Gooed afternoon, ladies and gentlemen, and welcome to Oerlikon's virtual Annual and Investor Conference on the full year results 2020. It is my pleasure to welcome you all on a global basis via our webcast. Before we begin, I would like to draw your attention to the Safe Harbor statement on page 24 of the Oerlikon presentation. This conference call includes forward-looking statements. These statements are based on the company's current expectations and certain assumptions, and are therefore subject to certain risks and uncertainties. Earlier today, you've probably seen we announced our full year results, we published our annual report, and we published Oerlikon's first sustainability report. All including associated documents are available on our website for download at oerlikon.com. Quick look at today's agenda.
Our CEO, Dr. Roland Fischer, will provide you with a high-level overview on the market environment and the perspective on how the group performed during 2020. As Oerlikon published its first sustainability report today, Dr. Fischer will also take the time to share with you Oerlikon sustainability credentials and commitment. Following that, our CFO, Philipp Müller, will provide an insight into our financial performance, as well as the outlook going forward. To remind you, today's presentation will be broadcasted and taped. After the prepared remarks of the two gentlemen, we will have a Q&A session. Following that, we will have the replay available on the website later tomorrow. Having said that, it is my pleasure now to hand over to our CEO, Dr. Roland Fischer. Thank you.
Thank you, Kerstin, and a warm welcome from my side as well. Let me start by providing my overview of our full year 2020 results. Oerlikon performed resiliently during our 2020 that was characterized by the impact of the COVID-19 pandemic. We acted fast to protect our employees and to secure our business. I'm proud of how we have successfully weathered the global impacts. The robust performance of our business is testament to the value proposition we bring to our customers, the strength of our business models, and our market diversity at scale. Our Surface Solutions division was heavily impacted by the pandemic from March onwards. For the full year, sales were down 15% on a constant currency basis. We started the year already with headwinds in automotive and signs of stress in aerospace.
In this climate, we had already last year set out to address our structural cost base. When the pandemic hit, we extended and accelerated our cost-out programs, in addition to tightening controls on discretionary spending. We have made strong progress against our goals. The structural program was 90% complete by the year-end, and we expect to be fully complete during the first half of 2021. The results are already now clearly visible in the bottom line. The fourth quarter was Surface Solutions strongest quarter of the year. The anticipated recovery in automotive and tooling continued. We executed well to ensure all year-end equipment shipments were delivered to our customers as planned. The aerospace sector continues to lag behind as lower flying hours and reduced production rates of new aircraft continue. Fourth quarter sales and Surface Solutions were 6% below 2019 on a constant currency basis.
Our Manmade Fibers division was impacted earlier by the COVID-19 pandemic. In China, there were initial production disruptions and administrative slowdowns causing delays in booking orders and recognizing revenues. The underlying order book remained robust without any major cancellations. The team executed strongly over the year and was able to deliver sales well over CHF 1 billion. The filament business delivered the expected production outcome and set new records for monthly production of winders. The service and spare part business was impacted by restrictions on travel. Outside the polyester filament business, we have been diversifying and growing significantly over the past few years. This includes the precision flow control business that lies at the heart of our ability to process molten polymers for extrusion and polycondensation processes. We expanded our capability in 2020 with significant expansionary investment in the polymer pump business, for instance.
As previously highlighted, we had a record year with nonwoven activities. This is another growth area where we diversify our offerings beyond just the filament space. We booked CHF 120 million of nonwoven orders, and sales were up 224%. The unexpected arrival of the COVID-19 pandemic accelerated demand for melt-blown lines, which are used for facial masks materials. This acted as a further catalyst for our anticipated growth in wet wipes and other sanitary products. Now let's move on and talk about another important topic. I'm extremely delighted to announce that Oerlikon has published its first sustainability report today. Sustainability has been at the heart of Oerlikon's customers' value proposition and culture for decades. Now we are publicly commit our responsibility to making the world a better place. Sustainability is an integral part of Oerlikon's strategy.
When we think about it, the vast majority of our products and solutions do have one goal. We help our customers to do more with less, using less fuel, facilitating future mobility, extending the lifetime of tools, and saving energy in processing polymers and beyond. Our sustainability report further serves as an expression of our public commitment to transparency and documentation of our process in sustainability. Our targets cover environmental and social aspects of material importance to our business and stakeholders. We are now able to demonstrate that our operations are intrinsically linked with our financial performance. In summary, we have delivered resilient profitability and strong cash generation during this challenging year. Combined with the continued underlying financial strength of our company, the board of directors is in a position to propose a stable dividend of CHF 0.35 per share.
This is a continuation of our track record of paying a stable or progressive dividend since 2011. Let me give you some more details on our financial performance in 2020. The year 2020 saw the COVID-19 pandemic impacting the modern globalized economy in an unprecedented way. All of our markets were impacted, but in different ways. At a group level, Oerlikon demonstrated resilience during 2020. Group orders were down 9.1% compared to prior year on a constant currency basis. In light of the challenging trading environment, this is a good outcome. Group sales declined 8.6% on a constant currency basis. This reflected strong sales performance in Manmade Fibers, the strong order book and the order bookings positioning Manmade Fibers well, and it overcame the operational challenges to be able to recognize revenues.
The Manmade Fibers team additionally responded quickly to support customers in the nonwoven area who urgently needed equipment to manufacture melt-blown fibers for facial masks. This was the third year in a row Manmade Fibers has recognized sales above CHF 1 billion. Surface Solutions, by nature of its markets, was impacted more heavily by the pandemic. Sales were down 15.2% on a constant currency basis. The final quarter demonstrated the resilience of the division as it met customer demand and increased sales by 17.6% over the prior quarter. As a company domiciled in Switzerland, with global operations, Oerlikon experienced a significant negative impact on sales and orders due to the strengthening of our reporting currency.
Our actions on structural costs in Surface Solutions, combined with high utilization levels in Manmade Fibers, delivered a high operational EBITDA margin of 17.7% for the fourth quarter, some 400 basis points higher than prior year. On a full-year basis, we are only 90 basis points lower with 12.9% lower sales. The trajectory of travel towards 2021 is a very positive one. Overall, we look back to 2020 as a year where we used the crisis to position our company for the future. Our businesses are strong and continue to have leading technology, providing that the COVID-19 situation will become more controlled. We also have a more positive outlook on the markets. Let me give you some more details on the next page. For full-year 2021, in Manmade Fibers, we expect a stable development in the filament business. Temporary fiber production interruptions did not impact long-term structural capacity additions.
Polyester filament yarn capacity is expected to grow at net 7% per annum from 2020 to 2022. This is driven by the large consolidators in China and a re-acceleration of expected polyester fiber demand of 4% to 5% post 2020. The nonwoven business continues to enjoy a positive market development. It has been a real breakthrough year for our nonwoven business. The special filament business, including industrial and carpet yarns, peaked in 2018 and has been suppressed through 2019 and 2020. We are now seeing signs of recovery in these markets in Turkey and North America, driven by construction. For Surface Solutions on a forward-looking basis, we expect generally to see a positive development across our end markets. For the first quarter of 2021, though, there will be an impact from the usual seasonal impact of Chinese New Year on our Asian business.
Additionally, short-term temporary supply chain impacts on the automotive ramp-up are expected from the semiconductor shortage. We are comparing against a strong first quarter year-on-year for aerospace. We will continue to see a ramp-up in our short-cycle business, while the longer-cycle business with more capital equipment will see more of an impact later in the year. Automotive recovered strongly in the second half of 2020. We anticipate continued positive momentum. Pent-up demand accelerated by a shift in consumer spending patterns encouraged production to ramp up. Increased forecasts were released from industry market intelligence providers such as IHS. We see a small first-quarter production interruption from the global semiconductor shortage. We anticipate further market growth for 2021 and beyond. In tooling, we saw a continuation of the sequential market improvement in the second half of 2020.
Automotive is driving both cutting tools and forming tools used to create high-grade and function polymer parts, amongst others. Such polymer parts are lightweight and are essential for accelerating the shift to future mobility and reducing energy consumption regardless of the drivetrain. We see the recovery continuing and driving growth. General Industries, including our energy business, continued the more modest pattern of recovery. We see this market more closely linked to GDP growth and industrial production and see a certain market growth in 2021. We expect to see market growth beyond 2021, and we are well-positioned to outperform these markets. Continued restrictions on passenger numbers heavily impacted on commercial airlines, which has had a knock-on impact on the aerospace market in total. While we expect a certain market growth in 2021, the low base means it will take a long time to return to 2019 levels.
In the longer term and post-COVID-19 pandemic world, we see an attractive and structurally growing market. Overall, we expect a positive market environment for the next couple of years. Some of the growth rates will be off low bases, like in aerospace, but we expect a multi-year growth trajectory. Against this market evaluation and backdrop, I'm especially happy to provide you more details today on our first ESG report, which we made available this morning. With the publication of this report, Oerlikon is now able to articulate our sustainability values to provide transparency over our organization and to make a commitment to sustainability. We have always seen sustainability and innovation as interdependent, and our core sustainability values are rooted deep in our history, traditions, culture, and products.
As we move forward, we are increasing our efforts and are making a commitment that 100% of R&D investment in new products must cover ESG criteria. We also believe that we must deliver on sustainability within our own house. We are setting ambitious targets to make our operations climate neutral, to obtain our energy from renewable resources, and to cut our share of disposed waste by 50%. This will be enabled and accelerated by the extended rollout of our energy management systems across all of our sites. We believe in ensuring zero harm to people and to have robust health and safety programs that are deeply embedded in our business and linked to management remuneration are important. We are formalizing ambitions to improve our diversity and to ensure our cultural values are shared globally across our organization.
We also are working to improve our procurement practices with a keen focus on environmental and social factors in how we manage our supply chain. As our sustainability reporting matures, we expect to share with you strong progress against our objectives and greater transparency. From our assessment of material focus areas, our conviction is that we have the biggest impact from our products and services, as we show you now on the next chart. We, OC Oerlikon, make a real and meaningful difference. While industrial technology companies like ourselves contribute around only 1% of global carbon emissions, the use of industrial technology products and services influence the sustainability of over 70% of other sectors. This is an exponential factor over our own operations. We help key industries to become more efficient and accelerate the transition to a green economy through our innovations.
We have, since decades, delivered solutions, products, and services to our customers in the form of functional operational benefits. We are able to increase efficiency in aero engines, to extend tool lifetimes, to reduce fuel consumption in automotive, both through the engine and through polymer car parts, and last, but certainly not least, through significant efficiency savings in polymer processing systems. What we are now articulating is how these functional benefits help our customers make a difference in sustainability. First, tool lifetime extension contributes to the circular economy by wasting less material, reconditioning, and energy savings. Second, reducing the energy requirement in automotive, either by enabling high-quality, lightweight plastic parts or by engine efficiency, makes substantial reduction in emissions. Third, our leading technologies in polymer processing enable significant energy reduction in materials that you might end up wearing.
Each garment that is made possible by our latest technology will have required less materials and less energy. Fourth, aero engines efficiency can be translated into reduced fuel consumption, leading to a reduction in carbon dioxide emissions. In aerospace, we are a little bit further ahead in how we quantify the sustainability benefits. We are able to estimate with a high degree of confidence that our coatings contribute to a reduction in carbon emissions that is approximately 160 times the entire emissions of Oerlikon's operations as a combined group. This relates to our operational data on Scope 1 and Scope 2 emissions, which was externally assured for our sustainability report. We can't yet give you a number for the total contribution Oerlikon is making, but we know it is an exponential factor of our own operational footprint.
As I said earlier, we are overtly focusing our R&D spending on products and services that contribute to sustainability. We are incorporating the way we think about our sustainability benefits into our customer value proposition for the functional and operational benefits our solutions, products, and services bring. This is why I believe sustainability innovation is called Oerlikon. Now, following the commercial market and ESG overview, let me hand over to Philipp to present the group's financials. Philipp, it's yours.
Thank you, Roland, and good afternoon. I will start with the divisional results, give you an overview of our cash performance in 2020, and then provide you with our outlook. In Surface Solutions, fourth quarter sales were CHF 330 million. Sales declined 10.7% year-over-year on a reported basis and 5.8% at constant FX rates. Similar to the first three quarters, we saw negative impacts on FX across our major currency baskets as our reporting currency, the Swiss franc, strengthened. Sequentially, sales grew 17.6% versus the third quarter as markets showed further recovery. For the full year, orders were below sales, as our longer cycle businesses, such as equipment, are expected to recover during 2021. In 2020, our sales of CHF 1.2 billion were supported by existing backlog, which we had at the beginning of the year.
This significantly contributed to our sales decrease being 15.2% at constant FX rates, while our end markets were down substantially more. Operational EBITDA in the fourth quarter was CHF 76 million, or 22.9% of sales. The impact of our cost-out program is now clearly visible in the division profitability. The fourth quarter margin rate was exceptionally high as we benefited from the structural cost benefits, short-term cost actions, as well as strong mix in our fourth-quarter shipments. We expect this margin rate to normalize in 2021, and I will give you more details on the outlook slide. For the full year, Surface Solutions generated 14.8% operational EBITDA. You can clearly see the impact of our cost-out actions in this result. Overall, in 2020, we reduced operating expenses in the Surface Solutions division by CHF 215 million compared to 2019. This represents an operational gearing of 74%.
Next, on Manmade Fibers. Manmade Fibers continued to deliver solid order intake with CHF 326 million during the fourth quarter. For 2020, this reflects order intake of CHF 1.1 billion and positions us well for 2021 and 2022. The division's book-to-bill ratio was above one for the fifth consecutive year. Fourth-quarter sales of CHF 296 million were up 11% year-on-year. The Manmade Fibers team executed extremely well in challenging conditions and was able to catch up on the operational delays caused by the shutdowns in the first half of the year. For 2020, Manmade sales were CHF 1.1 billion, which, on a constant currency basis, were slightly up versus the prior year. This result was achieved despite not being able to deliver as much service work and spare parts due to the pandemic.
Nonwoven booked over CHF 120 million of orders and over CHF 95 million of sales in 2020. It demonstrates the excellent growth potential for Manmade Fibers outside of filament. fourth quarter operational EBITDA was CHF 47 million, or a 15.7% margin. This was driven by strong execution and good cost absorption on the higher sales levels. Full-year operational EBITDA was 14.2%. Included in this result is the positive effect from the revaluation of our Teknoweb acquisition, as well as a large negative effect from a customer penalty we paid in 2020. The net effect of these two was positive and contributed approximately 80 basis points to our result of 14.2%. On cash flows. Starting at reported EBITDA of CHF 288 million, which includes one-off restructuring costs, impairment, and discontinued activities, we generated CHF 108 million of cash from net working capital.
As we implemented tight cost and cash controls, we saw strong cash performance across the board. Inventory, payables, and accounts receivable were all sources of cash. The largest contributor was from cash advances received, primarily in our Manmade Fibers business. We generated CHF 72 million of cash from these advances. This is also a strong forward-looking indicator for the order pipeline in the business. Taxes paid, primarily relating to prior periods, amounted to CHF 63 million, and other operating cash flows were negative CHF 23 million. Within our cash and cost programs, we significantly prioritized CapEx spend. At a group level, the ratio of CapEx to depreciation and amortization was below one. We generated CHF 201 million of free cash flow before financing activities, a robust result in a difficult operating environment.
With this overall strong cash performance, we end the year with a positive total net cash balance of CHF 59 million. With that, let me continue with some more details on our commitment to reach group EBITDA margins of 16%-18%. As you know, we made this commitment before the COVID-19 pandemic, and we reiterated our target throughout the difficult year 2020, where Surface Solutions sales declined around 20%. Despite the negative impact of the pandemic, we have made significant operational progress in expanding margins in Manmade Fibers and on addressing our structural cost base in Surface Solutions. We are roughly 90% complete with our cost measures at the end of 2020, and we expect to see additional positive impacts in 2021. As we have previously explained, the program is focused on structural cost and SG&A and fixed fulfillment.
Apart from some exceptions in aerospace, we did not significantly reduce operational capacity, and we retained the capability to have Surface Solutions as a CHF 1.5 billion-CHF 1.6 billion business with our new structural cost base. We expect to be able to generate higher margins than our 2019 baseline in 2021, even though we expect lower sales than 2019. Let me walk you through the different items. Starting with the 15.1% operational EBITDA margin in 2019. In 2020, we saw a significant decline in Surface Solutions sales, which resulted in reduced ability to absorb costs and therefore lower margins. Included in this first bucket are the more short-term and discretionary cost measures, which provided a certain offset. In other words, had we not taken these temporary measures, the COVID-19 impact would have been more negative.
Secondly, in Manmade Fibers, we expect to get closer to our medium-term target of mid-teens operational EBITDA margin. In 2019, we were at 13%. For 2021, we expect around 14%. Thirdly, our structural cost programs helped us offset more of the COVID-19 impacts. Slightly more than half of the positive effects were already visible in our 2020 results. We're expecting additional positive impacts from the lower cost run rate in 2021. Lastly, as markets recover and revenues increase, we expect to see improved operational leverage. This impact includes the partial reversal of the temporary or short-term cost measures taken during the pandemic. Overall, this positions us well for the improved market environment Roland was describing. We expect to generate strong operational leverage on this as we continue to reduce our SG&A intensity. With this backdrop, let me continue with our outlook for 2021.
Naturally, I have to frame our outlook with the current COVID-19 environment, which continues to include a high degree of macroeconomic uncertainty. Roland provided you with our market outlook, which has the underlying assumption that the economic environment in 2021 steadily improves. Our assumption is that industrial production will gain steam during 2021 as vaccination programs are rolled out and travel restrictions are slowly released. Within this framework, we expect sales to be between CHF 2.35 billion and CHF 2.45 billion, and we expect sales growth between 4% and 9% at the group level. This is driven by structural growth in Manmade Fibers outside of filament and by the market recovery in Surface Solutions. In Surface Solutions, we see growth in the automotive and tooling end markets. General industry and energy will see a recovery as well as the global economy picks up.
We also expect growth in aerospace in the second half of 2021, it's off a very low base. In general, we expect sequential improvements as we move through the year. The first quarter will still be marked by impacts from the COVID-19 situation. This includes certain short-term supply chain bottlenecks in the automotive industry. We expect our short-cycle service businesses to pick up in Q2 and Q3, and our longer-cycle businesses, such as equipment, to accelerate in the second half of the year. Manmade Fibers continues to benefit from stable activity in the filament market with a full order book for 2021 and 2022, and increasing visibility into 2023. We expect the aftermarket service business to benefit from decreased travel restrictions. Outside of filament, we see continued structural growth in the nonwoven business. For the special filament business, we see encouraging signs of a pickup.
As usual, we expect to see a temporary impact on the business from the Chinese New Year break in Q1, which we expect to catch up on in the remainder of the year. On EBITDA margins, we expect between 15.5% and 16% at the group level. We expect to see continued progress in Manmade Fibers, as well as the benefits of the structural cost program and the increased volume in Surface Solutions. In Surface Solutions, we expect EBITDA margin improvements between 180 basis points- 280 basis points, primarily driven by the cost-out benefits as well as the increased sales levels. As you know, our cost-out program also included significant right-sizing activities in our additive manufacturing business. As a result, we expect the margin dilution from this business to the overall Surface Solutions division to reduce to around 150 basis points.
Additionally, we expect our effective tax rate at the group level to be approximately 25%. In 2021, we expect to see strong cash flow conversion driven by growth and margin expansion while we maintain tight controls on capital expenditures. Let me wrap up our prepared remarks by reiterating our company priorities. We are highly focused on delivering growth with improved margins in Surface Solutions as the recovery in key end markets continues. The division remains well-positioned for structural growth above global GDP and industrial production. In Manmade Fibers, we continue to drive our strategy to boost structural growth outside of the filament business, both organically and inorganically. Secondly, we are making strong progress on returning the group to the operational EBITDA margin corridor of 16%-18%. We will retain a tight cost focus while continuing to invest into our technology and future growth initiatives.
Thirdly, we are keenly focused on improving returns on capital employed. As the Surface Solutions top line recovers, we naturally won't need to invest as much for expansion. Additionally, we are driving an intense internal competition for capital. As part of our significantly increased focus on capital efficiency, we are making ROCE the primary metric for the long-term incentive element of senior management compensation. Fourthly, inorganic growth through small and mid-sized acquisitions is a key focus for both divisions. We believe these are generally more value accretive and easier to digest. We are looking at core and adjacent spaces where we can utilize our competencies and leverage our knowhow to deliver value-accretive M&A. We also retain the financial and operational capability to pursue larger M&A deals as they become available.
Based on our performance in 2020, our positive outlook, and the financial strength of the group, the board is able to propose a stable ordinary dividend of CHF 0.35. Moving forward, we will continue to focus on delivering an attractive ordinary dividend payout. This closes our prepared remarks. With that, we will open it up for questions. Operator, please go ahead.
We will now begin the question and answer session. The first question comes from Andy Schnyder from z Capital. Please go ahead.
Hi, gentlemen. Can you hear me?
Yep, we can hear you okay.
Perfect. Thank you. I have a question on the growth outlook in Surface Solutions. I don't quite understand the outlook for automotive, general industry, and tooling. You elaborate a little bit on that, but probably can give some more additional color why you see, for example, high single digit growth in automotive only when the market forecast out there are more like 15%-17% something percent this year. Same also true for tooling and general industry, which went down last year 18%, 20%+ percent. Why you only see such a low rebound of 5%, 6%, 7%, 8%. I wonder where this cautionary outlook comes from.
Okay. I think that is a question I take. You're right. I think in 2020, we know what kind of dips we made in the different market segments. What we saw over the course of last quarter was a strong rebound, especially, and now when I'm talking about automotive as an example, in China. To a lesser extent in Europe and in U.S., it's even lower than that. From that perspective, we are a little bit cautious here. We say, look, we do not know exactly how the next quarters are looking like. What we see right now is, beside of this small semiconductor shortage what impacted a few weeks. We do not have the strongest signals in terms of 10%, 15%, 20% rebound here in automotive. When we talk about tooling, this is a mixed vertical serving automotive, but also general industry.
This general industry part consists of oil and gas, energy, aerospace here. This is a mixed salad. That's why we say high single digit in the one case and medium single digit in the other one.
Yeah. Andy, if I can add just to the question. I would say it's definitely the component of a relatively slow start to the year that we're seeing that I think naturally is a pause factor. The other thing that I would say is that the longer cycle parts of our portfolio are picking up a little bit later, and we try to explain that. I think the short cycle part, really the OpEx driven part of our portfolio is picking up very quickly. We see that. To the extent that it's CapEx driven at our customer side, we expect that pickup to be more sort of in the second half of 2021. That's when we expect that then to provide some additional tailwinds in 2022.
How much of the business is late cyclical? I think power, which had growth in 2020 probably. I don't expect much change there. Of course, aviation, you said a lot about that. How much of the other businesses is really late cyclical and not OpEx related?
I think it's the entire equipment business, what is for sure late cyclical. Everything what is related to investments here. The verticals you mentioned, aerospace definitely is very late. Oil and gas and mining, we also are not expecting anything substantially before the second half of 2021.
Okay. The last question. I go back in the queue. The 6%-9% growth range you give, should we think about the margin guidance as related to the sales guidance? If we land at 9% growth, we will end at 17.5% EBITDA margin for Surface and vice versa if growth at the low end? How should we think about that?
I don't think there's a perfect correlation, Andy, in those, but it's the right way to think about it. I think as sales increase, we're going to see very strong operating leverage in the business. We're expecting obviously significant additional benefits from the cost out program, which we've already run. To keep structural costs really in check. The more sales increase, the more leverage we get out of that.
Okay, perfect. Just a very quick last one. Are there any one-off costs which don't come back in 2021 but will come back later at a later time? Can we just extrapolate the operating leverage you generate in 2021 when we think about 2022 and 2023 margins?
I would say a couple of things. I think our focus on structural cost will stay. It's very clear. We're laser-focused on keeping the structural cost in check and continuing to reduce our SG&A intensity, specifically in Surface Solutions. I think that's very clear. I think as it pertains to specific 2022 or 2023 guidance, it's probably too early, but we've always said that mid-term, we expect Surface Solutions to be a 20% EBITDA business, and that's our clear focus.
Perfect. Many thanks.
As a reminder, if you wish to register for a question, please press star and one. The next question comes from Michael Foeth from Vontobel. Please go ahead.
Yes, thank you. Good afternoon, gentlemen, and congratulations on your sustainability report. I didn't go through it all yet. Just two questions there. I was wondering on the ESG targets on usage of renewables and climate neutral operations going up to 100% by 2030. Can you remind us where you stand today on those targets or on those criteria? Also, as a second part to the question, is management compensation at all linked to any of those ESG targets? Then I have two follow-ups on financials.
Maybe I'll take the management compensation one first. We actually had that discussion internally very intensively. We're very focused on that. I think we're tying some of the specifically individual goals to these kinds of topics. I think given that we've just entered into the formal tracking of the results, I think we don't have long-term incentive compensation tied to it formally yet. We do believe there's an incredibly high correlation between what we incentivize in returns on capital employed and sustainability. I think implicitly it is in there. Then as we move forward and establish the metric system inside the company and externally, I think we're certainly also contemplating including that into incentive compensation going forward.
The other part, with respect to the targets, I think I have to make an initial comment first. We decided over the course of last year to take the year 2019 as a baseline because we feel 2020 is a special year and should not be the reference for the next 10 years here. That's why we took 2019. Here, we have to clearly state that we do not yet have a complete view across our entire OC Oerlikon landscape and sites. We have the energy management system established in many sites, but not in all. That's why we said this is one of the targets. We have to roll it out into all sites.
From that perspective, I'm not in a position to give you really a very sound and solid and especially approved and checked figure for the share of renewables we were using in 2019. I think the ambition and the target to go for these targets in terms of using renewable energy and to the utmost extent of 100%, to be CO2 neutral and to reduce waste is an ambitious one, and we are behind. This is our commitment.
Okay, thanks. That's obviously a good start anyway. On the business, just in terms of the margin upside in Manmade Fibers, you were guiding for 14% in 2021. Where can that go mid-term, really, and what does it take? Is it related to mix, I guess, mostly, or are there any other measures to be taken? Talking about mix, and that's the second question, is what sort of mix are you targeting longer-term in Manmade Fibers between filament and other businesses?
I think there are, Michael, two questions, actually. First of all, the mid-term target range for Manmade Fibers is mid-teens, that around 15%. I know you know our business since many, many years, and you know the history, the peaks we had in the past. This is, from today's perspective, not going to be back because today we talk about a different market. I think I mentioned it in my speech. Consolidators in China, so five, six big companies placing orders in the order of magnitude of CHF 500 million plus, are not allowing 18% or 20% EBITDA margin, as nice it would be for us. That's why we say the 15%, mid-teens, around 15%, it can be 14%, it can be 16%. That is the range where we want to be. The mix is contributing here to a certain extent as well.
Our long-term or mid-term target is to have, by far, a lower dependency on filament. Let's say 50% filament and all the rest, it's special fiber, BCF, nonwoven, polycondensation, and all these new activities which have been launched in 2016 are paying off now. The mid-term target is, let's say, having a balanced even share, filament and others. That's okay, Michael?
Okay. basically, your margin profile should stabilize over time as that mix.
Yes
Diversity extends.
Yes.
Okay. Very good. Okay, very good. That's it from my side. Thank you.
The next question comes from Alessandro Foletti from Octavian AG. Please go ahead.
Yes. Good afternoon. Thank you for taking my questions. I have a couple. If you don't mind, I go one by one. First, just a very brief understanding one. In the presentation on the sales split for Manmade, you spoke for the first time about special filament. Is that the polycondensation or is that the nonwoven? Sorry, I guess it's the nonwoven.
Yeah.
Special filament is the nonwoven and other activities in that area, and all the polycondensation is plants engineering.
Yes.
All right. Just for my understanding. Thank you for that. On the margin in Surface Solutions, you said that it's going to normalize in 2021 from the very high level in Q4 2023. Maybe you can explain a little bit better what was the reason for that 23% in Q4, which was very good, but not exceptional in this sense. We have seen it already. Maybe you can explain why that was not normal, and also why normal is 16.5%-17% and not rather 18%-20%.
Yeah. Alessandro, I'll try to take that one. I think in the fourth quarter, a couple of things. You have sort of both the impact from the structural cost actions as well as the impact from the shorter-term cost actions. The shorter-term cost actions, really the discretionary spend control, at least to a certain extent, we expect that to reverse in 2021. I think that's the first one. I would say we had a pretty favorable mix in the fourth quarter, maybe 150, 200 basis points really from mix both on the equipment side and geographically with strong sales in Asia, where we typically have the highest margins. I think that's the other component. We had a couple of typical year-end items that were probably 100, 150 basis points as well.
I think for next year, we're expecting the margins between 16.5%-17.5%. At the same time, we've stated that medium term as sales normalize to higher levels and levels where we've been to before, we expect the division to be back at 20% EBITDA. That's our target, but we need a little bit more. I'm going back to the sales walk there. We need a little bit more operational leverage from increased sales in all the different parts of Surface Solutions to get to 20%.
Alessandro, from my side, 2021 will be not a normal year. I think you know where we have been in 2019, close to CHF 1.5 billion, having a clear ambition to go towards CHF 1.6 billion. Now we are back to square one at CHF 1.2 billion. That means we do have technical capacity for about CHF 1.5 billion, CHF 1.6 billion Surface Solutions business. This is what we want to keep and what we want and have to fill. That refers to the statement Phil made earlier, where he said, "Look, whatever is going to come, there will be not so much capital investment required here." Because the capacity does exist, means 2021 from terms of profitability with a revenue range between CHF 1.25 billion and CHF 1.3 billion is not where we want to be, where we have to be, and where we will be.
From that perspective, the margin. It's an interim year.
All right. Thank you. That's great. If I may add an additional brief one here on the Additive Manufacturing, so to speak, dilution, et cetera. Can you maybe share some information on where you stand at Additive Manufacturing now in terms of sales levels? If that CHF 150, then dilution remains like that, or by when we sort of reach break even?
No. I think the dilution of additive manufacturing was dramatically reduced now. We did some structural adjustments in terms of our structure. More important is we are quite successful in really developing and shifting the nature of the additive business from the old days, where prototyping was a predominant type of business. Now, more towards bigger contracts, I'm not sure whether I made the statement or not, in between, we have even the first contracts in a range of CHF 500,000 -CHF 1 million+ revenue. One contract, right? That is exactly what we want to achieve and will contribute to the growth dimension we have in mind here.
Not talking about small, not nitty-gritty in terms of negative, but small size prototype business, and now that was a past, and in future, we will have much more and a bigger share of big, substantial contracts, whether it's aerospace, whether it's defense, whether it's oil and gas, subsea, just to mention a few.
All right. The number you mentioned, I'm not sure I understood it properly acoustically. Was it CHF 1 million or?
Yeah. A contract we signed, and we have been awarded for additive manufacturing in the order of magnitude of CHF one million-plus revenue.
Individual contracts, Alessandro. I think that's a very critical step for us. Overall, the business is probably in the CHF 20 million-CHF 30 million. Obviously, from an overall size standpoint, obviously, 2020 was a pretty challenging year, and we discontinued the medical activities. Just to your question, by no means are we happy with 150 basis points of dilution. I think the large contracts that Roland is describing are helping us significantly to reduce cost, to absorb cost, and to increase our profitability in that segment. We'll continue to expect the business to break even over the next 24 months, 24- 36 months, and are looking forward to that business growing. I think the growth rates that we see there are still very strong. Slower than we initially expected, we think that business can be an accretive component of the Surface Solutions portfolio.
Thank you. That's great. Can I take a chance to ask you one last question? When I go to your end market outlook on page five, or on slide five, you see that automotive today is 14% of group sales, whereas general industry and tooling are around 16%. It used to be that automotive was bigger than these two segments. When I look at this in growth rate indication that you're giving, particularly combining 2021 and 2022, it seems that you have the outlook that automotive will remain smaller of these two businesses. Do I understand that correctly, and why is that?
Look, I think the segmentation, the way we've provided that, has remained pretty consistent. Obviously, the automotive industry has been, Roland described that, in a challenging time period since pretty much mid-2019 now. I think you've seen some drawbacks there. I think our outlook, you always have to take that under the lens of that this is sort of how we see our portfolio developing. Over time, I think we see a lot of positives in the automotive industry. The last thing I would say is, Alessandro, you also know that for us, there is quite a bit of interlinkage between what we do on the tooling side and what we do on the automotive side. I think those two move in the same direction.
Maybe an additional comment, Alessandro. The figures we gave on this page are figures for the group level. Means 40%+, 45% is Manmade Fibers, and 55% is OSS. If we would create this chart just for OSS, you're absolutely right, the share of automotive would be higher, almost double. I think these are the figures you have in mind and you are referring to.
Yeah. Okay. No, that's fine. Thank you.
Yeah.
I'm not sure we have understood each other perfectly. Maybe I take that off the line. Thank you anyway.
Thanks a lot. Yeah.
I'm done. Thanks.
Great. Do we have any more questions in the queue? Is the operator still there?
Hello, can you hear me here, Sebastian?
Now, yeah. Now we can hear you.
Now we can hear you.
That's perfect. Great. Sorry for that. A quick two follow-up questions on the additive manufacturing. The first one, the dilution of the 150 basis points, just from my understanding, is that the dilution you are expecting in the fourth quarter, or that's the number that you expect throughout the year, that meaning that in the first quarter you may have a higher number, and in the fourth quarter you have maybe you have a lower number or just the whole year, something around 150. How should I think about this 150 basis points?
That's the number for the full year.
Understood. Quickly, I'm not sure if I got it correctly from the previous asking a question. That number is built on the understanding that that business is making some CHF 20 million-CHF30 million of revenues in 2021?
Yeah.
Yeah.
Directionally, yeah.
All right. It's perfect. That were all my questions. Many thanks.
The next question comes from Christian Ochs from Baader Bank. Please go ahead.
Yes, hello. Thank you for taking the question. I have a question again on capital employed. As this is a primary management incentives scheme, I have not found the capital employed for the Surface Solutions and the Manmade Fibers. Maybe you can provide us on that and your calculation for that. When you try to reach double-digit ROCE, is that also included in the 16%-18% EBITDA margin? Does that total framework which fit together? The second one is concerning the last two acquisitions in Surface Solutions. Can you give us some kind of an idea how big they are and what we expect from them? Thank you.
I'll take the capital employed maybe first, and then I'll hand it over to you if that's okay for the. I think from a ROCE standpoint, our total capital employed at the company level is CHF 1.6 billion. From a divisional standpoint, you know that we obviously have a much higher capital intensity at Surface Solutions that's both driven by organic investments and obviously by just the balance sheet that stems from some prior acquisitions. I think that's the rough split. Very critically, very much so, our 16%-18% EBITDA targets, together with the effect of working very effectively with the capital that we deploy inside the company, is absolutely tied to the expectation to generate double-digit ROCE at the group level. There's no question.
Both divisions have kind of their idiosyncratic things that they need to work on then. Then maybe on the Surface Solutions acquisitions.
Yeah, this is a challenging question. Actually, we are a little bit too early to give you details on M&A. Normally, I think you are aware and you fully understand that I cannot talk too much about it. In both speeches, I did it and Phil did it as well, you could sense between the lines, that we are having a clear plan and working on topics in both divisions. Not only in Surface Solutions, but also in Manmade Fibers. It will be, we talk about potential targets, in the triple digit range, but at the lower end, that means not the very big ones, but medium-sized targets. That's actually all I can say right now.
Christian, I think, your question to the ones that we executed last year, think about those two as very small, below CHF 10 million of sales. Very small sort of bolt-on acquisitions. We do this, as you know, very frequently. We tend to buy technology-based companies and then have an ability to deploy that technology across our global network. Really helps us drive organic growth based on that technology that we acquire. Just the revenue base that we bought in 2020 was very small. We're working actively on a number of projects, to Roland's point right now. What we executed in 2020 was really small.
Okay. Thank you for that. Maybe just a remark at the end. When you are saying that return on capital employed is very essential for the management incentive scheme going forward, I think it would be helpful to provide some details, and some framework also in the presentation. Thank you very much. All the best.
Yeah.
The next question comes from Christian Arnold from Stifel. Please go ahead.
Yes. Hello, gentlemen, three questions if I may. First, two smaller clarification ones. You were saying Surface Solutions, you took out OpEx in the range of CHF 200 million?
That's not just operating, it's sort of total cost base, yep.
Total cost. Yeah. Then, you also mentioned that there was a positive net effect on Manmade Fibers margin of 80 basis points. Was that Q4 related, and what exactly was that actually?
It was spread out during the year. There were two effects. One was the revaluation of a stake that we have in an acquisition where we purchased the majority over the course in 2020, Teknoweb. Very critical acquisition for us from a nonwoven standpoint. And that was partially offset by a larger customer penalty that we both recognized in the P&L and paid, that was related to a project from years prior, where we faced some delays. The net effect of those two was 80 basis points.
Okay. Understood. Thank you. Maybe again, coming back to your automotive outlook and also the share of sales of 14%. I have a little bit same questions or problems like two speakers before. Thinking of the strong rebound we see at the automotive, one could expect that more than just high single-digit growth could be possible for you. For 2022, you would expect somehow also a more significant growth here. What does it mean then? Do we have here some structural changes which are going on where Oerlikon is not benefiting the same way? Thinking about the automotive trends right now, we have lots of electric cars, hybrid cars, et cetera. Are these segments where Oerlikon is not so much involved?
No. two answers here. You mentioned the topic of hybrid cars. You can be assured we did our homework. We did deep analysis. We took the market outlooks in terms of ICEs and hybrid cars and fully electrical cars, and its potential impact on us. For hybrid, actually, we are more optimistic because a hybrid car carries both an electrical powertrain and a combustion one. A smaller one, yes, that's true, but a more efficient one, and here we talk a lot about turbochargers and elements like that. From that perspective, I think this is even maybe slightly more of an opportunity rather than a threat. The full electrical vehicle, whether it will be a battery or a fuel cell, this is further down the street, actually. From that perspective, I think we are fine.
We are just not as optimistic, or the other way around. Applying the dynamic we see and saw in China, applying it to Europe or even to the U.S. is something what we do not see happen immediately. Yes, second half of 2021, there will be really a kind of rebound. This dimension you mentioned, 15 or 18 people talk about 20%, this is from our perspective, by far too optimistic.
Thank you.
We have a follow-up question from Andy Schnyder from z Capital. Please go ahead.
Hi. Yeah. Two short follow-up questions. First on Manmade. You say that everything ex-filament is expected to grow this year and next year. Does it also include plant engineering or is this part mostly linked to filament and hence just remains on that level and all the growth come from all the other businesses, all special filament, what you call special filament? That would be the first one.
Okay. Let's try to answer it directly. I think filament is on a high level. We do see a stable development in this field. It's mainly China-based, and we talked about the five, six big consolidators. That's why what we see today is a different market compared to a situation five or 10 years ago. Here we do not see too much of a growth actually, because here we maintain and keep the high level. The growth is coming mostly from the non-filament part. Carpet yarn is a special yarn which was peaking in 2018. 2019, 2020 was down. Now it's coming back, contributing to a growth here. The nonwoven part, where we just talk about a triple-digit revenue business, didn't exist four or five years ago. polycondensation didn't exist.
This polymer processing part, we gave you a hint that we did, not a substantial, but a bigger investment in the Manmade Fibers business in order to push this polymer processing part to the next level. These all are elements which are contributing to the projected growth in Manmade Fibers.
The plant engineering part?
The plant engineering part does exist and is remaining on a high level. I gave you also another hint. There's a CHF 500 million-CHF 600 million contract being awarded earlier last year, with delivery schedules, I think late 2021, the first part, and then 2022. These are huge plants. These are big petrochemical sites. Here we do have plant engineering, as we had it before, and this is what we are going to continue.
Okay. Another question on the ESG plan. Have you any idea or any calculation made about the costs of the program of decarbonization of the profile of the company?
Yeah.
Yeah.
We've done the analysis pretty comprehensively, I would say. As you would expect, a lot of the initiatives that we're driving are really congruent with what we're trying to achieve from ISO certifications and so on. They're really integral within our financial framework. I think there is no investments that we're foreseeing right now that are outside of our financial framework. At the same time, we are shifting certain priorities. I think what Roland was describing, that the ESG factor is so much more critical for R&D investments, but also for CapEx investments, I think that reprioritizes certain things. There's nothing in the cost forecast for the next five years that we have that will be outside of the financial framework, neither from a CapEx side nor from an OpEx standpoint.
Maybe another comment.
Okay, great. Thanks.
From my side. It's not the case that we are just starting now with ESG. This is something what we always did. I think almost all of our solutions, whether it's Surface Solutions or whether it's Manmade Fibers, is contributing and did contribute to this aspect in the past as well. We just didn't summarize it and wrap it up in a report. From that perspective, yes, there might be some additional costs in terms of certification, and I mentioned the rollout of the energy management system across all our sites, but this is not a major effort. It's just about completing it now.
Okay, thank you.
Gentlemen, so far there are no more questions.
Okay. As there are no further questions, we are closing the full year 2020 earnings call. Please don't hesitate to reach out to the investor relations team in case you have additional questions. Our next reporting is scheduled for May 3rd, 2021, when we disclose the first quarter results for 2021. We look forward to speaking to you soon then. Stay healthy, stay safe. Goodbye.