Morning, ladies and gentlemen. I want to welcome you to the Media and Analyst Conference of StarragTornos Group, on the occasion of the publication of our half-year report 2024, which has taken place this morning. At the very beginning, I want to introduce the presenters of this conference. I start with myself, so my name is Martin Buyle. I am CEO of StarragTornos Group, and I am in my position since the first of June of this year. Together with me is Stéphane Pittet, Group CFO, and together we will guide you through the details of the last six months, as you will see in the presentation that is shown on the screen at the moment. For the participants who participate via telephone, you can find the same document on our website, www.starragtoronos.com, and then go to Publications and then Presentations.
At the end of my presentation, of course, you have the opportunity to ask a question, and we are pleased to answer them. I will now start with my presentation, and I switch to page number three, where you see an overview of the structure of today's presentation. So I will start off with giving an overview on the business. Then I will hand over to Stefan, who will comment on the financial figures of the last 6 months, and at the end, I will come back and give an outlook for the remainder of the year 2024.
So now I flip to page number five, and, as a summary, the first half year can be summarized as six months with a stable order intake, with a decline in sales and with a corresponding decline in EBIT. So going back to order intake, we had a good increase in order intake in the aerospace target market, especially in commercial aerospace. I will comment on that a little later. We have also brought to the market two new machines in the first six months. So one of them is the Swiss XT from Tornos, which is a nine-axis Swiss-type lathe, which is designed for complex parts for medical applications that require high productivity and difficult-to-machine materials.
On the Starrag side, we introduced a new vertical turning machine that is designed especially for target markets, energy and renewable, but also for MRO, that means jet engine overhaul. It's a new standard in terms of environmental compatibility, and of course, it's a very competitive product. We have also opened in March 2024 the new plant in Taiwan, and not to forget, we have also put on track a synergy program at the beginning of the year in order to benefit from the recently done merger between Starrag and Tornos. So the measures are on track. We are keeping track of them, and as promised, we are confident to see the first effects in the year 2025.
On page six, you see, the summary of the key figures for the first 6 months of this year, and I'm mainly referring now to the right columns, which are the pro forma figures, when I do comparisons, to the last year. So coming again to order intake, as you see, we only had a slight decrease of about 3%, which is quite remarkable on the current economic situations. It's a differentiated view, which I'm going to outline on the next 2 slides. So there were ups and downs, but I'm going to explain that a little later. On the net sales line, you see a decrease of about 14% from CHF 296 million in 2023 to about CHF 255 million this year.
This is a consequence of mainly two things. One of them is a slowdown, especially in the luxury goods segment, but also in other segments that are adjacent to it. And the second effect that can be seen here is an effect that we have from the large machines, where we had a high turnover last year, and the turnover is a little slower, but this is a timing effect because it's long-term projects and it will come back at a later point. So this is just a shift into the future, so to speak. Going down to EBIT, to the operational result, this is going back from about CHF 23 million in 2023 to about CHF 9.5 million in the first six months of this year.
This, unfortunately, is a consequence of a lower net sales, and in the EBIT portion of 2024, there is a one-time effect included, which Stéphane will explain a little later. Finally, order backlog has increased from last year. This is mainly due to the fact that the aerospace segment went well, and we got some long-term orders for aerospace applications, which do not immediately turn into net sales, so that means a build-up in order backlogs. Now, on page 7, you see a split of order intake according to the different target markets. Again, the bottom line is a decline of about 3%. If you look at the different target markets, the development was quite different... So again, as explained, aerospace went up by about 70% compared to 2023.
The main driver here was commercial aerospace, and most of it was to be found in structural parts. So that, that sector certainly is booming, and we can participate well because we are very well positioned in this, in this industry. The biggest downturn we have seen in the first six months of this year was in luxury goods. And of course, since our brands, Bumotec and Tornos, are mainly working in this, in this field, it had an effect on them. And then, transportation, as you can see, is a line which also went back from last year to this year. This is mostly attributable to a general slowdown in economy, especially in Europe, where this industry is a kind of an indicator for it.
I now move on to slide number eight, where you can see a geographic split of the order intake in the first six months, which resembles a little bit the development in the different target markets. So as you see, we have a slight decline in Europe of about 3%, of about 5%, I'm sorry. It remains to be the most important market for StarragTornos Group. Included in these 5% is a sharper decline in Switzerland, and as you might already think, this has a high correlation with the luxury goods sector, of course. It means, on the other hand, that in the rest of Europe, business went quite well. This is again attributable to the aerospace segment mainly.
The same holds true for the good development in the Americas, where we could also benefit from an upbeat industry for aircraft. Last but not least, on page nine, I show a split between machine sales and service sales, so we are now moving on from order intake to sales. And in net sales, you see, not very surprisingly, that machine sales went down by 16% and contribute most of the decline in the overall decline in sales of about 14%. The reasons I have already given, so it's a decline mainly in the luxury goods segment.
And in service, we also had a smaller decline from CHF 66 million in 2023 to CHF 63 million in 2024, which is partly attributable also to the fact that machinery is not fully utilized at the moment, for the same reasons I have just mentioned, and that means that less service work is needed. So now I'm closing the first part of my speech, and I want to hand over now to Stéphane Pittet, who is going to comment on the financial figures of the first six months.
Okay. So concerning the figure first, at a glance, of the overall figures, please keep in mind, these figures are displayed in terms of pro forma view, meaning that we cumulate the full year of both historical groups, Starrag and Tornos, for the past. So if you take the years 2020 to 2023, it's an addition of the Tornos Group and the Starrag Group, and 2024 displays the figures of StarragTornos Group. If you want to have the figures of the financial report, you will find it in our report, where we compare Starrag 2023 and the half year of StarragTornos for 2024. In terms of order entry, the post-COVID years of 2021 and 2022 were quite exceptional.
After a slight slowdown, we see in 2024 the impact of the economic context. However, we are on a good way to pass CHF 500 million for the total year, which is a good performance in the actual economic context. We remain with a very strong backlog, allowing us to see the future with serenity, with this CHF 350 million. Related to our sales performance, we had last year a good production load for all factories, placing the bar very high. The current economic headwind on the market, especially for the smaller machines, affects our performance in sales as well as our profitability for the first half year, with respectively CHF 255 million in sales, and an EBIT of CHF 9.5 million, or 3.7% of the net sales.
So moving to the more detailed overview, the order backlog, the situation, this situation is an outcome of a contrasted reality. We have areas like aerospace or energy, which are overperforming, while our machines, our smaller machines, are more affected by the downturn, as said before, in luxury or med tech industries. They face clearly now a typical low cycle, which is familiar in our industry. We also know that such cycles are made to be reverted within a reasonable timeframe. Still, with an order entry slightly higher than the sales, we have been able to even increase our backlogs since the beginning of the year. And this high level back orders of backlogs ensures us to limit the consequences of actual economic, economical insecurity, guaranteeing a certain level of activity in our various locations and providing a secured source of income.
Concerning the sales, the order entry has been overweighted with large-sized machines having a longer production lead time. Therefore, we were not able to turn immediately the orders into turnover. The adverse circumstances in specific industries impact directly the sales evolution. Fortunately, the situation on the currency market has brought a quite stable evolution for the currency mainly handled in our group. This means that our sales have been affected only to a limited extent by the exchange rates developments. Please keep in mind that we are still presenting these pro forma figures here, reflecting the full year of Starrag and Tornos committed for 2023, and compared to the StarragTornos 2024. Moving to the income statement, although our sales are decreasing, the gross margin is in percentage maintained and even slightly improved.
The measures taken to reduce the personnel and operating costs are only marginally reflected in the first half of the year. They should be much more visible in the second half. With a heavy fixed cost structure, which is unavoidable in our industry, the downturn in sales has a direct impact on the result and on our bottom line, shrinking our EBIT down to CHF 9.5 million, meaning 3.7% of our net sales. Now, moving to the balance sheet. The sharp evolution of our working capital has generated an increase in our current debt. The situation is partially linked with an increase of our inventory for finished goods, as well as in receivables.
The inventory of finished goods, even if higher than wanted, is at least a chance when entering into the next upcycle, to take the opportunity to move fast, using it as a potential for short-term sales. However, we cannot be satisfied with the global inventory evolution, and we have taken stringent measures throughout the world organization in order to reverse the trend and reduce our current debts. The equity remains very solid at the level of 656% of the balance sheet, reflecting our healthy balance sheets. By the way, please allow me to remind you that our current market cap remains at a low level when compared to their equity value. So our equity remains under the, above the market cap, sorry. Coming to more detailed overview on the, on the EBIT.
As you can see on the chart, most of the impact of the reduction of the EBIT comes from the reduction of our net sales. We still have to point out, as stated before, two extraordinary impacts. First, with the merger, we have seen that the current methodology for the inventory depreciation was not adapted to high cyclical sales and material consumption. Therefore, in order to ensure a stable and reliable depreciation value for the future, a revision of the methodology was necessary. This change in our accounting standard has generated a one-time positive impact of CHF 4.9 million in our gross margin and in our bottom line.
At the opposite, when Tornos Holding was absorbed into Starrag Group Holding, Starrag Group, sorry, Starrag Group, on December seven last year, we had to book a markup for real estate and inventory transferred over the transaction. You can find the detail on our website in the document referring to the purchase price allocation. This markup was never booked anywhere as an income, but now has to be depreciated over our PNL. Largest impact has to be booked within the current year. We'll still have CHF 2 million to be booked in the second half of the year, while we had CHF 2.9 million in total. As you see, these CHF 2.5 million in our gross margin and CHF 0.5 million in our operating expenses.
It will be a total of CHF 4.9 million for the total year, and for the following years, the impact will be much lower with decreasing step by step, and starting with CHF 800,000 four years. So much lower compared to the CHF 4.9 million this year. Moving to the free cash flow, the increase of working capital, mainly related to the inventory, has strongly impacted the cash flow, as you, as stated before. We have taken measures to it in order to revert this trend and to reduce our current liabilities. Investment in fixed assets are mainly linked with the completion of the building of our factory in Taiwan, and with this, is the installation of one of our large machines in Chemist for the production of own, or of own parts.
So in a nutshell, for the financial results, we can summarize our half year report with the following key elements: We are resisting very well with the order intake. We deplore, and we have to report, a decrease in sales of -13.8%, with an impact on the EBIT of 59.3%. We have an extraordinary net impact, net of +CHF 2 million, that will disappear in the second half of the year, and we have a negative free cash flow to be at least partially reverted in the second half of the year. And last but not least, we remain with a very strong equity ratio with this 56%. Give the word back to Martin for the outlook.
Thank you, Stéphane. So we are on page 20 now for the outlook 2024. So how do we see the rest of the year evolving? Of course, we are surrounded at the moment by a challenging, and more than ever, unpredictable global economic environment. We have crisis in many places of the world. We have upcoming elections in the U.S., with unclear outcome, and also with unclear impact on what it means for the economy, in general, and what it means for us as a company. We expect the weakening demand in some of the target markets, to persist until the end of the year. So at the moment, there are no signs yet for clearing, the sky clears up.
As a consequence, we think that order intake for the 2024 financial year will be comparable to 2023. Depending, of course, as I said, how quickly the economic situation will revert and hopefully moves up again. For net sales and EBIT margin, we see the second half pretty similar to the first half. So seen from today's point of view, we expect similar results and similar net sales to the first half. Having said that, of course, our medium and long-term targets remain unchanged. We still have the target to achieve 5% top line growth year-on-year.
We still have the target to reach 8% EBIT margin across the whole company, and we are still confident, given although the economic environment is adverse at the moment, that we can reach this, and we are pursuing this goal as hard as ever. And of course, coming back to synergies, the joint course of the two companies, the merged companies, which have now become StarragTornos. It offers opportunities on many sides that we have already outlined, also on the occasion of the merger itself, so where we see trajectories for synergies. So last but not least, on page 21, I want to give you a short outlook on the next dates.
So on January 30, 2025, we will, as usual, give a first information about the year 2024, with an emphasis on order intake and turnover. On the 14th of March, we will publish the annual report 2024, on the occasion of a physical media and analyst conference in Zurich. The Annual General Assembly will take place on the 17th of April in Rorschach. Herewith, I want to finalize our presentation on the half-year result, 2024, and now I want to give the opportunity to ask questions.
We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch tone 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 use the handset while asking a question. Anyone who has a question may press star and one at this time. Our first question comes from Tobias Badtke with DZ Bank. Please go ahead.
Good morning. Tobias Badtke, DZ Bank. I have two quick questions on the outlook for the second half of the year. First, regarding sales and EBIT, you specified similar levels to the first half, but considering the one-off positively impacting the result, I'm wondering, do you expect to set off the recurring negative effect from the PPA to be offset by savings you specified earlier? Then to my second question on working capital, could you elaborate the measures you are taking? And if you're already expecting an effect in the second half of the year, and maybe by how much, if you can give us a short guidance. Thank you.
Okay. So for the, the first question, of course, we have these CHF 2 million, which will affect us, which are extraordinary impact. But as we have also stated, we have taken quite a lot of measures to reduce the cost. And, this measure we didn't impact the first half, so we expected, so, an additional impact there. So it's, it's always difficult, to, to foresee, and we don't know how the market evolves. Of course, everything happens first with the sales, as usual in these, things, but, we don't, we think, under actual circumstances, that we should be able to come close to a compensation of this impact.
So, concerning the second question, of course, we have taken measures, as we are in a long cycle industry. It's not so easy when you act on the purchasing, reduce the purchasing and act on the inventory to see immediate measures. But yes, with the measures taken in the first half, we expect to see already an impact on the second half. Now, to size it exactly, it's quite difficult because we have also quite a lot of finished product, and depending on the rebound of the demand, if we see already a rebound of the market at the end of the fourth quarter, it may impact the inventory.
We are quite careful in the expectation, and we don't dare putting a figure there.
Perfect. Thank you.
As a reminder, if you wish to register for a question, you may press star and one. Our next question comes from Charlie Fenderbach in AWP. Please go ahead.
Good morning, gentlemen. I'm not quite sure how to read your outlook for the second half exactly. You said net sales and EBIT margin on the same level or similar to the first half. Does this mean that in the full year, is to be expected that sales will be in the mid-teens, lower, and that the EBIT margin will stay below 4%? Is this about correct?
Yes. So the idea is, our outlook is that the second half is developing or evolving itself, similar to the first half. So we expect a similar level of sales and also a similar level of EBIT, which then results also in a similar level of profitability.
Okay. Thank you very much.
Once again, if you wish to register for a question, you may press star and one. Ladies and gentlemen, there are no more questions over the phone. Back over to the management for any closing remarks.
Okay, my closing remark is, I want to thank you, thank all of you on the phone and also via-