Good morning, and welcome to the presentation of our first half twenty twenty five results. Today's speakers are Holkert Osman, CFO and myself, Jens Borje, CEO of the SHS Group. The agenda over the next ninety minutes will be positioning of SFS, key takeaways, adjustment of production and distribution network, key financials, development of segments, guidance 2025, organizational further development as of 2026, as well as the opportunity for Q and A before closing. Also at this point, we would like to inform you that today's conference webcast will be recorded and uploaded to the website. I will start with the positioning of SFS.
SFS is a reliable companion throughout the day, from early in the morning to late night, seven days a week, mostly unnoticed since our mission critical precision components, fastening systems, and quality tools for selected end markets are embedded in the successful products and processes of our customers, where they often fulfill mission critical functions. Our value proposition, inventing success together, driving innovation with value engineering. The direct cost of SFS products typically makes up less than 1% of the total cost of customers' product, but related to internal costs like procurement and logistics are significantly higher. To address this, SFS focuses on understanding customer applications and reducing total internal and environmental costs through customized value engineered solutions. Across its three segments, engineered components, fastening systems and distribution logistics, SFS creates synergies in tooling based technologies to serve a wide range of customers with tailored products, tools and systems.
These innovative solutions are brought to life by our dedicated employees, our value creators, who turn ideas into impact. Before talking about the key takeaways of first half twenty twenty five, let us revisit some of our innovative solutions based on our value proposition. In the segment engineered components, conventional multipulse solutions are often complex and error prone, leading to higher costs, longer lead times and reduced efficiencies. In contrast, our innovative and streamlined solutions simplify design and manufacturing, reducing complexity and minimizing the risk of errors. This results in faster production, significant cost savings up to 60% and a more efficient, reliable and cost effective outcome for our customers.
In the medical end market, most competitors only provide individual manufacturing solutions or processes. For our customers, this complicates the process of sourcing their products. At Tekara Medical, as an end to end solution provider, we manage the complexity for our customers from the source of raw material to molded, assembled, packaged and even sterilized products so that our customers can focus on market leadership in terms of competitive cost, quality and speed to market. In the segment Fastening Systems and the construction end market, for instance, the SFS NDC MXC fastener combines multiple functions into a single component, reducing the need for additional parts and simplifying assembly. This leads to faster, more reliable installation, low production costs and improved product quality.
By minimizing complexity and enabling tailored solutions, we help our construction customers to achieve great efficiency and cost savings. Staying in the construction environment, the SFS IsoVeld system is a comprehensive solution for mechanically fastening flat roof membranes, combining an advanced induction welding tool with specially designed fasteners and stress plates. The system ensures secure durable membrane attachment while enabling faster, cleaner and better independent installation. The offer is complemented by a proprietary installation calculation software for our customers. In the segment distribution logistics and the industrial end market, SFS aims to make customer more productive.
We offer products and solutions that reduce downtime in production, that safeguard workers' health and safety, and reduce manual effort in purchasing. The example shown is our GARRAND PIC1, a state of the art vending solution ensuring 20 fourseven product availability and reducing the need for manual tool distribution. SFS offers with that an integrated solution combining smart tool storage, high quality tool consumables and tailored services to optimize tool management for customers. Services such as tool re sharpening, extend tool life, reduce waste, low overall tooling costs. This holistic approach improves operational efficiency, ensures tool availability and delivers measurable cost savings for our customers.
Summarizing, SFS operates a global sales manufacturing platform with 150 production sites and distribution companies across 35 countries. Its strong local presence in Asia, Europe and North America ensures close proximity to customers. This enables SFS to provide fast, reliable support and tailored solutions. I will continue with the key takeaways first half twenty twenty five, which can be best summarized as solid performance. Solid results in a market with global trade policy upheavals and high uncertainty reflecting the company's sustained good positioning.
SFS generated sales of CHF 1,539,000,000.000 corresponding to a reduction of minus 0.4% compared with first half twenty twenty four. Currency effects reduced growth by minus 2.3%. On a like for like basis, slight organic growth of 1.1% was realized. To address the challenging market environment, SFS has started to selectively adjust its production and distribution network. The program will generate onetime costs of approximately CHF 75,000,000 and finish by the end of twenty twenty seven.
More insights to follow in the coming slides. Adjusted operating profit EBIT of CHF 168,100,000.0 and an adjusted EBIT margin of 11 in the previous year, 11.7% was achieved. Including onetime cost of 5,900,000.0, the reported EBIT margin stays at 10.6%. As of 01/01/2026, TSFS Group will, in a final step, complete the adoption of its organization, allowing it to sharpen its focus on end markets and customers. Besides, we updated TSFS Group guidance for the 2025 financial year.
I will continue now with the detailed explanation of our initiative to selectively adjust our production and distribution network. This is an adaption to the changing market environment, particularly in the industrial manufacturing and automotive end markets, which present SFS with challenges. To strengthen focus on core activities and adjust production capacities to market demand, selected sites will be closed and individual business areas carved out. The concentration on fewer strategic production plans and core activities optimizes efficient use of resources and reduces complexity within the production and distribution network. These activities will help to achieve SFS' defined long term growth and profitability targets.
The SFS Group's strategy remains unchanged, particularly its local for local strategy. The program is to be completed by the end of twenty twenty seven. The expected reduction in sales will be about CHF 110,000,000, and total program related one off costs will be approximately CHF 75,000,000, whereof CHF 30,000,000 are balance sheet effects and CHF 35,000,000 project costs and EUR 10,000,000 loss by sale of assets. In total, 25,000,000 in cash and EUR 50,000,000 noncash. A positive EBIT margin effect of approximately 0.8 percentage points as a result, And the one off cost will be reported at an adjusted EBIT margin and communicated during the time of the program.
The current project overview indicates that about six fifty full time jobs will be affected due to sell off, transfer and closing. Already communicated and initiated are the closing of the sales site, Bundammergebierge Austria. The activities are transferred to Germany in the spring of twenty twenty five. OPEC Germany, the production site closure in second half twenty twenty five. The business will be partially relocated to Helbrook, Switzerland.
Malaysia and Singapore, the Asia Pacific organization of Hoffmann will be moved to distribution partners gradually until fall twenty twenty five. Emenbrunke, Switzerland, as of 06/30/2025, a management buyout of Alkermit has been signed. The transaction will close by end of twenty twenty five. And Czech Republic turn off, the production site will be closed by 2026, the business partially relocated to Helbrook, Switzerland if profitability if profitable and if customers agree. As you can see by the measures to strengthen our position in a dynamic market environment, we are taking focused steps to optimize our structure and performance.
We are sharpening our core focus by closing selected sites and divesting non core business areas, allowing us to concentrate on strategic priorities. By streamlining operations and concentrating activities in fewer high performing locations, we improve capacity utilization and reduce operational complexity. These adjustments are aimed at increasing profitability and supporting our long term growth objectives. Importantly, our overall strategy remains unchanged with a continued commitment to our proven local for local approach that ensures custom proximity and responsiveness. We aim to communicate the remaining projects most likely until the end of the year 2025.
I conclude my explanations of the key takeaways and the adjustment of the production and distribution network and hand over to Volker for covering the development of the key financials.
Thank you, Jens. Good morning, everybody from my side. Well, welcome. The challenges have been described by the CEO. We are facing volatile frame conditions, and ambiguity is making our customers hesitant in their decision process.
With that backdrop, given we may result we may report solid results, clearly confirm our ability to generate cash, and continue fulfilling our customers' needs and rely as reliable partners. It is an opportunity to thank our customers and our dedicated employees for their loyalty and cooperation, which makes this performance possible. During first half year, we have, despite the circumstances, continued to grow organically by CHF 17,500,000.0 or 1.1%. From m and a effects, we grew additionally by CHF 12,300,000.0 or 0.8% versus the previous year. However, FX effects, particularly from US dollar and euro, have adversely affected our sales by minus 2.3%.
We therefore report overall sales of EUR 1,539,000,000.000, which is minus 0.4% or minus EUR 5,800,000.0 below prior year performance. Currency exposure to the U. S. Dollar and euro in the segments remain stable and vary between minus 2.8% to minus 1.8% according to the sales mix in the respective segments. First half year showed especially in engineered components good organic growth.
At the same time, volumes in the fastening systems segment suffered from difficult developments, mainly in Europe, whilst North America region shows some progress driven from a pricing point of view. The e and l segment shows restrained end markets with strong fluctuations, while customers partially are running austerity programs, the onboarding of our partners business in logistic city counterbalanced that effect partially. Looking into the geographies and end markets, we show an increased weight in North America and Asia as Europe is softening to 57.5%. Relative weight of Switzerland further slightly reduces and is now at 11.4%. North America increases to 18.8, Asia to 12.3%.
Sales breakdown by industries shows an overall stable situation. The distinct local for local approach remains a strategic pillar for SFS. With such a setup, we deem ourselves well positioned against tariffs and customs discussed in the current geopolitical development. As opposed to direct impacts, we are concerned that consumer confidence and waning investment fertility will further challenge the business. We report an EBIT for the first half year of 162,200,000.0 Swiss francs or 10.6%, which we normalize for the onetime cost connected to changes to the production and distribution network of 5,900,000.0 Swiss francs to 168,100,000.0 Swiss francs and 11% respectively.
During the first half year, we took actions on the site in OPEC, Germany, in Britain, Austria, as well as for Hoffmann, Asia Pacific. We almost finalized the closing of the sites and the transfer of the activity within SFS or as in Asia Pacific to our partners. The underlying performance shows that the challenges described are managed and countered effectively. However, as indicated earlier, we are convinced that more is possible and further improvements will be made. The respective projects are bundled, and we will, and will allow resizing focus adaptation of product footprint in parallel with strengthening of the core technologies, as explained at the beginning.
The reported earnings per share for the first half year is at CHF $2.86. This result is negatively impacted by the charges from the improvement program described by CHF 0.15 and is compared to the prior year's CHF 3.01 per half year 2024. Networking capital management remains a focus area, especially in times of slow demand. The importance of production planning and inventory levels as well as collection of receivables are reviewed constantly. Based on the operational improvements and the FX development, cash to cash cycle came down by four days.
Net working capital in percent of net sales came down by minus 1.2% to 29.2% of sales. CapEx is at 3.5% of sales following our commitment to drive capital utilization and limit CapEx continuously to maintenance and productivity improvement. We are therefore well below depreciation and amortization for the first half year. We are on track to attain a full year CapEx to the low of our indicated bracket of 4% to 6% of sales. Coming from a long phase of expansion, we turn our aim to capacity utilization, More selective investment decisions as well as the project to adjust our production and distribution network will lead the way.
Our free cash flow for the first half year is at CHF123 million, reflecting a conversion to adjusted EBITDA of 54.2% or 110% as we compare it to net result. This is compared to 35.5% of EBITDA in prior half year and 75% of net result. With this performance, we document our very good ability to generate cash and deleverage the balance sheet further to meanwhile very stable levels. With ongoing network and capital management, diligent CapEx decisions and organic growth, we see ourselves in a position to keep the cash generation up and reconfirm the targeted bandwidth of 40 to 50% of EBITDA on a full year basis. We have continuously deleveraged our balance sheet and report an equity ratio at 60.3.
The first of the two bonds has been settled at maturity against our revolving credit line in euro and congruent to our acquired euro investment. The remaining debt is treated as a net investment hedge and therefore from FX effects will be further recorded directly in equity. Given the above mentioned developments, we see return on invested capital and return on capital deployed on comparable levels to prior year. Going through the segments, let me start with the engineered components. Beginning with this, we report 563,100,000.0 Swiss franc, which is plus 2.4% versus prior year.
Besides automotive ramp up in Switzerland and China, we see positive momentum in HDD business and in aircraft applications. Medical and industrial specials confirms last year's performance. Overall, sentiment is restraining volumes, and low visibility impacts fidelity of our customers to sit decide on their investments. EBIT margin is at 13.7%. Normalized for the adjustments mentioned before, we report we adjust to 14.6%, which is compared to 14% in prior year.
Fastening systems, the segment which focuses on construction end market report sales of 297,200,000.0 plus point 6% versus prior year. Very soft construction demand, particularly in Europe, show effect. Further localization in North America in Exeter is completed. EBIT margin of 11.8% is affected by the dilutive effect from the Swiss based construction and boot business. Distribution and logistics segment is reporting 678,800,000.0 Swiss francs, minus 3% versus prior year.
The European industrial end market experiences a very muted situation, and demand is therefore slow. In parallel, the warehousing and logistics activity of two distribution partners have been successfully integrated in the logistic city facilities in Nuremberg further driving utilization of the site. The dilutive effect of the integration of these partner businesses paired with the muted demand of the industrial end market leads to EBIT of 8%. Normalized, we look at 8.2%. Coming to the guidance and having seen first half year of twenty twenty five, we update our guidance and state sales to be around previous year levels and the adjusted EBIT margin also around previous year's levels.
As usual, we state this in front of the current geopolitical and economic environment, which is paired with low visibility. Our strategic priorities remain the same for 2025. We prioritize the strategy execution, fostering high team motivation, capitalize on opportunities, lay the foundation for future growth, conduct disciplined reviews, and execute our strategic options meticulously. Mega trends, we understand and monitor, anticipate changes, and adapt strategies to remain competitive, focus on applications areas with strong underlying growth. In the local for local strategy, we ensure balanced emphasis on different regions and markets, distribution channels, and maintain close customer relationships to enable value proposition, achieve superior reliability in this proximity.
We focus on our technology, the integrate and integrate the AI machine learning and IoT and automation into our daily operations. We update our standardized processes, systems, and equipment to mitigate risks and continuously enhance flexibility. We stick to our solid financing, emphasis strict cost discipline, respond to challenging market conditions, maintain good profitability and a robust balance sheet and achieve continued increase in equity ratio. With that, I hand back to Jens. I conclude my report on the performance, and thank you for your attention up to it.
Thank you, Volker, and welcome back to the agenda topic organizational further development as of 2026. Vision 02/1930, prepare the organization for future growth is the headline we already have seen and shown during last year's Investor Day on September 5. Today, we communicate the second and final step of the organizational adjustment. The purpose of the project step up, as we call it internally, is we want to make our organization ready for future growth by simplifying and streamlining the organization, sharpening our focus on end markets, empowering the segment management teams for decentral decision making, and advancing the organization to the next level or as we call it step up.
The new composition of the group executive for showed sharpen our focus on strategic decision making by generating a broader perspective on segment and end markets. With that breakdown silos and promote decision making across divisions and functions, enable more holistic and strategic discussions, foster healthy internal debate, but also finding alignment with our company wide structured employee development program through promotion of job rotation and broadening of leadership capabilities across the organization also on the GEB level. Accelerate the growth in Asia with that drive expansion in the region and use potential M and A opportunities, a lever not actively used over the past decade. Increased diversity within the GB and with with that strengthened leadership by enduring gender diversity and moving beyond an all male composition. Now what are the organizational changes as of 01/01/2026 with the aim to strengthen the end market focus in EC segment?
First, the EC segment will no longer have divisions. The segment gets structured into business units, automotive form parts, automotive fasteners, medical, industrial and electronics. Urs Langenau, head of divisional automotive will take over as head of EC segment. George Pohl, Head of Division Electronics, retire from business and Executive Board at the end of twenty twenty five. Walter Kobler, Head of Division Medical Industrial Specials, will also step down from the Group Executive Board and will continue as Head of Business Unit Medical until his upcoming retirement at the end of twenty twenty six.
The organizational changes as of January 2026 with the aim of further development of the BUs in the growing Asian market. Martin Reifeneck, Head of Segment D and assumes overall responsibility for the Asian region. Isaac Ramiak, former head of division D and L Switzerland and current chief human resource officer, will take over the D and L segment for Martin Raiffenenkel. And Kristina Buhri, head of corporate accounting and reporting, takes over responsibility for human resource, marketing and corporate communications, and ESG from ISO. With that, she will join the group executive board as per 01/01/2026.
The Vision 2,030 in Reach in Asia is clear. We want to drive growth in Asia. As part of our Vision 2,030, Reach in Asia plays a central role in driving sustainable and profitable growth. Strategic initiatives are being implemented across key locations to strengthen our market position and unlock new opportunities. In India, we are building up local fastener production capabilities and advancing core automotive technologies to better serve regional customers.
In addition, we are actively developing new business opportunities in the areas of brake and restraint systems. In Antong, China, our focus is on expanding the BU activities business unit activities to drive overall growth in China. We are accelerating go to market strategies for medical customers and aim to establish a leading position in ball screw drive technology for brake systems. In Malaysia, we are broadening our capabilities beyond the hard disk drive segment and intensifying our go to market efforts for medical customers to diversify and strengthen our customer base. Through these initiatives, we are reinforcing our commitment to local value creation, technological excellence, and customer proximity across the Asian region.
Here, we still see today's group structure with the divisions in the segment engineered components. And on the following slides, the group structure and organization as of 01/01/2026. Finally, I would like to thank all SFS customers and employees for their hard work, their innovative spirit, and their loyalty. Their enormous commitment is pivotal for our success. With that, we'll start now the q and a.
And first, we take oral questions and then the written questions. If you would like to ask an oral question, please raise your hand now via MS Teams function, and you will then be called up. Please introduce then yourself briefly with your name and company before you ask your question.
So mister Effort, you can now mute yourself and ask your question.
Hello? Can you hear me now?
Yes.
Yes.
It took some time until I was able to mute to unmute the microphone. Thanks for taking my questions. I would start with three, and then I will go back in the queue. The first one would be, please, on the H1 margins. There was a 1% to 2% ramp in full time employees despite some end markets are developing not really great.
So was there not the opportunity to shift some employees from product lines, which are less utilized, to the new ramp ups? Was it really necessary to hire new people? And also, how do you see then in the second half the cost efficiencies coming from personal costs? This would be the first question. Second question, if I may, just looking on your end markets in general, do you see any signs for acceleration, signs for improvements?
Or would you expect that in the next six months, the end markets are likely more or less developing the same like it was in the first half? And then maybe the third question, if I may, in the few into 2026 when you look on these efficiency programs. I mean, do you expect the biggest movement in the margin improvements? Is it '26? Is it '27?
Is this gradual? Just to have a little better feeling here. Thank you.
Thank you, Jan, for your questions, and I will start maybe with the first two and maybe Falko does does the third one. On the h one margin, yes, certainly, we have seen on the personnel side an increase. This is seasonal. We see over in prepare for ramp ups in electronics in Asia and see the good development that increases the personnel cost in the first half, but then also in the third quarter. Secondly, also in the segment, components, we have currently now around 75 employees in ramp up of automotive products, which will not be needed in future.
This is mainly safe launch procedures, meaning temporary labor, you know, going through and and sorting products, you know, to secure safe launch for our major customer ramp ups. That's a procedural requirement. We also expect towards second half of the year that we'll step by step bring those 75 employees back. And then in the segment fastening systems, we have around 50 employees in specific roles helping us to increase inventory, ramp up production efforts to then later on support plant closures, which we foresee then for the near future. So we are driven already in the first half of the year to invest into the strategic adjustment program and see due to that also an elevated FTE and labor force level in the second half of the year.
We'll then see some of the benefits coming into play overall. As we indicated, we have around six fifty FTEs, which will be affected by the the program. And then on top of it, we we aim for reducing and sweating out an additional 300 employees, you know, through not replacing them due to fluctuation, which is still in in a range of around 6% to 8% globally. Now when we take a look at the end markets and charge a little bit what do we expect in engineered components, then we would foresee in the second half of the year continued ramp ups with customer programs, which help us to continue. You know that the slight organic growth because the underlying legacy business is a little bit softer, but we would still see an organic growth in the second half of the year.
In the segment, Fastening Systems, we have seen a challenging first quarter, hard winter conditions. We have seen the tariffs, which also caused some uncertainties. But overall, we see a good development, solid development in The Americas, but still a weaker development in Europe, which we foresee will improve probably in the coming year 2026, and we'll still expect a more challenging environment in the second half of the year in fastening systems. Distribution logistics, it's all about the tariffs, I have to say. As you know, 90% of our customer on sales is within Europe.
Europe is heavily export oriented, and so our customer our customers are hovering, you know, on the cost side. We see strategic initiatives where we can offset, you know, some of the customer reduction on on the cost side or the customer saving programs. But overall, we'll probably see a side about movement also in d and l for the remainder of the year. And for next year, it's difficult to judge. We plan and foresee that the current, you know, trade discussions and uncertainty is the new normal for the next few months and maybe even years, and that's why we also have a cost program initiated, which will help us to manage this situation.
So looking forward, we do not see any sparks, any causes, any reasons to see an ignition and an improvement. We certainly have good innovation projects, but the underlying existing business is a little bit softer for the time being.
Good. Let me go a bit into that question on on efficiency signals and and when we when we would expect these to happen. As said, it's a bundle of of projects that we initiate, and we will initiate during second half year. So depending on timing of potential closing and sale and transfer of the business, we expect effects to kick in in the second half twenty six. We have partially projects that we indicated in Germany, in Austria, and in Asia Pac that are almost to be closed. We will see some effect from these naturally earlier.
On the other hand, we are we are also dependent on on the customer acceptance of transfer of business as as Jens indicated with with Czech, And, therefore, we are we are a bit depending and and hesitant on on giving a clear timing. We are we are positive that we are realizing that by second half year twenty twenty six. Gives me the opportunity to probably shed a bit of light on on the overall cost that we engage. We we mentioned 75 millions overall, of which roughly 30,000,000 are equity effects from currency translation adjustments where where where you have where you have a pure equity effect and the the loss on sales of assets that we've been mentioning. These are also depending on how we can offload assets from a real estate point of view and others.
And then we we look at 35,000,000 of project costs, are engaged in in relocation, recertification, repurposing of production footprint and and closing selling off sites. 50,000,000, as said, are to be considered as noncash. Out of the $75.25 as cash, and you can expect for full year 2025 the effect to be around 20,000,000. That would mean that in second half year, you you look at 14 to 15,000,000 of extraordinary cost. The rest would then be distributed in 2026 and 2027.
Thank you very much for this. If you allow me one follow-up to be clear. For the second half, I mean, full year guidance implies that your second half EBIT margin is close to 12%. Or in other words, it would be a €10,000,000 improvement year over year amid more or less flattish sales in the second half. So where is this €10,000,000 total EBIT improvement then coming from?
Is this normalized headcount? Is this already the benefits of the efficiency program? Just to be clear. Sorry to to double
check It's partially effect from the from the from the mentioned projects in Alpe, Austria and and Asia Pac for Ofman, but it's also the hiring freeze where Jens alluded to the roughly 300 people that we are going to reduce in a run rate towards early twenty twenty six. So so that will that will show that will show the effects.
Thank you very much.
Thank you for the question.
No more questions so far. Then we have one from Tobias Valenwux. Yes, you can also unmute yourself.
Yes, hi. Good morning. Quick one on pricing. Could you tell us what the pricing impact has been in the first half? And what do you expect at the moment for the second half?
I assume you try to pass on all these U. S. Price hikes. That would be my first one. And then to understand these deconsolidations or the business you are going out is slightly more than CHF 100,000,000.
How much of this is EC related? So I guess mainly the auto part. And how much is D and L? And can you also say something about the timing there? So we know your full year guidance, but is there already a slightly negative impact from leaving some businesses?
So thank you, yes, Tobias, for the questions. First off, yes, price increases are happening in The U. S. As we see tariffs coming in, we usually follow-up them right away either to the customers directly as we do the trading of construction goods, for instance, in The United States, mainly sourced in Asia. So that's usually a quick adjustment and and increase.
On the pricing side, with tier one customers, it's usually also negotiation and contractual agreement finding on on how to absorb it. Usually, it's also passed forward to the customer and a matter of discussions. On the pricing side, not not much we are concerned about. The total exposure, if tariffs are in place, is maybe around CHF 60,000,000 out of the CHF 3,000,000,000 over the total company. So their exposure is very, very small there.
When we come to the development, sales development or the sales distribution of the improvement measures, Volker will give you in a minute there an answer. Let me say, on this project, which we now summed up to total a bit more than 100,000,000 in sales. Over the last five years, we have seen the environment has been rather a little bit bumpy and patchy in a sense that 2020 and '21 was corona, then we had the supply chain situation globally. And then later on, we we had a labor availability situation. So we had to manage the business always considering those circumstances, you know, batch by batch by batch a little bit and not in continuous flow.
So we accumulated a few topics over time and and said, okay. What is the right time or when is the right time to now approach those strategic adjustment and pruning of some business activities which we deem as not being, you know, core? That's maybe a little bit on on the history. Overall, we do expect that there's no negative impact to the sales development of the group due to these adjustments, which we do overall, especially in D and L and fastening systems. It will make us more efficient.
It will have certainly an impact on on cost and cost competitiveness overall. And in the segment, the engineered components, it's a little bit also a a mix. Some sites which are, you know, just not fitting the new needs anymore and which are subcritical in size get, you know, consolidated. So so you can speak of some satellite sites, which we established over the years, are kind of cold and withdrawn back to the larger plants where we have enough capacity and currently don't see a need to enhance this capacity for the time being. So so maybe there's a few words on on this program.
And if you look at the distribution of what what sales we are we are looking to discontinue, we are we are seeing probably 70% in the EC environment, 10% in fastening systems, and and roughly 20 in D and L. Right? So so if you if you wanna distribute that.
Now as it is the case with long term engagement in EC, sometimes it's not so clear cut how we get into a discontinuation of a program that sometimes takes longer phase outs in the in the tail, but that's what we are basically looking at 70% EC, 10% fasting systems, 20 in the end.
Yep. Thank you.
Then we have another question from a person with a Swiss mobile phone number. You can also unmute yourself now.
Yes. Yes. Hello. Can you hear me? This is from Neutrolscheitung.
Yep. We can hear you. Yes. We can hear you.
Okay.
Good. Okay. Thank you. Well, is this actually the the largest cost program, you know, in the in the history of of SFS? I mean, we've learned, you know, I mean, obviously, 650 jobs affected and another 300 because of the hiring freeze.
And there might be, as I heard, I think, closings of sites. And so if you could answer that for me. And if, regarding these further closures, maybe, where could they, again happen? And question also is in, for Switzerland. Alchemate, is this a big organization or small?
I mean, how many people as a result of this management buyout will leave FSF? And could you then finally also to let me know a bit about the your headquarter. Is there also the the personnel there being reduced? Or is it overall even as you transfer now some activities maybe from The Czech Republic and also from Germany to Herbroek, will Herbroek even grow in in personnel? Thank you.
Mhmm. Yep. Thank you for for your questions.
And and first off, no. It's it's not the largest adjustment which we have done before we went public in 2013 and 'fourteen. Also, have done strategic realignments of the business activities which we had at that time. We also kind of offloaded at that point in time some of the activities which we deemed to be no core and where we deemed they are better owners than we as an organization. So I think that's that's also very important and and the responsible decision making.
Are we the best owner? Or is maybe the target, like, for instance, you mentioned Algemet better off under, you know, a new leadership which maybe has more entrepreneurial freedom due to restrictions of a larger entity in which they are embedded. So Alchemit, for instance, there we do indirect sales to hardware distributors in Switzerland, kind of our competitors. And after the Hoffmann acquisition, it became clear to us, we would like to harmonize also within Switzerland the alignment with Hoffmann and distribution logistics. And therefore, over the last two years, have looked around what would be the best solution for Alphemet, and we are happy that we were able to solve it with a management buyout overall.
Now when we talk about where does the program have an impact and and what happens overall, we clearly see Europe, you know, Europe being challenged due to the trade discussions, which are continuing. We see, especially in the industrial sector, capacities are not being utilized. Our customers are suffering. And when our customers are suffering, certainly, we feel that as well overall. And so we see that the smaller satellites, branch offices and smaller production sites are just not utilized anymore and can be rolled back into the larger sites.
So that means, for instance, when we talk about Alpe in Germany, we certainly relocate the activities back to the site in Helbrook, and the site in Helbrook here will have a higher significance its activities in the years to come for our European footprint overall, for example. But also the activities in in Austria will now be done out of Frankfurt in near Frankfurt in Germany. Also there, it's it's a matter of efficiencies. Nowadays, IT technology, video conferencing, artificial intelligence and such things help us to to be more flexible in where we station our employees. And due to that, we can also consolidate back to larger site, larger entities, and with that, also become more efficient.
So these are maybe two examples. Then also our plant in Czech Republic, for instance, also around 150 employees, for instance, has been subcritical over the years. And now we do not talk about three, four years. For the last ten, fifteen years, we clearly realize this is subcritical for our technologies and for the challenges which we see in the end market. And also they have rolled back the activities into into the larger side of of Helbrook.
I believe, overall, we have to take a look at the big picture. What's happening is that we see India and China becoming more independent on the technological level so we can produce more local. And overall, the industry has developed itself nicely in those geographies, and and we see The United States trying to fence themselves off, yeah, to to these trade policies. And in the middle, it's the European continent who is very export oriented, which just sees less utilization on the industrial capacity side. And here, we are now taking measures to make sure that the plants and the activities which we deem as core have enough utilization and are focused on the right opportunities and challenges in the next few years to come.
That may be a few words on this strategic alignments and on the Alkermet side.
Yes.
And Alkermet goes into the same direction. It's a question of shortening the profile towards the end markets. And and, therefore, we we came to the conclusion that the activity of Alkermit is is better owned by another structure and sold that off. You asked about the size. It's roughly 35,000,000 to 40,000,000 business with a low one digit margin, EBIT margin, and therefore, the the impact on our p and l will be minor.
We are looking at, 45, employees. So it is very relevant on the Swiss market. In the overall, we see it as a clear part in in that bundle of measures to to drive focus and and end market orientation.
Good. Does this satisfy your questions?
Maybe sorry. Just, here, Brooke, you know, if you could answer this question. Will it, you know, did the person decide there, you know, will it stay the same, or or will it now decline as a result of all these measures? Or may it or will it even grow, you know, when on on a net basis as you are transferring, you know, some of the work you've done in in Germany and and in The Czech Republic there?
Exactly. Stays I would I would give a conservative outlook and say stay stable. Yeah? On the conservative outlook, stable.
Mhmm.
And how how big is is the network as we speak in in terms of staff?
Yeah. We have 1,700 employees here locally on-site. And as as mentioned, the scale effects are substantially in today's business environment, and that also explains why we are rolling back aside Old Bay Germany with 45 employees and tech with a 150 employees. Overall, it's just that the scale economies cannot be applied there, until this is the right time to to roll it back in an environment which is not expanding anymore industrially as we have seen that. For instance, ten years ago ten years ago, we had not enough space in in Helbrook.
We did not have enough capacity to manage the the growth the growth ambitions, so that's why we needed to have those satellite sites. But today, as we see geopolitically, you know, we come into new orders, and and that requires that we make adjustment to our European manufacturing platform.
Okay. Thank you very much. And just 117 +1 you have in in Yes.
703,500 overall in Switzerland.
Thank you.
Okay. And we have a next question from Mr. Obst. You should also be able to unmute yourself now.
Yes. Thank you very much for taking my question, and good morning. First question is, again, of course, with the current adjustments, you are mentioning you are adjusting your growth expectations going forward. So what do you expect for the next three to five years currently? Formally, had a growth idea for the entire group, which is now adjusted because you are reducing capacities and you are focusing on utilization rate.
This makes absolutely sense, of course, from my point of view. But what is the new growth expectations for the group overall? And the same is true, as I understand it, for D and L. There was some kind of an adjustment of the mix idea of the regional mix. So before, I understand that D and L should come from a more European centric towards more towards U.
S. And Asia Pacific. And now you are readjusting that at least a bit. So what is the new target from some kind of a regional perspective if you go for the next three to five years? And maybe two additional questions, if possible.
What is the FX impact? You mentioned that price increases, especially in The U. S, you can counterbalance the tariff costs at least a bit. Is it also true for all the FX changes you expecting? And last but not least, you had a very strong free cash flow in the first half.
How much of that is some kind of, I would call it, one off because of the structural adjustments you are making? And what can we expect in the second half on a more normalized rate? Thank you very much.
Yes. Mr. Ops, thank you for your questions. And when we look out midterm, we expect still 3% to 6% organic growth and an EBIT margin of 12% to 15. So our midterm guidance is unchanged.
When we take a look at our largest 20 customers, for instance, we grew in the first half year twenty twenty five compared to first half year twenty four, reported 4.7%. So it clearly shows focusing on the right applications, on the right customer groups, there's even in a challenging environment, the opportunity to grow nicely, and that's why we need to do some of the pruning because we are carrying forward or we have carried forward business activities, which we don't deem as attractive to take into the future, maybe once again where we are not the the best owner. Talking about distribution and logistics, yes, 90% of sales which we have in Europe. We have intensive activities in US, Mexico, China, and India to expand our market positions. We see good organic growth and on a low basis there in those regions.
And the decision to roll back Asia Pacific has just been the that we have seen that through partners, we can cover better the geographies, and we can have a more efficient setup in Asia Pacific than doing it by ourselves. That's the reason. So we also reallocate the resources and focusing more on the the big ticket opportunities with India and China and US and Mexico and and don't deem as Asia's you know, Asia Pacific as being our priority number one. That's why we have decided to hand it over to partners, which is not unusual. We have also in other regions still partners, you know, strong partners, we do the business with and which absolutely makes sense to to use it as the right arm to to gain market share and increase growth in in those regions.
Then counterbalance tariffs, yes, we can counterbalance them on on the on the pricing side. And then for the FX and free cash flow or
I mean, we we we said that you're targeting predominantly at the segment FSI. I I assume with with that, as we have the The US exposure there in a distinct manner. I gave the bracket that we have a mix of FX effects of minus 2.8 to minus 1.8. So FS is definitely there on the on the more impacted side, I would say. So we are we are there towards the towards two point something percent, above 2%.
We are we are having from from FX effect that rest is is pricing and and small underlying volume growth. Right? So when you when you try to model that, that would be roughly the the parameters that I that I could give you. Your second question was on the cash flow first half year being very strong. Yes.
It is very strong. We expect that to come down a bit towards the second half of the year. That is based on the cash production predominantly in d and l. That is now coming towards a situation where we have adapted inventory levels and where we have where we are facing the the the end market as we described it. But for full year, we are expecting to be well in our guided range of the 50 40 to 50% of EBITDA.
Thank you. Maybe one additional to the d and l issue. So bringing the the business into the to some kind of a partnership for for Asia Pacific. So you don't get the sales, but you get some kind of an income. This could increase your margin, or is this insignificant the the entire
From a model point of view, yes. From the from the given size, don't expect there to be too much visible on a on an overall. Here, we are talking about streamlining and increasing the focus and especially addressing that the sales cost in a sometimes extremely discarded geographical environment is is is optimized.
Yeah. And could this be also despite the fact that you currently mentioning that you will grow in India and in China by your own, could this also some kind of a blueprint for these areas?
No. At this point in time, believe not so, but but certainly, we find opportunities to maybe carve out certain regions and and give more power, you know, to the market development by having additional partners, you know, on board, then we certainly consider that and and have those discussions. So we are free and flexible on that side. For us, we usually run both models through partners and doing it by ourselves.
Okay. And the last one, just for clarification on the FX side. As we see that there is an ongoing weakness of The US Dollar going forward, Do we expect that you can counterbalance something additional with price increases there?
Well that will very much be linked to to the construction market in The US and and and how it how it behaves. At the moment, I think we reached a level of price increases that is that is bearable by the market, and we do not see a volumes effect. Depends on the on on the overall market condition and whether we have room for further price increases. But as we talk US, we would date that and time that statement that I made because it can be obsolete by tomorrow. That that is a bit difficult in The US.
Yeah. Of course. Yeah. Nevertheless, thank you very much for your answers and all the best, of course. Thank you.
Thank you, mister.
Thank you.
So then there's an additional question from Jorn Niflat.
Thank you. So it's Jorn from UBS again. Just three quick follow ups, if I may. You were talking about a 6% to 8% headcount reduction, which is driven by efficiencies and normal fluctuations where you have no replacements. Is this a net number we should look for by 2027 that your full term employees have 6% to 8% lower?
Or is this a gross number? This would be the first question.
It's a it's a gross number. Yeah.
Okay.
And certainly depends also on the economic development, you know, the environment overall. Today, this is the model, and and the model will certainly be, you know, reviewed and looked at depending on how the environment evolves.
Okay. But just to make clear, when I make the math, the majority of your cost savings you have announced, the 80 basis points on margin is clearly linked to full time employee headcount reductions. It's not okay. Then maybe the second question. I mean you were outperforming your end markets in 2024, 2025, given sales and market share gains.
Any larger projects you can highlight for 2026? Or will you be more exposed to the end market environment in 2026?
Overall, still some projects in ramp up, the the the usual ones in automotive and electronics, also good pipeline on the medical side where we see organic growth opportunities. So we would expect in engine engineered components to be to be also driven by ramp up projects, by large. In fastening systems and D and L, we fall more back on the cyclicality of the markets, of the end markets, construction and industry.
Okay. Thank you. And the last question, a technical one. The margin impact from FX in the first half, is this worth to mention? Is it is it that you can speak about this was a couple of basis points?
Or is it offsetting each other on global your footprint?
From a margin point of view, we look at pretty much an offset. We will yes, that's rather balanced. From a balance sheet point of view, you would find some impact in the financial result, of course, but but but the margin impact is equalized.
Okay. Thank you very much.
Thank you.
No more oral questions so far?
So no more oral questions as we see also in Yeah. Also no questions in writing. Yeah. Questions. So Good.
Good. Have one. One more question. Yes, please. Swiss mobile number here.
Yeah. You should also be able to unmute yourself now. The person with the Swiss number ending with 29. Going again.
Yep. Once again, you know you raised your hand. Swiss mobile number with 10 Hello. Can you hear me? Yes. Now we hear you. Yes.
Okay. I'm sorry about that. I had to push several buttons.
Yes. That's okay.
I have three questions, please, and I'd like to do them one after the other. Yes, it's Christian Barder here from ATKB. So my first question is regarding your guidance for this year. So I still struggle to understand it because you had an EBIT of DKK 162,000,000 in the first six months. And in order to meet your guidance of flat EBIT 2025, you will have to report DKK 188,000,000 of EBIT in the second half, which is in sharp contrast to the last two years when the, let's say, operating performance, both in terms of revenues and operating results, was weaker in the second half.
So can you walk me through what are the main, let's say, building blocks or assumptions behind this, let's say, ambitious second half year outlook, please?
Yes. Thank you for the question.
And absolutely, the right question to ask second half of the year. We have to say, for the last two years, 'twenty four and 'twenty three, we truly had a growth ambition. Remember, we acquired Hoffmann, and we increased capacities to truly go out in the market and gain more market share. At that time, also the economic outlook has been better. And as we realized later on in 'twenty three and 'twenty four, particular, second half of the year has not come as we expected.
And I believe when you go out into the industrial end markets, was a little bit the story, which was there second half of the year, will be better. And this is also what we prepared for, and we realized also then towards summer of twenty twenty four, This will not be the case, and we'll probably need to make now or use now the time to make adjustments. And that's when we started working on our adjustment project to reorganize the industrial activities and probably to now approach and now use the time to also dispose some of the entities and activities which we deem as non core. So very logical, very clear, your question. And certainly, in the improved we expect to see an improvement in the second half of the year.
Otherwise, we need to go back and sharpen the pencils again, yes?
And maybe, if I may, Christian, your calculation is correct, but I just wanted to emphasize that we are guiding on an adjusted EBIT base. And therefore, we would take the 168,000,000 for first half year versus the $350,000,000 that you imply in your calculation, which would be a 14,000,000 uplift, which, yes, is a is a significant uplift in the second half year, but not the EUR 162,000,000 to 188,000,000 that you implied.
Okay. Then my second question relates to the cost saving benefits that you have published. It is 0.8%. And am I right to assume for our modeling that this will be facing gradually and the full effect will be seen from the January 1?
As I said, maybe I was not very clear. Thank you for giving me the opportunity to come back on that. We we see some of the effects, probably in the second half year or we some we will see in second half year twenty twenty, five already because we took action in OPEC, in Britain, and in Asia Pac. Right? Some of it, we will see to the latter of twenty twenty six.
The full program ought to be finished by end of twenty twenty seven, and we would be in a run rate situation for 2028. But we will see all the way improvements in second half year twenty twenty five towards the latter of 2026 and then ongoing. Does that help?
Yes. No. That's very clear. Thank you very Thank
you very much.
And the last question relates to your main end market or one of the two main end markets is the automotive industry, which, according to your statements, has been struggling and is also apparently one of the main reasons to do all these adjustments. So I am wondering, can you maybe give a little bit more background information about this the business to this sector? This business, from your product point of view, has it disappeared to other to competitors? Or has it disappeared because some of your customers in the OEM area are losing market share? Or has the production been relocated to, let's say, low cost countries?
Thank you for that question.
On the automotive side, we see multiple developments. First off, we clearly see that most cars nowadays are produced in China. And today, still, our Tier one customers assemble a lot of components or do preassemblies in Europe and ship it to China. And we believe in future years, that will be done more locally. That's why we expand our automotive activities in China, and that's why we kind of roll it back to automotive footprint in Europe, which because we believe it's better off situated in India and China to some degree.
That's the reason on that side. Secondly, when we go back, we have strategically, ten years ago, defined our footprint for Europe, and we had activities, for instance, as we said, in The Czech Republic, and we had activities here in Switzerland. We still had at that time also activities in France. And the dynamics are quite often changing, and we see nowadays with the current technology, with the current needs of the customers, it's better to consolidate to to larger sites, use economies of scale much better rather than being regionally and locally like it was requested, you know, in, I would say, the decades before, there was a more heavy focus on do you also have a setup and service capabilities in the Eastern Part Of Europe. That has diminished that request, and that's why we have also now a higher level of freedom, and we can once again consolidate to larger organization.
And then thirdly, the site, especially in Czech Republic, technology wise, we have focused on screws. They are mainly not complex assemblies and formed parts. And especially on the screw side, we also have seen it's better to consolidate it back into larger organization and sites. We also see more opportunities, especially in electrification with rivet technology, less with screw. This is just also a technological development, which we have seen where we said, now it makes sense to reconsider the decision to have a Czech site and a Czech entity available for overall.
And number four, also the availability of skilled labor is interesting. In Czech, sometimes difficult in Switzerland, Rhine Valley here, more possible and feasible. This is also some of the considerations where do we get best access to talents. And and usually, with a good reputation and being a sizable employer in the region, you are just a more attractive employer rather than being maybe a small site with 45 or 150 employees regionally. These are maybe some of the considerations.
Oh, it's not the one or the other. The argument, it's a list of arguments which led us believe we need to revisit the strategy, discuss it intensively for the last twelve, eighteen months and come now to a decision on moving forward and reorganizing our footprint in Europe.
That was very helpful. Thank you.
Questions at the moment?
So as you still maybe have the opportunity to think about the question, what we have usually also got big questions around GP, the management team, what are the reasons to adjust the group structure overall than I think we have seen on in the presentation that we have now a head of segment for each segment, and we would like going forward, you know, being more free in the segment and within the segment management teams, engineered components, fastening system, and distribution logistics to take decisions easier, faster, more local. That's why we formed strong segment management team, and on the group executive board level, work more strategically on specific topics as we also have grown the organization over the last ten years. Secondly, we see substantial generational transition with Walter Kobler and with George Paul, both of them well more than thirty years within the organization and having collected experience in multiple end market and then geographies. And so it's now also the time for the current team, which is very strong, and we want to keep together in its current composition, give them the opportunity to learn, rotate and take a look at the business activities from different angles.
That's why we are on a rotating scheme with the team. We have seen Isaac Raujnak doing D and L Switzerland, doing for a year HR and other topics. That's a that's good, vital learning. And now he will collect more international experience as being in charge in D and L segment overall. Martin Reichenik, the same, a professional for many years within the organization for twenty years, now using the opportunity to relocate to to Southeast Asia and collecting more experience in in the Asian region.
The other gentleman who was longer now has has gained substantial experience in The United States and in in Germany where he had responsibilities and tasks to manage for the group, and now he steps further and taking over engineered components from that side and their perspective, and he will also expand his reach and scope more international. He will manage the Engineered Components business. So and then certainly, Cristina Burri, also a long timer within the SFS organization and now able to step into the team, refreshing the team and also making sure we have more intensive debates and discussions, you know, on certain topics with because that's that what makes the team strong and make a team grow is having, you know, multiple views and directions on how to look at the the business and debate it intensively for for the better of the organization and for the better of the development of the organization. Maybe that then and a short note on the organizational development. And in the meantime, there have been no additional questions. So I believe we can close today's calls and maybe move forward to upcoming publications. We'll see 01/23/2026.
Friday, we have publication of first results of financial year and then the publication of annual report, 03/06/2026, and then we have the Annual General Assembly, 04/22/2026. Overall, thank you, yes, for joining the call. We look very much forward in order to further good and solid development of the SFS group. We are very confident about the course and the direction which we take. Certainly, the environment around us is a little bit bumpy, and the road forward also maybe has some challenges ahead of us.
But overall, once again, we are strong, well positioned, and we see good organic growth opportunities in this current environment. And besides that, also on the m and a side, also see good opportunities moving forward. So we enjoy to some degree the current challenges which we have because they provide us also with new and unusual opportunities, which we usually would not see in a more, you know, stringent organic growth GDP environment as we have seen it in years before. Thank you all. Wishing you a good summer break, and talk to you soon again. Bye bye.
Thank you. Bye bye.