Very good morning to all of you. I know you all had to get up early. I know you all have a very busy day, that's why I appreciate particularly that you take the time to attend here physically or also virtually at the press conference of the Zehnder Group today. I will have the presentation together with my colleague, René, our CFO, and like in the past, I will cover a review 2023. He will then dive a little bit deeper into the financials. And finally, I will give some outlook for 2024, and we should have plenty of time to answer questions that you might have. So let me start with a statistics, and what you see here is obviously not what we wanna see.
It is a statistic that is being put together by a company called USP Consulting in the Netherlands. It's called the Architectural Barometer, and it is a combination of year-on-year development, but also the short-term trend in the construction industry. What you see here is the total construction industry without infrastructure, and obviously most of our key markets show a substantial negative development. Actually, this is total construction, so that includes commercial. If you look at residential only, the picture is even worse. If you look at new builds versus renovation, actually it's even more headwind that we're currently facing. So it's not a surprise, and you already have seen the sales figures because we published them, that we also are faced with that headwind from the markets.
You see that we had a sales decline in the total year of roughly 6%. Just as a reference, the first half was still balanced, so obviously the decline was in the second half of the year, and it affected both our segments, ventilation and radiators, with a double-digit percentage. Clearly, that also had an impact on the result, and while we achieved the 8%, of almost 8%, it clearly is a decline from last year, 16% less. While we were proactively taking cost-saving measures, particularly in the second half on ventilation, already in the year before started with radiators, we were suffering from underutilization in the plants, and we also were facing some restructuring costs in the neighborhood of CHF 3 million.
I think on a positive note, operating cash flow, and that was a big focus for us, we were able to increase it substantially by 48%. And at the same time, you know, really did a very active net working capital management with reduced trade receivables, but also we're very careful in investment spending. And so finally, that brings us to a return on capital employed of roughly 17%. Yes, nobody is happy when it goes down, but I think under the circumstances, a reasonable figure that also shows the resiliency of the Zehnder Group. So what were the key topics? I mean, let's not forget, we start into the year still with a situation that was tense in the supply chain, meaning that we still had substantial backlog, not in radiator, that was already consumed in 2022, but in ventilation.
That's also the reason why the first half was supported by feeding off that backlog. This, we didn't have in the second part anymore, and that's why we obviously had to follow up with cost savings measures, which we still try to do in a differentiated way. I said before, in the radiator activity, we started already in 2022. In 2023, we obviously now also looked at the ventilation activity. But what I would like to point out, to really reduce the backlog in the first half, we actually had to hire still a lot of temporary people. So the peak of our FTE was in April, and then as of July, we saw the drop, and that drop was quite massive. So in some areas, it really came to a grinding halt.
Nevertheless, and I think that's also important, we want to be steady. We want to follow our strategy. We feel that the strategy is firm and sound, and so we tried to maintain, to the extent possible, the strategic investments, be it into digital transformation, but also in sustainability. You will see a little bit later on an update on that. And we also are continuing to invest into our innovation, particularly on the ventilation side, to expand our markets. And here you will see later on, that affects mostly North America, but also European markets, where we don't have yet a penetration comparable, for example, like in Switzerland or in Holland. And we really also put money into our sales organization to get the better coverage. So let's look at the ventilation segment first.
Here you see that we have a slight decline by 4% only. But as I mentioned before, the second half was substantially worse in comparison to the first half. And I think there was an impact also, that during the time when goods were not available and the supply chain was not secure, a lot of our customers increased their orders to secure their stocks. And once they realized the goods become available, they obviously partially postponed orders, partially even canceled orders, and that obviously multiplied, then the impact, the negative impact from the market development. North America is a little bit different, and you see that overall in the year, we were able to grow. Partially, still an impact from the acquisition that we had in 2022, because we acquired Airia in February in 2022.
But all through the year, actually, we had quite a positive development. Also, in the North American market, we saw a decline of the demand in the second half. It came later than in Europe, and what we feel today is actually that unlike Europe, in North American market, it seems to be rather a soft landing, and we feel that already today we see some recovery still on a modest level, but actually we're quite positive for that market. Asia Pacific, on the other hand, is, for us, China, and China is a difficult market for several years, basically since the beginning of COVID. Just to give you a reference, if we compare our sales today or in 2023 versus pre-COVID, we're roughly at half the size, and that's not because we lost market share.
That's not because the product itself is not a relevant product for the future. It's just because the real estate market is really in the pits. We also felt that not only in the ventilation market, but as you probably know, we also have an activity where we produce heat exchangers. There, we acquired a company out of China. They're exporting, but their biggest market is the local market, so obviously they were affected exactly the same way. Now, yes, we're trying to counter that development. We counter it with cost savings, cost reduction measures, cost avoiding measures, but obviously, we're also trying to innovate, and we're trying to gain market share, and we're trying to launch new products. Here are just a couple of examples. One is on the left. That's the heat exchanger that I mentioned before.
That's a new product. We're able to regain some market share. In 2022, we had a hard time to actually supply to all the needs of the market and probably gave room to some of our competitors to gain some market share. The positive is that we regained that market share, but we're also trying to launch new products, and this is a new product that actually substantially reducing material, which is good for sustainability. It's good for costs, both for our customers, but also for us. But at the same time, you know, it really also helps us to hopefully expand our market position in the heat exchanger market. Then we have a second example. We acquired a company that is active in light commercial. That's not our traditional core market. Company in France called Caladair.
This is a product that they launched. It's called Eversky. It's a decentralized room-by-room solution, you see, also with an energy recovery rate of above 90%, and that is ideal, for example, for classrooms, and that's also where we saw quite some nice successes, particularly in the French market. We were able to sell a couple, 300 units. That doesn't sound like a lot, obviously. It's something that helps nevertheless. I mentioned digital transformation, also important for us, and we were able to launch our new digital monitoring solution, which is cloud-based, which gives you the possibility to control actually the climate in your house. At the same time, also, have remote access by app, but at the same time, obviously, we also have a history.
We can help to improve over time how the whole units and how the solution is working. Just a couple of reference project that I would like to show, and people who attended the last time, we introduced the ComfoVar solution. That actually is a valve, an air valve, that you put into a solution with a central ventilation, like we, for example, have here in this hotel, to control the air volumes into the different sections of the building. Now, this is something that is patented. It has a superior design in terms of airflow, and because of the superior design, it causes less noise and obviously also is able to reduce energy consumption. It's not our core market, it's an adjacent market, but again, here you see a reference project.
We were able to start the market success with some nice reference projects in the Dutch market. We also started here in Switzerland, and we do now a gradual rollout into other markets. Another typical project for us, and you see the ComfoAir Q unit, that's really our staple product. It has been launched a while ago, but still today, it's the benchmark in the industry in terms of energy efficiency, but also in terms of noise. And this is a typical project where these kind of units are being implemented, a project in Amsterdam. Now, if you look at the overall development over the last 20 years, that's pretty much when Zehnder started the ventilation activity. You see that we were able to grow this business from 0% of the Zehnder sales now to almost 60%. We're happy about that.
It really is a continuous transition from a building component supplier to an HVAC company. Now, HVAC is a big word, is a huge market, and what we are doing is we focus on a very defined small segment, which is controlled mechanical ventilation, where we obviously want to be relevant in the markets that we play, and relevant means that we're among the top three. We definitely are among the top three in Europe. We also are now in a position that is to a similar extent in the North American market and the same ambition we have for China. Why is that interesting? Because we feel that controlled mechanical ventilation is an integral part of new building standards, and hence will grow as a market, even if we face a volatile situation at this stage. Now, let's look at radiator.
And yes, radiator obviously is not really a very pretty picture last year. We had a decline overall of 13%, still accelerated in the second half, but over the first half was a clear decline, and that is true for Europe. And if you look at the figures in volumes that we currently are able to get into the market, we're roughly 30% down versus pre-COVID. I think it's important to know that before COVID, that was a very stable market situation, and there were no subsidies for radiators before, and it was a renovation business before. So obviously, we feel it will come back to some extent, but the question is a little bit when?
Now, one thing that we obviously do not have anymore are the sales in Russia, because we exited Russia already two years ago, and, or actually one year ago, and that is the equivalent of roughly 3% of total sales. North America is a totally different situation. It's not a standard, the radiators. The radiators that we were able to position in the market are really a design article. So it goes into upscale housing, mostly East Coast, but also Midwest, and there, it's a very stable situation. It's not really a growing market, but it's a very stable situation, and we're pretty much the last man standing, and that gives us the possibility to organize around that volume, and it's really a profitable small activity. Asia Pacific, again, totally different, that's a disappearing business for us.
And, we are in the midst of phasing out the production, and, we'll take it as a purely opportunistic trade business as long as we are able to generate some contribution. Now, also a couple of reference projects, or highlights on the radiator side. Radiators are not dead. What you see on the left is a new towel radiator. You see, we designed that with a design company, so they are also available in nice. That is actually a sub-segment that goes also into new build, not just renovation, also into hotels. And we saw a long-term trend before COVID that was slightly growing. We have an excellent market position there, and we feel that once, you know, the building cycle is coming back up, that this is an opportunity to also grow in the radiator segment.
What you see in the middle, we report also in the radiator activity. These are cooling and heating ceiling panels. Now, again, that's a small niche, but nevertheless, it's an interesting niche. Why? These are alternatives to, for example, gas heaters. And you see a typical example on the right. This is a cart track in Schöftland, Aargau, where they put in these units, and at the left side, you see an office. And why is it interesting? Because you can actually operate it with heat pump. So you actually can operate it much more energy efficient. What we're also proud, service is key for us, and we put a lot of efforts in all the markets on having good contacts to our installers, to our customers. We were awarded for the fourth time in a row, the Architect Starlings Award here in Switzerland.
So, we have a whole cabinet full of these awards now in Gränichen, in our academy, and we're really proud that we were able to secure that again last year. To see that, also in new construction, radiators are relevant; this is an example from North America. This is the new terminal at Boston Logan Airport. Quite a unique building, and the uniqueness is that it doesn't have a single right angle. And hence, you also need to tailor-make the radiators, and that's what we were able to do over there. Roughly 200 radiators, by the way, just on a side note. The color is a very specific color, too, and also comes from a Swiss company. Now, I mentioned sustainability, and today, parallel to our annual report, we also publish our second sustainability report.
We are happy that, in Scope 1 and Scope 2 emissions, we were able to reduce. Yes, that has also to do with a reduced production activity, but nevertheless, we have several projects that also will go into the next years, be it solar power on certain factory roofs, be it changing of heat sources in our offices, where we're working on a continuous progress to reduce our CO2 equivalent emissions. We have committed to the SBTi targets, meaning that we have committed to reduce our emissions by 55% on Scope 1 and 2. That means what we are producing, what we are using ourselves, and by 33% on Scope 3, and that's basically throughout the whole value chain.
If you look at the figures, you also see that Scope 3 obviously is the lion's share of the CO2 emissions that are caused through our activities. Scope 1 and Scope 2 is minimal. And that pretty much is the use phase of our products. And yes, we do have electric motors in our ventilation units. We have electric heating on our electric radiators, and we, throughout the lifetime, obviously, have an emission to that. What we, for the first time, looked at on top of that is the Scope 4, and that's pretty much what we, through our products, avoid in CO2 emissions. And I think that's quite an interesting figure, and I get to that in a little bit. If you use energy recovery ventilation, and that's what it's all about, what we're doing, you actually avoid energy consumption.
By doing that, obviously, you have a positive aspect that goes into your balance. You see that here. With a heat exchanger, what happens is you maintain or you keep the heat inside the house. You don't have to open a window when the cold weather is coming in, but in the summertime, it's exactly the opposite. So you also keep the heat outside, so you keep it cool, so you also have an impact in case you need to do active cooling. Besides that, there's obviously an impact that you reduce the indoor air pollution by exchanging the air, but you also make sure, through filtration, that if the outside air is not clean or it has a smell, that you don't have that in the room.
By doing that, and these are verified figures by the Lucerne University of Applied Sciences, we actually are able, through the lifespan of a ventilation unit, to save eight times, 8.9 times more energy than they're actually using. And if you then calculate that into the equivalent at the main energy mix, that was in 2022 in our markets, what that means in reduction of CO2 emissions, it's actually 6.2 times more than it generates. And just to put that in perspective, and I had our sustainability team to make a comparison that everybody can remember, and that is quite catchy. That is the equivalent of 17,744 cars driving from the Earth to the Moon and back, for all the units that we sold in 2023 over their lifespan of 15 years.
So we're quite proud of that, that we're also contributing with our products to this aspect of sustainability. Another highlight for us was the appointment of the first woman in our group management, Doreen Terpstra. She is Dutch. She joined us as of first of January this year. She has been the managing director of our Netherlands and Belgium operation, actually, sales organization. So she already has quite a good familiarity with the market, and she will be responsible at group management level for the sales in Europe, and that's roughly 80% of our total sales. But I think there's another thing that I'm also happy to announce.
We will extend our group management by an additional position, in that we feel that the North American market is crucial for us, and we want to have the North America responsible in the group management to make sure that the importance of that market is reflected, but is also represented at group management level. So finally, and people that have been to these conferences before, they're familiar with this chart, we stick to our strategy. We feel the strategy is sound. We want to grow the ventilation business. We feel it is a market that will grow, obviously not linear. It will have some hiccups, as we have it today. We want to grow with innovation. We want to also look at external opportunities, and obviously, we really want to also extend our reach geographically.
Radiators, yes, 2023 was not a year where this activity was able to contribute, but I've shown a couple of examples. There are sub-segments that are promising, and yes, obviously, we feel that there are opportunities to also work the organization in terms of capacities, in terms of focusing on the right segments, to actually improve the situation again, once we see a certain recovery of the market. And finally, yes, we also want to go towards climate solutions, a little bit, you know, outside of the pure ventilation, but we wanna do it around the core competence of ventilation. We want to go straight into heat pumps. This is for the big guys. We want to do where we are relevant, and there, where we also can, obviously, in a commander position over time among the leaders.
On top of that, we have three smaller activities, which we run pretty independently. One is what we call Clean Air Solutions . This is commercial filtration. It's a service business. We do not sell the units; we rent them out. We have lots of very reputable customers. Oerlikon, for example, is a big customer, but we also have many customers in the logistics industry, and that is a business that is growing steadily and is also over proportional in terms of profit. So very happy about that. We also have the heat exchanger business, which I mentioned before. We are clearly the leader in that segment worldwide. We are affected by the overall situation of the market.
So yes, we struggled last year as well, but, obviously, I think when the market is coming back, and we feel that the market is long-term interesting, we should benefit from our, leading position in the global market. And finally, we still have the closed ceiling business. That's not exactly the same thing like the ceiling panels, which I mentioned before with the cart track. That's for offices. That's a turnaround situation. We made good progress. We had increase in sales. We are not there where we want to be, but we also were able to secure some nice lighthouse projects. One of them is the new office tower, Triangle, in Paris, architects are Herzog & de Meuron, which is currently being built and which will be equipped with our, closed ceiling products. That's for the review.
Now, René, maybe you can tell us a little bit more about the financials.
Thank you, Matt, and welcome also from my side. 2023 financial results was strongly affected by declining volume, effective countermeasures, and a strong increase in operating cash flow. As mentioned, the sales were declined by 6%, and within these 6%, we have a 2% increase due to Airia, that's Airia and filter. Then we have a 7% decline, despite of about 5% price increases, and then we also had a negative foreign exchange impact of about 1% due to a weaker U.S. and Canadian dollar, but also British pound and Chinese renminbi. The Swiss francs was stronger compared to euro in 2023. So we had different impacts, and we come back to that in this segment again. Here we have an overview about the top 10 countries.
These top 10 countries contribute 87% of our sales, and Germany is still the largest country in our group, and then France, and both countries have more than EUR 100 million sales. Then followed by Switzerland, and then United States, Netherlands, and United Kingdom are very close together. They more or less have the same sales level. Canada, the Netherlands, and Switzerland achieved a growth in 2023, but on the other side, we also had Italy, China, and UK, with a clear decrease in 2023. And what is also a clear development, the contribution of North America is increasing. So North America contributed 15% to the total sales, to EUR 150 million, if that is an increase of 11%. And of course, then it means then the other areas decreased.
So we have Europe with 79%, and Asia Pacific, that's mainly China, with 6%. Our EBIT. So the main impact on the EBIT side is decreasing volume, and then lower utilization of the factories connected with it, especially from the radiator side, where we have quite a high fixed cost base due to manufacturing. On the ventilation side, it's more or less more assembly-driven, so the fixed cost base is less, and there we have a higher flexibility. There was also a clear salary increase due to the inflation, to about 4% salary increases for the total 2023 years. The first six months was an increase in personnel cost in total, and then in the second half year, thanks to countermeasures and also reduction of headcount, there was a lower personnel cost than the year before.
So we have really these two developments, the first six months with a better supply chain, better availability of components, and then in the second half of the year, with effective countermeasures and also with cost reduction. On the other side, we continued to invest, so we spent more, for example, for research and development, and totally spent EUR 25.5 million for innovation and new products. Net income. The net income decrease was a bit higher than on the EBIT side, it's 21%. The tax side was more or less stable. On the other side, we had some negative foreign exchange effects in the financial result. And to have a little closer look about the cost measures.
We reduced the headcount year-over-year by 319 FTEs, and as Matt mentioned, the peak was in April, so even during the year, the decrease was higher due to the increase in the first few months to have a higher output in the ventilation area. On the other side, we had used the FTEs in the radiator production. That is in China, due to the partially outsourcing of the production, but also in Germany, Turkey, and Poland. In China, Turkey, and Poland was about. In China, Germany, and Poland, was about 30 FTEs, and in Turkey, about 60 FTEs reduction. In Switzerland and in France, we had short-term work for certain periods in 2023 due to the low demand. Then we were also very selective with recruitments, and we also reduced our travel activities to save costs.
So overall, there's a package of measurements, about 400 measures, and that is partially completed, but also still ongoing. We adopt it based on the market developments. That's an ongoing process that we adopt, and we are agile in this current environment. But we also, again, continue to invest, so we are very selective. It's not that we cut everywhere, so we see the midterm potential, and so we continue to invest. Here we have an overview about the two segments. Ventilation contributing 58% of the total sales. There was a sales decrease of 2%, and again, the first six months we had an increase, and then the second six months, there was a decrease. It was 3% affected by acquisitions, and then the organic decline was 3.3% and we had negative foreign exchange impacts in the ventilation segment.
On the EBIT side, the decrease was 3%, so I would say only 3% in a challenging environment. So at the end, we achieved EUR 53 million EBIT. On the other side, the radiator business was strongly affected by declining volume, the whole year, not just the second half, but also the first six months. So overall, there was 11% decrease in sales in EUR to 321 million. And due to the lower factory utilization and the fixed cost base, there was a stronger impact on the EBIT. So the EBIT decreased by 57% to EUR 7.2 million, means 2.2% EBIT margin. And again, to have a closer look to the two half years.
So this first six months, we achieved 9.2% EBIT margin, and in the second half of the year, it was only 6.4%, and that is due to the sales development. So in the second half of the year, there was a decline in ventilation of 15% and in the radiator business of 13%, and that overall means 14% less in the second half of the year. That's why we implement the counter measures for radiator already starting in 2022, and for the ventilation business, when we realized that this demand decreased significantly, so we reacted fast and we implemented the necessary measures. Here, it's increasing in all areas. So operating cash flow, as mentioned by Matt, a clear increase. So that shows that our measures have the related impact.
The operating cash flow was EUR 87.9 million. We also increased our net liquidity, despite of the share buyback program. We come back to that, and also dividends of EUR 24 million in total. Also the strong balance sheet that we still have. We have 67% equity ratio, so that was also further increased in 2023, despite of the challenging environment. Here we have the overview about the cash flow. From the operating cash flow, it is nearly EUR 90 million. Then for fixed assets, we spent EUR 23 million, also reduced due to the market situation. Then dividends to different shareholders, also minority shareholders, EUR 24 million, and then the remaining share buyback and also share buybacks in connection with the management programs of EUR 17 million. At the end, we increased the net liquidity by EUR 20 million.
Here we have a development over the last few years in ventilation. So it was the first year, 2023, with a decrease of 2%, but for years, we were able to increase the sales in the ventilation area, and correspondingly also, the share increased significantly over the last five-six years to 58% of total sales. Then here is a long-term development of the sales and profitability. Yes, we were able to increase the profitability for years. Now, it was a slight decrease in 2023, but we are still clearly higher than five-six years ago, despite of a challenging environment that shows that we act and not wait in case of a market drop, and measures implemented has a positive impact to counter against the negative volume developments. Payout ratio.
The proposed payout ratio is in line with the previous year, 35%. That means a dividend of CHF 1.3 per registered shares that is proposed by the board of directors. Regarding the share buyback, that was started in 2021. The intention was to buy back 5% of the listed registered shares. That was completed in September last year, and in total, we spent EUR 33.8 million, and last year it was EUR 10.5 million for the share buyback program. The cancellation of the repurchased shares will be proposed at the annual meeting in April that we then have a cancellation of the 5% registered shares. With that, I would like to give back the word to Matt for the outlook.
Thank you, René. Well, the message is we're not through yet, and obviously, the challenging market environment persists, but we stick to the recipe, the successful recipe so far. So we will, in a proactive way, and consequently, continue our optimization. At the same time, we also look at the time after the crisis, and we want to be well-prepared to benefit once the market is recovering. But this is the heat map. This is your construct as of November 2023, and you see, these are building completion, new building completion. That's an important figure for our ventilation business. Obviously, Germany, France, Poland, key markets, still dark.... and I just saw yesterday in an article that, in Germany, the bank loans given for bank credits given for construction between January and September decreased by 43%.
So obviously, you know, it's something that we're still gonna feel for a while. Now, on the other hand, it's a fact that we spend 90% of our time indoor. It's a fact that in Switzerland, and probably it's in other countries not any different, 20% have hay fever. It's a fact that you have many cities with a lot of air pollution, and it's a fact that obviously our products help to preserve a healthy indoor climate. At the same time, it's also a fact that the energy consumption of housing is up to 40%, and therefore, also the greenhouse emissions. It's a fact that I tried to show that our products help to reduce that energy consumption.
The energy transition will be happening, and, I mean, I don't wanna talk about a housing crisis, but obviously in many markets, there is a need for additional housing. It's just nobody's spending money on it at this stage. So the recovery will come. The big question is: When? So, yes, if you look at the market, we don't expect the tailwind very, very soon. Obviously, we still have also some hiccups, but I wouldn't consider them major in the supply chain. Most recently, the situation with the Suez Canal. But we are positive mid and long term.
I think we tried to make that point now a couple times. We are taking the countermeasures to counter the difficult market situation, be it with new products, be it obviously also with optimization. We are betting on North America. We feel that is an interesting market. We feel also as a Swiss company, with, in a way, European technology, there are promising prospects. But, and I think that's a question that obviously everybody has, also us, you know, where are we gonna end up in 2024? And we debated it internally for quite some time, and we came to the conclusion, and it was a conscious decision, to refrain from a guidance today. But what we will do is, latest by mid-year, we will give you the guidance for the full year.
So in the end, why should you invest in Zehnder? Well, we have strong market positions. We understand that we are in a down cycle. We understand that obviously, the results are affected by that, but we also feel that this has been included in the share price, and we feel that, you know, going forward, we are having a clear strategy. We're sticking to the strategy. We also have a proven M&A growth in the past. We're looking at that going forward, and we have North America identified as one of our key markets, where we also see our possibilities. Finally, and I think that was also becoming quite clear, our financials are solid, so we do have the firepower to do things if they're attractive and if we feel that they really help in accelerating the successful execution of our strategy.