Good morning, everyone, and welcome. On behalf of the entire Oerlikon team, it's a pleasure to have you here today, both in the room and also online. We appreciate your continued interest in our company, and are very pleased to spend time with you today at this Capital Markets Day. During the day, you will hear directly from the leadership team insights in our end markets, technologies, positioning, and financial ambition. Thank you again for being with us today. We look forward for an insightful session and live exchange during the Q&A session, the breakout, and also at the booth later. Melinda Crane will moderate today. Thank you.
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Good morning, and a very warm welcome also from my side to Oerlikon's Capital Markets Day, its first as a pure play surface solutions leader. I'm Melinda Crane, and it is a great honor to accompany you at what is a very special moment for this venerable technology powerhouse. Oerlikon's been flourishing for 150 years, not least to an extraordinary capacity to reinvent itself, and it demonstrated that once again in February of this year when it divested the Barmag polymer processing business. With that milestone, the company's commitment to excellence, innovation, and pioneering materials science is stronger than ever. Today isn't just a numbers update. Today is the reintroduction of a sharper, more focused Oerlikon, a global player with local roots in key regions around the world.
Over the next four hours, you will hear, as Aymeric told us, from the leadership team on strategy, technology, and what it all adds up to financially, and the businesses themselves will share how they are turning that strategy into growth. We have got a number of panels to dive deeper into all those areas you just saw now in the video, and we will take your questions after each major block. That means one time mid-morning and then one time toward the end of the day. Let us get started. Please join me in welcoming Oerlikon's Executive Chairman, Michael Süss, who has been guiding the company's transformation since he took over as chairman of the management board in 2015. Michael, it is great to work together again. The floor is yours.
Melinda, thank you so much. Good morning, ladies and gentlemen. A very warm welcome here in this historic train station of Zurich. When you came from outside, maybe you have passed by Alfred Escher's sculpture. He was a pioneer of Swiss industry, born 1819, and we have been founded in his period in 1876. 150 years. That is a while. In 150 years, there was a period of reinvention daily, weekly, monthly, yearly.
Oerlikon went through all that as the Swiss community went through, and now after 150 years, we are here together to see what Oerlikon stands for now for the next 20- 30 years. I hope I will get old enough that in 25 years, I would be invited for the 175 years celebration, seeing that everything what we have done and said went fruitful further on, and Oerlikon remains as a cornerstone of the Swiss economy and the Swiss society. As a leader in material science engineering, it sounds a little strange, material science engineering, but it expresses exactly what we are doing. We are great in material, we are great in science, and we are great in engineering and making adaptations and applications for our customers.
We are driving the next generation of industries, because without that, what we are doing, nothing will work. You may have seen already or you will get a book with a little title, "The Big Impact," because we do since 150 years, small things which have a very big impact and you will see a lot of examples and you will realize that there is no day in life without Oerlikon. We will touch that, but first I would like to share you a little bit the view on why Oerlikon has such a unique business model. Because first and above, whatever you buy from us, it is pretty. I would not say cheap, but it is affordable versus the value we create for your products. We do that in a lot of products and in almost all of them we are mission-critical.
Without that, what we provide, this product would not fulfill its requirements. We do that long-term and very reliable. This is built on a toolbox where we have always the same tools in. We use these tools for 10 different industries. That sounds complicated, but it is not as long as you understand your industries. For sure, we have industries like cutting tools or automotive where we are in for decades, and we have industries like semiconductor where we are in for four or five years only. The intimacy with our customers is different and this is where maybe the complexity comes from. But when you are then local and truly global on the one hand but local on the other hand as we are, as we are in all five big hemispheres, we are in Europe, in Germany.
Germany is part of Europe, but it is too big to keep it within. We are in China and Asia Pacific. We are in the Americas. We are in all these hemispheres with these 10 industries and participating not by sending experts, but by local people which working for us there since decades as well. Then we take our integrated business model from coatings and components which fits very good together, built on the knowledge to build the right equipment and to provide the right materials for that, and have answers when there are new requirements show up. We do that with a very high entrance barrier on innovation, on technology. It is sometimes difficult for you to compare because we are the white unicorn in the forest. There is no other one. All our competitors are at least 3x smaller than we are.
They are doing niches or some parts of that, but this integrated model there where you interact with a customer and the customer has a demand and you can tell him it is PVD physical vaporizing thin film or it is a thermal spray solution or you need this, we can offer that. We do not offer them a solution, we make it happen and then we stay reliable with him like in aerospace where you have to stay 30- 40 years in the program. You cannot disappear because they have to do the full reevaluation again. With this leader in material, leader in application, leader in engineering, this is the entrance barrier which we have for all kind of competition.
Where we come from and where we are today, I do not describe you now in these last 150 years it would take a while, a very proud history, but that is why you will get the book. It is really interesting to read about. But in 2013, Oerlikon was built only on PVD. Yes, there was still a conglomerate, but that what is today Oerlikon was only PVD. We served 75% tooling industry, some automotive, a little bit energy. That is it. Within the last 10- 12 years, we diversified the company from these industries into 10 industries, serving from airfoils to luxury goods, from car to tooling, from semiconductor to defense. This diversification was an effort, but it gives us a huge resilience because in the end it is always the same toolbox again.
What do we develop, we roll it out in the different regions. Not in every region we are working in 10 industries. It depends which industries, like in India where you have a more automotive focus or in U.S. where you have a more aerospace and energy focus, but the 10 industries in total are a global scope. If you see we are still a European-centric company, 50% of our revenue is Europe. By the way, in this business we tripled in all three big hemispheres. So here there is in APAC there is China in and in Europe there is Germany in, but for the matter of easier handling we have separated internally. But we have tripled our revenues in all the three hemispheres. We have not achieved yet a super dynamic that America and APAC getting closer to Europe.
That is the reason why the Europeans are still doing very well despite the perception. But we have a good market in Europe and we work on that. But overall, we are shifting our focus stronger into Americas and strong into Asia-Pacific because there are growth areas and markets which we do not see and do not have today in Europe. If you do that, you need the right team for that. When I had the pleasure to join Oerlikon in 2015, there was still this impression about the company. It was super shaky, a lot of people have left it. We did not have a very strong team inside. We had to build that.
We had to hire from outside and you will hear later on from Anna what we have done on the HR level to have today, not only that people you will see today, but a very strong base throughout the whole organization. But it is a pleasure for me not to make a capital market day where the CEO and the CFO and the COO shows up, but that you see the whole you see here, that you see the managing board, that you see the people who run the businesses, who do the strategy, who do the communication, who is the CTO for the company, who stays for this innovation power. You will see them in action. You can interact with them, you can talk.
It makes the company for you more transparent because sometimes we realize that Oerlikon is very capable, but people do not understand what we do. Even people who have worked with us for 10, 15, 20 years, when you invite them on site, then they say, "Oh, now I get what you are doing." That was because of a conglomerate, it was difficult to tell the story. This powerful top management, a very lean group of 16 people, makes all the decisions for 10,000 people in a very lean and dynamic way. It has the right diversity and it has the right diversity on age, on gender, on experience, and on nationality. With that, as I said already, we are serving 10 industries, and there is not a single day without Oerlikon.
Wherever you are, wherever you raise up the morning, where you go to bed, you have met Oerlikon in products, outside, inside, because all these products wouldn't work. Whether it's power generations, defense, semicon, medical, aerospace, we will focus today very strong on electrification, on air traffic, on semiconductors, and defense. But don't forget about, there is an oil and gas industry, there's a medical industry, there's luxury, there is tooling, which are still very strong and very good industries for us. What's the benefit for us? I mentioned already the big impact, small effort, huge effect. You have a driller. You work with this driller 10 times, the driller is scrap. You coat the driller, you work 20 times, 50 times, up to 160 times, depends on the coatings which are on.
You can imagine what that means, not only for the cost of material or the cost of tooling, but as well for the operational stability, if you don't have to change all the time your tools. We're not talking only about small, little, simple drillers. We're talking about very complex tooling systems which work very efficient and you need them. If you think about defense, if you have armored steel, if you have composite materials, if you think about lightweight constructions with a carbon-based, how to cut carbon? You need diamond solutions. You need solutions which are not in the Walmart or in a Home Depot where you can buy them. That's where we are in. That's why we are in industry sometimes direct with the product and sometimes indirect via the tooling world.
If you take jet engines, we take all of this example because maybe that doesn't sound too much, that you have 0.1% of the cost of a jet engine and you save on a simple trip, you save 4,000 l, no gallons, of fuel. This is a huge amount. When we talk about sustainability, honorable, we mention that. What we save only by fuel in jet engines is equivalent on a 30%, 40% of Switzerland for one year. This has an impact. It's not only carbon emissions, it's fuel you're saving, it's range you're getting. That's why this company has this big impact. This is structured in a unique integrated business model. I will not go through this whole wheel because we will see all of that, the different coating services, different components, what we are doing, and the material equipment story.
That's why I'm jumping directly on the three segments. We made it a little easier for you to bundle that in segments. By the way, it was a request from the markets as well. You cannot report only on Oerlikon. You should bundle that. That's what we're doing. But it's still integrated. We work together. We are in the regions, the P&L sits in the regions, and we have the different tools in the different industries we are serving. Nevertheless, coating services can be considered as the backbone of the company. Coating services comes very strong out of cutting tools, of mold coatings, but meanwhile, there's a lot of precision goods and components which get coated, PVD coated as well. We have some thermal services as well too. Focus is Europe, 50%, Americas, Asia Pacific, 20%, 30%. Why?
Because even today, Europe, especially in the tooling world, is a very strong continent, and we are still very strong in this world. Almost 40% of group sales with a top-notch setup of technologies. Don't forget about 110 sites globally. I guess Dirk or someone will mention that, but virtual connected. Like one virtual coating center. This is why we have started into our digital world 2018 already because it takes you sometimes three or four years to get even your people on this trip until you really start to make benefit. But you will see the benefit in how we run 550 coaters in PVD coatings, CVD coatings globally as one coater, as it would sit here in Zurich altogether. Next story, components. Why we have components?
Because in certain areas, it makes a lot of sense further, either to market access, to deeper intimacy with your customers, or simply to have a virtual integration. One of the component stories was AM, and a lot of people have always said, "Oh, Mike with his hobby and with his AM and what it costed and so on." First, it didn't cost that what all of you have in your mind. I don't disclose the numbers. But meanwhile, we are growing 30%-40%. We are profitable. If I would have to buy this business, I would need the double amount of money which we have invested. Invested, I mean cost for CapEx and OpEx. It was a story which took a while, but to shape a new industry which fits perfectly to us, with all its material competences, with all that where we're already in.
To shape a new industry, it takes a while. At the beginning already, Melinda Crane was with us when we started to do this story. But we have a long relation, even in Siemens, and it was always great stories we had to share and we had to provide. But this AM story was something where you have to run for a while, and even if you have headwind, you have to keep track. It's by the way, the same with digitalization. A lot of people in the beginning at the steel and materials company did never understood why we go more digital. Today they understand. Today they buy in. But to convince them, it's a three, four, five years track. If you give up too early, and this is sometimes a problem of a public noted company, a lot of people know it better.
A lot of people tell you, "Oh, next year you have to have this and that," but you have to keep track. This is what we did. In the end, we deliver. The facts here are that we have 30%, CHF 450 million. There is some stories in luxury. A lot of people may have not understood why we bought luxury. By the way, I have to say, timing-wise, it was not super smart because we bought it in 2022. It was a super opportunity because typically this asset's going only to private equities, and the management team wanted to have a strategic player, and we wanted to get in the luxury story with our coatings.
Unfortunately, luxury industry went to one of the major crises the last four or five years. If you buy something at the beginning of a crisis, that's not super smart. Nevertheless, we made our homework. We cleaned up. We brought profitability further up. It's not there where we want to have it, but we are a full credible player. Katharina will give you more insight about in the luxury segment, where there's a lot of metal coatings and there's a lot of electroplated coatings, which takes much, much more energy, much, much more materials, and a really significant lower surface quality. For high-end luxury goods, the market we target there is 20 million customers globally. An average EUR 7,000 spending per year. We're talking about EUR 140 billion market. Our metal part is much smaller.
Now we have the credibility, not only in the areas where we work, but as well in other areas where we have a much deeper impact now in the watch industry and in other goods and luxury. This is a field where PVD, especially PVD, plays a role and where we develop stuff. Maybe some of my colleagues will share that with you, a new black, which was designed for luxury, but now you use it for defense, you use it for surgery instruments and for other stuff. Whatever you develop, you roll it out in the other industries. That's the smart part here. We will see about TIS, thermal isolated shields, how to make batteries safe.
We have one component business in here that's Friction Systems, which was contributing a lot in the past and gets more and more a little bit headache, but we still manage that because Friction Systems is manual gears linked. There's not too much manual gear business growing in truck industry yet, but we have to handle that. There is not all-time sunshine. There is some little shadows, but this is good to be handled in the component world. Last but not least, materials equipment, where we made a huge restructuring after we bought Metco because it was harvested and underinvested. We had to do a lot to clean up. Andrea will probably give us more insight about what they have done and where we are. Only one number we came from, more than two, I think 2,500 different materials.
Today, we have 1,000. We are highly profitable, and we are an indispensable partner for the energy industry, for the industrial gas turbines, as for the aircraft industry and others, because the semiconductor world as well needs that coatings. The facts are here. We are almost 130. Either fast-growing, very good business, not too much competition. In a business where you know that gas turbines, either for utilities or for aircraft, are sold out for the next 10 years, and this industry has a lot of struggle to ramp it up, and we can help them to make that safe and to make that ramp-up safe. As I mentioned, more or less to refocus you, air travel increase drives our business. The center of electrification is not only AI. It's simply the overall industrialization of the world, the access to electricity.
When I was head of Siemens Energy, we talked about 1.5 billion people, no access to electricity. Today, maybe it is still 800 million people, no access. So there is a sheer demand on electricity driven by a lot of different stuff. In the end, you have to answer that by nuclear, 15 years, and you have a lot of phase out. Coal, huge carbon impact. Renewables, no battery solution. The solution for the next 15- 20 years, not the only one, but one of the massive ones is gas turbines, high reliability, low carbon footprint, gas is available. This industry drives this growth on air traffic anyway. And semiconductors driven by electrification and AI, where we are in as well. Last but not least, a massive rebuild of defense. These are public numbers, that is why I can mention that.
U.S. has 5,000 Tomahawks, and they have used in Iran up to 1,200 already. We need a rebuild, but the capacity of the states are 80 a year. You can imagine what that mean if you think about future conflicts, how massive you have to ramp up industry. When ThyssenKrupp Marine makes 24 new submarines, this is a huge demand, but these businesses are not in the order books yet. They are on a negotiation level. The EUR 500 billion only Germany wants to spend in defense is not in the order books. We participate in that business in three elements, indirect by tooling, indirect by all the parts for jet engines and fighter engines, powders, equipment. Then direct, step-by-step in final applications where we do, for example, actually silencers and cool plates for fighters.
A fighter is an flying data center, a lot of heat, much more efficient. The breakthrough for the cool plates was in our aerospace, in the space world, where we made the RF antennas, and we took a huge amount of parts out and a huge amount of weight and optimized the parts by a 3D-printed solution. There is more and more applications you only can do with 3D printing. Either you are in or you are out. Or you buy your way in yourself with a lot of amount of money. These are the four areas we focus more, but again, don't forget about 10 industries which we are serving. By that, the Mission 2030 is pretty simple, and it is built on reality. It is not on wishful thinking. There is projects behind. There is clear, not only plans, there is plans with execution behind.
We know where we will come from, above CHF 2 billion, and we have to do so because after all this cutting off, we are getting subcritical. For a global company, you need a certain weight and a certain size. CHF 2 billion, above 20% EBITDA margin, and above 10% ROCE in all three areas, and Marco Freidl will give you more insight on that. We are very well on track. Then you make your own calculation. If you have CHF 400 million EBITDA out of CHF 2 billion revenue, you ask yourself with which kind of multiple you will reflect our actual share price. Then if you make this mathematics, as I have done, you would invest. With that, if you are not invested, you missed already the first 60%, but there is another 60% or 100% to come. That is on you.
We never force someone, but we know what we are doing, and we are very self-confident that we will execute that in a proper way. That is from my side up to now. Now I hand back to Melinda, and later on we have chance to interact, but before you will see a lot of incredible people.
Many thanks, Michael. We will come back to those numbers a little bit later on in the morning. First, we want to talk about how that strategy we have been hearing about translates into action. Dirk Linzmeier joined Oerlikon as Chief Operating Officer in April 2025, bringing with him a really unique combination of experience across traditional industry, operations, and technology, including senior roles at Mercedes-Benz, at Bosch, and a highly successful stint as CEO of TTTech Auto, a fast-growing automotive software company that you repositioned, scaled, and then successfully sold off. Please join me in welcoming Dirk Linzmeier to talk about operations.
Good morning, ladies and gentlemen. Also from my side, a very warm welcome. Michael has just outlined Oerlikon's Mission 2030, above CHF 2 billion in sales and a sustainable operational EBITDA margin of above 20% by 2030. My objective today is to show you exactly how we get there and why we are confident in that path. Now let me start. The new Oerlikon is diversified across markets and segments, and we benefit from powerful structural growth trends. It is aerospace, it is semiconductor, it is electrification, and it is defense. As Michael already said, it is only four out of our 10 industries. Across all these segments, that is a great thing. We benefit from a balanced exposure to OEM and aftermarket demand. Together, we expect these trends to strengthen our overall business and to add approximately CHF 300 million sales by 2030. Now let us start with air travel.
You all know air travel has increased significantly over the last years. We are above pre-COVID times. More than 5 billion passengers flew in 2025, and that is an all-time high. At the same time, aircrafts cannot be built fast enough. There is quite a big backlog. There is engine shortages and other components which are critical. The fact that not enough aircrafts are available right now due to supply shortages leads to the fact that airline keeps flying longer. Longer aircraft life means more maintenance. More maintenance means more Oerlikon. Both are growing, new aircrafts and maintenance, leading to a 6% annual growth in global engine MRO. Oerlikon is mission critical in these aircrafts, in these engines. No aircraft takes off without Oerlikon. There is roughly 13 different coded engine parts in an aero engine, and we supply 100% of all major aero engine OEMs.
And the great thing is, once qualified, we typically remain on that program for the entire life cycle, creating highly recurring revenues. Our average content of approximately CHF 10,000 is only a fraction of the aero engine cost. Michael has already outlined that. It's less than 0.1%, but plays a key role in improving the engine's efficiency. Another trend already mentioned is semiconductor, where we can play our technology. Here also, coming out of the world, I think it personally really fascinating. It took 40 years to get to a $600 billion semiconductor market, and now it takes only three years to hit the $1 trillion, and it's further accelerating and growing. That is massive. To manufacture semiconductors, of course, you need highly specialized production equipment, so wafer fab equipment. This market is around $100 billion.
For Oerlikon, this translates into an addressable market of approximately CHF 1 billion. Driven by around 7% annual growth in wafer fab equipment spending, our addressable market will reach roughly CHF 1.3 billion by 2030. Also here, the great thing is the fab equipment is refurbished roughly every 18 months to ensure consistency and quality, and also that is creating recurring revenues. Where are our Oerlikon technologies in semiconductor? Semiconductors are produced basically in four steps. You have deposition, you add the material, you have lithography, you define the pattern, you're etching, removing material, and then doping, changing the electrical properties. We are, with our wafer carriers in this whole chain, and in also other several steps of this, improving the yield and lifetime through precision, wear resistance, and contamination control.
But not only our coatings play in semiconductors a role, you have already mentioned, Michael, with additive manufacturing, also here, known as 3D printing, we have high performance components such as volume reducers for atomic layer deposition. Also with additive manufacturing, we are playing a role in semiconductors. We are trusted partner of the five leading OEMs in this domain. This AI-driven semiconductor boom is also accelerating another major trend, and that's where I'm coming next to. That is electrification. Also, we say technology is powered by electricity. Also here, AI needs data centers. Data centers need chips, and chips need electricity. A 50 MW data center consumes as much electricity as roughly 100,000- 150,000 households. That's equivalent to cities like Bern or Lausanne. Data centers need just not any electricity, they need stable electricity sources, such as gas turbines.
Gas turbines, again, need Oerlikon. There's a 20% more electricity expected to be consumed by 2030. That means roughly 10,000 additional industrial gas turbines. Again, Oerlikon plays here mission-critical roles. Our thermal spray coatings, they protect the turbine planes and vanes against this really high temperature of up to 1,150 degrees Celsius, improving efficiency and the lifetime. Also here, you can read this 1% improvement. First, I thought that's not too much a 1% improvement. But just imagine, you increase the efficiency of a turbine from 40% to 41%. This results, for 100 MW gas turbine, in a yearly saving of CHF 2 million already in natural gas. If you now have a 1 GW installed base, this is already CHF 20 million. This 1% is a significant saving.
And for a typical 100 MW gas turbine, we have approximately CHF 100,000 worth of Oerlikon coating materials in this gas turbine. And again, this is only a small fraction of the overall cost of a gas turbine. The next market I would like to highlight is defense, and that's already mentioned. Defense is growing massively, and defense is also a good example how we can replicate, how we can copy our existing technologies and solutions across different markets and applications. The defense demand and market is supported by basically two major streams. On the one hand side, there's a lot of investment, like the EUR 700 billion ReArm Europe, which goes into scaling existing production. What's already available, just scale, make more of it. And on the other side, we have then venture capital. For example, here, CHF 2 billion also already went into venture capital.
And here we are accelerating innovation, completely new things, robots, automation, where we have the chance to get in with new applications. And then on top, there's a trend in the defense industry to accelerate additive manufacturing because you need to have these additive manufacturing parts. They are lighter. There are certain structures you can't do with any other technology, and it's even forced by the U.S. Defense to have this manufacturing capability. Oerlikon contributes in all these three segments. That means higher volumes lead to a higher demand. New systems are designed and get more complex. Here it's where advanced manufacturing plays a critical role. Heat exchangers, for example, cooling plate structures. And then scaling production leads to a higher consumption of our materials and thermal spray equipment.
The megatrends create the demand, and now I switch into the segment view how we capture that demand. Let me start with coating services, our also known PVD business. We are the global number one in PVD, or those of you who don't know PVD, in thin film coating. And we operate the largest coating network worldwide. And I come to that Virtual Coating Center on the next slide. Growth in coating service is basically putting more volume through our existing pipes sites, largely by filling capacity with limited incremental CapEx. And we expect our business to deliver 4%-6% annual growth until 2030. And growth opportunities are moving in two directions. Coated tools become more critical as customers scale production. So there's more coated tools in aerospace, in defense, and in other industries where formerly have no coated tools been. And then there's new coated applications.
For example, in semiconductor and in the medical industry. Our strategy is clear. Technology replication across industries. Coating the uncoated. Once a customer is qualified, we typically stay for the entire life cycle, generating recurring revenues. And last but not least, leveraging our existing global network. And here, a little deep dive into digitalization because Oerlikon has invested a lot since 2018 in digitalization, and now we see the benefits out of these investments. So we have established, and we call this Virtual Coating Center, and basically, no matter where these 550 coaters in the 110 sites globally are, I can look at my dashboard, I can look at it as one big global connected factory. And we not only look at our own sites in the factory, we also look at the complete customer journey. So already it starts from the pickup of the tools until back delivering.
So we have, for example, introduced the pickup app, where we can see exactly where our tools is. We can optimize the routing. We can optimize the behavior of the picking up. We have a better transparency with the customer. I only picked two out of 10 examples or more we already have. I do not have the time to present all these great examples. The pickup app is one. The other one I also find fascinating is, in the meantime, when I summarize everything, we basically have 31 billion data points a day. That is massive. Now with the compute capability and AI, we can identify pattern in this data. So what good example, we had an issue at some site, and basically, we could not find it out in the first place with the technicians.
Then someone looked at the data, compared this coater data with a good coater data, and we found out that there is a certain sensor, it is not working properly. We told the technicians they could fix it within minutes. So that is the power of data once we use it in our facilities. There is many more examples. This, of course, reduces throughput by 10%, increases utilization by 30%, and reduces maintenance by 15%. On top, we can even create additional revenue streams. Another example are the components, and components is where our integrated business model really comes to life. We manufacture critical components and enhance their performance with our coating solutions. So we do not just protect the customer's turbine blade, actually, we also make it. That is a really fascinating part. That is a stator vane. So there is a lot of technology in that.
There is only a few companies in the world who can produce such a stator vane. We are currently ramping up. You need to imagine that is a ring at the end. We are ramping up that with one of the major aero-engine OEMs, and, yeah, I think it is fascinating. We do not just coat luxury components, we manufacture it as well. We expect this business to grow by 5%-6% annually through 2030. So growth opportunities are in aerospace, what I just showed, this one here with the stator vanes. But we also have in semiconductor and defense, especially with additive manufacturing, new opportunities. 25,000 3D-printed parts are already delivered by today. We have then in luxury, only also the technology shift into PVD. Michael mentioned it already, from electroplating to PVD. Already 15% is PVD technology, and there is also new customers coming.
Then in automotive, we should not forget automotive. My home base is automotive. I come from automotive, and this is still a great industry. So it just transitions, and there is also new opportunities for us. For example, and you can see that later in the showroom, there is the thermal insulation system protecting batteries, but also with Oerlikon HRSflow, new opportunities in hot runner systems with the latest technology. Also here in these businesses, we are diversifying out of automotive, for example, in packaging and medical. So our strategy is focused on high-value components where the integrated Oerlikon solution creates a real competitive advantage. Then last but not least, our really strong business right now, the materials and equipment business. Here, every machine we install is not just a sale, it creates recurring demand for our materials and services for many years.
Roughly 50% of our sales is already coming from aftermarket business materials, spare parts, and upgrades. Here we expect even 6%-7% annual growth through 2030. More than 2,500 thermal spray systems are already installed out there. This is also, to my knowledge, the largest fleet in the world. More than CHF 800 million worth of materials are sprayed annually through this installed base. We have on top of that secured, and we come to that later in the panels, critical minerals. That was a hot topic in the last 12 months. I think we did really well. You will later see from the team what they did to secure such minerals like yttrium and tungsten. This is creating now for us new opportunities because we are able to deliver where others are currently not able to deliver.
We are also launching new applications like, for example, brake disc. You can see that later. That's such a powder, you can't see it from here. It's very thin. It's very fascinating. This is adding additional sales then even on top. Also here, strategy is clear. Capture the super cycle growth with new equipment and material sales, and leveraging our installed base and recurring revenues over the next years. Let me pull that together in summary. All three segments contribute to Mission 2030. Above CHF 2 billion in sales with 6% organic annual growth. It's the sum of concrete identified growth initiatives. Gaining market share, coating the uncoated, scaling new applications, and ramping up aerospace components, additive manufacturing, and thermal insulation systems. Together, these four structural growth trends add roughly CHF 300 million by 2030. Don't forget, only these four adding the CHF 300 million.
There's other six industries we have in our business. Again, the new Oerlikon is more diversified, more resilient, and less dependent on any single market. We stay close to our customers locally while using our global expertise, knowledge, and competence. Most importantly, none of this would be possible without that outstanding team behind Oerlikon, many of whom you will meet today. Thank you very much.
Thank you very much, Dirk. I'm sure it hasn't escaped your attention that cutting-edge technology is the powerful engine that is driving the strong growth that both Dirk and Michael have taken us through. Let's turn now to the company's Chief Technology Officer and hear more about what's driving the engine today and how strong customer partnerships are helping to keep Oerlikon at the forefront of value creation in future. Who could be better positioned to deliver customer focus than a CTO who has worked for or provided services to all of the key industries that Michael referred to earlier? Brett Rosenthal started his career as a mechanical engineer at Raytheon. He then became a customer of Oerlikon as a manufacturing engineer at both Apple and Tesla. He subsequently served as CTO of an equipment business working with semiconductor, defense, and industrial gas turbine industries.
So pretty much covering the whole spectrum there. Brett Rosenthal, you have the floor.
Thank you, Melinda. I would like to walk you through our value creation process, how we are customer-focused, and how we translate this into some of the key metrics that Michael and Dirk talked about earlier. First, we invest in our customers' unmet needs. How do we do this? We take 4.5% of revenue, we allocate it to our R&D budget. We roughly break it up one third to revolutionary topics and 2/3 to evolutionary topics. How do we think about these? These are really customers' short-term needs versus their long-term needs, because a lot of times you are advancing from BALINIT ALCRONA PRO to BALINIT ALCRONA EVO, but the customers also have demands when they shift materials from stainless steels to these carbon fiber composites that Dirk and Michael have discussed earlier. So that is split between 1/3 and 2/3 .
Then we have a risk framework where we evaluate each project on four key frameworks. First, the value proposition. We have to be able to deliver at a price the customer is willing to pay. Second, market acceptance. Who is the customer? Who is the user? Who is the decision-maker in this? How are each of these stakeholders sized? Resource maturity. Do we have the suppliers in place? Do we have the equipment in place? Are our team members capable of delivering what they need to do? Finally, do we have the license to operate? You are going to hear more today about defense topics and others, and we need to be able to make sure that we meet regulatory, safety, and geopolitical topics. I will come back to this later.
Once we identify a risk, we work with a team to address it immediately, usually in the terms of a proof of concept. Why this is really important, we do not want just the best technology. We want to be working on technology that customers adopt. The way to do that is to de-risk the highest risks topics, and if we cannot, shift our resources to other, more promising solutions. This helps us reallocate our resources and always be working on the latest generation of topics customers need. A lot of people say that they are close to their customers, and I would like to show you how close we are with ours. First, we have six global hubs placed around the world. These are co-located with very critical ecosystems in our customers' own businesses. Then we have 120 customer solution centers. What is a customer solution center?
It is simply an application specialist. They take a global solution and they translate it into local needs. Additionally, with all this data and Virtual Coating Center topics that have been addressed, they take all these local learnings and bring that back to global business. This really helps us arm our 900 sales engineers that are really knowledgeable in industry trends with the latest technology and help address unmet customer needs around the world. This structure allows us to have three things. First, a short time to market. Second, it helps us protect our existing markets. Finally, it helps us expand into new markets. Now I will walk you through an example of each. Our first example is about a short time to market in our materials business. We acquired Scoperta back in 2017, and this is a company that helps us simulate millions of different alloys.
You are going to hear a lot about different AI use cases around the world. But what separates Oerlikon is what is next. We take these million different materials that we have simulated, we bring 100 to the lab to validate, we bring three into production, and we give these powders to our customers to test and validate. This used to take months. For Oerlikon, it takes days. Now, how does this actually generate value for the customer? First, we will talk about supply chain resilience. When China imposed export restrictions on rare earth materials, including yttrium, Oerlikon was able to support its customers in three ways. The first way, only a company of Oerlikon size, and later you will hear from Andrea in capability, could work with existing suppliers, existing vendors, to secure licenses to continue to ship these rare earth materials to where they need to be.
Second, and now we get into some unique things in the technology space, Oerlikon was able to identify new suppliers, but when you bring in new suppliers, you bring in new supplier qualification risk. With our simulation capability, we could quickly simulate these differences between the current and the new supplier, and we could help validate it for our customer quicker than our competition. Finally, we were able to develop new rare earth free and rare earth reduced materials for our customers. This is truly unique and something that when people talk about AI and big data and other things, I like to talk about customer focus value creation, and this is really a key part of that. Our second example is about defending existing industries in our equipment business. Traditionally, the thermal spray business is an engineer to order kind of business.
What that means is a customer sends us a request for quotation, we provide them a response to their quotation. There is an iterative process where we work on defining the specification. Then we get a purchase order from the customer. We purchase our equipment, we assemble, we do a factory acceptance test, a site acceptance test. You can imagine I am just going on and on and on. This is quite a long process. Now, with our modular systems, we have moved from this traditional engineer to order to configure to order. This really helps our customers move beyond an iterative, open-ended process into a more defined process. In the thermal spray industry, there is a saying that goes, "Spray and pray." Now our customers can spray with confidence.
And more and more customers are moving to these configured systems, and we have customers that are now ordering these machines by the dozen, where in the past, they used to be ordering one machine every few years. Our final example is about expanding our addressable industries in the advanced manufacturing or component segment. When Oerlikon has been providing thermal barrier solutions to the industries for decades, we have expanded our offering with cooling solutions. Additively manufactured parts are no longer prototypes, but critical pieces of complex assemblies where customers require maximum performance to function. Imagine you are an aerospace engineer and you are tasked with designing the next generation aircraft fighter or drone. One of the key features you have to think about is these flying data centers that was referenced earlier. We are adding more power electronics to a system, and you have to cool these power electronics.
What is your cooling medium of choice? It is your fuel. So we have this traditional trade-off of there is a limited amount of fuel on the aircraft, but we have increasing power demands. So how do we solve this debacle? With additively manufactured parts, we can increase the cooling efficiency by 10x. So now the customers no longer have to have this trade-off of cooling efficiency and range, in addition to all the topics that were addressed earlier, from part consolidation to weight savings, to conformal designs. And what is really unique about Oerlikon is, okay, other people you have heard from have additive manufacturing capabilities. Designing this in a way that it is actually manufacturable, industrializable, that you can take these powders out of the component after you print it, because you could imagine if you have AM powder in your fuel lines, you have a big problem.
This is really unique capabilities inside the Oerlikon business. As you can see from these examples, we deliver an immense amount of value to our customers. And as Michael talked about and Dirk talked about earlier, this is at a relatively low cost. And I think this is really unique about Oerlikon. We do not just look for the best technology. We do not just look for the most exciting industries. We say, "How can we have a reoccurring business model that generates value for our customers at a low base, so we have these really attractive niches that we get to take advantage of?" Thank you for your time. And back to Melinda.
Brett, thank you so much. Really fascinating, and you can get ready to come right back up here in front because we want to move seamlessly now into our first panel that will drill deeper on Oerlikon's solutions to serve growing industries and provide a host more examples of the kind of technologies that Brett was just taking us through. How is this company positioning itself to capture growth in key markets and industries, and what distinguishes it from competitors? We will hear more about that now from four leaders with expertise that spans technology, hands-on strategic oversight, and growth industries in key regions. And they are, respectively, Guilherme Rocha is Senior Vice President for Strategy, Business Development, and Commercial Excellence, driving revenue growth initiatives across the company. Jane Cao is Country President, China, at Oerlikon Surface Solutions. [Stephen Skrenta] is Designated Regional President, Americas. And Brett joins us as well.
I am going to go over here. Brett, let us start basically where we left off with you, and you have shared some key examples. Now drill down a little deeper, if you would, on what solutions for growing industries look like in practice, and in particular, how you work closely with your customers. Many of you this morning have talked about deep customer partnerships. Maybe you can give us a few more examples of those.
Absolutely. We generally have two models. Customers, they have demand, the sort of customer pull model, and we also have some technology push that we will get into as well. On the customer pull side, I mentioned the 120 customer solution center employees around the world, and they are really working with the customers directly. They have an immediate need. They need to address it. They are taking global solutions and adapting them to the local market requirement. This is daily business for Oerlikon. We also want to be able to find these technology pushes. We want to be able to look a little bit beyond what the customer's immediate needs are and see where the industry trends are going so we can be ready for solutions when they need to be. We have to de-risk these solutions really with proofs of concept.
Later you will hear from Jane and Stephen on this, that this is a regular topic for us where we find a way to bring a machine or a process or a technology directly into the region, so that we could get immediate customer feedback. One example here is we have a thermal spray customer in the U.S. on the defense and aerospace industry that was looking to manage their, I would say, variable demand. We had, of course, immediate solutions available for them, improving efficiency, reducing costs, and providing availability of materials.
We also said, "What if we brought in one of our standard PVD coaters, a machine called the INNOVENTA kila, and co-located it very close to you in our Westbury, New York facility?" This ultimately led to them to realize we could do coating service for them, we could sell them equipment, we could do a range of different outcomes. They ended up purchasing a machine. So now we have the machine sale, but we also have the reoccurring materials business out of this because we are not just providing them the equipment, we are providing them the materials. I think this is one way where we also show between the customer pull and the technology push that we meet our customers' most immediate needs, and then we show them solutions that will be beneficial for them.
That's a great example of that customer intimacy that has been mentioned several times. Apply that concept now of being so close to the customer in connection with this new demand for supply chain security and also particularly on rare earth and critical minerals. As we know, this is a very, very key challenge facing all industries, essentially, at the moment, or all tech industries.
Absolutely. Thank you, Melinda. We discussed a bit about the Scoperta model, but also it really integrates the business. We don't just develop new materials for people to test. We find ways to source and secure supplies that they're already used to. I like to consider Oerlikon an anti-fragile company. I don't know how many of you read Nassim Taleb's book on the concept, but as the industry is changing, as geopolitics are changing, as critical minerals are becoming a key feature of our supply chains, Oerlikon is uniquely able to not just handle these changes, but to grow stronger from them and grow closer to our customers with them.
A customer in particular came to us and said, "I really need a rare earth free." Or sorry, "A China-free solution for my topics." We were able to show them sources outside of China, but we were also able to show them technologies that just eliminated the need for these critical minerals. I think this is really in that anti-fragile spirit that we read about.
Thank you. Anti-fragility is definitely a good place to be at the current moment in time. Guilherme, the leadership team spoke earlier about current mega trends creating lasting positive momentum in these key industries, aerospace, defense, electrification, AI-related industries. In all of these, Oerlikon does have a strong presence. Can you elaborate on the related growth potential and share, again, concrete examples of that?
Yep. Absolutely, Melinda. Aerospace, power generation, semiconductors, automotive. Understanding the trends and the growth opportunities, and actually the challenges of our customers is the job that myself and my team do every day. I want to give you a couple of examples, as Melinda requested, in some industries we mentioned before. Let's take aerospace. We learned that there is a strong backlog for new builds, there is a strong demand for MRO, and we are there on the engines, supporting with the efficiency. There is another perspective into it. We see in the modern aircraft the use of more and more advanced materials. What they are looking for is efficiency on the fuel savings and the fuel consumption. So we see more adoption of carbon fiber reinforced polymers, ceramic matrix composites that provide them with this light weight, at the same time with the strength that they need.
The challenge here, those materials are quite hard to machine. When it comes to the normal production site, normally using cutting tools, they might bring some quality issues, delamination in the profiles, and at the same time, productivity issues because you need to replace those tools quite often. This is where we come. Oerlikon has developed a very thin and a very precise coating solution to the cutting tools that are used in the industry, diamond-based coatings. This is enabling our customers to produce with the quality they need, with the speed and the ramp-up that they need, and we are able to provide them with those solutions in the markets where it matters. Those industries are growing. In Europe, we have sites that can offer those specialized coatings. We have sites in the U.S. where also this demand is growing.
Every time you look out right on the window on the plane where you are flying, you see in the fuselage some carbon fiber elements. You would know that very likely these parts were cut using coating tools right from Oerlikon.
Thanks a lot. Aerospace is an established industry. As we know, it is going through a transition. Let's talk a little bit about emerging industries, where the ultimate direction is perhaps not entirely clear yet. Does an industry have to be fully ripe for Oerlikon to find a niche?
Yeah. Very interesting point, Melinda. As I mentioned before, we watch growth trends across different markets and across different regions. We spoke about AI here. I want to take a different perspective. With advance of AI, we all learn that now we are coming to a point where the models of the software is so advanced, they are enabling new use cases on the robotics side, what the industry is calling physical AI. We are seeing now an increase of a new industry emerging of humanoids, of robotics, where basically you are translating that knowledge on the software side into the mechanics. Imagine yourself, that is not only enough to have the right software power, but you need also to have the smoothness on the hardware side, because you need to move smooth. You need actually to make it reliable. You need to make it durable.
And this is where our solutions come in. We talked about the replication, so replicating the knowledge we have of wear and friction into that market as well. Think about safety. Those humanoids, they carry a battery. What happens when they have some issues with thermal insulation? There are solutions to thermal insulation systems. They can also provide safety there. I could go on and on, Melinda, with some examples, but for me, it is important, the message is, we are not a company with one single product, one single market, to one single region. We are, in the end of the day, a company with a technology platform, a toolbox, which is proven and enables our customers to solve one of the most challenging business problems, productivity, efficiency, durability, safety, sustainability.
We say we are present in everyday life, as you see, but I would argue that actually we are enabling the future of the industries with Oerlikon solutions.
Thanks so much. Within both established and also emerging industries, it is pretty clear that two industrial superpowers are definitely going to retain a commanding position, and I am referring, of course, to both China and America, which is why we have seated them at the center of this first panel.
Worry we went outside.
Exactly. This is a collaborative and complementary work that we have here. Jane, say more, if you would, about how Oerlikon is positioning itself to participate in China, which is clearly pioneering more and more advanced technologies, including, but not limited to, the robotics that Guilherme just mentioned.
I am very happy that Guilherme mentioned the robotics, but before I dive into that, China has, with all the 20 years economic development, has become a very dynamic and competitive market. As a Chinese, I relocated back to China 2024. Even me, I was shocked sometimes how industry, a market application, had developed in China. Look at the EV five, six years ago. I would not imagine that nowadays one of the two cars sold in China is an EV car. The top three OEMs, they are now BYDs, and Great Wall, and Geely, and they have changed the landscape of the automobile industry in China. We now also pick up similar trends in the robotic and humanoid area.
With AI development, with government subsidies fundings, with public and local investment, there are signs this could be, still immature, but it could be a very exciting growth opportunity for China. Let me ask you a question. Would you guess at how many small component, like gear and shaft, it takes for robotic hands to mimic a human movement? Just take a guess.
Call out the answer if you think you know it.
50. Our engineer told me, to my surprise, it is more than 200. It looks very simple from the outside, but there are hundreds of small components which need to work continuously, precisely, repetitively, to even do simple move like push a button or hold a glass. When these components need to move millions of times, friction and wear become a problem. This is where Oerlikon comes to a play. We are already working with some leading players in that field, and they are using a carbon-based coating solution from Oerlikon. When I say carbon, there are two formats of carbon, diamond and graphite. From one hand, with diamond structure, increase wear resistance. With graphite, and I am not an engineer, so very fascinating for me that provide friction reduction at the same time with the same material.
With this, we could increase the lifetime of such component easily by 30%-50%.
Make it even more concrete for us, if you would. What exactly are these robotic hands doing? You said hold a glass, but clearly that is not their key function, I guess.
Exactly. The team are really excited about this. We are supporting one of our customer, which are going to deploy hundreds of those humanoids in ice cream chain shops. I also see on a video they promoted, this robotic moves so fast, my eyes cannot really catch up, and then there was like in a minute, boom, kids for blizzard and for milkshakes. I literally feel like I'm in a Star Wars movie, but accelerated.
In a country as hot and muggy as China in the summer, that could be a very key innovation indeed.
There is already one in Shanghai store, so I'm very curious to visit myself.
Thank you very much. That's the hand. But robots clearly have numerous other highly complex parts that are also subject to wear and tear and repetitive action of the type you described. I'm thinking, for starters, about those jointed arms that we now see in so many videos from the high-tech factories. Tell us a little bit about what that could mean for Oerlikon going forward.
Indeed. It is not only hands, but although hands is most expensive component of a humanoid. It is more than $50,000, can be even more. But they are, as Melinda rightfully said, a humanoid contains also bigger component, like the joints of the arms, the shoulders, and the legs. Those are much bigger component. Also different a little bit from the hand, they often need to work with loads, like holding stuff, or accelerating, or make a stop, or pushing. There, the condition even get more challenging. We are now in the frontiers with our customer, developing the next generation solution. Some colleagues have mentioned material science. With the lightweight application, we are even looking to putting coatings and polymer, high strength polymer material, such as PEEK. This could, why custom need coating?
Brings a longer lifetime, bring the cost of the product lower, then it can enable more applications and working scenario of humanoid, because we do not want to have the humanoid just there for entertainment dancing, which they can do obviously. But we want them to work in extreme situations where the humans might not be suitable to do so.
Yeah. Based on that EV example that you started with, it sounds like you are saying to me this may all seem pretty far away to us right now, but five years from now?
Exactly. I think now nobody can be, say, 100% certain that how big the humanoid industry can be. But we are on top of it. If EV is everything about electrification in mobility, I think robotics, smart robotics, humanoids, is everything about intelligent motion. When there is motion, there are wear, there are friction, and Oerlikon has important role to play there.
No motion without Oerlikon. Thank you so much, Jane, for sharing your optimism. Stephen, let me ask if the outlook is in fact equally promising when it comes to participating in these mega trends also in the Americas.
Definitely so, and in particular across aerospace and defense, energy, power generation, and semiconductor. Maybe just start with aerospace and defense for a minute. In the U.S., we're seeing tremendous growth in that industry. It was discussed a few times already today, but if you look at the backlogs across both commercial as well as defense, the backlogs are huge. The latest reported numbers that I saw on the commercial side driven by passenger miles is today backlogs over $1 trillion, which is staggering. Equally sizable on the defense side, driven by modernization of the U.S. defense complex restocking due to the geopolitical activities that the U.S. is involved in currently around the world. Our business model, our three segments are leveraged perfectly against the aerospace and defense growth in the U.S. currently. When I talk about segments, we're talking about coating services, materials and equipment, and components.
Our customers in aerospace and defense in the U.S. are some of the biggest names in the space, but also dozens if not hundreds of tier one, two, and three suppliers. Those suppliers we're serving through our vast coating services network. We have the largest coating services network. We're talking about PVD coating services across the United States. What does that mean practically? We have coating facilities where we need them and certainly where we want them, and it's typically up against clusters of industry participants, and aerospace and defense is no exception there. We're doing a lot of coating work at those centers, mainly on the tooling side for our aerospace and defense customers. Within materials and equipment, I'll start with equipment. We're selling both thermal spray as well as PVD equipment under the Metco and Balzers brands, respectfully, into aerospace and defense.
We are increasingly being the go-to equipment provider largely because of our global capabilities, our size, and our customers on the aerospace and defense side want to work with very well and long-established equipment providers such as Oerlikon. On the materials side, we're very active. Here in aerospace and defense because it's a strategic industry, more and more so, almost uniformly. We're being required to produce materials locally in the U.S., and so we do that in our Westbury, New York facility, as well as our two facilities in Plymouth and Troy, Michigan. On the component side, it's been touched on. We're probably most active on the component side within aerospace and defense in our additive manufacturing business. That is work getting done in our Huntersville, North Carolina facility in the southeast. The cooling plates have been discussed.
I'll spend a brief second on the suppressors or silencers, as they're called, that we are in serial production on the additive side in Huntersville, which is great for us and supporting that business model and driving a lot of growth.
Thank you so much. What I'm hearing from you is that those backlogs and this massive structural transformation in the industry that are often depicted as challenges in the big picture, actually, that's a multi-year runway, excuse the intended pun, for Oerlikon, it seems. Let me ask you now about another massive growth sector in the U.S., namely AI and the associated infrastructure build-out. Talk to us a little bit about how the enormous investment in that area is also creating new opportunities for Oerlikon.
Yeah. The AI build-out, it would be an understatement to say it's tremendous in the United States. We all read about it all day, every day. The sheer amount of capital that's flowing in to support the infrastructure build-out, to support AI data center build-outs is tremendous. When you think about energy infrastructure in the U.S., you think about power generation. When you think about power generation, you think about industrial gas turbines. Industrial gas turbines for us, very similar to aerospace and defense, massive backlogs, huge demand. We are playing in that space with all of the largest OEMs. We have both our equipment, mainly Metco, some Balzers, as well as our materials going into the most demanding parts of those turbines. So it's a great business for us and a long-term growth trend that we would expect for years to come.
Equally, I would say, interesting for us is, driven by the AI investments that are getting done and the insatiable demand that this build-out has for compute power, thus chips, thus fabs and equipment that goes into those fabs, is our coating services within semiconductors. We do that work largely in Upstate New York at our Amherst facility, where we have our coatings going into that end market. It's been a growth market for us over the last few years, and we would expect that to continue. Equally exciting as well on the component side for us is some of the additive parts that we're producing in North Carolina that's also going into semi, which is helping diversify the additive manufacturing business for us, which is excellent. If you think about the U.S. across aerospace and defense, energy, p ower generation that is, and then semiconductors.
These are long-term trends that we are participating in are currently expected to continue. The last thing I would say about each of those three is that it is interesting for us, because not only is the growth quite healthy, but the margin structures in each of those segments are equally attractive. We are participating across both the consumable cycle at our customers as well as the CapEx cycle, which helps further diversify our own earning streams.
Stephen, very quick word, if you would, please, on localization and critical minerals, because this, of course, is an area that has been mentioned several times, of enormous concern also to many major U.S. companies. So maybe you can talk about that a little bit in terms of the opportunities that also offers for you.
There is a big opportunity, if you operate locally, which we do, across all three of our segments, and that is excellent for us. It is not just aerospace and defense. Aerospace and defense is a good example, but it is other industries. Technology, for instance, is a critical industry in the U.S. So more and more we are seeing the benefits of our localization strategies. In particular, a good example would be our materials business where we are producing powders in New York as well as Michigan, and meeting the requirements increasingly so by these critical technology customers that we have.
Thank you very much to all of you for sharing your fascinating insights and also your very convincing proof points about how Oerlikon is positioned to support and profit from dynamic growth industries in these key regions, and from these mega trends that put a premium on those local roots that you have very convincingly described for us. All those place names that Stephen just took us through, those are all local companies in the eyes of the customers that you work with. That is why it is also possible to have both China and America sitting here side by side in harmony on this panel, because this is a global company with local roots, and that offers enormous advantages at a time when anti-fragility, as Brett called it, is at a premium. So let us give them a warm round of applause if you would. Strategy, execution, technology, market reach.
We have covered a lot of ground. Now we are going to talk about the numbers. What does it all add up to when it comes to financial impact and value creation? For more, we hear now from Chief Financial Officer Marco Freidl. He is formerly at UBS in equity capital markets and M&A advisory, and brought from there strong financial expertise with a strategic mindset. He has now been with Oerlikon for nearly nine years. He played a key role in executing the pure play strategy and leading the carve-out and sale of the polymer processing business. He is also helping guide Oerlikon's Mission 2030. Marco, the floor is yours.
Thank you, Melinda, and good morning, ladies and gentlemen, also from my side. This session is about how we convert the strategic progress that we have heard a lot about into measurable financial impact and shareholder value. The underlying principle here is to maximize value creation by capturing profitable growth, while at the same time remaining diligent on cost, capital, and cash allocation. Let me quickly recap our three headline targets that you have already seen. Our 2030 mission is to organically achieve more than CHF 2 billion of sales, higher than 20% EBITDA margin, and more than 10% return on capital employed. The combination of EBITDA and return on capital employed here is the essential proof point for the quality of growth and earnings. These three metrics are naturally interlinked, and in our execution, we will focus on striking the right balance within this financial triangle.
What do I mean by this? We will not optimize an individual KPI in isolation, but balance achieving increased percentage margin while creating value accretive growth. Here again, ROCE ensures that we execute in this triangle with the right balance. In all that, we keep focus on diligent cash flow generation, allocation, and balance sheet strengthening. This slide here is the anchor for my presentation, and over the next couple of minutes, I will provide you with substance and examples how we will achieve these targets. Let us start with profitability, and here the baseline is 17.3% EBITDA margin as of 2025. Our 2030 mission is to achieve more than 20% EBITDA margin. On the following pages, I will elaborate on the bridge from the baseline to the target, and I will base that based on three levers. First, it is volume and mix impact.
Second, it is cost of goods sold optimization. Third, it is reduced SG&A intensity. The logic will be built on showing you examples of already successfully implemented measures, and in addition to that, initiatives that will provide further upside potential. This will show that the path to 2030 is indeed built on a well-diversified set of initiatives and not based on single high-risk measures. Overall, I think about these three levers in the following way. Volume and mix is the commercial quality lever. This means we must grow in profit and value-creative areas. Cost of goods sold optimization is the industrial discipline lever. Means efficiency, means footprint optimization, and means complexity reduction. Last but not least, SG&A is the focus to create further operational and functional leverage and remain diligent on cost. The next three pages will unpack the details behind each of these three levers.
First, on improving revenue quality, so not just volume. Here, a successfully implemented example I would like to mention is portfolio optimization towards higher-margin solutions. The great success story here is our strong growing materials business, in which we have increased profitability over the last five years by more than 30%. One key enabler here was the reduction of the product portfolio, getting rid of dilutive and subscale products to strengthen the margin. So here we have reduced the number of product references from around 3,000 to around 1,000. Another example is, and you heard about that from Brett, is innovation as a driver for differentiation and pricing power. Here we have launched, over the last five years, more than 200 materials in that segment to support that target. Now looking ahead, very important for us will be that we improve the mix of our businesses.
You have seen which industries benefit currently from strong growth trends. We expect that the share of these industries with above-average margins will increase by 15% to 2030. This is driven, for example, by aviation, energy, and semicon that benefit from these sustainable strong trends. In terms of scaling, also components will play an important role as outlined by Dirk. A second upside I would like to mention is high-value innovation and low marginal cost of growth. An example, we expect a higher than 30 x sales to innovation cost ratio for recently launched products. Just to give you an example what I mean. As we innovate a coating, this happens to a very large extent in the process innovation. So it's not about putting a new equipment into the field every time we innovate. So this supports our growth journey quite a lot.
The second one is low marginal cost of growth, and here you've seen it before. We operate based on 110 coating centers globally, and we have material sites in all three regions. So this allows us to scale very efficiently, and I strongly believe that this is a key differentiator for Oerlikon. Bottom line, this bridge element combines portfolio and mix strategy, pricing focus, and efficient scaling. Let's move to cost of goods sold as the industrial discipline lever in the bridge. Here we have, over the last two years, closed or combined 17 sites globally to support that target. Already this year, we see that this contributes to the financials in the way that we expected. Another example is productivity-related using digitalization. We are using and have introduced a technical design software that saves us more than 50,000 hours a year.
This means a reduction of manual work and allocation of resources to areas that really create growth and value going forward. Looking ahead, efficiency potential remains a key driver within the cost of goods sold lever. Here I would like to highlight the utilization of our coaters as our most important asset in the base. We expect that we can increase the utilization by more than 30% going forward. This will be achieved by reallocating coaters within the global landscape and by optimizing the use of this equipment. Here again, I refer to what Dirk was saying, digitalization supports. Because knowing how these coaters perform and being able where they can identify where they can fill a gap is very essential, and we already see the very positive dynamics which were triggered by these developments.
A second example is complexity reduction, for example, by modularization in our equipment business. Here we expect that the reduced variation of parts will enable efficiency and support the cost of goods sold ratio by 20 basis points. An example here is, for example, the spray guns, controllers, and powder feeders. Here we are on track to reduce the variation by 60%-90% until 2028 if we compare to what we had in 2020. That's a significant step and an important example for a driver as well. Bottom line, cost of goods sold naturally is key to achieving our target on the margin, but also to strengthen the resilience of our business. Now to the third lever. It's about SG&A as the functional and operating leverage lever. Means as the business scales, SG&A intensity has to reduce.
Last year, we rolled out Salesforce as a CRM tool to 1,400 users within only 12 months. What does that mean? It means standardization and providing one platform to our sales force to drive growth. In terms of central functions, we reduced the G&A cost over the last three years by CHF 15 million. This shows that we kept a very strict focus on cost after the sale of Barmag to compensate for, but even beyond the required savings from the sale. Also looking ahead, sales cost will remain an important driver. We expect that the cost of sales will grow at the pace of below 50% compared to sales growth. Here, digitalization will also support sales effectiveness, for example, reducing the back-office work by 10%-15%. On the functional side, we have identified more than 200 basis points of G&A ratio improvement potential.
Here, AI and digitalization also play a key role to optimize organizational structure and processes. To not to leave it just with the buzzwords on AI and digitalization, we are already using a digitalized payables management system. We use bots in treasury, in reporting, we use agents for our IT help desks or also for trade control screening. Looking ahead, the implementation of SAP S/4HANA will further strengthen process standardization and optimization. Here, with this slide, I close the EBITDA margin bridge. All the elements matter to achieving the 2030 targets. If you look at our H1 2026 results, you see that we are very well on track. Now, ladies and gentlemen, let's move from profitability to capital return. We introduce return on capital employed as an additional target because EBITDA margin alone is not sufficient if capital intensity is not well managed.
The importance of ROCE for Oerlikon is also underpinned by the fact that this KPI is used as part of our long-term management incentive plan. Now, how do we work on ROCE operationally? We use our capital allocation framework, which simply means as we identify the right areas to invest in, we make sure that these areas are margin and value accretive, and that they create above-average growth. Naturally, we will focus as well on allocating capital to the strategically important areas highlighted before. Now, where do we stand? What are the drivers that will bring us to the target of more than 10% ROCE? If you look at H1, we achieved 6.2% return on capital employed, so we are on track towards the target already.
In addition to allocate capital to the right industries, what I would like to highlight here is allocating capital to businesses with lower than average capital intensity. Looking at our segments, the strongly growing materials and equipment and components segment have a significantly lower capital intensity compared to coating services. Also basing our capital allocation on that fact will be key. In addition to that, footprint optimization, asset utilization, as discussed earlier, will improve capital efficiency. This will help us to reduce the gap between EBITDA and EBIT and drive the EBIT margin towards the low teens area. Capital allocation for us is a key steering element in achieving the targets 2030. For us as Oerlikon, it has become deeply rooted in our governance. It is much more than just a budgeting exercise. A key element for improving capital return is CapEx.
Here, this is about supporting capacity, but also capability to support the path to 2030. We expect a CapEx envelope of around CHF 110 million per year, which corresponds to 4%-6% of sales. I would like to highlight three examples, which I consider as very important to support the path to 2030. Number one, in 2024, we invested in India into a combined coating center. By combined, I mean integrating our thin film capabilities and thermal spray capabilities. We did that close to the technology hub, Bangalore. This will help us to benefit and capitalize on the strong trends in aviation and semicon. Looking at the states in 2025, we invested to combine two material sites in the state of Michigan to improve capacity and efficiency. Also here, the strategic industries are in the focus.
It is a lot about driving growth in aviation and in energy. Last but not least, this year in Switzerland, we are investing in what we call Campus Reichhold. It is the combination of three sites to build a thermal spray hub integrating engineering, production, and services. Bottom line is, our CapEx envelope is disciplined but supports the right priorities towards our 2030 targets. Let us continue with balance sheet, and here the commitment of Oerlikon remains clear that this is a focus for us. When you look at the pattern here, end of 2025, we stood at 3.4 x net debt EBITDA, including Barmag. We communicated with our full year results 2025 that our target at the end of 2026 is to be at below 2.5 x. As you have seen in our H1 result, we achieved that target already half a year earlier.
This was supported on one side by using two-thirds of the Barmag proceeds for deleveraging, but as well by the very strong H1 results that we were able to report. Leverage management clearly builds on achieving the targets as outlined before. Another KPI that is important when we talk about balance sheet strength is our equity ratio. Also here, we are very glad that we were able to show an improvement to 41% in our H1 results. The combination of the deleveraging path and the strengthening of the equity ratio also supported the reconfirmation of all of our three investment-grade ratings in spring this year. In summary, we see balance sheet strengthening as protecting financial and strategic flexibility, but also support shareholder returns. Now over to our final element, which is the cash allocation strategy.
And basis for this is that we expect that profitable growth and tight net working capital management will support a cash conversion ratio of 80%-90%. We expect to allocate around 35% of cash flow to CapEx as our main reinvestment priority. Around 25% will be allocated to dividends based on an unchanged dividend policy, and the remaining 40% are allocated to financing, balance sheet strengthening, and creating strategic optionality. The target of our cash deployment strategy is to strike the right balance. To reinvest enough to grow, return cash reliably, and enable balance sheet strengthening and strategic flexibility. Ladies and gentlemen, let me close this part of the presentation with summarizing our financial strategy. Number one, we have a clear path to achieve more than CHF 2 billion of sales and more than 20% EBITDA margin by 2030.
Second, on this path, we act on a strengthened focus on capital allocation and return, which will help us to achieve the ROCE target of more than 10%. In all that, as I described initially, we will act in the financial triangle, striking the right balance and making sure that overstretching one KPI will not cannibalize another. Third, in all that, we will act with a clear strategy on balance sheet strengthening and cash flow generation and allocation. Ladies and gentlemen, we are convinced that the diligent execution of this financial strategy will improve the quality of growth and earnings, capital return, strengthen our resilience, and with all that, be the basis for sustainable shareholder value creation. I thank you for your attention.
Thank you so much, Marco, for that very detailed and very informative presentation. There's a lot to talk about now after all we've heard, so we're going to open the floor for questions. Let me ask Brett, Dirk, Marco, and Michael to please return to the front, and we will now take your questions. Please raise your hand if you want to pose a question, and do tell us your media outlet and your name. So let's go here to the third row.
Hi, good, well, still morning. Laura Bucher with Octavian. I would like to ask a question. Just from the presentation today, you're mentioning CHF 300 million incremental revenue, right? Then you go to the EBDA slides where you show the three levers. If I look there, basically it leaves 50 basis points of margin potential to increase. Based on volume, so i.e., operating leverage. Maybe I'm wrong, but for me, that doesn't seem a lot of operating leverage there on the CHF 300 million incremental revenue. So first, I'd like you to comment on that. Maybe I'm seeing things in the wrong way. Second, if you could give some light into utilization rates and all the other six markets that were not mentioned today. Do you need a significant pickup there so that we would really see the operating leverage starting to kick in? Or
Start first and Dirk second.
Thanks for the question. What we outlined is in the bridge of the EBITDA, individual elements and examples that will contribute. As you've seen, for example, looking at the G&A ratio improvement alone, if you look where we stood at H1, this is supporting a target of above 20%. We are not aiming to 20, but this is about showing that there is a well-diversified set of initiatives that will support achieving these targets, which are beyond what you showed. There is definitely operating leverage in all these areas, and the CHF 300 million will support that.
Dirk, you want to say?
Yeah, I can say. So utilization rates, we have to differentiate between our coating service and our material and equipment production. So material and equipment, we are fully utilized, and in coating service, depends on the industry. So we have automotive industry, where we have a utilization of 70%+, between 70% and 80%, and then we have other industries where we are around 50%.
Maybe to add to utilization and to finalize your question on the other industries. First, what you have seen. Out of the past, we are optimizing the real to the ideal. The real was coming from a time 20 or 30 years ago. You had to be very close to customers. Now we are bundling, we are making bigger centers. We optimize that by using more modern logistic setups. We can move. It is not like to move big equipment. We can move coaters very fast from one site to another one. The only what you have to consider is if you go from 60 hertz to 50 hertz, that you have to do something on the controls. Otherwise, you can move these equipments very fast around. To have the overview, that is why we are working on the Virtual Coating Center. It is like one center.
It is only distributed globally, but it is like one center. Coming to the other six industries, I think the secret is above. We are talking above CHF 2 billion. Dirk was mentioning CHF 300 million out of these four segments, which we have shown. Even if you take CHF 100 million or CHF 150 million, we are above CHF 2 billion. So we are not targeting exactly for CHF 100 million. But today, what we see is the super dynamics we have in industries. Oil and gas for us for the moment has not a huge dynamic because they do not drill too much. When they start drilling again, we are already coating with the drill heads. Automotive have a different dynamic. In some areas, it works very well. In other areas, it is stalling a little bit. Channel industry is wide range. Medical is growing nicely. Here we are in robotics and surgery elements and dental.
We are not in this, how you name it, C-
Class 3
Class 3 level. Metco, before we acquired, had one big issue, and we said we don't do that. The other industries are contributing, but for today, it was really to highlight the super obvious ones. If you have a 10 years dynamic, and I think Stephen mentioning that very well on U.S., defense will invest the next 10 years like hell. Utility for IGT's industrial gas turbines, that's the only way. I was 10 years in that industry. The only way is. Can you shift a little bit your head? Yes, perfect. Thank you. The only way is to fill that gap with gas turbines. A nuclear site from start to 15 years. By the way, we have 450 big nuclear power plants on this planet, and 150 are phasing out in the next 10 years.
Even to keep that level, you need a lot of that one which are in the pipeline. The real answer to feed the power demand is gas turbines. The same answer is jet engines. The same answer is if it's rockets or drones, you need the engines for that. That's why we highlighted that these are trends which are not for one or 2 years. This is a 10 years, 15-year story. We are in, and we are indispensable there. But the combination is more than the 300.
Thank you. Let's take some more. Up with the hands, please. There's one in the third row again.
Oh, that's okay. Mm-hmm.
Yeah, Christian Arnold from ODDO BHF. Thank you for taking my question.
Was it Christian?
Yeah.
Yeah. Yeah. [inaudible] . Sorry.
No problem. On your deleveraging path, you are below 2.5x in 2026. You aim for around 2x in 2027. Until 2030, you only go for 1.5x - 2x. If I look at your CapEx spending, if you look at your growth, I would expect actually to go this ratio much further down to more like 1x or even below 1x. What I am missing here, are you planning M&A, and do we have some extraordinary CapEx we have to think about in that area? Actually, not according to your slide you mentioned. What I am missing here?
Yeah. No, your calculation, thanks for the question, is obviously right. In our cash allocation slide, we had the 40%, which were on one side, obviously, for financing cost, which we cover below cash flow from operations. Then it is about deleveraging and also creating strategic optionality. I highlighted that CapEx is our first reinvestment priority because we are strongly convinced that there is a lot of organic growth potential in the business. No, there is no extraordinary CapEx element planned. With regards to M&A, we do not consider that a priority at the moment, but as one of the options coming out of a strengthening of the balance sheet, that could be one, but it is not a priority at the moment.
If no M&A, then it will be further small time.
Yes.
It gives us simply more flexibility, as he was mentioning there.
Thank you. Next to that gentleman, and then we will go to the back.
Yeah. Thank you for taking my question. Torsten Sauter, Kepler Cheuvreux. Actually, I have a question and a request. The question would be, I appreciate very much that you give us group targets for growth and margins. Now you have introduced these segments and could you give us a little bit of a feel for the segment dynamics, the margins that you have in mind for these, specifically given that components currently has a negative EBIT? Then a request that I would like to chip in, is there a chance to receive a longer-term track record of these segments' performances?
You want to start with-
I can start, yeah. Thanks for the question. We introduced the segment reporting first time in H1, right? What we provide is the guidance on the group level, and we do not intend to give a guidance on further below revenue on the segments. Revenue outlook, you saw we gave CAGR ranges for the individual segments. This is certainly something that we do provide. On the components performance, this is clearly not there where it has to be. We outlined that this segment, and this is important for me to highlight, that I will let Michael and Dirk add, it has a lot of growth opportunity in there, which is benefiting from strategic industry dynamics. This is the components business in aviation, for example. As that segment scales, this will contribute to improving margin. Secondly, we have taken restructuring measures also in that segment.
In luxury, we closed two sites last year in Italy, and here we manage the profitability side also on the cost. We do not give targets below revenue for the segments, but the measures are in place. We want to drive growth, and secondly, we are very diligent on the cost side as well. In terms of giving more history on the segments, we have to look into that. At the moment, that is not planned.
If I can comment on, I do not look too much backwards if not necessary. Instead of doing all the work to clear up on how could this track record look like, anyway, you should look more forward than backwards and about that dynamics. Because history, if sometimes people say, "You made 22% margin in 2016." Oerlikon was a different, the world was a different, the setup, the mix, everything. It is not comparable. If you would say 2016 and say what is 2026, we all would have been wrong. The forward-looking and the quality of that on which our forward outlook is built on, that I would like to discuss with you more and go deeper in. For example, when we talk about components, I go a little bit deeper and I go a little bit beyond there.
The Oerlikon Friction Systems story is a story which is phasing slightly out, and this is the components. Still makes a good business in Asia, but not to make too much business in Europe. This is something which depends on how finally e-mobility is ramping up and how China will look on this battery security. Because today the government has ordered a system for their cars, but for the mass cars, it is not. In Europe, it is different. There are different dynamics where we are positioned, but we are not always in the driver's seat to have an impact on these dynamics. In Eldim, we have a big order since a while from a customer, and the transition took longer than expected, but now it takes pace, and this is what Dirk was showing you.
That this component will contribute significantly in future and will make the component story better as additive manufacturing is on a growth pattern, profitable now, and as I said, growing by 30%, sometimes 40%. Still from a base, you could say, yeah, you have only to start deep enough, but we expect a significant contribution by 2030. So within the component world, there is a lot of interesting parts in, but there is as well, does luxury come back and when? We do not know, but we know what we are doing in luxury with the PVD story, and we have achieved already 15% of our revenue today in PVD, and we would never have been there without being a player of the crowd. If you are not in this industry, they do not take you serious.
We had in the past, before my time, some project with Rado and Swarovski that never really worked out because they said, "You don't have the smell of us. You don't understand what we're doing." This is the secret of Oerlikon now, that in the 10 industries, we are perceived and accepted and realized as a real player of these industries. That's the industries we are walking through now. Now we have a dynamic in materials equipment, fantastic dynamic, which will last very long because of the underlying effect. We have a very good dynamic in coating services, which could be even better. But regaining market share, even in the industrial gas turbines, not industrial gas turbines, sorry, the ICEs, regaining market share against market.
But it's a matter of fact that 90 million cars have 15 million electric cars, and it's not the amount of 90 million combustion chambers anymore like in 2018. But there are other elements, as it was told us, in defense, in aero, where they do the coatings. There's a very good dynamic here, and as I mentioned already, in the component world itself, we have these different chapters to solve. And to follow.
Just one more add-on. In the showroom, you see our components. I think it's really worth to look at the showroom later. There we have explained, and also then you see how we grow there.
We will also hear more from the components and the other segments after we take a quick break, but the break isn't yet. So thank you so much for your presentation.
But don't miss the other panels. Really, don't miss them.
Yeah.
They're really good.
We have a couple more questions in the back, and I see one here, too. Let's go to the back first. They've been waiting, and then we'll come to you.
Yeah. Sebastian Kuenne from RBC. I have two questions, one on the sourcing side and one on the windfall gains that you might see or have seen this year. On sourcing, we have a very extreme situation now for the rare earths and for tungsten. China closed down its U.S. clients in April and closed down EU clients in June. That makes Oerlikon last man standing now. How long do you think the situation will last? Can you still source in China? For how long can you source in China? Why are you different to others?
Do you want to start?
If that situation continues, what does that mean for market share? The second question on the windfalls, the way you presented your first half was a bit like, yeah, everything is done operationally and out of your own power. But at the same time, we had a 20x, 30x, 50x increase in some rare earth prices in the last year. You passed that on to clients. To what extent was your margin performance driven by windfalls or by one-offs, basically? Thank you.
I take the first question, [Michael adds], then Marco can elaborate also on the second one. First of all, I think when we realized the shortage of materials, I think we were one of the first, really, and the team has done, in my opinion, a really great job of diversifying, building up a second source, in that case, somewhere else outside of China, we build up a second source. We ramped it up over the last 12 months. This enables us now that we have now, as already presented, different sources, and we can even say, okay, we can provide for our American customers, for example, yttrium without Chinese yttrium, and for our other customers with Chinese yttrium.
I think that is one of the things we have done very fast and good to build up this second source, which now is actually supplying us, and we are now secured, with yttrium, also for our growth in the next years. A second thing, I think that is also very important to mention, what I realized, our materials in the past were a commodity. We were basically, Oerlikon was at the team leader level of the procurement organization of the bigger OEMs. Now, we are in touch with all VPs, SVPs, or board members of procurement, and we became a strategic element. By that, we could secure long-term agreements over the next years for our materials, which is a huge benefit. I just have been to the Farnborough Airshow, have meetings with all major aero engine OEMs on the highest level.
And this brought us so much closer and really that's, I think, we can also build on for additional business. So that is one of the things, yeah. Michael.
Maybe if I'm allowed to add. The situation will not ease now completely the next 5 - 10 years, simply because China will keep themselves in the game because they will be stupid to force everybody to build up other resources. So they play a balance. We are ready, and we have shown them that we can deal with this balance better than even our much bigger customers. So there's been 20 metric tons released without any limitations where we can use to each and everybody from Chinese administration because there is a certain trust level you have to maintain. And they have fully understood if they don't supply, we will find a way to supply. As we said, we have three elements there. That's the strategic one. You have a non-Chinese source. For the customers who want, they have a non-Chinese source.
We have a Chinese source where China as well starts to cooperate despite the fact that they put things on export control. This is as well a geopolitical signal how strong or weak they are. Third, we have technology solutions. This yttrium-based answer for yttrium is a real technology solution and where our customers are testing them, and then they have the opportunity either to use the one or the other. Coming back to before Marco may add something to your windfall profits. They are not windfall profits. I don't like this word because it's a market position. If you are strong and good, sometimes you have headwinds, which we had. I never was accepting that we have headwinds, and sometimes you have tailwinds. The market situation actually is in favor for us, and we use them.
We use the pricing power, we use the power that we can supply, and others cannot supply. Is it always easy? No, it's not. Is it always that way that we have. I think we not even can rework all the backlogs we have out there because there is significant demand. But as a windfall, I wouldn't consider that. It's simply a position where Oerlikon has positioned themself and takes benefit out of different sources. Marco, maybe you give a more qualified answer to that, but
No, I wouldn't call it more qualified. It's a mix of the effects. I guess you listen to the H1 results. At the same time, you see that our updated margin comments on what we assume in terms of prices and what it could mean in the range, to that effect. I think yes, it is a balance of effect. It is the restructuring we did in the last two years that I highlighted, which contributes. It's the right positioning, which allows us to push prices in the right areas. There are some elements that we benefited from, but you need to be at the right spot to benefit from that.
We do powder in China, in Europe, and the U.S., so we have invested years ago in a situation where we have now this flexibility that we can play it.
We're going to hear more about that as well later on in our second panel. Let me now go to the lady in the middle for one last question. That's you. Can you raise your hand?
Hi. Leonie from UBS. Thank you so much for taking the questions. I have three.
[inaudible]
I make them quick. Regarding the incremental revenue that you mentioned, like those CHF 300 million-CHF 400 million, can you just give us a bit of an understanding in regards of the aerospace? I understand that this probably is one of the biggest chunks that will add to those CHF 300 million. You mentioned around 6% growth that you expect from MRO. You expect a similar growth number as well from the new engines, or how should we think about the split within aerospace? Is that more or less balanced? Then also, is aerospace likely going to make up half of the additional revenues or probably between 30%- 40%? Can you just give us some broad numbers? Then I'll
I will start
have some details on the ROCE.
Sure. I wouldn't go that deep in, but I give you some mathematics to calculate. Airbus and Boeing are ramping up the narrow bodies by 75 aircraft a month, which is 750, 900 a year from both. So it's 1,800 times two is 3,600 engines, which you need per year. You see already the dynamic behind there, but that's new build. Then you have, if you go for services, you have in the jet engine industry, three services over lifetime, over 20 years, and each service almost contributes a completely set up of our coatings. So you need to strip the blades and vanes and everything and to get a new coating three times. There are some more parts in the second, which is the most and the biggest service effort. Something similar is in gas turbines utility.
The real driver for us is gas turbines, and I would not fix it only to aerospace. The industrial gas turbines has a comparable dynamic and the fleets behind. Because of the installed base, and I think it was mentioned several times, 2,500 thermal spray systems globally out of 3,500 in the segment. So in aerospace and in energy, there are 3,500 systems and 2,500 of us. 2/3 is us. This business comes to us wherever it comes, new and the recurring maintenance. To differentiate here too much, it's a theoretical exercise which doesn't bring us too much forward because it's the same customers. They very often do not even differentiate. You get an aircraft in, they take the engine off the wing, they put a new one on, and then it goes further on.
For us, it's important that each engine which comes into service is contributing the same as a new build.
Maybe just to add on this, so aerospace business is, Michael just said, materials for both new builds and MRO. Then we sell the equipment, and then we sell also the stator vanes. Also, that is growing and is significantly contributing to that. On top, even the PVD business or the coating service, we have an increasing PVD business in the aerospace. Not only on the engine itself, but also on the coated cutting tools, which are taking a higher and higher share.
Thanks very much.
Can I? One last question.
Super short, if you would.
Super short. Okay.
Yeah.
ROCE above 10%, do you include goodwill or not?
Goodwill is in the denominator, yes.
Included. Okay, thanks.
Great. Thank you very much. I am afraid we will have to leave it there, but we will have a second question period after our next panel, or you catch up with our EC during the break. We will now go to a break, and please keep your eyes open when we reconvene because we are running a bit late, but I assume we are going for about a 15-minute break, right? Yeah.
Yes.
So see you back here for a multi-part panel that will feature those segments that you all want to know more about. Look forward to seeing you in a minute.
Thank you.
[Break]
Welcome back, everyone. Let me just say also, welcome back to our online audience. We're very glad to have you with us, as well as all of those who have joined us here live in Zurich. I hope everybody had a good break. Our second panel is entitled Oerlikon Solutions to Serve Growing Markets. This is not one panel actually, but three. We are going to go with the different business segments, coating services, materials, and equipment, and components, and hear their respective outlooks on performance across regions and markets. We start out with coating services and ask the key question: how much further can an already leading position be expanded and where? Here to answer that question are Florian Rovere. He's Head of Product Management in Coating Services.
Then we have Sumeet Gupta with us, sitting in the middle, also sits on the management board and serves as President for the APAC region. Martin Bartsch is Country President Germany and a member of Oerlikon's managing board. Welcome to all of you. Florian, let's start out with you. Of course, this is Oerlikon's most established high margin business. Share with us, if you would, a few more examples that show us how the company's positioning itself, and the coating services solutions to capture the potential of the growth markets and industries that we've been talking about so far. Maybe you can also say a word about what sets Oerlikon apart from its competitors.
Thank you. Good morning, everyone, or almost noontime. I will start with stating or emphasizing that Oerlikon is today the undisputed leader for wear-resistant coatings in cutting tools and forming tools. We have helped our customers with a global network of 110 coating centers today to improve their productivity, to improve quality, and ultimately to save cost for decades. This is a very strong foundation. Even here in this legacy business, we continue to innovate and grow. We have heard a couple of examples before. The market is throwing new challenges at us, difficult-to-machine materials. Think about modern aircraft engines or aircraft in general. We have heard about humanoid robots, but also about defense, where materials by design are kind of difficult to deform or difficult to machine.
Here we work with our R&D teams to bring new solutions almost every year to stay at the cutting edge of cutting industry, if you will. What truly sets us apart, however, I would say, is our ability to bring these advanced coating solutions beyond tooling into all the different components applications across all the industries that we touch. I will give you a couple of examples. We have heard about technical toolbox. We have heard about diverse properties. Jane mentioned before friction reduction. Let us start with this diamond-like carbon coatings. As such an impossible material, you could say, you combine the hardness of diamond with the low friction coefficient of graphite in one material. That is actually not possible. We made it possible in our coating machines. You can put such coatings on, let us say, transmission components, let us say in an electric car.
I guess everyone has driven one these days. You probably enjoy the acceleration, the immediate torque. I can assure you that the gears do not enjoy that at all. There we actually put carbon-based coatings on these gears to improve the load-bearing capacity, to actually make the trip to your next service a little bit longer. It also can reduce the noise, by the way, and even can contribute to extending the range of your electric car. You can also put such coatings on large roller bearings in wind turbines or in huge mining trucks, where this very thin layer on a roller component can actually extend the lifetime of these huge machines manifold.
Last example, we can also put these friction reduction coatings on a critical valve component in, let us say, a subsea oil and gas production facility, where the coating ensures that the valve opens or closes when it matters, prevent an oil spill.
I was just thinking, this is interesting because it takes us back to what Michael talked about when he was talking about the streamlining, essentially the versatile toolbox where you can take one tool, one process, and that has a potential to cover a broad range of different applications, as I understand it.
You are absolutely right. I can give you a different example. As our coatings are also very hard and wear resistance up to elevated temperatures, you can put them in an aircraft engine. Where they, for instance, help to prevent erosion on airfoils or turbine blades and will ensure that the engines function as designed over the lifetime and save fuel, save cost for the operators, reduce carbon dioxide footprints. If we then put wear resistance and friction reduction together, you get a reduction in particle generation, which is very important actually in semiconductor manufacturing, as we heard before. Particles are the enemy of the microchip. Here basically our coating solutions on wafer fab equipment can help to keep the yield in modern microchip manufacturing up and keep the cost of microchips down.
I asked you what sets you apart from competitors, and we heard from Michael there is no one competitor who spans all these different businesses. In coating services itself, what would you say makes Oerlikon unique, and how do you play with that global footprint, local presence in that context?
That of course helps with 110 coating centers and the sales teams around it. You have your eyes and ears close to the marketplace, so we can actually recognize market requirements in all those industries early and address them. One thing, we have heard it earlier, that I would see as a key differentiator is our customer solution centers, Brett mentioned that, which is basically interdisciplinary teams, if you will, experts in the countries that closely work together with our sales and operations teams, and also combine deep coating technology knowledge with application knowledge. Then work together with our customers to bring something from an idea, if you will, from a feasibility study into stable production. We increasingly also use digitalization and artificial intelligence here with this. So we could consider it, let us say, a global application brain. All those different neurons in the different countries.
We connect that also with digital tools and AI tools, so that in all this data that is generated in the countries locally, together with customers, we also make sure that we find it later, we find it quickly, and make this application brain, if you will, smarter and faster every day.
Thank you very much. Let me jump over to Martin now. Europe is the largest coating services market for Oerlikon. At the same time, this sector is highly competitive here in Europe. Is there still room for growth. And where would you see that growth particularly?
I would answer your question with yes, Melinda. Yes. First of all, we are the largest coating service market in Europe for Oerlikon globally. 50% of that business is coming out of Germany. Actually in August, we are above the 50% ratio in Germany. It is a very competitive market, for sure. People think it is a mature market, and I do not believe so, because we still see a lot of room for further development in the region or in Europe. Europe is in a transition. We heard about it. It is about global geopolitical situation, putting a lot of competitive pressure on Europe nowadays. Also these circumstances we are working in are not so favorable with increasing energy costs, labor costs, and also bureaucracy. This is putting a lot of pressure on the industry and the companies.
It is not a bad thing because they are moving towards higher resilience. Higher resilience is not just having the best cost base, it is also to innovate and to invest into innovation in processes as well as in products.
When I think
For us, this is the driver for growth in general in the European region.
When I think about this market, highly competitive, also highly complex. You mentioned some of the factors, geopolitics, supply chain security issues, but also industrial transformation, sustainability requirements, advanced manufacturing technologies. What do those all add up to in terms of opportunities for Oerlikon?
I can give you some examples on that one. We heard about aerospace, energy, and semiconductor, and these are areas where we are in and developing also in Europe. Europe is much more than that because we have a very high portion of general engineering, general industry, in the region. Some examples we heard about this Euro 7-induced material sales for brake disk. You can only do this together with your customers when you know about the application. This application know-how we bring into this discussion with the customer to develop the right material for the right purpose. That is one example. The other example is pumps. Imagine how many pumps are in the market. It is a huge capital bound in pumps. We developing for the different purposes of pumps, the solutions for our customers.
We have pumps for water, we have pumps for wastewater with different needs. We have pumps for chemicals, different chemicals, aggressive chemicals, where we have to have a solution. We have pumps for even in the food industry, where the situation is completely different. Here we are innovating together with our customers, the main pump OEMs, to come up with the right solution for the right purposes.
Thanks a lot. Another great example of one tool, but with multiple applications in multiple sectors. You mentioned at the beginning the geopolitical shifts. Is that proving to be beneficial that you have a strong local European identity?
I would say so. Alongside this topic, competitiveness, innovation, and solution engineering, we are talking about customers looking more and more for security of supply, local manufacturing, and trusted partners. We heard a lot about trusted partners in the market, and we are one of them. They expect from us that we enable them to have the better products, the more reliable products, increase their productivity levels, and also to help them to come up with the next-generation technologies. That is our role, how we drive our sales and our development in the market, because we are the ones enabling our customers to perform.
Thank you very much, Martin. Let's go over to Sumeet now. Asian countries, and particularly India, have delivered the strongest regional growth for Oerlikon in recent years. Tell us more about how the company plans to capture that momentum, and what are the two or three growth drivers for coating services that make you especially bullish on the next, say, three to five years?
Thank you, Melinda. We heard a bit of a deal around China this morning with my colleague, Jane Cao, so I am going to give you some insights on what is happening in rest of Asia, as you particularly mentioned, India. As you rightfully mentioned, Melinda, Asia has been the strongest growth region for Oerlikon in the last few years. Across our product lines, coating services, materials, equipment, APAC has delivered a staggering growth of 9% from 2021 to 2025 if we look at a constant FX. Within APAC, I see India and Southeast Asia as major growth regions going forward in the future, driven by three main markets. First is the broad-based industrial growth, second, semiconductors and advanced electronic supply chain, and third, aerospace and mobility.
Broad-based industrial growth. Can you break that down a little? What do you mean by that?
Sure. India's manufacturing base is expanding rapidly, as we all know. In fact, manufacturing GDP is poised to double from $500 billion to $1 trillion in the next five years. The growth is coming from many high-precision sectors, for example, renewables, for example, pharmaceuticals, capital goods, electronics, and so forth. These industries are very relevant for Oerlikon. Florian mentioned earlier, all of these industries require high-precision solution, highly engineered surfaces, higher throughputs, long lead time of the equipment, and this is exactly where Oerlikon technologies and advanced materials and services play a crucial role. In India, we are very well represented. We have nine coating centers. We cover the major industrial corridors from north to south, very close to all the manufacturing hubs. In fact, Marco mentioned we opened our largest coating center globally last year, which is in Bangalore in India.
That is why I am very confident to achieve high single-digit growth in coating services going forward.
That does indeed sound promising, and I know those numbers in India are sometimes so that you have to rub your eyes to believe them. Let's talk about the semiconductor angle, because this is also an area where India's got a lot of aspirations.
Sure.
Not only India.
Correct. In fact, I see two countries within APAC where I see very strong growth potential for semiconductors. Let's start with India, as you mentioned. India is currently laying the foundation for self-reliance in semiconductor industries. I do not know if you have heard, Indian government has just announced 12 major semiconductor projects totaling $17 billion in fab equipment investments. This number is expected to multiply as we go through 2030. India's domestic semiconductor industry is poised to triple from $50 billion to $150 billion in next five years. Brett mentioned about four major OEMs. All of them are very active in India. They are looking India as a strategic hub, not only to capture this domestic demand, but also to diversify the supply chain and make the supply chain more resilient.
You can rest assured that we are in contact with all these OEMs to help develop this ecosystem. Another country, Japan. As geopolitical tensions are increasing, OEMs are looking to diversify their exposure beyond U.S., Taiwan, and China. We all know Japan, being a major industrial economy, being a mature supply chain, very resilient supply chain, offers a great leverage to help support this ecosystem and growth. Like India, we have six coating centers in Japan. We are very well represented from Tochigi in the east to Kobe in the west, and that is what convinces me that we are well-positioned to capture this growth.
[inaudible] big ambitions, aerospace, another sector where India in particular is looking to move fast and forward. Tell us briefly, if you would, about that
Sure
and the opportunities.
India's commercial air fleet is expected to triple in the next few years. However, currently, most of the component MRO and aircraft manufacturing is happening outside India, and only 15%-20% of the MRO work is currently being done in India. That creates a huge opportunity for the MRO market to grow, which is poised to grow from $3 billion to $10 billion in the next few years. We are seeing major aerospace OEMs coming to India, Safran being an example. They have recently announced their largest MRO facility globally in Hyderabad in India. We are working with all of these OEMs to help develop that ecosystem. On the side of mobility, as you all know, automotive, India is one of the major automotive suppliers to the world. From passenger vehicles to two-wheelers, the demand is just surging in India through 2031.
For passenger and commercial vehicles, we see India exceeding 7 million production units by 2031, and for two-wheelers, 25 million production units. We are currently the major supplier to all these automotive companies and very well-positioned, as I indicated before. I will summarize my view on Asia overall, Melinda. I remain very bullish on Asia because in Asia, growth is not driven by one isolated driver. It's by multiple drivers, driven by supply chain diversification, growth in the domestic demand, availability of a labor force, highly skilled labor force, and the demand is just surging. With 33 locations that Oerlikon has, Oerlikon is well invested and uniquely positioned to leverage on this growth. I must emphasize here, there is no other player in Asia which even closely matches the footprint, the technology breadth, and the scale that we have. Thank you.
Thank you so much. Again, that strong striving for autonomy in India, obviously very good for a company with local roots of the type that Oerlikon does have. Let's give them a warm round of applause, please. You may take your seats, because we are going to move seamlessly now to components, the business that several of our guests were asking about earlier on. It is a business that pairs Oerlikon's specialized metallurgy, its cutting-edge production to engineering, and also its advanced materials and surface technologies to create precision components for demanding environments. We are going to talk now about products that range from turbine components. This wasn't one of those, though, right? Or was it? I forget. You are going to tell us again about it.
Also transmission module systems, thermoelectric insulation, and high-fashion accessories, which is why a bag has pride of place here in this panel. We have put together a panel with wide-ranging expertise. David Franz is President, Europe. Andrea Peruch is CEO, Oerlikon HRSflow. Katharina Rick is President of Oerlikon Luxury. David, the components business is a diverse one, and in the past, automotive has played a key role. The disruption in the auto industry is making headlines, especially here in Europe and in Germany. How is Oerlikon managing this transition?
Thank you for your question. First, I like when you say automotive is an exciting business. A challenging one, but it remains a very exciting one. I will not state the obvious. The volume and the pressure, the electrification is changing the engineering content of our vehicles. Last but not least, we know that the manufacturing chain is moving to low-cost locations. But we said already before, this is nothing new for us. We have already started more than a decade ago to diversify and to reduce our exposure to automotive. Basically, two elements to navigate in this transition. The first one is to adapt the footprints to the shifts of the demand. Marco, you mentioned we have reduced our footprint by 17 locations. The second one, what I find internally very exciting, is that we have redeployed our engineering capabilities towards new applications.
Give us some examples. Make that concrete for us, if you would.
I will take one we have discussed already a bit about. Let's speak again about electrical vehicles. Thermal insulation systems is a great example. Key for us is that we have redeployed our engineering capabilities from Oerlikon Friction Systems, being in the traditional automotive, to tackle and to solve one of the biggest challenge that electrical cars have. We mentioned that already, battery safety. Just imagine what it is. You have a cell in the battery which overheats. We run the risk to have a chain reaction that can lead ultimately to the fire of the battery. Our solution help to contain the heat, the gas, and the particle in order to prevent or to delay this propagation. This is what I see for us in terms of transformation. We reallocate our engineering capabilities in growing fields.
So another way you're doing that, as I understand it's not only electric vehicles, it's as we move away from the internal combustion engine. Essentially, you are becoming increasingly powertrain agnostic, as you put it. Can you tell us what that means specifically in practice?
Thank you, Melinda. I will ask nobody what means powertrain agnostic, so I will translate that. Powertrain agnostic is an elaborate word to say something very simple. If you charge your car with electricity or if you fill it with petrol, the application stays. A very simple example. It's also your business. Headlights. If you have electrical cars or combustion engine, we have more and more complex systems. Oerlikon, with our coating solutions and also the capabilities from Oerlikon HRSflow, we are fully integrated into the supply chain of these parts. The same logic applies also to other parts. Just think about the body of the chassis of the part, electrical or combustions, the application stays.
Tell us a little bit about the diversification strategy beyond the automotive sector itself. What are you doing with that versatile toolbox to provide component solutions beyond automotive?
I have close to me our baby. Components for Oerlikon is much, much more than automotive, and we will witness that across the next minutes. I take an example I like very much, Eldim. You said, Dirk, already we manufacture and we assemble highly complex parts that are being mounted in engine, and at the end, they are under the wings of Boeing 777 or the new generation coming of the Boeing 777X. These parts, you have been a bit shy in saying that, Dirk, but this is basically, you imagine you have 10 of these parts assembled in a 1 m something range, and you have four to six of these elements inside. This is the complexity we manage. We are ramping up this project with one of the leading aero engine manufacturer in America.
With a certain pride, I have to say that the contract we have been awarded with is one of the biggest Oerlikon ever had. Just short, the secret recipe behind why we get the contract is that the customer has recognized that Oerlikon is the only one to have the full box, the full toolbox, and this is why we get there. Another point, I keep it short, moving into components bring us higher in the value chain, but also closer to our customer challenges for surface solution. We get firsthand experience. For example, if we look for the machining of a very complex alloy in aerospace by manufacture parts, we can learn it and translate that into solution for our customers. This is a relatively simple circle. We manufacture, we learn, and we provide better solution for our customers.
This is the logic of our transformation, Melinda.
Great example of a virtuous feedback loop within that customer intimacy that we've been talking about. Let me go over to Andrea now. As Oerlikon moves to execute this pure play strategy, Oerlikon HRSflow is clearly one of the highly profitable and advanced tech anchors in the component segment. Traditionally, Oerlikon HRSflow has been automotive focused. Is that changing now in view of the transition we're talking about, and what does it look like?
Thank you, Melinda. Thank you for the question. Yes, you are right. The Oerlikon HRSflow core business has been, since the company foundation, automotive. But lately, the company has been diversifying into a wider spectrum of vehicle segments, embracing not only passenger cars, but also commercial and heavy-duty vehicles like trucks, agriculture, or motorbikes. Today, I would actually describe the anchor of our main revenues and margin stream as mobility rather than just automotive. In my role, together with my team, of course, I am constantly monitoring the trends and the latest development of this industry, an industry which is evolving very rapidly in different directions and with different paces. This is because of the different regulatory frameworks all over the world, and also because of different local consumers' behaviors.
But there is a common denominator across all the latitudes, and it is the strong need for driving further efficiencies in production in the supply chain, and the plastic supply chain where we are in is no exception. Coming to your questions, yes, there is strong growth potentials for Oerlikon HRSflow, even if we are market leader already, because we intend to exactly leverage this strong market need efficiency. Let me give you two elements. The first, even in automotive, so passenger cars, like David was mentioning, where the traditional logic value over volume is now entering a critical phase. We are still in a good position to deliver additional value for our customers, enabling them significant productivity gain or cost saving, cost optimizations.
I am basically referring to those technical shortcuts that our Hot Runner Solutions are providing, enabling customers energy saving, material scrap avoidance, lightweight in general, or even the elimination of some injection molding post-processing activities like painting, for example. A very expensive process if you consider that 60%-70% of the cost, the final cost of a plastic part is given by that. Now, imagine to have the possibility of getting a plastic part ready to be used in a production line by car makers, which is paint free.
No longer in need of painting. Later, actually, if you join our booth, our automotive booth, I can tell you more, and I can guide you through this disruptive technology, which has clearly an impact on this. The second point, it is of course keeping this over time, because being a true global partner with strong after-sales presence across all the regions, we can maintain our customers' productivity seamlessly like no other competitor can achieve.
So in short, basically, it is about driving certain efficiency into our customer processes and then making sure they can maintain it over time.
What I am hearing from you is that for an industry that is hard pressed at the moment to reduce costs, your cost value proposition is of particular interest in that automotive sector. Now talk to us very briefly, if you would, about applications beyond automotive, because I know that Oerlikon HRSflow is also seeing some promising opportunities beyond that.
Yeah. This is secondary specification that we put in place over time because there is a lot of know-how and expertise that we wanted to move from automotive and beyond automotive into segments that, on top of my mind are basically rigid food packaging, medical and pharma packaging, beauty and personal care. Even robots we mentioned today, because sooner or later, injected plastic will replace metals and other materials. And we are already in that journey with excellent results so far. And let me also conclude by saying that this is a great example, a great outcome of the pure-play strategy because we are now applying into our products, unlocking full potential from the non-automotive product line, the coatings offered by Balzers and the surface treatment offered by Balzers, with an improvement of the performance, specifically cycle time or durability of our system, which has no equal.
Mm-hmm. Thank you so much. Let us go over to Katharina now. And Katharina, like the automotive sector, and this was mentioned by Michael at the outset, the luxury sector has seen some clouds of late. However, in luxury, there are definitely also silver linings, both metaphorically and literally. So tell us a little bit, if you would, about how you see the fundamentals evolving in luxury for Oerlikon and how the company is positioned to capture an upswing, a turnaround.
Thank you, Melinda. Certainly, and that is no secret, the luxury industry has undergone the deepest crisis in decades in the last few years. You can see that by the stock prices of the large maison. However, what is happening the same time is really helping our strategy to move more from the traditional electroplating to the PVD coatings in this sector. Consumers increasingly demand much higher quality, durability, and also sustainability of their articles. You also indicatively see that in the rise of the second-hand market, because traditionally manufactured goods have gained more appreciation. A second-hand luxury bag is actually more expensive than a new one, and that is our main outlet of product. Instead of the traditional brass and electroplating coating for the metal components and such a handbag, for instance, and you will see more in the booth later, you have with PVD a huge advantage.
You have a much more durable color. You have a harder surface, and also because of the stainless steel inside, the product is never oxidized. You have a lot of the traditional quality problems you would have with leather, which is a very aggressive material. Leather eats the parts, actually.
You will not have those problems anymore, and that is one of the key factors for our customers. The second element is that we have also invested in becoming a very integrated player. Oerlikon, through the diversification strategy, entered the luxury segment in 2021, and we have strengthened our position to become a fully integrated provider of metallic components in 2023 with the acquisition of Riri. Now we are the only player that is basically producing all metal components from zippers, buttons, to what we call fine parts, which is all the other attachments you would need in such a metal accessory. On top of that, we also invested into producing the parts. We are integrated in terms of the portfolio we offer to the customers, but also in terms of our vertical integration depth.
Let me ask you about a hint that we got from Michael earlier. I always thought orange was the new black, but from what I understand, you have got a new black. Can you link that up with what you are doing in using new technologies and advanced innovation in the luxury sector?
Absolutely. Same as my colleague here from HRS, we are benefiting a lot from being integrated into the R&D environment of Oerlikon. Brett has already mentioned there are revolutionary and evolutionary products. This is probably more of a revolutionary one. Unfortunately, not yet applied because not on the market yet. This was coated with a lacquer, the logo. If we had done this with our new black, which is basically much deeper and profound black than the lacquering, it probably would not come off after a couple of years' use. That is definitely something that is giving us an edge to replace traditional production methods. The other part where we have to innovate, we have to stay competitive with our 10 production sites in Europe, is also to invest into automation and robotization, where also the Oerlikon environment and ecosystem give us a leading edge. To give you one example.
We are now introducing, instead of a manual visual control, which traditionally is the case in the luxury business, an automated system that works with cameras to sort the good from the bad parts in lightning speed. That is definitely a big step forward in terms of productivity and also maintaining that strong position in Europe. We are definitely one of the go-to partners for the luxury business. Whenever they are testing something new or they have a new idea, they usually knock on our door.
Thank you so much. I was fascinated to hear that hint that this new black is not only applicable in luxury but also in sectors like military, which is not luxury, I guess. Although,
To a certain degree, yes. If they cannot see you coming, yeah.
True. Exactly. Thank you so much to all of you for this very, very interesting look at promising opportunities for components. And we move on now in the final segment of this panel to raw materials and equipment, a segment that clearly has global reach and is also a segment whose time has come at this moment of concern about raw materials and supply chain reliability. Which is why we've invited three decision-makers with regional and operational responsibility to share their perspectives on key sources of demand and growth in the business. It's a pleasure to welcome Wolfgang Schmitz. He is President of Americas, and he's also a member of Oerlikon's management board. Andrea Lai is President of Global Operations. And Jane, you know. She was with us earlier telling us about those robotic hands and joints, and she is now back in her capacity as Country President, China.
Welcome back to you. I think we'll start this time around with Andrea. These days when one hears mention of material supply chain challenges are one of the first things that comes to mind, and they've been mentioned, of course, several times here already today. Your materials and powders do rely to some degree on rare earths. Tell us how and to what extent supply chain disruption is impacting your operations and how you're responding, what you're doing to boost resilience or antifragility, as Brett called it.
Thank you, Melinda. It's the hot topic of the day for me. It's the hot topic of the last couple of years, to be honest, and that's why I'm sitting between U.S. and China here, right? Yes, we have been impacted. We have been impacted, going back beginning of last year. You all know all the export restriction that came out of China. I must admit that us as a team, we reacted really from the first second. How did we react? We react in multiple ways, right? There was a question this morning about prices. We face increase of prices of yttrium from $10/kg to $1,000/ kg within three weeks, right?
Us, as Oerlikon, in terms of competitive advantage, we started really first of all, with our manufacturing footprint, being present in the three different regions, and this was definitely one thing that for us has been vital and is vital today in terms of localization. Secondly, the most important aspect is the supply chain diversification. Okay? We really started from the first second to build sources outside of China, to keep the sources in China, because as of today, we can export material out of China because we have been lobbying with the U.S., with the authorities in the U.S., and also with the China's authorities. So we had credibility, both countries, because our target in terms of resilience is to supply everyone from everywhere. If someone wants to have China-free or non-China materials, can get it.
If someone wants to have the Chinese customer, Chinese material, they can get it. Last but not least, definitely is what Brett mentioned this morning, and it has been also thanks to Scoperta and thanks to his team develop rare earth-free materials and as well really offer this to our customers.
I am very glad you brought up that last point because I was really struck by the idea that you use that customer intimacy to help customers identify needs, new needs, maybe before they have even realized those needs themselves. Can you share a little bit more about that?
Well, that is actually what happened. Dirk mentioned this morning, we were a commodity. Now we are a strategic partner, right? Gas turbines sold out by 2035. Huge backlog. We need to be resilient. We are resilient now, right? Out of this crisis, we came up really strong. And the white unicorn now is the king of the hill. We need to stay king of the hill because the growth that is in front of us is really huge, and that is a must. By the way, our horn is well-coated. So we want to stay king of the hill.
Thank you very much. Let me go over to Wolfgang now. Your installed base in the Americas is one of the largest globally. Clearly, that generates strong revenue in the short term. What about the longer term, especially in a market that in some ways is quite volatile at present?
Thank you, Melinda. Let me introduce the answer with a summary of what we heard today. We have not only in Americas the strongest installed base. Basically, our equipment at our customers at different tiers is the largest in the industry, number one. Number two, we are in the most critical industry. High reliability required in aero, in medical, for obvious reason, but also energy, the gas turbines, but also semiconductor. Those industry have a very high requirement in terms of their qualification. Qualification processes take two to three years, can cost multimillion CHF to run through those processes. Number three, we heard that also when we sell an equipment, that is the installed base, that is the starting point of a customer relationship. I like to take the espresso example. If you have an espresso machine, you buy the capsules, that is similar with us.
Once the base is installed, we have after-sale services, we have upgrades to those equipments, we have spare parts, we have consumables, and obviously the coffee is the material that we sell into those markets. This explains why we are growing very strongly now, and you can see the order book in our first half year's numbers. They come a lot from the equipment piece. Why do we believe we can grow long-term? We are driving a change in the thermal spray market with our new equipment. I also invite you to go back into the next room. I cannot detail that here too much. Historically, if someone wanted to have, in those regulated industries, wanted to have a thermal spray equipment, it was customized. They wanted to have something very specific, engineering variation and so on.
We have built a toolbox and equipment, a platform architecture with some core elements that allows us to specific requirements of the customer, still answer with a standard solution. It is obvious that helps us reducing variation, in those equipments. That helps us with expansion of margin. Even at a location Switzerland, we can do low-cost sourcings of some of those modules. For me, Americas most important is I can now localize some of the equipment in the U.S. because we have a very strong order book, and our plan is next year to finalize 30% of the equipments we sell in the U.S., in the U.S. Tariffs, everything else we know, will have a less impact on us, so that helps us with resilience.
I would like to come back to that last point in a moment, but first I would like to ask about what you said, that this is not a one-off transaction business. These are essentially, I think it was referred to earlier, a recurring business. What is it exactly that creates that stickiness? We know what it is in Nespresso's case. You have to buy those capsules, but what is it in your case?
Yeah. The stickiness that we really have, it comes from the criticality of the components that our main partners produce. Oerlikon technologies embedded in the production system, not only at the OEM, but also at their tiers. The guns we use, the controllers we use, they have their qualification process, which is done with our technology. And finally, on the material side, this is all qualified and therefore Oerlikon becomes part of the reliability concept of those players, and they cannot change. They will not do pirates because they are going to lose the reliability concept, and therefore it is really sticking more even than with coffee, I would say.
Through the certification process, you essentially become an indispensable part of their supply chain. Just very briefly, beyond this bundled model, what is it that gives you confidence that materials and equipment will show significant growth also going forward in Americas?
Yeah. In our segment, the materials piece is even a larger component than the equipment, which is the start of the customer relationship, and I am even more bullish than Sumeet Gupta about the Asian market, about this materials market. We serve the markets that we have heard now the whole day, that they have very strong fundamental drivers, aero, IGT and so on. And those drivers are not We have some other industries in America that are consumer depending. Interest rates go up and then people buy less cars. Those are consistent long-term drivers. Secondly, we are expanding share at the moment, partially because we are able to better perform than our competitors on the materials side and have that supply chain resilience that customer want. But also because of the portfolio. We heard about 200 new offerings and materials that we bring to the market.
We have the strongest materials portfolio from all competitors. And the third element is that customer intimacy. You have seen those coating centers. We talked about oil and gas. We have in Houston, our oil and gas center does qualifications for the customer. They come to us with their powder, we qualify for them, and then you have an intimacy that really gains us market share. So if you have the coffee machine base, our installed equipment, it is the largest base. I am sure we are growing at the moment also this market share of the base. We have a very strong demand on those industries we have. We are having a very strong materials position. So over time, the growth rate in that segment is compounding. It is not linear. It will compound, because of the aftersales, the stickiness, and the whole system.
Thank you very much. Now jump over to Jane and come back to the growth markets in China, this time through the lens of materials and equipment. Wolfgang just took us through some of the localization efforts in Americas and the importance there of customer intimacy. How much does development of a local footprint in China figure into your strategy for tapping the strong growth you were talking about?
Thanks, Melinda. I think before I talk about localization, there is something important to understand about China. Chinese government, every five years, they publish a five-year business plan. The last one was recently published, the 16th five years business plan. In this plan, the government lay out hundreds of emerging applications, also several strategical industries. Within that, we see a couple of those we have already talked about this morning. There are semiconductor, there are energy, not only industrial gas turbines, also hydrogens. There are also commercial aviations. These are considered strategical industries because it bears certain national interest behind that. Take industrial turbines, for example. There is a lot of after-sales market. In the past, I would say the global players take a majority role, but recently, in the last four to five years, we see an emerging of local after-sales players emerging up.
These often also have some government backings, can be public company, private company. In the meetings, we just met with them in the last few months, all of them not only ask the cost side of the question, they are more focused on, is Oerlikon able to produce the powders and provide a secure supply chain? Are you flexible enough to cope if the policy changes? Because it will change. Let us be also realistic about that. Luckily, Oerlikon made also a strategic decision more than 10 years ago. We partner with a local company and set a footprint in China in 2014. With this, we actually also defended our market in tungsten carbide in China. We heard a lot about gas turbines and engines. But there are also thermal spray application in general industry, like papers and steels.
The local footprint give us not only cost effectiveness, but also give the confidence to our customers that we are close to them, we can manage with local supplies, with shorter lead time, and this gives us the resilience of the supply chain.
Let me ask you about how you make that localization decision, because I'm guessing, but I would suppose that you can't simply localize every single aspect, and you did mention that those five-year plans tend to shift focus from time to time. So what's the balance there? What are the factors that you weigh in deciding how and when to localize?
Absolutely. You heard we produce more than 1,000 material. We cannot produce everything at every site. So when it comes to making a decision whether we localize or not, we look at the local market, the market potential, especially economics. So in certain cases where, for example, China, we have strong demands in ceramics to support the energy sector. That's why we're expanding the capacities and capability locally to support and tap into not only the global OEM, but also the local OEMs. However, in certain areas that we think is still best to leverage our global footprint, where we have the scales and competence, and then still could provide the best actual security and also the cost side of things.
Thank you very much. You've all three given us a great overview of how Oerlikon defines the opportunities in a rapidly changing business and essentially profits from the challenges at this moment in time. So many thanks to all of you, and you may take your seats because we are now coming to the closing session of this year's Capital Markets Day. We spent the morning on strategy, on technology, on markets, growth industries, and numbers. We want to turn now to the foundation of every strong company that it ultimately rests on, namely its people and its long-term commitments. And to that end, it's a great pleasure to welcome Anna Ryzhova. She is Chief Human Resources Officer and Chief Sustainability Officer at Oerlikon. Did I say human rights? Yeah. Human resources. It's been a long morning.
She's now in her 10th year at Oerlikon, and the CSO position was just recently added to your responsibilities, which tells us something about how closely Oerlikon sees the link between human resources and long-term sustainability. So take it from here, Anna, the floor is yours.
Thanks to you very much, Melinda. Good afternoon on my side. As Melinda said, I would like to talk about people that drive the beautiful strategy and the beautiful projects we have been talking about first, then I will move to the sustainability. Let's look at the big picture first. Oops. Let's look at the big picture first. Oerlikon has a motivated and diverse team. We have more than 100 nationalities diversified across regions in line with our revenue distribution. That allows us to be local, as my colleagues explained, and at the same time, keep the global strategy together. Our sales force is extremely motivated, engaged to drive growth journey. Our engagement of the sales force is consistently above the market benchmark over quarters when we measure it.
We have about 10,000 people in Oerlikon, and 60% of them are aged between 30 and 50, which is a balanced age profile, which underpins the continuity of today, but also renewal for the future. We are able to retain those great people. Our voluntary turnover has halved since 2022. Again, in every country, we are below the benchmarks, which means we are doing better than our competitors. That is important. Our average tenure is a little bit less than 10 years, which speaks for the great experience being retained in the company, and at the same time, enough space for the new things, for the new developments. You see 75% of our jobs are filled internally. That means making a career inside is much more possible.
If you work hard, if you develop yourself, you have three chances out of four to get promoted into management or high-tech roles. Altogether, that is a balanced, motivated, and diverse team to drive our growth journey, and we are ready for that. Not only we want to have the team in place, this team also needs to have the skills, the skills of today and the skills of the future, and I would like to bring three examples to your attention. The first one is digitalization and AI. Marco talked about amazing productivity gains we achieved, for example, in engineering in Oerlikon HRSflow. Marco was talking about hours, I take times. Two times the productivity was improved. How did we get there? On the skill side, only three elements. The first one is intrinsic motivation. The team itself has developed a vision.
They said, "We want to be 100% digital." No change management, no convincing, no pressure. They are in the driver's seat. The second story, the competence of transforming processes, automating, and improvement was built inside that engineering tech team. They themselves transformed each other. The last but not least, Oerlikon investment in digital hub paid back because the digital hub experts have been able to develop that mathematical algorithm which stood in the middle of the optimization and the processes. That is how we deal with digitalization and AI, and we do it across the company. The second important area is research and development, Brett, teams, and around. There, we totally talk about collaboration and endless competition and exchange with universities and peers because it is impossible to innovate and develop in the black box.
Here, I am proud to say that we are getting every year some nice achievements, and one of them is a Houska Prize, which was achieved this year for the high-temperature coatings, and we are very proud of the team. Last but not least is the talent, the leadership to lead the company. This year, we have started our fourth generation of Horizons program. It is a leadership program which is run all over regions to develop the future generation of leaders, somebody who will step in our shoes some years later. It is not only about the right education and the right exchange. This is also they are challengers. They talk to us, they challenge us, they propose projects. They talk about some ideas, and we listen to them. It is an amazing exchange of experience and, I would say, ideas between generations, and we value that a lot.
Altogether, digital innovation, award-winning research, and future-ready talent is the skills, and we have the right skills to shape the future. My last step on the people side is about incentives, because having a team is great. Having the team which is skilled and develop itself is amazing, but how does it connect to the strategy? You see the small wheels on the picture. You have heard from Michael, Dirk, and Marco about the goals, 2030, marginality, markets, achievements. What we have done on our side, we have also optimized the organization first. Since we have divested Barmag, we have reduced, we have de-layered a lot of roles. Our top management count have reduced from 78 to 37, half. That made us leaner, that made us faster, and that also achieved speed together with the costs.
Another dimension, we wanted our incentives to be meaningful or to make sense for the people. That is why we always watch at the pay mix. So what is the share of variable for every employee? The higher the level is, the higher the share of variable. The last but not least, we have been reinforcing the performance culture. That means we have thought about the strategy and connected the goals of the long-term incentive and the short-term incentive exactly to the same parameters. So what you will see in 2027 is the higher weight of return capital. You will see the net sales growth coming in in the long-term incentive, and also in the short-term incentive, you will see higher weight of all the financials, which my colleagues have been talking about, cash flow, growth, and profit.
Altogether, from strategy, through the right organization, through incentives, to shareholder value increase. That is how we see and connect the wheels together. That concludes my part on the people side, and I would like to move and say a few words about sustainability. When I took over the topic, I asked a question to my predecessor, how sustainable is Oerlikon? When you lean back and give yourself a pause and you think about it, the answer is obvious. We are absolutely sustainable because everything that we do contributes to the efficiency of fuel, to the reduction of efforts, to less electricity consumption, or to the lower use of metals. These are the six pictures. I will talk about four of these and ready to get other questions later on. The first one is air turbines. Michael mentioned that. That was in the video. 5% increase of efficiency.
It comes through our coatings. Abradable, bond, and top coats are applied in different stages of the turbine engine. What does it mean? If you take the forecast of 2026 flights, we will save about 12 million metric tons this year because of our coatings. This is 30% of the Swiss CO2 emissions. That is a number. Another example would be from tools. Our coatings give us from 20 to 170 times lifetime extension, depending on the coating. Again, if you take all the tools coated by Oerlikon worldwide, you multiply it with the savings, it is 16 million tons or 40% of the Swiss emissions, which we save just because of our main activities and our main products. My favorite fascinating example comes from the new or relatively new markets additive. If you think about the space, a lot of fuel consumption, energy consumption.
We now produce space antennas, and because of additive, we managed to move from 350 components to only five. We managed to move from the weight of 170 kg to only 40 kg. This is a substantial improvement and substantial reduction. Then imagine how much less fuel a rocket will need to fly, and this is Oerlikon. Last but not least, in luxury, because of replacement of electroplating with PVD, we are 4x more CO2 efficient because there is no chemical waste, there is no water. We only use a little bit of gases, and we use much less metal. To conclude of this, Oerlikon has a high track record of improving sustainability for our customers just because of what we do. I would like to highlight three of our sustainability commitments, which you see in our annual report. First, Scope 1 and Scope 2 reduction.
We are targeting a 42% decrease compared to our base year, and we have proven in 2025 we have already reduced by 17%. We also focus on waste. We increase treatment and recovery of the liquid waste. We improve waste aggregation and recycling, and we also try to reduce the waste generation in all our operations. The target is a 50% reduction at 2030 compared to our baseline. Of course, people, total accident frequency rate. Our motto is zero harm. We would like people to come healthy and leave healthy and be happy afterwards. With this, we track the total accident frequency rate, and our target in 2030 is below 0.5. We do it by investing in processes and training, a lot of awareness campaign, but also in walking the talk ourself. We measure ourself.
We are tracked by a certain number of ratings, and I would like to highlight, of course, the MSCI. We are AAA. We are medium risk at Sustainalytics. With EcoVadis, we are 70, and we intend to increase this year because of our commitment to SBTi and because we are considering to commit in addition to UN Global Compact. With CDP, we have improved from C to B in 2025 on climate and water security. With this, I want to say it is not an easy journey. These are hard targets, but I am very sure we will achieve it through hard work. Thank you very much.
Thank you, Anna. Thanks very much. We are almost ready to take more questions from you, dear audience. But first, let's go to Michael Süss for some closing thoughts, and then we'll open the floor once again for your questions. Michael, over to you.
Thanks to all presenters and thanks to your time, to the audience to be with us today to share a great story, which is not a story, which is reality. That's why it's so easy to tell it about. You don't have to think about something and then to make it artificial. It's matter of fact that this is what we talk about is happening. If you summarize 10 industries, global footprint, being local, having the people seen, which are driving the show, it's not one person. It's not two person. As an old friend of mine, Klaus Kleinfeld, once mentioned, "Nobody's perfect, but a team can be." I think this team, with all its diversity, with its set-up, it's a great team, and it's a pleasure for me to be their chair and to give them a little bit sometimes direction, and then they push me sometimes.
That's a good in and out. If you see all that, what you have seen, and you represent investment forces, I can only encourage you, engage you more with us and become really friend of Oerlikon, become part of the Oerlikon family. If you're already part of the Oerlikon family, go deeper into that. You will not regret. Thank you so much.
Thank you, Michael. Let's now open once more for questions. I'd like to ask the EC team to please join me one more time up here in front, and we will now take your questions. Please raise your hand if you have a question, and do tell us your name and your media outlet. Are you thinking about lunch? Lunch will be served, I promise. But first, we want to hear your questions.
Okay, so good. We have answered everything.
Maybe a question from my side, [inaudible] , UBS. I was wondering, you said about all the potentials you have in the three, let's say, divisions, and I was wondering, what are the synergies between the three divisions, especially thinking about materials? Does materials serve also coating services, components? Is there potential to get here synergies, or is it mainly a thick film and use the equipment or a synergy with the equipment you are selling in the same division? The same question is a little bit on the equipment side. Are you selling also internally, or are you deploying internally thick film equipment into the coating service centers or using it in the component sides to see this, let's say, would be
My view showing that you have one-hand solutions for all the three divisions. Thanks.
The big change came in 2021, which we executed then in 2022, but 2021 was the time where we started that, was the regionalization. As you know, the P&L sits in the regions, and in the old days before 2021, we had Balzers and Metco even as business units. The big difference is now, yes, you have the intimacy with all customers, and don't forget about, we have a lot of strategic accounts and we have a lot of global accounts. The aerospace industry, for example, it's five players on the engine side. It's four or five players on the frame side. If you take the two players, maybe three, if you take Embraer including then on commercial, and another three on the military. For them, they're working global. We are going with our global, with our regional setup, we're going with all the toolbox.
We go there with additive offer, we go there with PVD offer, we go there with our equipment and materials. Equipment, the PVD equipment we typically sell to ourself because that is our service model. We only sell to customers if they are big OEMs, which will not be in touch in competition with us. In the past, not always successfully. There are some years ago, 10 years ago, even longer, we sold too much equipment even to potential competitors, which turned then into competition, but more on the thermal spray side, like TOCALO Co.,Ltd. in Japan. They are working with our equipment and our materials, but on thermal spray and serving Tokyo Electron. That is all our equipment, all our stuff, but we do not do the service business because they established themselves. In the PVD, typically we do our service center.
In the thermal spray world, the customers wants to have it on their own. It is an integrated part in the business. The synergies is this customer approach. The synergy is that they come with one voice, sometimes two, three different people. If you take a Raytheon or a Northrop Grumman, they have different divisions, but they interact, and they get one answer from our company, from the regional setup. That is the big synergy part. What was the second part of the question? I missed it. Can you repeat, or it is answered? There was synergies and there was something else.
On the equipment side.
Equipment, we only sell thermal spray and some PVD.
Yeah.
Main PVD goes with us. And actually, we have a pretty good PVD fleet, that's why we have reduced the new build on PVD significantly, mainly on diamond and carbon and some stuff which we don't have enough in the fleet. The rest where we optimize simply the fleet by utilizing and seeing where the better markets are.
Okay. Maybe then add on question on India. You opened a major service coating center there. A little bit to understand how do you do it. Do you have already demand-
Yeah, quickly.
from clients in that region, or is it opening and then going and searching for-
No.
Yeah.
Sumeet, can you switch on this micro or?
There it is. It is there.
Okay. As Sumeet already said, in India, we already have a huge footprint, so we are already the largest provider of PVD. Quite often what it works, we have in Oerlikon established a concept which is called strategic accounts. Whenever we have something in one region, we also transfer that. We see currently in India that more and more is moving towards India. Actually, I have been together with Sumeet, at Hyderabad, and we visited one of the big engine OEMs. As Sumeet said, they are building their biggest MRO facility. Not only that, we have also been to a customer for electric scooters. Also, they apply our coatings in their electric scooter. Also here in India, we also have the big advantage that automotive is still growing. India is still a booming automotive industry.
Here actually, we see semiconductors moving to India, we see aerospace is moving to India. Auto is still growing nicely, and the general industries are growing as well. I would say I can only share the confidence my colleague Sumeet has brought over or transmitted. I am as confident as he is. Yeah.
But maybe on the way how we do it is not decades ago. I am not saying years ago, maybe you went to service center to be close with the customer. This is not the major item anymore. The major item is, and by the way, on Monday we had an EC meeting and we just passed a service center in China on request of Jane Cao. If the size, customer volume, somehow guaranteed volume already, plus a certain security demand volume is big enough for a service center, which fits strategically in this real versus ideal landscape. There is an ideal landscape will even change year over years because ideal will change. And there is a real landscape. And our total game is to get closest to ideal without making nonsense. So not doing something that it only looks nice, but it has no payback.
Wherever we can do, we close strategic windows, we put something where it makes sense. We had two or three sites, very small, somewhere where we thought it will develop proper, then we shut them down. You always be in line with your rental agreements of the lease, or if it is your own land, to have then an idea what you make with this land. So it is not that someone said, "Oh, I have dreamt pretty nice, and my dream has shown me I need a service center in Kamchatka." No, that is not the case. There is a real process behind. It works very well, and it is highly disciplined. And it is Darwinistic. If there is a certain amount of money and you have five requests and only money for three, the three best will get it.
And maybe if I can add on your first question, what is the common denominator? It is really material science. And again, I think I pull this because I think it explains this very well. So we get the outer bands, then it is a very tough material, so a special milling process. Then you cut in with a water jet, you cut in the holes. Very unique process. You need to understand the materials. Then you get the wanes, you assemble them. You first do a small ball pin soldering, then you brace it. So we could reduce, for example, the brace cycles from three to one, which reduces cycle time and gets uptime. And all this is about material science, and there we have a lot of experts getting all this together.
Thank you. He just decided to take the powder home with him.
That's [inaudible] powder. That's great.
I see you wanted to ask one more. Can you keep it super short because we do have a couple more in the audience?
Yes, okay. Just a short one. De-industrialization Europe, how of a problem is it? I see that you are now compensating with some of the new markets, but is there any need to, let's say, restructure the footprint of the service center in Europe you have, or do we have to expect any major restructuring activity in the coming years due to this European de-industrialization topic?
I would say for the future, we do not expect, but we had some, and you know that, especially in France and Germany, where we did some stuff that cost money. But when we have seen there is a need, we did it, without how that looks like. But it's done. If you talk in general about Europe, I think we're very well-positioned. If the European Union doesn't stop the over-bureaucracy, we have an issue. Not we as Oerlikon, because for that, we are global enough, but we as Europe have an issue, and then we here in Switzerland have an issue because it will not work without Europe. This is a total different political scheme.
If we do not stop this over-bureaucracy, if we do not stop this over rescuing the world, if we do not stop all these legacies where we have to deal with, then business goes where it is easier, and then we will not give up positions, but we will grow more in other areas as we do somehow already. Money is shy, and money goes there where it finds the best environment.
Thank you. I had two more over here.
Andreas von Arx from Zürcher Kantonalbank. Maybe since we come towards the end, it is time to tackle big questions here. One for the Chairman. You said you do not look back, but you do have an ambitious above 10% ROCE target, which, since you have arrived at Oerlikon, you have achieved in one single year of more than a decade. I guess what most investors think about is why now will it work when it has not in the years before? What is different today, and why is that 2030 target achievable? Thank you.
I try to make it in a short answer because, as you rightly mentioned, until 2018, the company developed very well. There was a COVID time. There was a lot of cleanup. There was a conglomerate. There was a diversification, and a lot of things took money and took effort, and that is done, and that is the difference. Simply, the company of today is not the company which was. That is why you could look back, and you can look back, but then you judge on something which is not existing anymore because it was a company with four different businesses, not regionalized, struggling between a Metco and a Balzers, which have been two silos, which you have to clean up. We cleaned it up. We made all the effort necessary.
We brought the right people in, and that's why I'm looking forward, very encouraged and positive that with all this homework done, the outlook is a strong one. I think we will prove it, and the ones who join us will see that this approval is nice for them, and the ones who are not joining us will see that they missed an opportunity.
Thank you. Here, I had one more.
Thank you again. I'll try and make it very brief. Just a follow-up on the semiconductor. You mentioned around 1 billion market potential. Where do you see your market penetration today, and where would you like to see it five years out? Or if that's easier to say, what is the revenue share today, and where would you like to see in five years?
You want to
And maybe a similar question around energy, because there you have 5% revenue share today. Where should this ideally go with all this IGT growth? Should this go to 10%?
I start with the semiconductor market, and you can take the energy. In semiconductor, basically today our biggest technologies are PVD coating and also additive, but we are extending also in thermal spray. We have signed contracts also in Metco Coating Service or in thermal spray extending into that area, and this enables us a much bigger market. The thermal spray market within the semiconductor equipment manufacturing is the biggest one, and that is the market we have just entered. And we are extending also the others, additive and coating. They are growing nicely, but as said, thermal spray is a completely new entry.
We talk follow-up to this?
Yeah. Broad revenue estimate for semicon.
As we always say, for us, a really good business is for Michael.
We are disclosing not numbers in the future in that deepness, I would say. But it's about Marco to give us.
You want to say something regarding that?
No, we do not guide on revenue on that level, but it is already a significant part of our business. You see the share of general industries, and the growth will, in that part of the business, significantly come from semicon.
On energy, if you say 5%, I think you think about the share 5% of our revenue into gas turbines or how it is.
No, 5% of total revenue.
Yeah.
From 25 numbers.
Yeah. That will go up if they will achieve 10%, depends a little bit how the other business will do.
Oh.
You simply can calculate what is going on, and we will grow significantly materials and a huge part of that comes out industrial gas turbines. I would say if you take a number above 5 and below 10, you will be right.
Good, thank you. Then maybe just a bit of a closing questions. Can you give us some thought about the biggest risks that you would see to your Mission 2030 and why you think those risks are controllable or will not stop you at least to reach your targets?
As the
In terms of end markets or I
As the world is already very, how to say, shaky, I would say this is included in our strategy. If there is not a big war or something, because this is what we cannot calculate. If there would be, as some people are predicting, I wouldn't buy that, but if there would be a significant conflict between NATO and Russia, that could have an impact. But that would stimulate, and maybe that sounds cynic then, but that would stimulate other areas where we are in as well.
It would shift within the industries, but it would most potentially not disappear.
But that would be a potential I do not like to harvest.
I think if I may add, what we were showing today is that how the portfolio of Oerlikon is set up today in terms of industry exposure, in terms of business model balance, and also in terms of the levers in the bridge to achieve higher profitabilities on the very operational level, on the overhead level. It is a well-diversified and balanced mix of measures and businesses. I think this is key for resilience as we highlighted.
Here I would also like to add, because I also had it in my speech on the resilience, not only the 10 industries, but also when I look back the 18 months, what has happened the last 18 months, it is tariffs, it is wars, it is material shortages, and we were always capable of dealing with that. I think that gives me confidence in the team that there are some unexpected things in the future. This will happen for sure, but it is how we deal with these risks and how fast we react on it.
Thank you so much.
Thank you. We could take one more short one. Anybody? Then I will just say thank you very much to everyone in the audience for your attention and for your questions. Thank you very much to all of our speakers and to everybody in the organizational team who helped put this event together. And dear audience, I hope that you will take with you some of the energy and enthusiasm that we have heard here today in this very informative and also very thought-provoking event from a company that has a long history and a new identity, that has global reach and local roots. I think certainly you have shared a lot of your enthusiasm with us, and hope everybody will take that with them as they go off into this sunny day after we serve you lunch and you visit our booths.
Before
Please don't miss that.
you leave, a big applause to Melinda Crane because you contributed a lot for this top performance of the people here, and a big applause to the team around here, to all these people engaged that this could work today that smooth and soft as it worked. Thanks a lot for your support.