Schindler Holding AG

Barbara Zaech - Chief Communications Officer Silvio Napoli - CEO Erich Ammann - CF

Remo Rosenau - Neue Helvetische Bank Phil Wilson - Redburn Partners Christian Arnold - Bank Vontobel Torsten Wyss - UBS Martin Husler - Zurcher Kantonalbank Martin Flueckiger - Kepler Cheuvreux Patrick Appenzeller - Helvea Baader Andre Kukhnin - Credit Suisse John Revill - Wall Street Journal

The company is represented today by Silvio Napoli, our CEO, and Erich Ammann, our CFO who will also take questions during the Q&A session later on. We will start with Silvio Napoli, who will present the results 2014 and the action plan to 2015, including the outlook.

For your information, we have included two short videos in the presentation that are not included on our website. Therefore, we kindly ask all participants of the conference call for their patience during the videos.

Thank you. After Silvio Napoli's presentation we will open the floor for the Q&A session.

That's it from me for the time being, and I'm happy to hand over to Silvio. Silvio, please?

Thank you, Barbara. Good morning, everyone.

As Barbara said, I'd like to thank those who made the effort for being with us here today in Lucerne; and also thank those who are joining online or over the phone for investing the time with Schindler today. Last year, and it's gone very quick, it seems like yesterday we had organized this on Valentine's Day.

This year it is Friday 13th and Fasnacht [ph] Carnival. This is the big occasion here in this side of Switzerland.

So, us showing two video clips is also part of keeping up with the entertaining mood, and I trust they will add to the message which we'd like to convey today. And precisely, before we start with slides, perhaps you will allow me a general statement about our message today, and, most of all, about how was 2014.

2014 was an intense, intense, but also rewarding year. One where we stayed on-track with our growth strategy; one where our growth has actually accelerated; and one when we embarked on an improvement, not only in terms of top line, not only in terms of products and infrastructure, but also in terms of profitability and margin.

Having given that general statement, let's see now in a bit more detail what the key highlights of 2014 were. First of all, as I mentioned, we had an accelerated growth in terms of orders and revenues.

We had a particularly strong fourth quarter with order and revenues achieving unprecedented level, and with an EBIT margin that reached the level of 11%, a marked improvement over the last few quarters, before restructuring cost and impairment. This was achieved overall in the year, in spite of stronger than ever currency impacts, which had taken away as much CHF200 million from our top line, and CHF30 million from our EBIT.

Financials, of course, are important, but there were other key events. We did complete two new factories; one in India; one in China.

I'll say a few words later. We introduced new products; the Schindler 3600, that you may remember presenting last year here in this room, has been doing very well, has become now a top seller in the residential market in China.

And, as recently as last December we introduced myPORT of which you'll hear more about later this morning. We did, I must say, very well in China, in India and in Southeast Asia.

And, we have consolidated our joint venture XJ-Schindler into the Group. At structural level, we have now introduced a new organizational setup, with dedicated business lines complementing our geographical focus that we have had over the last few years.

It is precisely upon this platform that now we're ready to embark on a new set of improvements throughout the years to come. Now I mentioned that our growth strategy is on track, but let's now look at some numbers as why I say this, and why this growth strategy is the right strategy to have.

For this, I liked you to have a look at the sequence of pie charts behind me. The first one is about order backlog.

This is the orders that we received, but they're not yet fulfilled, and perhaps looking at the section of the pie in dark blue. That is Asia Pacific, the fastest-growing market; the biggest market in the world.

You can see that only 10 years ago, 2005, that accounted for 24% of our backlog. Fast forward 10 years, Asia Pacific accounts as much as 44% of our backlog.

Conversely, you see that Europe, which is the dark gray section in this pie, has had exactly the opposite phenomenon. That would not have been possible, had we not embarked on a growth strategy.

And, by the way, as you will see later, this is not the result of Europe shrinking. Europe has also grown, but Asia Pacific has grown a lot faster.

In turn this is what leads to this bottom section of the chart, showing the revenues. In 2005 revenues from Asia Pacific accounted for 15% of our total and by end 2014 they accounted for 29%, almost one-third.

The question may come up later, so let me anticipate that, what is the end game? Well, the end game is to have our revenues and backlog in line with the overall market structure and the market structure is, more than ever, geared towards Asia Pacific, which accounts for 60% or more of the total.

So, that blue section will have to gear towards the 60% and it is happening; it is happening faster than ever. I mentioned the market, so let's have a look at the market here.

In 2014 the overall elevator and escalator market for new installations grew by 5.9%, let's say 6%. A total of 46,000 units were added to the global market, bringing it to a total of 828,000.

If you look at the diagram behind me, you see that the lion's share is from not only Asia Pacific but especially from China. Out of the 46,000 units, 28,000 come from China; remaining 14,000 from Asia Pacific, excluding China.

That makes for more than 90% of the total. These are the markets where one must be today.

These are the markets where focus must be and, in order to realize the growth, one needs to invest and that's what we've been doing. As I mentioned in my introductory statement, we actually have been investing successfully and have completed two new factories on budget, on time.

We see them as our hubs for the second planet which, as you may have heard in the past, is a new second reality for Schindler, in Asia Pacific, in the growth market. We have opened an elevator factory in India, in Pune.

That was inaugurated last November; it is fully operational. The next step there will be a new R&D center to be opened in the second quarter this year.

Earlier in 2014 we opened our new escalator factory in Jiading, which is a suburb of Shanghai, China. This factory, as you can see from this picture, but you'll see more, is impressive in its size.

And, yes, to operate in Asia Pacific size does matter. Had we not invested in this factory, had we not had this factory today, today we might be faced, actually, with an issue in terms of under-capacity.

This factory, I'm pleased to say, has been fully operational, working a full regime within less than three months of us opening. We have now as a next step, the new elevator factory that's going to come right next to it.

You see on this picture some [inaudible] to the construction site. And then we're going to build a new Schindler City that's going to be our new headquarter in the second planet.

Now to give you a sense of what this is about, about the activity, the level of quality, the effort we have invested in making sure we have exactly the same level of technology, whether it is in China, in Switzerland or anywhere else in the world. We have prepared the actual video clip that gives you an idea of our new factory in Jiading, China.

[Video] So to give you an idea, you probably realize the size. It's to the size of an airport terminal, 180,000 square meters, and this is what it takes to be successful.

This is the testimony of our commitment to our growth strategy. And perhaps those of you who've been following us for some time, from conception to opening and full operation, it has been three years.

This is what is also possible to do in Asia today with the right commitment and investment. There are more aspects we can talk about later in terms of 2014, but perhaps let's now to move on to the figures.

Let's start first by our fourth quarter results. Let's first start by the first lines.

You heard me talking about growth, more will come. But perhaps, if you look at fourth quarter, you'll see that, in local currency, our orders received has grown by 11%, reaching the unprecedented level of more than CHF2.5 billion.

Our revenues have reached the same value for the quarter, recording an increase in local currency of 7.6%. We can address all the figures later in the Q&A.

One more I would like to stress in terms of Q4, is the profitability. You will see that the operating profit reported, EBIT, is CHF238 million and 9.2%.

I would like to draw your attention to footnote number 2, which clarifies that on a purely operational level, i.e., excluding impairment and restructuring cost, the actual operational EBIT level was 11%; a level that marks a material improvement over the performance that we had in the last few quarters. So again, this is a testimony of our clear resolve to work not only on top line but also on bottom line.

Let's move on now into the full year, so adding this last quarter to the three previous that you already saw. Let's first start by observing the first three lines.

You see there that in terms of growth we can only talk about orders received and revenue. But on the right-hand side of the chart you see that in terms of order received, revenue and operate, our growth has been of more than 7%.

The fact that this is a very similar number, I think, is a very healthy sign of growth. It isn't only growth; it is what we call balanced growth.

It is one that shows that we grew the top line to bottom line, but also order book in parallel. So this is the first point that I think again re-confirms the strong growth and improving performance.

In terms of net profits, net profits you will see we have now reported CHF902 million; definitely, a large increase of 94% over the previous year. But let's be absolutely clear, this is also the result of a number of one-offs, such as XJ-Schindler consolidation and the real estate operation of the Mall of Switzerland.

If one adjusts for that, you see that the net profits are CHF740 million for the year. Again, this is for us a level never attained; 8.5% over the previous year.

Moving on to the other element of financials, which is cash flows. This is where clearly the value of the company is measured.

Schindler, I am pleased to report, has continued to do very strongly on the cash flow front, with a further improvement of 11.6%, recording CHF902 million for the year. This is the result of effective capital - net working capital management.

But also it is a result of our CapEx reducing as we complete our infrastructure projects, such as our factories. In the second section of this chart there is another fundamental element which goes back to our growth strategy.

Look at our order backlog. We now have achieved a level of CHF9.2 billion, which is an improvement of 20% year on year.

I would like to stress the number 20% and refer the same figure to the one you saw on my second slide, which was the overall growth in the new installation market worldwide; you may remember the figure was 6%. So as a policy we never talk about market share, but by comparing this 20% order backlog increase to the 6% global growth, may give an idea of our performance in terms of growth worldwide and, in particular, in the growth markets.

Before I close 2014, perhaps one information that is not on the slide, because this was discussed yesterday at our Board of Directors. It is dividend.

Though some of you might have read the media release we published this morning and you will have noticed that it was proposed by the Board of Directors to be submitted to a General Assembly to issue a dividend of CHF2.2 per share, this is the regular dividend we have had over the last three years, plus an additional CHF1 for a total of CHF3.2 per share for the year 2014. I would like to stress the point extraordinary.

So this CHF1 extra is an extraordinary item resulting from a number of extraordinary events that featured this year. Perhaps allow me also to stress that this should not be taken as a reference for future dividend payouts in the years to come.

This is a quick summary of, again, what was an overall rewarding intense, but also I believe successful 2014. We'll answer and address any questions you would have in the Q&A session, but for now please allow me to shift now to 2015.

And for 2015 we present to you what we did also last year, an action plan. And as we delivered on action plan last year we're confident we will do it this year as well.

It will not be easy, but our objectives are three. Number one, and you will not be surprised to hear, that again we remain absolutely dedicated to our growth strategy.

There it's about execution in achieving growth above market rate. The second objective is to also grow our operating revenues and EBIT in absolute value, together with the growth.

The third one is focus on the margins. Now we have the right set-up that we can start doing this in a much more granular effective way than ever before.

To do that we have three strategic modules, the first one is about operational excellence. That's what our operating company will be doing on the front end.

The second one is about growth markets. They are still the same, China, India, Southeast Asia and the third one is what we call global delivery.

It is what we as a global management team have to deliver to the front line, in order to enable them to meet those objectives. This is, first of all, cost competitiveness; number 2 is realizing the potential out of our new state of the art supply chain, leveraging volumes and continuing on building on our global platforms.

It is also about making work a new structure that - you may remember we introduced end of last year. We call this structure a fast-forward structure.

This is one where we have dedicated business management for new installation, for service and supply chain, which then enables to have the type of synergies and scale economies and focus on cost, on margins, worldwide. And, we'll also continue introducing new products and we'll now take all the opportunities possible in terms of digitalization.

Our former IT department is now called Schindler Digital Business Solutions. It is not because we just wanted to get a fancy name.

It is really about them delivering all the opportunities generated by the Internet of Things, and I'll come to that in a second. To deliver that we'll need to work harder than ever on our high-performance culture.

That's something that I take personally at heart and one that, together with the management team, we're driving very hard. Now let's touch upon a few points in this plan.

But before we do that, let's, first, see well, if we're going to go for this growth strategy is there growth to be had? The answer is yes.

Our view, based on a number of sources triangulated, is that the elevator and escalator market will continue to grow above global average in 2015. Our estimate is that the growth will be again in the order of 6%.

This will be the result of, let's call it, a three-speed market trend. Number one is Europe where unfortunately, the growth in the North will be offset by the continued uncertainty in the South.

Americas will pick up growth again, thanks to the recovery in United States and then, of course, Asia Pacific, where the main area of the market growth and size will continue to be. That is visible on the pie chart in the middle, where you see that out of the 47,000 units that will be added to the market, as much as 43,000 will come from Asia Pacific.

Now again, I thought it was useful, like last year, to stress that the growth in the market still remains not only above global average, but also above other industrial sectors, such as automotive or cement. So the elevator and escalator industry remains the right industry to be in.

Now of course, in that forecast there is one key factor and this factor is China; and the question is what's happening to China? As some of you may know I spent most of my career in Asia; 11 years in China, so I do take particular attention in somehow getting a sense for it myself, not only by travelling, but also by checking personal extra sources and talking to key players and customers there.

Now there is no question that China is slowing down. As a matter of fact, I believe that a slowdown in China is good.

It means a much more sustainable growth; one that strength will prevail, as opposed to speculation. And it is a fact that looking ahead, a single-digit growth will be the new norm, but the single-digit growth will be on a much bigger base.

So the new norm will be a sub 10% growth on a massive base, which then will provide for continued opportunities. As a matter of fact, for a company like us who's increasing market share, this is the perfect timing.

Now when I spoke about big growth and single digit, I thought maybe you should compare the elevator and escalator market to the GDP. You might have read about China's Prime Minister, Li Keqiang, saying exactly this; saying yes, we're slowing down.

Our growth might be 7.5%, but look at the base, look at the comparison with the past. Now if you look at the bottom chart here, the same can be said for the elevator and escalator industry.

In 2007, the elevator and escalator industry in China was growing by as much as 30%; 30%, but then look at the base. The base was less than one-third of what we have today, which is about 0.5 million units.

So yes, this year the growth will be, according to our estimate, about 6%. But the base is 0.5 million units, so there is a lot of opportunities, in particular in the segments where Schindler now starts to be present with its new products and with the new branches we opened throughout the country.

So China market, but again are we foreseeing a sudden crash? Well, we don't.

The view that we have is that on the base of urbanization, China, as all of Asia, still has at least a good 10 years if not more, ahead of it in terms of growth market. The chart we have here is one developed by the economies together with the United Nations, and this is one I'm sure you're familiar with, showing that there is a strong correlation between urbanization ratio and GDP per capita.

As it happens, urbanization is also the single biggest proxy to elevator and escalator density. So you can see today, this is 2010 as a base, but if you take 2015 very close to that dot, China is still around 50%.

So it has some way to go and, as you know there is a deliberate policy by the government to transfer 250 million people from the rural to the urban areas. So that is the way ahead.

Now is it all about China? We believe there is more.

The next one will be India. I know this is an overused comparison, India being the next China and clearly there are differences.

At the same time, if you look at a country with the same population, today the urbanization rate is less than 40%. There the potential is, arguably, even bigger.

There are studies, some of which were done by some of the analysts, who today are at this call, show that - no, they suggest that if you look at the curve of progression of the Chinese and Indian market, India is China but 12 years behind. So India, China, but there is more.

Let's take Indonesia. People don't talk about it much.

When I used to work in Asia, I traveled there regularly. We're a very successful company.

If you ever are in Jakarta, you'll be amazed by the skyline in the city. Look at Indonesia, 220 million-plus population; urbanization rate just above 50%.

Today the market in Indonesia is gaining ranks, at about 5,000 units, but it used to be less than 1,000 only eight years. That gives you an idea of the potential we see coming and why, again, the growth strategy in the second planet is the way to go.

Now is that all? No, I mentioned before, we see more opportunities, not only opportunities in terms of market, but also opportunities in terms of technology.

And most of all, as I referred to before, the opportunities created by the digital era. The Internet of Things is about machines communicating with one another, machine-to-machine communication.

Now it is time for the elevator industry to enter and embrace this opportunity. Schindler is clearly dedicated to that, focusing on this, like we always have.

For this, we have four areas of focus. Number one is customers, where we're introducing new portals, whereby we allow much more transparency and ease of communication to our customers, which in turn creates customer loyalty and improves our net promoter score.

And ultimately, is good business in service, but also in new installations. The other element is smart products; products indeed that have this machine-to-machine functionality, which, for example, can lead to remote monitoring, so we can have predictive maintenance.

Today, the latest units we introduce can actually send signals about potential problems; about necessity to be greased; about, for example, doors needing to be serviced. This is, again, increasing our ability, most of all our safety and the level of technology that our customers will enjoy.

The third one, of course, is how people work. Today, out of our population of 31,000 technicians, more than 18,000 work using a proprietary technology, called Fielding on mobile devices.

This allows them to know exactly what work they should do; what unit they should service. For each unit they service, they know the history; they can identify the spare parts; they can order them online; and, again, also communicate with the call-back center but also with the customers.

Finally, this is now the latest generation, we start working on applications. One of them, as an example, is an application whereby our service technicians have a route that is planned at the beginning of the day.

It is on a map with the location functionality. Then depending on what call back they attend, depending on traffic, this route can be re-orientated live, in order to optimize the work and optimize the capacity of our technicians.

So this is coming. This is one reason that has even allowed Schindler to earn an award, actually last month in Germany, where we're competing very large companies, in terms of digital business innovation.

But that's not all. Schindler remains at the forefront in terms of products that are smart products.

You may remember about PORT, which is a destination control touch-less technology now. Now we have a new generation and that is the myPORT.

myPORT is the combination of mobile devices with destination control, access and security. It is a technology that has a security level similar to e-banking, four steps.

But most of all, let me be provocative here, this is a technology that can be sold to people who do not even have an elevator. This is about access.

As a matter of fact, we already introduced it. We were asked to provide it to a center for the disabled in California, who do not have any lifts, but they used it, because it allows to cater for special mobility needs in a large center.

The performance is extraordinary. So this is not only a vertical transportation product, that's where you have an immediate impact.

But this opens up many more opportunities, in particular in the residential segment, which, as you know from the picture we saw before about urbanization, is the fastest growing one in the elevator and escalator industry, but also in the construction worldwide. But rather than me trying to explain to you how this works, we also prepared a short clip to give you a sense of what myPORT is about.

Please. [Video] We call this the Internet of Elevators, it's coming this year and Schindler is at the forefront.

We can address more questions about also other products. If you remember last year in our plan for 2014, we said we wanted to differentiate ourselves from our competition, and this is one example by which we deliver on that commitment.

For now we've talked about action plan, but I'm sure we're all here today also to speak about an outlook. And now before I speak about the outlook, clearly, as you appreciate, this outlook would have been very different had we met on January 14.

On January 15, something happened out of Switzerland, but then, of course, it had a global reach. There was the Swiss National Bank decision to forgo their cap value versus Europe.

Now you all know this story much better than I do, but it is fair to say that is an impact on all companies actually, not only Swiss companies. But for us who, of course, consolidate in Swiss franc, and we definitely are very proud to do so, we believe in a strong Swiss franc, it has forced us to revise and look carefully about what this meant.

We'd like to share with you now some of our findings and how we see this affecting our business. First of all, an important qualification; today, Schindler generates more than 90% of revenues outside Switzerland.

We see, overall, a limited transaction risk, but we have to recognize that there will be a substantial translation impact. Now if you look on the left-hand side of this chart behind me, you see a pie chart and you see really that the portion of our cost is exactly in line with our revenues in our operating companies.

We actually have as a policy, 100% hedging policy for all residual and transaction exposure. This is clear.

So on transaction, as I say, there is not much of a risk. On translation, on the other hand, you see that due to the reporting currency, we will have a negative translation impact on 2015 revenue, which we estimate at 10%.

Now 10%, if you look at our figures for this year, would mean as much as, potentially, CHF1 billion, and this is in Swiss franc. So as a team, we have to recognize it may well be that all the substantial growth we were going to report in Swiss franc for next year will still be there in local currency, but in Swiss franc that might well be eaten up by this new currency situation.

This of course will depend on what the currencies really will do. So this can only be a tentative impact, but one definitely we're resolved to do everything we can to try to minimize the impact of.

But it will be honestly impossible to offset totally. Now what also should be said is that at bottom line, the impact may be actually higher, and why's that?

Because of our corporate functions being based in Switzerland. So if our impact at top line is 10%, it may well be that at bottom line, it will be even more.

Now is this a tragedy? Is this something which deserves panic?

Absolutely not. Every company in our business, starting with Schindler Switzerland, but all them, is doing very well.

This is an accounting issue; one that has to be taken into consideration, but one that we have already dealt with in the past. And we've prepared for you the chart.

Again, those who have been following our company for some time will know it very well. You see that the strong Swiss franc impact is something that we have lived with we have been prevailing over since some time; actually, since 140 years.

Only since 2008, Schindler endured a top-line impact of CHF2.3 billion, due to the Swiss franc appreciation. And the bottom line it was [inaudible] CHF300 million.

I'm convinced that what's coming will make us even stronger and that, again, we already are working on - we were somehow already prepared, but we have to work even faster on bringing about the measures that will make us even more performing and we'll come over that. Now all in all, then what is our outlook for 2015?

We see going forward continuous uncertainties in the economy. We do remain convinced that there are substantial market opportunities, which will lead us to grow even faster.

We're, therefore, resolved to continue even reinforcing our growth strategy. We're working on a plan that will lead to a substantial improvement.

We call this plan Fast Forward. I will not say much about it today.

This is something we'll come back to you with mid-year, but it's something that I'd like to clarify. We were resolved to do regardless of the Swiss franc impact.

This is not responsive; this is proactive. And it's something that will bring us to the next level of improvement.

We see an increase in revenues of 7% to 9%, which unfortunately, as I said, will be offset by a negative translation impact of 10% on our top line. With all of that, we're not in a position to provide any profit outlook for 2015.

But, as we did in 2014, we'll come back to you with an estimate and a projection in the summer with the half-year results. That concluded my presentation.

Now Barbara will take us through the Q&A. Thank you very much.

As usual, we will take questions from the participants present first. Afterwards we will take the questions from our participants of the conference call.

But, to all of you, could you please state your name and the company before you ask the question, because that would be very helpful for us. Thank you.

And then I would say that please go ahead, ladies and gentlemen.

Remo Rosenau, Neue Helvetische Bank. As you just outlined on slide 22, there is a slightly strong impact on the EBIT in currency.

[Inaudible] those numbers of the last 10 years, if you lose 10% of the top-line profit of the EBIT, 0.5% of the margin into maximum 1%, I would say. Okay so we have this negative impact due to the currencies on the margin of around, let's say, 0.7%.

Now on the other hand, we would expect some improvements - underlying improvements, due to finally LEAP program kicking in with benefits, which, as you admitted last year, were coming in a bit later than expected originally; the whole impact of strong growth, all the transformation you did. And we saw that in the Q4 where we had an underlying 11% margin.

So in balance, we should still expect a margin to rise. Is that a fair assumption?

Number one. This is the first question.

Number two, one year ago we already thought when you elaborated on the LEAP program and the whole transformation process, if you would not be prepared to come up with some targets. Because all these major efforts need to yield something at the end, which you probably also have a view on how much they should yield and put them into some kind of target, which then you say, yes, probably of the Q2 results.

However, you didn't do that. Now we haven't got any mid-term targets either.

Would you be prepared to come up with some target with the three-year/four-year view at some point? Thank you.

I'll start with the second question, and Erich will take the second. Thank you, Mr.

Rosenau. As I explained we're dedicated to one thing and what it is to create long-term value.

For this we continue unabated on our growth strategy and we also focus on our margins. Now you say; can you provide some targets?

At the risk of disappointing you, the answer is no. I'll tell you why.

Sometime ago, allow me, [inaudible] I happened to meet a gentlemen who used to be captain of a World Cup team in rugby. And I said what made the difference.

He said because we stopped playing the score board. We played with the game we were doing the right things and at the end you would win.

This is the approach we have. It's not about shying away.

You can see our plan is quite ambitious. But as much as I appreciate it would facilitate your work, for us coming with targets now at this stage would be just premature.

But what we can tell you that we definitely are resolved to improve and you highlighted yourself there our number this year suggest we move in the right direction. That combined with the uncertainties now that are coming in the market stronger than before, we don't feel it would be professional for us at this stage to come with specific targets going forward.

That is the first answer.

Yes, back to your first question on 2015. Could you get slide number 22?

On slide 22 you see the impact and that's where you made your calculation. In my opinion from today's perspective at least 2015 might look like 2011, where we'll have up to CHF1 billion, maybe it's going to be less than CHF1 billion, because the currencies have improved somewhat.

And the EBIT impact will be proportionally more. When you do the EBIT margin on 2011 I believe you get to 12%.

If you do it on the total you get to 12.9%. So this I think should be a guidance for you going forward.

In my opinion the 7 basis points are too high. I think it will be more like 3 basis points to 5 basis points impact on 2015, depending obviously on how the currencies pan out.

3 basis points to 5 basis points?

Yes. As much as that.

It is significant, because when we go to slide number 21, I think there are two points that are actually working against us this time, is that you see the revenue share of the euro is significant. As you know the euro has gone down significantly versus the Swiss franc.

In euros we have - or in the Eurozone we have very good profitability, due to the strong service base. That's another contributing factor, a diluting factor, of the margin.

So it's basically two things that work against us. It's this cost book that we have here in Switzerland.

And, it's the dilution effect of the different profitability levels of the currency blocks. So the impact on margin is quite strong, I have to say, from today's perspective if we just run the consolidation based on last year's results.

Obviously, we will try to offset as much as we can. But as Silvio said, it's impossible to assume that we can offset everything.

Perhaps to complete an answer it's the Swiss franc margin, because the margin in all these countries remains very solid, and actually to a large extent is improving; but this is the beauty of exchange rates. So it's about what currency you use to consolidate and we consolidate in Swiss franc.

Thank you.

Phil Wilson, Redburn. Three questions, please; just firstly on price.

You talk in the outlook about significant pricing pressure persisting in all markets. Can you talk about where it might be deteriorating, or maybe even slightly improving, for price; with specific reference, maybe, to Brazil and China?

That's the first question. Secondly, on China.

If I'm measuring it correctly, I think you're looking for something like 6% market growth in 2015. Can you talk about some of the assumptions behind this?

And then thirdly, a wider question, the example you gave of myPORT looks like you're moving into slightly adjacent industries of entrance systems, with different competitors. Is this the start of a wider diversification at Schindler?

Thank you.

So the first question is about price. Clearly, we work in a tough industry.

You saw in my chart about the action plan, I referred to cost-competitiveness. We have absolutely no illusion that the way to survive, and most importantly to win in this industry, is to be cost-competitive.

And we have had price pressure since I joined it 20 years ago. Now depending on the economies, things indeed might change.

You mentioned China. In China, the price pressure will continue.

It always been there. We don't see this worsening or getting better, so that's stable.

But definitely it's a tough market to be successful in. Brazil.

Brazil as an economy is still suffering. There we see - it's the - not so much a question of price, it's a question of volume.

We see really the market contracting a bit; single-digit, nothing dramatic. But, therefore, there are less jobs coming up.

To this date we don't see any undue pressure on margin, in particular in service, materializing at this stage. Your second question was about China.

On China, I would like perhaps - what does our 6% forecast come from? Can we please put on slide 31?

Apologies. 91.

That's right. So you can see, as I mentioned, China is slowing down, but there is still an element of growth.

These are figures from the National Bureau of Statistics for China. On the left-hand side you see the floor space started, and this is the final figure for yearend.

There you can see that floor space started, this is the Chinese definition about buying and starting new work, new construction. There is a decrease in residential and in commercial.

At the same time, there is growth in the office. Now the right-hand side of the chart shows real-estate investment.

And there you see there is a slowdown, however. Overall, there is real estate - is real-estate investment growth in every single segment of the Chinese market.

That is one element that supports the 6%. The other one is urbanization that we discussed already.

The other one is that we see also the service economy coming about. If you can go to slide [inaudible] you see that - I'm sure you're familiar with the chart.

Finally, after talking about it for a long time, the service portion of China GDP is now shifted away from investment and construction into service. This is another very strong proxy in favor of growth in the construction business, because this means more offices; this means more shopping malls; more office space.

So this is some of the macro-indicators that lead to our forecast of continued growth in China, combined with the urbanization. Your third question related to myPORT.

Schindler is the elevator and escalator company, and we, at the moment, remain focused on that. myPORT indeed opens possibility for the future, but at this stage this is just a concept.

At the moment, this will be focused on our business of elevator and escalators. But definitely, it opens other avenues; but at the moment it doesn't at all mean any change of scope in our business.

If I just come back on the second question. Do you think, to get that 6% growth next year, therefore, that Chinese construction has to grow to support that 6% market growth in the elevator industry?

I'm not sure I understand the question.

To support the under - the growth in the elevator industry, do you think the construction market itself in China has to see growth next year?

Yes, I think. And it depends in which city.

You see, for example, today we see smaller cities, it's actually the contrary that we saw two years ago. Third/fourth-tier cities have now an over-capacity of new construction; while especially first-tier cities, the big ones, Shanghai, Beijing, there is a big wave of almost tearing down old buildings and building new ones, which then leads the type of growth; single-digit, but definitely present.

Christian Arnold, Bank Vontobel. I have a question.

In terms of pay-out, you stressed out that the increase in the dividend on CHF1 is extraordinary. So thinking of that you are going towards the end of an extraordinary CapEx cycle, one could think that you could actually increase the dividend also sustainably.

So what's your thought about - or behind that extraordinary dividend increase? And then in relation to that, we have seen that you restarted your share buyback program just after the SNB decision for two weeks.

You had to stop it now ahead of the figures publication. What's your future plan?

Are you restart again from next week on? Could you elaborate a little bit here on that strategy?

And then maybe last question would be about your investments in India and China, the escalator factory. Could you remind me when these next steps will be concluded?

Are there further major investments already planned, new factories, either in China or India, or maybe Indonesia? Thank you.

I'll take the last question. Erich will take [inaudible].

On factories, we’re in the process of completing what we call breakthrough project, a strategic investment that were focused; initially. it was also factories in Europe, United States, and now China and India.

The next step for China will be the completion of this elevator factory; and this will happen in the fourth quarter this year. We will then complete that with a new R&D center.

We test our things. Important also to focus on the Indian and Chinese markets with engineering competence locally.

The Indian side, on the other hand, we will now - we had - we've an escalator factory planned. The escalator factory is, we're proceeding with the land.

We're - we have not yet pushed a button on constructing the factory, simply because, as you probably know the Indian retail market, which is a big driver for the escalator market, has had a little bit of a slowdown in the last two years. So we're ready to go, we just don't want to open this factory unless we're 100% sure that it's going to be fully utilized.

Today, our capacity out of China allows us to do that until the right time has come. So again, this is a way to show you that when we go for this growth strategy, we're not just blindly going for it, we're constantly reassessing opportunities and risk.

To answer your question; at the moment, we have no other major investment plans to build any new factories in other places. We always look at this very carefully.

Indonesia, for example, today not; it might happen in five, 10, I don't know but we need first to have a critical mass that then justifies local production as a more added value option than import out of China, for example.

Yes. Mr.

Arnold, in order to explain the payout ratio, maybe look at slide number 33. Here you see the ordinary dividend for proposed for 2014 to CHF2.20 ordinary and CHF1 additional.

Given the good results of 2014 and also some of the special impacts, the Board decided to propose this additional CHF1 to the General Assembly. But going forward, I have to say we should not take it for granted with all the uncertainties that we have currently, we just didn't feel comfortable to do anything else than this additional CHF1.

The share buyback, you're right, has resumed beginning of the year and will continue. Basically, after today we'll continue to buy back shares.

So the Board has approved that and we're going ahead.

Tors Wyss, UBS. A follow-up to Remo's question on the margin impact based on transactions.

Did you say 2 basis points to 3 basis points? Did you mean 20 basis points to 30 basis points?

I misunderstood it, sorry. Just the first one.

It's 0.3 basis points to 0.5 basis points, sorry I misspelt that. I'm sorry about that.

Okay, so to my questions, basically. Then there is another perhaps misunderstanding on my side, the operating leverage in Q4.

My understanding - if I look at your adjusted EBIT before one-offs, my understanding is that the Q4 EBIT margin is in line with Q3, i.e. 10%, the way you publish it as an adjusted EBIT.

Could you correct me if this is wrong? If this is right, however, my question is the following; you had an 8% top-line growth in Q4 in organic terms on the sales level and no operating leverage.

Do you see any reason to change - to see this changing into 2015 on whatever basis? That's the first question.

Another question is on the positive profit warning you made; I think it was January 19, guiding for the net profit you published today on the basis of one-off financial gains. What exactly is the one-off financial gains back then that made you increase the net profit guidance?

It's still not clear to me. Then another question is on the service business.

I'm speaking now service, order intake on a Group level in local currencies for Q4. Would you confirm that the service business on Group level Q4 did grow around 5% in local currencies?

Is this a fair assumption? Then I have a next one; just one left, please.

Thanks.

Okay. Let's see that I noted them all.

Let's start at the end. I think the service business growth in Q4 is a bit high with the 5%, but it was growing nicely, but it's a little bit on the high end with the 5%.

On the financial result, if I could get slide number 31, I will just focus you on the second line; net income from securities. Over the last years - in last 18 months, we had invested in shares, as a company, which were classified as available for sale, and just before Christmas we sold the whole portfolio, which generated a very strong benefit coming out of the other comprehensive income.

So this sort of Christmas gift, if you want, led afterwards to this correction or to this ad hoc statement. Then talking about the EBIT leverage, maybe you could get the Q4 result which is slide 8.

You're right, when you look at the footnote, which is hidden very nicely. We did achieve in fact an 11% margin.

Obviously, also helped by XJ, I have to say they had a very strong finish. They are a very good addition to our company.

They had a very strong finish of the year. That helped.

And, we also saw progress in a few companies in the fourth quarter where we were not so pleased with their performance previously, so at least this is our hope that they will now also continue to perform better in 2015. Now before the SNB decision we were clearly hoping for a better margin, for an improved margin for translating these improvements into 2015.

But, as we have discussed before, due to this mix shift, cost block, we're seeing unfortunately a headwind of 0.3% to 0.5% that we cannot really offset fully. I believe those were all the questions, right?

There is one left that I didn't ask. But just to clarify so you're adjusted EBIT margin Q4, 11% compared to the 10.1% I think or 10.0% even in Q3.

Is this the right comparison?

Can we have it again? You need to adjust the restructuring costs on both ends and we have a slide for the restructuring costs, 64, because we knew that this question would come.

So here it is. In Q4, we had CHF25 million of restructuring costs in both years.

So you need to adjust both years accordingly and then you see the improvement, which is noticeable in 2014. Maybe I can add here that for 2015 you can count again for another CHF25 million - CHF20 million to CHF25 million of restructuring costs.

And just a last one, you've made that statement with the Q3 conference call speaking about 2015, which will be another transformation year, October 21 you stated that, I think it was even you. You said the real payback to start in 2016 speaking about the efforts - all the efforts you've done, would there be any reason to change that statement at this point in time?

No. Clearly, we're building the platform; we have built the platform already to a large degree, Silvio mentioned this.

So there is no change in this statement that we should start to see the leverage and the payback in 2016-2017. With the fast-forward program, which Silvio also addressed, we will even hopefully fast-forward some of the improvements.

But that remains to be seen and to be communicated mid-year.

Two questions, first could you give us an estimate what is the impact of the lower oil price on your EBIT? And second, you have on your balance sheet you have a cash amount of CHF2.7 billion.

What is the strategy with this cash amount and does it make sense to have this huge cash amount in the current situation with negative yields?

Okay. Yes, the oil price; that is for sure.

But, to be honest, I don't really have a very good quantification now. We have a large service fleet and obviously that will benefit.

Obviously, in the factories we have lower energy cost, but it's going to be marginal rather. So, I cannot quantify that.

The cash pile, you're right, this may be one very positive outcome of this SNB decision, that we have a lot of cash here in Switzerland, in Schindler Holding. This cash has now more firing power, because that was not affected through the exchange rate.

Over the last years we have really worked hard to repatriate a lot of the operating companies in Switzerland and, with hindsight, this was a good decision. Now we started with an additional CHF1 to make use of the cash pile as an extraordinary dividend.

We're continuing to buy back shares. Obviously, we're continuously streaming the M&A market, we believe, as there will be more targets coming up, also in China, which is quite attractive for us.

As the market may slow down a bit, the market opportunities may become bigger for M&A. But this is all I can say to the use of the cash pile.

Martin Husler, Zurcher Kantonalbank. I have two questions.

Sorry to come back on the EBIT margin. I was just wondering whether this 30 to 50 basis points you would rather deduct from the Q4 margin, so the run rate, 11%, or if we should start on the base for the full year, i.e., the 10.1% margin.

That's the first question. And the second one is, can you give us your review or an action plan for Hyundai Elevator.

I saw that you revalued your participation up by CHF120 million. Why and how did you do that?

Yes. Shall I take that?

For that we also have a very nice slide, slide 87. We anticipate all your questions and your observation is absolutely right.

When you look at June 30, we had a book value of CHF95 million and we had an impairment of CHF40 million last year. Now in our IFRS books we have to value the Hyundai participation to market and the share price has gone up significantly.

At the end of 2014 the value was CHF223 million. The difference between the CFH95 million and the CHF223 million is going through equity, through the - out of comprehensive income.

So in that sense we have a lot of headroom, if you want, for new share price reductions, if they should ever happen, that's according to IFRS. We cannot write up the P&L these CHF95 million.

It will go through OCI, through equity, which I think is absolutely correct. And the first question was on the margin, that's a tricky one, the way you put it, but you should not take the 11% as now the new run rate for 2015.

Obviously, in our industry, for whatever reason, margins tend to be stronger in the fourth quarter as a lot of jobs close out and therefore the 11% are at the higher end. But we expect clearly an improvement from the overall 10.1%.

Obviously, now we have to deduct those 30 to 50 basis points and work on measures - countermeasures, to further improve the margin. So don't count with 11%, will be probably somewhere in between where we were for the full-year 2014 and the 11% for the fourth quarter.

And maybe just an add-on, your strategy with Hyundai Elevator, can you give - do you have a new idea or are all options open still; or do you have - did you decide on what you will do in the future?

Perhaps I can answer this. As Erich mentioned, Hyundai Elevator is doing well as an operating company.

The Korean market remains one of the top five in the world. Unfortunately we're in this deadlock situation, which has also a substantial and very current legal front, where there is public knowledge that there are ongoing litigation.

Therefore until this situation is not resolved, it's very difficult for us to come up with any clear strategy. But today, as Erich said, it is not a bad investment.

Definitely, we remain committed to the Korean market as an option. So more than that it's difficult to say at this stage.

Maybe one word on the networking capital side. Do you see any more improvement in 2015?

And I have another question about the organization. You have spoken about more simplification.

Can you give some examples about that?

Networking capital, yes, we're very pleased with the progress. I have to say it's primarily also driven by the new installation business where we get good down payments and progress payments from the customers.

As we intend to grow our new installation business also going forward, I also expect the networking capital to improve. But I say it every year; it's probably going to be even more difficult in 2015, but I expect further improvements.

On your second question about simplification, can you put up the slide 40, please? I spoke about software.

This is software that we announced and rolled out end of last year. This is a software that combines the traditional geographical focus we've had, which are those horizontal boxes, with now a new focus per business.

So, you have new installations, supply chain and existing installations, i.e., service and modernization. This will provide, I'm convinced, simplification.

Even though usually people think about the matrixes as being complex, in this case it is simplification. In the past, if you had one new product to be rolled out as a global platform, we had no single accountability at Group level to make it happen.

It was always through geographies, through region and we're doing, of course, a fine job in delivering the results locally, but did not have the means and even the reach and authority to deploy that. With that new structure there is a lot to be gained in terms of speed, in terms of clear accountability, but also in terms of global reach and market gathering.

So, that's element number one. The second is, let's be very clear, part of our proud Swiss tradition, we sometimes tend to have very complex processes.

I always say we're the Swiss watchmakers of the elevator industry, which is great and fine, depending in which segment you operate. Take for example, mass residential in China, you need to have the right quality, you need to have the reliability, but you also need to have a very simple process in terms of technology.

This is very much our focus, our approach that we bring about in most of our processes today. For this perhaps can you go to slide 43?

Let me give you another example of simplification. This is about product simplification.

You see here our approach, in terms of 3600. You see on the 3300 series, these were the projects - the product we have launched in China, which is nothing else than a slim line version of the 3300 that we used to have in Europe.

That's much more relevant for the Chinese market. Now we're coming in the 5500 series which is more for the mid-rise segment with a product called 5500S, which is really one that we developed for China, which is a reduction in complexity, in number of options, in number of features.

In number - that is extremely, if you can click one more time on the slide please, one more, that's right, you see. So this is the 5500 version, streamlined for China, in a much simplified way, which is conceived and designed in China, which brings a radical simplification and, by the way, also a much higher cost competiveness.

This is an example of what we mean by simplification, both on products and on processes. And this will be introduced in China this year.

Thank you.

Martin Flueckiger, Kepler Cheuvreux. Three questions please.

The first on - coming back to M&A in China, if I remember correctly, back in December, you gave a press interview talking also about the ambition of Schindler to become number 1 in China. And I was wondering whether you could elaborate a little bit on the white spots you perceive for Schindler in China.

So we can get an idea of the areas that are of most interest to you. Then the second question would be more on the outlook; this time for Europe.

I was wondering, firstly, whether you could give us a little bit of an insight into the latest developments that you have seen in Europe, by the different regions, South, Central, Northern Europe, in Q4; and what that leads you to conclude for 2015? And then the final question would be on financials please.

Firstly, on XJ-Schindler, could you quantify the consolidation impact for 2014, please? And secondly, if I saw this rightly, the operating profit for the finance line, the corporate line in 2014, was minus CHF29 million, which seems some CHF7 million/CHF8 million lower than what it used to be previously.

Is that due to an extraordinary item or is this amount of CHF29 million roughly sustainable, going forward? Thank you very much.

Let's first talk about China. Let's be fair very personal opinion [inaudible] spoke about the high performance culture.

I hate to wake up the morning and think that we're not number one in our industry. And the only way to be number one in an industry, is to be number one in China.

Now do we have - going back to the first question, about the deadlines and points, it's not about an obsession, becoming that in year two or three. But if we do all we do in China, you saw the picture, you saw the movie, if we do this, it's not to be number two.

So what I said then, and I repeat now is that our ambition is to progress through this step by step, to be there in the leading position. This is what it is.

It's not about becoming there tomorrow; it's about sustainably getting there. And if you look at our progress over the last seven years, I think we're moving in that right direction.

Now how do we get that? And why is there more opportunities to grow in China?

One, I just showed you new products. We're covering now every other product that before we didn't touch.

So this is for us, an immediate growth opportunity. We're also - and can you go to page - slide 107 please?

Good, this is - you remember I mentioned here too, we were going to have 100 branches in China, by 2016? Well, we've already made 100 branches in 2015, and more are coming.

So today we cover 80% of the cities, with 2 million inhabitants or more. We're in many cities with 1 million inhabitants, we haven't touched yet.

So in terms - 100 branches in China, let me be very open, it's not enough. But this is a second lever whereby we see ourselves continuing to grow.

We see opportunities in product coverage at the right topside. And we see opportunities in terms of geographic coverage.

Now then third question is, which cities? Then it's a known fact there are new mega cities.

Can you go please to slide 96 ? And this is [inaudible] by the economies intelligence unit, showing that actually there are 13 mega cities [Technical Difficulty] let me show you the picture.

We're talking about [Technical Difficulty] and these are new hubs, these are incredible cities. Some of which you will have never heard of, where [inaudible] travel, where frankly a presence is still today below what a presence in the big cities.

Therefore, the opportunities coming up in those ones, highlighted in red, are honestly spectacular. And it's about being there, having the right products, and the right people, of course, and having the right approach inaudible.

So this is a sense of what our strategy for growth in China is based on. Then you asked me about Europe.

In Europe, what we saw in 2014 is actually in Northern Europe, in particular not only Switzerland, but if you take Germany, if you take anything, put it this way, above France, we actually see the markets coming back. This is new information, but also in service I think the opportunities continue to be present by people renew their maintenance portfolios and invest in modernization.

In the South, unfortunately, and this I parallel to the macro situation, there we see the crisis continuing. Even though maybe Spain, that used to be one of the top three markets in the world, seems to have bottomed out.

There is probably a very small growth coming back, but we're still not [Technical Difficulty]. That, I would say, is our picture.

And Europe, as I mentioned at the beginning, we see it very mixed and [Technical Difficulty].

Yes, now the impact on XJ, for the full year, XJ would have [Technical Difficulty]. The performance was very good.

We're very pleased with the acquisition, and they perform above Group average. Then your question regarding the financial result, if I understood it correctly, could we have slide 31?

You should expect a negative result from financing activities, because we will not be able to repeat this net income from securities. So it's going to be more like 2013.

What I can also say here is that our hedges for the - for after January, were completely working properly, so we had a net zero impact from this sharp drop of foreign currencies. So basically no negative impact coming from there.

But we will no longer have in 2014, this positive impact from the securities. So overall, financing will be more like 2013.

Sorry, you have a clarification question to finish. Sorry, what's your last point, you would like to clarify.

Can you give him the microphone back? Thank you.

Yes sorry, maybe I wasn't clear enough, but I didn't mean the financial result, but I meant in the segment reporting you have these two segments, the elevator and escalator division, and then the finance or the corporate segment. And I was referring to that corporate segment where we have seen now a lower cost of minus CHF29 million, I think it was, underlying, excluding all the exceptionals that we have had in 2014.

No, I think you should basically take whatever it was for the full-year 2014.

Sustainable, that's what you're saying?

Yes, yes.

Okay. Thank you very much.

And sorry, just to come back on China. Unfortunately, the issue of M&A in China was somehow not addressed.

Firstly, if you'd just elaborate a little bit on the white spots or the segments that you're looking at; whether it's China that you're particularly interested in, in the M&A, or whether it's more other regions as well? Thank you very much.

As a matter of fact, as you probably know having followed us, we never talk about M&A specifics; we communicate after. That China is an area of interest, I think, goes by itself based on what we said.

We're looking for, at the risk of saying something obvious, solid companies with a focus on technology and, most of all, safety and quality in an area that is ideally complementary to ours. We remain dedicated to organic growth as a first priority, but if we find good companies aligned to Schindler, we're definitely very keen.

It is true that the slowdown in the market may provide new opportunities because companies that maybe before felt they could conquer the world, maybe Now they reconsider that in a different way. So that's all I can say at this stage, if you don't mind.

Thank you.

Patrick Appenzeller, Helvea Baader. Three questions from my side.

First of all, just to clarify, your local currency growth guidance. That includes, obviously, XJ-Schindler, so is this an additional 2% roughly or a bit less?

And then also to clarify on your answer given as the growth for the service. I think you mentioned that fourth quarter growth in service was above 5%.

Is that also for the full year or how do we have to understand that?

Yes. Now then, sorry I mis-expressed myself.

No, it was precisely below 5%. The question was I think from Mr.

Wyss, whether it has been roughly 5%. And my answer was no, it has been below 5%.

In the service business, in a way we're suffering from the low inflationary environment. Price adjustments tend to be tied to the CPI, to material cost indices and therefore, the price development is rather lower than what we had in the past.

So overall, the service business is growing less than what it was maybe three/four years ago.

But that's meant for the full year and I would interpret 3% or 4%, something like that.

Yes.

The last question on the financials again, you mentioned the firepower with the Swiss franc?

Yes.

But now we have negative interest, so do you expect any negative impacts now on your Swiss franc cash from that?

Well, it's a challenge I have to say, but our Treasurer who is sitting in the back is doing a good job so far, moving the cash around. But every day or every other day, we get calls from banks saying that they will or are about to implement negative interest rates.

But obviously, thanks to good relationships, we can sometimes manage to get a certain bucket where we're not really hit with the negative in interest rates. We also move the cash to other places, maybe to longer-term maturities to avoid this negative impact.

But it is a risk. You are right; it is definitely a risk.

We have an issue if you are not on time, because we didn't take yet any questions from people joining online. So if you gentlemen don't mind, we should, in view of the timing pressure, allow some questions online please.

Thank you.

Yes, then so that it's clear, we would now be ready to take questions from the participants on the conf. call.

I'll go one at a time if that's okay. Firstly, I guess unsurprisingly on China, there's been a few questions asked already.

My understanding is that within your 6.7% guidance for Asia Pac market orders growth, you're looking for above 6% for China. Could you just share with us what's the underlying set of assumptions for, I don't know the country GDP, maybe for the construction industry, that you're basing on, so that we compare that to what we're thinking?

I'm afraid the line wasn't that great, but let me just say it's about what are the assumptions for China growth. We shared some element.

I don't know if you had a chance to see what we had as a chart for floor space decreasing, except in the commercial segment, but then investment in real estate. Plus, we can take this offline.

Again, we can share some more of that. But it is also based on very much our granular research, looking - talking to key accounts, which account for more than 30% of the volume in China.

Similarly, we're looking at the individual growth rates for different cities. It may take a little bit long to discuss all this online, but if you want, we can discuss on a separate basis.

I would say, our figure isn't only based on macro, but also on micro elements. Was there a second question?

Yes, maybe I can take the other point. When you go to slide nine, you see that the orders received were up 7.8% for the full year.

In our company, slide nine, you see in local currency 7.8% and in our company orders received is reported included everything; new installation, modernization, service and repairs. It's a bit simplistic, but it's not wrong to assume that the 7.8% orders booked in 2014 will show up as revenue in 2015.

That's the simple answer why we're confident with the growth rate for 2015.

And yes, I would love to take the opportunity to discuss this further offline. Just a couple of others.

One on India, interesting, you mentioned the curve and we have looked into that as well. From what we understand, it's really about the rate of urbanizations stepping up, rather than the intensity.

From what you see on the ground right now and from your personal experience, Mr. Napoli, do you see any evidence of that rate speeding up, or is this something that we can actually reasonably expect in the next - well, in the near term, in the next two years?

It is indeed, a fact that urbanization is taking place in India. A city like Mumbai, the number of new inhabitants coming to the city every day is a staggering figure; I'm talking about thousands.

Is there any new development? Well, if you hear what the new prime minister said, he is definitely resolved to improve the infrastructure situation in India.

It is the first time in my memory that a prime minster makes that an official really clear policy statement at that level. So that, at least for the next four years, augers for a progress in that.

Of course, one of the issues in India is that it isn't much of a federal state, so as the elections in Delhi showed last weekend, you can see that even a powerful majority government, like BJP, will have to deal with some local realities that might complicate the plan. Overall, I do see an acceleration in India, but before India becomes the market within China, it will take long.

So the assumption we discussed before about 12 years lag is clear. But on the other hand, let me see, today India is one-tenth of the market in China, so we see China 0.5 million; India, we see about 50,000 maybe a little bit more.

There is no reason why this should stay like this, absolutely none. The other element, of course, is the cities in India.

Contrary to China, we don't have that widely dispersed urbanization. It's still about maybe a dozen cities that make the whole difference.

How quickly are the cities of that level can develop in India will be the big question.

And another question on the new products, you've given some very interesting examples on the Internet or electronic products that you're working on. Is there anything in the pipeline on the mechanical side about the 5500X [ph] that you cited before?

Yes, the 5500S is one. You see today more and more, we work on evolutionary development for the, call it this way, hardware products.

So now we improve our platform, as opposed to introducing brand new concepts and bringing in new electronics, new mechanics. We actually work now on those proper platforms.

So they might not look as exciting on paper, but this is the way to go forward and we see also a lot more cost effective and fast development coming in that regard. 5500S is clearly the first example.

There is more coming, in particular, in the high-rise segment, and I'd say watch this spring for more.

And maybe just the last question. It looks like there were some significant management changes that you implemented right at the end of last year.

And the question from me really is, is this more of a margin or growth target? Or is there a skew towards one or the other?

And in your previous experience, how long it took for those changes to pay off in terms of results? [Technical Difficulty]

I was quite interested in the currency impact, which you spoke about, which obviously you outlined as being mainly translational. I was just wondering what steps are you taking to reduce the impact of the franc's depreciation versus the euro and the dollar in Switzerland.

Are you freezing recruitment or extending hours, or losing staff or anything to do with that? And just generally, how difficult does the franc rise make life for the company?

Did you hear my question?

Yes, we understood your question perfectly, and sorry for being cut off, but maybe we go back to this slide number 22. Well, first of all, I have to say that we're not panicking, because, as you can see on this slide, we have been dealing with the currency issue for many, many years now.

So in Switzerland, our factories have taken measures already in the past to gain efficiency, basically through working on euro sourcing; euro sourcing for materials but also for services. But it is also true that we're considering other measures, like other companies have, extending basically the work hours in the units to really offset some of the negative impact.

This is under consideration.

Right, extending work hours is that?

Yes.

Right. And any job cuts, is that what you're possibly looking at or wage freezes?

Well first of all, I have to say that over the last few years, basically in Switzerland we had zero rounds of salary increases, even before this issue with the currency popped up, middle of January, we had already decided to do a zero round on the wages in Switzerland and this is the third consecutive year. That will continue.

Right. And job losses, is that something you're possibly looking at?

Say again.

Job losses, is that something you're looking at?

No, as you saw, our order intake was very good, our backlog is very strong. So our factories are very busy right Now so that's not up for discussion.

So job losses is not something you're considering at the moment?

Not at this point.

Right, okay. Just generally, how frustrating is it that you get this revenue growth and stuff, but it's been wiped out by the franc appreciation?

How difficult is that making life for the company?

Well if you are an investor coming from outside of Switzerland, you really don't care, because, obviously, the earnings per share in Swiss franc just has gone up too. But in a way, yes, it is somewhat frustrating looking at the CHF2.4 billion evaporated in the consolidation.

But at the end, it's accounting. In the operating companies, we retain a very solid market position.

We're as profitable as we were before. So from that perspective, we're not frustrated at all.

It's correct, no more questions. So that reminds me with just to say thank you, to all of you, for all for joining us today and apologies for the technical issues towards the end with the conference call.

But we would now kindly invite you to join us for refreshments and to use the time to maybe speak a little bit and maybe have the time to further ask questions. Thank you again.

Thank you.