This product embedded or used in the production process of our customers' accounts, often for less than 1%. However, the associated costs on the customer side, such as procurement costs or logistic costs, are several times higher. Therefore, we always strive to understand the customer's application and to reduce the total customer internal process and environmental costs, thanks to an individual innovative solution enabled through the SFS value engineering approach. As such, we create over and within the three segments, synergies in tooling-based technologies. In the segment, Engineered Components, this means as engineering partner of our concentrated customer base through the development and industrialization of tooling-based, customized precision components and assemblies. In the segment, Fastening Systems, a solution provided to our thousands of mainly mid-size and small customers by the development and distribution of application-specific installation tools and fasteners.
In the segment, Distribution & Logistics, a system partner to our thousands of large, mid-size, and small customers through the development and trade of tools, fasteners, and work equipment. SFS operates and produces at over 140 locations in more than 35 countries worldwide. Through local service and proximity to the customer, we guarantee a minimum of logistic effort and costs, as well as synergy effects through optimal know-how transfer. The global business platform, in combination with standardized products, processes, and machine park, allow the support of international customers on-site. Proximity to customers has been the major driver for the internationalization of the SFS Group ever since. I will continue now with the key takeaways, first half, 2024, which can be best summarized as stable development. The economic environment in the first half of 2024 has been challenging.
Marked by inconsistent business performance and inventory reductions in individual end markets. Total third-party sales of CHF 1.5449 billion was generated, corresponding to a reduction of -2.3% versus first half 2023. The currency effects reduced sales--the currency effect reduced sales growth by -2.4%. On a like-for-like basis, a slight organic growth of 0.1% was realized. The operating profit, EBIT, of CHF 180.8 million, is influenced by mix effects and even capacity utilization. The EBIT margin amounts to 11.7%. The key projects and investments were continuously driven forward. That includes the ramp-up of precision components and assemblies for electric brake systems in Heerbrugg, Switzerland, and Medina, Ohio, US. The completion of the second expansion phase in the location in Nantong, China.
The acquisition of land suitable for building up a larger site in India to expand the local manufacturing platform. Last but not least, there's an ongoing high commitment to advancing ESG measures. For example, CO2 emissions were further significantly reduced, thanks to an increased share of renewable energy being purchased. I conclude my explanation of the key takeaways, and hand over to Christina for covering the development of the key financials.
Thank you, Jens. Good morning, and welcome, everybody. Let me draw your attention to the development of the key financials. On a sales level, the Engineered Components segment benefited from ramp-up of components and assemblies for the automotive and electronics industries. Sales prices slightly increased in this segment. In contrast, the Fastening Systems and Distribution and Logistics segments were facing a slowdown and weakening of market demand due to destocking effects, also reflected in a slight decrease in sales prices. In the D&L segment, an increase in sales of round about CHF 15 million resulted from the integration of a first strategic partner into the logistic platform in Nuremberg. Overall, foreign exchange translation amounts to -CHF 37.2 million and resulted in a -2.4% growth for the first half year.
From an end market point of view, we can see an increase towards the end markets of the EC segment, especially automotive and medical devices. Relative market share of construction industry is decreasing, along with the decrease of sales, due to occasionally high inventories across the entire value chain and the weakened market environment. ... In industrial manufacturing, the previously mentioned integration of a first strategic partner into the logistic platform of Nuremberg, helped to achieve a slight sales share increase. From a geographical point of view, region Europe remains the most significant region from a sales perspective. No major shifts in regional distribution of sales took place in the first half year of 2024. Compared to the first half year, 2023, a slight recovery in the Asian market was recorded.
The profitability in the EC segment is recovering, and all divisions within this segment are showing an improved profitability compared to previous year. The FS segment, as well as the D&L segment, are experiencing a slowdown in market demand. The subsequently lower capacity utilization is burdening the performance in these two segments. In nominal terms, the EBIT amounted to CHF 180.8 million, which is a decline of CHF 9.1 million compared to previous year. The margin of 11.7% is in line with the margin of the year 2023, and just shy of meeting our expectations. There are no effects on the EBIT on first half year, 2024, which would require the separate reporting of an adjusted EBIT.
Overall, contribution margin as a percentage of net sales was slightly improved to 58.6% from 57.8% in previous year, due to mix effects, especially with the recovery of the EC segment. Personnel expenses of 28.1%, in the previous year, 26.8%, are affected by a slight increase in FTEs, as well as a salary increase due to inflationary adjustments. The financial result is negatively affected by the weakening of the Swiss franc compared to the closing date rate as of 31st December 2023. With larger Euro positions on the debt side of the Swiss companies out of the Hoffmann acquisition, the change in the Swiss franc-Euro exchange rate of 4% compared to year-end 2023 caused the majority of the negative financial result.
Effective tax rate of 25.6% is in line with previous half year, with no significant changes in the global tax exposure. The decrease in operating profit, as well as in the financial result, and therefore, the by 11% reduced net income, is burdening earnings per share and letting them stay at 3 CHF. Weighted average number of outstanding shares is on a stable level. The net working capital increase was caused by seasonally high balances of accounts receivables, further supported by a weakening of the Swiss franc foreign exchange rates compared to the closing as of thirty-first December 2023. Sales in December are usually low. Sales in June are usually higher, which normally leads to higher AR on a pure closing date comparison.
Compared to half year 2023, accounts receivables increased due to the termination of the ABCP program in the segment D&L in September 2023. Also, inventory overall slightly increased. In the Engineered Components segment, a larger increase is reflecting the ramp-up of various products, while in the other two segments, the inventory could be reduced and adapted to the slowdown of the market demand. Continued expansion in the EC segment for specific growth projects is still ongoing. The slide outlines nicely the distinctive difference between the business model EC versus FS and D&L, respectively, the higher capital intensity of the EC segment compared to the others. The significant share of CapEx in the EC segment is stemming from the new 2024 ball screw drive machinery in Heerbrugg.
The building project, Tegra Medical in Costa Rica, aimed to be completed by year-end 2024, and the capacity expansion in Nantong just finished in the first half-year of 2024. Totally, we spent 4.5% on net sales, mainly on expansion projects, being with that well within the targeted range of 4%-6% on net sales for CapEx. We were able to improve the operating free cash flow, especially due to our net working capital management efforts and CapEx reduction compared to previous half-year. Cash conversion rate stands at 35.5%, which is a significant improvement compared to 2023.
As educated readers of the SFS media releases, you may be certainly aware that mainly large CapEx projects in 2022, as well as the earlier mentioned termination of the ABCP program in the D&L segment in 2023, caused the drop in the free cash flow conversion in the prior two years below the targeted 40%. Net debt only slightly increased to CHF 456 million compared to year-end 2023, with CHF 445 million, and this mainly due to the payment of the dividend in May. Net debt is expected to further decrease significantly until the end of the year. Equity ratio was further improved to 56.1%, which is in line with our target to go back to a level above 60% in the near future.
The bond financing out of the Hoffmann acquisition is hedged, and related revaluation of this net investment hedge is shown as changes in hedges on the equity table. The market value of the hedge has slightly decreased to CHF 42.5 million compared to December 31, 2023. Majority of the hedge is aligned with the bonds, which is June 2025 and June 2027. Return on capital employed with 20.2%, as well as return on invested capital with 8.7%, remain on the similar level as in the financial year 2023. In previous presentations, we have given you the details on how we calculate both of these performance indicators. Details can also be looked up in the financial report of the year 2023.
We have summarized the KPIs for the first half year 2024 for your reference. With this, I thank you for your interest and give back to Jens, who will lead you through the individual segments, as well as the update on our guidance in detail.
So welcome back, and thank you, Christina. Always doing a tremendous job. Thank you once again for stepping in for Volker. So let's continue with the development by segment, and starting here with the headlines of the Engineered Components segment: low point passed. Reported sales of CHF 549.9 million were recorded. That's a +2.1% versus first half 2023. The EBIT margin of 14% confirms a positive development. The major application areas were all with good performance. The Automotive division continued to outgrow the market as a whole. That means the ramp-up of precision components and assemblies for electric brake systems develops according to plan. The new capacities in Nantong, China, are used for producing stamped precision components for the electronics industry.
In India, the SFS Group acquired additional land to strengthen the local production platform. The intended expansion will essentially provide the necessary future capacity for the automotive and Electronics divisions. The expansion at the Heredia site in Costa Rica is expected to be completed by the end of 2024. This will provide SFS with the necessary capacity for further growth. Riveting became part of segment Engineered Components as of January 1, 2024. To the outlook, in the segment, Engineered Components, SFS assumes that the remainder of the year will see a continuation of the positive development. On a like-for-like basis, the SFS Group expects an improved result for 2024 as a whole, compared to the previous year for the segment. We're coming to the headlines of the Fastening Systems segment, where weaker demand was observed.
Fastening systems reported sales of CHF 243.8 million. This is a reduction of -10% versus first half 2023. With 14.6%, the EBIT margin was burdened by a lower level of capacity utilization. The economy, weakened by high inflation and high interest rates, equally in America and Europe. Besides, the segment has encountered occasionally high inventories across the entire value chain. Thanks to the acquisition of Etanco, the market position in the building envelope area in Spain and Portugal was strengthened. Riveting became also here part of the segment as of January 1, 2024. To the outlook, the SFS Group assumes that the inventory corrections in the European and North American construction industry are largely completed. Accordingly, SFS expects to see a slight improvement in the market environment over the course of the year.
A note on the strategic investments and initiatives which continued with high focus. As already mentioned, on May 1, 2024, SFS Group acquired Etanco, a Spanish distributor of fastener, fixings, and other products for the building envelope. Etanco's core competence is to offer customers added value with high-quality products and systems, as well as services such as consulting, design, and planning. In 2023, Etanco generated sales of around EUR 4 million, with customers mainly in Spain and Portugal.... The acquisition enables the Fastening Systems segment to strengthen its competitiveness through the expanded product portfolio, become a leading specialist in the Iberian market, and to secure its own further differentiated positioning in the long term. In North America, the expansion of local production capacities is continuing. This will gradually ensure local product availability and independence from geopolitical changes and long supply chains.
The headlines of the Distribution & Logistics segment, robust positioning. Overall, D&L reported sales of CHF 751.2 million. This led to a minor reduction of -2.6% versus first half, 2023. The EBIT margin of 9% was burdened by lower level of capacity utilization than expected. The results were impacted by a weaker economy, nearly all end markets and regions, and a continued slowdown in market demand that began over the course of 2023. The customers occasionally reduced the high levels of inventories. Two years after the transaction with Hoffmann, the integration project was successfully completed. And to the outlook, the SFS Group assumes that the inventory corrections in industrial manufacturing are not yet completed. The segment's development during the remainder of the year remains uncertain as a result.
Further, important to mention is the efficient use of LogisticCity for strategic partners of the segment, D&L. At the start of the year, we began supplying the customers of one of the D&L International divisions, three strategic distribution partners in Germany, our most important sales market, directly from LogisticCity. Since the beginning of 2024, around 10% more goods have been shipped than before. From 2025 on, the shipping volume will be increased by a further approximately of 10%. This will significantly increase capacity utilization in the coming years. The partners pay D&L International an appropriate fee for the logistic services provided. This gives the partners, customers, the opportunity to benefit from the advantages of Europe's most modern tool logistics.
The highest delivery capability, combined with the optimal connection of logistic partners, ensures that the delivery performance to customers is noticeably improved and that they can be served even more effectively. A final note on the completion of the integration project with Hoffmann. The acquisition of Hoffmann was officially completed on May 11, 2022. In May 2024, two years later, the SFS Group formally completed the project to integrate Hoffmann. During the intensive collaboration, the team exchanged ideas, defined goals, and analyzed their achievement on an ongoing basis. This has laid the foundation for fully exploiting the potential of the collaboration in the future. The most important decision and milestones include the IT architecture decision for two SAP systems that support the production and retail business models of the SFS Group, a concrete roadmap for Hoffmann's entry into the new important fastening technology market segment.
Various savings were realized in direct and indirect purchasing. The options for the uniform e-commerce architecture were considered and, decisions prepared. Also, last but not least, numerous quick wins were achieved on the group and divisional level. Coming to the guidance 2024 and group priorities. The expectations for the 2024 financial year have been updated, and we expect a slight growth and slight profitability improvement. Our top priority remains placing highest focus on customers and ongoing efforts to pursue forward-looking innovation projects. We want to identify the chances and opportunities that go hand in hand with the current changes and systematically seize them. From the second half of the year onward, SFS anticipates a slight economic recovery that is sustained by global demand and improved industrial momentum.
The SFS Group expects the 2024 financial year to bring slight organic growth and a slight improvement in the EBIT margin compared to the previous year. With that, arriving at the last slide of the active part of our presentation and covering the SFS Group priorities, I can summarize under diversification, continued balanced focus on different regions, end markets, and distribution channels. Under megatrends, focus on application areas with strong underlying growth drivers due to global megatrends. Under local for local, close customer relationships are essential for successful realization of the value proposition and superior supply reliability, thanks to short and robust supply chains... Under technology, focus on a core set of tooling-based technologies allows leadership and standardized processes, systems, and equipment, reducing risk and increasing flexibility. Under solid financing, good profitability and a solid balance sheet enable ongoing investments in innovations and implementation of growth projects.
Finally, I would like to thank all SFS colleagues for their hard work, their innovative spirit, and their loyalty. Their enormous commitment is pivotal to our success. Christina and myself are now ready for your questions. We'll start with spoken Q&A, and subsequently move to questions in the chat. Please raise your hand now on the Teams platform if you want to ask a question verbally, meaning we will unmute you on our side as well. You will need to unmute you on your side as well. So we look forward to your questions.
Hello, it's Joern here from UBS. Not sure if it's already my-
Yeah, we can hear you well.
Yeah? Okay, okay. Sorry, I thought there is another intro. Three questions, if I may. We'll take them one by one, and hello. The first one is, are you not seeing any incremental weakness in the automotive market recently? We had a couple of companies warning May, June, are incrementally deteriorating. Do you see this? And also for construction for North America, there are some warning signals. Do you see the same in your end markets? And to what extent can you compensate this potential end market weakness in the second half, with new products, innovations, coming up? This is the first question, please.
Good. Thank you for your question. First off, in automotive, certainly, the underlying business, the existing business, we certainly see some volatility in the business. Order income is bumping a little bit, as it usually does, better than right after COVID, but maybe still worse than before 2020. Overall, on our side, the main driver is the ramp up of the BSD, the ball screw drive electric brake systems, which is kind of covering for the sometimes subdued demand underneath in the legacy products. So from our side, we are very confident that this year will outgrow the automotive market again by 3%-5%. As we look at IHS numbers on the automotive light vehicle production, we see a decline of roughly around 1%.
We, on our side, had good organic growth in automotive end market, and are continuously optimistic about it. Also, to mention on the ball screw drive electric brake side, we expect this year to ramp up to around CHF 70 million in sales, between Europe and North America, so a major step up from last year, where we were around CHF 30 million in sales. And next year, we expect to further ramp up to roughly around CHF 100 million in sales, then in 2025 with this product line. So on automotive side, yes, a little bit bumpy road, but since we focused very much to be drivetrain independent, we don't see the swings so much in the market. Like, for instance, the electrification of the drivetrain, which has now ran a little bit in a cooldown or slowdown.
Vehicles are not being purchased with, I would say, the same optimism like maybe a year ago on the electrification side. So we don't see that, because once again, we positioned ourselves to be with innovative solutions which are independent from the drivetrain. On the construction side, North America, certainly we see that mainly the larger customers on the OEMs, the system producers, have slowed down. That's still the case currently. We don't see a pickup there, a small sidebar development. But what we see is that, since we serve in the U.S. a lot of also the small installers, who the Triangle Fastener Corporation buying at our hardware stores, we see their good development overall, because a lot is going into renovation, but maybe not so much going into new build.
I'll give you an example. A friend of mine, he has a house in Pittsburgh, Pennsylvania. He would like to do some upgrade in that house, and he asked three contractors whether he can get a quote, and all three of them said, "No way." They will not give him a quote by the remainder of the year. So that's, that's a little bit the situation. So we are benefiting from renovation. That keeps our top line, I would say, a little bit more. Then if we would focus on new build. New build, we believe we have seen the market bottoming out, and we would expect that in the second half of the year, we see a slight improvement in demand, first in North America, secondly, then follow in Europe as well.
Thank you.
Those questions, yeah?
Then maybe the second out of the three questions, if I may, it's a quick one. When you split the organic sales growth for the group Q1 and Q2, I mean, was Q2 already much better versus Q1, or was it a mild improvement? Just to better understand the sequential trends.
We have seen Q2 certainly has been better than Q1. Q1, especially January and February, we had very slow sales development due to a hard winter in the Nordics. Also in January, we have seen that, especially on the industrial side, customers have not ordered coming back and ordered as quickly as they usually do in January. So here we still see some, I would say, inventory effects kind of the destocking effect, as we mentioned. And secondly, also still a certain caution, especially in the industrial manufacturing side, that customers are not too optimistic currently. And due to that, the behavior is rather a little bit slow when it comes to place orders.
We also still see an inconsistency in order income, which is a clear sign that customers are not too confident. Secondly, also, I think for, for us, a little bit of learning was the last week in June. Also here we have seen that a lot of orders were postponed out into July. Also, customer outstandings stepped up overall. A clear indication that the industry overall is focusing very much on cash flow and cash management, which is also an indication that the industry overall is not yet in a, in a, back in a growth mode or in a, in a mode where they are maybe optimistic about the immediate outlook, in the, in the coming weeks and months.
Thanks. And then maybe the last question: in D&L, robust organic performance, given the new, insourcing of your distribution partners or customer events, however you want to call it. But the EBIT was down more than sales, actually, and you also added 100 full-time employees, despite sales are going down. So how shall we read the incremental EBIT contributions from the new, yeah, I would call it, customers?
A good question. Certainly, we prepared the year 2024 to be a different one. We expected certainly a slightly better market momentum in the industrial manufacturing side. So I think that's point number one. We expected organic growth and another flat, rather flattish development in D&L. So that's part of the investment which we have taken into the market, which is quite important. It's vital. You invest in the market with salespeople, with digitization, and then sales usually follows. So here we see a little bit of a delay due to overall the market sentiment, but we are convinced we invested in the right capabilities and competencies.
Secondly, I think that that was the second surprise, and for us, more or less, a little bit also the reason why we could not hit, you know, the 12% EBIT margin as expected by half year. This is a labor trade agreement reached late in June, and there were some one-time payments required for the year 2024 also, which we already have done in 2023. And those 2023 payments to our employees in Germany could not be included in the new agreement, which is a very unusual development, and we have not seen as such before.
So, unusual development, I would say, on the labor union trade agreement side, and secondly, a little bit of slower development cost us that the personnel costs stepped up overall. And we also clearly identified now measures for the second half of the year that we see then also a hopefully better utilization on the top line, but certainly also have additional cost measures already implemented in the first half of the year, which will show its full effect in the second half of the year.
Thank you very much.
Next, in the queue is Tobias Fahrenholz from Stifel. Tobias, please unmute your microphone and ask your questions.
Yes. Hi, good morning. Again, on automotive, how do you progress here with your portfolio fine-tuning, meaning taking out those less profitable orders? Does it work? How long could it last at the end, and what should we expect here for top-line burden in the next years? That's the first one.
Yep. Good. Thank you for the question, Tobias. Yes, we are progressing with heavy negotiations with our customer base in segment Engineered Components, especially also automotive. We can say that we reached with smaller customers a good agreement overall, and with larger customers, we are closing the negotiations within the next few weeks, as we expect at this point in view. Overall, I would say we are optimistic about the development. We clearly see that the portfolio discussions which we have with our customers are fruitful and bring a lot of value to both sides. From today's perspective, I would not expect that we see a major impact to the top line, owed certainly to the fact that the automotive market is still developing solid.
Secondly, changing suppliers is usually quite a cumbersome task, so cannot be achieved immediately. And thirdly, we have also a good pipeline of innovative projects which going to ramp up in the second half of the year, substantial ramp-ups in the second half of the year, but also in the year 2025. So overall, from today's perspective, we'll continue to grow in automotive, and we'll only see underneath that some minor adjustments in the product lines. And certainly, we are clearly on track with continued profitability improvement. This is our objective overall in the segment, Engineered Components going into the year 2025.
... Okay, thanks, Hans. And coming to destocking in terms of percentage, what did you face for a headwind now in Fastening Systems and D&L? Could you quantify it? Was it maybe 3%-4%, or what's your best guess here? And if you look ahead, are there any activities where you also hope to see some restocking then in the quarters to come?
Yes, on your question, overall, what we have seen is that, over the Group, we have a slight volume and also price reduction, less than 1%. As from today's perspective, overall, certainly, I need to correct, the volume went up on the Group level overall, and the prices came slightly down on the Group level. When we go then into the different segments, we see the segment Engineered Components. There we have seen a slight price increase and also a slight volume increase. And then in the segment Fastening Systems, we have seen a volume decrease and slight price decrease, and in D&L, we have seen a volume increase due to the onboarding of the partners and a slight price decrease, overall.
So that's a little bit what we see in the markets, in the segments, overall, not concerning to our point of view. I would say that the normal slight adjustments related to volume and pricing, as you usually would have in such an economic cycle.
Okay, but asking more specifically, you were speaking about the volumes, but what has been the, let's say, real underlying demand at Fastening Systems, which you saw there in Europe and the US, and what was kind of special inventory reduction? Was it half of the decline, or what's your best guess?
Yes, the inventory at, from our point of view, not knowing the detail of the inventory of our customers, but, from our point of view, we certainly have seen the minus 10% in the top line performance, and this is mainly attributed, I would say, I would call it 50/50. I would say half is probably inventory, and the other half is probably slowdown in the market of new build. Overall, I would expect second half of the year, we'll still see an element of being slow with new builds, but we should also see secondly, then, an improvement of the inventory adjustment cycle being over, which, for which we have good indications from our customers that they see a pickup in demand.
We already have seen pickup in demand in the second quarter with some customer groups. But since we have many, many, many smaller customers as well, we are not having a clear indication. I would say it's probably half and half, attributed, or once again, due to slowdown and inventory adjustment cycle.
Okay. Merci.
Give insights, and the heads of the divisions will give presentations on automotive, electronics, construction, and also, D&L. Also, we'll do a deep dive on key projects, on innovations, on trends, and certainly we will also do plant tours. Invitations will be sent out by mid of August, so we look forward to you coming and visiting us and joining us on this Investor Day on September 5. And then, further looking out into the year 2025, we have the publication of the first results on Friday, January 24, 2025. Then we have also the publication and presentation of the annual report, 2024, will be on March 7, that's a Friday. And then we have our general assembly on a Wednesday, as usual, April 30 in 2025. This may be on the next dates. So as I see, no more questions.
So we hope with that, we have given you clarity and insight in the development of the SFS Group. We wish everyone a good and healthy summer break, and we'll see you back at the Investors Day. See you all. Thank you. Bye-bye.