Ladies and gentlemen, welcome to Sulzer's Q3 Conference Call. I am Alessandro, the conference call Operator. I would like to remind you that all participants will be in listen-only mode, and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Mr. Christoph Ladner, Head of Investor Relations. Please go ahead, Sir.
Thank you, Alessandro. Good morning and welcome to Sulzer's Q3 Conference Call. Today with me is our CEO, Greg Poux-Guillaume, and our CFO, Jill Lee. For this call, we have prepared a presentation, which you can find on our homepage. As always, I want to draw your attention on the safe harbor statement on slide number two. The call may contain forward-looking statements containing risks and uncertainties. These statements are subject to change based on known or unknown risks and various other factors, which could cause the actual results or performance to differ materially from the statements made in the call. Having said that, I hand now over to Greg for the presentation. Thereafter, you have the opportunity to ask questions. Please, Greg.
Thanks, Christoph. Good morning, everybody. Today is Q3 results, and it's order intake only as always. I'll do most of the talking, but we've tried to address in the presentation some other P&L and performance elements that could be helpful to you at a time of COVID-19 when things are a bit harder to project. Jill Lee is with me, and we'll be happy to take your questions on anything you want afterwards. Let's get started. For the first nine months of the year, our order intake was down 3.6% organically to CHF 2.6 billion. Foreign exchange had a negative impact of CHF 185 million year to date and CHF 60 million in Q3. ForEx continued to be very significantly negative for us because of the strong Swiss franc. Keep in mind, it's mostly translation because we're naturally hedged.
We've got our operations that are a pretty good match for where our revenues are in terms of cost base. In our Pumps Equipment and Rotating Equipment Services divisions, project shifts and site access restrictions made July and August rather soft months. We think this was the bottom, and both rebounded in September. We believe that Q4 is going to confirm this. In Chemtech, after trailing our strong 2019 performance in the first half of the year by about 12%, we had a flat Q3 year-on-year. We saw commercial activities picking up towards the end of Q3, and our funnel tells us that should continue. In Applicator Systems, the rebound that we saw in June and July picked up faster than anticipated, with August and September actually above 2019 levels in all applicator segments: adhesives, dental, beauty. Some of that was due to restocking.
There was a little bit of an effect on market reopening. It's hard to differentiate what was restocking and what wasn't. Essentially, our end markets reopened, and we are well ahead of the recovery curves we presented to you in July for Applicator Systems. While the pandemic is still impacting our lives, all our sites are currently operating, although we have some limitations in India. We're probably operating at something like 85% of capacity in India. We are on track with our cost takeout programs. We said we'd squeeze our OPEX by CHF 60 million in 2020. We reported CHF 21 million in H1. At the end of September, we are at CHF 45 million, so we're well on our way to achieving our OPEX squeeze for the year. We're also on track with the structural cost takeout in our energy-related activities. Actually, we're probably a bit ahead of schedule on this.
We expect CHF 70 million of recurring savings, as you know, in total. The majority of that will be felt in 2021. Non-recurring costs of around CHF 80 million related to these structural changes will be booked this year. Our free cash flow generation continues to be well above last year. We were ahead of last year by CHF 45 million after six months. We're now ahead by more than CHF 100 million versus last year after nine months. We can expect that we'll be significantly above the full year free cash flow at the end of this year. We'll be significantly above last year's full year free cash flow at the end of this year. I'm sorry. Finally, we closed the acquisition of Haselmeier at the end of the quarter.
On October 1st was the close, and I'll come to this strategically important acquisition later in the presentation. Let's go to the divisions. Pumps Equipment on slide five. You see that our energy business, that includes oil and gas and power, was down 36% in Q3. We were not particularly worried about that. As you know, we had a very strong start to the year where we were well above the market, and I think we were something like 35% up in Q2, despite the fact that the market was 25% down. What's happening is that we're catching up with the market as the countries that performed really well for us in Q2, like Saudi Arabia, Brazil, and China, also slowed down in energy spending.
Part of the effect is also that we launched our cost-cutting early, and that gives us the opportunity to remain very disciplined on pricing. What we're seeing is that we are increasing our margin on order intake by 80 basis points year -to -date. We favor quality over quantity as we have a high order backlog after this great H1 that I've just alluded to, and the restructuring, as I said, is ahead of plan. In industry, we were only slightly below last year's Q3. I think we were - 2% versus Q3 last year. Water was up sequentially, but down 6% year-on-year on fewer desalination projects. The core municipal water waste markets continues to be solid, and as you know, that's what this business is about.
I'm sure you also recall that we have these lumpy water infrastructure, mostly desalination orders that come in here and there, and it doesn't create an absorption issue for us because these are manufactured in the same factories as the energy pumps. It's more of an add-on, and because it's lumpy, sometimes it happens in a quarter, sometimes it happens in another quarter, and that moves the numbers around. But the main message is that water is strong and the core municipal water market continues to be solid. From a regional perspective, if we look at pumps equipment in Q3, Europe, Middle East, and Africa held up well at -3% year-on-year. Asia Pacific was down 11%, but China was up 18% and the Americas were down by 34%. Let's move to Rotating Equipment Services on page six.
Our service orders were down 7.1% year-on-year in Q3, mostly on a soft July, but we have already seen a re-acceleration in August and September. The division had a significant negative ForEx impact of CHF 22 million in Q3 and CHF 68 million year-to-date. The same is also true for the other divisions, as I mentioned. We also had a high baseline in Q3 in 2019. In Q3 2019, we booked larger gas turbine orders and that boosted the baseline, hence the unfavorable comparison. In Q3 this year, we also felt the impact of Hurricane Laura, which made landfall between Houston and New Orleans at the end of August, and that is actually where we have a lot of our service operations in the U.S. That was an impact for us for a few days.
More importantly, continued site access restrictions driven by the pandemic shifted planned activities and outages to the right on the time axis. Some of that came back in September, so we're optimistic for the rest of the year. Some things will slip into 2021, but we still expect RES, Rotating Equipment Services, organically to be up for the full year despite the pandemic, demonstrating once again the resilience of our model. If we look at the regions for RES, we saw organic growth year -to -date in Asia Pacific and the Americas and a flat development in Europe, Middle East, and Africa. Let's move to Chemtech on page seven. After a few difficult months, Q3 was flat organically year-on-year in Chemtech. The Tower Field Services business was still negative due to the continued site access restrictions. As its name indicates, these are service activities that happen on customer sites.
No site access means you shift the outages. That'll come back. The separation technology business was up with successes in the newly created bio-based and renewable technologies group. We've always had those activities, but we formed them into a group and we'll be following and probably disclosing those numbers in terms of activity development in bio-based and renewable technologies. That's a market that's currently buoyant, and I think this will continue. We were also driven by the chemical market, where our orders were up 6% in chemicals. Regionally, China continued to set the pace, but the rest of Asia is also coming back as well. The strong September orders and the pipeline visibility we have make us optimistic for the rest of the year.
Also noteworthy, we closed a new financing round for a company called Worn Again, which is a textile recycling technology venture that we have in partnership with H&M. H&M, the fashion retailer, and ourselves have together more than 50% control of that company, and it's a solvent-based technology to recycle textile into fibers that can be used for new textile again. It's very exciting. The technology is working well in the lab, and we are hedging towards a pilot plant with H&M. Let's move to Applicator Systems on page eight. After the market stalled in April and May on lockdowns, as you recall, we've seen a progressive pickup every month since June. Every month has been up sequentially. August and September were actually above 2019 levels on continuing market reopenings and some restocking, as I previously mentioned.
Overall, Q3 orders were more than twice the orders of Q2 2020 and only 2.9% below Q3 2019. August and September were higher than 2019. July was still below and overall, only 2.9% below Q3 2019. Beauty and adhesives were already back to 2019 levels in Q3. Dental will take a little bit longer, although in Q3 it was at 90% of the 2019 level. All very positive signs for the rebound and re-acceleration of the Applicator Systems markets and therefore our activities. In Q3, we acquired Haselmeier to build the healthcare and medical device leg of APS. As I will detail on the next slide, we now have, including our existing medmix business, a CHF 50 million revenue medical device platform that has the potential to more than double over the next four - five years.
Let's get into that briefly before we conclude this presentation. On slide 10, you see the reminder of what we said we'd do in 2019. We said that we were in applicators and adhesives, we were in dental, we were in beauty. We wanted to build a leading market position in medical. Medical being mostly drug device delivery products. It's mostly pharma oriented, but not only. We also do things like tissue repair devices and bone repair applicator devices. What we have in Applicator Systems as a model, once again, for those of you who are less familiar with that business, is that APS addresses distinct technology-intensive niche markets through a shared industrial base. All APS segments develop handheld plastic injection molded applicators for sensitive applications.
Each segment is independent in its product development, sales, and marketing, and scale is created through the mutualization of intellectual property and industrial resources, shared factories, joint procurement, and the likes. That's the APS model, and it's worked quite well to date. If I go to the next page, no page number, but that's page 11. Haselmeier is, we believe, in a sweet spot for growth. It's a very strong company in injector pens for hormonal treatments like fertility, growth disorders, and osteoporosis. The market for this treatment is driven by long-term mega trend such as population growth and aging. Add to that the fact that more and more drugs like biologics and biosimilars have complex active substances that need to be injected. Together with the trend for self-medication, this drives the demand for pen and auto-injectors.
We see that market growing something like 5%-10% per year and more actually in some segments. If we have specifically a look at Haselmeier on the next page, page 12. This is a short spotlight on D-Flex, which is the new Haselmeier product pen platform. D-Flex is something that was launched recently. It's gotten good traction commercially in the market, and I'll focus on what makes D-Flex unique. Orphan drugs for rare diseases necessitate small to mid-size volume injectors, calling for flexible platforms. Haselmeier has developed this platform with D-Flex. The IP-protected D-Flex pen platform works for fixed or variable dosage and allows manual multiple injections with a single pen. It can be easily adapted to different requirements and allows connectivity and smart data management.
The flexibility of the D-Flex platform does not only offer great opportunities to develop customized solutions for clinical studies, but will also help patients track injections and share data with their doctors to increase efficiency of the therapy. As you see, this is squarely in line with what's needed in today's environment, where people are potentially less mobile, have less access to their doctor, and will increasingly rely on self-medication or at least self-injections. On the next page, page 13, the ambition for Haselmeier. Where do we see this business going? It brings certain things to us, like IP and pen drug delivery systems, a clean room expertise and environments, and a growing number of pharma customers.
What we bring as Applicator Systems to Haselmeier is this industrial base, which we can mutualize, and high volume and injection molding, which can also be used as a supplier to Haselmeier, and also financial firepower for growth. In the past, Haselmeier was a family-owned business, and it was capital restricted. It had a tendency to limit its volumes and global development because it was constrained in what it can invest at a capital level. We will extend the business internationally, and we'll complement Haselmeier with our scale and our expertise in high volume, high precision injection molding and assembly. As I said, Haselmeier brings us this IP, which is unique because not many companies in this space have their own IP. A lot of companies that you know are actually using the pharma company's IPs and therefore are more dependent.
Haselmeier is involved in a fast-growing number of pharma customers' projects. What's our ambition? Our ambition for Haselmeier is to more than double the size of the business from EUR 35 million in 2019 to about EUR 90 million in 2025, and we'll do that while we take the EBITDA margin from 15% - 30%. Lots of exciting prospects for Haselmeier. Now let's go to the summary and the outlook to wrap up this presentation. Our orders bottomed over the summer and re-accelerated in September. We expect that recovery to continue in Q4. Applicator Systems has recovered faster than anticipated, with August and September already above last year, and the acquisition of Haselmeier adds an important new segment to Applicator Systems. All positive in terms of developments and boding well for the rest of the year. What do we think about the rest of the year?
We expect orders to be down 3%-4% organically on a continuing rebound in Q4. There could be some impact to lockdowns if they accelerate in businesses like beauty, for example, if beauty retailers shut down. As you saw from what was announced over the last few days, there's a partial lockdown in Germany, but the retailers remain open. There's a partial lockdown in France, but some retailers are closed, some retailers remain open. It's a mixed bag of things, but overall, we believe that order intake should be down 3%-4% organically for the full year. We believe that sales should be down for the full year by around 5%.
Most of our sales for the rest of the year are already in our backlog. We have pretty high visibility on this. Therefore, we have high visibility on our operational profitability, which we expect to be near the middle of the 8.5%-9% range that we previously indicated to you. For 2021, we continue to expect our operational profitability to rebound towards the pre-pandemic levels that we had. On those words, Jill and I will now take your 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 entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use only hand set while asking your question. Anyone who has a question may press star and one at this time. The first question comes from Patrick Rafaisz from UBS. Please go ahead.
Thank you. Good morning, everyone. A few questions, please. The first one would be around the order trends going into October and what you're expecting for November and December. Do you think that this will be rather flat as implied by your guidance, or will there be maybe more volatility in the monthly order intake? The second question would be around, maybe even not just for this year, but more midterm organic growth. Performance year -to -date here, and you did say that you expect to end the year significantly up versus last year. What's your take on Q4 here with the cash collections, et cetera? You think Q4 will again be ahead of last year, or will there be maybe a normalization? Thank you.
Okay. Thanks, Patrick. I'll take the first two questions, and Jill will answer the free cash flow question. The trend in orders, when we project the last few months of the year based on what we saw at the end of the summer and in September and in October, we probably would have had a tendency to be a bit more bullish. We're straddling the fence in a way. The news over the last few days in terms of increased lockdowns made us think about how we could dampen that a little bit to introduce also some element of caution. Where we came out is we came out with something that says essentially flat, as you said, in Q4. The momentum that we have up till now has been better than that. What's really hard to predict is the impact of increased lockdowns.
As you recall from Q2, the lockdowns didn't have a whole lot of impact on most of our businesses because these are essential services/infrastructure businesses, water, energy. The industry spend continues despite the lockdowns because factories are still operating. In Q2, we had an impact on dental because dentists were closed and on beauty because the beauty retailers were closed. Well, it doesn't look like the dentists are going to close this time around. I think this is something that will continue in all countries. It looks like there might be some impact on retail. Certainly in France, it sounds like there's going to be some impact on retail for at least two weeks and maybe a month. It was just trying to find the balance in all of that so that we wouldn't betray the momentum that we're seeing.
At the same time, we wouldn't come across as delusional and not in tune with what's happening in the world. It's not a great answer, but that's the best I can explain at this point. If I look at your second question, what's the midterm guidance on PE and will we sacrifice growth for margin? At this point, we are sacrificing growth for margin. We could have done better in Q3, but we chose to stick to our guns in terms of pricing to make sure that we continued building a backlog at a good margin level. It's important because I think we've made a lot of strides in that business in terms of improving the operational execution of that business and improving the commercial discipline of that business. We've also resized the business, and we're ahead of the market in terms of resizing the business.
If we don't use that opportunity to make sure that we maintain the right level of backlog, I think it'd be a missed opportunity. If you try to project that further out, despite the fact that we're closing factories and we're taking theoretical capacity out, we continue to debottleneck our business. I'm very comfortable that if the market rebounded, we could rebound our volumes also without rebuilding factories or without adding machines or without capital investment, essentially. What we're really doing is we're absorbing the downwards force of the market currently by aggressive and anticipated cost out, and we're building the operational leverage that will benefit us when the market rebounds. We do think that the market and energy will rebound probably towards the later part of 2021. That's the thinking on that.
The final point on this is that keep in mind that in pumps, our energy business is dilutive, and therefore, it really is a question of how do we continue to maintain the right level of business in this environment. What I believe we'll see is that we'll see that pumps equipment overall will continue to improve its margin overall as a business. I expect that despite the downwards force in pumps equipment, that you will see because of the cost takeout, and therefore that mitigation, that you'll see the margin of pumps equipment continuing to go up. We'll talk some more about that next year when the clouds dissipate and we are able to give you a little bit more visibility. The short answer is that the improvement story in pumps equipment continues even during the pandemic and beyond. Jill, free cash flow?
Yes. On the free cash flow, we have very strong free cash flow taking payoffs from our very tight control and management of the net working capital. Already last year, if you recall, we have taken activities to improve on our inventory management, on our collections and supply chain. What we see this year is we are able to continue to progress on that front. That's the reason why we've seen two development, one basically our net working capital improving, and at the same time it is a smoother curve than we had in the past. All in all, what we have seen is a continuous improvement of free cash flow quarter -on -quarter. If you see that in Q1, we had CHF 15 million + against previous year. H1, we had CHF 45 million, and now we are more than CHF 100 million.
We certainly expect the full year, as mentioned, to be significantly better than previous year. Q4 last year, we had a stronger spike. This is something we will continue to have the improvement, but it may not be the same magnitude as we have in Q3, depending on the conditions of COVID-19 too. That's why all in all full year, we will continue to have the uplift versus previous year. I hope that answers the question from you.
Thank you both for these extensive answers. Thank you very much.
Thanks, Patrick. Other questions?
The next question comes from Armin Rechberger from ZKB. Please go ahead.
Yes, hello, gentlemen. I'm trying to find out now which question I still have. Yes, first, I'm scared a little bit. You generate 40% in Europe, 34% in the Americas. You sound quite optimistic about Q4, but the COVID-19 cases are exploding in Europe and in America. You expressed that concern as well, but I can't explain your optimistic views. November, December, I'm rather pessimistic, but that's my view. Maybe you can shed some points here again. Some minor questions maybe. Restructuring. You mentioned in your presentation a closure of PE energy factory in Europe, which factory is that? You were mentioning you are booking all the CHF 80 million for the restructuring costs in 2020. Nothing in 2021. You shift nothing over to 2021, I mean. Yeah, this bio story in Chemtech, how big is it? I assume it's very minor till now.
That's all for the moment.
Okay, thanks, Armin. I'll take them backwards. If I take bio renewable or recyclable technologies in Chemtech. It's a combination of things. It's biopolymers like plastics from polylactic acid, which is essentially sugar or starch, in which we're a market leader. Plants are being built every year, and I think about 80% of the plants in the world have Sulzer's technology. It also counts things like our recycling technology that we are currently implementing for ArcelorMittal on one of their steel plants, where we take carbon monoxide, and we transform it into biofuel. The work that we're doing with Quantafuel in the Nordics, where we take plastics, and we transform them into biodiesels. There's quite a few things that are actually commercial and generating business.
There are a few technologies that are in the late stages of development, like our PEF technology for bioplastics or the developments that we have for textile. It's a combination of commercial things and things that will be commercial in the next few years. It's actually quite exciting, and if you have a look at what it means for Chemtech overall, it's a bit early to give you numbers, but it's close to CHF 50 million of business when you sum everything up. It's not there yet, but it's in that ballpark. It's not negligible in the sense that I'm not one of these guys talking about hydrogen that doesn't have 1% of its revenue in hydrogen. This is actually real stuff that exists, real technology that's sold.
We just haven't done a very good job of communicating about that because you guys are still of the belief that Chemtech is a refining business, which it isn't. It's like 20% refining and 70% chemicals and 10% everything else. In that 70% chemicals, historically, we also count the bio-renewable green activities. What we'll probably start doing is start splitting that out because I think we do a disservice to that business. I don't think the market understands how exciting Chemtech is. If I take your restructuring questions, the factory that we're closing in PE in Europe is in Belgium. It was part of the Ensival Moret acquisition, but it's redundant with other factories that we have. We had the volume that justified that factory. We no longer have the volume that justifies that factory, therefore, we're shifting the volume to other existing Sulzer factories.
We're also making significant cuts to our factories in Brazil and the U.S. Really, these adjustments are happening around the world. Most of the restructuring provisions will be taken in 2020. I wouldn't swear on my life that there won't be a few million of tail end in 2021 because you never know how these restructuring programs progress. Either the opportunity to do a little bit more in something that's already announced or something that ends up costing a little bit more than you'd planned through social discussions. Most of it should be in 2020, and I don't expect 2021 to be significant from that perspective. I'll finish with your optimism question. It's hard to be an optimist in this world, and I struggle with that too.
What I tried to explain to you is if you look at what we're saying about our guidance, forget the order intake for 2020 for a second. Sales for 2020, there is two months left in the year. We are a backlog business. Most of our sales are already in our backlog. I don't think the pandemic will lead to customers asking us not to deliver products because most of what we do, as I said, is essential and infrastructure related. If we do deliver the sales and we don't screw up the execution, which we have no intention of doing, we will deliver the profitability. If I look into next year, a CHF 70 million of cost takeout, even with lower volumes, which volumes are under pressure, you see it in the market.
Even with lower volumes, we believe that we can deliver the type of profitability that we are alluding to. You'll notice that we don't give volume guidance for the time being for next year. We do say that whatever happens to the volume within reason, obviously, we think that we're able to mitigate that through the cost actions that we have. Where does that leave us? That leaves us with a little bit of uncertainty on the order intake for 2020 because there's two months left to go and lockdowns can be more or less harsh. They can be more or less all encompassing. From what we've seen to date, it doesn't seem that there'll be a lockdown in the U.S. before the end of the year.
I'm not a politician, but a politician that will lock down the U.S. during the election is probably an ex-politician pretty soon. It seems like many countries in Europe are taking targeted measures. France is probably the extreme case. France is going into something more significant. Once again, if you look at what a lockdown like France means for Sulzer, and I'll take that as an example. Factories are still open, companies are still running. Essentially, they're closing restaurants, they're closing retailers, but not food retailers. The medical services remain open. The parts of our business that should be impacted significantly by that, as I said, I can think of beauty, for example. I can think a little bit of dental if people are scared to go out again. It's hard to predict these things.
We're not looking very far out, and we think that with the information that we have and the momentum that we've had up till now, we're actually a bit conservative based on the momentum that we have. We might be a little bit optimistic if you read yesterday's press. We'll see where it lands. There's two months to go, and it's just a way to help you guys understand, once again, that Sulzer is a resilient model. The view of Sulzer, which is highly cyclical, the bottom drops out whenever anything happens in oil and gas. I think that's a very dated view, and that's what we're trying to demonstrate this year, and hopefully that we've demonstrated by our performance up to date.
Did I answer your question, Armin?
Yes, very much so. I have two more.
Yeah, go ahead.
Okay. Pumps equipment. You mentioned a weak August. You were already explaining the situation like now in September and October, but now specific on pumps equipment, as I was a little bit disappointed with the Q3. What do you see in September, October there? You mentioned also significant FX impact. Which currency is the most, probably Brazil maybe? I don't know.
Jill will take the ForEx question. It's everybody's favorite financial question in our team, because ForEx has such an impact. When you report in Swiss francs, your life is complicated these days. Once again, it doesn't really impact our margin because we're naturally hedged. Your question on pumps equipment, we're like the specialist of presentations that don't have page numbers, but it's page five. If you go to page five, which is the pumps equipment slide, you see that we gave you the order intake for September.
Yeah. Right.
We gave you the monthly order intake, which hopefully you guys find that helpful. It's more than we usually do, and I don't think Christoph is happy with me because you guys will ask me questions about this stuff forever. It's a way to show you what the momentum of the rebound is. You see that the rebound in September was pretty good. We were at roughly CHF 100 million for the month in our pumps equipment business. You also see that water and industry, if you take them together, have held up quite well. A little bit of weakness in industry in August, but the rebound in September. Really the story of the drop in PE is the managed drop in energy.
Once again, we could grab more volume, we could make those numbers look better, but it'd be at the expense of the quality of our backlog. We don't need to, because we are doing the cost takeout and building the operational leverage for when the volume comes back towards the end of next year. That's the thinking on that. Once again, I understand your comment that it might be seen as a little bit disappointing, but I think that we have to accept collectively that the energy market will be depressed for a while. We took those actions very early at a time when orders were still booming, and I think it raised some questions as to why we were doing it. This is the reason why. It's so that we don't have to take business that we think is bad business for Sulzer.
Mm-hmm. How was October or will be October? What do you think? Rather like August or rather like September?
Oh, I certainly hope that it's rather like September. I don't have the latest numbers. I haven't chased them, but I haven't heard anything from the guys. You can imagine that I'm harassing people around the company, but I haven't heard anything that leads me to believe that it's not going to be in line with what we saw in September.
Thank you.
Jill, you want to take the ForEx question?
Yes. In general on the ForEx, again, to reinforce what Greg says, it's pretty much translation that you see. We have, say, 1/3 of our exchange is U.S. dollar, about 20% in euro, and then you have probably 15% of the British pound. We have the rest, maybe 10% in China, and you have another close to that in Brazil and the rest of the world. Truly, if you look at that, it's just because we have a very strong Swiss franc that's moving in relation to the rest of the currency. It's not Brazilian. Your point was, is it particularly exposed to Brazil?
It's not because it's actually a mix of different currencies. In general, the Swiss franc has strengthened across most of the currencies.
Jill is not saying that we intend to change our reporting currency to the Brazilian reais. It'd make our numbers look really good, but we'll stick with the Swiss franc. Bear with us on the ForEx. It doesn't hurt the profitability. It has a marginal impact on the profitability. It mostly makes us have to focus on the ForEx-adjusted numbers because the nominal numbers don't mean a whole lot given the strength of the Swiss franc.
Okay.
Armin, anything else?
No, for the moment, I'm fine. Thanks.
Thanks, Armin. Other questions?
For any further questions, please press star and one. The next question comes from Alessandro Foletti from Octavian. Please go ahead.
Yes, good morning, everybody. Thank You for taking my questions. I have two of them. Greg, one on oil and gas, that I know you don't like so much, but the next one will be something you may appreciate more. Starting with on APS. Maybe starting with the oil and gas. The Chemtech business. Now you said, obviously, that there are still delays in the Tower Field Services. I remember in Q1, I think, or Q2, you said that you had these delays where clients were sort of booking the maintenance lots into September. Did that happen or did they wrongly speculate and now they have to postpone again?
We got a little bit more business in the U.S. It picked up a bit in the U.S. in Tower Field Services. I think we had a decent summer. There's still a shifting effect. It continues to be difficult for customers to get comfortable with the idea of bringing multiple 100 people into their site for a short period of time for an outage. When they can avoid it, they have a tendency to try to avoid it. It came back a little bit. Tower Field Services is not doing badly, in a normal year, it'd certainly be better.
Mm-hmm. I was trying to understand a little bit your sort of, I'm not sure if it is optimism again, which is in general a good thing, but your outlook that you said energy markets should rebound by the end of 2021. I wonder These people, be it on the oil side or on the refinery side, postpone service. Is it related to that? Hence, it's not only a question for Chemtech, but maybe also for pumps and Rotating Equipment Services, that you may have, at some point, an avalanche of service that you have to do. Are you already thinking about that or not?
This is the one avalanche, as a skier, that I'd be excited about. Chemtech is really a business that's driven by chemical spending more than anything oil and gas related. It's really chemical plants. If you see the driver of what's happening in Chemtech is China in particular, but also Asia more widely, is making a big play on chemical capacity and therefore there's investments happening and that's what's driving the business. The Tower Field Services stuff is a bit anecdotal in the sense that it's probably more impacted by the U.S. refinery world. That's the part that's kind of shifting. I think you're correct. You can only delay these outages, if only for insurance reasons, for so long. There's a moment where there'll be a catch-up effect.
That catch-up effect, I think at this point, I believe will not happen before 2021. I don't know exactly when in 2021. The service question in general, our service business, if you took a look at Rotating Equipment Services, our service business continues to do quite well. I think without the pandemic, this would have been a year where we would have had growth. Look at the half year, I think we were at +6% organic for the service business. We'll still end up positive organic for the year for service, but clearly, site access is an issue. That has slowed down and that is impacting our ability to grow faster than what we're doing today. I agree with you. I do think that's going to come back at one point.
I don't know if it'll come back as an avalanche because what I see is that countries seem to be staggered. One country comes out of a lockdown, another one goes into a lockdown. Not everybody will reactivate their spending at the same time. I do think some of that stuff will come back in 2021. The overall comment on oil and gas. New projects in oil and gas is about 14%, 15% of Sulzer, so it's not very large. You're right. I'm often a little bit defensive when I'm asked the question because our share price tells me that people still think Sulzer is oil and gas because there's really no other way to explain where we're trading at. If I take the oil and gas question, you look at the capacity that's been taken offline, it's very significant capacity.
I think the U.S. shale patch will be impaired in its ability to rebound because it has been financed by the financial markets, and I think there's a lot less appetite for these plays today. I think there's a moment where there'll be a need for spending around the world to address a rebounding demand. We were already seeing it in this later part of the year. That might be dampened a little bit by what's happening with lockdowns. I do think there's a moment where you'll see oil prices moving up simply because supply will still be depressed, but demand will have recovered to the point where it makes sense to invest again. That will be when we get the operational leverage on our pumps equipment business. That's kind of the thinking overall. A rambling answer to a good question.
Do you have a follow-up or did I address your question?
Yes. No, that's fine. Thank you. Sorry for that. I'm working at home.
No, no problem.
It's also home school. Excuse me. On the Applicator Systems business.
Yep.
When I look at the Haselmeier acquisition, seems to me now that or let's put it different, sorry. When you started with that, it used to have some sort of technological connection with Chemtech or with mixing, with technology that you said you already master. In the adhesives, in the dental. Medical in particular, also Haselmeier in particular, seems to me kind of outside that.
Yeah, you're right.
Not a mistake. This broadens up the field to the whole industry. Can you lay out now what will be the strategy there?
Yeah, you're totally correct, Alessandro. A long time ago, Applicator Systems started as a development that came out of Chemtech. If you look at the adhesives business, it still had something to do with the knowledge from Chemtech. These businesses have developed, and today Applicator Systems is really self-sufficient. Applicator Systems doesn't really benefit from being part of Sulzer, apart from having the balance sheet of Sulzer for acquisitions. What we've tried to do is we've tried to build four solid legs in Applicator Systems: dental, beauty, adhesives, and now this medical leg, which is essentially pharma, drug delivery, medical, whatever you want to call it. We believe that with those four legs, Applicator Systems is a pretty solid business. Forex has moved around quite a lot. If you take the 2019 numbers and you added Haselmeier, it's essentially a what?
It's a CHF 500 million business. You got to adjust it for whatever 8% ForEx impact we've had since. It's a sizable business that is self-contained in terms of the technology knowledge that it has, and the technology knowledge in all four of the segments is related to applying fluids in a sensitive space in a repeatable manner. Whether it's a drug or whether it's some sort of active component for dental, or whether it's an adhesive to make the iPhones, it's all the same skill set, and industrially it's very similar. I think it leads to the question, not so much of, is that too much of a diversification away from Sulzer?
You really should have a look at Applicator Systems as a business of its own, because you've asked me the question before, and I think I've already told you, I believe Applicator Systems is a standalone business in the medium term. In the long tradition of Sulzer, which is we pioneer stuff, we develop these businesses, we reach a level of maturity or a level at which these businesses are able to function on their own. If there's no value to shareholders to these businesses being inside Sulzer, we're quite happy spinning them off to shareholders. I think this is probably what you're going to see down the road. You'll probably be making comparisons between Haselmeier and Ypsomed or Haselmeier and Nordson in the U.S., rather than to be having discussions about Haselmeier and our flow control business. I'm sorry, I said Haselmeier, I meant Applicator Systems.
Okay.
You have comparisons between Applicator Systems and Nordson. Nordson in the U.S. is a very similar business to Applicator Systems. It's a multi-segment business along the same logic. Ypsomed, if you look at what we're doing in Applicator Systems in terms of the medical part and the dental part, it's quite similar in terms of the business type. I think these are the peers down the road, and probably this is a business that will be outside of Sulzer sometime in the future. I don't want you guys to start the countdown, because it's a year where we still have a lot of things to do, and these things have to be well thought out.
The logic of keeping Applicator Systems long-term and Sulzer is not very strong logic, because once again, the comment that you made, it doesn't benefit from the rest of Sulzer, but also it'd be trading at a very different multiple.
Oh, yes. Okay. Yes. Thank you. Thank you very much.
I need to shorten my answers because I kind of said the same thing twice. Anyway, hopefully I covered everything, maybe over-covered.
That's fine for me. Thank you.
Thanks, Alessandro. Other questions?
As of right now, this was the last question. I would like to turn the conference back over to Sulzer. Please go ahead.
Okay. Well, thank you very much for everybody for taking part. We try to bring more substance than we usually do to the Q3 presentation, so you'd have more to chew on. We've done well as a business for the first nine months of the year. I believe that we've demonstrated resilience that should really lead investors to rethink who our peers are and maybe take us out of that highly cyclical oil and gas bucket, where we still seem to linger with some investors, or at least if I believe our share price. That resilience is paying off, will continue to pay off. We certainly see the clouds on the horizon in terms of new lockdowns in Europe, but we also try to bring you a balanced view of where we think the business is going.
We look forward to talking to you guys again for the full year results. Thank you again.
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