Ladies and gentlemen, welcome to the H alf-Year 2024 Results Conference Call and Live Webcast. I am Alice, 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 a Q&A session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Heinz Baumgartner, Chairman of Bystronic. Please go ahead, sir.
[Foreign language] And now I switch to English. So once again, good morning everyone. Thank you for your interest in Bystronic. And welcome to today's conference. I would like to take the opportunity at the beginning to quickly introduce you to Domenico Iacovelli, our new CEO.
Domenico has a very profound and successful proven track record, knowing the sheet metal industry very well from various CEO positions, such as CEO of Schuler, CEO of ANDRITZ Soutec, as well as member of the executive committee of ANDRITZ Group. Or in other words, Domenico is the right person to navigate Bystronic through currently very rough sea. Domenico is only a couple of weeks with us. I'm very impressed how quickly he has started to thoroughly assess and understand the challenges we are facing.
Nevertheless, I would also like to request from you, please give him the necessary time he needs to carefully assess all issues in order to make sure that at the end we execute the right corrective actions. Having said this, once again, welcome on board, Domenico, and I want to know to you, the floor is yours.
So thank you very much, Heinz. Basically, you made the introduction for me with high expectation. On the other hand, you made the bridge to have a little bit of time. Nevertheless, I would like to take the chance to welcome you as well. So good morning, ladies and gentlemen, and welcome to our half-year results for 2024. I think it's not a secret we are all not happy about what we are going to see today, what we have published already so far today.
As already mentioned by Heinz, I'm on board since a few weeks. I took over the position as CEO since the 1st of July together with me for the presentation. Today is Beat Neukom, our CFO. But before we start, please kindly take note of our disclaimer. It's basically the time I needed to read it, so we go further. Let me introduce you to the agenda.
So I will give you a first business review and, of course, some first impressions I have got about Bystronic. Then I will hand over to Beat, which will go through the financial review with you. At the end, I will try to make a short outlook. I think everybody's expecting to hear something. And last but not least, we will have a Q&A session, which I think will be the most important part of today.
Afterwards, we will even have a lunch together for whom wants to stay, which will be a further chance for exchange. So let me shortly introduce myself as well. I mean, many things already said by Heinz. I was born in 1976, so I still feel young to take the burden at Bystronic. So I still have a few years to go in my business career. I'm Swiss national. Yes, it's true. I'm since 20 years in the sheet metal industry. It's unbelievable. I started with a laser welding company, which was a very successful one. At the end, I had a difficult time where I got really the chance to grow from a software engineer to the CEO of that company. It was 2011.
From 2011 till 2017, I was the CEO of this Soutec AG, whereafter I took over the position as CEO at the Schuler Group, which is basically, or by far, I would say, the biggest press manufacturer in the world, located in Germany. I had a similar situation when I started there, I have to admit. So we were just going into the disruptive situation in the automotive market, which impacted a lot on the business there.
So what's happening here is not new to me. The last two years, I was even part of the executive board of the ANDRITZ Group. ANDRITZ is a large system and machine manufacturer home-based in Austria, doing EUR 11 billion, 30,000 people. I was in the responsibility of the metals area where Schuler became a part of it. Widely, I would say the metals business was the Schuler business.
But beside the business, I even had the group functions, IT and digitalization. It comes somehow with my background. So I do believe that I know what we are talking about, at least in our business. I know the customers. I know what sheet metal means. And unfortunately, I know even what the economy waves or the cyclicity are in this business, which we have to tackle. So as already mentioned, I started the 1st of June 2024. I had a four-week overlap with my predecessor, and I took over from 1st of July. So I want to give you some first impressions. When I joined Bystronic, I had the chance to visit all the sites, basically all around the globe. I think we are a global player. We have a fantastic setup everywhere in the world.
It was very important to me to understand how we are going to serve the market. So I had the good chance to visit our sites, whether it was in China, in the U.S., Germany, and even in Italy, and of course, Switzerland. But I think the key was as well the chance to meet with the customers. So we were talking about job shoppers. You will see it later in the presentation as well.
This is a world depending on the big OEMs, right? So the big OEMs, basically, they lead the market. And then you have the tiers, you have the steel service center, and then you have the job shoppers. So it's a kind of a chain. So when an OEM starts to struggle later on, the tiers will struggle later on, the steel service center will struggle.
Of course, the ones which will take the full burden are our customers, which are basically the job shoppers. So talking to them was very important to me to understand why they buy Bystronic, but even to understand what we could do better, because for sure, the downturn we see right now is mainly driven by the economy, but not only. So we have to be somehow even a little bit self-critical, I would say. So it was an eye-opener and very good for me to have this onboarding.
I've seen even some highlights. I think I want to point out this as well. I mean, our highlights definitely are our teams, right? Our people. We have unbelievably engaged people. We have a treasury of know-how in our company. We have a fantastic history. We have, I would say, a fantastic brand, which you can see in our product.
I do believe, and I think I can say that we are somehow the market leaders in terms of technology. We are becoming more and more an end-to-end solution provider, which will be one of the keys of the future. If it goes in developing the company, end-to-end means that we are not only delivering a machine, but we are delivering a full system being capable automatically to produce the sheets needed by the customer. So are we yet there? I don't think so. We will talk about a little bit later. But for sure, it is the right strategy to go without forgetting about our main and bread and butter business, which are our machines itself, right? So I've seen some focus areas. It's clear, customers, it's key, right? We have to turn around the order intake situation.
I think order intake will, in my era, be the most important KPI and not net sales. I always say, if you have order intake in absolute numbers and you have EBIT in percentage number, you just manage the sales, right, to get there. You have to manage the costs to get there. I think this is a message I want to convey as well later on. Customers have to be our main care. We have to put the customers back on the top in everything what we are doing. I have some, of course, I met many, many people of our organization, but not all of them. I need to understand our teams, how we organize, where our strengths are. We have to strengthen and optimize our end-to-end business approach. It's not a secret.
I think we already mentioned this this morning in our press release. We are facing some frictions which are leading to some project deterioration when it comes to system. It is a transition from a classic machine manufacturer, which basically builds a plug-and-play machine, to a system provider which provides basically a wide part of a factory, right, including the software, including the ERP system and the MES system.
So it is a transition which costs money. We have to say this, right? Then, for sure, a focus area as well. It is, as nice as it is to have a global setup, an operational setup has to have the right size for the market we serve. And I think here we can optimize, honestly speaking. So there is room for improvement. So I will definitely review our organizational structures and optimization potential.
Now, please let me come to the key figures. You have all seen it. We had a very, very weak order intake of around about CHF 305 million. In absolute terms, this is around CHF 116 million less than last year in the same time period. So it's dramatically low. This impacts, of course, even our order backlog, which is CHF 238 million less compared to a normalized level.
Therefore, our sales declined more or less in line with orders and amounted only to CHF 330 million. Because of the low sales volume, our EBIT loss amounted to CHF 23 million. And you see, I hardly can say this number. It's the all-time low we had in our history. So it is a tough impact in our business. But Beat will for sure elaborate on this one furthermore when it comes to the financial report.
So in line with the loss, our ROA was negative with 15% as well. Our operating free cash flow was negative CHF 27 million. For such tough time like this, we are pleased. I cannot say we are pleased, but for sure, it gives us a certain security that we can still rely on a strong balance sheet. It is important, and it will help us to manage this storm or to go through these tough times.
But on the other hand, it shouldn't give us the security that we are safe, right? I mean, we want to make it much better. So insights into our current market dynamics, I mean, we have a very weak development definitely in our key sectors. I mean, one of our strengths was definitely agriculture. Besides many, many others, we have a dramatic decline in requests for machines.
I don't know who read the news, but even John Deere, which is one of our big key customers or global key accounts, let's call it like this, are reducing stuff in the thousands of level in the U.S. So the agriculture market is under pressure. It's not only the agriculture. It's, of course, even some automotive white goods and all the markets. Basically, we serve. This somehow led as well to an underutilization of our equipment, which on the other hand led even further to put service under pressure. We are still on track. We still have a growth. We're still positive on service. But even there, we can feel that the machines are underutilized.
And when it comes to wearables and consumables, of course, this is a kind of a stream which we are missing, which is important for us to have a kind of a floating of small business, which gives us a certain security. So, other than expected, I don't see signs for recovery yet. I mean, I have to say this clearly. So it means that we have to work on ourselves. It's not that we can just wait that things are getting better. My personal opinion is always we shouldn't wait that it gets better.
We have to work on ourselves. But again, we have to strengthen our exposure to all the fast-growing end markets. And I think that's a good thing. We have many opportunities. We have a fantastic product portfolio. And again, I do believe that our strategy to go for end-to-end solution is the right one.
I see, honestly speaking, I really see opportunities. Commercial progress. It's hard to say commercial progress in these tough times, right? But on the other hand, it's not that we are sleeping. It's not that we are doing anything. We strengthened our system portfolio. We are bringing up new products such as the ByCut Eco and the ByCut Nova, which are for lower segments.
Y ou can imagine when the market is under pressure, customers are rather buying, I'm not saying cheaper machine, but machine with less functionality, good enough machines. I think we have here the right products to answer on this demand. We are coming up with these new products within this year. I'm very confident on this one. Of course, it's not that the new products are saving these years, but I mean, at the end, we definitely look to the future.
So the second one where I do see low-hanging fruits, it's in the project execution. I have a wide experience from my past life, even in projects. I mean, at Schuler, basically, we had around about 3,500 units in machine business, but we had even large projects. And I do believe that we can increase our project execution excellence to reduce the project deteriorations, right? I think this is a very high, low-hanging fruit. How much can we materialize within this year?
It's difficult to say, but definitely, it's ongoing. Our service, I told you already, the lower utilization of customer machines definitely impacts in the demand from our customer. Sales is slightly below previous year, but still on a very good level. This gives me some confidence. And I have even to convey you that during my talks with the customers, they still feel a very strong support.
They see still in Bystronic to be a very good service provider. For sure, we have to somehow manage pricing and so on. It's clear in tough economic times, everybody tends to double-check every pricing before he buys. Then software and solutions. Again, I personally believe that even here we are on the right path. We have an increased demand for complex automation solutions. It is a key, right? I think here what we have to do is definitely to try to commercialize it better, right? So far, customers, they ask for it, but they hardly pay for it. So this is definitely a transition in our market as well. But we were able through this solution to open up new markets, which basically in the past were somehow closed market without now mentioning Australia and the United States.
There are several orders as well where we really can make the difference with our solutions. This was somehow my part, my first part. I would like to hand over to Beat with his half-year results. Beat.
Also a warm welcome from my side. As Domenico said, we'll now have a more detailed look into the financials. I will start with giving you some flavors about the regional performance, both on order intake and on net sales. What you can see here on this slide is that order intake declined substantially in all regions due to the environment that Domenico was telling us, economic market conditions, etc.
Now, when you look into the orders, what you also see is that against the overall trend, that is the macro trend that we have seen over the past years, there is actually a tendency back now towards single machines, which are smaller investments for the customer, shorter delivery times, and obviously then better financing conditions. And they also tend to buy machines, especially on the laser side. There's kind of a downgrading from the Gold segment with more features and higher laser power to the Silver segment.
So there's a clear trend, which has an unfavorable impact on the margin on our backlog. Then completely on the other side is we do see an increased demand for larger projects. These are mainly OEMs with multiple lasers, bending cells, loading and offloading systems, sorting systems, storage cells, etc., etc., then all supported by our software.
Now, looking at the regional development, about 50% of our order intake is coming from the EMEA region. We do see some, albeit on a very low level, we do see some sequential improvements kind of starting in Q4 2023, now going into Q1 2024, and then also into Q2 2024. The Americas used to be our growth engine in the past, basically because of some offshoring activity, because of our presence in the U.S., and was able to compensate some parts of the decline in other regions. The normalized backlog, we started off the year 2023 last year and now working down our backlog and the reduced demand in the Americas ahead of the upcoming elections and also the still high interest rates kind of hold our customers back from making an investment.
China, again, there is a decline already on a very, very low level, continues to be very challenging for us. It's very competitive. There's a high price pressure. And for us, this means also lower participation rate because we're not participating in some of the low-level, really back to the lowest level competitive transactions. APAC, this means for us, this means mainly the market, Korea and Australia. Those are the markets which are important for us. Australia has a large potential, especially for the solution business. It's more like a westernized market with high labor costs and a solid industry. So automated solutions here is the answer. Now, Korea benefited from some government subsidies in the past, especially coming out of the corona pandemic, so back in 2022, and customers basically are waiting to get these renewals of these programs.
In addition to closing less projects, we also had a little bit of an increase in cancellations. They're still on a low level compared to the backlog, but we do see an increase. So they're a little over CHF 10 million and are higher than in the past and impacting our order intake number. So because customers, the economic difficulties for them decide or make the decision to cancel some of the orders. Now, what do we do or what have we done to fight the declining orders? We started to give some more pricing flexibility. We have dedicated marketing campaigns also with our leasing partner. And there's the EuroBLECH coming up at the end of October, which is held every second year. And it's now time again at the end of October in Hanover.
And then Domenico talked about it already with the launch of the ByCut Eco and ByCut Nova laser cutting machine. We will strengthen our offer in the lower price segment. Then we continue to conduct further analysis on the overall organizational structure, now also with Domenico coming in and bringing his expertise. Looking at the P&L, we closed the first half with CHF 331 million in net sales and a loss of CHF 23 million on EBIT. In terms of sales, it's a decline of CHF 137 million or 29 percentage points respectively. Only about CHF 14 million or 3 percentage points are coming from unfavorable FX development. Service with CHF 111 million of this CHF 331 million has been more resilient. But also there, we're experiencing a decline of around 5% because customers are less busy.
They spend less money on spare parts because the machines are being consumed less. They do less break and fix because the machines are operating less. And also for the non-captive parts, customers are more active on the internet and looking for third-party products that they can buy and use. Our systems business has a decline of 33% on a constant currency basis.
And let's remind ourselves in 2023, we benefited from a high order backlog of over CHF 400 million, which is now down to CHF 239 million at the end of June this year. Some positives on this P&L is the development of our gross margin. The gross margin improved by 1.6 percentage points. This is, on the one side, driven by an overall mix from a segment perspective, so with a higher service business compared to a machines business that is a driver.
But we're also benefiting from the work that our sourcing department is doing from a reduction in material costs on the machine side. And it's partially offset by the unfavorable mix within the laser segment because, as I said, in economic challenging times, people are tending more to buy less features in the machines or even downgrading from gold to silver. Going to the personnel expenses, over the last 12 months, we have done a reduction in force of around 300 FTEs, which represents about eight percentage points.
And it's done across all functions in the organization and also across the globe. Overall, the material, sorry, the personnel expenses are declining by six percentage points but were not able to compensate the decline on the net sales. And the same is true for the operating expenses, which declined by 16 percentage points. There, part of it is purely variable costs.
But then also, on the other hand, we have done, as part of the cost optimization program, we'll come to that on the next page, a reduction on our fixed operating expenses. In summary, however, the cost-saving initiatives were not able to compensate our large operating leverage and absorb the significant overcapacities we have, for example, in production. Now, a few words on the cost optimization program. We announced a cost optimization program earlier this year with our Q1 update, and I want to give you kind of the status for that. We have measures taken both on structural and volume-related costs, such as streamlining our leadership structures, reducing headcount, and implementing short-term work at our Netherlands facility. The structural adjustments are being executed over the year of 2024, as we have announced.
Due to the one-time costs in this year, we'll only see a marginal impact from that in this calendar year. Then we'll have an impact, an annualized impact then in 2025. Some examples of the cost-saving measures that we have taken, for example, in EMEA, we reduced management layers by combining countries and functions. We formed now, from independent countries, we formed six market clusters.
By combining them, we have been able to take out some management structure. In Asia-Pacific, we closed the regional functions in Singapore. Most Southeast Asian markets report now into Song, the President of China, because these markets have similar market dynamics as China. Further actions have been taken, for example, in reducing FTEs in various admin functions. We transferred some of them to our nearshore center of excellence in Poland. A word to some one-off costs.
In the first half, we booked costs for this cost optimization program in the magnitude of about CHF 2 million. There's more costs to come in the second half. However, we do not expect that the originally or thought 10 million will need to be spent for this cost optimization program. Looking at the balance sheet, Domenico already mentioned it.
We continue to have a very strong balance sheet with an equity ratio of about 70%. Cash and securities decreased by CHF 45 million compared to the end of last year. 25 million of that 45 million reduction is due to the dividend payment earlier this year of CHF 25 million. We still have a cash and securities level of over CHF 300 million. Now, on the inventory side, they actually increased by CHF 7 million to CHF 244 million despite the sales reduction.
This is due to higher semi-finished products and some systems that are close to completion and to handover. You do also see that, which is a little bit counterintuitive when you have a decline in order intake on the advance payments from customers. Also, the advance payments from customers actually increased by CHF 7 million. This is because we have received the second and the third payment, which is an indication that these systems that are in our backlog are close to completion and to generation of sales. Net operating assets remain at about CHF 300 million. Now, my last slide before I hand back to Domenico is on the operating free cash flow. It's basically impacted by the negative result of CHF 21 million.
working capital were at the same level or approximately at the same level as at the beginning of this year of about CHF 778 million and remained flat. Also, our CapEx is at the same level as last year and we're really holding back on investment. As you can see on the right-hand side of this chart, we have a CapEx to depreciation ratio of 58%. So in summary, the operating free cash flow was negative by CHF 27 million in the first half. All right. This concludes the financial review, and I'm handing back to Domenico.
So thank you very much, Beat, for the deep insight you gave us. I'm coming now to the last slide. I mean, many things have already been mentioned during the day. Personally, we don't see signs of market recovery.
So it is even the situation that even though we have some recoveries in certain areas of the world, we see now even the U.S. going down. So it's not that the whole world is going down at the same time. So it's a kind of a sequence, which is quite normal in our business. So therefore, we see more or less the same development in the second half year of 2024. We will definitely continue with our measures to move closer to the customers. And we have to become much more efficient. I think this is one of the keys when it comes to the end-to-end solutions. And with that, even improve our customers' experiences, right?
I think we already mentioned that with that, we have to reduce the costs we have on the end-to-end solution so we don't get paid if we take double the time to make an installation. So it's burning money. That's the reality, and we have to face it. I mean, Beat talked about that we reduced costs on the PEC side. We reduced costs on the OPEX side. Due to the dramatic lower sales we have, it's definitely not enough. If it will stay like this, right? I mean, the reality is that compared to net sales, we had 28% in the half year of 2023. And with this very low net sales today, we are at 37.1%. So even though we had a decline in PECs in absolute numbers compared to net sales, we are still too heavy, right?
The same situation we have with the overall operational expenses, which basically from 22.4% last year, we are ending up at 26.6% this year. So if we will figure out that this is the new volume, which we do not believe today, and for sure, we need to do much more investigation on this one. And it's far too early for me to make this statement that we have to go there. But if we see that this is a reality, we have to definitely deep dive on this one. So I think Outlook 2024 in a nutshell, right?
Market conditions are remaining challenging. And Bystronic does not expect recovery in the second half of 2024. So as a result, the group expects order intake and sales below previous year levels. And accordingly, we will face a significant loss for the full year 2024.
With that, we are done with the presentation. Let's move on to the Q&A session. We will first take the questions from the room here before we move then to the people participating online. Patrizia.
Yes. We'll start with the questions from the room. Please raise your hand and also mention your name and the company you're working for.
Thank you, Patrizia. Good morning, everybody. I would like to challenge you, Mr. Iacovelli, on the statement that you see or you have to increase the exposure to other fast-growing end markets. Apart from defense, I do not see such a market currently. So is that with new products? Is that with more systems? Or will you circumvent the job shoppers, which are your main client base?
No, I mean, very good question, by the way. Thank you very much. I mean, job shopper will stay our main customers. I think this is a message I want to convey. We have to move towards end-to-end solutions. We have to move towards new markets without letting our customer base fall. I think this is a very important message because usually companies tend to go behind the strategy and forgetting where to get the money from, right? So this, first of all.
Secondly, these markets, for me, there are EV markets as an example, right? We have already bigger projects we are working on, which I hope to finalize in the third quarter, which are going towards automotive OEMs, where basically Bystronic was not in in the past. So there is some market, especially with OEMs, where we are not yet present, where I see a chance.
Does that require you to change also your products, make them?
Good question. We have a wide product range. It changes a little bit our approach to the market. It changes a little bit our exposure, I would say. But we definitely have already the products to attack these markets.
The second question, if I may, regarding the projects, the big projects that seem to have gone out of control. What was the error? How can you fix it? How fast can you fix it?
I mean, I would not say they are going out of control. It's a bit tough wording, so I would not agree on this one. We are talking about project deterioration. So if you do something the first time, right, you have certain learnings. Did we expect it? No. I mean, this is the point. But the reality is we could now talk about project deteriorations, or we can even talk about we did R&D.
If we do R&D to create a new product, nobody is challenging it, right? If we do a project to learn, everybody is challenging it. How we can fix it? Very easily. Just learning. It's catching the mistakes we did and don't repeat it, right? So basically, every project is a learning project. I think we are right now coming very close to have it really under control.
We see it in the new projects, right? I mean, there are very easy indicators, KPIs we can use. I mean, how long it takes to make an installation, right? If you for the same project in the past, we had 6 weeks, and now we have two weeks, we have a three-times improvement, right? So we see already the improvements.
Thilo Bach, AWP. You mentioned, I guess, more than once that you don't expect the recovery in the second half of 2024. But I also heard you saying that you've seen some recovery in order intake coming in. Was it in Europe? Or I'm a bit confused about that. You see recovery from Q1 to Q2. But yeah, you can help me here a bit.
Yeah, I can. I mean, EMEA is slightly better in Q2 than in Q1, whereas we see the other regions being weaker in Q2 than in Q1. That's exactly this dynamic we see all over the year. We expect now in Q3 to have a weaker U.S., whereas the other ones are going up. For the full year, it's kind of a balancing out.
And if you'll allow me a second question, I know that the predictions are quite difficult for you at the moment, but do we have to calculate with a similar loss in the second half as in the first half so that the operating loss could be maybe in between CHF 30 million-CHF 40 million? Or maybe it will be a bit better because of the measures you have taken already. And concerning sales, about the same. Do we see the same drop as in the first half, or can you manage it a bit? Thank you.
So market visibility is very, very limited at the moment, right? And all the backlog is not really increasing, right? And some of the orders we might get at, well, we will get at EuroBLECH, will not be executed this year. So if we assume not really a market recovery coming soon, then it's fair to assume that we would basically need to double what we have this year in the first half of 2024.
Maybe, Beat, if you allow, I would like to add something. I fully agree with Beat. On the other hand, it's even in our hand to decide how much we're going to invest for the future, right? I mean, we can take huge measures in the second half year to temporarily reduce costs, right, by jeopardizing maybe some development. So we have to still judge on this one.
I mean, we have to analyze the situation. How much are we going to invest? Maybe we have to do something even on the structural side. Are we going? It's an investment as well, right, which would impact as well. So for the time being today, please allow me to say that after two and a half weeks, so basically three weeks in charge, it's a little bit too early to say exactly what we are going to do. But it's clear.
We know more or less what we have to do. We will analyze it, and we will define, let's say, how much we should stop to further reduce the deterioration of the EBITDA and what is worthwhile to continue, which will impact negatively on the EBITDA to have a better future. I mean, we all see a future. I mean, this is a clear statement from our side.
From this point of view, if we continue as it is, this is the situation.
Yes, hello, Torsten Sauter, Kepler Cheuvreux. I would have two questions on the market and one on the company. And maybe I take them one by one. The company-specific one would be, can you elaborate a little bit about the differentiating factors of your equipment vis-à-vis the equipment of your key competitors? And how would these help you regain market share?
I mean, yes, good question. Thank you very much. I mean, definitely, we are a quality and in terms of quality and functionality and even in terms of software, I do believe to be, although allow me to say we are the market primus, right? I mean, this is a point. The reality is that in a weak demand, in a low market, people tend to buy for less money. That's unfortunately for sure.
I think Beat, as well as myself, we already emphasized that we are now launching a product segment with the ByCut Nova and the ByCut Eco to enter in there. But nevertheless, our promise to the customer is still the same. You get more functionality, you get more quality, and you get a product which is more reliable, right? That's the point. What we have to work on is to keep this promise. This I want to clearly state.
Okay, understood. Thank you. And then maybe just on the market, two things that came to my mind. If I remember correctly, last year after Q3, the company talked about signs of stabilization in the market. I think that was part of the press release. What has happened incrementally negative since?
Yeah, shall I take this one? I mean, I could go in the past when I was not here. So I can only give an outside view. So given that, I would add something maybe, yes. So what made us believe that we have seen a stabilization was basically the order intake from the at the end of September. We kind of looked at quarterly order intake. And it was around CHF 210 million every quarter. What has changed is mainly in the Americas, right? There has been a decline in the U.S. in particular, right, compared to the previous year. So when you look at order intake in Q1, well, already in Q4 last year, and then Q1 and Q2, it has been a notch down from the previous quarters in 2023.
Thank you, Trivio Sono from Stifel. Two, three questions also from my side. First, on the current trading, if you look ahead, you mentioned EuroBLECH is coming. Do you expect a rather cautious order momentum of your clients as they might wait for innovations, or don't you see an impact there? So might the order level even come in below the low Q2 level than Q3?
We don't see this. So we don't believe that it will be lower. Yes, we are facing again a situation right now in the U.S., which is mainly driven by the election in the U.S. So that's a very classic situation we face every 4 years, right? So this may lead to a kind of a rally in the U.S. after the election, but we're only talking about 2.5 months, which hardly will have a very positive impact in our results this year.
It might nevertheless cover somehow some weaknesses in order markets in terms of order intake. EuroBLECH usually always positively impacts. We are launching new products as well during the EuroBLECH. And from the experience, this always was a kind of leverage to the order intake. And it's too early to say which market recovers in which way, right?
This is right now not predictable, but again, I see it rather stable than a further decline.
Okay, thank you. On the savings program, you've shown limited to one-off costs now in H1. What do you currently expect here on annual level next year for the structure and volume part? Is it still a figure like in the mid-20s for each position, or has expectation come down a lot?
Yeah, can you repeat the question? I understand it's a one-off cost.
I think it's relatively high cost savings expectations for the savings program on the volume and structural part. So I think CHF 25 million for each position, as far as I'm not mistaken. Yeah, could you give us an update here? Have your expectations come down now as you have less cost savings potential, less one-offs?
So you're talking about the separation between volume-related structural adjustment and the structural adjustments, right? No, they have not. They have not. We're still on track to execute on those, both on the structure and on the volume side. However, as Domenico was pointing out, we need to have a further look into this over and above these cost optimization programs.
Good. Last one on pricing. I mean, China should be most competitive. Could you give us a feeling for the price cuts you're seeing there? Are we in the single-digit area, in the double-digit area, or how critical is it?
I mean, China, as you know, we have a dual-brand strategy, which is quite successful, especially in China mainland, we have to say. Nevertheless, we see a price deterioration of around about 20%, which we're still facing. But despite this, we can keep the volume, especially with our second brand. With our local brand, I'll say with our Bystronic brand in Asia, we are rather suffering less from China, which was always kind of a weak market for us with our Bystronic brand.
We are rather suffering in China for the export business, which was very strongly driven even by the Korean market, which right now is quite down. So that's the reality. And I would not say that now in Korea it's driven by price. There is a purely market situation. China mainland, it's a tough, tough competition. Prices are falling week by week.
It's unbelievable that we are facing a difficult competition there. But nevertheless, if I look at the units we are going to sell, now I'm not talking about the price, quality or the quality of the money we make with that. But if I look at the units, we are more or less on the same level like last year, which is a good sign. That means we can still compete.
Are there additional questions in the room? Yes.
Daniel Koenig, Mirabaud Securities. I have a simple question. My predecessor said that the market share is going down. And I was digging around in the capital market presentation, and I saw TRUMPF 20%, Amada 15%, and you 12%. But that capital market day was in 2021. How does it look like currently? Because I'm not sure that you ever confirmed that the market share has been shrinking. And then I had a question on pricing. You mentioned that word pricing flexibility. How much is that in numbers? How much is the price vector going down? I'm just wondering how you can split price and volume. How much is the price lower? And then a final question on this cancellation of order intake. You mentioned CHF 10 million. Would it be fair to say that this is a one-off?
If one has at least some hope that in H2 the cancellation would be less than CHF 10 million, so that's it.
Okay. I think we start with the market shares. It's a good question. Should I answer right or no? We expect 2% market share loss from Bystronic compared to the competition. Why I shouldn't answer this? Because the main competitor has not yet published his full results. We only know the global results. And when we compare with our main competitor, we have to compare Apple with Apple, right? And just take our. But I would estimate the 2% is what we are going to see.
These are not firm numbers, but this is a potential. That's why I'm saying it, because we want to gain back the 2% at least, right? On the price level, it's a very difficult question to tell you what is the price deterioration compared to the volume. The reality is we kept our prices so far. And you see it in our balance sheet.
If you go deep in the detail there, so far, we kept our price level. Question remains, is this the right strategy? Because it might bring to the situation we have that we lost our market shares. Shall we destroy prices? Usually, the situation is this one. If the downturn is for a while, the strength of a company is to keep the prices. Because if you have the upswing, you have your prices, right?
So now it looks like that the downturn lasts longer than expected. Then we have to raise the question internally, is it worthwhile to keep the prices and lose volume, right? But this is an answer I can't give today. And I think I would like to ask Beat to dig in in the cancellations. All right. So Daniel, we always have cancellations, but in CHF single-digit millions.
You need to take them also into perspective of the order backlog, right? And with a lower order backlog and then higher cancellation really means there is more cancellations as a %. Is it fair to assume that this would be a one-off? I don't think so, right? Because there will be cancellations. Will it be in the same magnitude as we had in the first half? It's difficult to say, but there will be single-digit million CHF, high single-digit million CHF of cancellations, I would expect.
Andreas Meier, Finanz und Wirtschaft. There was a time when Bystronic had EBIT margins of above 10%, even 12%. Do you think that this is at some time still possible, or are the markets now totally different and you have to have new goals or new for your margin?
I mean, I would like to dig in on this one. I would love to give you an answer on this one, but please understand I've not yet put my strategy together. I'm facing a situation I was not expecting when I signed half a year ago, right? I mean, we already saw the tendency. I think we have to make a kind of a reassessment of what is possible, right? Definitely, the product mix has changed.
We have to admit this one, right? The product mix has changed. Beat elaborated on the gold segment, which in tough times is always deteriorating. That's the truth. But in reality, if you look how we consume, we all tend to go towards cheaper and cheaper, right? So will it be possible? I would say right or no. But do we need a double-digit EBIT to be healthy? My personal opinion is no.
We need to have a high single-digit EBIT, even if we have a downturn, then you see a healthy company. So that's right away the direction we are working. And then we should not underestimate. If we go further towards, and this is our strategy today, towards system, you have larger parts, you buy more robots, you have third-party articles, we definitely will give you a lower margin. That's the reality. But again, I think we should target the upper side of the single-digit, even in a downturn. I think this would make the difference to what we see today.
And again, about market share, what's the reason that you lost 2% market?
I would say it's being resilient on the prices, which again, if you expect that you have an upswing again, it's a market share you should give away, right? Because in terms when it comes back, you kept your prices. Because it's clear, it is a price fight when the downturn comes, right? There are some competitors, without naming them, making price dropping, so they keep the prices. And I would say this is definitely one of the main drivers. And for sure, I mean, we are better represented in the higher segment than in the lower segment so far. But with the new product strategy, I do expect that we can tackle this one as well.
Thank you.
Any further questions from the room? No, then we move on to the webcast. Ollie, are there any questions in the webcast? As a reminder, for questions over the phone, please press star and one.
It seems there are no questions in the webcast, so we move back to the room to Torsten.
Yeah, thank you very much. I just have one little follow-up question. You talked a little bit about the weakness in the agriculture sector and your plans to enter the automotive sector. Can you give us a feel about the verticals exposure that the group has? I mean, which are the key industries we need to focus on to understand where your orders are going?
That's very, very important. I think the key is still our base customers, which are really strong in the agriculture, right? I mean, this is especially in North America, which for us is the second largest market. This is the driver, right? What I'm saying, vertical exposure, I mean, I don't see it critical, honestly speaking. It is a kind of a conversion of the culture and the mindset of the customers.
You know how it is. We are still in the people business, especially on the job shop area. And you feel in your comfort zone. If you go to the people, you know, right, where you speak the same language. So personally, I don't see a risk exposure, honestly speaking. It's really a different approach. It's rather a different market approach. And open up somehow our, how to say it, open up our customer base with different one.
Automotive, I'm not talking only about automotive, as we'll be very careful, right? But the supply chain, what it means in tiers, Tier one to three and steel service center, it's a huge installed base, which so far it's rather in the mass manufacturing. That's why, let's say, with our single machines, we never were in the mass production. Going towards systems, we can, of course, by fully automated line, produce higher volume, which are becoming much more interesting, even for these industries needing mass production. It is definitely a chance.
Understood. But staying with us, this topic of going from single machines to systems, you just highlighted it could have a dilutive effect to the margins. Could it not in turn also include a higher risk profile because you would add project execution risk?
We already faced this, right? I mean, that's exactly what we tried to explain today, that definitely the market is weak. That's why we are losing somehow. But exactly this project deterioration, exactly this risk, we already faced, right? But is it a killer? Absolutely not. There are many, many companies doing it. And I'm coming from companies doing this very successfully. So you just have to do it, right? And you have to do it the right way. But it's like everything. You can bicycle. And if you do it right, you will survive. And if you pass a thread, you will die, right?
There are no questions in the webcast. We'll go for another question in the room.
Daniel Koenig from Mirabaud Securities. I have two questions. First, I was a little bit surprised on the agriculture part because I was really digging in that capital market presentation. There is a statement, "Top 10 customers account for 5% of sales." That was in 2021. I'm wondering if that dire agricultural downturn is really that drastic if the top 10 customers are just accounting for 5% of sales. That's the first question. Then I was wondering, I saw this downtrend in Asia-Pacific. The order intake is CHF 17.7 million for a huge region. I'm wondering, does it really make sense to be in Asia-Pacific for CHF 17.7 million? It's tiny for your company. I'm just curious.
So let me start with the second question, if you allow me, because I struggle a little bit to know what was presented in 2021. Coming to APEC, we should not underestimate that 50% of the APEC market was basically driven by Korea. So having there the downturn, it hits dramatically in the whole APEC region. But yes, you're right, honestly. Are we focusing on the right markets with the right product? It's definitely something which is in my analysis for the weeks and months to come because it's definitely not a low-hanging fruit. On the other side, we do firmly believe that with the products we are going to launch, that we are going to meet the requests of this market. The market is too large in our eyes just to let them go, right?
It has to somehow bring money as well because otherwise it doesn't make sense. The question about the market presentation 2021, I cannot.
Yeah, if you don't mind, I'll take that. So what you're pointing out is the exposure to single customers, right? Right. So what happens in the agriculture market with companies like the John Deere's or the New Holland or so? So what they're doing is they're taking in because their own manufacturing facilities are not full, right? So they are what they have before given to job shops, right, and to suppliers. They're taking that in, right, which makes the job shops, which are our main customers from a numbers perspective, less busy, which in turn makes them not invest and buy new machines from us. Right. So the exposure to large customers is unchanged. It's just that the job shops are less busy.
Are there any last questions from the room? If not, then I hand back to Domenico for a closing remark.
So thank you, Alice, or Alice, right? Alice in Wonderland. She's the facilitator, the nice voice you hear here. So thank you very much. I think if there are no more questions here out of the room and from our webcast, I would like to close the conference for today and wish you a successful afternoon. We have finally summer in Switzerland, even though it's only till tomorrow. But for the ones staying with us, we have a standing lunch, which could give further opportunities to meet each other. So I warmly welcome you to stay with us. And yes, we look forward to this journey. Thank you very much.