Ladies and gentlemen, welcome to the Burckhardt Half Year 2026 Results Live Webcast. I am Valentina, the Chorus Call operator. I would like to remind you that all participants will be in listen-only mode, and the conference is being recorded. The presentation will be followed by Q&A session. Webcast viewers may submit their questions in writing via the relative field. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Fabrice Billard, CEO. Please go ahead.
Yes. Thank you, Valentina. Good morning, ladies and gentlemen. This is Fabrice Billard speaking. I am here together with Rolf Brändli, and we would like to warmly welcome you. Today, we will present the results for the first half of fiscal year 2026, starting with the market environment and our key highlights, before taking you through the operational and financial performance of the group, and then concluding with our outlook. The first half was marked by continued geopolitical and macroeconomic uncertainty, as we read in the papers every day. Amid this backdrop, we returned to order growth in both divisions. We maintain underlying profitability despite lower sales, and we continue to see attractive opportunities across our markets. Assuming that you have already read the disclaimer on slide 2, I will jump directly to the highlights on slide 5.
First, order intake returns to growth, increasing by 5.4% to CHF 422.5 million, with growth in both divisions. This is particularly encouraging considering the continuous uncertainty and temporary disruption in some of our markets. Sales decreased by 11.1% to CHF 459 million, as expected, and reflects the lower opening backlog following the record levels of previous years, as well as the phasing of project deliveries. The lower sales should not be interpreted as deterioration in demand. Profitability remains resilient, with reported EBIT margin at 12.1%. This includes CHF 3.4 million of one-off restructuring costs linked to our August announcements. Excluding this cost, the underlying EBIT margin was 12.8%, basically in line with the 12.7% achieved in the prior year period. We also continue to generate strong value, with RONOA increasing to 40.1%, well above our mid-range ambition, which is 25%+ .
Finally, we confirm our guidance for fiscal year 2026. We continue to expect stronger sales in the second half, supported by our current order backlog and scheduled deliveries. Let's now look more closely at the development of order intake on the next slide. After a significant reduction in order intake last year, both divisions have now returned to growth, and several factors supported this development. Firstly, we saw lower tariff-related uncertainty compared with last year. As you remember, this was the main effect in our result of last year. Secondly, in systems, we continue to benefit from our strong marine position, and we enter new applications to compensate for the current market disruption. Thirdly, in services, we secured several large orders in Asia. Finally, the Fornovo Gas acquisition provided additional support.
What is important to highlight here is that growth in the period was not driven by one single market or application, reflecting the diversification of our business and our continued commercial activities across different markets. Nevertheless, the environment remains challenging for our customers, and therefore for us, due to the conflict in the Middle East. At the same time, this conflict creates opportunities associated with energy security, which I will explain on the next slide. Let me spend a couple of minutes on the Middle East situation, because its impact differs significantly across our businesses. When I look at systems in the region of Middle East, projects currently under execution are largely unaffected, and they continue. At the same time, we see opportunities related to new investment in infrastructure and alternative transportation routes.
We see, for instance, a potential project to expand the export terminal infrastructure in Fujairah, in the U.A.E., and also a phase 2 project for Marsa LNG in Oman. In services in the region, the short-term impact is more direct and quite negative. Several petrochemical refinery LNG sites in the region are operating at reduced or unstable levels. Actually, we hear in the news that the oil is flowing again, but the petrochemical products, chemical products, et cetera, are not. This reduces compressor operating hours and consequently delays maintenance, overhaul, and service activities. We expect these activities to recover progressively once the situation normalizes. There is also an indirect but material effect in Asia, especially in China, for both divisions. Reduced feedstock availability affects refinery petrochemical activities and has contributed to postponement of investment decisions and service activities in our key markets.
At the same time, we see opportunities developing also in the region, especially in China, in areas such as coal-to-olefin, which means producing petrochemical products out of coal instead of oil, because it supports China's energy independence. There are at least four new project opportunities in the final decision phase for this application. The key message here is that the conflict is creating a very clear short-term order intake headwind in both divisions, while at the same time reinforcing the strategic importance of energy infrastructure and opening new opportunities for systems in the coming years, in the region, but also in Asia. Let's now dig deeper into our order intake, looking at the different market segments on the next slide. The picture remains quite diverse.
In petrochemical and chemical, the Chinese market continues to be affected by overcapacity, which we had before, and reduced feedstock availability, as I have just explained. On the other hand, demand for polyolefin in India remains healthy, and we continue to see future project opportunities outside China. Gas transportation and storage remain one of our strongest markets. LNG and LPG, marine and onshore activity continues at a good level, supported by the global requirements to transport, trade, and store energy. In hydrogen mobility and energy, the development is geographically mixed. Europe continues to show positive momentum, while the Chinese market has slowed significantly. The industrial gas market is overall stable at rather low level due to the lacking investment, the lack of investments in new polysilicon capacity. But we have entered a new application with ultra-high purity hydrogen for semiconductor manufacturing in Taiwan and Korea.
I will come back to this later. Traditional refinery investments remain selective, also disrupted by the Middle East conflict. Sustainable aviation fuels help to maintain the market stable. The gas gathering and processing segment continues to provide opportunities across several regions, and we are growing in this segment thanks to Fornovo Gas. In conclusion for this slide, there is no single market direction. Our diversified exposure across applications and geographies continues to be an important strength. Against this volatile backdrop, on the next slide, we have continued to actively adjust our cost base rather than wait for markets to normalize. Our fundamental setup remains resilient. We still have a supportive and sizable backlog, diversified end markets, new opportunities emerging, an increasing install base in services, regional supply chains, and a global footprint with significant local value added that makes us more stable.
Last year, we already implemented targeted cost reductions, as I communicated a couple of times. We reduced external and temporary workers, we restricted hiring, simplified global functions, and increased outsourcing. This year, we have taken further structural measures. As announced in August, we are reducing 220 positions, including around 150 in Switzerland. At the same time, we are further developing our global service center in India, localizing selected products and components in China and India, and we are continuing our Fit for Growth operational excellence program in Switzerland. The half-year results include CHF 3.4 million of restructuring costs. Based on current volumes, we expect these measures to generate approximately CHF 20 million in annual savings from fiscal year 2027 onwards. These are not only short-term mitigation measures that we've just implemented.
They structurally improve our competitiveness, and they prepare the organization for profitable growth when the market conditions improve. Let's now dig deeper into the two divisions with the operational review, starting with Systems. Order intake increased by 6.3% to CHF 260.9 million. Net of currency effect and the Fornovo Gas acquisition, growth of 3%. This development was supported by the strong marine market and by our success in developing new applications, including CO2 transportation and the semiconductor manufacturing application. Sales declined by 15.2% to CHF 321.1 million as expected due to the lower opening backlog following the record levels of previous years and due to the expected project delivery schedules. The gross margin declined slightly by 0.5 percentage points to 20.6%. Lower capacity utilization was largely offset by operational excellence and our continuous cost optimization measures.
Despite lower sales and the restructuring cost, Systems maintained a double-digit EBIT margin of 10.3%, actually slightly above last year's 10.2%. That was really an excellent achievement by the team in this context. On the next slide, we see beyond the numbers. We continue to execute our strategy. You know this slide by now. We continue to improve both our competitiveness and growth potential. The new division president, Daniel Meier, who was leading the region EMEA until now, will continue in the same direction. On our core business, we have expanded our marine offering with the launch of the new Boil-Off Gas 100 compressor, which I will introduce in a couple of slides. On operational excellence, Fit for Growth continues in Switzerland, while we are adapting the workforce to the expected workload and further strengthening our capabilities in India.
At the same time, we are opening new growth avenues, including the Fornovo Gas acquisition, which gives us immediate access to biogas and biomethane applications, and we have order wins in new applications, including CO2 transportation by ship, ultra-high purity hydrogen for semiconductor, and gas turbine testing. These examples are important because they demonstrate that we are not relying on the recovery of our traditional markets. We are actively broadening the application base for our technology. Let me now give you a couple of more concrete examples, starting with Fornovo Gas. We completed the acquisition of Fornovo Gas in July, giving us immediate access to the European biogas and biomethane market, which we estimate at about CHF 200 million. You can see on the right of the slide the type of project that the company is delivering, with an example of a biomethane project awarded to Fornovo Gas in Ireland.
Our ambition here is not simply to grow the existing European activity. We see the potential to leverage our global sales and service presence to make these solutions available more broadly over time. Concretely, since July, more than 70 customer requests for quotations have already been generated through our global network, and we won the first joint project. This gives us an early indication of the cross-selling synergies we can create. Fornovo Gas adds an attractive application to our portfolio and gives us another platform for profitable growth. Let me move to another example of how we are enlarging our addressable market. We often mention the R&D activities we have in marine, and here you see some outputs out of it. We have launched the new Boil-Off Gas 100 2.0 compressor for LNG-fueled merchant ships, with focus on container ships. This is not simply another compressor.
This product allows us to address a broader part of the CHF 80 million-CHF 100 million LNG-fueled merchant ship market by competing more effectively with alternative technologies. This compressor has lower total cost of ownership than alternatives, based on three points. First, compared with the previous generation of compressor, this new one offers 10%-15% higher efficiency. Second, this compact and oil-free design simplifies the operations for the owners and the maintenance on board the vessel. Third, and really critical here, if we compare with screw compressor alternatives, which dominate this market, fuel consumption is around 40%-50% lower, thanks to our ability to handle very cold gases. This is critical because energy on board of a ship is very expensive. We received first very positive response from the market about this compressor.
This will enable us to expand the additional market by competing with other technologies. Finally, as another example, to further grow our addressable market, on the next slide, we are also successfully transferring our hydrogen compression expertise into new industrial applications. Semiconductor manufacturing is clearly a growing market, supported by the continued expansion of artificial intelligence, data centers, and digital infrastructure. It requires hydrogen across several production steps, with very demanding requirements regarding purity, safety, and reliability. These requirements are well aligned with our existing diaphragm compressor technology. We have already sold 11 compressors to two customers in Taiwan and Korea. In this case, we have increased our addressable markets not with innovation, but with business development, using our recognized brand name and our technology to open doors and create new opportunities.
Wrapping up the first part on the Systems division, while hoping that the disruptions linked to the Strait of Hormuz will cease soon, we will continue to manage our cost base, expand our addressable markets through innovation and business development, and we will search for selective bolt-on acquisitions which are strategically compelling. Moving now to Services. Order intake increased by 4.1% to CHF 161.6 million, despite the temporary disruption of the Middle East and parts of Asia. This was supported by further growth in marine and several large orders in Asia. Sales remained stable at CHF 138.9 million. The gross margin decreased by 0.7 percentage points to 47.1%. There are two main operational reasons behind this. The first, a less favorable product mix, and second, a reduced capacity utilization in some service locations. Restructuring costs also affected the margin.
As a consequence, EBIT amounted to CHF 30.1 million, and the EBIT margin decreased from 23.9% to 21.6%. Nevertheless, an EBIT margin above 20% in this environment demonstrate the fundamental quality of our service business. Importantly, the underlying install base growth remains intact. In Middle East and Asia, we expect maintenance activities to recover progressively as the situation around the Strait of Hormuz normalizes. Also in the Services division, we continue to strengthen the foundations for future growth. The integration of ACT into our organization is now completed, strengthening our local manufacturing and service capabilities in the U.S. We are also investing in operational excellence, including the modernization of our manufacturing capabilities for rings and valves, including our first 3D-printed part delivered to customers, and further modernization and optimization in our factories. At the same time, we continue to develop digital and recurring service offerings.
This includes AI-supported monitoring solutions, as well as additional long-term service agreements. I will show a good example in a minute. Finally, the rollout of our global CRM and SAP platform continues to strengthen the way we manage our business globally. What I would like to highlight today in the Services division is one of the structural growth opportunities, increasing the share of our installed base covered by long-term agreements. We regularly state that the growth of our marine business is supporting the growth of the Services division and often compensating for other segments which are disrupted. To make this more concrete today, let me share an example on the right side of the slide. In H1, one of our ship owner, who has nine high-pressure LNG carriers and 13 Laby-GI compressors, has renewed a five-year long-term service agreement, LTSA, after we successfully completed the initial agreement.
The value proposition is very tangible for the customer. The compressor availability was above 97%, supported by condition monitoring, predictive maintenance, and advanced spare part planning. For Burckhardt Compression, these agreements deepen the customer relationship and increase the visibility and recurring nature of service revenues. As you can see from the chart on the left, the number of compressors covered by long-term service or framework agreements has increased significantly over the last years, and we now cover more than 80% of the fleet with such agreements. This is exactly the type of business we want to continue expanding, especially in the marine segment. This concludes my first part, and I would like now to hand over to Rolf for the finance section.
Thank you, Fabrice. Good morning, and welcome also from my side. Over the next three slides, I will cover the group financials, starting with the income statement. Total order intake increased by 5.4% to CHF 422.5 million, with positive contributions from both divisions. Adjusted for a 0.5 percentage point tailwind from currency translation and a 2 percentage point contribution from the Fornovo Gas acquisition, organic growth remained solid at 2.9%. Sales declined by 11.1% to CHF 459 million, excluding a 0.4 percentage point positive currency translation effects and 2.1 percentage point contribution from Fornovo Gas, organic decline was 13.6%. As Fabrice explained, this reflects the lower opening order backlog after the record levels of previous years and the expected timing of project deliveries. Gross profit reached CHF 131.4 million, corresponding to a margin of 28.6%. The 0.3 percentage point improvement mainly reflects the higher share of the service in the sales mix.
Selling, general and admin expenses remained stable at CHF 63.4 million. Due to the lower sales base, however, they increased from 12.3% to 13.8% as a percentage of sales. Research and development expenses decreased by CHF 2.5 million to CHF 12.7 million, or 2.8% of sales, which compares to 2.9% in the prior year. Activities remained focused on marine applications, digital solutions, as well as new applications. Other operating income was CHF 0.9 million, compared with an expense of CHF 2.1 million in the prior year, mainly due to foreign exchange effects. EBIT amounted to CHF 55.5 million, resulting in a reported margin of 12.1%, compared with CHF 65.5 million and 12.7% in the prior year. The current period result includes CHF 3.4 million one-off restructuring costs, and excluding these costs, as Fabrice mentioned already, the margin was 12.8%, which is broadly in line with the prior year.
Higher financial income partly offset the lower operating profit, while the effective tax rate increased from 23.3% to 24.9%. Net income therefore amounted to CHF 43 million, compared with CHF 48.7 million in the prior year, and earnings per share were CHF 12.74. Overall, underlying profitability remained resilient despite lower sales and temporarily disrupted market environment. Turning to the summarized cash flow statement, cash flow from operating activities increased to CHF 59.9 million from CHF 30.3 million in the prior year, supported by positive developments in accounts receivables, thanks to strong cash collection. Cash from investing activities was minus CHF 36.4 million, mainly reflecting maintenance and IT CapEx, and the acquisition of Fornovo Gas in Italy. Cash flow from financing activities was minus CHF 63.9 million, mainly due to the CHF 60.9 million dividend distribution, which is broadly in line with the prior year.
Currency translation difference contributed positively with CHF 14.5 million, mainly from cash positions held by subsidiaries in China and other locations outside Switzerland. As a result, the group's cash position stood at CHF 237.1 million at the end of September. Borrowings remained broadly stable at CHF 152.2 million, which is mainly comprising the CHF 150 million bonds, which has a term until September 2028. The group therefore ended the first half with a positive net financial position of CHF 84.9 million. That compares to CHF 6.3 million in the prior year. Overall, strong operating cash flow further strengthened our financial position and flexibility, despite the dividend payment and the acquisition we made in the reporting period. Let me conclude with the balance sheet, which remains on a solid footing. Property, plant, and equipment increased moderately to CHF 179.5 million from CHF 172 million in the prior year. That includes CHF 7.5 million coming in from the Fornovo Gas acquisition.
Inventories decreased by CHF 71.4 million to CHF 366.8 million, mainly due to lower work in progress as more projects from the high order backlog were completed and delivered. Customer advance payments normalized to CHF 271.5 million. Projects remained more than fully pre-financed by customers, with a positive net balance of CHF 36.6 million after work in progress and advance payments to suppliers. Trade receivables decreased by CHF 16 million to CHF 254.9 million, reflecting our continuous collection efforts. Receivables overdue more than 90 days increased to 40.8% from 37.8%, while the absolute overdue amount remained broadly stable at a high level. Shareholder's equity increased by CHF 33.9 million to CHF 337.7 million, mainly due to net income and positive currency translation effects, partly offset by the dividend and the goodwill from the Fornovo Gas acquisition. Accordingly, the equity ratio improved by 3.1 percentage points to 29.2%. The balance sheet total remained broadly stable at CHF 1.16 billion.
In summary, the positive net financial position, higher equity ratio, and continued customer pre-financing provide a solid foundation for the group's strategic development. Thank you for your attention. With that, I hand back to Fabrice.
Yes, thank you, Rolf. Let me conclude with our outlook. I mean, with this positive half year, we confirm our fiscal year 2026 guidance of CHF 900 million to CHF 1 billion in sales and an EBIT margin of around 12%. Actually, when we originally set this guidance, one of our assumptions that we communicated in June was that the Middle East situation would normalize during the second half. Today, this assumption has changed, and we expect market disruptions to continue because there is really no sign of improvement. Nevertheless, several other developments give us confidence to maintain the guidance. First, the current order backlog and scheduled project deliveries provide visibility for higher sales in the second half. Second, we have implemented measures to structurally optimize our cost base. They will start to have a positive effect in Q4 of this fiscal year.
Third, we continue to see new market opportunities, and we expect further commercial synergies from Fornovo Gas. So, while the mix of assumptions behind our guidance has changed, our expectation for the full year has not. Of course, the outlook remains subject to geopolitical developments and other global or regional disruptions. Looking now beyond the current disruptions, the fundamental drivers of our markets remain intact. Our business continues to benefit from three structural megatrends, which you know by now. First, population growth continues to increase demand for energy, transportation, chemicals, polymers, and industrial gases. Second, energy security is becoming increasingly important. Despite creating market uncertainty in the short term, the blockade of the Strait of Hormuz has further increased the strategic importance and urgency for governments globally to invest in additional energy infrastructure.
This includes LNG and LPG storage, gas pipelines, and transportation infrastructure, ships, which are applications where we play a leading role. The Middle East countries with an access to shipping routes other than the Strait of Hormuz, meaning Oman, U.A.E., Saudi, are also planning new investment in refineries and petrochemical plants. Third, the energy transition continues to require new infrastructure and technologies. The examples we mentioned today, from biogas to CO2 transportation, demonstrate how we are positioning ourselves in these growing markets. Together with the measures we are taking to strengthen our cost competitiveness, these opportunities also provide the basis for our mid-range plan ambition of around CHF 1.2 billion in sales and an EBIT margin of 12%-15%. Thank you for your attention this morning. With this, we open the floor for questions, which Sandro will take and give to Rolf or to myself.
The first question for you, Fabrice. The question is, what can we expect in terms of order trends for the group and the division into H2?
Well, as you know, we do not give order intake guidance, especially not in such a volatile environment. It is hard to say. I mean, I mentioned all these positive factors which we have. We have the marine business, which continues to be good. We have a number of hyper compressor projects in the pipeline, but the timing is a bit unclear. We have improved regional coverage, new applications. We have Fornovo Gas, where we see synergies. So, a number of positive aspects, but at the same time, we have a big uncertainty in the market, in the geopolitical situation, and that makes the decision on large projects difficult for our customers. If they come, then it could all come good. If they postpone further because new things happen, then it will be more difficult. So, hard to say exactly when the timing of the recovery will come.
It is really linked to the disruptions.
Following the first question, [inaudible], in June, you said about three-quarters of the guidance midpoint was in backlog at the start of the year. Where does the low end of the range sit if the geopolitical backdrop doesn't normalize?
Well, it sits at the lower range of our guidance, which is CHF 900 million. Actually, if you look at the backlog, it should be slightly more, very logically, but we don't know what Trump will do this week in Iran, what it will mean, and that's why we remain prudent. That's why we didn't change the backlog. A number of things can still happen in the world, and the lower point is CHF 900 million. As you see from the figures, we are well on track to reach the midpoint. That would be the logical conclusion of this half-year figures and what we see in the backlog, but we still want to keep the lower end at CHF 900 million just to be on the safe side.
Thank you very much. A final question, by when should the structural order growth in services come back?
Again, it's linked to the disruptions. If you look at the Middle East, we have almost 40% of our business there, which is stopped at the moment because facilities, refineries, petrochemical plants are running at 40%- 50% reduced capacity. That's really a hit that will come when the situation improves, and the additional impact in Asia will come to that. I mean, the main impact will be this recovery when the situation improves, and then the continuation of the structural growth linked to the installed base continues in an underlying way, I would say, just like you've seen with the marine business, with the long-term service agreements. That will certainly continue, but at the moment, it's just about compensating the short-term impact.
Thank you, Fabrice. The next question would be for Rolf. I think we partially answered this question already, but we can repeat it. Can you split the 2.5 percentage points gap between reported and organic sales growth into ACT, Fornovo Gas and FX?
Can certainly give that information. The FX effect counts for 0.4 percentage points, and 2.1 percentage points is the effect from the Fornovo Gas acquisition.
Thank you much. The follow-up question was also, what revenue run rate should we assume for Fornovo Gas for the rest of the fiscal year?
Right. So far, in the first half, we have about CHF 10.5 million from Fornovo Gas overall sales contribution. That is for about two and a half months. Extrapolate that ended up close to CHF 60 million. Run rate when we acquired it was between CHF 40 million and CHF 50 million, depending on the year.
To Rolf then, another question from Fabian Piasta from Jefferies. In your last call, you provided some granularity on the order pipeline. Most projects were either pushed or canceled. Fabrice, you can take the question.
Yes, indeed. I mentioned how the pipeline of big projects was evolving. I mentioned at that time that we had 15 large projects in the pipeline for sales in September last year, so just one year ago. in June, most of it was still here, but not yet decided by customers. Now, the update is as such. I mean, these 15 projects, they were representing CHF 340 million, just 15 projects, CHF 340 million of potential business to come in the following 18 months. Today, I can say that we have won four of these 15 projects, represents about CHF 80 million-CHF 90 million. We have lost none of them to competitors, very important. There were three canceled, so really 20% of the projects were canceled, and that means that the remaining eight are still in the pipeline.
They are mostly Hyper projects in China, marine projects, and Middle East projects. Overall, from the CHF 340 million, we still have, one year later, CHF 200 million remaining out of these eight projects. This is really what we see, and that's why it's hard to give a guidance on order intake, because these projects, they are here. Customers are about to decide, and they're still working on them, but they are not pressing the button. Hopefully, probably they wait for a bit more stability to press the button.
Thank you very much. Then another question for you, Fabrice. Can you give indication how pricing dynamics are evolving in this environment?
Pricing dynamics are rather, let's say, challenging because the market is overall tense. We have more pressure on the pricing side. At the same time, in the applications where we grow, like marine, with our new compressors, there we still enjoy very large market share. You remember on LPG, we have more or less LPG tankers, we have more or less 100% market share. LNG tankers with high pressure, we also have 100% market share. Merchant ships, we can now gain market share with our new compressors. Overall, that's our way to fight this, because when we have this kind of market shares, the pricing is there, not affected. It's more in the refinery segment, for instance, industry gases, gas gathering and processing, that there the pricing competition is higher. These are also the smaller segments for us.
Another question for you, Fabrice, regarding order intake. The question comes from Christian Salis from Cantor Fitzgerald. Now that order intake seems to have reached a positive inflection point, when can we expect sales to follow suit? For example, return to growth again?
Here, I mean, we'll give the guidance next year for the sales, but you see that we are still consuming backlog. It will take some time before we come back to sales growth. Again, we'll say more in June when we see the backlog.
There's a similar question coming from Andreas von Arx from ZKB . In H1, orders point to an annual sales level of CHF 800 million- CHF 900 million. This is significantly below, first, the midterm CHF 1.2 billion target, and second, current midterm consensus of CHF 1 billion. What do you see as key pillars to close the gap, and how good do you see midterm visibility today to reach these high levels?
Indeed, this is clearly lower, and that is why we have not put a timing on the mid-range plan. How do we see the gap? I mean, that comes back, maybe I can link that to the previous question. We have just CHF 200 million of large projects waiting for customers to decide, and that already could close the gap. Plus the service business stopped more or less in Middle East, plus all the customers in Asia are waiting. Then plus all the new opportunities that are created on the positive side by the Strait of Hormuz. Energy security in the coming years will become an even more important topic for investment. I mean, just like defense has been a growing topic in the past, not for us, but overall for the year, as priority for the governments.
Defense was a key topic in the last three years, and energy security becomes a key topic for the governments in the next three years or more, because they see the impact on the population when the oil is not flowing, when the petrochemical products are not flowing, when diesel is not flowing. I think this mega trend will create the market dynamic to reach the CHF 1 billion-CHF 1.2 billion for sure. Again, as soon as customers feel that there is enough stability to invest, which is the question mark at the moment.
Thank you very much. Then we received many questions about the margin outlook for the second half. The main question was, your margin outlook is conservative. Are there any specific factors why margins should be lower in the second half? Maybe Rolf can take this question.
Yeah, it is a good question. I mean, in the second half, there should be a benefit from the higher sales and the better service mix within the sales mix, service share. On the other hand, we expect also a less favorable sales mix in the systems division, and uncertainty remains also around the regional capacity utilization. With all that, overall, a 12% approximate EBIT margin remains an appropriate expectation.
Thank you, Rolf. The final question also goes into the financial section, maybe you can also take that. The question is from Andreas von Arx from ZKB. Are the reductions in R&D and CapEx just temporary adjustments in H1, or is this structural? What is the CapEx guidance for 2026 and 2027, fiscal year?
We have no intention to lower our efforts, therefore also not the expenses. These are also not linear expenses. They do not occur month by month on an equal amount. So the CHF 2.5 million less investments compared to last year, not a major change. No, we have no intention to lower that, it's not structural. On the CapEx side, we expect CHF 20 million-CHF 25 million maintenance CapEx per year. On top of that, we mentioned that also during our Capital Markets Day a couple of years back, we have about CHF 20 million-CHF 30 million investments in additional manufacturing capacity. As we speak, we are about to build a new factory in India, and we also do some IT investments. Fabrice mentioned earlier, we have an ERP rollout going on, but that's about approximate CHF 20 million-CHF 25 million regular maintenance CapEx per year.
Maybe [inaudible] level with depreciation.
What you could add as well on the R&D, the guidance that we've given, that we will spend around 2.5%-3% of sales in R&D, that remains. So if sales go down, we will adapt, we will postpone a couple of projects so that we spend the money that we can afford. But it's not a structural change, it's just a temporary change to adapt to the sales level.
We just received one more question from Laurent Juban from Octavian. Question is for Fabrice. Do you expect that marine momentum to continue in H2, and how confident are you of keeping the systems margin above 10% in fiscal 2026?
Yes, indeed. The marine business is very active. Ship owners earn a lot of money at the moment. When they rent, I mean, for instance, the oil carrier, the price to ship oil from Middle East to U.S., I just read this week, moved from around CHF 1 million-CHF 2 million before the war to more than CHF 30 million. This money is just flowing to the ship owners, so they get a lot of cash. These ship owners, especially the family ship owners, there are many of them, typically when they have cash, they reinvest in ships, because that's their wealth, that's the way they manage the family business. That's why we expect some additional ship orders in the coming years.
Also, that goes together with the fact that LNG will continue apparently longer than what we expected maybe five years ago, where we expected LNG to peak around 2030. Now it looks like it will last longer, so there will be a need for more ships. These ships need to be more efficient to reduce CO2 and methane emissions, and that's why they will scrap some old ships and invest in new ships. So that's rather positive on the LPG. Also, it's rather positive for the next six months, so that's positive. The question that remains here, as you know, and it's for us important, is the decision on the technology for LNG tankers. High-pressure engine on LNG tankers are great for us because we have 100% market share for the corresponding compressor. Low-pressure LNG tanker is more difficult for us. We have some products, but not very competitive.
Here, the decision is still I mean, we still have some customers really wanting to invest in high pressure, and maybe we see some good news here in the coming six months, but somehow the market has not fully decided what they want to do here. That's one of the main factors for an upside on our order intake side.
Oh, and the margin of 10%, sorry. Here, we have at the moment a very good product mix in the sales, and we also had, until last month, some very good capacity utilization. The good product mix is linked to the deliveries of the LPG compressors. We should continue the next couple of months, but then we cannot count on such a good product mix for the next six months and for next year. I would be careful. I would not promise that it will stay at that level, which is the reason why we remain careful on H2 as well.
Okay. There are no more questions.
Okay. Then thank you very much. I mean, let me wrap up quickly about the key messages for today. Order intake returned to growth in both divisions, and we managed to compensate the short-term disruptions on the systems side by entering new applications, on the services side by leveraging our installed base. We have lower sales, and they reflect the lower opening backlog and the expected project phasing rather than a deterioration in demand. The underlying EBIT margin remains stable at 12.8%, excluding restructuring costs, versus 12.7% last year. We are reducing our cost base with approximately CHF 20 million of annual savings expected from fiscal year 2027 onwards. We have been delivering strong operating cash flow and robust, and we still have a very robust financial position despite the high dividends and the acquisition of Fornovo Gas. That will conclude our presentation today.
Thank you very much for your presence and for your questions. Have a good day.
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