Good morning, ladies and gentlemen. [Non-English content]. A very warm welcome to the R&S Group 2025 annual results presentation on this very sunny day here in Zurich. We thank you for your interest and are delighted to have you with us today, either here in person at the Park Hyatt in Zurich or by following via webcast. With we, I mean our Group CEO, Eduardo Terzi, our Group CFO, Matthias Weibel, and myself. My name is Doris Rudischhauser, and I'm the Investor Relations Officer of R&S Group. Before we begin, I would like to take care of a few housekeeping items. Recording and webcast. Please be aware that today's event is being recorded and broadcast live as online webcast. By remaining in the room, you consent to being recorded. I would also like to draw your attention to our disclaimer on slide three of the presentation.
This presentation contains forward-looking statements that involve risks and uncertainties. Please acknowledge the disclaimer. Let's now move to the overview of today's agenda. Eduardo will begin with a brief introduction of the key highlights of 2025. He will then hand over to Matthias, who will present the full year 2025 financials in detail. Eduardo will follow up with an update on our strategic progress before we turn to outlook and conclusions. After the presentation, we will open the floor for your questions. We will first take questions from those of you here in the room. As a courtesy, when you wish to ask a question, please wait for the microphone to reach you. Once you have it, kindly state your name and the name of your organization clearly before posing your question. Thank you.
Afterwards, we will take questions from participants joining via webcast, and I will read out the respective question to everyone. Without further ado, I'm now pleased to hand over to our Group CEO, Eduardo Terzi.
Thank you, Doris. Can you hear me? Good morning, everybody. Nice to see a great turnout here. The room is full and there are many, many colleagues also watching us online. It's a pleasure to see the great interest in R&S Group. Let's start with some highlights of the year 2025. First of all, record order backlog. This is a confirmation of the excellent market momentum that we are living in, and our successful penetration in the new markets and new applications. We benefited strongly from customers in the renewables, especially photovoltaic industry, infrastructure like harbor electrification, and increased our participation in the data centers market. Another highlight was the inauguration of our new oil distribution transformer factory close to Bochnia in Poland. It was in April last year. I think some of you were present there.
I'm glad to say that we achieved the target of phase one of capacity production targets and now we are ramping up our sales. As I mentioned many times last year, I explained that when you have a new factory, you need to qualify by the biggest customers. You need to produce prototypes. There's factory visits, audits, until you are allowed to participate in tenders, for example, to E.ON. For E.ON we are fully qualified now, but it takes some time, so we are doing this continuously to increase our sales in that factory. We're very confident that factory will bring excellent results for us already in 2026 and beyond. The third key business highlight is our new greenfield power transformer factory in Łódź in Poland. The groundbreaking ceremony was in November last year, and it was fantastic.
The construction works are going as planned without delays, and we expected to start producing the transformers by the last quarter of this year. I'm going to give you more details later on in this presentation. Which were the key achievements in 2025? Complement what we just saw in the previous slide. There are a lot of things that were achieved, as you can see in the presentation, but I would like to focus on the two very important ones, is the last two ones that you can see in this slide. First of all, you remember that after my 100 days in the office, the number one question from all of you was, "Eduardo, you come from the industry, from outside. You are new here. What are the strengths of R&S and where do you see potential for improvement?" Yeah.
Because you cannot benchmark and et cetera. I mentioned some things, but one of the key areas was to drive higher efficiency by building capabilities in some key areas in our industry. Procurement for procurement bundling, operational excellence, digitalization, and of course, human resources. We have been very successful so far, and this is bringing already great results with the new capabilities, sometimes new colleagues, and we will continue doing so in 2026. This is a very important topic, fundamental for our future. After identifying the key strategic topics based on what we want to achieve and how we want to achieve it, we defined the three main areas, which is the go to market with better market intelligence and changing our sales set-up to focus on the high growth and high margin market segments. We'll talk about that later on.
Operational excellence to remain always competitive and building a high-performance culture. We define concrete measures out of this strategy, because strategy alone doesn't bring anything. You can put it on a piece of paper, but you need to have a concrete and disciplined strategy implementation plan. We did that, and we converted all these key initiatives in concrete priorities for 2026 and beyond. I will elaborate a little more in detail later on in my presentation. Before I do that, I would like to hand it back over to Matthias. I'm pretty sure you're curious to hear more details about the full-year 2025 financials, and then I'll come back to you. Okay? Thank you.
Thank you, Eduardo. Good morning and welcome also from my side to this annual result presentation. Many thanks for your interest. I'm very pleased to report that the R&S Group delivered a strong performance in 2025. It was supported by good market demand, Eduardo mentioned it, continued capacity expansion, improved operational execution, and ongoing cost discipline. We've already published the key figures, but since they look so nice here and they are again on one slide on the top left, the order backlog, which continues to grow. In 2025, it increased by 17% from CHF 278 million -CHF 325 million. Net sales reached CHF 414.8 million. That's an increase of 47% in reported numbers and 8.6% in organic terms. EBITDA margin of 20.9%, in line with our guidance. I will elaborate on this later on.
High profit after tax of CHF 58.1 million, an increase of 41% compared to prior year. Free cash flow increased as well from CHF 44 million adjusted to CHF 48 million or 11.6% of net sales. This result was achieved thanks to good cash conversion, high operating cash flows, and despite higher investments in capacity expansion. I will also say more about that later. In our ad hoc announcement, you might have seen this table already. Here we directly compare the actual financials with those from the previous year, and the table therefore helps get a better idea of our growth in absolute terms as well as in relative terms. Since in 2024, the Kyte transaction was included, it makes sense for once to compare the current reported figures for 2025, to compare with the adjusted numbers for 2024. In particular when comparing the free cash flow.
For the rest, the differences are very small, which I think is a good thing. Let me just briefly highlight one thing in this table that is particularly interesting, besides all the numbers we have mentioned before. Net financial debt. It was reduced by 31% in 2025 and is now only about CHF 63 million. That is a very reasonable level. It can be recognized by looking at the leverage ratio, which compares debt to EBITDA after the acquisition of Kyte. In 2024, we had a leverage ratio of 1.6, and now it's at 0.7 by end of 2025. This shows that we have successfully digested the acquisition of Kyte after just one and a half years. Of course, there are many more details to discuss regarding our financial statements and consolidated results.
I'd like to refer to this slide with the P&L, where you can review further details for each specific position and item. This year, unlike last year, it's very self-explanatory. The presentation includes similar slides for the balance sheet and the cash flow statement with explanation of all details. Don't worry, I don't go through all the items. I won't read anything out loud here. Just, if you find time, please have a look at the cost ratios, personal expenses and operating expenses relative to net sales. You will see that despite our growth in 2025, we achieved high level of cost discipline with slightly lower cost ratios than one year ago. Thanks to this cost discipline and improvements in the operational excellence, we're able to keep our margins stable. I will say a little bit more about that later on.
Let me say a few words now about our customers and the order intake. On the right-hand side, the development of the book-to-bill ratio reflects the stable and continued positive market momentum, with numbers consistently above 1 and above 1.1 in most months. The high order intake, as well as the high backlog of CHF 337 million at end of February 2026, provides evidence and visibility and a positive outlook for the future. Of course, here we have to be very transparent. The new plant for power transformers, which will be opening in Q4 this year, is strengthening our competitive market position already today. Our customers are looking forward to it, which is why we are already booking orders for power transformers into the year 2028. Where are our customers and what products do they buy from us? All product groups performed well.
Just a second. Contributed to the positive result. We saw good demand for power transformers in Germany and Poland, stable demand for oil distribution transformers in most markets, even though sales of these products were affected by lack of installation capacities at some of our utility customers. With cast resin transformers, we were able to compensate for muted construction environment in Germany with applications such as data center and harbor electrification. We can state that R&S has a very balanced sales mix. Europe, in particular Western Europe, is and remains our home market. Just look at the pie chart. You see that in 2025, we generated 78% of our net sales in Western Europe. One year ago, it was 72%. The breakdown of sales by country illustrates our well-balanced sales mix.
On the one hand, the acquisition of Kyte, of course, has significantly increased the share of sales from U.K. and Ireland, and thereby reducing the risk connected to other countries and regions. Of course, one can also see here the upside potential that still exists, for example, with markets in Asia and the Americas. Sales generated in the German market, 11% of total net sales, 8% was it in the previous year. In the first half of 2025, it was even at 13%, but that was not that much because of the German market, but primarily because of other strong markets such as Poland and Italy, which were able to catch up in the second half of the year. Yes, we are growing in the Middle East, true, but there our exposure is still below 3% of total net sales.
Another real highlight in 2025, the POC-related sales with our power transformers, percentage of completion sales. They were 40% higher compared to previous year, and once again, contributed more than 20% of total net sales. Let's go down a bit further in the P&L and have a look at how the margins have developed. Following the acquisition of Kyte, it was clear that the consolidated gross margin, we call it the added value, would go down a bit, as Kyte has a different level of integration, vertical integration, and therefore has another cost structure than all other plants of R&S. In 2024, the group's gross margin was around 50%. Now it's slightly lower. It's at 46%. However, we have successfully managed EBITDA and EBIT at, say, healthy levels between 19% and 21%. Profitability was kept very healthy despite the portfolio effect from the acquisition.
Of course, this didn't just happen by itself. It's the result of our strategy and our ongoing efforts to keep costs under control, personnel costs, operating expenses, most of all, material costs. That's a good transition to my last slide. It's actually my favorite slide. It illustrates very well both the nature of our business and the factors behind our success. I was told to explain it well, so I will start with the lower gray line. It shows the monthly development of R&S operating cash flow. As you can see, it remained stable within a range of CHF 5 million-CHF 10 million per month. This resulted in operating cash flow for the full year of overall CHF 66 million, CHF 17 million, or more than 1/3 higher than last year.
Based on our monthly operating cash flow, it took us an average of eight months to finance our working capital. The development of our net working capital is shown by the upper two lines, the blue one and the orange line. The acquisition of Kyte, of course, has added inventory, work in progress, receivables, payables, as well as our growth with power transformers. Both led to an increase of the working capital. And that's important for us, despite more business, the net working capital remained well below 15% of net sales, which is very good. Why is that? On one hand, because net working capital management is key to us. We keep a tough eye on it. We work on it every day. On the other hand, it was thanks to higher advance payments from customers. They pre-finance the material procurement and processing of the orders.
The advance payments from customers on our balance sheet as of end of 2025 was over CHF 36 million, almost 2 million more than end of 2024. Let me sum up my thoughts on our financial performance in 2025 and conclude with two messages. One, we had a year with strong operating results, high order intake, 17% higher backlog, strong top-line growth reported as organic, margins still at the healthy level. Second key message, continuous high cash conversion, underlying our ability to translate EBITDA directly into cash. Free cash flow on net sales, 11.6%. High cash conversion led to a lower leverage ratio, as explained, of 0.7 and lower debt of only CHF 63 million. Last year, it was over CHF 90 million.
A positive cash flow not only helps us repay loans, but also enables us to finance further strategic investments and, of course, to pay out attractive dividends to our shareholders. Good. Before I hand over to Eduardo again, let me say a few words about our non-financial report. Sustainability is an important part of R&S business model, supporting our long-term value creation because our products are inherently sustainable. We conduct our operations in accordance with the UN Guiding Principles on Business and Human Rights and the OECD Due Diligence Guidance, and of course, with the UN Sustainable Development Goals. In 2025, the group strengthened its sustainability framework with a focus on enhanced group governance, conducting a double materiality assessment, as well as a climate risk assessment.
There were significant efforts also directed towards improving the quality and robustness of greenhouse gas emission data across Scope 1, 2, and 3. We have specified and reconfirmed the following group targets: reduction of operational greenhouse gas emissions by 33% by 2033. Key initiatives supporting this target include energy efficiency measures, on-site renewable energy generation, et cetera. Net zero by 2050. It goes hand-in-hand with our first target. Achieve group ESG rating EcoVadis by Q4 2026, very important for the whole group, and often a must-have in tenders. The targets to be set in today's changing regulatory environment conform to these changing requirements. Of course, we have defined action plans for each of these targets, along with assigned responsibilities and a roadmap with clear milestones.
You can find all the details in our non-financial report, including the results of our double materiality assessment and our ESG roadmap for the next three years. Now I'd like to hand over back to Eduardo, who will tell us more about the strategic progress.
Thank you, Matthias. Great financial performance, don't you think? At least the stock price now says it is. Let's talk about our strategic progress. As you know, we're operating in a highly attractive environment. The energy transition is here to stay. It's not a two to three year hype. It's the industry story of our lifetime, and transformers are at every place of it, in the center, and it's everywhere. There's no energy transition without transformers. I will use the next 15-20 minutes to go through the structural demand drivers for electricity and transformers. Our market position in a sweet spot between the large players and the small local manufacturers, how we are targeting high growth, high margin business, our go-to-market strategy and approach, the focus execution, how we convert strategy into execution to achieve profitable growth.
Finally, as Matthias loves to talk it, about our disciplined capital allocation to provide attractive shareholder returns. In this slide, you can see what we called structural megatrends. They are the driving forces for energy and transformers demand. First of all, demand growth sounds trivial, but let's not talk about electric cars or new applications, transformation of industry from gas to electricity. Just think about population growth and use of, with the global warming, more air conditioning, et cetera. Normal increase of electricity consumption. In the last 20 years, there's not much increase. Actually, there was increase of population, increase of more usage of electricity, but there were several measures, efficiency measures in Europe, eco-directives to reduce losses and increase efficiency. For example, the LEDs. Remember before we had these light bulbs, they used a lot of power, 100 W.
Now, an LED with 7 W has the same brightness. There is a lot of measures from the EU and also in other regions of the world to increase the efficiency. There was no real increase in demand for electricity in the grids. Now we are reaching a point that it's hard to squeeze the lemon and get more efficiency in power consumption. There is now a continuous increase in demand from the normal regular electricity consumption from lighting or air conditioning, and increase of population. This is one thing that didn't happen in the past, but it's one of the drivers now. On top of that, we have several other megatrends. For example, decarbonization. The build-up of renewable power generation, electric cars, and battery storage.
All of these required grid connections, and since these are in low voltage, they required transformers for every single point of integration. The third point that decentralization adds to all of this, because more and more of the power generation and storage is happening at the end of the grid. At the end of the grid, like a rooftop photovoltaic in the houses. Battery storage, microgrids, increasing the number of generation and storage points, which also requires transformers for the connection. We have digitalization. With increase of data usage through social media, cloud computing, everything's on cloud now, all the application on cloud, and most recently, the last three years, we saw with the artificial intelligence, the amount of data that is required, processing power that is required for all these AI agents being adopted worldwide.
This creates a huge demand for reliable energy, and transformers are used everywhere. Think about the data center. A data center campus needs distribution transformers inside the campus because they consume so much energy. To distribute this energy, you cannot do it in 220 V or 480 V that the GPUs use. You need to transmit this energy in medium voltage, 10,000 V-23,000 V, so that you don't have much losses, and the cables are normal size. It's impossible to feed the data center internally with low voltage. You need distribution transformers inside, but you need also transformers outside the data centers for the network that is feeding that data center. You need bigger transformers. On top of that, there is the modernization of the grids.
A significant part of the European grid is aging and significantly so, about half of the equipment in our grids will turn 40 by the year 2030. This equipment were not designed to work for 100 years because there is degradation of the equipment. Be it a switch gear, a circuit breaker, or a transformer, there's a degradation because of paper, insulation, oil, and so on. That means that replacement of this equipment in the grid is not optional anymore, it's scheduled. This will come. For many, many years, there was no investments in the grids. For one side, as I mentioned, there was no real increase of demand, basic demand. There was no data center. There was no renewables. The grid was not so old. Now we have a perfect storm for us, a positive perfect storm.
On top of that, we need to consider, as you see here on the right side, for every megawatt of power generation added to the system, at least 3 MVA of transformers is needed. Why is that? Why do we have this multiple? Because remember, transformers are used Generation is always in low voltage. You need to increase the voltage, transmit, and then you need to decrease again. You need at least the double because you need transformers to increase and to decrease the voltage. On top of that, there's a redundancy. In many parts of the grids, there are two transformers there, because if one fails, there's no blackout. For every megawatt installed in the grid, there's 3 MVA at least, sometimes up to five or six times more in transformers required. This multiplies the demand for our products.
Together, all these drivers support a market growth of about 4%-6% per year. This CAGR, in general, all the products with all the markets, all the customer segments, is an average. Some much higher. For example, data centers 15%, some less, but on average, it's 4%-6%. If you're going to see later on when you talk about the guidance again, we are aiming at growing as double as fast as the market. Let's talk now about our product portfolio. I think many of you already know that, and we discussed continuously in the last year, but for those not, I would like to explain a little bit more. We have a broad portfolio, mainly organizing three product classes. The oil distribution transformers, oil-immersed distribution transformers, the cast resin distribution transformers, the red ones there, and the power transformers.
Let me just explain what the difference of oil immersed and cast resin is. Basically, it's insulation means used inside the transformer because you have the windings, high voltage winding, low voltage winding, and in order to avoid the short circuit between the turns, you need to have insulation means. Inside that box, there's mineral oil or vegetable oil inside that penetrates the windings and avoids the short circuit. It's insulation. Does not allow for a breakdown and flashovers. The cast resin transformers we call also dry type transformers. It's dry because it doesn't have oil. The insulation there is with epoxy resin. It's a hard resin. When you manufacture, it's not hard, it's liquid, but then you put it in an oven, and it becomes hard. This transformer has some advantages compared to the oil.
It doesn't catch fire, so it's preferred by industrial customers, data centers, infrastructure like metro, because you don't want the transformer to catch fire in a metro, right? It costs more than oil, but there are some specific applications for that, and that's why we have both. There's good markets for both of them. As I mentioned several times when we discussed last year, the transformers market is very fragmented. There are different customer segments, different applications. That's why we need to have also different transformer types. The third one is the power transformer. They put a young man there so that we have an idea of the size. In our new factory in Poland, it's going to be even bigger than that one. It's also oil-insulated. You cannot have dry types so big transformers.
It's used more for bigger customers, mostly in photovoltaic or in the grids, transmission distribution grids, when the nodes are still big and then you distribute with distribution transformers. With this broad portfolio, of course, for each of these categories, we have several different variants of these transformers, different voltages, different power, special applications. We're going to talk about that later when we talk about R&D. With this broad portfolio, we are serving broad and diverse customer base. We serve industrial companies like a factory, Tesla factory, for example, that needs the transformers inside. Infrastructure builders, I mentioned airports, renewable energy developers, photovoltaic or wind farms, and utilities, as I mentioned, are the transmission and distribution grid operators like Repower, CKW, or Amprion.
In this slide, you can see some examples of customers in the segments that we serve, such as ships and harbors, data centers, airports, wind farms, just to name a few. Again, as you can see, transformers are everywhere. This diversification of products and customer base give us exposure to multiple, well, it's important to say multiple demand drivers, because could be that in some period of time, one driver is better, it's growing faster, the other is slower, and then they turn against. It gives us the flexibility to continuously choose the applications where technical requirements and the margins are also the strongest. Having a broad portfolio and a broad customer base allow us to be selective and to guarantee profitable growth. Let's now look into a third dimension.
To talk about product, customer segment, and now regions and markets, and of course, our footprint in these regions as well. I will not talk about specifics about our footprints, our factories. You know that already. I want to explain here our positioning in the market. A question that comes very often, how we differentiate ourselves. How are we compared to the large players or smaller players? Are we better? Worse? Of course, we are better. The transformer markets speak between the large players, very large players, their global footprint, they have very large factories, and the smaller players. There are some smaller players in one specific country. There's one family with a small factory there, and they supply basically to that specific country.
Large players focus on large tenders because they need to have the base load for their big factories, so they need to participate in a more commodity business as well. They carry higher overheads. The smaller players on the other side, they lack scale, like procurement bundling among several factories, engineering capabilities and depth and consistency. The R&S Group sits between these two groups. We call it there's a deliberate sweet spot that we chose to be. With well-established and renowned brands that you can see here, we operate a network of nine facilities, including the new power transformer factory in which we're going to have nine factories in these locations that we are seeing there across Europe and Middle East.
This footprint spread all over Europe and Middle East give us a very good customer proximity and deep local relationships, which is crucial in our business and is part of our unique selling proposition. At the same time, we have scale advantages against the local players, and we are more agile than the large conglomerates. We are less dependent on these bulk orders, large three years, five years tenders with e-bidding. We do not need to participate in such biddings with dog-eat-dog tenders with very low margins. We can be much more selective in choosing profitable business. Lastly, we have high-quality factories in best cost countries, like in Poland, that coupled with our lean overhead, allow us to be price competitive and deliver stronger margins. This is a position that we have compared to the larger players and smaller players.
I truly believe that we are in a sweet spot, and we continue reaping the benefits of being there by fostering the key success factors that we know that exist in this niche. Let's talk now about our go-to-market approach. We talk a little bit about our product portfolio, the customer segment view, they're very diverse as well, and the market, we can read it as a region. It's Poland. This is Germany. Our go-to-market approach is that we look at the combination of these three dimensions and map it regarding growth rates, CAGR per year for this combination, this cluster, we can call it a cluster, and the earnings potential, what is the margins is. Then we define our sales setup and our sales initiatives with concrete measures to drive business in these clusters of combination of product, customer segment, and market.
I can give you one example. We have been very successful with cast resin transformers in the harbor electrification in Southern Europe. Customer segment, product, and region. Also, in power transformers. Power transformers in renewables in Germany. But there are some areas which are not so attractive, and this we leave it aside. For example, I just talked about renewables, power transformers, renewables in Germany, very attractive. What about industry in Germany? You guys know how the situation in Germany is, it's a losing industry. Nobody's building factories in Germany. So the industrial market for distribution transformers in Germany is not so attractive. There's no growth and there's no margins. If you look in Poland, there's a lot of new factories being built. We are building, ramping up one factory, building the fourth factory in Poland.
Same type of market industry, neighbor country, but completely different attractiveness. Our go-to-market approach is to have deep market intelligence, look into these three dimensions, identify the clusters with highest growth and profitability, and define our sales activities and measures accordingly to guarantee profitable growth. That's why we think we don't want growth for growth. We focus on areas we can have both growth and margins, because at the end of the day, you know that what matters is profitable growth. How do we do that? On this slide here, you see our priorities, to translate growth into what I just said, strong profitability and cash generation. The execution of our strategy cover five strategic levers, the way for us to summarize for everybody to understand more easily. The first topic is the go-to-market, which I just presented, and I will give some examples.
It's not completed because these clusters with high growth and high profitability, there are several. In general, for each of our product groups, we have a main idea where we want to play. Again, there are many others. For example, in oil distribution transformers, the first one that you saw in our product portfolio, they are sold mainly to utilities. We sell mostly to utilities. We plan to continue growing with the market. We have already high market share in the markets that we are, like Ireland, U.K., Switzerland. We want to grow with the market because if you want to have more market share, the margins will suffer. We want to keep our market share and increase the operation performance, increase the profitability. We want also to diversify from utilities. Oil distribution transformers are also used in data centers.
There are some customers, data centers, they put the transformers outside of the building in case it gets fire. There's also part of the customers that use oil distribution transformers for data center. Battery storage is a big market for oil distribution transformers as well. Photovoltaic as well. Photovoltaic, when you are on the road, you see on the right side, left side, a lot of photovoltaic farms. You can see there's some small houses there. There's always a transformer inside. Yeah? Normally, in this case, this oil distribution transformer. We want to grow with the utility market, but diversify to data centers, battery storage, and photovoltaic. For gas-insulated transformers, we're expanding capacity. We're going to tell later on what are priorities for 2026 in my next slide. We're expanding capacity to gain market share.
In this case, we want to grow fast in data market and gain market share, primarily in data centers, battery storage, and construction, both in Europe and the Middle East. For power transformers, the focus is capacity expansion. I mentioned that we are building a new power transformer factory in Bosnia, and we're increasing capacity in the existing factory with a new equipment, new oven that brings more productivity. Not only increasing capacity, but we also want to go to new high-end applications. For example, in the new power transformer factory, we'll be able to produce transformers with higher voltage that we do not supply today. These are more special transformers with better margins, and where they used different loads of the grid with the bulk power, you need to have higher voltage so that the current is lower.
The higher the load is, the higher the voltage is. We're going to be able to produce up to 230,000 V transformers. Today, we produce up to 110,000 V. Also the power of the transformer is going to be bigger. Maybe you can also tomorrow produce shunt reactors and other special applications in the new factory. As I mentioned, the market is huge and we're going to selectively approach these clusters that are combination of product, customer segments, and region. This is in a nutshell for the three product categories, what we are aiming at. I said before, there are a lot of other classes that we will address. The second lever here is the operational excellence.
We discussed also in the past that to address the key success factors in our transforming industry, we need to be excellent in procurement, in design to cost, in lean manufacturing, and achieving productivity continuously, and avoid bad quality, means waste, quality cost. The key drivers for that is digitalization, global procurement bundling, and design to cost initiatives. The third lever of our strategy is to focus on people and building a high-performance culture. We're strengthening competencies, as we said before, developing our talents, moving towards a more integrated group structure with the job rotation and more bundling, best practice sharing to use the muscles that we have as a global company. But we will continuously preserve the freedom and entrepreneurship from our business units. Of course, also the local customer-oriented culture has to remain in the business units.
What we do at corporate level is to support the business units. We need to give and keep the entrepreneurial spirit and the customer orientation of our business units. The fourth lever here is our portfolio development and R&D. We define a roadmap, our R&D roadmap, and we are executing this roadmap to achieve two things. To go to higher-end products, as I mentioned before, higher voltage, shunt reactors, special transformers for data centers. Second thing, design to cost. Not everywhere, sometimes you have the best design. With engineering and prototyping, you can produce a transformer that has the same electrical characteristics, but use maybe less material. There are new techniques, new materials that you can try.
It's important that we continuously develop that so that we keep our competitiveness in the state of the art compared to the best in the market, and also driving by being the best. Finally, the fifth is M&A. We will continue with a proven acquisition strategy. Matthias said in 1.5 years we absorbed the acquisition of Kyte. We are very healthy financially, and we are very robust to continue this journey. We are clearly focused on selective and value-adding opportunities. We will not do M&A just for doing M&A, but I think the company has proven already that we are good at it. Together, all these levers, they drive profitable growth and build a scalable organization for the future. How does that translate to 2026? What are the concretes?
Because a lot of what I presented is this theory and a strategy on paper and PowerPoint. How do we convert this into concrete actions in 2026? I listed here some of the actions that we're implementing in 2026. We do have strategic program for the implementation for strategies, very comprehensive. Here, I'm going to highlight the most important ones that are bringing and will continue bringing results to the R&S Group. To support our go-to-market approach and strategy, we are continuing to ramp up the factory close to Bochnia. We are progressing with the construction of the new power transformer factory in Łódź, where we plan to start operations already in Q4 of this year. We're going to deliver the first units already in 2027.
At the same time, we're expanding the cast resin, the red ones, the dry-type transformers production in Italy, Poland, and in Abu Dhabi. Focus will be in battery storage, data centers, and construction because of the very high demand of these three applications. Regarding our operational excellence program, with full power, we are leveraging our Kyte factory to its full potential. We discussed many times, there is potential in Kyte and that there are concrete measures there to improve output, to get more output of the factory, reduce costs, and increase the efficiency and profitability. We are capturing efficiency in several areas for operational excellence in the design that I mentioned, design to cost, design to manufacturing, global procurement, and also efficiency in production in all our factories, not only Kyte.
Kyte is the focus right now because it's a large portion of our business, but we have an approach to roll out these initiatives to all our factories, to the nine factories. In addition, as part of the operational excellence, we need a very important backbone behind all these features. We started to prepare for a group-wide ERP. Today, we do not have a harmonized system. We have different systems, even with different suppliers in different factories. A harmonized system will help us create a scalable platform for the group. It's a basis for improving transparency, first of all. Standardizing process helps a lot. Strengthening planning, controlling, and procurement as well.
Imagine if you have different factories with different material numbers, you cannot even see how much you buy of this type of material here so that you can go to the supplier and make a global tender of the amount that all the factories have. Each factory has a different component number, part number. There's a huge potential when you have this transparency. That's why it's one of the preferred topics from Matthias, and we are very keen to start with this project. Of course, it will support with all of this also our growth and our margins. Wave one, so the first part of this project with the first pilot, it's planned to begin already in 2027. Organizationally, we continue to build capabilities, competencies that I mentioned before, and harmonize our group-wide processes.
In global procurement and supplier qualification, in quality, we are strengthening our sales setup to be able to achieve what we decided in the go-to-market approach. Without a sales setup, real people going after the customers, writing to customer, making the offers, talking with engineering to design the transformers according to the specifications of the new customers that we want to approach, reaching the target prices. Without that, the go-to-market approaches remain on paper. We are doing this in a concrete way. We are capturing all the market opportunities as possible. Overall, becoming more and more resilient. When we talk about our R&D roadmap, the focus for 2026 is to establish a R&D center. Doesn't mean that it has to be physically in headquarters in Sissach or in any of the places.
We have excellent engineers in all our factories, but it's important that we have a clear, centralized roadmap so that we do not spend hours of engineering developing same things in two factories. It has to be coordinated because now we are global company with nine factories. This roadmap was defined looking to what we call technology radar. We're looking to the future, what the competitors are doing, what the market trends, what the customers are needing, what are the particular regions, what are the risks, what are regulations coming in three years, in five years, in seven years. Based on this technology radar, we defined R&D roadmap to develop the application that will be needed next year, in three years, in seven years, and maybe even in 10+ years, for example, solid-state transformers. Alessandro always like to talk about that.
We always screen the market to define which products we need in the short term, mid-term, and long term. On top of that, half of our projects are designed to cost and designed to manufacture. We screen also the market. We know in which markets we are not yet competitive compared to our competitors when we participate in a tender. We define backwards what's the target price and then say to engineer, this is the target cost. With that, we are able to penetrate new markets or to increase the margins in the markets we already have presence. Lastly, the M&A. We have an active pipeline that we work continuously every month, and we keep evaluating opportunities that bring added value to the company.
With that, I would like to invite Matthias to present the guidance and conclusions, and I'll come back later for the key takeaways. Thank you.
Thank you, Eduardo. The execution priorities Eduardo just mentioned are reflected and incorporated in our capital expenditures. You see, we continue to invest in our organic growth in our year of investment, 2026. You see, 7% of cash CapEx, including the new plant power transformers in Łódź. Just look also at the blue bar there below. These investments will help us to accelerate growth from 2027 onward. After the opening of the new plant in Q4 this year, the CapEx spending for maintenance and expansion will normalize. They will go back to about 3% of net sales. An additional 1% will cover the external costs for the new strategic project, the new ERP. We're launching this new project now, end of this year, starting with 2027. As Eduardo said, it will be the backbone of a more integrated group.
It will help us to enhance scalability to benefit from synergies and monitor and control everything much better than today. We will tell you more about that also at our Capital Markets Day in November. As said before, this year the focus is on our new plant in Łódź, which will double our capacities of power transformers. That's why we have prepared a short video on this we would like to show to you now. Looking ahead, we expect the market trends to remain strong and supportive. Let's have a look at the guidance now. It is the summary of all we presented and explained to you today. All of our plans, all our conclusions are reflected in our guidance, which you see here on this slide. You can see that there is no change to our guidance.
Our midterm targets are confirmed at 8%-12% organic growth, and an EBITDA margin of 19%-21% over a three-year cycle. Nothing new here this year. As communicated earlier, we expect to be at the lower end of these ranges. On the dividend, the board is proposing CHF 0.50 per share, with at least the same level planned for the upcoming years.
Thank you, Matthias. Let me close with the key takeaways, and they are great takeaways. First of all, as we discussed thoroughly today, we have direct exposure to the electrification super cycle. It's a structural growth. It's not a hype, it's not a cycle. It's a structural growth of demand for energy, and as you could see in our presentation today, also for transformers, because transformers are needed everywhere and in a multiple of the power generation added to the grids. We have a differentiated market strategy. Different than the large players, different than the smaller players, which targets with the right customer segments, with the right products, in the right region, meaning that we focus in high growth, high margins markets, gain profitable market share.
We have clear execution priorities, and execution is a word that I like very much because most of the companies, they fail in implementation of this strategy. Defining the strategy is not the most complicated, but having disciplined execution is crucial, and we do have a clear strategic program to implement our strategy, deliver operational excellence, and disciplined capital allocation to translate growth in strong profitability and in cash generation. All of this cannot be done if not driven by a proven leadership team, a performance-oriented culture everywhere up to the shop floor, and ongoing initiatives to strengthen the organization as we evolve and grow. Lastly, strong cash generation supports attractive shareholder returns and supports also our investments in R&D, investments in the capacity expansion, and any growth that might come through acquisitions. With this, I'd like to thank you for coming here today.
Very happy to see great turnout, and I look forward to also interesting discussion with you in the Q&A. With that, I pass it to Doris to moderate the Q&A session. Thank you.
Thank you, Eduardo. As I mentioned before, we will start with the Q&A here in the room. As a reminder, please wait for the microphone, state your name and organization. Also, in order to give everybody a fair chance, may we ask that you pose just one to two questions at a time, and then we will come back later on. Who will raise his hand here in the front row?
Okay. Thank you, Alessandro Foletti, Octavian. Thank you for taking my questions. I'm going to limit to two and then go back in the queue then. Maybe on the expansion of capacities, am I understanding correctly that you are moving up the target for deliveries or production in Bochnia as well? And can you maybe specify how many transformers you might plan to produce in that factory?
Sure.
Yeah.
You're referring to this slide here. Actually, we stick to our original plans. The orange bar below is still the ramp-up phase. We're still in the ramp-up phase. We started last year with the ramp-up of Bochnia, and also in 2026 we are in the ramp-up. The ramp-up is always two-folded. You have a production ramp-up, and then you have a sales ramp-up, and in 2026, we are now in the sales ramp-up. There was no change.
When you say no change, what does it mean? 3,000? Are we cruising towards the 3,000 or so?
No, we stick to our original plans, which are above 1,000 units, 1,200 units this year.
Okay.
Just as always, units, you cannot count our business in units.
Fair. I understand.
It's also about MVA.
Okay, the second maybe, again on this slide, would be the blue line.
You write there that you expect to have initial deliveries in 2027 with the power transformers. I'm a little bit surprised.
Maybe already in 2026.
Yeah, that would be my question. Would that be real deliveries or only maybe some POC completion of certain projects that have started in Q4?
Let's see. The opening is Q4. We'll start. We do the procurement. We have orders already in our books, and we will have a work in progress, and we will have first deliveries in 2026.
Alessandro, if I can say a few words. Remember, the power transformers requires 9-12 months production. When you say that we start producing in Q4, we start with the windings, et cetera, so maybe some POC can be booked, but it will be in the very beginning of the production of the transformers in Q4. Exactly. For us, it's important to have a milestone because it's really when you start really having procurement, having the material, and the workers, the winders already working. It's important for us to have this start physically more than the thinking about the revenue recognition.
In the slide before this one, you write that for the power transformers, you expect to have first deliveries in 2027. Doesn't sound like much—
No
—in million.
No.
Why is that? I would have expected that in 2027 we have already a substantial amount of million in sales.
No, it's not a substantial amount. We do not disclose the exact amount.
2027.
2027.
Oh, in 2027, yes.
2027 is correct. 2026 is not.
Yeah.
2027 is correct.
First delivery still means a substantial amount of—
Yes
Sorry, I don't understand the—
2027. Yeah.
Okay.
The real sales ramp-up of the power transformers will be in 2027.
Yeah.
Yeah.
Florian Sager, ZKB. You didn't really talk about utility impact, and I know there's been a lack of electricians recently, and it's in some parts of Europe. Maybe you could talk about that, and would my assumption be correct that that is the reason you're now tilting more towards other end markets away from utilities? I would have a follow-up.
Yeah. First of all, it's correct. We're still seeing the effect that some utilities in U.K., Ireland, Switzerland, or Germany bought too much during the COVID phase with the fear of not having enough supply. They have their yards full, and they do not have the electricians to install it. We are still seeing here that we expect improvement of situation second half of the year. The decision to diversify from utilities is not because of this temporary issue. I think it's important that we have a diversified customer base in different applications also in the oil distribution transformers. It's not healthy to be so dependent on the utilities. There are some clusters that I mentioned, the different application region, product, and the customer segment that have better growth and better margins.
This diversification is a deliberate decision based on our market intelligence analysis and our go-to-market approach.
Okay. Thank you. For the power transformers, I don't know on which slide it exactly was, but you mentioned you're booked until Q1 2028, I think it was, and this would include the new plant as well, right?
Yes.
In Poland? Okay.
Yes.
Correct.
We are already receiving orders for the new power plant. Yeah.
Okay, perfect. Thanks. I'll go wait in the queue.
Okay.
Sebastian Vogel, UBS. First question is on the raw material side. Given what we see at the moment, do you see any sort of constraints to the availability of raw material per se? Can you remind us what sort of raw material hedging you're using? What sort of lag we see there until you could see something on your P&L, if you have any sort of pass-on clauses, just that we have a little bit of a better idea of the whole topic.
We have in most of our customers' contracts, we have a price escalation formula that we can pass to the customers. There are still some customers that do not accept that, some photovoltaic customers for power transformers where they do not accept, but then we put a risk adder in the buffer, in the offer calculation. We do not expect any impact from material price variation over the long term. It's not a perfect solution. The price escalation formula, there's a lag until the index is published, and then you can apply the price escalation formula. But in one contract, you lose a little bit. The other one, you have a positive effect. It balances out. For the hedging, maybe you can—
Yes. You see all the details in the notes to Note 28 in the annual report. We hedge the raw material, especially for the power transformers. As we heard, it takes eight to nine months to produce a power transformer. It definitely makes sense, and we even secure our FX on these products and these orders.
Got it. Second question is with regard to pricing. Can you remind us what you have seen in terms of pricing headwind in the second half of 2025, what you have seen year to date, and what you're sort of baking into your organic sales growth guidance for this year in terms of pricing headwind?
Yeah. First of all, I need to repeat that the transformer market is very fragmented. There is no one single answer to your question. The same way that we are looking to the combination of product, customer segment, and country, for high growth and high margins, the competition and the price pressure or not is also different in each of the clusters. If you see now, for example, power transformers is still a very strong market. We're enjoying good margins there. If you see in a situation with oil distribution transformers in the utilities where they have already the yards full and they are not starting, therefore are not buying, the tenders that are in the market are aimed from all the players in the market. There is temporarily more competition. You see more price pressure there, which maybe in three months it stabilize again.
You have a timing effect when it's temporary, and you also have different customer segments. There's no one answer to that. In general, we saw already that there was a normalization of price in some areas after the COVID, but the market is very strong. As I said in the beginning, the demand is really structural, the growth is structural. This will keep the prices in a good level. We are prepared for any price reduction. We are prepared for any normalization for price through the program that I mentioned to you with a continued improvement of operational excellence and productivity enhancement. Further question?
Yeah. Maybe if I follow up two things. First thing is in this chart on the book-to-bill, you have shown sort of a dotted line for March. I'm just wondering, what is that? Is it an average, a moving average? Is it a hard number? Or if there's anything, what you can add? If I may, if I just have the mic, on the SAP program, how long do you expect them to be a drag on your CapEx side?
It is indicative. You mean this dotted line here, huh?
Yes.
Yeah. It's just illustrating that we expect a good month.
Gut feeling.
Serious gut feeling. Sorry, the second question was about the SAP, yeah? The SAP, actually we've started already with material data cleansing and so some of the costs are already in the P&L 2025 included. The 1% included in the CapEx, the additional 1% is, if you take CHF 400 million net sales per year, then you see more or less over three years how much this project will cost. 4 or 5 million each year times 3, 15 million, more or less. We are very convinced that we can absorb these costs and we'll get much higher benefit back from this project.
Yeah.
Thanks. Just wanted to talk again a little bit about M&A, and you said you already have a pipeline. Could you maybe give us, I know you can't really say, but in what directions geographically you're thinking, or what would be your preferred target acquisition area?
I would say an important criteria for us is of course, what Eduardo mentioned before, we do not just M&A for the sake of M&A. It has to really create additional value. There are a lot of family-owned small businesses, CHF 40 million, CHF 50 million net sales. It does not make sense that we look at those targets, because the due diligence process more or less is the same. Having said that, of course, we focus on bigger targets and additional value creation is of course key for all of us. With Kyte, we had a geographical approach, and we said we want to grab the white spots, U.K. and Ireland. Now we have already 78% share in Western Europe. Now it's also about technology. It's also about customer segments, what Eduardo elaborated on his slide.
Exactly. When we look into these, call it clusters, yeah, the combination of product, customer segment, and region. We look, can we expand there organically? Can we deliver to this cluster from our existing factories, or it would be easier if we could acquire a company that is already strong in this market. That's the way we give the inputs for market screening.
Okay, thanks.
Yes, Mark Bosse, VVaG. I would have a question on the operational efficiency within your factories. Can you describe that journey over time? How fast or how much can you improve the lead times from 9-12 months, maybe down to another number? What other measures can you take in order to really increase your efficiency? Can you maybe allude to these nine factories, the capacity utilization rates that you currently have?
Okay.
On the ones that are already kind of framed.
Again, there's no general answer to that question. Each factory has a different level of operational excellence. We have a framework based on best practice in the industry where we bring defined measures. We do a screening factory by factory, do this gap analysis, and define measures to bring in each of the areas, from sales to digitalization, to HR, to procurement, to engineering, to define measures to bring. The ones where the gap is bigger, we don't do the 5,000 measures at the same time. We want to have the low-hanging fruits, but we do this factory by factory. The gaps are also different in the different functions, which is totally normal. We bring the benchmarking of the group to each of the factories. We have different levels of opportunities, but also different levels, parts, you can say the output toward reducing the delivery time.
The delivery time depends also on the delivery time from the suppliers. You need, for example, power transformer, you need 2-3 months to do the design of a transformer, and then you can order the copper, then there's some months of delivery. Depends on other things, but we look also that from supplier side. There's no general answer to your question, but what I can say is there's potential. Our factories are great, but if we work together to bring global standards, best practice sharing, we can, as a team of factories, and business units, we can achieve much more. This is what I can say.
The capacity utilization.
The capacity is very high. In power transformers, fully utilized. In dry-type transformers, the red ones there, we have a full utilization. Now, that's why we mentioned that we want to expand capacity in Italy, Poland, in the Abu Dhabi.
The oil distribution transformers is where we are relatively well loaded in Kyte, Sissach, and in Bochnia. There we are seeing this temporary issue with the installation of transformers by some utilities. We are not yet but 100%, but capacity utilization is still very, very high.
Can I just add another one concerning your visibility and the prepayment activities of clients? Can you describe them over the three categories of products that you have?
Very good question.
How they look like?
Very good question. That is mostly in power transformers.
These advanced payments changed over time in the past, and it is, for power transformers, necessary because a lot of material that you need to buy, and the customers understand that is the industry standard that they have advanced payments. We are happy now with the second factory that we're going to increase the share of business that we have with advanced payments, which will reinforce our cash position even further. For the dry-type transformers, this is more transformers, is normal that the payment is at the end with the delivery.
It doesn't make much sense because—
Yeah
—the throughput is you deliver within three to four months.
Some customers, they buy just three, four transformers.
The processing of all of this doesn't make sense.
Yeah.
Can I just ask a last kind of understanding question concerning the use of digital twins, for instance? How much can you improve the design? Or you talked about design to cost of a transformer over time. My understanding is these technologies are 100 years old. So how much more can you do there in the future as well?
Yeah. First of all, I need to disagree with you. The physics, the basics of a transformer is 130-140 years old. The transformers are becoming more complex due to the applications that they are. For example, transformer for a wind turbine needs to cope with the fluctuation of the voltage much different than a transformer that's sitting in a Repower. That is two cycles per day, when people go to work and they come back at the end of the day. A photovoltaic transformer has thousands of cycles per day. The tank expands and shrinks thousands of times. The tanks need to be specially designed, otherwise there will be leakages there. There's also electrical things that I don't want to bother you here, that the whole industry learned.
Many transformers, thousands of transformers failed because they are applying the design rules for normal transformers in wind or photovoltaic didn't work. There is always a continuum, and then you design, you solve the problem, but then you need to optimize it as well. Because you solve the problem always with more tolerance, and then you need to improve it. There is a continuous need for development for the new applications, especially if you want to enter new application where we do not serve and our competitors serve, that we need to develop this know-how. The physics are old, but there's a lot to do in innovation. This should be seen not as a problem, but it's our strength. We have great engineers, and we have great designs, and capable of doing anything. Yeah.
Michael Männlin , PKB Privatbank. How much of the revenues are directly dedicated to renewables?
Shall we say it? It's over 30%.
30%?
Over 30%.
How do you cope with the situation that these sunny days, about 30%-40% of the solar parks, for example, in Germany, are switched off of the network, which at the end, cuts down the yield of such a park and the growth of establishing it?
Well, many project owners for these photovoltaic farms also have battery storage. We delivered last year a project in the Liverpool John Lennon Airport, a transformer that makes a connection to the photovoltaic. Receiving the energy from photovoltaic, it has a second exit direct to the battery storage. With that, you have continuous power supply also at night.
The storage is very limited.
No. If you see the Tesla Megapacks, it depends how much you invest in storage. There are some utilities that have high-volume battery storage. It's like the size of a small city in containers with battery storage. That's why I mention many times battery storage. Battery storage is an area that we want to participate more. It's a huge market. It's growing significantly. It will be a solution. It's not our problem.
It's our customers' problem.
It's actually good for us because we can solve the problem to our customers. Yeah.
Thank you, Alessandro Foletti. Again, thank you for taking my follow-ups. Two, if I may, on the Kyte factory, I'm a little bit surprised to hear that you want to expand that. Can you give an indication how big that expansion will be?
You mean Kyte?
Kyte. Yes, Kyte.
No, I think maybe.
Well, it was in your slide.
The Kyte, we improve in operational excellence, we're going to get more output. What we invest in there, maybe in CapEx. We are modernizing some machines, changing the design of some types of transformers. They have a broad portfolio. Some of the machines are quite old. The design can be optimized for that. We can have faster production and lower costs. This is what we invest in CapEx in Kyte. The idea is to get more output. We are not having a second building or have more people there. With the same building, same number of people, but with better machines, better design, we can get more output and better margins.
Okay. In the film, in the movie, now I don't know, this obviously is just a rendering for our impression, but it looked like that factory was isolated. I remember you mentioning that one of the reason why this one is less risky, the ramp-up of this factory, is because it's an expansion of the existing one.
Yeah. First of all, it's the rendering, and second, it is in Łódź, same place, but not right beside the current manufacturing.
We have already an established factory.
Yeah.
For example, the employees that will start working in new one, they already been trained in existing one. We already have the design. We have the engineering.
They're very close to each other.
Yeah. It's close to each other, so if you are missing employees from one factory, you can lend to the other one, so you can help each other. It's a much better position than what we had in Bosnia, which was a start from scratch.
Might be interesting. By end of 2025, we already had over 40 FTEs on our payroll for the new factory, the new plant for power transformers.
Okay. Can I add an additional one? You mentioned the shunt reactors. Would that be something you would develop organically, or would that be, for example, a M&A target opportunity?
No, I mentioned specifically power transformer factory in Łódź.
Yes.
If we have a target that has special transformers, all types of special transformers, large special transformer, they have above-average margins. Could be also or even higher voltage, like above 300,000 V or 500 kV, could be also something interesting for us because the higher the voltage, the more complex, the better the margins and the fewer competition there is. Shunt reactor, we thought it's just an idea that we can develop ourselves with our own engineer or the consultant and start producing there as well as a separate line.
The higher power transformers, you could not develop yourself?
It is already. The new one, we can produce up to 160.
160, yeah. MVA.
160 MVA.
Yeah.
Which the other one's up to 120, I think.
120, yeah.
Yeah, we are going with higher voltage and higher power already. We design already a new factory, already having the flexibility to produce bigger transformers with higher voltages.
Their own capability is not a limiting factor to go higher in the voltage and in the power? Do I understand correctly?
It's part of their R&D roadmap to develop the know-how. We are working with external consultants to help us so that we can design also and deliver these transformers.
If I understand you correctly, let's say you have two opportunities, developing the shunt reactors or developing higher power transformers.
Both.
Would you—
It is not exclusive. It's just one example, Alessandro.
Okay.
There are many other type of transformers that are special, that we can also have in our portfolio. I'm a big fan. I think you saw already that I'm a big fan of diversification. Have a broad portfolio capability, broad customer-base so that we can navigate fluctuations in the market and always have better options for high growth, high margins. Of course, because ZREW comes from the past producing 110 kV transformers, and they are great, have a potential to do more special transformers.
You're not going back to switches? No. No. We just sold the business. No.
Other questions? Online?
If there are no questions from the room right now, we have a question from Stefan Vercruysse from Goldman Sachs. He's asking, R&S is adding capacity in distribution transformers, Bochnia and power transformers Łódź. Can you provide an overview of your competitors and share with us to what extent they are adding capacity as well?
That's a huge question, huh? We just added capacities in Bochnia. We mentioned it, over 1,000 units per year. Maybe we can even go higher. What we see is that competitors are doing brownfield. They try to—
Increase capacity.
— expand their capacities, their processes. They work on their processes, on their operational efficiency. Greenfield, we haven't seen many, right?
No.
No. Nor in Poland or Switzerland or in Ireland, in the markets we are, we do not see a lot of greenfield.
Thank you. We have a question on Ukraine from Jan Martinek from Central European Capital Partners. He's saying, I can imagine the post-war reconstruction of Ukraine may be a multi-billion-dollar opportunity for R&S and its peers. Can you talk about the opportunity? Is there a Swiss government support program for Ukraine that you're maybe able to benefit from?
I think Matthias can—
Yes, there is a program running. Swiss government is running this program, I think over a few hundred millions, and we apply. Let's hope that we'll soon have peace there and then might be a very interesting market for us. Yes.
In parallel.
We have first contacts.
Yeah.
Yeah.
We made already the first offers through this agency, Swiss agency supporting the reconstruction of Ukraine and also offering through the JICA, the Japanese investment bank.
Thank you. A question from Adrian Pehl from ODDO BHF. Two points on 2026. While the progress of the Bochnia ramp should provide revenue growth this year, what are the sources of growth stemming from the other existing factories and markets for 2026? And where should we be expecting slower developments? Which amounts do you see for investments in operating expenses for 2026 relative to last year? That's actually two questions.
Yeah. Well, I think, since we are seeing strong growth in power transformers, that we will see this year as well. In dry-type transformers, as I mentioned, the epoxy resin transformers. Also, it's very strong. We have very good start to the year. The factories are well loaded. That's why we decided to invest further in Italy, Poland, and Abu Dhabi. The normal growth, as I mentioned before, we will grow with the market for the oil distribution transformers because of the current temporary situation in the market. The second question I will give to Matthias.
Operating expenses in 2026.
The operating expenses in 2026 will stay more or less on the same level as in 2025. We are at a level of 7%-8% of net sales. We expect to keep that level.
There's another question from Jan Martinek from Central European Capital Partners. Can you talk about how management is incentivized, whether management are shareholders and you have a share option award? What are the motivation criteria?
Yeah, I would say it's too far to talk about all the details. You will find all the details in the annual report, in the compensation report. Yes, of course, the EC is also incentivized with a short-term incentive and even more important with a long-term incentive program. Also all others in the management, they have this incentivization.
Yeah.
Skin in the game.
Yes. A lot of skin in the game actually from the very beginning when we went stock listed. Yes.
Another question from Adrian Pehl from ODDO. Housekeeping items, D&A for intangible was high in 2025. What was the background? That's a Matthias question. D&A, depreciation and amortization—
Yep
—for intangible was high in 2025. What was the reason for this?
Yeah, the reason was that with the acquisition of Kyte, we had this purchase price allocation. You remember that we were able to capitalize the software and parts of the property, so that's why we have a bit of a higher depreciation and amortization compared to last year.
He's also asking whether you have cashed in on the receivables related to the sale of the non-core business end of last year.
Yes, a little bit. That's correct. That's the normal thing in the world, that business is moving from one year to the other, the deliverables are moving to December, and then maybe it's planned to deliver it in December, and you move it to January or vice versa. This is the normal thing in the world.
Thank you. There's a question from Hugo Mars. He's asking, could you say a word on the Middle East exposure and if you expect any negative impact on your current activity in Q1?
No, as Matthias presented before, our exposure to the Middle East is less than 3%. We saw some delays in material delivery to our factory in Abu Dhabi, but not significantly. Of course, some transport cost is higher because there's a risk and safety adder in the transport contracts. We don't expect to be anything significant for Q1.
Our people are safe and cope extremely well with a really difficult situation.
Yeah.
He's asking a second question. It's regarding the guidance. Can you please confirm the midterm guidance in terms of revenue growth of 8%-12%? Is that also valid in 2026?
The existing guidance is as it is. I showed it on the slide, and we confirm what you saw on the slide. We should not speculate on what could be or what could happen. Maybe we can show it once again. That's how it is. We confirm a strong midterm outlook over a rolling cycle over three years, 8%-12% growing at healthy margins between 19%-21%. What do you want more? For 2026, we'll be at the lower end of the guided ranges. That's it.
Coming back to 2025, there was a question again from Adrian Pehl from ODDO BHF. He's wondering whether Swiss revenues were down in the second half of 2025. If you could comment on the trends in this market.
I think the Swiss market is experiencing something similar, the temporary cooling of the orders for the utilities, exactly the same issue that they have still their warehouses relatively well loaded and difficulty to install the existing transformers there, like U.K., Ireland and Germany. In the same way there, we expect that the situation will start improving in the upcoming months.
Thank you, Eduardo. Actually another question from Jan Martinek. He's not so happy about the communication of last November. What steps are you taking to rebuild confidence in the future?
Communication.
I think the simple answer to this question is to deliver.
To deliver.
To deliver. I think we have presented, we have a clear plan. We know what we have to do. We have a great market in front of us. We just need to be very disciplined in execution. Remember, I mentioned many times execution is key. We have a lot on our plates at the same time. There's a lot of things being done. We have a great team, and we will deliver.
Thank you, Eduardo. I think that's a good closing word. The questions from the webcast have been mostly answered, or they're similar questions. One last chance to have a question in the room. Other than that, we would come towards the end. Maybe I can go over here towards the very end of the presentation. Just coming to the end, we want to thank you again for your interest as you expressed today by being here in person. The end of the presentation was that we wanted to show you our calendar of events. We have our Capital Markets Day scheduled for 4th of November, and we already invite you today to mark your agendas. If you have any further questions that were not answered now, then please come to me.
You find the details also in the appendix of the presentation that is online. We look forward to continuing the exchange with you as we go through the year, and there's many priorities we have set for 2026 and many things to report on. We're happy to give you an update at the latest on the occasion of the half year results, or then see you in November, hopefully in Łódź in Poland. With this, actually, we're closing. We'd like to invite the participants here in the room for a luncheon where we can continue our exchange with the management that we have here. Thanks again for coming and see you soon.