Yeah, good morning and welcome, ladies and gentlemen, to HUBER+SUHNER's Media and Analysts' Conference on the Full -year Results 2024. I give you, in a first section, an overview of the business year 2024, and then our new CEO, Richard Hämmerli, who is today with us here, will dig a bit deeper into the financial results of last year. If we look at the overall business figures, I think from distance everything is looking really good, with a plus in top and bottom line. Orders grew by 10.5% last year versus the previous year, and in particular, in the very first months of the year, we were really able to get large orders in, mainly in the communication segment in Asia. That, later on during the year, has driven sales, and we were able also to increase sales by 5%, organically by 6.4% in the previous year.
Already, or by the six months' results after the first semester, we were still clearly behind the previous year, so you can easily derive from that that we had in 2023 a first good half on sales and a very weak second half, while in the past year, 2024, it was exactly the opposite, with strong order intake in the first half and then consequently sales growing in the second half of last year. Driven by the increased sales, we were also able to increase our operating margin by 60 basis points to now 9.7%, and we were quite happy and pleased to be able to stay within our long-term target range for the full year, and also were able to announce that already at this occasion a year ago and then could stick to our guidance. I think very few industrial companies were able to do that last year.
We have to say that there were two halves, as I said, strong order intake in the first six and higher sales in the second, and we have seen in some markets clearly that the situation has normalized, in particular the overstocking. The word of the year 2023 came to an end, and in particular in the industrial sub-markets, we have seen that the inventory levels have gradually been consumed and came down to a normalized level, which then has also given the opportunity for us to capture more orders again. What has not normalized is the situation with regards to the economic and geopolitical situation, but I will come to that in a bit more detail towards the end of our presentation today.
When we look at EBIT on a 10-year history, during those 10 years, we have increased our target range twice in the year 2017 and in the year 2022. The present range is between 9-12%, and if you look back, there was just one year that we have not hit our target range that was set year 2017, but since then, every year, even during the COVID phase, HUBER+SUHNER has been a very predictable and also resilient company delivering EBIT from 8.3% to 12.1%, which I would consider a very solid performance. Also the year 2024, after the dip in 2023, returned again to decent levels in the middle of our target range, while we just made it within those 9-12% a year ago. A bit a deeper look into the segments, the industry segment had a good year, mainly in terms of order intake.
Here, as I said, the business accelerated in the second half, and here the order intake has clearly outperformed the sales, which resulted in a book-to-bill of 1.11, and the momentum continues, so we are here happy that we have a positive trend in the segment with the highest margins for HUBER+SUHNER. On sales, we were not quite able to close the gap. We ran 3% short versus last year, but also here, what I mentioned for the group, we have a different pattern. In 2023, we had a strong first half and a weak second half in that segment, and we started the year 2024 with very little backlog and with little tailoring, so only the orders that came in during last year drove sales.
At half year, you may remember we were clearly behind the previous year, and we were nearly able to close that gap towards the end of the year. The operating result, as a consequence, also remained on a good level with the 17% and represents even a small increase versus the previous year. The drivers here were broadly, mainly on the order intake, on sales. The main contribution came from A&D, while our sub-segment HPC has seen a decline in sales, mainly on the back of a very weak order intake in 2023, but the trend in orders has already reversed towards the end of 2024 and will hopefully remain positive.
The communication segment is the main driver for the growth last year and grew by 26% on sales and 21% on orders, and also has delivered impressive improvement on the bottom line from 4.9% to 6.7% at half year to 8.1% at the full year 2024. We have to note here that there were two main drivers, as already mentioned in our half-year conference. The first driver was the Asian mobile communication market, in particular the Indian market, where we were able to win a large 4G project, and you hear correctly and rightly it was a 4G project. It was a government project which provided access to rural areas for the people living there to access e-government services in a more practicable way. Huber+Suhner has already won that project at the end of 2023 and has then almost completed that project throughout the last year.
There are the last deliveries still falling into the actual year, but that project will come to an end and has been at the forefront of growth in the communication segment. The other driver for growth was the data center market, which picked up momentum again, mainly on the back of AI data center and also our attempt to introduce our all-optical switches into that sub-market. The transportation segment, which has enjoyed a good year in 2023, has had to accept a setback on top and bottom line, so orders and sales came down by 7.6% versus a very solid and strong 2023, and also EBIT declined from 9.1% to 7.3%. We report two sub-segments under the transportation segment. It's railway and automotive, while railway proved to be stable with some gross contribution from our rail communication growth initiative.
The automotive market disappointed last year, and we do not see major signs of recovery towards the end of last year, and we believe that this market will be soft going forward with still potential long-term, but more about that in the outlook. Needless to say that with 7.3% operating margin, this segment is below our mid to long-term target for operating margins for the segment. This just wraps it up. While all three segments were on the same level in 2023, we have seen steep growth in the communication segment with 26% representing now 40% of our turnover, while industry declined by 3% and transportation by 8%. Still a very solid diversification, but with a bit higher share of the communication segment thanks to the success last year.
Here we mirror this development in the sales by region, and you can see that Asia-Pacific grew by 26%, and that has to do mainly with the communication segment doing really well in that part of the world, while the Americas grew by 6% versus a very weak previous year, and EMEA came down by 5%. You should be aware that in 2022, the U.S. was quite strong with nearly CHF 250 million, so the level that we have today, CHF 180 million, represents clearly a lower level compared to the better years in HUBER+SUHNER's history. This split with 50% in EMEA and about 20% in U.S. and 30% in Asia, I would have considered a few weeks ago not very positive. I may come to a bit different conclusion from a risk point of view.
The European share with 50% will probably prove to be a strong pillar going forward in the present uncertainties about tariffs and geopolitical tensions. A few highlights on the sustainability reporting, which is part of our annual report. We are transferring towards ESRS reporting. We are still not obliged to the size of HUBER+SUHNER, but latest next year we will comply fully with the ESRS standard. A few highlights out of the present reports is that we have just submitted new SBTi targets. They were also separately announced in a press and media release. They have been approved, and they support our global transition plan towards net zero. We have already had SBTi targets submitted in 2017 on the basis of 2015 until 2025, so we are coming to an end of this first SBTi period.
On that track, we are doing really more than okay with, again, a strong contribution to CO2 emission reduction last year by 27% compared to previous year. Also, the resource efficiency has improved substantially with reduction of total waste by 10% and also the energy intensity down by 4.6%. The Scope 3 emission accounts for the lion's share of HUBER+SUHNER's emission, so it's really key that we also focus on that, and we have set ourselves the target to bring more than 80% of our suppliers for direct production material on a platform where we do a comprehensive sustainability assessment in order to also track their emissions, and we have outbeaten that 80% target by quite a bit. Last but not least, an all-time low was achieved regarding lost time injury and also the lost hours in the production.
With that, I have concluded my overview of the business figures 2024, and I would like to hand over to Richard, and he will guide you through the details of our financial result 2024.
Thank you very much, Urs. Good morning, ladies and gentlemen. Very warm welcome also from my side. My name is Richard Hämmerli. I'm the new CFO of HUBER+SUHNER since 1st of January this year. I'm very happy to guide you now through the details of our results. As communicated by Urs, HUBER+SUHNER grew in order intake 10.5%, and very pleased to see that the vast majority, even better, the organic growth was with 11.9%, while the other effects, currency, copper and portfolio were slightly negative. The main drivers were the communication segment and the industry segment. Both grew double-digit, while the transportation segment on organic basis had a slight decline.
Similar picture on the sales side. The organic growth with 6.4% is even higher than the reported growth of 5%. Also here, the non-organic growth, currency, copper and portfolio had a slight negative effect. Main driver here, also communication segment with the aforementioned project by Urs in Asia with 29.4%. Industry and transport had a slight decline on the sales. Now looking into the gross margin, gross margin was at a stable level at 35.4%. This compares to 35.3% in the previous year. When we now look into the half years, as you can see here on this slide, you can see that the second half of 2024, the gross margin was slightly lower. This is due to the business mix, but we are on a stable level compared also with the previous years. Operating expenses increased from CHF 227 million in 2023 to CHF 233 million in 2024.
Main increase comes from sales and marketing, and this is related to the volume as we had higher volume in 2024. Sales and marketing expenses grew from CHF 119 million to CHF 127 million. R&D on the other side was CHF 56 million, and also the admin expenses of CHF 49 million remained flat. On the EBIT side, we achieved a higher EBIT. EBIT grew by 12% from CHF 77.6 million to CHF 86.6 million in 2024, which results in an EBIT margin of 9.7%, an increase of 60 basis points. When we look into the segments, you can see industry remains the key EBIT contributor for HUBER+SUHNER with CHF 47 million or an EBIT margin of 17%. Communication improved very strongly in terms of margin from 4.9% to 8.1%, and transportation achieved an EBIT of CHF 19.1 million or 7.3% EBIT margin. Also, thanks to cost control, corporate costs were lower compared to 2023.
Now looking into the financial results below the EBIT line, you can see here we show quite an improvement. In 2023, we had a financial result of minus CHF 2.9 million. Now we are at CHF 0.8 million. How did this come about? You can see that the currency effects, mainly hedging costs, remained on a similar level like in 2023, but what improved is the other financial results, and we had two drivers in there. On the one hand, we had higher interest on our cash deposits, and the other effect was withholding taxes that we previously until 2023 showed on this line are now shown on the tax line. Going further down in the income statement to the tax, HUBER+SUHNER achieved an effective tax rate of 15.7%, which in my opinion is still quite a good level. It increased compared to 2023 from 13.1%, mainly due to three drivers.
The first one is the volume mix that we had, that we had more volume in higher taxed countries. The second effect is the aforementioned withholding tax that is now shown here, and the third effect is the minimal taxation that had a first-time effect now in 2024 on HUBER+SUHNER. In terms of investment, HUBER+SUHNER strongly also invested into innovation. Also in 2024, CHF 45 million we put as investment, which equates to 5% of sales, and this compares to CHF 36 million depreciation, so we invested more than we depreciated in order to have a good future potential and capture the potential that is out there in the markets. The balance sheet of HUBER+SUHNER remains rock solid. The equity ratio is still at the very healthy 74% on the total volume.
The balance sheet also grew last year by 14%, and this is mainly due to higher accounts receivable that you can find on the line other current assets, but is partially compensated also by higher payables, accounts payable that is under other liabilities line. Net liquidity is at the very healthy CHF 184 million, again an increase compared to previous year of CHF 163 million. Looking into the cash flow, cash flow from operating activities were at CHF 19 million. Deducting the invested cash flow, which is CHF 36.8 million, results in a free operating cash flow of CHF 53 million compared to CHF 63.7 million in 2023. We paid roughly CHF 31.4 million in dividends, and this results then in a free cash flow of CHF 19.9 million.
Now looking at the capital efficiency, also this indicator increased. Capital efficiency, return on invested capital increased to 16.8% compared to 15.8% a year ago, mainly driven by the net operating profit after tax, which was at CHF 73 million, and also the average invested capital at CHF 434 million increased slightly compared to previous year. Now on the dividend side, I mentioned that our EBIT increased by 12%. Also the dividend increases by 12% in 2024. The board is proposing the general assembly dividend of CHF 1.90 compared with CHF 1.70 a year ago. We maintain here our range for the payout ratio of 40-50%. Here we have the upper end with 49% on our payout ratio. In total, it is planned to be paid out CHF 35 million in dividends for the business year 2024. To sum it up, 2024 was a strong financial year.
We had on the one hand the increase of the accounts receivable clearly. On the other hand, orders grew primarily organically, double-digit. We improved the EBIT margin. We had a higher capital efficiency, and last but not least for the shareholders, also are able to increase our dividend. With that, I'm handing over to Urs. Thank you.
Thank you. Before we come to the Q&A, I'll try to give you a bit of an outlook, and I will try to elaborate a bit on the trends and the developments in the different markets. Fundamentally, the trend in connectivity is still positive, and it's clearly an area or a business scope that we feel comfortable in. There is no attempt and no strive to move our center of gravity away from the present field of activity.
There are obviously, against fundamentally positive trends in connectivity, key risks to be managed. I'm probably not the only one that presents year-end figures these days without highlighting the risks in the markets coming from the geopolitical tensions, but also from the unpredictability and the risks of trade wars that we have got already a bit an early taste. There is also, and I have to say that HUBER+SUHNER is a globalized company, and that comes with risks and with opportunities. The risks are obviously coming from the global value streams that also exist in HUBER+SUHNER, and the opportunities, they come along with a global structure that we are able to react in our structure and move value streams, not overnight, but within reasonable short time, around and away from countries where there may be trade barriers imposed.
Our strategic focus is, as I said, remaining in the area of connectivity, and the fundamental drivers that I have mentioned, they are the mega trends such as personal safety, seamless communication, and environmental friendly mobility. I think the company has proven resilient in the past thanks to a balanced diversification and a diversification which was perceived quite often as a bit too broad, but I have to say that we feel quite comfortable with the three market segments which give us really business in different markets with completely different cycles. In particular, we can also highlight, and I will come to that in all three segments, growth initiatives which promise attractive growth also in quite difficult times as we have enjoyed last year. Last but not least, our business model is built on three pillars: innovation, customer proximity, and also the operational excellence.
That gives us a certain position in the negotiation with customers so that not in all cases we are obliged to swallow the tariffs to the full extent or to a partial extent, but we will be able to pass on some of those potential tariffs that will be imposed to our customers as we enjoy such a strong position in certain markets with our technology. Last but not least, we should also mention that where there is change, obviously there are always risks, but there are also opportunities, and it's definitely not our strategy to complain about the risks, but address them properly and act, and then also to try to capture the opportunities that may arise out of these changes. We have started to give you a little bit further breakdown on our market segments as this was always a question.
We don't give you full transparency on how much business we do in which application, but this should enable you to understand a bit better how HUBER+SUHNER is positioned. If you take the 31% sales in the industry segment last year, you can see that aerospace and defense accounted for 12% unchanged versus previous year, which means if we take the 5% growth on the group top line that also this aerospace and defense business grew approximately by those 5%. Within that bucket, we also report obviously three applications, so we have the space application there, we have the defense application, and we have the civil aviation application.
We do that for the simple reason that many of our customers here, they have business in all three applications, and for us it's very difficult to track whether a component or an assembly or a subsystem goes into a civil or into a defense application. This even more as we have nearly 100% of our business turnover in so-called dual-use goods, which can be used for either application. The other part of the industrial or the industry segment is the subsegment or the bucket industrial, so our test and measurement market goes in here, but also the high power charging and all the rest like medical, energy, and process industry, which has seen still a slight decrease last year, but with a positive trend in order intake.
Communication grew from a third to about 40% on the back of the growth in the mobile network, mainly with the Asian business, but also fixed network where we report data center has grown last year, which represents about 70% of our total sales, while the mobile network is the largest bucket here with 23%. The transportation market is divided up, as I said already earlier, in railway and automotive, while railway was stable on the rolling stock and growing on the railcom application and has achieved 19% of our total sales. The automotive business declined and came down from previous year 15% to now only 10%. We report two sub-applications here. It's the cable for electric vehicles, mainly on the commercial side, and then also the sensors or antennas for radar applications that enable autonomous driving.
Looking at the industry segment in more detail, it's really about several interesting applications which ask for high-tech products and which offer a high degree of differentiation, and that's also how the high margin in that segment is really explained. Connectivity quite often for our customers comes really very last and represents a relatively small portion of their business, so they rely on very competent companies, and here we can definitely play on our strengths. The test and measurement market where we go into the test gears, but also where we supply test connections from the test equipment to the products, is quite often linked to the comms market because the comms market is one of the largest electronics markets, and the electronics market is the driver behind the test and measurement market.
With the decline of the communication market, we have also seen a decline of our test and measurement business. This is a high-end, highly differentiated application for us, which also provides really good margins and where we have a very long history and also a very strong brand name. We have seen that decline bottoming out. I think the worst is behind us, and we have from the equipment manufacturer slightly higher volumes in the forecast for this year, so we believe test and measurement will reverse the trend and move back to modest growth. In addition to that, we have also developed an application which is called lab automation. You must imagine that this test equipment is distributed quite often in the production of electronic equipment, and this does not make use effectively of this very costly test equipment.
These test boxes, network analyzers, and the like, they cost easily a few hundred thousand, and if you can use them better and utilize that expense better in the production more effectively by centralizing and then controlling remotely, that gives a big advantage to the customer. The only problem is that you test RF signals, and RF signal on long distance, that's a problem. On the way between the production and the test equipment in such arrangement, you have to convert the signal from RF to analog optical, so from an RF signal to an optical signal. In order to use the test equipment and switch through the different test stations in your production, it is very advantageous to have an all-optical switch that is in the core of such a lab automation, being able to connect with all different test stands in your production.
That's the whole concept behind lab automation, which we have already mentioned quite several times and which we see now more and more interest in the market. The growth initiative here, A&D, I think it goes without saying, we see rising defense budgets, but we have to explain that this is a long cyclical market. If the budgets are discussed, it takes a while before they are approved, and when they are approved, there is a time lag between approval and the decision on which systems and on which applications within defense those budgets are being spent. When those allocations are made, there is a specification, then there is a request for quotation, and the different system suppliers prepare.
When one is chosen, you have quite often a lengthy phase where these products are being tested in the field before a ramp-up and volume commitments are given to a component and subsystem supplier like HUBER+SUHNER. Even though we have rising defense budgets, I will not expect that business to skyrocket, but I expect that we have really a position where we can enjoy, based on the recent budget decisions, a long-term growth out of this market. As I said, it is not just the defense application that falls into that bucket, it is also the space application, and here mainly commercial satellite applications that we have a major position in and that form a part of that sub-market for HUBER+SUHNER. The high power charging is an interesting market.
It is a market that is developing, but it's developing actually not with the pace needed, so it's still a bottleneck and it's still a major precondition that electric vehicles can be charged within minutes on the go before a large number of people is ready to change from a conventional car to an electric car. The same applies also for the commercial vehicles that we have a key role in, so high power charging is a fundamentally basic or fundamental basic infrastructure for electromobility on the road. Here we have a very strong position. We are clearly the market leader for these high power charging cables, and we discuss here 500 amps or higher with the 1,000 volt that gives you 500 kilowatt of power that is transmitted by our basic solution. We are going towards higher power.
We are even talking about megawatt charging for boats, ferries, and trucks, but that's not mature from a market point of view, but HUBER+SUHNER would be ready. In this market, we enjoy a very strong position. The U.S. is most advanced, but the market has come to a stop due to discussion around the connector standard, and the connector chosen in the U.S. is slightly different from the connector in Europe.
In Europe, we have the CCS2, while in the U.S. we relied on CCS1, and that proved to be an interface which had certain disadvantages and which had certain failures in the field, which has caused the industry to reconsider the interface, and the decision has been taken mainly also by the support of the car manufacturers in the U.S. that have decided that they would like to go to the Tesla standard, which has caused a halt to the investment, which has caused also HUBER+SUHNER to review its product policy and develop an NACS interface, a Tesla interface which is now readily available. When this market is now coming back and there are substantial funds in the pipeline, then also HUBER+SUHNER will be ready with the respective technology and designs.
In Europe, it's progressing a bit smaller, but step by step we see fast chargers being installed. Also, China is now coming also based on a different standard, GPT, where also we try to play a certain role. Last, we have these small niches on the general application. I don't go into the details, but it's still interesting high-tech niches for HUBER+SUHNER where we have a highly differentiated offering such as medical for tumor ablation, but also energy application that we support our process industry. In the communication segment, we have four sub-markets that we address differently. We have the component manufacturers, companies like Ericsson, Cisco, and Samsung would fall into that category. Here, our main market is that we go into the equipment with RF connectors, port-to-board connectors, so from board to board, the connections in RF come from HUBER+SUHNER.
The trend is also here going towards components that support much faster network speeds from 200 to 400 to 800 to 1,600 Gb, and that requires transceivers, so the sending and receiving unit in the optical network that can support those faster speeds. Here we play a key role with our optical filters from Cube Optics, this WDM technology that is at the core of those fast transceivers. We expect that business really to pick up as we have now for two, three years really invested into designing into next-generation transceivers. Also, in the communication segment, we have this fixed access network, and that is a constant build-out because for every data traffic increase, the fixed net has to keep up.
That means also if we have more traffic going through the mobile network, at some point it will end up in the backbone, and this is a constant development and an evolution of our fixed access networks everywhere in the world, which is always built on optical transmission or glass fiber product, and here we play a key role. The mobile network, I have mentioned in the context of this 4G project in India, and we have completed in many countries the 5G rollouts, but that does not mean that the investments in those 5G networks stay stopped. There is a constant evolution of those networks. Also, within the 5G standard, speeds are increasing, which requires again investments into the mobile network, which we are still enjoying.
We are also working towards the next jump in technology from 5G to 6G standard, and the leading companies, among which HUBER+SUHNER plays a role, are developing and defining the standard for these 6G networks already. I expect first pilot installations towards the end of this decade and some first commercial rollouts late 2020s or 2030 and onwards. Here, the data center is our growth initiative. I think I have already mentioned that in several instances, and I do not make it very long, but AI still plays a key role in the build-out and in the investments for data center. The computing power, which is required to run large AI data centers, is high, and also the Chinese approach does not play a major role here.
The computing power is as good as the combined computing unit is working, and in this context, the optical connections are key, and then also the way how these computing units are combined and integrated, and that's where we play with our all-optical switches, and we are really working towards mass deployment in those data center architectures with our optical switches. A bit more niche are these hollow core fibers, which I have also mentioned in certain instances, and on which we work with manufacturers of those hollow core fibers on the cable side, but then mainly also on the connector side. Here, the gating topic is really the capacity to produce those hollow core fibers.
The advantages are huge: 50% higher speed of light in air compared to speed of light in glass, and the latency gain through hollow core fibers is paying off for the higher cost at this stage, but we do not get more fiber to the market as the process is still under development, and this is not easy to scale up. All in all, I think even though we have had a 4G project at the basis of the success last year in the comms segment, we have so many technologies which are really advanced and can play a key role in the business cases of our customers that we are quite convinced to be able to close that gap with other applications and high-tech technology products. The transportation segment, the rolling stock business, stable or slightly growing. We have seen a dip during COVID.
Nobody wanted to use public transportation for quite a while. That has postponed and also delayed certain rolling stock programs. They are back, and the market is doing fine, and we are clearly the company to beat when it comes to cabling for rolling stock, and this on a global basis. The growth initiatives, we have two here, used to be three, but now we have two. The electric vehicle has seen a difficult year last year. I mentioned that, and we do not expect that to change immediately. We have been extremely successful in the early phase of this EV commercial market, and we were able to design in our high-voltage cable with all key truck and bus manufacturers on these Gen2 platforms. You have to imagine that in the first instance, they did proof of concept based on existing vehicles.
They took the diesel engine out, put electric drive and the battery in, and that was the e-truck. In the next stage, the OEMs have started to develop real e-truck platforms from scratch, the so-called Generation 2, and they are now available. It just has to be said that the truck of the year, 2024, is an e-truck from Daimler eActros. I think the market is ready, and we hear from companies that run both combustion engine-driven trucks, diesel trucks, and electric trucks that when the charging problem is solved, and they can do that overnight on their docks or in their parking yard, then they can be operated commercially at least as advantageous as the diesel trucks. It takes a while for people to realize that and for people really to be brave enough to change to electric trucks.
Independently, the industry is working already on the next generation, Gen3, and that does not help Gen2 to break through because it is expected that again with this young technology, the improvements from one generation to the next is quite substantial in terms of cost, but also in terms of reach. Gen3 will again be a different league. Huber+Suhner is trying to repeat the success of designing that we have managed on Gen2 also with Gen3, and we are very well positioned, and we have in our planning not huge growth for 2025. We do not believe that the pattern in the market will change so quickly, but to long term and latest 2026, we still believe in that growth initiative, and with the success on the design inside, we will for sure see volumes growing in that market as e-trucks and e-buses become more popular in the market.
We believe in that market. We don't expect a turnaround quickly, but mid to long term, we see still very attractive growth in the area of electric commercial vehicles. An area where we already enjoy a very dynamic market environment is the rail communication application. That's at the crossroad of rolling stock and communications. It is the system in the train that communicates with the trackside and then also the system which provides access for the passengers to stable and fast internet. Here we have been able to announce last year the large contract with Deutsche Bahn, not on components, but on systems, and we have more projects that we are currently working on in this market that will be decided this year. We believe the fundamental drivers in this market and also the position of HUBER+SUHNER is strong.
We have the ADAS, the Advanced Driver Assistance System, which was considered a growth initiative. It was downgraded due to the fact that we do not believe to reach the 100 million within the targeted time frame, but we believe in that business, and we have our design in. It is just so that the contracts which we have won, the volumes have been reduced in certain cases, and that has caused us to downgrade it. We still pursue that business. We are still invested in that business, and we have still new opportunities that we work on and which will also help to compensate for the decommit on the volumes of the existing contracts. We believe that this autonomous driving remains a key trend, although it does not happen so fast.
I was also too optimistic a few years ago when I said in 2025 I will come to this press conference in an autonomous car, but fact is that it's progressing and that also the regulatory side is moving forward, and we will see—I don't give you a time—but we will see in the future autonomous cars on our road. In certain cities, it's already the state of the art, and if you call a taxi, you will be picked up by a car without a driver. Yeah, that almost closes my outlook and my deep dive into the market. I hope I was able to give you a bit of details on the markets we work on.
I think, as I said, fundamentally we are in very attractive markets, and in particular the growth initiatives, maybe with the exception of EV, should, according to our plan, continue to grow in 2025. We still provide the market with a relatively cautious outlook. Please keep in mind that apart from the very positive drivers, we have a few uncertainties in the market, which does not make it easy to be very enthusiastic or very optimistic. We have to replace a large Indian project and close that gap, and we do not expect the EV commercial market to come back already in 2025. With those three factors, we provide you with a net sales guidance for 2025, where we expect to have net sales on the level of 2024.
As far as EBIT guidance is concerned, we stick to the target range of 9%-12%, which is also confirmed as our midterm target, so no change on that level. As always, in that place, the disclaimer assumes that there are not key influencing factors turning tremendously negative, such as inflation, exchange rate, geopolitical tensions, and other risks. This was my outlook for 2025. Certainly, room for speculation, for optimism. There are plenty of upsides, but also plenty of risks, and it's a very volatile environment we are working in. It requires highest agility and a fully determined management and staff, and we have certainly all hands on deck in these turbulent times. Thank you very much. I close with the financial calendar.
We will be again on stage then in a fully online webcast on the 19th of August with our half-year results 2025, and we will certainly have an update about the outlook by then. Questions. I think as always, we take the questions first from the people in the room, and then we have also the opportunity for the people in the webcast to ask questions. Please wait with your question before you have a mic. Thank you. Yeah.
Thank you, Adam Blochs. That's it, Gaby. Two questions, please. The first to you, Mr. Ryffel. Can you update us with the progress that you've made with your innovation technologies, the all-optical switches as well as the hollow core fibers? And where do the projects with your development partners stand? How close are you to a potential breakthrough, in particular in the data center business?
How long will it take, if there is an order coming, until this will be reflected in your P&L? The second question is more probably to Mr. Hämmerli. For several years, the company is now coming along with an every-year increasing net cash position, which appears a bit oversized, and I wonder if it was not a good idea to increase the payout ratio and return a bit more to the shareholders. I do not think it would impair your business opportunity.
Thank you, Mr. Laux, for these two questions. Innovation first. First, I have to say we have obviously those high-impact innovation projects. There is a lot of innovation going on. Again, we spent last year between 6% and 7% of our sales in R&D. The project that you have particularly mentioned, hollow core fiber and all-optical switches into data centers, they are progressing.
We see already first business on both. The impact of the optical switches could be higher in 2025. Here we work with one key operator of data center, of a so-called hyperscaler, in a very close collaboration. We are developing our platform to their needs. There was a little bit of change on the way, which has caused a bit of a delay, but we are working towards general acceptance of this slightly modified specified switch. That should happen if everything runs according to plan in the first half year. Based on that, we would ask for volume commitments, and based on the volume commitments, we would release also investments in the production to be able to ramp up.
If everything works well, we have just invested proactively into a new location in Poland, into a new plant, which will be ready these days to move in, which is also a precondition to be able to deal with the higher volume. If all that is fulfilled, we will see volumes picking up in the second half. If we are on track, if things go as planned, we will see volumes picking up. As you know, these days, a lot can still happen. We are obviously working very hard on that opportunity, and we throw in what we have, and that is a lot. Hollow core fiber, I think I touched upon here. Really, the gating topic is the production of these fibers, and we have here enough hands on deck and capacity to do whatever is needed.
I expect a single million sales contribution out of that. That is not going to be a game changer, but it is an attractive new thing. Allow me to answer the question about the cash, as it also has a bit of a history. Yes, our cash position is strong. I think particularly in turbulent times, we are happy that we have a strong balance sheet. Whether it has to be as strong as the one that we presently have, that is debatable. I mean, we have now also intensified our efforts in identifying a very strategic attempt, M&A targets, and that is running, and that would easily consume, depending on the size of the acquisition, a large portion of our cash.
On the other side, if we cannot use the cash for M&A or our organic development, then obviously there, at some point, we will discuss also ideas with the board of directors. It could be, again, a share buyback, as we have already done once, or it could also be a super dividend. That is certainly not at the forefront of our strategic intent. Yeah? We have Falkes from the NZZ.
Thank you. Yes, I would like to follow up on M&A. Could this really be now a time maybe to do an acquisition, especially in defense, where there obviously are a lot of opportunities now, or are valuations maybe already too high? That would interest me if you are looking at targets there maybe. Could you also explain to us why are margins in industrial divisions so high?
I mean, do you just enjoy much more pricing power there than in other divisions? Maybe two more questions, but maybe you could also provide us a view a bit on the U.S.. I've heard a bit all of a sudden now CEOs come out and say, "Well, good that we have a lot of European business," and the U.S. anyway, the revenue there has come down. Are you concerned maybe about the path the U.S. has chosen? Very last question maybe in fast charging there. I mean, we saw a competitor of yours, Brugg Cables, had to announce some restructuring recently. Are you also suffering there?
Yeah. Four questions. Let me be relatively short so we allow other people to ask their questions. M&A, we have identified nine target fields. I don't disclose which ones.
A&D could play a role among those nine fields, but we also should be aware that currently the multiples in the A&D area are inflated. We will certainly carefully observe the valuations in the different target fields, but you can be sure that if we have a strategic approach, it is around our growth initiatives, but not only. The second. Industry margins. The industry margins. Let me explain that very briefly. In communication, connectivity is a key commodity. It enables communication. On networks that are built of connections, the data is transmitted. If for an industry, a component or a technology plays such a vital role, it is in the center of innovation, but also in the center of purchasing. In particular, the technology in connectivity has gone better than needed. We can do more than the networks need today.
That is why in a large part of communication networks, you have price pressure because what is required has to be good enough and not the best possible. That is why in com, we focus not only on those products, but also on higher differentiated technologies, and I think I have mentioned them. In the industry, the value of the connectivity is of minor importance. It still is key that the application can fulfill its purpose. Quite often, it is not as good as needed, but as good as possible. If you take a test and measurement application, you can only test what your test connection allows to get through. You can the sky is the limit. That is where HUBER+SUHNER is really good. We can throw in our strengths and our advantages and achieve on that basis also higher margins. We have the U.S., Europe.
The U.S., Europe. No, I'm not happy about the 50% in Europe. The U.S. plays a key role in our strategy. I believe it's an important market for HUBER+SUHNER, where we can also offer a lot, and we will certainly not rest and accept the situation. We will try to do more, and there are opportunities, as I said, and we will try to capture that. It's a fact that with 50% in Europe, at least it's that part of the business where we do not have to worry too much about changing boundary conditions. I don't want to have that understood that we defocus from neither Asia nor the U.S.. HBC, your last question. No, we don't fear that we will have to lay off people. Actually, it's the opposite.
We have so many ideas and initiatives running that we could need more people in this field. The market requests those changes very fast. We are very close, not just to the charging point manufacturer, but also to the charging point operators because those are the ones that operate those charging points in the field. That is where we get the feedback loop closed. Based on their feedback, we improve our products, and we have aligned roadmaps. As I said, more work than hands and brains. I am positive about that. It is obviously always dangerous, like in Formula 1, if you have a safety car phase and you are held back, the lead that you had disappears, the others close up. I think we have used that phase to get new tires and more power, and we will be coming back even stronger.
Amaya. Amaya from FUE.
Also about the U.S., can you a bit explain your position there and how many products are imported to the U.S. market? How much are assembled there?
I don't want to give all the details. I think that would go too far. You can take the $180 million sales, and you can cut that roughly in half. That's about what we import into the U.S.. From that half, we also have to differentiate into products where we are confident that we can pass on any tariffs. Not all the half that we import will also be subject to tariffs as long as some countries are not subject to that. At the end of the day, it is a risk for HUBER+SUHNER, like for all other global companies.
I consider the risk significant, but not to the extent that it would endanger HUBER+SUHNER's business model. We are obviously not just since a few weeks working on mitigating the impact. First of all, we have this globalized structure, and we can move around value streams. We are also working on qualifying more U.S. suppliers in parallel to be able to shift volumes and by that avoid the tariffs. I can't give you an answer in million CHF. It is there, but it's managed, and the longer it takes, the better we will be prepared. Thank you.
Favanaki, BKDS Management. On aerospace and defense, it seems that into 2025, particularly the defense part should significantly accelerate looking at all these spending and budgets in Europe and elsewhere. Can you give us a bit of a flavor of this? Where are you in?
If Dimetall sells a new tank, do they have a full package of communication components and so forth? Could you just give a bit of flavor of your positioning and what you expect?
I can give you the details of the customers and the customer list. You can be sure that we are known and engaged, and we have business with all large defense companies, be it in Europe or be it in the U.S.. With the business growing, as I said, we would expect certain things to arrive at HUBER+SUHNER already this year. We are confident that we can stay on the growth path with our A&D business. We do not expect that business now to skyrocket for the simple reason that the budgets which are now approved, it will take years to arrive at our end.
You have to imagine that before we see volumes, it's a few years. This trend has not just started this year. There have been increases in the past on the back of the Ukraine war and also other conflicts. We believe that that will have already a certain impact. I would also confirm that the mid to long-term outlook for HUBER+SUHNER in this business is positive. We have a very strong position as far as RF technology is concerned in A&D. We have an attempt to leverage our market access also into the area of our copper products or fiber optic products and move from a component more to a subsystem supplier. That bears additional potential as we can climb up in the value chain and leverage our market access. Herr Bach from RVP.
You have to replace this large order in India in the communication segment. Is the assumption correct that you probably will lose sales in this segment in 2025 compared to 2024? Thanks.
I think the assumption is possible. I mean, it could happen, yes, because it is a big project. If we are not able to compensate the full chunk, then we will see the communication segment shrinking slightly. It is certainly one of the factors that I have mentioned why we do not dare to promise growth in 2025. If everything goes well, it could be that the communication segment stays on the level at least of last year. That will be the case if we are able to win follow-on orders in India and also grow the data center business substantially. Those two factors have to materialize, and then we can stay on 2024 level.
I do not dare to promise that at this stage as it is still open. I think that takes care of the question from the audience in the room. Let us move on to questions from people in the webcast.
I do not think we have any questions in the webcast, but in the chat. Let me start. There is also India. Again, a follow-on question. Will there still be volumes from the Indian project this year?
Just answer that. What does it mean for the second part? It will be, hopefully. Hopefully, we will be able to take that volume.
Again, on India, what is the general outlook? What does that mean for Huber+Suhner's footprint and expansion in India and Asia? What is the outlook there?
Yeah, I think in general, we can say that we have two very strong organizations in Asia, one in India and one in China. We see tendencies in both countries that the market goes local for local. The location in China is less and less of a global manufacturing plant, but then it's becoming really a self-sufficient center for serving the local markets. We are in the middle of that transition. In India, we have also a very competent team. I mean, here we have a base structure with a few hundred people. If we have those large projects in India, we have nothing or large. That's a bit the name of the game there.
We work very much with contractors, and that allows us to be really flexible in cost and structure and to breathe and to be able to cope with these fluctuations in volume. Overall, the knowledge and the core sits in these few hundred people that we have. Around that, I'm sure we will develop a strong and sustainable business in India.
The next question is about A&D again. I think you already elaborated a little bit, but could you summarize the strategy and the business chances in this segment?
Yeah, I have to repeat myself. A&D, we are a long-term player. We have a very strong brand and a reputation of high-performance product and quality. That comes mainly from our legacy in the RF. RF plays a key role in our strategy, but we are on the back of those larger volumes.
We are trying to expand, but also not just volume-wise, but also by scaling and leveraging our market access and developing solutions which comprise of all three technologies: RF, copper, and the fiber. Another question on our strategic growth initiatives. Sort of if you could summarize how much they, in terms of revenue or sales, they account for the growth initiatives. Yeah. The range of 30%.
There is one last question here in the chat. What is the percentage of group revenues generated in Germany if we can specify?
No, we do not specify, but we have usually Germany is always among the top three countries. In the past, we used to have in the top three always Germany, U.S., and China. India makes it from time to time into those top three, so it becomes top four. We have business in more than 65 countries.
We have a very long tail end with strong business in other significant economies of the world, such as Australia, England, Switzerland, Korea, Spain, Italy, France, and so on.
That question actually included two more questions. Apologies. On the mobile network end market, how does the pipeline for bigger 4G or 5G rollouts look today in the different regions? If you can speak about that.
Yeah, I think the big rollouts on 5G, they're over in the U.S.. They are now trying to get the cash back in. In Europe, they have started earlier and they complete later. There is still something to be done. In some countries, like emerging countries or other countries there, there's still 4G rollouts, as you may have noticed, and 5G is also taking place. It is a constant build-out that takes place.
Potentially to Richard, what is the reason for the change in trade receivables seen in the cash flow statement?
This goes back again to the large projects that we had in India. As you could see, we reported high order intake on this India project in the first half year. We reported sales in the second half year mainly. Obviously, by year-end, the trade receivables with India were still there. This explains the increase year over year. The positive message, we have already received a large portion of these receivables now in the first couple of weeks of this year.
I think India is, again, of big interest. Just to repeat, how are we planning to replace the Indian project and what does that mean for this year and beyond?
Yeah, I think, as I said, the Indian market offers great potential in a broad range of applications, and we are focusing on the most attractive. There is also an opportunity that the same program runs a bit longer and is being extended, and we are trying to win that part as well. That would allow us to have a bit of softer landing in India. Obviously, we have a lot of other growth opportunities in the area of communication, and it's our strategy that they should grow and contribute to closing the gap in India. We have again Charlie Fehrenbach from RVP.
Can you tell us how the first two months, January and February, were compared to 2024 in sales?
Yeah, that goes into too many details, but obviously, it's worked into the outlook. The start was okay. That has also influenced our outlook.
We are just closing February now, the books. It is really early.
Okay, we have a persistent question about India. For the first half of 2025, what does that specifically mean to replace it and how it is going to sort of the tail end of the project? Can we describe that?
We will report on that on 19th of August, obviously. I mean, we will then certainly disclose a bit more details how India has developed and how the project has impacted the different semesters of HUBER+SUHNER. Okay, I think there are no further questions. I would like to thank you again very much for attending, be it in person here in the room or in the webcast. Thank you for the interest in HUBER+SUHNER. We will see each other again in the summer and hopefully in between. Thank you very much.
Yeah, wish you good resilience in these turbulent times.