Ladies and gentlemen, welcome to the Analyst Conference 2019. The following presentation will be held by our CEO, Yves Serra, and our CFO, Andreas Müller. First, Yves will comment on the course of the business of the year 2018, Andreas will comment or give further details to the financial statements, followed by an outlook 2019 from Yves. The presentation will be recorded, therefore, please make use of the microphones. After the presentations, we are pleased to answer your questions. Also there, please take the microphones that everybody in the internet can clearly hear you. You will find a record of the presentation on our website as of tomorrow. After the conference, you are invited for an apéro outside in the foyer. I think this said, we will start the conference. Yves, the floor is yours.
Thank you, Danny. Well, ladies and gentlemen, welcome to annual conference. We are happy, slide two, to present results for our 2018, which despite markets, currency, and political adverse effects in the second half year, show a clear increase compared to previous year, both on top and bottom lines, and are well in line with our 2020 strategy goals. The top line of our company increased by 10% to CHF 4 billion 572 million. Free of acquisitions, divestments, and currency effects, growth amounted to 7%, with America showing the highest growth rate. The operating result is up 9% to CHF 382 million, and earnings per share 11%, increasing from CHF 62 to CHF 69 a share. Based on the above, the board of directors will propose a dividend increase of two CHF per share to CHF 25 at the upcoming shareholders meeting of April 17th.
2018 was also, slide three, a year of strategic transformation. We changed the name of a division, GF Automotive to GF Casting Solutions. We bought into Aerospace Castings, and as announced early December last year, we divested two large German iron casting plants. All this in line with our 2020 strategic thrust. That is the reshaping of our portfolio towards higher value businesses. All three divisions, slide four, grew significantly. As you can see on the slide, which shows the organic growth rate, GF Piping Systems did grow the most with 8%, followed by GF Casting Solutions and GF Machining Solutions, each growing by 5% organically. As such, all three divisions did outgrow their 3%-5% organic growth objectives.
Regarding profitability, as measured by the EBIT margin or ROS, slide five, GF overall reached 8.4%, slightly lower than the 8.5% of previous year, but well in line with our 8%-9% objective range. The largest division, GF Piping Systems, substantially increased its profitability from 11.3% to 11.9%, and GF Casting Solutions kept the same high level of 8.3%. Casting Solutions, on the other hand, saw its return on sales decrease from 6.3% to 5.1%. I will come back to the reasons. The ROIC, slide six, further increased to 22.4% against 20.3% in 2017, thus slightly surpassing our 18%-22% objective range. All three divisions did again generate a high amount of value well above their cost of capital. GF Piping Systems and GF Machining Solutions had an ROIC over 27%, and GF Casting Solutions reached 16%.
Now the eighth year in a row that all three divisions from GF have generated value for our shareholders. Looking now at the three divisions and starting with GF Piping Systems, slide seven. Sales were up 9% to CHF 1,821 million, organically 8%. The division enjoyed a sustained demand in its industry and utility sectors worldwide, which grew double digits. All segments and geographies contributed to the high growth of the division, with America growing the most. In the picture, you can see an example of a desalination plant. Certainly a growing business in countries where water is scarce, and for which all products of GF Piping Systems are used, sensors, valves, fittings, pipes, and where we even pre-assemble skids for our customers in order to speed up project completion.
The operating results, the EBIT was up 15% to CHF 217 million, as all plants were well loaded, and the higher share of high-value products contributed to the margin increase. Looking forward, slide eight. GF Piping Systems has developed a whole line of digital smart valves to facilitate remote calibration, monitoring, and control at our customer's facilities, left of the slide. Moreover, the division has entered promising new market segments, such as the cooling of data centers. Those will no doubt support sales growth at the division in 2019 and beyond. Turning to GF Casting Solutions, slide nine. The division had a strong year regarding order intake, especially for electric and hybrid car components, which accounted for about 30% of the long-term orders of the division. The example on the slide is the aluminum housing of the electric motor of the recently launched Audi e-tron.
Sales were up 14% to CHF 1,687 million, organically 5%. The difference has mainly to do with the acquisition of Precicast in April 2018. The operating result, the EBIT stood at CHF 86 million, down from CHF 93 million in 2017. The main negative effects was the ramp-up of the new light metal plant in the U.S., which started production in August 2018 and impacted the division's EBIT by about CHF 16 million. Also at year-end, call-offs from several car manufacturers went down, partly due to the newly enforced emission registration test, the so-called WLTP, the Worldwide Harmonized Light Vehicles Test Procedure. Major steps have been taken during 2018, slide 10, to reshape the portfolio of GF Casting Solutions. We acquired, in April 2018, Precicast, the well-known specialist of precision castings for aircraft engines and industrial gas turbines.
In December, we divested two large iron casting plants in Mettmann and Singen in Germany. This is in line with our strategy to shift our portfolio towards higher margin businesses. Accordingly, the profitability objective of the division for the current 2020 strategy period has been increased by 200 basis points, to an 8%-10% range for the return on sales. For GF Machining Solutions, slide 11. I think the well-balanced presence worldwide of the division did support its profitable growth. They had high growth in the aerospace and medical sectors, especially in the U.S., which compensated the slowdown in China related to trade tension concerns. The example on the slide shows a typical aircraft engine component called the fir tree, made with our specially dedicated wire cuts machines developed together with our customers in this sector. Sales were up 8% to CHF 1,066 million.
For an organic growth of 5%. The operating result itself increased by 7% to CHF 88 million. In September 2018, slide 12, GF Machining Solutions entered into a partnership with a company, 3D Systems of the U.S., to offer new integrated and automated 3D printing lines to its customers, including the automated change of powder chambers without operators handling, as well as dedicated wire cut EDM to efficiently and precisely detach the 3D printing components from their support. On the picture, you can see fuel injection nozzles for industrial gas turbines produced with these 3D printing machines. These products will be shown at the next EMO exhibition in September 2019, with sales already starting this year. I now yield the microphone to our CFO, Andreas Müller, for a closer look at the 2018 figures.
Thank you, Yves. Ladies and gentlemen, welcome also from my side. 2018 financial statements reflect a solid and profitable development of GF. It is once more a pleasure to present the figures of last year. On slide 14, we see the sales per division. All three divisions contributed to a solid growth of GF. Sales went up by more than CHF 400 million to CHF 4.57 billion, corresponding to an increase of 10.2%, previous year, 10.8%. The organic growth rate came in at 6.5%. GF shows the highest growth in Americas with 19%, followed by Europe with 11%. After a strong first half year in Asia, the Chinese market softened in the second half, resulting in a growth in the region of 7%. GF Piping Systems increased sales by CHF 143 million to CHF 1.82 billion. Acquisitions counterbalanced negative currency effect.
The product portfolio expansion at the division Casting Solutions into aerospace and energy products contributed five percentage points to the growth of overall 13.8%. Sales came in at CHF 1.68 billion. By eliminating the effect of the stronger Euro, as well as acquisitions and divestments, the organic growth amounts to 5.2%. GF Machining Solutions increased sales by CHF 74 million, corresponding to a growth of 7.5%. Organic growth came in at 5.4%. The American market showed the largest increase of 14%, followed by a strong Europe with 10%, whereas after a strong first half year in Asia, the last month came in at a lower level, resulting in an annual growth of 2% in the region for this division. The first semester, on the bottom, growth rate came in at the level of the second half year 2017.
Trade tensions between America and China worsened in the second half of the year and consequently negatively affected the markets, with China the most. Combined with the normal seasonal effect, growth came in at only 0.8%, organically 1.4% in the second semester of the year. The metal price impact, as shown on the bottom of slide 15, had a positive impact on sales of 80 basis points on the corporation. The division Casting Solutions faced metal price increases between 5% for aluminum and 10% for iron scrap during the year under review. As a result, the division sales were positively affected by two percentage points. Main metal prices came down in the last months of 2018. Slide 16 shows the EBIT and operating profit margin per division. GF Piping Systems increased its EBIT by CHF 28 million to a strong CHF 217 million.
The growth of 15% resulted in an EBIT margin of 11.9% compared to 11.3% in 2017. Today, the division contributes 57% to the consolidated result. GF Casting Solutions had to face ramp-up costs of CHF 16 million, previous year, CHF 6 million, which were 100% consolidated for its new joint venture facility in North Carolina. The two divested iron casting facilities did not contribute to the division's EBIT in the year under review. Overall, the EBIT went down by CHF 7 million to CHF 86 million. The margin came in at 5.1%. GF Machining Solutions sustained its operating profit margin of 8.3% from last year. EBIT increased by CHF 6 million to CHF 88 million, with sales remaining on the same level as the first six months of the year. Newly launched products nicely contributed to the good margin development in the second semester 2018.
The EBIT of the corporation came in CHF 30 million above last year at CHF 382 million, with an EBIT margin of 8.4%. In 2017, the second half year was clearly stronger than the first semester, whereas we see the opposite picture in 2018. The second semester 2018 was marked by lower sales and strong currency headwinds in the amount of CHF 12 million, reflecting an impact on the EBIT margin of more than 40 basis points, resulting in a reduced EBIT and operating profit margin. As shown on slide 17, exchange rates turned from tailwinds in the first semester to headwinds in the second half of 2018. The strong appreciation of the Euro in the first six months flattened in the second half of the year and even negatively impacted sales.
The same effect can be seen for the Chinese renminbi. The strong devaluation of the Turkish lira left substantial traces on sales predominantly in the second half of the year in our division GF Piping Systems. For these reasons, the positive impact of CHF 97 million for the first six months was reduced by CHF 39 million in the second semester to an annual effect on sales of CHF 58 million. Whereas in the first half year, the currencies positively contributed with CHF 6 million to our results. In the second half year, we had to cope with an adverse effect of CHF 12 million, resulting in a negative impact of CHF 6 million on EBIT for the year. Raw material purchases in US dollar from China and Turkey had a negative US dollar effect on EBIT. On slide 18, we have outlined the currency impact per division.
GF Piping Systems sales were influenced by the strong devaluation of the Turkish lira, which counterbalanced the positive development of the US dollar, Euro, and Chinese renminbi. In addition, the Turkish lira caused a strong negative impact on EBIT. GF Casting Solutions and GF Machining Solutions sales were boosted by the stronger Euro. The effects on the result can be neglected. On slide 19, we have outlined the consolidated income statement. Sales reached CHF 4.57 billion for a growth of 10%. Gross value added increased by 8% to CHF 1.668 billion. This is basically in line with the real volume growth of the corporation after deducting raw material, metal, and currency effects. Personnel expenses increased by 9% to CHF 1.14 billion. A good portion of this rise is due to ordinary salary and workforce increases, whereas acquisitions and divestments account for three percentage points and currency impacts amount to 1.3%.
EBITDA went up to CHF 529 million for a growth of 8%. Increased depreciations came in at CHF 147 million and were caused by higher CapEx and acquisitions in the previous years. The financial result was driven by an overlay of the refinance bond in September and increased hedging costs for the USD. The income tax remained, once more, stable on a reasonable level of 20%. Net profit, after minorities, increased by 12% to CHF 281 million. Slightly above the net profit of CHF 279 million. This unusual situation was caused by the negative minority interest due to the ramp-up cost of the Casting Solutions joint venture in North Carolina. On slide 20, we see the assets of our consolidated balance sheets. Lower year-end and currency spot rates reduced our assets by approximately CHF 120 million. Acquisitions and divestments diminished total assets by approximately CHF 325 million.
Ordinary increases, net of dividend payment of the year, amount to approximately CHF 230 million. The vendor loan of CHF 62 million out of the divestment of the two iron casting companies is reported under other financial assets. Overall, we had CHF 3.44 billion of assets. Slide 21 shows the liability and equity section of the balance sheet. Non-current liabilities have been affected by the divestment, the new bond, and the acquisition of the investment casting company, Precicast. The new bond of CHF 200 million with a maturity of 10 years and a coupon of 1.05% replaced a bond of CHF 150 million, which was due in September. The divested two iron casting facilities reduced the liabilities in the amount of CHF 267 million, whereof CHF 151 million were interest-bearing and pension obligations. The equity increased by CHF 59 million to a strong equity ratio of 41.5%.
The goodwill from acquisitions of CHF 73 million has been offset against our equity with immediate effect. As for last year, we can once more present a strong and solid financial structure. Let me guide you through our cash flow statement on slide 22. Net working capital went up by CHF 77 million, net of acquisitions, divestments, and currencies. Equally shared between inventory, accounts receivable, and accounts payable effect, caused by the ramp-up for our new facility in North Carolina and stronger seasonal negative impact on accounts payables in the fourth quarter. These are the main drivers for the slight reduction of the operating cash flow despite an increased EBITDA. CapEx peaked to CHF 234 million in the year under review. In addition to our ordinary investments, the new casting facility in North Carolina and the new building in Biel for milling activities had to be highlighted as the main drivers.
Acquisition outlays came in at CHF 154 million, primarily for the investment casting acquisition, Precicast, in Switzerland. The divestment of the two iron casting facilities in Germany was cash neutral. Free cash flow before acquisitions amounted to CHF 147 million, basically at the lower target range of our guidance. On slide 23, we display the major acquisitions, investments of 2018. On the left, you see the progress of our new milling center in Biel. The overall investment end of 2018 amounted to CHF 79 million. Therefore, CHF 43 million in the year under review. The inauguration is scheduled for autumn 2019, where also our capital market day will take place. In the top middle, you see an illustration of the new headquarter and training center of GF Piping Systems in Schaffhausen.
The training center hosts more than 6,000 customer visits and trainings annually. Overall, GF is investing CHF 25 million in new workplaces and training facilities.
The investment summed up in the year under review amounted to CHF 7 million. On bottom middle, you see the new light metal facility in North Carolina. Overall investment until 2018 amounted to CHF 94 million. In 2018, the capital expenditures amounted to CHF 35 million. On the right-hand side, you see a part of the production process at GF Cast, our promising entrance to aerospace and energy industry at GF Casting Solutions. The company was acquired in April 2018. Please allow me to summarize on slide 24 a few important key figures. Net debt increased by CHF 55 million to CHF 238 million. The outlays for acquisitions are the main reasons for this development. However, the net debt EBITDA multiple remained on the same good level as last year.
As a consequence of the strong development of earnings per share from CHF 62 to CHF 69, our board will propose a dividend of CHF 25 per share. This reflects an increase of 9% and a payout ratio of 36%. Headcount dropped by 808 people. Main impact, the recent divestments, which reduced the headcount by 1,924 people. 812 people, employees joined GF through the acquired investment casting company. Ordinary headcount increases were 304 out of 100 for our Mills River new casting facility, North Carolina. As we said in December media conference, we will share with you all the details of the transaction of the divestment of the two German iron casting facilities. Slide 26 shows the turnover split of GF Casting Solutions and illustrates the strategic portfolio changes within the division. This transaction means a significant reshaping of its portfolio towards more promising technologies.
You can see on the slide the divested iron casting activities accounted for 37% in 2018, equaling to CHF 617 million. These divested companies did not contribute to the division's EBIT. Post-transaction, 56% of the turnover goes to the light metal automotive castings, for which we announced large orders last year. Aerospace, energy, and industrial applications will sum up to approximately 24%. The lion's share of the remaining 20% automotive iron castings stands for the division's Chinese operation. Slide 27. This displays the transactional details of the two European iron casting plants divestment. The companies were deconsolidated effective December 1st, 2018. The sale included the operations and production equipment in Singen and Mettmann. Since GF remains the owner of the real estate in the value of approximately CHF 50 million, these assets have been reclassified as non-operating investment properties.
The purchase price of CHF 62 million was the result of a fair valuation corresponding to an enterprise value of approximately CHF 225 million. This corresponds to an EBITDA multiple in the range of 6.5-7. The granted vendor loan amounts to CHF 62 million and is expected to be repaid within the next five years. The interest rate will increase from 3% to 4% with the beginning of the third year, and finally reach 5% for the last year. The transaction was profit and cash-neutral. With that, I conclude my presentation and hand over to Yves for the strategic impact and the outlook.
Well, looking first at slide 28 at the consequences for the GF Corporation of the portfolio reshaping of GF Casting Solutions. The return on sales objective of the GF Corporation is being increased by 100 basis points to the 9%-10% range, and return on invested capital by 200 basis points to the 20%-24% range. This increase is, on one hand, a consequence of raising GF Casting Solutions profitability objectives. Also, slide 29, because as of 2019, the weight of the most profitable division, GF Piping Systems, has substantially increased from 40% of total sales before the divestment of the plans of Singen and Mettmann, to 46% post-transaction. You can see the pro forma sales for 2018 of the new corporate structure would have amounted to about CHF 3.98 billion as compared to the reported CHF 4.57 billion for the year 2018.
As you also can see on the slide, the exposure of the GF Corporation to the automotive industry has been substantially reduced from about one-third of its sales pre-transaction to one-fifth post-transaction. As a consequence of the divestments of the two iron foundries in Europe, slide 30, GF find itself also with a better balanced worldwide sales split. Whereas Europe accounted in 2018 for 55% of GF sales, this is post-transaction reduced to 47%, with the share of Asia growing from 25%-29%, and that of America from 15%-18%. What are we expecting for 2019? Slide 32. Well, it may well be that the first semester of 2019 will be weaker than the very first strong semester of 2018. Market uncertainty is higher. The automotive industry is at least momentarily in a slowdown, and customer sentiment in China remains affected by trade tension concerns.
To top it all, currency tailwinds turn into headwinds. On the other hand, new products, new market segments should help GF Piping Systems to sustain its growth momentum. GF Casting Solutions starts 2019 with a reshaped portfolio, which all things being equal, will lead to higher profitability. At GF Machining Solutions, the demand worldwide for automation solutions remains very strong. New technologies, such as those presented earlier, should help support growth. Therefore, chances are intact, slide 33, during the second semester of 2019, to make up for a possible shortfall in the first semester. More so as the base for comparison in the second half with the second half of 2018 is clearly lower as the first semester 2018. Moreover, the wide presence of GF in growing sectors like aerospace, as well as the launch of attractive new products such as digitalized valves, will support sales going forward.
Overall, we're confident for the whole year 2019 to grow at least on organic basis and reach profitability figures in line with our revised 2020 targets. Ladies and gentlemen, let me at the end summarize the actual positioning of GF as of 2019. I think 2018 was a successful year with results well in line with our targets, but also a year of strategic transformation. GF is not immune to recessions, but our company has a strong and solid financial structure, has a well-balanced global presence, and is well positioned in markets with secular growth characteristics and driven by sustainability requirements. The water sector at GF Piping Systems. Cars and aircraft engine efficiency at GF Casting Solutions, as well as the miniaturization of components and production automation at GF Machining Solutions.
Moreover, the weight of its most profitable and most stable division, GF Piping Systems, has been step by step increased to now reach almost 50% of the corporation sale. By the way, you're all invited, as Andy mentioned, for our capital market day of the 25th of September 2019, where the new management of GF will expand on those themes. With that, I would like to conclude our presentation. We're now ready for your questions.
Yes, thank you. Tobias Arnold from MainFirst. Three questions if I may. First, on metal prices, could you remind me on the margin impact you've seen here in 2018? Also assuming stable prices or in the meantime, a bit lower prices, what the positive impact could maybe be for 2019? The first one, then second on Biel with regard to these combination of the production facilities, what kind of annual savings do you currently foresee there, given the higher productivity? Last but not least, on M&A, could you remind us what is left out of your 2020 strategy program? How much M&A you could still do, and how do you see the chances to reach this level?
Okay. Maybe I will answer the third question and I think I'll see if Andreas Müller will answer the two first ones, yeah. On the M&A side, well, we have told you already one year ago and two years ago that we want to increase our presence in the aerospace industry. If we can make more acquisitions in this area, we'll do. Also at GF Piping Systems, basically, acquisitions in countries where we're not really present. Acquisitions in sectors like digitalization, sensors would of course be welcome. In GF Machining Solutions, basically, if we can, let's say, acquire a company to complete the portfolio, that would be, of course, welcome. Now, to the acquisitions, one has to be two to tango, right? Basically, does not change. First priority, GF Piping Systems, and then if we have good acquisition possibilities in the two other divisions, of course.
We'll try to do them.
The most important impact on our margins is obviously through the divestment of the two iron casting facilities as we have said, CHF 617 million of sales without any EBIT contribution. The division account for the major dilution whenever metal prices increase, so 70 basis points has been the impact on the GF Casting Solutions division last year. We see the raw material price increases normally in the range between 1%-2%. It depends a little bit what kind we look in the various divisions, which we normally can also pass on to our customers. Coming to the second question, Biel, we expect annual savings in the year 2020 in the range of CHF 3 million-CHF 5 million. We do not expect any impact in the year 2019.
Thank you very much. Alessandro
Chances are the second semester should be a bit stronger. That's the reason why we mentioned this point. Backlog, mentioned at the same time. Margin outlook, maybe in general, Andy will answer in details. I think the GF Casting Solutions starts with a much different, let's say, portfolio. There are two points which influence the margin. One, we do not have any more in 2019, the two plants which in 2018 are the negative impact on the return on sales. Let's see, CHF 600 million did not bring anything. Also in 2019, we should get much less losses in the U.S. regarding the new plants that we started in August 2018. These two factors combine, in our view, to justify the increase of profitability at this division by 200 basis points.
The third point, if you look at the overall picture, that we have now the weight of the most profitable division, GF Piping Systems, which is much higher, which mathematically increases profitability at GF overall. Did I answer all the questions?
I think I may add one thing.
Go ahead.
The Mills River facility, as you made it in your calculation, waving away the whole loss, that's unrealistic. We still expect a loss in the year 2019, definitely not in the range as we have seen in last year. Secondly, it's important to mention that the previous strategic corridor for the ROS was 6%-8% in that division, and we have increased that to 8%-10%, and the starting point obviously is not 6%, the starting point is 5.1%. With your calculation to reaching the corridor of 8%, that is, in our opinion, clearly the right stretch of the target.
Thanks for taking my question, Martin Flück, Kepler Cheuvreux. Actually, I've got three, and I'll take one at a time. Starting off with Piping Systems demand dynamics expected for 2019. I heard your elaborations, but I was wondering whether you could be a little bit more specific on the individual customer segments, i.e., the industry segment, maybe to start off with. If I remember correctly, last year and particularly 2017, you had a nice boost from the U.S. shale oil and gas industry for Piping Systems in that region. That's the first driver that I would like you to highlight. Secondly, if I remember correctly, China, the utility sector, the switch from coal to gas heating was also an important driver. How have these trends developed over the last few months, and what do you expect for 2019?
Two questions.
That's my first question.
First question. Sorry. Answer the first question first, okay?
Please.
Thank you. All right. Dynamics of Piping Systems. Last year, what did we see? We saw that the U.S. grew over proportionally. It was the first time that America actually grew much more than Asia or Europe since many years. I don't know if it's thanks to a new president, but that's what we saw, including, by the way, the use of gas. There's a lot of shale gas in the U.S. which is available and for which a lot of investments are going on to use the gas. I think we are lucky enough to be well-positioned in the U.S. in that business, at least last year. Regarding the industrial segments, basically, they have to do with water treatment, with the transport of chemicals, as you saw the desalination plants, and so on. This is quite a stable business. It grows more than the GDP.
Every year, maybe 4%-6%. This, we don't see why it should be different in 2019. The needs for water increase in this world. Of course, it will not grow linearly every year, but basically it's a secular growth, like water. Regarding the other segments, building technology, for example, there we didn't grow as much as the industry or utility last year. Let alone because we are mainly in Germany, in Switzerland, in Turkey and in China. We grew in some countries and grew a bit less in the others, but overall, we grew. Where we didn't grow last year was mainly in gas in China. I think gas in China, we grew outside of Beijing, but not in Beijing. It's a bit funny, right? The reason is there is not enough gas.
Maybe you have seen that the region had to rely on coal a bit more because people were freezing during winter. That reversed a bit temporarily, at least to use the use of coal. They just delayed, in our view. What happened last year, that in the gas business in China, it was more stagnant than the previous years. Otherwise, even in China in the last year, in the industrial applications, we grew quite well. Yes.
Thanks. My second question would be to your metal prices in GF Casting Solutions. Now I realize Andreas' statement about normally compensating higher metal prices on an annual basis. Was that also the case in 2018, and is that your expectation for 2019? Judging from the recent changes in prices, at least market prices for aluminum, steel, and so on, one would assume that customers are starting to ask for renegotiations. Is that the case?
I'll answer basically quickly. I think Andy will give you more precise figures. Basically, our contract with customers allow for a compensation, automatic compensation of the increase of metal prices. There's a delay of 2-3 months. Therefore, when prices go up, we lose a bit of money. When prices go down, we gain a bit of money. Because of the delay of 2-3 months. Last year, well, because the price went up, we lost a bit of money, of course, onto that reason. Andy?
Yeah. Since we divested two iron casting facilities, which have been the major influences on the income when it comes to these time delays, you do not see a huge impact in the years to come. Aluminum is much more, in terms of procurement price levels and how to proceed on, process these prices to customers on the same level. We do not see a major impact on that. As Yves said, 2018 was pretty much on the level of the year before.
We didn't see customers asking for the renegotiation of contracts on that topic.
Finally, on Machining Solutions, if I may. Looking at some market intelligence data for European and Chinese demand for machine tools, picture doesn't look rosy, to be honest.
What's your outlook? I've heard your statements about the backlog and so on, if you could elaborate a little bit on your view on the market and how you think that's going to affect you towards the second half. Thank you very much.
Yes. Well, we're affected the last year in the second half by weaker demand in China. That's correct. In China, it's mainly in the ICT sector. In other words, information communication technology. It was compensated last year by a very strong demand in the aerospace and medical sector, especially in the U.S. and in Europe. For 2019, we saw in January, I think it started quite well, same trend. In other words, aerospace, medical going still very strong, China on the same level. Basically, we didn't see why it should be a major change compared to this trend in the next few months. The backlog increased in January. That's positive. Now it remains to be seen whether it will be the same in February and March. The year did not start very badly.
Thank you. Two to three questions, please. The first one is, with your divestment of the two production sites in Germany, you have a vendor loan given. You are still having a 20% equity share. What would happen if significant restructuring would be needed or there are liquidity needs in these two production sites? Would you be supportive here? Do you really consider it a totally separate entity now? Second question would be please, in the Casting Solutions segment, the sales numbers in the automotive industry in your two key regions, Europe and China, was very weak in January and also, I think, in the first weeks of February. I think down -5% to -10%. I was surprised to see your bullish statements in the press release this morning about the good order intake, and your prospects for 2019.
Can you help us to better understand, is now Georg Fischer Casting Solutions outperforming the auto cycle, due to hybrids and electric vehicles, or how should we read this? Last question, I know it's a basic one, but not totally unimportant for us. To sum all your answers up on momentum, in Machining Solutions, piping, and Casting Solutions, is the organic growth on group level positive in January and the first weeks of February?
Sorry, it is-
Is the organic growth in the positive territory?
Positive territory.
Year to date, yes, on group level. Thanks.
Thank you very much. I will answer the last two questions, then I think Andy can answer the first. Basically, you are right. In January, the statistics show that the production of cars in Europe went down about 7% in China as well. In Europe, it may have other reasons than China. Probably it's this WLTP, which has an impact especially on those customers which have a lot of models like the Volkswagen Group. The others less. In China, I think it has to do with the so-called customer sentiment, right? Of, oops, what is going on in the future? Whether it will last, we don't know. What is sure is that in the U.S. we had nothing before. Now we have a lot of orders for new plants, I see it's a plus.
In China, we've had a lot of orders and especially for the hybrid and the electric cars, which we didn't have before. It so happens that we start 2019 with a very high portfolio. The question is whether the models for which we got these orders will be all successful or not, because we depend on a month-to-month basis, not so much from the order intake, which is very good, but from the call-offs of customers. I think what is important for us is of course to have a lot of orders for the future, but also to see in the next two, three months what the call-offs are. The call-offs in January, February, basically in America, well, since we start from zero higher, that's clear. We believe this year we should sell about CHF 50 million in America, about.
I think in China, I see the market is so big, even if there is a reduction in January, it doesn't impact us too much. I think in Europe it's a bit different. I think in Europe, the-- also depending on the production of cars. Probably what we'll see in the first two, three months is growth in America, because we grow from zero. In China as well and in Europe, probably a slight decrease in the first two, three months. At least that's how we see it. In Europe will depend very much on whether all these models have been yet now registered or not, and whether the car industry can start to produce with all these models. The momentum you have asked for the first months. I think January was not bad. We've seen in Machining Solutions, a higher intake in January.
Piping Systems was continuously at a very strong momentum. Casting Solutions, we just mentioned. Overall, of course, difficult to have a crystal ball, but if we put all these ingredients together, in our view, probably the first quarter will be a bit weaker than the first quarter of 2018. All things together, probably Piping Systems up. There are two divisions a bit down. Second quarter, we should start to compensate. Unless, of course, there's a major trade war between China and the U.S., and all bets are open. It will depend very much on whether the currencies stay stable as they are today. I think we have a good chance in the second half to compensate the first quarter. That's basically how we see the year developing. Andy, you can answer the vendor loan topic and the 20% equity, the first question.
We believe that the new management, which knows the two companies very well, is more flexible than a corporation would be to run and lead these companies, which is sometimes also required. We also believe that they are well-structured, and we see that they had a good start into the year. Overall, of course, we are exposed CHF 50 million, CHF 62 million. In addition, we would give them an emergency line of CHF 10 million net working capital if required. At this point of time, we do not see the need since the EBITDA performance of these organizations are quite okay and quite strong. As a corporation has a target of 6%-8% return on sales, this new owner may will be happy with a range of 1%-3%, and therefore we do not see at this point of time any concerns.
Okay. Thank you. If I may follow up on this one, just in case we have a deteriorating truck end market and maximum amount in one or two years, these two production sites would need CHF 20 million, CHF 30 million cash, or you have significant restructuring cost of CHF 20 million, CHF 30 million. Is this now for you a legally separate entity or would you help them?
It's a legally separated entity, and as we said, we do not see at this point of time any reasons, as you mentioned them. The companies are well-structured. As you may have seen, we have invested in this company, so we haven't sold overaged assets to the new owners. Therefore, we do not see that scenario at this point of time.
Thank you.
[inaudible], we see a range of CHF 200 million in the year 2019. As to most of the investment will be allocated to Piping Systems.
build a new facility in China. As well we construct the new training and customer centers in Schaffhausen. Approximately 35% of the total CapEx will be spent at GF Casting Solutions. Still major driver here is the Mills River facility, and the rest, the remaining 25%, are allocated to Machining Solutions.
Thank you.
Are there any major Brexit implications? I have seen in the past there were not, but maybe there are some hidden ones in the supply chain on the Casting Solutions maybe.
Thank you very much for the question. I think it has two aspects. How's it going in England and what will be the consequence of Brexit going forward? What we have seen last year is that there was almost no country where we grew as much as in England. It was very astonishing for us. I think they did a very good job, especially to serve customers very well and to enter into new segments like, for example, these data centers. Which in Ireland play a major role in the economy now. That was very positive. For us, England is together with Ireland. We look at it as one market. We should not maybe, but it's like this. Brexit, I feel we depend on England for about 2% of our sales. Yeah. May have an impact, but not really significant for the corporation. If things go wrong, of course.
I think a more important impact would be if there is a real trade war in between the U.S. and Europe or in between the U.S. and China. I don't know if I answered your questions about Brexit. Was it answered?
Yeah. Perhaps also in connection with supply chain-
Okay.
For example, on the automotive industry, because it's not always that you directly can allocate the direct sales in the U.K. with the actual impact of Brexit.
Okay. Well, basically, our main business in the U.K. is Piping Systems. We do also good business in Machining Solutions. What we did is to increase a little bit the lager, the stock in the U.K., so we're able to, whatever happens, to serve our customers in that country. I didn't see how the U.K. and Europe cannot find a middle ground, frankly speaking. It'd be very astonishing if it doesn't find a middle ground, in my view. Who knows?
Yes.
Armin Rechberger from ZKB. Two questions. While we were talking a lot about Precicast, you did another acquisition as well at Casting Solutions in Romania, when I'm right?
Yep.
How does this develop? While the technology might be not as sexy as Precicast.
Yeah
Still, I would be interested. China, you just mentioned the market there is big and no worries about, but how is the situation about building technologies, especially for Piping System?
Okay.
Also Machining Solutions. It's an important market as well for your discharge technology.
In China, you mean?
Yeah.
Yeah. Thank you very much. Yes, in Romania, in fact, we have two plants or three now. Two that we bought in this company, as you mentioned. They do quite well, by the way. We're investing quite a lot to bring some of the businesses from our plants in Austria to whatever is manual in Austria, we bring to Romania. That's a positive. Precicast, by the way, has also a company there where they more do all the, let's say, manual labor. It's called the post-casting operations. They did it in Switzerland, more and more in Romania. That's positive in Romania. I think we're quite happy about the investment there. Building technology in China, we are quite surprised. Last year, quite good, actually. Especially in the 3rd tier towns. That was quite okay. The GF Machining Solutions, yes, of course, in China, as I said before.
We had in the second half year a slowdown in China in investment goods. That continue, it will depend on many factors. One, the trade tensions, two, the 5G. Three, the new models of computers, smartphones, electronic equipment. Long term, I think unless the sky falls upon our shoulders, I don't see why China will not keep a very good rate of growth. The needs are there, either for cars and therefore car components, including electronic components. China is at the forefront of 5G. As you know, with Huawei and so on. It's basically the factory of the world for many of the products we use every day. Yes, there are ups and downs. Short-term, long-term, I don't see why there should be a major breakdown there. Don't know if it answers your question.
By the way, we have now in China more employees in that country than any other country worldwide. We have 4,000 employees there, 3,400 in Switzerland, much less in Germany now that we sold two companies. U.S., 1,500, and so on. At least also, I think we are much better, in my view, let's say diversified geographically or globally as we were before. That helps to compensate one region or the other. You have seen last year, we compensated basically China with the U.S. Any other questions? There is no other question. If there is no other question, I think before concluding our remarks, and after 11 years at the helm of GF, I would like to thank you all very much for your longstanding interest in our company, your always challenging questions, and your incisive analysis.
It's been a privilege for me to share with you a part of the history of GF, and I hope you will give my successor, Andreas Müller, the same level of challenge and attention you gave me over the years. Thank you very much.