Ladies and gentlemen, welcome to the Zehnder Group Full Year 2024 Media and Financial Analysts Conference. I'm Sandra, the Chorus Call operator. I would like to remind you that all participants have been placed in listen-only mode, and the conference is being recorded. The presentation will be followed by a question-and-answer session. If you would like to ask a question from the webinar, you may click the Q&A button on the left side of the screen and then click the raise your hand button. If you are connected via phone, please press Star followed by One on your telephone keypad. For operator assistance, please press the Operator Assistance button on the left side of the screen or star zero on your telephone keypad. At this time, it's my pleasure to hand over to Matthias Huenerwadel, CEO. You will now be joined into the conference room.
Okay, good morning, everybody. Welcome you here to the press conference of the Zehnder Group. I appreciate very much that you are here. I know it's your busy season, so thank you very much for joining for today's meeting. Also, the people that are attending online, we will have a presentation in three parts. I will give a short business review about 2024. René, our CFO, will then dive a little bit deeper into the financials, and I will, in a third part, give an outlook where we see the markets going, but also what we feel the next year or this year will bring, and finally, we should have plenty of time to answer questions, both here in the audience, but obviously also from the people who are attending online, so let me start with a quick business review at a glance.
I think it's fair to say 2024 was yet after 2023 another challenging year. Most markets contracted, and that is true for new build, but also for renovation, and that clearly also is reflected in our results, but on the other hand, and I think that's the positive part, we do see some light at the end of the tunnel, and if you look at our ventilation sales, for example, we saw a stabilization and actually a small modest growth in the second half of the year, and that is true year- on- year compared to the year before, but that's also true if you compare to the first half of this year, and that's also true for organic, so it's not just with the acquisition that we did last year. North America actually started to recover a little bit earlier already at the beginning of the second half.
and that's also the reason why the percentage of the American sales rose slightly to 16%. We're happy about that. We feel that North America is a key growth market going forward. But also, you know, we did some other important steps. If you look at the radiator segment, I think you can also see in the figures that we were able to significantly reduce the break-even point by reducing capacities, but also additional cost savings, but namely also by divesting a non-core activity and by closing two radiator plants from originally eight last year to six. The second closing is currently happening, but in spring this year, we will close our Swiss plant and will then have a much smaller footprint.
At the same time, we tried to strengthen our sales footprint in Europe, but also in North America, and particularly also looked at those countries where we feel there will be a better development in the next few years. So you are aware that we acquired a company in Spain. And so this is not just a better footprint in Spain, it's also giving us an improvement of our portfolio because the southern European markets have slightly different specifications. And it gives us the possibility to utilize that portfolio also into other markets. And that's something that we're tackling as we speak. And also, I think a figure that is interesting, service, traditionally not a focus point of the Zehnder Group, has been increasing steadily. And it makes up now 15% of total ventilation sales.
That's very important because ventilation so far is very dependent on the main driver, new build completion. As you know, this has been quite a volatile situation there. So 2024 was really a transition year where we used the possibility to solidify our operating model. I mentioned before we divested in June, the climate ceiling solutions business. It's really an activity that didn't fit to all the other activities. Hindsight, we could say we could have done it earlier. Fact is it's done. We also decided to close the factory in China for radiators, a factory that was built in 2007. But at the same time, the decision was taken to close the Swiss factory for a company that has been producing radiators in Switzerland for 95 years. You can imagine that was not an easy step.
And we're currently in the midst of transferring the production and consolidating that production for these flat tube radiators in France. At the same time, we used last year also to clean up some remainders from the real estate crisis in terms of accounts receivable. Evergrande is the topic there, so we hopefully have now a clean slate. And at the same time, we're in the midst of a transformation in our largest sales organization, the European sales organization, where we shift from a traditional country-by-country model to a regional model where we also bundle certain functions centrally, for example, marketing, but also customer excellence, business development, which enables us to get standards.
And at the same time, also then enables us to apply digitalization, which is a crucial topic that we are working on. We have built a digital innovation team over the last two years. The idea there is really to seek possibilities and opportunities with the new technologies, be it for internal efficiency gains, but obviously also be it for adding value to our customers. Acquisition, Siber, I mentioned already an expansion of service offering along the closing of the Swiss plant. We have communicated that we will build an international competence center for service. It's not something new.
It's just something that we really didn't focus on, but service with 1 million units installed in Europe, it's something that we feel has quite an untapped potential. So we're talking about filter exchange, we're talking about duct cleaning, we're talking about many new service packages that we offer to the customer. And clearly, it's something that we now address in all of our relevant markets. Service business also in the area of clean air solution. You might remember that we have a smaller activity where we produce filter boxes, which we do not sell, but we rent out in a flat fee model. That's an activity that is continuously growing, nicely growing, also profitable activity, and already today is about 10% of the total ventilation sales, so something that also helps to stabilize the sales in a volatile environment.
Nevertheless, if you look at 2024, results are hardly rewarding, but I mean, clearly the major impact we had from the market environment, we saw ongoing geopolitical, but also economic uncertainties, and that restrained the new build activity, but also the renovation market, and in general, and I will show later the latest Euroconstruct data, in general in Europe, we saw a decline in most of the markets. I mentioned before some countries started to show a certain recovery.
I would like to point out Eastern Europe, but also some of the Southern European markets. We also were able to stabilize the situation and get back into a growth mode in some other important markets for us, like for example, the Netherlands, but also the UK In North America, the ventilation that we are providing is really a topic that originates in Canada. Canada is our larger market of the two United States and Canada. Canada picked back up earlier in the year, as I mentioned before. But also the US, we feel that there are good pockets that we can address with a certain disclaimer, but I will talk about that later on. In the end, that led to lower sales for the full year. That affects both activities. Ventilation went down 8% organically, with the acquisition 4%.
And if you look at radiator, it was organically 10%, with a divestment, it was 12%. Now, because we did structural measures, not just in 2024, but already started in 2022, late in 2023, and you will see that later on when René presents the financials, we were able to stabilize the EBIT situation. And so we feel much better prepared to profit and benefit from a market rebound that will happen. The question is only a little bit to what extent and when exactly in which markets. We had substantial one-off costs. I think that helps us again to be in a better position going forward. So let's look at the ventilation market a little bit more in detail. What you see on the left are our five top markets, our largest markets. That does not reflect the potential, but that's where we currently have the highest sales.
And it's good to see that Netherlands is our largest market and actually is performing quite well. And that has to do not necessarily with the market as such, but also with the capability to regain some market share. You might remember that we also faced some supply chain issues. And along those supply chain issues, because we had really a very strong market share, we lost some customers to our competition. But it's very good to see that many of those came back and that we're coming back to the market shares that we used to have. Germany obviously lost both in ranking, but also in sales. And the United Kingdom again is a different situation. Actually, a new build completion is not really growing, but the awareness in that market for ventilation seems to be on the rise. And that has also to do with some regulatory environment.
I just can here refer also to one law, which is coming into place in October this year. It's called Awaab's Law. That forces landlords to actually fix damp and mold issues in social housing. So there's really a different awareness for the need of good ventilation solutions. Siber, already mentioned twice, why is it so important? If you look at Spain, Spain had a dramatic bubble in real estate in 2007, and the figures dropped dramatically afterwards. But Spain is probably the market that has the best growth as we talk, but also looking going forward. But it's not just this geographic expansion. With Siber, we are number one in the heat recovery and energy recovery ventilation. It's also addressing a different segment that so far we were not that strong at, multifamily homes. Multifamily homes have somewhat different specifications.
And with that portfolio, we can now address also other markets. We just started to already along the integration ship our first products into Italy, and other countries will follow. It's also a product portfolio which is probably positioned a little bit below our traditional product portfolio. I will compare it to an Audi, our traditional product portfolio, more for the north central European markets compared to a Seat, which is really now much more geared towards, first of all, this subsegment multifamily homes, but also for, let's say, a medium price market. Finally, growing clean air solutions. We really are very happy about this activity. It's an activity that is not limited in potential. It's really more a resource-limited activity. We have to make market. It's a model that is unique, and it's obviously a problem solver.
So it's something where we have to develop market after market. Last year, we went into three new countries. We also started in six new sales regions. And the efforts over the last years, but also in 2024, are proving that we're on the right direction with double-digit growth. And I mentioned before now a total proportion of 10% of our ventilation business. So we are in a transformation. That's not a new slide, but I think it's a slide I like to show. We have a good track record. The ventilation sales is now at 60% of total sales. That's not just by acquisitions. That's also internal growth. And I think it's fair to say that we are the thought leader. And we are the expert not only in the European markets, but also in the North American markets.
You can see that on social media, but you can also see that on various other platforms, and that also reflects in our market share that we have in this balanced mechanical ventilation, or in America, you call it heat recovery or energy recovery ventilation. I just would like to show a couple of examples. This you might know. That's the new development in Andermatt, where we supplied some ventilation units, the larger units for the commercial parts of the buildings, a tailored specified solution that we were able to do, and it's also good to see this is a product that comes from Caladair. That is an acquisition that we did about three years ago that we're able to now position these products, for example, in the Swiss market, which is relatively new for us. Another example to show it's not just new build, it's also renovation.
This nice little castle in France. Now, I don't have one of those, but I have stayed in one of those, and in the summertime, it's too hot. In the wintertime, it's too cold, and all year long, it's too humid, and with the ventilation unit, and it's a solution with including air distribution, plus what we call ComfoClime, that's our temperature module that we can attach to it, we were able to really change the climate, the indoor climate, and had a very happy customer. It's a beautiful reference case, but this is not just for niche market or single objects.
What you see here is a renovation project in Germany. It's a little bit complicated. The KfW Efficiency House 40 EE standard, where again, because we are the experts, we can help also the planners. We can help the installers to plan the full project. Particularly, the process was unique in that the tenants didn't have to leave the apartments while the installation was going on, and so we were able there to install in all these apartments our ventilation units that we actually launched just last year, so much for the business review. René, I would ask you to give us some more insights about the financials.
Thank you, Matt, and also welcome from my side. We mainly had to manage two challenges in 2024. One is the acceleration of the transformation and the other side, a declining market demand, and that is now reflected in our result in 2024, so the sales declined by 7%. Organically, it was 9%, and we lost about 60 million. Despite these sales drop, we were able to achieve a reasonable, I would say, adjusted EBIT with 50 million. That is 7.1% of sales.
We also invested further. It's not that we cut cost everywhere. We clearly selected our measures also to secure the mid-term growth potential. Important is cash. So the operating cash is 60.6 million. That is 8.6% of sales. And that was a key focus also in this environment to make sure that we secure operating cash flow. Yes, it cost a lot, this restructuring and measures implemented in 2024. So overall, we had one-off cost of 35.9 million and thereof 15.7 million impairment. And due to this one-off cost, there was a loss of 2.4 million at the end and as a net loss. From the return on capital employed, we were able to reduce our capital employed. But on the other side, also the profitability was lower. And therefore, the return on capital employed was 15.4 million. That's 2.5% less than last year.
From the sales side, both segments were affected by the decline. The ventilation more from the new build side and the radiator segment from the renovation side. The divestment of the climate ceiling was a negative effect of 1%. Then the acquisition of Siber, the second half only was 2%. And then an organic decline of ventilation was 4%. And from the radiator side, it was a decline of 5% organically. There was nearly no foreign exchange effect. So overall, there was a decline of 7% in EUR. And organically, it was 9%. In spite of this decline, we were able to secure a double-digit EBITDA adjusted margin of 10.9%. There was a lot of measures implemented already in 2023 that then had an impact in 2024. And also we saw improvements in the second half of 2024 thanks to different measures implemented.
And again, a few words, the net loss of CHF 2.4 million, that's mainly due to the one-off effects and also a high tax rate because a lot of these one-off effects were non-deductible. And we also had an impairment on the deferred tax assets in China that also then resulted in a negative net income. As already mentioned by Matt, we had a positive momentum in the second half of the year, especially on the ventilation side. So compared to the year before, we were able to increase our ventilation sales by 12%. That was 3% organically, and the rest was due to the acquisition. On the other side, it was different. There was a further decline. About half of it was due to the divestment of the climate ceiling business. And the other one was a further decline in organic.
But it was more or less at the same level as the first half year, but with a better product mix. That means at the end, we were able to achieve a better margin. I will come back to that. Overall, in the first six months, we had an EBIT margin of 6.6%, and we were able to increase the margin in the second half of the year to 7.6%. So we clearly see a positive development, or we saw a positive development in the second half of the year. The top 10 countries contribute 85% of total sales. And we saw a growth in the UK, in Netherlands, and in Canada. And if I see the first six months, the growth was only in the UK So especially Netherlands and Canada, we were able to turn around from a decline to a positive sales development for the full year.
But again, the main two markets, Germany and France, were declining. It was a double-digit decline, and that is quite difficult to compensate with the other countries. Then from the region side, 80% is in Europe, about 16% in North America. That's Canada and the US and Asia-Pacific. That is mainly China. That's only 4%, and there was a decline of 26%. I'd like to give a closer look to the ventilation segment. So there was a decrease of 4%. Organically, it was 8%. So we had a positive impact from the Siber acquisition. And again, the ventilation sales is mainly related to new build activities, but we try also to develop other activities like the clean air solutions business, also new products that we launched, and also the service business that we extended to compensate, I would say, the demand in the new build activity.
From the margin side, we were able to keep a double-digit margin despite of further investments. So we continue to invest in product development. We also continue to invest in market expansion, also to secure the mid-term potential that we see in the ventilation segment. On the radiator side, it's different. So there was a further decline of 12%. It was 10% organically. So the 2% was from the divestment of the climate ceiling solution. And from the margin side, there was only a small margin of 2%. But also there, in the first six months, we achieved CHF 1.1 million EBIT. And so in the second half, there was CHF 4.6 million EBIT. So we see that the measures implemented already for 2023, but also then in the first six months in 2024, showed a positive impact. Yes, it's still not sufficient. That's clear.
We see that the measures taken have a positive impact on the profitability, especially in the second half of the year. That's thanks to strict cost management and a lot of smaller and bigger measures implemented. A closer look to the one-off costs that were mainly radiator related. From the EUR 35.9 million, EUR 28.9 million were related to the radiator segment, and that mainly to the footprint, the production footprint. There was the climate ceiling investment. There was the closure of the radiator plant with about each eight million negative impact. Then also the impairment in China of our Dacheng factory with about EUR 11 million. Significant measures in one year to turn around the radiator business and also to lower the break-even point as already addressed by Matt. Cash.
As already mentioned in the beginning, we achieved 60.6 million operating cash flow, but we heavily invested. We invested in the acquisition of Siber and the 25% participation of Caladair. That's the French company. Overall, we spent nearly 100 million for acquisition. On the other side, we also lowered the CapEx significantly to somehow compensate it slightly. Balance sheet. We still have a solid balance sheet despite the acquisitions in 2024. The impact was significantly from the acquisition of Siber. There was a goodwill of nearly CHF 80 million. Also due to purchase price allocation, there was an increase in intangible assets of about 12 million. Then we also increased our debts, long-term debts, about 60 million at the end of 2024. Overall, the equity ratio decreased from 67% to 51%, mainly related to the Siber acquisition.
The net debt at the end of the year was EUR 11.8 million. Dividend. The Board of Directors proposes a dividend of CHF 1 per share. So the last year it was CHF 1.3 per share. So despite of the net loss, we have, I would say, only a small debt position. And we also generated a good cash flow. That's why we keep CHF 1 dividend for our shareholders. And then here an overview about, I would say, the long-term development. Yes, we lost sales. We lost nearly, we lost more than CHF 100 million sales the last two years. But on the other side, we were also able to secure a reasonable EBIT margin despite of, I would say, further investments in the ventilation segment in 2024, but also the years before.
With that, I would like to give back the word to Matt for the outlook. Thank you. René.
So, let's start first with some statistics, and, well, I guess 2024, Euroconstruct—these are figures from December—new build completion. You see predominantly red, and particularly in the German market, -15%, but also French market and some other markets substantially down. You saw the effect that it had also on our activity, but let's look now at 2025, and so, yeah, well, the two big markets, France and Germany, and particularly Germany for ventilation is important for us, does not really show a promising picture. Now, you hear in the media about some large players wanting to increase new build permits, but it's first to be seen.
What is good, though, if you look and you remember the slide I showed about our largest ventilation markets, and you also include Canada, five of our six largest markets, they show actually positive development, and I think that's giving us a certain confidence that we have reached the trough and that we're actually seeing some recovery going forward. Now, renovation is not totally different. Renovation was, according to Euroconstruct, one of the most difficult years, 2024, in the last several years, with minus 2.4% overall over the 19 countries that are in the statistics, and of those, France was one of the worst with minus 4.6%, but also Germany was above or below the average with minus 2.8%. Now, Germany and France forecasts a further reduction, however, much lower pace.
But what you also see there on the renovation is that some other markets, for example, Switzerland, but again, the UK, but also Poland, but also Scandinavia, they anticipate a growth. And renovation is important for our radiator market. So let's have no doubt. A demanding construction market will persist in some of our key markets. And I highlight Germany, but I also would like to highlight France and as well as China. But we see some positive outlooks in some of the smaller markets, but also in North America. And actually, I was just at the fair, the yearly fair in Orlando, and the atmosphere is really good. But I would like to also make a disclaimer. There are these looming import duties, which have also an effect on our business.
We are in a position that is probably rather favorable in that we have plants both in Canada and the US, so we do have a certain flexibility in where we produce and where we assemble, but nevertheless, it will also affect our business, but it will affect everybody else as well, so realistically, the question is to what extent we can mitigate these import tariffs internally, but also how we can mitigate it into the market, and in the end, it will lead to some price increases, possibly with a certain delay. In general, interest rates are better or lower than in the past. That will support, particularly in Europe, and at the same time, you saw before, I tried to point that out. We have business elements that are stable, that are growing, steadily growing, and they're becoming more and more relevant for us.
It's the clean air solutions business. It's also the service business. And you have seen we started 20 years ago with our first ventilation units. So we will see a growing replacement business going forward. So we want to focus on accelerating and finding growth in those markets where we see the rebound, namely in Southern Europe, in North America, but also in Eastern Europe. We will continue the path that we have taken for the last years in transforming ourselves from a component manufacturer to a solution provider in the indoor climate space. And we will also seek actively the opportunities on the installed base in terms of service, maintenance, and modernization. At the same time, we will be alert and we will further adapt should we see markets that are not performing, should we see developments where we have to react and go on into further structural measures.
Now, long debate, what do we give as an outlook? We came to the conclusion because it is a mixed bag and there are uncertainties that we refrain to give an exact outlook. We will, if we see the rebound happening, give an outlook as soon as we feel comfortable and have the transparency and latest for the half-year result presentation. So 2025, what are the concrete initiatives? Well, we have to still finalize the transition from the Swiss plant to consolidate with the French plant in radiators. Digitalization is a topic where we see big opportunities with efficiency gains, but also for our customers. We have defined local growth strategies, also including the acquisitions, which we will actively push. And at the same time, that's something I did not mention before. We continuously innovate in new products. That's also true for 2024. That's also true for 2025.
For example, air distribution, it's a topic that is important because we supply full solution. We don't produce air distribution, but we came up with a totally new system called RapidLock system, which is replacing the old system, which makes it much easier and much faster for the installer to install our total ventilation solution. But also in the US or in Canada, we're increasing efficiency rates of our solutions and came out at the fair with a new series of highly efficient energy recovery ventilation units. Clean air solutions, we go as fast as we can. I said before, it's a make-market situation, so it takes time, but we will see the benefit of the new markets that we have entered, of the new regions, and we'll continue that path. And if you look at the Siber integration, yes, we acquired the company last summer.
Now we're in the midst of the integration, and obviously, we will reap the fruits of the integration by bringing these products also into the other markets where it can be applicable. If you look long-term, I confirm what we have said in the past. We have structural drivers that are in our benefit, but also drivers from the end-user market side. The demographic is a known. There are housing shortages in all metropolitan areas that will have to be resolved at one point in time, and that will help us, particularly along the new building standards. Buildings are built in an insulated way. That means you need air circulation. I can give you a long speech about what the benefits of these balanced mechanical ventilations are. We believe that is the solution.
And that ultimately is also something that people are getting more aware of, not just because you have problems, but also because you have much more transparency. You can buy at any internet platform. You can buy these measures or controls that give you the quality of the indoor climate, and we see that people are getting much more aware also after COVID about the indoor climate, and that will help this growing trend for healthy indoor environment that will help our case. We are a solution provider, and we are building competencies around the ventilation, about humidity control, about tempering the air, about filtering the air, and so we have solutions that we can apply in an easy way to all our partners. We provide services, and so we really are the thought leader and the experts for the industry.
We have seen that in the examples, but the customer needs that obviously are going in the directions they're also playing in our hands. We are the only one in our industries that can educate the people that have the facility to transmit know-how. I mentioned before, if you ever have a chance to stop by in our academy here in Switzerland, you see sample apartments where we have built in all these various possibilities for ventilation, the ones we offer, but also the ones we do not offer. And you see what works and what doesn't work. It's quite impressive. And I think this is something that we want to push and we want to build along that to really make sure that our partners, the installers, but also the planners, but also the investors, they can choose our offering.
So if you look at our levers, well, we have some commercial levers, but we also have some operational levers. And I start maybe with the commercial levers. We still do have many, many markets that we can tap into. Now, important is that we focus and that we select and choose our battles. But that's something that we're starting to do this year. I mentioned the market in Southern Europe, but also, for example, North America. North America is a huge market. North America has 50 states. And interesting enough, some states are actually similar in terms of penetration rate for balanced mechanical ventilation, like Switzerland or Germany, for example. The state of Washington has roughly one-third of all new houses that are built with mechanical ventilation. At the same time, you have markets like California where regulation is steadily getting stricter.
So that's also an area that we'll focus on. And the East Coast is probably a little bit comparable to California. And then we also started to tackle one of the, let's say, most powerful, economically powerful markets. That's Texas. Now, their mechanical ventilation is probably not yet that known. It's a little bit of a different approach. So we have a market-by-market approach. We're not going after everything at the same time, but we really go for clusters and try to put the necessary efforts and resources into these particular markets to make an impact. Service business, I think I mentioned before, it's clearly one that will grow, but also the clean air solution and heat exchange business. That's our component business. Heat exchange is very much dependent on the ventilation business overall.
We have come up with new products, and they're actually the topic is enthalpy or humidity control heat exchangers because the traditional product is a paper version. We feel with our offering, and we're the only one offering that globally, we can start to dig into that paper core market and obviously get the growth that we would like to see. If you look at the operational levers, we constantly optimize our portfolio. That's true for radiator, but that's also true for ventilation. I mentioned the, let's say, mid-market portfolio. We're working on, let's say, the legacy topics. In the past, every acquisition had their own product portfolio with their own controls, with their own supply chain.
We're working on new combined ranges, which we want to launch possibly next year, which will help us to get lean in terms of supply chain, but also much more efficient in the assembly. Continuous efficiency gains, digitalization is a topic. I mentioned before, we have from history, a very confederate organization. By starting to really bundle our efforts, we do see big opportunities there and ultimately, with the shift and the increasing proportion of the ventilation business, obviously, our business model, operating model will become less and less asset-heavy. Nonetheless, if you look at the radiator business, you saw that we were able to reduce the break-even point substantially. Radiator volumes are 30% down versus pre-COVID. I personally would have expected a certain recovery already this year. It hasn't happened. I mentioned before the renovation rate. They're mixed. Some markets are getting better.
But if we see some increase in radiator volumes, that will have a medium impact on the result. So yes, I'm a little bit tired of showing a mid-term target of 9% to 11% because I'm in my job for six years now. We have reached 10% in 2021, but we have lost in terms of result in the last couple of years, mostly market-inflicted. We feel we have done a lot of the homework. There are still many things to be done, but we clearly also see the opportunity to get to that mid-term target with the efforts that we have taken in 2024, but that we're also taking going forward. With that, I would like to conclude the presentation part and would like to go to the question-and-answer part.
I suggest that we start here with the people physically here on site before we then go over to our people that are listening to us by video. Who would like to have a question? Martin. There's a mic.
Thank you. Martin, he's not self-confident always. Three questions, one by one. First, a clarification. If you say 15% of your turnover is now service, does this include clean air solution or not? Yes, it does include clean air solution, which is already almost 7, 8% on group level. It's 15% of ventilation. Okay. Not of total. So 5% is pure service like filter clean exchange and service. Yeah. Then the second question, if you look at raw material prices, so what do you see there? Steel prices and so aluminum, what is there the impact for radiators mainly, I guess, and what can you do on the pricing side?
I mean, if you look at the radiators, steel is relevant to a much lesser extent than aluminum. Steel has been slightly declining and is relatively stable. So we do not anticipate a negative, but also not a positive impact on the steel side. If you look at pricing, realistically, we have seen a certain pressure on pricing, particularly also in project business. So price increases will be only very selectively on the radiator side. Okay. And then maybe lastly, you showed the adjusted EBIT margin in radiator, and I was wondering how much of this, let's say, improvement in the second half was the pure de-consolidation effect of climate ceiling.
Very simple. It was about the loss of CHF 1 million in the first six months related to the climate ceiling business. CHF 1 million. So it's product mix.
And normally you have a better, I would say, utilization of the factor in the second half. So due to the investment, there was more or less a flat development at the end for the first and the second half of the year.
Thank you.
Thomas Fong from GAM. I have a question regarding the refurbishment business. I was a little bit astonished to see the two projects since I saw that refurbishment is difficult with your products in your field. Can you talk a little bit about the share and potential refurbishment tasks going into the future?
Yes. Actually, it is not the norm. The norm is new build. We wanted to show on purpose that there are also renovation projects. And yes, the difficult part is not so much to install a ventilation unit, but to warranty air distribution. And if you look at the second project, the renovation of the apartment buildings, these are not central units with an integrated air distribution that you have to install. These were decentral units. So you have a unit in the living room, for example, possibly a second unit in one of the bedrooms. So it's not the same kind of concept. It's an adaptive concept. And these are the topics that we are working on to actually increase the share of renovation. But realistically, today, renovation is still a very, very low percentage.
Yes. But we also have to differentiate between the renovation and the replacement. And we have about installed base in Europe about one million. So at a certain point, the existing units must be replaced. And considering a life cycle of 15-20 years, at a certain point, that must be significant besides the new build exposure. So renovation, refurbishment, replacement, and then new build.
Volta.
It's Lothar Lubinetzky from Octavian. Good morning. I think one of the really encouraging messages today for me was that you said five out of your six most important ventilation markets are expected to grow in 2025. The biggest market, I think, is Netherlands. Germany is number two, but building completions in Germany should still be significantly down this year, even compared to last year. So the question is really the slump there. Will you be able to overcompensate that with the growth in the other markets? I know it's difficult. We are in February, but what's your best guess there?
If we would know, we would give you an outlook. But I guess that is the question, whether these markets are able to overcompensate the downturn that we still will see next year. And yeah, I wouldn't want to give an exact number. I mean, I can say that we saw a certain development in the last quarter. Trends normally don't just abruptly change, but I guess that's the best we can see at this stage. There are also certain uncertainties. I mentioned the situation, for example, in the North American market, which has contributed substantially also last year in the second half. I mean, these are just the topics that we do not have clarity on.
Okay. And talking about North America, how quickly can you basically build up the organization to really penetrate the market?
That depends. We are at different stages in the different states that I was mentioning. So, we're targeting, other than the business that we already have, and you might remember that we acquired the company in Canada. They already had a certain distributor network, but always in the past focused on the Canadian market rather than the US market. But we have earmarked five states that we really are going after. And certain states are at a reasonably established level also in terms of our channels, sales channels, for example, Washington, but also the East Coast. Some other markets are greenfield, Texas.
And so I think the approach is also then different state by state. In Texas, for example, we're going for the high-volume people. We're going for the tailor-made homes. And so obviously, we need to be able to get reference cases. We need to be able to get into the people's mind. Money is there. That's not the issue. We have to make sure they understand the concept and really the benefit of the concept. That will take time. In other markets, I think obviously we can benefit of the market itself because there's already a certain penetration rate.
Last question. How is the progress in rolling out the Siber concept to other countries? I think you are thinking about Italy, as well as Belgium. Yeah, we are actually, I mean, you can also call him because he's very much involved, René, in that integration. Very happy because we also have a staged approach. We target Italy as the first country. We are ahead of implementation plan in that we just launched the product and sold the first units. Let's not forget, though, it's very much also going into multifamily homes. Multifamily homes normally have a certain lead time. Also need to be specified.
That's a certain delay that you will see from there. But Italy is launched. We have first successes. Next one is Belgium, but also parts of the Eastern European countries. And obviously, if we see that successful, then we always can also accelerate. But yes, we are in plan with the integration and also with the bringing products to other countries.
Thank you.
I'm looking at the audience. Does anybody else have a question? Because if not, then I would hand over to the moderator.
Thank you, sir. Anyone who wishes to ask a question from the webinar may click the Q&A button on the left side of the screen and then click the raise your hand button. If you are connected via phone, please press star followed by one on your telephone keypad. Anyone with a question may queue up now. Our first question comes from Fabian Pasta from Jefferies. Please go ahead.
Yeah, can you hear me? Yes. Good morning. Thanks, gentlemen. A couple of questions from my side, and I would go through them. So maybe you can quantify the expected growth for Siber in 2025, as you seem to have a better visibility on that one. The second one would be on the radiator break-even point. So is that now sales of CHF 260 million to CHF 280 million a realistic assumption? And then on the cost structure going forward. So in 2024, we've seen the gross margin improving significantly. Do you think that this is a more sustainable trajectory given the stable steel prices, as you were mentioning, or are we going to go back on lower levels?
The second one on the cost is also personnel that has increased in 2024, but I guess that has something to do with the restructuring measures. Yeah, some color on that would be helpful. Thank you.
Okay, I'll take the first one, Siber, and I'm glad you wrote down the questions. Well, first of all, Siber is very much concentrated historically on the Spanish market. Realistically, what we'll see as an impact is really what they brought along in the Spanish market. You saw the Euroconstruct figures. Spain is anticipating a growth of roughly 5%. We should also benefit from that. The market share is already quite strong. To what extent we're able to increase market share is probably a little bit early to say. So realistically, that will drive the growth.
If you look at the total sales of Siber, we are talking roughly about, I would say, 8% of the ventilation business. And to what extent we see already a major impact from other markets is to be seen. I mentioned before that we started to launch the products, but it will take time. But we're convinced and we also have first echoes that we are able to gain over time.
Then I got a break-even point. When just considering the 2024 result, in the first six months, we achieved 140 million radiator sales with more or less zero EBIT, one million. And in the second half, we achieved the same sales, so slightly high, but very slightly higher with 3.2% EBIT margin. So we see that it goes in the right direction.
Break-even point before was 140, and now it's going down step by step, and hopefully we'll also then have some additional volumes that should support it. Then [we get to] personnel costs. Yes, there is further pressure with the salary increases in 2024. That's one side. Then we also had higher short-term incentive again, due to the target that is set a bit below. Then also related to the restructuring measures. In general, we'll see further pressure on the personnel costs due to the salary increases in different countries. For this year, we expect about 3% salary increases on average. Some countries are regulated, so you cannot really do a lot. You just need to accept what is foreseen in certain markets, like for example, in the Netherlands, where the salary increases are high. Also in Germany, it's given.
You cannot just say how much you pay.
Thanks, and maybe on the gross margin or material cost development.
When that Matt already mentioned on the radiator side, we will have, I would say, an increasing price pressure because we would say the whole industry is underutilized. So there's a lot of capacity in the factories. So there we will have further pressure, and we also need to consider that we significantly increased the prices over the last few years. In the same time, the volumes are decreased about 30%. So that is a competitive environment, and probably the steel will stay somehow stable. That means at the end, to further improve the margin, also needs further cost measures which were initiated already in 2024. That's why we have a higher attention on our footprint and cost structure on the radiator side.
Thank you very much. That's super helpful.
You're welcome. As a reminder, for questions on the webinar, please click the Q&A button on the left side of the screen and then click the raise your hand button. If you are connected by a phone, please press star and one. Gentlemen, so far, there are no further questions.
Okay. Then I'll look again here, whether in the meantime there is an additional one. Martin.
Thank you. Can you maybe talk a bit about innovation, new products, and maybe the successes of the products you introduced over the last couple of years?
Yes. First of all, we had quite some innovations in the last few years, which we also shared with you in the past. One of the products that is really starting to happen is this climate module that you can attach to our, let's say, typical ventilation unit. We call it ComfoClime.
It's a very particular solution in that you can cool, but also heat the air to some extent. So it is not replacing a central heating. It's really an add-on. And here we are now selling in the thousands. Now, that might sound like not a lot, but nevertheless, for having started that product launch about two years ago, we are actually quite happy about it. It is a niche market, and we will see further growth. But realistically, in terms of sales volume, it's still relatively minimal. At the same time, if you look at also Siber, they just launched a product which is called the Siber One.
That's also a unit that you can attach to any regular outside heat pump, where you then can also not just circulate the air, but also at the same time use the external heat pump to cool or to heat the air. That's something that has some potential. Again, if you look at Spain as their classical market, that's a market that has these typical split unit solutions. And the split unit to cool the air is just really, really cheap. So it's a little bit in a different application, probably more an up premium application. We'll see on how that will develop, but again, also going into that direction. So we have several products that have shown some good echo, but it takes time until you really see the volumes.
And maybe on regulation and maybe subsidies. I know there's still a lot of programs running in different countries in the EU. Do all your products have the efficiency qualifications needed to be chosen as a subsidy program, or is this something which you don't consider that important because those rules might change?
Actually, there are not that many subsidy programs left. There were major programs in Germany for schools. We did not have the product that was tailored for that. There are programs at least announced in France for that particular subsegment. We do have products, but on the other hand, whether they're really going to come through is a different question. Obviously, France has a dire situation in their finances. I'm not aware of major subsidy programs in Europe at this stage.
But if you ask whether our products comply with the standards or the highest standards, I can confirm that this is one of the differentiators that we have, is that we have higher than average performance rates, but that's in terms of energy recovery, but that's also in terms of noise. But if you go back to your question about subsidies, I don't think that this is a topic that we can really benefit from at this stage. New build is mainly regulation-driven, and then the renovation is more with subsidies and ventilation is more new build.
Yeah, there's another question.
I was wondering whether you can talk a little bit about the competitive situation in radiators. So one of your competitors will be sold either tomorrow or the day after. The other has been taken over by private equity, so also there we don't get much information. It looks to me like radiator sales, the volume is not recovering yet. Is anybody dropping out of the market?
We are not aware of anybody dropping out of the market. What we see is with the competitor that you mentioned in the beginning, that actually there's quite an aggressive behavior for volume. Might also be in connection with the takeover. But realistically, it's a shared pain. What we probably also face is that we have a certain shift from higher-end radiator to some lower-end radiator. We can see that on the towel radiator side, where we have, let's say, an upper range, probably suffering more than the mid-range. And so probably the ones that have, let's say, a lower-end portfolio are not as hampered as the ones that really go into the premium market. But realistically, as I said, there's massive overcapacity.
We have not seen anybody going out of that market yet. But if you refer to Purmo, for example, they also have taken some steps, which are known and which were also announced while they were still public, to reduce capacity, also close down some plants.
And often it's connected to investment. If somebody needs to invest in a new plant or new machinery, then they consider to stop or to do something else.
Purmo, at least the last things I wrote, was quite optimistic that they can enhance their margin, and actually they were making good progress. So let's put that differently. What are the smaller players?
You have, I mean, obviously it's quite a fragmented market if you look at the product range. So we are in steel tube radiators. We are not in press steel panels. Press steel panels is a totally different game.
Arbonia is very strong. Purmo is very strong. Stelrad is very strong. Also in the press steel market, we're not in that market. Our market is really make-to-dimension renovation market. And in that market, Arbonia is a rather strong competitor in Germany. In Italy, you do have some local competitors. These are family-owned competitors. One went out of business, was acquired by Stelrad. That was De'Longhi, coffee machine manufacturer. Relatively small activity, but there is another one called IRSAP, I-R-S-A-P, family-owned business. And they are probably the fiercest competitor in the Southern European markets. And then in terms of other local competitors, if you talk about electric radiators, which is very much a French topic, you have a big powerhouse, which is Atlantic. But they're not just in radiators. They're in the HVAC industry. They have a very strong market position in France.
You have another player that is in France that used to be the company Soter, and they were acquired by a company called Glen Dimplex. And so they are also very much strong in that particular field of electric radiators. Thanks. Okay, I understand that we have another question from.
We have a follow-up question from Fabian Pasta from Jefferies. Please go ahead.
Yeah, maybe just one question on the very promising tone that you have on the clean air solution. So maybe just to understand the customer structure. So are we talking about single customers, or are you also approaching, let's say, bigger warehouse operators or even thinking the Amazons of the world where selling to one unit could multiply into multi-country contracts?
Yeah, thank you for the question, Fabian. I mean, it's realistically a situation where you do not have any regulation regarding fine dust in any of the countries. So outside, yes, what comes out of the car, yes, but what you have inside a warehouse or in a production, that's not regulated. So ultimately, we come in when there is a problem, a problem because they have to do a lot of cleaning, or you have an obvious issue with dirty air. And funny enough, that's not always in every country the same segment. We do have some larger customers that see the benefit also for their production processes. I think one I can mention that's Oerlikon, where we are now in many of their plants because they really see that as a benefit to operate their production. But it's not the situation where we have multinational customers as key accounts. We address local topics.
Normally, our partner or our customer is a production responsible or a maintenance responsible. And that is very much different country by country.
Okay, thank you. That's understood.
Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Matthias Huenerwadel for any closing remarks.
Okay, thank you very much. And thank you for pronouncing my name so well. That's normally quite difficult. Yeah, I mean, I just would like to thank you for attending today. Hopefully, one or the other can stay and have a coffee with us. We also have a couple of snacks. But let's see what 2025 is bringing. And thank you very much for being here. Looking forward to seeing you again. Thanks.