Good morning, welcome everybody, here from Torino, from the very nice place in Piedmont. My name is Daniel Bischofberger. I'm the CEO of Accelleron. I'm excited to announce to you today that Accelleron and OMT will be joining forces, to further develop the combined business as one, and to build a prosperous future. I'm happy to see that we have quite a high number of participants, despite the invitation at very short notice. The short notice was about keeping our legal obligation, as the information disclosed is subject to the Ad hoc regulation of the Swiss Stock Exchange. Thank you very, very much for joining us this morning. I'm looking forward to guiding you through our presentation. At the end, we will have a Q&A session. You may pose your questions at any time of the call in the chat.
Please make sure to state your name and organization. We will answer your questions afterwards and in the Q&A session, where we will read each question and provide you with the answers. Please note that where it applies, we may answer similar questions just once. With me are my colleagues, Adrian Grossenbacher, our CFO, who is joining us from Baden, the headquarter of Accelleron, as well as Michael Daiber, our Vice President, Strategy and Head of Investor Relations, who is with me here at the headquarters of OMT in Torino, Italy. Now let's start. Here, just please consider our safe harbor statements due to our forward-looking statements in this presentation. Let me come to the highlight and reason of today's call right away. I'm excited to inform you that we are intending to acquire OMT.
Let me briefly explain what they do and why we both, OMT and Accelleron, made the decision to join forces. Let me start by introducing OMT to you. OMT is a world leader in fuel injection systems and serves engine builders with high-precision equipment, mainly for marine. Based in Torino, Italy, OMT was founded in 1930, and currently has 250 employees, mainly based at its Italian headquarters. It achieved revenues of approximately EUR 52 million in 2020, of which more than 70% was generated through service-related demand and has an EBIT margin of above 20%. OMT and Accelleron have a similar customer base of engine builders. The purchase price is in the high two-digit EUR million range, and the transaction is expected to be closed within the next few weeks.
I would like to give you an overview of why we are so fascinated by the potential of OMT and its technology. You might know, marine propulsion is all about performance, efficiency, and low emissions, and that's exactly where we both, Accelleron and OMT, are leading the field in turbocharging and fuel injection systems, respectively. A brief explanation: fuel injection is the direct introduction of fuel under pressure into an internal combustion engine. High-precision mechanical and common rail injectors operate with up to more than 2,000 bar. You see it on the picture, their fuel injectors, dark gray. The fuel injection is, as the turbocharger, a mission-critical and engine performance-defining component with intensive service needs. The maritime industry is in a deep and long-lasting transition and decarbonization journey.
Against this backdrop, fuel injection is a critical technology for enabling the use of low-carbon fuel, such as biomethanol, or in the medium to long term, zero-carbon e-fuels, such as synthetic ammonia. As already shown at the annual conference, dual-fuel engines, which are becoming more and more the standard in this transition phase, have significantly higher scope requirements for fuel injection systems. Dual-fuel engines need two separate fuel injection systems, one for each fuel. This means this doubles the future revenue potential per engine produced for fuel injection systems. OMT's research and development, as well as the manufacturing team, have a strong expertise in high precision and electromechanical equipment. As a company dedicated to innovation, such as we are, OMT is a perfect fit to us, almost, I would say, like a twin sister.
Moreover, it's important for Accelleron to work in close development and manufacturing partnership with key OEMs in low-speed and medium-speed engine. By joining forces with OMT, we'll have a more holistic relationship with the engine manufacturers. As you know, Accelleron is the undisputed leader in mission-critical turbocharging application, which is a consequence of almost 100 years of significant and continuous investments in technology, investments in partnering, and end users with OEMs, investments in an unrivaled global service network of more than 100 service center, and also an investment in a unique service culture that will never let our customers down. By acquiring OMT, we are not only extending our offering, but even more important, strengthening Accelleron's highly attractive core business. When it comes to propulsion of ships, fuel injection is another mission-critical component.
It is especially so when developing zero-carbon combustion engines, an aim that the industry is striving for. Keep in mind, e-fuels will be significantly more expensive for foreseeable future, and are likely, once fully available and scaled up, to remain at the price level of 2-3 times the ones of fossil fuels. Like turbocharger, OMT's injection equipment is at the core of new developments for the application of new fuels. Both technologies, turbocharging and fuel injection, require close partnership with the OEM engine builders in their development phase. Injection manufacturers are even involved at the very early stage in the development process of the OEM. All this development means, firstly, Accelleron will have a higher impact when it comes to the decarbonization journey. Secondly, Accelleron will be early involved in the OEM's R&D activities on new fuels.
The acquisition of OMT, Accelleron will have the possibility to extend the digital offering to fuel injection systems, in addition to Accelleron's turbocharger and Tekomar XPERT. Once more, and simply put, Accelleron and OMT together will advance the energy transition and decarbonization journey in shipping. We already have much in common. Both have a solid foundation, reaching back 100 years, and are both highly respected leaders in our fields, within the same industries. We share the objective of maritime decarbonization through innovative solutions, with the aim of achieving greater fuel efficiencies. The acquisition of OMT is adding now to Accelleron, a complementary technology, important to successfully handle the trend towards zero-carbon fuels.
Injection manufacturers are involved at the early stage in the development process of the OEM engine builder, creating an opportunity for Accelleron to be earlier and more relevant in the development initiatives using alternative and future fuels. Like turbocharger, OMT's injection equipment is at the core of new fuel developments and the driver in the future development of ships. We can say together, we will be a partner of choice and leading innovator in the development of alternative fuel technologies. Together, we'll be able to better support our customers to achieve their sustainability goals and decarbonize the shipping industries. Together, we will support our customers with even stronger and more comprehensive digital solutions. Let's talk about the further growth potential.
Acquiring OMT as a market leader in the two-stroke, low-speed engine sectors, reinforces our position as a partner of choice and leading innovator in the development of alternative fuel technologies, such as hydrogen, methanol, and ammonia for large marine engines and other heavy-duty applications. Moreover, fuel injection is, as the turbocharger, a mission-critical and engine performance-defining component with intensive service needs. Have a look at our graphic on the left side. Accelleron is the undisputed market leader in low and medium speed, with about a 40% market share, and in high speed gas, with around 80% market share in turbocharging. We are a small player in the off-highway, high-speed diesel market, with less than 5% market share.
Thanks to our strong service network, we enjoy a better service market share on our own installed base when comparing with market shares of our competitors on their own installed base. This higher service share favorably impacts our overall profitability and cash conversion. On the right side, you will see OMT's position within the fuel injection market, which has a global size of approximately $500 million for low and medium speed. OMT has a leading market share in the low-speed engine market and is considered number four within the medium-speed market. The company is not active in the high-speed segment and has no intention to do so in the near to midterm future. The acquisition fully supports our objective to expand Accelleron's leadership position in low and medium-speed market, driven by the development activities for new fuel application.
What does the acquisition mean for Accelleron and OMT employees? OMT will become part of Accelleron's new independent growth story, and the acquisition will give their technology and dedicated workforce a global platform to further expand. We have confirmed to our OMT colleagues that their jobs are secure. There will be no changes to their employment status, their place of work, or their conditions. We are taking over OMT in its entirety, retaining all employees as well as the strong brand name of OMT. We will run the OMT business as a separate division within Accelleron, and Accelleron Italy's operations will remain separate from OMT's operations. Reporting-wise, OMT will be part of the medium and low-speed reporting segment, and we are not planning to integrate OMT in our global ERP landscape in the near future.
Furthermore, alongside with our strategy, we intend to invest in OMT and even expand the employee base over time. We will also continue the planned investment in a new R&D and test facility, almost adjacent to the existing OMT factory here in Torino, Italy. Together, we will provide customers and end users with an enhanced offering in innovative design and global service solutions. This agreement is a great growth opportunity for us to combine our expertise with an established market player that shares our long-term tradition, offers us greater stability, and our market's innovative joint solution in design, product, and servicing. This acquisition strengthens Accelleron's core business, as well as its attractive financial profile, with sustainable revenue growth, resilient margins, and strong cash flow.
Regarding revenues and growth, OMT adds inorganic revenues growth of at least EUR 52 million on an annualized basis, on top of Accelleron's guided organic revenue growth of 2%-4% for 2023, as announced during the annual conference. The final inorganic growth contribution for 2023 will depend on the closing date, from which OMT will be consolidated within Accelleron's financial statement. For Accelleron's profitability, including OMT, we expect the operational EBITDA margin to remain at the lower end of Accelleron's midterm guidance of 23%-26%. Post-closing and ex-dividend, Accelleron expects the net leverage for the financial year 2023 to be slightly above 1.0. Assuming a normal business environment, Accelleron intends to pay out a dividend in 2024, which is at least stable compared to the dividend of CHF 0.73 per share, paid out in 2023.
With that outlook, I would like to close the presentation. Thank you for your attention. I would say now, let's proceed with the Q&A session, and the question already received in our chat, Michael. Okay.
Yes, we have questions from the chat tool. The first one from Serge Rotzer, from Credit Suisse, asking about OMT's sales growth in the past and the expected growth for OMT.
Good. I think, Michael, you want to take that one?
Yes, please. You know, in the last, you know, if you look at longer term, you know, 15, 20 years period, they have been growing a little bit more than us, around 5%. The expected growth in the future, I think we expect them to drive our growth and grow slightly more than what we expect in our business.
In our core business. Mm-hmm.
Now, I have multiple other questions from Serge. I would leave someone now from the call, from the telephone to answer some questions and would then follow up with the next ones.
Okay.
Sandra, please.
The first question comes from John Kim from Deutsche Bank. Please go ahead.
Hi, it's John Kim from DB. Thanks for the opportunity. A couple of questions here. Firstly, can you speak at all about synergies for the deal? It does feel more revenue-based, but it will be helpful if you can confirm that by the targets. Secondly, financing on the transaction, is there any color here, debt versus equity or existing cash reserves? What sort of regulatory approvals are we looking at over the next few weeks, or what needs to be true for the deal to complete in the next few weeks? Thank you.
Okay. Thank you, John Kim. To summarize, it's about synergies, financing, and approval.
Right.
On the synergies, we don't really consider any cost synergies. That's also not the idea. It's a new business, the synergy is definitely going to market. We, as mentioned already, we have more or less a similar customer base. It's the OEM engine builders or the licensees on the low-speed. Here, definitely, we see the synergies that with some customers, we have, on the turbocharger side, better relationship and more business, and vice versa. That's where we see the synergies on going to market, but also on the service side, we can give OMT a better base, global footprint on the site. On that one. It's really on the top line. Financing, Adrian, you want to take over?
Yes. This is a combination of organic cash generated and debt. We have increased, and you might have seen as well in the aftermath of the annual closing, the subsequent event, that we made use of the CHF 50 million option in anticipation of what there is to come. It's a combination of organic and partially debt financed.
Good. Thank you, Adrian. Michael, about the approval?
Yes, I think, the closing is subject to customary conditions, but we don't foresee that regulatory approval should be a big hurdle.
Okay, I hope we answered your question, John. What shall we take next?
Great. Thank you.
I think.
Thank you.
Yes, I think I would just take one from the, from the chat again, that came in, and that's from Doron Lande, from Kepler Cheuvreux. What are the future M&A plans? Anything in energy sector as well?
Okay, thank you, Doron. I think we take one step after the other. I already has mentioned, in term, we have a strong growth potential in our organic business, and now we have done this acquisition. We want to make sure that we give the right focus attention to this business, so definitely it's organic growth without turbocharger and making sure this acquisition will be a great success, and that's our priority. It's not that we want to run into the next acquisition. Look, as already said, when we had investor meetings, we take a look. We are still developing the pipeline on the acquisition, and we want to be selective and disciplined.
I'm not saying there will be nothing come in the near future, but definitely the major focus is now running our business and making this integration a success.
Good. I would follow up with a question from Mark Diethelm from Vontobel. Will the net leverage fall below one in 2024, or are further M&A projects in the pipeline? The second one, as no ERP integration is foreseen, do you see any cost synergies?
Well, I would say that's a question for you, Adrian.
I mean, on the second one to start with, right? We said this is namely on the revenue synergies. Cost synergies, not much for the time quantified. I would expect that to be rather marginal. On the first part, I think it's important that we first look through 2023, as we still have a lot of non-operational activities ongoing in respect to the build-up. There we have stated by year-end, we would expect net leverage to be slightly above 1x operationally EBITDA. I think for 2024, if there would be no, let's say, M&A activities and the dividend would, let's say, be stable to slightly growing, yes, one would expect that naturally we would deleverage ourself. That's correct. Daniel, anything you would like to complement?
No, I think you said everything, and I hope you answered the questions. I would suggest we go to next.
Yes, I'll take a question from the telephone, please.
The next question from the phone comes from Charlie Fehrenbach from AWP. Please go ahead.
Good morning, gentlemen. Thanks for taking my questions. I wanted to know if you expect any special integration costs. I'm not quite sure if you mentioned this already. Thanks.
Hi. Good morning, Charlie. It's always a pleasure to take your questions. I said already, we will have a light integration. We'll not consider any big investment in integrating because, as I said, they are quite successful, this business. We definitely make sure that the financial reporting and compliance is on the level we are, and that's it. The rest is more or less business as usual. This is a very, very small integration cost I see here.
Thank you very much.
Running through the details. I hope, we answered your question, Charlie?
Yes, thank you.
Thank you.
Good. I would propose to follow up in the next, you know, on the, on the phone. The next person on the phone line, please.
The next question comes from Alessandro Foletti from Octavian. Please go ahead.
Yes, good morning, everybody. Thank you for taking my questions. I have a few, if I may. Just to confirm, the price that you have mentioned or indicated does not include any additional debt to take over. This is all inclusive, this is an EV price?
Yeah. Yes, correct. It's cash-free, debt-free.
All right, perfect. The second, on the margin of OMT, you have indicated it above 20%, and now you have reiterated the group target after the acquisition. Does it mean that OMT is also now above there, or the difference between 20% and, say, 23%-26%, is any cost or any amortizations that you have to consider?
As I said, the margin is above 10% EBIT. From the volume you have to consider. I mean, the weighting is not so high with CHF 50 million that the 20%, so slightly above 20%, will fully our margin. That's why we're confident, and we will do everything also to get a margin which is close to our level, but definitely it's slightly below. Again, that would not be so easy to find a target that's on the same level as we have in the turbocharging. The other question was what? Repeat again.
Excuse me?
I think I missed the last question you had.
No, no, that's fine. The next question is regarding the service content. You also indicated there that it is the majority of it, so 50% and above. Can you sort of give a little bit more indication how far it is from your Accelleron's level, and why maybe there is a difference, if there is one?
I think probably I was not clear, but the service content is above 70%, so quite similar to ours.
Okay.
And, uh-
Oh, okay.
The good thing here, it's even more frequent, the service, because, you know, you have to consider, on the fuel injection, it's not the main shaft you have, but there's the nozzle ring, which is a quite, heavy wear and tear because, you know, the holes will be washed out through the fuels and over time, so there's quite frequent wear and tear replacement, especially these are the high precision part which needs wear and tear.
Okay.
The effectiveness of this business.
Okay, great. Very good. I have two more, if I may, very quickly. On the cash flow side, can you give an indication how cash generative that business is?
Well, I've not taken it too much, look into the detail, but Adrian, I would say similar to ours.
Absolutely, Daniel. I think classical product business we service pretty quickly turning over that, so it's networking capital build up reduction, which might, you know, make the difference on the cash conversion, but I would say in profile, quite close to what we represent. Yes.
Very good. The last one, semi last question again, on R&D. You are about 5% from memory. How high is OMT? Do they need to invest more to follow suit with the changes that are in the industry, that are taking place in the industry, or are they already there?
First of all, we invest about 7%.
Right.
In strong. Their profile is normally slightly different. They do development based with customer contracts, so they don't have this R&D like we have, you know. I mean, they have a portion, but the biggest one is developing together with the customer, fuel injection. You know, turbocharger, we develop our products, and we define more or less the range where we believe on the power and price. The different, they developed the fuel injections together with the WinGD and the MAN and the Vincitis. That's a slightly different profile when it comes to development.
Okay. Very good.
I hope it's clear.
Thank you very much.
You're welcome.
Thank you very much, congratulations.
Thank you.
Thank you. I would now take one question from the chat again, from Yannik Ryf, from ZKB. To what extent are the service contracts for fuel injection systems structured differently, or can they be compared with the turbocharger business?
You want to take it, Michael?
Yes. I think in general, first of all, the difference is that OMT so far goes through the OEM, the engine builder, and delivers parts that are then sold through this channel. On the nature of the service business, Daniel talked about the frequency of exchange of parts. There is certain similarities, with the fuel injector probably being more exposed to wear and tear. Okay.
Probably also here, as Michael already said, it's more through the engine builders. Where we can definitely help is on the last mile distribution. Because we are, especially when it comes to the licensees, so the HHIs, the Hyundais, or the Mitsubishi or whatever, there we can be closer to the engine builders. OMT doesn't have such a strong network, and there we definitely can help better on the distribution on the last mile for the spare parts and close interaction with all those customers.
Good. One more question from the chat tool, from Rosie Steiner. Thanks. Yeah, hi, Michael, thanks for the call. Any assumptions you could share on PPA handling, e.g., annual amortization?
I would say that's one for Adrian.
Yes, in that very respect, I mean, on the U.S. GAAP, this is a pretty detailed science. We have started that work stream, and we'll get back in due course. I think it's too early to state the specific numbers as this is quite a detailed procedure, which is ongoing in the back since then towards the closing.
Okay. Thank you, Adrian. I hope we were able to at least answer the question, how we want to tackle the PPA, so I suggest we go to the telephone.
Yes.
The next question comes from Serge Rotzer from Credit Suisse. Please go ahead.
Yes, good morning, gentlemen. I'm not sure whether I missed something, but on, on your dividend guidance here, is it true to assume that you will pay out 50%-70% of reported net income in 2023? The guidance you have given for next year implies, or you say, only a stable or slightly growing, although it will be a clean year. We don't have any unusual costs. This would tell me that this delta of the reduction rate, the costs which go away in 2024, will get compensated by any PPA or whatever. Can you share here some thoughts? I don't...
No, thank you.
Connect the quotation.
Thank you, Serge. Definitely, it's important that we are here clear. I mean, first of all, we talk about the dividend in 2024, which is based on the result of 2023, we pay. We said also that irrespective of whether we are above 1.0 or below, we will at least pay the same dividend like what we have paid this year or higher. Probably you have to, if you remember, we have this year still high one-offs of CHF 70 million-CHF 80 million. That means the, if you are going close to what we paid last year or slightly higher, that almost means this is close to probably 80%-90% of the net income. Adrian, you want to add here something?
Well, I think, Daniel, for 2023, I think, yes, that these are the mechanisms, right? We face.
It's okay. I made a mess with that. When you talk about dividend 2023, it's the dividend basically from 2022, but paid out in 2023, huh?
That's right.
this year-
Correct.
Okay. Okay. This was the what puzzled me. Got it. Good.
No, that's fine. We were not clear on that one. It's definitely, when we talk about 2024, it's based on the 2023 results. That's why we wanted to be clear here. We are above 1.0. If it would be 50%-7%, if all our guidance is correct, then that would mean we would pay less than last, than this year, the CHF 0.73.
True.
It's clear we keep that one, and that means we will be higher on the payout than based on the 1.0, slightly above 1.0, which means 50%-70%. I hope it's clear, Serge.
No, I got it. Thank you so much.
I know it's important here because we don't wanna confuse again, or at least we have seen that it was not so ideal when we communicated last year about our dividend payout. Thank you, Serge.
You did it again, but many thanks now.
Serge, are you done? I would take the next question.
I'm done. I'm done. I'm done.
Thank you. From Daniela Costa, from Goldman Sachs. Could you talk about OMT's margin profile historically?
Michael?
Yes, I think the margin profile has been in similar ranges throughout the years. I think, of course, 2020 with COVID, and especially in Italy, with lockdowns, there was a negative impact. In general, it was always on that high profile.
Always nicely above the 20%, a bit.
Yeah. Good. Good. I think we have one more question in the phone line.
We have a follow-up question from John Kim from Deutsche Bank. Please, go ahead.
Hi, it's John again. Quick question. Can we talk a little bit about the market share? For specific to OMT, who do you see as the main competitors, in the low-speed and the medium-speed segments? Are the market shares in fuel injection similar to what we see in turbochargers? Thank you.
Thank you, John. The line was not so, but Michael, we tried to answer what we understood.
Exactly. I think if I understand it right, it was about the market and the competitive situation. On the slide, we had one slide where we explained that the market share in low speed is higher than in medium speed. I think in low speed, OMT is the biggest, and then you have certain competitors, which are smaller companies in Japan, there is also in Europe. It's more distributed. I think in medium speed, you have companies there, on the one hand side, for example, Woodward L'Orange, and you have Bosch in the market that is more coming from the smaller engines and have certain business in medium speed.
Did we answer your question, John?
Great, that's super helpful. One last follow-up on that. Help me understand the margin progression here. It seems from a distance that this business model is fairly similar to yours. You're pretty comfortably in the mid-20s range. Is there something about fuel injection that kind of lends itself to a low 20s margin? Is there something about the structure, cost structure, that's different?
The cost structure for fuel injection compared to ours, I think it's, you know, if I get the question. Sorry, I take it right now.
Yeah.
I think I get it right now. You know, it's a little bit from the essence, it's a similar product, which is a small part of a big asset, which is highly critical for the operations of the asset, for the maintenance. Yeah, it's critical and mission-critical for the asset. That's, I think, the undergoing.
As I said, it's very similar to our business. Also, the equipment is different, that's why I always use the word of twin sister. It's really from the model, it's the customer and the service portion and how it works, quite similar. That's why I think it's a great fit to our business.
Great, thank you.
Not that we have to completely change our business model. It really fits. It's an additional equipment or component that really is complementary to our business. Okay, thank you, John. Do we have any other questions?
I will check the, on the Q&A tool so far. I think there were questions, but we believe they were answered.
Mm-hmm
... in a separate call. Anything else? I think. Yeah, there's no more in the chat. I think if someone, Hemosh?
Mm-hmm.
Oh, no. Yeah, we have one question from the tool, whether we would report OMT as a separate division. I think there the answer is that we structure it as a separate division from an organizational, from a management perspective, but it would be a separate report. It would be reported within our medium and low speed segment.
Because-
Correct
... it's exactly in there, in low speed and medium speed, and it's marine business, so it fits into that one to give a good picture about what we are achieving in these fields.
Good. Sandra, I think there's no more questions in the line.
So far, there are no questions from the phone.
Oh, good, Sandra. Again, thanks for your interest and for joining. It's always a pleasure to have this interaction with our investors and also media. Next step in our independent journey, and be assured that we will not lose our focus on our core business. As I said, this fuel injection is not, is even also strongly supporting our core business. I'm not worried on the distraction and M&A, we will only, I think we have now enough on our plate with the very active core business, the marine still doing fine, and the integration here also, it's a light integration. We are in close contact with all our customer to make sure that we will not lose the attraction, especially on fuel injection.
We will support them even stronger, that we will invest in this business, especially also shown by the investment in a new test and test facility in R&D center. With that one, I would like to close the call. Again, thank you. I wish you a nice day, and stay in touch. Thank you.
Thank you. Bye-bye.
Thank you.