Earnings Call: H2 2018

Feb 14, 2019

Ladies and gentlemen, good morning, and greet you, Mitteland. Welcome to Solsys' Annual Results Presentation here in the Park Hyatt in Zurich. This conference call is also being webcasted. The link to the webcast can be found on our website. A replay will be available on our website shortly after the end of this event. As always, I would like to draw your attention to our safe harbor statement, which is shown in our presentation handouts on Slide number 2. Please note that this statement also applies to any verbal statements in the webcast and on the call. The participants here in the room have received a printed version of today's press release, the presentation and the memory stick with a digital version of our annual report. All these documents are also available on our homepage. Please note that our annual report is online only as last year. For today's agenda, we will have the presentation followed by questions. Thereafter, Aperol will be served in the 4 year. For media interviews, Greg and Jill will be available after the Q and A. For these interviews, we have a separate room just behind this room here. May I ask journalists to request to address their requests to Rainer Weihofen so that he can coordinate. So that's enough from my side. The annual results presentation will be held by our CEO, Greg Bouygueson and our CFO, Jay Li. After the presentation, we will open the line on the floor for questions. So Greg, your part. All right. Thanks, Christophe. Hello, everybody. It's a pleasure to be with you today. Thank you for taking the time to be with us. I'll address this once and for all because I get questions from everybody. This is a very NCO like injury because it essentially tells you I ski too much. And I picked the color myself, yes. And for those of you who are following online, I'm sponsored by the Scholtes Clinic in Zurich to which I send my best wishes. But everything is fine. And we have, we think, solid results to present to you today. And with no further ado, I'll get into it. It's been a busy year. Lots of things happening and some good results that we've achieved and that we'd like to share with you. Actually, I should say, we have today not only Joe Lee, our CFO, but we also have Armand Sohay, our Head of HR, who's in the room over there, if you guys want to catch up with him at the break afterwards. This year was, as I said, a busy year, 2018, strong year in all operational metrics. We delivered what we said we would, and we showed some pretty healthy growth. All right. Okay. Everybody awake? Yes. All right. We'll close that door. We showed some pretty healthy growth and that bodes well for the future for Solsys. Sanctions resolved in 3 days, the free float rebuilt to 51%, no impact going forward. And we've performed really well. Actually, one of the areas of the world where we've performed best in 2018 was the U. S. We have some nice stories along the way. I mentioned at the half year that the Sulzer pumps were the dewatering pumps that were used in one of the most heartwarming stories of the year, the Wild War football team in Thailand, all those blue pumps that you saw on the news coverage, these were all soldered. 5,000,000 shares placed into the market, 860,000,000 of bonds into the markets at pretty competitive rates and it shows you that there continues to be an appetite for Sulzer Instruments. Largest oil and gas contract won since the downturn of $42,000,000 pipeline pump contract in the U. S. Connecting the Permian Basin to the coast in Q3. We won the Gold Award at the Digital Economy Awards for our pump's advanced analytics platform, showing that despite the fact that I tried to break CEO form by not using Internet of Things and Industry 4.0 every 2 sentences, we are still doing things that are measurable that our customers are utilizing and that we get recognized for. And finally, a nice environmental breakthrough, a steel and oil project where we are working with a steel company to use the MODEX side that comes out of the steel making process to make biofuels. So a lot of interesting things happening this year and let's get into the results. Orders up 12.5 percent organically 8.4 percent, sales up almost 12%, 11.9%, organically 7.8 percent. The margin of EBITDA margin at 9.5%, up 110 basis points versus the 8.4% of last year. SFP savings of €230,000,000 to date, we beat our target again this year. And as you know, we have another €10,000,000 to go in 2019. That will take us to €240,000,000 Doesn't mean that we'll stop managing our cost base afterwards, but we'll stop reporting it as a standalone program. Financing mix, as I said, we issued 4 bonds between July October, dual tranche with staggered maturities and were fully refinanced. So essentially, Solsys is in good shape with a strong balance sheet and fully refinanced coming out of 2018. We made a few acquisitions, JWC in the U. S. JWC is a business we bought to strengthen our wastewater business. It's a grinder, screen and crusher business, the stuff that you put up front of the pumps. It's a very well recognized product range that's market leading. And takes our wastewater business to essentially number 2 in the market. It might be surprising for you guys, but if you look at our pumps equipment business, there is the size of the water business is pretty much as big as the size of the oil and gas business. I think water is a bit over $400,000,000 and oil and gas is about $460,000,000 at this point. So for all of you who have this image of Sulzer as the oil and gas pump company, our water business is just as big. Medmix was a small acquisition. It's pharma applicators, it's bone repairs and tissue repairs for our applicator systems division. We've made no secret of the fact that we want to build a 4th leg to our applicator systems division and pharma. And it's a start. We have our pharma leg is now about CHF10 1,000,000 of revenue. It's small, but we'll continue to add to it. And Brittany is a small acquisition, the service center for the Californian markets. It gives us access to the service market for wind farms, which we think we've got some interesting things to bring to the market and these guys had a good presence in an area that was of interest to us. Free cash flow, dollars 174,000,000, 37% up. I should really read my notes once in a while. And net debt to EBITDA below one turn. It's actually 0.7 if you count the money we still owe to Renova as permanent capital. And if you don't count it as permanent capital, it's 0.13, I think it's later in the presentation. Because as you know, we continue to pay we continue to owe the dividend to Renova, but we don't pay it. We keep the money. We don't pay interest on it. It's a payable. We don't count it as debt, but if you guys count it as debt, then you'll see later in the presentation, money held back to date between the dividend and the remaining consideration on the shares that we bought from them is I think $185,000,000 You'll see that later in the presentation. Okay. Let's go into the divisions. Pumps Equipment. Pumps Equipment benefited from a rebound in the oil and gas markets. Oil and gas orders were up 39% with upstream almost doubling. So the oil and gas market was very active. You may remember that downstream started rebounding in early 2017 and up stream started rebounding in early 2018. And in 2018, essentially the market was firing on all cylinders and we our order intake was 39% up year on year. Downstream is also up. Midstream, as I said, we received the largest order since the downturn in the U. S, a pipeline connection from the Permian Basin to the Gulf Coast. We've been able to be more selective on orders and essentially manage our gross margin in energy. Energy for us is power and oil and gas in pumps. To drive that up progressively, there's no pricing uplift at this point in the market to speak of. There are areas where we can price up a little bit. But I think what you'll have heard from most of the market participants in the oil patch is that the market is up, but the prices haven't gone up yet. They will at one point, but they certainly didn't in 2018. But because there's more opportunities, we got the chance to cherry pick to a certain extent and that allowed us to bypass some of the lower margin orders and to focus on some of the higher margin stuff that was available. So it's not as much driving up the margin of that business is not as much the pricing uplift at this point, it's more of the cherry picking. But the pricing uplift will arrive hopefully sometime in 2019. Organic sales growth was driven also by water and oil and gas. The water business was also quite good. The higher volumes in combination with lower cost base had significant impact on the profitability of this business. We went to being from being slightly negative to €40,000,000 of EBITDA, 3.1 percent UP ROSA. So it's heading in the right direction and it should continue as the, I guess, the second engine of the rocket clicks in, which is once again pricing uplift, which should happen on top of the volume rebound sooner or later. We strengthened our water business. I mentioned JWC. The pie chart here is we presented it a little bit differently from previous times. You saw that what we did is we separated mid and downstream and upstream. It's not the same volatility and we got a lot of questions on that, so we thought why not break it out. And what you see on this doughnut is actually in pea. Our largest business today is water. It's about 30% of pea. Then mid and downstream is 22%, upstream is 11%. So it's increasingly a diversified market exposure in P. Let's that's what I have to say at this point on PE and let's move on to RES, Rotating Equipment Services. Rotating Equipment Services, we had a strong momentum in Pump Services. As you see from the donut on the right, there's really 3 businesses in here. There's the pump service business, which is 56% of RES and pump service is mostly our pumps. We also do 3rd party pumps, but it's mostly an OEM business. And the other two businesses, turbo and electromechanical, are independent service providers. We service other people's equipment. Pump services are very active. It's repairs and spare parts for our pumps and other people's pumps. Electromechanical was also very active. Pump services was driven in part by the oil and gas market rebound. I mentioned that the power market continues to be difficult. You see overall power is about 12% of Sulzer. There's 2 places where we have power exposure. There's pumps equipment where we do about 100,000,000 of pumps for the power market every year. And there's a rotating equipment services where a lot of the turbo services business is power because it's a lot of gas turbine service. There's also compressors and steam turbines, but it's a lot of gas turbine service. And orders for us in the power market in RES were down 9% on the year. So 9% is not a down is not a good number, but if you compare that with the other market participants, if you follow GE or Siemens, these guys had drops that were much steeper. And what it highlights is that we have a fairly resilient business model with joint ventures where some of the volume is captive. 9% down, but also we had a high comparative base in 2018 because you may remember that we booked a large order in turbo services in the power markets in Q3 of 2017 for $32,000,000 So the combination of a market that's a bit difficult in power and a high baseline in 2017 is the 9% down for the power markets once again. Sales increased along the lines of the order intake and up EBITDA was slightly up. The margins were slightly down. The main driver of that was the competitive pricing environments in gas turbine services. We bought this small service business in California, dollars 10,000,000 of sales, small impact. The remainder of the acquisition effect, if you compare adjusted to organic, is the tail end of the Rotech acquisition that we made in June 2017. But overall, RES almost 6% up organically, a good year for us. Chemtech. Chemtech had a very strong year. Chemtech had a very good sorry, I went too fast. Chemtech is up 20% organically as you see. And it's a 20% organic growth in a year where we readjusted downwards the tower field services business in Chemtech. I'll explain that in a minute. So that tells you that the downstream and CPI markets are were very healthy in 2018 and we see good continuing trends in these markets in 2019. As I said, we're 20% up despite the fact that we shrunk the Tower Field Services business by around 10% in 2018, and we did that on purpose. As you may recall in 2016, we discontinued what we call the extended scope business, which was part of TFS And we took an exceptional non operational charge linked to that business wind down in 2018. There's a separate slide on that, where we highlight 2 offsetting one offs, one positive, one negative. I'll come back to that in a minute. The weight of the separation technology business in Chemtech went from 76% to 82%. So today, more than 80% of Chemtech is separation technology, which is a products business. And this business was growing by almost 30% in 2018. Part of that was the return of larger projects, which had been absent in the market in the years before. Operational EBITDA has increased disproportionately due to higher volumes, improved productivity and a favorable mix. So good momentum overall for Chemtech. Applicator Systems. Applicator Systems grew 4.2% on the year in orders and 6.3% on sales, but that's adjusted. If I look at organic, the number is pretty much flat for order intake in 2018 versus 2017. That's not what we sold to you guys, right? We told you these are markets that are GDP, GDP plus essentially 3% growth a year, and we said we grow at something like twice the market rate on average. And actually that's what we did in if you look at the segments, it's Beauty, Adhesives and Dental. In Adhesives and Dental, on the year, we grew at 5% organic, but we shrunk by 5% in beauty over that same period. And it's not because there's anything wrong with the beauty markets. It's something that we've explained to you already at the half year. It's because we had a single product, single customer exposure. We try to fragment our product exposure because a lot of these products are sold to it's Valentine's Day. So they're sold to a very analytical customer base that is not emotional and is quite stable, but still has there's an element of fashion. A mascara is it's not all science. It's you have to click with the product. And we manufacture these applicators, but sometimes the products take off and sometimes they don't. And it turns out that we had a customer that where we allowed ourselves to have really large exposure to that customer because we were single sourced. And this was a good customer of ours. The volume grew from small volume to a pretty large volume. And then in 2018, at the end of Q1, they decided to pull the product from market and to go with a second generation that they'll start manufacturing with us in 2019. So that created a production hole for us. And it's really hard to turn these things around in a few months because you have to acquire additional products and you have to set up the manufacturing and these things don't come to market overnight. So we had a production gap linked to that customer. We were able to partially make that up, but not fully, hence the 5% down in beauty. But there's nothing wrong with the beauty market overall. It's once again, it's a case of an exposure to a customer that we probably allowed to get too large. We don't have other large customers with single products like that in our beauty portfolio. So it's one of these things where it was very successful for a while and then the customer pulled the product. But overall, as I said, dental and adhesives 5% up on the year. The operational EBITDA and the margin for APS increased in 2018 due to strong dental volumes. Dental is higher margin, so it's a favorable mix for us. And as you see, we went from 20.5 profitability in 2017 to 21.1 in 2018. We acquired Medmix, as I said, in August 2018. Pharma applicators, it's a beginning for us. It's a start to that pharma segment, which it says 1% because here because it was only not even half a year, but it's about on a full year basis, it's about a €10,000,000 business overall, if we take what we have plus what we bought from Medmix. And once again, it's a start. It's a start and we'll continue to add to that. I mentioned these offsetting one offs. Let me go to that right away. What you see here is 2 offsetting one offs and a future upside. So net effect is minus €2,000,000 for the year of the 2 offsetting 1 offs. And then there's an upside for the future, which is going to happen sometime probably over something like a 2 year period and we don't know how much of it, but I'll explain that in a minute. So Tower Field Services, I've mentioned that in the past. We discontinued this extended scope business, which was supposed to take us beyond the tower. Beyond the tower was this idea that the Tower Field Service business was the tower specialist. We replaced the tower internals. And there's a moment in our history where we thought, well, why don't we address things around the tower? It turned out not to be a good idea because we didn't have a whole lot of added value beyond the tower and a lot of the things that were available beyond the tower, things like heat exchangers, these things were actually EPC contracts. I'm not a fan of EPC contracts. I've run EPC businesses and it's a very difficult way to make a living. We decided in 20 16 that not long after I arrived that we were going to deemphasize this business and actually we decided to discontinue it a bit later. So as we discontinued it, we had 2 remaining projects in the backlog. The 2 projects were with the same customer in the Middle East. A small one, some of the 2 projects about €50,000,000 a small one around €10,000,000 and a big one around €40,000,000 The small one we've renegotiated with the customer. So we've renegotiated the price, we've renegotiated the scope, we're in good shape on this one. The large one, we were in execution and we had very significant disputes with the customer in terms of the timing and the scope. Timing because they've made a bunch of changes that impacted the execution of the project and these were people intensive projects, lots of people on-site and essentially our costs went up because of that. And scope because there were a lot of areas in which we had a very different contractual understanding from the customers. But at the end of the day, these projects, you have to execute them and you have to discuss afterwards because that's the way these contracts are built. It's part of the reason why I don't like them, by the way. So that's what we did. We executed the project. We handed over the plants to the customer sometime around the summer in 2018. So it's handed over. The customer is running the plant. The plant is running well. But we had these additional costs that we are in commercial disputes with the customer. Commercial dispute, what we essentially ended up doing in 2018 is we said we'll take all the costs, so $30,100,000 all the costs to complete so that we get those out of the way. And the commercial disputes will treat as an upside. These were claims that we submitted for $36,000,000 I think we submitted most of that. There's probably the tail end of that that's being submitted as we speak. And this is going to be a lively commercial dispute with that customer for the next 2 years probably. But that's the way that market works. It's unpleasant. It's painful. But because we had this offsetting one off in 2018 of roughly $28,500,000 we decided that it was the right time to take all the costs and to leave the upside for the end of that commercial dispute resolution. The upside that I show here, the 28.5% is an equity instrument that we were carrying at cost. It's a legacy policy that we had at Solsysor in the days when we had a lot of manufacturing around Vintitor, we had affordable housing for our blue collar employees. Now we had that for a long time and as operating assets essentially. And over time, as we decreased manufacturing in Switzerland, this became something that we were carrying on our balance sheet at cost. We exited that in 2018. Most of the disposal price was an upside because we were carrying at a cost and sold it for the consideration that you see here. And this offsets the cost to complete that we were able to book in 2018 while having an effect which is close to 0. As I said, once again, there will be upside somewhere in the future. I have no clue how much it's going to be. I have no clue how long it's going to take. It's a difficult part of the world and it's a lively legal process, but that's our life. What else should I add on this? That's pretty much what I have. Let's see. Yes. Okay. So let's go to SFP now. SFP ahead of plan, ahead of targets, €230,000,000 to date at the end of 2018, €45,000,000 achieved in 2018. I had a question earlier this morning. Somebody said, oh, but you came in lower than what we expected in terms of EBIT. We have $10,000,000 more of SFP cost in 2018 that we had originally planned. Actually, the delta is €10,000,000 of SFP cost and the rest is acquisition related costs for JWC and the tail end of Van Sieve Almorhea from the year before. But €10,000,000 more in costs in 2018, also €10,000,000 more of savings and another €10,000,000 to go in 2019 before we stop reporting SFP. As I said, we'll continue adjusting our cost base. We continue making acquisitions. As we make acquisitions, we acquire factories. Sometimes we have opportunity to rationalize by combining things, but we'll stop reporting it as an ad hoc program. We'll continue to be transparent about restructuring, but we won't report it as part of SFP from the end of 2019 onwards. You saw from the 110 basis point uplift in our Op EBITDA that all the hard work we did to in SFP is making its way to the bottom line. And it will continue to be that way as we finish this program. A slide I dislike, but I present anyway because the one time I didn't present it, I was asked why don't you have the slide anymore, the famous Bundesliga table that we introduced some years ago that creates all sorts of issues because we're comparing apples and pears and but still we made our beds and now we have to lie in it. And I'll comment it again this year. So as you see here, Sulzer is continuing to migrate towards the top of the table. When you look at 2014, 9.4 percent 2018, 9.5 percent, it doesn't sound like a great uplift, but you know what happened in the middle in the markets, and you see that we reacted better than most of our competitors. The light blue stuff that you see on those bars is these are the companies that have mostly water exposure, not oil and gas. So this essentially in terms of operating profitability, there's 3 of our peers that performed better than we did in 2018. 2 of them are almost exclusively water related. And one of them is really no longer a peer of ours because they sold the business that was closest to ours. I guess we've made this anonymous, so it says company A probably starts with W and ends with an R, right? And it has EI in the middle. But what it tells you is, look, this is not a perfect comparison. It's we're I don't want to make it too scientific, but it does show that compared to people that have similar exposure to ours, we are trending better and we've probably handled our cost adjustment more decisively and effectively. Management team, I have this up because we had 2 changes in the year. The first change is Jill. Jill is not as you know, Jill is not new to Sulzer. Jill was a Board member for 6 years and she was the Chair of Audit Committee. So it tells you that we have full transparency because our Chair of the Audit Committee becomes our CFO. She knows everything and she's done a great job. And she joined on the 4th April and the sanctions, remember, hit on the 6th April. So Jill had a very, very lively start to her tenure. She performed admirably and we're very happy to have her on board. She'll present the financials in a minute. The other change that we have is that Frederic Lalain, who used to be our Chief Commercial and Marketing Officer, became the Head of our pumps business at the end of 2018 replacing Michael Striker. Michael remains an organization. He actually reports to Frederic. He runs our water business. But we felt that Frederic's profile was suited to what we need to do going forward. And Frederic has a very strong track record, both on the commercial side, but also on the operational side. He ran larger businesses than pumps equipment in General Electric and in other businesses in the past. The rest of our team is stable, has been on board for a few years now and it's a very solid team that I'm honored to lead. Our Board has also been very stable. We had 3 changes in 2018. One of them was Jill going from our Board to our executive team. The other one was Thomas Glantzmann, who'd been a Board member for 6 years, who didn't stand for reelection. And the third one was Axel Heitman, who was a Renova representative who dropped out dropped off during the summer as we worked with Renova to bring their Board representation in line with their influence today, essentially a minority influence. You see that they have 2 out of the 7 Board members. And it's a sign that Solsysor is no longer a company that has an overly influential significant shareholder. As you guys all know, Renova is no longer allowed to buy, they're no longer allowed to sell and they have limited Board representation. We're happy to have them as a shareholder. They've been a very supportive shareholder throughout and they continue to be very supportive shareholder, but they're a passive supportive shareholder. Okay. On those words, I hand over to Jill, who's going to walk you through the numbers and then I'll come back at the end to wrap this up. Jill? Thank you. Thank you, Greg. So ladies and gentlemen, also a warm welcome from my side. Very happy to meet you in my new role. And before I forget, happy Valentine's Day too. Very happy that it's organized on this special day. So let me run you through the next couple of slides giving you some insights into our financials. Greg already commented on the order intake sales and order intake sales and OPEBITDA. So let me comment the other lines. Order intake gross margin, as you can see here, decreased to 33.3%, mainly as a result of the rebound of the oil and gas pumps new equipment resulting in actually a negative mix effect. Now this business inherently carries lower margins, but it is the source of future service and spares revenue. So it's a business that we like to as we have that later the revenues later. Order backlog was up by 4.6% and would have been even higher excluding the negative currency effect. EBIT was 34.5 percent to up to 184,000,000 resulting in an EBIT margin or return on sales of 5.4%, up from 4.5% in 2017. Now core net income, which is the net income including tax adjusted non operational items, increased by 25%, about the same magnitude than operational EBITDA. When looking at EPS, you have to be careful because this is calculated on the average shares outstanding during the year. For almost half a year, We actually have the 5,000,000 treasury shares. And therefore, the average of the outstanding shares would have been reduced due to the effect. So core EPS therefore rose disproportionately by 37%. With the growth in volumes, also the headcount, as you can see here, grew by 5.7% and this is primarily also driven by acquisitions. So let me go to the next slide. Now when looking at our Q4, we are happy to report that the organic growth order growth of 12.2 percent. With the assumption of APS, all divisions contributed to growth. Even in APS, there's actually nothing to worry about because when we the orders can shift from 1 month to the next. But when we are looking at the APS sales, in fact, Q4 has increased. So looking to the market in Q4, what we see is as well very good order intake in oil and gas despite the decline in oil price. So all in all, we had a good Q4. We had quite significant impact as well from foreign exchange, which shaved off about RMB31 1,000,000 or 4%. The acquired businesses JWC, MetMixed, Britney contributed a combined RMB22 1,000,000 to our Q4 order intake that's shown here in bullet 4. Now let me give you some other insights on the next slide regarding our Op EBITDA. As you can see here for 3 years in a row, we've been reporting on market headwinds. For 2018, the market impact is actually neutral. So you can see that meanwhile, the positive contribution from the higher volumes offset by the negative impacts from margins, from mix and from the cost of growth that we have to put in offset. And therefore, the headwinds effect in fact is meanwhile neutralized. And you see the entire flow through of the 45,000,000 0.8 percentage points dropping to our bottom line. I probably do not have to explain volume. Margin is negative as we have taken orders at lower prices in 2017 that became sales as we worked down our backlog in 2018 primarily in pumps equipment. Mix should not also be a surprise as we sell once more again the more of the new equipment business. And the other costs relates to the other operating costs that have increased with our higher volumes. Now what does it mean looking into 2019? Probably you're trying to do your models here. It's going to be quite reasonable for you to assume that volumes will continue to impact positively. Margins at least on a neutral level and mix and other costs are likely to be negative impact once more. And as Greg has mentioned before, we expect additional savings from our SFP in the tune of about RMB10 1,000,000. Now with that, you now have the building blocks that you can use for your model on our expectations for 2019. Now let's take a look at the bridge then the flow through from Op EBITDA to EBIT. In 2018, amortizations have been higher, RMB15 1,000,000 higher than in 2017, mainly due to the acquisitions of JWC, Medmix and Britney, Restructuring and impairment of assets were lower compared to the previous year, but the other non operational costs were higher. As Greg mentioned earlier, we saw an uncoated equity instrument related to affordable housing that we have historically provided to our employees. And from this, we made a profit of 28,500,000 relative to the low cost that we have in our books, which helped to neutralize the cost of the extended scope business. And the other operational costs are primarily the SFP related costs of RMB28.5 million, dollars acquisition related expense of close to 9,000,000. And we have around 6,500,000 that's associated with the sanctions. I mean, earlier on, we had told you that it would be within an envelope of 10,000,000 rather in the mid range and this is where we end now. Total SFP cost in 2018 therefore has been in total 45,000,000. You can see in the headline here. And compared to the year before, EBIT in 2018 increased therefore by 34.5 percent to RMB284 1,000,000 resulting in an EBIT margin or cost of or return on sales of 5.4%. Now let's take a look at the extension now from EBIT to net income. EBIT grew by 34 0.5% to RMB184 1,000,000 as I mentioned earlier. Our financial results was higher RMB8 1,000,000 higher in 2018 on the back of higher level of debt of borrowings. The effective tax rate, slightly lower, 29.8% versus 30.5% in 2017. And the normalized tax rate was 23.1% versus 23.4% in 2017. Difference between the effective and the normalized rate is primarily due to the fact that not all the SFP costs would be tax deductible in the respective geographies that we have. And net income was KRW 116,000,000, an increase of 33.6% compared to last year. Core net income, which is the net income as explained excluding the tax effects of non operational items was RMB223 1,000,000 and that means 6.6% of sales, 25% higher than in 2017. So that means that the core net income to our shareholders was 113,000,000 or 35.8 percent higher than a year before. Now cash, how does it look on the free cash flow? So if you look to our mid year report in 2018 presentation, we then reported a build up of our net working capital. And we had explained at the time that we expect this to be reversed somewhat in the second half. And indeed, this is the case. We have a built up in Q1, in H1 and H2, we had a reversal. And at the end, our net working capital remained unchanged despite a significant increase in growth, Whereas our level of depreciation has remained unchanged from the previous year. The amortizations have gone up due to our acquisitions. CapEx was higher last year as we have invested in a new test bed for pumps in India, which we have shared earlier and also opened the factory for APS adhesive business in Poland. So all in all, our free cash flow actually grew by 47,000,000 higher compared to previous year. The 174,000,000 now represents about 5.1% of sales, up from 4.2% in 2018 2017, sorry. Balance sheet. Turning to the this is somewhat unusual, this balance sheet, in the sense that we have some special items, but we are fully transparent here. You see we have a total of JPY 185,000,000 just now you heard Greg talk about that. That is RMB185,000,000 owed to Renova, but not due yet. We have splitted that out so you can make your own calculation. And it is not that, but rather payable. That's because it doesn't bear interest. There's no maturity tenor to that. And both would be necessary prerequisite or conditions for setting it as debt. But nonetheless, we show this transparently for you. So part of the RMB185 1,000,000 is the 2018 dividend of RMB76 1,000,000 that we have not paid out. And the other RMB109,000,000 relates to the share repurchase, which we now would have to repay to Renova. So again, once more, there's no maturity date on this and it's non interest bearing. So depending on how you look at it, you can see here that our net debt to EBITDA, with that included, it would be 0.7 times. And when we were to take that separately, then our net debt would be slightly higher to 4 to 4. And as a result of which, it would be 1.3 times, but both of which are in very healthy zones. This if we look then to what we have done during the year, we have issued 2 dual trench bond. And the details of the bonds are respectively here that allows us more financial flexibility. It gives us a better maturity profile all in all. And it basically allows us to have a very flexible balance sheet at this point in time to support our growth. Now on the dividend side, you can see that with the good free cash flow, our Board of Directors will propose an unchanged dividend of CHF3.50 per share. So if you have bought this at the end of on 31st December, taking that as a reference, it would translate to 4.5% in terms of dividend yield. And when I look to yesterday's close of 9,115 in terms of our share price, that would then still be a yield of 3.84%. So important to mention once more the Renova's dividend part of the dividend which is about REN58 1,000,000 in this year when we would have the RMB350 1,000,000,000 that's their share for the 48.8% stake will not be paid out like before. And we will once more for the portion that is coming out from this year be reflecting it as a payables just like the RMB76 1,000,000 that I spoke about. Now with that, I think I would have covered my section, and I would like to pass now to Greg on the outlook. Thanks, Jill. Thank you. Jill will be back for questions. We'll the both of us will take questions. So I've got 3 slides, I think. Outlook. Our markets all our markets are going up except the power market, which is 12% of Solsysor, where everything else is showing positive trends. It's not a very popular view these days, because whenever I say that we've got good market momentum and we our early indicators are unperturbed and showing that momentum of 2018 is continuing in 2019. I get a lot of questions, so yes, but what about the China slowdown? What about the trade wars? What about different impacts? But the reality is this is what we're seeing today. We're seeing the leading indicators that we have are things like non binding offers, inquiries from customers. And we track that to see whether these inquiries that will lead to orders maybe 6 months down the road or a year down the road, whether these continue to hold up and they've been holding up. So we don't see a slowdown at this point. And in oil and gas, unless the world goes into recession and demand starts going down, I really don't see how there'd be a slowdown. As I said again, pent up investments, look at the big five oil companies, 3 out of the 5 have increased their CapEx for 2019 very significantly and the other 2 are roughly flat. So that's what our customers are saying, that's what our early indicators are saying and that's what the market is saying at this point. So good momentum and a pretty good balance that allows us to feel optimistic about 2019. But once again, We stay close to our customers, we stay close to the market, we understand the world is a difficult place and we are able to react should our businesses slow down in any area. But at this point, we're not seeing it. Guidance. Guidance, 2% to 5% for order intake, 3% to 5% for sales, around 10% profitability on an UP RZA basis for 2019. The 2% to 5% in terms of order intake, if you remember our guidance for 2018 early in the year, I think was what was it, Christophe? 5% to 7%. And 5% to 7% was all in including non organic and the 5% to 7% translated into 3% to 5%, percent excluding acquisitions. This is organic because there's no significant acquisition impact for 2019 because we made a significant acquisition JWC with about $80,000,000 of sales, but that was in January. So therefore, you've got almost a full impact in 2018. And the other two acquisitions, Medmix and Britney are small and therefore they're negligible in terms of the delta between organic and non organic. So these numbers are pretty much organic numbers. And they from an order intake perspective, it reflects the 2% to 5%, I had the question before this meeting. It reflects a view on upside and downside essentially. We the market continues as we think it will. I think we have a chance to perform well within that guidance. But it also is reflecting the fact that there could be instability down the road and that we want to make sure we come out with a range that we feel comfortable that we can execute. So that's what we're showing here. The 3% to 5% sales, historically what we told you is that orders in year end are pretty much sales in year n plus 1, give or take, because we have a mix of short cycle to long cycle that changes all the time. More short cycle in the last few years as we developed APS, long cycles coming back as the oil and gas rebound drives the order intake. But if you take the middle of that 3% to 5% guidance in sales, you'll find roughly the order intake of 2018. So it's in line with what we said historically. And the around 10% of Oprosa is we continue to have the we continue to feel the benefits of both the volume increase and the results of our cost takeout over the last few years. As I said, there's no significant adjustment linked to acquisitions because JWC early in the year and the rest was small. And on those words, I'll move to the summary. And summary, successful year at or above guidance on all our KPIs. As you know, we took our guidance for orders twice up. We took it up twice in the year 2018 despite all the external stuff that we had to cope with during the year. So it tells us that the business has good momentum and is resilient. The increased SFP commitments, another €10,000,000 to go in 2019. But once again, it doesn't mean that the extent of our cost takeout in 2019 is €10,000,000 It means that what we report as part of SFP before we close the book on SFP is €10,000,000 But we'll continue to adjust our cost base in a proactive manner. We just won't report it as part of SFP. So we'll freeze the costs and we'll freeze the savings and the rest of it, we'll still report, but we'll still disclose it to you guys, but we'll stop talking about SFP. All markets expected to grow in 2019 except power, which once again is 12% of our business. And volume rebound plus the competitive cost base are driving our profitability upswing. We're not factoring at this point a price uplift. We think it will come, but we'll talk about it when we have something that we can measure. And for the time being, it's volume and cost essentially. I've added a pie chart at the bottom of it as a conclusion because I've come to realize over the last 3 years that 80% of the questions I get are on oil and gas. And I think it underpins this notion that Solsys is a really cyclical company that's exposed to the oil and gas cycle and we are exposed to the cycle, but actually if you break down our businesses differently, aftermarket applicators and water, I mean water is wastewater mostly and wastewater is a GDP type business. It's driven by population growth. People don't stop I always go down the wrong path if I start commenting this. So look, it's wastewater is not a cyclical business. Applicators is not a cyclical business. Yes, you can tell me, oh, beauty went down 5 percent, but it was a very isolated case linked to one customer. Otherwise, these are GDP markets and these are markets where we do better than GDP ourselves. And aftermarket is resilient. It's spare parts and service and even in the downturn, even on the oil and gas related part, you saw that we didn't swing much. So essentially, if I take the I've put the water aftermarket with water. So this is why maybe if you look at the aftermarket number, you'll say, well, it's lower than what we usually say. It's because the water aftermarket is in water. But if I take aftermarket applicators and water, this is 2 thirds of Sulzer, the order intake, and it's more than 2 thirds of the profitability. So I'm trying to alter this notion that 80% of your concerns on Solsys should be oil and gas. I really don't think that's the case. I think the business is shaped differently today and hopefully this is the beginning of an explanation of that. On those efforts to hopefully slightly alter your perception, Gill and I are happy to open it up for questions and answer anything that we can answer. Thank you, Gill. Maybe just for organizational matters. We first take a couple of questions from the room and then we can also the guys at the call can also ask some questions. So we flip forth and back. And that also the guys on the call know who you are, please, whenever you ask a question, say your name and firm, please. We start here. Thank you very much. To Oliver Henbach, AWP. You said last summer that you were a bit worried about the trade dispute. In the meantime, some fees and customs are introduced. In what way did this take influence onto your figures, onto your business? And second question, also a bit politically, did you take prepare any measures to face the hard Brexit? Jill will take the first question, the cost of tariffs questions on measures related to Brexit. Jill? Well, I think on the cost, I presume you're referring mostly to the tariffs that was imposed. It's we have some temporary effect, which we took and some of which we could manage by managing our supply chain and some of which to the customer. But overall, it's a low single digit that we have taken in our books, the net effect. Yes. 4,500,000? Yes, around 4,000,000. Yes, something like that. Somewhere between 4,000,000 and 5,000,000, so not very significant. Yes. Because as Jill said, we were able to rejig our supply chain. Whenever we buy externally, we usually have multiple suppliers for the same thing. So you can if we have a supplier from China and the tariff is an issue because you're selling you're bringing it to the U. S, we can shift to another supplier. And if it's our factories internally that are providing products, we can also change the flows. The example I've used in the past is applicators for adhesives. We have a factory in Poland and we have a factory in China. Historically, the Chinese factory is supplying the applicators for adhesives to the U. S. Turns out that adhesive systems are on the tariff list. So what we do is we have something which is not very logical, which is that we have China supplying Europe and Europe supplying the U. S. There's a cost, there's a logistics cost and it's part of that $4,500,000 that we talked about in terms of adjusting these things. But we can adapt. We're at this point in time, unless you have a crystal ball on geopolitics, it's about maximizing flexibility. Maybe at times you're a bit suboptimal, but at least it allows you to sort of react on your feet essentially. Brexit flows from Europe into the U. K, CHF 20,000,000 a year flows from the U. K. Into Europe CHF 30,000,000 a year. It's not very material because if you look at what we have in the U. K, we have a large service business, which mostly is a domestic business. We have a pump factory for oil and gas pumps, which mostly oil and gas pumps don't go into Continental Europe. And we have a water factory in Ireland and Ireland is part of the EU. So essentially what we have in terms of measures is our factory in Wexford. Historically, the trucks drive through the UK and go to Continental Europe. I mean the trucks will go on a ferry in Ireland and go to Continental Europe directly, so that we don't have to go through customs twice probably, if there were to be something like this. I mean, these are the type of plans that we're talking about. It's really not rocket science. It's the scale of it is limited for Solsir and it's quite manageable. Andreas Neijer, Finance and Veatchchaupt. Concerning the pumps equipment, the margin there is still very low with 3%, 3.1%. But in 2 to 3 years, what is possible as a margin improvement? And what has to be what has to happen in the market that the margin can go up? And what can Zolto do to improve the margin further? Well, pumps equipment is really 3 businesses. It's an engineered pump business, which is oil and gas and power. It's a standard pump business, which is our water business. And it's a configured business, which is our industry business. And the industry business is doing very well. It's growing. It's at very competitive profitability if you benchmark this with anybody else. The water business is growing also and it's the profitability is still increasing. It's we're in terms of EBITDA for the water business at this point, we're high single digits, but this is something that this is a business that should be double digit and will be double digit down the road as we continue growing and as we continue generating the benefits of the cost takeout we've had over the few years after we acquired Cardo, there was a lot of integration that we had to take care of. So industry, I think business as usual, water, the growth will continue and that profitability will continue migrating up because everything is in place for that. And then it's about the engineered pumps. And the engineered pumps, the picture is a bit distorted because the engineered pumps, all the service and spares are in RES in rotating equipment service. So you only have the products, the new products in PE. And the oil and gas business and the power business for these capital goods is these are businesses where you make all the money on the aftermarket. I mean look at the GE and the Siemens results on their power business. They break even at best when they sell turbines and they make the money down the road. The customers are built that way and it's very hard to alter the view on where the value should be recognized by the customer. Now the margin is still going to go up and should go up still significantly because you've got essentially 2 things. You've got the market rebound in oil and gas where the pricing has not gone up yet and pricing will go up because as people see their factories filling up, there's a moment where they change their pricing by increasing it because they feel that they're able to take the chance of losing. You're still in a market where people felt that they had to grab whatever they could grab. And part of our guidance for 2019 is also we're going to be selective. We're not trying to drive volume for the sake of volume in engineered pumps. We have to take the prices up and we have to make that business healthier from that perspective. And then the second impact is as the volume goes up, the absorption goes up because we're not building factories. So the combination of these two things will have a significant impact on the Engineered Pump business. So what that means in terms of P, the margin in P is going to continue to go up. At this point, we're not giving a guidance on margin for PE down the road, but it will certainly continue to go up. And things are in place in terms of the cost takeout, the way we're organized and the commercial policies that we have in terms of being selective and using the fact that we're a market leader to try to contribute to driving the prices back up in the market that really needs it. So the trend is going to be up clearly, by how much and how far and how long it will take, we're not guiding on at this point. Question right behind you, Geraint. Thanks for taking my questions. This is Vasco Forger from Foamtope. So maybe starting with the first one. In terms of markets, your comments were quite bullish. So is it fair to assume that also January was another strong month, in particular when having in mind that last year, you were facing rather tough comps? And then the second question related to this. You mentioned you apply sort of a cherry picking strategy, so some projects you are not accepting. So is there other competitors in the market out there who accept those projects still? Or what is happening with those? The you're trying to get me to kind of like give you the play by play of where we are in January and I'll succumb. January was actually a good month. So it's the momentum is intact and January was a good month by all metrics. So once again, this is not gloom and doom. This is we see the market continuing on its momentum. We I had the question of are we guiding conservatively. Well, last 2 years we took our guidance up during the year. We have a tendency to recognize that there are geopolitical risks that if there was a simple view of how the market is going to perform this year, we'd all be rich. But what we rely on is our early indicators. Our early indicators are good and the momentum continues into January. So no change on that. And the other question, I'm sorry, was what? The cherry picking. The cherry picking. Cherry picking, look, it only these are tender markets. There's a call for tender and people submit a price. It only takes 1. So it's the process of having prices go up in markets that are not organized markets. So essentially, I mean, this is not a cartel clearly, as you can see from the margins in Engineered Pumps. The process of that is people have to get on the same have to have the same read of the market over time. And there are companies that still are well, nobody I'll say it differently. You look at our growth in 2018, most of our competitors are not at those levels. So what that probably tells you is that there are companies out there that are still probably more volume challenged than we are. We're not comfortable by any stretch of imagination in Engineered Pumps. We still have I mean, we're running like 1.5 shifts on most of our Engineered Pump factories. So it's not we're not back to the heydays, but we're we have enough visibility in the market that we feel that we can be selective. And if you take oil and gas, I mean, there's we're a market leader, we're the market leader. It's essentially us and Flowserve at roughly the same level. I think over time, the market will pick up in terms of pricing because volume continues to have good momentum and people have taken capacity out over the last few years. But we're playing our parts. We'll see when that happens overall. Maybe last question for Jill on free cash flow. So last year, you opened up 2 factories. And is it fair to assume that CapEx will be lower in 2019? And with regards to net working capital, you kept it basically flattish, which was basically quite strong performance. So any further improvements on that side in 2019? Thank you. You. We don't guide on the working capital. But what I can say to you is that certainly, we continue to look into how to improve our working capital as we have done in 2018, managing that we stay stable on that despite the fact that we have a higher growth. We do still have the seasonal effect. And you can see that traditionally, we tend to be high on the first half of our work in terms of working capital and then we are in the second half better. So I still continue to see that kind of pattern just because it's reflecting the way we run our business. And on the topic of CapEx, CapEx wise, we still have some increase for 2019, primarily because we are also expanding I think we talked about the Bechoven plant that we will be doing in terms of the APS in expanding the APS capacity as well as in addressing some other new segments. I think that one is the resident beauty expert. Yes. I've tried all the applicators. We guided last year, we said we'd be up in CapEx versus or normative level because we said we're opening the factory in Poland for APS Adhesives and we also had the new test bed in India for pumps. The Indian government changed the rules. You have to test with in country. We were testing outside, so we had to build a test bed. The factory the Adesis factory in Poland is up and running and all of that is good. The test bed in India, we delayed it a little bit. So therefore, we spent less in 2018 and we have the tail end of that in 2019. And the Beecofen APS Beauty development that Jill talked about, I said that the market in beauty is healthy and the market is healthy, but it's changing in terms of customer types. The beauty markets today, it's I'm trying not to feel self conscious lecturing you guys on the beauty market, but the way the beauty market works is historically, the beauty market was driven by the large companies, the L'Oreal's and the Coty's and the PNG's of this world. And these are because we're the market leader in Europe and the Americas, those were our traditional customers. If you look at how the beauty market is evolving today, the large incumbents are suffering in terms of growth. And the growth is being captured by independents. And the independents are essentially small companies that have no assets mostly, and they launched their products through viral marketing. So the approach is essentially you get Kendall Jenner to endorse a mascara applicator that looks like a snowflake for Christmas and you she communicates on that and demand picks up and suddenly you have to make a mascara applicator that looks like a snowflake. And we're the guys that make these things, but these customers are very different. Our traditional customers, they spec, they iterate, they have strong views on a lot of the industrial aspects and a longer lead time. The independent customers, they have really short lead times. It's about viral marketing. The market today is not the market tomorrow. So it's and they have no assets. So what they want is our traditional customers tell us make the applicator and we'll fill it, we'll put it in boxes, we'll send it to Sephora. The independents they say make the applicator, but the fill the applicator yourself, so get the mascara and fill it, put it in boxes and send it directly to Sephora. So for us, it's a great upselling opportunity because these customers rely a lot more on us for things that we can make money on, but it forces us to reconfigure our business essentially so that we can make those lead times and we can incorporate these decoration heavy products that these independent customers want. So we're spending somewhere between CHF20 1,000,000 CHF30 1,000,000 to double the size of our plant in Bicco for next year and to in house decoration capabilities and to shorten lead times by about half. And we think that's going to make us very, very competitive on those customers going forward. And we think these types of customers will continue to capture a disproportionate amount of the market growth in Beauty. So it's really about adapting the business for the evolution that we see in the markets. And that's a CapEx that's a little bit out of the ordinary for us and that is mostly going to be incurred next year. And to your point on cash flow, I mean, in the past you have seen in the previous years, we traditionally have about 4% to 5% free cash flow as a percentage of sales, and we see ourselves continuing with that. Hans Meyer, Dorges on Zager. Airbus, as I've seen, is a customer of you. They announced to stop producing the A380. Does this have any impact on you? Airbus is not really a customer of ours. As much as I've seen on your homepage right now. On what? On your homepage, it's written that you're producing a clue. Oh, we produce it okay, I apologize. We probably produce Adesis. I'm sure we do, if you've seen it. We produce Adesis for Airbus. But our total Adesis business is like 150,000,000 dollars And I'm 100% sure that there isn't that Airbus is not material in this. I mean, it's so for us it's some customers go up, some customers go down, some customers shift things out. I don't think Airbus is going to stop making planes. The adhesives are the same on whether it's an A380 or A320neo or whatever. It's I don't think there's a specific Adesa for the A380. So it's really more about them than it is about us. It's just like indirectly one of our big customers is Apple, because we make adhesives for people like Foxconn to make the iPhones. We're actually sensitive to iPhones also. But it's a mix of customers and what explain in Beauty, one customer with one product that had a disproportionate weight, really doesn't happen overall in our APS business. So, no, Airbus not an issue for us. Question behind you, Werner. Janik Dusz, Credit Suisse. I have a question on leverage. And basically, you always highlighted in your slides that you have substantial headroom for acquisitions or dividend, sorry. And basically, you don't do that anymore. Now you're at a fairly moderate level now, and your dividend is stable and you only do bolt on acquisitions. What has changed? Or do you have a different target now? No, actually, it's important question. Nothing's changed. We our bread and butter is the bolt on, add on, whatever you want to call them, acquisitions. And why? It's because it allows you to be really targeted. You buy something that doesn't come with a bunch of other things that you don't want. It's easy to integrate usually because it's usually single market or a single product and it's the way to integrate it into your business is quite straightforward. And mostly the valuations are pretty good and you see that we're a value investor, I guess, is the way I'd call it. Somewhere in the back of the presentation, there's the multiples that we paid on the businesses that we bought over the last 3 years and it's mostly somewhere between single digit EBITDA multiples, somewhere between 9% and 10% and some of them lower than that. What I've said in the past is we're open to 2 things. We're open to we think there should be a market consolidation in the flow control space. And we continue to think that this market needs it and that it would create significant value to shareholders. But you got to be too to tango. And it didn't happen when the market was down and it's probably not going to happen at this point when the market is rebounding because people are focused on capturing growth. So we're still open for business. We believe that scale matters in Flow Control because once again you make outside of combining ranges or factories, you make all the money on the aftermarket and Solzer to operate its pumps business needs 100 service centers around the world. Most of our competitors have somewhere between 101 150 service centers. You combine any of these two companies, you still have 100 service centers because that's full coverage. So there's value to scale. The flow control market is still fragmented. But as I said, you have to be too too tango. And at this point of the cycle, I've given up hope that anybody will want to focus on value creation from that perspective. And then the other thing that we're focused on is, we have the means to make larger acquisitions. And actually over the last 12 months, we've looked at larger acquisitions. We've bid, we made binding offers on 2 large acquisitions. And when I say large, it's kind of roughly close to CHF2 1,000,000,000 of enterprise value. But in both cases, we walked away because we have a view on value. And if that if the process or if the seller runs away from that in a way that we're not comfortable with, then we'll pass. So we'll continue to look at things. But once again, it's not about just buying stuff for buying for the pleasure of buying. It's the value creation equation has to be in place and it just hasn't been for the things that we looked at over the last 12 months. We'd still do something if the right business came along. But right now, we don't have anything large like that, that we're engaged on. We engaged on 2 such deals in 20 18 and actually the tail end of 1 was recently. But at this point, we don't have anything active in terms of large acquisitions. Doesn't mean that it's not going to happen later in the year, but it has to be the right business, it has to be the right value. Any more information that you were looking for, but anyway. Okay. Is there a number? Is there a factor of leverage that you will be comfortable with? We intend to stay an investment grade business. We've got good cash flow generation. It's I think we're capable of that and the type of things that we're looking at are not in ranges that make us uncomfortable. Thank you. Right here, Werner, upfront. Yes. Armin Reshbergoff from ZKB. First question, you mentioned a big order connecting via pipeline from the Great Basin to the ocean in the south in North America. How big was this? Euros 42,000,000 €30,000,000 booked in Q3, euros 12,000,000 booked in Q4. Don't ask me why it was booked in 2 parts, but it was. Is that the right number? Am I making it all right? Okay, good. Okay. Then regarding the dividend you keep from Renova, what's the plan there? What will happen in the future and when? Well, it's a complicated question. I've addressed it in the past and I'll try to give you again my view on where this thing lies. Renova, when we were collateral damage to the sanctions applied on Renova, We essentially bought shares from them. We worked them down to below 50%. And we signed an agreement with them, blessed by OFAC, that essentially limited a certain number of their rights. And one of the things that limited was limited by this agreement is Renova agreed that we would not pay the dividend until. And the until is it's the if I paraphrase the wording essentially, we will pay the dividend to Renova the day Solzer through a legal counsel of its choice gets a legal opinion that says that there are no secondary sanction risks to Solzer associated to paying the dividend. It's quite a high threshold because lawyers probably wouldn't confirm that my cash is pink. So getting them to confirm something like that is so it's I wish the best for Renova. Victor Vekselberg has been a very supportive investor, continues to be a very supportive investor. I really take no pleasure in what's happening to them. But the reality is that we can't pay the dividend to them as long as we don't have certainty that it doesn't expose us to anything, which essentially the simple way of looking at it is probably until the day he's no longer under sanctions. And there your guess is as good as mine. The U. S. Political climate as it relates to Russian sanctions is probably not conducive to lifting sanctions anytime soon, at least my read of the same newspapers that you guys read. So I think that money would be on our balance sheet for a while. And it doesn't carry interest, it's not sequestered, we can use it for financing. It's look, the Renova guys and this I mean, I should really give them credit for that. They could have made that a lot harder at the time when we were negotiating over the weekend. But when we said, look, we can't pay the dividend, Victor Vekselberg's reaction was keep it in house, don't sequester it, use it to finance the company. If I can't have it, Solsys might as well do something positive with So look, it's a good form of financing for us. And we hope for Renova that we'll be able to pay to them sometime down the road, but I don't think it doesn't there's no indication that it's anytime soon. Did I answer your question? Yes. I have 2 more questions. Please go ahead. Okay. One is, you mentioned costs from sanctions and mainly due to the fact we just spoke about? Yes. Also maybe about Iran or can you have some figure there how big Iran might how big the costs were there? Iran as a business for us was I think what we said in the past was that it was not material because order intake in 2018, I mean, we stopped taking orders in Iran early in the year, but what did we say for 2018 for Iran? 0.6%. So Iran was not a very large business for us, but it was a business for us. And what we did is when the U. S. Sanctions were announced, we went into full wind down mode. So we had a local office, we had a backlog. And what we did is, in line with the U. S. Sanctions, there was a wind down period where you were allowed to deliver and get paid for orders that had already been taken. And essentially, we delivered everything apart from, I think, the remaining backlog that we didn't deliver for Iran was in single digits CHF 1,000,000. And it wasn't even stuff that we had mostly it wasn't even stuff that we'd started. It was stuff that we didn't start because we knew we'd never completed in time, so we never expended much money on it. But there was probably a little bit of there was a little bit of write off still and but it's all low single digits. It's all low single digit. All low single digit. So it was very effectively done in terms of the wind down. Shame for us because it was a booming market, but it is what it is. So look, Russia, Iran, Venezuela, it's you have to be nimble these days, because it forces you to adapt all the time. You had this another question? Yes, yes. Regarding aftermarket, if we go to Page 27 or Slide 27, there you have an aftermarket share of 40% and then some from water, including aftermarket. Yes. So you're trying to reconciliate the reconcile, I'm sorry, reconcile the numbers. Exactly what I pointed out to. I said you're not going to recognize the number because so if you look If I turn to Page 29, I get another figure for off the markets, 51%. Yes, I knew this was going to happen. See, it's a good question. But it's the beauty of mathematics because here what it says is that 51 aftermarket excluding APS, because APS there's no notion of aftermarket. APS is a business you sell a product and it's a disposable product mostly. So when we were indicating aftermarkets, we were always saying excluding APS because we're trying to give you we didn't want to count APS as aftermarket, because you guys would have said, oh, you're counting APS as aftermarket, it's not aftermarket. We didn't want to count APS as new equipment, because you would have said, oh, it's new equipment, Sulzer has a lot of new equipment, whereas APS is very, very resilient. So we were kind of between a rock and a hard place and we said, we'll give that split without APS. Now the split here is all of Sulzer because we're counting APS. You got APS here, applicator here, and then you've got water. And water is 12% overall. I think in water, probably a third of water is aftermarket roughly. So if I take 4% for the hell of it that makes me at 44% aftermarket on all of Sulzer. So if I take 51% aftermarket divided by Sulzer without EPS, which is probably KRW 3,000,000,000, It's probably equal to 44 percent aftermarket if I divide by KRW3 1,000,000,000. I mean, you guys can do the math, but you know what I'm talking about, right? Want me to yes? Did I explain that well or did I lose you guys along the way? It's 51% of Solzer minus APS or it's something like 44% of all of Solsys including APS. Because once again, it's not to confuse you guys. It's just the reason why I wanted to use this slide instead of that one is that one's always been an attempt to get you guys to stop thinking about us like this incredibly volatile company where horrible things were going to happen, right? But APS was a different animal. So if I stick APS in, you guys the impression that we're more volatile. If I stick APS in aftermarket, I give you guys the impression that I'm trying to pad the aftermarket numbers. So instead, we went with essentially what we're trying to talk about is low cyclicality, right? So this is low cyclicality. It's aftermarket for everything except water, water and aftermarket for water and EPS and it's 2 thirds of Solsys. It's a different way of looking at it. And I apologize if we've confused you guys. It wasn't the intent. Please, please. Thank you. Hassanoff Foletti, Octavian. I wanted to ask a question on this subject as well. If I take the 40%, so forget the water for a moment, that's about EUR 1,400,000,000 in 2018. And RES, which I imagine is included there, is €1,100,000,000 So can you give an indication of what the €300,000,000 is? Where did it come from? It comes from 3 places. The lion's share, the €1,100,000,000 or €1,200,000,000 is RES. So RES is totally inside there, I imagine. RES total is inside there, yes. And then in PE, you have aftermarket, which is the water part that you see here and the water part is still in P and the industry part is also still in P, which is not broken out here. So industry services in here. The reason for that is water and industry, these are standard configured pumps and it's an industry where the aftermarket is smaller because people have a tendency to take out the pump, put a new one in. So in terms of supply chain, you can't really it doesn't make business sense to have a separate supply chain, a separate business for that because there's not enough scale for it. So we keep it with the new equipment and therefore it's counted in PE. And we're also counting the TFS business, because when I exclude the business that we discontinued, the rest of it is all aftermarket. But not, let's say, the separation part of Chemtech is not there. ST is not there. We count that as full product. Thanks. Other questions? Eugene Pergo from Research Partners. You were talking a bit about the engineering pumps. And I wonder whether you can see in the oil and gas business, especially in upstream, some areas where especially interesting like enhanced oil and gas discovery or deep sea geographically or thematically, which are especially good or especially weak maybe? The market is and upstream is because your your question is on upstream, right? So the market is quite active overall. It was how much were you buying upstream and for pumps in 2018? Almost doubled. It's like 40% or 50%, I think it was like 50% up or something like that or magnitude, we'll get the exact number. And we're benefiting from investment trends throughout. In terms of things where there's potential for differentiation, I guess, where you're not just rising with the tide, there's things like it's counterintuitive, but the subsea market is quite interesting because there's really well, first of all, there's really only 2 companies that have subsea pumps. We're the 2nd mover. There's a historical player that had pretty much a monopoly and we developed the product with FMC, which is now Technip FMC over the last few years. And we've put the first 2 in the water in 2018, 1 in Brazil and the other one in Africa. So we're a player in that market now. It's not a massive market, but it's a market that has interesting trends. 1, it's a very complex product, very differentiated, which is good for pricing. But the second one is in a world where people think oil companies will not invest in deepwater because deepwater is expensive. But actually deepwater is in many areas of the world is quite competitive. If you take Brazil, for example, I mean Petrobras doesn't really have a choice than to invest in deepwater because that's where the reserves are. But also there's been so much work done on deepwater that the value equation for our customers is actually a good one. And what they do is they look at some of the subsea pumps. What they look at is look at existing fields and adding a platform is really expensive. We're in a world where oil companies are trying to favor investments that have shorter paybacks and less exposure. So what they'd rather do is a field extension, but sometimes the field extension is complicated because the platform is already saturated. And when you can have a subsea pump instead, you're taking real estate from the platform onto the seabed and therefore you're allowing yourself to tie more wells back to the same platform. So it's a really interesting play in terms of fuel extension for oil companies. And we have another product range that plays the same thing. We in our Chemtech business in ST, we have an upstream business that we built from 2 acquisitions. And this upstream business is essentially what it does is it does in line separation. So traditional separation, it's big equipment that takes a lot of floor space. What we do is inline separation, which is much more condensed, which allows to free up real estate on platforms also. So we've got the subsea pumps and the in line separation subsea pumps in PE and the in line separation in Chemtech. And both of those, it's a play on freeing up real estate on the platform so that you can have field extensions. You can tell I'm more comfortable on drilling than I am on the SCAR applicators, but I used to be a drilling engineer in a prior life. Other questions? Maybe a question for Gill. You gave on Page 18 the building blocks for the EBITA margin next year. I was wondering if you can give a similar statement for the next page, the building blocks for below that line. For below the line, let me see. We are talking about Slide 19. Okay. I think on this part, we've the discontinued and affordable piece are pretty much exceptional items. Hopefully, there will be no sanctions also? And there will be no sanctions, I hope. We continue to have the SFP as we will complete the RMB 10,000,000 realization that we talked about. SFP cost for next year, we said RMB 10,000,000, right? RMB 10,000,000, yes. And we will have the acquisition piece depending on part, but most of it will be there. So yes, over time, we would expect the convergence between the operational and the EBIT level. But there will be as Greg mentioned, from time to time, whenever depending on the conditions, we continue to drive the optimization of our operations and it might not be under the SFP bracket, but there might be one or the other restructuring when it makes sense for us in terms of fine tuning the capacity. But On the restructuring, you would expect less expense now this year on this €13,000,000 part piece? Restructuring, you want me to take that one? Yes. Restructuring is the short answer is I'm not sure. In terms of recurring well, not recurring, but in terms of something like $10,000,000 in normal run rate, you're always adjusting somewhere that order of magnitude is not silly, but the issue is that restructuring is very lumpy, because we're no longer at the point where we have we're no longer at the point where we're painting the corners. I mean essentially we've closed quite a few factories and we've optimized our footprint. And anything else that we take out is essentially factory closures, because the specific adjustments to given factories have already been made and the market is going up. You saw the momentum in 2018 carrying into 2019. So where would that come from? It comes from I'll give you an example. We said Iran was not a huge business for us, but it was still a few tens of 1,000,000 of business a year. Now most of that came from Europe. We you don't see that the fact that Iran is gone as the markets from our numbers because there's growth, but the growth is coming from elsewhere. So sometimes you have an issue where you have one factory that's overloaded and one factory that's underloaded. And the question is, can we rebalance? Can we shift a load from one place to another? Or do we get to a point where we say, well, for the foreseeable future, we believe these markets are close to us and therefore this feeder factory is doesn't have a future. And these are the things that I think that as the tariffs get resolved in 2019, the China U. S. Things, as we figure out which markets remain foreseeably closed and which markets reopen, we'll know a bit more whether we have to do additional adjustments. But I think it will be kind of binary, either it stays at levels at low levels or if you have a closure, factory closure, the size of factories that we have, it's I mean, it's anytime you do one, it's like somewhere between $20,000,000 $30,000,000 because of people, geographies and so on. So we were not I mean, we don't get enthusiastic about closing things. We hate closing factories and we hate restructuring. But it is our responsibility to anticipate market conditions for the long term and that there's still a few areas where we have question marks because of this changing geopolitical environment that's closed off certain markets that were significant markets for certain factories. I'm sorry, long speech, but Okay. It leaves an indication. Thank you. My last question on this chart maybe. €35,000,000 amortization was in pumps. Can you explain me where that comes from? From Melanie from yes, yes, from the JWC acquisitions we have because last year, we had the acquisition of JWC that added like 2 €10,000,000 into our books, and those are related to the those recent acquisitions. Yes. The reason I'm asking is because the EV that you're saying here for JSB and Ensign Balmoret combined was €300,000,000 So unless all of that was other intangible and not goodwill, I was a little bit surprised to see €35,000,000 Yes. We have intangibles, yes, because we have the typical stuff like IP. We have customer relationship stuff and Alessandro is looking for a split, if you have one. Otherwise, we'll come back to you. No, but maybe I find also that in the final report. Yes, yes, right. But it's primarily linked to the intangibles. Easy. Kristian Arnold, mine first. So also just a follow-up question on this chart. So we also continue to have this amortization impact roughly about SEK 70,000,000 maybe. Yes. So if you're looking to whether there's goodwill impairment there, no, it's amortization of intangibles. Exactly. And that will remain. And if you do more acquisition, it go even up. Yes. Okay. The second question is on the order intake gross margin. You were saying that it's down because of mix effect. That I understand. We don't have to be scared that I mean, we have seen lower oil prices last quarter that you actually acquired orders with maybe less attractive pricing? You don't have to be scared about that. No. The gross margin on orders in Sulzer, it went down this year because we had a disproportionate amount of growth coming from oil and gas, new equipment and that's lower margin. The good margin is down the road when you have parts and service and that starts 18 months to 24 months after you sell the new equipment. If I take if I isolate oil and gas pumps and try to give you an answer on a number that we don't disclose, the trough in terms of margin on orders for oil and gas pumps was in Q1 of 2018 trough. And then Q2 was higher than Q1, Q3 was higher than Q2, Q4 was higher than Q3. So and once again, it's not about pricing, it's about arbitrating. It's I don't know, you're in Leeds, you have 2 potential orders. 1 of them comes from Angola and the other one comes from the U. K. Sector. The one in Angola for whatever reason is at a higher margin and sometimes you're able to cherry pick a little bit. But the trough at least the trough was in Q1 for margin on orders for oil and gas pumps and we look at that. I mean, I have the answer ready because I actually look at that often. And that's how I also guide the businesses. I tell them the market is recovering. I understand that we'll still have at times orders that we take because we feel that we need the load in certain place and we feel that the overall value of it with the aftermarket is a good move for Sulzer. But I still want to see the overall basket go up because otherwise you're digging a hole for the future. So we're still trading that backlog that was a challenging backlog from that time. But the stuff that's coming in that came in, in 2018, margins going up all the time. Then you once commented also that your customer are happy to invest if the oil price is at 60% or above. You're very positive right now. Oil price is actually not much higher than 60%. So is this kind of hurdle, is it did it come down or No, it's maybe I'm a victim of my own simplistic communication maybe. But what I try to say is that if you take the 5 large oil companies that I've mentioned, most of those guys today make money with oil in the 40s, Brent. So they're it's maybe they won't invest as much if oil is in the 40s, but they still they make money at those levels. They didn't make money at those levels 5 years ago. So they've adjusted their cost base and they've adjusted their approach to developing fields also quite significantly. Before it used to be everything was tailor made, everything was bespoke. And now these guys really look at how they can reuse concepts and products and so on. The 60 number that I gave, what I try to say is we see oil remaining we at Sulzer see oil remaining for the next year and the current levels it's at today, our plan is not predicated on anything that's coming from oil prices going much below something in the 60s. So at those levels, our customers haven't changed their investment patterns because oil went from 75 to 65. It's roughly we don't see the difference in the inquiries of our customers because at those levels they're fine. And once again, the difficult explanation at times that I try to the reason why I try to break this down is that actually lower oil prices is really good for these for the downstream guys, right? Low oil prices is not great for the upstream guys, but our exposure to downstream is like 3 times our exposure to upstream. So even the notion of oil prices on Sulzer, what really what perturbs me is that when I look at the way the share price behaves and I try to never comment on the share price, but it's really interesting where if you look at what's happened to Sulzer since the 4th, what was it, November when oil prices peaked, We're correlated to the oil prices and we're correlated to like Weir and Petrofac and we have nothing to do with Weir and Petrofac. One of them is an oilfield services and construction company and the other one is actually a fracking company, which is like the one thing that we don't do in mining. But it's we're we've been put firmly in that oil and gas basket and people think that the swings are actually more pronounced than they are. Even in our oil business, you forget CPI that we separate here, even in the oil business, it's not the lion's share of Sulzer. It's a smaller part of Sulzer than you think when you break it down, but also the downstream part is a much bigger part than what you think. Now upstream is growing right now. So that 7% number I'm sorry, 7% 11% number is going to go up. But once again, our customers are showing in their communication and their CapEx expectations for 2019 that they're not overly worried about these short term fluctuations. And once again, our plan is not built on the higher oil prices. If oil prices went down significantly, yes, there's a moment that has an impact because there's a moment where that forces our customers to rethink their investments, ambitions. But we're in a range where, I mean, that 60 plus range sort of thing is fine for us at least. Thank you. Thanks. Question right here. Thank you, Ian. You mentioned your strongly reduced footprint you have and now you have this good recovery of the market, oil and gas market. Will your customers have to wait longer to get their products? Do you see any bottlenecks in production maybe? In which part of the business, anything specific? Oil and gas market. Oil and gas. It's actually it's an important question because the way markets rebound I mean, the way oil and gas rebounds is that despite the fact that our factories are probably 1.5 shifts operating at 1.5 shifts, so that would tell you that we have plenty of capacity and therefore we should be able to take whatever comes our way. But the reality is that in these market rebounds, customers have a tendency to wait until the last minute to order. So the differentiator, I'm sorry, is not so much spare capacity as it is lead time. You try to debottleneck so that you can have short lead times so that these guys who place their order and want everything tomorrow, you're able to serve them. So we've invested time in sort of lean processes in our factories. We've invested money. If you look at where we spent money in the last few years in CapEx, we spent money on test beds because in pumps, for example, the bottom leg is usually the test bed. So we think we're in decent shape for that, but lead times are really important despite the fact that in some of these businesses the factories are not full. Other questions? There also no questions from the call. All right. Well, thank you very much for your time. I know it's a busy season for all of you. We hope you were able to answer your questions. And as I said, Solsysor has a positive outlook on the market. We've got good momentum, and we believe that our numbers will continue to improve along the trend that we've demonstrated over the last few years. So thank you very much.