Good morning, ladies and gentlemen, and welcome to Heidelberg's conference call on today's announcement of our future plan, which is a key enabler within our growth strategy. Together with my colleague and CFO, Tania von der Goltz, we will run you through the presentation before welcoming your questions at the end of this call. Let's begin with our first slide. Today, Heidelberg stands on a significantly stronger foundation than it did a few years ago. Despite facing substantial margin headwinds, we have successfully navigated these challenges, delivering a stable financial performance last year and maintaining this trajectory into the current year. In addition, our balance sheet is in a robust constitution with a positive net financial position supported by our renewed ability to generate positive free cash flows from our core operations. With our financial fundamentals in place, we are now focused on the next chapter of Heidelberg's evolution.
As we look ahead, our strategy centers on balancing growth opportunities with disciplined cost management. A key part of this effort is our strong commitment to reducing our overall cost base, as demonstrated by today's important announcement. Enhancing the financial efficiency of our primary production site in Wiesloch will improve our margin potential while enabling the investments needed to drive future innovation. Based on this, our clear objective is to return on a growth path, generating moderate year-over-year top-line growth in our core markets and beyond. Ladies and gentlemen, expanding horizons captures the essence of our future vision. Since taking over on July 1st, the new management team has put significant effort into refining our strategic direction. Working closely with the global interdisciplinary strategy team, we have identified a series of key initiatives, some building on ongoing actions, others inspired by fresh ideas that highlight the rich potential of Heidelberg.
Thereby, we would like to give you our commitment that these initiatives will yield at least EUR 300 million in annual sales within four years. This represents an important milestone for us as we signal a shift beyond the cost-cutting focus of the past years. While maintaining a disciplined cost management, we firmly believe that achieving moderate year-over-year top-line growth is equally vital to expanding our margins and driving sustainable value creation. Today, Heidelberg is built on a solid foundation of technology and market leadership. Over the past years, we have significantly expanded our packaging footprint and made a strategic leap forward into digital inkjet printing. Notably, we are also highly diversified in our global market reach. While only 12% of our net sales comes from Germany, more than half is generated in fast-growing economies outside Europe. This global diversification underscores our strengths and adaptability in sizing global opportunities.
However, let's discuss the main levers driving our midterm growth ambitions. The first is packaging printing, which benefits from global megatrends such as the shift away from plastics, global population growth, and the rising demand for premium packaging. This segment has seen substantial growth over the past decade, with Heidelberg's packaging sales increasing from EUR 750 million to EUR 1.24 billion last fiscal year, and what is our plan going forward? First, while our sheetfed business is well established in industrial markets, we will put more focus on high-growth emerging markets, where expanding populations and rising wealth present significant opportunities for us. Second, we will capitalize on the powerful tailwinds from global sustainability efforts as brands increasingly move from plastic foils to paper-based solutions.
This trend does not only affect folding cartons positively. It is also driving growth for flexible packaging, where we will soon have an offering based on our flexographic printing technology. Lastly, while we have historically concentrated on improving the efficiency of our printing presses, we are now shifting our focus to activities beyond printing. By addressing performance bottlenecks along the value chain and enhancing efficiency holistically, we aim to unlock additional value for our customers. Another major growth area is commercial inkjet printing, which is expanding at a CAGR of more than 5% to reach a market size of EUR 7.5 billion by 2029. Our recent partnership with Canon has opened new opportunities in this growing sector, which will play a central role in the future of the industry. And this future will be hybrid, combining the strengths of offset and inkjet printing in one integrated system.
As the only supplier offering both technologies within a unified software ecosystem, Heidelberg holds a unique position. A key part of this ecosystem is Prinect Touch Free, an AI-driven software launching in 2025, designed to streamline and automate the printing process further. Additionally, this initiative supports our aim to increase recurring revenue in the future. While we resell Canon machines, Heidelberg takes responsibility for aftermarket activities, providing significant opportunities to grow our recurring revenue within this partnership. The third growth opportunity lies in our extensive installed base, the largest in the industry, which provides a strong foundation for expanding our lifecycle business. Currently, this business contributes EUR 900 million to our annual net sales. To enhance global service coverage, we will tailor our contract models to appeal to a broader range of customers again.
Thereby, our mass data generated from 10,000 installed assets worldwide will feed future AI-based service models, improving our customers' print shop efficiency significantly. Based on this, we will also transform our service activities from a reactive to a more proactive approach. Finally, let's explore initiatives beyond our core business, which will play a pivotal role in shaping our future equity story. In our charging equipment division, we will focus on our project business while developing technology to drastically reduce costs for high-performance charging. Furthermore, Heidelberg's extensive industrial capabilities are uniquely attractive to potential partners. In addition, and contrary to the common perception of the printing industry, we are at the forefront of technology in several areas. Going forward, we will leverage our strengths in hardware, software, and electronics integration for high-precision products and autonomous systems within our business division, Heidelberg Industry.
Next to industries, with a clear focus on resilient domestic supply chains, we are also exploring into the field of green hydrogen. And here, we started an important milestone over the past weeks. Heidelberg is currently building its first prototype for an electrolyzer, which clearly demonstrates our wide range of capabilities for new business fields. However, at this moment, we are in active discussions with partners across various industries and look forward to sharing updates in the coming weeks. I hope this provides a clear initial idea of how we plan to achieve our sales ambitions. Looking ahead, we will provide a more detailed update during our Capital Market Days in June, where we will share further insights and progress on our strategy. Now, I would like to hand over to Tania.
Thank you, David. Good morning, everyone. As David already highlighted, the top-line aspects, I will delve into the measures we have implemented to optimize our cost base and drive sustainable efficiency moving forward. We are pleased having reached a constructive compromise with the employee representatives, paving the way for a stronger Heidelberg with enhanced commercial and financial competitiveness. This agreement is expected to deliver over EUR 100 million in cumulative personnel cost savings before one-time expenses over the next four years as a result of combined measures, which I will outline on the next slide. Thereby, it is important to emphasize that this agreement applies exclusively to our main production site in Wiesloch, which plays a central role in our global operations. Let's take a closer look at the breakdown of the personnel cost savings, which can be categorized into two primary levers.
Firstly, we will reduce the workforce at our Wiesloch site by up to 450 full-time equivalents, representing approximately 10% of its total workforce. These savings, shown in dark blue on the slide, will ramp up to approximately EUR 40 million annually in the third year, starting with EUR 20 million in the upcoming fiscal year. Secondly, we have agreed not to pass on the 5% tariff wage increase negotiated with the unions for the next two years, shown in light blue on the chart. This is a key point to highlight, as it ensures that the positive impact of the FTE reduction will not be offset by wage inflation over the next two years. Overall, the program is designed to be fast and effective, delivering a break-even point in under two years.
Achieving cumulative savings of more than EUR 100 million would come along with a cash out of approximately 40 million EUR over the next two years. Therefore, we will build a provision of up to EUR 30 million in the third quarter of the current fiscal year, while the remaining 10 million EUR will be drawn from an existing provision created in 2020, which remains partially unused. Since this agreement was only signed last week, we are currently in the process of refining the specifics of the FTE reduction, which has implications on the timing of the cash out and the provision to be built. Therefore, we will provide you with a detailed update on this during our call on the third quarter results. Let us briefly summarize the messages from this call.
Firstly, the future plan agreement is our key enabler for our growth strategy, as it improves our commercial and financial competitiveness and supports the profitability over the next years. Secondly, at the same time, Heidelberg is committed to returning back to a growth path over the next years, as just outlined by my colleague David. And last but not least, we confirm guidance for the current fiscal year, reporting a resilient year-over-year performance. That's it from our side. Now, we open for questions.
The first question comes from Stefan Augustin Warburg Research. The floor is open.
Yes, hello. Thank you. I have a couple of questions, actually. So it seems pretty clear what happens over the next three years, but how does it look thereafter? Is in that agreement somehow baked in that post-standstill of the wage increases by the tariff, there will be a catch-up effect after 2028? And respectively, once, let's say, Wiesloch is agreed on, I guess all the other sides will somehow follow. And does that mean that the production setup, as it exists right now, is still not absolutely decided because there could happen something at another site which looks different than the agreement in Wiesloch? So that would be my first two questions.
I can start answering your questions, and Tania, please add on. So first of all, talking about the effects after 2028, you're asking. So at the end, we do not expect a catch-up effect, as you're saying. So at the end, it's a sustainable reduction of personnel costs for us in our definition. Second, production network is always under evaluation, so we always look into that, and we are in the discussion, and this is exactly what you stated. So we are in discussion with all sides right now how to participate in the cost saving. And yes, we expect also an additional reduction from the other side, not only from the production side, also from the sales and service network globally. And yeah, always the production setup is under evaluation, meaning no final decision taken for the time being.
We start from this point here as agreed with the unions here on site in Wiesloch.
Okay. Do you have a, let's say, when would we expect probably further news flow on the other sides? Will that happen until the capital markets day next year, or is it actually closer around the corner?
So we expect, let's say, final agreements around the corner, so hopefully end of this fiscal year, everything is settled.
Okay. Great. Thank you.
So right now, we have no more questions in the queue. So back to the host.
Okay. Thank you. There seem to be no further questions. Thank you to everyone for dialing in. And in case further questions may come up afterwards, please reach out to us. We're happy to share with you our thoughts. Thank you.