Good morning, everyone, and welcome to the Comet's annual press conference. For obvious reasons, the presentation will take place through a telephone conference to protect us all. Comet is at work and delivers. Work was resumed also at our Shanghai plant two weeks ago, and Comet Switzerland is producing at normal levels. We have, of course, taken all measures to protect our employees from the virus, as instructed by the authorities and beyond worldwide. As of today, we have not registered any infection in our workforce worldwide. Many employees have set up their home offices. Only production people are on-site and some support services. As of yesterday, there is a total shutdown in six counties in the Bay Area in California. Affected are Comet, Applied Materials and Lam Research, as well as Tesla and more. The shutdown was ordered by the authorities and will last until April 9th.
This is partially affecting our deliveries to our customers in the Bay Area only. Primary demand has not changed. Samsung announced two days ago that their investments will continue as planned, and other semiconductor manufacturers send out similar signals. The biggest concern of our customers in the semiconductor industry is that we maintain our ability to deliver, which we do. We are convinced that there will be a strong ramp beyond the virus pandemic, whenever it will come. We want to be there. More about the market situation later. With that, I'm changing to the slides of the presentation. We have five items. I give you a glance on the group's results, financial year 2019. I will cover the strategic direction, followed by financial reviews by Nicola Rotondo, our Chief Controller.
At the end, I give you an outlook, and of course, you're going to have the option to ask questions. Moving to the next slide. Of course, you know already these numbers. We have made a revenue of CHF 371 million. This is slightly down, about 15% over 2018. It's mainly because of the semiconductor industry that was very weak in the first quarter of 2019. Despite this reduction in sales, we could maintain a reasonable EBITDA. Of course, as you know, I'm not happy with 11% of EBITDA. Should be actually 25%, but at least we made progress with several measures, especially cost savings and restructuring of IXS and EBT, as well as the absence of one-time items, which were in the numbers in 2018 that did not recur again. We also could uphold the free cash flow by CHF 30 million.
This is also a result that made us very pleased under the given circumstances. The equity ratio remains at 50%, slightly down from last year. We consider ourselve as a healthy company. Now, what are the components of the revenue? This is of course, mainly coming from PCT. PCT is the biggest division still, with CHF 151 million sales, followed by IXS with CHF 140 million. The profit of PCT or the EBITDA is, as I said, not bad, but should be better, and is because of the low volume as well as investments we did into R&D. We did not slow down R&D at all. That has led to this 10.1% of EBITDA. IXM is slightly down. However, they did a very good job in improving the efficiency and reducing the costs that resulted in a pretty high EBITDA of 27.8%.
A good example to show that actually, at least some people in the company know how to make profit. The IXS with CHF 140 million, and CHF 12 million is a big improvement over 2018, where we had a lot of write-offs and cost savings and reduction of products happening. EBITDA with CHF 15 million with a minus of CHF 6.2 million in EBITDA is actually what we expected and will go away as soon as this unit has been transferred to a new owner. Come back to the PCT business results. You can clearly see the reduction of the sales in 2019 compared to 2018. Interestingly is that both the first and second half have approximately nearly the same sales. A very big difference in EBITDA, whilst the first half year has only given us CHF 3.2 million of EBITDA. The second half was much higher.
That already reflects all the actions that we have taken to bring the costs down, while investing into R&D. It was not surprising what happened. Surprising was the EBITDA in second half, that was pretty good. Next. IXM is pretty flattish. The reduction of sales is mainly due to the economic situation or slowdown, and comes mainly from the oil and gas sector, as well as security, because they have their cycles over years. We expect 2020 to be better in security, and we'll see how it develops in oil and gas. Very successfully is the management of their bottom line with cost reduction in general, and also production costs could be reduced significantly. At the same time, they worked on new products.
On the left side, you can see that they have three products, where we have really very high hopes in terms of revenue, starting from 2020 going to 2021 and the following years. The Xplorer MesoFocus and the ION products, which have a higher performance and lower costs for manufacturing. We are very happy that this division developed pretty well in 2019, and has a good outlook for 2020, 2021, and beyond. IXS had certainly a very strong restructuring behind them in 2018. Now moving into 2021, the sales was up slightly. That was a good achievement after 2018, with all the problems that we had there, and significantly could improve the EBITDA compared to 2018. Of course, there were a couple of write-offs and one-time items in 2018 that did not come up again in 2019.
Same as I said with PCT, the second half was actually very good compared to the first half. This is also a result of all the new positioning, the restructuring cost savings, and price maintenance, so to say, that we are on the right way here. The ebeam business is developing without any surprise. Of course, we have isolated this unit, so it does not have any negative impact on the rest of the company. We have reduced the losses to -CHF 6.2 million. As we announced, and there's a high probability that we'll move away by the middle of the year, and will hopefully not appear anymore in the second half of 2020, and will definitely be gone in 2021. With that, now the future is set. This is the strategy. Continue. We have already presented the strategy at the Investors Day.
There is no change in what we announced at that time. There's a focus strategy that is in place, and it's now going to be implemented. We have reduced the portfolio to two technologies from three. Of course, this is ebeam that has left. We have now four core markets instead of nine, and we have repositioned the X-Ray Systems business significantly, going into modular standardized systems and digital services based on artificial intelligence, machine learning, and data analytics. This change, this restructuring is in full swing and the situation is going to be much more positive in the couple of months to come. We did a health check in order to investigate and probe the organization, what needs to be improved in order to reduce costs further and to increase the efficiency and productivity.
For that, we did a health check with all the people in the whole world, where we got the feedback of 81%. This was very high, and I can tell you that this was really substantial. They did not only make a cross on questions, they made their opinion clear, and we certainly could find out the real things that needs to be improved in order to make the company more successful and performing higher. It was a good finding. One guy, he wrote, "Comet is functioning but not high-performing." That is really what it was. We are now in the way of becoming a high-performing company, but takes a couple of months, I would not say years, to really be a benchmark. Can we go back again?
We're going to have a more focused operating model worked out that has now been confirmed by the board. That makes our organization leaner, faster, and more clear for everybody. There were a lot of defects in the organization with roles and responsibilities, accountability, and who does what in the regions. This has been clarified and is in good shape right now. Next. We already talked about the program that we started that is actually the outcome of all the investigations, the deep learning that we did in the company, and it's based on growth, on efficiency, and culture. We're working on all these three areas very intensively. We also have identified, among these three areas, 20 projects which have board level and are followed by the board, and they have to be reported, and they are the multimillion impact on sales and of course, also the bottom line.
We have changed a lot, and we are absolutely convinced that we did the right things. Now it's obvious to say that when you have new rules, that's not automatically mean that these rules are also lived by the people. It's like when you learn driving a car, you learn about theory first, about the rules on the street and all that. The first time when you sit into the car, you get the problem moving the car in the right way. What we do is we have set up a leadership program with the IMD, together with the IMD in Lausanne and the last module even in Penang, in Malaysia, to tune the people totally and 100% to the new rules and the way we work together, the way we achieve good results, the way we organize ourselves, the way we keep responsibility and accountability.
I've been doing that for two times, once at Unaxis and once at VAT, that was very successful. I'm pretty sure after these tight discussions among the people, we have approximately 45 senior managers and 20 talents which are joining. I'm pretty sure that this will give another boost inside the company. We also work on new products. That's extremely important to safeguard the future. You heard about the RF generator from PCT several times. Still alive. It's doing very well, must say. Prototypes are working fine. The first systems are now going out in June, July to the biggest customers for testing. They are really intrigued by the technology and very interested to get the first prototypes to test it out. We will enter the phase of spec-ins. That will take, of course, also a couple of months.
We do not expect a high volume sales of the RF generator before 2021. We may ship the first generators in the fourth quarter of 2020, the ramp-up will not become true before 2021 just because of this selection process. This testing phase at our customers usually take time. In IXM, I mentioned that before, there are several products coming on the market. One is the X plorer, where we have high hopes also in the semiconductor industry. The semiconductor industry has to go to find a focus. We have made a product that really delivers very good results and is also cost-wise affordable. Finally, also important is the system FF65. That's a system which serves in the semiconductor industry on the highest level, especially suited for the new devices coming into the market for autonomous driving.
All parts or all packages, semiconductor packages, which need an inside testing because of safety reasons. The existing optical testing is by far not enough, so they have to look into the devices by X-rays in order to find latent defects which could cause accidents or any other malfunctions. This is going to be a very big market. As I said, this is a cooperation with a company where we engage ourselves, and we will be able to tell you more about that at the late stage. We also expand our manufacturing capabilities. In Aachen, we have a new building that is actually built for the new generator, which is going to be highly automated. You may know that Aachen is a very good place for technology. It's near the technical university where we cooperate very closely. We also can hire people from these areas easily.
The cost situation is also reasonable in the Aachen area. We moved from Stolberg and are just now setting up the production lines to be ready for the generator once the ramp will come. The second expansion takes place in Malaysia, in Penang. You see the building here. I can tell you not the whole building belongs to Comet. We have the top floor that you can see here. It's a cooperation or a collaboration, if you want, with a local company. Of course, we have our own company inside this building. We also work with this partner for the pre-assembly of match boxes. The pre-assembled match boxes is going to be done by the partner, and the final testing and adjustments, and quality control is made by Comet. It's kind of investment light what we are doing here. We spend maximum about CHF 3 million for investment.
The rest is shared with the supplier. It's at the moment in the setup phase. We have funded, the company is already registered, and they start manufacturing by the middle of this year. Some initiatives that show results. You can here see the IXS efforts to reduce the warranty costs in percentage of sales from 1.7% to 1.3% in 2019. We, of course, drive this issue further in the next couple of years. We have to be much below 1% in warranty costs. The effort that was made was significant. We also have reduced the lead time for systems, and believe it or not, but the system, a full system, is, in today, assembled, or let's say, in final shape, in only five days.
Most of the equipment comes already from a sub-supplier, and we do the final intelligence into the system, and that's why we only keep it for five days. We came down from seven days, and this is really a big achievement. With that, I give first to Nicola Rotondo, the Chief Controller of Comet, and he will guide you through the numbers.
Thank you very much, Heinz. Good morning to all also from my side. Before I start with the financial review, let me share some considerations. The financials which you are going to see are still impacted by the restructuring we did in 2018 for the division X-Ray Systems and imaging technology. While in 2018, this had a negative P&L impact, in 2019, we benefited from those restructuring gains by having a lower cost bank. This helped us to achieve also in a demanding year like 2019, a decent result to maintain a robust balance sheet, and is now a solid basis to achieve both further profitable growth and also face potential short-term challenges. Despite lower sales of 15%, the profitability remained stable, and in addition, the free cash flow increased to a high value of CHF 30 million. I will later explain these KPIs in more detail.
Driven by the high free cash flow, we have reduced our net debt, which now equals to a low net debt factor of 0.6. Also the equity ratio is with 50% still on a high and solid level. Economic profit and return on capital employed increased slightly by a higher net operating profit after taxes in combination with a stable capital employed. Needless to say that these low values do, of course, not meet our expectation. Here we see the impact of the IFRS 16 restatement for the year 2018. I only would like to mention the relevant ones. Both EBITDA and free cash flow are now reported with CHF 5.2 million higher. The grossing up of the balance sheet reduces the equity ratio by 2.3%.
On this page, we see the P&L, and I'm going to talk about the items which will not be discussed on the next page. The new orders are clearly below prior years, driven by the downturn of PCT. What this KPI does not show is that in Q4, the demand dynamics in PCT improved significantly. For this, we have to look at our year-end order backlog, which is 20% higher compared to prior years. Also this, driven by PCT. Looking at the gross profit margin, we were able to almost keep it at prior year level, despite 15% lower sales. On one hand, we have the negative sales volume impact, and on the other hand, we have the positive restructuring gain of the division ebeam. Further, I would like to explain what happened in R&D.
A comparable basis, we did not reduce our R&D spend as it is reported here. If we do not consider the one-off cost of last year and the restructuring gain of the division ebeam in the R&D section, we would see an increase of CHF 1 million between the other three divisions in order to maintain the pace to execute on our strategy. SG&A shows the highest cost reduction, which was driven by both the one-off cost of last year and restructuring gain of the division ebeam, in addition, we reduced the cost in the other three divisions by roughly CHF 8 million. In total, we reduced our functional cost by CHF 29 million, of which CHF 14 million were the one-off costs in 2018. Here I will explain what were the main drivers of the strong free cash flow.
First, driven by lower sales, we had a lower cash flow of CHF 12 million before the change of net working capital. Second, while in 2018 we did increase our net working capital by CHF 20 million. In 2019, we were able to reduce it by almost CHF 30 million, which is a cumulative difference of CHF 33 million. This was the driver that increased the net cash provided by operating activities with CHF 21 million compared to prior year. Third, we had lower spend for capital investment. 2018 still did include CHF 13 million related to the new building here in Flamatt. After the cash out for financing activities, we did increase our cash position net by CHF 17 million, which brings us back to CHF 60 million, which is at the levels we had in the beginning of 2018. What we can see here is that our balance sheet looks very solid and straightforward.
I will just highlight a few points. Assets increased mainly due to the higher cash position, offset partially by lower inventories and lower accounts receivable. Liabilities increased by a minor loan and higher customer prepayments in the division X-Ray Systems. Equity ratio decreased mainly by grossing up the balance sheet compared to 2018. We will now see the breakdowns for sales, the EBITDA margin, and the net income. Let's start with sales. The negative volume effect at local currency was in total almost CHF 64 million, driven by PCT. While the division X-Ray Systems increased their sales and reached the guided level, the division X-Ray Modules had a shortfall of almost CHF 2 million, and the division ebeam was negatively affected by the divestment in 2018 of the business located in Davenport.
Currency impact of -$1 million is related to a negative EUR 3 million and a positive $2 million. On this page, we have the breakdown of the EBITDA margin. Let me guide you starting from the left-hand side. The IFRS 16 restatement in 2018 increases the margin by 1.1%, which brings us to the restated value of 9.8%. The EBT and IXM restructuring impact in 2018 of roughly CHF 10 million at EBITDA level reduces the EBITDA margin by 2.4% and leads to a normalized EBITDA margin of 12.2% in 2018. The lower sales in 2019 reduced the EBITDA margin by 6% and were partially offset with the cost reduction of CHF 15 million, which had a positive impact of 4%. Those on a comparable basis, the EBITDA margin was two percentage point lower than in the previous year.
The currency impact was minor with 0.6, leading to a full-year EBITDA margin of 10.8%. What we can see here is that the cost reduction was fundamental to achieve this result. As a last breakdown, we will see, based on the same structure, how the impact was in million Swiss francs at the level of net income. All impacts are always after tax. The EBT and IXM impact, including also impairment costs, reduced in 2018 the net income by CHF 12 million, leading to a normalized net income of CHF 24.3 million. The lower sales in 2019 had a negative impact of CHF 25.1 million and was partially offset with the cost reduction of CHF 11.9 million, which brings us to a net income at constant currencies of CHF 11.1 million. Those on a comparable basis, net income was CHF 13.2 million lower than in the previous years.
Here, the positive currency impact was minor with 0.9, leading to a full-year net income of CHF 12 million. Here it is even more visible that without cost reduction, we would have achieved only a break-even result. This overview we are showing every year, although for 2019 the currency impacts were minor, you can already understand that stronger impacts will be expected in 2020. As both EUR and USD are trending lower compared to prior year. The main elements to highlight here are that we have still a very high cost base here in Switzerland with CHF 100 million, that we have sales in dollars of CHF 190 million and in euro of CHF 100 million, or combined, almost CHF 300 million. This means that 1% in currency fluctuation will change the sales by CHF 3 million.
We also can see that for the EUR, we have a natural hedge, in that we have a big net exposure in USD of almost $90 million. This means that the lower US dollar of 1% is impacting the EBITDA with almost CHF 1 million. Based on both the strong cash flow that we generated in 2019, but even more important, based on the unchanged growth drivers for our company, we propose a dividend for our shareholders of CHF 1 per share, which is slightly below prior year. Let me first explain what do we see on this chart. The line is showing the half year sales from 2016-2019. The columns are showing the changes of the half year sales compared to the preceding half year.
First, let's focus on the second half year 2018, where you see a sharp decline of sales of 12%, followed in the first half year of 2019 by another sharp decline of 30%, both driven by PCT. Finally, in the second half of 2019, our sales started to increase again by 10%. As we said, the sales increase in 2019 was back-end loaded and happened in Q4, with an increase of 20% compared to the September year-to-date run rate, also here driven by PCT. As we showed in the past, and you can see this on the chart by looking to the left-hand side, we were able to manage strong ramps and are ready to repeat it again. I would like to hand over to Heinz so that he can explain when and how this is going to happen.
Thank you very much, Nicola. Yeah, when it comes to the outlook 2020, of course, it's overrided by the question, how long the viruses are hampering our business, hampering our companies, what's going to happen in the United States. The good thing is that China has managed the virus, and companies are back to work. Yesterday, we had a phone call to several companies, and they are between 80% and 100% at work. They see themselves as the winner of this virus game. We are still at a very unknown situation in Europe. You know that pretty well. My question is, what's going to happen in the U.S.? It's very hard to make a forecast. Interestingly, is that talking to our customers, they still believe that they're going to reach their outlook for 2020.
Although their first quarter might be low, they may not make the guidance, but they're still optimistic for the second half of 2020. It's very hard to figure out to what extent this will happen, or there's going to be another hit on the business by then. They ask us to be ready for the ramp-up, and not to reduce our workforce or to let them go. We are doing the best to make sure that if it takes off again, the ramp is coming by the middle of the year, that we are able to ship as much as we can. We at the moment, between those two situations, we see the situation on the virus development on the one side, we see the expectations of the customers on the other side.
Definitely, China has improved in the last couple of weeks and sends out positive signals to be ready to do further installations in China. That means we will continue. We will, of course, reduce costs wherever we can. We work from home, those people who can do that. We, of course, have contingency plans. What happens if the business does not take off? Also contingency plans, what happens if the business takes off in the next couple of months? We remain on highest alert and must say we are still positive, believing that the situation in Europe gets under control, and it's not going to be too bad in the United States, so that the year can be safe in one way or the other. We are ready for all of that. With that, I'm coming to the last slide. We have fundamental market drivers intact.
Semiconductor, the basic market is there. The applications are waiting. We are just in a situation where we cannot predict the next couple of months. In the automotive, of course, there's a big change to the electric cars. The traditional manufacturers of cars are in a transition. We have to see what that means for us. Definitely in future, the automotive is more driven by electrical components rather than by combustion. We are ready for that. Digitalization is continuing in the aerospace field from analog to digital. Definitely, this is a market that will grow in the next couple of years. Safety becomes more important. At the moment it's flat, but we are sure that this market is going to grow again.
Basically, we believe that the fundamentals for our business are intact, and we are just about to take as much as we can out of these markets. Okay, the last slide shows, as I said, fundamental growth drivers are in good shape. We have a clear strategy. We strongly believe that the strategy we have presented a year ago is definitely going in the right direction. We have a strong financial footing, and we have a workforce that is very motivated and is also very keen to improve the organizational defects that we have in the company. We made already big progress, and I can say that the people are actually motivated now with the exception of the virus, that is, of course, a difficult situation. As the company is concerned, I think we are in good shape.
With that, I'm concluding the presentation and ask the participants to ask questions if there are any.
The first question comes from Michael Foeth from Vontobel. Please go ahead.
Yes, good morning, gentlemen. I have three questions to start with. The first one is regarding your setup in Malaysia. I think Lam Research was talking about also mandatory closures in Malaysia. Are you also seeing that, and do you have any supply chain issues related to that? That would be the first question. The second one is, I think you mentioned somewhere the positive development in memory prices and inventories moving down. Is that statement still valid today? What are you seeing in the short term in that space, and how does it affect the demand, you believe? The third question is relating to ebeam. I was just wondering why this process of disposal is taking so long, what the issues are. Thank you.
Okay, Michael, let's come to the first question, Malaysia. For us, Malaysia is not yet in operation, so we do not have any impact at this moment. Of course, we hope that by the middle of the year, we have more clarity when we start manufacturing. Even if we could not start by the middle of the year, this will not have an impact on the overall output that we produce. Lam is not yet actually in Malaysia. The plan they have is to set up a plant in Penang, which should deliver approximately an output of $8 billion. If correct, $8 billion by the fourth quarter of 2021. They are now looking for a temporary place to start production. They have some suppliers in the south of Malaysia, close to Singapore. They might be affected by that.
Malaysia at the moment is actually not a big issue, neither for us nor for Applied. The second question in case of memories, it's absolutely correct what you said. Inventories have been taken down. Prices have stabilized so far. The demand is here. Now, maybe you heard that the Chinese, they mentioned that their smartphone sales was down by 50%, that's not surprising because they couldn't buy at all. They could even not get out of their homes. I expect, of course, once they normalize, the market will take off again quickly. I do not believe that there's any change in the outlook of memories in the next 12 months.
Also because memories are mainly going into data centers, and data centers are extremely hungry for the new memories because they want to replace the hard disk drives, which are still to 80% in the data centers installed. They need to be replaced by NAND because it's more cost effective and high performance. Talk about ebeam. Of course, this is a big item. As you know, this has been in the portfolio for 15 years in Flamatt. It's very much focused on one big company, and to sort all this out takes time. It's just a matter of negotiations and investigation also to have a plan what's going afterwards. Of course, we want to get totally out of EBT, still supporting in a commercial way if that is needed. They will stay in Flamatt, so they will occupy a certain space in the new building.
There's no change planned, but it's just a big thing to sort it out and to finally come to an agreement. I'm very optimistic that by the middle of the year, we're going to have a final paper or let's say, a closing, that we can then announce and then this is off our table. It's going in the right direction at the moment. That's all I can say to those. More questions?
There are no further questions. Oh, we have a follow-up question from Mr. Michael Foeth from Vontobel. Please go ahead.
Yes, if there are no other questions, I have a few more. We saw strong growth in the systems business, IXS, driven by aerospace or aviation. The question I have, is that sustainable? What are you seeing for this year?
Okay. This year, it's more difficult because we don't yet know the impact on the virus. We have a lot of orders. As you have seen, order intake was very strong in the first quarter, which are the delivery times let's say by the fourth quarter 2020. If this continues, this recovery from the virus, also the supply chain is important in that sense. Shipping is a problem. We might have a couple of projects moving into 2021. The systems I showed you, which have actually a lead time of five days, these are electronic systems. The electronic systems market works quicker, but we are still hanging on these orders for the areas where we actually want to get out. We are in the middle of this transition. Basically, from the electronic side, I see positive signals from the automotive rather not, because of obvious reasons.
We'll see how this is turning out. At the moment, we are going sideways, and we'll have to see what we can do as soon as we know how these problems with the virus continue or going to get solved quickly.
In electronics, which applications specifically are those systems used for?
This is mainly in the back end, the PCBs and things like that. The new systems that we plan for the IC packaging are not yet in the market. They will come 2021 or maybe late 2020, is mainly in the back end, the PCBs.
Okay. Thank you. One last question, financial question. Can you give us some outlook on your CapEx plans for 2020 and '21?
Nicola?
Yes. They will be higher compared to 2019, as we still are in the phase of increasing our capacity. I would say that it will be on roughly CHF 30 million for 2020, and then for 2021 until 2025, I would say that we will have average CapEx of 25 over the next couple of years then. This is the amount that you can factor in in your model.
Perfect. Thanks. Thanks a lot.
The next question comes from Giorgio Müller from NZZ. Please go ahead.
I see that the board proposes the general assembly to cancel the age limit of 70 years for board members. That means, Mr. Kundert, that you plan to stay longer than the next two years at the board.
That's exactly what I wanted to avoid, that this was made because of me. It's a general question. We talk about diversity, we talk about change. In the United States, it's forbidden to have an age limit. We adjust to the latest recommendations from proxy advisors like ISS, who does support this. Actually, I'm going to be elected every year, so it's up to the board to put me on the list, and also by the shareholders who vote for me or not. I'm not hanging on this position. That's not the problem.
still in practice for Comet, it only applies to you, of course.
At this moment, yes. It's not made for me alone. A couple of years later, maybe it looks different.
Your timetable stays more or less the same, that when you were elected to the board, that you said, well, actually, it's a three-year program for you, and you also mentioned the 70 years. You don't see any prolongation of that timeframe?
I never thought about that. I have a job to do, and I'm on the way to do this, and I want to hand over a company that is in good shape, and I'm sure that we can do that. Again, if the general assembly elects me again for another term, then I will consider that, of course, in a positive way, if I'm healthy and still motivated, what I'm absolutely right now in both cases. Again, I'm not hanging on something just because for personal reasons. I just want to see a company that is in good shape, that is going back to the position they had before and are leading in the world. I hope that's not taking too long.
Okay. What stage is the search for a new CEO? It has that priority, I guess.
Has a very high priority, of course, very high. We have a candidate, and we are not at the negotiations level at the moment.
Okay. You have different candidates or?
We have one preferred. To be openly on that, it's not easy to find somebody who really understands these markets, to have the network, to have the experience how to go through a cyclical business and all that. You can almost not find them in Switzerland, not even in Europe. Of course, you can find a good manager, but that's not enough for this company. You can't expect somebody who is really familiar with all these items that I just mentioned. Otherwise, it's going to be a difficult job.
It will be non-Swiss. That's for sure, I guess.
It's not for sure, but as I said, looking just into Switzerland, there are good people. We had the same problem with VAT, you know that.
I think the selection was not a bad one. I'm pretty sure not the same thing we have to do here. If we find a Swiss who has all these features, then it's fine. If not, then we have to look for somebody else. It's very hard to find managers in Switzerland with that experience that is necessary to bring this company quickly forward.
You can say that the preferred candidate is not Swiss.
It's not a Swiss, yeah.
Thank you.
The next question comes from Daniel Regli from Octavian. Please go ahead.
Hello, good morning, and thank you for taking my question. Apologies for being so late. I was first only on the webcast and tried to ask my question there, but somehow I didn't get through. Now I redialed into the call. I hope I didn't miss anything important. I just wanted to ask whether you could be a little bit more specific on your exposure to the oil and gas and the aerospace sectors, and also the automotive sectors, which obviously are currently a little bit into trouble. What is the percentage share you generate with these industries on the revenue side? also what do you have in terms of receivables on your balance sheet to these sectors? Thank you.
The ratio of the business, Nicola maybe has the numbers if you want to think about that afterwards. Basically, the main markets for IXM will also be in electronics. Oil and gas, this is something that is going forward in cyclical. one year they order big numbers and the next year nothing, and then again. it's a very erratic business. At the moment, you see what happens with the oil industry, with the prices, they go to hell, and that's maybe not a good time to invest into that technology for the owners. We call it a bycatch. we do that, of course, and we are happy to make revenue in oil and gas. the biggest potential is definitely in electronics. it's not impacting us too much.
It's not going to zero, definitely not, but it will be difficult this year maybe to have growth in oil and gas. Automotive, a traditional car with combustion engines, has approximately 25% of the value of the manufacturing value in the electronics. An electrical car has more than 50% in electronics.
The definition of a car is going to be very different in the next couple of years, and you can see that every day when you read the paper, what's going on, what is being discussed. Part of this transition in the automotive industry is going also into PCB. Now PCB is profiting from that situation. Also packaging, as I said, packaging have to be tested throughout. There are several chips, up to 10 chips in one packaging. These chips are connected with approximately 100,000 connections, and if only one of them is defective, then you're going to have a safety problem. There's got to be 100% testing of IC packages, which are going into cars. This is a huge market, and needs definitely X-rays and not anything else.
Okay. if you could just-
Yeah?
You would then say that all the impact on the oil and gas or automotive industry are currently not really relevant for you for the growth projections in IX-
I would say so, yeah.
Okay.
Of course, any kind of loss of one of the side markets are not wishful, but it's not the mainstream.
Okay. Thank you.
Also, if I may add that, when you look into the portfolio of new products, we have a lot of new products coming out in the next couple of years, and most of them are electronic related. Most of them. From all three divisions.
Okay. Thank you very much.
Welcome.
We have a question from Sebastian Vogel from UBS. Please go ahead.
Hello, can you hear me?
Yes.
Perfect. I've got a couple of questions. The first one would be on IXS. You mentioned earlier that you wanted to get rid of a couple of sub-industries. Was wondering if you can give us an update there, where you stand at the moment. The second one would be on working capital. Second half was really good in that regard, as you have outlined in the presentation. Was wondering how you see this, at the moment given, of course, all what is going on in the world. The third one would be on your guidance with your press release in February. You mentioned that you have seen a decent backlog. That statement was not anymore part of today's press release. Was that just IXS-driven that you have not included that anymore?
One very last one would be on PCT with regard to logic and foundry exposure, if you can update us there where you stand in the meantime after your previous announcements at your capital market day.
Okay. The working capital will be answered by Nicola Rotondo. The IXS, what was the question again on IXS? You said the-
You mentioned in the past last year, that you want to get rid of a couple of sub-industries, and you want to focus-
Yes.
On just a couple of verticals. I was wondering where we stand in that regard.
Yes. We are, of course, let's say IXS at the moment is in a transition phase. They have to get out of the old systems. They have to get out of, for instance, they made systems for museums and institutes, one of a kind. Very long delivery time and not making much money on one system. We stopped taking orders. We still have orders in those areas which have to be fulfilled. Of course, they will be shipped during this year. We will not take new orders anymore. It's a slight change over from those one, two system, one of a kind, into volume markets. At the same time, the standard platform with the module platform is in development, is in the prototype stage being tested right now. There are a lot of activities, which are maybe not mainstream, also could be done.
We have one system, one module system, and it will not take for a couple of months up to nine months to make such a system. It will then be very short-term, and we can decide whether we serve a certain market which is not mainstream or not. We only serve these markets when we have the chance to have a high profitability. Otherwise, we won't do that. Usually all these one-of-a-kind systems, they deliver very, very low margins, and we have to stop that. We are in the middle of this transition, and I'm very, very positive that this will be successful. In 2020, it's going to be tough because we have to get out of these old systems. We have to get into the new systems. At the same time, everybody's expecting that we have a higher EBITDA ratio.
That's a management challenge of highest level. Again, I'm very, very optimistic. The right things have been done. In two years from now, IXS will be a totally different company. You bet. Nicola, you want to say something to the working capital?
Yes. Basically, the point is twofold. You have seen that we have reduced it significantly by year-end, and now we are basically adapting it to Q2 levels, depending how then the demand will be. There, basically, we have to balance on one hand, maybe slightly shrinking demand in Q2 or lower demand. I will not say shrinking demand. On the other hand, also we want to be prepared once the ramp then is kicking in. It could be that during the middle of the year, we may increase it a little bit more compared to the sales that we are going to generate, but only to be ready, once then the ramp would start, let's say in Q3.
Having said that, our goal is that regardless now what is going to happen is that our ratio, so meaning our net working capital ratio as a percentage of sales is not going to increase, which then is basically the indicator of how well we are managing our net working capital. This is basically my consideration to this point.
You want to say something to the guidance, Nicola?
To the backlog. Yes. Basically, as said, we had, at year-end, backlog 20% higher compared to prior year, and this was still valid by end of February. Means that basically we continued that level. We have not yet really felt a strong decline in demand so far, but how it is going to develop in the next couple of months is really hard to predict. Really to repeat, still end of February, we were 20% higher compared to prior year. We are still there on a good shape. Our books are full, and we have basically still a lot to produce and ship.
Yes, there are also no cancellations. The business continues at the moment as usual. Of course, there are these kinds of uncertainties that we know, but at the moment, it looks not too bad. The fourth question was PCT regarding, did I understand that correctly, the foundry business. Can you repeat that again?
Yeah, that is right. You mentioned earlier that you want to expand further out of memory, also into other areas of the semi side of things. I was wondering if you can give us an update there, how advanced you are in the meantime.
We are not addressing actually the sub-segments of semiconductors. Our products are going into all areas. They're going into foundry, into logic, into memories, into power devices, whatsoever, because the technology is always the same. The recipe is different, the design is different on the chip, but the machines are more or less the same. The reason that we are so strong in Lam is because Lam was mainly, like the first company that approached Comet to help them to get the plasma better under control and to make matchboxes, because of the excellent capacity technology that Lam has developed over years. That is why we have a high exposure in memories, but we are currently working with Applied Materials, with Intel, with others. For us, it doesn't matter whether it's foundry, whether it's memory.
It's just that the equipment suppliers, they need to buy from us, and finally, where they sell their machines is not that important for us.
Understood. One follow-up question, if I may, with regard-
Yeah.
To the tax base. That's a question that comes up in many calls these days. How should we think of your tax rate going forward given the lately changed tax regime in Switzerland?
Yes. Let me answer this. We will basically benefit here in Switzerland, not that much from the patent box mechanism. We are going to benefit for the R&D-related tax reductions that we're going to have. You may expect going forward, that the tax rate will decrease by, let's say, 2%-3% points compared to what we have now on a normalized basis. That will be basically the overall impact that you're going to see.
Many thanks.
Welcome.
The first question from the webcast comes from Rainer Weihofen, from Finanz und Wirtschaft. Is there anything ongoing to use X-rays in semiconductor production, not only for quality control, but also for the exposure process itself?
I'm so far back with the problem. Can you repeat the question again?
Is there anything ongoing to use X-rays in semiconductor production, not only for quality control, but also for the exposure process itself?
No, X-ray cannot be used for the process itself. That's just for quality control, artificial intelligence during quality control to make sure that the learnings are going to be feedbacked to the assembly line. it's not involved in the semiconductor process itself.
The next question from the webcast comes from Christian Wolf from MainFirst. Could you please share with the EBITDA margins of PCT in Q4 with us?
Yes. Basically, as you know, we have the ramp in PCT in Q4, and so by definition then EBITDA margin was the highest in Q4. What I can tell you is basically that it is slightly below 20. It is close to 20, but it is not 20.
Another question from Christian Wolf. What margins can be expected in the PCT when the segment reaches sales of CHF 212 million like in 2018?
Yes. Basically here I would even make the comparison not with 2018, as in 2018 we suffered already two quarters, meaning the second half at the downturn with low capacity utilization. I would take as a benchmark 2017, and there we reached 26% EBITDA margin. By reaching again this sales level of 210, 220, you can again expect margins in the mid-range of the twenties, still including high investment for R&D.
Another question from Christian Wolf. Could you please give us some more details about the different customer segments of IXM, and what are your expectations for the segments in 2020?
Heinz disconnected.
Heinz?
We have lost connection with Mr. Heinz. We will try to join him as soon as possible. Mr. Heinz, your line is now connected to the conference.
Yes, I'm here again. I was disconnected.
We have a question from the webcast from Christian Wolf. Could you please give us some more details about the different customer segments of IXM, and what are your expectations for the segments in 2020?
Now, that's what I said before. At the moment, it looks like that they make headways in the electronic business. This is the most promising sector for IXM, and also the new products are going to be positioned. I mentioned that the oil and gas at the moment is flattish. We don't know what the effect on the price crash of the oil has on this market, but definitely not positive. there's the security sector, which was very bad in last year in terms of order intake without losing market share. These are the waves that we see in this market segment. Here we expect actually a positive trend, of course, always with a grain of salt, that the impact on the virus will also hit these markets.
It's very hard to say, but at the moment, all the intake from China is increasing in the last couple of days, since they declared actually the virus as solved, so to say. It's very hard to say how it's going on, but electronics will definitely be a market that is getting more important for IXM.
We have a question from the phone comes from Remo Rosenau from Helvetische Bank. Please go ahead.
Yes, thank you. I also was partially off the call, so I hope this has not been asked before. About the potential divestiture of ebeam or other solutions. You mentioned that already at the investor day last year. You said that there are talks ongoing with potential partners. Given the current environment, do you expect that these discussions get kind of a bit delayed or that the whole process of these potential solutions might be going into 2021 and/or that the prices will develop in a direction where you would not be prepared to do certain steps anymore?
No, I do not see any impact on the current situation, especially the virus. These talks are very complicated because it's the nature of the technology and the business model. I mentioned that before. The talks are going into a very positive way, and I definitely expect that we can solve it by the middle of the year, regardless what's going to happen with the virus.
Okay, great. That's very clear. Thank you.
We have no further questions at this time.
Okay. with that, I'm closing the conference call, and thank you very much that you joined and you ask a lot of questions. I hope we can fulfill all the promises and expectations in the next couple of months. We remain positive and bullish, of course. We have now to see what's going on in the United States, mainly. we are really positive for the longer term. Thank you very much and have a good day.