Good morning, everyone. It's my pleasure to welcome you all, both here in person at the SIX ConventionPoint in Zurich, and those who are joining us online to the StarragTornos Group Annual Media and Analysts Conference. We truly appreciate your time and interest in our company. As we begin, I would like to draw your attention to our vision, which is displayed on the screen. This vision continues to guide our strategy and our commitment to delivering excellence in our industry. Today, we present the 2024 financial results, and we provide insights into key business developments that have shaped our year. We have structured this conference to ensure clarity and transparency, allowing you to gain a comprehensive understanding of our performance and future outlook.
I'm pleased to introduce our three speakers for today: Mr. Michael Hauser, Chairman of the Board of Directors, Martin Buyle, Chief Executive Officer, and Markus Jäger, Chief Financial Officer. They will each play a crucial role in presenting different aspects of our performance and strategic direction. As you can see on the screen, the agenda outlines our key topics for discussion today. We will conclude today's session with a Q&A, where you will have the opportunity to ask questions and engage directly with our leadership team. In this regard, I also mention that the Q&A, you can also raise questions in your language. It doesn't need to be necessarily in English. So, without further delay, I now invite Michael Hauser, Chairman of the Board of Directors, to open the conference with his introduction.
Ladies and gentlemen, good morning. Welcome, and thank you for joining us today as we present our Annual Report 2024. The past has been marked by a challenging macroeconomic environment: rising geopolitical tensions, shifting demographics, supply chain challenges, and fluctuating demand across key industries. Like many in the machine tool industry in 2024, we navigated inflationary pressures, shifting market dynamics, and evolving customer expectations. Despite these headwinds, we remain resilient by adapting our strategies and leveraging our expertise in metal cutting solutions to sustain both our performance and that of our customers. Among the global megatrends influencing our 2024 financial results were technology and innovation and environmental resources. For example, our StarragTornos division's strongest market segment was aerospace, with new projects requiring advanced manufacturing solutions and technologies.
Additionally, related to the environment and resources megatrend, StarragTornos' sales in the energy market more than doubled in both renewable energies and conventional power generation. As another example, the economics and business megatrend, including reorganization of value chains, boosted new orders in our transportation market segment, where our Tornos division increased its new orders by more than 37%. This was primarily due to the original equipment manufacturers and first-tier suppliers driving a geographical shift to source components from more competitive markets. At the same time, in the industrial market segment, which includes the electronics segment and job shops, both of our divisions had to accept cyclically related declines. To a lesser extent, the medtech and dental market segment was also impacted. Due to the global economic landscape in 2024 and associated hesitance to invest, demand in the luxury goods market segment fell sharply.
Still, both of our divisions maintained their market shares and successfully brought new and innovative products to the market. This fact is evidence of our commitment to innovation and customer-focused solutions in an ever-changing world. It is against the backdrop that we will discuss our 2024 financial performance, our strategic priorities, and outlook for the year ahead. Together with Martin Buyle, CEO, and Markus Jäger, CFO of the StarragTornos Group, I look forward to engaging with you in providing insights into how we are positioning StarragTornos Group for continued success. But before I pass the microphone to Martin Buyle, I want to take a moment to honor Walter Fust, who was the Vice Chairman of the Board of Directors from December 2023 until his unexpected death on February 4, 2024. A visionary entrepreneur and investor, Walter Fust significantly influenced our StarragTornos divisions as their main shareholder for many years.
He also played a leading role in creating the StarragTornos Group in 2023. With his passing, we lost our major shareholder and a valued partner and friend. Walter Fust's unwavering commitment, his firm belief in Switzerland as a manufacturing hub, and his principle will continue in the community of his heirs, who have decided to keep the shares with the family, ensuring that our group remains firmly rooted in Switzerland. Thank you.
Good morning, ladies and gentlemen. I would like to start my presentation with a short recap of who the StarragTornos Group is. We have been, as we heard before, established lately, so in December 2023, as a result of the merger of two companies, as you know, the formerly independent Starrag and Tornos. We are headquartered at Lake Constance, and we produce machinery and solutions that go into metalworking. So we are talking about milling, grinding, turning, and boring solutions. When we talk about the solution, it's not just a machine. It's a complete offer for the customer that also includes after-sales services, which, as you know, and as you see in the figures, is an important part also of our business. On the market, we operate under two distinct brands. On the one hand, we have the StarragTornos umbrella brand, which again contains 10 sub-brands.
On the other hand, we operate as Tornos. StarragTornos is not used in a marketing sense. Our customers are operating in distinct applications and industries, which I'm going to go into a little deeper on the next slide. We are a global company, so we operate 11 production sites all around the globe, which puts us in a position to serve different markets very closely and also have some flexibility when it comes to the tariff discussion that is currently going on. Which are the most important markets that we serve? StarragTornos is a company that focuses on certain applications and certain markets. I would like to start with the aerospace market, and in this respect, I have to include defense also, because a good part of aerospace is going into defense, into the defense sector.
The drivers are obvious at the moment: it's an increased need for security. On the other hand, it's globalization, which is pushing the civil aviation, but also increasing environmental demands, which is an important driver for innovation if you think about jet engines. As a consequence, our customers can be found among civil and military OEMs and the tier one and tier two suppliers of this industry. A second important target market for us is the medtech and dental industry, with the obvious underlying driver of an aging population, especially in the Western world. We are focusing very much on producers busy in orthopedics, the dental industry, and also medical instruments. Luxury goods, as a Swiss company, is a very important pillar as well. You have more and more rich people because the population, especially in Asia, is also growing, and also the wealth is growing.
Our focus there is watchmaking and jewelry, or luxury goods in a broader sense. The energy sector is also a market that we target, and you're certainly aware of the change of energy production going more to renewable energies. So we are busy in both of those sectors. So on one hand, in renewable energies, and here particularly in wind turbines, but also steam and gas turbines and oil and gas, which must not be underestimated in its importance still today. Transport, our definition of transport, is not so much automotive. It's more the sectors that you see below. So it's construction and agricultural machinery. It's also automotive, but it's also truck and bus. And last but not least, we have an industrial market, which is a mixed bag of many different applications.
We are mainly focusing there on job shops, on producers of large parts, but also of companies acting in the lock industry and hydraulics and pneumatics. So how did the year 2024 go? Here are the most important figures of last year. We had an order intake of about CHF 476 million. We had net sales of about close to CHF 500 million, so 494. We employed about 1,980 FTEs. Out of this net sales of 494, we were able to achieve an EBIT of CHF 15.4 million, which is the same as a 3.1% EBIT margin on net sales. And the proposal for the dividend that is going to be presented to the shareholders at the AGM is CHF 1 per share. On this slide, I don't want to dig too deep into the detailed figures. Markus Jäger is going to do that afterwards.
But here, I wanted to show you a little bit of a comparison to the Pro forma figures of 2023. Pro forma means we count together 12 months of Starrag and 12 months of Tornos and compare it with one year of StarragTornos. So it's apple and apple. On the order intake, we had a reduction of about 10% in year 2024. The reasons for that I'm going to explain on the next two slides a little bit because we had different developments. We had industries that were booming or growing very fast. We had others that were in decline. I'm going to say a little bit more about that later. Net sales came down by about 13%. So the decline in net sales is a little bit more than the decline in order intake because the turnaround rate was slower.
That is because most of the orders that we got and the order backlog that came in were projects that last for longer than just a few months. These were large orders, big orders that take longer to materialize as net sales. As a consequence of the reduced net sales, the EBIT came down, unfortunately, from about CHF 46 million to CHF 15 million. This is largely a volume effect. We have countered this by implementing cost-saving measures because otherwise the result would have been much worse. We ended up at CHF 15.4 million. Order backlog, as I mentioned before, came down by 4%. So it's still at a decent level, although the order backlog is very different looking at the different applications and at the different parts of the company.
So on the next two slides, I would like to go a little bit deeper into the order intake distribution and have a look at it from the application side and then on the next slide from a geographic side. As you can see here, aerospace surpassed luxury goods last year in terms of being the biggest single market segment that we serve. It came up by about 8%. And the drivers I outlined before, but one of the important drivers of last year was also increased capital investments in the defense industry, where we are well positioned and we could benefit from this trend. Another increase we have seen in energy. So energy doubled from a low level, but we could double the figures. A driver there was both investments in renewable energy, but also in the traditional energy, as I said before, gas and steam turbines.
Transportation, which was mentioned before, also came up by about 10%. The downturn of last year was certainly the luxury goods development, which came down from about CHF 101 million to almost CHF 52 million. The reason is because we are well positioned in this industry, but the industry itself didn't invest last year on a sufficient level. It also has to be said, CHF 101 million was a very high level, but we came down there. The effective end result is that on a machine, the total machine order intake came down by about 11% and including service, which was a little bit less down, but more or less on a constant level. When you look at net sales, we ended up with 10% less order intake. Geographically speaking, the picture is like this, and you have a high correlation between the different applications and the different geographies.
For example, if you look at Switzerland, the decline in order intake can be directly attributed to a decline in luxury goods. On the other hand, America doubled the order intake from CHF 50 million to almost CHF 100 million. And the driver for this being aerospace and defense mainly, a little bit also medtech and energy. Asia had to record a decline of about 30%. There, of course, an important factor is the economy in China and also the increasing activities for gaining industrial autonomy, which didn't help both. On the other hand, looking into the future, I'm not too pessimistic about Asia because Asia does not consist only of China. We have markets like India coming up and also the former Tiger States, which also represent a good potential for us. Service, as I said in the beginning, is an important part of our business.
As you see, this is now net sales. Net sales was kept at a stable level between 2023 and 2024. This figure of 134.5 represents about 27% of the overall net sales that we achieved. It is a remarkable and important part of our business. What did we do on the innovation side in 2024? I think this is also important for you to know. We invested a lot in new developments, and I just highlighted two examples, one on the Starrag side, one on the Tornos side. On the left side, you can see the Berthiez VT , VT standing for Vertical Turning machine. This is a machine that is aimed at the wind turbine market because you can produce big parts of wind turbines on this machine. It features all the things that we think are important for innovation for the future.
It has been designed with the target of lowering costs, of course. This is always a very important target, but also having less energy consumption, not just to operate the machine, but also to produce the machine by making it lighter, by using different materials, by using different drive concepts, and so on. At the end of the day, to have a targeted machine at a certain market because we are a niche player. We focus on various applications, and we also need to focus our new machines on specific applications. This is an example on the Starrag side. On the Tornos side, we introduced the Swiss type XT machine last year, which is also following the same logic.
So it's aimed at increasing performance but keeping the price or even being able to lower the market price a bit, but also focusing on customer needs, the customer needs of today. And this is basically cost per part, cost per part production. And as you see there, it's perfectly capable of serving the needs for automotive and medical applications. We have made a good step last year in terms of sustainability and ESG. So 2024 was the first year where we really established an ESG strategy. We have selected four areas that are of importance to us, which are products, environment, social and business ethics, and compliance. And last year, we focused on the environment part of it. So we kept investing in solar panels on the different production sites that we have. So we completed the installations in Rorschacherberg, in Taichung, which is in Taiwan, and in Moutier.
The enhanced energy efficiency is important, something I just mentioned, and I'm going to go into an example just now. We have also established the full carbon footprint analysis, including all the different scopes, which will serve as a basis for defining targets for next year and then follow up and gradually improve on this. On the energy efficiency, on the right-hand side, you see a Bumotec machine. This is one of our brands, the Bumotec s191neo . This is a machine where you produce small parts for the watch industry, but high volume. It's a mass production machine. What we could achieve there is we could save energy per workpiece by 25% by redesigning the machine. The process time has been shortened down quite a bit. The footprint has been reduced, and it has been all done together with the customer.
So we could be sure that it fits the customer need. It's impressive how much you can reduce energy consumption of a machine if you make it a target of an R&D project. Finally, a comment on the synergy program that we started at the end of last year, no, at the beginning of last year, at the end of the year before, December 2023. This was part of the measures that we took just right after the merger. We started implementing the synergy program this year. We focused very much on procurement activities and could reach remarkable successes, which are going to pay out in the coming years. So this is part of the cost synergies. On the sales synergies, the main sales synergies were referring to the Bumotec and Tornos parts of the company because they are operating in similar industries.
Unfortunately, they have been hit, as I explained before, by a downturn in the industry. So we have been working on this, but we are not there yet because industry made a little bit of a problem last year. But we are very optimistic that we will come into these sales synergies in a better way as soon as the luxury goods industry especially recovers. On the right-hand side, you see just two pictures. So one of it is we are now representing ourselves together at the different exhibitions. As you also see, the branding remains different, and there will be no change in the future. But you can share all kinds of costs. And the lower picture is a part of a MultiSwiss machine from Tornos that is now machined at our machining center in Chemnitz.
As you might remember, we have invested quite a lot of money there in order to produce core parts ourselves and also be able to provide this machining capacity also to the outside. And this is a good example where it has been accomplished to really cross-utilize existing capacities on the machining side in this case. And now I want to hand over to our CFO, Markus Jäger, who is going to give you an overview about the financial year 2024.
Ladies and gentlemen, it's a pleasure for me to give you a little bit more insight to our financial performance in the last year. And I have to mention, I have to stress this word again, and it's the last year we have to do that. Pro forma numbers. Sorry for that, but we have to do it because otherwise I think it would not be a really true and fair picture of what we can provide to you. As you all know, we have made a merger December 2023 between Starrag and Tornos.
Therefore, from a financial point of view, we had only one month of Tornos in our books in the financials. Now, when you go through the annual report, you will see it in the financial part, there are two columns, financial 2024, financial 2023. Please keep that in mind. It's just one month in there from Tornos. This is a true picture, true and fair picture. Also, the other one is a true and fair picture. Please don't get me wrong here.
But this gives you a little bit of a glance of what happened actually when we would have been together since the year 2020, both companies. That would have been the development. Those numbers are not audited, only the last one, 2024. You see here the development from order intake. And maybe you see in 2020, CHF 291 million. Yes, both companies. In 2019 as well, sorry, yes, in 2019 and 2020, also the economy was not so good. We had COVID and so on. And therefore, you see what happened to our intake and what happened. And this is for me the main point here what I want to stress.
You see when the economy turns around, that means from getting a headwind to getting a little bit more tailwind, this is what we would have been in the position to do or what we have been in the position to do in the past. You see also the 2023 to 2024, this is approximately 10% decline in order intake. We stressed that already 2023 to 2024 in order backlog, CHF 326 million, net sales down to CHF 494 million. And yes, the EBIT, as we could also read already this morning, declining. But I would like to show you later on that 3.1% under this economic environment is not that bad. Now, also an introduction slide here. I used it on purpose. Why?
Because half a year ago, roughly, we made a media conference about what we at the middle of the year 2024, what was our outlook, what we expected, what could happen. At that point, we had, that you can read the chart. To the left, you see two bars. I start with 2022, first half year, CHF 130 million order intake, second half year, CHF 159 million, and then the order backlog as the second bar. Now, you see in the first half year of last year, we had CHF 255 million order intake compared to CHF 263 million in the previous year. And at that point of time here, we made a statement that we thought, taking the headwind into consideration, yes, it's a difficult year, but we could end up more or less in a range like in the first half year.
Reality shows us we were wrong, quite heavily wrong. The economic recession which we are facing in Europe lasted longer than we expect. It's still lasting, and this happened to us. But nevertheless, the good thing here is you see the order backlog is still at CHF 326 million. What happened to us? That the fast-moving engines we are producing, more or less the orders for them, they are, yeah, we could not get it because the economy is down, but what we have still have bigger orders for big machines.
And we have to work them now one by one to get it out in the market. Now, let's have a little bit of deep dive into the P&L. Mr. Buyle mentioned it already. So what you see here to the left, these are our financial statements 2024, starting with CHF 494 million in sales, 2023, CHF 409 million financial statements, and pro forma when we 2023.
Now, you see here the difference in the third line from the top, CHF 70 million Tornos revenue. This is exactly one month of December 2023. So if we would just compare 2023 with 2024, we could stay here and tell you, oh, we did a great job. We have an increase of 21%. But this is not a fair picture. Therefore, we are comparing still with pro forma numbers. That's the reason. And the pro forma numbers, as you can see here, shows clearly CHF 71 million less on sales, CHF 71 million. Yes, we have to stress that. And you see also when you go to EBIT, CHF 56.9 million last year to CHF 27.5 million, but even further down to EBIT of CHF 46 million and CHF 50 million this year. Now, I can give you a short insight. We had really kind of headwind here.
Nevertheless, we have been in the position to keep our margins, gross profit margin. It's not here on the slide, but when you take your numbers and put it in your Excel sheets, you will see it immediately. We are still at around 58% gross profit margin. So we could keep the good margins. We could even slightly improve it, but this is a little bit. So when you take 58% gross profit and you lose CHF 71 million of net sales, you are missing CHF 41 million EBIT. Now, take away the CHF 46.4 million out. That would have been the result if we would not have made countermeasures. And we made countermeasures, as Mr. Buyle already mentioned. We could reduce our cost by more than CHF 10 million, approximately CHF 11 million.
When I call it net, because actually it was a little bit more, because we clearly said we believe in our future and our long-term goals are still valid. For that, we have invested also in 2024, more into research and development. That means CHF 2 million more. So actually, we would have had savings of CHF 12 million, but when you take it net. So also this year, we invested CHF 37.5 million in R&D for our future. Taking CHF 41 million, taking a cost saving CHF 10 million down, you are at EBIT. And we also made investment in CapEx of about CHF 70 million last year, CHF 7 million more than in 2023. Also for our future. For example, we just opened in 2024 a new plant in Taiwan for Tornos, giving us another 12,000 sq m of production line.
We have invested in Chemnitz, where we said critical components we have to do by our own. We produce by our own. So we have invested, and this adds another CHF 1.6 million approximately into depreciation. So you see the decline down to 15.4. If we would not have made those investments, we are convinced that they are right. You would see here 4% EBIT margin. But we are convinced it was the right thing to do so because we see a great route in front of us. Now, when you go to the non-operating result, you see here CHF 2.5 million. Yes, we sold land at Rorschacherberg, which we did not use for production and so on. Financial result with CHF 3 million below what you see in 2003 in both. Why?
We lost on top line about CHF 6 million FX, but in financial result, we had a positive impact of approximately CHF 1.5 million taxes. We are talking about here for the group, approximately 14.3%. This is our average tax rate. And last year, you see here CHF 6.6 million. We have lost carry forwards in the group of approximately CHF 60 million. And a portion of that, we said maybe we cannot capitalize and take it out into expense. Therefore, the difference between 2023 and 2024. Now, moving on, balance sheet. Just a couple of highlights here. Cash still good position, CHF 60 million, even though with this environment. And when we look at net debt, that means cash minus open bank facilities, we are this year at more or less zero. When you look exactly into the numbers in the financial report, it will tell you minus CHF 0.3 million.
Last year, we had CHF 20 million positive. So we had more cash than we have bank facilities. Now, what happened with this money? That is shown in the next line. Receivable goods and services. On the first glance, you would say, why are they increasing? Do they have problems with their accounts receivable? No, we do not have problems with our accounts receivable because there are two parts in there which we have to distinguish. On the one hand, the normal accounts receivable, which every company has, they went down by CHF 3 million to approximately CHF 46 million.
But on the other hand, because of Starrag is using the Percentage of Completion method, POC, we pre-finance some of the orders, the large orders, because normally payment terms in the range of 10 to 20 minutes, sorry, 10%-20% advance payment, 60% payment when we deliver the engines, and the rest when the customer finally approves the project. Therefore, we are going, we pre-finance that. This number increased by CHF 30 million, and therefore you see the increase here. On a net position, we have increased these pre-financing activities this year by approximately CHF 24 million compared to last year, about CHF 8 million. So here, there we needed the cash for. Inventories, you see down by CHF 60 million, still high inventory level. We don't have to talk about that. We know that and we do everything to bring them further down.
Investments in non-current assets, as I mentioned already, roughly CHF 80 million. I told you what we have done with that. When we look then at the equity ratio, still at a very high level at 57%, a little bit below what we had last year. When we now go over to the cash flow, I start here with the operating activities. Yes, there is a delta. The delta you can easily take out from the net profit. More or less, you see the same deviation down to the operating activities. Therefore, I would like to start really about some special points in here. Last year, once again, merger, which brought cash into our organization net at approximately CHF 60 million. We have made more investments this year, but you can see that about CHF 8 million. Disposal of land, I have already told you.
This was the land which we sold off for CHF 2.5 million. Gives the cash flow from investing activities, CHF 50 million net, brings us to a free cash flow of negative CHF 7 million. As I mentioned, we have made investments in our future. We covered that by increasing our borrowings. We paid last year dividends in the magnitude of approximately CHF 40 million. Net financing activities, CHF 6.8 million, and cash at the end of the year, CHF 6.7 million. You see here a gap of CHF 6.7 million to CHF 6.2 million FX differences at the end, which you will see in the finance report when you look into that. Now, more or less, last slide. Once again, I'm comparing now financial results with each other. 2024 to 2023, net profit CHF 11.9 million versus CHF 25.2 million. Last year, when we did the merger, we increased our shares by 2.1 million. So from up to 5.0 million, roughly 5 million shares.
What you see under the column 2023 was the weighted average outstanding shares. This is a calculation. I mean, we had only the merger was valid for 23 days. Therefore, this little bit odd number here of 3,493,000. Earnings per share, CHF 2.17 this year. Last year, CHF 7.21. Dividend, as already mentioned, CHF 1 proposed for this year. Last year, we paid out CHF 2.5. For the payout last year, the shares of 5,463 were eligible. Yes, of course. Therefore, the payout ratio of 54% last year, this year, it will be approximately 46%. Yeah, the share price at the end of each year, you have it here, CHF 37. PE ratio, 1,706. Net cash debt, I already mentioned to you, and return on equity at approximately 4%-10% last year. When we did the merger, we made a story.
We said we want to increase our sales on average on a long-term run by 5%. We should be in the position to achieve 8% EBIT. Payout ratio, 35%-60%. And at the moment, the PE ratio is 17.1. We are still convinced that also the first two numbers, what you see here, that we can achieve them. Thank you very much.
So what is the outlook for next year or for this year? I'm sorry. You will probably join me in agreeing that to make outlooks today is as difficult as it has ever been. We have economic issues on the table where we do not exactly know in which way they are going to develop. I think what we can say for sure is that there are no clear signs of a long-term recovery of the economy.
We have political changes in the last few weeks and months that give more insecurity into the world. This is also something that we are also affected by. What we do believe is that we have good perspectives, again, in the defense industry and also in the medium to long term, the underlying market drivers of the niches and the applications that we are in are good. If you look at energy, if you look at aerospace, if you look at medtech, these are all sectors that will develop in the long run. We are very well positioned. This is the good news, even though we have a lot of insecurity and uncertainty looking into the next year. The order backlog, as you have seen, is good. It's a solid foundation for what we can do 2025.
But what we want to do and what we have to do is we have to apply a cautious approach, a very, let's say, short-term approach to see how it is going to develop. So from today's point of view, we believe that the first half is going to be close to what it has been the last year. But then it all depends on how certain things develop. So what we are quite sure about is that defense contracts and defense orders will come in next year. The question is just when will they come and in what magnitude they will come. But it's for sure that they have to come looking at the political situation in Europe and also in the US.
The second critical factor when it comes to the second half of the year is, of course, also how the luxury goods sector is going to recover. There are also different scenarios that it's going to recover rather soon, which would mean by the end of this year or maybe in the fourth quarter of this year or probably only next year. It remains to be seen. But that is basically the bottom line why it makes forecasting and giving an outlook at the moment so difficult. I want to re-emphasize what Markus Jäger said about our long-term goals. There is absolutely no reason why we should not be able to achieve a year-on-year growth of 5% on the top line. As you have realized, we are in the project business. So we will never be able to draw a straight line and say it's five years every year.
But across a time span of 3-5 years, we should be able to achieve that. We are in the right industries. We are in the right applications. We follow megatrends and we are very well positioned there. And to reach EBIT levels higher than 8%, EBIT margin levels higher than 8%, we also believe is absolutely feasible given the good positioning that we have in the market and also given the potential that we still have inside of the company. So we are very confident of being able to reach both. And I think this is the good news for every investor looking into our share and looking for an opportunity to invest. Thank you very much. And I hand it over to you, Rose.
Okay, we have now reached the Q&A section of our conference. We would like to start by taking questions from the audience here at the SIX ConventionPoint in Zurich. After that, we will invite our online attendees to ask their questions. So please feel free to participate. Who would like to begin? I will come then with the microphone and you can. Actually, then talking here, then we have that on tape. Thank you.
Yes, Tobias Klepper from Zürcher Kantonalbank. First, just to clarify, you said outlook for the first half of 2025 would be similar to last year. Do you mean the first half of 2025 or second half on average?
The first half of 2024.
Okay. Then a question regarding aerospace. You also mentioned the backlog of all has changed a lot in composition. Can you give us a number, what we can expect in regards to large machine projects from aerospace maybe? And then how big the backlog in this segment is? And then what's the capacity you can achieve in 2025 maybe? So the backlog for large machines at the moment is close to CHF 80 million. And what was the second part of your question? What's your capacity in aerospace? You mean the production capacity? Exactly.
Production capacity, we are currently increasing. It's not sufficient yet in order to process all these orders in time. At the moment, we are still able to offer marketable delivery times for the machines, but we are looking into the subject in the mid and long term, and we think it's going to increase. So we have to adapt production capacities in order to cope with the increasing demand or what we see as an increasing demand.
Thank you. And then one last question maybe in regards to the increasing importance of America. Do you already see any impact in that regard from aerospace, from the tariffs?
No, I have been asked this question many times. I have my own opinion and there are facts. At the moment, there's a lot of talking about the tariffs. Some of them have been implemented, some of them have been announced, and then not been implemented. I think we are prepared for both. So if the tariffs come, I think we can draw from our international footprint, manufacturing footprint, to maybe try to circumvent it a little bit in a way that we try to produce machines in different places. On the other hand, for certain customers, it's not so important because they need the type of technology that we can offer, and they would also be willing to pay a higher price for that.
So we are affected by it, and it plays a certain role, but it's not prohibitive in that sense. And especially looking at the major industries that we are working in, I think the reason why we sell is not necessarily the price, but it's the technology and the relationship with the customer. And this is not so much affected by this tariff discussion.
And if it's going to last in the long term, nobody knows because we already see signs that it's harming the U.S. economy already.
Any other questions here in the room?
Maybe just to follow up on the last question and clarification. How secure are those orders that are being now, now that we have North America basically doubled and making up 20% of the order intake? Are these orders fixed? Should tariffs now arise or even export or import restrictions will come up?
Well, to everything that you can secure in terms of legal aspects, they are secured. You are never sure if they are not canceled. Every contract can be canceled, but it would really be a very, very big surprise if this happens, especially since the customers that we are working together with are very big customers. Our defense contractors are very big civil aviation companies, and it would come as a big surprise. We have talked about the tariff issues with most of them, but the reaction was a little bit similar to what I explained before. So I don't see any if the background of your question is, is that order backlog secure or not, I would say it's 100% secure.
Thank you. Could you maybe give us some color on the defense part in terms of regional split? I would assume that it's now more or less most of it is in North America. And you kind of touched it, and I think I missed the point there about how you would see the development in Europe on defense.
You are right. So the main focus of defense spending overall is clearly U.S. And this is not only related to our company. If you look at the statistics, for example, of SIPRI, you see that among the top 6 defense contractors, 5 are in the U.S.A. And we have relations with the majority of them. So also for us, the main correlation is defense and America. Europe is currently putting the act together, I would say. When Mr. Scholz announced the EUR 100 billion, I don't know what Sondervermögen means in English, but this program, we waited quite some time until it finally materialized.
Now you could see or you can see the effects. You can see increased investment activity. But the U.S. is one or two steps further in this respect. But this is something Europe is going to come this year and next year and the year after next year. So we believe defense is going to be another megatrend that is going to last for at least the next 10 years.
And just one last question, if I may. We saw the increased CapEx now for this year. Is this something that it's going to remain at this CHF 17 million level or what is your plan on investments in the future?
We have planned for this year in the budget, we have about CHF 10 million, a little bit below the level we had this year, but in line with what we have seen in 2023.
Any other questions here in the room?
Yes, sir. Johannes Baudendistel, if I would have two questions, please. First, similar to what we've heard in defense, maybe in other target markets, could you run us through the momentum in those markets? So the question specifically is, in which areas did you see more deterioration going into 2025? And there eventually you see some positive momentum in your respective target markets. And the second question is more on the cost base. And we are going into 2025 with less backlog, still sound, but less. Now, are you aiming more cost-cutting eventually?
Is there more to come, either from actions you've taken in 2024 or additional actions you take now at the beginning of the year? And can you give us then a feeling with respect to whether the break-even point with all the actions you've taken is the little bit lower? Because we've seen 2023 performance. I mean, you've already reached above 8% EBIT margin with kind of a little bit more sales, obviously a bit more sales. But is that a reference we can base as a starting point going into the midterm targets? Or is there more leverage in your cost on the cost side?
Okay. So you asked three questions. I will focus on the first. So you asked about, just to repeat, about the dynamics of the different industries and what is our view on it. So defense, I have already given you my point of view. Sticking with aerospace for a moment, we believe the mood is still good there because underlying factors are supporting it. We still see an increase of market share from European producers versus U.S. producers, and investment activity is still going on.
And we see no sign of that cooling down too much, especially also because that's what I mentioned in my presentation. In aerospace, you also see this sustainability aspect kicking in. So the new generation of civil aviation, civil aircraft is made more of carbon fiber and put lighter weight and everything. And this is usually a driver for new machine installations and for also changing material requirements. So this is good for us. We are also well positioned in the jet engine world. So all the big producers are our customers. And this is going to remain, and it's going to further increase, in my opinion, because we always have to think about Asia. And in Asia, hundreds of new airports will be built in China. So I mean, this for sure is a good place to be.
There is really no reason to think this is going to stop somehow. The energy sector, I would probably like to comment on. So the energy sector is something that is partially politically driven. Especially the change into renewable energy and alternative energies has reached a stage only recently where it is self-sufficient in terms of cost. For the renewable energy, China is an important factor because all the major producers of wind power generators are located in China. China has, in fact, overinvested its capacity in wind power, which is something unbelievable for Europeans because we keep talking about this and the Chinese keep investing in it. Eventually, the Five-Year Plan foresees another increase in wind power installations per year. And we are also there. We are working together with the most important players in the field.
So if it gains momentum in the future, we will be well positioned. The other part is the fossil energy production, which has had a certain revival in the U.S. recently, as you can imagine. Whether that is going to persist in the long run is a little bit unclear, but energy in general is also a megatrend. It's something that is going to be more in the future. And independent of which kind of energy production we are talking about, I think this is also something I would expect to persist.
Maybe the last part I would comment on is MedTech. So MedTech is something that was moved a little bit sideways last year. And we expect it to remain about the same level again in the long run. And maybe this is even going to happen this year. I don't know. We also see an increase there. So these are the areas where we see most where we are most confident about. The ones, the critical factor is really luxury goods, as I explained before, which will determine a lot, especially looking in the second half of the year.
If I may insist on transportation, I was surprised to see transportation relatively well. If I have a look at the target markets, it's difficult to understand because they have difficulties in their respective markets, all of them. What was the driver in 2024? And is that something that could pick up in terms of momentum?
Well, it's a good example, transportation, because it highlights again the structure of our company, I think, which Markus Jäger also explained a little bit. So our order backlog, the kind of projects that we sell, is a mix of a big number of smaller projects and some big projects. And transportation not only includes the automotive industry, it also includes, for example, the naval industry, and it also contains a part of defense there. So one of the drivers of transportation in the last year certainly were also defense contracts. It's something you might not think about in the first place. But this probably brings the two ends together. Markus?
Thank you for your question with regard to the cost situation. Maybe I should have covered that during my speech. But when we look at it from where did we start? We showed you pro forma numbers, 2023. Our cost basis, total cost, CHF 270 million. Out of the CHF 270 million, we have approximately CHF 190 million personnel expenses. Other costs, roughly CHF 80 million.
Last year, we have been in the position to reduce that by approximately CHF 10 million. More or less 50/50 between personnel expenses and operational expenses. Now, we showed it also in our slides. We have a seasonal business. I really would like to invite you to one of our shop floors to see our engines. Not only the big one, which are amazing, but also the small ones. Why do I address that? To make them, to assemble them, we need very skilled people. This is the backbone of this company, skilled people. So can we just lay the people off? No, we can't. We need them because we know it's a cyclical business and we'll come back. We want to be prepared when it comes back. We want to be the first one to deliver new products. What I want to say with that is very easy.
Yes, we are playing the game with short-time work. This is normal in this cyclical business. We try to do it by our best. I mentioned in my speech before that we thought last year that the economy will come back at the end of the year. It didn't. Actually, we started to decrease our cost basis in the second half of the year. And we could do it by CHF 10 million. This year, we are already prepared for that. We have short-time work in Moutier. We have short-time work in Vuadens. We will start short-time work in Chemnitz. So we are prepared to go down with the cost basis. And you can be assured we are looking at average Swiss franc, you call it euro, dollar, whatever, on what we are spending it. But we are really reducing our costs.
But we need our people because if the cycle goes in the other way, if we have tailwind, then we need everybody to be on the shop floor to assemble those machines. And as I mentioned, I invite you to see what they are doing, these machines. We have such a high position in there. We cannot just hire everybody from the street or a passing stranger. We need skilled people. We have to keep them on our side. And therefore, we are really using wherever possible short-time work. But we do not want a layoff of people, which we need later on.
Okay, thank you. Any more questions in the room? I'll just go first to this gentleman. Okay.
Andreas Meier, Finanz und Wirtschaft. And also a question about production. You have many different production sites, very specialized ones. How is the capacity utilization in all these different production sites? I mean, I think some of them are very high and others are very low. And are there possibilities that you can maybe more integrate this work so you can use people for different machines to work at different machines, at the production of different machines or something like that? Thank you.
Yeah. Thank you. Very, very good, relevant question. So it is, as you explained, the capacity utilization is very different if you look at the different sites. Again, mainly depending on what kind of industry they are working for. So we have sites that are fully booked and that are overbooked and even going into next year. We have other sites that Markus mentioned before where we had to implement short time. Of course, we try to equalize. So we have skilled people everywhere. So we try to take the people where there is short-time work to the places where we have undercapacity, and we try to equalize this. We also include, of course, the global footprint that we have in these considerations.
Which ones have a very high capacity utilization right now? Well, all the ones that are working, especially for aerospace industry. So the site in Rorschacherberg is well filled. Talking about Switzerland, the German sites in Bielefeld. So all the sites that are producing the large part machines are very well filled.
The ones that are more reliant on luxury goods are underutilized, as Markus already outlined. So the sites in Moutier and in Vuadens could use more work at the moment. And that's about the utilization that we have.
I just had a spontaneous follow-up question. You mentioned that the cost cuts are about CHF 10 million this year. If I remember correctly, in the merger proposal, we also talked about cost synergies of CHF 10 million. My question is now, are these on top of that, or is this an overlap of these cost synergies? Or in other words, what is the potential of more costs or efficiency gains that you can achieve?
We are looking into that. What we have done in last year, 2024, we have already achieved quite good synergies effective combining our purchasing force, have more purchasing power. So this is running quite well. We are looking, but also in further activities to reduce our costs with that, especially when you look at overhead cost.
Maybe to add on it. So when I mentioned before on the cost synergies, the procurement part. So a lot of these measures have been implemented this year, but we will see the effect. How do I say this year? Last year. The effects are going to be seen this year and in the consecutive years. So the cost cutting of last year was an overlap, but to a lesser extent coming out of synergies. The synergies will be deployed as effects from 2025 ongoing, as we have already announced back in 2023. So we are sticking to that plan. Any further questions here in the room?
Okay.
So thank you for your insightful questions and your participation. At this point, we would like to open the floor to our online attendees. I will now turn it over to the operator to facilitate any kind of online questions. Operator, please go ahead.
Anyone who wishes to ask a question may press star and one on their telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Questioners on the phone are requested to disable the loudspeaker mode and eventually turn off the volume from the webcast while asking a question. Webcast viewers may submit their questions in writing via the relevant field. Once again, to ask a question, please press star and one on your telephone. There are no questions from the phone at this time. I would now like to turn the conference back over to the speakers for any questions from the web.
Okay. Thank you very much. Okay, so we have now reached the end of the conference. I would like to sincerely thank everyone, both here in the room and those who are joining us online for your time and engagement today. For those attending us here in the SIX ConventionPoint in Zurich, I warmly invite you to join us for an apéro in the front.