Hello, and welcome to our Capital Markets Day, and thanks for taking the time to join us, whether you're here in London or joining us on the webcast. As you know, I'm Nimesh Patel, Group Chief Executive Officer, and I'm pleased to be joined today by my executive team, so starting with Louisa Burdett, who is our Chief Financial Officer, having joined us in July. We also have Maurizio Preziosa, Managing Director of Steam Thermal Solutions, or STS, who's been with the business for over 10 years, then Andrew Mines, who recently moved into the role of Managing Director of ETS, Electric Thermal Solutions, having previously led our Watson-Marlow business since 2019. You'll also be hearing from Chris Molnar, who's been with Chromalox for 25 years, led Vulcanic post our acquisition, and has responsibility for strategic business development and sales in EMEA for the Industrial Process Heating division.
To conclude the lineup of presenters, we're also joined by Maria Wilson, our Digital Director, who joined the group in 2023. A number of my executive team colleagues in the room won't be presenting today, but I do encourage you to take the opportunity to speak to them during the break. From Watson-Marlow, we've got Phil Scott, Finance Director, and Martin Johnston, Strategic Business Development Director, both of whom are also joint interim Managing Directors following Andrew's move to ETS. We also have with us Sarah Pearce, our Sustainability Director, Jim Devine, our HR Director, and Celine Baroche, our General Counsel, who joined us just over a month ago. Let's have a look at today's agenda.
First, I'm going to build on what I shared with you at our results in March and in August, specifically, my views on our group, its potential, and what I firmly believe we can achieve together, and how we're going to deliver. More on that in a few minutes. Andrew is then going to share why he was excited to lead ETS and set out our priorities and opportunities within that business. He'll also briefly explain the industrial equipment heating segment of ETS. He'll then hand over to Chris, who'll take a deeper dive into the industrial process heating segment, including the technologies that are absolutely pivotal to delivering on our customers' Net Zero ambitions. Moving to STS, Maurizio will remind us about the strong and enduring qualities of that business and explain how we're evolving to drive future growth.
At around 3:15 P.M. in the U.K., we'll take a thirty-minute break, and when we return, Andrew is going to provide a brief update on Watson-Marlow and why it will continue to contribute high growth and high margins to our group, and then Maria will walk through how digital is enhancing our business model, including a short demo, before handing over to Louisa, who will bring all of what you've heard together, explaining what it means for our growth, our margins, over both the medium term and the long term. I'll then wrap up and lead a Q&A session, including all our speakers. As we do have a full agenda and both a virtual and physical audience, we're asking you to hold your questions until we've finished all our sessions.
But Mal Patel, our Head of Investor Relations, will monitor questions coming in from the webcast participants, and if you are online, feel free to type your questions into the Q&A panel as we go. Right. With that, let's begin. So, as you know, I took over as Group Chief Executive in January of this year, and I've spent time in all the different parts of our group, meeting with colleagues at all levels within our organization. Listening and learning from them has been instrumental in shaping my views on our future. So I begin from understanding that the strong foundations of our past success have not changed. They remain just as relevant and differentiated today as they've always been.
While the macroeconomic and trading backdrop against which we operate has become more challenging, that is more than matched by our ambition to benefit from global mega trends, which will shape the world around us for decades to come. We will deliver against this significant potential, not only by leveraging today's strengths, but by building on that platform. In this way, Spirax Group is evolving for tomorrow's world together. We're together with purpose to engineer a more efficient, safer, and sustainable world, and we will achieve this together across our businesses, all three of which are high quality and well-positioned to deliver on our significant potential through our common business model, working in partnership together with our customers. With an ambition to accelerate our compounding organic growth, enhancing our already proven track record over many decades, we are together for growth.
Picking up on our strong foundation, I expect that you'll recognize these charts, but I make no apology for reminding you what a strong group this is and what has driven our track record of organic growth and industry-leading margins. Our products, solutions, and expertise are critical to the operating efficiency and safety of our customers' industrial processes across thermal energy and fluid technology. Delivered through our global direct sales force of 2,100 engineers and their deep process insight, they serve our customers through building close and local relationships with a focus on consultative solution selling and pricing that's based on customer economics. Solving customer problems has long been at the heart of our differentiated customer solutions business model.
Our sales are mostly funded from customers' operational budgets rather than capital expenditure, and our average invoice size is around GBP 3,000, so our local customer relationships are key to our success. We help maintenance, production, and plant managers achieve higher throughput when times are good, and we help them increase the efficiency and reduce the energy required by their processes when times are hard. We benefit from being highly diversified across sectors, with a high proportion of sales from defensive end markets, and we are truly global as a group with a direct presence in 66 countries. As I said, we are three high-quality businesses, all with the potential for sustainable long-term growth and attractive margins. Steam Thermal Solutions, or STS, accounts for around 50% of group sales and has a proven track record in outperforming IP growth.
Our reputation for quality and service, and our large installed base drives MRO demand. While our solution selling and value-based pricing also delivers at high margins. Looking forward, we are well-placed to lead the decarbonization of steam generation, which will support accelerating long-term growth of above two times IP at a margin above 23.5%. Maurizio will expand on this later. Next, we have Electric Thermal Solutions, or ETS, which is a business built through acquisitions between 2017 and 2022. My priority is to improve our ETS margin to 20%, an increase of over four hundred basis points over 2023 in a business which accounts for around 25% of sales. Early on, I made important changes to the ETS leadership team, and I am now confident that we have a clear understanding of the path to operational improvement, with positive signs of progress.
I'm confident in the growth and pricing potential in that business. Andrew is going to expand on this and explain how these elements come together to deliver on our 20% target. We see ETS growth outperforming IP by more than two times, similar to, if not above, STS. Finally, Watson-Marlow, which comprises Biopharm and Process Industries, is a high-margin business with an attractive growth outlook. Underlying Biopharm growth at around 10% and Process Industries growth above IP combine in high single-digit growth potential. The business is well invested following manufacturing capacity expansion. Through our focus on attractive end markets and our sector-focused solutions, as well as our leading technology and a high proportion of consumable sales, we anticipate a sustainable long-term margin of over 30%.
Together, across our three businesses, as Spirax Group, our long-term ambition is to accelerate our compounding sales growth and improve margins, enhancing our proven track record of strong EPS growth. Why am I confident that we have the opportunity to accelerate our long-term compounding growth for decades to come? Because across these three high-quality businesses, we are well positioned to benefit from megatrends which are defining the world around us. Starting with resource efficiency and sustainability, our customers are setting reduction targets for greenhouse gas emissions and water usage. Industrial thermal energy today accounts for 20% of global carbon emissions, which is more than global transportation. Reducing energy waste, and therefore emissions, is what STS has been doing for over a hundred years, building a deep understanding of our customers' industrial processes.
STS, together with ETS and its products to reduce customers' carbon dependency through the electrification of thermal processes, is a powerful differentiator for the Spirax Group in developing decarbonization solutions. I'll speak further about this in today's presentation. But it's worth noting that we're also supporting the expansion of nuclear and energy sectors in ETS, and within Watson-Marlow, we're already a leading player in the wastewater sector. The next global trend, an aging global population, is going to need increased healthcare provision, fueling innovation in Biopharm to develop and produce new treatments, supported by Watson-Marlow. The pharmaceutical and biotechnology sectors, as well as healthcare, account for close to a quarter of our sales, principally in steam in Watson-Marlow.
Then there's the emerging middle class, characterized by an additional eight hundred plus million people, and this demographic will drive increasing consumption, impacting the food and beverage and energy and power sectors, which today account for a third of our sales. And finally, we're also investing to expand our addressable market in other high-growth sectors driven by changing lifestyles. For example, through ETS, we're a leading provider of critical thermoelectric solutions to the semicon sector, and Watson-Marlow is building a presence in future foods, and both Steam and Watson-Marlow support the production of electric vehicle batteries. So these four trends underscore our potential for growth through the structural attractiveness of our existing end markets and scope to expand our addressable markets. What does this mean for our annual target addressable market? Today, it stands at GBP 10.7 billion.
But the size of the decarbonization opportunity ahead of us will increase this significantly. A focus on the electrification of steam generation through what we refer to as Target Zero, will add a further GBP 2.4 billion to our annual addressable market. This is sized on today's installed base of fuel-fired boilers in our target sectors and regions, and we've assumed adoption will take time, constrained by factors such as customer appetite to invest, availability of green electricity, and grid transmission capacity. But you see the scale of our ambition. Additionally, there is opportunity in the decarbonization of thermal energy beyond steam. This adds a further GBP 4.2 billion to our addressable market, taking the total to GBP 17.3 billion. Note the relative size of the two decarbonization markets. ETS is fundamental to accessing this opportunity.
Moving from an annual addressable market of GBP 10.7 billion to GBP 17.3 billion is a 60% increase, and of course, this will continue to expand moving forward with IP-related growth, pricing, biopharm and semicon recoveries, and our addition of new target high-growth sectors. Because we have this strong organic growth opportunity, we are not reliant on M&A for growth. We do not intend to add a new business to the group. Any M&A activity would be bolt-on to accelerate delivery of this opportunity within our businesses, and Louisa will speak later about our capital allocation priorities. How are we going to serve our customers to meet their evolving needs in line with these megatrends? We start with our business model, which has been an important point of differentiation and competitive advantage for us.
I've already spoken about customer solutions, which sets us apart from our competitors, who focus on best product, characterized by their focus on developing new product features, supported by technical product expertise and reliance on third-party channels to access customers. This is also why we target sectors where our solutions are mission-critical to our customers' processes, where they see value in what we offer, and are prepared for that value to be reflected in our pricing. You see that in our margin. Now, building on our model, as our customers' needs evolve in the future, the way in which we deliver also needs to evolve to what we refer to as customer partnership. What differentiates customer partnership is today, we can solve customer problems.
Tomorrow, we want to position ourselves to anticipate their needs by being more connected with them through our local presence or physically, and through data or digitally, and through our digital insight, we can build on our sector-focused process expertise to become even more knowledgeable on our customers' specific processes, and to optimize across these processes to benefit their overall system. Our applied engineering skills will continue to be critical to identifying solutions, and we'll build on ETS's design engineering capability, particularly in delivering more bespoke decarbonization solutions, and finally, through our expanded and holistic understanding of the customer, we will seek to stay connected to them throughout the lifecycle of our products and their processes, moving from point-in-time sales to more frequent, even continuous engagement, which Maria will explain later. This is how we maintain and build on our competitive advantage, drive our growth, and improve our margins.
You will hear further examples on how we are already delivering against the building blocks of customer partnership from all of our presenters, including how this ties into our investment priorities. Our business model is what binds our group together across STS, ETS, and Watson-Marlow. Now, you know Watson-Marlow well. You know that it is a fantastic business which has delivered high growth and high margins. While the last couple of years have been more challenging as a result of the temporary effect of biopharm destocking post the pandemic, I think you all understand that that hasn't changed the quality of the business, nor its importance and contribution to the group. So the emphasis of today is going to focus on what's new, and in particular, how we deliver on the significant decarbonization potential through STS and ETS, providing even greater duration to our strong growth.
Therefore, over the next few slides, I'm going to explain that customer partnership journey I touched on, but through the lens of decarbonization. Let me start by highlighting where we play across STS and ETS. Today, we serve the steam and electric thermal energy markets separately and independently. The chart shows the different operating envelopes for each technology. Essentially, steam is typically utilized at temperatures of close to one hundred degrees Celsius, up to three hundred and fifty degrees Celsius in applications where higher power loads are required, and it's more versatile in its uses. Steam remains the most efficient method of transferring thermal energy from point A to point B. That's why steam remains critical to our customers' processes. Electric is utilized where higher temperatures are required, typically with power loads that are lower and where greater control is critical.
We also see both technologies in use within customer sites in the oil and gas sector, and by OEMs that we serve in food and beverage and pharmaceuticals, as just a few examples. As a global leader in industrial thermal energy solutions, there is huge value to be unlocked from our combined expertise. We're seeking to help those customers decarbonize their thermal energy use across their systems. That is our unique proposition, integrating our deep understanding of steam and electric. As a result of our combined expertise, and coming back to those significant addressable market opportunity that I talked about, we can help customers decarbonize 45% of their industrial thermal energy use through the electrification of the generation of steam, and also replacing the direct burning of fossil fuels for higher temperature applications through direct electric technology.
Combined with access to green electricity, this allows our customers to reduce their scope one and two emissions to zero. And of course, they're part of someone else's supply chain, reducing their customer's scope three emissions. And this opportunity is why ETS is so important to us. Because of its proprietary technology, a proven track record in new product development, along with differentiated design engineering and bespoke manufacturing expertise, these capabilities are critical to the decarbonization opportunity. How do we deliver for customers? Well, through a partnership approach that spans their journey in decarbonization and leverages our combined relationships, expertise, and solutions. So moving around this wheel, firstly, we work to understand our customers' thermal energy generation and use, helping them to eliminate waste, optimize their processes, and therefore, their energy needs. Secondly, we seek to help them manage their use through constant engagement.
Essentially, what we've always done with engineers walking the plant, now augmented by walking the data. This also gives rise to additional solution selling and maintenance and replacement opportunities. Both of these steps together allow us to work with customers to develop their Net Zero roadmaps, combining different technologies across their processes, and so the third step is to deliver the decarbonization of their energy source through our Target Zero products in STS, supported by ETS technology, and separately, through our Powering Zero products in ETS, moving beyond steam. To deliver on this potential, we will need to build on our existing skills and continue to extend our range of products, which support our decarbonization solutions.
We are developing an operating model to harness the combined expertise of STS and ETS through bringing together our sector-focused insights to prioritize our targets, to connect with our customers at both a strategic level through our existing account management teams, helping customers to understand their thermal energy options and develop their Net Zero roadmaps. But linking this to local execution, working with customers' very different plants, each of which has its own specific needs and challenges, all informed by carrying out local thermal energy assessments, expanding on our audit and service capability, and then leveraging applied engineering to detail the solutions, working with ETS's design engineers and our bespoke manufacturing. We're also expanding our suite of products to better position us across technologies as an honest broker. Maurizio will explain more about our Target Zero products, including our partnership to develop High-Temperature Heat Pumps.
Maria will speak to our connected products and digital platform, and Chris will explain the next generation of medium-voltage technology. These proprietary products, delivered through our operating model, enable our ability to partner with customers and benefit from an exciting runway of growth for years to come. So I've explained how our customer partnership model will support us in tackling the decarbonization opportunity, and there are case studies later today which will further help bring that to life. So let's now turn back to our focus areas, and what should you expect of us? Here, we set out our priorities, starting with a focus on ETS and improving our margins. This is my number one priority, and that's why I took early action to improve our operational performance. The pathway to 20% is clear.
One, the largest contributor is increasing throughput by improving our controls over product design while still meeting the needs of our customers and improving our manufacturing processes. That is quite simply the bottleneck to higher growth and stronger margin, specifically in Chromalox's Ogden plant in the U.S. We are improving output from our current footprint, and we will complete the expansion of the Ogden site next year, adding extra capacity. Therefore, two, we will continue to drive demand while also taking the opportunity to adjust pricing to reflect the value we deliver through our solutions. And three, we are positioned to benefit from the recovery in higher margin semicon wafer fabrication demand when it comes. Moving to our next operational priority, we see opportunity to improve our organizational fitness through simplifying our structures, optimizing our manufacturing footprint, and investing in the core systems that support us.
I'll talk to these points more on the next slide. Delivering on organizational fitness will support our ability to invest in our longer-term growth. So where will we invest? Well, digital will help us deliver on core tenets of our customer partnership approach, improve data, deeper insight, increasing the speed to solutions. The returns are clear, reflected in the growth we will deliver by better leveraging our direct sales expertise, but also improving margins through increasing the value of our solutions to customers. What does that mean specifically? Well, simply put, we're freeing up more time for customer visits through simplifying what we ask of our direct sales engineers, so they can focus on what they do best.
We're supporting our engineers with improved training and technical resources, and we're leveraging tools and expertise from across our businesses to bring together the best of our solutions to be shared across our footprint of sales companies. Maria will explain how our digital solutions support us to do exactly these things. Let me now come back to the points on simplifying our organizational structures and optimizing our manufacturing footprint. Having grown as a group, both organically and through acquisition, we have seen a doubling of our sales and manufacturing operating companies compared to ten years ago, with over one hundred and thirty sales companies and thirty-seven manufacturing sites today. So now is the right time to address this, to simplify our organization while maintaining a focus on our customers and serving them well.
It is important that we preserve our local and direct sales teams as they are critical to delivering on our business model. But consolidating non-customer-facing activity to be both more effective and efficient is a clear opportunity. I also continue to believe that our local manufacturing footprint is important to connecting with our colleagues in sales and our customers, meeting their local needs. But there is scope for driving optimization in the footprint. We have a number of small sites, and we're looking at where we manufacture standard products, where we manufacture products for local markets and/or engineered or more bespoke systems. Our first step has been to understand our capacity, and we're well advanced with that exercise. To make the most of our asset base, we are also developing a best practice framework to improve effectiveness and efficiency.
This will help us both manage our capital investment, but also reduce our operating costs. Likewise, we're also focusing on savings from purchasing activities, which is not an opportunity we have previously leveraged across our group, but one which we have advanced this year and which will deliver benefits in 2025. At this early stage, I don't have more to add, but we will update you at our full year results, and Louisa will also set out the target for operational improvement, which the executive team have worked through together. These benefits will help significantly in funding our investment to drive future growth. Finally, I'll touch on systems. As you know, ERP investment programs have been underway across our three businesses.
This is an investment which is needed in both STS and Watson-Marlow, which we've owned for many years, as current systems are dated, and perhaps even more so in ETS following the acquisitions, where prior private equity ownership did not invest adequately. Without this investment, we might face an impediment to growth, but with the new ERPs, we can drive further efficiency. But this is a long-term investment project. A change we've already made is to move away from three separate ERP designs and implementation projects because we should leverage the benefits from the scale of the group. We'll now have a common design where sensible, for example, on core processes through a single team, but we will also sequence implementation to minimize the risk of disruption and to learn as we go. Let me now summarize how what I've talked about translates into organic sales and profit growth.
Louisa will add detail later, but the important point is that our success has been rooted in translating consistent growth ahead of underlying markets into compelling shareholder returns, which has been reflected in a multi-year track record of strong EPS and dividend growth. Of course, we recognize that recent years have been more challenging as we faced a tougher macroeconomic environment and post-pandemic destocking in the Biopharm sector. And while I've talked about the attractive long-term growth opportunities we are pursuing, we are not waiting for these to fuel our growth. The medium term matters. I want to remind you of the three strong growth engines in our business and what we believe we can achieve over the medium term, being clear about both our trajectory but also the drivers of our growth and what underpins our confidence.
In the medium term, we can sustain our high single-digit profit growth as a group, delivered through mid-single-digit organic sales growth and an improving margin reaching between 22% and 23%. In STS, we expect to continue to outperform IP growth, but we also recognize that IP is likely to be weaker over the next few years, as it has been since 2019, pre the pandemic, through to and including the forecast for this year at an average of 1.7%. This includes the impact of slower growth in China, which has been an important driver of growth for STS, as Maurizio will explain. We will continue to maintain our pricing discipline to protect margins, with pricing at or ahead of inflation, but we recognize that inflation rates are normalizing, and so pricing will contribute less to top-line growth than in recent years.
Taking into account our operational improvement program target, which will fund our additional investment, we expect low to mid-single digit organic sales growth in STS, supporting a margin of around 23.5%. In ETS, growth in our end markets, including a recovery in semicon demand and growing contribution to our order intake from decarbonization-related demand, will drive above mid-single-digit sales growth. And delivering on our operational priorities will, as I've already explained, underpin our 20% margin target. In Watson-Marlow, we expect a recovery in biopharm demand, which has been slower than originally anticipated and is very challenging to forecast. But we, we remain confident that the recovery will come on the basis of strong underlying sector growth. Added to that, our continued growth in process industries at two times IP will support both high single-digit sales growth and margin improvement to over 30%.
Beyond the medium term, we'll see even more strongly the benefits of what we are building, as I described earlier, our significant opportunity and how we intend to get after it. We are confident in our long-term growth potential, and what I mean by that is an acceleration compared to our proven track record of compounding organic sales growth and improving margin, driving strong EPS growth. Why can we deliver this? Because of our powerful and evolving business model, supported by the development of our digital capability and associated services, with the required investment funded by our operational improvement priorities. Because through this business model, our three high-quality businesses are well-positioned to capitalize on structural mega trends that expand our addressable market. This will deliver long-term organic sales growth at over two times IP and margins of over 23%, with higher cash generation.
This slide is simply a reminder of our proven track record that underpins our ambition. In the long term, our organic sales growth, improving margins, and higher cash generation translate into an acceleration of our strong growth in EPS, supporting our progressive dividend and delivering shareholder returns. Our intention was to share with you an overview of how we intend to develop Spirax Group, working to build on our strong foundations and positioning ourselves to benefit from the significant growth opportunity ahead. Much of what you've heard from me, and will hear from my colleagues, is already in train. While we are signaling the changes we are making, the evolution, these things are about where we focus. For example, in decarbonization and digital, and they're about how we execute, for example, through customer partnership and together as a group, rather than as three individual businesses.
What we're doing today is lifting the lid on much of what's underpinned our success, but also will underpin our potential. Of course, we're still early in this journey, but that does not mean we aren't already making progress, and you'll hear more about that from my colleagues. I have no doubt that there will be challenges ahead, but it is important we remain focused on what it is we're trying to build and why. With that, I'm now really pleased to hand over to Andrew to talk about ETS. Thank you.
Hello, everyone. My name's Andrew Mines, and as you've heard from Nimesh, I assumed the role of Managing Director for ETS on the first of September, having previously led the Watson-Marlow business for five years. I joined Spirax Group in November 2019, having previously worked for Illinois Tool Works, ITW, a Fortune 200. I worked within the ITW business for 23 years in a number of leadership roles in industry sectors. The ITW business model is a high focus on manufacturing and commercial excellence. My most recent role being the Executive Vice President for the $1.7 billion global high margin, but niche construction components business. I'm gonna give you an overview of the ETS business and share some of the early observations on that business.
I'll also talk you through the industrial equipment heating segment before handing over to my colleague, Chris Molnar, who will speak in more detail about the industrial process heating segment, as well as the technology and the very significant opportunity we have in electrification. I'll then come back and close this session with our growth and margin outlook for the ETS business. I've spent the last month traveling to all ETS locations in Europe and the USA. The first point I want to make is that ETS is a fantastic business. We partner with customers to deliver highly configured, process-critical applications using differentiated and bespoke manufacturing techniques to solve their decarbonization and heating challenges. Independently, and together with our colleagues in STS, we are extremely well-placed to play a fundamental role in helping our customers decarbonize.
We also have a leading presence in the semicon wafer fabrication equipment sector and are well-placed for when demand there recovers. From my recent ETS site visits, I have witnessed firsthand the motivation and the willingness of the teams to drive the business forward, as well as the real value they place on being part of Spirax Group. I see this specifically for the most recent acquisitions, Vulcanic and Durex Industries, that joined the group in late 2022. As Nimesh has outlined, we are focused on a number of operational improvements that will enable ETS to achieve its full potential. One of the most important of those is driving improvement throughput in our Ogden facility, and I will walk you through what we're doing there later. It will become clear from this presentation why it was an easy decision for me to take on this role.
I genuinely feel very privileged to take on the opportunity and shape this next and important phase for ETS and the group's future, and I'm excited about the opportunities and the potentials we see. I can sum up that what I've seen over the past month while traveling around the business is what, in one word, it's opportunity, so let me share some of that with you now. Put simply, ETS represents a full operational turnaround opportunity for the group, which is already in progress and starting to deliver visible results. ETS has market-leading expertise in high-growth sectors and applications with high and growing demand in our target sectors. In addition, and complementary to the STS business, ETS provides us with the foundation and conditions to realize our full potential as a major growth engine for the group.
All of this positions it, ETS to deliver above mid-single-digit organic growth over the medium term and a clear pathway to 20% margins. Let's remind ourselves about ETS. Earlier this year, we organized ETS into two segments. As you can see in the center of this slide, industrial process heating, which comprises Chromalox and Vulcanic, and industrial equipment heating, which comprises Thermocoax and Durex Industries. This structure enables ETS to drive greater collaboration between our businesses on both sides of the Atlantic and realize revenue and cost opportunities while offering our customers unmatched solutions capability. Combining these four brands across the two segments gives us unparalleled ability to compete in delivering proprietary and complex electric thermal solutions.
That's because we have a track record of solving customer problems within their critical applications using proprietary technologies, a strong focus on R&D and new product development, and our design engineering, bespoke manufacturing expertise and capability is really unique in the market. We have strong demand tailwinds and a record order book in both segments, and they each have attractive market positions, which will enable us to take advantage of some exciting long-term opportunities. ETS is also complementary to STS. The skill set, expertise, and technologies that ETS brings to the group are critical to enabling the decarbonization of steam generation. Nimesh has already outlined how we are building an operating model to deliver on that significant opportunity, and Maurizio will cover that in more detail later in the context of Target Zero solutions. The decarbonization of thermal energy beyond steam, which we're introducing today as Powering Zero.
Chris will be talking about Powering Zero shortly and is an even greater opportunity for ETS, representing an additional GBP 4.2 billion of annual addressable market, as you've already heard from Nimesh. In combination, the total decarbonization opportunity we have across Spirax Group is material for both STS and ETS, and ETS's industrial process heating capabilities are critical to capturing this multi-decade growth. So why are we so well positioned? This slide provides an overview of the high-growth end markets that we serve through ETS. Industrial process heating accounts for approximately 75% of ETS sales delivered through Chromalox and Vulcanic, while industrial equipment heating accounts for approximately 25% of ETS sales delivered through Thermocoax and Durex Industries. We are focused on ten strategic subsectors, which we group into energy transition, materials, advanced technologies, and health and nutrition.
On this slide, we have called out the strategic end markets, which account for about 70% of our sales, which you can see includes power generation, including the renewables, oil and gas processing, semiconductor, food and beverage, and aerospace and defense. These sectors represent an attractive combination of resilient and defensive demand and strategic long-term growth opportunities in line with some of the global macro trends that Nimesh has already described. Many of those sectors are also, by necessity, highly regulated. ETS's accredited position within them differentiates us and significantly contributes to our strong competitive moat. That said, we know we're not fulfilling our potential today, and we have clear areas of operational improvement need to be addressed in order for us to do so.
As you can see on this slide, we've focused on four themes that, along with some of the target strategic investment, will shape the positive evolution of ETS. Before I go there, that each one of those in turn, I just want to make a broader point, and I say this with confidence rooted in insight from over twenty-five years of working in highly competitive manufacturing industries. What I see in ETS is a turnaround, and it's fixable. It's about being joined up and laser-focused, and we are already making progress. Leveraging our capabilities in the first point, and I've already given you a flavor of our capabilities we have in the business.
Now, it's essential we bring the team together to create more cohesion and fully leverage the skills, talent, technology, and best practice we have within ETS and from across the wider group to ensure that we're aligned behind the priorities. I've talked about opportunities and how well-positioned we are in really exciting growth sectors, including the semicon industry and for the electrification of thermal energy processes as our customers address their sustainability challenges. And of course, I've mentioned our collaborative operating model with STS to deliver decarbonization of steam generation opportunities. So that's why operational excellence must be a focus and will include enhancing our manufacturing talent as a priority. You'll see that fixing Ogden features prominently in the slide, and I'm going to talk about that in more detail because it's important. But before that, I want to highlight the fourth priority, which is pricing.
We need to price for the value we deliver to customers. As I have mentioned, we have unique know-how, our manufacturing processes are proprietary and are embedded in our customer processes and products. I believe we are undervaluing our position and uniqueness in the market and therefore leaving value on the table. Let me now speak about our clear priorities investment areas for the ETS business. This slide pulls them all together and should look familiar, given that Nimesh has already talked about some of these at the group level. But let me just share some of the detail for ETS. Firstly, to reach the ETS margins of 20%, we must be focused on improving throughput at our manufacturing sites, including Ogden. We must also improve our pricing through capturing more of the value we generate for customers.
Organizational fitness will include new Ogden expansion that will come on stream in twenty twenty-five for medium-voltage solutions to support our growth ambition. As part of our customer partnership and anticipating customer needs, investment in digital will enable us to establish connections and data-driven insights, allowing us to develop service solutions. We will invest in decarbonization solutions. Medium-voltage technologies underpin the growth that we are driving in industrial process heating, and it's a critical element of decarbonization solutions that we are able to offer customers in both ETS and STS. Continued investment in the next generation of lower medium-voltage technologies is of utmost importance, and this will be supported by our bespoke manufacturing capabilities. Let us now look at how we are improving our Ogden facility. The Ogden challenges are not new to me.
I visited the site in 2023 when I was the MD of Watson-Marlow. I came away from that visit having understood the magnitude of the opportunity and then put my group hat on, and with the support of Nimesh, we moved the then Watson-Marlow operations director over to ETS. What's transpired is that we clearly understand the problem, how to solve the problem, and we're already making progress. The ETS differentiation is to provide customers with best-in-class, bespoke temperature, power, and thermal energy solutions. We have this capability, but we must be structured in the way we sell, design, and manufacture our solutions without compromising customer needs. Controls must be in place to ensure that we sell to the customer what can be made effectively. Not having sufficient controls in place has meant that overly complex design engineering projects have created significant challenges in production.
We've already made progress in Ogden. This has started with new leadership and other critical hires this year, the most notable being the ETS operations director, as mentioned, as well as a new Ogden general manager and a new design engineering manager. And we have a lot of improvements in progress. These include development and implementation of a new configuration program and work to reduce bottlenecks in design engineering. I also mentioned the need to leverage best practice within ETS and across the group. Our Vulcanic Europe business uses clear roles and responsibilities, governance, and configuration programs, which enable effective handover between quote, "Applied engineering, design engineering, and manufacturing." This helps reduce production planning challenges and production stability challenges, and we're going to leverage that in Ogden.
We're also working to improve the plant layout and to eliminate low-value bespoking by building block designs with only 20%-30% configuration content. Taken together, these improvements will drive improved routing, improve resource planning, reduce complexity, reduce tooling requirements, reduce our scrap rates, create higher productivity, and reduce lead times. Fixing Ogden is a top priority for me, and I'm pleased to say that even before I've fully gotten my feet under the desk, the team have already began to deliver improvements. The early signs of progress in Ogden are really encouraging. Since the start of the year, we've seen 30% increase in low voltage production and a notable increase in medium voltage output, both of which have delivered double-digit % growth in volume during the first eight months of 2024. We're also seeing a reduction in our overdue backlog.
There is still more to do, but I've been really impressed with how committed the team is to change. Before I hand over to Chris to talk about the industrial process heating, let me finish off this section with a few slides to remind you of the positioning and focus of our industrial equipment heating segment. The industrial equipment heating accounts for approximately 25% of the ETS business through Thermocoax and Durex Industries. This involves providing solutions for challenges involved in the precise sensing, measurement, and generation of heat in ultra-critical processes across industrial and product applications. These technologies are engineered for some of the most demanding applications, from semiconductor wafer fabrication and aerospace to precision engineering heating solutions for critical safety applications in defense and nuclear installations.
Our industrial heating engineers typically get involved in the design of customer processes to help solve their challenges from a very early stage, sometimes ten years before product launch. This allows us to co-develop solutions that leverage our unique knowledge and manufacturing processes, making it very hard to displace us and often providing annuity sales over the lifetime of the customer's process, product, or projects. Thermocoax and Durex Industries are highly complementary. In both engineering know-how and manufacturing processes, they use to deliver the solutions to customers. There are significant opportunities to leverage both brands and technologies in our target markets. Let's look at a few of the end markets now, beginning with semicon wafer fabrication. Semiconductor wafer fabrication equipment manufacturer is a key end market for ETS and accounts for around 11% of the ETS total sales.
You can see here how the two brands are present in the key manufacturing steps of wafer fabrication processes: deposition, lithography, etching, and ion implantation. Once we're embedded in the customer development process, it's very difficult to replace our design and solutions, which are based on our unique know-how and R&D capability. As an example, one of our million dollar national semicon customers needed to deliver increased radio efficiency power while improving radio frequency shielding in its wafer etch process, which required high tolerancing within limited space parameters and material compatibility challenges. Durex Industries solved the challenge after others had failed to do so. We leveraged our vertical capabilities, which included knowledge of the customer, equipment and processes, R&D capability, and our specialist manufacturing capabilities.
This same technology, developed by Durex Industries, has now been adopted within other semicon equipment systems and other business units within that same customer. Thermocoax and Durex Industries complement each other with little overlap between them, even in the same processes. Essentially, Thermocoax focuses on high temperature, which means above four hundred degrees and inside chamber applications, while Durex Industries focuses on lower temperature and outside chamber and chilling solutions. There are no competitors today with the combined capabilities of our industrial equipment heating segment of ETS. Another important end market, particularly with Thermocoax, is the nuclear industry. Thermocoax provides precision engineered solutions for safety-critical, in-core nuclear applications to leading companies within the industry. We have strong internal R&D and design engineering capability.
In addition, the product, supply, and process manufacturing processes need to go through lengthy accreditation processes with multiple protocols, and as a result of which Thermocoax has built a strong position in that sector. Our proprietary solutions include high-precision thermocouple cables for high radiation and high temperature environments, and heating systems within nuclear reactor pressurizers. We're currently developing solutions in partnership with key players that include critical applications, which will be introduced to the market in three, five, and ten years from now. Solutions from the aviation sector are another example of how ETS technologies are embedded in customer projects very early in the product development cycles. Here, we develop thermocouples for combustion chambers, sensors for aircraft engine management, and anti-icing systems.
I'm going to finish this section by giving a quick overview of our competitive landscape, and I've already made reference that there are no competitors today with the combined capabilities of Durex Industries and Thermocoax, and in fact, our competition is incredibly fragmented, and we don't believe they can match the breadth of in-depth knowledge and customer processes that we have built over many years through our consultative sales approach, R&D, and new product expertise, nor our unique and proprietary manufacturing processes. These are high barriers to entry in the industries and sectors where we are present, as I've described, including the level of accreditations required, and I'm sure you'll recognize some of the similarities with my previous business, Watson-Marlow, and with that, let me hand over to Chris Molnar, and then I'll come back to briefly close this session.
Thank you, Andrew. Good afternoon, ladies and gentlemen. I am Chris Molnar, Managing Director of Vulcanic and Vice President of Industrial Process Heating for ETS. With twenty-seven years of electric process heating experience, I've been pleased to speak to you today about the vital role ETS plays in the group's future. As a seasoned veteran of electric process heating, I have a deep understanding of the challenges and opportunities facing our customers. I'm excited to share how ETS is uniquely positioned to drive growth, innovation, and engineering expertise as a part of Spirax Group. Now, industrial process heating accounts for approximately 75% of ETS's sales by providing process heating and temperature management solutions across diverse customer industrial sectors. Our products and solutions deliver thermal energy directly into the process medium across a wide spectrum of processes in critical end market applications.
Chromalox and Vulcanic, the two businesses that comprise industrial process heating, have a collective one hundred and sixty years of experience combining advanced thermal technologies with industry-leading application engineering to solve the customer's most demanding heating challenges. Both brands are well established in target markets, particularly in North America and Europe, and growing in Asia. Now, we segment industrial process heating into three product segments: industrial heaters and systems, component technologies, and heat trace. And what unites these three solutions into one business is how they collectively incorporate, install, maintain, and deliver high temperature heat efficiently and effectively across the entire plant. Now, industrial heaters and systems are complex process heating solutions specifically engineered for a customer's mission-critical process and include our proprietary medium-voltage technology. Component technologies are essentially discrete heating and sensing solutions tailored to optimize the control and performance of thermal energy inside processes.
Finally, heat trace solutions are short sales cycle stock products that can quickly be deployed for thermal management of piping, valves, and tanks for freeze protection and temperature maintenance throughout a customer's plant. Now, at first glance, an electric heating element may seem like a simple component. However, the technology behind it is highly complex and engineered to deliver tremendous value to our customers. Our heating elements consist of four primary parts: the nichrome resistance wire, which provides the necessary heat, magnesium oxide insulation, which offers dielectric strength containing the electricity while being an excellent thermal conductor, the metal sheath, which allows the element to be directly immersed in industrial processes, and finally, the termination, which seals the element and provides the electrical connection.
Now, the seemingly basic configuration is a result of over 250 collective years of subject matter expertise, R&D, testing, and real-world experience across a wide range of applications and sectors within ETS. Our ability to transform these raw materials into highly engineered, mission-critical process heating systems is what sets us apart as the global leaders in both traditional low voltage and the new medium voltage electric heating technology. What looks to be simple is anything but. What we do is indispensable to modern life. Without our electric heating systems, you would not have the same performance or quality in the food that sustains you, the homes that protect you, the cars that transport you, the technologies that assist you, and the hospitals and medicines that care for you.
Chromalox is the pioneer of the process heating industry, having invented the technology over 110 years ago in the United States, and Vulcanic advances its use throughout Europe. Our customers rely on us to embed the vital process heat needed to convert basic raw materials into nearly everything you see and touch. Despite the market's current fascination with emerging technologies like carbon capture and green hydrogen, I argue that our medium-voltage electric process heating is the most important technology for advancing a carbon-free world now and over the next 50 years. This is not a claim made lightly. I'll explain the potential of electrification to enable global, sustainable sustainability transformation. As countries convert their power generation to renewable carbon-free sources, our electric resistive heaters can convert that carbon-free electricity into carbon-free process heating at virtually 100% efficiency.
For the first century of our industry, this capability was restricted to low-voltage power input, limiting the heat that could be delivered cost effectively. In the past, industry largely relied on steam or direct fuel-fired systems for their large process heat demands. Ten years ago, Chromalox changed the game by developing and commercializing the world's first true resistive medium-voltage process heating technology. By leveraging the more efficient power-delivering capability of higher voltages and reducing the amount of current used to deliver that power by a staggering 16 times, this breakthrough allows for the delivery of 5- 10 times more heating power into processes. It is significantly less costly to install and more efficient than traditional low-voltage systems and provides reduced CapEx and substantial long-term operational savings. We're literally transforming the industrial landscape. Medium-voltage technology has opened up a vast new market opportunity.
Whereas historically, electric process heating was relegated to only 5% of the total industrial heating landscape, we can now expand into serving applications in the remaining 95% that was previously dominated by only steam and direct-fired equipment. We've been seeing that happening in the last decade since its launch in 2014. These highly engineered, completely customized systems are integral to the success of our customers' processes. Our heaters are installed in mission-critical applications across industries, from solar production to petrochemical, and from power generation to pulp and paper. These are essential process systems. If our heaters stop functioning, so are our customers' operations. Now, you're probably thinking, Chris, everyone claims to be unique and special. Let me share a few fun facts with you that truly set ETS apart from our competition.
Did you know that Chromalox heating elements can last up to thirty times longer than our competition? Did you know that Vulcanic elements have been running for over thirty years in French nuclear power plants with virtually no failures? And did you know that the unparalleled durability and reliability of our systems is reinforced by their use in mission-critical national defense systems and space exploration applications? I've got countless such anecdotes, but more importantly, thousands of customers worldwide who can attest to why they choose ETS over the competition for their complex process heating challenges in our traditional low-voltage market. Therefore, it should be no surprise that our pioneering medium-voltage technology is equally special and unique. And here are three reasons why that is true. First, patented designs. Our heating element design is patented in all major markets to protect this first-of-its-kind innovative technology.
We're the only company incorporating a patented control system and safety devices to protect our customers, employees, and processes from danger. Number two, unmatched performance. Our systems exceed the performance of all of our competitors' offerings. We're the only company providing third-party certified systems. We're the only company that can with an element that can pass the twenty thousand volt critical dielectric strength tests, and even in the lab, we're doing more than that. And we're the only company with elements operating individually at the full seven thousand two hundred volt potential. And then number three, a proven track record. For the past decade, our technology has been successfully deployed and operating. We've delivered over ten thousand elements, medium-voltage heating elements across seventy-nine projects and a hundred and thirty-seven systems with an installed capacity of two hundred and seventy megawatts.
We support a decade of safe, reliable, and uninterrupted operations worldwide, and we have an exceedingly low failure rate in the field. Yes, we do have some competitors offering medium-voltage systems, but at best, they have a handful of orders in the past year or so, and very few, if any, installations, and technology that cannot pass third-party standards or receive certification. The point is manufacturing an electric process heater capable of operating at high temperatures in an industrial environment, utilizing medium voltage is very, very difficult. It wasn't easy for us, and it won't be easy for our competition. Unfortunately, we have essentially an almost decade-long head start. And at ETS, we're confident that that track record of innovation, performance, and reliability will continue to make us the preferred partner for mission-critical, medium-voltage process heating.
Our medium-voltage technology delivers unparalleled economic and sustainable impacts to our process heating customers. Let's take a look at a 2.5 MW real-world example of our medium-voltage technology in action at a chemical facility producing olefins, ethylene derivatives, and octene. On the top left are the economic benefits of our solution. Regarding CapEx savings, the total installed cost of our 2.5 MW medium-voltage system is 70% lower than traditional low-voltage systems, a savings of GBP 290,000 for this customer. For operational savings, the higher voltages result in a staggering 90% reduction in parasitic energy losses, translating to almost GBP 4 million in energy cost savings over the system's lifetime. And on the bottom of the chart, are the carbon reduction benefits of our solution.
So by replacing a traditional direct fire heater with our electric process heating system, coupled with renewable energy, the customer will save 2,324 tons of carbon emissions annually. And regarding energy efficiency, our electric heating systems reduces the process's total energy consumption by 18%. And these are results that customers are willing to pay for. As Andrew discussed earlier, our customer partnership value proposition, delivered through this technology, justifies the pricing premium and some of the highest margins achieved in our industrial process heating business. Now, obviously, I've spoken at length about medium voltage for clear reasons. However, it's important to note that while medium voltage is a game-changing innovation, most of our business still focuses on our solving mission-critical process heating challenges with our proven low-voltage technologies, which increasingly is using the service of decarbonization through electrification.
So let me share a recent project that showcases our success in using the customer partnership model, and in particular, leveraging the applied design and engineering approach, as well as optimizing the customer's systems. This low-voltage project shows our consultative engineering approach and our ability to deliver highly customized solutions for customers' most complex process heating needs. For this decarb project, a European drywall gypsum board manufacturer sought to eliminate natural gas and LPG, fuel-fired drying processes, and create a carbon-free production process. And as the customer stated, and I quote, "We have no experience of electric heating and highly value your guidance." So Vulcanic engineered multiple electric air heating units with a total capacity of 10 MW to electrify this customer's calcination, slurry, and drying processes.
We leverage our decades of experience in air heating to prove the reliability and performance of these heaters in this new-to-world electric drying process. Our electric heater is not just an off-the-shelf component or configurable component; it's used in the customer plant. They are designed to become an integral part of the customer process. This is true custom engineering, and customers recognize that our process application expertise, world-class design capabilities, product quality, and product performance are essential to the success of their mission-critical processes. Customers come to Chromalox and Vulcanic because we can partner with them for the long term, providing 15-20 years of operational and engineering support that our competitors cannot match. Our installed base of experience is unparalleled. This case study exemplifies, I think, the STS and ETS decarbonization go-to-market model that Nimesh discussed earlier.
ETS provides the process heating design and engineering capability that enable the Spirax Group's Partnering to Net Zero strategy to work. And while we're actively partnering with customers today to decarbonize and electrify their process heat demand, we acknowledge that there's more work to be done. We're focusing on developing areas like predictive maintenance, process optimization, and enhanced on-site support to deepen our partnerships. We aren't claiming perfection, just a commitment to continually grow and improve to better serve our customers. We are positioned well to take full advantage of this enormous opportunity ahead. Now, as you can see here, our core traditional low-voltage solutions can decarbonize the full range of applications across seven key sectors, limited only by the maximum temperature capability of our elements of around seven hundred degrees Celsius. And ETS has the broadest and most comprehensive portfolio of electrification solutions in the industry.
Our addressable market analysis, opportunity funnel, and real-world case studies all support an inescapable reality: electrification is happening now, and ETS's Powering Zero solutions will lead the transforming global process heat over the next half century. As shown at the bottom of the slide, our existing medium-voltage technology can meet the massive heat demands necessary for new-to-world process electrification, and about half of the applications based on a maximum temperature capability of around four hundred degrees Celsius. And as you can see, with this very early, limited view, the opportunity for ETS is massive and immediate. The only limitations to our growth will revolve around the ability to deliver, which Andrew has already discussed, and if there's one challenge highlighted by my part of the presentation, it is the question of gaps in our technology and capability to fully capitalize on electrification opportunity.
But make no mistake, we're not standing still. So let me provide a little insight into what we are doing from an R&D perspective. ETS currently enjoys a significant advantage and lead in technologies capable of delivering massive carbon-free electric heating systems across many existing markets and applications. But we're not resting on our laurels. We have been actively working on the next generation of technologies to serve this rapidly expanding market opportunity, and we believe we will most likely expand our lead against competition in 2025 as we launch several major advancements in the first half of that year, filling key gaps. Our ETS R&D teams are working diligently to enhance our Powering Zero solutions across the following four key areas. Number one, higher temperature capabilities.
We're developing element technologies capable of exceeding 700 degrees Celsius to serve high-temperature applications and extend the temperature range of our medium-voltage systems. Number two, higher voltage systems. We are currently creating higher voltage capability to open up new market sectors, such as grid-scale energy storage, and expand our geographic reach to regions with higher standard operating voltages, such as China and key European countries. Number three, massive heating capacity. We are pioneering new approaches to resistive heating that can enable the delivery of truly massive 50-100 megawatt heating units. And finally, application-specific testing. We are conducting extensive in-field testing programs to optimize our heating systems for unique needs of our customers' specific processes. But this is, you know, more than just R&D.
Here, I think this is one of the clearest examples of ETS focused on evolving to a customer partnership model. The driver for these advancements is based solely on the anticipating needs of our customers' future needs and optimizing their systems through applied and design engineering. So what we've presented today is not the end, but merely the beginning, and I can't wait for you to see the transformative advancements we will reveal to the market in twenty twenty-five and beyond. So to close out this section, I want to share a real-world example that demonstrates our partnering to Net Zero go-to-market strategy in action. So we've kicked off a decarbonization assessment pilot program, directly engaging industrial end user customers to evaluate their thermal energy processes and determine how we can help them improve energy efficiency and reduce their carbon.
Here's a snapshot from a recent customer visit with a specialty material manufacturer that produces high-end chemical additives. This customer has an award-winning sustainability program, and we reached out to them to see how we could support their journey through the electrification of process heat. The forty-three-page assessment report we provided identified numerous opportunities across our solution portfolio to decarbonize their footprint and improve energy efficiency through electrification and access to carbon-free renewable energy source. What we're learning is that these types of results are actually quite typical when it comes to taking a holistic approach to thermal energy. We identified opportunities to electrify all facets of process heating in their single production plant, including the electrification of steam production through our Target Zero solutions, as well as the electrification of direct process heating and heat tracing needs through our Powering Zero solutions.
And in total, we could reduce this plant's carbon footprint by 9,211 tons of CO2 per year and reduce their operational energy consumption for thermal processes by 19% to truly remarkable numbers. And this is the power of ETS within the Spirax Group. It's what happens when you combine the world's best steam company with the world's best electric heating company. You get the world's best thermal energy company able to transform industrial process heating towards sustainability. So now that you understand the opportunity, one important question remains, and that is: How big is the opportunity? So let me explain quickly, building on Nimesh's introduction. We've conducted a comprehensive analysis of the electrification market.
Our team scrutinized eleven independent research studies and reports from authoritative sources like the International Energy Agency, U.S. Department of Energy, and McKinsey, and we've meticulously evaluated specific process heating applications across sectors to determine our addressable market expansion. Starting with total global demand for industrial process heat, as reported by the IEA, we excluded existing electric process heating market, as well as areas where our technologies aren't applicable. For example, fired applications exceeding 700 degrees C, fired applications that are better served by non-resistive electric heating methods, such as induction or radiant or impedance, which aren't in our portfolio, and also steam applications that align with Target Zero solutions, which Maurizio will elaborate on later. What remains is our prime target, the subset of industrial process heat demand perfectly suited for ETS' Powering Zero electrification solutions. This is where our expertise becomes crucial.
We've leveraged our seeps, our deep sector knowledge to apply specific utilization factors to each application, and this approach converts the total heat demand into the estimated power required to meet that demand. And as you can imagine, the resulting global heating power demand is massive. And recognizing that this transition is a long-term endeavor, we've factored in a multi-decade conversion to allow for it to happen. And this calculation is what yields an annual conversion or adoption rate for electrification amenable to our solutions. So finally, to determine the addressable market value, we map the value-specific solution sets that we have to the various sectors' and applications' power demands, resulting in a total market value estimate. And this analysis culminates in the GBP 4.2 billion incremental addressable market that Nimesh presented earlier.
So in conclusion, we're entering an era of unprecedented opportunity for ETS and the Spirax Group. And this presentation on electrification of fuel-fired industrial process heating lays bare the immense potential before us. And so I look forward to any questions you may have later today, but for now, I'll hand it back to Andrew to wrap up our ETS presentation. So thank you for your attention.
We structured today's presentation to give you a real insight into the strength and opportunities of ETS—what ETS brings to the Spirax Group, not just as an individual growth engine, but also in its critical role it plays in delivering on the decarbonization opportunities that we have in STS. You have now had an overview of the ETS business, as well as my observations and priorities, and so I hope you can see that the combination of ETS's strengths and capabilities, together with our focus on driving improvements in the business, leave us very well-placed to deliver on our growth and margin commitments, which are above mid-single-digit organic growth over the medium term and 20% margin.
This will be delivered through our growth focus, supported by continued strong demand in our target sectors, including our differentiated decarbonization solutions, improved pricing, recovery in the semicon sector, and our new Ogden ramp-up. These will support our medium-term margin expansion, along with improving throughput in Ogden and other operational efficiencies that we will implement across the ETS business. We're also continuing to align ETS to Spirax Group standards, which will need investment, that along with the ramp-up costs in our new Ogden site, will be more than sufficiently covered by the margin improvement we expect. In the long term, ETS can deliver organic growth greater than two times IP and above 20% margins. Thank you for your time and interest, and I will now hand over to Maurizio, who will talk to you about the Steam Thermal Solutions business. Thank you.
Thank you, Andrew, and good afternoon, everyone. I'm delighted to be here today to provide more insight into the part of the company I have the honor of leading. My name is Maurizio Preziosa. I'm the Managing Director of our Steam Thermal Solutions business, and I'll do my best to keep your attention high before the coffee break. I hold a degree in electronic engineering, and after a short period in a Accenture, my career continued in the ABB Group with the electrification and instrumentation businesses. In 2011, I joined the Spirax Group as GM of Spirax Italy. Throughout my tenure with the company, I've taken on multiple responsibilities. I led the Gestra acquisition and integration before becoming Managing Director of Steam Thermal Solutions in 2021.
I will start this presentation by taking for granted that the application of steam in many critical industrial applications is well understood. From the dairy products or the cereals we eat at breakfast, down to the beer we drink after work, and through the electrical car we have used to come to London to avoid the congestion charge, whose lithium batteries are produced with steam. So nearly every modern industrial process and every sector uses steam in some way, and the quality of the product and the productivity related to the process are directly impacted by the control of, and management of steam, which makes it a mission-critical element in today's industrial output. So with this common understanding, let's talk about how our business model can create and capture value today and in the near future.
Through our strategy, we aim to continue growing faster than the market, for which the best proxy is industrial production or IP. We expect to achieve this by combining steady MRO demand with self-generated solutions and by supporting our customers' decarbonization journeys. Let's see how. The steady MRO demands come from our installed base and delivers our baseline growth, and because MRO spend come from OpEx budgets, it's typically less cyclical, with the highest correlation to IP. We are able to deliver this baseline growth because of our business model, built on our direct sales presence and our proximity to customers, and for this MRO part of the business, our attractive margins reflect the low ticket value of our sales, combined with their criticality and the strength of our brands.
In addition, we are able to generate growth ourselves through the expertise of our sales engineers and their proximity to the customers. We call these self-generated solutions. How it works: A sales engineer's visit to a customer site may start from a situation where our customer has no specific identified need. There is no MRO, no plant expansion, no project. On the face of it, no opportunity. But by working the plant or by digitally working the data of the plant and using the expertise of our sales engineers, we discover needs that the customer was not even aware of. And from this point, we can develop a value-based offer and win an order that typically comes with an attractive margin because it delivers an attractive payback for the customer. And for this self-generated part of the business, our pricing is value based, considering payback as a key element.
So in this way, we are both a problem solver, based on the customer's known needs, and a problem finder, based on their newly identified needs. The third element of this equation, which is becoming more and more relevant, is related to solutions that support our customers to decarbonize their operations, on which I will expand later. So how do we deliver all of this? Through a direct and sectorized sales force, by selling on value and the value delivered by our solutions, by equipping and updating our sales engineers with rigorous training through our academy, by enhancing our current high levels of customer engagement and global reach through digital connections, and by leveraging our dual brand strategy across Spirax Sarco and Gestra brands. This is how we create and capture value to drive growth in excess of IP.
Our ambition is to grow at two times IP, which will be higher than the levels achieved in the past. In the past 10 years, our compounded average organic growth rate of nearly 5% has been fueled by various factors. First, our value-based selling and our pricing capabilities have allowed us to consistently mitigate inflation over the long period, both during the low as well as the recent high inflation period, and this has contributed 2.8% to our long-term growth. In China, China is our best operating company. They have embraced our strategy in full, delivering value to our customers through a consultative selling approach and by focusing on key sectors.
The latest example of this is lithium batteries, where they have worked with customers to co-design a process to use steam to lay down a layer of lithium during the battery manufacturing processes. A significant portion of our China growth has been driven by the expansion of manufacturing capacity in the country, and thus it has significantly contributed to our overall growth, accounting for nearly 1% over time, and over the past 10 years, we have also pursued growth in the rest of the world, of course, opening new operating companies, either organically or inorganically, including the organic growth in Gestra following the acquisition. We have been growing the rest of the world by delivering on our proven strategy through both brands, with steady MRO, plus self-generated sales based on our consultative selling approach.
This third element has contributed another 1.2% of our overall growth. From a profitability perspective, up until COVID, we were able to grow our trading margin to a sustainable level of 23% through the consistent delivery of our strategy and thanks to the exceptional growth of our business in China, operational gearing, and pricing discipline. Since COVID, our trading margin has been more elevated, reflecting some particular short-term factors. Immediately after COVID, we saw a very strong recovery in IP and demand, resulting in growth with very high operational gearing, with overheads investment struggling to keep pace with this growth. In addition, the impact of much higher inflation was captured within our pricing during 2022 and 2023. Finally, during 2023, we contained our overheads in response to the declining IP and to mitigate the impact of falling demand in other areas of the group.
So given the impact of these short-term factors, we anticipate margins stabilizing around 23.5% in the near term, which is above the historical level, before increasing again as we achieve further growth. Now, looking ahead, we anticipate that some of the historical growth drivers may be less influential, especially in the short to medium term. The market will continue to be volatile, but with lower inflation, especially lower relative to the level seen in 2022 and 2023. Our China operating company will, in the short term, contribute less to steam's overall growth as it pivots from capacity expansion to MRO and self-gen. And rather than entering new countries, we leverage our existing footprint to expand our presence in existing markets, such as India or Africa. However, other drivers will support our future growth.
The biggest driver is decarbonization, which represents the largest growth opportunity for Steam Thermal Solutions, Electric Thermal Solutions, and our overall group, and this growth driver will more than offset the potential use of alternative technologies in place of steam for less critical applications. In addition, digitalization will play an important role in our growth, as will our continued focus on commercial and operational excellence, so now let's deep dive into the most significant future growth driver for STS, decarbonization, that we address through three levers: optimizing thermal energy usage, decarbonizing steam generation, and leveraging our group capabilities. These three concepts are all critical to our consistent approach to decarbonization, as represented by the image in the middle of the slide. Let's go through them one by one.
The best way to explain the first lever of this growth driver is through a real case study, in this case, a dairy plant in California. The customer's goals were clear and sound. Their objective was to reduce CO2 intensity by 20%, as well as energy and water intensity by 10%. We followed our traditional approach of working the plant and consultative selling to design and agree a roadmap to optimize the energy used in the plant, delivering quantified sustainability and financial benefits, as you can see. So in this respect, our solution was not defined by the volume of steam traps or valves that we have supplied, rather by the tons of CO2 reduction and financial savings that we enabled. So this is a typical STS self-generated solution, fully aligned to the customer's decarbonization goals.
Having supported our customers through the optimize and manage phases, we are well positioned to support them to decarbonize their steam generation. But before discussing how we support them, I would like to recap on why they are so focused to decarbonizing steam generation. This slide sets out the multiple different ways that heat can deliver to industrial processes, including steam. Through our regular voice of customer reviews, we have received confirmation that for the vast majority of customers, steam provides the best technology to transfer heat into their critical processes. It's an established technology, presents limited risks, and is embedded in our customer processes and infrastructure. However, steam is mainly generated through the burning of fossil fuel, especially gas, and our customers still need to decarbonize.
That is the reason why decarbonizing the generation of steam remains the most attractive solution for our customers to achieve their Net Zero ambitions while retaining the core benefit of using steam, and this was also confirmed by our recent anonymous voice of customer. As you can see from the slide, there are alternative ways to decarbonize steam generation, either by changing the fuel source of the boiler from gas to green electricity or to hydrogen, biomass, or by changing the technology to raise steam. We have chosen to focus on electrification because we believe it will have the highest rate of adoption and is most aligned with the combined capabilities of STS and ETS.
The other solutions may also play a role, but this will reinforce the use of steam and the opportunity for us to support our customers to optimize and manage their energy use and to decarbonize other parts of their plant. Now, moving on to how we support our customer to decarbonize their steam generation. Thanks to the ETS acquisition, we are in position to assist our customers in electrifying their boilers. Our first solution is called SteamVolt. Sorry, our first fit solution is called SteamVolt, and we are working with our boiler OEM partners to promote this technology. Our retrofit solution is called ElectroFit, and this technology is still in the pilot phase, but we envisage a significant addressable market opening up over time. Another technology that we have added to our portfolio through the recent partnership with SPH is high-temperature heat pumps.
This is a solution aimed at producing steam using electricity, and by recovering waste heat in a very efficient manner. On that basis, this technology is expected to deliver both sustainability and financial benefits to our customers. And finally, using the same ETS technology, we can offer our steam battery solution that, within certain operating conditions, can deliver decarbonized steam. Now, as you can see, these technologies and solutions have been added to the STS portfolio only recently, and they are still evolving, as demonstrated by the recent addition of high-temperature heat pumps to this portfolio. This is a targeted strategy to address what we believe is the largest and long-lasting mega trend of our time, i.e., decarbonization.
As Nimesh introduced, this new portfolio represents an additional estimated GBP 2.4 billion addressable market that will open up gradually, driven by two forces: demand for industrial boilers to generate steam and the customer adoption rate to these Target Zero solutions. I won't go into details now, but I'm happy to provide more insight if you want in the Q&A section. Thus far, we have seen how we can help our customers on their decarbonization journey by optimizing their thermal energy, the first lever, and by decarbonizing their steam generation, the second lever. We can achieve both of these objectives with our customers through the existing STS organization, but there is a third lever we can use, as Nimesh referred to in his introduction, a combined STS and ETS approach.
If we combine the STS decarbonization technologies with the ETS decarbonization technologies presented by Chris, we can address a bigger, much bigger, portion of our customers' CO₂ emissions. We can design and deliver the best path to decarbonization for our customers, and we can also add further technologies to our portfolio, either organically or inorganically, consistent with this value proposition. So in this way, our group's ability to meet such a broad range of customer needs will be a distinctive competitive advantage, and this breadth will continue to be supported by the significant depth of expertise retained within it in each of our businesses. So through this approach, we aim to become our customers' decarbonization partner, in line with the partnership model that Nimesh described earlier.
In order to deliver this, we are developing a fit-for-purpose group decarbonization operating model to structure how we bring the breadth and the depth of our capabilities to the market in the most effective way. In particular, this starts with an account management organization, which can present our full portfolio of decarbonization technologies and solutions to targeted customers. It will be supported by full thermal energy assessment capability, what we might consider as thermal energy, able to identify the decarbonization opportunities and design the optimal decarbonization roadmap for our customers. Beneath this broad approach, we can deliver this solution through the existing STS and ETS organizations, leveraging the depth of capabilities that has been built over many years. Returning to the new growth driver that will play a critical role for STS in the future, let's turn to digital.
The role of digital in our business is to enhance our level of customer engagement over and above our direct physical connection. As we get digitally connected to the critical components of our customers' processes, we can derive insights, based on which we design and supply solutions that generate value for our customers and pull through for our business. The acquisition of Cotopaxi was the starting point to build our capability, but we are now going well beyond this point, and the application of AI will enable us to gradually generate these insights automatically. In addition, digital has the potential to improve the efficiency of our extensive direct sales force, complementing our work-the-plant approach with the work-the-data approach. Maria will further explain the role played by digital and the opportunity that it represents for STS and for the whole group.
In the near term, commercial and operational excellence will be a critical growth driver for STS, leveraging the capabilities and experiences across our group. Commercial excellence is not a new concept in STS, having been delivered through our academy over a number of years. However, we are continuing to refine our approach. In particular, we are looking at how we can accelerate delivery of this knowledge to our sales engineers, including through the use of AI. And again, Maria will share soon this methodology. Moving to operational excellence, that's also not new in our global supply chain organization. However, we will substantially enhance our focus on supply chain, leveraging the group-wide operational excellence initiative launched this year.
In doing so, we will ensure that we balance our competitive advantage of regional manufacturing and proximity to our customers with maximizing the productivity and capacity utilization of the plants across the supply chain network. And lastly, we are working across our organization to simplify our ways of working and reduce organizational complexity by designing a new operating model that will deliver a more resilient, efficient, and scalable organization while maintaining our strong focus on customers. And this model will be further enhanced following the delivery of our group-wide ERP program. So let's summarize now the priority for STS in the short and medium term. The decarbonization opportunity remains the most significant long-term growth driver for our business, but will build incrementally over time as customer adoption increases.
In the shorter term, we are focused on clear set of operational priorities to address the evolving market condition that I described earlier in this presentation. In sales, we have launched a series of priority initiatives. Historically, MRO has always been a captive part of our business, and this is still the case. However, we are now designing new methodologies to proactively go after additional MRO that delivers value to our customers and generate additional sales for us. For example, if we are able to demonstrate to customers that surveying and replacing steam traps more frequently is beneficial for their operational performance, well, we generate value for them and additional sales for us. Digital. Digital is a means to generate additional sales. On that basis, we are strengthening the link between the insights generated through our digital connections and product pull-through.
We are also enhancing the role played by our distributors in the context of our direct business model, again, with the objective to generate more sales. Some distributors can help us in increasing our installed base. Others can play a major role, mainly in MRO. The objective is to deliver a win-win formula which delivers growth for both parties. In China, we have seen a meaningful shift in our business in the first half of 2023, where we will still experience a very significant expansion return in the second part of the year. On this demand, part of this demand was driven by the expansion of electrical battery, a lithium battery sector. As we said earlier, we can no longer rely just on capacity expansion to drive growth on our China business.
In response to these changes, we are reshaping the organization to pursue the MRO that can be generated from the very significant installed base that we have in the country. MRO that typically comes at a more attractive margin than capacity expansion projects. In addition, we are seeing also some Chinese customers shifting their own capacity expansion to outside of China, while retaining the design and investment decision in the country, so our China OpCo is tracking these projects and collaborating with other operating companies to support these customers and still capture these opportunities, even if outside of China, and then supply, we are driving operational excellence to deliver benefits in the short and medium term through two main initiatives. Firstly, we are targeting purchasing benefits beyond what we have achieved to date, through a more strategic approach working across the group.
And secondly, we are rationalizing our manufacturing capacity, as we started already in our biggest manufacturing site in the U.K., with further benefits expected in the following years. Furthermore, we are focusing, as I said before, on reducing organizational complexity to concentrate our resources on delivering sales growth. As part of this process, we are reviewing our operating model in preparation for implementation of a new ERP across the group. All these initiatives have clear ownership, targets to achieve, and plans for execution. On that basis, I feel confident they will deliver the expected results in the short as well as in the medium term. So I hope this presentation has provided you a summary of the key drivers of our business over the past and into the future. In particular, I hope that you have a good sense of exciting opportunity ahead for Steam Thermal Solutions, particularly in decarbonization.
While our environment is changing, we have a clear set of near-term priorities focused on driving sales growth and margin, and the long-term growth formula for Steam Thermal Solutions will evolve through the addition of decarbonization. We anticipate low- to mid-single-digit growth over the medium term as inflation normalizes, China transitions from capital-less projects to MRO and self-generated growth, and global IP remains at around 2%. In the medium term, we expect our margin to be around 23.5%, as we drive improvements from manufacturing and reduce the structural complexity of, across our business. We do expect a level of investment into the business to support the expansion of our decarbonization capabilities, the rollout of our digital strategy, and the investment in the ERP program, as Nimesh described earlier.
Over the long term, we anticipate growth at or above two times IP, as we sustain our historical growth formula, augmented by growth from decarbonization solutions and our new group operating model across the group. Furthermore, we expect gradual margin expansion over time, driven by operational leverage as a result of higher growth, supported by the benefit of our increased focus on operational excellence. Thank you for your attention. I look forward to further discussion on the Q&A. We are now going to a thirty-minute break. Refreshments are being served for those who are here in person. Please, can I ask you to be back in the room as we start promptly at 3:45 P.M. U.K. time. Thank you very much.
That's right. Yes. Keep an eye on everybody. That's okay. Good. Thank you, Hazel. Well, welcome back. I'm now going to provide a brief overview of the Watson-Marlow business, which I led for five years before transitioning to ETS on the first of September. As you've heard from Nimesh, Phil and Martin, who are over at the table over there, I will be calling on in the Q&A session so that they can contribute. So let's get started. Watson-Marlow is a high-growth business.... It's well invested and ready to fully capitalize on the expected recovery in biopharm when we reach the end of the current destocking cycle.
Our growth will come from strong underlying growth in the Biopharm sector of around 10% per annum, and continued penetration in process industry sectors through growth in both existing markets and new emerging industries, such as future foods. We expect process industries to grow at two times industrial production. The outcome for Watson-Marlow as a business, therefore, is high single-digit growth and a return to greater than 30% margins over the medium term. Watson-Marlow is a global leader in a wide range of sectors focused on solving customer needs in critical fluid path applications through our precision peristaltic pumping and extended fluid path solutions. Around 50% of the sales are to defensive and growing industrial end markets, including food and beverage, water, wastewater, and mining, where we continue to increase market share.
The highly regulated biopharm sector, which accounts for the remaining 50% of sales, has high barriers to entry for fluid contact products. We supply global biopharm sectors with precision pumping and single-use consumables that are predominantly in contact with the fluid. Despite the biopharm volatility, we have made some critical investments for the long term, and as I said, Watson-Marlow is well invested for the future as a result of the investments in manufacturing that we've made in Europe and North America. We're also a total fluid path solutions provider that goes beyond pumps and consumables, such as niche tubing, clamps and connectors, hoses and diaphragms, representing around 40% of our product offer. Our growth is made possible by our direct sales model, an approach we share with the rest of the Spirax Group.
Watson-Marlow has around three hundred sales engineers in the global market, is sector-focused, and delivers process and application knowledge through solution selling. This brings value to both customers, to Watson-Marlow, and to the consumers who rely on the products and service we produce. Let's focus for a few minutes on the biopharm sector, which underpins growth. Our extensive fluid path expertise helps our customers in both upstream and downstream fluid processes of media and buffer to enable protein expression, harvest, purification, concentration, final formulation, and filling. The peristaltic pumps and our single-use solutions are extremely well suited for these critical customer applications. These processes require extreme levels of certification and regulation, and that's a critical differentiator for us.
Process control and validation are valued highly by our customers and the wider industry, and we are already certified to industry standards, creating substantial barriers for new entrants, especially for products that are in contact with fluids. We support customers in multiple subsectors of biopharm. They include mAbs, vaccines, recombinant proteins, and cell and gene therapies. Not only is there strong underlying growth across biopharm, as mentioned, but these subsectors are high margins for us because they are producing biological medical products with high cost of failure. We're a small proportion of their overall cost, and our sales mix is very much weighted towards the higher growth biopharm subsectors, which should support higher growth rates than the total market.
Single-use components and consumables include Watson-Marlow tubing and connectors, also continue to grow above average market rate, growth rates, driven by demand for reduced contamination risk and also stronger sustainability case than the alternatives, such as stainless steel equipment, which accounts for around 85% of the biopharm medical product production today. Stainless steel equipment needs extensive cleaning and commissioning between biopharm medical production batches and comes with batch-to-batch contamination risk. Our business is also highly differentiated from some of the very large players in the broader multi-industry pumps and consumables market. We operate in specific niches at the very apex of the market pyramid, niches where our highly expert direct sales engineers, armed with deep knowledge of biopharm processes, have built long-term partnerships with our customers. It's this expertise and solution-focused approach that, in turn, underpins our continuing ability to deliver high margins across Watson-Marlow.
Watson-Marlow has a highly diversified customer base with over 4,200 biopharm end-user customers. We're seeing encouraging signs with our end-user customers, where we are typically providing pumps and single-use consumables, but our OEM customers that are more dependent on biopharm capacity investment are seeing mixed demand across their customer base. This leads us to think that the biopharm recovery is evolving towards a more U-shape than a V-shape originally anticipated by the market. This means that we do not expect a steep recovery bounce back. Nimesh spoke about strengthening our competitive differentiation and value proposition through customer partnerships. A really strong recent example of customer partnership is Watson-Marlow Architect, the range which brings together many segments of the customer partnership wheel, from applied design and engineering, customizing, optimizing customer systems, deep customer insights, and seamless service delivery.
Watson-Marlow have worked with our biopharm customers to identify unmet needs. Our customers are experts in their biological medical product development and manufacture, but need support in the configuration of critical components to connect their batch production equipment. Identifying this need, Watson-Marlow are strategically moving up the value chain as we combine our Watson-Marlow branded tubing products with BioPure branded components and connectors, all manufactured in a clean room environment. The outcome is bespoke, pre-assembled kits to meet individual customer needs. This allows us to differentiate and add customer value by bringing repeatable and regulated solutions to our customers that transcends the value of standalone components. You can see on this page how Watson-Marlow Architect moves from individual component solutions to a bespoke pre-assembled kit on the top left of the customer partnership wheel.
Going one step further is our AI-enabled pump developments that moves us further towards our model of customer partnerships, being able to anticipate customer needs through being more connected with them, leveraging these deepened insights to become even more knowledgeable on their specific processes. We're in the customer proof of concept phase, which you'll hear more about from Maria later. But this use case combines predictive AI with one of our pumps, and we're proving out how this supports customer process uptime and real-time data-driven insights. A good example of anticipating customer needs.
Now moving to Process Industries, which I said earlier accounts for 50% of Watson-Marlow and has grown at nearly two times IP, with high single-digit CAGR since 2019, with double-digit growth in niche sectors such as food and beverage, water, wastewater, and mining, counterbalanced by lower average growth in the industrial category, which includes subsectors such as construction, chemicals, printing, pulp and paper, and electronics. We operate through a sectorized direct sales model using consultative selling techniques that drives our market penetration. We support customers with their specialist and specialized pumping and metering challenges in a wide range of critical applications, such as their manufacturing site uptime and productivity, and solving their quality and sustainability challenges.
The highly fragmented competitive landscape in these sectors, combined with our wide product range and direct sales model, underpins our ability to gain share in targeted niche applications where our technology and expertise can resolve customer problems that the competition cannot. A continued investment in our peristaltic technology is core to the value we bring to customers. Growing our total addressable market through innovation will remain a key driver of our success in process industries. In early twenty twenty-four, we launched our Watson-Marlow Qdos high flow pump that expanded our addressable market by providing high flow rates with accuracy for chemical metering and dosing. Most sectors within process industries do have a correlation with IP, but our relatively low share in most gives significant opportunity to grow above market.
Over the long term, we would expect to see growth of two times IP through our differentiated direct sales model, broad served markets, product portfolio, and emerging high-growth markets such as EV and future foods. We've made investments in Watson-Marlow over the past three years, including new product development, enhancing talent and capability, and new manufacturing facilities. Moving forward, our priorities and investment focus areas are now on enhancing our commercial excellence by leveraging best practices from across the Spirax Group, as well as our value selling capability. For example, we can learn from our colleagues in STS on self-generated sales capability. I've made reference to digital and our customer proof of concept phase of an innovative, predictive AI hose life pilot that leverages machine learning, which is another investment focus area.
Completing the customer value proposition work on this AI development will help us drive continued value for our customers through digitally enabled pumps. Finally, in terms of our operational priorities, we're looking to implement our operational excellence framework across our manufacturing sites. As stated, we already have manufacturing base and capacity. Our focus now is turning to driving best-in-class, end-to-end manufacturing processes and supply capability, which will include leveraging purchasing power across the wider Spirax Group. In summary, what I hope I've been able to demonstrate today is that Watson-Marlow is well-positioned to reach high single-digit growth and greater than 30% margins with a drop through on organic growth. This will be delivered alongside the recovery of the biopharm sector, which is a market that is predicted to grow around 10% per year.
We will continue to increase market share in process industries to deliver greater than two times IP through our differentiated direct consultative sales model, broad served markets, product portfolio, R&D, and emerging growth markets such as EV and future foods. So that concludes the Watson-Marlow update. Thank you, and I'll hand over to Maria, our Group Digital Director.
Thank you, Andrew. Good afternoon, everyone. My name is Maria Wilson, and I'm the Group Digital Director, having joined Spirax eighteen months ago. Prior to this, my last role was with Howden, a multi-billion revenue OEM, where I led a global digital program, as well as the commercialization of a global customer attachment initiative, both of which supported aftermarket growth related to services. Now, you heard from Nimesh earlier about the way in which we are evolving delivering customer value, from this product to customer solution to customer partnership. Developing our digital capabilities is fundamental to our ability to undertake this evolution, and so is our continued focus on leveraging our existing key capabilities, like our highly specialized application knowledge. It's also important to acknowledge that our vision for digital impacts all vital areas of our business and our relationship with our customers.
From our products to our connected product strategies, to our operations around digital and services. Here, by focusing on the customer experience we create, we ensure high levels of customer retention, which is the link to us achieving incremental growth through product and solutions pull-through, then to the suite of digital technologies we are building that will enable our sales engineers to be more effective in their role and focus on value-creating activities, and finally on how we are going to deepen customer relationships as we progress towards customer partnership. Now, we have been on a journey, and some of the use cases you are going to hear about today are the culmination of this journey so far. We started by focusing on the customer value we can enable to digital insights, and we used proof of value programs to validate our proposition.
This is an accelerated approach that sees us partner with key technology providers, giving us access to best-in-class digital innovation, enabling us to stay focused on our intellectual property, a different kind of IP. Our success metric here is mainly focused on incremental products and solutions pull-through. Phase two is all about delivering an enhanced customer experience, where we are supporting, the end-to-end customer need. We are doing this by developing new tools for our direct sales engineers and launching new digital services offerings. Ultimately, this phase is going to allow us to expand the capture of our product life cycle, and the way we're gonna measure success here, in addition to the pull-through, is also by measuring revenues created by digital services, including the proportion of annual recurring revenues. Phase three gets us to the place where customer value delivery is always on.
We do that through a blended approach to self and assisted service. In this phase, the essence of our value proposition is constant availability and seamless customer service. It signifies our commitment to providing customers with uninterrupted access to our digital services, ensuring that their needs are met promptly, regardless of the time of the day. This approach not only enhances user satisfaction, but also fosters trust and reliability, as customers know that service will be there for them whenever it is required. By adopting an always-on philosophy, we are effectively evolving towards a proactive delivery, and an experience for our customers that keeps them connected and engaged. Finally, in phase four, which should be roughly around 2027, we get to tailored solutions with expert support that addresses a broader set of our customers' needs, and therefore firmly landing our footing into customer partnerships.
Broadly speaking, our digital strategy can be simplified across three fields of activities. I'm gonna start at the left. With the technologies that we're developing, where our focus is on four initiatives: connecting our products in the field to help collect vital performance data, developing the right digital tools to aggregate this data and drive deeper insights into our customers' operational needs, to developing the platform to deliver these actionable insights back to our customers by focusing on the customer value and customer experience we create. And finally, to developing tools for our direct sales engineers that deliver that highly specialized application knowledge on demand, driving significant improvements in our commercial effectiveness and productivity. In the second stack, we focus on how we deliver value and the capabilities we're enhancing through these digital technologies.
We're looking at collecting data that we transform into actionable insights that drive better solutions for our customers. We're looking at enabling our direct sales engineers to be more efficient and effective, and you'll hear in a few minutes about how we're partnering with Microsoft to develop digital tools for our direct sales engineers and support them with seamless, on-demand access to our highly specialized application knowledge. And by further developing our services capability, we are firmly evolving towards that North Star of the customer partnership by combining the deeper insight from our digital solutions with our ability to support our customers throughout more of the lifetime of our products. You will be able to identify these three capabilities in the use cases I'm going to present shortly. But before I get there, how do we measure success? Well, our approach is simple.
It is to combine these two stacks, where we're enhancing our capabilities with digital technologies, with one goal, and that is to support organic growth. By focusing on key capabilities, such as our application knowledge and customer closeness, and working with digital partners to stay at the forefront of digital innovation, we are delivering solutions that can be quickly tested in the field. This means that we can validate value propositions in agile cycles, and we can prove our hypothesis that this approach will support our growth ambitions and return on investment. And as you can see, we have a clear set of success metrics, from measuring an increase in sales to an increment, incremental pull-through, through achieving a higher degree of customer satisfaction, and ultimately, creating a solid foundation for annual recurring revenues through our services strategy. Now, you have heard me mention services strategy a few times.
So what I would like to do right now is take a minute to set the scene on how this is going to support our growth ambition, especially when it's fueled by our digital ambitions and our thought leadership in sustainability. We're looking to, over time and in a targeted way, to increasingly offer services across the product life cycle. These services will enable the optimization of our customers' critical processes. They will support predictive and proactive maintenance and rapid repairs, keeping our customers' critical processes and equipment operating at maximum efficiency for as long as possible, and then supporting with appropriate end-of-life disposal of the product. We know that digital is going to unlock our ability to serve our customers throughout more of our product's lifetime. And next, I'd like to bring this to life with two examples. So I'm gonna start with Steam Thermal Solutions.
EasyHeat is an intelligent hot water system for hospitals, industrials, and multi-residential, providing safe, reliable, and efficient hot water supply. For context, STS sells about 1,500 units a year and already has an install base of about 25,000 units globally. Through our consultative sell process, our sales engineers help spec and configure the most appropriate EasyHeat solution for their customers' applications. We sell the EasyHeat, we invoice the sale, and historically, our revenue opportunity in most cases would be largely complete at this stage. Through our new services proposition, we offer digital monitoring from commissioning all throughout the product lifetime, and this includes 24/7 monitoring and access to a digital dashboard that allows users to see the system's operating performance in real time.
It also includes access to remote technical support and regular performance reports that are complete with insights on how to optimize the system. Customers can select to receive automatic alerts on the EasyHeat status and performance, and we will also offer remote technical support to help resolve any faults or identify problems which may need a physical service to repair. We'll further support maintenance and repair through a physical service offering, including an annual minor service that typically looks at valves and critical controls, but also an annual major service. Now, through this comprehensive service offering, we effectively enable preventative maintenance and technical support, improving uptime, operating efficiency, and sustainability for our customers, and as a result, we're further deepening customer bonding in the process.
Finally, further adding to the opportunity, the data from early adopters shows that for customers with digital services, because of that closer bonding and the deeper insights we're able to provide, we generated incremental product pull-through that we would have otherwise not realized. Now, you heard about how we think we're going to generate growth from this opportunity, but what gives us confidence in this approach? Well, EasyHeat isn't just a heater package, nor just a heater package with a modern control system, for that matter. EasyHeat is a process-critical solution that can tell our customers how exposed they are to Legionnaires in their water system, and this is crucial when the systems are being installed in hospitals. It can tell our customers how efficient their energy consumption is and gives them the opportunity to react to peak demand and control the cost.
This is even more valuable when the package solution is combined with digital and services, following the approach I've just described, representing how we can evolve towards customer partnership. Another example of these enhanced capabilities comes from Watson-Marlow, where we've been focusing on ways in which we can evolve the level of insight we can derive from the data we collect. We did this by developing bespoke product analytics, like the machine learning models we developed for our Bredel pumps, where vast amounts of data, lab data, were used to create an AI model capable of predicting hose failure. You heard from Andrew.
Through the balance of this year and most of next year, we will be focused on validating the accuracy of these models in field through a proof of concept program, where we're working with select customers to install our connectivity solutions onto their Watson-Marlow assets and train this AI model on actual operational data. This proof of concept program will also be extended to ETS in the second half of twenty twenty-five, where our plan is to retrofit our machine learning capabilities to select process heaters in our install base. Based on early customer feedback, we know that being able to anticipate maintenance events before they happen, especially when these assets operate as process critical, is of significant value to our customers.
The proof of concept program will validate our hypothesis that we can expand the value of our products, and we can evolve our approach towards customer partnership by effectively achieving three things: by extending the component's life, increasing the uptime of our products, and through a tailored services offering, that includes maintenance, repairs, and disposal of this, of the consumable components, we ensure the continuity in our customers' critical production. The third capability I mentioned earlier on was enablement. Today, we know that our application knowledge is highly specialized, and in addition to our closeness to customers, it's also our main competitive differentiator and the reason for our ability to command premium pricing.
That high degree of specialization in our direct sales engineers is built over multiple years, and we do that through a combination of self-learning, of highly technical material, through shadowing senior sales engineers, and by just being out in the field with our customers. As a result, we know that it takes a new sales engineer about three years to deliver full impact. We also know that if we focus on optimizing and shortening the learning journey of our engineers, we will enable them to deliver value sooner than these three years. This is how we started working on MIM, an AI sales assistant that leverages Microsoft's best-in-class generative AI capabilities. To that end, I'm very pleased to have Jette Griffiths, Chief Digital Officer at Microsoft U.K., who worked with us on this project, with us here today.
Through the Microsoft Innovation Hub, we developed the minimum viable product for a proprietary large language model that represents a solution that curates our highly specialized application knowledge and packages it up in easy-to-consume, bite-size, on-demand content. We believe that for new sales engineers, this will accelerate their learning journey, with our most conservative assumption looking at reducing that time to value by two months. MIM will also deliver value for our more experienced sales engineers. By supplementing the tool with customer context from other business systems, such as CRM and content around the engineering of our products, we enable our sales engineers to deliver broader solutions to our customers faster, saving hours in any given week. In doing so, we are effectively facilitating more time to be spent with the customer and therefore deepening customer bonding in the process.
Additionally, we also recognize benefits such as improving our sales engineers' learning experience and connecting them to a global Spirax sales community, where knowledge gained in the field is constantly added to the system, and therefore, our application knowledge is perpetually enriched. So let me show you how this works. Jamie O'Sullivan-Rush as a process industry sales engineer in Watson-Marlow, who ran a live demo of how he would use the tool to prepare for an actual customer visit, and we recorded it. Just to set the scene, Jamie has been with Watson-Marlow for about 18 months. He covers quite a large area in the Midlands, and within process industries, he's focusing on water, wastewater, mining, food and beverage, and other industrial segments. So quite a broad coverage of both applications and technical knowledge.
Now, he's about to visit a wastewater treatment customer, and although he has already completed the academy training, he would like a refresher on the basic concepts of the water treatment process. That is because he likes to be prepared, and it's important for him to demonstrate expertise and gain the customer's trust. Can we play the video, please? So what you're seeing now is, Jamie's going to use MIM to prepare for this meeting and starts by asking a question about the fundamentals of the water treatment process. You are watching the tool parsing live through the academy material, through hundreds and thousands of pages of technical content, to return a summary of the basic steps in the water treatment process.
It also selects pictures that were found relevant to the topic and match the context of the question, and at the end, offers a list of all the references that were consulted in the process. Next, Jamie would like to dig deeper into certain processes in the overall water treatment works, and in this case, he's looking for more details around coagulation and flocculation. MIM generates an answer, and again, the key message here is that vast amounts of academy material that would have otherwise consumed hours of Jamie's time were reviewed and summarized in key points by MIM in seconds.... Next, because Jamie's after all prepping for a sales meeting, he would like to understand how our product, and in this case, the Qdos pump, can help with these specific water treatment requirements.
MIM is listing the key characteristic of the Qdos pump, and where available, it also offers to our competitor solution, in this case, a diaphragm pump. Again, several references are listed at the end of the answer, as well as pictures and product diagrams that Jamie will include in his final presentation. Finally, because he knows from previous meetings that on this specific site, the customer has issues with high turbidity in the water, Jamie would like to review any other situations where this issue has happened before to other customers and how it was dealt with by his colleagues. MIM found a use case from a different water company where this exact issue has happened, and it generated a summary that includes steps in diagnosing the issue on site, as well as correcting it.
What's not captured in this short video, are the last few steps that Jamie takes in the process when he asks the tool for specific client information and CRM data is consulted during the answer, and finally, MIM generating a PDF document summarizing this entire search. In Jamie's own words, this will help him show up prepared and confident during the customer meeting, having achieved all of this in a matter of minutes. The key message to take away from this short demo is that the power of the tool is greatly amplified by achieving two things simultaneously. One, we're connecting application knowledge and technical content to customer context. And two, we're connecting our global sales force into a sales engineer's community of practice, where content from individual experiences of dealing with a customer need is shared, and our application knowledge is perpetually enriched.
I hope that these three use cases of how we use digital to further enhance and amplify our capabilities have given you a good sense of the opportunity we are creating. What I believe gives us the right to win is our approach to investment in building these capabilities. First, because we're funding developments, like a group reference architecture for our connected products and the AI sales assistant, ensuring that we develop the tech once and that we leverage our scale to deliver secure, scalable, robust, and cost-effective solutions. Secondly, we focus on our competitive differentiation. We focus on those capabilities that make Spirax Group uniquely Spirax, like our highly specialized application knowledge and our closeness to customers, and we leverage best-in-class digital innovation through our partners' ecosystem. This effectively results in a low-risk approach to developing digital solutions, which accelerates our commercialization strategies.
Finally, we are decreasing our time to value by optimizing the learning journey of our direct sales engineers and by deepening our insights into the customer's process. These three enablers support our ambitions for organic growth through incremental product and solutions pull-through, and new revenues linked to our services strategy. With that, I want to thank you all for your attention, and I will hand you over to Louisa.
Hi. Thank you, Maria. Hello, everyone. My name is Louisa Burdett. I joined Spirax Group as CFO three months ago. What I've learned in that time echoes what I hope you've heard from my colleagues today, that we have three fantastic businesses, each with material scope for growth, and we're going to build on those foundations, unlocking the potential with targeted investments. We also have really high-quality teams that will adapt and help us to deliver these future opportunities. My objective in this session is to bring together what you've heard today and marry that to our group's medium-term financial guidance. Before I do that, I just want to comment quickly on current year trading. For full year 2024, we guided in August to mid-single digit organic revenue growth and a trading margin of 20%.
We are not changing our guidance, and in line with our historic trading patterns, we continue to expect a stronger Q4 versus Q3. Since our first half results, sterling has strengthened against the main currencies to which the group is exposed, and if rates at the end of September were to prevail for the rest of the year, the headwind impact would be approximately 1% greater on both sales and adjusted operating profit than we expected in August. So over the medium term, we will be sustaining our track record of mid-single digit organic sales growth. But we wanted to unpick some of the context in which that growth has been delivered over the last fifteen years.
On the left-hand side of this chart, we've shown a 10-year period where we operated in a low inflation environment alongside good growth in global IP, and this resulted in average group organic growth of 4.3%, which was equivalent to 1.8 times IP. More recently, on the right-hand side of the chart, we've seen more volatility in the macroeconomic backdrop, with much higher inflation alongside weaker global IP growth, and over this 5-year period, our average organic growth was much stronger at 6.1%, equivalent to 3.4 times IP, with a higher proportion of this growth fueled by passing through inflation with strong pricing.
Going forward, we expect inflation to normalize and IP growth to be around 2%, and against this backdrop, we anticipate continuing our mid-single-digit revenue growth rate into the medium term and then improving on that in the long term through our growth accelerators. Whilst the mid-single-digit element of our medium-term revenue guidance will be sustained, the mix of our delivery is going to change. The shape of our business has shifted materially from an 80/20 Steam and Watson-Marlow sales mix in 2016 to a 50/25/25 mix today, with the addition of our four ETS businesses. So taking each of the components of this revenue guidance in turn, starting with Watson-Marlow at the bottom right of the pie chart, we expect this business to grow at high single digits in the medium term.
As Andrew laid out in his section, this will be delivered through exposure to exciting parts of Biopharm, which have growth trends of around 10%, plus a diversified process industries portfolio growing at two times IP. The business has been well invested in recent years and has the capacity ready to support growth. Moving clockwise to Steam, which remains a healthy contributor to the group, but which we expect now to grow in low- to mid-single digits in the medium term. As you heard from Maurizio, this is a result of a lower rate than in the past, I beg your pardon, due to lower IP and lower inflation and a slowing China.
The significant decarbonization opportunity we have in front of us, including the multiplier effect of Steam and ETS working together to address more parts of this decarbonization market, means that growth at over two times IP for Steam remains intact over the longer term and finally, we expect ETS to grow at above mid-single digits in the medium term, underpinned by our strong demand for our equipment and process heating capabilities, as you heard from Andrew and Chris, so in summary, Steam remains attractive, but its revenue growth will be lower over the medium term than in the past, with ETS and Watson-Marlow, our higher growth businesses. Over the medium term, we anticipate improving our margins to between 22% and 23% whilst continuing to invest sensibly for the future.
Before I address some of the details, from left to right, we expect margin expansion to be driven by, one, organic growth of around 200 basis points. Two, about 150 basis points of financial benefit from operational improvements. And three, offset by investments of around 100 basis points in incremental and group-wide programs to support our longer-term growth. I'd now like to draw out five key points from this slide. Firstly, the organic growth assumption of 200 basis points. This is derived from our mid-single-digit revenue growth guidance over the medium term, dropping through at a slightly higher % than our historic average because of the anticipated recoveries in some of our higher-margin businesses like Semis and Biopharm.
However, some costs will come back as we return to higher growth, and these costs are around GBP 15-20 million, with the most significant item being the reinstatement of a normal level of variable pay. But as you've heard during this presentation, we will be driving procurement savings as a group for the first time, and we will be using the benefits from this program as business as usual to offset a large proportion of this cost headwind. Second, I want to emphasize our investment discipline. Our margin guidance is given net of investment. We're creating an additional envelope to cover the incremental and group-wide investments that you've heard about from my colleagues today. Delivery of operational improvements, estimated at 150 basis points, will not only free up funds to invest, but will have the added benefit of helping us to simplify our business.
Third, the shape of the margin progression. We do not expect progression to be linear over the period because the benefits of operational improvements will be delivered across different timelines. Fourth is mix. With our group margin guidance of 22%-23% in the medium term, the anticipated margin mix is shown in the middle of that chart. Watson-Marlow should return to historic margins of more than 30%. ETS has its plan to reach 20% margin target by 2027, and Steam will continue delivering at 23.5%. And to complete the math, given that 50/20/25 business mix that I talked about earlier, the offset impact of our corporate costs is shown at around -2%. And lastly, the fifth point, the multiplier effect.
By making these new investments in decarb, digital, and other capabilities, we will be well positioned to deliver our longer-term ambition of high single-digit organic revenue growth and margins in excess of 23%. So throughout our business presentations today, we have highlighted the various operational improvements and investments that will underpin our growth. You've seen this slide before, and for completeness and a reminder, we're showing you this again. Our operational priorities are on the two boxes on the left-hand side, and the pieces in there are each at various stages of implementation and will deliver benefits at various stages over the medium term. It won't come as a surprise to you that some of these things are more complex to execute than others and may span our medium-term guidance horizon before they are fully complete.
So in the first box, specifically within ETS, the improvement plan at Ogden remains one of our most important opportunities, and you've heard all about what needs to be done and the timeline from Andrew, so I'm not going to say any more about that here. But moving to the second box under organizational fitness, we have expanded capacity in recent years, notably in Watson-Marlow and Chromalox, Ogden. But elsewhere, we feel we can optimize some of the legacy manufacturing capacity, thereby reducing the future cost of production and future CapEx needs. Such optimization is the norm in all manufacturing companies and will be an ongoing focus. Historically, we've captured global growth really successfully by expanding the number of our operating companies, and it is essential to retain a local customer focus.
But we have started to assess how to simplify and strengthen our operating model to remain fit for the future. We've already talked about how we will deliver procurement benefits as a group. And lastly, our ERP change program. This will seek to standardize the things that make sense to do in the same way across the group and to implement more modern tools. But it's also a really powerful customer and employee retention proposition, making doing business with us easier. ERP is clearly a longer-dated program, which reflects both its relative complexity and our desire to roll this out carefully rather than everywhere, all at once. We will see incremental benefits as we progress through various stages of the project, and it will be an important enabler of our new operating model.
We will update you on the implementation details and the cost to deliver these operational improvement programs as part of our normal results cycle. But staying in the second box, of the activities in that second box, simplifying organizational structure and optimizing manufacturing footprint are the key drivers of our 150 basis points operational improvements in the margin bridge. And these will require one-off cash costs to deliver them, which, for clarity, are not included in the adjusted profit margin walk that we showed you on the previous page. Covering our investments in the two boxes on the right-hand side, these are the 100 basis points, which are in the offset to our margin. You've heard from Maria about our exciting digital ambition, capability, which will provide internal connective tissue between our sales engineers, as well as building an installed base of connected and monitored products.
We are on our way with this investment, and we will see build costs in 2025 and 2026, with the expectation that pull-through revenue will help fund ongoing investment. We will continue our R&D investment in both decarbonization products and decarbonization capabilities. You've heard very clearly from Chris, Maurizio, and Andrew that we are uniquely positioned to support our customers in the decarbonization and electrification of their industrial processes. Investment in the implementation of a joint operating model across STS and ETS to address this market is really important for us as we think about this attractive addressable market. We are shifting the focus now to our CapEx investments and cash guidance.
As you can see on the chart, our average investment in CapEx as a percentage of sales over the period 2014 to 2021 was 4.4%. In the last three years, we have invested closer to 7% of sales, and that's been driven by production capacity in Watson-Marlow and Ogden, other footprint expansion, plus initial ERP investments in ETS. Over the medium term, we are guiding to CapEx of between 5% and 6% of sales. As indicated at the bottom of the slide, the drivers for this are broadly that, one, the current ETS capacity and production projects will complete. Two, our review of manufacturing footprint and capacity should limit new build CapEx requirements in the medium term. But three, the ERP will enter and take up some of that capital envelope that has just been released.
Then on cash, in the medium term, we expect to deliver around 80% cash conversion in line with our current performance, but in the longer term, our intent is to deliver cash conversion better than 80%. The group's primary capital allocation policy is to maximize organic investment to drive future growth. I trust our priorities for organic investment have been made clear over the course of the afternoon. Over the medium term, our focus will be on organic investment and maintaining our history of paying a progressive dividend. And as we generate more cash, we will also be seeking to deleverage from the 1.9 times position that we reported at the end of June. On M&A, our focus is to get the ETS acquisitions embedded. However, M&A remains an important part of our growth story, and where bolt-on suitable opportunities arise, we will assess them.
But for clarity, we have no intention or need to build a fourth leg of the business. And then finally, we are not seeking to define the specific conditions for shareholders' returns today, but we will return share, cash to shareholders when appropriate, and we have a demonstrable history of doing so, as evidenced by the special dividends declared in 2010, 2012, and 2014. So we acknowledge that our returns are not where we want them to be. That's a function of building ETS and recent margin compression. We are really focused on driving improvement, and we are confident that we have a clear plan to improving returns over the medium term. We have historically delivered mid-single-digit revenue growth at 1.8 times IP and average margins of 21.6%.
This was delivered in an environment supportive, an environment of supportive macros and stable inflation, with China growing and entry into new geographies, but as you've heard today, despite moving into a lower IP and inflation environment, we intend to sustain these financial parameters in the medium term, with revenue growth in mid-single digits, with margins increasing to 22-23%, with CapEx as a percentage of sales falling, and with an 80% cash conversion, and we will achieve this whilst investing for the future, and these investments will drive attractive longer-term growth in support of increasing returns. Thank you very much for your attention, and I'd now like to pass it back to Nimesh to conclude our presentations.
Hello again, and thank you to all of you for bearing with us and to my colleagues for their presentations. Now, before we get to Q&A, I just wanted to bring together some of what we've heard, starting with what's important to me as I think about our longer-term potential for this group. So simply put, enhancing our track record, our proven track record, of delivering strong EPS growth. That's what's important to me. So why do I think this is possible? Because of the significant addressable market opportunity in front of us, recognizing that we are uniquely positioned to benefit from global megatrends, particularly decarbonization. So how? How will we harness this potential? Through our three high-quality growth engines of STS, ETS, and Watson-Marlow, each of which tap into these megatrends and are well positioned to grow strongly at attractive margins. So how will we succeed?
Through evolution of our business model, which is what binds us together as a group. We are harnessing the strength of our foundation in customer solutions and building on that to customer partnership, which involves leveraging digital and developing a service mindset to be more closely connected with customers more frequently and with deeper insights, and working to bring together our expertise from across the group to better serve our customers. Finally, how does that apply to our most significant opportunity in decarbonization?
By taking the best of what we do across STS and ETS and applying that across our customers' thermal energy processes, whether those are steam or electric, or the direct burning of fossil fuels, to optimize their energy use, continually assess their energy needs, and decarbonize their processes through our proprietary technology and our proven capabilities, whether that's the generation of steam or Target Zero, or whether that's the replacement of direct burning of fossil fuels or Powering Zero. So let me leave you with this: We have an enviable track record rooted in consistent growth ahead of underlying markets, while also improving margins, all of which is reflected in a multi-year track record of strong EPS and dividend growth.
In the medium term, we will sustain this track record, delivering high single-digit profit growth from organic sales and significant margin improvement, while investing for the long term, funded through operational improvements, and through this approach, we will accelerate our long-term organic sales growth, our margins, our cash generation, and therefore shareholder returns, so the medium and the long-term phases sustain and enhance our track record, while further extending the longevity of our future growth, underpinned by our group, its quality, and the opportunities ahead. Thank you very much.