Okay. Ladies and gentlemen, welcome to the annual Finance Analyst Conference here in the Widder Hotel in the middle of Zurich, for all of you who are with us despite of the coronavirus. Welcome also to everybody at our live stream in the office or back home. Of course, we will inform about the consequences of the coronavirus to our company too. We have also prepared some other information for you. I think the best is Wolfgang would start immediately with that. Thank you.
Thank you very much, Peter, for the kind introduction, and welcome to those brave ones of you actually being with us here in Zurich. Of course, a warm welcome also to our dear friends in the conference call, even though we can't see you here. I'm sure you will be able to, and you will actually ask questions at the end of the presentation. We start with the first slide actually, building a leading, fully integrated CDMO player, which is the same title that we used before. Why? Because that's still what we are doing. The news today, of course, refer to what happened in 2019. Here we are actually happy to be able to report a robust sales growth and higher margins for the full year.
A safe harbor statement, please read carefully, take note. Because we are going to make forward-looking statements, be aware, please. The agenda that we prepared for you actually starts with an executive summary, status, and outlook provided by myself. I will hand over to my dear colleague, Reto, CFO of the company, who will actually look back on 2019 and provide detailed facts and figures. It's me again, looking forward, looking ahead on 2020 and beyond, talking a little bit about markets or the environment we are operating in as a company. About strategy, our core beliefs here, size matters. In the end, discussing outlook for the company before we will welcome questions from all of you. Executive summary. Successful as a global team. In other words, we delivered upon what we promised a year ago.
Which is on the top line end, robust growth, up to CHF 834 million, which is a plus of close to 5% in CHF and almost 7% in local currencies. Upper end of our guidance. We also managed to increase our Core EBITDA up to CHF 141, plus of above 10% against the previous year, also increased the EBITDA margins or profitability by one percentage point to now almost 17%. Core net profit amounted to almost CHF 66 million. The core part is important. We introduced that to you already for the half-year results, actually Reto will give more details on that later. Based on that, the board will propose to our annual general assembly an increase of the cash distribution from CHF 2.60 to now CHF 2.80. This annual general assembly is going to take place in April, hopefully.
We did provide for a backup date in June in case that we can't have that meeting in April. Let me give you some high-level highlights in terms of what we did in 2019, what we achieved as a global team. First, we continued to invest into technology and capacity. A multipurpose train with a special chemical technology, high-pressure hydrogenation, for those of you interested, is going on stream as we speak in our new production building, 425. We are right now constructing a micronization facility on our site in Evionnaz, which will be taken into operation mid of 2020. We also strengthened our approach to the biologics drug products market by investing into a new R&D building, new R&D labs on our north German site in Hameln. These are all important investments in brick and mortar, steel, and equipment.
Of course, you might remember, I'll talk about that later, we need qualified, motivated people, which is why we also invested into software, so to say, people, and actually concentrated all our training activities in what we now call the Siegfried Academy, and actually increased spending in these efforts. This Siegfried Academy is not only for, let's say, a small group of people, leadership development. That's also included because it's important for our ambition to actually really exploit our full potential as a company. It's available to essentially all employees on all levels because we need excellence on all levels. Next part is we have been subject to critical eyes as every year, being inspected continuously by customers, many governmental authorities, and in 2019, more often than ever before by the U.S. FDA administration. They have been with Siegfried six times.
In Minden, Irvine, Evionnaz, and even twice in Zofingen, and most notably, also in Nantong. Some of you might remember, we have been talking about that in August during our half-year report. That we actually successfully passed that inspection with No Action Indicated, which means actually no formal observation. Which is a great result for a site which has been incepted just five years ago and for the first U.S. FDA inspection ever. Just two days ago and really right on time, I guess not by coincidence, Reto and our General Counsel, Luca Dalla Torre, actually signed a new revolving credit facility, which further increases our financial flexibility at actually better terms. Last part, outlook on 2020.
Despite uncertain macro environment, white elephant in the room, I guess, the coronavirus, we still expect low single-digit percentage growth of sales with local currencies and a modest improvement of the core EBITDA margin.
This is effect purely related to the spread of the coronavirus. Our midterm guidance, our strong conviction of the business model, our conviction that Siegfried is a great place, a place of opportunity and a place with a lot of potential is unchanged. Which translates into the second statement here, midterm outlook confirmed. Profitable growth in line with market, with the ambition to outgrow, including value-accretive M&A. Unchanged. Siegfried is intact as a company, of course. Let me briefly give you some details on coronavirus, how we have been affected, and how we assess risk. We see essentially two risks. I'm sure most of you have similar thoughts, similar analysis in your companies. Maybe somewhat different as at least most of you are not manufacturing companies. Let me briefly share some thoughts and insights on how we approach that.
First level of risk is, of course, keeping our plants running. Here I'm actually happy to be able to report that so far, no Siegfried employee has been positively tested for coronavirus. First and foremost, most important. Of course, with our Nantong facility in Jiangsu Province, we have been affected by coronavirus. China central government decided to actually extend the Chinese New Year holidays by one week mandatorily, and I think rightfully so, for essentially any company in China, and that affected Siegfried as well. The Nantong facility has been down one more week and started to ramp up on, I think, the 10 February, as compared to the 3 February as originally planned. It took some time for our people to actually come back from holidays. Some had to stay in Hubei Province because that's where they were coming from.
In the first one and a half weeks, we have been at 50, 60 people. It actually took us until 24 February before we have been again at 90% of our personal headcount in Nantong. The site is now essentially fully operational again, still at 90%, but things are working well right now. Still means we lost some productive time, probably something in the range of two and a half weeks. Second level of risk is not so much related to our own operations. It's more related to the operations of our suppliers. We of course, have complex supply chains, and we have suppliers in China. We most likely have suppliers not from China, but themselves sourcing from China. Complex world, obviously.
Our procurement department did the analysis on different levels first, looking ahead three months and really purely at Chinese suppliers directly delivering to Siegfried for productions starting in the next three months. We are rolling it out right now towards June 2020, and we will now also include, let's say, the second-level analysis, which refers to suppliers themselves not being in China, but potentially sourcing from China. What we saw here to give you some flavor, and which of course is also reflected in the adjusted guidance, is there will be delays. Namely, we have identified five intermediates which will for sure be delayed. We don't know exactly for how long, but that's just a fact. That's one data point.
In order to provide you a second data point to get a better feel for the risk or the not so high risk, we at Siegfried source approximately 1,500, 1,600 raw materials from all around the world. Only 5% of these 1,500, 1,600 raw materials, not value-weighted, come from China directly. Only 5%. For only half of these 5%, so 2.5%, we don't have a second source. What we see here is, of course, not nice to have delayed shipments from customers, which will have an effect on revenue generation, also in terms of when certain revenues will occur.
Still, it's not so bad risk diversified, I would say. Also for this 2.5% where we have decided to go for a second source, these are, of course, the most valuable, most important raw materials, which is why we defined them as raw materials for which we need a second source. What helped us to be well-prepared, actually, the fact that in 2017, Chinese government went hard on implementing environmental law and shutting down Chinese suppliers, which was the latest point in time when we started to actually carefully look at critical raw materials and actually establishing second sources. That's a little bit background on how we look at coronavirus as a company. Maybe some more facts which might be interesting for you also with regard to your own operations, with regard to things that we implemented at Siegfried to manage risk on the employee level.
The first warning went out on 27 January, restricting travels. We escalated according to a crisis plan, which actually goes back to the SARS crisis of 2003. We escalated step by step. Our reference point for our own decision-making, our own assessment of the situation, are the World, the WHO, the BAG, Bundesamt für Gesundheit, and the Robert Koch Institute in Berlin. That's the guidance that we use for our own assessments. Right now, we decided not to have meetings with many people. CEO session, which was supposed to take place tomorrow in Zofingen, me speaking about the year and what's going to come, will not take place, unfortunately, because it's a great event, and also for me, the opportunity to say thank you to the people having achieved this good result in 2019. We didn't do it because there's no reason to actually increase risk.
Meetings at Siegfried are more and more transferred into the virtual world, conference calls, and we try to limit number of people participating. We are still happy that you are here. You're not 1,000 people. That's supposed to be the executive summary, and I now happily hand over to Reto, who will guide you through details with regard to facts and figures in 2019.
Thank you very much, Wolfgang. Welcome, everybody, also from my end, people here locally, the brave ones, as well as the people who participate electronically via the web call. Very happy to take you through another year of profitable growth at Siegfried. You see that we have been able to increase sales by 4.9% in Swiss francs and 6.9% in local currencies. That's quite a gap, 2% difference due to currency effects. We have already seen it coming at the half-year numbers, quite a strong currency headwind, and it was especially the euro which has depreciated strongly against the Swiss francs, obviously hurting our top line. Maybe a word on currency positioning overall, so currency exposition on the margin, et cetera. We have worked hard on that and actually quite successfully managed the natural hedge, so balancing cost and revenues in local currencies.
We have been able to limit the impact on our margin quite well during the whole of 2019. You see that we have a strong growth in the Drug Substances business, which grew by 7.2% and even 9% in local currencies, and an only small growth in the Drug Products business, which grew by 0.5% in local currencies, just as announced at the half-year results. It is worthwhile thinking back five years and have a look at Drug Products and the development since 2015. It grew by an average of 7.5% CAGR on average since then, including this year, 2019, and all of us are convinced that the Drug Products business will continue to follow a positive and successful trajectory going forward. That gives you the revenue split for 2019, 77% in Drug Substances, 23% in Drug Products.
Maybe a word on what to expect in 2020 in these two business lines. Everything obviously included in the guidance just explained by Wolfgang. In the Drug Substances business, the ongoing regulatory discussions around controlled substances introduce a certain element of uncertainty, especially to our U.S. business. In the Drug Products business, it's fair to say that our decision, which we have taken in December to concentrate our oral solid dosage form business, OSD business in Malta, will obviously introduce a certain softness to these type of revenues for 2020 as well. Again, as you already know, the first half of 2020 will be weaker, softer than the second half of 2020. This is my favorite slide. A lot of bars, and it explains to you what the introduction, the core translations do to my P&L.
As mentioned by Wolfgang, we have introduced that concept with the half-year numbers mid-2019. We have actually adjusted for special effects already before using the typical Swiss way of before and after special effects. With the core concept, we put that in a much more structured and also much more transparent way of communicating these adjustments to you, to the participants in the financial markets. How does this waterfall chart work? Let's start on the left-hand side. You see the EBITDA as calculated under our accounting framework, which is Swiss GAAP FER. We eliminate certain cost elements, I will explain these in just a second, and arrive at the core EBITDA. Taking back depreciation brings us to core EBIT, and a further few adjustments bring us then down to the core net profit.
You see a number of five dark blue bars, which I will explain into great detail, just shortly, which affect these Core adjustments. The light blue bars are just normal elements out of the P&L. These five blue bars can be grouped into two different effects. The first effect, which was already included in the half-year numbers, relates to foreign pension plans and obligations coming from foreign pension plans, especially in Germany, where we see three effects. On the one-hand side, on the Swiss GAAP FER, I'm obliged to include all of these pension effects as a part of personal expenses, so as a part of operating expenses, so above the EBITDA line. What I do with the first adjustment is that I take the CHF 2 million, which is just the net interest on these pension obligations.
I take these out of the operating expenses, where I think they don't belong to, and put them into the financial expenses. You see that bar actually twice, the two million as between EBITDA Swiss GAAP FER and core EBITDA, and they will reappear as an expense in the net financial result. Two of the five explained. The second effect, and I'm still with the pension obligations, it's the largest one. It's the CHF 30.1 million. This is now directly caused by a change in the technical interest rate used to value these foreign pension obligations. If you value these pension obligations, it's a function of two things. On the one hand side, you have a portfolio of obligations sitting somewhere in the future. Secondly, you have a technical interest rate, which is used to value these future obligations, calculate the present value to today.
As you have seen, the interest rates in the Euro lands have declined significantly throughout 2019, and this technical interest rate came down 100 basis points from 1.9% to 0.9%, which has actually increased the value of these obligations. On the Swiss GAAP FER, this charge of the 30.1, which I have to stress, that is a technical charge and which is non-cash. All of the effects I discuss here are non-cash. The 30.1 had to be included as personal expenses on the Swiss GAAP FER. The 30.1 we have eliminated as not related to our business at all, as purely technical, as purely non-cash. Three of the five explained. I'm still with the pension obligations. This increase of the pension obligations also had actually a favorable effect on the tax line, created a tax income. How funny is that?
Obviously, that tax income we have eliminated as well. That is this CHF 9.0 million additional tax expenses that we have created. Four down, one to go. I am switching now to the second effect, which was a change in Swiss tax legislation. STAF 17, the tax reform, new tax legislation in Switzerland, which has offered Swiss companies as an option, the right to increase the value, to recognize the value of brands, et cetera, on the top-level holding, and the opportunity to write this value off over a period of five years. This effect, which is not single or to Siegfried, you see that extraordinary tax income in many other companies as well, has created a positive tax line, so would have increased my net profit by CHF 8.5 million. However, we thought this is not related to our business, and it will reverse over the next five years.
We have taken out this CHF 8.5 million as well. Two effects, pension obligations and the introduction of the new tax law in Switzerland, have led to these adjustments and to a Core EBITDA, which is an important number for us of CHF 140.7. On this slide, you see actually the year 2019 in five columns and much more numbers. I would like to concentrate on one, which is the most important one for us, the Core EBITDA margin. We have been able to increase that from 15.9% to 16.9%, which is obviously a function of the increase in sale and increase in the gross profit, absolute and relative, and then further down in the P&L. A lot of people ask me, "Well, how do you do it?
What do you need to do in order to maintain that continued growth and also to maintain that expansion of the margins basically on all levels? I'm happy to add some colors beyond the numbers to that. I think two things, external view, but also the internal view. I think from the external view, it has been absolutely great to see that the demand from the client side, our customers for our products and services is as strong as never before, actually. All of our hypotheses on the importance of growth to which Wolfgang will allude to in just a few minutes have been well confirmed. That's absolutely good and great news. On the other hand side, we obviously have also been very diligently and very hard been working on internal processes. Just two things.
On the one hand side, we have been doing product transfers, so moving production orders from one site to another in the network, freeing up valuable launch capacities in a number which we had not done in any of the years with Siegfried before. Even more important will be very important for the years to come to maintain that growth. Secondly, we have also introduced new measures in operational management. We have introduced a whole new framework. It's called operations controlling, which provides Wolfgang, me, the excom with a much, much, much tighter grip on the operational performance of the individual sites on the ground. On that basis, we have actually taken our time to sit at the occasion of the half year numbers.
Now after the year has closed with all of the local management teams, under the lead of Wolfgang, with other excom members participating, we have taken the time to sit with them, review performance, identify weaknesses, identify strength. We have also listened to these guys. What do they need from us in order to be even more successful going forward? I tell you, it will be a combination of these measures which will bring Siegfried to an absolute new level of performance going forward. To the P&L, and I will concentrate on one line actually in the SG&A. You will see that most of the cost in the SG&A, so not directly related to buying, producing, and selling products. I will concentrate on research and development. You see that this has been an increase from CHF 27.5 million to CHF 33.3 million, so quite a significant increase.
We have invested into that function, and that function is important from a client-facing point of view. A lot of clients appreciate our abilities in especially that regard. As a percentage of sales, that's now at 4% of sales, 4.0%. Those of you who have listened to the half year numbers, we have been at 5.1% there. This has come back normalized as announced, and this 4% represent an increase of 0.5% when compared to the 2018 numbers. Yes, correct. Cash flow statement. Two messages here. Firstly, fair to state that the operating cash flow prior to changes in net working capital, almost unchanged to last year, which tells me that cash generation as such is actually okay and stable, which is good news.
However, if we calculate the real operating cash flow, so considering and taking into account the net working capital positions, you see that we have invested about CHF 40 million more into net working capital as compared to last year. Now, drilling down a bit further into what has led to that CHF 40 million more capital allocated to net working capital, it's mostly inventory. We have invested about CHF 35 million more into the inventory position, and that's an information which you will not find in the financial report. Within the inventory position, it went almost exclusively into the semi-finished goods. Which means semi-finished goods is work in progress. We have long production cycles, so when a production order is not finished at the end of the year, obviously it's included in the semi-finished goods production. That's potential for the future.
Which will materialize over time into sales, accounts receivable, then, obviously cash again. You see that the purchase of PP, so the CapEx line is almost unchanged to last year, obviously free cash flow then affected by this CHF 40 million of additional investments into the net working capital. The capital allocation framework is almost unchanged to last year. The focus is still to provide the funds for the strategy execution, which is EVOLVE, which is investing into organic growth and which is, or investing into an organic growth, meaning M&A. How do we do that? Exactly as laid out last year, we will minimize and reduce to the max possible the payout to shareholders. Moderate payout ratio steadily increasing to the 280, we will use opportunities to deliver our balance sheet. Maybe two words on the leverage.
Those of you who have really studied my financial report will have seen that I have regrouped in the statutory balance sheet for Siegfried Holding, the first tranche of the hybrid bond from long-term to short-term. Current liabilities, which is a clear signal of our intent to call that first tranche on 26 October and then to redeem it. We will use the newly signed syndicated loan to cover that next to obviously own generated cash. This newly signed syndicated loan is a great pleasure and a great joy for us, and we're really happy about it. A few of the bank representatives are here today. Thank you for participating, and thanks for all the trust that you have put in us and the continued trust also going forward. The payout proposal to the AGM, CHF 2.80 per share.
AGM scheduled for 17 April 2020, which is an increase of CHF 0.20 per share. Remember, this will be effected through a reduction in nominal capital. For Swiss natural persons, actually tax-free, which is a result of our efforts last year to restructure the equity position, converting Kapital-Einlage-Reserve into nominal capital. These have been my remarks for the year 2019. Wolfgang, back to you.
Thank you, Reto, for guiding us through a good and successful year 2019. I will now have the pleasure to discuss market strategy and outlook with you here and with the colleagues in the conference call. A brief two or three slides only on, I mean, reflecting on us as a company. Some of you might know this slide, but it's always worthwhile to remember because kind of makes clear what the company is good for and what actually drives us at Siegfried towards the future. First of all, Siegfried is a substantial source of active pharmaceutical ingredients to the pharmaceutical universe. Out of the approximately 1,500 APIs being approved by the U.S. FDA, Siegfried is capable to manufacture approximately 200. That's almost 15%.
It's important that we actually, as a supplier, are efficient and actually are able to deliver active pharmaceutical ingredients to the world. Second of all, if you actually do not only look at the next parties in our value chain, but beyond our customers to the patients. We estimate that approximately 40 million patients each year are either treated with a drug product which contains an active pharmaceutical ingredient manufactured by Siegfried, or might even be directly treated with a drug product manufactured by Siegfried. That's a privilege, of course, but it's of course, also an obligation in terms of how we do our things and that we do our things in the right way. There is this special animal on our North German site in Minden, which came to us as part of the BASF acquisition in 2015.
We are the last remaining Western caffeine manufacturer to the pharmaceutical world and also to the food and beverage industry, and also one of the largest caffeine manufacturers. If you look at these products, it is probably fair to say that up to a billion, I would think even more people get in contact with a Siegfried product every year. It's obviously important what we do and how we do it. We translated that early last year into our mission statement. We defined a new vision statement and spent time on discussing what are the true core values, what is our core mental framework when doing business. I would like to briefly guide you through them again. Mission. With mastery of science and technology, we take the precious innovations of our pharmaceutical customers to industrial scale and manufacture safe drugs for patients worldwide. Mastery of science and technology.
I mean, that's core of what we do. We solve technological problems of our customers. Precious innovations. Last year, I told you the story about this passionate team of a small startup company closely working together with us at Siegfried on one of our manufacturing sites because they entrusted us with their most precious value, innovative product, relying on us that we would be able to actually create a commercially viable, large-scale commercial process for their product. Whole company depended on that product. These gentlemen, together with our people, being part of the combined project team, literally slept beside the reactors. How did the story went on? We have been successful together with the company.
The company was so happy with the services that we provided, with the passion that our people displayed to make it happen and solve their technical issues, that actually now we got a follow-up project. Same company, backward integration, new business. Even better, the company has been acquired by a big pharma company, a company where we didn't have inroads yet. Now I have a reference point, them talking to that company and guiding that company to Siegfried. That's how our business functions. It's trust based, and if we as a company deliver upon that expectation, we can differentiate and create new business opportunities. Vision statement. First part, still boring. Want to be the leading CDMO in our space. Second part, still important. You will see that that part actually is reflected in what we did in 2019.
We want to become the leader in the CDMO space by having the strongest team and the most competitive network. Remember, investment into technology, micronization in Evionnaz, high-pressure hydrogenation in Zofingen, R&D labs for biologics fill finish in Hameln. Most competitive network. You might also remember Siegfried Academy investing into our people on all levels. The strongest team. You see alignment between concrete actions in 2019 and the vision statement that we gave ourselves as a global team. Last but not least, excellence relating to mastery of science and technology, passion, the team working together with the small startups, sleeping besides reactors, integrity as the mental framework, how we do business, how we treat each other internally and also our business partners, quality as an entry ticket in our industry, and sustainability. Sustainability, a few words on that.
We do have actually two perspectives on that core value, one being an economic one. How do we make decisions at Siegfried? We claim for ourselves that we don't sacrifice the mid to long term future for a short term gain. We make decisions in a way that they hold true, ideally, also mid to long term. Second part is, of course, ecological footprint. Here I can happily report that we included five of the Sustainable Development Goals of the United Nations into our sustainability report in the annual report for the first time, that we kind of summarized our activities, which are going on since quite some time at Siegfried under these categories provided by the United Nations.
Peter, not only him, also many other colleagues actually spend and have spent a lot of time over the past years to actually reduce our footprint in terms of water consumption and energy consumption and emissions. I think we as a company are actually making good progress here. For more details, please refer to our annual report. The playing field. A few key characteristics of our environment, of the CDMO market we are actually operating in, which are essentially all favorable, which is, among others, why we see so much potential for our business model and for us as a company in our space. First part is low cyclicality. The healthcare systems, they are growing or they are steadily growing with the GDP and stay at probably 1.4% each year.
That's the kind of spending which is affected last by crisis, right? You might, in case of crisis, postpone the purchase of a car or of a house, but you won't postpone the purchase of a medicine when you're ill today, because you can't, right? It's a structurally market with low cyclicality. Also low volatility, which relates to the lifetime of a drug. Typically, a certain drug which has proven to be efficient stays on the market for 10, 20, 30, sometimes even 50 years, right? If you are a supplier, if you have developed a competitive technology, a close relationship to your customer, then you've got a long-standing relationship and long-term business. Low volatility. Resilient growth. Our target market, the pharmaceutical market, is growing at 4%-5% year-on-year. Relates to what I said before, low cyclicality.
That means that is at least the growth potential that we should have as a CDMO supplying the pharmaceutical market. On top of that healthy growth rate, there's a growth increment coming from a redistribution of activities within the value chain. Meaning pharmaceutical companies less and less doing the manufacturing and the process development of their own active pharmaceutical ingredients or Drug Products internally. Big pharma companies divesting, shutting down capacities to actually streamline their balance sheets. That's a positive trend for our business model, which gives us a growth increment of a +1%-2%, 1.5%, leading to the 6% that we see approximately as the average growth rate in our market. Last part is structural profitability. It's pretty tough what we do. Technologically very demanding. That's science, engineering science. If you are good at that, there's a lot of potential to differentiate.
If you've got a differentiated offering, that means you can protect margin. That's what we see at Siegfried and with leading CDMOs like Siegfried. It's a good playing field to be on. Where do we stand as a player on that specific playing field? On the left-hand side, based on the market size of 2018, however, with actual data for 2019 where available, where we see ourselves in the pecking order of leading CDMOs. Left-hand side, CDMO market, probably in the range of $75 billion as a whole, with the top 10 players, including Siegfried on play seven when it comes to revenues, only accounting for even less than 20%. That's not so much a surprise if you think a bit closer about the situation, because the business model itself is pretty young.
It has been developed only in the 1990s by companies like Lonza and also Siegfried. For a young business model, you in many cases see fragmented competitive landscapes. However, there is a strong strategic imperative for scale. Also in our industry, it is not the typical economy of scale like with car makers, but there is also a strong imperative and a strong benefit from scale. I will talk about that in a minute. Size matters. Before coming to why size matters, let us briefly look at five fundamental trends that we observed in our target market, the pharmaceutical world, and which have been the starting point for ourselves to actually define our actions. Because the better you can adjust and make use of these trends and prepare yourself for these trends, the better you can take advantage from them.
First one being pharmaceutical companies more and more focus on their internal R&D activities and marketing and distribution, and not on in-house manufacturing anymore. Reason being, their true value driver is innovation, new therapeutic areas, new molecular entities, and their ability to actually distribute and market their products. It's not manufacturing. It's not having a kingdom of sites all around the world with 50,000 people. There are specialists who can do that, who can do that in some cases even better than pharmaceutical companies. That's something that we are seeing since probably 10 years. You might yourself remember headlines that large pharmaceutical companies, also Swiss ones, actually decided to divest capacities. That's a good thing for our business model. Second part, increased cost awareness.
If you look at some of these large pharmaceutical companies who are also the result themselves from M&A, they've got a zoo of suppliers to manage, hundreds, thousands of them. There's a high complexity costs related to scale in the pharmaceutical space. For a company like Siegfried, who actually is able to take over significant parts of the value chain of a pharmaceutical company, that is a benefit if you fulfill yourself certain criteria. Third trend, breakthrough innovations, and referring again to the startup company I was talking about before. Breakthrough innovations in the pharmaceutical space more and more take also place by smaller companies, mid-size companies, which by nature, by default, don't have internal manufacturing capacities. They have to focus their funds, limited funds, on the true core value driver, which is innovation. They by default need companies like ourselves with our competencies, with our capacities.
Another good thing for the CDMO business model. Fourth trend, increasing complexity. The molecules themselves get more and more demanding in terms of how to chemically build them together and how to actually manufacture them. A source for differentiation, if you're able to do that in an efficient way. Last but not least, proactive life cycle management. Some, not all, but some innovative pharmaceutical companies do not necessarily give up anymore on their products after loss of exclusivity. They try to protect revenues. If you as a CDMO are able to provide the right cost structure for their products, also for an off-patent time in generic competition, that is of value.
Bottom line, and we could go through each of these trends, is you need scale, either for providing sufficient flexibility and capacity, global presence, either by providing the necessary expertise and broader technology toolbox to really take over significant parts of the value chain, either by having special expertise to solve special chemical or pharmaceutical problems. All that in the end relates to scale. If you as a CDMO have the right scale, you can actually benefit from that. The very instructive analysis shown on that slide, which kind of supports my previous statements. On the right-hand side, we see on the X-axis revenues for different CDMO companies for two points in time. First data point, 2012. Second data point, data is available 2017, 2018, for some even 2019. On the Y-axis, you see the EBITDA margin as percentage of sales.
What you see is a clear correlation, a clear corridor. Those companies who have been able to actually grow the fastest through organic growth or M&A have also been those companies who have been able to increase profitability, competitiveness the most. That also holds true for Siegfried. We see ourselves here, this little blue dot here, over time until 2019, moving up this corridor, and our midterm target is to actually further accelerate on that trajectory. Clear quantitative support for my qualitative statements before in terms of size matters. How did it happen? A few words on that. On the right-hand side, you see more specifics. In 2016, after the BASF acquisition in 2015, we have achieved the lower end of what we call critical size. That amplified our growth trajectory.
Year-over-year, we have been growing in Swiss francs here, 5%, 6%, 5%, and 7% in 2019 in local currencies, and at the same time have been able to step by step increase our EBITDA profitability. These are the details behind the trajectory that I've just shown to you on the previous slide, which probably looks similar for some of the other companies who have also been able to accelerate on that corridor. On the left-hand side, roughly, how does it work? First of all, optimize utilization within our existing capacities. Free up, as Reto referred to before, high-value capacity to make it available and ready to take on new business, transfer products to other capacities which might be more cost-efficient, and create value by that. Grow profitably. I mean, how is it possible that we grow profitably?
It is, of course, not only incremental cost that we need to add for additional business, it's more than that. That would be too easy. In terms of infrastructure costs of a site, SG&A, a little bit R&D, there are efficiencies. These efficiencies mean additional business comes in at a higher profitability. That's working out quite nicely for Siegfried. Idle capacity also relates to our ability to manage utilization, to manage a network. Idle capacity is important to be able to take on short-term business opportunities. All that, this profitable growth, this management of our utilization of our network, of our portfolio, leads to funds. Funds available to invest into further growth in a growing market, either organically into new technologies, additional capacities, or M&A.
That's the value creation cycle that we are actually applying at Siegfried over the past, and that we will continue to apply in the years to come. I briefly alluded to network. I also qualified the statement, size matters, by it needs to be the right size. What do I mean with right size? Here I've shown you the network of our drug substances operations. Chemistry, chemical operations. White powder is the result, typically. If it's brown, it's not good. We see six manufacturing sites, Taufkirchen and Evionnaz, Minden, Saint-Bonnet, Pennsville, Nantong. We also see that we only have three R&D hubs globally in Taufkirchen, Evionnaz and Nantong. They are actually supposed, and they actually do support the whole manufacturing network. Products, projects coming in from customers are developed by these three R&D hubs.
These teams then do not necessarily only transfer the process to capacity on their own site, but to any site in our network. That sounds easy, it's not. You really need to make sure that people cooperate, that people understand that there's a greater good, which is the company good, and not necessarily only the good for a specific site. People understand it. They understand the mission, the vision statement, and it's working quite well. The benefit that we take from our ability to actually really manage a network of integrated sites is shown on the right-hand side. What we can do with that sizable competitive network is we can create dual sourcing opportunities for our customers. Right? Usually, a customer would never entrust a company, a supplier with 100% supply. Too risky. He wants to have two sources in case of emergency, coronavirus, whatever.
We have been able to actually acquire, in quite some examples, 100% of the volumes of our customers because we could provide two sources within the same network with the benefit that the customer doesn't have to deal with two parties. Doesn't have to deal with two quality management systems. That's working out quite well. That needs scale. For that, you need a sizable global network. Size matters. Horizontal integration of the value chain. We do have a number of examples where we have been able to create a competitive position because we could actually, for a 10, 15-step synthesis, allocate the different steps to different sites. There's one instance where actually the synthesis starts in Nantong. It's then taken over in Saint-Bonnet, and the last steps being done in Minden. That you can only do when you have a diverse global competitive network. Size matters.
Life cycle management for margin protection. A certain product, which if we look at the old Siegfried until 2012, three sites, essentially only one main chemical manufacturing site. A product that has been taken on in [inaudible] maybe 15 years ago, essentially stayed there forever. What happens to price? It goes down. You've got high-value capacity being blocked by low-margin products. Would it be necessary to just stop and say the customer goodbye? You don't do that. That's not our mission. Now we can actually transfer those products to, on the cost and more competitive sides like Nantong. That's what we are constantly doing, and in 2019, we have transferred more products than ever before in our company's history. Last part is optimized utilization.
That's really balancing idle capacity and allocating it to the right site, which in cases where we are actually dual sourcing or dual supplying a customer is quite easy by allocating volumes to the respective sites. We will talk about strategy M&A later. Today, I'm not able to present to you a similar picture for the Drug Products business because we lack size. We don't have that world-scale global manufacturing network. We can't offer dual sourcing, which doesn't mean that the Drug Product business today is bad business. Not at all. Got very good sites, very good business, very good people. That strategic relationship to customers is not possible at the degree as it is possible for the drug substances part. Strategy.
Three areas of activity when it comes to what can you expect from Siegfried and how will we actually support our growth ambitions as a company. First part is investments in technology and in our existing manufacturing network. That actually you see what happened in 2019. How risky is it that we actually deliver strong top-line growth? I think here it's useful to look at how we are diversified within our business model. We are actually pretty well diversified. If you look at the four dimensions, broad customer and product portfolio. Diversified, I will give you some details on that later. Wide range of technological capabilities. We are not depending on one single technology, one single product, and if that is not working anymore, or there might be a breakthrough technology overtaking us, and then being dead as a company, that's not the case. It's quite the opposite.
We need to be capable to essentially apply any chemical technology. That's what we are able to do. There is a very low risk in terms of technological capabilities. Customer concentration, not very strong either. Good news in terms of risk here as well. Services along a drug's life cycle. We talked about this low volatility before. Long product life cycles. I think good news in terms of our top-line development in the future. We alluded to that during our coronavirus discussion also on the supply side, yes, there is risk. It's not catastrophic. It's well diversified. Based on our knowledge today, it will be manageable. Customer concentration 2019. The top 10 customers account for less than 40% of our revenues. Largest one being at 6%, that's pretty diversified.
Product, similar picture. A bit more than 30% account for the top 10 products, with the largest product accounting for 5%. Of course, you don't want to lose 5% of your revenues, but it's still low risk in terms of really having bad consequences on the company. Good news on the risk dimension here. Top line understood. How is EBITDA margin expansion supposed to work, and how did it work in the past? Answer is actually on the next slide, 29, economy of scale. Talked about size matters and our ability, based on scale, to address the most attractive market segments with the highest willingness to pay of customers. Second part is our ability, again, relating to scale, to have idle capacity sitting ready to take on short-term opportunities. Second element.
Third element is our ambition to actually grow the Drug Products business, which structurally is more profitable than the drug substances part. By building out that business through organic growth or acquisitions, you automatically increase the margin of the overall portfolio. Last but not least, and we also discussed that, product allocation within our manufacturing network to the most competitive sites. That's how margin expansion in the past did work at Siegfried and is going to work in the future as well. That all culminates in this last takeaway wrap-up slide, which on the left-hand side shows where we are today, Siegfried 2019. Net sales of CHF 834 million. On the right-hand side, we see, let's say, the Siegfried vision, being a global leader in the CDMO space, most trusted partner, strongest team, most competitive network, and so on.
On the way, you see actually our base case. I am a shareholder, obviously, myself, and that's how I look at Siegfried. There is a base case which builds on robust organic growth. In line with the CDMO market, with the ambition to outgrow, which is our confirmed midterm guidance. On the way, by using the levers I just described to you before, expanding our core EBITDA margin up to 20%, having to selectively invest into technologies, invest into additional capacity in our existing network and further integrate our entire site network. That's the base case, which in itself is a very attractive one. On top of that, there is the M&A case, where we as a management team are committed to actually execute and make use of growth potential, which is available to us through M&A. This is supposed to be value accretive in our core areas.
We can also imagine to make an entry into adjacent areas within the CDMO space, meaning, for example, an entry into biologics drug substances. That all leads to the guidance that I presented to you on the first slide already. Despite macro uncertainty, and we discussed the background, we are still positive and project the lowest single-digit sales growth in local currencies for 2020 with a modest expansion of our Core EBITDA margin with, important, our midterm outlook being confirmed. That's what we wanted to present to you, and now we will be happy to actually take questions and provide answers. Thank you.