Ladies and gentlemen, welcome to the presentation of the half-year results of the Siegfried Group. I'm pleased to be your host today. My name is Peter Stierli. I'm together with our Chief Executive Officer, Wolfgang Wienand, and with Reto Suter, our Chief Financial Officer. We proceed in two sections. First, we hear and see the presentation of the half-year results, and in the second part, we will walk through some slides concerning strategy and strategic intent. If you have questions, please use the form, which you can find at the link which you received yesterday. Now, let's start. Please, Wolfgang.
Thank you very much, Peter, for the introduction and also warm welcome from my side. We decided to actually, in contrast to the past, go for webcast also for the half-year earnings based on the positive feedback that we received after our webcast on the full year earnings 2020. It's actually great to also communicate visually, not only on the phone. As always, we try to actually indicate in the titles of our presentation already where the presentation might be going, and this time it is further on track. Siegfried increases sales and earnings in the H1 2021. Further on track, of course, means that we look at six months full of important events and steps for Siegfried, but also a significant challenge that we, as a Siegfried global team, had to overcome.
Actually, key message of today is we have been able to master our challenges and deliver growth in terms of sales and earnings. Before we dive deeper into the presentation, please read the safe harbor statement carefully in terms of forward-looking statements that either myself, Reto Suter, or Peter Stierli might make throughout the presentation. A brief look at the agenda. It's going to be me first talking about the status of the company and providing the outlook going forward. I will hand over to Reto Suter, who will share his view on financials, facts, and figures. It's going to be me again, sharing my perspective on what we did in the six months and what you can expect from us going forward before we then enter into the Q&A sessions, where we will be happy to actually receive questions and provide useful answers for your information.
Executive summary. Further on track in the H1 2021. Siegfried delivers growth on all levels while consistently implementing its strategy and mastering short-term challenges. Short-term challenge obviously relates to the cyberattack to which we fell victim in May and June, and which actually required, especially our IT team, but in the end, all of us, many more colleagues on our sides, to actually stand up to that specific challenge and overcome the shutdown, which for most of the network actually brought all our operations to a full stop. I'm actually happy to report that due to very stringent, efficient, and clear crisis management, actually huge efforts of many people of Siegfried, we have been able to shorten the time of the shutdown to the degree possible and actually get back on our feet very fast and limit the impact on our business.
The outcome you see here, net sales of CHF 467 million, which is up more than 20% in Swiss Franc and almost 20% in local currencies. All that we have been able to translate into a core EBITDA above CHF 80 million, which is up almost 40%, and a core EBITDA margin of 17.3% as compared to 15% in the H1 of 2020. It wasn't only a significant increase of EBITDA, but also in free cash flow. Obviously, a very important figure for all of you, but also for us as a company in terms of our ability to further invest into growth, to be able to also, in the future, make use of the many opportunities available to a company like Siegfried in the CDMO market. This cash flow figure means more than doubling the cash flow that we earned in the H1 2020.
Now, a few highlights about which I will talk in more detail later in the presentation. First and foremost, very important. Good news integration and transformation of the TWO new Spanish manufacturing sites acquired from Novartis in January 2021 is well on track due to actually a great effort of our integration team and especially also of the new Spanish colleagues, who actually have proven to be a great cultural fit and are able to actually work with high commitment to become an integral part of the Siegfried family. Second highlight is the successful start of commercial aseptic filling and finishing of the BioNTech COVID vaccine on our Hameln site in northern Germany. Based on a capacity expansion that the team there, together with the support of BioNTech and many other colleagues from the Siegfried network and also suppliers, obviously, have been able to execute in record time.
The Novavax COVID vaccine is expected to follow in the H2 of this year. As always in the past and in order to prepare ourselves for future growth, we continue to organically invest in capacities, technologies, and people throughout the whole network in order to be ready for more business to come. We continue to have appetite for value-accretive external growth through M&A as part of our corporate strategy EVOLVE, which will be a part of my presentation later on. On the financing side, also good news. We had our successful debut with the issuance of unlisted senior bonds of CHF 200 million in May 2021. Last but not least, we continued our ESG journey and decided to go for quantitative, measurable, transparent targets in the field of energy and CO2 carbon footprint, and define the targets.
An ambitious one, actually, for 2030, also committed to the net zero greenhouse gas emission initiative by 2050. All this culminates in actually, the confirmation of our outlook that we presented to you in our February earnings conference, which is significant jump in sales to well beyond CHF 1 billion, with profitability further expanding towards target range of 20% core EBITDA margin, with a positive midterm outlook beyond 2021. This is when I hand over to Reto Suter, our CFO.
Thank you very much, Wolfgang, and also from my end, ladies and gentlemen, a warm welcome. What you see here on this slide is the top-line perspective, where we report in aggregate a substantial growth of 20.3% versus the prior period. Of course, this includes a substantial acquisition effect on the drug product side, as these numbers now include the revenues from our two new pharmaceutical manufacturing plants acquired at the beginning of this year. As reported, also the cyber attack at the end of May, early June, has left its traces. The drug substances business was more affected, as more complex and with a more pronounced lumpiness in revenue recognition, especially in the month of May and June. Also on the drug product side, we had the two Spanish sites, which had not been affected at all by the attack.
We are, however, confident that both business lines will contribute to organic growth in the full year of 2021. On the currency side, you see that we had a slight tailwind in the first six months, with the U.S. dollar depreciating and the euro appreciating against the Swiss franc. As the two new Spanish sites invoice in euros, we now have more than 50% of our revenues in that currency, balancing actually quite perfectly our cost structure. As a consequence, we now report 59% of our revenues in drug substances, last period 74%, and 41% in DP, as this is prior to the vaccines business kicking in in the H2 of this year. This is the bridge between reported EBITDA under the Swiss GAAP FER Framework and our core numbers.
Core numbers are a good measure for the Group's performance, as they very transparently split out extraordinary effects, we also use these core measures for internal measurement of performance. Most of the adjustment that you see on this slide have already been included last year, with only one item specific and new to this H1 of 2021. Let's quickly run through it. I will only comment on the adjustments, so in dark blue color. One repeating adjustment relates to our foreign pension plans. It's the reclassification of the current net interest from the operating expenses part down to the financial expenses. At year-end, we will then also consider any change in the technical interest rate and would adjust for the non-cash P&L effect caused by such change in the interest rate.
The one adjustment which is specific to this period is the adjustment for the cost incurred in connection with the integration of the two new sites in Spain. A total of CHF 2.7 million that we split out. Last but not least, we have reduced tax expenses in an amount of CHF 0.9 million from the reversal of the step-up on the Swiss tax law and have also included the additional taxes for the core adjustment, -CHF 0.3 million. On this slide, you see the core income statement, and you will see that we have been able to increase gross profit quite substantially, also on a relative basis. This is despite the cyber attack. The SG&A have increased, especially in the R&D area and admin.
For R&D, this is due to the fact that we have included two new sites into our network. The largest parts of the cost related to the cyber attack have actually been recorded in the cost of goods sold as well as in the admin expenses. On the R&D expenses, they are now at around 4% of sales. This is where we were for the full year of 2020. Also where we actually should end up for the full year of 2021. Now on to my favorite and actually very important financial statement. Firstly, you will have noticed on a formal level that we have now also in the half-year report presented the long form of the cash flow statement.
This had been at the request from our valued new bondholders, and we have been very happy to comply with that request. I'm also very happy to report to you that we had a strong H1 year in terms of cash generation, with increases from both the raw cash generation, due to higher sales and also a higher profitability, but also very favorable developments in the net working capital area. Which includes a very strong decrease in accounts receivable, an extension in accounts payable. However, we do have observed a buildup of inventories, which is, on the one hand side, related to the inclusion of the two Spanish sites into a network, close to CHF 40 million, but partially also related to production delays caused by the cyber attack. As already at the end of 2020, we have continued to be able to get customers to make prepayments.
Overall, if you have a look at the net working capital consumption relative to sales, you will see a significant decrease in this number as a percentage of sales, which is a result of our efforts, but also caused by a mix effect. More DP business with shorter cash cycles. On investing activities, we have deployed CHF 62 million in the first two months, including substantial investments at our site in Hameln, which relates to the vaccines business. Cash flow from financing activities includes the placement of the hybrid bond, of the public bond, CHF 200 million, and the payback of monies owed onto the revolving credit facility. I will touch upon that in just a second. I would like to make two comments related to the financial statements.
As laid out in Note 10 of the half year report, subsequent to period end, we have detected fraudulent payments at a subsidiary unrelated to the cyber attack. We have immediately launched an internal investigation, which is supported by external specialists and overseen by our board of directors, which is currently ongoing. The damage is expected to be in the high single-digit to low double-digit CHF million range. We nevertheless continue to be confident to meet our 2021 targets under all scenarios. We very much regret this incident. We are investigating the matter, and we will learn and grow from it. Please note that the purchase price allocation and also the final determination of the purchase price will be included in the financial report for the full year of 2021. These numbers aren't final yet.
You will, however, see in my balance sheet that we have acquired quite a bit of fixed assets. This is now a picture that looks very similar to the last periods. We have improved again the numbers on all levels, from gross profit to core EBITDA and to core net profit. We have done it despite the headwinds of various short-term challenges. This is a clear demonstration of the resilience of our business model. Now on to the capital allocation framework. I have shown this slide before. We actually use it these days quite a lot also internally, as it describes clearly the levers available to us, ultimately increasing the capital returns for our shareholders. Next to all the efforts that we do on the net working capital side that I have just described to you, our focus is also on the investing side.
Here we need to make sure that the marginal Swiss franc finds its way to the highest-yielding opportunity. Be that internally, that's then topic one, or externally, topic two. At the same time, we also need to find ways to sweat our assets to the max extent possible, and Wolfgang will speak about these issues in just a minute. Just a few remarks now on my end on topic three, the optimizing of the funding structure. There we have done some further work based on what we have done so far and further optimizing our funding structure. In May 2021, we have done a debut on the Swiss debt capital market by successfully placing senior bonds for CHF 200 million at very attractive conditions, substantially decreasing funding cost over the years to come and increasing cash generation.
The proceeds will be used for an early refinancing of the second hybrid bond, which will come to a call date in October 2021, and also other general corporate purposes. It is clear, it's our intention today to call and redeem also the second hybrid bond in full. With that, I will now hand over back to Wolfgang.
Yeah. Thank you very much, Reto, for this. It's now going to be me guiding you through our thinking when it comes to strategy, also where we want to take our company and what we did to further implement our strategy in the reporting period. Overall, I think we can state that our corporate strategy EVOLVE is very well on track. We continue to drive organic and external growth by executing a set of independent strategic initiatives. The transaction, the acquisition of the two Novartis sites in Spain, they used to be an action item in the second field of activity, acquisitions in drug products, and are now part of the Siegfried network and our investment platform, development platform to actually create new business potential and revenues. Let's start with the first area of activity, investments in technology base and in the existing network.
This is about strengthening our capabilities and technology base and adding capacities in the small molecule manufacturing space. We also, a few years ago, decided to organically expand our activities into the large molecules area in the field of aseptic filling and finishing, especially on our site in Hameln, but also on our Irvine site. Actually, these investments have been the basis and have provided us the chance to be ready to take on the vaccine business from BioNTech last year. Technologically, that, of course, is a very demanding process and not easy to implement. I will talk about that in a bit. We also continue to invest into capacities, debottlenecking first, of course, and release of hidden capacity, because that's the cheaper way to add capacity, but we also need to add and did add new capacity on our existing sites.
The other fields are external options, acquisitions in the drug products area and/or acquisitions in the drug substances area. Both still hold true also in the future. We continue to be convinced that also additional capacities in different dosage forms in the drug product areas, different technologies, but specifically in the area of sterile aseptic filling and finishing in Europe and U.S. would be great additions to our network and would add significant business potential. We continue to look for opportunities in that space. The same holds true also for acquisitions in the drug substances area. Today already, we have one of the largest CDMO small molecule manufacturing networks in the world, and a very competitive one actually. Also here, adding capacity, adding business, adding sites which are competitive and attractive to Siegfried remains an attractive option for our strategy execution.
With the biologics drug products business growing fast based on the activities over the past years, especially with the vaccines business in Hameln, we still believe that we as Siegfried, as one of the leading CDMOs in this space, would have a right to play and offer our integrated services, not only in the drug substances small molecule area and drug products small molecule area, but also offer integrated services in the area of biologics. With our presence in the drug product area, the backward integration could very much make sense for us and very much depends on what targets will become available at what valuation. We all know that this area offers only limited opportunities at typically rather high valuations, but we continue to also look in that space because it would be a great addition to Siegfried.
This is the strategic menu, based on which we operate and execute our strategy EVOLVE. I will now guide you through some specific activities which especially took place in the first area of activity here with regard to investments into our existing network. Actually on all three areas, drug substances network, drug products network, and also on our corporate network, we made important investments and introduced important improvements. First of all, very quickly, and I will go into more detail later on, a highly potent micronization, a particular technology in Evionnaz, capacity increase in Zofingen, and continuous improvement essentially on all our sites when it comes to debottlenecking and adding capacity. Drug product network. Here, the focus clearly is to integrate the manufacturing site, and actually this integration efforts are very well on track, and we continue to invest into systems and processes.
Very specifically, we started a fast-track project to establish a development center of excellence in Barcelona, focusing on different technologies available on both sides, which is OSD, highly potent OSD manufacturing, ophthalmics, sterile ophthalmics, and other technologies. That's going to be a very important milestone for the two sides, but also for the whole Siegfried drug product network in order to enable us to take on significant new business. The expansion of the fill finish capacity in Hameln for the vaccine manufacture I already mentioned before, and we'll come back to that in a minute. The corporate network is now also playing on a larger base, and we continue to invest into our people.
The Siegfried Academy, which was launched in 2019, is very well received by our people. It's not focused on a small population of managers or senior managers only, but actually is available to almost everyone within the Siegfried family. More targeted towards leadership and enabling our people to actually also operate on a global scale in a very complex network with different cultures, different technologies, different management styles. We launched our leadership program, LEAP, this summer, which was actually well-received and will help to further develop our capabilities to operate a strongly growing company. It's also clear that a global network now offers even more opportunities to globalize and to concentrate shared services at the best place. Best place being in terms of organizational synergies or capabilities, availability of talent, or just simply costs.
That's an exercise which is already ongoing and will continue over the next one or two years. Driving ESG initiatives. ESG has been important for Siegfried in the past, of course, already, and I will talk about that as well. We made important decisions in the recent past in terms of setting up specific quantitative targets and their controlling and reporting. Let's start with a significant investment in the new development center of excellence in Barcelona to support our new business development for the local capacities, but also for the global drug products networks. Some highlights of the investment, it's going to be a fast-track executions to establish new labs. Not only small scale activities in the laboratories, but also GMP pilot facilities for, let's say, small scale commercial manufacturing.
Fast track, in our case, means that this center of excellence will be operational in the Q3 of 2022 already, and will then be available to support our business development sales activities to take on new business, especially on our new Spanish sites, starting in the year 2023 and 2024. Total investment is expected to be up to CHF 15 million. In terms of services, it's going to be very comprehensive. Formulation development, pilot manufacturing, and of course, analytical development. We very much build that center of excellence based on local talent already available on the two sites and hiring new talent. Second of all, an overview of other important investments and activities in the network.
Essentially, the mRNA COVID vaccine filling in Hameln, of course, is a highlight, and that is based on a cooperation and supply agreement for large-scale aseptic filling, finishing, and packaging of COMIRNATY®, the BioNTech vaccine, and the contract related to that we signed in September last year. It's going to last until end of 2020. We believe that there's a good chance to actually expand the cooperation with BioNTech beyond that date. The project has been executed in record time, eight, nine months only, for an exercise which usually takes a company 18 months or so. There was no alternative. It had to be fast and the team in Hameln actually has been very fast.
I think we all, the team in Hameln, but also the whole Siegfried Group, the whole Siegfried family, can be actually very proud of what we have achieved together in Hameln. The production, and I'm very happy to be able to report on that as well, the production of commercial volumes actually started successfully in the meantime. The second investment is into a differentiated technology, kind of a bridging technology between drug substances and drug products. It's about particle technology and micronization as an important technology to actually fine-tune the physical properties of an API, which then is helping the bioavailability of such an ingredient, which is important for the efficacy, and sorry, efficiency of a drug.
In here, we are now able, after this significant investment, to actually offer large-scale commercial services, not only for micronization, but even for micronization of highly potent APIs, which is truly differentiating. We also added capacity throughout our network, and I just want to highlight one major exercise on our Zofingen site in Switzerland, which was the revamping of an asset to really rapidly get access to additional capacity. The first phase ended in December 2020 after replacing and upgrading utilities and infrastructure, and currently the second phase is ongoing by replacing reactors so that we are fully operational with this additional capacity in Zofingen in the Q3 of 2021. If you look at the individual activities here, I believe you can very well see a well-balanced area, a well-balanced number of investments within the global network, providing for both.
Our ability to capture short-term opportunities like the vaccine business in Hameln, but also to create readiness for continued mid-to-long-term profitable growth in an attractive market environment, with Siegfried being one of the leaders in the space. Siegfried's commitment to sustainability. This is actually already today deeply embedded in our corporate DNA and also already acknowledged by leading reporting standards. Let's briefly reflect on the term sustainability. Sustainability is, since I took over as CEO and actually spent a lot of time with my executive management team and also other senior managers on defining what the Siegfried vision is supposed to be, what our mission as a company, as a global team actually is. Also deciding, getting clarity on what are the dos and don'ts when operating in our business, when running Siegfried as a company.
Providing the mental framework, the values, core values for our activities. Sustainability has already been, and is since then, one of our five core values. However, we take a pretty broad approach when thinking about sustainability. This is not only about ecological footprint, but it's also about many other dimensions where we seek for sustainable decisions and sustainable actions. It all culminates in the sentence that we already at that time stated, "Siegfried is here not only for today or tomorrow, but for the next 150 years." Why 150 years?
Siegfried has been founded in 1873, which means that in two years from now, we will be celebrating the 150th anniversary of the company. We consider it to be our obligation to actually run the company in a way and make decisions in a way that not only success today or tomorrow is available to us, but also in the long run. If the time comes, we want to hand over the company, which is in a better state than at the time when we took it over and enable the next generation of leaders to actually run the company for many more decades in the future. Siegfried started its ESG journey, of course, not only this year, but already years ago, and stepwise build out our activities, including controlling and reporting. Our first sustainability report was actually issued in 2016 already.
It was this year when we decided to actually structure, streamline, organize all activities in that space, by implementing a cross-functional ESG governance board, which is funded by myself as the CEO of the company and supervised by our board of directors because it's a very important project and close to the heart of our directors as well. Briefly on reporting. Our reporting follows our actions, first of all, of course, and is geared to the standards of internationally recognized accepted guidelines. First of all, Sustainable Development Goals of the United Nations, and also the Global Reporting Initiative, GRI. This is in order to enable you to assess our performance in terms of ESG to make it transparent and comparable with what other companies and other institutions actually do.
We have been successful already with our activities in that field and have been rated with an A grade in the MSCI ESG rating and have been granted prime status by Institutional Shareholder Services, ISS, and are thus among the best 10% of all life science companies certified by ISS. Of course, that's not enough, which is why we decided to be more specific, be more transparent, and actually set transparent, quantitative, measurable targets in one very important area, which is the carbon footprint of Siegfried as a manufacturing company, making use of environmental resources, of course. Here we actually decided to go for a twofold approach. First of all, looking nine or 10 years ahead and decided to actually commit to reducing our CO2 footprint in terms of CO2 equivalents, by 50%, indexed against Sorry.
Normalized against revenues until the year 2030 compared to what we have been consuming and emitting in the year 2020. 50% reduction, which is a pretty ambitious target, I believe. However, we have defined specific measures in terms of where is our energy coming from, how do we build new facilities, how we run infrastructure. All that makes us very optimistic that we will be able to live up to this very ambitious target of reducing our CO2 footprint by 50% normalized against revenues over the next nine years by 2030. An overarching commitment beyond 2030 is that we as a company, as a group, commit to implement measures to achieve the 2050 greenhouse gas emission net zero goal to limit global warming to 1.5 degrees Celsius.
A midterm target, which is very transparent, quantitative, measurable until 2030, and the target to actually reach net zero goal by 2050 in terms of greenhouse gas emissions. That's actually the takeaway slide that most of you who are following us since quite some time already know. It remains Siegfried's ambition to consistently deliver profitable growth and invest in optimization and the expansion of the global network. On the left-hand side, we see Siegfried as it has been in 2020, with revenues of CHF 845 million. On the right-hand side, we see where we want to take our company, the Siegfried vision. We want to further evolve as a global leader in the CDMO space. Today, we are probably number five in that space, already part member of the leading pack.
We clearly want to stay there, but we also want to further evolve, as a leading CDMO in that market. We want to further evolve as the most trusted partner of the pharmaceutical industry. We want to build the strongest team running the most competitive network. We want to have critical size in all segments in which we operate, and we want to be able to offer to our customers essentially all relevant chemical, biological, pharmaceutical technologies to solve their problems. What is the way? I mean, how do we get from left to right? It actually is the corporate strategy EVOLVE, which is divided into two parts. The first part is kind of the base case of Siegfried. Robust organic growth through investments.
Organic growth in line with the CDMO market, with the ambition to outgrow. In the next few years, you can expect some fluctuations from variability in the COVID vaccine demand and the phasing of old versus new business in our new sites in Barcelona. On the way from left to right, we will stepwise expand our profitability in terms of core EBITDA margin into the 20% range. We will do that through continued investments in technologies, people, capacity, and a deeply integrated global network. On top of that base case, we continue to also go after external growth options. Accelerated growth through M&A, as just proven by the acquisition of the two Novartis sites. Value creative acquisitions in core areas, but also considering acquisitive entry to new areas within the CDMO business model.
All that leads to the confirmation of our outlook for 2021, as we have provided it in our February full year earnings conference already, which is significant jump in sales to well beyond CHF 1 billion, with profitability further expanding towards the target range of 20% core EBITDA margin and an overall positive midterm outlook for the company. This is what we wanted to share with you today, and we will now be happy to actually take questions and provide answers for them.
Thank you, Wolfgang. Thank you, Reto. We are ready for the Q&A session. I start with questions from Patrick Wood. First question, revenue contribution from the two Novartis facilities in H1. I think, Reto, it's a question for you.
No, I'm very happy to answer that, and that's obviously a question which we get quite a lot. Firstly, I would like to draw your attention to the financial report of 2020, where we have described the most important characteristics of the two newly acquired sites in note 27 of the financial report, where we have said that we expect revenues from these two sites to be in the region of about EUR 150 million, and that we will take over 1,000 people. Other than that, we do not comment on the performance of individual sites, for a reason. We run the company as a network. I think what is fair to say at this point is that these two sites, they deliver according to expectation. We did not experience any negative surprises after the takeover, comparing to what we have seen in the due diligence phase.
The sites are performing consistently and overall, they're a strong addition to the Siegfried network in terms of capacity, technology, and also people.
Patrick would like to know a sense of potential contribution from the two vaccine projects in H2.
Yeah. We have provided transparency on the revenue volume for the BioNTech project. Let me just reiterate that. We have a contract which will come to a close with obviously an expectation to go beyond that at the end of 2022, and we have said that the volume of that contract would be a high double-digit million Swiss Franc number. We have also said that we would start producing mid this year, and we have done so as just reported. The whole volume spreads across these three semesters and is a bit backloaded into 2022. That's what I can say about the vaccine's contribution at this point.
Patrick ask any further details on the fraud reported after balance sheet date, how confident that the issue isn't bigger? I think, Wolfgang, you will answer this question.
Hi, Patrick, and thanks for the questions. We detected the fraud event only a few days ago, immediately took all necessary internal and external steps to protect the interest of Siegfried and our shareholders, obviously. By doing so, we have been able to fully contain the issue. We immediately established a task force led by our Chairman of the Board, further comprising our Head of the Audit Committee and myself, immediately kicked off an internal investigation conducted by reputable external forensic auditors, which is currently still ongoing. We will deal with this challenge as we generally deal with challenges at Siegfried, be it positive ones, of which we had quite a number recently, or a less positive one like this.
First, fact-finding to understand what exactly happened, analysis of the findings, followed by reflection on ourselves of root causes and why our internal procedures, which we of course have, didn't suffice in this case. Eventually definition, execution of all measures which need to be implemented for the future to improve. All in all, we are very confident that this is an isolated one-off event with no effect on ongoing operations, and we expect no impact on our ability to achieve our full year targets. Which is why we confirmed our positive guidance for the full year.
In terms of disclosure, the board, together with executive management, has assessed all disclosure obligations and options. We concluded to be open and transparent, as we have always been in the past, and to share our current assessment of the situation in the half year report, as well as in the results presentation we just gave to you, and of course, answering your questions here. With the internal investigation currently ongoing, we cannot, for example, identify place or people involved yet or provide actually any further details beyond what we just shared with you on this.
Thank you. Last question. A nice gross margin step up despite cyberattack and acquired facilities at lower utilization than group average. Is this a function of mix or something else? I don't know, Reto?
Yeah. No, this is a general effect of margin progression that we have been observing actually over the past few result cycles. Obviously, it is indeed the case that the cyber attack there has hindered us a bit in this margin progression. As you know, most of the additional costs I have just described have been absorbed in COGS and actually in admin expenses.
Okay. We have further questions from Sibylle Bischofberger. Is the EBITDA margin in the H2 year higher than in the H1 year?
Yeah. Maybe, if I may answer, Sibylle. Thanks very much for this interesting question. There's obviously one general explanation available, which is true for every year, you have been following Siegfried for quite a number of years, you know that. Historically, the H2 of a year is always stronger than the first. This is true both in terms of revenue as well as profitability. The reason for that is mostly based on the longer production cycles that we have in the drug substances part of our business, where revenue and also, importantly, the margin are, in most cases, only recognized at the end when a product is shipped to the customer. That's the general explanation that margin usually is higher in the H2 than in the first. Now, 2021 is a bit of a special animal.
There are three additional points to be mentioned here. Obviously, the one is that the H1 numbers have been affected by the effects of the cyber attack, which included unplanned expenses for external providers, which have supported us in this difficult situation. These expenses will obviously not reoccur in H2 2021. The second element is that also in the drug substances area, we had delays from H1 into H2, meaning profit recognition in H2 and not in H1. Thirdly, and that's then the last point, the vast majority of the vaccines business will kick in only in the H2 of 2021.
Maybe adding to that, you can see it also in inventory development, right?
Yeah.
That is actually not only, but also due to the delay that we have seen in May and June, but will of course translate into revenues in the H2 of this year.
Okay, next question. Is the FX effect expected in the H2 of the year? Reto?
Well, obviously, I have to take certain assumptions as regards how the euro and the US dollar will progress against the Swiss. If we assume that actually the current forward rates are a good proxy for that, we expect the FX not to be totally different from what it is at the half year. Let me just reiterate that with the inclusion of the two Spanish sites which invoice in euro, the FX situation has actually improved as we are now quite perfectly balanced between revenue and the corresponding costs in the respective currencies.
Thank you. Mr. Khoury asked how many other COVID vaccines besides BioNTech and Novavax will be produced by Siegfried. When will the Novavax production start? Those are the two questions related to the matter.
Yeah, I take this one. We expect the Novavax vaccine manufacturing to start actually within the H2 of this year. We all know while this seems to be a great vaccine, I think for the sake of completeness, we need to state that approval is not yet there by all global health authorities. That is going to happen, the manufacturing, in the H2 of this year, subject to approval. In terms of new business, of course, the fact that we as a company can live up to a challenge like building up capacity within record time to absorb volumes also for vaccine, made the rounds, and we of course, talk to other people as well. There's nothing to be reported yet. We actually usually anyway don't really report on individual projects or products and customers, but that's where we are today.
Then she asks, are there any acquisitions in Siegfried's M&A pipeline?
Yeah. I think our standard answer to that is actually, while the acquisition of the two Spanish manufacturing sites from Novartis, actually, I believe, I think we start to see that as a great addition to the company. There's a lot of work going on for integration, transformation. We, of course, remain to have appetite to not only organically but also externally grow by acquiring other businesses, sites, and capacities. The M&A team, I didn't send them home, actually, they continue to look for suitable targets. As in the past, we announce an acquisition as soon as we are sure that it's going to happen and the contract is signed. Nothing to report on this actually right now. Focus clearly is on integration and transformation of the two sites right now.
Thank you. Henriette Ruhmberger asks in German: [Non-English Content]
Well, what we can say is that the vaccines business will kick in H2, which will obviously lead to more drug products revenue. However, we will not provide the guidance on how the exact split will ultimately be for the full year of 2021.
Okay, thank you. We have a question from Barbora Blaha, again, to the BioNTech vaccine. What is your capacity utilization of your dedicated line? Should there be a third booster shot required? Do you have free capacity until end of 2022 to take further orders in this vaccine business?
Hi, Barbora. Actually, a great question and pretty close to what we are working on every day. We don't provide specific capacities or volumes. We are even not allowed to do so by contract. The partnership with BioNTech is very important for us right now and obviously next year. We, of course, try to extend that partnership beyond 2022, be it for further vaccine manufacturing or other products of this impressive company in a way. We clearly see that as a strategic partnership that we would like to extend in terms of time and volume.
Sophie Botha asks, as the CHF 200 million new bond is expected to refinance the CHF 160 million hybrid bond, how do you finance the acquisition of the 2 new Spanish sites?
A very good question. Thanks for that, Sophie Botha. Yes, indeed, the CHF 200 million debut senior bonds have indeed been pre-financing the calling and the redemption of the second hybrid bond over CHF 160 million. For the purposes of the financing of the Novartis deal, we have actually done a special financing transaction, which was privately placing two hybrid convertible bonds with Ernst Göhner Stiftung in a total amount of CHF 80 million, so specialized for this transaction. That funding package was closed in the very last day of the last year, so 2020.
Okay. Thank you. Daniel Jelovcan asks, is it a fair assumption that your D&A in the forecast 2021 will be around CHF 80 million, including PPA amortization? The second question, should we expect CapEx for H2 at the level of H1?
Thank you for that, Daniel. Very fair question. We have recorded a depreciation number of CHF 40.2 million in H1. Doubling that, obviously, we end up exactly at the CHF 80 million that you forecast. This is correct. That is fine. The CapEx, what we have guided for was 6%-7% of maintenance CapEx and in addition, the expansion CapEx, a total of around 10% of sales. That's where we will end up. Not nearly a doubling of what we just had, but substantial CapEx also in H2.
Okay, thank you. Sibylle Bischofberger had also the same question to CapEx. A second question she had was on the tax rate 2021, as in H1 of 2021 or different?
Yeah. It's difficult to guide for tax rate half year after half year, as obviously, the tax rate that you observe in a certain reporting period is highly dependent on the profit generation and the country mix in where that profit generation actually took place. Generally speaking, we will see lower tax rates for the periods to come, especially due to the fact that Switzerland has introduced new tax laws two years ago. We will see tax rates below 20% in the mid to long term for the next 3-4 years to come. After that, we will need to reassess the situation.
We have questions from Charles Weston regarding cyberattack. He's concerned about impact regarding customers and the ability to win new business and how confident that we are that we can catch up on missed supply.
Maybe I take the first part and then Reto might add his thoughts to that. First of all, being down at a full stop essentially for either days or even for some of the sites for even weeks is not a good thing. Of course, delays an ongoing operation, and during that time you don't have business development sales meetings with customers, obviously. That is something which we, at least on the business development and sales side, clearly can make up for. I also read the question in a way that it might also ask, did it impact the trust level that customers have in Siegfried? Here I'm happy to be able to share that we perceived and receive a lot of attentiveness actually from our strategic partners, which is probably due to two effects or two facts.
One being that they know us as a reliable partner and that they appreciate the level of professionalism we generally apply in manufacturing, developing, but also in managing our company. I think equally important, maybe first, we also have been very transparent with our strategic partners in terms of sharing information, describing what happened, and also sharing learnings because they have been very eager to learn and see what happens so that they can learn from that as well. I think the level of attentiveness that we experienced from them is also due to the fact that I think the whole world is now aware these are things which can happen.
It's not good, obviously. We are confronted with a level of professionalism and criminal energy in the end, which is unprecedented, and many companies, not only Siegfried, have experienced this in the last weeks and months. The answer to that is, we continue to be able to win new business and the level of trust that we have with our customers is at least at the level where it has been before. I think maybe a few thoughts of Reto.
Yeah. No, exactly can totally echo that. I think it has really paid off that we have been brutally honest, brutally transparent, also relating to what had happened with our customers and the cyber incident teams of these customers. Our teams, their teams, our advisors have actually shared thoughts in order to prevent that anything like this can happen on our end. Also, as Wolfgang has mentioned, also our customers have been very interested in learning what exactly had happened in order to prevent the same thing to happen to them. This was actually, we felt a lot of support also from our customers during that time.
In the same kind of questions, Andy Schneider asks if the costs are all booked in the H1 year of the cyberattack. He assumes that these additional sales, which are postponed to the H2, come at an extremely high margin now since the costs have been booked in the H1.
Yeah. Andy, you're right. We have recognized the cost of these incidents and as the cyberattack really had indeed happened in the H1 and we have these invoices paid, that's a correct assumption. I have already alluded to on the profit effects of the delays. The margin indeed will be recognized only in H2.
Yeah. Maybe taking the second part. Hi, Andy. Of course, we will be able to catch up to some extent, but essentially in the end, production down is production down, which means production capacity lost, right? Also the idle costs related to this production being down are also fully recognized in the H1 results.
That brings me to a further question of Charles Weston. How was the H2 year progress so far? I think a good question in this field.
I can only give an indirect answer as we, of course, wouldn't enter into, let's say, monthly reporting. The fact that we confirmed our guidance tells you something about the expectations that we have for the H2 and the plans that we have in place. That might be at least a useful proxy for you as an answer to that question.
Rupen Boyadjian has a question. Can you give more guidance on the goodwill? Can the CHF 38 million disappear or be reversed to a goodwill at the end?
Yeah.
Good question.
Very fair question, and as mentioned in my part of the presentation earlier today, the purchase price allocation, which will then do two things. Identify the final purchase price that we paid for these two sites to Novartis, as well as the allocation of liabilities. As a result, the goodwill that will actually be reported in the financial report for the full year of 2021.
Okay. Might be a last question to the cyberattack from Bettina Raddatz. Is the fact then that the two Spanish sites were not impacted by the cyberattack only a consequence of them not having been fully integrated into the Siegfried platform?
Yeah, that's a fair assumption. The impact on the site was really minor and mainly on communication systems only. The operational systems were still in the Novartis environment, which is why they haven't been affected by the attack.
Okay, Rupen Boyadjian has a second question: Is the Novavax deal about the same size than BioNTech?
I'm actually, unfortunately, not able to comment on this one, as we can't comment generally on volumes and revenues with customers.
Okay. We have the last questions from Daniel Buchta again. Drug substance was at a minus 5% sales growth in the H1. If it wouldn't be for the cyber attack, what kind of growth rate would he have in the H1 for drug substance?
Yeah. A very fair question, Andy. We have actually been quite transparent on what has happened to our network in the cyber attack. We have issued three media releases. The first one, May 21, where we have actually informed about it, that we are down. 10 days later, on May 31, we have informed the market that we had largely overcome the cyber attack. Finally, in the week of June 7, we have said that we had resumed full production again, with the exception of our site in Malta. This gives you a little bit of an indication of the production time lost. Overall, you also have the information around the DP sites in Spain, which have not been affected.
Based on that, you can do the calculation on how many days, weeks we have lost in the DS network, and then compare that to the normal organic growth rate that we usually observe in the DS space.
Thank you. I think the last question from Sibylle Bischofberger, a very technical one. You plan to reduce CO2 by 50% until 2030. How much CO2 equivalents are the basis for the reduction? I think we have to answer this question afterwards directly, since this is very technical.
Yeah, I actually don't have that figure in mind. A few days ago, I might still have been able to remember, but if I remember correctly, it should be included in our 2020 sustainability report. Yeah. That would be the reference point against which we commit to reduce our CO2 footprint by 50% by 2030.
Okay, I think we are at the end of the list. I apologize for taking together some questions which have been similar. I hope we could answer all the questions in detail. I thank you so much for being with us. On February 23 next year, we are then ready for the yearly media and finance analyst conference, probably in Zurich again. Thank you.