Accelleron Industries AG

Hello, everyone, and a warm welcome to the Accelleron Full Year Results 2024 Investor and Analyst Conference. We are happy to have you as participants here in the room in Zurich as well as remotely via webcast.

For the in-house participants, please be aware that we don't plan any fire drills today. So in case of an emergency, stay calm, follow those green signs, go down the stairs and gather in front of the hotel entrance.

Then please also take note of the safe harbor statement. The presentation today contains forward-looking information that naturally comes with uncertainties.

Furthermore, figures in the presentation are in U.S. dollars and were prepared according to the U.S.

GAAP accounting standard. After the presentation by Daniel and Adrian, there will be a Q&A session where you have the possibility to ask questions.

If you're in the room, it's very simple, just raise your hand. If you're joining remotely, please use the chat tool.

I will now hand over to our CEO, Daniel Bischofberger.

Thank you, Michael.

Welcome.

So also from my side, welcome. Happy to have you here in the room.

And besides Michael, you already know -- as usual, I have also my CFO with me, because he knows the financials better than I know, and that's also the task of him. So happy to have you here, and let's now go through the agenda.

So I will start with the key highlights of '24, and then Adrian will then take over for the financial review of the full year. And I will conclude with a deep dive into the Marine and Energy markets and the outlook for '25, including our guidance.

Besides the financials, the decarbonization of the Marine industry will be a focus of today. And of course, we will have the usual Q&A session and at the end of our presentation.

As already mentioned by Michael, for those here in the room, you are most welcome to join us afterwards for a networking lunch outside this room. So I would say, it's now time to start.

2024 was a landmark year for Accelleron as we celebrated the 100-year anniversary of the turbocharger. It was also the year in which we concluded all buildup activities related to our operation as an independent and listed company.

And what a successful year it was. We broke through the USD 1 billion revenue mark with key figures improving across the board.

Revenues reached in '24 USD 1.023 billion, increasing by almost 12% year-on-year. The operational EBITDA was up by 17% to USD 262 million.

The operational EBITDA margin increased by 1.2 percentage points to 25.6%. Net income grew by 63% to USD 179 million and free cash flow conversion stood at 99%.

Looking at the big picture, we have established in '24 the foundation for sustainable growth and the baseline for future profitability. When you look at revenues, operational EBITDA and net income from '22 to '24, you can see that the figures went up year-after-year.

The only exception was a dip in net income in '23, a result of higher non-operational costs in '23 versus '22. From USD 110 million in '23, net income went up to USD 179 million in '24.

How can this be explained? Well, as I mentioned, we concluded all our buildup activities in '24, incurring non-operational costs of under USD 16 million, down from $77 million in '23.

The higher net income enables a dividend increase of 47%. The Board of Directors will propose a dividend payment of CHF 1.25 per share to the Annual General Meeting this May 6.

Let us now look at some other highlights in '24. Last year, we celebrated our legacy and invested in our future.

Besides the 100th anniversary of the world's first industrial turbocharger production, we could also be proud of our first bond issuance with proceeds of CHF 180 million. It was several times oversubscribed.

The highly successful bond issuance reflected the capital markets' confidence in us. And then after OMT in '23, we made another two bolt-on acquisitions by acquiring Italy's OMC2 and Canada's True North Marine in short TNM in '24.

We expanded our capacity in fuel injection and capabilities in the marine digital solutions. We took over all 70 employees from OMC2 and all 50 employees from TNM.

Let's move on to the next slide. We also grew market shares and created new revenues.

The ship you see on the far left was the first cruise ship in the world that could be operated on purely liquified natural gas in short LNG. The cruise ship was equipped with our turbochargers in 2018.

Fast forward 6 years now, and our market share in all LNG fueled low-speed engines built in 2040, '24 was roughly 2/3 and around four out of five LNG-fueled medium-speed engines built in '24 were equipped with Accelleron turbochargers. Those are impressive market share figures.

And in fact, we even have a market share of over 90% with LNG carriers. In a few minutes, I will also explain to you why LNG is becoming the fuel of choice for the transition period in the maritime decarbonization.

Another highlight last year was also the signing of 60 full-cover service agreements. This achievement demonstrates our continued evolution in service from classic transactional service business to a model that we call Availability-as-a-Service.

In general, there's a clear trend to keep ships running as reliably and efficiently as possible. Shipowners invest more in the servicing of their fleet.

They invest more in retrofits and upgrades to improve efficiency and reduce emissions. By selling Engine Part-Load of Optimization, here on the slide, in short EPLO, and Flexible integrated Turbocharging System for 2-Stroke Engine, in short FiTS2, we already showed that in the half year of last year, we could further grow our service business.

These solutions provide tangible fuel savings and emission reductions for marine engines operating at varying loads and speeds. Finally, what you see on the far right of the slide is a TPX high-speed turbocharger.

We sold 2,600 units of this model in '24, double the amount of '23. Where did the demand come from?

From data centers, of course. I think, you will all agree that today, more than ever, having a resilient and global value chain is crucial.

We always have acted with foresight when it comes to this topic, meaning that already today, we are set up in key markets to meet growing demand and be close to our customers and suppliers. The four examples on this slide demonstrate this.

The strategic contract manufacturing agreement that we signed with Hyundai in South Korea in '24 gives us greater operational flexibility and reduces trade complexity. Thanks to the investments in manufacturing capacity and people in Italy, we achieved a close to 20% increase in OMT output in '24.

Fuel injection plays a key role in decarbonizing the Marine industry, and we are seeing high demand for advanced dual fuel systems. In the U.S., we are continuously expanding our capacity for the remanufacturing of high-speed turbochargers.

Last year, we were halfway through a 5-year USD 5 million investment program. This is to meet the growing demand in gas compression and decentralized gas-fueled power generation in the U.S.

The number of free work units were up by 10% in '24 compared to '23. In China, last year, we also invested in USD 1 million in a new machine to enhance compressor wheel production.

The resulting increased capacity and flexibility supports our business expansion in the various strategic countries. Same as in the U.S.

or South Korea, being close to customers and anticipating demand is a key consideration for local presence and investment. With those remarks, I conclude my first part.

And I will now hand over to Adrian for financial review. Adrian, the stage is yours.

Thank you, Daniel. Let us now take a closer look at our '24 financials, starting with the group performance.

We saw a positive market momentum throughout the entire year, especially the strong demand for merchant marine products and the extraordinary demand for merchant marine services supported us in breaking through the USD 1 billion revenue mark. What an accomplishment.

In the Energy industry, high demand for emergency power solutions, for data centers compensated for a temporary slowdown in the gas compression market. Overall, our revenues grew by 11.8% to USD 1.023 billion for the full year 2024.

In constant currency, we grew by 12.9%, exceeding the latest guidance. Overall growth was driven organically as well as inorganically.

Consequently, on an organic basis, we recorded a growth of 7.3%. Moving to the operational EBITDA, which was up by USD 38.8 million or 17.4% to USD 261.9 million.

The operational EBITDA margin increased by 120 basis points to 25.6%, which is slightly higher than our latest guidance. We delivered this attractive margin, again, on the back of a healthy operating leverage and effective cost management.

Finally, the ongoing moderate cost inflation, namely for labor was largely offset by price increases and continued productivity initiatives. The next slide depicts the performance of the Medium & Low Speed segment.

We saw a strong demand in the merchant marine business across the entire life cycle. Strong shipping demand paired with geopolitical tensions led to high ship utilization.

Hence, we further grew our service business, supplemented by the selling of retrofit solutions. We also capitalized on opportunities in new fuel applications.

In the Medium Speed power plant market, new build activities remained subdued in 2024, while services performed well. The segment's revenues increased by USD 108.6 million or 16.3% to USD 773.5 million.

On an organic basis, we grew by 10.1%. The incremental revenue contribution by OMT, OMC2 and TNM amounted to USD 52.9 million in 2024.

The operational EBITDA margin increased by 110 basis points, which was again mainly driven by operating leverage and effective cost management along the value chain. Lastly, our supply chain, respectively, throughput fully normalized in 2024.

Let us have now a look at the High Speed segment. While the turbocharger demand in the U.S.

gas compression market temporarily slowed as customers reduced their inventories, demand for turbocharged emergency generators continued to grow in '24. Our High Speed turbochargers were highly sought after, especially among customers looking to protect data centers and other critical infrastructure with emergency power solutions.

On the one hand, revenues in the High Speed segment decreased by USD 1 million or 0.4% to USD 249 million compared to the previous year. On the other hand, the operational EBITDA margin increased substantially by 150 basis points.

The operational EBITDA increase of USD 3.5 million resulted from effective cost management and a beneficial product mix. And it more than compensated the lower indexed-based pricing.

Now on the next slide, let us go through the bridge from operational EBITDA to net income to highlight a few specific effects in 2024. Starting on the left, operational EBITDA amounted to USD 262 million.

Next to it, you can see the one-off and non-operational costs, which amounted to USD 19 million compared to USD 80 million in 2023. About USD 16 million were linked to the residual buildup activities where we were well within our guidance of USD 20 million.

As Daniel already pointed out, these costs came down from USD 77 million in 2023. Moving on, we had acquisition-related amortization costs of USD 5.4 million.

As a consequence, income from operational -- from operations amounted to USD 238 million. Going to the next item, the interest and finance expense.

This mainly comprises of interest payments, pension income and fair value changes of FX instruments used to hedge non-operational foreign exchange risks. In total, it amounts up to USD 12.1 million.

One further to the right, we can see the income tax expense, which amounted to USD 46 million. The effective tax rate for 2024 stood at 20.6%, which was higher than the year before due to a change in profit mix, mainly resulting from the newly acquired entities.

And with all of that, you get to a net income of USD 179 million, 63.1% higher than in 2023. Next, let's look at the free cash flow a bit more in detail.

A very strong cash conversion in the second half of 2024 of more than 160% again propelled the full year conversion to a very healthy 99%. Firstly, the strong cash collection kept working capital stable despite significant volume growth.

Secondly, the aforementioned normalized throughput resulted in lower purchasing volumes, respectively, a decrease of payables. And thirdly, inventories were slightly up versus prior year, driven by the shift of transportation mode from air to sea for a portion of our new business, resulting in lower costs and emissions.

The slightly increased capital expenditure reflected our continued investment in the Swiss, Italian and Chinese factories to optimize and expand our production capacities. So in spite of Accelleron's strong growth, free cash flow generation increased by USD 69 million to USD 178 million in 2024.

Let me conclude the financial review by providing some color on the capital structure and our dividend on the next slide. Due to the high cash generation, we managed to close the year with a leverage of around 0.7x operational EBITDA, despite M&A-related investments for two bolt-on acquisitions of USD 56 million.

In light of the strong financial results and healthy balance sheet, the Board of Directors will propose a dividend payment of 1.25 CHF per share to the Annual General Meeting on May 6, 2025. As already mentioned by Daniel, this corresponds to a dividend increase of 47%.

The resulting payout ratio of 76% of reported net income after minority interest underscores our commitment to return excess cash to our shareholders. With the proposed dividend and the executed M&A, we will return, respectively, have invested roughly what we earned in 2024.

This is fully aligned with our capital framework. Thank you.

Let me now hand back to Daniel.

Thank you, Adrian, for going a bit more into the details of the, I would say, strong financials. So now let's take a look forward.

And let's see what -- how we see the market trends, the opportunities and the outlook for 2025. First, I would like to give you a high-level overview of the decarbonization path in the maritime industry.

You all read the news. So you might be asking, where do we stand on that topic?

Let me reassure you that the maritime industry is sticking to its path to decarbonization, driven by regulation of the International Maritime Organization, IMO and the EU. The big question is, will the new fuels arrive on time?

Nobody really knows. What we do know is that transitional fuels, new fuels, onboard carbon capture and efficiency measures are must to reach net zero.

The challenge is that it's unclear when exactly new fuels, especially e-fuels will be available at scale. If they arrive at scale between '35 and '40, net zero by 2050 might still be possible.

If they arrive later, reaching net zero will be pushed back. Since e-fuel availability is uncertain, LNG is becoming the temporary fuel of choice.

LNG in combination with efficiency measures, at least allow for a limited reduction of CO2 emissions until new fuels arrive. You might also have picked up the term stronger-for-longer in the news.

The reality is that we have a situation where LNG will be here stronger-for-longer than previously thought. On the next slide, I would like to give you some insights on why LNG is becoming the temporary fuel of choice.

Why today are LNG dual fuel engines clearly favored over methanol or ammonia dual fuel engines? It has to do with fuel costs, fuel availability at scale and the fuel potentials for decarbonization in the short and long term.

As you can see, LNG doesn't cost much, and it's widely available already today. It also supports further decarbonization and ensures compliance at least until 2035.

In the long term, however, LNG requires technically and commercially viable onboard carbon capture and storage. An alternative for carbon capture and storages on ships would be to retrofit the ships for new fuels, such as e-methanol or e-ammonia.

Now when you look at the new fuels and the different types of methanol and ammonia, you see that the costs are high to very high. Only limited bio-methanol is currently available and bio-methanol is hardly scalable.

And to make things even more challenging, at the same time, various industries, including aviation, are fighting for the same feedstock for bio-methanol production. So sufficient availability of either e-methanol or e-ammonia is unlikely in the short term and most likely in medium term.

And in the long term, the potential of e-methanol and e-ammonia depends on the speed of the required massive infrastructure ramp-up, including hydrogen ecosystem. Remember, e-fuels are produced from green hydrogen.

And green hydrogen is produced through the electrolysis of water using zero carbon electricity generated from wind, solar, hydro or nuclear. You can see for e-fuels to become available at scale, a lot of puzzle pieces must fall in place first.

In a nutshell, new fuels are costly and they require massive infrastructure investments. For these investments to happen, we need international cooperation, regulation, incentives, innovation and coordination across all hard-to-abate industries.

For shipowners who build assets today that will be around for three decades or more, it means that there is no silver bullet when it comes to fuel selection to transition to net zero. So unfortunately, a silver bullet that works today, tomorrow and after tomorrow does not exist, which makes the decision to be taken by the shipowners quite challenging and costly.

However, dual fuel ship engines can serve as a bridge through the transition, which brings me to the next slide. How can the marine industry decarbonize and how can Accelleron support?

I will start on the right. As just mentioned, dual fuel engine can serve as a bridge through the transition.

We offer future-ready turbochargers and fuel injection systems. Improving the technical efficiency of a ship is another way to decarbonize.

Further, we offer retrofits like turbochargers, EPLO, as well as FiTS2 and service agreements to achieve that. And finally, there's operational efficiency which includes optimizing for ship speeds and routing.

And for this, we offer digital solution. Of course, our recent acquisitions play to operational efficiency and new fuels.

The acquisitions are strategically aligned with our goals of enhancing efficiency and supporting the transition to new, more sustainable fuels. Next, let us look to at the market trends and opportunities we see in the marine industry.

They are unsurprisingly close linked to decarbonization. Let's start with ship new-build activity.

We clearly see that decarbonization drives fleet renewal. In merchant marine, the order books of shipyards are full for the coming years.

And the share of new builds for dual fuel capable vessel is high, and the backlog will not disappear quickly. Because shipyard capacity is only expected to increase moderately, and this mainly in China.

We see an opportunity to further increase our market share in dual fuel capable vessels. Decarbonization also increases market interest in retrofits and upgrades.

Overall service activity is healthy, and we expect a continuation of this positive dynamic for services in the Marine market. Having said that, shipping scrapping could increase if Red Sea traffic normalizes.

Overall, we see our retrofit solutions for decarbonization and full cover service agreements as the main growth driver for us. Let us now switch the industry and look at the market trends and opportunities in the Energy market.

There's a clear trend towards more flexibility and resilience. On the one hand, there are opportunities in decentralized power generation.

The underlying market trends are increasing electricity demand and electricity grids at the limit. We see this predominantly in countries with weak grid infrastructure.

Opportunities, therefore, lie in fixed on-site power generation or mobile rental power. Turbocharged gas fuel combustion engines are one possible technical solution.

On the other hand, there are opportunities in backup power, specifically for growing number of data centers as critical infrastructure for AI and streaming. The more data centers you have, the more building security you need in case of power failures.

High Speed diesel-fueled combustion engines with turbochargers can offer that security and provide emergency power if and when needed. Demand from data centers will likely stay strong.

And of course, the data centers themselves will need more power, too, which could again increase the demand for decentralized power generation, including power behind the meter. An analysis by the U.S.

Department of Energy in December '24 found that the data center energy demand in the U.S. doubled from '17 to 2023, ultimately accounting for more than 4% of the nation's electricity consumption.

This number, according to the analysis, could rise to 7% to 12% of the energy consumed in the U.S. But let us now focus on the immediate future.

What is the outlook for '25 and our business? As we look ahead to '25, we are optimistic about the positive market momentum driven by growing demand in the Marine and Energy industry.

We are ideally set up to strengthen our market position in new fuel application, turbocharger services, fuel injection systems and reliable energy supply. We will also leverage our unique service network and customer relationship to offer additional digital services.

As you can see, all the arrows for different Marine and Energy market segments are either pointing up or sidewards. Let's look at the top row, first, Marine, which makes up more than 50% of our revenues.

I already mentioned the full order books of shipyards in the merchant marine. They are already fully booked until '29.

Some are even fully booked until 2030, and the order demand is still high. And as you can see, all the arrows in Marine are pointing up.

There's only one exception, cruise ship. Here, significant growth may only occur in the next 1 to 2 years.

The tanker market is driven by a rising global energy trade by sea instead of pipeline. Regarding the bottom row, Energy, which is more than 40% of our revenues, I already mentioned the expected strong demand for backup power related to data centers.

The gas compression market will remain volatile, but greater LNG carrier capacity, which are coming now online, they almost month by once could drive demand in export business for U.S. gas.

We continue to see good momentum for High Speed power generation in gas application, too. In the power plant market, we expect new-build activity for Medium Speed power generation to remain subdued.

So in summary, our outlook for '25 is positive. Where then do we set priorities for '25?

To begin with, we will continue to invest substantially in R&D, particularly in solution for new fuel applications. Our unparalleled investment in research and development ensures that we remain at the forefront of our -- of the industry's advancements.

The OMC2 production capacity will support OMT in addressing the significant increasing demand for advanced fuel injection system, while TNM digital solution will complement Accelleron's Tekomar digital solution. The OMC2 and TNM acquisition have demonstrated our ability to identify, successfully integrate and develop companies in adjacent markets.

Importantly, the acquisition have shifted the market perception of Accelleron as a technology leader beyond turbocharging, providing a long-term growth perspective linked to decarbonization. But we're also aware that decarbonization is a demanding, complex and costly effort that cannot be managed by individual industries or even one player alone.

But we are reducing our Scope 1 and 2 CO2 emission, Scope 3 emissions from transport and supply goods are harder to abate. They account for 90% of our CO2 footprint.

The quick question is, how companies can achieve sustainability goals, while maintaining international competitiveness? Consequently, we're also testing to the extent to which region, segments, customers are willing to pay for products and services with a lower CO2 footprint.

We'll be setting sustainability goals aligned with Science Based Targets initiative, that are ambitious, yet achievable, market-appropriate and commercially viable. The big topic for '25 is striking a balance between ESG criteria, the geopolitical climate and trade complexity.

These factors will determine how we can further strengthen our supply chains and footprints. This brings me to my final slide.

So what is our guidance for '25 million? Of course, the geopolitical uncertainties and their potential impact on our markets and business make any forecast even more challenging and difficult.

But with buildup costs a thing of the past, we are confident that we have established a solid baseline for growth and future profitability. We forecast constant currency growth -- revenue growth of 4% to 6% in '25 and an operational EBITA margin of 25% to 26%.

The capital framework remains unchanged. We reaffirm our commitment to delivering shareholder value through attractive dividends and selective and disciplined M&A activities that align with our value creation strategy.

If no M&A opportunities materialize, the return of excess cash via share buybacks remains an option. So with that, I close my presentation.

Thank you for your kind attention. And now we are happy to take your questions, both in the room via audio and virtually via chat.

So Michael, I think that's your turn now.

Yes. Thank you, Daniel, and welcome to the Q&A session.

Please note that if we receive similar questions, especially by the Q&A tool in writing, we will be -- we will -- we may combine them into one. If you're asking a question, especially here in the room, please kindly make sure that you state your name and the organization you're affiliated with also here.

So I think we would start with the questions from the room.

Janik Rüegg from ZKB. First question about the fuel injection business.

Now with the acquisition of OMC2, you have increased your capacity significantly. So just to give us a rough numbers.

With the current capacity, what do you think -- what kind of revenue you can make in that business within the next 2, 3 years? That's the first question.

And the second question is towards those alternative fuels because in the end, you still make 75% of your revenue comes from services. And my question is that, in the medium and long term, do those alternative fuels need the same service intensity like, for example, ship diesel and also so ammonia, methanol and LNG?

Okay. First, fuel injection, valid point.

So I mean, we have now an investment plan in execution. We expect to invest around up to $50 million to increase the capacity of OMT and OMC2 to $150 million.

Just that, if you remember, OMT at the time when we acquired was around $50 million. So we want to triple that.

Let's say, time frame, not everything in our hand, we need permits and so on, but we expect to reach that at around 2029. And your second question, again, that was about, Janik?

Service intensity on -- from alternative fuels.

Yes. I mean, synthetic fuel tend to be cleaner.

That's clear. But we don't -- I mean, the big shift was already when shipping moved from heavy fuel to diesel and now natural gas.

We don't expect the intensity to change significantly. Thank you.

Perhaps I would take a question from the chat. While in the room, you can find other questions from -- one question from Uma Samlin from Bank of America.

Can you give us some update on the integration of OMC2 and OMT? And what are the growth and margin assumptions you have for fuel injection?

So as I already mentioned, I mean, the integration is really working well. I mean, they are part of Accelleron.

We are careful not destroying the business by trying to get all the cost synergies. We have a light integration.

The focus on OMT and OMC2 is now just to grow. Grow, grow, grow and the $150 million might not be enough.

We are looking for other possibility to grow. So integration, runs perfectly, and they get all the support they need from Accelleron.

Then the second question was?

Margin.

We don't give guidance on fuel injection, but we have the ambition that any of our business are similar to the group.

Good. Stephan?

Yes.

Stephan Sola, Sola Capital. Maybe just trying to find the smallest negative.

You speak about the temporary slowdown in the gas compression business, temporary. Your outlook obviously reflects that this reduction in inventories is already behind us.

Do I understand that correctly?

Thank you, Stephan. Probably, again, let's turn back to '23.

At that time, one of our customers were so positive that they order too many turbochargers at that time. And they had finally realized at the end of '23, there had to be too many turbochargers.

So the end market didn't go down. The end market was slightly growing up.

So he was adjusting, I would say, was last year between Q2 and Q3. That's over now.

And we are -- the demand now from the customers is in sync with end customer demand.

Doron Lande, Kepler Cheuvreux. I remember last year, especially, was we learned that visibility -- your visibility of the order book is rather short, and that's why we saw those trading updates from time to time regarding the revised guidance.

Were you able to improve it, this visibility? Or are we going to see in June another trading update?

What we have given as a guidance is what we truly believe as of today, with all the information, with all these geopolitical changes. I mean, we are always trying to improve whatever we can do.

And I think so far, to be honest, second half was pretty well. So I mean, we guided more or less and we were within the upper end of the guidance, but fully in line with what we -- I mean, it still remains that -- we have definitely good visibility when it comes to ship newbuildings.

But here, we have to accept it's about 15% of our business. And the service business, we have more or less an order book of 3 to 6 months.

And also service is not much fluctuating. But since it's 75%, it will have an impact in services fluctuating by 3% or 4%.

So that's why we do our best. It's -- we don't want to surprise.

We want to guide. But as I said, sometimes, it happens that the markets are more positive than what we expected.

Thomas Puri [Indiscernible]. I would like to have a question on M&A strategy.

You acquired a year ago one company. Last year, two companies.

Does this mean you are going now this year to consolidate these three companies and look that you bring up the capacity and that you are not looking for M&A transaction? Or do you look at it opportunistic?

I mean, first of all, it's clear we have a very strong business already. And the focus is on organic growth.

And as I said, we have our fuel injection, a clear organic growth strategy to get to $150 million. So also, $50 million needs some time to invest and a lot of effort.

So that's definitely a focus. But as I said already, we believe we should have more capacity because customer asking even for more.

But this is not only our challenge. It's also the whole industry is just ramping up.

So also here, we are looking for further expansion, and this could be organic or inorganic, but mainly it will be in Asia. So again, we are looking around.

But again, the focus is on organic growth. And the integration is already working well.

So I would take a couple of questions from the chat. One question from [Adrian Peel] from ODDO BHF.

What is your CapEx budget for 2025? Would you be able to grow free cash flow in line with profits in 2025?

That's a good question, indeed. I think in the past, we have roughly spent between 3% to 4% of global revenues on capital expenditures.

Now with the additional capacity needs, especially on the fuel injection side, but as well as optimization initiatives on the turbocharger side, we see that potentially a little bit higher, more between 4% to 5%. But again, fundamentally, this will not impact the conversion to materially extend in that sense.

It's maybe $5 million, $10 million more of investments need annually. Therefore, we remain confident to turn continuously profit into cash, as we have demonstrated as well in the past.

Okay. Another question from Meihan Yang from Goldman Sachs, which is combining also a similar question.

What's your positioning in terms of potential U.S. tariffs impact?

Yes. I wish I have a crystal ball or I would have a direct contact to this person, but probably, they might not help either.

Now, number one, we have about 10% of our revenues are really related to what we call onshore U.S. business, so around $100 million.

We have very strong -- and the main delivery to the U.S. is coming from Switzerland.

So for the time being, good position because there are no tariffs on it. What has to be said is that our products cannot be easily replaced by the engine builders.

So that normally takes 1 to 2 years to replace ours with someone else. And that's why we expect that we have a strong position, but we have quite a strong relationship to our customer.

If further tariffs would increase, we would sit together with our customer and find solutions that are acceptable for both. I mean, if the customer is willing to pass on all the tariffs, because he is also in a strong position, we definitely would do the same.

And again, we did that already during the high inflation. We were not the one telling that we took advantage of inflation.

We increased our margin. We wanted to be fair, and we do the same here.

And we are confident that we -- with this partnership, we will go through whatever comes to us.

Good. Perhaps one more question from the chat and then we move back.

One question from Sebastian Vogel from UBS. How would an open up of the Red Sea impact your business in Marine?

Yes. I mean, as I already said, there will be more scrapping.

But you have heard that the shipyards are so full. There are so many new ships coming online that even if the scrapping increases, the fleet will still grow.

It might not grow. Just what comes in now as new, there will be some ships taken out, but the fleet will grow for the next 3 to 4 years, no question.

There's not even enough capacity to scrap the same amount of ships that are coming now nearly online. So fleet will grow.

[Indiscernible] ZKB. About the fixed income side.

I have a question on your capital framework, and you're stating that you have a stable to growing dividend policy. But now it has increased by, I think, over 40% your payout.

So I think it's rather fast-growing than stable or growing. And my question is, where is your threshold that starts you to shift from paying dividends and starting the share buyback?

I think, first and foremost, we need to see that in the past years, and that's why we consciously as well guided on these buildup activities, and this is of the past that has impacted basically our profitability, right? We see now a normalized new reference point in terms of profit, as outlined by Daniel, and consequently, then as well for the dividend.

On this basis, now that framework will really work in the sense of stable to growing. So it is a new reference point with having the one-offs of the past basically or the buildup activities to say.

Okay. So the new reference that is 80% payout of net income.

I think, the new reference is the absolute dividend, we would say. We have never said anymore that there is a specific payout as such.

But yes, we have said we want to continue to provide an attractive and pay an attractive dividend.

Janik Rüegg, again, from ZKB. Just to add on the capital allocation policy.

I mean, last year, now you paid roughly $60 million for both acquisition, OMC2 and TNM. Is it roughly a good figure going forward for your flexible capital allocation, let's say, between $50 million, $60 million either M&A or if you don't find M&A, you don't have any large CapEx, then that goes maybe to share buybacks?

Is it roughly fair to say?

I can start and you can complement. You're ultimately, right.

With M&A, you do not exactly know then what's to come. So is that budget?

No, it is not. We look what fits to us selectively and disciplined.

But consequently, we have a new reference point for the dividend. And from there, we will continue to work.

But I can confirm more or less your assumption that this is a level where we feel comfortable that we can always -- as we said, we want to keep the dividend at least stable or growing. So even if there's some strong headwinds, we can keep that one.

It gives us enough leeway for acquisition, and it gives us enough leeway if no acquisition that we can have a good share buyback package.

Perhaps one follow-up question from the chat here from Sebastian Vogel of UBS. What size you need to have in mind to make a share buyback worthwhile?

I think, we have already stated that in previous conferences. Even I'm not mistaken, where we said roughly around $100 million potentially.

Far below would be potentially too small. Above would be potentially too big in light of a potential share buyback within 2 years.

Good. Then another question with regards to the growth guidance from Georgi Kinkladze from MAN.

What M&A contribution are you assuming in your 4% to 6% constant currency guidance? And as things stand today, what's the estimated FX impact?

I think on the latter, we do not have that crystal ball. So we do not guide on this specifically.

We said constant. On the constant side, 4% to 6% includes roughly 1 percentage point of inorganic, maybe roughly 1 percentage point of price, the rest volume.

If we take the 6% to reconcile too. But again, roughly.

Okay. Then another question from John Kim from Deutsche Bank.

Should we expect more balanced revenue growth between the divisions in 2025? What's the current visibility on your Marine new product order book now given the yard constraints?

Is it 3 months? Is it longer?

First of all, I mean, the division has the task to get whatever it's out there in the market to capture. So we have no guidance that one is not allowed to grow more than the other ones.

So if one is growing more, then they shall grow more. No, I mean, on what we have in the order book on the shipping, that's normally we get them normally 1 year.

Or before they deliver the ship, you get the order and then we deliver, so that's in line. So the 3 to 6 months will not change, especially since the capacity of the shipyards are really not moderately growing.

I just had talks with shipyards owner in Japan and Korea. They are struggling to keep the capacity.

For example, in Korea, they're saying, "Our people want to go to Samsung, which is sexier for mobile and semiconductors. We are struggling to keep the people and to keep the capacity."

So the only country that is growing in capacity is China. But also they are only moderately growing.

So we don't expect there are big changes. We have seen over the last 3 years a kind of 3% growth from the capacity -- from the shipyard capacity.

Good. If no questions from here, we'll continue with the chat.

A question -- another question from Uma Samlin from Bank of America. On capital allocation, how do you think -- should we think about CapEx planning versus M&A?

I mean, in the end, I probably didn't complement, Adrian, if you have more information. I mean, as I said, organic and inorganic, both they have the pros and cons.

I mean, inorganic, that goes faster. But as I'm always saying, it needs two to tango.

So you can't buy something when someone doesn't want to sell. And they also want to buy at a reasonable price, not at a crazy price.

So the good thing it happens fast, you get an existing business, you get existing infrastructure assets and you get people. Organic, everything is in your hand.

You don't need two to tango. You just need to decide.

But it takes longer because, again, you need to build a factory, you need to buy assets. But the biggest challenge is then to get the people in.

And as I said, when you go to Asia, it's not that they are unemployed. They are also running at full steam.

And so that's -- so we follow both together. And if you see, as we have seen in the past, good opportunities in M&A at good price, we will capture them.

If we -- if there's nothing available or not a good price, then we go the organic way.

Another question from the chat from Adrian Peel from ODDO BHF. Would you please be so kind to speak about the service share in your segments and how developments were moving versus 2023?

What is -- in more detail, what is the share of retrofits in Low and Medium Speed?

Good. First of all, we all know that in average, we have about 3/4 our service business.

I mean, we don't go into detail on the segments, but it's clear that the share of service is bigger, the longer the assets are running. And doesn't need a PhD on shipping.

The lifetime of a ship is 30 to 40 years, while sometimes the power plants are 20 years. So we definitely have a slightly lower share in the high-speed for service.

And especially now with the TPX, which is for emergency power and the merchants power by definition, broadly runs. So that means we sell them, and there's never service behind.

So definitely on the High Speed, we have a little bit more. Less service business, while on the Lower, Medium Speed, we have more, but that doesn't make a difference for the targets.

We have for all our business the target to get a good margin for those businesses. And that means where we have more product business, we have to make sure that we make the margin already.

It's new business, because we can't rely on the service business. Retrofit is a growing business.

I mean, order intake, it's in the mid double-digit million dollar business, but it's growing.

Good. Another question from Meihan Yang from Goldman Sachs.

What's the revenue contribution from data center now? And what's the outlook for 2025 growth?

So these are, again, the TPX, we already said in '23, we had $6 million. Now we are going to $12 million, and we expect this business also to double in this year.

So to get above $20 million.

Good. If no questions come from the room, I'll continue with questions from the chat.

One question from Sebastian Vogel from UBS. Can you clarify your sales growth guidance?

In the press release, you write local currency. In the PowerPoint, you mentioned total revenue growth.

I think, we guided 4% to 6% in terms of total revenue growth.

Then another question from Sebastian Vogel on data centers. Do you see demand coming with regards to data centers' baseload energy demand?

Yes. There's two opportunities when it comes to data center.

One is about emergency trendsets, and they are normally coming with diesel engines, because diesel is something you can store on site. While if you would have a gas engine, you're always relying on the gas pipelines that they bring more.

So data center always come with a diesel engine. In addition, now in the U.S., they have realized that it's probably easier to get a pipeline -- a gas pipeline to the data center than to get the grid connected to the data center.

So what we see is now more decentralized power. So they are building besides the data center a power plant, power generation units, because, again, it's speed, and that's the only way to run now.

Also, they have renewables energy. It's clear, but if you have a data center, 500 megawatt, you need good grid connection.

And they are building now the power plants where there's not a strong grid connection in the Midwest. And so they are struggling, and that's why we see more and more decentralized power or what we even call behind the meter.

That means these are power plants built by the data center mainly producing the power for their own needs, and they might export power to the grid. So we see in both direction good opportunities with data centers.

Good. Question from [Adrian Peel] from ODDO BHF again.

On regional developments, the U.S. was down in H2 2024.

And also revenues in Switzerland were heavily down. As regards to letters, should we just assume a change of how revenues were recognized versus other regions.

And in the U.S., why the decline versus the growth in High Speed?

I think, to the Swiss part, we are a truly global player. Sometimes, our customers demand us to deliver through the Swiss channel, sometimes through another channel.

There have been no fundamental changes in terms of the underlying customer mix. To the first one, it really depends then on the sequence of deliveries.

Usually, we look year-on-year. And year-on-year fundamentally, the Americas have, I think, decreased by roughly 100 basis points.

So it's not the fundamental shift as such. But for us, the focus is really on a year-on-year basis as opposed to taking each half year, because that then again depends on deliveries, how much have we put on the vessel, the throughput and so forth.

So when we talk about growth, then it's usually a year-on-year view, which is the most comprehensive one.

Okay. Another follow-up question from John Kim on the margin guidance for 2025.

It looks conservative given 2024 results. Is this a function of investment and additional OpEx or more a function of revenue mix?

I think it's, first and foremost, a function of the investment side. We said we continue to invest in R&D, continue to invest in artificial intelligence, 3D printing.

But as well as we ramp up new capacity, initially, you are not as effective. Consequently, you feel that, especially in the ramp-up phase in the first 6, 12 months.

And under this assumption, the guidance has been formulated.

Yes. Just imagine, we have last year hired 50 people in OMT.

They were 250. Now, they are 300.

Until you get them up to speed and productive, first, you have costs. We call it investments, and that hits slightly our bottom line, and we will go ahead.

I mean, we already had with several investors the discussion. We said we have a high margin, but we want to have a long-term high margin.

You could easily increase short term the margin, but we believe it's better to invest today that we already also delivered the high margin in 2, 3, 4, 5 years. And that's the long-term strategy we have.

Good. Yes.

Stephan?

Just coming back to that remark from before, the conservative guidance on the margin. I mean, you probably also have to be a bit careful what you show, because you've got clients that say, look, the guys are running on 25%, 26% margin.

So it's probably a bit better to invest into growth. Or do you get that sort of pushback sometimes?

Not directly. We definitely have sometimes a bit of tougher discussion when we talk about pricing.

Yes, that's life. I mean, so -- but in the end, they already knew when we were on the ABB that they pay us a quite a nice premium.

And they paid us a nice premium, because not -- because they were not aware of the -- probably the good business we do, because they appreciate our service, support our competence on new products. So that's -- and again, we will not keep the margin loan not just to show to the customers.

Then we will have to talk again. And there's alternative to us in the market.

It's not they are relying on us. We don't have not at all any monopoly.

And nevertheless, they still order from us because, again, we -- I've shown you the figures on the LNG fueled engine. I mean, 65% on the Low Speed, 80% on the Medium Speed and above 90% for LNG carrier.

And there's a reason behind. It's our close relationship to all the customers.

I mean, Qatar Gas, the famous one. We have close relationship with Qatar Gas.

They defined the specification of the ships, and they are chartering. We know all the shipowners.

Some are in favor from us and some are not, but Qatar Gas is making sure that they prefer us. Then all the shipyards like Hyundai and so they also favor us.

So we have quite a good network with everybody. And if someone doesn't like us too much, then at least he has someone left and right, who tells him that he should prefer us.

So that's -- and again, it's our technology and it's our service support. That makes the big difference.

And I mean, we have excellent competitors, but they can't offer the same in that respect. They have good technology, but they have to compensate with lower prices.

And that's a model that was built up over 100 years, continuous investment. And it's a lot of money and the relationship you don't build overnight.

Good. Perhaps, still a follow-up question from the chat from [Adrian Peel] ODDO BHF.

Please quantify the amount you expect of one-offs and acquisition-related amortization in 2025.

I think, to the first one, we have only guided on buildup activities. This was something we knew, right?

Usually, you do not guide on that element. But we can assume that this becomes immaterial in light of the non-existing or the closed out topic on the buildup side.

In terms of amortization, I think we stood somewhere around $5 million, and I would assume that this stays roughly in that part. Obviously, assuming that we have the three companies, we have acquired amortized.

So plus/minus around the $5 million for '25 million, I think, this is a fair assumption.

Then a follow-up question from Sebastian Vogel, on the answer -- on the sales guidance. In the slide deck, the written total revenues growth guidance is then the same as the local currency sales growth from the press release, because total growth sounds like reported sales growth.

So I think, this is not reported as such. It's the constant currency growth, which is 4% to 6%.

Organic thereof would be then 5%. As I stated, 1 percentage point is inorganic.

I hope this clarifies.

Good. I have one more question actually here from the chat also from Adrian Peel on the onboard carbon capture solutions.

Do you consider to invest in onboard carbon capture solutions? Do you consider it a transition technology as well or rather a long-term solution?

Yes. I mean, I think, everybody originally thought it's -- everything is going to synthetic fuel, and that's why nobody invested in carbon capture.

I mean, Carbon capture was in power generation 20 years ago, and that was already a topic but never materialized. All right.

We'll see, but the longer it takes that, the longer it takes until we really decarbonize all the industry, not only shipping, also car and whatever. That only takes the battery it would be that we have carbon capture, because it's still better to fight the symptoms than not fight anything.

Are we looking at technologies? Yes, we are looking at technologies.

Is carbon capture the right one? The one which I established are not the right one.

There are other interesting technology. But very often, this company has a high margin, but unfortunately, it's a wrong sign in front.

So they are minus. So we are watching them.

And then the question is, is it the right technology that fits into our portfolio? And when is the right time?

And again, so we are looking at -- the good thing on decarbonization, there's a lot of new technology now popping up, not only on new fuel. And again, we are scouting them.

And we don't know whether there's something and when is the right time.

Okay. I think, in a chat, there is some more questions, but I believe they have been answered in a way or asked by someone else and answered.

If someone from the chat feels differently, I think I'm happy to answer them bilaterally. You can always call me.

So is there still a question from the room?

Apologies, but I still have one small question. Obviously, one USP that you have is your service network.

And as I understand, the biggest competitor is not set up like that. Is there the optionality that you could service their product with -- through your service network?

Because I'm still impressed about that video that we saw at the IPO where you deliver it within 48 hours. Obviously, the competitor can't do that.

So can you help him out for something?

Also here, it needs two to tango. Because we have a clear strategy.

We do service competitor products, but we want to have OEM parts. Also because the variety is so big, we would never be able to deliver within 48 hours, because we can't have the whole portfolio of our competitors.

Just that you know our warehouse in Baden, has a value of CHF 100 million already. And this is just to cover our installed base.

So I'm not saying that for each and every competitor, we will have another CHF 100 million. So we only serve competitors' product when we get OEM parts.

That means it's a collaboration. It's not a direct competition.

I mean, he still tries to service his own turbocharger, but a lot of our customers, they have -- the biggest fleet, what they have is Accelleron turbocharger, and they said it would just be great if you could also do those. And if the competitor is providing us the part, we will deliver the services on site.

So we do it.

Good, good. So there has not been additional questions in the chat.

Any last -- anyone who wants to take the last chance to ask a question in the room?

No. So then, I would like to thank you for your attention and also for your time.

Now we close it. And the question probably you have, where do you get the food.

It's outside through the row, and I'm happy to have further discussion with you. Thank you for your time.

Thank you.

Thank you.