Edited Transcript of SFSN.S earnings conference call or presentation 8-Mar-19 10:00am GMT

Continuing with the development by segment. I will start with the headlines of the Engineered Components segment, where all 4 divisions contributed to the growth development. The achieved sales increase of 4.4% led to a top line sales of CHF 967 million. The growth, as such, was mainly fueled by ramp-up of new projects. An attractive profitability of 18.2% EBIT margin was achieved, however, burdened in the first half of 2018 by increased raw material costs and high advance outlays for the 2 mega projects within the division Automotive, ball screw drive for power brake and Electronics components for new power adapter.

A positive margin trend could be achieved in the second half of the year after higher raw material costs were passed on to customers and the 2 projects, as mentioned, finally left the engineering stage and entered into the stage of initial serial production. The unexpected drop in demand in Q4 2018 as well, mainly in Automotive and Electronics, put then unfortunately an early stop to the further recovery of the EBIT margin on the last mile before closing the fiscal year of 2018. Continued high level of CapEx at CHF 116.3 million or 12% of segment sales with spending CHF 30 million alone for the new production platform in Nantong, China further characterized the past year.

The key messages of — or the key message of division Automotive, continued above-market growth further underlines the just mentioned development of the entire segment. Growth was fueled by the launch and ramp-up of innovative customer projects and achieved on a like-for-like basis 4% organic growth, whereas the global light vehicle production output stagnated at 94.7 million cars or a decline of minus 0.5%.

The trend towards autonomous driving and electrification of cars proved to be a further reliable innovation and growth driver. The unexpected drop in demand in Q4 2018 also affected performance of the Automotive division. Nevertheless, we are still expecting a solid growth development in 2019 despite a softer start into Q1 due to further ramp-ups of innovative customer projects. The strong position as engineering partner resulted also in 2018 in new and significant project wins with an annual sales potential of slightly over CHF 80 million or 21% of divisional sales, which represents an increase over 23% compared to previous year.

The key messages of division Electronics follows along the same characteristics as we just have heard with division Automotive because the division Electronics achieved a further penetration of a new application with the new power adapter program for an important customer. Besides the new application win, only modest sales growth of 1.5% was achieved as expected and envisioned for the year 2018 due to the titanium insert decline of minus 4%, FX and scope [fix]of minus 0.6%, resulting in a still respectable organic growth of 6.1% in the core business.

With that, the Electronics division further proved its strong competitive position in mobile devices, hard disk drives and lifestyle electronics by increasing sales and wallet share, for instance, in a declining market environment of hard disk drives, despite significant progress was achieved in lifestyle electronics, a further increasing sales for smart watch applications. The successful entry into the new application of power adapter based on SFS cold forming expertise, offering hence significant growth potential for 2019 and 2020.

The construction of the new manufacturing platform in Nantong, China nearing completion as per the original schedule. The new factory will be hosting all SFS core technologies and will be serving as strategic hub also for the Automotive division. The strategy by having 2 divisions utilizing the same infrastructure efficiently could already be proven by winning a substantial new Automotive order for the site of Nantong. All in all, we expect positive development in 2019 and look forward to the new electronic devices launched by our customers in the current year with SFS content inside.

The division Industrial achieved in the year 2018 the same like in the previous year, and namely stable sales trend and strong project pipeline. This stable sales development roots back to the mix development by business unit. Besides the successful acquisition of new growth projects, the division experienced the still sluggish development in Aircraft business due to lower demand of Airbus A380, flatter ramp-up and inventory effect of Airbus A350.

For 2019, we are expecting a positive trend fueled by the ramp-up of newer projects and stronger momentum in Aircraft business as well as a continued declining and finally phasing out of the current CHF 3 million sales of A380 business over the next 2 years.

We’re coming now to the key messages of our still new Medical division, where in 2018, the management team achieved accelerated growth dynamics. The growth momentum continuously improved over the course of 2018. Like with the previous 3 divisions, also in the Medical division, the development is driven by launching new customer projects. The manufacturing platform close to the med tech clusters in the U.S. and Costa Rica proved to be a clear advantage for acquiring new programs. For 2019, we expect continuous — continued positive top line development on the back of a solid project pipeline as well as a catch-up step on the bottom line because of being now able to cover the past year’s advanced layouts with additional sales revenues.

Approaching now the headlines of the Fastening Systems segment, where important progress was achieved in 2018. Continued strong momentum resulted in sales growth of 13.8% year-over-year. Organic growth contributed with 5.6% comparable, driven by market success of innovative products and supported by good market environment. The initial consolidation of HECO in the second semester contributed another 5.8% to the segment sales development. Significant progress in profitability was also achieved with an EBIT margin of 9.8%, previous year, 7.6%. Projects to sharpen the production profiles are largely completed and provide basis for future and further productivity gains.

Looking into the details on the progress with division Construction. We can state that the division was able to substantially strengthen its market position besides repeated attractive growth development, broadly based by region and product groups. The Construction division successfully expanded market share thanks to innovative products, systems and services. Trends to higher safety, energy efficiency and aesthetics are key triggers for innovation. Interest in HECO increased from 30% to 51% as of July 2018, which allowed for more effective exploitation of growth and synergy potential and full consolidation since 1st of July 2018. A further positive development of the division’s performance is expected in 2019.

On the strategic collaboration with Triangle Fasteners, as initially made public in October 2018, we can state that the negotiations are at an advanced stage and final results are expected within the next few weeks. The strategic rationale behind: gain of direct access to a broad customer base through a well-established sales network in the U.S.; realizing of cross-sell potential; and the strengthening of the competitive position in the U.S. construction market.

A broad market spectrum has been covered by the division Riveting in 2018, the results achieved, therefore, not surprisingly. Solid growth developments driven by healthy environment and good results in various application areas, a compelling competitive position to benefit from trends like electrification of assembly lines and 100% quality control. Successful product launch of the iBird and Flow Drilling Rivet to fuel future growth. Successful development of operations in Nansha, China, where the production volume for standard rivets could be doubled. Therefore, solid business trends are expected for 2019 as well.

Continuing with the headlines of the Distribution & Logistics segment, where an accelerated growth momentum was achieved in the previous year. Attractive organic sales growth of 5.1% was achieved, excluding the sale of the security system business, therefore, once again well above the Swiss GDP. Primary sales drivers were the e-commerce site, the tool business and the distribution of construction-related products. Profitability significantly improved from EBIT margin of 7.6% in the previous year, comparable 6.9% with our book gains from disposal of properties which occurred in 2017. For 2019, we are expecting again a positive development despite a more volatile economic environment.

Ongoing investments into the multichannel activities of the segment Distribution & Logistics clearly strengthened the overall performance of the segment. Going forward, the strategy, clear and coherent with past practice. Best-in-class delivery performance must be achieved through all channels. In the past year, the segment, therefore, strengthened and widened its online presence through the launch of the new e-commerce website at sfs.ch, which resulted in significant growth with existing customers and led to new customer wins as well.

Attractive network of retail pick-up points of HandwerkStadt were expanded. The segment further fostered the attractiveness of digital logistic solutions by enhanced functionalities on mobile devices, and last but not least, strengthened its logistic capabilities by expanding the central warehouse in Rebstein, Switzerland with total investment of CHF 11 million over the past 3 years.

With that, I conclude the presentation of the development by segment and hand over for the development of key financials to Rolf.

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Rolf Frei, SFS Group AG – CFO, Member of Executive Board & CEO of SFS Services AG [3]

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Good morning, ladies and gentlemen. First of all, please apologize my weak voice. It’s due to a cold I just catched a few days ago. Nevertheless, I’m pleased to elaborate on the development of the key financials, together with additional background information.

Before I do so, a side remark to the layout of our annual financial report. We picked up the upcoming trend of financial streamlining for the first time. And we are almost sure that you and all of the investors will find the new layout much more reader-friendly and much more effective. Duplications are eliminated, graphs added to highlight important issues and new relative KPIs support a quick interpretation of the numbers.

Now back to the numbers and the sales bridge. These are the drivers of our sales growth of 6.5% year-over-year, which is behind guidance of 7% to 9% due to a weaker foreign exchange contribution in the second half ’19 — ’18, sorry. The organic growth with CHF 80 million or 5% was pretty pronounced, dynamic and within the guidance of 4% to 6%.

The titanium inserts’ trade activity in the Engineered Components segment has now almost reached its important sale with the remaining $4 million in that year. The majority of the change in scope is due to the first-time consolidation with HECO Group Germany in the second half ’18, HECO, our specialists when it comes to timberwork construction.

Let me give you an additional insight into our monthly growth rate in the core business. Throughout the year 2018, the monthly growth was robust and steady both as a percentage, the red line, and in absolute numbers, the gray bars. Still in the month of October, the growth rate was 8%, October ’17 compared to October ’18. But then in November and December, an unexpected decline, mainly in Automotive and the Electronics division caused negative effect.

Instead of an expected growth of CHF 10 million in those 2 months, we suffered a drop of CHF 10 million, which signifies a gap of CHF 20 million that is missing on the top line and did not add to the bottom line. Imagine, 60% value added on the CHF 20 million is CHF 12 million effect on bottom line and just for the 2 months, November and December.

The trend for 2 first months 2019 shows a stabilization but declined against a quite strong 2018, but in both month around 2% in the core business. This minus 2% in those 2 months was compensated by the change in scope of HECO Group. And therefore, the overall SFS Group achieved cumulative sales for January and February this year equal to the previous year 2018.

The pie chart on the left indicates a robust and balanced sales breakdown by end markets. In the construction industry, we strengthened our market position, thanks to innovative products and the first-time consolidation of HECO Group with its share of 26.5% of total sales, it competes head-to-head with the automotive industry. The development by region is shown on the right side of the slide.

SFS has made a further step towards its strategic approach to reach a sales share of 20% each in the region Americas, Asia and Switzerland. The remaining 40% sales share shall be generated in Europe. This share of sales in Europe again amounts to 40% or just a little bit above. This is thanks to an above-average growth rate with 3 factors, organic growth, change in scope and currency impacts, contributed each with around 1/3 with the attractive growth of 9.6% in Europe. The region Americas performed equally well during 2018 with an organic growth of 9.2% year-on-year. And it reaches now 17.7% total sales.

Adjusted EBIT increased 4.2%. This represents an EBIT margin of 14%, which is slightly less than the year-ago margin and our guidance. Until end of October, we were on track to make up the lost EBIT basically caused by raw material price increases and high outlays in the first half year. Due to the unexpected decline in November and December I just explained before, however, and in contrast to our internal projections, we were short in sales with CHF 20 million and short in EBIT with CHF 12 million. Nevertheless, the second half year performance was better with an EBIT margin of 14.4% against 13.6% in the first half.

It’s also noteworthy to mention our strong record on our profitability development throughout the business cycle of the company. This 12-year cycle comprises a severe financial economic crisis in 2008/’09; 2 strong appreciations of the Swiss franc 2011, 2015; but also some disposals, such as the steel service business in 2010/’11; as well as substantial acquisitions of Unisteel and Tegra Medical. During this 12-year period, SFS progressed the EBIT or EBITDA range from then 17% to 19% to the now higher level of 19% to above 20%.

We constantly measure the share of Swiss francs expenses against the total group operating expenses. For the second time, the percent share reached our strategic target of 40%. The drivers for this trend are the strategic goals to relocate labor-intensive products and processes to foreign SFS sites as well as to pursue international acquisitions. The Swiss sites are important technology and innovation flagships. Their excellent productivity levels, know-how and passion are decisive for the SFS Group. The number of employees in Switzerland remains stable at just below 2,500 heads.

The development of our net working capital at the year-end was again stable and where it is in the narrow range of 30% to 31% of net sales. The cash cycle has slightly improved by lowering 2 days to 111 days. Our capital expenditures shows 2 consecutive years of record spending, 2018 with CHF 149 million or 8.6% of net sales. If there is a time lag between investing and fully operating the capacity, these investments will clearly support future growth with 2 to 3 years to come.

A cash-out for property, plant and equipment was triggered by capacity needs to fuel existing but also new projects as well as the construction of our new China Nantong site. The CapEx share of Asia has, through that, significantly increased to 36% of total CapEx. And by the way, in Switzerland, we also spent the same 36% of CapEx share.

Engineered Components segment lived up to its claim to be a development and innovation partner. And this leads to an attractive EBITDA margin well above 20% but also to the need of high CapEx. And you see the share of total CapEx of Engineered Components segment amounts to 78% of total CapEx. We consider the normalized CapEx level for the SFS Group as a whole in the range of 6% to 7% of net sales in which we schedule to come back in 2019.

As a result of the high CapEx in the last 2 years, the conversion rate of EBITDA into free cash flow suffered a drop below our internal benchmark of 40% to 50%. Nevertheless, the cash-out of operations was strong and increased by 16% to CHF 263 million. We expect this to continue. Together with a slightly lower CapEx rate, conversion rate should move back into the range indicated.

The equity ratio, with 74%, remains strong and solid and is part of the SFS DNA. Net cash improved to CHF 59 million. Despite a record in CapEx and a substantial dividend payout, SFS remains debt-free. The financial flexibility to exploit external and organic opportunities and projects is secured through existing net cash, unused credit limits and fresh free cash flow generated year-by-year.

One of our internal KPIs is to return leveraged capital employed. The adjusted EBIT is measured on that average capital employed. And this is a pretax return and it varies in an attractive range of 20% to 25%. The red graph shows the development of the after-tax return measured at equity before the goodwill offset. Tax return again moved sideward, just below 10%, which is not yet up to our own ambition. However, it’s above our cost of capital. And as such, we achieved economic value-added.

Consistency in the payout to the shareholder is important for SFS. The board will propose to the AGM a payout of CHF 2 for each registered share. For the last time, we were able to distribute part of the dividend from statutory capital reserves. The total dividend distribution amounts to CHF 75 million and represents an increase of 5.3%. With the 37.8 — 38.7% payout ratio, SFS stays at the low end of its target range of 35% to 50% payout.

Summing it all up. SFS Group looks back to a solid business year. Top line grew by 6.5%. The adjusted EBIT fell slightly short, previous year and the guidance. Reasons are the unexpected sales decline in November, December and the mix change in the segment. The financing of the group is 74% before equities outstanding. Record-high CapEx of the last 2 years will support growth in the years to come. And the operational capacity employed — capital employed gave an attractive return pretax of above 20%. With this solid, healthy bunch of KPIs, SFS is well prepared to tackle the near future.

With this, I hand over back to Jens to comment on the guidance. Thank you.

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Jens Breu, SFS Group AG – Chairman of the Executive Board & CEO [4]

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In 2019, we expect the market environment to be volatile in view of the trade tensions between the U.S. and China and the perceived slowdown in global economic activity. Thanks to our healthy project pipeline, we expect robust sales growth of 3% to 5% in 2019 despite a challenging environment.

In view of the uncertain economic development, we expect the adjusted EBIT margin within the range of 13% to 15% in the fiscal year 2019. Expenditures related to the commissioning of the new manufacturing platform in Nantong will result in one-off costs in the low double-digit millions in 2019. Conversely, accounting book gains on the disposal of property are likely to be recognized in the current year. These combined one-time effects are likely to burden reported EBIT in 2019 with a high single-digit to low double-digit million amount.

And lastly, a big thank you goes to all SFS employees of the group. It is thanks to them that 2018 was another successful year for the SFS Group. Employees throughout the company demonstrated high levels of competence, creativity and dedication and delivered outstanding results. Thank you.

We’re approaching the end of the active presentation of the full year 2018 results and are now happy to be available for your questions. First, we take the questions from participants here in the room before we take questions from participants joining us by web meeting first and then second, on conference call. So thank you for your attention. And we are ready for questions. The microphone is also available here.

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Questions and Answers

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Tobias Fahrenholz, MainFirst Bank AG, Research Division – Director [1]

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Tobias Fahrenholz from MainFirst. Speaking about your guidance, in the past, you have shown for the top line always the single components. So could you give us an indication what you expect for organic growth, for the trading activities, for currency and especially for scope, so maybe also already a small positive impact from Triangle in there? And if you would acquire Triangle, what would this mean for revenues on an annual basis? That’s on the top line.

And then coming to the EBIT margin, so am I getting it right that the 13% to 15% is excluding the real estate disposal, which I would also classify as one-off, but also the ramp-up costs in China, which you could also say it’s a kind of operational [novel] business? Is this assumption right? And why are you not mentioning the 15% return target anymore? So is it out of reach for the time being?

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Rolf Frei, SFS Group AG – CFO, Member of Executive Board & CEO of SFS Services AG [2]

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Okay. Let’s start with top line, the guidance, 3% to 5%. It’s a quite volatile environment right now, certain unsecurity, so it’s not easy to give a guidance. You have seen where we started for the first 2 months. So the 3% to 5% is the overall growth of the group. It’s not easy or it’s not basically possible to do an estimation on FX, though we assume is plus/minus 0. If you know that we have, for the first half, the first time the HECO Group and then from July onwards, it will be — because it’s equal, that change in scope will add probably again, say, 1% on growth. So the remainder then would be the organic growth, which we currently anticipate in this market environment.

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Jens Breu, SFS Group AG – Chairman of the Executive Board & CEO [3]

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Maybe on the adjusted EBIT margins side, why adjusted? Why is it not a normal transfer of an operations from A to B? I think here, we have to keep in mind that we have strict regulations to follow in China. In China, when a factory is moved out from one specific jurisdiction to the next one, a new legal entity needs to be opened. And then also clearly defined social contributions have to made to the employees who are leaving the company for good and even to the employees who are just moving from one legal entity to the next new legal entity. So this is why this has an extraordinary, one-time, special correction to it. In general, as you see with the top line and bottom line guidance, we are still optimistic on the top line due to many projects, new projects in the pipeline. We clearly expect that we can outperform, we’ll say, in general the end markets where we are active.

On the bottom line, we are fairly cautious because, a, the volatile environment we have seen that maybe a softer November and December will leave its mark. We may be driving throughout the year, and then all of a sudden a swift adjustment comes in November and December, where we cannot adjust as quickly within 1 or 2 months left within the year. Secondly, we mentioned we have ramp-ups, every ramp-up is an opportunity, but they also have some risks associated with it. And thirdly, we also have quite high value-added, high profitability in our Swiss operations. And when times become more uncertain, the Swiss franc tends to increase in value. And our sales revenues are in euros and costs in Swiss francs. So that’s one other reason why we guide more conservatively on the EBIT adjustment.

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Rolf Frei, SFS Group AG – CFO, Member of Executive Board & CEO of SFS Services AG [4]

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You’re right. The EBIT adjusted is after the add-back of these 2, the net effects of the 2 one-time effects, right? And that would come then in a separate item. That’s the 2 effects, it means the move of the Nantong, right, and the — which is negative, and the positive effect, the potential book gains of disposal of properties.

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Marta Kinga Bruska, Joh. Berenberg, Gossler & Co. KG, Research Division – Analyst [5]

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Marta Bruska from Berenberg. I have a couple. I start maybe with following up on the question of the colleague here from MainFirst. I think he also asked about the EBIT margin target of 15%, if this is still on the table. I also heard this one on the list as well as the 4% to 5% organic growth target, which were given us mid-term probably the last time in 2016. So are we still having those targets? When they will be updated? And the secondly maybe on the, first, on the trends — the sales trends for January and February.

You mentioned that this minus 2% would be more close to 0 in accounting for the HECO acquisition. On the core business though, how much it is in total? And then even with assuming that this would be still around 0, for the second half of ’19, this would imply a growth rate of around 6%, which is close to what you achieved in 2017 in a booming market environment. So if you could give us a little bit more color where the strong acceleration should come from.

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Jens Breu, SFS Group AG – Chairman of the Executive Board & CEO [6]

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Going back to the question on the EBIT margin, we have not changed our mid-term guidance. Overall, we still envision the EBIT margin of 15% as a feasible, attractive to go for and to shoot for. And also the mid-term guidance on organic growth of plus/minus 5% to 7%, also there are no change to it. We clearly see 2019 as probably a softer year, a softer start, a year of adjustment in many industries as we probably have seen in November and December. But we are still optimistic for the year as a whole overall on mid-term guidance.

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Rolf Frei, SFS Group AG – CFO, Member of Executive Board & CEO of SFS Services AG [7]

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Okay. And the second question, in January, February, I presented you the minus 2% in the core business growth. And basically, it’s kind of a continuation what we have seen in November/December. Not as strong as it was in December, of course. And this was compensated basically by the HECO first-time consolidation. Remember, it’s 1% for the full year, but it’s 2% in the first half year because it was already consolidated last year from July to December. So that is right now an effect of 2% in the 2 first months. So basically, we are on track or on the same level of sales as we have been in January, February 2018.

We expect a weak first quarter and are, on the other side, also more optimistic that business will pick up from quarter 2 onwards, certainly into quarter 3 and hopefully also with the success of the product of our customer, customers, especially in Electronics. And then you see a similar trend as in the past that second half year normally, seasonally, is much better than the first half. And that leads to our overall estimation of an overall growth of 3% to 5% right now. Of course, we can probably be more precise once we see the first 6 months into the year and then having a basis and then understanding what’s going to happen in the market.

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Marta Kinga Bruska, Joh. Berenberg, Gossler & Co. KG, Research Division – Analyst [8]

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Okay. So maybe — I’m sorry to question a little bit. So your non-core business in the first 2 months, did it grow or decline?

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Rolf Frei, SFS Group AG – CFO, Member of Executive Board & CEO of SFS Services AG [9]

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Minus 2%.

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Marta Kinga Bruska, Joh. Berenberg, Gossler & Co. KG, Research Division – Analyst [10]

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The core. But the non-core, would you consider…

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Rolf Frei, SFS Group AG – CFO, Member of Executive Board & CEO of SFS Services AG [11]

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You could say that the overall, if you exclude the change in [cold] price, so like-for-like was minus 2% plus, then you add back the first-time consolidation of [holdco].

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Marta Kinga Bruska, Joh. Berenberg, Gossler & Co. KG, Research Division – Analyst [12]

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And the titanium inserts?

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Rolf Frei, SFS Group AG – CFO, Member of Executive Board & CEO of SFS Services AG [13]

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Well, that’s more or less in the same level. And it’s almost to 0 with this CHF 4 million last time in 2018. And most probably it will move along. It will probably always be a base now. But it’s so small on the total sales so that we would not consider it any longer.

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Marta Kinga Bruska, Joh. Berenberg, Gossler & Co. KG, Research Division – Analyst [14]

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Okay. And then following up on the margin, so the 15% is still on the table. But we’re seeing a trend, especially in your most profitable division, Engineered Components, on the EBITA level, which is more comparable than EBIT because of the — EBIT changed because of the change of the reporting standards. So when we look at the EBITA for 2016, it was around 28%, then it declined to 26% in 2017 and to 24% in 2018. And the next, it declined farther in 2019 already, then accounting, of course, the one-off, probably even more so. So what was driving this decline? And why do you think it should pick up again?

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Jens Breu, SFS Group AG – Chairman of the Executive Board & CEO [15]

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As we have communicated and informed over the last 2 years, we have substantial projects in the pipeline, which created and caused advanced outlays we have in this segment. And I think in the year of 2017, we also communicated a number of one-time costs and for 2018 as well. So when I go back to my notes, I’d say in 2017, we had one-time effects of CHF 6 million to CHF 8 million, in 2018, probably CHF 7.5 million, which were costs associated with these new projects and new investments.

These are complete new product lines, which do not fall back on existing infrastructure to start with. And due to that also caused this additional — I would say this additional pressure on the profitability. Going forward, we clearly expect the profitability will increase again. Besides that, we have also to mention that we have a new division onboard, which also on average reduced the profitability of the segment, that’s the division Medical, which also has to be considered when we analyze the profitability over the last 3 years.

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Marta Kinga Bruska, Joh. Berenberg, Gossler & Co. KG, Research Division – Analyst [16]

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Okay. Try to go a little bit to reconcile that new projects and the new product lines with the flattening growth profile. So if you invest it in the new projects, shouldn’t that increase or accelerate the growth, while we actually see deceleration?

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Jens Breu, SFS Group AG – Chairman of the Executive Board & CEO [17]

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Absolutely, and that’s why I also made my comments ingoing or incoming that, first off, we had this unusual drop in November/December broadly in the market, which affected mainly existing business and not the new business. The new business usually is more resistant towards downturns in the market. Secondly, we had clearly outperformed the Automotive market by around 4.5 percentage points. And thirdly, we have also to keep in mind that for — especially for one of our large customers, this is the year of the [S model], and the year of the S model tends to be weaker in usually most cases. So from that perspective, I think we can say division Electronics performed as expected, it’s a softer year. It’s a year of transition to a year with a new model, but also a year with the new power adapter. So we would expect 2019 to pick up and cover for these costs, for these expenses we had over the last 2, 3 years’ development. And on the Automotive side, we have seen that the new program in production increased sales by 4% organically, and we have seen that the market decreased by 0.5% negative. So over here, we have seen a benefit of the investments of the new programs. But we also need to keep in mind that in 2019 and 2020, the project, which caused this material reduction of profitability are just ramping up as we speak. So this has been a longer phase of investment and this is not uncommon with new technology. As soon as it is established, implemented on the customer side and on our side, then usually, the cycles get shorter in innovation because the basic capability is there.

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Marta Kinga Bruska, Joh. Berenberg, Gossler & Co. KG, Research Division – Analyst [18]

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Okay. And you don’t see it as a problem that these projects will be ramping up in the softening end market environment with some of the key players relocating the capacities — production capacities out of China, for instance, what happens in case the end market demand is a little bit softer even than expected?

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Jens Breu, SFS Group AG – Chairman of the Executive Board & CEO [19]

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I think overall here, we have to take this question apart in 2 pieces. First off, innovation is always helpful because it calls you ahead. In down cycle, innovative products still find buyers in the market. So usually, they are more resistant against downturns. So it’s always good to stay with innovations because the existing commodity business is usually the one which is affected and usually pulls the performance down. So it’s good to invest, it’s good to be ahead. It’s the opportunity to also to perform better than peers in the same industry. The second question of the site of Nantong and the Electronics business, in general, I think here we have to keep in mind that our value of the average cost of a smartphone manufacturing cost, bill of material total cost is probably between $80 to $160. Our value content is usually around $1. So these are strategic precision components, which need economies of scale to be produced efficiently. So whenever a customer intends to relocate assembly, value added from one side to another side and strategically reorganizes the portfolio of assembly locations, usually the fastening parts come last, if they come at all. Today, it’s quite common that precision components are manufactured at maybe 1 or 2 locations globally and are then distributed from there to the assembly sites because the advantage of combining them and gaining economies of scale is to a higher degree and level than localizing it. So if you would take apart the economies of scale, there would not be a benefit. So in short, we see the customers reorganizing themselves, that they consider shall we assemble in Vietnam, in Indonesia, in China or in India, and we can support them as well. We can support them out of China, we can support them out of Malaysia, and we can support them out of India and the production equipment is standardized and also flexible and feasible to move. In case, such shifts are happening reality, which we have not seen yet, up to now it’s only discussion, we can add — instead of adding new capacity in China, we just add new capacity in Malaysia or we add new capacity in India. It’s not a shutdown scenario and transfer scenario. It’s a question where do we add new capacity. Secondly, as I also mentioned, we have to keep in mind that Nantong, the new site, is also a site for Automotive where we just had won additional programs for the market in China, which falls back on same and similar capabilities as we used for the Electronics division. So strategically going forward, we’re making sure we’re balancing our capabilities and capacities in the region to reflect also changes in assembly by our customers.

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Marta Kinga Bruska, Joh. Berenberg, Gossler & Co. KG, Research Division – Analyst [20]

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Well, also Automotive, passenger vehicle sales in China dropping by 17% in January. I see that as a risky backup plan, but I leave it maybe the discussion open for other participants and come back with additional questions.

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Jens Breu, SFS Group AG – Chairman of the Executive Board & CEO [21]

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That is a good point, but here we have to also keep in mind that our market share in China is very low. And here we talk about replacing existing volumes we don’t own today. So these are like volumes of competitors, which we would replace over the next 3, 4 years. This is completely new fresh sales.

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Armin Rechberger, Zürcher Kantonalbank, Research Division – Analyst [22]

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Armin Rechberger from Zed KB. I’m interested in the ramp-up of Nantong. When — are there further costs to be expected next year, I mean, 2020, or will it be fully ramped up in 2019 already? Then the Triangle acquisition. If I calculate the workforce and sales, I get up to a figure of CHF 70 million to CHF 100 million sales per year. Is that the range, which you could say, yes, it’s okay, or is it less or more? And then Triangle, you would put it in your division Construction or not Distribution & Logistics as they are only in Switzerland active. Then, yes, market January, February, you mentioned 2% down for the core business. How did, especially Automotive and China develop in these 2 months? CapEx 2019 how much? And then, one for Airbus A380, you mentioned CHF 3 million sales with this type of airplane, but I think the stronger — or more business you do with the A320 and for — I mean, the question is, is that a major chunk of the air business you do with CHF 3 million or is it just [correct] for both?

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Jens Breu, SFS Group AG – Chairman of the Executive Board & CEO [23]

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Rolf, you do.

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Rolf Frei, SFS Group AG – CFO, Member of Executive Board & CEO of SFS Services AG [24]

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The question was Nantong, right, and the moving cost? We anticipate the majority or almost all of these costs will be covered in 2019. So there is still part of the factory to be moved in 2020, but the moving cost or the relocation cost, so to speak, will be provisioned in 2019. So you will see the effect in P&L, almost everything in 2019. And on TFC, that is still a project, still negotiation — in negotiation. We expect decision to come in couple of weeks, few weeks. I was not sure what calculation you did, but if I do calculation sales per head, it’s in the range of USD 350,000 to USD 400,000. It’s a trading business. Strengthened our — would strengthen our position in U.S., the division Construction considerably, adding in new customer base with similar products, and we’ll have quite some synergies. But as I said, it’s still a project, it’s in negotiation, but we believe in a couple of weeks, we’ll have final decisions and then we’ll inform accordingly.

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Armin Rechberger, Zürcher Kantonalbank, Research Division – Analyst [25]

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And according to the Internet, they have about 200 heads.

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Rolf Frei, SFS Group AG – CFO, Member of Executive Board & CEO of SFS Services AG [26]

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200 heads, yes, that’s true.

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Jens Breu, SFS Group AG – Chairman of the Executive Board & CEO [27]

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On the sales development for January and February, we can say that in Automotive, we are probably around 5 year — 5% below the pace we had in previous year year-to-date, and in the Electronics, we have around minus 10% to the previous year-to-date roughly — it’s a rough indication. And I think Automotive, we have understood that the year 2018 has been a driving one that many uncertainties led our customers to probably schedule ahead and we have seen a phase of inventory and WIP adjustments in November, December and January and expect now a normalization of the demand because the actual demand is clearly lower than what is produced on the level of cars overall to be distributed to the different geometry — geographies. On the Electronics side, I already mentioned, it’s the S version. The S version is a soft version usually. And we expect in April then a pickup of demand due to the ramp-up of new programs, but then also in June, starting with the prebuilt for the next models coming in the third quarter. So both elements, we probably have seen and projected and watched it for the year, it has been softer in the first quarter this year. On the CapEx side, I think that question is answered on Automotive and Electronics. On the CapEx side, as Rolf mentioned, 6% to 7% is the objective for the year, and we do not foresee major changes there. Don’t expect major short-term new projects coming in at this point in time. And to the question of the A380 days, 380, the CHF 3 million annual sales, which we currently have will phase out — fade out over the next 2 years. The A380 is still leaving in another year or more, so we probably expect last year, no more sales because of inventory, which will need to be utilized and used up. This used to be 3x more. So the peak of the A380, this used to be 3x more higher in sales and came down now year-by-year. And we see the opportunities mainly with the ramp-up of the A350 and then we also see opportunities in the midterm, probably 5 years out with A320 because there’s a heavy material, design change, where we also expect we can add some value overall. A320, besides that, we have not much value in there today, not to the degree like with A350 or 380. More question?

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Michal Lichvar, Bank Vontobel AG, Research Division – Analyst [28]

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Michal Lichvar, Bank Vontobel. I would have just 2 questions. I see most of it was anyway answered. Just to clarify whether this engineering components project is very large ones, where you’ve also seen an impact on the margin that you mentioned, so you expect no more of these large projects and, therefore, pickup in margins. Is that — did I correctly understood this? And then maybe, with these one-offs that you expect this year, is it coming more in the first half? Do you have any time line? Do you expect to sell the property in the first half of the year or in the second?

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Rolf Frei, SFS Group AG – CFO, Member of Executive Board & CEO of SFS Services AG [29]

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Third year.

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Jens Breu, SFS Group AG – Chairman of the Executive Board & CEO [30]

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So first on the Automotive project, we are — had preproduction runs, small-volume runs with the electrical drive system for the last 3 years and now, we see the major ramp-up in 2019 and 2020. And we expect now first time earning a margin. Before, costs were higher than the sales we get because of the dynamic of such a ramp-up. Not unusual in the first 1, 2, sometimes 3 years, depending on the program, the first — we spent money before you make money on that side. So 2019, we should see an increase in profitability, which then should be visible overall within division Automotive as long as the market, which is soft now, then later on pick up in the year, we should certainly see overall an improvement in 2019 in Automotive. Besides that, certainly, our strategy has always been what has been invented once should be and shall be multiplied. And over here, we expect not within the next 2 years, but probably within the range of 2020 and beyond to have an opportunity to maybe add more volumes to the same. Below, we have existing electrical drive systems for the parking brake applications. Those, we have informed about the last 2, 3 years. Substantially, some of those lines are still in ramp-up. And so we should also see there improvements of margins due to process control being better year-by-year and such. On the Electronics side, with this large power adapter project, same. Up to now, we have only seen expenses. More or less, more expenses than sales perceived. And also here, we should see starting in April, we should see now a positive effect coming in our direction. The volumes will increase, engineering issues have been solved, agreements have been made on high cosmetic aspect, so we should also see there an improvement of profitability. So overall, 2019 has, on that side of the business, quite a few upside. That is all.

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Michal Lichvar, Bank Vontobel AG, Research Division – Analyst [31]

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Can I just maybe make a follow-up question to that? It just seems that it’s kind of a typical part of your business that you win a project, you ramp up for 2, 3 years, you don’t see any sales, then it starts to be profitable. So aren’t there — isn’t there going to be another project in 2020, where you have this basically the similar effect, which will have again a margin dilutive impact? So just seems it’s a typical kind of a cycle that you’re seeing or was it kind of extraordinary what you’ve seen in last 2 years?

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Jens Breu, SFS Group AG – Chairman of the Executive Board & CEO [32]

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Exactly. It’s been very extraordinary, those 2 product lines. Because of the scope, the size of the business opportunity we’ve had, both together have an opportunity of midrange to upper range double-digit million in sales over the next 2 years. And these are the largest projects we have seen — or such large projects we have not seen in the group in the previous history. We have seen smaller, which are the more easier to digest. Also the uniqueness of the processes and design here challenged us quite a bit, and that’s why we had quite — a lot of upfront engineering expenses to cover. So was an unusual case, it’s not happening many times that you have such opportunities for complete new product line, and that’s why we entered them. And we see also the opportunity to multiply later on. So the capability for the power adapter, for instance, the basic capabilities we put now in place in Nantong is the same capability we will use for Automotive for the 1 Automotive order, I’ve mentioned, we have won for China. So the next and following projects should be able and capable of falling back of existing equipment and with that, have a much flatter cost development early life.

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Rolf Frei, SFS Group AG – CFO, Member of Executive Board & CEO of SFS Services AG [33]

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Okay, the one-off cost for the relocation to Nantong, it has, I would say, basically 3 different components. The first one was mentioned, the legal requirement to pay a certain amount to each person whether it stays or moves or leaves the company. We are these days in the process of informing the people of the location — of the relocation. So I would assume that probably that portion will come due soon, so probably in the first half. That is my assumption. And the second portion or component is that we expect that 70% of the employees, roughly 70% of 1,400 will take the opportunity and the chance and will go with us to Nantong. And for those employees, we will offer a retention amount, an incentive to stay with us, bring the knowledge and know-how over. We believe the 70% is the fair estimation, but it’s an estimation. But that portion would be paid out after first year and after second year. So we’d incentivize them to stay, get the money, but stay for 2 years at least. So we will make a provision for that one, but the cash out probably will be then in, I would guess, 2020, early 2020, early 2021. But we will make a provision for what we promised them. And the third component, there is various costs, which we have in a way doubled. For example, we have the new Nantong factory, was built for — all together for the whole investment cycle, just above USD 40 million, we start to amortize and depreciate, right? So we have the depreciation cost. At the same time, there is still the rental fees in the 4 locations where we are currently. So as soon as everything is moved, and if moved to these locations with currently rented premises, those costs will fall away. And probably, even here and there, we have to bring those locations back to the original status, right? There is also potentially some cost considered for them together. That are the 3 main components. So first portion, I would guess, first come in the first half and the other two, we will see in, probably partly first half, certainly the remainder in the second half. It can be more precise midyear. Yes?

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Michal Lichvar, Bank Vontobel AG, Research Division – Analyst [34]

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(inaudible)?

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Rolf Frei, SFS Group AG – CFO, Member of Executive Board & CEO of SFS Services AG [35]

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Exactly. There is some plans to focus certain businesses, which would mean that the currently used assets would not be used anymore and could be sold, we are in negotiation with potential buyers and depend how that moves forward, it could be first half, it could just after and falling to the second half. We can’t say more there currently. But there is valid reasons to believe that, that will happen certainly this year.

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Alessandro Foletti, Octavian AG, Research Division – Financial Analyst [36]

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Alessandro Foletti, Octavian. Can I ask 2 fast ones for Rolf and one fast and long one for Jens? The 2 fast ones for Rolf are, you mentioned CapEx 6% to 7% in 2019. Do you have already a view on what may be the level afterwards?

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Rolf Frei, SFS Group AG – CFO, Member of Executive Board & CEO of SFS Services AG [37]

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We believe it probably — most probably in the midterm in this range, 6% to 7%.

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Alessandro Foletti, Octavian AG, Research Division – Financial Analyst [38]

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All right.

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Rolf Frei, SFS Group AG – CFO, Member of Executive Board & CEO of SFS Services AG [39]

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So normalized — back to normalized level, say.

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Alessandro Foletti, Octavian AG, Research Division – Financial Analyst [40]

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Okay. So from this perspective, from today’s perspective?

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Rolf Frei, SFS Group AG – CFO, Member of Executive Board & CEO of SFS Services AG [41]

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Yes.

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Alessandro Foletti, Octavian AG, Research Division – Financial Analyst [42]

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All right. And then there was in the past, I think a target for the cash and cash cycle that was below the 111 where we are now. The cash to cash cycle, I remember we have discussed a few times. I think it was the ideal time, but afterwards, there was a target for that number, 111, a bit below that. So trending towards, if I’m not mistaking, 105, maybe a little lower — what can you comment about this because it has been very stable at 111?

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Rolf Frei, SFS Group AG – CFO, Member of Executive Board & CEO of SFS Services AG [43]

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Very stable, and I would rather save your problem. At normal level, if you say 30% to 31% on sales, which then turned into the 110, probably a little bit more 112, 15 days. You have seen on the slide, I showed also the outstanding [sales] and the accounts receivable somewhere in the 67, 68 days. It’s 1 component, of course. Then we have permanent pressure from new customers to extend that one, so we have to fight against it, and hopefully, it will be successful there. And then the other big portion comes from the inventory. And the reminder is accounts payable where we are the ones, which pay quite fast to take advantage of cash discount. And I would say 110 to 112, 115, that’s probably a level we have to see — foresee also for the future.

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Alessandro Foletti, Octavian AG, Research Division – Financial Analyst [44]

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Okay. Then the first one, the fast one for you, Jens. You mentioned CHF 7 million more or less that it cost you to ramp up this project last year and the year before more or less. How do you measure that, I mean, is this number really a precise one that you can calculate easily?

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Jens Breu, SFS Group AG – Chairman of the Executive Board & CEO [45]

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It’s an estimation. It’s an estimation. We can certainly — I said in Engineered Components, in 2017, was 6% to 8% and in 2018, we estimated around 7.5%. There are some certainly known amounts, which can easily keep track of and the rest is usually efforts in engineering and production to produce sample, to produce initial serial production that it’s probably a little bit harder to segregate what is normal production and what is now accountable for this project because sometimes they run right next to each other. So it’s an estimation.

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Rolf Frei, SFS Group AG – CFO, Member of Executive Board & CEO of SFS Services AG [46]

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I think 2 portions there. One is staff. And remember when I talked to the division, there is in the project phase, where you do not gain any sales, 200 persons working on the project. So they can identify by the number the persons working for that project. And the second component is the tool, where they build up their own capacity, but also have to buy in certain tools within the group so you have their builds and again, people to measure it. But it’s — at the end of the day, it’s an assumption, a measurement, yes.

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Alessandro Foletti, Octavian AG, Research Division – Financial Analyst [47]

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All right. And then my last one when — I’m going to Alaska, a few weeks ago spoke about the U.S. Europe trade wars, she looked to me pretty worried if the input duties to — for American — to German cars go up. Are you worried as well? Should you be? And what can you do if this Armageddon-like scenarios with 50% loss of volume input, did that really would verify?

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Jens Breu, SFS Group AG – Chairman of the Executive Board & CEO [48]

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I think the first question is probably a day filling question, what will happen and what will not happen. I believe we’ll next year see selection process starting. My personal view is Mr. Trump will need good news, and he will need to project that he has brought an improvement to the country. So I personally, I don’t think that he will set for another conflict. He will rather make it appear towards the outside. I made a better deal, that’s what it is and let’s go back to normal. That’s probably a little bit assumption. We talked to also plan for the year. After not achieving success with North Korea, there needs to be a victory win. And the European Union has made clear that they would also impose — implement strict tariffs. So I personally don’t think it goes that way. We’ll see. We’ll find out many surprises are possible. Overall, when there are tariffs in place, we have to keep in mind what are the underlying requirements in the Automotive sector. So short term, there will not be any shifts in value-added because the component, the product are specified in. The customer cannot easily change due to regulations, cannot change suppliers, cannot change sources. So I would not expect that market share will be lost and gained due to us or other competitors, for instance. It will probably more a shift of what kind of cars will be bought by the local population, what cars will be bought in the U.S. And then probably, more cars will be bought or will be more affordable, which has more local or higher local content inbuilt. It’s very challenging. In the U.S., a lot of cars have European content no matter whether these are American brands or European brands or Japanese brands, for instance. So I would rather see that the tariffs will impact the profitability short term because someone will need to pay. The customer will probably still buy a car, maybe few cars will be bought and then the products will still need to be shipped to the U.S. to be assembled or the components will need to be shipped to the U.S. to be assembled and that cost short term is usually pushed to the supplier and then later on, in the negotiations, pushed back to the customer. That’s the most likely event for us that we’ll probably see a softening of demand — general demand, but we’ll also probably see impact on importing components and importing raw material to the U.S. Besides that, short term, I would not expect a major shift in where value added is happening overall. I think most companies would just say, let’s wait for the election because after the election, change may come soon around. It’s probably less costly than changing, shutting down or moving plant.

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Unidentified Analyst, [49]

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Four very quick questions, please. The first one is when we have followed the smartphones, have you already used the prototypes to tear down and to see what is the content of screws inside and what is your conclusion? Number two, please, what is the revenue line incrementally on the new product launches you will see in 2019? Are we speaking about CHF 10 million, CHF 20 million, CHF 30 million, so independent on macro? And third question, what is your capacity churn? When you, for example, have now the ramp-up of capacity for the power chargers. If this is, for example, lost — is this capacity then shutdown or can you use it for any other products? So what is your capacity churn in general? And last question, have you already got from your customers indications that Q2 should improve versus Q1 on average?

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Jens Breu, SFS Group AG – Chairman of the Executive Board & CEO [50]

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I’ll take question one, three and four. Number two, we have to ask back what exactly the question is so we can precisely answer it. First off, yes, we have — certainly, we are always buying customer products, tear them apart and take a look what kind of components are in there. This is the full range as expected. We’ll take a look at the design. We can also identify which ones are origin SFS, which ones are origin competitors, for instance. So the teardowns have not brought any surprises to us of these new programs. We’ve seen the content we expected to see in those devices and overall, this has been stable. So there’s — there are not — no major design changes visible. There’s no change in practice that we would then see an increase or decrease in demand of any kind of component. So fairly, fairly stable over the last 4, 5 years, and we keep track of the phone fairly stable. Then, ramp-up capacity is usually installed short term. That means we have not yet released all of the capacity to be built, which we need this year. This is usually done quarter-by-quarter. Most of the machines we will need to buy are available short term in the market. So we have now built up the capacity for the first and for the second quarter. And for the third and fourth quarter, we are still waiting and seeing the further development and then release the POs to buy equipments and machines. Q2, on the Electronics side, we’ll definitely improve. As I mentioned, we have a rather steep ramp-up ahead of us. In April, we’ll see — especially for the power adapter program, we’ll see the demand increasing. We’ll see it peaking probably towards June and July and then going into the third quarter, so it’s a buildup. It’s a buildup of inventory. It’s a buildup ahead of time because of a, a new design and b, because of 2 phones will be equipped with this new power adapter and, therefore, quantities will need to be built ahead of time. The phone usually is then coming in the third quarter later on. This on question number one, three and four. I hope I was able to answer them. Number two, please, can you formulate the question again?

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Unidentified Analyst, [51]

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Yes. On the new product launches, for power chargers and for the braking systems in Automotive, what is the incremental revenues coming through in 2019 year?

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Jens Breu, SFS Group AG – Chairman of the Executive Board & CEO [52]

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The incremental revenue coming ahead of — so as I stated earlier, we expect that all the programs together are probably mid or higher double-digit million range in sales. And for this year, we expect half. So probably midrange — below midrange.

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Unidentified Analyst, [53]

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Okay. And the other, you can take offline afterwards.

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Unidentified Company Representative, [54]

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Okay, thank you. [Tina]?

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Unidentified Analyst, [55]

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Yes, this power adapter is very interesting, and we never saw a picture of it, and how does it look like, what parts do you produce there, you have an example here?

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Jens Breu, SFS Group AG – Chairman of the Executive Board & CEO [56]

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Yes, yes.

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Unidentified Analyst, [57]

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The other question, very minor question, your tax rate was low. For me, I expected a higher tax rate. What do you expect for the tax rate in the running — this year?

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Jens Breu, SFS Group AG – Chairman of the Executive Board & CEO [58]

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So we cannot talk specifically. We can talk in general. So we can say, in general, we have a program and it’s a power adapter, and we have precision components in there, which maybe goes into the connection. So it’s the connecting side of the power adapter. And so these are mechanical components here, which then differ per country. So there are many different versions. There are probably around 8 different versions globally, and we participate in the 3 high-volume versions of this power adapter with precision components, which go to the plug inside of the power adapter. That’s what we do. What is the difference? What is the uniqueness, you may ask? The uniqueness is it’s a requirement. It’s a static requirement, which are given, but also then the requirement in the cost level to achieve that. And due to that, cold forming is very efficient. It’s a powerful technology. It replaces machining CNC technology. So rather than having 300 to 400 CNC machines, it’s 2 handfuls of cold forming machines, which produce the same amount of component. So it’s a total cost-down scenario for the customer, but this goes into the power adapter. This is very unique. It’s a unique design. It’s very special payload to this specific customer.

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Unidentified Analyst, [59]

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And you mentioned the same or similar machines and technology you will use in China in Nantong for the Automotive industry, what parts are there?

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Jens Breu, SFS Group AG – Chairman of the Executive Board & CEO [60]

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There also that cannot be very specific, but it goes into ABS and ESP applications. And it’s the same machine, same equipment or takes — it takes tool manufacturing capabilities, it takes cold forming capabilities and this is — that’s a large investment. And there we can use the same machine parts. So the knowledge, the know-how transfer of the last 2 years for this power adapter project, the cost we have just talked about, the onetime cost, can now be utilized also for an Automotive project. That’s the logic behind it. The standardized machine part, which can produce components for both end markets. And with that, we’ve reduced risk in the midterm and increased utilization.

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Rolf Frei, SFS Group AG – CFO, Member of Executive Board & CEO of SFS Services AG [61]

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The question on the tax rate, it was right. 17.5% quite low, especially compared to previous years, where it was around 20%. And I believe the 20% is what you also can expect for your calculation, what to come in the coming years. There were some special effects in 2019, partly use carry loss forwards, not so much with one, but also a shift in the mix of where the profit was achieved. And there, it also had to do with these intangibles, which were amortized last time. Last year, CHF 14 million, the cost was no longer there. It was now full benefit in Asia with the tax rate. Singapore is roughly 13% with tax rate, which is far below what the average is, right? So 2 main effects. That’s more kind of special effects, I would say, that you are in a good side if you calculate this 20% going forward.

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Jens Breu, SFS Group AG – Chairman of the Executive Board & CEO [62]

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Any other questions?

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Marta Kinga Bruska, Joh. Berenberg, Gossler & Co. KG, Research Division – Analyst [63]

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Just a quick one follow-up from Marta Bruska, again. With regard to this Automotive project in China, also synergies with Electronics, do you have already the project or you hope to acquire one?

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Jens Breu, SFS Group AG – Chairman of the Executive Board & CEO [64]

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We already have the project. There’s a letter of intent in place.

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Marta Kinga Bruska, Joh. Berenberg, Gossler & Co. KG, Research Division – Analyst [65]

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Okay. And with regard to your Distribution & Logistics in Switzerland, you had a good growth of 5%, but your competitor posted some 8% growth figure. Are you losing market share here or what’s the reason?

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Jens Breu, SFS Group AG – Chairman of the Executive Board & CEO [66]

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I think that, first off, we are not knowingly losing market share. So from our perspective, we have seen 1 customer, it’s Bombardier. Bombardier, we had lost last year, for instance, but against a North American competitor who had already strong position within the Bombardier network globally. And as I said, Bombardier in Switzerland is phasing out its production anyhow. So market share lost, we don’t see in a substantial way in 2018. We have 8 new customers from direct, from indirect competitors. We were able to increase also sales with the existing customers. And I think the 5.1% is a result of the project wins we had also over the last 2 years and the good economic environment overall. I think when we talk about competitors, we have some direct competitors in Switzerland, but there we also have to see that we only overlap roughly with around 1/3 of our business with our direct competitor who is also listed on stock exchange. The growth — the main growth we have seen in the tooling business as mentioned, within the Construction business as mentioned, and there, we do not have a direct overlap with the 1 competitor as mentioned. So it’s mainly within the fastening business, where we have an overlap. And in the fastening business, we have seen plus/minus a stable development because as I mentioned, customer Bombardier will serve within the fastening business unit and the business had to be replaced in 2018, which we were able to do. So overall, 5.1%, for our product portfolio, a good achievement, solid achievement, a solid year, and once again, we do not see a head-on competitor in Switzerland, who is doing exactly the same as we do in a material way.

There are no more questions or there seems to be no more questions, so we would like to thank you for your interest, for your questions and all the best for the day and for the weekend. Thank you for your attention.

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Operator [67]

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Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.