Earnings Call: H2 2019

Mar 19, 2020

Good morning, everyone, and welcome to the Komet'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 2 weeks ago, and ComEd 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 6 countries in the Bay Area in California. Affected our COMET, Applied Materials and Land Research as well as Tesla and more. The shutdown was ordered by the authorities and will last until April 9. This is partially affecting our deliveries to our customers in the Bay Area only. Primary demand has not changed. Samsung announced 2 days ago that the 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 5 items. I give you a glance on the group's results, financial year 2019. Then we'll cover the strategic direction, followed by financial refused by Mike Nicolas Rotondo, our Chief Controller. And at the end, I give you an outlook. And of course, you're going to have the option to ask questions. Moving then to the next slide. Of course, you know already these numbers. We have made a revenue of €371,000,000 This is slightly down, about 15% over 2018. Is mainly because of the semiconductor industry that was very weak in the Q1 of 2019. Despite this reduction in sales, we could maintain a reasonable EBITDA. Of course, as you know, I'm not happy with 11 Percent 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 onetime items, which were in the numbers in 2018 that did not recur again. We also could uphold the cash the free cash flow by €30,000,000 This is also a result that made us very pleased under the given circumstances. And the equity ratio remains at 50%, slightly down from last year. So we consider ourselves as a healthy company. Now how does this what are the components of the revenue? This is, of course, mainly coming from PCT. PCT is the biggest division still with 151 €1,000,000 sales followed by IXS with €140,000,000 The profit of BCP or the EBITDA is, as I said, not bad, but should be better and is because of the low volume as well as investments indeed into R and D. We did not slow down R and 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%. And a good example to show that actually at least some people in the country know how to make profit. Then the IXS with €140,000,000 and €12,000,000 is a big improvement over 2018, where we had a lot of write offs and cost savings and reduction of products happening. EBITDA with €15,000,000 with a minus of 6 point €2,000,000 in EBITDA is actually what we expected and will go away as soon as this unit has been transferred to a new owner. Coming back to the PCT Business results, you can clearly see the reduction of the sales in 2019 compared to 2018. Interestingly, it's that both the first and second half have approximately nearly the same sales, but a very difference very big difference in EBITDA, whilst the first half year has only given us €3,200,000 of EBITDA. The second half was much higher. That already reflects So all the actions that we have taken to bring the costs down while investing into R and D. So 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 the years, and we expect 2020 to be better in security, and we'll see how it in oil and gas. Very, very successfully is the management of their bottom line with cost deduction in general and also production cost could be reduced significantly. At the same time, they worked on new products. On the left side, you can see that they have 3 products where we have really Very high hopes in terms of revenue starting from 2020 going to 'twenty one and the following years. The Explorer, MESSA Focus and the Ion really products, which have a higher performance and lower costs for manufacturing. So we are very happy that this division developed pretty well in 2019 and has a good outlook for 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 onetime items in 2018 that did not come up again in 2019, but same as I said with KCT. The second half was actually very good compared to the first half, and this is also the result of all the new positioning, the restructuring, cost savings and price maintenance, so to say, that we are on the right way here. EBITDA, EBIT 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. And we have reduced The loss is minus CHF 6,200,000. And as we announced, and there's a high probability that we'll move away by the middle of the year and will not hopefully not appear anymore in the second half of twenty twenty and will definitely be gone in 2021. With that, now the future is set. This next one, this is the strategy continue. We have already presented the strategy at the Investor Day. There is no change in what we announced at that time. There's a focused strategy that is in place, and it's now going to be implemented. We have reduced the portfolio to 2 technologies from 3, of course, it is E Beam that has left. We have now 4 core markets instead of 9. We have repositioned the X-ray this business significantly going into modular standardized systems and digital services based on artificial Visual Intelligence, Machine Learning and Data Analytics. This change, this restructuring is in full swing, and the 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 20 of 81%. This was very high, and I can tell you that this was really substantial. They did not only make a Those on questions, they've made the opinion clear. And we certainly We could find out the real things that need to be improved in order to make the company more successful in performing higher. It was a good finding. 1 guy, he wrote the comment sanctioning, but not high performing. That Really, that's what it was. And we are now on the way of becoming a high performing company, but it takes a couple of months, I would not say years, to really be a benchmark. We're going to have a more can you 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 also responsibilities, accountability and who takes 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 the 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 3 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 always obvious to say that when you have new rules, that's not automatically mean that these rules are also left 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. And the First time when you sit into the car, you get the problem moving the car in the right way. So 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 percent 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 2 times, once at the Unaxis and once at VAT, and this was very, very successful. And I'm pretty sure after these tight discussions among the people, with 45 senior managers and 20 talents which are joining. I'm pretty sure that this will give another 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 It's doing very well, I must say. Prototypes are working fine. The first systems are now going out in June, July to the biggest Customers for testing are really intrigued by the technology and very, very interested to get the first prototypes to test it out, and then we will enter the phase of spec ins that will take, of course, also a couple of months. So we do not expect high volume sales of the RS generator before 'twenty one. We may ship the first generators in the Q4 of 2020, but the ramp up will not become true before 20 '21 just because of this selection process is a testing phase that our customers usually take time. Also in IXM. I mentioned that before. There are several products coming on the market. 1 is the AT Xplore, where we have high hopes also in the semiconductor industry. The semiconductor industry has to go to find a focus. And 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 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. And the existing optical testing is by far not enough, so they have to look into the devices by X rays in order to find defects, latent defects, which could causes accidents or any other malfunctions. And this is going to be a very big market. As I said, this The cooperation with the 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. You also can hire people from these areas easily, and 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 Komet. 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 inside this building, but we also work with this partner for the pre assembly of Matchboxes. The pre assembly of Matchboxes is going to be done by the partner, and the final testing and adjustments and quality control is made by ComEd. So it's kind of investment light, what we are doing here. We spent maximum about SEK 3,000,000 for investment. The rest is shared with the supplier. And it's at the moment in the setup phase. We have funded the company. It's already registered, and we'll start manufacturing by the middle of this year. Then some initiatives that show results. You can here see the IXS efforts to reduce the warranty because in percentage of sales from 1.7% to 1.3% in 2019. So we, of course, we drive this issue further in the next couple of years. We have to be much below 1 same thing in warranty costs, but the effort that was made was significant. We also have used The lead time for systems, and believe it or not, that the system, a full system, is today, assembled or let's say, in final shape in only 5 days. So 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 5 days. We came down from 7 days, and this is really a big achievement. With that, I give first to Nicolas Rotondo, the Chief Controller of ComEd, and he will guide you through the numbers. Thank you very much, Hans. 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 System and Mining Technologies. While in 2018, this had a negative P and L impact, in 2019, we benefited from those restructuring gains by having a lower cost base. 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 €30,000,000 I will like to 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 of 0.6%. And 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. In the Q4. Here we see the impact of the IFRS 16 restatement for the year 2018, and I only would like to mention the relevant ones. Both EBITDA and free cash flow are now reported with SEK 5,200,000 higher, and the grossing up of the balance sheet reduces the equity ratio by 2.3 percent point. On this page, we see the P and L. And then going to talk about the items which will not be discussed on the next pension. 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 year, 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 EB. Further, I would like to explain what happened in R and D. On a comparable basis, we did not reduce our The margin gain of the division E beam in the R and D section, we would see an increase of EUR 1,000,000 between the other three divisions in order to maintain the pace to execute on our strategy. SG and A shows the highest cost reductions, which was driven by both the one off cost of last year and the restructuring gain of the division E beam. And in addition, we reduced the cost in the other three divisions by roughly €8,000,000 So in total, we reduced our functional cost by SEK 29,000,000 of which SEK 14,000,000 were the one off costs in 2018. Here, I will explain what were the main drivers of the strong free cash flow. 1st, driven by lower banks, we had a lower cash flow of $12,000,000 before the change of net working capital. 2nd, while in 2018, we did increase our network adjusted by EUR 20,000,000, In 2019, we were able to reduce it by almost €30,000,000 which is a cumulative difference of €33,000,000 This was the driver that increased the net cash provided by operating activities with €21,000,000 compared to prior year. 3rd, we have lower spend for capital investment. As 2018 still will include €13,000,000 related to the new building here in FlamMap. After the cash out for financing activities, We did increase our cash position net by SEK 17,000,000, which brings us back to SEK 60,000,000, which is at the levels we have 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 the minor loan and higher customer prepayments in the division X-ray system. 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 Waggles. The negative volume effect at local currency was in total almost €64,000,000 driven by PCT. While the division X-ray systems increased that sales and reach the guided level. The division X-ray modules had a shortfall of almost SEK 2,000,000, and the division E beam was negatively affected by the divestment in 2018 of the business located in Davenport. Currency impact of minus €1,000,000 is related to a negative €3,000,000 and a positive dollar of €2,000,000 on this page, we have the breakdown of the EBITDA margin. Let me guide you starting from the left hand side. The IFRS 16 replacement in 2018 increases the margin by 1.1 percent, which brings us to the restated value of 9.8 The EBS and IXS restructuring impact in 2018 of roughly €10,000,000 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 partially offset with a cost reduction of SEK 15,000,000, which had a positive impact of 4%. Those on a comparable basis, the EBITDA margin was 2 percentage points lower than in the previous year. The currency impact was minor with 0.6%, leading to a full year EBITDA margin of 10.9%. What we can see here is that the cost reduction was fundamental to achieve this result. At the last breakdown, we will see, based on the same structure, how the impact was in 1,000,000 Swiss francs at the level of net income. All impacts are always off the pack. On the EBS and IFS impact, including auto impairment costs, reduced in 2018 the net income by €12,000,000 leading to a normalized net income of €24,300,000 The lower sales in 2019 had a negative impact of 25.1 and was partially offset with the cost reduction of SEK 11,900,000, which brings us to a net income at constant currencies of of €11,100,000,000 Those on a comparable basis, net income was €13,200,000 lower than in the previous years. Also here, the positive currency impact was minor with €900,000,000 leading to a full year net income of 12 in the second half of the year. Here, it is even more visible that without cost reduction, we would have achieved only a breakeven result. In the Q1. This overview we are showing every year. And although for 20 2019, the currency impacts were minor. You can already understand that stronger impacts will be expected in 2020 as both euro and dollar 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 100,000,000 and that we have sales in dollars of CHF 190,000,000 and in euro of CHF 100,000,000 or combined almost €300,000,000 This means that 1% in currency fluctuation We'll change the sales by €3,000,000 We also can see that for the euro, we have a natural hedge in that we have a big net exposure in U. S. Dollars of almost 90,000,000 This means that the lower U. S. Dollar of 1% is impacting the EBITDA with almost 1,000,000 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 likely below Pioneer. In the Q1. Let me first explain what do we see on this chart. The line is showing the half year sales from into 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 twenty eighteen, where you see a sharp decline of sales of 12%, followed in the first half year of twenty nineteen by another sharp decline of 30%, both driven by PCT. Finally, in the second half of twenty nineteen, 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 2010 year to date run rate, also yield 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 ramp and are ready to repeat it again. Therefore, 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, Nicolas. Yes, when it comes to the outlook 2020, of course, It's helping our companies what's going to happen in the United States. The good thing is that China has manage the virus and companies are back to work. Yesterday, we had a phone call to several companies, and they are between 80% 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. And my question is what's going to happen in the So it's very hard to make a forecast. Interestingly is that talking to our customers, they still believe that they're going to reach the outlook for 2020. Although the Q1 might be low, they may not make the guidance, but they are still vis the for the second half of twenty twenty. So 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. But they ask us to be ready for the ramp up not to reduce our workforce or to let them go. And we are doing the best to Make sure that if it takes up takes off again, the rent is coming by the middle of the year that we are able to ship as much as we can. So we're at the moment between those two situations. We see the situation on the virus development on the one side. We see the expectations of to customers on the other side. Technically, China has improved in the last couple of weeks and sends out positive signals to be ready to 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. And we, of course, have contingency plans what happens if The business does not take off, but also contingent plans what happens if the business takes off in the next couple of months. So we remain on highest alert. And I 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 is going to be can be saved in one way or the other. But 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. So we are just in a situation where we cannot predict the next couple of months. In the automotive, of course, it's a big change to be electric cars. The traditional manufacturers of cars are in a transition. So if you see what that means for us, definitely in future, the automotive is more driven by to go components to offset 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. And the Safety becomes more important at the moment is led, but we are sure that this market is going to grow again. So 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. So the last slide shows, as I said, fundamentals the 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 strong financial footing, and we have a workforce that is very motivated This also very keen to improve the organizational effects 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. But as the company is concerned, I think we're in good shape. With that, I'm concluding the presentation and ask the participants, so ask questions if there are any. The first question comes from Michael Firth 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, that statement 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? And the third question is relating to e beam. 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. And of course, we hope that by the middle of the year, have more clarity when we start manufacturing. But 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. Land It's not yet in actually, in Malaysia. The plan they have is to set up a plant in Penang, which should deliver approximately an output of $8,000,000,000 It's correct, dollars 8,000,000,000 by the Q4 of 2021. So 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. But Malaysia at the moment is Actually, not a big issue, neither for asthma 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, and the demand is here. Now maybe you heard that the Chinese, they mentioned that the smartphone sales was down by 50%, but that's not surprising because they couldn't buy at all. They couldn't even get out of their homes. And I expect, of course, once they normalize, then the market will take off then quickly. So 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 3rd after the hard disk drives, which are still to 80% in the data centers installed, and they need to be replaced by by 3 gigabytes because it's more cost effective and higher performance. Then talk about e beam. Of course, this is a big item. As you know, this has been in the portfolio for 15 years in Framat. It's very much focused on 1 big company. And To sort this 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 E Beam, still supporting in a commercial way if that is needed. They will stay in Flammar. So they will occupy certain based in the new building with no change planned, but it's just a big thing to sort it out and to finally come to an agreement. But 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 at this. We have a follow-up question from Mr. Michael Voth 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 IHS, 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 Q1, which are the delivery times by the let's say, by the Q4 2020. So 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 5 days, these are electronic systems. So the electronic as market works quicker, but we are still hanging on, on these orders for the areas where we actually want to get out. So this is in the middle of this transition. So basically, from the electronics side, I see positive signals from the automotive rather not because of obvious reasons. So we will 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 These problems with the virus continue or going to get solved quickly. And 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 seasons that we plan for the IC packaging are not yet in the market. They will on 2021 or maybe late 2020 is mainly in the back end with the PCBs. Okay. Thank you. And then one last question, financial question. Can you give us some outlook on your CapEx plans for 20 '2021. Nicolas? Yes. So 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 roughly EUR 30,000,000 for 2020. And then for 2021 until 2025, I would say that We will have average CapEx of €25,000,000 over the next couple of years then. So this is the amount that you can factor in your model. Perfect. Thanks. Thanks a lot. The next question comes from Georgiou Muller from NZ. 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. Kunder, that you plan to stay longer than the next 2 years at the board? That's exactly what I wanted to avoid, that this was made because of me. It's General question, we talk about diversity. We talk about changes. And in the United States, It's forbidden to have a limit, an age limit. So we adjusted just to the latest recommendations from proxy advisers 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 both for me or Mark. So I'm not hanging on this position. That's not the problem. But still in practice, for Komet, it only applies to you, of course. At this moment, yes, but it's not made for me alone. I mean, a couple of years later, maybe it looks different. And your Timetable stays more or less the same. That when you were elected to the Board that you said, well, Alexey, it's a 3 year program for you. And you also mentioned the 70 years. So you don't see any prolongation of that time frame? I do not have I never thought about that. I mean, I have a job to do, and I'm on the way to do this. And I want hand over a company that is in good shape, and I'm sure that we can do that. And again, if The General Assembly elects me again for another turn. Then I will consider that, of course, in a positive way and healthy and still motivated, but I'm absolutely right now in both cases. But again, I'm not hanging on something just because for personal reasons. So just want to see a company that is rolling back to the position they had before and are leading the world. And I hope that's not taking too long. Okay. And what stage is the search for a new CEO? 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 the We have for 1 preferred. It's not 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. So it's not it's of course, you can find a good manager, but that's not enough for this company. I 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. So it will be non Swiss, That's for sure, okay. It's not for sure. But as I said, looking just into Switzerland, They are good people. I mean, we had the same problem with VAT, you know that. And I think the selection was not a bad one. I'm pretty sure Now the same thing we have to do here. And if we find a Swiss who has all these features, then it's fine. If not, then we have to look somebody else. And it's very hard to find the managers in Switzerland without the experience that is necessary to bring this company quickly forward. But you can say that the preferred candidate is not Swiss? It's not the Swiss, yes. Thank you. The next question comes from Daniel Regli from Volkswagen. 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. So now I redialing into the call. 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? And also, what do you have on in terms of receivables on your balance To these sectors. Yes. The ratio of the business, Nicolas, maybe have the numbers. You could 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. So 1 year, they order big numbers and the next year, nothing and then again. So it's a very erratic business. At the moment, you see what happens with the oil industry. So the prices, they go to hell, and That's not maybe not a good time to invest into that technology for the owners. But it's a we call it type of bycatch. So we do that, of course, and we are happy to make revenue in oil and gas, but the biggest potential is definitely in electronics. So it's not impacting us in us too much. It's not going to 0, definitely not, but it will be difficult this year maybe to have growth in oil and gas. And automotive, automotive, not a car, A traditional carbon combustion engine has approximately 25% of the value of the manufacturing value in the electronics. Electrical car has more than 50% in electronics. So it's 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. So part of This transition in the automotive industry is going into also into PCT. Now PCT is profiting from that situation. But also packaging, as I said, packaging have to be tested throughout. They have several chips, up to 10 chips in one Packaging dates, these chips are connected with approximately 100,000 connections. If only one of them is defective, then you're going to have a safety problem. So there's got to be 100% testing of packaging, in IC packages, which are going into cars. And this is a huge market and needs definitely X rays and not anything else. But 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 projection denied, I I would say so, yes. I would say. Of course, any kind of loss of 1 of the side markets are not wishful, but it's not the main stream. 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. 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. I 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? And then 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 Markets Day. Okay. The working capital will be answered by Nicolas at Rotondo. The IXS what is the question again on IXS? You said this You mentioned in the past that you I mean, in the past last year, I should say that you want to get rid of a couple of sub industries and you want to focus on just a couple of verticals. So I was wondering where we stand in that regard. Yes. We are, of course, let's say, IXS at the moment is in the through the transition phase. I mean, they have to get out of the old systems. They have to get out of for instance, they made systems for museums and and institutes 1 of a kind, very long delivery time and not making much money on one system. So we stopped taking orders. We still have orders in those areas which have to be fulfilled. And of course, they will be shipped during this year, but we will not take new orders anymore. So it's a slight changeover from those onesies and twosies, one of kind into volume markets. At the same time, the standard platform with the module platform is in from is in development, is in a prototype stage being tested right now. There are a lot of activities, which are maybe not mainstream, also could be done. But then we have one system, one module system, and It will not take for a couple of months, up to 9 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. So we are in the middle of this transition. And I'm very, very positive that this will be successful. But 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. And at the same time, Everybody is expecting that we have a higher EBIT ratio. That's a management challenge of highest level. But again, I'm very, very optimistic. The right things have been done. And in 2 years from now, IXS will be a totally different company. You bet. Nicolas, you want to say something to the working capital? Yes. Basically, the point is twofold. I mean, we 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. And there, basically, we have to balance on one hand maybe slightly shrinking demand In Q2, our lower demand, I will not say shrinking demand. But on the other hand, also we want to be prepared once the ramp then is kicking in. So it could be that during the middle of the year, we may increase it a little bit more compared to the sales that You're 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, The percentage of sales is not going to increase, which then is basically the indicator of how well we are managing our net working capital. It's basically my consideration to this point. You want to say something to the guidance, Nicolas? Thank you. 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. So means that basically we continued that level. So 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. But really to repeat, still end of February, we were 20% higher compared to Pioneer. So we are still there on a good Our books are full, and we have basically still a lot to produce and ship. Yes, and there are also no cancellations. So the business continues at the moment as usual. Of course, there are these kind of uncertainties but we know that at the moment, it looks not too bad. The 4th question was DCT regarding, did I understand that correctly, to found the business. Can you repeat that again? Yes. That was 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 subsegments of semiconductors. I mean, the 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. So the reason that we are so strong in Lam is because Lam was many years back. The first company that approached ComEd to help them to get the plasma back under control and to make matches, match boxes because of the excellent capacity technology that layman has developed over years. And that is why we have a high exposure in memories, but we are currently working with Applied Materials, Retail, with others. So 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 regards to the tax base. I mean, of course, there is that's a Question that comes up in many calls these days, how should we think of your tax rate going forward given the badly changed tax regime in Switzerland? Yes. Let me answer this. So we will basically benefit here in Switzerland not that much from the Patent Box mechanism. We are going to benefit for the R and D related tax reductions that we're going to have. And you may expect Going forward, the tax rate will decrease by, let's say, 2% to 3% points compared to what we have now on a normalized basis. So that will be basically the overall impact that you are going to see. Many thanks. Malcolm? The first question from the webcast comes from Rainer Reijerhoven from Piranzhund Birtschaft. Is there anything ongoing to use X rays in semiconductor production, not only for quality control, but also for the exposure process itself. Now, our contract department, 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, application intelligence during quality control to make sure that the learnings are going to be feedback to the assembly line but is not involved in the semiconductor process itself. The next question from the webcast comes from Christian Wolff from MainFirst. Could you please share with the EBITDA Margins of PCT in Q4 with us? Yes. So, basically, as you know, we have The ramp in PCT in Q4 and so by definition, then the ethically margin was the highest in Q4. And what I can tell you is basically that it is slightly below 20. It's 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 €212,000,000 like in 2018. Yes. Basically, Here, I would even make the comparison not with 2018, as in 2018, we suffered already 2 quarters, meaning the second half as a downturn with low capacity utilization. So I would take as a benchmark 2017. And there, we reached 26% EBITDA margin. And by reaching again this sales level of 210,000,000,000 to 120,000,000. You can again expect margins in the mid range of 20,000,000 still including high investment for R and D. Another question from Christian Wolff. 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? 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. It was disconnected. We have a question from the webcast from Christian Wolff. 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? Well, 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 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 technically not positive. And then there's the security sector, which was very bad in last year in terms of order intake without losing market share, but these are the waves that we see in this market segment. And here, we expect actually a positive trend, of course, always with The 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 that antivirus as solved, so to say. So we it's very hard to say how it's going on, but electronics will be will definitely be a market that is getting more important for IXM. We have a question from the phone comes from Rene Morozano from Helvetica 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 Sure of e beam or other solutions. You mentioned that already at the Investor Day last year, you said that there are talks ongoing with potential partners. Have you 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, they are very complicated because it's the nature of the technology and the business model. I mentioned that before. But the talks are going to be to a very positively, 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. So with that, I'm closing the conference call. And thank you very much that you joined, and you asked a lot of questions. I hope we can fulfill all the Promises and expectations in the next couple of months really remain positive and bullish. Of course, We have now to see what's going on in the United States mainly, but We are really positive for the longer term. Thank you very much, and have a good day.