Good morning from Andritz in Graz, the place of our origins 174 years ago and also where our headquarters is. A warm Welcome to the Andritz Capital Markets Day 2026, and thank you for joining today. I'm Matthias Pfeifenberger from IR, and I will guide you through the day. Actually more than 100. We have 120 registered participants, bankers, analysts, investors, and our board members, and we are really pleased to have this level of participation. Speaking of investors, we have our largest shareholder here in the audience and our chairman. Please give a hand to Dr. Leitner. I hope you have enjoyed the corporate video. It's what we do at Andritz and what we stand for. Before I walk you through the agenda, let me highlight what we try to accomplish today.
We like to present you Andritz from a different perspective with a focus on the two areas that you see on the slide. Please enjoy. I hope you had an espresso pulled already because it will be a day full of information. Now let me guide you through the agenda of today. I need to click. First, we're going to start with our executive board on a strategy update, followed by the financial update. We'll present new medium-term financial targets to you, our positioning in energy businesses, and also our digitalization strategy, followed by a Q&A. We will then resume the morning with a focus on our energy businesses in detail and the deep dives on large Pulp & Paper, our Metals diversification strategy, and then end with closing remarks and key takeaways before lunch at 11:30 A.M.
In the afternoon, we have the pleasure to open the new Andritz Experience Center for you, showcasing Andritz capabilities in automation, digitalization, and AI, and guide you through the customer value cases and digital solutions. We'll also have a tour of our manufacturing site. We will divide you into four groups, two of them running on one track AC, followed by the manufacturing, and then the groups will basically reverse. You're already assigned to your group on the VIP cards we distributed, so see the individual agenda items there below. Then we will come back to this presentation room, and you will be distributed farewell presents. Then there will be transfers to Graz and Vienna Airport. Before the AC visit, there will be a safety instruction, and you will also get safety equipment in this room. Now it's an even greater pleasure to introduce our speakers to you.
Please welcome with me the Andritz Executive Board, our CEO, Joachim Schönbeck. Our CFO, Vanessa Hellwing. Our CEO Pulp & Paper, Jarno Nymark. Last but definitely not least, our CEO Hydropower, Frédéric Sauze. Nice photos. Now it's my pleasure to welcome Joachim Schönbeck to the stage with initial remarks and an update on our long-term profitable growth strategy. Joachim Schönbeck, please join me on stage.
Thank you, Matthias. Good morning, ladies and gentlemen. Not too many ladies in the room, but some. That is very good. Thank you very much for coming all your way to Graz to join us here for our Capital Markets Day. If we move now right into the middle of it, we believe that Metris is relevant and will remain relevant for the industry. We have a, I would say, diversified and well-balanced portfolio through Pulp & Paper, Metals, Hydropower, and Environment and Energy. While Pulp & Paper represents about 40% of the business volume, Metals, Hydropower, Environment, and Energy fluctuate at the moment around 20%, with Hydropower on a very steep increase in terms of volume and relevance for the group. What is driving Metris is the need for electrical energy, for renewable energy, for circular economy, and for digitalization.
This has been developed over the years, and we believe these will be strong drivers for the business to come. While we hear a lot, many people or also investors say that Pulp & Paper is very boring business. Wood, biomass, basically is the only renewable raw material that has a critical meaning for the industry. Therefore, we believe being in that business with a long expertise and understanding and developing how much more you can do from wood than just paper is a key asset. As we are not, even though we report every quarter to you, we go beyond the quarter, and we go beyond the year, and we believe that on the long term, a lot of these technologies we are currently developing and have developed will be very relevant. We are coming from Metris.
Here is where you are, where the company has been born, but we believe we are a true global player. We do not even have the majority of our employees in Austria. It is 12%, and I would say we are regionally well-balanced among the globe, 14% in China, 14% in Germany, 15% in North America, 30% in South America. I think that is well-balanced, and we are basically driving the trend out of Europe further on, bringing as much value add close to our customers as we can. We have about 30,000 employees in 280 locations in more than 80 countries, which is a strong value proposition to our customers, knowing that wherever they go, we probably are already there and can help them. We are particularly proud that we managed a couple of years ago to surpass on our manufacturing footprint.
The emerging markets have now the majority, and that trend is continuing as we are shifting value add close to our customers into the emerging markets. We are leading well-diversified industrial group. We do what we do with leading technology positions. We are in attractive niches that are big enough for us to grow and small enough not to attract too many others. We have significant barriers for entries, new competitors, through very extensive and good references, and we have a long-lasting customer relationship which secures a lot of our business model. In each market we are in, actually, we only have a few customers, so also for us, it is important to deliver, to behave well because we cannot lose the customers. Therefore, I would say it provides a good discipline for us. We have a global setup, which for our business model is very important.
We can execute locally, we can source locally, and we can keep a good customer proximity. Developing the service business is one of the well-proven growth engines. For Andritz, we have now 45% service revenue. We had an increase in service revenues of 8% compound annual growth rates now for many years. This not only provides a closer tie with the customer, but it also lowers the cyclicality of Andritz business over time. We have a strong balance sheet, and we are financially as independent as you can be in this world. We believe this is a critical qualification to do large-scale projects over significant lead time because also our customers, they want to be sure that the supplier exists not only at the beginning but also at the end of a project.
I know from many discussions with some of you that what we call the diversification is not always what you really love. But what is holding our group together is a, I would say, a good operation model providing complex custom-made projects to our customers worldwide. And you need to have a certain volume, and you need to have a certain also financial stability to do that trustfully and reliably, and that is what our customers like. Bringing complex projects to, I would say, many remote parts of the world requires certain skills, requires local expertise, requires a robust business model, and it also requires that you enable exchange of information inside the group because the countries are very different. The industries are different, but also the countries are different. And when you know your way around in Uruguay, you for sure do not know your way around in Chile.
You need to be aware, and I think we can bring a lot of that to the field. We exchange on joint customer relationship, but also on best practices in project management, supply chains. But also local partners for installation, civil works is a very valid point. So we believe that from that setup that we have, in particular in that respect, our business and our customers benefit a lot from our structured approach into different industries. Our business model has also a true financial benefit for our investors. We operate extremely asset light and we can convert good margins in a very efficient capital utilization, resulting in a very high return on invested capital. If we compare it to our WACC, it's a very solid gap. But also if we compare it to our peers, I would say it's quite an impressive figure.
We select very carefully on our value add steps, in particular in manufacturing. We are heavily engaged in the engineering because this is where we create the value for our projects, for the customers. The margin progress also uplifted the return on the employed capital, and through that we can generate steady cash and provide significant shareholder returns. So we believe it is a good model and the variety of industries we are serving is benefiting here in particular. If we look back to our last Capital Markets Day in 2024, we can see today that the businesses we are in, they are in a different cycle than they have been two years ago. In Pulp & Paper and in Metals, we are basically in the beginning of a cycle, which we believe is good for the future to come.
In particular, in Metals, which is a lot of your concerns, we see light at the end of the tunnel. In Hydropower, we are climbing up. We don't believe that we reached the summit yet, as we see a good future to come. Where we are a bit unclear where the market is, in particular, when it will develop favorably is on the green hydrogen and carbon capture, where a lot of the expectations on future growth has not materialized over the past two years, and we will come to that a bit later. Let's say we did what we could do. We developed technology, and we are ready to deploy that when the markets will come.
What is truly a game changer for Metris is this significant energy exposure and the demand of the world for electrical energy and for renewable energy is definitely driving our business to an extent we did not expect couple of years ago. We have approximately EUR 3 billion of our revenue is energy related. Of course, the majority, two-third of that is driven by Hydro, but also our other business areas have a significant exposure to the energy market. It's Metals, Pulp & Paper, and Environment and Energy. The business we are doing in the energy is well-diversified over several steps in that value chain. It's related in power generation, grid stability, electrification and e-mobility, as well as energy transition storage and decarbonization. So we can benefit from all these areas, and a lot of investments need to go on there.
You can see that the share of our energy exposure has increased over time, and we expect more to come. We will go in a deep dive. We will go into the details, what we are doing in which area. Our underlying strategy has not changed. We focus on customer service, digitalization, and decarbonization as the main drivers. We want to grow in revenue, want to grow in profitability, and we want to grow in our service share. That's very simple, and it's not changing, and most probably will not change very quickly. If we see how the growth has been driven in the past, could be an indication for the future. We definitely see the significance of service. While our total revenue grew by approximately 4% over the years, service revenue increased by average 8% annually. That is a very good trend.
The margin expansion over that time by more than 200 basis points, also driven by the strong growth in service revenue. When we see where does the growth come from, it's almost 50% organic and the other 50% coming from M&A. Disciplined M&A, for sure, is a strong growth accelerator for Metris. It always has been, and it will continue that way. We basically focus in four areas. The first and foremost, and basically our historical M&A agenda is complementary technologies. So we try to complement our offerings towards our customers to complete the value chain, to provide them a one-stop solution and provide them a better service than they had before.
That is not only good in terms of the customer, that they know us, that we have a reputation in those markets, but it is also a significant element for us to de-risk M&A processes, because we basically know our targets already for many years. We know how they behave in the certain industries. We have a feedback also from the customer side. Through that, we definitely have more successful M&A and less riskier targets than many others. We understand their products, their culture, and the risks are lower. We have a good track record with three to five acquisitions per year, and since 2018, we invested EUR 1.5 billion here, and we believe with a very good return.
The next main area where we focus our acquisitions on is customer service, because if we want to grow in customer service, we also have to understand that all customers that haven't planned are already serviced by somebody. Acquisition is a very natural way to grow into these markets. You can see that the portfolio expansion is across all business areas. Definitely a heavyweight is the acquisition in Pulp & Paper, but it is also as it is the largest business area. That is very good. Last year, we had a, I would say, particularly successful year in M&A with six major acquisitions that we made. This year, unfortunately, we did not report anything yet. Growth and service business, as I told you, is a key priority and a key driver of our equity story.
8% compound annual growth rate over the past seven years is a good track record. Over that time, we grew the service share from 35% - 44% of our total revenues. Worldwide, we have about 120 service locations with more than 7,000 people dedicated to serve the customers. What you probably have not been aware of so much, the service market usually is five to eight times larger than the capital market. With the volume, the market shares we have there, it is basically always the opportunity for us to grow. That is particularly attractive for us as on the capital market with the high market shares we have in many areas. We cannot grow against the market. When the market goes up, we will go up, and if markets go down, we will go down.
That is the burden of being a market leader and having a high market share. We will grow further. We will grow our market share in the existing fleet. Also the good capital business that we are doing is growing this field. We will move more into O&M models for our customers. That, I would say, tightens this life cycle partnership and also our customers more and more understand the value of leaving the maintenance and in some areas also the operations to the OEM who understands the technology and the design to a very large detail. We employ digital solutions to provide a better service with, in particular, analysis of the assets and also predictive maintenance approaches. Of course, we will continue to look for M&A targets in the service area. We are serving basically with a strong portfolio.
We provide field services for all our customers, on-site repairs, emergency supports, training, and consultings. We heavily engage into spare parts and consumables. There is a huge demand, fast turn items, and there are many critical components where we need to be very close to our customers. We do retrofits and upgrades on a regular base as an order of magnitude for industrial assets like we are producing. Our customers spend usually the original investment amount within the first 15 years once more. So there is a significant business behind that, and that's also sometimes larger projects we need to run with the systematic of a capital project. And then what I said, operational and maintenance.
We are working on service contracts for the O&M predictive maintenance and AI-powered digital solutions definitely will provide us in the future a better position in that area than what our customers usually can provide. If you look to the service revenue share, you see that in Pulp & Paper, we already reached 59%, which is very high. Partly that's first half 2026, partly because the capital is lower than we like to have it. On the other side, also 50% is quite high. If you look at Metals, we are only at 29%, which we can say it's a pity, but on the other side, it's a big opportunity, and growing the service share in that market also towards the 50% definitely provides good opportunity to increase the profitability. Overall, the target midterm is to reach the 50% of our revenues in the service.
You can do your mathematics yourself if we keep the 8% when we reach the 50%. As I said, capital revenue is more fluctuating, therefore the numbers are not that predictable. But you can see service revenue share constantly rose over the past years, but also the absolute value of the service revenue increased. That is what is really important. Makes our business more robust, makes the returns more stable and a bit more predictable. Maybe that is something that investors like to see. On the digital side, I would say we have two different approaches to the digitalization in Metris. The one is our vision and mission for our customers, what we provide for our customers. We want to be Leading partner of our customers for digital solutions, fulfill the customer needs with the final target to enable the autonomous plant and raise the productivity.
That is basically what we are focusing and developing around our customer solutions. Then we have an internal perspective to provide the Metris organization with the right digital setup, the state-of-the-art tools and technologies to provide good solutions to the customer. That's basically standing on three pillars. The one is a secure foundation, and that first and foremost is operational resilience and cyber security need to deploy our tools highly efficiently and to create a competitive advantage through what we are doing. If we go maybe into a bit of a detail, AI is in everybody's mouth, and I would say also in ours and if we would characterize where do we stand between our peers who are, some of them are, I would say, very AI euphoric, and some are very AI cautious. I would say we are right in the middle. We are very pragmatic.
We definitely are a first mover, but we do everything we do against measurable business value. We have chosen a four-step approach. We moved in very early beginning of last year to onboard as many of our employees to AI tools. We have now more than 10,000 AI users in the company on a regular base. We gave a lot of freedom to our people to develop, to play around with the new tools to see what can be done and what came up. We have now more than 10,000 agents that are regularly used, which tells us that a lot of creativity is within the people. We are steering that through our AI competence center. They govern and orchestrate what is being done, and they connect the people who are working on similar topics.
Through that approach, we could then create some of these key areas where we want to really excel and get a competitive advantage. That is what we call the Metris Engineering Assistance, where a lot of activities have been combined. There is this analysis of terms and conditions from the customer. Knowledge preservation plays a big role, field service agent, contract assistance, and also the entire area of quality management with the NCR analysis and the lessons learned. Vast amounts of data are resting there, and probably they are too much for a human to really go through. Then we have in the middle there, we have this one step we call accelerate. This is where we work with our partners, in particular the software providers in the engineering area, because they provide good AI solutions we can connect and we can work on that.
From that point of view, we believe we are on a good path there. At least this is what we have been told by others that for an engineering company, we are moving well ahead. For you, that might be also important to feel safe with what we are doing in our IT, that security is a solid base of our IT system. We basically provide a security by the design of our systems. We have a significant cost advantage if it comes to cyber insurance on retention level and insurance premiums, we are well below industry average. On the certification and compliance, I would say we are really good. No major non-conformities have been reported through these audits. We are on a measurable maturity level on the CIS 18 ranging from zero to five.
We have a target of four, which is considered very high in class for an industrial company like ours. We are currently at 3.5, and by end of the year, we will be at 3.6. So we protect the group and to be sure that also tomorrow we are able not only to deliver the solutions to our customers, but also on time pay all the salaries of our people. Looking to our customers, we are looking from basically to move our customers on their path from automation to autonomy. In our global automation, we have more than 100 locations with more than 2,000 employees, 12,000 installed base systems installed with our customers. We are focusing on the assets, keeping them productive throughout the lifetime.
We want to turn the complex processes our customers are running into stable and predictable operations, and we want to convert the operational data into measurable efficiency improvements. All that we do with a target to a fully autonomous operation and our experts will provide more details to you in the Andritz Experience Center that we will see in the afternoon. On the financial side, we talk in our automation business, we talk about roughly business volume of EUR 800 million, which has been growing with 10% approximately over the past five years. That's the speed and the growth rate we would like to keep. We are working in three areas. The one is this classical automation electrification, which is basically the basis you need to set in order to get something moving. We are moving then with smart products, especially robotics and vision systems.
These are the most drivers as well as advanced analyzers. Then we move to digitalization, digital twin solutions, operator training simulators, physics-based simulators to really test new ways to run the operation without risking the assets. These are the areas that we are working in. To implement that, we have developed an open vendor-neutral automation platform we call Metris. Here we are running on top of this shop floor level, which is provided by the major automation suppliers. We are running our models for asset optimization, process optimization, and operational efficiency. Basically, the shop floor level provides the network on which it's running, and we are providing the Netflix content to make it better, to have an idea how that works. We are delivering, I would say, strong customer value through this Metris approach.
On the process optimization, we can reduce the OpEx by up to 20%, increase the output by up to 3% through asset optimization and lifecycle management, and driving the operational efficiency 10 percentage points up. That is all without major hardware investments. That's only basically through analyzing the data, choosing better set points, and decreasing downtime of the assets. Our business model, we go through supply contracts, we have performance-based contracts, but we also have software-as-a-service contracts. On the AI journey for our customers, we believe we have been early mover. We joined with SEEBURGER, a data science company from Germany. We took an equity participation already in 2018. We have now machine learning implemented in our Metris All-in-One Platform. You will see about that in the afternoon.
We have innovative products, moving computer vision into autonomous operations, and we are happy that it has been externally recognized when we received this intelligent manufacturing award from Microsoft, which was a nice recognition of what our people are doing. On our ESG, there is not a lot of new things to report to you. We have set up last year our new sustainability program, enabling the green transition, supporting people to grow and govern with integrity. That is what we want to achieve. We have set up KPIs to measure the progress in these dimensions towards 2030. That's e-impact revenue, that's greenhouse gas emissions Accident frequency rates, women in leadership positions, and on the governance side, we have very much focused on our supply chain. Short update where we are. First half 2026, we are well on track in all dimensions.
And so we are confident that we will meet these targets by 2030. Also, our ESG performance has been externally recognized. All rating agencies have increased their ratings. In particular, I want to point out this top five rating of EcoVadis, which is really a good achievement of our teams. We had high hopes for several new technologies that we have presented to you on the last Capital Markets Day. If we put it in short, we had one of these new products that really met our expectation, that's the synchronous condenser here, the market really developed very favorably. Then we had three areas, the sidestreams, the bio-methanol, and the textile recycling, where we could see a decent market, not a brilliant market, but some progress.
And then we had three technologies, the green hydrogen, carbon capture, and the battery, where we did not see the market developing in a way that we expected that, and we will come to that in a bit detail. So we also provide you today with new midterm targets financially. These are the targets now we have set up for 2029, and we are targeting for revenue of EUR 10 billion and a comparable EBITA margin of 10%. As you're all quick in mathematics, you might be surprised about these high ambitions we have, because it would require stronger growth than we had in the past. First of all, of course, tomorrow we want to be better than yesterday.
But also we have a particularly strong backlog in our orders, and we also see that on the cyclical side in the markets, we are in a better position than we have been two years ago. Just for the books, these will replace the 2027 targets we have put out. But of course, we continue trying to achieve that. But the new targets are now the one for 2029. We also reviewed the margin corridors for the four business areas, and we have uplifted the business areas hydropower and metals. That has been increased by 100 basis points each. So hydropower now is targeting 8%-10% comparable EBITA, and metals is targeting 7%-9%, while Pulp & Paper remain stable. We have harmonized Environment and Energy also to this two percentage point bracket, and we have lowered the 13% upper margin to 12%.
Even though it has been revised, I would say it's still on a very strong profitability side, well above the 10%. Why we believe we can achieve that? We have a backlog well above the EUR 12 billion. That's the strongest in our history. We have more favorable positions in the cycles. We see a continuing strong growth potential in hydropower, and we also see that on the metal side, we will collect some fruits and harvest from the heavy restructuring we made over the past years. With that, I come to my end, and I would like to hand over to Vanessa, our CFO. She will give you more guidance on the financial strategy update of the group. Thank you very much, and we would be available for Q&A later. Thank you. Vanessa.
Yeah. Thank you, Joachim. Warmly welcome here in Graz and also online, wherever you are. We just heard from Joachim that long-term profitable growth remains our key objective. I would like to start here directly with ROIC steering. We here ensure that our growth really creates value. As many of you know, in the last few quarters, we have focused a lot on ROIC and economic value creation. ROIC is indeed embedded in how we assess our business investments and M&A opportunities. Our metric here is deliberately clean without any adjustments and full goodwill and intangibles. We are prepared also to accept temporary ROIC dilution, when we see a clear strategic or financial rationale behind this. This is also what you could see in last year, 2025.
What remains important for us here is that over the time we keep a healthy spread above our WACC on the ROIC level. In fact, we could increase the ROIC by 550 basis points since 2018. Also increasingly we use ROIC as a monitoring tool for our M&A targets, which we evaluate in terms of their impact to the ROIC of the group. I will also come to that later. The resilience of the model is very important here. Even in weaker times, Andritz has historically generated substantial returns, and you can see this here on the chart in 2019 and 2020, we had huge restructuring measures. The impact is seen here also in the gray bars, where we are indicating the comparable EBITA. Even with this, still the floor has always been nicely above the WACC.
In 2025, we had quite concentrated M&A spend, as you might know, and you see a bit of a dip from this and already can also see the recovery in the first half of this year is visible. We think we are operating at a quite industry leading value proposition also amongst our peers. Our steering will certainly remain focused on this KPI, making sure that we use our capital to grow with sustainable value. That also brings me directly to our capital allocation, because with our strong returns and the cash generation, this gives us a significant strategic flexibility. Our capital allocation, we actually see as an integrated framework of four parts, which over the years are pretty well-balanced. As you can see here, we are looking at the combined figures from 2020 - 2025.
See here that, of course, a share buyback is naturally the smallest and most opportunistic part of this instrument. For M&A, we predominantly do bolt-on deals. However, we do have the balance sheet capacity for larger strategic transactions, but as always here, also the discipline on target selection remains, of course, priority. We obviously dedicate also a relative fixed part to our dividends with our progressive policy and a target payout ratio of 50%-60%. You may remember that we increased our dividend per share to EUR 2.70 in 2025, and that was the seventh increase in a row. On the CapEx side here, the main part was 40% over the years. As you know, we are quite an asset-light model, and that also means that our CapEx for our maintenance is structurally quite moderate.
What comes on top is basically selective capacity expansion also for service, which is very important for us. Then also for IT investments, digital infrastructure, and sustainability or customer-related investments. We are actually frequently asked about our M&A strategy, and Joachim already elaborated on the strategic criteria. Let me also share some view on the financial perspective here. Generally, we buy, we improve, and integrate, we create synergies, and thereby we create value. Synergies and operational improvements can effectively reduce the acquisition multiple in about three years. What you see here, and the businesses that we acquired since 2018 at the time of acquisition had an aggregated EBITA margin about 380 basis points above Andritz margins. These numbers are revenue weighted, not only simple average of the takeover multiples.
That clearly shows that our M&A strategy has obviously not just added incremental revenue, but has consistently also contributed to improve the margin profile of the group, and thereby is our main lever also to profitable growth. You can also see from our balance sheet that we have acquired in a very disciplined manner, leaving goodwill and intangibles on quite a low level of our total balance, especially if you see this in comparison to our direct peers. This also translates very well back to our ROIC effectiveness. Speaking of strong financial headroom on our balance sheet, this is also, as you can see, much stronger compared to our direct peer group. Which in fact brings me also to the next slide.
Financial headroom remains significant with our strong financial position, EUR 600 million net liquidity and close to EUR 1 billion gross liquidity, and an additional flexibility that is provided through our revolving credit facility of EUR 500 million. Even theoretically, considering a leverage indication of 1.75 x our additional transaction capacity, it could be more than EUR 2 billion. This is ready and available through strong commitments of our core banks. Thank you for this at this time. We are not indicating here that we will do a large-scale M&A transaction anytime soon. But if the right strategic opportunity comes along, it shows our balance sheet gives us the ability to act. We have also shifted our focus in the recent quarters to operating net working capital. Our objective here is not to minimize net working capital at any cost.
This is to optimize while protecting also our profitable growth project execution and especially our supply chain security. On the contract working capital, of course, the clear target here is to structurally stay negative over the project life cycle, and this is with strong order intake and advanced payments of our customers, very well supported. Trade working capital on the upper side, we of course optimize it, but not to the expense of profitable business and supply chain resilience. You have seen significant supply chain disruptions and geopolitical events in the last years, and we can consider that this also might continue to a certain extent. Therefore, net working capital can deliberately increase here, where we see service activities requiring availability of stock, where geopolitical risk really justify additional safety stock, and also where backlog execution requires it.
Fluctuations on the backlog, this can be about EUR 300 million quarter-over-quarter. That is what we can expect with our business model. Following frequent conversations in our investor meetings and also in some earnings calls last year, I would like to shed some light on a more structural topic here, which is in fact very close to my heart. We have embarked on a global transformation initiative over the last two years and have started the One ANDRITZ in Sync program last year. This program is about the enterprise architecture of our support functions, and based on actually three pillars, which is legal entity optimization, business shared services, and also the residual SAP rollout at Andritz.
The clear objective is here to maximize the degree of automation based on standardization and global data and financial governance in order to improve accuracy, achieving more real-time data access, and thereby also enabling faster financial analysis. This goes very well hand in hand with our overall digitalization strategy that Joachim just introduced to you. This is not a restructuring program. It is about building an operating and financial backbone that allows Andritz to grow without adding further complexity and to easily scale tools and best practices globally. I mean with a history of almost 175 years, a constant transformation actually should be part of the daily operation, especially for the central functions. We have grown significantly during the last decades and need to reconsider lean structures from time to time.
Talking about the development of the last decades, you might have heard that Andritz also celebrated the 25th years anniversary of being stock listed at the Vienna Stock Exchange in June this year. As a reflection of our long-term profitable growth story, we really created substantial shareholder value in this period. Since the IPO, Andritz has increased its workforce seven times from 4,000 - 30,000 employees, revenue eight times from EUR 1 billion - EUR 8 billion, and earnings 16 times from EUR 40 million to approximately EUR 700 million in reported EBITA. Of course, we expanded our global presence to more than 80 countries. We generated 6,600% total shareholder return, including 25 dividend payments worth EUR 211 per share in total. We substantially outperformed also our peers in Austria and European indices and reached an all-time high share price in the anniversary year, just two weeks ago.
I could close my part now with this wonderful marketing remark here, but as a CFO, I probably cannot have a presentation on the 6th of October without current trading information on Q3. Let me briefly share this. On a preliminary basis, our order intake in Q3 should have remained on the level of the last eight consecutive quarters, which is above EUR 2 billion. We have had the opportunity here to book another large-scale hydro order in Slovakia, a very great success. We reiterate here our fiscal year guidance for 2026 and see ourselves well between our target corridors for growth and comparable EBITA margins. Ladies and gentlemen, I thank you very much for your attention, and I would open the floor now for any questions and would ask Joachim to join me on the Q&A.
Thank you, Vanessa. Thank you, Dr. Schönbeck, for your elaborations and the strategy update. A couple of statements before we start the Q&A. For the participants joining in the webcast, please click Q&A on the button on the left and then raise your hand. We will then pull you into the room to ask your questions virtually. Written questions, please click Q&A and select text and type in your question. We will then read it, and for participants dialing by telephone, just press star and one, and then we will continue to hear you. Please, we take the first questions from the room. Akash.
Yes. Hi, good morning. Thank you for your time. It's Akash from J.P. Morgan. I got a couple to start with. The first one is for Joachim. You mentioned that the service market is five to eight times larger than new equipment, yet if you look at four division across, the highest service share we have in Pulp & Paper at 60%, which would indicate either you are having very low penetration or maybe your current offering may not be able to cover all the service opportunity. Maybe if I can ask the question, what is driving this low aftermarket share compared to the opportunity? Is this the portfolio that may be lagging the building blocks that you might need to capture all or something else? That's the first one to start with.
Yeah, I think it's a combination of all. We are definitely not offering all the services we would like to offer currently, but there is also a resistance of our customers to outsource each and every service the assets need. So in some regions, an outsourcing of a maintenance is very frequently done, and in some areas it is considered core competence. That is definitely driving that. But as I said, there are also many offerings we would like to provide and we do not provide today, and that is the growth opportunity for tomorrow. Our teams are constantly working on that.
So maybe we can say this five to eight times is more like theoretical addressable market, not the-
That is the total market considering what is spent on the asset over the entire lifetime. There is also very some, I would say, high labor intensive, low value add, low margin business, which we probably do not really like to go after. But I would say the market is there and besides profitability view, every activity we do together with our customers is basically increasing our customer proximity and tightening the partnership with the customer, which is also a value. We are exactly evaluating in our strategic plannings with the divisions exactly where to go in, what to invest. We are building new service centers to move close to our customers to do that.
Then maybe a follow-up on your automation business, and thanks for sharing some numbers. I think it was interesting to note that the business has grown at a CAGR of 10% in last five years. I think if you look at the numbers from automation players, clearly this is much higher growth than what we have seen in the market in last 5 years. Maybe if a question I can ask, how much of this growth that you have seen in automation is organic versus inorganic so that we can compare with other automation players?
The majority is organic. We have made, I think, two acquisitions, if I recall. Majority is organic. If you are starting low, you also know that it is more easy to grow at higher rates.
And maybe last quick one for Vanessa. On the CapEx outlook, I think given the growth in hydropower, you may need more expansion there. When we look at the, let's say, CapEx in next three years, should we expect anything different as percentage of revenues than last three years? Thank you.
Yes. We definitely have already started to invest in capacity expansion for hydro to cope with the demand that we have. You will see some increase, but not substantially.
Hello. Patrick Steiner, ODDO BHF. Two questions from my side. Firstly, on your 2029 EBITA margin target of 7%-9% for the Metals division. How much is coming from service revenue growth in terms of a better margin, a better mix from expected market improvements, and thirdly, from cost improvements and efficiencies? That's the first one. The second one, your 6.6% revenue CAGR to EUR 10 billion in 2029. Should we again expect roughly 50% or a little bit less coming from M&A?
Starting from the back, we will continue our M&A strategy. We expect to end up also in the same 50/50 share that we had. On the Metals side, I would say majority comes from the much better cost point we have. We have lowered our break even substantially through the restructuring. And then we have significantly improved on order execution. I would say the majority maybe comes from that business. The service growth has been slow, as you saw it on the Metals side over the past years.
We do not expect that we can accelerate that heavily even though we are pushing hard. Market is not very easy to accept new offerings, as both major customers group, steel industry and automotive industry, are themselves under very high cost pressure. And so that also limits us there. To put it together, two-thirds from the capital side, one-third from a different split.
Perfect. Thank you.
Daniel Lion in the back.
Hi. Daniel Lion, Erste Group. Just a clarification on your 2027 targets. Are you canceling those targets, but aiming to reach them nevertheless, or are you keeping the targets in place in addition to the 2029 targets? Just to make sure how you meant your statement.
We think that if we have one target out in the financial market, one should be the official target, and that is what we have now put out for 2029. As I said, we are working on achieving the 2027 targets anyhow. They are well on the way to the 2029 targets, so I say that is clear. But I think it would be a bit confusing if we have too many targets out. This is why I said they are replacing the 2027 targets.
So you are still expecting to reach them?
Yeah.
Even if it is not officially stated?
Yeah.
Okay. The second one, could you maybe provide a breakdown or a split on automation service business within the divisions, or at least some kind of comparison how automation services may be different in profitability itself? Just to get a better feeling on how they contribute maybe overall.
We'll think about it.
Okay. Thank you.
Thank you. I think we have one question in the conference call. Ben, here in the room.
Yeah. Hi, Benjamin Thielmann from Bernstein. One question, if I may. Regarding your 9%-11% margin range target, you focus on 10% at midpoint. I just wonder what has changed compared to the calculations that you did in 2024, because back then you went out and you initially said EUR 10 billion revenue, approximately 9.5% margin. Now at midpoint we are at 10%. Also back then, the Environment and Energy business was, I would say, not in an early down cycle, but it clearly is now because of the weakness in your end markets. I was wondering what gives you the confidence that maybe the hydropower demand, which is a lower margin business than the E&E business, can get you towards 10% in the medium term?
I would say the major difference is that the growth that we saw in E&E basically came from the new products, which do not provide as much service as we are moving into the installed base. Also the first of its kind projects usually don't have the profitability at peak. This is why we expect now better margins to come. Even though hydro is, on the margin side, lower than E&E, it is increasing. We have made substantial, I would say, progress in the restructuring of Metals, and that is what gives us the confidence to go for the 10%.
Perfect. Thank you. Maybe one follow-up question is on the Metals business. You upgraded basically your margin or your midterm margin targets there by 100 basis points. I think the restructuring is basically over in, let's say, six months. I remember during the earnings call that H1, it is going to be over. But at the same time, you mentioned that volumes are still relatively soft. You expect that in the next two years, we see a volume trough. So where is the margin improvement coming from if it is not coming from volumes?
I probably was unclear. We reported in the last call that we see an improvement in the market this year in steel and by end of the year for the automotive market. That is basically confirmed. So we see project activity, and usually that project activity then results also in some orders to be placed. From that, we have with a lowered break-even point, we have a good basis for this margin expansion.
Perfect. Thank you.
Thank you. I think we have time for one from the webcast. I think there should be one.
The next question comes from the line of Sven Weier from UBS. Please go ahead.
Yeah, good morning. Thanks for taking my two questions. The first one is also on the 2029 guidance because you have a point target for the revenues of EUR 10 billion. Well understood, but you guide a range of 9%-11% on the margin, and I was just wondering what's defining the lower end of that range and the high end. Is it that you may be uncertain about the divisional contribution in that year, or what is defining the range? The second question is just coming back on services. You already alluded to Metals and that it's difficult to raise that share, but what about Hydro? I remember that there's been also a long-term goal to raise the service share in Hydro. Do you think with the shifts that you see currently that it will be easier to raise the service share of Hydro? Thank you.
Yeah. Vanessa, can you say why we have the range on the EBITA margin?
Yeah
And the point on the revenue?
Yeah. So, you actually pointed this out quite rightly. So of course, we will also have a shift in volumes and hydropower is heavily improving and also with this a bit slower, increasing the margin. And thereby, we have this range to see how we further develop with hydropower until 2029 in the combination with the other segments that we see. Yeah. So that's basically the argument here. And on the hydropower service share, will you elaborate on this, or?
Yeah. Hydropower service share is structurally increasing over the time as, I would say, especially in Northern America and in Europe, the increase in hydropower is usually done through modernizations and rehabilitations. So this is where the service margin or the service volume is increasing hydropower. New builds mainly happening in South America, in Africa, and in Asia.
Thanks a lot. I think this concludes the first Q&A session. We are slightly behind schedule, so I would ask you to come back here at 9:50 A.M. in 10 minutes for a short coffee break. Thanks a lot. Thanks Dr. Schönbeck, Vanessa, for the elaborations.
Thank you.
Flexible hybrid solutions, relying batteries and hydropower that we also offer through our hybrid controllers. The grid stability is also under pressure because there is a huge retirement of traditional fleet from gas, from coal, from oil worldwide, which is putting a lot of difficulties on the grid because all those rotative power, which were massive on the grid providing inertia, are disappearing, are not replaced by photovoltaic and wind, which provide little inertia or short-circuit contribution. Although there are some electronic solution to these features, hydropower is also very well-positioned together with our SynCon to give those additional features which are needed in the grid on very sudden basis, and the blackout in Spain two years ago is a good example of grids which are performing very well, which can fail due to impact on voltage and frequency.
AI data centers are also, as I said, a major driver, even if it is isolated, but that provides some difficult features because they need continuous stable power to operate and therefore only thinking that PV will fuel those AI is not sufficient. They need additional features which are given by grid operators or by local grids. So triggering a lot of utilization of gas power, and we are also well-positioned here because we are one of the top five suppliers for generators coupled with gas turbine from our past, and we have been increasing that recently. I will come back to it. The aging of the fleet, it is not a new topic. More than 40% of the hydropower fleet installed worldwide is older than 40 years old. They were designed to operate in base load power, when now the needs of these grids are completely different.
They require flexibility, they require storage. So conversion of a conventional plant to a pumped storage is quite frequent. There are plenty of needs on the grid, on the system that are there. Funding is not an issue. G2G organizations are very active, giving better facilities for renewable projects and fostering not only the funding and the financing of project, but also development programs in innovation, again, around grid stabilities and so on. There is a lot of private funding available worldwide. We connect a lot of our customers with those available funding, and that works pretty well. What is very important is this hydropower industry developing market contracting models. We come only three years ago, or let's call it five years ago, from a traditional buyer to supplier relationship through a contract which were highly non-flexible, to now two different things. One is early contractor involvement.
I've mentioned that in the last CMD. We were looking at it as a starting phase. This has increased exponentially. The early contractor involvement is a very nice feature. You will see it on my presentation of pumped storage, reducing lead time, enabling more collaboration, and de-risking the project significantly for the investors and for us. This is a win-win situation that more people are taking. It started with Hydro-Québec. Now many utilities in Europe are doing it and worldwide, India is using it very actively. The second aspect is those partnership. Hydro-Québec started with a partnership working chunk by chunk rather than buying the full EPC project in one shot.
They will buy first the engineering development. Then when the engineering is completed, we move together with the supply part of the contract on open basis where origin of supplies are shared, decisions are made, where to buy what in parallel or not. This is clearly de-risking the project. But the most important part is on site installation, which is always a very difficult exercise to plan in the long run for projects which last up to six years, seven years, and therefore, this is ordered separately. It started very well. We have benchmarked that with plenty of our customers worldwide, and this is adopted more and more. The last point is important, digitalization, linked to our lifetime asset management. It has been reported before. It's an environment where our customers are widely equipped. They are knowledgeable. They run their, they operate their power plants.
They maintain them, most of them being large government-owned utilities. But we see in some aspect with more private investors coming, people with less knowledge about operation requiring more of those services. We are already using our data from many decades to be able to optimize design, to optimize operation mode and predictive maintenance. This is coupled with digital twin, that are more and more used to simulate relationship from these power plants with the grid. This is very useful in this continuous evolving environment. I said last night at dinner that most of the headaches are with the grid operators today more than the generators because they have to deal with all those intermittency, frequent variation of the grid, and they need solutions and features for that. Digital twin helps for them to simulate different utilization of our assets.
Cybersecurity is at the heart of the worries of the generators or the grid, and we are, thankfully, from development from the past, able to provide solutions. How do we respond to those market trends? If you remember, two years ago, I introduced the fact that cyclicity of hydro would need us to do something else in addition to prevent that in the future, and to enable us to grow. We introduced this grid solution dynamic, and I will expand that a bit more, coupled with our traditional, long-lasting service approach to the market. Our ambition is to grow revenue to EUR 3 billion in this area, which went down to EUR 1.2 billion just before COVID. This is a strong ambition for the coming three to five years.
As you see, the result from 2025 are on its way and this year we will continue in that similar positive trend. In hydropower solutions, we are clearly number one, in revenue, in number of plants or units or projects sold. Our Chinese competitors are well-positioned, but they only dedicate their attention to turbine and generator activities. The rest is contracted with other companies, which make them lower in revenue, and they are very much centered in China. Ourselves, we are clearly covering the rest of the market in all continents. In grid solution, our ambition is to grow this business from a low, EUR 300 million revenue to EUR 1 billion. Obviously, this amount is not included in the EUR 3 billion. This is going through organic developments that we are currently preparing and through acquisitions that we are actively seeking.
In service, as I said, we have through our global network of representation in more than 25 countries, the local attention, region by region, to our customers, not only for service but also for capital project development and cooperation. Going through a snapshot of what are our products and solutions that we offer on the market. The first one is pumped storage. We discussed it in the last CMD. It has grown exponentially. As I said, China is ordering between 10 and 20 power plant per year, pumped storage plants per year. Last year it was 2022, in 2025. They are growing towards 30 plants per year until 2035. At very competitive prices, low margin, we take there some share, very limited compared to what was the share given to non-Chinese companies, five years or 10 years ago, but we are still present in this market.
Behind China, the rest of the world is equivalent to the Chinese volume. Most of it is driven by India, where we see big plants, mainly driven and invested by private investors compared to what we are used to in the past, the government-owned utility, which was a bit more difficult to work with. We have a very strong attention to those private investors who are now moving even outside India, a bit more easily than the Chinese investors. We see a balanced market for the rest of the world. In Europe, it is mainly conversion of existing plant into pumped storage. We see in Southeast Asia a lot of push. We are running a very big project in the Philippines called Pakil. We are tendering significantly in this region.
The Americas is a bit slow in the north and in the south, but plants are there, and they will have to get there sooner than later for their grid stability purposes. Our position is clearly a number one position. We have commissioned, over the last two years, two power plants, one fixed speed in India, one variable speed in the Emirates, Hatta, working well. We are solving some technology difficulties on some projects, but the evolution of this market is very positive. We are well-positioned with standard technology, which give us a mid-triple digit revenue landscape for those solutions. What are the solution here? As I said, standardization is key because pumped storage compared to a conventional hydropower plant is not so sensitive to efficiency. You can come with a reasonable size of equipment for a given site and implement it on a more standard base.
This is clearly the Chinese market. They are all very standard 300 MW units. But we see worldwide, three ranges of pumped storage. The big ones, 350 MW. Europe, which is more 150 - 250 MW. So between those three stable ranges, we are enabling to standardize, which when you couple that with early contractor involvement and partnership makes the project much faster. The clear topic here, I can give you an example of one of the running plant in India, Pinnapuram, that we commissioned beginning of last year. The project was a total of five years, compared with the six, seven years that we see for a plant of four times 250 MW plus two times 150 MW. Basically, the first two years of technological development for us was made in parallel, from the customer closing their permitting side and the financing side.
This time, which is normally sequential, was made in parallel, at reduced cost for the investor, and we saved two years on that. Then the installation of the six equipment, full turn-key, our customer was taking care of the civils, took two years and a half. Which is very agile, and when we look at some regulations in Europe, in North America, still a challenge, but this is achievable in a country like India, where five years ago we were struggling. And then six months for commissioning one unit, one by one. So that give around five years of a full project, which makes, in terms of competitiveness of pumped storage versus battery, a good start. And obviously, we are investing a lot on reducing those cycles and the cost. I will move to the next. Sorry, I will skip this one.
The next one are hydropower new build solution. Still an important play in the market. What do we do there? Different kind of Francis runner, Pelton runner that you will see today in this workshop here. Obviously, a lot of run of river solutions, Kaplan, small size or bigger size. This is still a very active market. This is basically, again, worldwide. We see more development in Asia, in Africa, and in Latin America than in Europe. And we have very big projects like our Luang Prabang projects on the Mekong River, which are huge Kaplan being installed on a very fast-tracked project. And we do have a lot of compact hydro solutions, medium size, that we sell all over Europe, selecting profitable projects. Our position here oscillates between number one, number two.
Year to year, it depends on big projects, but we are clearly on a leading position as well. The next one are modernization and service. I group that. Modernization can be of different style. The very big ones, where a plant with six units is fully modernized, looking for more output power, looking for more efficiency to produce more megawatt with less water, looking for flexibility, because as I said, hydropower is not so much anymore used as base load power, but as regulating power. The operators require this flexibility to stop and start the units when they want to reduce the load, increase the load in a flexible manner, and this has impact on the design of our equipment, both mechanical, electrical, and electronic. The very large projects for us are classified as capital projects. They are quite big, quite long lead time.
Customers will give us access unit by unit, not to stop the operation of their running plants. However, this is part of our service attention to the market. The rest of the market will be more on single system intervention. We do a lot of modification of automation, of turbo generators, and we provide, as I said before, lifetime support to our customers, with different solutions, digital and mechanical. We will accelerate a bit. Turbo generators, it is a niche market. Those are equipment running behind gas turbines.
We provide those equipment to some of the gas turbines suppliers, technology suppliers, specifically to one where we have close relationship, and we are developing investment with them, both here in Europe, between here Hungary, and somehow in India, to be able to provide those turbo generators in a growing business, which is mainly driven by grid stability first, because gas turbines are very flexible, but also by AI data centers. The market for gas turbine, you know it is mainly centered at the moment in North America, in the Middle East, but somehow starting to expand in other regions of the world. I will finish with the grid solution.
In grid, we started, and Joachim Schönbeck mentioned it as a growth initiatives three years ago, to use our knowledge on generators technology to be able to design and produce synchronous condenser, which are basically generators working in short circuit on the grid to absorb excess of energy coming from intermittent power in special peaks and prevent blackout like in Spain. This started very actively in Australia, some years ago in Brazil, but we are now seeing country by country the growth. We got a significant amount of project last year in Europe, in isolated grid to start with, like Ireland, U.K. But progressively, all countries are developing the investment. We have booked this month projects in Spain. We are actively developing Europe. India, we have been selected for the first SynCon project in the country.
And we will see that, and we are running a few projects in North America. This is a temporary device to stabilize our grids, and this is our backbone of our grid strategy. From there, what I explain is that we are developing organically solutions to attend substations because the use of substation is completely different than it used to be five years ago. That requires modernization in automation system in new device, and this is an area of possible growth through M&A. In conclusion, we are attending a booming market that we expect to continue mid-run, even long-term, mainly driven by this grid stability positioning, where hydropower is the only renewable energy enabling more wind or solar power. Driven by security of energy from different countries, looking more at indigenous electricity supply than supply relying on import of gas or other technologies.
Then we have a good complementary strategy with grid, as I explained, enabling us to look at stabilizing this level of revenue or let's say, reaching it on a sustainable manner, even if there is some drop in hydro, as we have seen in the past. Then our historical and long-term oriented service base is our core business. We are continuously investing on that, being close to our customers, and that's probably one of the reason of our success to listen to the customers and be present when they have capital plan. So this concludes my presentation for hydropower solutions. I will hand over to Jarno Nymark for Pulp & Paper. Thank you.
Thank you, Frédéric. Good morning, ladies and gentlemen, and it's my pleasure to shed you a bit of the light of what we do in the Pulp & Paper area regarding the energy business, and this is namely our boiler business and the related services. If we start, we start with the recovery boiler for the pulp mills. Those who know a pulp mill typically call this the heart of the pulp mill because the heart shall never stop, and this is the same with the recovery boiler. We are the global leader within recovery boilers. We have the largest operating boilers. I think the four largest are operated by us. Within the last 10 years, we have supplied the market with over 40 recovery boilers. Of course, the recovery boiler size is vary depending on the production of the mill.
So you have the extremely large boilers, and then you have also the smaller boiler, and especially the smaller boilers that we are supplying currently to the Chinese market because they are integrated mills. Of course, the delivery project type also varies from our EPCC in Latin America to EPC in Europe to EPS in Asia-Pacific and North America. But there is no pulp mill without a recovery boiler today. I'm sure that you're all wondering what does a recovery boiler do. It's a simple process. So it takes the black liquor, the so-called lignin, from the cooking process, we burn it, and we generate energy, and also recover the chemicals so that the chemicals can be reused in the pulping process.
As you can see, the recovery boiler can render a pulp mill from a big energy consumer to a net producer of energy, and at the same time improve the sustainability footprint significantly. If we look at the growth drivers for the recovery boiler business, it is clear you can see it is related to the increase of the production in China, Asia Pacific, but at the same time also the possibilities for retrofits and looking at the improvements in the chemical recovery, but also in the energy efficiency to produce more from the existing recovery boiler. The USPs in this area is like the rest of any of the pulp mills.
The key strengths that we have in the recovery boiler areas are the proven technologies, the high efficiencies, and the long running times without the stoppages, because typically a pulp mill stops every 15 or 18 months, and the recovery boiler has to stay open during that time. Then the ease of operation and the fast ramp-up curves on the boiler. Of course, with this large install base, there are also potential then for the service business, and not just the upgrade, but also the maintenance repair, because it has consuming or wearing parts that needs to be changed in each of the annual shutdown. Then if we look at another boiler type, now let's talk about the power boiler business for a few minutes. Power boilers, in fact, turn a diverse range of fuels into sustainable power, steam, and heat.
As you can tell, they are not only related to the Pulp & Paper industry. The power boilers are used in a rather diverse set of end markets. The power boiler converts biomass, sludge, residuals, waste-derived fuels into the steam, heat, and power. We offer complementary technologies for these various industries. The type of the boiler varies on what is the fuel that will be burned. Here we see a market that is expected to continue to grow significantly in the next few years. This is also driven by the decarbonization, the increasing of the plant sustainability footprint, and especially also that we have customers replacing fossil fuels with biomass. This, of course, gives the opportunities for new modernizations of these large conversions.
If you saw in Joachim's presentation with some of the mergers and acquisitions that we have done, for example, last year with the acquisition of Diamond Power, these are products, the soot blowers, these are mostly used in the recovery boilers and the power boiler areas. Compared to the recovery boiler and you compare the power boiler, here you have more competition than just a few competitors in this area. But we are among the leaders in this industry in the power boilers as well. Really to mention again that the power boiler serves multiple industries. Pulp & Paper is just one of these industries. But we also work with utilities, independent power producers, with municipalities and district heating for waste and sludge to energy.
We are not just a power boiler supplier, we are actually a power plant supplier because the recent reference that we have done is really from the fuel feeding, combining the automation, electrification, and including also the turbine. We have a leading solution for any type of the fuels to be burnt in the power boiler. That was a short summary on the Pulp & Paper. Then I would like to hand over to Joachim for the Environment & Energy and the Metals side. Welcome, Joachim.
Thank you, Jarno. Indeed, we can continue with Environment & Energy and with Metals, where we have also significant exposure to the energy market. I would say first and foremost, definitely what we call clean air technology to clean the flue gases to the level we like to have in order to feel comfortable in the environment of a power plant, and that is basically dedusting. The majority here is too young to really remember when it was for boilers without dedusting. Then of course, desulfurization and denitrification, which are the main drivers for flue gas and clean air technology. That is the particulate and gases emission control that we are doing.
Then another important part there is the heat recovery, because we want to make sure that we recover as much heat back from the flue gases as possible in order to increase the overall efficiency of the power plant. Then what has been developed in that division is the carbon capture, because that is also something, the CO2 from the flue gases can be absorbed and recovered, stored or utilized, whatever the lawmakers allow in the various regions. We are doing that business for many years. We would say that globally, we are number 1 supplier of these technologies. We are historically, I would say, very strong position in Europe. We moved strong into India over the past 10 years, and we have made an acquisition last year in the U.S. also to participate a bit stronger in that market.
We see a strong trend of stricter emission controls. We see potentially a good business to develop and you might be surprised, but I can tell you against all prejudices we have, these stricter emissions do not origin in Europe, they origin in China. That is also something very important. If we don't go there and participate in these projects, then we will end up in a couple of years, we will end up with competitors who can reach much stricter emission control limits than we can. Therefore we like to be also in this Chinese market. What is our strength? I would say definitely is a complete technology portfolio, especially if we go to multi-stage processes like what you need to do with the dedusting and if you have catalytic reactions like you need in denitrification. There are a couple of challenges to be done.
We have an installed base of more than 6,000 units worldwide where we can develop the service which we started couple of years ago. Therefore, we see a good way forward. What is definitely the Champions League in flue gas treatment is the waste to energy applications, where we also are happy to report that we are, at least globally, we are the number one. What is particularly challenging here is that at the end, you do not know the fuel, and if you do not know the fuel, you do not know what is in the emission, but you need to be sure that nothing leaves the stack that you do not want to have in the air. Therefore, that is a growing market.
For sure it's a competitive market and the waste to energy, we see also a structural increase as the restrictions to landfill waste is increasing. It's not only it's growing in Europe, but also other parts of the world. This will become a predominant position. Then we have in Environment and Energy, we have developed this green hydrogen. As already said, we had higher hopes for that than what has materialized over the past years. However, we were able to build up a strong technology position over that time. We have been awarded two major projects. One is for Salzgitter. It's a steel company in Germany. It's a 100 MW unit. We are at the moment at the end of installation and starting commissioning. Plant will be operational in 2027 and we have been awarded a smaller unit, 12.5 MW from Austrian company RAG.
That's the largest gas storage facilitator in Europe. And they need the hydrogen to buffer what they call in Austria, the [Non-English content] which I'm not able to translate with my limited command of English language. These two projects are important for us. I think we have with these projects, and with a good startup, we will establish a good position in that industry. We are already acknowledged as one of the serious players who can not only provide technology but also deliver a project in time and in quality. As I said, most of the money is spent on our side. We need to get the plants up and running. Whatever happens in the world or in lawmaking or in the society, we can hibernate these activities without too much cost on our side.
But I think the good thing is the technology is ready, and whenever the market will come, we are ready to provide it. What is good that what is missing in these markets is more the, I would say, regulatory framework as well as some infrastructure for the green hydrogen. Also, incentive schemes are unclear. However, with or without these incentive schemes, there are viable business models for the green hydrogen. I think that is important. But of course, you made the cake even sweeter with some incentives, and no investor would like to have that pass by. Another area where we have a significant exposure to the energy side is our pumps business, and there are three main activities that we do on the energy side. The one, and probably the most important, is the main reactor cooling pump for a nuclear plant.
That's a business Metris is doing for about 50 years. I think in Europe, we are definitely leading supplier of that technology. You will have the pleasure to see one of these pumps on the workshop tour, and it's really a machine. It deploys several thousand cubic meters per second, because if there is an emergency in a nuclear power plant, you better want that the water is moving at high speed. You will be impressed. The second main application we have is the small to mid-size pumped storage, where we are supplying pumps. For some of the projects going on in Austria, we are currently having active projects. Then, of course, several auxiliary pumps in the nuclear, thermal, and hydropower plants. That's also part of our portfolio there. We see that market strongly growing with approximately 30% in total until 2030.
That is significantly driven by the renaissance of nuclear. On the metal side, we have two main exposures to the energy side. The one is what we call the battery. To be very clear, we are not manufacturing batteries, and we don't want, but we have moved into the development of production equipment to produce batteries. We have done this through an acquisition and then on that platform, made some development and innovations. We are currently, I would say, we are one of the leading suppliers of manufacturing equipment for lead-acid batteries. We are, I would say, number one for pilot lines for lithium-ion production machines, and we are developing into production equipment for lithium-ion mega factories. We have built, delivered, and commissioned one of these lithium-ion mega factories in Germany. It is operating.
However, we have to admit, even though it's what you call a mega factory, it's small compared to what the large Asian providers have built up. We are also, I would say, behind in technology, what they have. We have to admit they are 10 years ahead of us, and now we have to apply what we have learned from the Asian suppliers that we need to start the know-how transfer the other way around, because we do not believe that it's good to be fully dependent and not have that production capabilities in Europe. This was an area where we invested. We had higher hopes, and we made a clear misjudgment of the market to come, and also we made a clear misjudgment on how far away and well advanced our Asian competitors are. We keep that on a development basis for the lithium-ion.
We move into service of the lithium-ion mega factories, which are installed in Europe and which are currently operating with more or less problems. We want to close that gap to the market leaders in that area. During that time, these developments are financed by the, I would say, solid development on the lead-acid business, which is running well. The second exposure we have in metals to the energy side is the electrical steel. As you know or you don't know, electrical steel is a high silicon alloyed carbon steel. It comes in two ways, grain-oriented or not grain-oriented. The grain-oriented is what you need for steel parts, meaning transformers. The non-grain-oriented you need for rotating parts or whatever is connected to a motor. We have about 20% of the world market is grain-oriented and 80% is non-grain-oriented.
We have a strong position for the non-grain-oriented, number one or number two, however you slice down the market. Why is our equipment so important for that business? To increase efficiency in these electrical machines, the reduction of the steel thickness is one of the main drivers of the efficiency. As we have rolling mills that can roll this brittle and hard material to very low thickness better than our competitors can do, we enjoy a very high market share, and we believe that we can develop that. Just to give you an idea, normal standard for electrical motors you see in cars today is a material thickness of 0.3 millimeters. And we have now one project under execution, one mill to deliver rolling down to 0.03 millimeters. That is a quantum gap in efficiency. And I tell you, handling of that material is not very easy.
We see there is more to come, and we are happy that we are a good partner for the industry. And by that, I like to finish. And I think we have a Q&A now or not?
Yes.
Then-
Thanks a lot, Mr. Sauze, Mr. Nymark, and Dr. Schönbeck. I'd like to welcome you back on stage, and we conduct a second Q&A session. First questions maybe in the room and then moving to the webcast. Akash?
Maybe a question on growth in hydropower. I think you mentioned a revenue target of EUR 3 billion in three to five years. Then I think you also mentioned there is up to EUR 1 billion growth revenue target for grid-related businesses. So that up to EUR 1 billion is on top of EUR 3 billion or that part of that EUR 3 billion?
Part of the EUR 1 billion are in the EUR 3 billion. This is what we do in synchronous condenser. The rest should follow with our organic development or through M&A. It is an ambition more than a commitment. That is our vision of how this market, which is huge in transmission and distribution, could be attended through that.
Okay. Maybe a follow-up on hydropower margins. I think we have seen with some other power equipment companies who are investing massively in production because of the strong demand. They all are seeing some dilution on margins because you have to take upfront cost before the new production kicks in. So when we look at hydropower performance in the next three years, does the target include some kind of dilution from these extra costs that you need to take upfront before the new production comes online?
It does, because this is the business model. But as I said, through early contractor involvement and partnership, we managed to de-risk that significantly. And obviously, our ambition is to reach the upper side of this band in future.
Additional questions? We have one question in the webcast, I think.
The question from the webcast is from Sven Weier from UBS. Please go ahead.
Yeah, I got two questions if I may. The first one is on the turbos, because there in the slide, you say you expect the book to build up over one, whereas on the grid side, you have over 3.5 times. So I was wondering why you're not putting in a bigger figure for the book to build on turbos, given the dynamics in the market. And the second question I had, you said you're number two on hydropower plants. So do you consider Voith being bigger than you on that end? Thank you.
Turbos are pretty standard models. So we manufacture them upfront, most of the subparts, and the lead time is around one year. So we manage to have quick turnover of our turbo orders. For grid solution, this is, as I said, mainly related to synchronous condenser, which for us is the hardware plus the systems around into a substation, making it slightly longer lead time. So that explain the difference between the two. One is product, the other one is more solution.
On the margins, I think-
You don't get the order so much in advance on the turbos than on the grid side?
Yeah. Margin side for the turbo are growing significantly because demand is moving up. We are also developing service attention to our own fleet. Therefore, we are seeing gradual increase of margin. It's a very low OpEx business, mainly working on order management.
And market share of Voith and Metris was asked.
Yeah. Since the last CMD, we have seen a big increase of market share for Metris worldwide outside China, as I explained. The main reason is our traditional service attention. We are organized in nine regions which are roughly 4 hours flight from any customer headquarters or power plant. From this tradition, obviously they are very much present to help developing capital project, selling capital project, and executing them. I think that's the strategy which position us as clear number one. We also have been successful in the past in on time restructuring to maintain profitability. Now as market leaders, we drive the profitability increase within limits in the market.
Thank you.
Thank you.
Okay, any residual questions in the room? Okay, no, that seems not to be the case, so thanks for your interest. We're back on track and continue right away with the deep dives. Thank you, gentlemen. I ask Mr. Nymark to stay on stage. Thank you.
Thank you. Yeah.
I will now give you a short but deep dive into our Pulp & Paper business, but then especially a focus on the pulp side of our business. If we look at our total portfolio within the Pulp & Paper area, last year, we were the largest business area with 38% of the revenue, double-digit profitability, and with a large service share of 59%. We maintained a number one to three position in all of the areas where we are active across, but we see that we are clear number one on the pulp side of our business, both in the large scales mills, but also with the smaller integrated mills in China.
If we look at outside the pulp capital, we are also strong with our complete service, and especially here on our pulp service side, we see a number 1 benefiting from the installed base that we have. It is also worth to mention that our service on the Pulp & Paper side is not only for our own installed base, but we work with any of the installed base in the market. Also then strong on the nonwoven side, but also fiber preparation, but then very well-positioned for the growth also on the tissue and the board side. I think on the board side, there is a lot of discussion about overcapacity on each of the grades.
Our exposure is not that large to that area, but beginning of the year, we have received an order, for example, in General Emballage, where we will supply a complete board machine, including the stock preparation, and this is basically to the end of the winder, so combining all of the acquisitions that we recently have done in our Pulp & Paper area to supply a complete full line. Last but not least, our Pulp & Paper automation side, we do not report this separately. It is a part of our project, but also a part of our service business. You will have the possibility in the Andritz Experience Center to learn more about the value-added solutions that we provide to our customers then in the afternoon.
But if we look at the market, the global mega trends are supporting the volume trajectory in the Pulp & Paper markets. This is driven largely by packaging and the hygiene sector. So we have the demand of sustainable packaging, replacing plastics, and then also the e-commerce and the increase per capita usage also in the emerging markets. The shift from the mature markets to the more the southern hemisphere, especially on the virgin, the pulp production continues. We also see that the short fiber from the southern hemisphere is also replacing the long fiber from the traditional Nordic producers. Then, of course, we see also that more and more of the pulp fiber is used in man-made cellulosic fibers like Lyocell, and this is predominantly always the short fiber.
So of course, our Latin American mills are, let's say, the most cost-competitive, lowest in cash cost in operation. But clearly, we see that the Chinese integrate is increasing its integration levels extremely fast.
This has actually been an opportunity for us in Andritz as we have a leading market position, and we have a global manufacturing footprint, and we have a global service footprint. So we have been very successful in the recent years with the new install base in China. Actually, you will see that the market share that we have in the Asia-Pacific region is globally, it's higher than what our average in the global is. If we look at the pulp projects, we have a dominant market in the large-scale pulp projects, but also in the smaller mills. We have an extremely extensive reference list. We cover all the major pulp regions, we cover all the major process islands in the pulp mill, and also on the graph, you can see this is an example of the bleached pulp.
So in the top, you have mills that are completely supplied by Andritz technologies. Then in the middle section, you have mills which are a mix of various suppliers. Then you see a small portion at the bottom where we have a very minority share. You can see also there that the capacity ranges that we have from the 2.55 million tons, also down to the smaller mills. We see that, as was mentioned also earlier, that on the side-stream. So it's not only the technology that we have with our process itself that lower the chemical consumption, lower the energy consumption, improve the yields, better efficiency. But then we work also a lot to create additional value streams to our customers from the side streams.
For example, the sulfuric acid, our SulfoLoop, we have our lignin process, take the lignin to create additional value-added products, and then also the bio-methanol. For us, it's we really target what we call the BioCircleToZero, and we really want to make sure that our customers can produce more without harvesting more trees, so that we can create additional values from our pulp mills. Then, of course, it's a lot about technology, but I think that it's a lot about the people and the footprint that we have so that we really have our expertise, as Frédéric mentioned on the hydro, that we have them locally where our customers are. I am sure that this is a question that Matthias and we get all the time. We put it here. What is on the next big project in Latin America?
Yes, there are projects ongoing, projects in discussions. If we look at, for example, the Paracel, yes, we have the contract with Paracel. Of course, the works and investments are progressing, but the financing structure of the mill investment is still unclear. No change on Paracel, and we will not guide you on any timing, but the project still remains alive. Then we see several projects are alive in Brazil, and some hurdles have been overcome, but the final project kickoff and notice to proceed still remains open. As you will see, the large investments in China, of course, this is then postponing a bit the decisions of our South American market pulp producer because the biggest market for the market pulp is in China.
We also see outside of Brazil, good project opportunities, for example, in Argentina, where you have good access to a very competitive wood basket. Hopefully these will also proceed. Of course, we are ready to execute on the mentioned projects in South America. Looking at the size and the concept of the current mills, I think we should be in a very strong position because we have existing references for identical mills in the region. Of course, once the project goes ahead, looking at a three-year lead time for the projects, and of course, on the margins, looking at the low single-digit levels, but then a rather large EBITA contributor to our business. With this, I like to remind that I think that on the Pulp & Paper, we are not doing too bad without having any of these large orders in South America.
Of course, we have a strong service business. We have a big install base, so we have opportunities to grow. Just to show a little bit a proof on some of our recent success that we have had, and this is a project together with Suzano Cerrado. This was a project from 2021 - 2024. We supplied all of the process islands to this, the main process islands to this mill. It was an EPCC contract, so we had the responsibility of the civil and the installation. With the startup of this mill, we set a new benchmark in the industry regarding the startup curve of pulp mills worldwide. Within less than 90 days, we reached the nominal production. The daily nominal production, and this is a mill producing 2.55 million tons a year.
The learning curve was reached within 161 days from the mill startup. The first year of production reached 92% of the design capacity, and the second year will be over the design capacity of the mill. So really after 100% of the annual capacity was reached 3 months after the operation. This shows our capability to execute large projects in South America, and therefore we feel that we have a good position for the next mills going forward with the proven references. Then if we move to China, as mentioned, our market share in the Chinese pulp mills is running ahead of our global market position. You see that we are in Asia Pacific, over 70% market share on pulp, while in the worldwide a bit less than 60%.
As capacity growth is shifting to China, we are converting these project opportunities into orders. Currently there is a decline of the use of wood in the construction industry, which has allowed the Chinese customers to invest in upstream pulp mills. We have to remember also that China actually has the largest forest, so that there is forest available. Currently, approximately 50% of the forest is from their own and 50% comes from chips. This is based on recent discussions I had last week with the customer. This is how they have it. We also feel that, or we see that the growth of imports to China will still continue, but it will be at a lower rate than historically.
We have actually been one of the main equipment supplier to, or played a very key role in all of the projects that have been executed in China in the past years. I think that our success relies, as anywhere in the world, on the technology edge, but very much of our local manufacturing footprint and the presence that we have in China. The more project we complete, the more references we collect, and we feel that there are additional projects, opportunities in the market in China, and looking forward to convert these also to orders. Irrespective of where the Chinese integration trend will end up, we think that growth in pulp imports will still take place in the future. Good. Thank you. Short update on the Pulp & Paper side. I would like to hand over to Joachim for a deep dive in Metals.
Thank you. Thank you, Jarno. After being in the beautiful world of Pulp & Paper, I now guide you to the at least beloved business area. We have the Metals, and to finish with that. Where we are with our Metals business, just a small recap. We are basically offering the full production line downstream of the hot rolling process for steel and aluminum, the pickling, cold rolling, annealing, coating, finishing, and welding, and then transferring these plates or strips into the presses and form the parts that to a large extent form automobiles afterwards, but also surround your dishwashers, washing machines or furniture, whatever you have. We have about one third to two third split of the business between the strip processing and the metals forming part. We have about one third to two third in the volumes between service and capital.
As I said, largest potential. Regionally, we are very well balanced. We have 30% Europe, 30% in the Americas. We have 30% in Asia and 7% rest of the world. It also gives a clear indication that we are basically supplying with all existing and all emerging partners in that industry, let it be on the steel side, on the aluminum side, or on the automotive side. If we look at our exposure to the customers, I would say 30% we are relating to the steel side, and 30% to automotive, 30% to general industry, and then battery and defense make up another 10% of that business. We would say we have the operational turnaround in progress, but we see that we reach, I would say, a business setup, a capacity that matches with the markets that we have. We have strong market positions where we play.
We are definitely number one press manufacturer globally and also with an extremely long history. We are on the processing side. We are clear number one. On the cost side, I would say we came a long way. We are under restructuring, in particular in Schuler, for the last five years minimum, maybe even longer. We have now a setup with the right capacity for the European market, for the American market, and also for the Chinese and Asian market. That is, I would say, good. Combining that with the cycle that we see currently in automotive and steel, that investment's going to happen puts us in a good position for a solid improvement of the business. If we look a few years back, we can see that we made significant reduction in our capacities. We reduced in metals forming.
In Schuler, we reduced headcount by around 30% over the past years. In total, our reduction was 20%, and that's the net number. I can tell you that in Germany, we reduced almost by 30%, but we increased our capacities in India and in China to accommodate the shifts of our markets. We believe we are coming out of that restructuring more efficient. We have a lower break-even point, and our cost base is definitely more competitive. What should not be overlooked and makes me also proud to see that over the past six years, we could continuously improve the operational margin of that business. That going on under constant restructuring shows that not only the business model works out, but also the management team in place knows what they are doing and there is no risk that things are falling apart or are flying around.
We believe that we can continue to increase these margins now that the turnaround has been done. We also complemented the business with some acquisitions, and we believe we have good prospects to grow the margins to the 7%-9% corridor that I introduced to you. We have other areas where we can expand, and we want to expand the business too. The first and maybe most prominent I'd like to inform is the defense side. That is clearly a growth market in Europe. In the current environment, we do not see too much business outside Europe there. But in Europe, we see that there is a demand growing. It's an industry we need to get used to. It works a bit different than the markets we currently know, but I think we get our way in.
At the moment, we see that mid-double-digit EUR business in our metals, and we trust that we can grow it to small to mid-triple-digit million business over the next years. We have a wide, maybe not a wide, but we have a significant portfolio of products that we position ourselves for the defense. I think it's important to understand we are not a direct defense contractor, so we are not contracting with departments of defense or the supply chain of these departments. We are supplying capital goods to the defense contractors. That's basically the business model we are doing. What is currently driving our business is the forging business that goes first and foremost to shell lines. That is the outer part of the ammunition, which is a wear part at the moment in high demand.
Companies need to refill their storages, but there are other engine components for aerospace, composite structures for naval vessels, but also defense energy storage. As I told you, the battery activities we are doing, the batteries you need in a drone has a complete different characteristic than a battery you need in a car. Also, I would say the appetite of the contractors to procure the production equipment from outside Europe is limited, so that opens some opportunities for us. That is one of the areas where we are investing, and I think we have good. With our exposure to heavy machinery, we are well-positioned in that. If we look to recent acquisitions, we acquired, very happy that we could acquire Chinese company Baoding Sanzheng Electrical Equipment Co. We acquired 51% of the assets. They are a provider of induction heating equipment. First, it's a perfect fit.
We learned them through a project. As I said, that's part of our de-risking M&A strategy. We know the partners. We know what they are doing. We worked with their equipment. We also understood that there is a good cultural fit with the way to do business. There are two main reasons that was driving that acquisition. The one is that we see a lot of heating solutions in the metals industry is moving from combustion solutions to electrical heating solutions. Among the electrical heating means, induction is definitely, on the efficiency side, the best available technology. That was a strong driver for that. We also, and this is how we met Sanzheng, we have developed together with them several crucial heating applications for the production of the silicon steel, grain-oriented, non-grain-oriented.
Therefore, we can now provide the entire technological chain out of one hand. I think it was a very good acquisition, developing according to business plan, and we are quite happy to have them on board. Next step is then to move also outside China to provide the technologies to our other customers in Asia and the rest of the world. Would like to finish with a particular, I would say, outstanding project we have done for BMW in Munich. It's the first time in history that a complete press line was refurbished with only using planned downtime of the equipment. It went over a period of a year, but there was not a single minute used that where the production assets needed to be stopped. It was a great project. Required a lot of planning, a lot of cooperation between BMW and our teams.
It was extremely successful, and it really saved a lot of money. If you do not need to stop your production to get that revamp. We believe, and also BMW believes, this is the new blueprint for how press lines will be refurbished in the future. And we believe that we are well-positioned here. Having said that, I would like to thank you for your attention and hope you join me in my firm belief in the future success of the Metals business. Thank you.
Thank you, Dr. Schönbeck and Mr. Nymark, for the deep dives on Metals and Pulp & Paper, and we will now conduct our last Q&A session. I would ask the entire board to join Dr. Schönbeck on the stage, and we will take it from the room. Akash.
Yes hi, maybe starting first with a couple of questions on Pulp & Paper and Metals. Maybe on Pulp & Paper, I think it is good to see the details on this China win, but I am more curious on how does the scope of work margins and revenue per unit of output compares in China versus, let us say, outside of China. And on the same topic, could you utilize your factories in Europe for these Chinese projects or everything has to be built locally? And then on the Metals, it is quite encouraging to see margin expansion or margin upgrade in the medium term. But maybe if Dr. Schönbeck, if you can talk about what is driving that improvement, how much of that is coming from metal forming versus metal processing? Is one part doing more than the other?
How much of that is also coming from some of the new opportunities like in defense that could be margin accretive? Thank you.
On the Pulp & Paper side regarding on the CapEx, of course the projects in China are EPS projects, so it is really the main equipment and typically with the Chinese customers, they are very CapEx oriented, so it is not even the EPS that we traditionally would do in Europe. So it is even a smaller scope on those projects. So of course, comparing a mill where we have EPC or EPCC, it is a big difference on the machinery and the equipment. And the utilization of our workshop in Europe, yes. For example, if I take the recovery boiler, we have two locations, where we can manufacture the bottom pressure parts because this is a critical that you have your own manufacturing for, and this is what we are utilizing, for example, in our workshops in Europe and producing. But majority of the equipment is produced locally.
And metals?
Metals, it is a mixed picture. I would say both are increasing, metals forming and metals processing. And they are increasing nicely. Profit level in metals processing is a bit higher than it is in metals forming. And I would say the majority comes from lowered break-even points or more competitive cost position, much better project execution on the run, not losing as much margin towards the end of the project. And definitely the mix plays a role with the new businesses. For example, defense also improves the margins.
I would also like to follow up on the metals side. Given your guidance raised now to 7%-9% EBITA margin, is my understanding correct to see the 7% without increasing scale of the business? And what would you expect or require as a revenue level in order to reach the 9%? Or is it rather a question of mix than revenue overall?
I see it as a mix. Also, this range is a precaution to what is happening in the markets. We are giving you a guidance for 2029. I do not know what is happening tomorrow. So there is some uncertainties also priced in. But if the economy runs well, if markets are good, if we get some tailwind, then I see more towards the nine. If another war starts next week with some further disruption, maybe more the seven. So I would say that is the range. We do what we can. And as I said, we see project activities, we see project announcements. So basically, we continue to be optimistic and prepare for the worst.
And then maybe follow up on the defense side. You mentioned that you could grow the business towards a triple digit business, maybe also 2029. Given the long lead times of defense, actually, you should have quite a good visibility on how this business should develop going forward. So, what visibility do you really have and also in terms of margin accretion from this business now into 2030 or 2029?
Unfortunately, our visibility is not as good as we would like to have it. That definitely depends a bit that we are new in that market, and as I said, this market, they work differently than the traditional markets we are in. And I think it would be early for me to say that we fully understood all the rules.
Okay, thanks.
Patrick.
Thank you very much for the presentation. Two questions remaining from my side. First of all, what are the most important factors in ramping up a large pulp mill for you? Why were you so quick and successful at Cerrado? The second one is on the Metals division, would you expect a tailwind from a stricter European regulatory environment for steel production? Should this be reflected soon in the order book, or what are your thoughts on that? Thank you.
I would say that the start ramp-up curve in Cerrado, of course, as I mentioned a few times on the technology, but I think a lot comes to the project execution and the project execution capabilities, and then also a very strong cooperation together with the customer. I mean, we do not do it alone, we do it together with our customers. I think that as we have executed with Suzano, we have executed for example, the Três Lagoas projects, really to know the team. I think this is really supporting that, to have a fast execution.
Metal side, CBAM, all our European customers, they connect investments decisions with effective CBAM procedures in place. I would say looking for the next two to three years is probably supportive. How supportive it is on the long run, I do not know. I believe that, if we try to protect the markets to an unhealthy extent, that at the end backfires. You know that the steel industry is not the most profitable. I think that is where we have to look out.
Thank you very much, to both of you.
Thanks for the questions in the room. I think we have Sven on the line.
The next question is from Sven Weier from UBS. Please go ahead.
Yeah, thanks for taking my questions. Just two questions on the Pulp & Paper side. I was just wondering what visibility you have on China, how long this project tends with integrated mills in China will still continue. Do you see that further delaying the greenfield projects that we have in Latin America? The second question is, I guess globally, we might actually walk away a bit from the integrated model and people buying more market pulp. Do you think that this could then actually accelerate the Latin projects? Thank you.
Thank you, Sven. Thank you for good questions. Looking at the projects that we have ongoing in China, at least we see for the next couple of years that we see that there are the activities. Of course, there is a lot of the big producers already in China are investing, but there are a number of mills still that are not yet integrated, so we see on that side. Of course, that is a typical discussion that I have every week with our South American colleagues and customers. How long will this continue in China, and what is for sure, this is delaying some of the decisions. But as we saw, the market pulp of virgin fiber, it is growing. The consumption is growing because you have also other application than just the hygienic or the tissue and the board.
With the growth of man-made cellulosic fibers, Lyocell, you have other applications which are growing as well on that. The last question is I did not fully understand on the market pulp.
Yeah, I think when we look at our recent Pulp & Paper meetings we had, we get a sense that some of the integrated mills globally might actually start buying market pulp rather than being integrated, just because of the pulp price being relatively low. Do you think that's then obviously helpful for taking up some of the market pulp capacity, I guess?
Yeah, I guess this varies and depends a lot in what region that we are discussing, and I think it also varies a lot to which are the grades that are integrated. Is it unbleached, long fiber, short fiber? I think this varies a lot on that side. I cannot just give a general overview on that topic.
Understood. Thank you.
Akash.
Yes. Hi, thank you for a couple of follow-ups. The first one is on data center. I asked one of my colleagues to count how many times you mentioned data center in presentation, and apparently it is more than 15 times, yet I have not seen you talking about data center being as one of the key growth driver of Metris story. There is some mention here in revenue target where you do see pockets of significant growth in data center among few other end markets. But maybe it is just to talk about when we look at from this data center AI holistically, what sort of opportunity do you see there? Because I guess there may not be direct benefit, but there may be indirect benefit.
So maybe if you can talk a bit about how do you see the growth prospects, thanks to the data center CapEx growth that we see out there. The second one is on M&A. I think we have seen very limited action this year, and now we are in an environment where interest rates are going to go up, which may have an impact on the value of some of the assets out there. So, what needs to happen for us to see a bit higher M&A activity? Could we see in back end of this year or it will be more likely next year when we see a meaningful step up on inorganic growth?
You take the data center?
Yeah. Data center, as I mentioned, relies on stable supply of electricity to operate continuously, and therefore they have difficulty to obtain these supplies from the grid. They at least as backup, but very often as main generation source, they invest in their own power generation supply, which is mainly gas turbine driven today. When we look at the financials of our gas turbine technology supply worldwide, data center represent less than 20% of their supplies today. Most of the supplies go to the grid environment, grid stability, so flexible power generation more than data center. At the moment, the growth, as I mentioned, is mainly North America and in the Middle East, with very strong visible investment still to be seen in other region of the world. Is this short-term bubble? Is it a long-term continuous investment?
For this, as I said, we rely on the gas turbine supply market.
Maybe if I can ask a follow-up here. We have seen some hyperscalers are paying to utilities for expensive nuclear power for their own base load. Sorry, just to. We have seen some hyperscalers, they are paying premium to utilities for expensive nuclear power in Europe. I guess here in Europe, we also have a lot of hydro resources, and there is a big opportunity to increase overall performance or the capacity of those. Do you see those type of projects coming in your pipeline, where maybe some utilities are more keen to go ahead and refurb their installed base because they can increase amount of power they can generate, and then they can sell it to data center customers at a premium above the current wholesale prices?
Yeah. For massive concentration of data center, nuclear supply base load can be considered for sure in some specific areas where they have access to this energy. As I mentioned, hydropower is the renewable power enabling to regulate the other intermittent renewable power from wind and solar, which are growing, but not necessarily highly available to supply quality, stable energy to a data center. I do not see a link so much with hydro, between hydro and data center. This is for us mainly through our turbo generator business.
M&A?
Yes.
We constantly look for targets that fit. Which targets fit, I explained to you. But you need somebody who wants to sell the asset you like to have, and you need to agree on the price. It is a bit difficult sometimes on the timing. We see the rising interest rates, and we expect that probably would have a positive impact on the M&A market. At the moment, the expectation on the proceeds on the seller side are still very high. And we have a history of a discipline approach to M&A not to overpay. If we are talking about a must-have acquisition that would harm Metris if it comes into the wrong hands, then we definitely would be also ready to pay a premium.
But don't get me wrong, if it's a nice to have acquisition that would be a good addition, then there is no need for us to spend a premium. And if we have too much money, we initiate a share buyback.
We have another question in the webcast. Daniel?
Hi. Thanks. One more on AI. Could you maybe give us a rough split of how much you supply directly to clients in terms of turbo generators and how much indirectly? And what does this change in economics, and what's the strategy actually going forward? Do you want to increase actually your direct share, or are you fine with supplying basically through the two market leaders here?
It's 90/10. So most of our contracts are with gas turbine technology companies, so it's indirect sell. We are plugging our generator behind their gas turbines. The 10% is likely to grow through, let's say, emergency supply of generators in case of failures through service, as I mentioned before. But still in a very reduced manner, this direct business. Because at the end, you need the full turbo generator island to generate electricity. So you cannot sell a generator on its own.
Would you expect the profitability to be margin accretive for the whole segment going forward?
It is still a very competitive segment with many solutions, global solutions. I would expect similar to what I have mentioned for new hydropower plant builds, some improvement, but probably this is the segment with less opportunity compared to pumped storage, compared to some grid solutions which are of better opportunities.
Thanks.
One question from the webcast.
We have a written question from Emanuele Sartori from Kepler Cheuvreux. You described synchronous condensers as in some respects a temporary solution for grid stability. How do you think about the longevity of this market? Could grid forming inverters or other power electric solutions eventually reduce the need for synchronous condensers, and over what timeframe?
Yes, it is definitely potentially a temporary solution because at the end it is evacuating excess of energy on the grid, and this is not efficient and markets will look at better utilization of those excess of electricity like storage or like more electrification of other processes. As I mentioned, there are two ways to regulate the market for absorption of over energy. The SynCon are the more electromechanical ways to do it. Then there is a power grid, the grid forming approach made of inverters and batteries, which we are also looking at. This is part of our growth potential for our grid solution environment. This, I see that complementary still for a reasonably long period of time because until the power generation new form of supply stabilize, the grid still needs those evacuation of energy systems.
Both for SynCon and for grid forming, this will be a long-term run.
Okay. I think this concludes our first part of the Capital Markets Day. I would like to thank the audience in the room and on the webcast for the attention and the interest, and our Executive Board for the very exemplary presentations. We will now have a well-deserved lunch. I expect you back here at 12:30 P.M. for a safety instruction, for a very interesting tour on the afternoon in our Metris Experience Center and site tour. I would like to hand back the word to Dr. Schönbeck for final remarks on the first part.
Matthias, thank you. We provided you update on our strategy, how to increase the service, go further on the digitalization and develop new technologies for the decarbonization area. We gave you the prospect that we will not change our path on our M&A, so that will be part of our growth machines. We provided new targets for 2029. The EUR 10 billion revenue and 10% comparable EBITA margin, and excuse my short thinking on that. As we have 2% margins on the business areas, the mathematics conclude that and this is why we have given the guidance there around the 10, but the target is the 10. Vanessa Hellwing explained to you on our capital efficiency and our well-balanced capital allocation, which we also will stretch out to the future. Frédéric Sauze and Jarno Nymark gave us impressive presentation of the exposure to the markets in the energy sector.
I think the good development and also the good outlook in Hydro really is exceptional. Metris is in a very good position to capture on that. On the deep dive in Pulp & Paper, I think the main takeaway is that there is a good business, a very profitable business, and a well-managed business in Pulp & Paper, even without a large order from South America. A large order we received was 2021. The outcome is this Cerrado project Jarno explained about. It provides not only a good basis for further service business, it also provides a comfort for the customers that they know that we can achieve things. On the metal side, I am brave enough to tell you that the restructuring is done, will be finished in the course of next year, and that with the regained competitiveness, we can increase and improve the margins further.
With that, I would say enjoy the afternoon where you can see a lot of tangible products in the manufacturing and a lot of intangible values communicated to you on the automation and digitalization. From that, enjoy your lunch. Thank you.