2%, in 2019, 12.8%. There the objective is, as communicated also many times, of course, but also confirmed in the Capital Markets Day, more than 14%. In the Capital Markets Day, I think we have already shown where we believe the improvements can be made, and how we believe we can realize these goals.
ROCE, return on capital employed, also increased over the last years. You see a nice, let's say, trend. It's now impacted this year. When you have a lower performance, that's logic. You keep on investing and also acquiring companies, it has impact. We still see a lot of potential to improve that. We have already announced our divestment program that we will accelerate. That will also support it. Of course, especially the self-help of our internal business, but also the organic growth plans to create more profit for the future. At the end, we should realize this objective of more than 18% in 2022. The free cash flow conversion ratio, at this moment, 60.5%. The leverage ratio of 1.3 at the same level of last year. The solvability percentage of over 53%.
That is already above, of course, the goal that we have set. Aalberts accelerates, and we will achieve our strategic objectives as set in the Capital Markets Day. Wim.
Yeah, Aalberts looking forward. I think what you see here is the key takeaways on the next slide. That's what we said in December. Of course, three months later, it's only three months later than beginning December, we still have the same key takeaways. We allocate our capital in the most efficient way. We further narrow our focus, so we are very busy with that. Achieving unique leading market position with sustainable impact. Building an even stronger and better Aalberts. Accelerate organic revenue growth, so we are doing that. Our goal is to realize an operational leverage drop through 25% and accelerate the portfolio optimization with the EUR 300 million-EUR 350 million of, let's say, revenue.
Where we now did the first thing in December, small thing, roughly EUR 20 million, further focus on clustering and simplification of the organization, where we already made a lot of actions the last months, in the last 6 months. The driver of the EBITDA percentage increase is the operational leverage and excellence mainly, an efficient capital allocation drives the return on capital employed increase to evolve into a stronger and better Aalberts. Of course, when you have a dip or some headwinds during a certain period, it doesn't mean that you're also going to change your strategy. We will pursue and be relentless in our execution. Aalberts looking forward in the segments. We try to give you here a little bit guidance about our thoughts. Of course, it's not in numbers. We will not do that in 2020, as we do that not in any year.
We give guidance over our strategic objectives on the long term. Installation Technology, in technology, many sales innovation and efficiency initiatives. We did change the management one and a half year ago. We have put a strong team in. We see the efforts of that also in 2019, where we have a really better inventory position, much better. We generated much more cash, and we're also improving, despite these cash initiatives, our margins. We have a great sales force in Europe and America, which gets more and more traction, and that all will have a positive effect. We see that every day now. We feel that it's only very difficult to predict when everything comes together more and more, but it is coming together more and more. There's so much to gain here, as you also put here in December.
Material Technology. The European business will recover. Cars will be sold. Machines will be built. Planes will be built, I think 40,000 in the coming 10 or 15 years. Gentlemen and ladies, this will not stop. When people are uncertain, look to yourself. You stop investing a little bit, you are a little more careful, but it doesn't mean that the world will going to stop. It will recover. Let's see. First half, let's see. Second half could be a little bit better, and then it will continue. That's our expectation based on our management, but also based on what we learned from the past. In the meantime, we take the initiative to streamline our organization in a very rigorous way to be much more lean, and also realize the business plans of the acquisitions we did in the past.
We will continue, and we will pursue, mainly here, organic growth and optimization. Here, acquisition will be on a lower pace for the coming three years, as already mentioned in December. We guided there between EUR 100 million and EUR 200 million over this three-year period, and that is also what we are doing. We are focusing on improvements, leverage, excellence, organic revenue growth, creating unique positions with innovations. We are exactly doing what we say. Climate Technology, leverage the newly launched product lines. It's nice to launch product lines, at least 15 or more. In the end, we need sales, we need margin. We have to pursue all these investments and get the returns out of these investments. We have to get the leverage of all the things we did and accelerate that revenue growth. In the meantime, especially Climate Technology needs portfolio improvement.
We need to divest certain activities as quick as possible, as already mentioned earlier. Industrial Technology, strong growth in Semiconductor Efficiency. We are preparing ourselves at the moment. I am very happy that we did the investments two years ago, because otherwise we could never have gained that position which we have now. We did it again last year, and we do it again this year because we believe in this business. We are able to double this business in Semiconductor Efficiency, as we said, but you need to invest, and you need to be ready to deliver. Further capacity and footprint expansions, Europe, Asia, we're working on, and a very, very nice position we have there with unique IPs, unique patents, where we are a pretty unique player in that industry. fluid control innovations will accelerate organic growth. The full flow valves, the regulators, compressors, high-pressure valves.
A lot is going on in Germany in our company, a lot is going on in Denmark, and we will see there some nice innovations coming in the market more and more. On the other hand, there's still also some uncertainty, especially in automotive. You still see that here and there, what is going to be developed? Is it hydrogen? Is it LNG for trucks? We are there. We are talking to the OEMs. It is a very interesting time because a lot of new developments are in the things, in the thoughts of the OEMs. Also the automotive will recover. Also there will be combustion engines also in 10 years. It is impossible to have all electrical cars on the road for 100%. It's impossible. That's our opinion. You still need hybrids. You still need combustion engines.
We have the whole portfolio, and we are alert in investing and also innovating in the new segments like hydrogen, like LNG, like CNG, but also fuel reductions for marine, new legislation. This is how we see the segments. Our outlook, our Aalberts outlook is the Aalberts outlook. We do what we said in December. We will accelerate our actions as presented, and we remain confident in all these plans, and all these plans need investments, and we achieve our strategic objectives. That's our goal on the long term, and as we always said, as soon as possible. One remark I want to make. When you look to our Material Technology business, when you have lesser volume in your factories, you get hit hard, as we could see.
What is also there, you have a lack of cost reductions that always goes slower than when the revenue goes down. The same effect, the opposite you get when the business goes up. When the business goes up, you have the same effect on the positive side. Don't forget that we have roughly 90 locations in the world. We have a number 1 position in surface treatment with fantastic projects in electrification of cars, aerospace, but also in heat treatment, we have great positions in America, Europe, where. It's not so easy to copy that business because you need a lot of capital, as you know. We are confident in the recovery
You will probably also see another picture. Thank you very much for listening to me and my colleague, and I hope we have a lot of questions because we are very anxious and motivated to answer them to get the right picture of our performance of 2019. Martijn?
No need actually for this thing, right? Okay.
You need the microphone. Otherwise,
Okay. Martijn den Drijver from ABN AMRO. To start off with Installation Technology, I actually need a bit of your help. The reported growth is 0.3%. I think you've had some tailwind from the US dollar and the British pound. By my calculations, given the proportion of the U.K. and the U.S. business, some 1.6%, there was no M&A impact. I come to a negative organic growth while you are saying that it's positive and actually good. Maybe you can help me out here. That's one with regards to Installation Technology. If the organic growth is good, I don't know exactly what that means, 1%, 3%, but you may actually provide some color there.
I was wondering, given what you said last year, also what you said during the year, the finalization of the DCs, global alignment of integrated piping, many optimization and efficiency initiatives, growing sales from innovations, isn't the 20 basis points margin improvement a little meager? That's the second question on installation. The third one on installation is, what was the fast-selling product line?
Which was that? What you said?
You mentioned in your presentation that.
That's Installation Technology?
Yeah.
Okay.
I would like to know which one was the fast-selling product line. On Material Technology, you have said now on several occasions that you expect a gradual recovery during the year. Is that based on RFQs, RFPs, orders, just discussions, or maybe a little bit of color on that? A second question, I'm almost finished here. Even if you adjust the CapEx in Material Technology, EUR 40 million-EUR 50 million from the fire, it's still high. What have you invested that in? My final one, if you look at the cash out from acquisitions, how much of that was actually earn-outs, so we can calculate roughly what you actually paid for those acquisitions? Thank you.
Okay. Starting with your first question on, let's say, the organic growth of Industrial Technology. You said there's no impact of acquisition and divestments. There is still, because we divested our retail business in 2018 per the 1st of July. There's still half a year of impact in 2019, negative. Plus, we shifted some business. We shifted some business between Installation Technology and Climate Technology.
I seem to recall that you also explained to me you sold the business, but you kept on selling to the actual buyer, so it shouldn't have a sales impact.
That's correct. That's, let's say, the sales that we have to the outside world, we don't have. The sales to the retail customer is out. The total impact was EUR 40 million on annual revenue. We did it the July 1st, so it's a EUR 20 million impact. I think the organic growth of roughly the segments was, of course, in Material Technology, was minus, but actually -2 , -3 , you could say, -3 , because it was compensated by U.S. and also aerospace. Installation, Climate, we did pretty well in our opinion, because don't forget, in Installation Technology, we have also an industrial component in America, which is pretty big. That is actually the only thing what I had expected it would be better, but due to the uncertainty which happened in August, we saw that a lot of quotes were postponed.
There also we did roughly three. Installation Technology, we did at three plus. You have roughly, yeah? In Industrial Technology, we did also a small organic growth, despite the much lower semiconductor, despite all the headwinds we had there also. Yeah, that's roughly the picture.
Yep.
Your question.
Oh, sorry. Yeah.
I believe the second question was about the margin of Installation Technology, that you expected that to improve bigger, faster, or higher. As I said, we have really a big difference with last year, where we built up a lot of stocks, and mainly also in the area of Installation Technology, where this year we did not have that effect. That is really a big, let's say, impact for the added value. Nevertheless, we improved the added value.
There is margin improvement, but we are convinced also, therefore, that in the next years, there's further margin improvement possible because that will come out at the end, because you don't have that effect then. We focused in America mainly on stock reduction. Partly it will also be this year, and that has to do, the moment you have the distribution set up ready. It's just a set up ready. The reason why it took, in our opinion, all so long, but let's agree, we also want to have the margin up as soon as possible.
Is that you first have the setup, then we had the inventory there, but we didn't know what was the regional need of every SKU. We didn't have that knowledge. In the beginning, we put a lot of inventory in. I tried to explain it also one year ago or two years ago. Now we have this information more and more, so we can optimize the stock. We focused mainly on cash and on cost reduction, streamlining, but we are not done yet. In the press release, you read there as a first step. We see more cost optimizations possibilities. We see also better inventories possibilities. I fully agree, we should be able to increase further the EBIT margin, and that has also to do with the leverage of your factories. At the moment, you of course, lesser absorption, which we had because we reduced the production.
Yeah.
You already start negative.
Yeah.
I think we are in a better and better position. We are now in Europe, actually busy because also the centers are there in Zeewolde. We are now moving the equipment from Amersfoort to Zeewolde at the moment. We started also there the warehouse that we will integrate the other warehouses. Should be operational second half. Also there we make big progress. Yeah, we do a lot to optimize the business still in that segment. U.K. didn't help. Don't forget the U.K. Not that the business was so bad. That was not even the projects were there. They were at a lower level, and they will also be at a lower level coming years.
Yeah.
It's our expectation. Maybe the government can help. That we also winning market share. What didn't help is that end of March, everybody ordered to a very high stocks, our wholesalers. You have to produce, you have to take in people, and then you can stop your production again. Yeah, that is so bad for a factory. That did really not help. Difficult situation, volatile, we managed that, but it didn't help. That's roughly Installation Technology. Fast-growing product line. It's a very nice product line. We are very happy with it. It has a certain color, but I don't want to say too much about it. That's also we write it like we write it in the press release.
Yeah.
When you read well this book, it has to do with an integrated piping system where you try to get the connections on the valves and on the product we also make in Hilversum. Yeah, the connections with the valves, and there we see a real attraction in the market. We also gain some very nice big key accounts, in Europe but also in America, where we actually have the hands full to produce everything. We have to get it more efficient also. That's the situation. I fully agree the potential of that segment is still the same as we always said.
Yeah.
Also had some headwinds there in industrial.
CapEx, Material Technology, yeah?
Yeah, Material Technology. Why do you think it will recover? Do you have signs for that? The signs for us are, of course, possible orders, and possible orders are our customers, but also our experience and also our management. The opinion is based on that. What is the order intake of the last months? What do the customers say? What is normally happening when inventory reduction is over? There you have then also some differences per region, but that's why we also guide it in the sheet. It's difficult to predict the speed of the recovery, I'm also careful. For the first half, let's say it stays a little bit like it stays, but it could be that going to the second half, you see some improvements. It's difficult to predict.
It will recover, and we see already some signs for that, but also some nice projects. High CapEx. Where did we invest in? I tried to explain that. The most CapEx went to Eastern Europe and North America. We on purpose because, we were in quarter three, four, especially quarter three, we also already said to each other, should we cut CapEx because you can easily cut things when you want. We see opportunity in Eastern Europe and North America, and we think it's a dip which will not last forever. When you cut off investments, then it's very difficult to start them up again. We believe in investing, and also because in Eastern Europe and North America, we have very nice positions to grow. There the CapEx went. The other thing went to new technology.
We invested in North America in additional technology for additive manufacturing. That's a certain process where you, under pressure, and also high temperature, treat the parts, and, yeah, actually, there's almost no competition besides one company. We see a big opportunity somewhere in the South Carolina, North Carolina, and what we get now back from the market looks very promising. We will even go more invest in that area. We should not stop. That is actually what we said, because we will overcome this. I think we will even come better out of it because we also streamline the whole organization. Based on the Capital Markets Day, we also look to the portfolio of the locations. It's part of the divestment program. The cash out of the acquisition was the question? Yeah. Arno?
Yeah. Let's say, we did two acquisitions. We had some deferred payments, and we had some earn-out payments that we had to do. At the end, that total number is included all in this line. It's about six, seven items. Would you be able to provide the components for the deferred payments and the earn-out so we can get to the underlying cash out for the acquisitions? No. Okay. We don't disclose that.
Next question.
Luuk van Beek of Petercam. Well, first on, you mentioned that towards the end of the year, the markets that were under some pressure stabilized. Obviously, after that.
Order intake, inventory reduction stabilized.
Yes.
I didn't say that the market stabilized
The world continued with Brexit, the coronavirus, and other elements. Do you see that pattern continuing in the first two months of this year?
Yeah, these are two things. I think when you talk to the U.K., look to the U.K., I think the U.K., we took the decision to really take cost reduction actions with the last year already, which will continue. We also wrote that a little bit more in the press release. That will continue this year, and that will have effect probably end of this year, but also next year. The second thing we're going to do in the U.K. in Installation Technology is we have accelerated our innovations, but we do it already last years to get more market share because U.K. made becomes really an asset that was already the last year. We're really accelerating that, but also the innovations we have now more and more globally launched, as also explained in the press release.
We have a much more efficient way of launching the product lines because of our global management structure, which is really getting more and more traction, which we changed two, three years ago. We will do further consolidations in Europe. That means that in the U.K., we will probably consolidate some locations inside the U.K., so we get more added value. That are the actions we're going to do in the U.K. The total market had a lot of time uncertainty. I think we coped well with it, but the volatility hurt us. Hopefully, we get now a less volatile situation because there is now a decision. I'm very happy with that, there is a decision. Now you can really become also more efficient in your manufacturing. That you can almost say every week unforeseen circumstances.
I'm not accountable for because tomorrow is coronavirus, the day after tomorrow it is trade wars. I don't know what happens in the political environment. We do our thing, and we focus on our business, and we're going to execute our strategy. Regarding coronavirus, it seems to be a virus, coronavirus, and it's in China. We have not a big direct impact because we have a very small position in China. We've only three, four factories. The factories we have there are for half roughly based in the south. There you see that roughly, maybe now at the moment it's already increased again. The last weeks, because we did some tracking, of course, with our people, is that 60%-70% of the people are working again. In the area of Shanghai, it was more like 50%, which was working again.
I think more and more people are regaining work. I think directly it will hit us a little bit, but it's very small numbers. What is more the thing, but I think then the whole world has an issue, is when, of course, this situation in coronavirus takes longer than, in our opinion, eight to 10 weeks longer. The supply chains of our customers, especially in the industrial arena, where they cannot deliver their own OEM products anymore, then of course their sales will go down, and then they also will need us lesser. That's a sort of indirect effect. It's very difficult to predict. At the moment, it's not the case. We have no real issues at the moment. I think the coming six to eight weeks, I think is also okay.
When it takes longer, when it takes three months still, but then we will not be the only one. Our sales in China and that area is very small. The other thing is, Aalberts is, as always said, is producing their products very local. In America, we make almost 95% of our sales for the local market, and also in Europe, and also in the U.K. That can also be an advantage. We see here and there some advantages already that they want to our products, especially in certain piping systems. We see that at the moment. I'm careful, and therefore, I don't know exactly. It's too early, and therefore, we didn't wrote anything in our press release. Of course, we're living in the world we live in. We have to be alert. We have to react.
We also react now on the new electrification of vehicles. There's also a lot of opportunities. That would be my answer.
Okay. Last year you had quite some positive one-offs. This year you had restructuring costs. Would you consider them?
You mean 2018?
Yeah.
Last year was 2019.
Sorry, I mean 2018 and 2019.
Okay.
The restructuring cost in 2019, do you consider them to be at a normal level that we show for also pencil in going forward, or should there be a positive comparison base effect?
We have always said that between EUR 11 million, EUR 12 million holding elimination line is a normal level. That's also what we foresee for the coming year. Unless we will do a divestment, because as we also always explained, is that we Of course, when we do a divestment and when we make some money on it, which is of course also our goal. When you do a divestment, that you really try to do the best possible deal, and that you can finance with that money the further improvements of the company. That is how we always have worked.
It's very important.
Let's say that is different. Therefore, the difference in 2018 was really that we had Of course, also there we did divestments and also there we did restructurings and these kind of things. We had one big thing that was really exceptional, related to the fires, and it was this property insurance claim. That's the reason that this line shows a different picture in 2018. With right, I would say. It was the right way to show it, because it was an incident, and that's also what we try to explain to everybody.
Maybe not always too clear.
what we are doing is we have a divestment portfolio of EUR 300 million-EUR 350 million.
We're going to divest that in the coming three years.
Yeah.
We try to do it at the best way. You optimize what you can and then try to divest it. Of course, when you can make money on it, we are not in a hurry. We're going to do that. When you have that money, you sometimes use it for restructuring or other things. As we always did in the last years to optimize our core. When you look to the amount of operational actions and leverage things we still can do that depends on if you are successful with that divestment or not. We know exactly what we want to do internal, it's very difficult to guide what is the exact number.
Yeah
You have in your holding corrections. In principle, we have always said, also in the past, it's between EUR 11, EUR 12, EUR 10 and EUR 12 million , because we have holding costs of EUR 8 and EUR 9, and we have always EUR 2 million- EUR 3 million redundancy costs. You come to the EUR 10- EUR 12.
That's normal level.
That's the normal level. When we do additional things, you read that we have a lot of thoughts to improve further. Yeah, we try partly also to finance that with our divestments.
Yeah.
To optimize, to narrow the focus of the portfolio. That we're just continuing what we already do for the last four or five years. We are going to reduce the number of locations. That's what we also said in-
Tax rate is the same. Tax rate is, by my former colleague, always guided between 24 and 25. We are now 22.9, that is, you could say, that it came out better than we thought.
Yeah.
Please, it is between 24 and 25.
Yeah. That's also the expectation for 2020 again.
Yeah. In your spreadsheet, you should put that in.
Okay.
When it's better, it's better. It's also difficult to guide the exact number. It's impossible.
Yes. Now, my final question for now is on the drop-down. With the Capital Markets Day, you guided for a number of 25%.
Just drop through.
Sorry. Yeah, drop through. If I now zoom in into surface technologies, where you give the revenues and the EBITA impact, then they get to 67%. At the same time, you mentioned that there's obviously a lagging impact of the cost reductions. Is it, when revenues go down, also fair to expect with some time lag to have a 25% drop-down, or is it asymmetrical, or is it typical for this business that it is a higher percentage?
Let's say the number of 25 we gave for the total of Aalberts. That is what we gave as a direction. What we see in the organic growth of the other Aalberts business, that you see that at least a better number than 25%. You may expect with all the improvements that we make in the company coming years, that also that number will go up. In the decrease of this specific area of surface technologies with an, let's say, a very high added value, because they make a surface treatment or a heat treatment, there's no raw material in many cases involved or only a little. The added value is very big. When you go down in that particular area, of course your drop-down is higher. You compensate that with costs. You cannot compensate everything in the same pace.
Besides that, when we face the situation as we have it today, we also make some extra costs to further decrease the cost base.
Roughly on the EUR 21 million, which was mainly happened in the second half, mainly, we lost an EBIT of roughly EUR 14 million.
Yeah.
Where you have EUR 3 million, roughly.
Yeah.
Roughly. You have EUR 3 mil redundancy. That means when we have EUR 21 million going up again, you have also a higher drop-through than the average. That's how that business works. The reason why that business worked like that is that you have an installed base of equipment, which you have to fill with volume, a certain volume. You have a certain break-even point what is relatively high. Because you still have to function these equipment. When this equipment is not fully full, you have still the energy cost and the personal cost. Yeah, you can't save more money, so your leverage goes down. The other way around, it's the same story. When you go up again.
Yeah.
What is very important here is recovery of the volume. In the meantime, what we do immediately, and we did that very quickly, we reduced the costs where possible. We have temps, we streamline, we further optimize. What we did additionally, and that is really new, is that we changed the whole group structure, and we really took out a lot of overhead, because we merged AHC and Impreglon. We merged the two companies after the acquisition in 2018. It was really one organization now, so we could also now take the step to reduce further our overhead. These things will have an effect also in the coming years. When the business comes back, you have a nice leverage going the other way around, and that is higher than the 25%. That's correct.
Yeah.
In average, our goal is to have a drop-through of 25% for all the businesses.
Thanks. Henk Veerman, Kempen & Co. My first two questions are also on Material Technology. Still trying to wrap my head around the operational leverage in the second half of the year. According to my calculations, - 5% organic sales growth and about - 15% to 20% organic EBITA decline.
What do you mean? For Material Technology or?
Yes, Material Technology in the second half of the year. Could you maybe, because you also give these graphs, I think the drop-through as you make it visible, it's very significant, as my colleague mentioned.
That's how the business works.
Yes, exactly. If you include these restructuring efforts you did, how would the drop-through look like? Maybe give a little bit of guidance.
For Material Technology?
Yes, exactly.
It was EUR 3 million, we already said.
Sorry?
EUR 3 million.
EUR 3 million.
When the business goes down EUR 21 million, which it did, and that's in the bridge.
Yeah.
Yeah. The bridge.
Yeah.
Which mainly has taken place in the second half, we lost there roughly EUR 14 million of EBIT, because the other EUR 3 million is restructuring. That's in the surface technology activity in Europe.
Okay.
That's what is standing in the bridge.
Okay. I think secondly, related to that, regarding your CapEx spending in that division, I think it's one of the most capital-intensive businesses. If the market would remain a bit muted in the upcoming years, as some people expect.
What is muted?
Well, low growth to no growth. Would you consider, let's say, delaying your investments in that division? I think this is also the main threat to your return on capital KPI, because you spent most of the CapEx here, and if we have to take into account operational leverage in case the business declines, it could be a threat to the KPI.
It's not only CapEx, it's also goodwill of acquisitions. In general, the comment on Material Technology, it is a high CapEx business. We did also acquisitions there the last years. Pretty amount of acquisitions, where we also paid goodwill. Of course, when then your existing business in Europe has a lesser EBIT, you still spend the CapEx and also the two acquisitions, PPC and Applied. It's a simple math, then the return on capital goes down pretty quick.
Yeah.
That's the case where we are in. What we say, this business will recover. It will recover. We are very happy with that business also to be clear there. I'm very happy with that business. It's a great business, but it has also its own characteristics, and it will recover, so you get the other side up again, what you see now, where it goes down. Of course, the market, it is simple as that, will mute for the coming years, slow or no growth, of course, when we see no opportunities for growth and there comes no return out of it, we will also reduce the CapEx. Also, we reallocated the CapEx mid-year, and when you read the press release thoroughly, we reallocated to Eastern Europe and America mainly, and America mainly to this new technology, because there we can be pretty unique.
Also here, you first have to have the equipment, then it can take two years before you have these furnaces filled. We invested much less in Europe. Yeah. There we already acted very quickly in the mid-year. What I try to say, but of course, it's our opinion, is we must not become nervous due to this dip in Material Technology due to very clear reasons. The reasons are very clear. The automotive was in turmoil because of all the emission things, because of the lack of capacity for testing, which is all solved. The emission ruling is more and more clear. When they are insecure and they need cash, they're going to reduce the inventories. Parallel, what we see is they also move certain factories away to low-cost countries.
Yeah.
What we do, that's Aalberts, we follow them, we change also, we invest in the right technology. The total business is not gone. We are coating and treating 1 billion parts a year. That is not gone. That's a little bit less, that will recover. That is what we say. Also, return on capital will improve. Of course, you are right. We have to be careful with investing in our capital when there's no growth. I'm the first one, I can tell you, when I don't see the return or the growth, I will immediately allocate my money somewhere else. It's also part of the strategy. When I want to bring new product lines, and we did now 15, I first have to develop them.
I need R&D people, then I need to buy the equipment, then I need to produce, then I need to build stock. I still have not 1 EUR revenue. That's what you see in Aalberts the last years. That's also why we go to 4% R&D. We have now headwinds in certain industrial markets. It doesn't say anything about our strategic goal. Let's see.
Okay, that's.
Of course, we will take action when there's no growth.
No.
Maybe more action than just only reducing CapEx.
Okay. That's clear. A question to Mr. Monincx. Could you maybe explain why D&A has been stable for the last four years, despite quite a sharp increase in total assets on your balance sheets, as well as obviously driven by the high CapEx? That's to do with the time that you discounted assets?
Let's say the D&A for this year was impacted by, let's say, a correction in a depreciation in a building. Yeah. That is an impact of a few EUR million. Normally, the depreciation would be higher for EUR 3.5 million. Besides that, the picture is normal.
You're saying a EUR 3.5 m illion, EUR 4 million -
EUR 3.5 million
- positive impact -
EUR 3.5 million. Yeah.
- in your D&A line?
Yeah. The rest is normal. We still expect that also for next year, because we continue to invest, of course, that also for next year the depreciation will go up.
It's laid in time, of course.
actually, this year it was already expected to go up, but there was one correction, which brought it more or less equal to the previous year. Next year, we expect that mutation at least plus, of course, new CapEx that start to depreciate also to come up. We expect it to increase.
Just to be clear, there's been no changes in the lifetime.
No.
No.
Has not to do with this. No.
Okay.
No, it will go up, of course. When you invest more, it will go up.
Yeah.
Okay. That's clear. Thank you.
When we don't grow, we have an issue.
No.
Of course. We do not do investments when we don't have plans behind it.
Yeah, Peter Olofsen, Kepler Cheuvreux. Arno, to come back on the holding costs. Just to get it clear, in H2, you booked EUR 3 million restructuring in Material Technology.
That was not in the holding cost.
No, in material. In the holding, you had a typical small cost as well.
In the holding, like Wim also said, we have a normal picture of, let's say, eight, EUR 8.5 million holding costs and about EUR 3 million of, let's say, restructuring costs that we more or less have every year. Yeah. These are plans that we always work on, execute. That's the normal picture. We always have between EUR 11 million and EUR 12 million negative line in the holding elimination line, because we say that we take these expectations, we take in the holding line. The thing in Material Technology has nothing to do with the holding line, because these costs are booked in Material Technology EBIT.
The cost that you booked in holding, these are actually measures that you take in the process.
Yeah, there's more than only these Material Technology things. There are more costs booked there. Let's say, we have, let's say, a normal stable, let's say recurring It's not recurring, we are planning our plans like that we have a stable, recurring holding, let's say, restructuring cost of about EUR 3 million every year.
Why then usually booking these costs in the holding, but then this time booking the EUR 3 million in Material Tech? I don't understand.
We have also redundancy costs in Installation Technology in North America.
Yeah.
When you lay off people or you streamline. It is very difficult to give there an amount for. You have business related costs, which are probably there, but we always have EUR 2 million or EUR 3 million. We had it in the past all the time.
Yeah.
When the holding elimination line is between 10 and 12, that's a normal thing.
Yeah.
You have always small things on the head office. You have whatever you have. On a company of EUR 3 billion, there's always something.
Yeah.
That's more how you should see that.
To me, it sounds like a little bit you can play around with it.
Play around is difficult with accountants.
in which segment?
We don't play around with numbers, Peter.
No, because you book some costs in the holding, while these are measures that you take in the segment. For the Material Technology, you book the amount in the segment.
No, also Installation Technology, it is not booked. You just have costs which you make because you lay off people.
Yeah.
That happens every day. We maybe lay off people now at the moment. We just try to give you some color on the number of 17. That's why I said it is roughly EUR 3 million.
In the holding cost in H2.
We laid off hundreds of people in the surface treatment, Surface Technology locations in Germany and France. Maybe we laid off hundreds of people during 2019. That costs you some money. I don't know. That's also why I give you roughly a figure. Yeah. We don't have these numbers completely ourselves. That also happens when you streamline the organization in America with the distribution setup and your overhead. We changed tens of people in the organization. We changed management. We just give some guidance that there are additional redundancy costs in North America. Which we will also have this year a little bit, but it will be lower, and that we are working on operational actions and leverage. The normal pattern in the head office is always between 10 and 12. Yeah.
That there are some things which you have also on the head office. Almost most of all these things, you book in of course in the business, but we also don't know these in detail. We don't follow them in detail because then we have to control these people every day.
Maybe to clarify on divestment. You had HFI, which was already done in the first half, and then I think it's called STAK?
Yeah. Which was done in the second. STAK. STAK was really December, fairly late.
Okay. Yeah. Is it correct that this business has something like EUR 18 million in annual sales?
Roughly, yeah. It has no impact in M&A revenue this year. For next year it has. Yeah. Basically, it was to the very end of December. Yeah. Very late in December.
It's in Climate Technology, yeah?
Yeah.
Was there then a cash proceed that was included in this -EUR 110 million M&A, which we see in the cash? Okay. Yeah. That's already done. It's all concluded. Was there then a book gain in the holding costs in H2?
In H2 there was also a book gain, yeah. Okay. Yeah. It's a very small company.
Yeah, okay. Maybe on pricing.
It was part of Flamco. Yeah. Division of Flamco.
Maybe on pricing, what was the contribution to the top-line growth for the full year? I think it was somewhere between 50, 100 basis points in the first half. Was it something similar in H2?
I would say the same. R aw material is pretty stable. There, I think what we already said much earlier is that really the personnel costs, there were a lot of people had the idea there are no personal or the salaries are not going up. That you see really in the second half, but especially in 2020, not only in Holland, but also in Eastern Europe and a lot of countries. I think the main price increases were based on that topic. I think raw materials, we didn't have the big swings which we had also last year. I think the effect on 2019 is not so big, actually, probably the same as what we guided at mid-year. I think that could be for the whole year. It's mainly related to personnel.
We really pushed the management, also in the budget meetings in November, to take more actions for 2020. Because these personal expense due to all kind of increases, is a sort of, when you don't take action, it can be nasty. We took our actions. Raw material was flat.
Okay.
Roughly
then on portfolio optimization, which is something you touched on for more than one segment. Was it that material, that product pruning had a noticeable impact on your organic growth in a year? Is it something that happens each year and it's not really something that stood out this year compared to earlier years?
In Capital Markets Day, we gave a clear guidance for this for the coming three years, huh? That's not only divestment, this is optimization of your portfolio. I think we still have a lot to gain there, especially in Installation Technology, because we have a lot of SKUs, which we can optimize.
In Material Technology, also in locations. We guided in December, we go from 155 to 122, 154 to 122. That's all portfolio optimization. It's difficult to put a number on. That's ongoing. It means also that when you have all the product lines and you earn lesser EBIT, then you say, "Now I rather have lesser revenue but more margin, so I reduce the amount of SKUs," which we, for example, did in the U.S. and the U.K. It's a continuous operation where we still have a lot to gain. It's not something that had a much bigger impact in 2019 than in earlier years.
No, not much bigger.
All small things help, huh?
Especially here, it focuses the attention of the management to the right business.
When you see the big picture and you see surface technology, how that business works, actually what is in the bridge of my colleague mentioned as Aalberts added value. When you do the EUR 50 million and you do there this organic EBIT growth, that's a very good performance. That's also why we believe, okay, we have this market environment. We don't know what happens with all the coronavirus in the future, of course, it says also something about resilience of the company. When we are able, have even less benefits of 18
To have almost the same operating profit. Of course, your percentage is going down, which we don't like, but there's a very good explanation for it, and is that it's a very solid and resilient performance mainly. For me, it also says that our management acted very quickly also to reduce costs, to optimize. It says also something about the much stronger portfolio we have, in my opinion, compared to the last years. Despite the fact that surface technologies going down. We know that business. It also happened, but then much deeper in 2008 and 2009. Now it's much more going gradually, but it's longer, but it's a little bit the same situation, much less deep. I also know you come out of that. It's how it is, because everybody needs parts in the end. It's a temporary thing.
When you look to that whole situation, it's a solid and resilient performance, but that's our opinion. Also due to all these small things, portfolio, better pricing, management gets stronger. That is exactly why we believe that we reach our strategic objectives. It's a long-term thing. It's not a short-term thing. It's a long-term thing.
Then my-
We are not ready yet.
My final question on the setup of your distribution in North America.
Yeah.
When you were still streamlining that setup, you had somewhat higher stock levels.
Yeah
some inefficiencies and some additional costs.
We still have. We're still not there.
Okay. It's not that in H2 that was already at the.
What we did is.
I just wonder.
We tried to It's a big mammoth tanker, and we try to turn that. I think, let's say the buildup of stocks has stopped. That is what we see. Of course, the inventory is a little bit higher. It's only EUR 12 million or so. Let's say, at the end, we built up EUR 63 million less stocks within our core business. That has been done, and we have.
A big part was America.
A big part was Installation Technology, the biggest part, also a big part of that was in North America. We have made, as we also said, a plan to further optimize our inventories over the next three years, so 2020-2022, which we are executing with our business teams, who have an opportunity to improve. All these investments that we make, but as with all investments, like Wim already said, with distribution centers, et cetera, that we all do at the end to come to a better level also of our inventories, because we have a better and smoother supply chain. That is of course what you need to optimize. You can just cut stock and kill your business, but that's not what we want. We want to have a more efficient usage of the inventories that we use for our business.
America situation, we set up the distribution center through the countries roughly 3 years ago. We step by step did that. We put in too much stock. We knew that.
Yep.
We saw, now we learn from the regions. We, last year, also after the change of the management, we get more insight in the real stock we need. In the meantime, we did an acquisition, it is called Shurjoint, which we had to integrate in 2018. Which is now 2017, 2018, which is one or two years ago, which also had two warehouses, but we closed them and we integrate them also. Was maybe not the right timing, but a very nice product line. Now that was all ready. The physical thing was ready. Last year, we streamlined as a first step, it is written also in the press release, we streamlined the inventories, but also the cost structure. It is a first step.
We see still we can optimize further the amount of SKUs, the service rate, in the meantime, also the overhead, but it's made a nice way. In the meantime, we built up much lesser stock in our factories, which of course hurt your added value. That's the situation. It goes in the right direction, get more and more traction, but further improvements to gain. It's not ready yet.
Again, the negative impact on the added value for 2019, you should not underestimate that. It's a big number, EUR 63 million. On top of that, the high-value business of Surface Technologies Europe that declined. Still performing with an added value that is even a little bit better than last year. That gives us at least the confirmation that the business that we have is very resilient and also with a very strong price position.
What we do now, for example, in the factories, the next step, some of you have seen the technology we have in Hilversum in Installation Technology. We have roughly three or four factories who make the same products. We're copying now this technology to America and to other places in Europe. That is also why we spend this CapEx. We can reduce the cost price heavily, really heavily, and take out a lot of people. That will be a next step, for example, in Installation Technology. For the distribution in Europe, also to guide that a little bit, because it is a different situation than America. In America, we had to change the whole sales structure. In Europe, we just need to integrate the warehouse, and because we have already our external sales, so it is a much easier process.
Building is built, it's now filled, and then the other warehouse will be integrated. We hope for you to be fully operational the second half of 2020. Yeah. It's all part of improving to come to, as I always said, this segment has the potential to do at least 14% EBIT. Maybe even more, but let's first stand there. You have to get it structured and integrated. Actually, that is getting more and more shape. Also with the name of Aalberts Piping Systems. Therefore, it was also good that in December, that presentation was given with the persons who really are in charge to get it also realized together with us, of course.
Maybe a follow-up on the earlier question on the muted growth outlook.
Yeah.
Assuming that car production would be stable, but the mix shifts from internal combustion engines towards EVs.
It will shift.
It will shift. Assuming that the overall volumes are stable, how will your business then develop?
That's a very good question.
Will it also be stable? Will it grow? Could it even contract a bit because you're maybe more exposed to internal combustion engine?
No, this is a very good question, and this is exactly what we also did in the preparation of the Capital Markets Day, and also during our budget period, of course. Our expectation is that that's what you hear from the most of our customers, and also when you look to their studies, is that in 10 years, but okay, that's an assumption. Roughly 30% of the population of the cars will be driven electrically. 30% will still be fully combustion. Because some cars, they think for long distances, they need power. For example, SUVs, they could drive with a diesel engine. You still have 40%, which will probably be hybrid, because hybrid is a combination. You have electrical, and you have combustion.
When you look to that situation, it is nothing new because I explained it many times, is that 70% still have a combustion engine. 70%. The other trend is, in our opinion, that the amount of cars will grow because we get more people. They expect that the amount of cars to be produced will grow from roughly 100 million- 130 million in this 10-year period. When you take the 70% of the 130, you come almost at the same amount, that you have 90 million cars which still needs a combustion engine. It could be that you have different cars. Could be small cars, could be bigger cars, hey, maybe you have more smaller electrical cars in China than you would have in Europe or in U.S. There's also differences in the uses of the cars.
You have to look very carefully what do you really need in the countries where you're active. What we see, and that's due to talks with customers also, is that, for example, in Germany, that combustion-related production is also step-by-step, but that goes gradually, moved to other places. What we are doing, we are adapting our model to that situation. Now, what is situation? Eastern Europe is growing, so that's why we're investing there. North America goes more to own fabricated products, like the bigger trucks, SUVs. Also you have to put your technologies, like Roy Metal Finishing, for example, where we do all the brake systems. You have to, let's say, adapt your position to that new market trend. We did that. To answer your question, yeah, it could be that here and there, volumes change.
We still think that surface technologies will be a big needed technology because, and that's the other trend you see, big OEMs have a difficulty to develop all the new models, and they are looking for partners who are on a global scale active, who can also help them with co-development. There are not so many parties who can do that. We think we are in pole position there. We see that in the amount of projects we get, especially in surface treatment and line coatings, that we have there a very nice position. These technologies will be needed.
Yeah.
It could be that they are needed a little bit different way, but also in a little bit different region. We are adapting to that. It could be, for example, that we maybe get rid of certain countries. We get smaller in certain regions. We add certain technologies in certain regions to adapt to the situation. Of course, that's why you are an entrepreneur.
Yeah.
In general, still the market is very interesting, in my opinion. Especially for us. Because the biggest part is foreseen to be hybrid. You have to move. A lot of different parts related to that with hybrid cars. It could be that certain treatments are going down. That will happen.
Yeah.
You have to reduce your volume there, or don't invest in anymore, what we do, and that other treatments come up, and there you invest in. It's not only a question of the market, it's also what happens within the market. Still, we make 12.6%. I can remember a time, I was even in the board shortly, that we've made much lesser margins in 2009 and 2008.
Maarten?
Maarten Verbeek, Idea. Firstly, in your cash flow statement in the past, you always used to make a split between acquisitions of subsidiaries and disposals of subsidiaries. Now you have combined this number to one number. Could you still break it out? Because it would give a little bit more transparency about what you have paid for acquisitions.
That's also what.
I was more asking about earnouts.
Martijn asked.
This is more on excluding those.
No, we did, in this line, I can tell you, are two acquisitions, two divestments, and two disposals and one earnout. Sorry, two deferred payments and one earnout. That's what they did. It's seven items calculated together to this EUR 110.6.
Okay. If you would just break it out into two, I think everybody would be helpful. Okay. Going forward and looking into 2020, could you provide what, at this moment, what you do know and what have communicated the spillover impact will be of acquisitions and of divestments?
It's in the press release. The spillover, you mean what is the actual effect?
What is still the impact will be in 2020?
Oh, 2020.
of acquisitions and of divestments?
Revenue-wise, let's say not so much, and actually EBIT-wise also not so much. It's more or less in balance as it looks like now.
Okay. When looking at the European surface technologies, you have provided the absolute numbers, but could you also give some indication about the total revenue of that business? I can also relate it to Material Technology as such, then it is 3%, and I can imagine that there are other businesses within Aalberts on which also might have a 3% downturn. Could you provide a bit more color on what size we're talking about this European surface technologies business?
You mean on the organic decline?
Yeah. Decline or the absolute sales level of that business, more or less.
No. I will not tell that because I think it's pretty confidential.
Yeah.
The second thing is, what I can tell you is that the surface technologies decline, which is of course a higher decline than in other areas. When I say it's -3 , -2 for total Material Technology, it will be higher in surface technologies Europe, what we said. That means mainly Germany and France. That answer I can give, but not more. More questions?
Yeah. Martijn den Drijver for ABN AMRO. On page three of the press release, you mentioned closures.
Which page?
Page three.
Three.
You mentioned closures. three. What has been the impact of those closures in terms of sales, EBITDA? A bit more color there. A clarification on the CapEx guidance. You said, I think, Arno, 2020 would be similar to 2019, but that included the EUR 15 million from the fire. Should we take out the EUR 15, and then that number should be applicable to 2020? My final question, again, I need a bit more help. In the cash flow statement, you show change in trade and order payables, a cash outflow of EUR 51.2. You've already mentioned that you've paid your suppliers a bit faster than normal, which you already guided for at the half year figures.
The delta in your balance sheet for those exact lines is just EUR 14.2. Normally, I wouldn't bother you with a small difference, but the difference between the delta and the balance sheet and what you report in the cash flow is quite significant. A bit more clarity there, please.
I can, let's say, starting with that one, I think that has to do with acquisitions. The delta is organic, the organic cash development between the two years. The CapEx for 2020, we guide the same as we did, like Wim said, for the Capital Markets Day between EUR 140 million and EUR 160 million. That's including everything. What was the third one?
The one on the closures.
Yeah, that's Material Technology.
Yeah. That is Material Technology.
Yeah.
We closed some smaller locations, integrated them.
Yeah.
Already, yeah, we took action, you could say. Not a material amount of revenue or EBITDA that got impacted because of those closures.
Yeah. What you also do when you have some customers, you move it to another location. It will not have a major impact, no, from a revenue point of view. Just optimization.
Okay. Thank you.
More questions? No questions anymore. Are there questions from the webcast? There are no questions via webcast. Yeah, I would like to thank you, the people in the room for all the questions and all the attention, and also people joining the webcast. Thank you very much.