Ladies and gentlemen, good morning and [Non-English content] . Welcome to Sulzer's annual results presentation 2019 here in the Hotel Widder in Zurich. This conference call is also being webcasted. The link to the webcast can be found on our website. As always, I would like to draw your attention to our safe harbor statement, which is shown in your presentation handouts on slide number two.
Please note that this statement also applies to any verbal statements in the webcast and on the call. Please also note that we will show so-called alternative performance measures as defined by SIX Swiss Exchange. You find all the bridges on how you can calculate these alternative performance measures from reported figures in the financial sections of our annual report.
The participants here in the room have received a printed version of today's press release and the presentation, and a memory stick with the digital version of the annual report. All these documents are also available on our homepage. For today's agenda, we will have the presentation followed by Q&A. Thereafter, we will have an aperitif. For media interviews, Greg and Jill, and also other members probably of the Executive Committee, which are present in the room, will be available after the Q&A.
For these interviews, we have also a separate room, at least for some of them. May I can ask that you address Domenico Truncellito, my colleague so that he can coordinate these interviews. That's enough for the housekeeping part. The annual results presentation will be held by our CEO, Greg Poux-Guillaume, and our CFO, Jill Lee. After the presentation, the floor will be open for questions. Greg, the stage is yours.
Thank you, Christoph. Let's see if this works. There we go. Okay. Thank you to all of you for being here today. We appreciate your time. We know it's a busy time of the year. We have a little bit of a treat today in terms of people available. As Christoph mentioned, we've got all the members of the Executive Committee of Sulzer present except for Daniel Bischofberger, who's traveling.
They're in the front row, Torsten, who runs the Chemtech business, Girts, who runs the Applicator business, Frédéric, who runs the Pumps business, Armand, who's our Head of HR, and you know Jill and I. You can grab him afterwards, ask him all the questions you want, get into details. Don't hesitate. They'll be available. Let's get into the highlights.
In 2019, Sulzer was again able to generate strong organic growth in orders and sales, and we worked hard to improve our profitability. Orders increased by 6.3% organically and sales by 10.8%, including acquisitions, but excluding a negative currency impact, growth was a strong 8.2% for orders and 13% for sales. Continued positive momentum in most of our end markets, and in particular in water and chemicals, supported our businesses in 2019 and into 2020.
The higher volumes, saving from SFP, and solid execution led to an increase in our operational profitability or operational EBITA, a margin of 40 basis points, and we reached double digits at 10.0%. Despite the strong growth, we had a tight grip on our networking capital and generated in 2020 a record level of free cash flow.
Backed by the good results to reflect the confidence that we have in our future, the Board of Directors of Sulzer is proposing an increased dividend of CHF 4 to the AGM. Previous dividend in the last five years was CHF 3.5, we are proposing to go up to CHF 4. We successfully completed our SFP program that was started in 2015.
Over the five years of SFP, we had cumulative savings of CHF 253 million. We're off CHF 23 million of those in 2019. Although the program is completed, we continue to have a very tight handle on our cost base, you'll see that we will continue to take aggressive measures whenever they give us the opportunity to be more competitive. In 2019, we made two acquisitions, one for Chemtech and one for Rotating Equipment Services.
For Chemtech, we bought a business called GTC in May 2019 to expand our portfolio with proprietary processes and systems for the production of aromatics and other petrochemicals. In July, we bought Alba Power for Rotating Equipment Services. Alba is a business based in Scotland that does service for aeroderivative gas turbines.
It allows us to expand our range for these light turbines that are used for things like distributed power, a market that is quite active currently and for the years to come. As I mentioned earlier, we have a new member to the Executive Committee. Girts Cimermans joined us in October and took over as the President of the Applicator business. As I said, he'll be available to take your questions afterwards if you have specific questions for him. I will introduce him in more details a little bit later in this presentation.
Before I go into the details, let me just start by giving you an overview of Sulzer. Sulzer is a well-balanced business in terms of end markets, in terms of regions, and in terms of the proportion of aftermarket, which is about 45% of volumes at Sulzer. As you see on the donut chart on the left, upstream, midstream refineries, you add that together and we're 28% oil and gas.
We're about 22% chemicals, 13% water and growing, 12% power, and everything else is different industries, whether for applicators or in areas like pulp and paper mining, fertilizer, food in the category that's called others, where we sell a lot of specialized pumps to these different industries. We're well-balanced also across regions. As you see, 43% EMEA, 34% Americas, and 23% Asia-Pacific. Knowing that Asia-Pacific, the smallest of our three regions, is actually the fastest-growing.
We grew 20% in Asia in 2019. We're closing the gap. If you look at the donut on the right, which I've presented to you already a few times, Sulzer is two-thirds low cyclical, one-third cyclical. I repeat that over and over again because the misconceived ideas about Sulzer is that, oh, it's all oil and gas. Actually, it's 28% at Sulzer. Oh, Sulzer is highly cyclical.
The fact that we've got 45% of our business in spare parts and service, so essentially aftermarket, plus 13% in the water business, which is essentially a wastewater business. Wastewater is correlated to population growth and urbanization. It's not a cyclical market. 11% in applicators, which Dental Adhesives, these are low cyclical markets. Beauty also, although you see that we are undergoing, from a market perspective, quite a high level of changes in the beauty world.
I'll get to that a bit later. The remaining third, the part in green, is new equipment for things like oil and gas, power, and other industries. Once again, one-third cyclical, two-thirds low cyclical. Now, we'll get into the businesses. What we try to do is, as an introduction to each of the four businesses, we wanted to give you a highlight of something interesting that we've achieved in 2019 that may give you a different perspective on the given business.
The first one is our pumps business, and this is fresh water supply for Riyadh in Saudi Arabia. We won two large orders in 2019, both of them in Q1. What you see here is the water pipeline that connects Saudi Arabia's capital, Riyadh, with desalination plants at the Arabian Gulf. It will deliver 1.2 million cubic meters of potable water every day.
The other project was pumps for a desalination plant, also in Saudi Arabia. The two projects together had a value of about CHF 42 million. Remember that when you do your Q1 order estimates, because these were exceptional and both of them in Q1. What you should know about our water business is that it is the largest segment of our Pumps business.
I don't think too many people would guess that. It's the largest segment of our Pumps business today with more than 30% of volumes. It's got strong franchises in wastewater and in water infrastructure. We offer market-leading products like our pumps. Also products like grinders and aeration compressors, bringing innovative solutions to limit water consumption worldwide. With this, let's go into the numbers. Pumps Equipment.
Thanks to the two large orders that I've mentioned, the water business for us was the fastest-growing market in 2019 in Pumps Equipment at +17% on the year. Even without these two large orders, the water business still grew at a healthy 6%, which once again, 6% for a business which is mostly wastewater and kind of GDP correlated, is a healthy number.
The chemical markets, you've got the split on the right on this donut chart here. The chemical market, which is 13% of our Pumps business, was quite active for us, buoyant for us, really, at +16%. +17% in water, +16% in chemicals. Power was up from a low base, and oil and gas was up 4%. In oil and gas, it's not about volume for us. It's about selectivity.
The aim for us is to maintain a certain level of volume and reasonable growth while improving the quality of our backlog. We do that by being very selective on the orders that we take or we don't take. Doing this, we were able to increase our operating margin in the Pumps Equipment business from 3.2% in 2018 to 4% in 2019.
A significant part of the improvement came from our engineered pumps for things like oil and gas and power. Also, obviously, cost savings and good execution. Repeating it again, the donut on the right shows you that water is 30% of our Pumps Equipment business, its largest end market. Even if you take upstream, midstream, and refineries together, you only get to 25%. 30% water, 25% oil and gas. Now let's go into Rotating Equipment Services.
Sulzer is recognized by its customers as a leader in the application of additive manufacturing. This slide is really an additive manufacturing slide. It's to try to give you a little bit of flavor on the innovation that goes on in Rotating Equipment Services. We focus our efforts on developing and qualifying proprietary industrial processes for either full additive or hybrid components, spare parts for pumps and turbines or casted parts.
Casting a pump impeller can have a lead time in months. Additive manufacturing can reduce that to days. It can also allow us to manufacture optimized designs that we wouldn't be able to do by traditional methods. This is in no way straightforward, by the way, because pumps mostly operate in corrosive environments, and they're made out of complex alloys, which makes additive manufacturing for what we do, very complex.
We're seen as a market leader in terms of the application of additive manufacturing to pumps. Large companies like Chevron and other big oil companies recognize us as one of their leading suppliers on this dimension, and they collaborate with us to make spare parts with additive manufacturing. Some of those parts are already in operation with our customers as we speak in challenging conditions.
This is all about getting the processes qualified so that down the road we can deliver value to our customers and to Sulzer. To our customers, essentially by allowing them to have lower inventories. If we reduce the lead times from months to days, they can operate with much lower inventories and therefore it makes their business more efficient and more profitable. For us, it allows us to reinvent essentially the way we manage our spare parts business.
The industrial footprints, the industrial assets that you have to have behind the spare parts business, if we're able to do additive manufacturing widely, it becomes a lot lighter, a lot more cost efficient, and a lot more reactive, which would allow us to gain market share in this market. The quality of the parts made by additive manufacturing, by the way, are at least as good, if not better than the quality of parts that are casted.
The reason for that is that the material has the structure of forged metal, and you don't have the porosity that you may have in some of the casted solutions where quality can be uneven. Additive manufacturing leads to high quality parts, and once again, Sulzer is a leading player in this field. Okay, let's go into the Rotating Equipment Services numbers.
The order intake in Rotating Equipment Services increased by 9% and sales by 10% organically, which is quite a feat for an aftermarket business. Turbo Services, if you see the donut on the right, our service business is split in essentially three product lines. Pump Services, which is 55% of the business, Turbo Services, which is 28%, and Electromechanical Services, which is 17%. In simple terms, Pump Services is servicing pumps, our pumps, and other people's pumps.
Turbo Services is servicing exclusively other people's equipment, rotating equipment, turbines, compressors, anything that rotates and that's part of the same infrastructure as our pumps. Electromechanical Services is mostly servicing other people's motors, drives, generators, anything that's electromechanical. Turbo Services showed the strongest growth in part because of a low base the previous year. Also because we shifted our focus away from utility gas turbines.
Utility gas turbines, as you know, is a depressed market if you follow GE and Siemens. We shifted our focus towards other types of equipment like compressors and steam turbines that are part of the industrial value chain, which is doing better today than the utility value chain. Pump Services and parts were up by 7%, and we started to see the benefits of all the new pumps that we sold in the last few years.
We are also seeing the benefits of our strategy on third-party pumps and on reclaiming our install base. 7% growth once again in 2019. Electromechanical Services grew by 4%. It's a very local business and it's really kind of a GDP type business. We made an acquisition, as I mentioned earlier, the acquisition of Alba Power, which gives us access to aeroderivative technology.
These are gas turbines that are light, that are really like jet engines when you think about it. They're used for distributed power applications, things like offshore, remote locations, anything where you need power locally in a place where the grid might not be as accessible. It's synergetic with the rest of our service business, and it's off to a good start.
I didn't even mention profitability. I think I've gone so fast that I forgot profitability. 13.7% in 2018, 14.1% in 2019. You may recall that this business has been flat at around 13.7%, 13.8% for I think three or four years. We're starting to trend up now 14.1%, and I think it'll go higher in 2020 as we get the uplift from the rebound of the new equipment sales for engineered pumps that started occurring about two and a half years ago. Moving on to Chemtech.
Chemtech is known for its strong positions in chemicals and refining process technologies. Increasingly, Chemtech offers groundbreaking solutions that contribute to the circular economy with leading positions in biopolymers, biofuels, and the recycling of plastics and emissions. An example on this page, last October, Chemtech announced that it had partnered with a company called Quantafuel to deliver separation technology for a full-scale plant that is being built in Denmark.
That plant is based on a chemical recycling process that converts plastic polymers back into hydrocarbons. The benefit is twofold. Waste is reduced and hydrocarbons can be used to produce new plastic materials, creating a more circular economy. Sulzer was approached because of its leading position in fractionation, an important part of making this process industrially scalable. This is not an isolated case.
We developed technology currently being implemented by a steel maker to turn carbon monoxide emissions into biofuels, and a process allowing for the separation of fibers and solvents for a textile recycling company in which we are an investor with H&M. Really lots of fascinating innovation coming out of Chemtech with more to come, and Torsten is here and can tell you all about it afterwards at the break if you have more interest in this.
Moving on to the numbers for Chemtech. After growing 21% in 2018, Chemtech's order intake continued on a robust trajectory at 6.5% organically. The momentum continued into 2020, but you have to keep in mind that Chemtech does 30% of its business domestically in China. Rest assured, our factory is back up and running. We've got a lot of the people that have already returned, and we're ramping up production.
What we're likely to see on Chemtech is a little bit of softness in terms of orders and sales. Well, maybe mostly sales, actually, in H1 with a catch-up in H2. Our customers continue to be very active. Our pipeline continues to be very full, but it's a big facility that's being ramped back up again. If we listen to our Chinese team, they think they'll be back in fighting shape and have recovered the numbers in H1.
We think it's more likely to be in H2. The Chemtech business, once again, very healthy and on a strong trajectory the last few years and for the years to come. Sales were up by 12.7% organically, supported by high backlog entering the year and continued favorable market conditions.
Profitability was up on higher volumes and on good contract execution, 8.9% in 2018, 9.6% in 2019, and Torsten and his team will certainly be double digit in 2020. The acquisition of GTC in May 2019 strengthens Chemtech's leadership in petrochemical processes and expands its revenue base to process licensing and associated proprietary equipment and chemicals. A very interesting development for this business. Moving on to Applicators.
Trying to move on to Applicators. Here we go. Applicators, the slurries, the liquids of different consistencies. The slurry that our applicators are used to dispense are usually very valuable. It can be dental ingredients, it can be high-end adhesives, and the likes. An important part of their value is to minimize their waste. For example, through shorter mixers, where the trapped volume after you've finished applying is smaller, and therefore there's less waste.
It's important to minimize the waste of the product that we apply, but it's also important to minimize the waste linked to the applicator, and we commit significant resources to making the applicators themselves more sustainable. In September 2019, our Applicator business won the Packaging Europe Sustainability Award for Resource Efficiency for our ecopaCC product. ecopaCC is a collapsible cartridge that is used for adhesives and sealants.
It's a foldable design that reduces waste by up to 75% versus the rigid cartridges that are prevalent on the market, and it minimizes the space required for both empty and filled options. Industrial adhesive manufacturers as well as users benefit from substantial reduction in shipping and storage cost. ecopaCC also features an improved shelf life and improved leak-proof properties. All that leads to massive cost reductions, resource and waste reduction, and therefore, to significant savings across the value chain.
Moving on to the numbers of applicators. Applicator Systems did well in 2019 in all segments apart from the Beauty segment, where it struggled. The decline of orders and sales, which you see here, 5% decline in orders and sales, is actually solely due to Beauty.
If you take everything else, Dental, Adhesives, and Healthcare, and you lump them together, everything else is two-thirds of APS, and everything else grew by 3% collectively. In Beauty, we suffered from different trends that hit us all at once. I've talked about this before. It's the growth in the market that's increasingly being captured by new independent brands. We, as the market leader, are still very incumbent-centric.
Within the beauty market, there was an investment shift in 2019 by our customers from color cosmetics to skincare, there's also an element of premiumization, as the L'Oréal guys call it, pulling the market towards the premium end of the segment. What does that mean for us? We're still the market leader. It's a temporary setback that forces us to rethink how we handle this business industrially, we've already started making inroads with these independent brands and had our first successes in 2019.
We're also retooling our Bechhofen factory in Germany, we're closing our other beauty factory in Germany in Bamberg. What we're going to have in Bechhofen is an industrial setup that will allow us to serve these independent and premium players better and certainly a lot faster. Finally, we're exploring other microbrush applications to other type of end markets beyond cosmetics.
Once again, keep in mind that our beauty business is a microbrush applicator business. With that, we expect our beauty business to have bottomed out in 2019 at about CHF 150 million a year, and we expect that our Beauty business will start growing again in 2020, probably more towards H2 than in H1, but we expect positive growth for beauty in 2020.
If I take applicator as a whole, profitability has remained stable in 2019 at 21% compared to 2018. Some of that is based on favorable mix despite missing the beauty volumes. Within APS, you guys may recall that the highest profitability is in Dental, then Adhesives, and then Beauty. If you take all the segments individually, the margins on order intake, so essentially the reflection of the pricing of the market, has stayed at a very high level.
Our volumes are under pressure in beauty because of the market change, but our margins are not under pressure at order level. It's really a scale issue that we're fixing and that we'll start recovering from in 2020. Moving on to a brief flashback on SFP. SFP was launched in 2015, Sulzer Full Potential. It's come to an end. Overall, we achieved savings of CHF 253 million, which is a big number for a company of our size, and it's an even bigger number when you remember that it excludes direct procurement savings.
We buy cheaper castings. That's not counted as part of SFP. It is really structural cost savings that are counted as part of SFP. When we look back at how much SFP cost us, we generated CHF 253 million of savings by investing CHF 308 million of costs. It's a ratio of about 1.2.
If you guys are familiar with these types of programs, that's actually a pretty good ratio, actually, a really good ratio . If you see the donut on the right, a lot of the savings come from streamlining our operations. Essentially, we closed factories, and we sold or closed foundries, and we saved a lot of indirect procurements, and we have reduced our overheads in different parts of the business and across the group functions. Now, SFP is behind us. Why did we close the books on SFP? Well, I think these multi-year programs should be exceptional. I don't want to be the company that every year has a new multi-year program.
We've closed the books on that just to give you a final tally, but let's be very clear that we'll continue to manage our cost base aggressively, and we think we'll have interesting opportunities to get more competitive in 2020, and beyond. That remains a very important part of our focus. The only difference is that instead of announcing these things as part of multi-year frameworks, we'll announce them individually and give you all the numbers that you need.
Quick look at the leadership team. Everybody is here apart from Daniel Bischofberger, who's traveling. The newest addition to our team is Girts Cimermans. Girts is the Head of our Applicator business, joined us mid-October. Girts has a very interesting background. Last few years, he was the CEO of a business called Vision Care, which is the ophthalmic care business of HOYA, the Japanese company.
It's a CHF 2 billion business that he ran. Before that, he was the Chief Operating Officer of a large part of HOYA's business in healthcare. Before that, he was a senior executive in different businesses, the Danaher dental business, the PENTAX Medical business, and GE HealthCare.
If you keep in mind that Applicator Systems today has 60% of its profits in healthcare, combination of pharma and dental, Girts has certainly the right background, and we're very happy to have him on board. He'll be available to you afterwards if you want to ask him specific questions. A small change in our Board of Directors. As you know, our board is, in the Swiss sense of the term, exclusively composed of independents because nobody is a former company executive.
In terms of the representation of Tiwel, our largest shareholder, we've come to an agreement with Tiwel that they would maintain two representatives. The Board is proposing to add a Board Member, Alexey Moskov. It'll be proposed at the next AGM. The reason for that is that Marco Musetti, who historically had a working relationship with Tiwel, has ceased all activities with Tiwel and has terminated all his mandates and is now completely independent from Tiwel.
In order for Tiwel to maintain that representation of two people on the Board, Alexey Moskov is coming on board. You may recall that we had eight Board Members. We went down to seven. We're back up to eight. Once again, eight Board Members, two of them Tiwel representatives, and six of them independent from Tiwel. Okay. Financial review, I'll hand over to Jill. Jill.
Thank you. Thanks, Greg. Good morning, everyone. As Greg mentioned at the beginning of the presentation, order intake increased by a solid 6.3% organically, mainly driven by Rotating Equipment Services, with 8.6%, Pumps Equipment with 8%, and Chemtech with 6.5%. All three divisions grew orders strongly in 2019 as in the previous year.
Acquisitions, and here I'm referring to GTC and Alba Power, added CHF 69 million, and currency effects reduced the number by CHF 74 million. The order gross margin has increased by 30 basis points on higher order selectivity in Pumps Equipment, and this despite a negative mix effect. We had continued good momentum in oil and gas, and we were deliberately not taking certain orders when margins were too low. Order backlog remains stable nominally, but increased by 2% when you consider the adjustment for currencies.
Sales grew by a strong 10.8% organically, once again, driven by Pumps Equipment, Rotating Equipment Services, and Chemtech. All three divisions recorded double-digit organic sales growth rates. Currency effects shed off CHF 72 million from our sales growth. As you know, we have a much stronger Swiss franc. Acquisitions added CHF 73 million.
The operational EBITA margin or opROSA increased by 40 basis points from 9.6% in 2018 to 10% in 2019 on the back of higher volumes, SFP savings, and solid execution that more than offset the once again negative mix effect. We had 17% higher sales in Pumps Equipment, where we have a margin of 4%. On the other hand, we have 7% lower sales in Applicator Systems, where we have 21%. EBIT increased by 31%, leading to an EBIT margin or ROS, return on sales, of 6.5% compared to 5.5% a year earlier.
It's 100 basis points higher. Our free cash flow increased 18% to CHF 213 million. This is a record level from an already high level in the previous year. Despite higher volumes running through our factories, we kept our net working capital under control. Adoption of the new IFRS 16 standards on leases added CHF 34 million to free cash flow in 2019.
If you recall, we reported a one-off positive free cash flow impact of CHF 32 million last year from the sale of our participation in an affordable housing operator. Net-net is pretty comparable between the two years when you take out the effect of exceptional items in both years. The number of employees is up by 6%, partly due to acquisitions. Now let's take a look at the quarterly order development.
For the full year, we had positive trends in almost all of our markets. Water, power, and oil and gas were up double digits, and chemicals high single digits. General industry segments were down, with beauty within our APS division being the main factor for that. Looking at isolated Q4 order intake, you see that order intake was again up 3.2% organically and 6.2%, including acquisitions adjusted for Forex.
Growth was driven by Pumps Equipment, which was up 6%, and Rotating Equipment Services and Chemtech both up by 5%. Chemtech order intake could have been even higher, but some projects got shifted to 2020. In Q4, acquisitions contributed CHF 25.3 million, and Forex had a negative impact of CHF 19.7 million. Let me go into the details of our profitability. Our opEBITA was up 15% for the year, driven by higher volumes, higher margins, and savings from the SFP program.
The volume effect is pretty easy to explain. We had higher sales in Pumps Equipment, Rotating Equipment Services, and Chemtech. While this led to higher volume impact, you can see here CHF 95 million, it also resulted in a negative mix effect, as growth was highest in Pumps Equipment. The margin impact is to a large extent driven by our Pumps Equipment division, where the higher order selectivity starts to become visible.
The mix effect comes not only from the higher share of Pumps Equipment and lower share in sales of our APS division, but stems also from the fact that under IFRS 15, we had some lower margin, larger orders booked entirely in 2018, whereas otherwise they would have been spread over two years.
Just now you saw from Greg's presentation that we have actually the opROSA rising in all our three divisions, stayed constant in APS, but despite the fact, we still have a negative mix effect that brought it to 10%. The other costs are mainly related to increased OpEx on the back of higher sales volumes. As a result of sales, however, our OpEx remain unchanged.
As a percentage of sales, however, our OpEx remain unchanged. Savings from our SFP program had a positive impact of CHF 23 million and is more than we announced at the beginning of the year. The negative Forex impact comes from translation, not transaction effects. Finally, acquisition contributed also CHF 7 million of opEBITA. All in all, opEBITA grew 15% to CHF 371 million, and opEBITA margin rose to 10%, up 40 basis points from previous year.
Going down from operational EBITA to EBIT. We had amortization of CHF 65 million, a little bit lower than last year. The beauty factory consolidation in APS, where we closed the factory in Bamberg and consolidate our operations in the extended Bechhofen factory, necessitated CHF 28 million of restructuring and non-operational costs.
The other restructuring and non-operational items were related to SFP or one-off costs due to resource adaptation in the other divisions. EBIT finally was up 31% for the year, rising to CHF 241 million, which corresponds to a margin of 6.5%, a solid 100 basis points up versus last year, 5.5%. Going further down to net profit. Our financial results was more negative than in the previous year, mostly on fair value changes. This refers to actually the hedge instruments that we have.
On balance sheet date, this is the fair value change, but it is the unrealized part of it that goes into financial results. The normalized tax rate was 23.1%, but as some of the non-operational items are not tax-deductible, the effective tax rate was 25.9%. This is still a lower tax rate, effective tax rate, compared to previous year of 29%.
For 2020, we again see a normalized tax effect of 23%. Net income was CHF 158 million, and net income to shareholders, CHF 154 million, both 35% higher than in the previous year. Core net income, which is net income excluding all non-operational items adjusted for tax, was 16% higher at CHF 258 million. Let's take a look at the free cash flow.
When looking at the bridge from net income to free cash flow, you'll see that despite the higher sales volume, our networking capital did not change, which is really quite an achievement. Deriving from operational and lead time improvement, we generated CHF 83 million of cash flow from lower inventories. Accounts receivable rose only modestly relative to the high sales growth, benefiting from better order to cash management.
Contract assets introduced under IFRS 15 reflects the work in progress related to projects in execution. The increase is primarily because of business growth, particularly in the Pumps Equipment. In 2019, cash out for CapEx increased slightly due to our test bed for Pumps Equipment in India, as well as the commencement of extension work on our plant in Bechhofen for APS. Overall, net CapEx was CHF 106 million.
Depreciation and amortization amounted to CHF 171 million. Therein is an amount of CHF 34 million arising from the adoption of the new IFRS Standard on leases. If you recall, in 2018, there was the one-off positive free cash flow impact of CHF 32 million, which I had mentioned earlier, related to the sale of affordable housing.
When comparing the cash flow over two years, the exceptional items actually offset one another. On the back of that, we achieve a record high free cash flow of CHF 213 million, primarily from the better profitability as well as the working capital efficiency, up 18% from previous year. Now balance sheet. Through strong cash generation, our balance sheet continues to be robust and support our strategy of selected acquisitions.
What has changed from last year is that under IFRS 16, leases are now also considered debt. As you see on the chart to the left, leases increase our debt by CHF 110 million. Here we give you all the relevant net debt to EBITDA multiples in a table to the right, and you can do your modeling then.
Like for like, meaning excluding effects from IFRS 16, the multiple has moved to 0.6x in 2019 from 0.7x in 2018. Including IFRS 16 for 2019, we now stand at 0.8x. As you know, technically, the meanwhile CHF 218 million that we hold on behalf of Tiwel is not debt, as it is not interest-bearing, it has no maturity, and it's not sequestered.
It is essentially a payable. If you want to nevertheless treat it as a debt when computing the net debt to EBITDA multiple, we have also put the number as well on the table, and there you can see the contrast, the 0.8 x, as well as the 1.4 x. Dividend.
We achieved strong results in 2019. We have a robust balance sheet, and we have good business prospects. Sulzer Board of Directors has therefore decided to propose at the annual general meeting, an increase of our dividend to CHF 4 a share, up from the CHF 3.50, which we have paid over the last five years. It is a clear message from our board about the confidence in Sulzer future performance, and it is fully supported by Tiwel, despite the fact that this dividend will be due but not paid to them. With that, I'd like to hand back to Greg for the outlook.
Thanks, Jill. Okay. Almost finished, a few more slides. Guidance. Order intake up 2%-4% in 2020, sales up 1%-3% in 2020, and operational profitability, in a range of 10.2%-10.5% in 2020. How do we think about this? The macroeconomic uncertainties and the geopolitical risks have continued to rise in 2019. We're impacted, as are our customers, by things like trade disputes and tariffs.
Now there's the coronavirus, which beyond its catastrophic human toll, is disrupting supply chains and affecting production in China. At the very least for a few months and possibly longer, in any case, it's really too early for us to estimate what will be the impact of corona. As you'll see on the next slide, we'll give you some elements so that you can think about this and think about what it means for Sulzer.
Still, having said that, we're still very confident about the prospects for our businesses in 2020. We enter the year with a healthy commercial pipeline, good end market momentum, and a solid backlog. We expect continued growth in order intake, as I said, 2%-4%, and in sales in the range of 1%-3%. The tail end of acquisitions in 2019 is less than 1%, just so you have an order of magnitude.
The order guidance is consistent with continuing high tendering activity, but also a high baseline, given the previous two years where we grew in upper single digits, as you know. The continued focus on selectivity that we have in our engineered Pump business.
The sales guidance is slightly lower. It's mostly lower because if you look at the sales that we achieved in 2019, we achieved a very high level of sales, higher than our guidance, even our revised guidance. Actually orders is equal to sales in 2019, which means that if you take our opening backlog in 2019 and our opening backlog in 2020, within CHF 6 million, it's the same. We are in a situation where we've improved our execution.
We're converting orders into sales really quickly. Therefore, we don't have a backlog effect of an inflated backlog after a good year of commercial activity. We also had in 2019, a very high level of sales, of revenue. Operating profitability will be in the range of 10.2%-10.5%, up from 10% in 2019.
We do not expect any of this to come from market pricing uplift, but from a higher quality opening backlog in engineered pumps and from sound operational execution across the board. Coronavirus, to update you on where we are. We have five factories in China, three Pump factories, an applicator factory and a Chemtech factory.
None of them are in Wuhan. I think the one that's closest to Wuhan is probably 600 km or 700 km away, but all of China is being disrupted. Mostly positive news on our side. The first and foremost positive news is that none of our employees are infected. We have no reported case of infection or symptoms, and that's our priority. Our priority is the safety of our employees and their family, and that's what we spend our time on, supporting them.
Beyond that, the positives are that four of our five factories started operating again on the February 10th, and the fifth started operating again on the February 14th. All five of our factories are back up and running. If we take the percentage of our people, our employees that are available, we're at 73% across all five factories that are available.
If we try to give you a little bit more information, because the people available, the fact that you've got, I don't know, the finance guy available, is not something that will allow you to produce pumps or separation equipment. If you try to look at the core labor, and we define the core labor in terms of the core labor to run the factory.
Essentially it's Sulzer employees and temps that are either on the shop floor, direct labor, anybody who's involved in running the factory from day to day. The percentage of people available on site is 63%. It's a little bit lower, and it's a little bit lower why? Because blue collar labor in China has a tendency to travel from further away, especially temps. 73% for all employees, 63% for the employees linked to running the factory.
On the February 17th, two days ago, that translated across our five factories and factories operating at 40% of capacity. When we look ahead, we think, or our guys think, that they'll be back at full speed at the end of March. Why a month and a half between 40% capacity and 100%? Really two things.
It takes time to get the rest of the people back, and some of the temps, for example, will never return because it's a highly mobile population. Most companies will tell you that after the Chinese New Year, you lose a lot of your temps because they make career life choices. There's an element of disruption from that perspective. The other element of disruption is our supply chain, the people we work with are also back up and running.
The part that's most challenging today in China is the domestic logistics. It's essentially the transport between cities and between regions. The transport, it's not a free-for-all. It's actually being managed by the central government, and therefore, companies have to ask for authorization for routes. We have examples. I'll use an example for our Pump factory in Dalian.
We are expecting casings, and we're expecting motors. They both come from the same city, two different suppliers in another region. The casing guys, the foundry, tells us, "The castings are ready, but we don't have yet the green light to have a truck go over to you." The motor guy in the same city tells us, "We've obtained the authorization to load a truck and send it to you."
We end up doing matchmaking, have the casting guy talk to the motor guy and maybe combine the trucks and so on. It's a lot of scrambling. It's a lot of being creative. All of that in an environment where the priority is for everybody to be safe. Our teams in China are doing a remarkable job.
I think 40% of capacity today or two days ago is a good number, as I said, ramping up towards the end of March, towards cruising altitude. If you think about what that means for Sulzer during the year, what we think at this point, if the trend of the coronavirus in terms of the recovery in China and the resuming of industrial activity, if the trend continues as it is currently, we believe that we'll make up the volume during the year.
That's orders and also sales, which means that we'll probably have a softness in orders and sales in China in H1, we'll recover in H2. We think that in the current situation, we think that it kind of evens out at the end of the year. Order of magnitude of Sulzer in China is 12% of our order intake.
It's about a CHF 450 million business domestically. There's also a supply chain element for facilities around the world. Sulzer are like most companies. We're rarely single-sourced, so usually we have multiple sources of procurement, and therefore, it's really a question of balancing these things out. There's a short-term impact, but over the course of the year, we believe that it evens out.
The thing that will probably not even out over the course of the year is that we've got 73% of our people available, and we're operating at 40% capacity, and we were closed for a week or 10 days. That under- absorption, because we pay people, that under- absorption will not be recovered, and it'll be recovered because as we accelerate to catch up, we'll pay overtime, we'll bring in temporary labor, we'll do all these things that also cost money.
Whether we'll be able to claim any of that from insurance companies, we'll see. It's force majeure, and we have the certificates that say it's force majeure. At this point, it's really too early to say. What I would leave you with as an impression is that our teams are doing a remarkable job. The five factories are up and running, 40% capacity, 73% of the people.
Volume evens out over the course of the year. A little bit of a deficit in H1, we make up for it in H2, and there'll be some under- absorption that we'll report as a separate item so that you guys can get a feel for how much it ended up costing us, and we'll keep you posted as we report throughout the year. I'm happy to take questions on this afterwards. Final slide, 2020 outlook. It's really a summary.
We expect our end markets to remain supportive for orders and for sales in 2020. We expect the water, the chemical, and the oil and gas markets, as well as our aftermarket activities, to continue to grow. Active commercial pipeline, it hasn't changed, and it continues to be at a very high level. We see opportunities in power despite challenging market conditions.
Some of our industry markets, for example, pulp and paper, have softened, and we expect Beauty, part of Applicator Systems, about a CHF 150 million business. We expect Beauty to start growing again in 2020, and we expect all of APS to grow in 2020. Operational profitability, we expect to improve by 20 basis points to 50 basis points in 2020. The impact from the coronavirus is currently unclear and therefore, as I said, excluded from our guidance. It'll be under- absorption related mostly. We closed SFP in 2019.
As I said, we continue to have ambitious cost actions that we'll undertake in 2020 and beyond, and we'll update you whenever there's something significant to announce. Last but not least, the proposed increase of our dividend reflects our confidence in Sulzer's future performance, and it also reflects the independence of Sulzer from the constraints impacting our large shareholder, Tiwel. With that, I hand it back to Christoph to launch the Q&A.
Thank you, Greg, and thank you, Jill, for the presentation. We start now the Q&A. We start with some questions from the room. We'll then take some questions from the call, and also, if there will be questions in the webcast, I will also see them and ask them. First question is, please announce also your name so that the guys on the call know who is.
Good mor ning, Jorg Schirmacher, Baader Helvea. I have a couple of questions. First one will be on the order intake gross margins, which was up 30 basis points. You've talked a lot in 2019 about selectivity in pumps business. Does this remain to be the case?
Do you see pricing power here, or is it more going to be volume, in 2020? On the operating EBITDA margin in PE, is 4.5% realistic on the back of that? Second question would be, are there any further non-operational costs relevant for the operating EBITDA calculation in 2020? My third question, I think you've answered it already, but just to be sure. Sulzer's business is generally very backend loaded.
Given the current situation, slow start into the year, in other industries we've seen the coronavirus potential impact. Is it fair to assume that this year will be even more backend loaded in terms of top line and also especially bottom line for Sulzer? That's it for my side. Thank you.
All right. Thank you. I'll take him backwards and Jill will complete if I miss anything. The backend loaded, yeah, Sulzer has a tendency to be backend loaded. The additional backend loading aspect of 2020 will be what I said about the coronavirus, orders and sales a little bit lower in H1, catching up in H2. Before the corona crisis, if we look at our order intake for January, it was at a very high level.
The year started off well from that perspective. We usually start off slower in sales because we deliver so much in November and December in order to get paid, that we usually have a little bit of a lull in sales in January and February. Order intake was going strong and really the only impact on order intake is corona.
As I said, China is about 12% of Sulzer, which means that it's about CHF 40 million of volume a month. That allows you to get a little bit of a feel for what the impact could be. Nothing drastic, as I said, a bit softer in H1, making up for it in H2. Non-op in 2020, we've got the tail end of the closure of Bamberg and the ramp-up of Bechhofen.
It's really the perfect storm for Girts and his guys because he's got two beauty factories running in parallel in 2020, one which is being shut down, with all that it entails, and the other one which is a construction site because of the expansion. There'll be some non-op related to that as we ramp down Bamberg and as we ramp up Bechhofen. Anything else of significance would be linked to announcements in 2020.
We've got a few things that we're working on, but anything that we do will be something that has a good payback in terms of cost efficiencies. PE, you said, would 4.5% be a good number for 2020? We usually don't give guidance. Well, we never give guidance on a division per division level. If Frédéric only gets to 4.5%, I'll look at him with bushy eyebrows.
I'd expect the number to be higher, honestly. The gross margin on order intake up 30 basis points. You're right, it is on selectivity. Look, gross margin on order intake in Sulzer, there's a mix effect, which means that the more we secure business in pumps, especially in engineered pumps, the more dilutive it is.
You can have a situation where all four of your businesses are improving in gross margin, and Sulzer is still decreasing in gross margin on order intake because of the mix effect. This year, it turns out that we're actually up 30 basis points because all the businesses are doing well. As I said, APS, even in beauty, which is challenging, is still at a high level, at the normal level of gross margin on order intake. Everything else is doing fine.
In Frédéric's business in Pumps, in engineered Pumps, we're really migrating up the profitability of the order intake of end of the backlog in an aggressive manner. None of that is through price uplift. The only price uplift that has happened is in North America, and mostly it's done. It hasn't happened in the rest of the world.
As I told you, we're not projecting in our numbers for 2020 that it will happen in 2020. If it does, it'll be a pleasant surprise. All of it is on selectivity, which means that we're willing to give up volume in order to stick to our guns in terms of what the pricing level should be. If you look at what other peers in our industry are reporting, not everybody is as disciplined, but the guys that reported yesterday or the day before, Flowserve, are really doing the same thing.
If you read what my counterpart, Scott Rowe, is saying, he's saying the exact same thing. He's saying that he'll sacrifice volume in order to improve the margins. Once you have the two market leaders that are being open about their strategy from that perspective, it does send a signaling impact to the market.
If I look at the margin on order intake between where we were at for engineered Pumps, which is a CHF 500 million business, where we were at the beginning of 2018, and where we were in the middle of 2019, there's probably a 400 basis point delta between the two. It's a significant impact. January was also good from that perspective. I'd say so far so good, but it's about selectivity. Did I answer your questions?
Thanks.
Fabian Haecki from UBS. Question on your profit guidance. It seems honestly a bit disappointing. It's a bit a question about this is now 10% operating EBITA is the end of the story. You were talking about backlog margin in engineered Pumps that are going up with 12 months delay should particularly impact positively 2020. You can a bit quantify this impact on pumps and on a group level. Also, you talked about selectivity.
We have not seen significant capacity expansions, your utilization rate is going up. You can be a bit more selective on projects, that should further improve. Pricing is not going down at all, also not much up, pretty stable. Is there any other cost drivers we are missing here, like wage inflation? Is it just as impact because you're still excluding corona out of this guidance? Is there any other elements we are missing we should be conservative on?
Yeah, corona, once again, it's a one-off. It's under- absorption during that ramp-up phase. It really depends how long the ramp-up phase lasts until we get back to cruising altitude. I think you can't guide for that. I don't think anybody would do that. The profitability of 10.2%-10.5%, essentially, it's a guidance based on limited volume growth because we're guiding on essentially low sales growth, 1%-3%.
The reason why we're guiding on low sales growth is that there's a lot of stuff happening in the market in terms of c orona and so on. We said we'll recover the volumes, but we're early in the year. There's still a lack of understanding worldwide as to what it means for the industry, the supply chains across the world. I guess we have a tendency to err on the conservative side.
If we ended up at higher volumes, last few years, we ended up revising our volume guidance upwards. If we ended up at higher volume, that'd have a positive impact on the profitability. At slightly up volumes, in an environment where we are guiding for margin uplift which is not linked to pricing uplift. We said essentially flattish to slightly up volumes in sales. We said flat price environment, essentially the guidance that we have on profitability improvement is all operational efficiency. Now, if any of these things ends up being more positive, then you'll see a more positive impact.
If you take what I said about the engineered Pumps, that 400 basis points of margin delta in the backlog, and you do what's kind of like math in high school, like you've got the number of pickets and the number of gaps, essentially, and you straddle that over two years and you say there's a 200 basis points impact to be traded forward, you apply 200 basis points on a CHF 500 million or CHF 600 million business, which is what our engineered pumps business is.
Call it CHF 600 million to make it easy. CHF 600 million, 200 basis points, that's CHF 12 million. CHF 12 million at the scale of Sulzer is like 0.25%. If you want to think about it that way, you could say that we're essentially, we're guiding for realizing the margin uplift from the backlog in pumps, plus a little bit of improvement across the board.
I think overall, we're true to normal Sulzer form in terms of not trying to oversell what we see in terms of volume as we start the year. As I said, if we continue on a positive trend of recovery and the coronavirus ends up being something that's manageable, then we continue to have a high level of tendering activity. Volumes could be higher. This is what we're seeing today, and once again, it's not about overselling at this point. That's what we think is reasonable. Did I answer your question?
Yes. On the backlog on the pumps, backlog margin or backlog improvement that should feed through in 2020, is there anything, some granularity you can share with us?
As I said, you take the 400 basis points between early 2018 and sort of mid 2019, you apply 200 of that 400 because some of it has already hit the 2019 numbers because we've been trading our backlog very fast, as you saw in 2019. The sales are equal to orders. You take that 200 basis points and you apply it to the engineered pumps, which is the CHF 600 million business, and you kind of get CHF 12 million of bottom-line impact just through the better quality backlog, which is, as I said, about 0.25% of profitability for Sulzer.
25 basis points. We're guiding for profitability improvement from of 20 basis points to 50 basis points. It kind of gives you a little bit of perspective. As I said once again, we're confident that we'll improve the profitability of our Pumps business.
We're confident that the trend in service will continue to be positive also from a profitability perspective. Chemtech will be a little bit disrupted by the Chinese market, which is 30% of Chemtech in the first half. We believe we'll make up for that. Chemtech continues to be on a positive trend. In Applicators, it's going to be the volume recovery in 2020. As I said, Girts is going to be carrying kind of double costs in some areas. From a profitability perspective, he's going to fight hard in 2020. I think you'll see the benefit of that in 2021. That's kind of how I would think about this whole thing.
Okay.
Follow-up, Fabian?
Yeah. Quick on-Capacity. I think you kept your capacity stable. You are still in a growing market. We have enough kind of leeway into 2020 and 2021, maybe also to give a bit of a CapEx guidance here, what's your view on a cycle, particularly in the Chemtech, but also pumps business?
Yeah.
Is there something you rather start to say, we rather err on the side of caution and keep capacity stable, and maybe we lose some orders, or are you moving forward here?
There's no plans whatsoever to increase capacity in the pumps business. Let's be clear. We're very good at squeezing more in our existing factories. You get that operational leverage when you do that, and we have no intention of adding capacity anywhere. If anything, we'll take out capacity.
We'll continue to take out capacity. If you come back in a year, we'll have a discussion about it going down, not going up, I think. The reason for that is that the problem with businesses that are tender-based businesses, where a customer does an RFQ and people bid, is that you'll have three to five qualified bidders, and it only takes one.
It's a combination between science and psychology, and this is why I mentioned that both Flowserve and ourselves are being very clear about the fact that market pricing has to go up, and we're willing to suffer the consequences of sending that message clearly to the market. Everybody has to get on board, and it takes a little bit of time. Different companies are run in different ways.
Thank you. That was clear. The last one, is there any extra costs we can expect for 2020?
Extra costs?
Extra costs, restructuring costs.
As I said in my conclusion statements, we've got the tail end of the member Bamberg and Bechhofen, and anything else would be linked to 2020 announcements. If we do make 2020 announcements, they'll be about taking action on our footprint that will have a good payback. I think that if we have to do something, it's always socially difficult, but from a purely performance perspective, these will be things that will have a beneficial impact on the bottom line down the road.
There's nothing to disclose at this point. This is more a discussion for later in the year, depending on how things evolve. We buy businesses. When we buy businesses, we always look at, can we rationalize our footprint? Can we combine things? Can we put more in the best-performing factories, and so on. That continues.
It's just, we don't call it SFP anymore because I don't want you guys to believe that we're hiding behind a multi-year program forever. I think these announcements are better as a one-off. They're usually easier to explain also, because you'll get more details. That's the thinking. Did I answer your questions, Fabian?
Yeah.
All right. Thanks. I think there was another question in the back.
Yes, it's Dominik Feldges from Neue Zürcher Zeitung. You've mentioned that you are being still perceived very much as an oil and gas company out there, quite cyclical. Obviously, you need to remain attractive both to shareholders and also to young, especially young talent.
Yeah
who want to work for a purpose, a company with a good purpose. The question is really, do you see any need to reposition the company a bit more in the future, maybe further away from fossil fuels, oil and gas, because that's just not so popular anymore? That would be my first question.
The second question is about this decline you had in beauty. Have you not been agile there enough? Why did you miss out on all these independent brands? The third question, I know this is ongoing, or could be asked every year, but the relationship with Tiwel, Mr. Vekselberg and his companions, how does that still restrict your activities, or how much might it impact your image?
Okay. Thank you, Dominik. I'll take them, actually, in the proper order this time. Attracting young talent like Jill and some of these guys, we're very successful in attracting young talent. We are because Sulzer's a dynamic environment. It's an entrepreneurial company where people realize, once they're exposed to Sulzer, that it's a decluttered environment where there's not these multiple levels that you have in a lot of big industrial companies, and the dilution of authority, because everything is a matrix and everything is divided.
We have the tendency to delegate, to empower, to make people accountable. The selling argument of Sulzer is really that if you come on board at Sulzer, you'll be able to measure your impact on the company. People do, and they see that, and then they bring their friends.
In terms of our ability to attract people, it's actually quite high. You had a question, which was a slightly different question, which is oil and gas a deterrent to attracting people? I think it's a very valid question. Sulzer doesn't need to change the strategy. Sulzer needs to change its perception. We're 28% oil and gas. We are 22% chemical.
We're 13% water. Everybody thinks that Chemtech is a business that does stuff in refineries, but most of Chemtech, 60% of it, is actually chemicals. Torsten's business is one of the leaders in the market in bioplastics, biopolymers, emission treatment. Our pumps are the leading pumps in terms of CO2 re-injection. We have a lot of cool things that are happening in Sulzer that we, I think, historically, haven't done a good enough job of putting out there.
The people in Sulzer see that. They're excited by that. We have innovation awards, which are a lot about sustainability, and there's a lot of competition within Sulzer to have the best ideas from that perspective. I think the people internally get it. Externally, we still have to fight this, oh, it's all oil and gas type of perception.
Once again, 28%. Really interestingly, there's a large market trend around ESG, and ESG is here to stay. Environmental, social, governance, it's the trend that's agitating the investment community. In my first four years at Sulzer, I had exactly zero questions on ESG from investors. In my last four months as the EC of Sulzer, I think I've maybe met 90% of the investors I met asked me ESG questions.
The really interesting thing is that the rating bodies, the people that rate companies on ESG criteria, that actually get into the details of these things, rate Sulzer really highly in ESG, which may not be your perception because people have this image, "Ah, Sulzer, oil and gas." If you take MSCI, the big index company, very influential, they rate us as a double A ESG leader.
If you take DWS, which is the former Deutsche Asset Management in Germany, they rate us as an ESG leader. If you take EcoVadis, they gave us the gold medal for ESG. People see the combination of the strong governance, the social implication, and the implication in our community, the fact that we do these employee surveys, where 85% of our employees take part.
83% say that they'd recommend Sulzer as a good company to work at with their friends, and 93% of them say that they'd go the extra mile to help Sulzer be successful. Plus all these developments that we have in biopolymers, biofuels, efficient pumps, and eco-packaging and applicators. The people that actually look at these things in details see it and rank us highly from that perspective. ESG is a positive for Sulzer, not a negative.
Our pipeline of products is a positive for Sulzer, not a negative. Our perception is something that's still evolving, and a lot of it is on my shoulders. I probably should have done a better job preaching the message over the last few years, but better late than never. The substance is there. The communication probably needs a little bit of work, but this is why we have Domenico. Where's Domenico?
Our new head of external communications, joining us from ABB, where he was the Head of Communications for ABB Switzerland. Sulzer is not a company that communicated very well historically. We're trying to do a better job of it, the substance is there. That was the attraction in oil and gas question. The beauty question, did we fall asleep at the wheel?
The honest answer is a little bit. Look, at the end of the day, you kind of have to acknowledge it's great to talk about our good results and to say, we're up 8% here, 12% there, net income is up 35%, no company is infallible. Frankly, on the beauty side of things, yeah, we fell asleep at the wheel a little bit.
We fell asleep because we're the market leader in brush-like applicators for cosmetics, and we're the market leader, and we sell to the big guys. At the end of the day, if all you do is talk to the big guys, you miss the small guys.
Then when it does happen, you sit on your hands a little bit too long. Just for full disclosure, the Applicator business wanted to move ahead with the closure of Bamberg and the retooling of Bechhofen a year before I allowed them to do it. It was a lot of money. I was reluctant. I wanted to see whether what they said about the market was really true. I wasn't disappointed, but the end of the day is we pulled the trigger too late.
A lot of that is my fault, we're still the market leader, and we'll be just fine. Did we waste a little bit of time? Did we waste a little bit of performance? The honest answer is yes. Tiwel. Look, the wonderful thing about our dividend increase is that I can tell you stories about Tiwel until I'm blue in the face, that they're non-intrusive, that they're great guys, that they're easy to work with, all of that.
There's always people that won't believe me saying, "Yeah, I mean, come on, they're Russian." Look, the reality is, look at the dividend increase. We're increasing the dividend in a company where we have a shareholder that has 48%, where CHF 218 million of his money is sitting on our balance sheet. The dividend is going to go up from usual CHF 120 to CHF 137, I think.
He's got 48% of that CHF 137, which will be sitting on our balance sheet again. I mean, it's almost masochistic from their perspective, right? Still they're doing it, which tells you that they have the best interest of Sulzer at heart. Whatever constraints that they have are real, and what's the impact on Sulzer? The impact on Sulzer is mostly that once in a while, once every month, Jill has somebody from Treasury that calls her up saying there's some obscure bank in Turkmenistan.
Well, not a good example. Some obscure bank in Asia or in America that just blocked a payment because they said, "Oh, you have a weird shareholder. We need to understand what that means." Then she'll have to have her people spend a little bit of time handholding the OFAC thing, the license, blah, blah, and then it'll get sorted.
All it means is that Jill has to be nice to our treasury department because they have a little bit more work than they'd have in a normal company. Commercially, it has no impact whatsoever. Hopefully you see that the governance, once again, look at the dividend. At the end of the day, money is the best indicator of these things. They're willing to support a dividend increase despite the fact that they don't get the dividend.
Let me just add to the ESG topic.
Please.
Actually, in 2020, we have the top 200 employees, the senior management members of Sulzer, all having a target that's related to ESG. This is because we believe by leading by example from the top, and that should be also very encouraging for people who are joining us.
Armand will tell you that when we do our employee surveys, Armand is our Head of HR right there. Last employee survey that we did a few months ago, the number one topic that our employees expect of Sulzer is, it's corporate social responsibility. They want to feel the purpose of Sulzer. It's not a criticism. They say, "This is important to us, and we're willing to take part and to propose things and to do incredible things."
I think, in a way, it's a very positive way for us because it allows us to build on something that we're already pretty good at, despite the fact that it's not maybe as visible as we'd like it to be, and to involve people across the company to do good things that get people excited about working for Sulzer. Other questions?
Hi, Andy Schneider from South Capital . An add-on question to the beauty business. It was, I think, roughly 20% belo w consensus in the fourth quarter in terms of sales. I think you also, as you mentioned, had higher hopes for that. Can you tell us why after such a weak quarter, it should grow in 2020? Why? What have you changed? What is different in a little bit more granularity?
I don't look at the consensus. Maybe I shouldn't admit that, I don't know who comes up with a consensus on CHF 150 million business within a CHF 4 billion company. These are people with too much time on their hands. At the end of the day, we've been very clear about the beauty business. At the half year, I said the business is 15% down, it'll be 15% down for the full year.
We said it, we didn't disappoint. I wish it recovered already at the end of 2019, we had a pretty clear view of the pipeline and, getting a new order from a beauty company, it takes a little bit of time because these guys have their product development, they have their market launch. There's a little bit of a lag time.
I think when we look at, Girts can tell you about it at the break afterwards, when we look at how our beauty business is running today, first we changed the management team. We have Florent Ralu who we recruited from the outside, from one of our competitors, and joined us in September to lead the business.
We have a new head of our Bechhofen factory that joined us a year ago. We have a new Head of Sales that joined us at the beginning of 2019. We changed the leadership team. We changed our focus to put more boots on the ground in terms of talking to these independent companies and securing business.
Also there's a market effect, which is that if you follow the Coty's and L'Oréal's and the Avon's of this world, there was a real trend in the market in 2019, linked to skincare. What goes around comes around. We see some opportunities on the beauty side of things. We have an active pipeline, and the feedback from Girts and his guys is that it's going in the right direction. We had a good January in beauty. I don't know what that means. It's one month.
I'd say we're cautiously optimistic. We're not expecting a tremendous rebound. What we're expecting that we'll stop the erosion and we'll start the rebuilding. Where we'll really go into overdrive is when Bamberg's closed, Bechhofen is up and running, and that's 2021. Still from a volume perspective, we expect a modest rebound in 2020 in beauty.
The main thing you changed is basically the sales approach going more to these small brands. That's the main part. Of course, the footprint adjustment.
It's not completely as simple as that, but yeah, there's a big part of that. What you also have to keep in mind is that whether it's the premium segment or the independents, they both have the same constraint, which is a little bit different from the what's called the masstige market in beauty, which is a combination between the mass market and prestige.
The middle market in which we've secured the lion's share of our volume historically, is less decoration intensive than the prestige market and the independent market because these independent companies, it's viral marketing, it's about how the product looks. Therefore, for us, it involved either retooling in terms of our decoration capabilities or finding partners in order to be able to propose things that were attractive to our customers.
There was a little bit of kind of teaming up with people and finding clever ways to address that weakness that we had industrially in decoration that we're filling with the Bechhofen development. It was a question of a few months to get that stuff in place so that we'd have something to sell, essentially. We did all these things. I think it's heading in the right direction.
When you look at your order book in Beauty right now, compared to 12 months ago, client segmentation-wise, do you have now like 20%, 30% of your order book with these small brands, independent brands?
I'll make up a number and hopefully Girts will confirm. What I have in mind is we do something like 20% of our volume with people that you'd qualify as independents. Am I exaggerating, Girts? Somewhere in that range?
It's growing. The proportion is changing slowly down.
Microphone.
Right.
Proportion's changing?
The proportion is changing, the share of mass market orders and projects is going down in comparison with independent brands and prestige labels coming back to us. The mix is changing slowly. What you need to keep in mind for Beauty business, for established brands, it can take up to one year to launch a product. The lead time between when the companies come to us with a new product idea till the time they launch, it could take up to one year.
Okay.
Okay, thanks.
Did we answer the question?
Yeah. Yes. Thanks.
Anything else?
Just two quick ones.
Yeah.
You mentioned additional one-off costs for the beauty segment in 2020. Will they be lower than in 2019 or same magnitude? Do you have any guess for us?
Once again, you're trying to get us to comment on one-off and restructuring costs linked to things that we haven't announced yet. It's really hard to do. Look, a perspective is if you close a factory in Europe, usually it costs somewhere between CHF 20 million and CHF 25 million, something like that. If you downsize something, it's a fraction of that.
The stuff that we're looking at is sensitive, socially painful. We're not 100% sure that we'll pull the trigger yet. It really depends on whether we're able to absorb the volume elsewhere. I apologize for not really answering the question, this is something on which we'll give you an update at the half year. Look, Sulzer is not going to be the company where every year there's a large restructuring number, and it kind of becomes the norm.
It's just that when you start something like SFP and you get people in the mentality of optimizing, if you're successful, they don't stop. We're running out of big things to do. We still have a couple of things that we have on the radar screen, and we'll be clear at the half year, I think.
Thanks. Just a clarification question on the guidance. You said before, okay, it's a little bit conservative also because of the coronavirus. Is the guidance including coronavirus or not?
Well look, the guidance excludes coronavirus in the sense that the main impact of coronavirus as we see it today is going to be an under- absorption impact that we'll report separately because we don't know how much it will be, because it depends on the speed of the ramp up. There'll be a number. We don't know what that number will be yet, but we'll report it separately. We don't expect a volume impact for the full year.
Whether it includes it or excludes it, because we don't think there's going to be volume impact, you could say in a way that it includes it for volume because I'm saying one thing and the opposite in a way, which I acknowledge, which is I'm saying there's maybe a little bit of disruption linked to corona around the world and therefore. I think that the short answer is the impact as we see today of the coronavirus for us will be under- absorption, which we'll disclose separately once we have the tally, and a shift of volume from H1 to H2, but neutral for the year. This is what we see today. Other questions?
If there are no more questions in the room...
There's one more question here.
Delia Bachmann, Der Landbote. You made it very clear that you don't want to be perceived as an oil and gas company, and you kept mentioning those 28%. My question is, where should this percentage be in, let's say, five years?
I don't have a number, the reason I don't have a number is that oil and gas business, it's a good business. We're part of the solution. We're not part of the problem. What we do is we supply the most energy-efficient products out there in the market. As long as the world needs energy infrastructure, you might as well have the most energy-efficient infrastructure possible with the lowest environmental footprint.
That's what we do, and I think that the market understands that, which you see in the way we're ranked in ESG. If you have a look at the detail of our ESG rankings by different companies, they focus on the efficiency of the products we supply to some of these markets. I'm not actively trying to reduce the size of the oil and gas business.
What we've been doing is we've been diluting it by pushing into other areas like water over the last few years. I think it's likely that dilution will continue as we grow other areas of the business. We have the highest growth today. In 2019, it was 17% in water and 16% in chemicals. All of that dilutes oil and gas. It'll happen over time. I think that there's no stigma associated to that business. It's really more of a balance and a perception issue. A balance because it's a good business, but it shouldn't be the main activity of Sulzer, and it isn't today, 28%. A perception because you saw how this meeting went. A lot of the questions were still on oil and gas because it's a volatile type of thing and people are trying to understand for obvious reasons. It'll happen over time, but there's no active target or no quantitative target of taking it to a certain percentage. Other questions?
No, there's also no question in the call, so we can finish the meeting.
Wrap up. Last chance. All right. Well, thank you very much for taking the time to be here with us today. I know it's a busy day. Sulzer continues to head in the right direction. In large part through the work of these guys on the front row. They'll be available to you at the break afterwards. Grab them, ask them questions. Thank you again. See you next time.