Ladies and gentlemen, welcome to the OC Oerlikon Q1 2019 results conference call and live webcast. I am Ira, the current call operator. I would like to remind you that all participants will be in listen-only mode, and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference will not be recorded for publication or broadcast. At this time, it is my pleasure to hand over to Mr. Andreas Schwarzwalder, Head of Investor Relations at OC Oerlikon. Please go ahead, sir.
Thank you very much. Good afternoon, ladies and gentlemen, and welcome to OC Oerlikon's conference call on the results for the first quarter of 2019. Your hosts today are our CEO, Roland Fischer, and CFO, Jürg Fedier, and myself, Andreas Schwarzwalder . As a reminder, all related documents on the Q1 results, including the following presentation, are available for download on our website. Today, we will follow the well-known agenda. Roland Fischer will start with an overview and an update on the segment's performance, followed by Jürg Fedier, who will comment on the group's financial performance and the confirmed full-year guidance. After the presentation, as already announced, we will host a Q&A session to answer your questions. It is now my pleasure to hand over to Roland.
Thanks, Andreas. Good afternoon to everybody on the line, and thank you for joining our first quarter 2019 earnings call. For the first quarter of 2019, OC Oerlikon achieved sales growth despite the challenging market environment. The group sales went up by 3.3%, both reported inorganic to CHF 624 million. Group order intake amounted to CHF 680 million. Importance to note, order intake in the same quarter of the previous year was a record quarter, which is the reason for the year-on-year decline of 10.2%. Beside of that, it should be noted that the order intake level in the first quarter of 2019 marked the second highest amount we have achieved in four years. I think this is the relevant reference of our ability to deliver a high level of sales in the upcoming quarters.
The Surface Solutions segment maintained a high level of both orders and sales in the first quarter. The Polymer Processing Solutions segment continued to capture a significant share of business across its application range, where we see high levels of demand prevailing. In the first quarter, we delivered an EBITDA margin of 15% for the group. The margin represents a healthy level for an industrial company that is investing significantly in growth while facing challenging markets. The margin is lower than our own targets, that is true, but can be explained as follows. Firstly, the industry sector in general and the automotive industry in particular, had a slow start in the year, which impacted the service business in Surface Solutions. This resulted in a product mix, with a higher proportion of revenues generated by the materials and equipment businesses.
Just to give you a flavor, the material business showed a growth in the mid-teens. Secondly, as announced as part of our full-year results presentation, we continue to forge ahead with significant investments to secure future growth. We are fully committed to these investments and consequently prepared to bear the related operating expenses. On a positive note, the Man-Made Fiber segment improved its profitability with an EBITDA margin of 13.2% for the first quarter of 2019. In addition to the aforementioned investments in our growth, which is a key element of our strategy, we have taken further strategic actions. We executed another string of post-acquisition during Q1 in Germany to strengthen Surface Solutions position in thermal spray services.
The segment also further broadened its technology portfolio by launching the new BALIMED portfolio, a portfolio of seven different coatings for the application in the medical area. Based on our steady performance, we are affirming our guidance for the full year of 2019. I think Jürg, later on, will provide further details on that topic. Let's now turn to the Surface Solutions segment performance for the first quarter 2019. The Surface Solutions segment delivered another quarter of consistent performance and sustained its high top-line level in both orders and sales. The top-line performance is especially noteworthy considering the increasingly challenging market environment. The segment realized good sales growth driven by aviation and tooling. The effects from the small-sized acquisitions and raw materials surcharge was CHF 0.6 million lower year-over-year, including currency effects.
This results in organic sales growth of 3.2% compared to 2.8% on a reported basis. In this quarter, we saw a strong increase in the material business I indicated already, and we are continuing to see success in the uptake of our SUMEBore and Surface ONE technologies. Our automotive business has been impacted by the lower production levels, with global car production declining. This, of course, has affected areas of our business that are volume-driven, such as synchronizer rings or coating of piston pins. Our structural growth that is inherent in our business remains valid. The mitigation effect partially compensated for the lower car production volumes by a magnitude of some 200 basis points, whereas it's a global volume decline of around 6%. This leads me to the Q1 2019 numbers.
Orders increased by 0.3% year-over-year to CHF 385 million, and sales increased by 2.8% compared to the first quarter of last year, and stood at CHF 371 million. EBITDA for the segment stood at CHF 61 million for the quarter. That is 16.3% of sales. The operating profitability is lower in this quarter compared to Q1 2018, and this is partly anticipated as a result of the higher operating expenses related to investments in additive in the ePD Competence Center and new centers for forming tools. Profitability was also impacted by the product mix, mainly the higher proportion of revenues generated from materials and equipment businesses in this quarter. From an end market point of view, we observed stable activity in the tooling industry. The automotive business, as already mentioned, is facing decreasing production volume, particularly in China and the rest of Asia.
We also echo what is being reported about the industrial sector in terms of uncertainty in the global economy, slower trade growth, and investment activities. The aerospace market, on the other hand, is seeing growth. Power generation remains a challenging market. From a regional point of view, we saw strong growth in North America and good development in Europe, while Asia is trading at low levels. Overall, we saw a slower start in the first two months of the year. Despite that, we are reporting good top-line growth in the Surface Solutions segment, which continue to be the main revenue and income generator for the group. Investments in additive manufacturing and in other growth-generating solutions are impacting the operating profitability of the segment right now.
We are convinced that this investment in structural growth will pay off, as it will enable us to enter new markets, win new customers, strengthen our presence and technology portfolio, and successfully leverage digital opportunities. Having this said, let's now move on to Manmade Fibers. The Manmade Fiber segment delivered a strong performance in the first quarter. Order intake was down year-over-year due to the record orders we delivered in Q1 last year, but it's trading at a very strong level. Historically, the first quarter order intake was the second highest quarterly order intake since the fourth quarter of 2011, when we established the Manmade Fiber segment. The segment achieved strong growth in sales for filament equipments and polymerization business, which was supported by a substantial increase in sales of nonwoven systems. The sales growth was mainly led by business in Indonesia, in particular in China.
This leads me to the Q1 2019 numbers, which show excellent results. Orders stood at CHF 296 million and were sustained across all product lines. Sales increased by 4.5% compared to the first quarter last year and stood at CHF 254 million. The segment further improved its operating profitability. The EBITDA increased by 26% year-over-year to CHF 34 million, and the EBITDA margins stood at 13.2%, the highest level since the downturn, thanks to higher sales and disciplined cost management. Furthermore, to strengthen its position in the nonwoven market, the Manmade Fiber segment has launched its Oerlikon Nonwoven brand. It was introduced at the IDEA exhibition in Florida, U.S.A., where the segment signed its first contract under the new brand with a well-known European specialist company for the manufacturing of nonwovens in filtration. Now a few words on market development.
In the Chinese filament equipment market, we see continued healthy demand from key players. There is increasing customer demand for automation solutions, the Manmade Fiber segment is constantly strengthening its market position in this field. The texturing equipment market remains positive as a result of increased filament activities, we continue to see stable demand and high levels for our texturing machines. Our carpet yarn technology in the main markets in the U.S. and Turkey has, as expected, calmed down. The strong increase in sales for the nonwoven business and the promising project pipeline in this field underline our initial success in establishing a strong foothold in this market. We also saw an increase in demand for staple fibers and a promising project pipeline for continuous polymerization solutions.
As communicated before, the magnitude of orders for the manmade fiber segment has resulted in a pipeline with delivery lead times reaching well into 2021. Right now, we are starting new project negotiations for delivery even in 2021. Thus, in the upcoming quarters, we expect the healthy demand in this market to continue with healthy order intake in the coming quarters. After this review of the segment's performance, let me now hand over to Jürg for additional comments on the group's financials. Jürg, please, it's yours.
Thank you, Roland, and good afternoon to everybody. Let me start the group's financial review with a closer look at the first quarter group numbers. Group order intake, what you have seen, stood at CHF 680 million in the first quarter. That's a reduction of about 10% year-over-year on the reported basis, or 9.2% after adjusting for currency developments. Again, this is a result of the exceptionally high order intake in the first quarter of last year, where we reported record orders in manmade fiber. Let me reemphasize again that this strong level of group order intake is the second highest in four years. Sales came in at CHF 624 million. That's up 3.3% year-over-year reported and up 4.3% accounting the exchange rates. The book-to-bill for the group was exceeding one at 1.09 for the quarter.
EBITDA reached CHF 93 million, a slight reduction of 2% and was impacted, as mentioned earlier, by product mix and higher operating expenses related to investment for future growth. The EBITDA margin stood at 15% and came in slightly lower year-over-year, but was slightly higher compared to the previous quarter. EBIT was CHF 44 million, which corresponds to a margin profile of about 7.1%. The development of exchange rates in Q1 2019 compared to the same period of last year was slightly detrimental to Oerlikon's top line. This is mainly related to translation effects. As you know, we record in the Swiss franc. The depreciation of the EUR against the Swiss franc was only partially compensated by a stronger USD against the Swiss franc.
Assuming stable currencies, orders would have been at CHF 687 million, a difference of approximately one percentage point compared to the Q1 of 2019 reported figure. Sales would have been at about CHF 630 million, equally about 1% higher compared to the reported figure. The currency development has, as usual, what we have seen in the past, no impact on EBITDA, and the impact on the margin overall remained minor. When looking at the group sales, the cap of manmade fibers becomes visible as its share of group sales in the first quarter 2019 remains almost stable at about 41% compared to the same period of last year. When looking at profitability, the upturn in profitability from manmade fibers is visible as well. The segment accounted for 36% of total EBITDA in Q1, while Surface Solutions delivered about 65% of the group operating profitability.
From a regional point of view, our proportion of sales increased in Asia Pacific to 45%, North America to 16%, while remaining stable in the European environment at about 35%. Sales in the rest of the world decreased to a level of about 4%. The share of our service and spare parts business, which was addressed before, remained stable at 40% of group sales in Q1 compared to the same period of last year. The group's first quarter performance resulted in a rolling 12 months return on capital of 9.5%. The decline in ROCE is mainly the result of the first time recognition of leasing assets under IFRS 16 and the increased asset base that was contributed by the addition of some M&A assets. Oerlikon's return profile continues to run at a high level and reflects our ongoing commitment to create value while executing our strategy.
Ladies and gentlemen, let me conclude with the 2019 outlook before we start the Q&A session. In a difficult market environment, we delivered a steady performance in the first quarter. We recognize that there is a slowdown in global economic growth and ongoing uncertainties in the geopolitical and trade environment. The stabilization and performance improvement we saw towards the end of the first quarter puts us in a position to confirm our guidance for the full year 2019. We continue to expect group order intake and sales to both exceed CHF 2.7 billion. The group EBITDA margin after operating expenses from increased investment is targeted to exceed 16%. Ladies and gentlemen, summarizing, Oerlikon has proven that we can navigate through challenging weather conditions. We succeeded to maintain a high level of orders and sales.
We also achieved a healthy profit margin against the challenging market backdrop and in light of the significant investment we are making for the future growth of the company. We are excellently positioned to take advantage of improvements in our market, initial signs of which have been noted towards the end of the first quarter. We are confirming, as I said before, our guidance for the full year 2019. This closes our comments on the first quarter 2019 results. We thank you for joining us on the call, and we are obviously happy to open the lines for questions now. Operator, please go ahead.
We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use only handsets while asking a question. Anyone who has a question may press star and one at this time. The first question is from Alexander Thiel from Deutsche Bank. Please go ahead, sir.
Good afternoon, gentlemen. Thanks for taking my question. You mentioned that the Surface Solutions margin negatively affected by investment. Could you elaborate a little bit more on the investment? I mean, should we consider the investment to be equally split into H2? What was the drag on the margin? Furthermore, some color on this SUMEBore technology would be nice in terms of total addressable market, as it is quite new for me. Lastly, the man-made fiber margin for Q1 stands at 13.2%. Should we expect some shift in the margin or to be constant, or was it kind of front-end loaded? Thank you.
A lot of questions. I try to do my best. I think starting with the last one on man-made fiber. We always said that we are targeting a mid-teen profitability level, and we are moving towards this level coming out of the trough. For 2019, actually, I think we indicated 100 basis points on top of last year's results of 11.7. That means we are well on track here, moving in the right direction. It's a cyclical business in terms of not only of the market sometimes, but also in terms of project business. The quarterly results might differ slightly from quarter to quarter. When we talk about Surface Solutions investments into future growth. We do have different technologies. We are right now pushing and penetrating and bringing into the market.
A famous one is the ePD technology, what is an embedded thin film coating for automotive application, but also for sanitary applications. Here we are building up a competence center in South Germany. Just to give you a flavor, the first unit, the first equipment is in commercial operation. A second one is right now installed in China, and more to come. Another topic and very interesting topic is the CVD competence center we are going to build also in South Germany in an existing site we have in Black Forest area. This is going back to a string of first acquisition we did in 2018, where we acquired a chemical vapor deposition technology, which we didn't have in our portfolio. This technology does offer certain advantages over the existing PVD technology, and it's running and developing quite promising.
This brought us to the decision to build a competence center here. Aside of that, digitalization is always a topic in all areas. Just to give you a flavor, we are preparing e-commerce for materials supply and sales of materials and other stuff. This for sure is not coming free of charge. It comes with a price tag. That was contributing to the EBITDA margin of the Surface Solutions segment, but not alone. There was also another factor which we call the market driven by the automotive, mainly by the automotive downturn. We do have a certain amount of volume of business which is proportionally related to the produced car volume. I mentioned it, the piston pins or the Friction Systems solutions. This was partially offset and compensated by the structural growth component, which we all the time explain what does it mean.
I think that's actually the answer for the question. Did I miss something?
I think-
All right
the drag on the margin, is it equally split into H2, or we will see it I mean, the-
The comments which Roland just made on those projects are obviously ongoing into H2 as well, right? Again, if you try to decompose basically the impact on the margin profile, which we reported, you should expect that this is about half/half, the way it has impacted the Q1. On one side, driven, as was mentioned before as well, by weaker volume, mainly driven by the auto sector. In combination to some of the projects which Roland mentioned and others which are ongoing. You should expect that to continue, at least from a project point of view, that some of that cost is being carried over into the second half as well. The second quarter and what is coming forward.
Understood. Thank you.
Welcome.
This is the operator. The next question is from Alessandro Poletti from Octavian. Please go ahead.
Yes. Good afternoon. Thank you for taking my question. I have two questions, one as well on the guidance. Can you please give an indication in which areas you see improvements now coming up in the second quarter maybe, and in H2 in particular? Obviously, specifically on the margin, having the first quarter in surface below your indicated full-year guidance, it must mean the next quarter will be above. Where do you see, in which areas do you see improvements? What kind of concrete indications you have for better trading afterwards? That would be my first question, and I'll come back to the second one afterwards, if you agree.
Okay. I think the question is fair. The answer is the following one. Q1 is, as you have seen, at 16.2 or 3% for the Surface Solutions segment. We also have to see that extra phenomena that especially the first two months, January, February, have been quite weak, whilst March was much better. This gives us a certain confidence that we will see better results here.
Alessandro, we hear you typing. You should go on mute, please.
Sorry.
Yeah.
I won't type. I cannot move on mute like this. Just go ahead. Thanks.
Yeah. Okay. That means this was the effect within the first quarter. We also expect a certain recovery into second quarter of 2019. Also coming out of the automobile industry, and this together with what we know in our different market tooling, makes us confident that we are able to confirm our guidance.
All right. Thank you. My second question is more technical. I saw the corporate cost. If I make the sum of the EBITDA of the two divisions and the group, the corporate line had a CHF 2 million negative. This seems to me a little bit lower than what I should have expected. If I'm not mistaken, you have to carry about CHF 15 million of corporate cost after the disposal of Drive Systems. I wonder if there is something positive in this Q1 result or if this CHF 2 million is the new level.
Alessandro, that is correct. By the way, the stranded cost, the way we were talking about, is probably not as high as CHF 15 million now that we have fully deconsolidated that number. Keep in mind, when we give indication on corporate impact, this obviously includes more than just the stranded cost.
All the activity which we're doing here on the headquarter side as well. Needless to say, being cognizant about what's happening from an overall market point of view, we take the liberty of managing that as well. In other words, project-related costs, which can be deferred or moved from one to the other quarter without having an effect, actually, of supporting the underlying business going forward. Please look at it in that context, right? That's basically what I can say to that from that point of view, Alessandro.
You cannot give an indication on how high would be that line for the full year then?
Well, again, that's what we said. I would expect that probably to be at this current run rate. It is a fact that we have some of the unabsorbed stranded cost from Drive. Again, on the other hand, there is discussion ongoing on how to deal with that. Also related obviously to the portfolio mix. Let's put that number at around, as I said, based on the volatility and the impact of the project.
Let's put that number at around CHF 10 plus million for the year.
All right.
That's the best in terms of visibility which we have today.
Okay, thank you.
Welcome.
The next question is from Graham Phillips from Jefferies. Please go ahead, sir.
Yes, good afternoon. A couple of questions. First of all, one for Jürg, an accounting one, really. If I look at the Surface Solutions, the EBITDA to EBIT bridge, the increase in depreciation and impairment from last year went from CHF 20 to CHF 28. What's that increase due to, and what is the expected run rate for 2019? I'll come back to my next question after.
Well, a big part is obviously driven by the IFRS change standards. That's the main one which you have in there, basically. Then obviously, the investments which have been ongoing in the business over time, which ultimately result in a higher amortization and impacting the operating levels.
There was no one-off impairment in Q1.
There was no one-off impairment on the business. Yes, that's correct. Yeah.
Okay. Expect that run rate to continue. My next question was around the end market description you give in the slide pack on the Surface Solutions performances. If I do the math on automotive, it looks like sales grew about 10% or 11%, and I'm mindful of your comments that the market was down. Clearly, what contributed in there was the acquisitions. Can you talk a little bit about, is that the main feature of the difference there for that growth to show up? Or are there other things, I don't know, surcharges or some mix shift or something going on there?
No. Sorry, I think the surcharge effect was quite minor. I think I mentioned it's CHF 0.6 million. No. Nothing special.
Nothing special. Yeah.
Okay. It's grown 10% or 11% when you're saying auto production was down in the order of, I think, 6% or 7%, I think you said, and you were down four. I'm just trying to understand that difference between plus 10 in the reported numbers and-
Plus 10.
Graham, it's Andreas speaking. I assume that maybe your Q1 base in terms of automotive might be-- because the plus 10 looks a little bit strange to me because I think we actually had minus four on the automotive business.
Yes. I'm with you. Right.
Maybe we take it offline and then look at the numbers base.
Okay. Just again, following up on the comment that was made earlier about how you're going to get the margins up in the remaining quarters this year for the Surface Solutions. What's the production level you're expecting in the automotive industry for the remainder of the year in order to get that margin up to the 19%-21% corridor?
I think the margins for the Surface Solutions business is the entire margin, right? Automotive, we expect to come back in the second half, third, and fourth quarter, to a certain extent. We see already, and I told you, in March, we saw a clear trend, upwards trend, for Surface Solutions as a segment. We see some good indications in April as well. China, we expect to come back and not further to deteriorate here. Beside us, the automotive business, you have to be aware that Surface Solutions consists not only of automotive, right? We do have sixth business. Aviation is doing quite well. Our Metco business is doing quite well. Material. Altogether, makes us confident to achieve the guidance. Yeah.
Okay. In terms of the recent acquisitions in that division, Surface Solutions, what are they contributing in terms of margin to the division?
The latest acquisition that TeroLab that is in line with what we have. It is not deteriorating, but also it is not a skyrocketing business which pulls us over, right?
The others that were made during early 2018, have they been as strong as-
It is the same, similar. I think we did some acquisitions, technology acquisitions, then pure business acquisitions, I told you, I will give you an indication. CVD acquisition, what was a smaller one, obviously it turns out to be a great deal, a great business. Again, it is an equipment business carrying some normal margin profile of equipment business, right?
Okay, thank you. Just finally on man-made fiber, was there a change in the service contribution to that division, given the sort of nice uptick in margins? Can you remind us what the proportion of service in man-made fiber again?
It's 10%, 12%, something like that. It's on not a minor volume, but it's a nice, great business. It's a low double-digit percentage.
Okay, thanks very much.
Yeah.
The next question is from [Andy Schneider from VEB Capital]. Please go ahead, sir.
Hi, gentlemen. I have also some follow-up questions on the Surface Solutions margin development. You said that March was much better than January and February. Was it already in the corridor in March, i.e., above 19% or not?
I have to say sorry. We don't want to disclose monthly results here. All I can say is it was not only moving in the right direction, but being substantially higher in the order to keep in mind, the nature of January, February. We had in Europe our new year process of taking of productive days. We had in Asia and China, the Chinese New Year effect. From that perspective, it was expected to be better. I think more I don't want to say, actually.
Should we expect it to be back in the guidance range already for the second quarter from today's perspective?
I do not give a guidance for the second quarter. All I can say is we are moving in the right direction. It's improving. On a yearly basis, 2019, we assume that we will make it. We will be within the guidance.
How should we think about these investments? Not talking about AM, which is separate.
Yeah
extra investments in surface technology. Are they just to keep the revenue growth run rate at 4%-6% in the future, or will they lead to higher growth in the future, or will they lead to higher margins in the future? Are they just to keep the business as is today? i.e., we will have to live with lower margins from now on because you've chosen higher investments.
I think you have to decouple the effects. I think it's a new investment in new technologies. Now maybe I take a second. If we talk about this ePD technology, which obviously does exist and which obviously starts to be successful. I told you several machines are sold and are in commercial operation already. Moving on top that this technology will develop in a quite positive way because the European Union, for instance, just a side mark, is limiting the old technologies based on chromium- 6 materials by 2025 or something like that. That means all the automotive OEMs and all the other industries have embarked on a journey to substitute the old technology, the old coating technology. Here, ePD is not only one, maybe the one technology which is going to substitute that.
From that perspective, we are quite optimistic to develop here a business over the course of the next five years, in the order of magnitude, a triple-digit volume, assuming it's an equipment business carrying the normal margin profile of equipment business. There is also an opportunity to go into coating business, going into service business, right? This has to be seen. This has to be developed. Again, we just started with it two years ago, actually. The competence center is even not yet in commercial operation. From that perspective, it's very difficult to give you a more precise information. It should be good enough to give you a sense that it's more than just a PowerPoint slide. This is reality. It's under construction right now.
Mm-hmm. I was just more thinking about, isn't that just how the business is? New technologies pop up every year. You have to invest in new technologies all the time. Hence, the margin will never be at the high end, so 21%, so always rather at the low end. Is that more the reality we should.
No
Think about? Is this just a phase and in a few years' time, we will have again, higher margins at the higher end of the guidance?
I expect to be back at the normal margin level. If you talk about this BALIMED technology, seven new coatings for medical applications. It's a typical service business. We expect this business to be on the normal level of margins, what we know since years. Yeah.
Okay, thanks.
The next question is from Michael Foeth from Vontobel. Please go ahead.
Yes, hi. Two questions which are really sort of follow-up questions. The first one is, you show in a slide that the service business overall is at 40% of revenues, unchanged from last year. If I understand you correctly, your service contribution was lower in Surface Solutions, so I assume that it increased in Man-Made Fiber. I know there was a question earlier on that, but my question here is really which regions drive this increased service business in Man-Made Fiber? Is China eventually adopting more service business also in Man-Made Fiber? That would be the first question. The second, I'm coming back on the automotive industry. You said that you are getting indications or you're seeing indications for improved business in automotive already now. My question is: what indications exactly are you getting from customers? Is that coming from China? What are they telling you?
Are they expecting really higher volumes already in the near term, or is it just expectations into the second half? Thank you.
The first question, service, Man-Made Fiber. I just learned that the service share increased from 10%-12%. The nature of the beast of the service business means, we do the service where we previously have installed our equipment. That means to a certain extent, a big extent, it's in China for sure, but it's also in the U.S. where we have, for instance, carpet yarn equipment in commercial operation. I think it's a move, yes, from 10%-12%, but this is math, actually. Now coming to the second question of Surface Solutions and the automotive business. You know that in the automotive business, we do have frame contracts, right? The customers are placing their orders within this frame contract, and here we do have just a simple indication that the customers are asking for more parts and pieces. This is one element.
Of course, we are discussing and talking to our customers. Here we do see and anticipate, for instance, in China, that this tax reduction step which was introduced is creating an effect. Again, I'm not talking about full recovery of the 15% or 16% reduction in production volume. No. I'm talking about a certain recovery to a certain level, and this is what the automotive market in general expects. Everybody talks to everybody. Again, we also see it in terms of number of pieces and parts being asked and ordered from our customers. In fact, it gives us the confidence.
Okay. Very clear. Thank you.
The next question is from Armin Rechberger from ZKB. Please go ahead.
Yes. Hello, gentlemen. First, you mentioned April was strong. How was March then? The other way around. I mean, March was strong. How was April? Was it as strong as March or even improved?
That's the only question?
No, no. There will be more.
Okay.
There's more to come.
No, you are right. March was much stronger than January, February. April was fine as well, let's say that way. You understand that we do not have yet the final figures for April due to time reasons, and we have to focus on the event of today, right? It looks reasonable.
Okay. Order intake. I have a question or a nasty question for Man-Made Fiber. You already announced two big contracts you have won in January 2018 of CHF 514 million. My question is, how much was booked now in Q1 2019 of these two big orders?
CHF 60 million, to be short and crisp.
CHF 60 million?
CHF 60 million, yeah.
Mm-hmm. Okay. Next question. Your EBITDA margin was impacted by the change of IFRS 16 at Surface Solutions especially. I wonder, you already guided that will have a positive impact of one percentage point on the margin. Could you confirm for Q1 that that was about the impact at Surface Solutions and all man-made fibers?
Yeah, we can confirm that. There hasn't been any other understanding or interpretation, your assumption is correct, yes.
Okay. On a like for like basis, the EBITDA margin at Surface Solutions would have been even one percentage point weaker.
Following that logic, that is correct, yeah.
Okay. I'm a little bit surprised. First, the other question. Additive manufacturing. You were guiding that all your investments in for additive manufacturing will have a negative influence on the EBITDA margin for Surface Solutions of around two percentage points. My question is, I got the impression that in Q1 you invested it a lot in additive manufacturing. Was it above 2% just additive manufacturing alone?
I do not know what created the impression on your side, because the major investments in additive actually are done. This is, in Charlotte, the production site, which does exist and which is in commercial operation and in Plymouth, where we have our material site. It is also in commercial operation. The infrastructure is done. What we are doing now is building up the equipment and machinery stuff in line with the revenue and the top-line development. From that perspective, now the CapEx investment is just now coming, what is really required to fulfill the revenue. The OpEx part for sure does exist in terms of all this R&D projects and product development projects with customers. That's the case. The big investment, the bigger stuff is even done now somewhere else.
Okay. About Surface Solutions, your guidance for the EBITDA margin, you still stick to the 19%-21% EBITDA margin guidance. Plus you mentioned that the impact on your investments for additive manufacturing and the other new technologies will still be high in second half year. It looks to me very challenging to reach even 19% EBITDA margin for Surface Solutions.
I think nobody said that it is easy to be achieved, for sure not. We also have to be realistic. The corridor is maintained, yes, we might end up at the lower end of this corridor. Yes. That's.
Well, you already guided for the lower end before Q1.
Yeah. I think you said it. Yeah.
Now it seems to me almost unrealistic in the light of your high investments going on.
If it would be unrealistic, we would not do it. Right? No. It might be not easy, but yeah, we stick to it.
Okay. my last question, if I may. Additive Manufacturing is mainly material business, or a big part of it
No
is material business. we are faced now with the deteriorating EBITDA margin at Surface Solutions due to an increase of material business due to thermal spray activities. Will we be facing the same problem while now materials deliveries will increase in Additive Manufacturing?
No, I think one of your base assumption is not correct. Additive today is only to a certain extent, let's say one-third, roughly. Material business and two-third is service business. That means we are producing parts and pieces. from that perspective, it would be wrong to draw this conclusion as you did.
Okay. That was it.
Once again, to ask a question, please press star and one on your telephone. The next question is from Wasi Rizvi from RBC Capital Markets. Please go ahead.
Hi, good afternoon. Just a couple left from me. Firstly, I was interested to see your tooling business is growing, particularly given what you were saying about the automotive market. I'd be interested to hear what's driving that growth for you, whether it's other own markets or market share gains. Secondly, this one on man-made fibers. I was just wondering whether you're picking up any change in attitude towards large projects. Man-made fibers are generally large capital projects and trade wars and things aren't I wouldn't imagine it's particularly helpful for sentiment. I'd be interested to hear what your customers are saying and what you're hearing.
Maybe starting with the second part of your question. No, we do not see any impact, and we do not see any change in behavior. I think indicated it in my speech that we are negotiating again bigger contracts in China, filament leading into 2022. The underlying demand and the underlying mega trends in China, asking for more sustainable technology in terms of resource consumption still exists and is maintained. From that perspective, no, we don't see any impact here. The first question was concerning tooling in the Surface Solutions area. Yes, you're right, automotive is a strong and important pillar of this business, but there are others. Electronics, semiconductor business is doing quite well right now. Food processing stuff and general industry, and maybe not to forget, we are implementing our strategy.
That means we are increasing our share of thin film technology in aero and aviation industry. This is contributing. Aviation is doing quite well. This is contributing and compensating the downturn in automotive production. This brings us to the result we have shown.
Very helpful. Thank you.
There are no more questions at this time.
Okay.
Okay.
Thank you very much for joining the call. We're happy to assist you if any additional questions may occur. Other than that, we'd like to speak to you at the half year results in August. Thank you very much again for participating, and have a good afternoon. Bye-bye.
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