Thank you. Good morning, everybody. Thank you for your time to participate in our call, annual report, and Q4 data information. We are happy to present today, first NKT Cables result, and then later, Basil, the CEO of Photonics will present the Photonics data. We have here in the room as presenter, Line, my CFO, Basil and myself. I will start with the presentation. If we look at 2020, I think 2020, I would consider for NKT, a successful year, a transition year. If we look at orders received, we have EUR 2.3 billion orders received, five major orders in Europe supporting to the green transformation. We expect that this trend on the green transformation in Europe, but also beyond Europe, will continue in North America and also in Asia. Our operational EBITDA in Cables tripled from EUR 15 million- EUR 57 million.
This is at the upper end of the guidance, also what we communicated to market earlier, what we expect, and we delivered as our expectation. NKT Photonics had some challenges in the first half of the year, but later in Q3 and Q4, we have seen some positive signs and some organic growth also in Q4, and Basil will come back to this in more details. We were able to reduce our debt level, and we closed the year 2020 with minus 0.4x positive free cash flow development, and we had some two successful capital increases with around EUR 260 million on net proceeds. All in all, I consider 2020 as a successful but a transition year. If you look at Q4, we improved our earnings in Cable and all the three business lines contributed to the results.
We have been also selected for one more offshore wind farm as preferred supplier with a value of more than EUR 250 million. This is not yet in the backlog. We have delivered on solution on the backlog and executed as planned. We have seen some negative impact in application due to COVID-19 on demand side, not on the supply side. Earnings, despite lower revenues, have improved compared to the same quarter in 2019. In service and accessories, we improved also. Organic growth in Q4 was 1%. Overall for the full year, as you can see here on the diagram, we improved revenues by 15%, and in absolute terms, from EUR 15 million -EUR 57 million, as indicated earlier, and in a quarter, from EUR 1 million -EUR 9 million. Looking now on the individual business line solution, as mentioned before, we executed on the backlog and had an organic growth of 6%.
Our vessel, Victoria, was busy with various activities like Moray East and so on. Overall, execution in solution was as expected. Looking at the high voltage market, 2020, I would consider it was a good year for the entire cable industry, but also particular for NKT Cables with five large orders, EUR 2.3 billion, supporting the green transformation, and the total orders awards in 2020 was around EUR 6 billion, where we got a major share of it. Most of the projects which have been awarded were with DC technology and all the five project, what you see on the right side, were with DC technology, four with XLPE technology and one with MI, the Attica-Crete project. For this year, we are busy with tender work, and we expect volume to be awarded more than EUR 3 billion, less than last year of EUR 6 billion.
EUR 6 billion last year was heavily impacted by the German corridor projects. We are busy in all these areas. If you look at the order backlog, we have a record high order backlog of a little bit above EUR 3 billion, relative to EUR 1.4 billion in 2019. We are active in execution on offshore wind interconnectors and oil and gas in the various countries as listed here on the right side. Looking at the next application. We have some headwinds on the demand side, where COVID-19 was impacted us, and you can see the revenues have decreased compared to 2019, from EUR 92 million- EUR 84 million. Despite of the decrease of the revenues, we could still improve the earnings from previous quarter in 2019, from EUR -2.6 million to EUR - 2.4 million. The negative growth still we could compensate through to better mix, cost efficiency and production efficiency.
The weaker market was mainly Sweden and Denmark, and again, it was the demand side. We have successfully rolled out an ERP system in Eastern Europe, and this will help us also further in the future on transparency and driving efficiency. In service and accessories, we have grown 11%, and revenue EUR 39 million. A good quarter in service. We have also completed repair jobs, Skagerrak 1 and 2, which interconnect between Denmark and Norway. We have signed a new service agreement, one with Elia in Belgium, and one with Litgrid for the NordBalt interconnector. Overall, we have improved the business in the growth in accessories, mainly driven by Middle East and also in Scandinavia. We are very active since years on our climate program, and we have now, as first cable supplier in Europe, signed up for the Science Based Target.
We will continue this journey in reducing our CO2 footprint emission. All our power cables are running on green energy, we are looking now how we can further improve our consumption by, for example, switching to biofuel and working continuous to drive our CO2 emission down. We committed to 5% decrease year-on-year. We work here on Scope 1 and 2. Scope 1 is our own emission, Scope 2 is from the supply, what we are buying, for example, on electricity. We work also with our suppliers on Scope 3, how we can cooperate with them and reduce this, as this is a major part of the value chain if it comes to CO2 emission. With this, I would like to conclude the cables part. Overall good.
Now I would hand over to Basil, and he can give you some insights on the photonic side.
Thank you, Alex. Good morning, everyone. Glad to come after a good presentation from Alex on the improved results, cable doing fantastically. Hopefully, we will follow on that as we go along. NKT Photonics. We continued the positive growth, organic growth in Q4 that we had seen the beginnings of in Q3, which shows a reversal in the fortunes of NKT Photonics. It comes really after a very challenging first half of the year. First two quarters were not good. We got hit pretty hard by COVID-19, this trend has reversed. We see that reversal going into 2021, into the positive areas that we had been experiencing before, and hopefully move forward in the same levels that we were pre-pandemic. We had a very good, positive development in our medical life sciences, despite the pandemic. That has been moving quite nicely forward.
It's also a nice business that the global trends in is moving in the right direction. In our industrial market, which comprises a number of different industries, we see the challenges in Q4. We have done better, but there's still challenges. There's still challenges that going into 2021, again, mainly driven by COVID-19. I'll go through it a little bit further in the next slide or so. The development in our aerospace and defense business was pretty much flat. Again, a little bit disappointing to be flat, but that's again, because of many projects had moved, basically being presented as being hit by COVID-19, so they were delayed. We hope and see those projects happening in 2021. The EBITDA in Q4, even at 16.4%, which is pretty good, was much lower than it was in the same period in 2019, which was about 28%.
We see that again hit by a number of different issues, mainly the cost base that we had. We had built the company on higher growth. There had been somewhat of a less favorable customer mix, and we've had temporary yield inefficiencies, which we have overcome at the moment, but they hit us hard in Q4. If we move to the next slide in business development. We're on slide 15 for everyone at the moment. You can see that the part of the medical and life sciences, that's the part that has been growing the best in our business at the moment. We've had solid growth. The solid growth continues with a number of different areas. Main applications is in ophthalmology, in medical devices are doing very well. Ophthalmology and things like cataract and various other procedures is moving really well.
So is our bioimaging and microscopy. Again, despite the COVID-19 pandemic, all those areas have done remarkably well. The industrial segment, as I said, has been the main pain that we've basically experienced, and going forward, we see that easing up, as we had seen in Q4 and as we see now going into 2021. Finally, the aerospace and defense market have been relatively flat, as we had said. However, with our very large customers, we see improvement going into 2021. With that, I will pass over to Line, our CFO.
Thank you.
Thank you very much.
Yes. Taking us through the financials of the quarter and the year. Here on our income statement, the main elements to pick up here is the revenue growth. If we start by looking at the full year for Cables, you see a very nice revenue growth of 15% for the full year, so good recovery. Staying with the recovery, even noting here that Photonics, as Basil alluded to, is coming to Q4, getting into a growth mode again. With the stabilization of in Q3 and Q4, we're now into a better mode. Going into the operational EBITDA, of course, it's a good place to be to see that we're improving our operations EBITDA to the degree we do of a doubling compared to last year. This constitutes of both Cables and Photonics contributing positively in the quarter of Q4.
Looking into the further down the lines, I think stopping at the EBITDA, for the year, the EUR 49 million, and if you go further down, you'll see that we are getting to a net result of EUR 75 million for the full group or negative EUR 75 million. The main contributing factor to this, I would note also that our tax is different compared to last year, very much related to the revenue recognition differences between IFRS and local tax accounting, but also that's the capitalization of deferred tax assets. An improved operational performance, definitely, and a revenue growth that is a very nice thing on the year. If you turn to the next slide, going into a few of the highlights on the balance sheet and on the working capital, I should say here that it's an unusually low level for 2020.
We came in very low already in 2019. Now it's improving further. The next slide, a little bit more on that. Down to the return on capital employed, which is improving also for the year, contributing from the improved earnings on the NKT. On the leverage level, we are at a very different place now compared to where we were earlier. The issuance of new shares and the development in the working capital takes us at a very good level. The debt right now is the leverage ratio at the -0.4 x EBITDA. Flipping to this slide on working capital, just to give you a few insights to this, it's very much related to the big backlog of the wins in 2020 that we saw and the prepayments. I would also not expect this level to continue, as you've seen before.
There's a seasonality pattern to this also, right? In that sense, Q4 came out very nice for NKT. Flipping to the cash flow statement, where I will start at the bottom of the table here, for Q4. The net cash flow of EUR 232 million is very much, of course, impacted by the issuance of new shares last year. Going up further, you see the improved earnings also panning into a positive cash flow for operations this year. You also should note here that now we have ramped up the activities around our investments. Our CapEx is increasing, and you will see even more of that in 2021. If we then go to the next slide, is our leverage ratio, and here you of course see Sorry, not the investment, the impact of the issuance of the new shares.
Right now to say we had the total available liquidity reserves of EUR 536 million this year in 2020. That consisted of cash of EUR 239 million and undrawn credit facilities of EUR 297 million. Just to note that, of course, 2021 is a year of big investments within the Cables business. This will, of course, change our cash position looking ahead. If you turn to the next slide, here we have the financial outlook for the year. We are reconfirming our guidance for the year on the Cables, NKT, and of the EUR 1.1 billion -EUR 1.2 billion revenues and operational EBITDA margin of EUR 80 million -EUR 110 million. We expect to continue to grow and also certainly improve our operational performance. When we look at Photonics, just to remind you that, of course, 2020 has been the year of fluctuating performance.
We still go in with some uncertainty for 2021, not knowing exactly how COVID-19 will impact us. Despite, we see a stabilization in 2020, and of course, in our guidance for the year, building that revenue growth of 0%-10% and looking at the EBITDA margin at 3%-7%. Noting on this that we have included restructuring costs of around EUR 1.5 million related to FTEs reductions in the business. Therefore you see this level. This will of course pan out into an improved performance going beyond 2021. That's our expectations. If to close this presentation and over to the questions on the key messages of 2020. It's a record high order intake, NKT is very well positioned within the global trend of the green transformation. That's a very positive note on the events of 2020.
We are improving our operational EBITDA, more than tripling NKT performance. Good contribution, strong contribution from all business lines. We are landing in the upper end of our guidance on EBITDA. Looking to Photonics, a challenging 2020, but good to see the recovery in Q3 and Q4. Finally, also that we changed our whole capital structure, and we now have a stronger balance sheet and a much lower debt level and a positive free cash flow contribution. By that, we will leave it over to question- and- answers.
Operator, we are ready to take question and answers, please.
Thank you. Ladies and gentlemen, if you wish to ask a question, please press star one on your telephones. We have a couple of questions lining up at the moment. Your first comes from the line of Artem Tokarenko of Credit Suisse. Please ask your question.
Yes. Good morning, everyone. Thank you very much for taking my questions. My first question is around solutions margin in Q4. Could you maybe elaborate a little bit about the drivers of a weak margin and maybe confirm whether you've seen any cost overruns on projects or maybe project delivery delays? Also, if the margin weakness is driven by just finalization of weaker margin projects from the backlog, how much of a headwind or for how long that headwind could continue in 2021?
We executed the backlog and the revenue recognition is of course depends on the project which we execute just in this quarter. We expect that the margin obviously will improve going forward through 2020 because otherwise. Therefore, we guided also on the values of EUR 80 million -EUR 110 million for next year. It's a little bit weaker, if you want to say so, a quarter, in Q4, but overall, better than the year before. We had no major delays in projects. In some, we have, but not substantial. Yeah.
Okay. Just to confirm, you haven't had any cost overruns in Q4?
No, we don't comment on specific projects. Obviously, you have some projects where you improve the result and some where you may have some challenges, but no overruns. No major issues to report.
Okay. Thank you very much. My second question is also on solutions margin. Could you maybe give us some color on how much better are margins in the backlog for 2021? Also thinking about your outlook for cables of EUR 80 million-EUR 110 million, could you maybe confirm whether with current backlog you have the lower end of that guidance already secured?
With the orders which we are taking in and with the better demand and supply base, the margin situation improves also. We have still some project with a weaker margin in the backlog, which we are phasing out. We expect that this improves now in 2021.
Okay. I guess in terms of the group outlook, the cables outlook, could you confirm that the lower end of that outlook is already secured in your backlog?
Yeah. As we said, we were quite successful last year with EUR 2.3 billion. This year, we expect a market of more than EUR 3 billion. We are active in all segments, interconnectors, offshore wind, and oil and gas, and we expect to win our share of the orders which are out. The timing of this large project can, of course, vary, but we expect to win some orders, and we also can take some orders, particular to improve the mix in the factory on the three-core AC cable side.
Okay. Thank you. I guess, just to elaborate a bit more on your EBITDA outlook for 2021, what are the major sort of swing factors determining whether you will end up in the lower or the higher end of your outlook?
Yeah, on the higher end, we need to execute the orders which we have in the backlog flawless, without any execution issues. What we need also to secure one or the other order, as just mentioned, particular on the three-core AC side, to have a better mix in the factory. This will contribute towards the higher end. On the application side, we have improved from 2019- 2020 from around EUR 0 million EBITDA to EUR 14.5 million. We plan to continue this journey to further improve the result on the application side with higher factory output, more efficiency, cost consciousness and being more selective on orders. This we need to continue, on the service and accessories side, we need to get some offshore repairs in 2021 and continue also our performance on the accessories side.
If that all ends up, then we will move towards the higher end. If not materialized, then it will be rather on the lower side.
Okay, understood. Thank you very much. My last question is about your outlook for the market of EUR 3 billion in high voltage segment. I guess, could you maybe talk a little bit about the phasing of those projects? Are there any bigger projects for you to win in Q1 or Q2, or the phasing will be more H2 weighted this year? Also, secondly, what are your underlying assumptions for interconnectors within that EUR 3 billion market estimate? Maybe you could name any particular projects you include in that estimate. Thank you.
If you look at this year, there is, in U.K., the CFD round, where we are talking 9 GW-12 GW. This will happen towards the end of the year, potentially could even slip into next year. That is a big event. We have several interconnectors, three interconnectors. Here it is difficult to predict really from the timing point of view, how they materialize, because there are so many aspects which are relevant. Those projects are well-known. I can also mention them. It is NeuConnect, GridLink, and NorthConnect. These are the three. Exactly what is the timing, and will one or the other even potentially move into next year is difficult to say.
Thank you very much.
Thank you. Your next question today comes from the line of Claus Almer of Nordea. Please ask your question.
Thank you. Yeah, I will also have a few questions. The first will also go to the cable division. What about the pipeline outside Europe? Should we expect one or two or maybe even more projects outside Europe to be announced? That would be the first question.
There's a project outside of Europe in North America, offshore wind and interconnectors, and we also attend on those projects. There's also projects in Asia, which we are also active. Again, here the same applies like for Europe. The timing can vary and when they will exactly happen. We go on several of these projects.
Do you need to make more performance bonds or those securities when you are active outside Europe? Is that just a normal project for NKT?
That's normal projects where you have your performance bond, your different bonds. There's nothing specific where you have a higher bonding requirement in projects outside of Europe.
Okay. Then as to pricing, in past calls, Alexander, you have mentioned a, let's just call it a positive pricing trend. Is that still the case? Maybe you can put some more color to how the pricing environment is at the moment.
Yeah, I can say overall, the utilization has increased in the cable industry, which is very positive for the whole industry. We had a good success rate last year, so we can be more selective. I guess also in the industry, the higher utilization logically will result in more discipline on the pricing side. I would confirm it, yes.
That sounds good. A question regarding Photonics. Basil, in giving the guidance for 2021, even looking at the high end of the range on the EBITDA level, it is not that much higher in actual terms at least, than what you achieved in Q4 2020. Maybe you could put some more color to why you are not more optimistic about 2021, even at the high end of the guidance.
Okay. Yeah, thanks, Claus. I think if you look at Q4 is always our largest quarter. A lot of what we ship goes out in Q4. Actually, a lot of what we ship goes out in December of Q4, and hence you saw the 16.4% EBITDA number. That is really, if you look at our past performance, at the top end of every year. Q4 is always a good year. You can't really compare Q4 with the full year going forward. 2021 for us is a year that we are readjusting the company. We are looking at our core business. There are some one-offs that Line mentioned in her talk that will affect us in 2021. What we're doing really is building the company for the type of growth and the type of EBITDA levels that we had before.
Going into 2022, that's what we're building the company for in 2021. You should see again, the double-digit growth in top line, in organic growth, and you should see EBITDA levels starting to hit the 20%-plus that we've always been forecasting in the past. You should see COVID-19 has basically hit us and knocked us sideways, and we're going back on the path by essentially concentrating on our core business and readjusting the company to do so.
Right. The reason why I mentioned Q4 is I know you're always doing a great job in Q4. Hopefully, you will do the same in Q4 2021. It seems like the first three quarters of the year will not show a lot of profitability, if any. Is that the way we should think about 2021?
I think what we're saying is we should be cautiously optimistic. The business looks much better. We are doing better, and we're doing better in Q1. In fact, we're doing better in Q1 than we have in any other Q1 before. We still have COVID-19, and that's the wild card. That's the joker in the deck. I'd be a very brave man, Claus, if I would be highly optimistic considering that we should have two more quarters at least, or maybe three more quarters of COVID-19. I think that's the cautious optimism you see. There's also conservatism there to move forward.
Fair point.
I don't like to overshoot.
Sorry?
I don't like to overshoot on this one.
That's a fair point. About the order intake, I think it was in the report that the growth in the order intake between Q3 and Q4 has been quite substantial. Can you put some numbers or some more color to how the backlog looks going into 2021? That would be my last question.
We don't report on that in exact numbers because it varies so much. We're in so many different industries. What gets pushed out, gets pulled in, and it will be just a mixed bag. You'll have some quarters very high and some quarters very low. It's almost nonsensical to report on a quarterly level. All I can say is getting into the year, the business looks good. Our backlog looks good. It looks much better than the start of many years. We're being cautiously optimistic.
Okay. Thanks a lot, Basil.
All right. Thanks, Claus.
Thank you. Your next question today comes from the line of Kristian Johansen of Danske Bank. Please ask your question.
Yes, thank you. Two questions from me. First one is on application and whether you can elaborate a bit on this minus 8% organic growth in Q4, and how it does relate to the pandemic, and also how it differentiates between low voltage and medium voltage.
Thanks for the question. Kristian, first of all, on COVID-19 side, we are fine on the manufacturing side and also on the supply chain. We have seen really that some countries had a weaker demand, like Sweden, U.K., also Building Wires to a certain extent. It's difficult to predict how this will continue here or not continue in Q1. We, despite the lower revenues and negative organic growth, we still could improve our earnings. With our actions to improve the profitability, we are on track. Considering that if the demands come back, we assume that we will continue on the improvements. We are not concerned on that side. This is a part which is difficult to influence. Of course, we try to compensate with other countries, other customers, but that was limited possible in Q4.
I understand. Just to clarify, so it's primarily the low-voltage segment and the construction demand which is creating the headwind in Q4. Is that how we should understand it?
Yeah, you can say. It's Building Wires is one area. We see also a little bit impact here that is not directly with COVID-19 on the utility side in Sweden. That's more a regulatory thing. There's a lower demand. We will see how that will continue or will not continue. It's too early to say. We are now just in February, I can also not comment on the Q1.
Okay. Understood. Second question is on NKT Photonics and the cost ramp-up and the cost adjustments. In Q4, you say that you are increasing costs to prepare for future growth, and now you're also talking about some redundancy costs. Basil, can you maybe just elaborate a bit on how you balance this current challenge on your profitability versus what sounds like a firm expectation that once the world normalizes, the growth potential is there and you still need to ramp up?
Okay. We did not increase costs in Q4. The cost had been there in the complete year. We did not adjust the cost increase in Q4. Being a growth company in high tech, we had looked forward and increased our cost base with the expectation, this is prior to the pandemic, that we will have higher growth. When the pandemic hit, it knocked us sideways or slightly backwards, but we'd already built in the cost that we had. That affected us in the year. Obviously, to adjust and to adjust to the change in business and to the new realities out there and the difference of paths that our markets take. Remember, we're in a number of different markets, so each one is going at a different pace.
To adjust to that and to adjust to the new reality and to keep the increase, we had to reorganize the company. That is being done in Q1 going forward. We should see, obviously, there are one-off costs that will hit us, and we should see, again, going back to positive growth, both on EBITDA and top line going forward. That's, like I said, our cautious optimism looking forward.
Where exactly is it that you are taking cost out? Can you be a bit more specific on that?
It's everything. We're looking at working capital. We're looking at headcount cost. We're looking at readjustment, the reorganization, looking at the priorities that change. It's not one. There's many, many levers in here. As I said before, we operate in completely different markets. Some markets are not moving at all, some are moving backwards, and some are actually doing exceedingly well. We are concentrating and reconcentrating our efforts, both commercial, engineering, manufacturing, on the core business and on where we're doing well. There wasn't one lever. There are many, many levers in there that we're using.
That's understood. Very clear. That was all for me. Thank you.
Thank you. Ladies and gentlemen, once again, as a reminder, it's star and one if you wish to ask a question. At the moment, we do have three more questions. Your next question comes from the line of Akash Gupta of JP Morgan. Please ask your question.
Good morning, everybody, thanks for your time. I have a few questions as well, I'll ask one at a time. My first question is about solutions business. If you look at 2020 performance, I would say that quarterly performance has been a bit volatile. The question I have for you is that when we look at 2021, can you comment on phasing of your backlog, that how you expect H1 versus H2 on both revenues and margin?
2021, the quarter is, I would say, we have, in particular in the first half, still MI projects, Attica-Crete and Viking in it. That should positively impact the quarter. Overall, it really depends on which project we have in the backlog and which we executed, and what we will see. We don't guide here now on Q1. It's clear that solutions needs to pick up in order that we deliver in the guidance which we gave, EUR 80 million-EUR 110 million.
Thank you. My second question is on this offshore wind growth. If you look at the forecast from third party, a significant growth will be coming outside of Europe, and we see some of your competitors are either working on or contemplating plan to have a manufacturing footprint outside of Europe. Maybe on a five-year view, do you have any such project lined up? Then the question is also, how much of this growth outside of Europe can you address with your existing footprint in Europe?
At the moment, we are on the implementation phase of the expansion of the Karlskrona and Cologne factory. With this, we are good cover, and we can also serve out of Europe and North American market. Also, we can also deliver towards Asia. At the moment, we implement investment, which is ongoing.
Thank you. Next question is on portfolio. If I look at applications business and size of that business compared to some of your other competitors in listed ones, where basically they use application equivalent business to generate cash flow and use that cash flow to fund growth in projects. Clearly, compared to these players, your application business is quite subscale, and you have a very big project business. If you look at current portfolio, what's your thought on application business? How core is that business? Let's say if you get a good price, then could we see you might exit that business and become more of a pure play in solutions?
No, we are not considering to exit the application business. We are working here on the improvements also on the cash side to generate positive cash flow from applications. We have some good improvement from 2019- 2020, from EUR 0 million- EUR 14.5 million in EBITDA. We plan to continue this in 2021.
There's no plans to divest here anything.
Thank you. My final question is on medium-term EBITDA margin target of 10%-14%. Can you tell us a rough estimate of depreciation and amortization that would be in the medium term so we can back out operating margin implied by this EBITDA margin target?
I think how you can look at this, Akash, it would be that we say that before we started the big expansion, we were at a CapEx investment level of around EUR 50 million- EUR 60 million, and now we are expanding next coming year, and then we will come back to normal level, being a bigger company also. Then I think you probably have some metrics to get that into a depreciation level for the medium term that you can use.
Thank you.
Thank you, ladies and gentlemen. Your next question today comes from the line of Casper Blom of ABG. Please ask your question.
Thank you very much. My first question goes to the working capital. You mentioned, Line, that right now it's probably at an unusually low level. Could you give any kind of flavor to how you expect it to develop during 2021? Obviously, depending on order inflow and prepayments, but still, if you could give any kind of help to what the setback we might see on the working capital side in 2021. Second question, following up a little bit on the previous one regarding CapEx. If you could just confirm that things are going as expected with the capacity expansions within the cable business. Also, if you could give any guidance to of the EUR 150 million of expansion expenses, how much have been consumed, how much do you expect to use more in 2021, and if any, how much in 2022? My third question to Basil.
There was a deal in your space here earlier this year with Lumentum acquiring Coherent. Obviously, Coherent being a somewhat larger company than Photonics. Are there any read-through that you sort of find relevant for Photonics in such a deal? Also when it comes to valuations here, or is it something else than what you're involved in? Thank you.
Okay. Three good questions here. Thank you. Starting off with the working capital position. I think you should take a note of course, that we say that it's unusually low, and it is due to a lot of wins. The wins also in 2021 will be the major thing making the working capital development right. I think you know by now that we are preferred supplier for one project, but besides that, everything depends. We are engaged in many tenders across, and this eventually the wins and the terms and conditions of those project will define that. I think not giving any numbers, you should look a bit at the pattern of our history rise and then expectations to the wins. I think that's the closest I get to that for the solutions business, which is the major part. On the CapEx part.
You are quite right. We are expanding now the two factories in Cologne and in Sweden. It's a big project ongoing. We saw by Q1 here that our CapEx level went up. I think we've earlier communicated to do that. The major part investment is in 2021. Definitely here you will see a high level. Some of it also will pan into 2022 before we finish the Swedish factory. We're doing well on the expansions. Absolutely. I think that's actually how you should think about the investment level of 2021 and 2022 we finalize. Yes. I think over to Basil on the last question.
Okay. I think it was somewhat of an open question. Lumentum hasn't bought Coherent. Lumentum put an offer in Coherent. Coherent got a better offer from MKS. They got a third even better offer from II-VI. What that tells you really is that the market's pretty hot in M&A in our industry. The multiples are very high. The companies that have announced results, similar to what we have seen a return to favorable growth, especially in the second half of the year. They see a positive growth in the industry in general in 2021. I would say a lot of them are saying the same as we did, that there's cautious optimism going forward.
Obviously, from the multiples that you see from those Photonics companies, there is a lot of excitement in the market, and there's a lot of movement in M&A, and I think you'll see much more going forward. I'm not sure what you were trying to get as an answer from me on a possible view.
No. I was basically looking to hear your view, if you think that there is anything fundamentally different from a Coherent to your business that would suggest another type of multiple, or if you would basically find that that would also be a relevant multiple to look at if Photonics were to be taken over by someone else?
Okay. Yes, then now I understand. We're very similar, what we do, to Coherent, even though it's a much, much larger company than us and has been going since 1966, so it's quite long in the tooth as it. We're very similar to Coherent. We're very similar to the Photonics side of MKS. We're very similar to what II-VI do. Probably more similar to companies like nLIGHT. If you follow nLIGHT's sort of results and multiples, we're in that type of league. I don't see us any different. As for multiples, we have not looked at that. We're part of NKT, so we don't look at the separate multiples for Photonics as such.
That's absolutely fair. Can you give any update to how things are progressing with your previous comments about potentially divesting a non-core part of the business?
Yeah. That's a small, non-core part of our business, and we're still looking at the opportunity of divesting that.
Is there also appetite in the current market environment?
Is there appetite on that non-core business?
Yeah. From bidders.
Oh, yeah. Absolutely.
Are you receiving.
Absolutely.
Yeah.
Yeah. It's not exactly totally in the Photonics market as such. It's a side market. As I said, one of the things that we do concentrate on going forward is our core business. Our core business is the business that if you had to sort of look at it from a different point of view is the most successful. It's also the part that basically elicits the most excitement from the market. This is really non-core to what we're doing at the moment.
Okay. That's good. Thanks for that flavor, Basil, and thanks, Line, for your answers also.
Thank you.
Thank you, ladies and gentlemen. We do have one more question on the line. This comes from the line of Artem Tokarenko, Credit Suisse again. Please ask the question. The line is now open.
Thank you very much for taking my follow-ups. My first one is around the low-margin projects and solutions. You mentioned that execution of those will continue in 2021. Could you maybe let us know when you expect to finalize all those projects?
I'm not sure what I talked about low margin. I said we had some, in the past, projects which are below average, and we are phasing them out. As we get more project in with higher margin, these have the positive impact. Here, I will not be more specific.
All right. Thank you. My second question is around NKT Victoria. I think your competitors have just recently delivered new ships. I guess question to you, how do you see the competitive position of NKT Victoria in the current market? What's the likelihood that you will need to make new investments into maybe newer boats in the space of the next two to three years?
No. NKT Victoria is still a very new vessel and a state-of-the-art vessel with a lot of features, and which is absolutely suitable to deliver current projects. We are not planning any further investments on the vessel side. Also, you need to consider that if you would need more capacity, there's also third-party vessels on the market, which we could take in as on a subcontract basis for specific jobs. There's several installers which have cable laying vessels, and we could reach out to them in case the Victoria would be occupied with certain jobs. There's no need for with the current size and even with the size on the expansion to go beyond and invest in a new vessel.
Understood. Thank you. My last question is about industrial markets in Photonics. Could you maybe talk a little bit about which specific areas of industrial markets are causing the weakness at the moment? Also considering that, as you mentioned, some of your peers have already started seeing a relatively sharp recovery in Q4, what's your typical lag to maybe industrial production and those peers?
Yeah. Our industrial market is a basket of a number of different markets. The part of our industrial market that is associated with the semiconductor industry is, for instance, doing very well for us. It's also doing very well with our competitors and peers. That market is advancing. Anything to do with quantum, whether it's quantum communications, quantum computing, cryptography, banking, et cetera, is doing very well. There's a lot of investment from different governments, especially China and the U.S., and now to a lesser extent in Europe, in quantum technology. Anything to do with that is doing very well. The parts that are a little bit lagging behind is our R&D business, our research and development with a number of different areas, mainly because of COVID, mainly because most institutions are still closed. Most universities are closed.
Most research establishments are still closed or working at a very reduced capacity. A lot of that market, which is also highly profitable for us, is slow and will continue being slow in Q1 and Q2 of this year because of COVID. That's the lag. I think if you sit and analyze our peers and competitors, you see that market there doing a little bit worse. The industrial manufacturing market, it really depends on geography. Our market in China was doing, for instance, really badly at the beginning of 2020. It's recovered nicely in the second half of 2020, and it looks like it's recovering really well into 2021. China is going back to more positive growth. It's always been positive, but even more positive growth going forward.
However, the industrial markets, anything to do with manufacturing, automated manufacturing, different kinds of manufacturing in Europe and in the U.S. are lagging behind. That, again, is very much pandemic driven. It's very much driven by the economy and what will happen after the pandemic. There is not one single market that we're in industrial that it is just pointing in one way. It's a basket.
Understood. Thank you very much.
Thank you. It appears there are no further questions at this time. Please continue.
If there's no further question, then I would like to thank you once more for participating in the call and for the good questions. Always appreciate it. Wish you all a good day, and talk to you soon.