Ladies and gentlemen, welcome to the Accelleron Half-Y ear Results 2026 conference call and live webcast. I am Sandra, the conference call operator. I would like to remind you that all participants will be in listen-only mode and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. Webcast viewers may submit their questions in writing by the relative field. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it is my pleasure to hand over to Michael Daiber, Vice President, Strategy and Investor Relations. Please go ahead, sir.
Hello, everyone, and a warm welcome to the Accelleron Half Year Results 2026 investor, analyst, and media webcast. Thank you very much for joining us today. Daniel Bischofberger and Adrian Grossenbacher will walk you through Accelleron's performance in the first six months of 2026, provide a detailed financial review, and share the updated outlook for the full year. Before we begin, please take a note of the important notices and safe harbor statement.
This presentation contains forward-looking statements based on current expectations and assumptions. These statements are subject to risks and uncertainties. All figures presented today are in USD and prepared in accordance with U.S. GAAP. Definitions of non-U.S. GAAP financial measures are available on Accelleron's investor relations website. After the presentation, there will be a Q&A session. Questions can be submitted through the chat tool or asked by telephone.
I will now hand over to our CEO, Daniel Bischofberger.
Hey, thank you, Michael, and good morning, everyone. Thank you for joining. As usual, I'm with Adrian, our CFO, and here is our agenda. I will start with the key highlights from the first half of 2026. Adrian will then take over for the financial review. I will return with an update on the marine and energy markets, also talking about our investment priorities and the outlook for the remainder of 2026. Finally, we will conclude with the Q&A session. I would say let's begin with the highlights. Accelleron delivered another strong set of half-year results building on the momentum of 2025. Revenues reached $737 million, an increase of more than 21% year-over-year, and slightly above 17% organically. Marine new builds and data centers continued to underpin growth.
Marine developed well, and we have not experienced any negative impact from the conflict in the Middle East to date. High ship utilization continued to support service demand. Growth in energy exceeded our expectations, driven by strong service demand in U.S. gas compression applications, and also high turbocharger deliveries for gas prime power application, mainly for the U.S. data centers. Operational EBITA increased more than 22% to $190 million. The operational EBITA margin rose by 20 basis points to 25.7%. Net income increased by close to 32% to $151 million. Free cash flow conversion stood at 58%, compared with 70% in the first half of 2025. This mainly reflects the high investments we are making to support future growth in Marine and Energy. Let us look at the main growth drivers in more details.
The product business grew by around 30% year-on-year, while the service business grew by around 15%. In product business, the strongest growth contribution came from gas prime power demand related to the U.S. data centers and from merchant marine new build activity in Asia. Data center-related revenues increased from around 5% of group revenues in the first half of 2025 to slightly below 9% in the first half of 2026. This is a meaningful increase, but the absolute contribution remains limited in relation to total group revenues. Service business growth benefited from remanufacturing work in U.S. gas compression, as well as service agreements, regular maintenance, and upgrades activities in the merchant marine segment. This slide highlights four developments from the first half. First, prime power gained further momentum.
Turbocharger deliveries for data center prime power more than doubled to around 5 GW, up from less than 2 GW in the first half of 2025. Backup power applications remained stable at around 3 GW. This is a consequence of our OEM engine customers allocating more of their constrained capacity to the production of prime power gas engines. Prioritizing prime power applications benefits us. Unlike diesel-fired backup generators, which typically run only a few hours per year, gas engines used for prime power operate a few thousand hours a year.
As a result, they will generate substantial service demand for our turbochargers in the future. Let me clarify a few technical misconceptions I've seen in reports about Accelleron's power solutions for U.S. data centers. When we talk about prime power, we are referring to internal combustion engines running predominantly on natural gas.
Internal combustion engines are also known as piston engines or reciprocating engines. We are not referring to gas turbines. Gas turbines do not need turbochargers and are a competing technology to gas engines. It's important to know that gas turbine production is largely sold out until 2030 or even 2031. When we talk about backup power or emergency gen sets, we mean internal combustion engines fueled by diesel.
You might ask why data centers need two complete set of engines on the same site, one powered by gas and the other one by diesel. The reason is that environmental regulations typically limit diesel engines to only a few hundred operating hours per year. As a result, diesel engines without emission control systems are not suitable for prime power applications running thousands of hours a year. Conversely, using gas engines for backup power is also difficult.
The challenge with gas backup power is not the engine. It is on-site fuel storage. For the same amount of energy, compressed natural gas requires several times the storage volume of diesel, while diesel can be stored and replenished much more easily in case of extended power grid blackouts. After this small excursion into prime and backup power, let us move on to the next highlight. We signed a long-term service agreement with the City of Denton in Texas. The agreement supports fast start power generation with a service model tailored to the requirements of peaking operations. The third A100, A200-L low-speed turbocharger series, launched in 2009 and 2013 respectively, surpassed 10,000 orders. The series is used across major merchant vessel segments.
It covers an installed power base of around 110 GW, equivalent to the installed power of around 100 nuclear power plants of the size of Beznau, the largest nuclear power plant in Switzerland. The superior performance and reliability of our A100, A200-L series are one of the reasons for our strong market share of more than 50% in the low-speed business. Finally, our next generation's ACCX300-L low-speed turbocharger platform entered the market.
The new platform improves serviceability and operational flexibility. Its cartridge concept allows major service events to be decoupled from dry dock schedules, giving operators more control over uptime and maintenance planning. First orders have been secured for more than 50 vessels, corresponding to more than 60 turbochargers and over 600 MW of installed power. With those remarks, I conclude the first section and hand over to Adrian for the financial review. Adrian, it's you.
Thank you, Daniel. Let us now take a closer look at our half-year financials, starting, as always, with the group performance. Group revenues increased by $129 million, or 21.3%, to $737 million. Organic growth reached 17.2%, primarily driven by volume, which contributed close to 14 percentage points. The remaining growth was attributable to direct pricing actions and indirect pricing effects from CHF Swiss franc-denominated pricing and invoicing. Marine new builds and data center-related applications continued to support our growth trajectory. As Daniel mentioned, data center-related revenues increased to slightly below 9% of total revenues. Operational EBITA increased by $35 million or 22.5% to $190 million. The operational EBITA margin rose by 20 basis points to 25.7%.
The faster growth of low margin new business and additional cost along the value chain were more than offset by strong structural leverage as revenue growth continued to outpace SG&A growth, resulting in a further margin expansion. In other words, the margin improvement came from SG&A absorption rather than gross margin expansion. Let us now look at the two reporting segments, starting with medium and low speed.
Revenues in medium and low speed increased by $70 million, or 15.2%, to $529 million. Organic growth was at 11.3%. Growth was driven by strong merchant marine new build activities, namely in China. Service growth was supported by fuel efficiency upgrades, a growing number of vessels under full cover service agreements, and continued high utilization in merchant marine and cruise. Service activity for medium-speed energy application also increased, supported by regular maintenance and reliability-driven investments at power plants.
Fuel injection revenues developed in line with expectations. In terms of operational EBITA, this increased by $90 million, or 16.1%, to $135 million. The operational EBITA margin increased by 20 basis points to 25.5%. The mix effect from strong growth in the lower-margin product business was more than offset by aforementioned structural leverage. Let us move now to the high-speed segment. High speed delivered particularly strong growth in the first half, continuing its growth trajectory.
Revenues increased by $60 million, or 40%, to $209 million. Organic growth was at 35.5%. Revenues from turbocharger in gas-fired prime power applications for data centers in the U.S. continued to grow, supported by capacity expansion at engine OEMs. As Daniel explained, revenue growth in diesel-fired backup power was constrained by OEMs' capacity allocation to prime power. In gas compression, demand in North America remained strong.
Investments in pipelines were supported by increasing domestic and export demand for natural gas. Service revenue grew strongly, driven by sustained U.S. natural gas demand. This supported continued momentum in turbocharger remanufacturing activities for gas compression applications. Service revenues from stationary power application remained stable, while the installed base continued to grow. Operational EBITA increased by $16 million, or 41.6%, to $55 million. The operational EBITA margin increased by 30 basis points to 26.2%. Additional costs along the value chain were more than offset by strong structural leverage in high speed. Let us now move through the bridge from operational EBITA to net income. Starting on the left, operational EBITA amounted to $190 million. Further to the right, one-off and non-operational items included a temporary unrealized foreign exchange gain of $1.7 million.
This resulted from the strengthening of the U.S. dollar against the Swiss franc and timing differences between payables and receivables. Other non-operational items, pension costs, and M&A activities totaled up to $3 million. Acquisition-related amortization amounted to $1.7 million and was linked to OMT, OMC2, and True North Marine, the three acquisitions completed since the stock listing.
The effective income tax rate was 19.1%, compared with 19.6% in the first half of 2025. The decrease mainly reflects the geographic profit mix and the higher share of earnings in lower tax jurisdictions. Net income reached $151 million, an increase of 31.5% year-over-year. Let us go now to the free cash flow section. Free cash flow reached $88 million, up from $81 million in the first half of 2025. Cash conversion stood at 58%, compared with 70% in the prior year period.
Net working capital and other increased by $52 million. The change in net working capital and other was mainly due to an increase in volume-driven receivables, slightly higher DSO, and the normalization of the income tax accruals. Trade payables and inventories grew broadly in line with volumes. Consequently, net cash provided by operating activities increased to $119 million. Let's now move to the capital expenditure. This position increased by more than 40% to $31 million. The increase reflects continued investments in manufacturing and R&D infrastructure upgrades, equipment renewal, and additional production capacity across the globe. These investments are intended to strengthen operational resilience and prepare the business to meet future customer demand. With that, I'm handing back to Daniel for the market update and outlook.
Thank you, Adrian, for the detailed review of our strong half-year financial performance. I will now address the marine and energy markets, our capacity investments, and the outlook for the full year. Merchant marine newbuild markets remain favorable. Ordering activity remains strong across the major vessel segments. Tankers are leading, supported by gas carriers, container ships, and bulk carriers. 2027 and 2028 deliveries in tonnage terms are expected to reach record levels, supported by ongoing capacity expansion in China.
It is clear the majority of expansion will happen in China. We do not really see a lot from Japan and Korea. Despite these capacity expansions, ship orders continue to outpace deliveries. This is reflected in the steadily growing order book, measured in millions of compensated gross tons, in short, CGT. As shown by the light purple area in the top right chart for 2026.
Order book forward covers has risen to more than four years, as illustrated by the blue line in the top right chart, or put differently, a ship ordered today would on average be delivered in 2030, compared with a typical lead time of two to three years under normal market conditions. This reflects a substantial backlog relative to current shipyard output and supports long-term utilization of yards. At the same time, annual deliveries of 4%-5% of world active fleet remain reasonable. Please refer to the right bottom chart.
The current delivery capacity implies a fleet renewal period of around 20-25 years, despite the recent acceleration in shipbuilding activity. Energy momentum also remains strong, with sustained demand for prime power, backup power, and gas compression applications in the U.S. power grid constraints and gas availability are driving demand for gas-fired prime power applications at U.S. data centers.
Given the long lead times for grid connections and the political pressure to avoid passing the costs of new power generation capacity and grid expansion on to utilities and ultimately residential customers in the U.S., BYOP, or bring your own power, is increasingly becoming the norm for U.S. data center operators. As mentioned before, our backup power remained broadly flat year-over-year because OEM capacity was allocated to prime power applications. Increasing manufacturing capacity and order backlogs at engine OEMs support future growth for prime power, backup power, and gas compression applications. The growing prime power installed base should also create service opportunities over time. We expect the main service effect to materialize with a lag of approximately three to five years after the power plants become operational, and that is depending on their operating regimes.
In gas compression, growing domestic and export demand for U.S. natural gas supports investments in gas infrastructure. Pipeline expansion and rising throughput requirements continue to drive growth in gas compression. More pipelines translate into more compressor stations driven by gas engine, especially on lower flow pipelines. Typical applications include gathering pipelines that connect shale oil and gas wells to major transmission pipelines. For transition pipelines that have a higher flow rate by default, gas turbines are generally preferred because of the higher power requirements.
Let us now compare our current market assessments with the outlook we presented in March this year. This slide shows the position as of March 12th, following the full-year results. All segments, with the exception of specialized vessels, show positive momentum with particularly strong growth in medium and high-speed power application. The updated view confirms positive market conditions overall, with some shifts within the portfolio.
In merchant marine, we see higher demand for new turbochargers, especially for tankers and bulkers, supported by growing Chinese shipyard capacity. The service business, both transactional and through service agreements, continues to offer attractive growth opportunity, supported by an installed base that has expanded significantly in recent years. Growth in upgrades and retrofits is expected to level off. The corresponding order backlog accumulated in recent years is being worked on, while the postponement of the IMO Net-Zero Framework has reduced near-term demand. In energy, the outlook has improved for high-speed gas power and gas compression, reflecting data center-related prime power demand and stronger natural gas infrastructure activity. The high domestic demand for natural gas is as well, among other things, driven by the growing electricity demand from U.S. data centers.
The outlook for backup power has weakened compared with March because OEM capacity allocation limits our growth despite continued end-market demand. Overall, robust demand in marine and energy supports the raised full-year guidance. The strong growth in recent years requires increased investments, but we are maintaining flexibility in how we expand capacity. Overall CapEx is expected to reach around 5%-6% of revenues in 2026. Since the stock listing in 2022, Accelleron's business volume has almost doubled, mainly driven by the marine business, bringing Swiss manufacturing operations close to capacity limits.
Higher CapEx reflects investments to strengthen operational resilience, expand capacity, and support future growth in marine and energy. For 2026-2028 period, around 20% of planned investment is allocated to manufacturing and R&D infrastructure upgrades in Switzerland. Around 50% to equipment replacement and around 30% to additional production capacity.
Almost two thirds of the investments are in Switzerland. The remainder is mainly in China, Italy, and the global service network. Our balanced keep, invest, buy approach provides the flexibility to adapt capacity to evolving long-term demand scenarios while remaining mindful of the risk of overheating demand, especially in U.S. data centers. By accelerating replacement investments and extending use of existing production equipment, we can temporarily increase capacity for some years to come.
In parallel, we are leveraging our strong partnership with long-term suppliers to outsource a greater share of production. Let us conclude with the updated financial guidance for 2026. Based on the strong half-year performance and the positive dynamics in our core markets, we are raising the full-year 2026 organic revenue growth guidance to 14%-17%, from previously 9%-14%. The raised guidance reflects the structural growth drivers in both markets.
We confirm the operational EBITA margin guidance at 25%-26%. The guidance assumes that the current market and geopolitical environment do not materially deteriorate. The guidance excludes any potential refunds of U.S. tariffs. If such refunds occur, revenues will be reduced by the amount passed on to customers, while the operational EBITA margin would increase mainly for the portion retained by Accelleron. Thank you for your attention. We are now happy to answer your questions via chat or telephone. Michael Daiber, our head of investor relations, will moderate the Q&A session. Michael, please.
Thank you very much, Daniel and Adrian, and welcome to the Q&A session. Please take note that questions that come in by the chat tool might be combined if they are similar. When asking questions, either by phone or by the chat tool, we kindly ask you to state your name and the organization you are affiliated to. I would now kick off with the first questions from the phone.
For questions on the phone, please press star followed by one. Webcast viewers may submit their questions in writing via the relative field. Our first question comes from Daniela Costa from Goldman Sachs. Please go ahead.
Hi. Good morning. Thank you so much for taking my questions. I have three questions if possible. I can ask them one at a time to make it easier for you. First, I think you make a quick reference in the presentation to pricing. I was wondering if you could give us some color on how much really it contributed in the first half to the 17% organic, and what do you have baked in into your guidance?
Yeah. Thank you, Daniela, for the question. We refer to an organic growth of 17.2%, roughly thereof 14 percentage points volume. That leaves 3 percentage points. One is basically that the direct pricing, I think is fairly marginal in the sense of something of 0.2%- 0.3%. We have then the tariff piece, which we priced in and passed on. I would say this direct pricing plus tariff roughly amounts up to half of it. And then we have one and a half plus percent is the indirect, and that comes through the fact that we have a Swiss franc price list, and we invoice in certain occasions in Swiss franc. So that's a twofold, this 3 percentage points as discussed.
Okay. Good. Thank you. That's very clear. Can you talk a little bit about how long is your backlog visibility now for marine and for data centers? What share of 2027 revenues are already covered in the backlog? If that's an easier way to comment on that.
I think in general, at group level, we still talk of four-six months. It isn't much more in terms of really having firm orders at hand. Yes, we obtain demand signals from our customers, which we obviously need to plan our value chain accordingly. It then boils down in the medium speed, low speed, we usually have a bit longer order windows, while in the high speed, it can go down to six-eight weeks. That's the visibility with firm orders, but obviously there is more to demand signals, which give us a certain comfort, but which are ultimately not committing. Daniel, anything I forgot to mention? A proper complement.
We have some orders, but we see high dynamic in prime powers that some customers then are delaying some of the orders because they are not as fast in ramping up their capacity. So it's quite a dynamic and fluid outlook now. But that's a bit what we are struggling with.
Mm-hmm. Thank you. You comment on the capacity increases on the OEMs on the prime power side, but in you increasing your own capacity as well. Should we think about the grade of magnitudes that your volume ability will increase or your planned volume capacity, let's say, in 2028 or 2029 when the OEMs finish their capacity increases in relation to where you were in 2025? What sort of grade of increase should we think? You've mentioned in the presentation that the volumes doubled from 2022. Should we think about a similar increment or?
No, thank you, Daniela. Fair question. Let me break it down. An important piece is now investment in infrastructure. You can consider more or less our shoe size now has become too tight, and we now need to move to a new shoe size. That's why we said we investing in the infrastructure, and that's mainly in Switzerland, where just the shoe size is too tight now, and that's mainly driven by marine.
Also in Italy, where we said we need to also invest. China is so far okay. Also here we need to, but what is the 20% now we invest in, or 25%, is now really in infrastructure, increasing the shoe size. With this shoe size, we believe we can increase the revenues by another one-third in the long run. The rest, and this is excluding production equipment.
The production equipment, we do incremental based on the feedback we got from the customers. With the infrastructure, you can't say what's 2027, 2028, but we are building an infrastructure which gives us now some runway for the next five to 10 years, depending how fast the feet are growing. The rest, the equipment we'll do based on what we believe makes sense for the next year and the year to come.
Got it. Thank you very much.
You're welcome.
The next question comes from Sebastian Vogel from UBS. Please go ahead.
Good morning. I have also three questions. I would ask them one by one. The first one is, with regard to the revenue share coming from services for your two segments, can you give us some sort of rough ballpark indication what are the latest numbers there?
Yep. Let me quickly check. I do not know all the numbers by heart, but, if I am not mistaken, we are about one-third product and two-third service.
Plus, minus.
That is on the group, but how would it look for high speed and medium and low speed in specific?
Here, I need to check whether we have the details. We have seen that in the high speed, a bit of an accelerated growth because of the gas compression piece. As we mentioned, the pipelines are running and need maintenance respectively to turbos. But we have seen as well a healthy growth level on the medium, low speed, but definitely a faster growth on the high speed. But we do not guide on that level ultimately, as clearly said.
True. The second question would be on gas compression. If I am not mistaken, in the past, you were alluding to that it is around 9%-10% of your group revenues. Can you give us an update there? What would be roughly the latest share?
On gas compression, that is about-
12%
12%.
Great. Then a follow-up question, the third one, with regard to the pricing. I am not sure if I got it correctly there. But the full year pricing ambition on your side, can you add some color there?
I think it will not significantly change to what we have for the half year. We have not in general raised prices. It was more point-to-point and that 0.3% for the half year, I would expect that not to fundamentally change for the full year.
Got it. Perfect. Then I have go back to the queue.
The next question comes from Uma Samlin from Bank of America. Please go ahead.
Hi. Good morning, everyone. Thank you very much for taking my question. Two for me, please. The first one is on your operating leverage. I guess you increased your guide on growth, but the margin guidance stayed the same. I understand that you have a lot of investment going on this year with personnel, equipment, et cetera. How should we think about that operating leverage going into next year? Would you expect to have a potential for any margin upside into
Yeah, I think important to understand this year with the accelerated growth of our products versus the service, we have a bit of headwind as product in average come in at the lower margin. But still in average, clearly green or positive. The investments, you are right. We do have, by ramping up capacity, we have a bit more people around, meaning efficiency end to end is not perfect. We sometimes have to rely on second-source suppliers, meaning the first one is already fully booked. Consequently, costs are a little higher than maybe with the first source. We sometimes have to air freight instead of sending our goods with the vessel. Consequently as well, there are some additional costs.
Ultimately, if we keep growing that quickly, then yes, we are not, let's say, end-to-end perfectly efficient, and if product keeps outgrowing the service, then I believe that 2023- 2026 is the bandwidth with a clear ambition to stay in the top third. But we remain open as well to invest in future capabilities. Is it in respect to growing our R&D on the fuel injection side, really towards
Yeah
the medium speed, or then investing into our AI capabilities, to improve our productivity and set up end-to-end ?
That's super clear. Thank you very much. My second question is on the backup power growth. I guess it seems like, versus what you initially expected, the growth was a bit lower on the backup side so far this year. I guess that seems to be more related to the OEM capacity constraint rather than the demand side of the equation. How should we think about that going forward? Do you expect that growth to come back later this year, or do you think that will be more into 2027?
Look, that's difficult to say. We are in close contact with our OEM customers, and they are struggling now with how shall they allocate now the share of the capacity. Is it prime power or backup power? Look, for us, I would say I'm more in favor of really prime power, because definitely this will create much stronger service business in the long run. While backup power is a one sale, and then most likely we'll never see the turbocharger anymore. So I'm either way. If I could decide, definitely I'm in favor of prime power.
That's super clear. Thank you very much. That's all from me.
Thank you.
The next question comes from Alessandro Foletti from Octavian. Please go ahead.
Yes, good morning. Thank you for taking my question. Just one remaining, if I may. On the data centers, you mentioned a lot of business in the high-speed segment. But when I look at what Wärtsilä has been saying and so on, you should have also some data center-related business in mid-to-low-speed segment. Am I correct, or is it too small to be relevant?
Alessandro, you are 100% right. We have medium-speed power. We do not differentiate because it is one big pocket. It is high speed and medium speed. There is definitely growth, but just to be clear, the high-speed gas is much bigger than the medium speed, just because of capacity. There are more players, and they have either deeper pockets or they are just investing more in the growth. But all in all, as I said, medium-speed and high-speed gas, they are all delivering to prime power data center.
All right. Thank you.
Good. Before the questions from the telephone line will continue, I will ask some questions, or I will read some questions that have been asked through the Q&A tool. First one is from John Kim from Deutsche Bank. Could you please comment on how your market share looks to evolve given the respective build-out plans from the different OEMs? For example, Caterpillar, Wärtsilä, INNIO. Should we think of your market share as fairly evenly distributed about the OEM designs, or is Accelleron over-indexed to certain OEMs?
Thanks, John. I take that one. I think we should separate between high-speed gas and medium-speed . On the high-speed gas, where we have 80% market share, it is probably fairly to assume that we have a quite an evenly distributed among the OEMs. We are participating, and that is why we are very close in contact with all of them. On the medium- speed, there are some engine OEMs that have their own turbocharger, where we have zero. So here is definitely a slightly different game, and here we are between 40% and 50% over the whole. That means where we deliver, you know the math, the average. So that means we will have a higher market share on those where we deliver, while on some we have zero.
But again, the growth, we do not expect that our market share will change with the corresponding OEMs we have already.
Mm-hmm. Next question was from Leah Süss from AWP. You have not seen a significant impact from the conflict in Middle East. So will high freight rates not lead to some service delays?
Yeah. Thank you, Leah. No, we have not seen anything. There's still enough idling around and still enough spare capacity. The Middle East is mainly on the tanker. It's not on the container. The container, there's enough. I would say that they can absorb everything. No, we have not seen any delays.
The second question is about our expectations regarding the timing and order impact of the IMO Net-Zero Framework.
Yeah, that's the famous crystal ball questions. Look, my personal opinion, I don't see any near-term change here in the IMO. It will be paused, and we will see whether it goes ahead or not. As I said, the decarbonization of shipping definitely needs a global regulation. But we see regional regulation, and we see investments, especially in the high-value ships like container gas carriers and so that they do efficiency improvement. But it's clear on the cheaper vessels, there's not a lot of investments going on here.
Mm-hmm. Good. One last question is from the chat tool before we go further to the telephone. It's from Kevin Ahn from Woodline Partners. Given your roughly 80% market share in high-speed gas engine turbochargers and strong ongoing demand, why is direct pricing contributing only 20 - 30 basis points? Are contractual pricing agreements limiting near-term service price realization?
I can take this. Thank you for the question. Let's take a step back. In the high speed, especially on the product side, usually this is governed by means of contracts which are linked to index-based pricing, meaning this is reflecting with 6- 12 months delay or in the price realization is carrying over the inflation part. We have not seen inflation lately thawing. Consequently, we do not see a lot of price realization at this point. As mentioned, we were able to share the burden in respect to the tariffs and passed there on more than 50% in average.
As said in the full year presentation as well.
Probably just to add, again, as Adrian already said, a portion of our pricing is in Swiss francs. So there is an indirect price increase. So where we do not have these long-term contracts, pricing contracts or frame contracts, we have to be careful. We should not overdo, but we always said we are in partnership, so we share pain and gain. We do not want to take advantage. So we are a fair partner, and I think that is more valuable, and this will give us a stronger long-term perspective instead of taking short-term advantages.
Oops, back to the phone line.
The next question comes from Will Mackie from Kepler Cheuvreux. Please go ahead.
Yeah, good morning. Thank you for taking the questions. I have three. Let's start with regional first. Exceptionally strong growth both in China and in the U.S., 43% and 41%, I think, in absolute terms. How would you characterize the growth in those regions? I think you've called out merchant shipping in China, but was that all of it? And obviously high speed and prime power in the U.S., but again, was that all of it? Are there other factors underlying those two points that you've already made?
No, thanks for your question. Product business is recognized where the customer is sitting, more or less. Here on marine, more or less 100% of merchant marine is built all in Asia and more and more in China. I would say now the share is about two-third China and one-third Korea and Japan. Only a few cruise ships are still built in Europe.
That's why in China, definitely the big growth is coming from the product business. The service business is more or less allocated to where the ship owner is. So, it could be in Greece when the service is done with a Greece ship owner or also with China. So here it's a diverse picture. Again, Asia mainly driven by new build marine. U.S. is mainly driven by gas compression, especially now in this first half year of service.
We have not seen so much take up when it comes to product, and the other one is the prime power in the U.S. Again, U.S. is very strongly driven by energy.
That's great. Thank you. The second question relates to somewhat of your budgetary planning or your expectations. You called out product growth in H1 up 30%. As you look at your planning for the year, what level of growth do you think or are you expecting to manage in the second half of the year that fits within your full year targets?
What we see is more or less, we don't expect the second half year to be significantly different from the first half year. We expect more or less than if you do the maths. That means the first half year product business and service business grew in absolute term the same, and we expect to be the same also for the second half year.
That's helpful. Thank you very much. When we think about capital allocation, your balance sheet is relatively strong, and certainly the nature of your business model could support more leverage. You've undertaken, I think, three acquisitions since the spin. How are you thinking about capital allocation beyond the CapEx that you've mentioned today, with regard to bolt-on M&A or perhaps extending your current buybacks?
Again, I think first and foremost, you're right. We want to support our business organically, and we keep investing. That will continue, and Daniel has pointed out 5%-6% of revenue, plus or minus, we expect to land. Additionally, yes, we have a commitment for a stable to slightly growing dividend, clearly. Then it all boils down to the opportunities on the inorganic side, where we want to stay disciplined and selective. But we have to say, yes, we are working on our pipeline, and if nothing there materializes, obviously a share buyback is then the adequate tool to return excess cash. That has been always our philosophy, and we will stick to this.
There's not more to say. We can't give any forecast of any M&A, but it's clear. As I said, we have seen some interesting possibility, and we will capture them if and when they arise. Here, please be patient. We'll see how the world will develop. But as important is a strong balance sheet doesn't lead us to making stupid moves. We will be selective and disciplined and capture when it's interesting. That means if it fits to our business and if it comes with a reasonable price.
Thank you very much.
You're welcome.
The next question comes from Adrian Pehl from Oddo BHF. Please go ahead.
Hi, gentlemen. Good morning. Thanks for squeezing me in. Actually, I've got also three, maybe do them one by one. The first one is actually because also you were referring in the presentation to your planning not to overdo it on capacity on one hand. On the other hand, some customers appear delaying some bookings on getting things on the ground in prime power. I was just wondering, from your perspective, does the funnel see any changes versus six months ago or something? Because also one of your largest clients is actually signaling that there could be some peak situation in Q2 on order intake on the data center side. That's my first one.
Mm-hmm. Yeah. No, that's definitely an interesting question. We will be happy if we know the full truth. The good thing is we are very strong in this business, and we have frequent exchange with our customers. I tell you, sometimes they mix firm orders with capacity plans and so on. So we want to be careful, but as I said, important is that we have the infrastructure set up because that's, I would say, the longest lead item we need to increase capacity.
The rest, we can react very fast. Also in Switzerland already, we have hired 100 people more just to manage the growth here. We'll do that going forward. Again, the outlook is great, but also depending what you read, some are very skeptical, some are very hyped. Some customers a bit more careful, and some go full steam.
We have to make sure that we deliver, because we don't want to lose those customers in this time. We are very confident that we can deliver whatever they need and whatever they order. But requests for capacity is still not an order, so we have to be careful here not to mix up capacity and firm orders. But for the time being, the way forward looks good. But again, we want to be a bit mindful.
Understood. The second question is actually quite a bit related to this, but from another angle. Because phrasing the question about what happens to your margin a bit differently, because I think at the end, what you delivered is really quite strong because you had this strong increase on the new build activity. So you must have had quite some efficiency measures. I was wondering if you can talk a little bit about this, because it doesn't seem that really pricing is the source of this strong margin. Anything on that? Did you increase outsourcing? What did you do on efficiency? This is linked to what should we think about the future? Is there anything that spills over into 2027 which makes us more positive on that you can conserve a higher margin? That's the second one.
Mm-hmm. I can take that. First and foremost, thanks for looking through this lens. Usually, we are asked, why isn't it increasing? Indeed, with the high product business growth, maintaining the margin as such is, I feel as well, an achievement. You need to see our DNA is all around continuous improvements, and we keep improving. Obviously, yes, labor costs keep increasing, so we need to stay on the productivity. We use all means. That's not new to us. That's basically somewhat business as usual. But again, it's year-on-year. You have to deliver on it. What we always say, look, we have a certain amount of fixed cost, and then the leverage effect can be felt. This time we see it especially on the SG&A side, right? Our finance, our IT, our HR, our communication, and so forth.
Our management costs are obviously not scaling with the revenue, and that helps because you see the gross margin over the years is having a little bit of headwind through that accelerated product business growth. While with the structure, we really can offset this can maintain, when not even slightly expand operating EBITA. In respect then to next year's margin, I think we have pointed out it remains our ambition and goal to stay in the top third of our margin corridor, 25%-26% is what I can reconfirm at this point. That's our ambition, but with a specific guidance, we'll get back as always in March.
Right. Fair answer. The last one is actually a bit on marine. When you are saying, actually that tankers and bulkers have been growing, or more in general, the growth that has been taking place in China, I assume that is rather a two-stroke growth than a four-stroke growth probably. I was just wondering what this does to your mix, and that said, revenue and margin profile, two-stroke versus four-stroke. That would be helpful. Thank you.
Probably let me explain a bit. The large ships have always a two-stroke and a four-stroke engine. The two-stroke is the main propulsion, and the four-strokes are the auxiliary engine that produce electricity required also on those ships. But there's, probably also you're referring to, there are ships that have a pure four-stroke propulsion. But then we-
Exactly
-very often we talk about cruise ship or special vessels, and that's them very often. As I said, cruise ship is made in Europe and also a lot of special vessels here. But all in all, we don't see a difference. We own large ships, and whether their main propulsion is two-stroke or main propulsion is four-stroke, we have equally strong position in both segments, and margin are similar.
Perfect. Thank you.
You're welcome.
The next question comes from Bhavin Thakkar from Bloomberg Intelligence. Please go ahead.
Thank you so much for taking my question. I, too, have three. I'll take one at a time. Out of the close to 9% revenue share that you had from data center end market, could you please provide a split between how much was prime power and how much was backup power?
Yep. Let me quickly check. I would say, if my eyes are correct, then yeah, I would say almost two-third came from prime power. Because as more or less the backup was stable while the whole growth in data center was coming from prime power.
That's great. At your full year results, you had provided an outlook for mid-double-digit growth to the prime power revenues for 2026. Is there any revision that we should consider to that outlook or that remains unchanged?
I think we were highlighting that we would expect to get closer to 10% of group revenue with basically the data center overall for the full year. I think with being now close to 9% and expecting a bit of further growth in H2, I think that still holds firm. As always said, if we can deliver a bit faster, customers might be quicker able to ramp up, then it's a bit more or it might be a bit less. But around this, I think that's where we are and on track for.
Mm-hmm. Okay. For services, which saw 15% growth in the first half, are you able to provide growth by end markets as to how much was the growth in the marine end market and what was the growth in energy?
Mm-hmm. I would say the strong growth came in two fields. One was merchant marine. So merchant marine in overall contributed to the overall growth by one- third, and I would say half of the business was new build and the other one was from service, regular maintenance, installed base, and upgrades. The other big share of growth was in oil and gas compression, remanufacturing. So a lot of the engines are now running, transporting or forwarding all the gas, and that created the service growth.
Thank you so much.
Mm-hmm. You're welcome.
We have a follow-up question from Sebastian Vogel from UBS. Please go ahead.
Yeah, sorry. Two follow-ups, if I may. First one is on gas compression. If I am not mistaken, you said that there was 12% revenue share in H1 this year. I was wondering what was the share last year. Another question would be on the tariff side of things. So tariff refunds, there was nothing in H1 2026. Is that the right understanding?
I can take both. I have it. The gas compression I think was last year more like around 9%, and it grew now to roughly 12% of group revenues in H1 2026 versus 2025. That is what I concluded on the table at 10%. For the tariffs, I would say clearly the vast majority of the refunds we expect still to come, that there was a very minor one in H1 which was not material to be mentioned. Now it is hopefully to come. We have filed our application and expect that hopefully to come in within the next 30- 90 days. Probably just quickly-
Got it.
compression. It's a bit a cyclical business, because it's not always final customer end demand. There's a lot of inventory in between. I think we had already in 2023 or 2024 already this issue that there was over-demand in one year and then our customer and their dealers realized they have too much in inventory. Here we would be careful a bit to draw a trend because we see quite a cyclical behavior in the gas compression.
Understood. Got it. Many thanks for the additional color.
You're welcome.
We have another follow-up question from William Mackie from Kepler Cheuvreux. Please go ahead.
Thank you. Yes. I wanted to just come back to the question of the market outlook, and go back to your slide number eight when you talk about data center power. I guess first of all, to set the base, from your perspective as you ship turbochargers for prime power or backup power, when you think of the product rather than the service stream later, are you indifferent? What I mean is, are they similar revenue opportunity and gross margin contribution opportunities across prime and backup applications?
That's the first question, just to set it. Then, when you talk about H1 2025 around 2 GW of install and H1 2026 around 5 GW of prime power, when you look at your, I don't know, consultants or your reviews, what is your planning assumption from your customer base for gigawatt installed in prime power going into H2?
How are you thinking about the 2027, 2028 outlook at this time?
As said, for the second half, we expect a similar trend like in the first half. The outlook is interesting because we get now all the demands from all our customers, and with an 80% market share on high-speed gas and almost a 50% market share on medium- speed, we more or less see the full demand from the combustion engine. The funny thing is when we add everything together, then that's bigger than the whole market. Ignoring that there are gas turbines also supplying. That's a bit the struggle we are in, because we have now full transparency and then we go to International Energy Agency and compare that one, and then it would mean that all the combustion engine would take the market and even bigger than the market.
That's a bit the challenge, and that's why we are very cautious now for the time being to say any meaningful things for 2027, 2028. We are now in close contact. We are sharing not the detailed data from whom we got what data, but we confront them or more or less tell them, "Look, that's what we got. Somehow it doesn't work together." Here now, I think we are moving ahead and customer, again, going through.
A lot have confirmed orders, but also a lot is based on forecast. Here we have to be careful, and for the time being, it's premature if we have any information on 2027, 2028. Maybe to the gross margin question, we were always clear the Prime Power means really sizable and fruitful service business opportunity, while on the backup, this is very limited.
Consequently, we have different service expectations, and therefore, in that sense, life cycle-wise, prefer the Prime Power business, because that comes with service opportunities, while backup is very limited.
Thank you. If I may, just to follow on a little. You've highlighted where your CapEx is going to be directed in Switzerland and Italy, and China. But when you think about capacity constraints across the system now, where do you see internally your most constrained operations? If you look at the supply chain, do you see any sort of feed-in suppliers that appear capacity constrained to you for your business?
No, we don't see with suppliers. I think the market is good, that we get enough. When we take a look, I think we have some production step where we still have enough capacity. On some, we are now really getting to the technical limit. But more important is that we now build the infrastructure, because we get equipment fast enough to increase.
So I'm not worried about the production. That's why the focus is really on expanding our infrastructure, getting more square meters. For example, here in Switzerland now, we are moving things about warehousing or assembly outside of Baden. The barn becomes mainly a production place, and we have now rented some good warehouse and space where we can do assembly. For me, really the main focus is getting the infrastructure ready. The rest is not an issue.
Because our customer need much longer to ramp up the capacity. We can always be in the shade or shadow of what they are ramping up. So we have enough early information that we can invest in the production equipment, also in people that we are ready when the customer is ready.
Very helpful. Thank you.
Did we cover-
Valeria, I think you muted here when you changed.
Hello?
For any further question, please press star, followed by one. So far, no further question. Back over to you, Mr. Bischofberger, for any closing remarks.
Yep. Thank you for all the interesting question. I hope you got all the information you need. Thanks for joining and hear you soon again. Thank you. Goodbye.
Thank you. Bye.
Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.