Schindler RISE was a smart idea. We took all that we learned from our experience with the prototype and improved on the concept to create a more reliable, more flexible, more independent solution. We are now proud to present the results of the fertile collaboration between our external robotic engineering partners and a highly motivated cross-functional Schindler team. The set of new features we have implemented focuses on three pillars: quality, efficiency, and people. The first major improvement is the new trolley, designed to combine easier handling with a safer and faster bring-in, take-out, and refill procedure. Thanks to its seamless integration into our current SLIM and INEX installation processes, Schindler RISE is ready to go in just a few steps, with operators working from outside the shaft or pit. Adaptable anchoring to any door opening guarantees a safe and speedy setup.
For maximum space efficiency, the upper wheels fold away while Schindler RISE is in transit, deployed when required. A winch and a precision-designed runner allow for effortless positioning of Schindler RISE in the shaft and enable bring-in and take-out from any floor. The telescopic tool station and magazine support has been designed to minimize the robot's footprint during transportation and handling. The bridge and modular magazines ensure a safe, hassle-free, and rapid refill process. The modular bracing system lets Schindler RISE adapt perfectly to different shaft dimensions, extending the application range to both Schindler 5000 and Schindler 7000 product lines. Setup is as simple as that. To guarantee the highest standards in reliability, we have designed an automatic tool cover to protect the enhanced set of sophisticated tools. For maximum dependability and performance, additional tools have been added along with the improved robot interface.
One of the major improvements is automatic drill bit replacement. In the event of wear or breakage, Schindler RISE can autonomously remove the drill bit and exchange it with a new one. With its state-of-the-art robotic technology, Schindler RISE is engineered to work efficiently, even in harsh and challenging construction site environments. To protect delicate components, we designed a special cabinet concept, leaving the arm underneath with complete freedom to rotate through 360 degrees. While the smart built-in software allows the robot to operate autonomously, it can be fully monitored and managed wirelessly via an intuitive interface. The new Schindler RISE will help close the digitalization gap from building planning all the way to construction site handover, making the entire process more efficient. It liberates people from repetitive and tedious activities, at the same time significantly reducing safety risks in demanding working conditions.
With its precise controlled drilling, Schindler RISE increases the accuracy of each installation, ensuring improved elevator performance and comfort. Schindler RISE, better quality, better efficiency, better for people.
This was Schindler RISE, the robotic installation system for elevators we just industrialized in 2019. I will come back to this later. Good morning, ladies and gentlemen, and welcome to today's full year results 2019 presentation. My name is Thomas Oetterli. I'm the CEO of the Schindler Group. I will start today's presentation by providing an overview on the development of the global elevator and escalator markets, our strategy, and innovation we've been driving forward over the year. Urs Scheidegger, our CFO, will then speak about Schindler's performance in 2019, guide us through the financial details, and also provide the outlook for 2020. Overall, we are pleased that we can present again a solid set of results. In 2019, Schindler managed to adapt to a challenging market environment, continued to grow, and strengthened the market position.
Before we dive right into the presentation, I'd like to make a few remarks on what has been an eventful year and a turbulent start to 2020. The elevator and escalator sector is currently undergoing an unprecedented period of change. We are operating in an already highly concentrated industry with four global players contesting for new installation projects, service contracts, and eventually, market share. A merger between two of them might sound easy but would create many issues affecting the whole industry. First, a four-to-three merger would result in lengthy antitrust litigations in various jurisdictions around the world, at least in Europe, in the U.S., in Canada, and eventually also in Australia and China.
Secondly, if two almost equal players were to merge, this would mean redundancies along the entire value chain in both companies, from R&D to production and supply chain, but most importantly, in what's the core of value creation in each and every branch office where technicians install, maintain, repair, and modernize elevators and escalators, resulting in local drama times 1,000 and a massive negative social impact. Thirdly, such a merger would result in severely increased competition, leading to enormous price pressure that could go on for years. We at Schindler do not want to trigger nor participate in such a scenario. Organic growth has been our DNA for almost 150 years. We do opportunistic acquisitions if we see strategic fit and the acquired company can be smoothly integrated. That said, we continue to focus on our strengths and our first and foremost priority, to grow faster than the market.
How do we want to achieve this? We continue to leverage our innovation power with various large-scale digitalization initiatives along the entire value chain. These multi-year programs lay the foundation to bring artificial intelligence to life and enable data-driven insights. Our modularity program will completely change the design of our product offering, making it more seamless and enhanced by various new design options. These are the key technical prerequisites to respond to the ever-changing demand for smart urban mobility, and even more precisely, vertical mobility, corresponding to macro trends such as urbanization and aging populations. Now, in early 2020, with the coronavirus in China, a new challenge came up, which basically halted the whole country in China for the last weeks. We are facing challenges of protecting the health of our employees while assuring the business continuity for our customers.
Our local team has established a local crisis management team, and I can say the team has done a really impressive job. We have started to slowly ramp up deliveries from our factories since this week and are in close interactions with our customers and suppliers. It is too early to quantify the whole impact on our financial results since it depends on the timing China comes back to normal. However, the first quarter and the half-year results will be heavily impacted. For the full year, depending on when the peak in China will happen, a loss of several hundreds of millions CHF on the top line is possible, directly impacting absolute EBIT and profitability. I'm convinced that we'll also overcome these difficult times.
Let me now start the presentation with a brief overview on the mega trends supporting our business and on the development of the different market regions in 2019. Advancing urbanization and demographic changes are the main global drivers for our business. Urban population is constantly growing. By 2030, 15% of the 5.1 billion people living in urban areas will be concentrated in just 43 mega cities. These are cities boasting more than 10 million inhabitants, like Delhi, Shanghai, Dhaka, and many others. At the same time, the middle class is growing by 60%, bringing the need for more infrastructure and living space, and the aging population is driving the need for solutions to facilitate safe mobility. Latest technologies foster our business since the demand for energy-efficient solutions, digitalization, and the aging installed base open business opportunities. I now move to the global markets.
The global new installations market grew by 2% in 2019. The upper section of the slide indicates the development of the various regions in unit terms. After a strong cycle, the North American market was slightly slowing down, mainly driven by multi-family, residential, and commercial segments. Infrastructure, institutional buildings, and large projects remained solid. Latin America was overall slightly positive, with growing signs of a recovery in Brazil. While units were flat in the Americas region, the EMEA region declined. Growth in the north was more than offset by the sharp contraction of the Turkish market, which lost again about 50% of market volume. In Asia Pacific, the construction sector benefited from continued urbanization and infrastructure spending. In many markets, slowing economic growth affected the construction industry. Contrary to expectations, the Chinese market was up. The other countries in the region showed mixed developments.
The lower section of the slide provides an overview of the global new installation market in value terms, with Asia-Pacific accounting for 65% global value, driven by China, still and being for a long time, the biggest market in the world. In the existing installation market, the key growth region in unit terms was again Asia-Pacific. The global existing installations market was up by roughly 4%. In value terms, the distribution among the regions is more balanced, since average prices in Asia-Pacific are lower than elsewhere in the world. Now let's have a look ahead into 2020 on slide number 8. We expect the global new installations market to decline, since China is expected to record a negative development due to the pandemic impacts, persisting trade tensions, and ongoing currency risks in emerging markets. I now come to the strategy of Schindler, on slide number 10.
We continue to follow and implement our strategy since many, many years. First, we want to grow faster than the market. That's our ultimate goal. Of course, we also want to improve profitability. Last but not least, we are working to foster a winning team on all company levels. Operational excellence and long-term investment programs support the achievement of these targets. Delivering on customer excellence, on quality, and on innovation, generate a unique user experience and value for our stakeholders. Schindler takes, like always, a long-term view and approach reactively, adequately to short-term turbulences. Our number one priority is growth. With that, we are even ready to compromise on short-term profits for the benefit of long-term health of the company.
Growth in the new installations business, coupled with a high conversion rate, safeguards the competitiveness of the group in the long run and inherently leads to increasing absolute operating results, which is priority number two. Schindler has continuously been able to outgrow the global elevator and escalator market, supported by a strong performance in the new installations business, a steadily growing portfolio through NI conversions, higher pricing through connectivity and selective M&A, as well as well-captured modernization opportunities. One of the pillars of our success is higher sales density we built over the last years, particularly in the two largest markets in the industry. In China and in India, we more than doubled our footprint, built local production and value chains, and are today perceived as a truly local player with competitive localized product offerings. We have secured more and more major projects in the recent past.
These are another important growth factor, supported by effective and client-centric key account management. On this slide, we show just a few projects around the globe where Schindler brings better quality of life to dense urban areas. In addition to growth, to improve profits is another strategic target. Over the last five years, Schindler was able to increase our EBIT by more than CHF 65 million on an average per year, net of negative FX impacts, which amounted to a total of CHF 113 million over this period. Field efficiency, pricing initiatives, and, in 2019, savings generated by the modularity program made up for headwinds caused by rising material cost, wage inflation, and accelerated expenses for strategic investments into technology and innovation. Our longstanding commitment to sustainability represents an important cornerstone of Schindler's way of doing business.
Last year, we formalized the Schindler sustainability strategy, focusing on six priorities relating to the environment, to our workforce, and to society, each complemented with specific targets for 2022. In the course of 2019, we drove various initiatives to further reduce our carbon footprint, to foster an even safer work environment, and to build a more diverse and inclusive team. I would now like to introduce the next agenda item, innovation for a unique customer experience with a video.
Imagine an elevator becoming a communication platform, opening up a whole new world. An elevator that connects with people, informs, entertains, indicates. An elevator that monitors itself around the clock, ensuring maximum safety and availability. A perfect host connected to the world. The elevator of the future, ready to board. We move 1.5 billion people every day, shaping their living space with safe and efficient means of transport. As digitalization moves ahead, it adds a new dimension to urban mobility, enabling an Internet of Things. We connect all systems digitally with passengers, operators, service technicians, and products, setting the new standard for the mobility of the future. A highly standardized internet of elevators and escalators allows us to integrate all our media products digitally.
Based on this unified solution, we transform elevators into smart advertising and communication platforms, enabling new ways of communication, advertising, and social interaction at focal points in private and public spaces for personal convenience and mass entertainment. It's showtime. Real-time advertising on landing doors. New perspectives. Real-time information and promotion in elevators. Moving people. Real-time advertising in elevators. Convincing, step by step. Landmark-style communication in large venues. Making people swing. Audio solution for elevators. Schindler pioneers new paths in urban mobility, setting the new standard. The elevator of the future is not a vision. It's right here, right now. Enter the next level of urban mobility. Introducing Schindler Ahead.
The ONE tower in Frankfurt is the first high-rise building in Germany with genuine mixed use for commercial to residential and public areas. The building is a showcase for seamless mobility with Schindler elevators, Schindler Ahead, with PORT and myPORT solutions for access and destination control. In more detail, Schindler Ahead ActionBoard provides real-time information and performance status of elevators. Schindler E-Vision offers in-car infotainment and a suite of PORT and myPORT applications maximize efficiency and convenience for tenants and user of equipment. We made significant progress in transforming our business digitally. We added new solutions to our digital product offering, which were positively received by our customers. Through Schindler Ahead, which has been the pioneering IoT platform in the elevator and escalator industry for four years, we significantly increased the number of connected units, paving our way for the transition to cloud connectivity and functionality.
Real-time information, adaptive maintenance, and personalized solutions are to be mentioned in this context, all provided with leading cybersecurity standards. Our technical operation centers are the core of the Schindler Ahead closed-loop system. They monitor now already 75% of our connected units, address issues, coordinate actions, and deploy technicians. The combination of industry-leading technology and highly skilled field people create a unique value proposition, providing efficient and customized services. The introduction of the digital twin for our elevators and escalators remains a key priority. It will change the way we work from a traditional step-by-step approach with a multiple systems environment and fragmented data along the value chain to digital data continuity. One common platform with seamless access to a single source of data will accelerate time to market of products and improve quality. The related multi-year investment is crucial to bring artificial intelligence to life and enable data-driven insights.
However, this investment into the future will generate the named improvements only in a couple of years. Our modularity program is market-ready. It is the foundation from which we will launch a new generation of elevators in 2020. Sales already started in several markets. With that, we provide our clients a seamless product offering and a range of user-friendly design options, streamlining component variants and solutions. Thanks to the state-of-the-art connectivity, our new elevators offer unique user experience through cloud-enabled digital features. Most importantly, all these new functionalities are channeled via industry-leading cybersecurity standards. We started this presentation with a video of Schindler RISE, our robotic installation system for elevators. It is not just a vision or a prototype anymore. In 2019, Schindler RISE has been industrialized, and we will use it in more than 10 key projects already in 2020.
It is an efficient, autonomous, self-climbing robot for safe and high-quality installations of elevators, eliminating repetitive and physically demanding work. That's not all. Recently, we also launched a new Schindler escalator. With the Schindler 9300 Premium, we are consolidating our leadership position in the escalator business. It sets the benchmark in quality and sustainable materials, provides seamless Building Information Modeling support, and unique Schindler Ahead services. I would like now to hand over to Urs to discuss the 2019 results. Urs, it's your turn.
Thank you very much, Thomas. Good morning, ladies and gentlemen. I directly jump to slide number 26 and kick off with the highlights for the year 2019. 2019, again, was a successful year for the Schindler Group. We maintained our strong top-line growth and further strengthened our market position. Schindler grew across all product lines and regions, and we were successful in winning major projects across the globe. Our strong brand is well appreciated by our customers. In view of increasing raw material costs, wage inflation, and negative foreign exchange impacts, we are pleased with the results we achieved. The next three slides provide an overview of the regional market developments. Since Thomas already elaborated on them earlier, I would like to continue with slide 30.
In the fourth quarter of 2019, our order intake rose by 3.2% to CHF 3,114 million, equivalent to a growth of 5.7% in local currencies. Our order intake includes all product lines, new installation, modernization, service, and repairs. The Americas region generated the highest growth rates, driven by strong growth in the new installation business. Same for EMEA. While new installations in Asia-Pacific was somewhat weaker compared to the remarkable performance of the other regions. The service and repair business lines recorded solid growth across the world. Revenue improved by 2.6% to CHF 3 billion in the fourth quarter of 2019. Negative foreign exchange translation effects amounted to CHF 70 million, particularly due to the strong Swiss franc against the USD , EUR, RMB, and the BRL. In local currencies, revenue was up by 5.0%, supported by the new installations and existing installation business.
The Americas region achieved the highest growth, followed by Asia-Pacific and EMEA. Operating profit declined by 2.3% to CHF 335 million, equivalent to a growth of 0.6% in local currencies. Foreign exchange translation effects had a negative impact of CHF 10 million. Restructuring costs of CHF 25 million, plus CHF 14 million compared to the previous year, and driven by local efficiency programs in selected countries, as well as expenses for BuildingMinds of CHF 4 million weighed on our result. The EBIT margin reached 11.1%. EBIT adjusted was CHF 364 million, equivalent to an increase of 2.8%, respectively 5.6% in local currencies. Margin of our EBIT adjusted slightly increased to 12.1%, which is sequentially improving quarter- by- quarter over the year. Excluding one-time effects in the fourth quarter of 2018, the financing and investing activities remained broadly unchanged.
Consequently, net profit decreased by 5.0% and reached CHF 249 million. Cash flow from operating activities in the fourth quarter of 2019 was very strong, increasing by 83% to CHF 529 million. There is a base effect since net working capital was particularly weak in the fourth quarter of 2018. Nevertheless, I'm pleased to see that global initiatives in the area of net working capital management bear fruit. Please turn to slide 31, showing key figures for the full year. For the 12 months of 2019, order intake increased by 3.9% to CHF 12.1 billion, corresponding to a growth rate of 5.8% in local currencies. Good volume growth was supplemented with success of major infrastructure and commercial building projects, particularly in North America and Asia Pacific. All product lines and regions generated growth compared to the previous year. Asia Pacific grew the most, followed by Americas and EMEA regions.
We are pleased with our China new installation growth in the high single digits for the full year. The modernization, service, and repairs business lines recorded solid growth both in volume and in value. Revenue increased by 3.6% to CHF 11.3 billion, equivalent to a growth rate of 5.6% in local currencies. Negative foreign exchange translation effects amounted to CHF 216 million, driven again by the strong Swiss franc against EUR, RMB, BRL, but also AUD and TRY. The Americas region achieved the highest growth, followed by Asia Pacific and EMEA regions. I move to slide 32. Revenue growth by region in local currencies shows continued strong growth in the Americas, while growth in Asia Pacific and particularly in EMEA somewhat slowed down from extraordinary high levels in the previous year.
Our order backlog continued to strongly improve by 7.6% in local currencies to CHF 9.0 billion across all regions. Back to slide 31. Operating profit reached CHF 1,258 million in 2019, 0.9% less than in the previous year. In local currencies, operating profit increased by 1.3%. Our EBIT margin was 11.2%. Foreign exchange translation effect had a negative impact of CHF 28 million. Operational progress and good price adjustments could not fully offset higher material costs and particularly wage inflation, as well as the higher spend on strategic investments. Before restructuring costs of CHF 38 million and expenses for BuildingMinds of CHF 18 million, the EBIT adjusted increased to CHF 1,314 million, equivalent to a margin of 11.7%. Net profit totaled CHF 929 million compared to the previous year result of CHF 1,008 million, which included a one-time tax refund of CHF 60 million.
Excluding this one-time tax refund, net profit was 2% less than in the previous year. Cash flow from operating activities strongly increased by 17.9% to CHF 1,185 million. Adjusted for the settlement of pension obligations and the introduction of the new accounting standard IFRS 16, it actually amounted to CHF 1,224 million. As a result, earnings per share reached CHF 8.04. I'm moving to the dividend proposal. An ordinary dividend payment of CHF 4.00 per share and participation certificate is proposed to the general meeting of shareholders on March 19. This represents a payout ratio of 49.8% and is very well in our payout ratio range of 35%-65%. Let me now finish my speech with the outlook for the year 2020 on slide 35. Looking ahead, demographic changes and advancing urbanization, among other global mega trends, continue to drive Schindler's business.
At the same time, fast changes in the political, social, and economic fronts, underpinned by historically low interest rates, will continue to affect markets. The strengthening of the Swiss franc constitutes yet another challenge. With more than 1,000 offices in over 100 countries, Schindler is well-positioned to tap into specific market opportunities. At the same time, we now have to recognize that the coronavirus pandemic will have implications on operations and results. The first quarter and half-year results will significantly be impacted. For the full year, a loss of several hundreds of million on the top line is possible, directly impacting absolute EBIT and profitability. Nevertheless, Schindler expects, for 2020, excluding any other unforeseeable events, to continue growing faster than the market, with revenue increasing between 0%-5% in local currencies.
As in previous years, the guidance for net profit for 2020 will be provided with the publications of the half-year results. With this, we would like to invite you to ask for questions.
I would propose that we maybe start first with questions here in the room, and then we also take the questions online.
MainF irst. Daniel Gleim. Thank you very much for taking the questions, and thank you very much for referring to the China pandemic as a key risk for 2020. Could you maybe help us a little bit understand what the economics are of foregone sales in China? If we lose CHF 100 million in sales locally, what will be roughly the negative EBIT impact?
Well, it is different to Honestly, at the moment, I am personally in a daily call every morning at 7:30 A.M., I did that also today, with our team in China. Let me elaborate a little bit how the situation is, and I think then it is easier also to think about impacts. Over the last three, four weeks, I have to say, the country came to a halt. There have been, of course, different elements. One is that due to the infections we had in China, people have to stay at home. Over the last three weeks, nobody was working in all over China. People stayed at home. We of course, tried to do as much as possible home office, like many other companies did as well. All the factories in China did not reopen until this week.
This is not only impacting our own factories, we have started this week, but also the factories of our suppliers. The impact has an impact in China because our Chinese supply chain, of course, in firsthand, is supporting our Chinese demand. It's also impacting our export markets, because we also export to Southeast Asia and Australia out of our Chinese factories. If the factories do not work, there is no export which can be shipped. If there is no export shipped, you also have delays in the installation in other countries than China. The story goes even beyond. As our suppliers do not have opened their factories, and you look on the global sourcing matrix worldwide, even if you source a component in Europe, in the U.S., in Latin America, or in India, the sub-components of this local supplier are coming from China.
De facto, 70% of worldwide components in our industry are coming from Shanghai and the circle of 100 kilometers around. The biggest issue at the moment is logistics. In order to avoid that you have from human-to-human infection, people at the moment are not allowed to travel from one province to the other. This means if you, for example, have a worker living just beside Shanghai in the so-called Jiangsu Province, this person is not allowed to travel in the morning, cross border to Shanghai to work for us, and go back in the evening. What happens is that they have to do a 14 days quarantine period. You can imagine, if you have a 14 days quarantine period, you cannot go back in the evening. What we have done, we have set up dormitories, we have rented hotels for our workers in Shanghai.
The people come in, but they have to stay for two weeks in self-isolation. After the two weeks, they are then allowed to work. Thank God, our team in China has realized that very early, and we have set that up already about 10 days ago. We now have a constant ramp-up of our workforce, but still, we are depending that factories of suppliers are opening their factories, and you need a permission by the government. In order to receive that permission, you have to have like a pandemic plan. How do you do sanitizing? How do you do cleaning of the factory environment? Do you have enough personal protection equipment for your workers? We have already secured more than a seven-digit number of masks, as we started that right at the beginning.
Seven-digit means more than 1 million, for those who are not aware about that. More than 1 million of masks, which allows us to keep, when the people are back at work, we are able to work with this amount of masks for the first half of the year. Now the topic is, we all don't know when the peak of the pandemic will happen. There are signs that it could be towards the end of February. There are signs that it could be somewhere in March or beginning of April. Factories are really fully ramping up. Now, at the end, you have to take a choice. How are you adjusting your structure in such a crisis situation? Because this then has an impact on how much the negative impact on your EBIT will be.
If you would tremendously reduce your workforce, so you are reducing your structure cost, then maybe the impact is less. We have full trust that after this crisis, China will be the biggest and strongest market, and it is not our culture to act short-term. We do not want to lay off the people, and then in a couple of months, we have to hire them again. Then you have to train them, you have to create a certain quality level. We will be, with that scenario, impacted higher than our average EBIT margin worldwide, because we do not adjust our structure immediately. What it will be, it's difficult to say for me. I do have confidence that there will be a ramp-up. We are prepared. We are in constant contact with our customers, not only in China, but all over the globe.
Of course, we are also supporting our suppliers, that they can establish the right plans to get a permission by the government to open their factories. I have to admit, it's a little bit looking into the crystal ball, because it's honestly every 24 hours, we have to be agile. You cannot do a multi-month plan at the moment. You have to first secure the health of our employees. Imagine we are keeping our service business ongoing. We have not stopped our service and maintenance tasks. We kept that, because people need those elevators in the buildings, in the hospitals, and of course, we have to protect our employees. We have done all the efforts to have no negative impact on the health of our employees. Then we are working on business continuity.
As I mentioned in my introduction, I'm extremely impressed about the effectiveness and the efficiency of our organization in China. It shows you once more, what in this country is possible and how people are able to live with very difficult situations.
Thank you very much for the elaborations on the supply side. Maybe could we complete the picture? What are your observations on the demand side? What are your customers doing? How is construction work progressing?
In order to have a contract in China, you need a signature, like in all the other countries as well. Now, the question is, how do you make a signature if people cannot meet? Today, all the efforts we are doing towards our customers in terms of sales, in terms of questions, is all done online and on the phone. This has also impact, by the way, the performance of the internet in China, because everybody at the moment is just working from home. Customers are waiting with the start of construction sites. There are signs that the first customers are now requesting the deliveries of elevators and escalators. We see signs that some construction sites are opening now and also in the next week. We are in constant contact with them.
It will take time, and it will depend region by region, what is the pandemic situation in a certain region, because there is not one rule in China. The different provinces and even the different municipalities have different rules about who is allowed to move within the province or the municipality. As all of our players in the market, for example, in the new equipment business, are working with subcontracting companies. Those subcontracting companies are usually not coming locally from that city. You also are facing the problem that people, even if the customer would like to start, you first have to bring the workforce to that job site. In some areas, again, you have this 14 days quarantine period. When you build up the workforce, you still have to wait for another two weeks.
I also believe that depending on the progress within the country, some of those restrictions might be loosening up in the near future. You have to expect that Q1 will be severely impacted by this very challenging environment. There's a question here.
One other challenge is the qualified field labor shortage. Is it mainly in EMEA markets or in other markets too?
There are two elements. One element is a social element. In many, many Western countries, people do not want to work anymore in a blue-collar job. In all fairness, if you look in Europe, but you also look in the northern part of the Americas, people would like to have white-collar jobs, and they would like to spend the time in the office and not on a bloody cold job site. That's a social development. We have to make the job more attractive, and we also have to remove some of the tasks which are really very dirty and sometimes also a little bit more dangerous. That's one reason why we have started with Schindler RISE. It will help us to replace some of the work to be done on a very dirty environment by a robot.
First tests we have done in 2019, and it was very promising in terms of efficiency, in terms of quality, but also in terms of safety. We are now ramping up our Schindler RISE program all over the globe. I have to admit, the demand is very high and we are overwhelmed also by the customer feedback. There is another topic, and this is, depending on the country, what kind of a union situation do you have? In some of the countries, especially, for example, in North America, in the U.S., you have a very strong union. You are not allowed to bring someone on a job site who is not part of the union. The union delivers to you the employee. You say, "I need five people," and they will deliver to you five employees.
If they have no employees, you don't get new people. There is a combination between social development and the labor environment. Of course, the third element is if you have a boom, a construction boom, like in Germany. In Germany, you can read very often Stau am Bau. We are also impacted not only by our own qualified field workforce, but also there's not enough field workforce in other areas of the construction industry. Far, we have seen that the timeline between the order booking and the billing to our customers in those markets has been expanded. The total cycle time is now longer and longer, and it can go even beyond two years in some of the markets for a normal residential building. Nevertheless, we have not faced a situation where we could not fulfill the demand of our customers.
It apparently seems to be that we have a very good employer brand, not only within the industry but also among industries. People like to work for this company, as I do it for more than 25 years, and they enjoy that they know exactly what they get.
Thank you. Fabian Haecki, UBS. I got a question on your new installation 2020 outlook. When I compare the new installation in 2019, actually, it has not really worsened. It is for Americas flat. This is about the same as the development last year. In EMEA, it's actually a bit better as you had quite a harsh Turkey impact. In APAC, you're saying growth in India and Southeast Asia, which also sounds reassuring. We got the pandemic impact. Pre-pandemic or pre-corona, what would have been your description for the Chinese market? For new installation.
I think this we can say, we were expecting more or less a flat development for China before pandemic impacts. In all fairness, over the last three weeks, Urs, we were going through that slide about the market outlook, I can tell you many, many times. We were adjusting that depending on what are the latest news. Our assumption before, so early January, was a flat development in China with different developments depending on the market segments. We do see that in some commercial areas, especially in the retail business, we still see pressure on the market because there are less shopping malls. This is also impacting elevators and escalator business. We have seen a rather stable area in the office area.
We have seen strong momentum still in the public transport area, which is a very strong area for us because it's mainly driven also in the escalator business. We saw stable, maybe slightly improvement in the residential. This was until three weeks ago. Now, at the moment, we have a different assessment. Our assessment is that there will be a decline in China as China is 60% of the worldwide market. If 60% go down and the rest is more or less flat, let's say, then overall, the total market will slightly go down. I also have to say, maybe in a month or in two, this will look different. There is maybe questions here in the front.
Bernd Pomrehn from Vontobel. Maybe coming back to the supply issue, please. From which point on do you expect the supply issue, these disruptions could have a negative impact on your operations in the U.S., in Europe, et cetera? How are your safety stocks looking, or when are you running short of electronic components, et cetera?
There are always two hearts in your breast. There is the heart on my right side, the CFO, he wants to have no stock because this is not good for net working capital. You have the people who are running, in fact, the factories. They would like to have as much stock as possible because then they can ensure operations. At the moment, we don't have an impact in the other supply chains. This could happen in March, that we do see impacts, not directly from suppliers to us, because we directly get supplies out of China. We do have impacts at certain suppliers of us. Also, local suppliers are short in certain components. We do have a mitigation plan for that. We are assessing at the moment, thanks God, our second sources.
For most of the components, we do have a second source. We are ramping up second sources. That's one element. The second element is what I have mentioned, we try to support our suppliers that they get the permission from the government. You have to imagine, sometimes those suppliers, they don't have such a corporate structure like we have. They are a little bit overwhelmed with, okay, what do I have to deliver now that I get a permission by the government? We are helping them. What is an escalation plan? What is a people protection plan? What is a logistic plan? Because we also are benefiting if they are back in business. The third element, that's the worst case scenario, is that you do have to do so-called partial shipments.
All the components you do have, you already ship on the construction site, because to install an elevator, it is not done overnight. You can start to install those elements. You anyway start with the installation, and then the rest, hopefully, you get a little bit later. This, of course, impacts your efficiency on the installation phase, because as always, it's not good to do twice, to go back twice to a construction site. It's much better if you have a smooth run. At the moment, we don't have an impact. We are also benefiting a lot that we have a very distributed supply chain. We have a very strong supply chain for elevators and escalators in Europe. We have a very strong supply chain, and we have built that up over the last five years in India.
We do still produce also in the U.S., we also produce in Latin America out of Brazil. We do have a little bit of an advantage that we are well-diversified, except of if there is a sub-component which we are waiting in one of those supply chains. This really helps us so we can confirm to our customers that at the moment, we don't see delay. If it would take still a couple of weeks, I have to say, the maximum impact we have mentioned could happen. There's one more here. Yes.
Remo Rosenau, Helvetische Bank. Looking purely at your service and maintenance business in China, where you usually have long-term contracts, is it fair to assume that there basically you receive your payments anyways because you received at the beginning of the annual contract release or renewal, and that is regardless of what happens in the market, right?
This is on first sight, a correct assumption. On second sight, I would probably partially disagree with this hypothesis. Yes, you are right. We usually have an annual contract or an annual payment. What do you do with a hotel who has no guests? How do you act in a moment of crisis with a customer? We are a long-term service provider, and we are someone who also want to go on the one side with suppliers, but on the other side with customers. We also go together through bad times. I remember what happened many, many years ago when we had SARS, and especially Hong Kong was tremendously impacted. Like this last year, Hong Kong was already impacted by the protests. Now they are impacted by the coronavirus. There is no guest anymore in a hotel.
The hotel, for example, or a shopping mall, they try to somehow stay alive, and they have to reduce also certain fixed costs. We have seen a couple of years ago that we had to do one-time rebates for a very, very difficult time for our customers. This has not yet been happened in this crisis, but this could happen. I don't say that I like that, in all fairness, because it is one-to-one, it goes to the bottom line. On the other side, you have to think about the time after the crisis. People do not forget how you act during a crisis when they want to do business after a crisis. We are a family company since almost 150 years, and our task is to make this company even more successful for the next generation of leaders and also shareholders.
We have a very, very simple slogan towards our customers: "We never let you down." This might have consequences, although on first sight, yes, you have a yearly billing, for example, but we might face the risk that we do have to do some concessions for a certain period of time.
Very interesting. Thank you for that. Talking about SaaS, could you just say what kind of magnitude those rebates were in that example, for instance, and for how long of a period?
At that time, it was mainly in Hong Kong. Urs, maybe you can explain, because in fact, you have been in Hong Kong and in China at that time.
Yes. That was a very selected issue, really focusing on the city of Hong Kong at that time. It's true, I have been there at that time. Schindler is a very big player in the city, in all the five-star hotels and the top-end commercial buildings. Short-term, particularly hotels were requesting rebates, clearly double-digit rebates, 20%, 30% for a short period of time. It has been proven, going forward, that this was the right actions, because we have a very, very low loss rate, particularly in that city.
There was a question here in the middle.
Thanks for taking my questions, Martin Flückiger from Kepler Cheuvreux. I've got three, and I'll go one at a time, please. Coming back to the China issue, obviously it's on everybody's mind these days. We've talked about demand and supply side effects, but we haven't really talked about policy effects that we might see over the next few weeks and months. I was just wondering, do you see, because so far, if my understanding is correct, in 2019, we've seen an overall tightening mode within China as regards property and particularly residential policies. What are your expectations here, both for the resi, non-resi, but also for the infrastructure side? That would be my first question.
I'm not in the position to say what the Chinese government will do. I'm not part of it, but I do have a certain assumption, of course. I think whenever you are in an economical, let's say, crisis mode or in an economical very difficult and challenging environment, usually you could expect that the government is pushing a lot from their side real estate. Now, there are two ways how the Chinese government could, for example, react. They are pushing even more public transport, because this is in fact infrastructure projects.
This will generate GDP. One element is still they have a multi-year plan about railways, metros, airports, and maybe they will advance some of those programs to drive economy. I think that would be very good news for us, as we are extremely strong in the public transport area. The other topic will be how would you react on these tightening controls they had on pricing for residential apartments?
Also there, if you look on the numbers from the Bureau of Statistics, it's quite clear that we still have quite a low level of inventory. The unsold apartments, it's quite low. There has been, in the last quarter, a little bit less of units sold, I have to say, or floor space sold. In order to maybe generate more sales, I could imagine that they would loosening up some of the restrictions they have in order to create more demand. With more demand, of course, you have more production. You have also, in our industry, more elevators to come. I could imagine that after the crisis, the Chinese government would push that.
Okay, thanks. My second question is on your modularity program. Could you elaborate a little bit on the key achievements that were made in 2019 and what your targets are with this respect for 2020? Maybe also give us a flavor or an update on what you think incremental savings will be for modularization this year and next.
Modularity Program, maybe you can talk afterwards about financial impacts. I make more the sales pitch. The Modularity Program, de facto, is according to plan. Last year, we have mentioned that we have introduced several components. Now we have started to introduce the products. In Asia Pacific, without China, we have started to launch our F3 products. We started first with the residential product. Towards the end of the year, we will have also the commercial product coming. At the moment, we are doing all the sales training and all the introduction work in the European countries. We are expecting sales launches until the mid of the year worldwide for the residential product. We are on track. First feedback is really good and promising. You have seen before, it's a fully digitalized elevator. Whatever you would like to have can be included there.
It also serves, as it is a modular program, you can do a seamless offering for different type of customer segments. From the very low end, you can go to the very high premium end. We are happy with the progress. Nevertheless, I have to say the big wave of roll-outs is coming now. We are very cautious to assure that we have highest quality for our customers. We have implemented a lot of quality gates to make sure everything runs smooth, because we never did something like that before. Globally, several product lines at the same time in all different type of supply chains to roll out. We are careful, but we also are thrilled by the first positive feedback of our customers. We believe that this will have a positive impact on our growth story.
There is one element, we are also converting. What we had offered maybe with the old product lines, we are converting the offers. The order backlog conversion. We are very careful because we always have to check whether the specifications of the old product fits with the new one. We still will ship, for a certain period of time, parallel the new products, but also the old products where we were not able to convert. This will stop late, probably mid of 2021. There will only be new shipments and no old shipments anymore. This maybe is the only thing where I was a little bit more optimistic that we can maybe start a full conversion earlier. Again, we are thinking long term. I don't want to make a mistake with the team that maybe make a mistake in the unit conversion.
Late June, mid somewhere July 2021, all shipments will only be the new modular products. Maybe on financials, Urs?
Indeed, modularity is a key pillar for our efficiency programs. In 2019, as Thomas is explaining, we have been on track and modularity delivered about CHF 50 million savings incrementally in 2019 to offset partly the very high increase of personal costs, driven by wage inflation and also our organic headcount increase. Into 2020, now the program is going into full force and full rollout. The plan is to achieve additional CHF 80 million of modularity, which was in the plan, and we now need to deliver it. This material cost savings are a big pillar of efficiency. Of course, you need to consider that this is phasing in, and we also have components phasing out in 2020. On those phased out components, we cannot achieve any more savings or purchasing savings.
Therefore, this is a bit the headwind we have on this material cost savings in 2020.
There is another topic, I don't want to repeat the story all the time, but of course, if you have 60% of the market worldwide in China, our modularity program is also planned to be rolled out in China. At the moment, we cannot train our people because we cannot bring them together. We cannot do all the trainings just via internet. This, we don't know yet, how long it will take, but there could be a delay in the rollout of our modularity programs in China. This could be a negative consequence in the savings for 2020.
Yeah, just a follow-up for Mr. Scheidegger. What is left over in terms of incremental cost savings for 2021?
The leftover is about CHF 50 million, as the total savings should achieve CHF 200 million. To make the bridge, CHF 15 million was achieved in 2018, CHF 50 million in 2019. Now we have planned to have CHF 80 million into 2020. About CHF 50 million should come in 2021.
230 altogether?
Two thirds are achieved now in 2020.
CHF 150 million out of CHF 200 million.
Three times 50 plus 80 is 230, right?
Fifteen.
Oh, 15, sorry. Okay.
In 2018 it was 15.
Got it. Thanks. My final question, I appreciate your comment, Mr. Öetterli, on the subject of industry consolidation among your key competitors. I was just wondering whether you could elaborate a little bit, what your main concerns are with respect to increased expected competition.
Textbooks tell us that oligopolization or monopolization would lead to less price competition. You're arguing completely the opposite. What are your key arguments here?
Well, if you look on today's competitive landscape, we have two players on the place number one and the place number two since many, many decades. We are very proud as one of the two, unfortunately, on the second position, that we have achieved that position for many years. We do not intend to give that up. If there is ongoing consolidation in the competitive landscape, you can expect that those who have been for many, many decades on the position number one and the position number two will not give up. This will increase the competition among the big players. We are prepared to do that because, again, we are thinking long-term. When you look into the market, it's not only the absolute size, it's the relative size. In our industry, we are already very consolidated.
I do not believe that further consolidation would ease the competition. I think it would increase the competition. Yeah, maybe here.
Thank you. Martin Hüsler, Zürcher Kantonalbank. Two questions maybe. The margin in the last quarter was 12.1%, and I was just wondering, apart of coronavirus, what would be your best guess have been for this year? Is this now a run rate, or are there some special factors that have driven this margin in the fourth quarter to a level that might have been too high for 2020?
First of all, I remember one year ago, we said Q1 will not be very good, and Q2 will be better, and Q3 will be better, and then Q4 will be better. First of all, I'm happy to confirm that we kept the promise. This also gives a little bit of confidence that in the way how we work on our, let's say, business models, we don't completely miss the point. Quarter four was a strong quarter. Yes, it was. You remember in our story we had, we said, usually at the beginning of the year, you are impacted by a lot of external factors which are negatively impacting you. For us, I think the biggest impact is wage inflation. The biggest impact we have is wage inflation.
Last year, we had about 3% of wage inflation. This, of course, comes at the early of the year and stays for 12 months. Then all the efficiency programs we are doing, all the modularity savings we are doing, the rollout of F3 products, this is coming later during the year, and then you start to catch up again. That's one element. The other element is we are preparing ourselves also for a difficult and challenging environment without the coronavirus. We would like to differentiate from competitors by delivering a better service, a better quality, and better and more innovative products. This comes at a cost, and you all know now since many years, I have to admit, the story is always the same.
We are investing a lot into our future competitiveness of Schindler, because we want to be competitive also in five years and in 10 years. We do further increase our investments into the digital twin, into our IoT solutions. We further increase our investments because we believe this will make us better in the eyes of the user and the customers than our competition. This is a key differentiating factor. That's, I think, very important. Therefore, this is one element which maybe goes a little bit against a potential, let's say, forecasting on a Q4 level. There is a second topic, and I think, Urs, we should also mention that because this might be overlooked, and this is foreign exchange impact we have if the actual exchange rates, as the Swiss franc is very, very strong.
Maybe you could also give us a little bit of insight about that impact.
This is correct. With the actual spot rates, EUR 106 or 107 on the euro, $0.97 on the U.S. dollar, and actual spot rates for Brazil and China, 2020 will be impacted at EBIT line of about CHF 60 million, and it will be dilutive of about 20 basis points. I also would like to quickly come back what Thomas said. We do forecast continued wage inflation into 2020 at the same level as 2019, which will hit us now in springtime, particularly in those markets where we have scarce resources, Germany or North America. Q4 is always a bit higher profitable quarter. As normally with the final accounts on new installation or modernization projects, you are able to recognize underruns in the final accounts. So Q4 is not the right base going forward. We have a full-year margin EBIT adjusted of 11.7%.
I would propose that maybe we still have three colleagues waiting in the line, that we would now shift to the questions in the line. Then we still have after the press conference, here in the room, we can still answer the one or the other question, respectively, we also have Marco Knuchel available. I would propose that we hand over to the people waiting in the line to ask questions. If we then still have time, we can go back here into the room.
The first question from the phone comes from the line of Mr. Andre Kukhnin with Credit Suisse. Please go ahead.
Good morning. Thanks so much for taking my questions. Firstly, just a quick follow-up on coronavirus. Sorry to keep coming back to it. In terms of paying your employees while they're not working, can you confirm that that's the case? Secondly, do you work up some kind of a time bank with that they can use for overtime in the future? Is this just outright kind of paying while they're not working and then continue paying them while they're working?
Good morning, Andre. I can confirm every single employee is safe. We have enough personal protection equipment. We have very strict regulations how people are or have to behave. We try to keep the, let's say, white-collar people as much as possible at home. Of course, we have emergency departments like the call center, the spare parts center, which is 24/7 available. In every single site we have, we do have temperature measures when people want to enter offices or a campus. If you have more than 37.2 degrees, you are not allowed to enter our facilities. It doesn't matter whether these are own employees or these are third-party suppliers. Also on the campus itself or in the offices, we are measuring three times a day the temperature. We are sanitizing and making disinfection of all the locations five times a day.
We are in contact with every single employee, every single day by the supervisors to make sure that they feel they are still part of the Schindler family and not forgotten, and also to have a feedback if there is any problem or any special need because someone is running out of masks, gloves, or goggles. I can confirm everybody is safe, whether he works or she works in the service business, in the construction business, in the factory, or in the office. We also have strict rules, very simple things, how do you eat in a canteen, how much distance you must have between people. We do everything to avoid that, to give you maybe an insight on this. Yes, I can say we are taking care really with big effort. Now you have to mention me once more your second part.
We confirm that we still continue to pay salaries to all our employees.
Yes. It's a good point. The government has prolonged the Chinese New Year vacation. This was declared by the government, so those costs are company costs. What we do at the moment is that people use annual leave if they cannot work. People who work at home, they still can work at home. Some people who cannot work, they are taking at the moment annual leave. That when people can go back to the work, that our employees do not come and say, "Well, now after three days, now I would like to take two weeks of vacation." This has been agreed, and so we try to mitigate potential impacts there.
Great. Thank you. Coming to modularization and the kind of savings versus costs, do you expect any of it to drop through to EBIT in 2020? Do you think modularization kind of as a whole is more of a neutral effect for 2020 given the phasing in and out costs?
No, it will drop through. It has to drop through because we have, on the other side, we do have increases of cost. We are spending more money for our investments into technology and innovation. We do have wage cost increases, which cannot be completely compensated by efficiency. There is no doubt the modularity has to bring an impact. It also will bring an impact. The only uncertain element I have at the moment is what is a potential impact in the Chinese area. Those CHF 80 million will positively impact our EBIT. There are other elements which impact the EBIT. If we don't have the modularity program, we would struggle to deliver a reasonable EBIT margin.
I like to emphasize that this personal cost topic will continue in 2020 for two reasons. One is inflation, as I said before, same level as last year, very likely 3% on wage inflation. Secondly, we are growing organically, so our head count will grow by about 3% at the upper end, and maybe a little bit lower now depending on our rollout of revenues. The two elements are an impact to our P&L. In addition, this strategic cost Thomas is referring to, which will be incremental of another CHF 20 million in 2020. We are investing into our Schindler Ahead IoEE platform, and we are investing into digital twin investments. The FX I have mentioned before. Those headwinds we need to compensate with efficiency measures.
Modularity is the key pillar with the CHF 80 million, but also efficiency measures in the field and a little bit on service prices and repair prices.
Very clear. Thank you. You preempted actually part of the next question on the digital investment. We take it as a CHF 20 million incremental spend for 2020. On the digital, maybe you could share with us the achievements as well. I think your three key peers have now shared some numbers in terms of numbers of connected devices and proportion of those being on paid contracts. If we could have that information for Schindler as well, that would be really great help in our benchmarking exercises.
Schindler Ahead is in full swing. We have rolled it out globally. I mentioned in my presentation that out of all the units we now have connected, 75% are already supervised by local technical operation centers. This helps us because we can sometimes avoid when you have a breakdown of an elevator, you can avoid that you have to send a technician, because remotely, we can bring the equipment back to operation. This will generate more and more efficiency in the future, the more and more we are connecting. We do not disclose the number of connected units because we have seen that maybe if you just are taking a long-term target, and then you cannot deliver on that, this is maybe not always the right choice. We have seen that sometimes this has been the case.
We don't do that, but we can say that we are exactly according to plan. If you look into our sustainability brochure, by 2022, we want to have 500 million people per day using connected equipment. We are exactly on track. We are even a little bit above our own ambition we had. In terms of connectivity, we are good. Once you have connected, and the main connectivity goes via new equipment, more than 50% of these connected units also get an additional contract, meaning that the customer is paying for it. If the customer pays, and I have mentioned that last year, in average, we are somewhere 15% higher in the overall contract price. We add about 10%-20%, sometimes it's 10%-15% on top of a normal service price.
We achieve a premium thanks to Schindler Ahead for more than 50% of the units we have connected. What we have indicated in the last quarters, we can still confirm that more or less, these KPIs, key performance indicators, are still valid.
Great. Thank you very much to both of you.
The next question from the telephone comes from the line of Mr. James Moore with Redburn. Please go ahead.
Yes. Good morning, everyone. It's James at Redburn. Thank you for taking my questions. Can I ask one on China and one on margins, perhaps one at a time? Thank you for the excellent explanations as to how you're managing your Chinese business and the impact of the pandemic. I wish you all the best with it. In terms of unit deliveries, I wonder if you could help around with some math I'm playing around with, which assumes that you delivered maybe 60,000 elevators in China last year. I guess that's something like 15 a quarter. Would it be fair to say that unit deliveries in China might be down as much as 60%-70% in the first quarter of this year from, say, 15,000 last year to 5,000 this year?
I'm not looking for precision, but just a rough order of magnitude, given what you already see in the first six weeks or so. Is that the sort of magnitude we're talking about?
I will maybe start, and then I will hand over to Urs. As you know, we don't tell you exact numbers of deliveries in different countries, not even globally. If you look on the impact on Q1, I think it's also important to know, when do you recognize operating revenue? One element is deliveries, but also when do you start to recognize operating revenue? This was the introduction of the new IFRS standards we had two years ago. There is a certain impact also on timing, Urs.
With the introduction of IFRS 15, when it comes to new installation equipment revenue recognition, we recognize it at installation start across the world. As a result, if there are now very limited deliveries to the sites, and we can only start to recognize it with the installation start. An NI supervisor, an installation supervisor, is pressing the button and starts to add hours and material into the shaft. Of course, that will affect quarter one very clearly. On your very specific numbers, I wouldn't like to comment right now.
You can say that January, due to the Chinese New Year, January had about three weeks. There we were doing work, and we were doing installation, so we also generated operating revenue. February, as you all know, there is no operating revenue really coming from new installation. Even if you ship a unit.
No
There's nobody who does installation. It goes into ICC, and there's not yet an installation start happening, so no operating revenue in new installation is happening. We will have to see then March, there will be a ramp up. If we are right that people are coming back to construction site, then also with the start of installation, you also will have a start of operating revenue recognition. Probably, the impact will be really substantial in Q1.
Thank you. You gave some helpful comments on labor inflation and digital. Just converting the labor inflation into sort of impact on the margin. I think you had previously talked about minus 100 basis points. When you add the headcount increase with the labor inflation, is that the sort of magnitude you expect to come out for this year? Also on raw material, am I right to say it was around a CHF 40 million headwind all in when the numbers completed for full year 2019? I think you mentioned that the third quarter you'd expect it to be less for full year 2020. Now you have probably a more complete picture. Is that still valid, or has that changed in any way? Thanks.
I think, Urs, it's not so far away what we also are expecting like in the year 2019.
If you look on our financial report 2019, you will recognize that personal costs went up by 5.8%, FX adjusted actually higher, closer to 7% in 2019. Driven 3% inflation, 4% headcount organic growth in 2019. As I said before, for 2020, we need to assume it's not 7%, but it will be clearly a higher number, 3% inflation, 3% headcount growth on the personal costs. On material costs, there was a clear headwind last year of CHF 30 million-CHF 40 million. Going forward, we would see it has stabilized, maybe lately even a little bit lower. Keep in mind we are locking in our prices for the next six to up to 12 months. I would say we should see a neutral material inflation now going forward 2020.
Of course, it will also a little bit depend because most of the sub-suppliers, again, are coming from China. I don't know yet what kind of a price impact this could have upwards, but also it could be that there is even a reduction of material prices.
Thank you very much.
Thank you.
Appreciate it.
The next question from the telephone comes from the line of Mr. Lars Brorson from Barclays. Please go ahead.
Oh, hi. Morning, Thomas. Morning, Urs. I had a couple. One on the commentary from you, Thomas, on the KONE-ThyssenKrupp deal, one on BuildingMinds, which we haven't talked about, and one on capital allocation, perhaps more to Urs. First of all, I was struck by your opening remarks, which I think painted an almost cataclysmic picture for the industry and the supply chain from a KONE-ThyssenKrupp deal. Maybe you can help us understand whether it offers some opportunities for you competitively and the supply chain, and where across some of your key markets you see the greatest opportunity. Maybe also specifically, since you singled it out, I was a bit surprised to hear you think there are antitrust issues in China. Perhaps you can elaborate a little bit on why you think that's the case.
Well, of course, it's always the same. Every risk and every crisis has not only negative sides, it always has also positive sides. When the crisis is impacting a whole industry, usually the ones who are doing good and doing well, they come out of the crisis stronger than the other. Of course, everybody will try to do the same, and to be stronger than the others at the end of the crisis. We have a good confidence that with the set up of our supply chain, we do have a good opportunity to maybe demonstrate a strong reliability and availability of our supplies outside of China towards all the markets. I think the diverse and global supply chain footprint helps us definitely. Nevertheless, we also will be impacted by the others. I do not want to comment how severe the problem is for our competitors.
I think at the moment we have enough to do with ourselves, and we would like to concentrate on our strengths, and not so much.
Sorry, Thomas.
focusing on the others.
I think maybe there was a misunderstanding around the coronavirus. I apologize if that was how you interpreted it. I was interested in your remarks around the KONE-ThyssenKrupp deal, around elevator consolidation. My question was more whether you saw some opportunity around that, and also your comment around antitrust issues in China, which I thought was somewhat surprising. Maybe you could elaborate on why you think that would be the case. It was really around elevator consolidation.
Okay. Let's assume there would be such a deal. What would happen? As I have mentioned, of course, all the other players would go into litigation. What does that mean for you as a combined entity? You are absorbed and you cannot move on. This would create, of course, on one side, a certain uncertainty, but I think also on the other side, it creates a lot of positive momentum for us. Also, if you look into the labor market, if you look into the people side, what we see, of course, is people like the way. Sometimes maybe it is a little bit boring how Schindler acts. You know today what you get tomorrow, and you also know today what you get in a year or in two years or in three years if you work for our company.
On one side, it's boring, but on the other side, it also gives you a consistent strategy over years. There is no change. In all our press conference calls, we in fact repeat for years exactly the same. Our employees are appreciating that, and they are also willing to fight for this type of culture of a family company. We also see that in the labor market we have within the industry, we are a very attractive player. This is an opportunity. Of course, even if you have three-five years you are in litigation and you cannot move on, then once maybe you can start to move on, it will take some time.
I have mentioned that in my introductory remarks that besides the litigation, it's in fact a very dramatic exercise if you have to merge everywhere in the world, you have to merge branches, you have to merge R&D and so on. This is, of course, a lot of resources are needed internally to bring that together. Our job is different. Our focus and our way how we look at the situation is we are focusing on our customers. We don't want that our customers have the feeling that we are looking inside and we are more occupied with internal issues than with external issues. I think this also can give you a differentiating factor to be attractive for the customers in the market. Yes, this will also give us opportunities. Now, on the China case, China is like in every country. You do have regulatory rules.
You have to look on market sizes, not only globally, but on different market segments. As we all know, one of these two potential marriage partner are very strong in China. They do have a strong position. Now, if you add to a very strong player, another strong player, of course, you would have the topic that you are facing certain antitrust issues. I have no doubt about that.
Understood. That's a helpful color. My second question was around BuildingMinds. I don't think there was a single mention in your prepared remarks on that. You spent, was it CHF 18 million in 2019? I think that's a bit lower than at least I expected. I think we were thinking of a sort of normalized annual spend rate of around CHF 40 million, albeit maybe a bit lower in the first year. Is there any sort of reassessment of the investment required into that venture? Maybe you could help us understand what are you looking for in 2020 to determine whether indeed the venture itself is viable or how to assess the overall commercial success of that business this year.
We have mentioned that last year, maybe on the financial, Urs you can give an update afterwards. We have mentioned last year, this is a startup we are doing. We really treat it like a startup, also in the way how it is managed. We almost act like an investor. We have shown at the EXPO REAL in October in Munich, we were demonstrating and we had the first public appearance. I have to say there was a very good feedback from potential customers. We are still in the co-creation phase or co-innovation phase with one of our key accounts. We now have more interested parties to join this co-innovation. We are, in fact, happy with the progress we have. As always in a startup, at the beginning, for a couple of years, it only costs money, and then the benefits are coming later.
I think in terms of investment we do, there is no big surprise to tell.
There is certainly a ramp-up of costs to be assumed. After the CHF 18 million cost full year 2019, I would expect about CHF 30 million in 2020, so about CHF 10 million incremental more than in 2019.
Thanks, Urs. Maybe finally, if I can be allowed a third one, just on capital allocation. We've had an ordinary dividend now move flat for three years at CHF four. It's been, what, three years since we last saw a special dividend from you, and you're obviously in a very comfortable net cash position. Wonder whether, Thomas, you can elaborate a little bit more on your thoughts around capital allocation in the short to medium term?
Well, I think it's a standard response I have. The dividend is first proposed by the board of directors. Then it is decided at the general assembly. I think, also here we are demonstrating consistency and continuity. We believe we now have, if that, more or less like a 50% payout ratio, which is even a little bit on the upper part of our range we have mentioned about two years ago. Looking ahead, we are facing turbulent times. We need this safety liquidity for us in order to be agile. We don't know what will happen in the next 12 months. Probably a lot of us don't know. We want to be open for any type of potential investments.
As I mentioned, if there are the one or the other interesting M&A activities, not the big ones, but really the ones where we want to fill wide spots. We are screening that, of course, all the time. We also want to reinvest into our investment programs we are further increasing, and we also want to be fit for growth. Sometimes growth comes at a certain cost, because in a situation as you are today, payment terms are a little bit more complicated. Some of our customers might be short term, short in cash, so you have to be able to finance your production. I'm pretty sure that we will have also, once again, the time like 10 years ago, where everybody's congratulating us that we have so much cash on the bank, even with negative interest rates.
Yes, partially, but our ultimate goal is to be independent and to grow organically and selectively with M&A and not to be dependent on someone else. For this, yes, we have a little bit more appetite for cash than maybe other companies, I have to admit.
Understood. Thank you both.
Thank you.
Thank you.
The last question from the phone comes from Miss Daniela Costa, Goldman Sachs. Please go ahead. Miss Costa, your line is open. You may ask your question. Miss Costa, we cannot hear you. Could you please unmute your line?
Good morning. It's Andreas Herr from Goldman Sachs. Thanks for taking my question. I have a follow-up one on your comments on the possible loss of CHF hundreds of millions in 2020 revenues. Could you please tell us how you think about second half of 2020, and if you see any possibility for the second half to fully compensate and offset the disruption that you're observing in the first half? Thank you.
Okay, the CHF hundreds of millions, to repeat it once more, is very much depending on the timing when you have the peak. I don't know when it will be. I just don't know. I have to admit, although we are in daily contact, we don't know. There are some signs that there is now slowly a ramp up. I probably would say that maybe latest in, hopefully, somewhere in May, the country is again on normal speed. We have prepared everything to speed up. Also, maybe to compensate some of the shortfalls we have in the first half of the year, to compensate in the second half of the year. We have all capacities available. You can do three shifts, you can do Saturday work, so everything is prepared. Now, the question will be, are the customers also speeding up on their side?
Is it just some elements are lost once and forever, and you have to forget about that, and you just continue in normal operation? Is it happening that in the second half, some of the lost operating revenue comes on top of a normal second half of the year? I think in the export markets, I definitely would expect that we are able to catch up. If we have certain shortfalls in the first half of the year because we have partial deliveries or so, I think there is a good chance that this could be caught up. I have to admit that I cannot imagine that you can catch up in the second half of the year in China and maybe also in Hong Kong, partially Singapore, Taiwan, Macau. You will not be able to catch up everything.
If there is the case that you have certain one-time rebates to be done, this also is lost forever. You cannot come then when the hotel is full and say, "Wow, now I would like to add 30% to the annual service price." I think this is difficult to implement. There are elements which will be lost and elements which there is a good chance to be caught up.
Very clear. Thank you very much.
I would propose that maybe there is no more question here. I think we can also quickly come to a closing. Maybe some closing remarks, also in the view of 2020, Urs. If I try to summarize once more the key messages we have. Point number 1, Schindler will grow faster than the market, whatever the market is. The problem at the moment is not that we are convinced that we can go faster than the market, the problem is more that we don't know how big the market will be. We have to address things we can change and not address things we can anyway not change. In order to be very strong in growth, I think we have all the ingredients for the recipe together. We are launching F3 everywhere in the world. First launches have started, and we have a positive feedback.
Secondly, we are continuing to do a lot of investments into our digitalization programs, Internet of Things, digital twin, because we believe this is a differentiating factor in our industry. We are very strong focused on customer relationship. We have established globally strong key account management networks. All of us are thrilled to really be in direct contact with customers and not to spend too much time only on internal issues. I think we have a very strong brand reputation due to quality, innovation, and also customer-centric behavior. We are confident that we can be stronger than the market. Secondly, we are working on profits, and you can expect that also with my personal background coming from accounting, I'm always looking on the bottom line, of course. We are focusing on absolute profits.
Our focus is not only the relative margin. I repeat it again and again, you don't pay dividends out of a percentage. You pay dividends out of cash. It's very simple. This is our key focus. If we can grow faster than the market, this contributes to our absolute profits, we will do that. There are some headwinds. Yes. We have a headwind. You should not underestimate, we have a headwind, besides the coronavirus, of FX. This is difficult for us. We cannot change that. We are also working on additional efficiency programs. We want to stay lean, we will cut fat. This will also come at a cost. You have seen that in the last quarter 2019, we had higher restructuring costs than we had in the past.
You also have to take note that this will continue in 2020. One reason is also, as some of you have probably read, that we have also, due to changes in the markets, we also had a restructuring in our supply chain in Europe, where we have announced that we will shift, or not shift, that we will have with the new F3 modularity program, some of the existing manufacturing places will be reduced or even closed. We will close one factory in Zaragoza, and we are strengthening our manufacturing footprint in Slovakia. This also will add some additional restructuring cost in 2020. Again, we always do that because we have a long-term view. Long term, this makes us more competitive, it makes us more cost competitive, and it also will deliver more top-line growth due to this.
Last but not least, we have discussed about the competitor landscape. Schindler has a very good employer reputation. I believe we have a very good chance to attract a lot and even more good people in the market. Fostering a winning team is by developing your own people and your own leaders, but it also helps us to attract leaders from outside, from other industries, as we are today a preferred employer. I think with this, we are confident and optimistic for the year 2020 and the years beyond. Yes, we will have some bumpy roads ahead of us now in the next few months, but this should not change our strategic approach. With that, I would like to thank you for following us today and looking forward to our next event, the first quarter results conference call on April 22nd.
Let's have a look what the results will show there. For questions maybe which we were not able to address and any follow-ups maybe, please contact Marco Knuchel, our Head, Investor Relations. Thank you very much. Have a nice Valentine's Day, and goodbye.
Bye-bye