Ladies and gentlemen, welcome to the Presentation of Full Year
Results
2021
Investors
and
Analyst
Conference
Call
and
Live
Webcast.
I
am
Alice,
the
Chorus
Call
operator.
I
would
like
to
remind
you
that
all
participants
will
be
in
listen-only
mode
and
the
conference
is
being
recorded.
The
presentation
will
be
followed
by
a
Q&A
session.
[Operator Instructions]
The
conference
must
not
be
recorded
for
publication
or
broadcast.
At
this
time,
it's
my
pleasure
to
hand
over
to
Mr.
Jens
Breu. Please
go
ahead,
sir.
J
Jens Breu
Chief Executive Officer, SFS Group AG
Thank
you very
much
and
good
morning
and
welcome
to
the
presentation
on
our
full year
2021
results.
Today's
speakers
are
Volker
Dostmann,
CFO
and
Jens
Breu,
CEO
of
the SFS
Group.
The
agenda
for
the
presentation
of
the
fiscal
2021
results
cover
positioning
of
SFS
key
takeaways
of
the
year
2021,
development
by
segment,
development
of
key
financials,
the
outlook
for
2022,
as
well
as
the
opportunity
for
Q&A
before
closing.
I
start
now
with
the
positioning
of
the
SFS Group. SFS
[ph]
are
companies
you
usually
unnoticed (00:01:25)
24
hours
a
day,
seven
days
a
week,
reliably
through
everyday
life.
Our
mission-critical
precision
components,
mechanical
fastening
systems,
and
tools
for
selected
niche
applications
are
embedded
in
the
successful
products
and
value
creation
activities
of
our
customers
and
fulfill
their
service
with
high
reliability
in
the
required
precision
and
cost
effectiveness.
Our
value
proposition,
sustainably
inventing
success
together.
Sustainability
is
important
to
us.
It
is
part
of
our
DNA.
Sustainable
thinking
and
acting
is
also
an
important
innovation
driver
and
gives
us
the
opportunity
to
question
our
processes
and
products
on
a
daily
basis
and
to
constantly
improve
them
for
the
benefit
of
all
stakeholders.
The
development
of
more
sustainable
products
and
solutions,
our
customers
gives
us,
as
a
value
engineering
specialist,
a
variety
of
opportunities
to
offer
our
customers
added
value
with
our
know-how,
true
to
the
mission
statement,
inventing
success
together.
In
doing
so,
we
strive
in
close
cooperation
with
customers
and
suppliers
to
continuously
increase
cost
transparency
and
also
to
include
other
aspects
of
sustainability
in
the
calculations.
In
addition,
the
value
proposition
is
supported
with
our
vision
statement,
every
employee,
a
co-entrepreneur,
and
achieving
sustainable
success
together,
which
has
shaped
our
path
over
the
years.
This
striving
for
sustainable
success
through
true
partnership
is
important
to
us.
It
is
firmly
anchored
in
our
core
values
and
actively
pursued
inside
and
outside
the
company
on
a
daily
basis.
While
the
business
model
and
customer
groups
of
our
three
segments
differ
depending
on
the
end-market,
the
organization
is
designed
in
such
a
way
that
the
natural
synergies
generated
are
maximized
across
all
areas.
These
primarily
relate
to
technology,
technological
competence
and
potential
cross-selling
opportunities
with
customers.
So,
for
instance,
in
the
segment
Engineered
Components,
we
industrialize
tools,
in
the
segment
Fastening
Systems,
we
sell
installation
tools,
and
in
the
segment,
Distribution
&
Logistics,
we
trade
with
tools.
New
with
the
Hoffmann
Group,
after
closing
also
in
the
segment
distribution
logistics
internationally.
With
acquisition,
we
are
making
substantial
progress
in
building
in
each
segment
a
global
business
platform
for
the
benefit
and
value
generation
of
our
customers
and
SFS.
Other
strategic
core
pillars
which
have
been
proven
for
effectiveness
during
COVID-19
pandemic
include:
our
local
for
local
strategy,
because
customer
proximity
is
essential
for
our
value
proposition
and
it
allows
us
to
achieve
a
more
reliable
delivery
performance,
as
evidenced
by
the
many
customers
we
have
gained,
especially
the
construction
division,
during
the
period
under
review;
the
diversification
in
end
markets,
regions
and
sales
channels
with
the
benefit
of
having
better
balance
revenue
development;
the
solid
financial
position
and
through
that
the
ability
to
continue
the
investments
in
innovation
and
realization
of
growth
projects
and
opportunities
even
during
crisis
times.
Focused
technologies
like
with
our
core
set
of
tooling-based
technologies,
relevant
secondary
operations
and
standardized
machine
park
allow
us
to
reduce
risk
and
maximize
flexibility.
Our
focus
on
relevant
megatrends
like
the
digital
revolution,
economy
globalization,
evolving
consumption
in
health
and
wellness,
resource
constraints
and
demographic
asymmetries
create
strong
underlying
demand
patterns
even
during
crisis.
I
continue
with
the
key
takeaways,
which
can
be
best
summarized
as
record results
and
inclusion
of
Hoffmann.
In
a
dynamic
market
environment,
characterized
by
high
demand,
supply
chain
bottlenecks,
and
the
COVID-19
pandemic,
SFS
boosted
its
sales
by
11%
to
CHF
1.893
billion.
All
segments
and
regions
contributed
to
the
growth,
enabled
by
robust
supply
chains
and
the
ability
to
continuously
fulfill
customer
orders.
High
capacity
utilization
drove
profitability
and
resulted
in
an
EBIT
margin
of
15.9%.
Focusing
on
mainly
temporary
adjustments
of
production
capacity
during
COVID-19
pandemic
allowed
to
benefit
from
high
demand
situation.
Prudent
cost
and
price
management
further
supported
profitability,
investments
into
projects,
including
production
capacity
expansion,
a
new
generation
ERP
system
and
cyber security
defense
continued
and
amounted
to
CHF 121.4
million,
ongoing
focus
to
achieve
the
set
goals
and
targets
in
sustainability,
release
of
a
CO2
roadmap
containing
measurable
targets
for
reduction
of
CO2
emissions.
With
the
inclusion
of
Hoffmann,
we
are
setting,
as
mentioned,
the
prerequisites
for
the
internationalization
of
the
D&L
segment
and
establish
international
presence
in
quality
tools
with
Hoffmann.
Both
companies
are
positioned
as
leading
providers
in
their
industries,
share
similar
value
proposition
and
value
systems,
and
look
back
on
a
longstanding
and
successful
partnership.
Inclusion
at
the
shareholder,
board
of
directors
and
executive
management
levels
at
SFS
establishes
continuity
and
the
basis
for
successful
future
development.
The
transaction
will
have
a
positive
impact
on
the
earnings
per
share
from
the
first
year
on.
In
2021,
Hoffmann
generated
around
€1
billion
in
sales
with
a
workforce
of
around
3,000
passionate
employees.
Joining
forces
will
mark
a
milestone
and
result
in
attractive
growth
opportunities
through
cross-selling
of
mechanical
fastening
systems
and electronic
procurement
solutions,
leverage
benefits
and
digitization,
logistics,
software
and
purchasing,
getting
access
to
Europe's
largest
tool
logistics
center.
Transaction
closing
is
expected
in
the
first
half
2022.
Continuing
with
the
development
by
segment
where
I
will
start
with
the
headlines
of
the
Engineered
Component
segment
in
which
greater
profitability
through
higher
capacity
utilization
could
be
achieved
through
sustained
substantial
recovery
driven
by
pent-up
demand
in
automotive-related
areas
and
the
industrial
sectors,
however,
negatively
impacted
by
supply
chain
bottlenecks
in
the
second
half
of
the
year.
Leading
to
a
reported
sales
in
the
fiscal
year
2021 of
CHF
975.2
million,
up
by
8.6%
versus
fiscal
year
2020.
The
Electronics
division
profited
from
positive
market
environment.
The
Medical
division
enjoyed
only
a
slightly
positive
development,
reflecting
demand
in
their
respective
niche
markets.
However,
this
was
partially
offset
by
the
good
progress
made
in
the
development
of
our
global
medical
production
platform.
In
general,
good
demand
situation
led
in
Engineered
Components
segment
to
high
capacity
utilization
thus
resulting
in
an
EBIT
margin
of
17.1%.
The
key
messages
of
the
automotive
division,
market
recovery,
lost
momentum
in
the
second
half
of
the
year
brings
to
light
after
good
recovery
in
the
first
half
year
driven
by
strong
pent-up
demand,
the
second
half
year
was
increasingly
impacted
by
shortages
in
semiconductor
supply
chain,
large
project
wins
in
electric
brake
systems
testimony
to
a
strong
competitive
position.
Growth
projects
require
investments
into
manufacturing
capacity
in
Heerbrugg,
Switzerland
and
Nantong,
China.
Stable
market
conditions
and
a
step-wise
recovery
of
semiconductor
supply
is
expected
over
the
course
of
the
year
2022.
The
Automotive
division
is
well
positioned
to
continue
to
significantly
outpace
market
growth
in
fiscal
year
2022.
The
key
message
of
the
Electronics
division,
good
development
with
record
results
in
the
first
half
year
follow
the
same
pattern
as
previously
outlined
for
the
division
Automotive.
Record
high
results
in
the
first
half
year.
The
second
half
year
was
troubled
by
supply
chain
bottlenecks
on
the
supply
side
of
our
main
customers.
Good
development
in
Lifestyle
Electronics
and
Accessories,
stable
demand
in
smartphones.
Unexpectedly
strong
demand
for
high-capacity
hard
disk
drives
further
supports
the
business
activities
in
Malaysia.
High
capacity
utilization
in
Nantong,
China,
besides
the
platform
requires
[indiscernible]
(00:11:30)
announced
an
expansion
to
cope
with
increasing
demand
also
from
other
divisions.
The
Electronics
division
expects
for
fiscal
year
2022
a
moderate
development
on
a
high
level.
The
Industrial
division
observed
a
significant
recovery
in
demand
throughout
the
year
where
the
recovery
that
began
in
the
second
half
of
2022
(sic) [2020] (00:11:55) and
encompassed
nearly
every
niche
market
served
by
the
division.
Luckily,
not
materially
impacted
by
supply
shortages
by
our
customers,
many
business
areas
achieved
revenues
above
pre-pandemic
levels.
The
stabilization
of
the
Aircraft
business
was
achieved
at
low
level.
The
situation
remains
challenging
with
only
initial
signs
of
recovery.
Overall,
the
Industrial
division
expects
market
demand
to
remain
good
in
fiscal
year
2022
than
the
reporting
year
2021,
realized
new
projects
will
further
underpin
the
positive
market
development.
In
the
Medical
division,
only
a
slightly
positive
development
was
achieved
considering
the
most
important
financial
KPIs.
Overall,
the
division
was
able
to
achieve
a
slightly
positive
organic
sales
trend,
however,
varying
across
product
categories.
Demand
for
instruments
and
implants
for
orthopedic
surgeries
were
still
negatively
impacted
by
COVID-19
pandemic.
Applications
in
production
ramp-up
for
sports
medicine,
however,
showed
good
growth
development.
Substantial
progress
was
made
on
filling
the
attractive
project
pipeline,
particularly
also
in
Asia,
high
attention
to
efficiency
gains
and
operational
excellence
yielding
initial
results.
The
Medical
division
expects
an
overall
positive
development
in
the
fiscal
year
2022.
In
the
Fastening
Systems
segment,
record
results
were
achieved.
In
a
dynamic
market
environment,
good
market
positioning
and
robust
supply
chains
led
to
a
record
sales
of
CHF
574.9
million
or
17.4%
year-over-year.
High market
demand
put
supply
chains
and
material
prices
under
considerable
strain.
Ongoing
efforts
to
expand
Construction's
market
access
were
supported
with
the
acquisitions
of
Jevith
in
Denmark
and
GLR
Fasteners
in
the
US.
The
successful
relocation
of
the
Riveting's
Chinese
production
site
to
Nantong
was
completed.
High capacity
utilization
and
efficiency
gains
resulting
in
a
record
EBIT
margin
of
17.4%.
Looking
into
the
details
of
the
Construction
division,
we
can
state
that
the
division
benefited
from
consistently
high
market
demand.
Strong
demand
led
to
exceptionally
good
growth
in
all
application
areas
in
Europe
and
North
America.
Market
share
gains
were
achieved,
thanks
to
robust
supply
chains,
good
material
availability,
and
a
high
degree
of
in-house
value-add.
Global
trends
towards
energy-efficient
building
envelopes,
streamlined
fastening
processes,
and
accident
prevention
remain
intact
and
provide
a
solid
basis
for
future
innovation,
activities,
and
growth.
Market
access
has
been
expanded
with
two
smaller
add-ons.
The
Construction
division
expects
in
fiscal
year
2022
market
conditions
to
remain
positive
and
a
further
growth
in
organic
terms.
The
Riveting
division
experienced
as
well
dynamic
demand,
however,
in
the
second
half
dampened
by
semiconductor
shortages.
Nevertheless,
stable
growth
has
been
achieved
driven
by
industrial
and
construction-related
areas.
Reduced
demand
from
automotive
customers
was
observed
in
the
course
of
the
year
due to semiconductor
shortages.
Innovative
product
solutions
such
as
network
tools
and
sustainability-related
applications
offered
substantial
growth
potential.
The
successful
relocation
from
Nansha,
China
to
the
Nantong
platform
will
further
benefit
the
division's
development
in
Asia
by
becoming
more
attractive
for
customers
and
allowing
to
reduce
costs
by
using
the
synergies
of
the
technology
platform.
The
Riveting
division
expects
continued
market
recovery
and
overall
growth
in
organic
terms
in
the
fiscal
year
2022.
In
the
Distribution
&
Logistics
segment,
we
have
worked
intensively
in
establishing
an
international
presence
in
quality
tools.
Stable
growth
throughout
the
year
resulting
in
reported
sales
of
CHF
343
million
or
8.2%
year-over-year.
The
segment
focused
intensively
on
maintaining
a
broad
focus
on
customer
needs
through
the
continued
offering
of
innovative
solutions
and
strategic
organizational
alignments
to
be
even
more
customer-centric.
The
envisioned
addition
of
Hoffmann
will
lend
the
D&L
segment
an
internationally
strong
position
in
the
attractive
area
of
quality
tools.
Strong,
occasionally
volatile
demand
led
to
good
capacity
utilization
and
an
EBIT
margin
of
9.4%.
The
Swiss
market
conditions
in
fiscal
year
2022
are
expected
to
remain
stable,
leading
to
an
overall
positive
development.
Besides,
we're already
looking
forward
to
the
closing
of
the
Hoffmann
acquisition
expected
in
the
first
half
2022,
allowing
us
to
even
more
leverage
on
the
combined
SFS-Hoffmann
growth
potential
The
targeted
strategic
growth
initiatives
can
be
summarized
in
the
following
four
dimensions.
Dimension
number
one,
use
of
the
new
platform
through
further
penetration
of
key
accounts,
targeted
acquisitions
of
customers
with
high
potential,
development
of
regional
growth
strategies
based
on
local
expertise
along
our
local
for
local
mindset.
Dimension
number
two,
focus
on
innovation,
new
products
and
product
lines,
which
includes
continuous
market
launch
of
new
products
and
innovative
supply
chain
solutions,
joint
development
together
with
our
customers
and
thus deeper
customer
integration.
Dimension
number
three,
further
regional
expansion.
Here,
we
target
the
expansion
in
the
growth
markets
in
the
US
and
China,
besides
supporting
existing
growth
initiatives
for
broader
market
access,
for
instance,
in
Europe
and
other
existing
activities.
And
then
dimension
number
four,
driving
forward
customer-centric
digitization
initiatives,
which
include
the
expansion
of
diverse
e-commerce
solutions,
as
well
as
the
further
development
of
digital
service
products
for
connected
manufacturing.
With
that,
I
conclude
the
presentation
on
the
development
by
segments
and
hand
over
to
Volker
for
the
development
of
the
key
financials.
V
Volker Bernhard Dostmann
Chief Financial Officer, SFS Group AG
Thank
you,
Jens.
Good
morning,
everybody.
Warm
welcome
from
my
side.
The
positive
start
into
the
year
2021
gave
us
a
solid
base
to
build
on.
Our
teams
managed
to
balance
the
constraints
like
supply
chain
issues
and
cost
pressure,
whilst
winning
new
customers
and
living
our
value
proposition.
In
the
second
half year, fast adaptation
on
capacity
had
to
be
managed.
Always
there
was
a
focus
on
the
finding
of
new
opportunities
and
realizing
these
potentials
decisively.
We
are
happy
to
present
to
you
today
the
financial
results
2021,
which
we
deem
as
document
of
the
dedication
of
more
than
10,500
employees
in
an
impressive
manner.
Sales
pattern
2021
were
characterized
by
distinct
rebound
in
first
half
year,
which
had
its
beginning
in
the
latter
of
2020.
Organically,
we
grew
by
10.3%
or
CHF
178
million
throughout
all
segments
as
described.
Currency
impacts
were
relatively
small
and
balanced
out
based
on
a
favorable
currency
mix.
[indiscernible]
(00:20:46)
effects
were
limited
to
the
base
effect
from
the
acquisition
of
Truelove
&
Maclean
in
2020
and
the
acquisition
in
2021
of
Jevith
in
Denmark
and
GLR
Fasteners
on
the
West
Coast
of
the
USA.
Sales
dynamic
faded
as
supply
chain
issues
in
our
customer
base
and
the
pandemic
impacts
came
to
light.
The
flexible
and
fast
reaction
of
these
shifts
have
sheltered
our
performance.
Decisive
seizing
market
opportunities
and
winning
new
customers
have
further
underpinned
the
development.
Our
teams
managed
to
maintain
delivery
capacity
towards
the
end
markets
to
a
large
extent,
thus,
underpinning
our
reputation
for
being
a
reliable
partner.
The
local
for
local
strategy
helped
to
secure
supply
chains
of
our
suppliers
and
managing
logistics
in
a
difficult
environment.
Seasonal
patterns
in
2021
were
distinctively
different,
mainly
due
to
the
very
strong
base
effect
of
2020,
but
also
due
to
a
slightly
slower
demand
in
the
second
half
when
the
supply
chain
issues
started
to
show
in
our
customer
base.
Therefore,
growth
in
first
half
year
2021
versus
prior
year's
23.6%
second
half is
negative
0.5%.
The
sales
breakdown
by
end
market
shows
a
strong
demand
in
Europe
which
slightly
shifts
the
relative
[ph]
weight
(00:22:28)
to
the
other
geographical
areas.
From
an
end
market
view,
construction
was
important
contributor,
but
also
capital
equipment
and
general
industries
were
driving
factors.
Electronic
end
markets
slightly
improved
on
a
nominal
basis,
which
is
due
to
an
extraordinary
2020
characterized
by
the
strong
demand
from
the
work
from
home
change.
Medical
end markets,
as
described,
remained
a
bit
slower
and
during
the
period
[ph]
where
(00:23:03)
mainly
elective
surgeries
delayed,
so
that
impacted
[ph]
a
bit (00:23:07).
For 2021,
we
managed
to
report
a
compound
average
growth
rate
for
the
group
in
the
upper
part
of
our
mid-term
guidance
at
5.9%
CAGR
and a
normalized
EBITDA
of
21.3%.
We
reconfirm
our
statement
that
the
growth
through
the
cycle
holds
firm
and we
report
a
record
high
EBITDA
margin
above
the
targeted
bandwidth.
Capacity
utilization
paired
with
a
distinct
cost
discipline
gave
the
whole
group
a
boost
in
2021.
As
mentioned
before
and
also
discussed
during
the
first
half
year
presentation,
the
uneven
demand
was
a
big
[ph]
ask (00:23:57)
to
our
organization
in
the
second
half.
The
significant
pent-up
demand
of
the
pandemic
normalized
to
some
extent.
This
was
paired
with
the
expected
cost
increase
in
the
second
half.
The
seasonality,
which
we
have
reported
over
the
years
comparing
first
half
year,
second
half
year,
therefore
did
not
materialize.
Overall,
it
even
shifted. Shown
to
the
right
of
the
slide,
you
see
the
breakdown
into
first
half
year,
second
half
year.
Despite
all
we
mentioned
before,
the
challenges
in
the
second
half
year,
we
report
in
the
second
half
year
is still
very
attractive
levels
of
EBIT.
For
the full
year,
we
report
an
EBIT
of
CHF
301.7
million,
15.9%
or
an
EBITDA
of
CHF
407.1
million,
21.5%.
To
optimize
production
footprint,
division
Riveting
transferred
its
production
from
Nansha
to
Nantong.
Subsequently,
we
have
managed
to
sell
off
the
plant
and
the
respective
land
rights.
And
with
that,
we
record
a
book
gain
of CHF
3.1
million.
Details
are
given
to
the
upper
left
of
the
slide.
Rising
cost
levels
were
predominantly
coming
from
production
cost.
We're
talking
about
tooling
and
energy,
but
also
workforce,
transportation
and
other
selling
cost.
Raw
material
price
increases
and
higher
[ph]
factory (00:25:42)
costs
were
successfully
passed on
to
our
customers.
The
net
working
capital
side,
along
with
the
[ph]
livelier (00:25:50)
top
line,
inventory
turns
increased
and
the
net
working
capital
came
down
to
29.9%
of
net
sales
or
109
days.
Selectively,
inventory
levels
were
replenished
and
raw
materials
stock
was
built
up,
while
DIO
came
down
almost
four
days.
Further,
the
receivables
management
successfully
reduced
[ph]
debtors (00:26:19)
risk
and
collected
successfully.
Infrastructure
projects
at Stamm
in Hallau,
Switzerland
and
for
automotive
here
in
Heerbrugg, Hall
6,
are
making
good
progress
along
the
planned
levels.
Parallel
to
that,
constant
renewal
and
improvement
in
the
machinery
[ph]
part (00:26:45)
take
place.
The
project
of
migrating
the
ERP
system
from
the
existing
SAP
to
the
S/4HANA platform
is
underway
and
is
partially
recognized
as
CapEx.
With
investments
of CHF
121.4
million
or
6.4%
of
sales,
we
are
within
the
expected
CapEx
range.
However,
we
see
ourselves
at
the
beginning
of
a
new
investment
cycle,
having
launched
the
announced
expansion
in
Nantong,
which
will
start
in
2022,
parallel
with
investments
into
machinery
and
capacity
expansion
in
other
areas.
Our
free
cash
flow
is
at
CHF
203
million,
which
is
a
plus
of
5.75%,
reflecting
a
conversion
out
of EBITDA
of
50%,
which
is
within
the
targeted
bandwidth.
This
is,
of
course,
including
the
before mentioned
nominal
buildup
of
the
net
working
capital
and
including
the
cash
flows
from
our
sell-off
in
Nansha
[ph]
and/or (00:27:49)
the
dividend
payout.
As
a
result
of
that,
the
equity
base
has
further
been
strengthened
and
is
at
–
and
our
equity
is
at
78.9%.
Our
net
cash
position
increased
by CHF
135
million
to
a
level of
CHF
279
million.
Looking
into
returns
on
capital
employed,
we
see
the
increase
to
26.1%
on
the
back
of
the
strengthened
EBIT,
reflecting
the
utilization
of
our
infrastructures.
Calculating
on
a
flat
tax
rate
of
17.5%,
we
show
a
return
on
invested
capital
of
11.2%,
which
brings
us
into
the
targeted
range
of
returns.
Differentiation
between
return
on
invested
capital
and
capital
employed
can
be
broken
down
into
a
tax
effect
of
4.6
percentage
points
and
the
capital
impact
from
goodwill
of
10.3
percentage
points.
The
effective
tax
rate
came
slightly
up
to
17.8%
and
remains
within
the
targeted
range.
Underlying
factors
are
the
shift
in
taxable
results
from
higher
tax
– into
higher
tax
rate
countries, which is
counterbalanced
by
the
tax
effective
depreciations,
which
we
take
profit
from.
The
board of
directors
suggest
to
the
general
assembly
payout
of
a dividend
per
share
of
CHF
2.20,
which
is
a
payout
of
33.3%.
[ph]
Depending
of (00:29:41)
the
authorized
capital
of
1.6
million
shares,
the
maximal
cash-out
is
at
CHF
86
million
or
would
reflect
a
payout
of
34.7%.
Let
me
summarize
the
KPI
overview
with
the
statement
that
I
deem
this
as
a
demonstration
of
stability,
[ph]
consistent
(00:30:07)
growth
and
a
demonstration
– demonstrated
ability
to
adapt
the
capacity
to
the
current
needs.
The
group
is
generating
attractive
levels
of
cash
with
reliability
and
standing
on
a
very
solid
balance
sheet.
With
this,
I
thank
you
for
the
attention
and
the
interest
and
the
subsequent
questions
and
give
back
to
Jens
who
will
take
you
through
the
outlook
and
the
priorities.
J
Jens Breu
Chief Executive Officer, SFS Group AG
Thank
you,
Volker,
and
welcome
back
as
I
continue
with
outlook
2022.
The
guidance
for
fiscal
year
2022
reflects
the
expectation
for
SFS standalone
without
Hoffmann.
Performance
in
the
2022
financial
year
will
remain
characterized
by
major
uncertainties
as
a
result
of
geopolitical
developments
like
the
current
war
in
the
Ukraine,
trade
conflicts,
and
sustained
disruptions
in
supply
chains.
Uncertainties
in
the
mentioned
international
supply
chains,
which
should
gradually
subside
as
the
COVID-19
pandemic
abates,
are
expected
to
persist
until
early
2023.
In
this
environment,
ensuring
the
highest
possible
focus
on
customer
service
takes
top
priority.
Investments
in
the
selective
expansion
of
our
production
capacity
and
[ph]
boost (00:31:33) the
implementation
of
ambitious
growth
projects
will
continue.
Major
projects
during
the
current
financial
year
include
the
[ph]
staff (00:31:42)
to
expand
the
production
plant from
Nantong,
China
moving
into
the
new
production
hall
at
the
Heerbrugg
site,
Switzerland
and
the
first
larger
go-live
of
S/4HANA,
the
new
generation
ERP
system.
Expansion
of
our
global
production
platform
for
medical
device
application
remains
strategic
priority
as
well.
Besides,
we
expect
the
successful
closing
of
the
transaction
with
Hoffman
to
take
place
in
the
first
half
of
2022
once
the
usual
closing
conditions
have
been
met.
Looking
out
further,
SFS
expects
product
call-offs
to
be
partially
subdued
in
the
first
half
of
the
year,
but
for
this
to
pick
up
over
the
course
of
the
year.
Given
the
solid
project
pipeline,
we
are
confident
that
the
development
will
be
positive
in
all
end
markets.
Based
on
that,
SFS
expects
standalone
sales
growth
of
3%
to
6%
for
the
2022
financial
year
at
an
EBIT
margin
of
13%
to
16%.
The
outlook
will
be
updated
once
the
transaction
with
Hoffmann
has
been
closed.
On
the
operational
side,
we
continue
to
focus
on
specific
priorities
tailored
to
be
most
relevant
and
beneficial
to
reach
maximum
performance
for
the
end
markets
and
customers
we
serve.
These
are
strengthen
innovation,
especially
in
the
megatrends
of
demography,
digitization
and
autonomous
driving;
investments
in
future
growth
projects,
namely
in
engineered
components;
establish
international
presence
with
Hoffmann
in
the
segment
distribution
and
logistics;
ensure
reliable
supply
capabilities
despite
the
current
global
sourcing
challenges
and
disruptions;
continue
improving
the
customer
centricity
of
the
organization;
balance
production
capacity
with
demand,
while
ensuring
supply
capabilities
and
keeping
costs
under
control;
integrate
sustainable
acting
and
thinking
holistically
in
the
business
model
and
corporate
strategy,
and
protect
employee
health
and
safety.
With
that,
we
are approaching
the
end
of
the active
presentation
of
the
full-year
2021
results.
And
now,
[ph]
we're all (00:34:00)
available
for
your
questions.
First,
we
take
the
questions
from
participants
on
the
phone
before
we
take
the
questions
from
the
[indiscernible]
(00:34:11).
Operator
We
will
now
begin
the
question-and-answer
session.
[Operator Instructions]
Our
first
question from
the
telephone
comes
from
the
line
of
Joern
Iffert
with
UBS. Please
go
ahead.
J
Joern Iffert
Analyst, UBS AG
Good
morning,
and
many
thanks
for
taking
my
questions.
The
first
question
will
be,
please,
on
the
margins
in
Engineered
Components
in
the
second
half
2021
falling
to
15%,
I
think
this
was
the
weakest
margins
I
can
remember
for
the
second
half.
Is
there
any
special
in
this?
Is
there
a
lack
of
pricing
power
and
also
would
you
expect
that
for
the
full-year
2022,
you
can
keep
margins
relatively
flattish
year-over-year
in
Engineered
Components
around
17%?
The
second
question
would
be,
please,
on
your
average
selling
prices
in
Fastening
Systems
and
also
the
margins
which
doubled during
the
crisis. Is
this
something that
you
think,
okay,
look,
the
average
selling
prices
are
[ph]
now sustainable given
the
strong
construction
sector
(00:35:33)?
Would
you
expect
average
selling
price
to
decline
again
in the
next
two
to
three
years
[ph]
if (00:35:37)
margins
are
normalizing?
And
if
normalizing,
what
is
a
reasonable
level,
please,
in
Fastening
Systems?
And
the
last
question,
if
I
may,
I
mean,
the
cash
conversion
was
pretty
strong
in
the
last
two
years.
Is
the
free
cash
flow
to
sales
margin
of
around
[ph]
10%
something (00:35:51)
which
is
structural
now
and
also
considering
the
rising
CapEx
needs
over
the
next
two
years?
Thanks
a
lot.
J
Jens Breu
Chief Executive Officer, SFS Group AG
Okay.
Good
morning,
Joern.
Thank
you
for
your
questions.
And
the
first
question
about
the
EBIT
margin
in
Engineered
Components,
you
are
absolutely
right.
We
have
seen
an
increased
volatility
in
the
Engineered
Component
EBIT
margin
due
to
higher
and
lower
utilization,
and
there
is
different
divisions
having
a
different
impact
on
the
margin,
as
you
see
it
in
the
Engineered
Components.
Overall,
we
have
achieved
a
17%
margin,
which
we
deem
as
okay.
We
would
certainly
expect
[indiscernible]
(00:36:31)
throughout
the
year, a
good
utilization
of
the
capacity.
We
should
see
EBIT
margins
of 18%
and
slightly
higher.
Looking
out
into
the
year
for
2022,
we
certainly
expect
that
the
volatility
will
remain
first
half
year, probably
a
little
bit
lower
utilization;
second
half
year,
much
better
utilization.
I
would
say
we
expect
a
similar
EBIT
margin
in
the
year
2022
as
we
have
seen
it
in
the
year
2021,
plus/minus,
based
on
utilization
of
the
capacity
we
provide
to
the
end
markets.
Certainly,
uncertainties
out
there,
and
we
expect
a
fully
loaded
second
half
of
the
year
and
probably
a
little
bit
lighter
loaded
first
half
of
the
year.
Hopefully
then
in
2023,
we
will
see
a
more
even
utilization
of
Engineered
Components
capacity
throughout
the
year.
On
the
other
hand,
I
have
also
to
mention
that,
for
instance,
in
electronics,
we
had
the
best
year
ever
in
terms
of
utilization.
We
had
a
well-loaded
[ph]
plan (00:37:45)
situation
in
the
first
half
and
second
half
of
the
year.
So,
the
swing
down
in
the
second
half
of
the
year
2021
mainly
came
through
the
lack
of
order
calls
from
our
automotive
customers
and
in
some
areas,
also
from
our
industrial
customers,
and
in
medical,
also
due
to
orthopedics,
and
in
aerospace,
also
due
to
the
lack
of
demand
on
those
customers.
So,
you
see
plenty
of
upside
potential.
I
think
we've
managed
the
year
very,
very
well
last
year.
We
expect
2022
to
probably
fall
into
a
same
or
similar
pattern.
And
in
the
future,
we
expect
increased
utilization
of
capacity.
The
second
question
is
then
on
the
selling
price
sustainability
within
division
Construction
in
the
segment
Fastening
Systems.
Also
here,
we
have
seen
increased
price
increases
on
a
quarterly
level,
at
least,
and
we
also
would
expect
that
this
will
continue
in
the
year
2022.
Prices
will
–
depending
on
the
region,
on
the
country,
will
be
changed
or
increased
on
a
quarterly
basis,
at
least.
In
some
countries,
we
even
increased
prices
on
a
monthly
basis
due
to
increased
inflation
and
due
to
increased
cost
in
the
supply
chain.
So,
I
would
not
expect
that
we
will
see
a
slowdown
of
price
increases
in
Construction
in
the
year
2022,
maybe
even
2023,
we
will
see
increasing
pricing
momentum
due
to
supply
chain
issues,
as
we
observe
due
to
COVID,
but
also
now
we have
the
Ukrainian
conflict
and
the
tight
involvement
of
Russia,
we'll
probably
see
more
disruptions
in
the
supply
chains,
which
will
then
increase
prices
and
which
will
be
an
absolute
necessity
for
us
to
maintain
our
EBIT
margin,
that
we
follow
those
price
increases
and
push
them
through
to
customers,
which
is
one
of
the
top
priorities
we
have
within
the
organization.
So,
for
the
next
two
years,
it
will
remain
volatile
in
the
supply
chains,
cost
will
increase
and
we
will
certainly
do
the
maximum
to
forward
those
cost
increases
to
our
customers
and
they
will
forward
to
the
consumers.
With
that,
I
hand
over
to
Volker
for
the
third
question?
V
Volker Bernhard Dostmann
Chief Financial Officer, SFS Group AG
Your
question
regarding
the
free
cash
flow
to
sales,
10%
is
certainly,
kind
of
an
area
we
strive
for.
We
have
certainly
learned
a
lot
in
improving
the
inventory
management.
I
alluded
to
the
faster turns
in
inventory.
We
see
also
the
upside
of
normalizing
of
the
supply
chains
in
raw
materials,
which
certainly
would
help.
What
goes
in
contrary
to
that
is
the
choppy
demand
situation
from
the
large
customers,
these
call-offs,
they
are
very
difficult
to
plan
for.
That
could
be
a
counter
trend.
The
second
topic
that
we
see
is
that
we
have
a
very
close
and
good
working
receivables
management,
which
we further
[ph]
hone,
but
which
will
be
or (00:41:15)
come
under
pressure
once interest
rates should
pick up.
I mean,
we
will
see
what
that
is.
[ph]
Certainly,
the
biggest
factor
is
our
investment
side (00:41:29)
where
we
see
for
2022,
a
pickup
in
investment
activity.
Hall
6
is
going
to
be
finalized
[ph]
in
–
to
the
latter (00:41:38)
of
this
year,
and
machinery
will
be
invested.
In
parallel,
we
have
the
Nantong
platform
that
is
going
to
be
built
that
will
certainly
put
the
strain,
but
the
mentioned
10%,
I
think,
is
a
good
target
to
strive
for.
J
Joern Iffert
Analyst, UBS AG
Thanks
a
lot
for
this.
And
if
you
allow
me
a
follow-up
to
Jens'
answer
on
Fastening
Systems.
So,
with
[ph]
ever
selling (00:42:07)
prices
further
going
up
to
mitigate
rising
costs,
then
you're
looking
for
an
EBIT
margin
relatively
flattish
in
2022
versus
2021
in
Fastening
Systems?
J
Jens Breu
Chief Executive Officer, SFS Group AG
Certainly,
in
Fastening
Systems,
we
would
expect
a
more
flattish
development
of
the EBIT
margin.
J
Joern Iffert
Analyst, UBS AG
Thanks
a
lot.
Operator
The
next
question comes
from
the
line
of
Andreas
Müller
with
ZKB.
Please
go
ahead.
A
Andreas Müller
Analyst, Zürcher Kantonalbank
Yes.
Good
morning, gentlemen.
Thanks
for
taking
my
questions.
I've
got
also
questions
on
the
raw
material
price
increase,
which
you
expect
is
going
to
continue
in
the
Construction
sector.
You
mentioned
already
that
you
can
pass
it
on
pretty
well.
But
can
you
talk
about
the
auto
segments
or
end
markets,
how
the
ability
to
pass
it
on
this
is
here?
That's
the
first
question.
J
Jens Breu
Chief Executive Officer, SFS Group AG
Good
question,
yeah,
Mr.
Müller.
And
overall,
we
see
this
as
the
top
priority
in
the
organization
and
already
made
it
as
a
top
priority
also
in
the
previous
year.
We
see in
the
Fastening
Systems
and
Distribution
&
Logistics
segment
where
we
have
usually
thousands
of
customers,
usually
with
smaller
purchasing
power
than,
for
instance,
in
Engineered
Components.
We
see
there
the
need
to
ongoingly
increase
prices
because
also
due
to
the
supply
chains
and
the
nature
of
products,
we
get
more
frequent
price
increases.
So,
in
Fastening
Systems
and
Distribution &
Logistics,
we
usually
see
three
to
five
price
increases
throughout
the
year.
[ph]
Certainly, it's
an
effort.
Certainly,
it will (00:43:56)
keep
people
busy
to
do
so,
but
I
think
there's
also
a
broad
acceptance
within
those
customer
and
end
market
groups
that
this
is
absolutely
necessary
to
secure.
Also
that
the
supplies,
and
especially,
in
the
Construction
division,
for
instance,
we
see
that
half
of
the
growth
is
achieved
through
new
customers
because
they
do
not
get
the
products,
they
do
not
have
the
availability
within
their
existing
sources.
So
there's
a
high
willingness
there
also
to
pay
the
increased
prices,
and
with
that
or
through
that,
secure
the
materials
they
need
to
have.
In
the
Engineered
Components
segment,
it's
a
little
bit
different.
There,
the
price
is
usually
increased
maybe
two
times
a
year.
That's
mainly
driven
by
the
raw
material
supply
side,
which
also
has
then
usually
two,
sometimes
maybe
three
price
rounds,
price
increase
rounds.
There's
a
higher
visibility
out
because
of
the
raw
material
–
[ph]
or (00:45:02) the
nature
of
the
raw
material
which
are
secured
there.
So,
for
instance,
today,
we
secure
raw
materials
for
the
year
2023
and
already
make
allocations
with
suppliers
and
tell
them
what
we
expect
for
2024.
So,
there's
a
much
longer
buying cycle
and
a
much
longer
visibility,
higher
visibility
on
that
side.
So,
due
to
that,
we
see
less
increases,
maybe
with
stronger
customers,
larger
customers,
maybe
the
price
discussions
are
more
intensive.
On
the
other
hand,
we
have
proven
over
time
that
we
also
are
able
to
increase
prices
there
as
long
as
we
don't
see
any
swift
changes
overnight,
like
currency
fluctuations
up
and
down
by
5%
to
10%
we
are
usually
able
to
maintain
the
margins
because
we
start
the
discussions
early.
So,
I
think,
overall,
we
are
optimistic
about
the
capability
of
pushing
through
prices,
but
we
are
certainly
very
careful
in
terms
when
we
see
swift
changes
overnight
fluctuations
of
currencies.
Then
we
usually
would
see
an
immediate
impact,
which
usually
then
takes
six,
sometimes
nine
months
to
cover
for
and
to
adjust
again
for.
A
Andreas Müller
Analyst, Zürcher Kantonalbank
Okay.
Thanks.
J
Jens Breu
Chief Executive Officer, SFS Group AG
I
hope
I
was
able
to
answer
your
question.
A
Andreas Müller
Analyst, Zürcher Kantonalbank
Yes.
I
have
another
one
if
I
may
about...
J
Jens Breu
Chief Executive Officer, SFS Group AG
Sure.
A
Andreas Müller
Analyst, Zürcher Kantonalbank
...it
seems
that
you're
a
bit
more
relaxed
about –
in
the
second
half
about
the
supply
chains
and
all
the
issues,
strains
in
the
supply
chain.
And
what
is
that
based
that
it's
going
to
be
better
going
forward
relative
to
the
first
half?
J
Jens Breu
Chief Executive Officer, SFS Group AG
It's
mainly
based
on
the
discussions
we
have
with
our
customers.
We
certainly
see
that
material
changes
have
been
implemented
in
the
supply
chains.
We
see
that
capacity
has
also
been
build
up.
And
I
think
that
the
lessons
learned
cycle
we
had
to
all
go
through
happened.
So
we
would
expect
that the
necessary
precautions
are
put
into
place.
And
due
to
that
in
the
second
half,
we
will
see
better
availability,
especially
in the
semiconductor
side
where
– which
was
kind
of
the
halting
or
the
stopping
or
the
braking
costs
for
lower
utilization
of
capacities
in
the
second
half
of
last
year
because
our
customers
did
not
have
the
semiconductors
they
needed
to
keep
also
their
products
in
the
market.
So,
overall,
I
think
the
supply
chain
learned
a
lot,
adjusted a
lot,
became
more
flexible,
also
increased
the
capacity
bandwidth
a
step
up.
So,
that's certainly
a
plus.
On
the
other
side,
as
we
see
with
the
Ukrainian
crisis
currently
that
there
will
be
also
some
indirect
movements
in
the
supply
chains
probably
in
the
first
half
of
this
year,
which
also
need
to
be
absorbed.
But
overall,
we
see
also
that
the
closer
you
come
to
the
OEMs,
the
more
flexible
the
capacities
are.
So
we
also
would
expect
that
a
catch-up
of
pent-up
demand
will
be,
again,
happening
in
the
second
half
of
this
year
which would
see
good
utilization,
again,
probably
similar
to
what
we
have
seen
in
the
first
half
of
2021
overall
in
the
industry.
A
Andreas Müller
Analyst, Zürcher Kantonalbank
Okay.
Thank
you
on
that.
And
then
really
on
this
sad
conflict,
you
just
mentioned
the
indirect
kind
of
impact.
I
don't
know
if
you
addressed
that
at
the
beginning,
but
do
you
have
employees
in
these
conflicting
countries?
And
also
what's
the
exposure –
sales
exposure
directly
to,
say,
Russia,
Belarus,
Ukraine.
Do
you
have
assets
over
there
as
well?
That's
my
question.
J
Jens Breu
Chief Executive Officer, SFS Group AG
Very
good
question.
No,
we
have
not
addressed
it
yet.
In
the
three
countries,
as
you
mentioned,
Belarus,
Ukraine,
Russia,
we
do
sales
of
slightly
below CHF
10
million.
We
do
not
have
employees
on
the
ground
in
those
countries.
We
do
not
have
a
strong
exposure
in
Eastern
Europe
anyhow.
So,
from
that
point
of
view,
we
have
a
limited
impact
certainly.
Indirectly,
we'll
see
a
slowdown.
We
may
have
customers
which
do
business
in
those
regions
there,
and
they
will
certainly
also
be
impacted.
So,
on
some
customer,
some
segments,
we'll
see
probably
a
weaker
demand
pattern
in
the
first
half
of
the
year
and
as
we
expect
all
the
Ukrainian
war
probably
to
last
a
while
from
today's
perspective.
Also,
second
half
of
the
year,
there
will
be
an
impact
on
the
demand.
On
the
other
hand,
we
also
have
heard
and
seen
that
the
rest
of
world
is
reacting. We
see
material
initiatives
to
build
up
and
improve
the
defense
side
of
the
countries
which
then,
on
the
secondary
side,
not
on
the
primary
side,
on
the
secondary
side,
will
then
also
generate
additional
needs
and
demands,
especially
with
the
segment
Distribution
&
Logistics
and
probably
Fastening
Systems
and
also
in
some
Industrial
customers
because
infrastructure
improvements
will
need
to
happen.
And
also
the
need
for
production
and
ancillary
products
will
be
needed
to
improve
and
increase
the
output
off
of
those
goods,
which
will
be
more
in
demand
when
the
Western
world
increases
their
defense
infrastructure
and
capabilities
overall.
So,
luckily,
nobody
on
our
side
impacted.
We
expect
some
secondary
impact,
some
downs,
some
ups.
Overall,
this
is
the
current
state
of
view.
A
Andreas Müller
Analyst, Zürcher Kantonalbank
Okay.
Thank
you
very much.
Operator
The
next
question
comes
from
the
line
of
Tobias
Fahrenholz
with
Stifel.
Please
go
ahead.
T
Tobias Fahrenholz
Analyst, Stifel Schweiz AG
Yes.
Hello,
gentlemen.
Hi.
Thanks
for
taking
my
questions.
First
one
on
the
H1
outlook.
Trying
to
understand
your
H1
cautions
a
little
bit,
to
which
extent
this
is
driven
by
just
the
high
basis,
or
do
you
really
see
here
an
ongoing
volatile
and
challenging
environment
at
the
moment?
Maybe
to
clarify
this,
I
mean,
maybe
you can
say
something
[indiscernible]
(00:51:58)
2022
was
in
reality,
so
did
you
see
some
growth
and
remained
margin
flattish
or
did
they
even
drop?
J
Jens Breu
Chief Executive Officer, SFS Group AG
Hi. Good
morning,
Tobias.
We
see
for
the
first
half
of
2022,
we
see
both
effects.
As
you
just
have
mentioned,
we
see
a
strong
base
which
we
run
against
due
to
excellent
utilization
in
the
previous
year.
Currently,
some
of
the
supply
chains
on
the
customer
side
have
improved
compared
to
the
second
half
of
last
year,
but
probably
are
still
not
as
affluent
as
they
were
in
the
first
half
of
last
year,
so
we
are
running
against
the
strong
base.
That's
certainly
true
and we
will
–
we
expect
that
in
the
second
–
probably,
the
second
issue
to
be
kept
in
mind
is
the
volatility
overall
in
the
supply
chains.
So,
it's
not
just
the
base,
it's
also –
there's
still
existing
volatility. We
see
patterns
of
strong
demand
and
we
see
patterns
of
weaker
demand
as
customers
getting
their
supply.
And
as
we
just
mentioned
in
the
current
environment
of
the
Ukrainian
conflict,
we
don't
– we
will
probably
see
more
challenging
situations
than
most
situations
where
problems
have
been
solved.
So
overall,
first
half
of the
year,
challenging,
second
half
of
the
year,
we
expect
a
smoother
right.
T
Tobias Fahrenholz
Analyst, Stifel Schweiz AG
Okay.
And
on
the
2022 growth
outlook,
you're
giving
us
the
typical
targets,
including
your
3%
to
6%
sales growth.
Normally,
there's
kind
of
a
1%
to
2%
M&A
part
in
there.
Is
this
still
the
case
for
the
running
year?
And
if
you
split
it
up,
especially
the
organic
growth
targets
between
volumes
and
prices,
which
should
be
both
in
there,
how's
the
split
looking
there?
So what's
the
–
at
the
end,
what's
the
pure
volume
target
for
the
current
year?
J
Jens Breu
Chief Executive Officer, SFS Group AG
I
think
that
what
we
can
do
is
look
a
little
bit
back
and
tell
you
what
we
have
experienced
in
the
past
and
you
may
be
able
to
apply
that
to
the
future.
Overall,
we
are
not
in
a
position
to
be
more
precise
about
the
year
because
there're many
uncertainties
out
there.
But
I
think
overall,
we
can
say
that
in
past
times,
we
were
able
to
grow
a
little
bit
more
than
3%
organically
and
the
difference
between
the
3%
to
the
6%
where
we
stay
right
now
has
been
inorganically.
But
in
those
years,
we
did
not
see
a
lot
of
price
increases.
So
maybe
this
year,
if
we
maybe
don't
see
an
additional
M&A
activity,
we
see
between
the
organic
normal
portion
and
the
gap
to
the
3%
to
6%
is
probably
price
increases.
Last
year,
growth
was
driven
by
two
thirds
volume
and
one-third
prices.
So,
we
may
or
you
may
apply
a
similar
model
to
the
year
2022.
That
on
the
expectation
side
for
next
year.
T
Tobias Fahrenholz
Analyst, Stifel Schweiz AG
Okay.
Thank
you.
Operator
The
next
question comes
from
the
line
of
Remo
Rosenau
at
Helvetische
Bank.
Please
go
ahead.
R
Remo Rosenau
Analyst, Helvetische Bank AG
Yes.
Thank
you.
On
the
price
increase
questions,
I
mean,
in
an
environment
where
input
costs
go
up,
obviously
you
always
have
a
time
lag
effect.
So
you
pass
on
these
high
input
costs
to your
customers,
but
there
might
be
or
there
is
more
or
less
a
larger
or
smaller
time
lag.
So,
could
you
define
how
long
it
takes
in
your
three
divisions
in
order
to
compensate
the
–
these
input
cost
increases?
J
Jens Breu
Chief Executive Officer, SFS Group AG
Yeah.
Good
question,
and
as
I
alluded
a
little
bit
before,
we
see
two
types
of
price
increases.
We
see
the
ones
with
longer
visibility.
And
this
is
what
we
have
seen
last
year
and
the
year
before.
So
we
had
pretty
good
indication
what
the
wrongful
prices
will
be
doing,
what
overall
energy
prices
will
be
doing
to
– throughout
the
year
and
build
it
into
the
model
and
we're
able
to
announce
price
increases
pretty
much
tailored
to
when
we
see
actually
the
goods
coming
into
house
and
into
inventory
overall.
So,
we
were
able
due
to
good
visibility
to
match
that
pretty
well,
increase
on
the
sales
side
pricing-wise,
and
the
incoming
goods
with
a
higher
pricing
point.
Looking
out
into
the
year
2022,
we
still
believe
that
this
will
be
the
case,
so
that
there
will
be
no
time
lag
or
time
delay.
On
the
other
hand,
if
we
see
shifts
in
currencies
overnight,
as
I
mentioned
before,
then
it
will
take
us
six
to
nine
months
to
restore
or
recover
the
margin
again
or
normalize
the
margins
again
to
the
previous
level
if
an
overnight
shift
is
happening
into
one
–
into
the
downside
direction
for
the
EBIT
margin
overall.
So,
I
think
we
are
prepared
for
the
year,
but
once
again,
I
think
we
all
look
forward
and
hope
that
we'll
not
see
a
major
shift
in
currency.
V
Volker Bernhard Dostmann
Chief Financial Officer, SFS Group AG
And
probably
for
your...
R
Remo Rosenau
Analyst, Helvetische Bank AG
Okay.
V
Volker Bernhard Dostmann
Chief Financial Officer, SFS Group AG
...model
point
of
view
factoring
that
we
see
roughly
15%
to
17%
of
raw
material
price
in
our
bill
of
material,
and
that
a
large
portion
of
this
can
be
planned
due
to
the
specialized
raw
material
that
we
need
can
be
planned
ahead
quite
well
and
is
contracted
ahead
quite
well.
So,
we
have
not
only
a
short
time
lag,
as
Jens
explained,
we
have
also
the
ability
to
plan
ahead
what
our
cost
levels
are
looking.
R
Remo Rosenau
Analyst, Helvetische Bank AG
Okay.
Great.
Thank
you.
Then
another
one.
I
mean,
the
whole
world
talks
only
about
higher
prices,
higher
prices,
higher
prices.
Are
there
any
spots
where
there
are
no
price
increases?
I
mean,
for
instance,
I
heard
that
steel
has
become
cheaper
specifically
in
the
US,
not
so
much
in
Europe.
Things
like
that
always
at
least
didn't
increase
that
much.
J
Jens Breu
Chief Executive Officer, SFS Group AG
We
don't
see – in
our
materials
and
goods
which
we
secure
and
buy,
we
have
not
seen
a
leveling
off
of
pricing
levels.
Maybe
we
had
selective
suppliers,
which
had
a
short-term
gap
because
maybe
some
I'd
say
automotive
customers
did
not
call
off
products,
then
they
maybe
came
to
us
and
offered
us
products
for
construction
market or
wired
to
–
for
construction
market
to
be
used,
but
that
will
be
a
very
spotty
development.
This
would
not
be
something
which
would
subside
in
a
P&L
to
a
large
degree,
that
may
be
a
small
tactical
gain
here
and
there
where
we
see
a
sportiness due to
a
weakness
in
a
certain
end
market
and
due to
overcapacity
of
a
supplier
who
is
very
much
exposed
to
a
specific
end
market.
So
overall,
not
we
see
on
the
labor
side,
on
the
energy
side,
on
the
raw
material
side,
we
see
price
increases
happening
on
a
daily
basis.
R
Remo Rosenau
Analyst, Helvetische Bank AG
Okay.
Then
my
last
question.
If
the
whole
situation
would
sometimes
change
again,
difficult
to
imagine
at
the
moment,
but
things
change
and
you
have
seen
different
cycles
in
the
past.
So,
if
raw
materials,
go
down,
what
happens
at
your
side?
I
mean,
do
you
proactively
go
back
to
your
customers
and
say,
okay,
now,
we
can
reduce
our
prices
or
do
your
customers
then
need
to
come
up
to
you
or
their
mechanisms
or
how
is
this
[indiscernible]
(01:01:01)?
J
Jens Breu
Chief Executive Officer, SFS Group AG
I
think
usually,
yes.
Customers
–
certainly
the
larger
customers,
which
are
more
organized
and
have
a
sizable
purchasing
departments,
they
monitor
that
very
specifically.
And
they
come
instantly
back
to
us
and
will tell
us
about
their
view
and
demands
in
our
direction,
so.
And
there
may
be
smaller
customers
which
maybe
do
not
have
such
a
concern
on
the
raw
material
they
buy
in
because
it's
a
smaller
portion
of
their
value-added,
which
they
have
in-house.
So,
it
varies
a
lot
between
customer
groups.
Overall,
I
think
we
also
need
to
take
a
look
and
keep
in
mind
what
happens
around
it.
If,
let's
say,
on
the
raw
material
prices
start
to
stagnate
or
slightly
start
to
reduce
but
cost
of
labor
and
cost
of
energy is
still
going
up,
then
there
will
not be
much
of
a
shift
in
pricing.
It
may
be
kept
stable
or
maybe
only
slightly
increase,
or
maybe
only
slightly
decrease.
I
think,
overall
what
we
can
say
is,
there's
no
falling
off
the
cliff.
We
have
never
experienced
before
in
a
cycle
that
[ph]
all in
a sudden, raw
material (01:02:17)
prices
drop
by
20%
or
30%.
And
due
to
that,
we
see
an
immediate
demand
from
customers
to
reduce
prices.
This
only
happens
in
currency
shifts
that
maybe
overnight
the
Swiss
franc
appreciates
10% or
15%
then
customers
would
comment
and
request
an
immediate
adjustment.
But
on
the
raw
material
side,
usually
things
happen
in
a
slower
pace.
Usually
developments
are
seen
in
advance
and
so
usually
suppliers,
the
supply
chain
customers
are aware
of
it
and
start
building
it
into
their
models.
And
there's
usually
visibility,
I
say,
between
three
to
nine
months
before
it
happened.
So,
there
will
be
a
soft
landing
if
the
change
comes
from
the
supply
[ph]
raw material (01:03:08)
side,
there
will
be
a
little
bit
harder
landing
if
the
change
to
fluctuation
comes
from
the
currency
side.
R
Remo Rosenau
Analyst, Helvetische Bank AG
Okay.
Great.
Very
clear.
Thank
you
very
much.
[Operator Instructions]
Operator
The
next
question
comes
from
the
phone
and
it's
from
Alessandro
Foletti
with
Octavian.
Please
go
ahead.
A
Alessandro Foletti
Analyst, Octavian AG
Yes.
Good
morning.
I
just
have
a
couple
small
follow-ups.
On
the
wording
in
your
outlook,
yes,
you
went
through
all
the
divisions
and
then
you
gave
some
sort
of
outlook
for
2022.
And
like,
for
example,
for
Construction
and
Riveting,
you
said
we
expect
organic
growth.
And
then
for
a
couple
of
others,
including
Medical,
Electronics,
et cetera,
you
said
we
expect
positive
development.
What's
the
meaning?
Is
there
a
difference
in
the
meaning
of
these
two
wordings?
J
Jens Breu
Chief Executive Officer, SFS Group AG
Good
morning,
Alessandro.
No,
there's
no
difference
in
the
meaning.
We
trust,
right,
not
to
be
too
boring
as
an
industrial
organization
and
use
always
the
same
term,
[ph]
but
you
were (01:04:27)
pretty
specific
in
picking
that
up.
Yeah.
A
Alessandro Foletti
Analyst, Octavian AG
All
right.
Good.
Then,
on
the
depreciation,
it
went
up.
If
I
calculate
correctly,
depreciation
and
amortization
together
like
[ph]
CHF 6
million
is
about
6%
(01:04:43)
less
than
sales.
[indiscernible]
(01:04:45)
anything
special
[indiscernible]
(01:04:50)
like
the
new
level
and
like
in
percentage
of
sales,
it
will
continue
that
direction?
V
Volker Bernhard Dostmann
Chief Financial Officer, SFS Group AG
It's
reflecting
the
normal
investment
cycle,
there
is
no
particular
extraordinary
effects
in
that.
A
Alessandro Foletti
Analyst, Octavian AG
All
right.
[indiscernible]
V
Volker Bernhard Dostmann
Chief Financial Officer, SFS Group AG
(01:05:06)
A
Alessandro Foletti
Analyst, Octavian AG
Thank
you.
And
then,
on
your
CapEx
plan.
Yeah. Perfect.
Thank
you
very
much.
V
Volker Bernhard Dostmann
Chief Financial Officer, SFS Group AG
As
we
said,
we
are
looking
into
a
CapEx plan
that
is
slightly
elevated,
that
goes
more
to
the
tune
of
the
8%.
If
we're
looking
out
into
next
year
just
because
of
the
parallel
ramping-up
of
[indiscernible]
(01:05:28)
and
ramping up
in
China,
Nantong.
So
we
see
ourselves
at
the
beginning
of
a
new
investment
cycle
like
we've
seen
it
probably
in
the
last
time
when
we
had
a
larger
platform
building.
This
time
probably
not
as
pronounced
[indiscernible]
(01:05:49).
A
Alessandro Foletti
Analyst, Octavian AG
Right.
But
probably
2022
and
2023,
up
to
8%
of
sales
and then
back
down
or
how
should
I...?
A
Alessandro Foletti
Analyst, Octavian AG
Yeah.
Yeah,
that
could
be
a
proxy.
A
Alessandro Foletti
Analyst, Octavian AG
All
right.
And
then,
my
last
one,
I
think
yesterday
or
the
day
before,
BMW
announced
the
closure
of
the
factories
in
Munich,
because
of
the
lack
of
cables.
So,
I
imagine
at
some
point
there
will
be
some
disruptions
there
as
well.
I
wonder
if
this
type
of
situation
is
already
including
in
the
statements
you
made
today
or
if
this
is
new?
J
Jens Breu
Chief Executive Officer, SFS Group AG
I
think
the
volatility
in
the
first
half
of
the
year
as
we
build
into
our
plan
can
be
manifold.
We
do
not
expect
that
the
first
half
of
the year
will
be
smooth.
We
also
expect
continued
shutdowns
on
the
OEM
side
and
we
believe,
in
our
guidance,
we
believe
that
there's
ample
capacity
on
the
OEM
and
tier
side
to
make
up
for
any
closings
in
the
first
half
of
the
year
and
the
second
half
of
the
year.
Pretty
similar
to
what
we
have
seen
last
year,
first
half,
loaded;
second
half,
lighter.
We
expect
this
year,
first
half,
lighter;
second
half,
loaded.
A
Alessandro Foletti
Analyst, Octavian AG
Okay.
Thank
you.
Operator
There
are
no
more
questions
on
the
telephone
at
the
moment.
J
Jens Breu
Chief Executive Officer, SFS Group AG
So,
since
we
have
no
questions,
we
maybe
go
over
and
ask
–
answer
the
questions
in
the
chat.
So,
first
question
we
have
from
[indiscernible]
(01:07:40).
The
question
is,
what
do
you
expect
for
labor
cost
increases
in
the
different
countries?
If
we
look
into
what
our
projections
are,
then
we
go
into
an
overall
labor
cost
increase,
which
is
very
patchy
and
regionally
not
only
country-wise,
but
even
within
countries
regionally
different.
If
we
look
overall,
we
see
a
labor
cost
increase
of
3.5%,
which –
given
the
time
lag
that
this
is
cranking
in
for
next
year,
will
come
down
to
some
2%
plus
on
our
P&L.
Then
the
next
question
also
from
[indiscernible]
(01:08:35)
is,
can
you
please
also
give
some
flavor
regarding
the
US
business?
Is
it
also
very
difficult
to
find
good
people
and
the
salary
costs
are
strongly
increasing?
V
Volker Bernhard Dostmann
Chief Financial Officer, SFS Group AG
Yeah.
I
mean,
that
neatly
goes
into
the
first
part
of
my
answer.
Yes,
we
see
that.
We
see
that
regionally
within
the
US
differently.
Certainly,
the
market
there
is
hotter,
but
we
still
are
able
and
managed
to
find
the
talents
we
need
to
keep
our
organization
growing
and
on
the
market.
J
Jens Breu
Chief Executive Officer, SFS Group AG
And
third
question,
same
source.
What
is
your
observation
regarding
the
out
of
China
production
trend
for certain products?
V
Volker Bernhard Dostmann
Chief Financial Officer, SFS Group AG
No.
I
mean,
that
is
the
–
we
mentioned
it
quite
a
couple
of
times,
the
local for
local
strategy
allows
ourselves
to
have
a
production
in
China
for
Chinese
direct
customers,
which
helped
a
lot.
And
certainly
the
production
out
of
China,
logistics
we
mentioned
it
is
a
constant
topic.
That
includes
customs and
logistics
as
such,
certainly
not
a
more
–
an
easier
market
at
the
moment.
J
Jens Breu
Chief Executive Officer, SFS Group AG
Overall,
when
we
take
a
look
at
our
customers,
we
see
as
Volker
said the
local for
local
is
becoming
more
vital.
So,
Chinese
OEMs
on
the
car
side,
they
localize
even
more
heavily
than
what
they
have
done
before
which
falls
right
into
the
direction
as
we
said,
local for local.
We
have
a
local
footprint
[ph]
due
to
that
are (01:10:30)
better
capable
in
receiving
and
getting
new
products,
which
we
can
produce
in
Europe
for
Europe,
China
for
China,
North
America
for
North
America
overall.
In
automotive
side,
this
is
helping
us
very
strongly
to
further
expand
our
footprint
in
China
with
other
customer
groups
on
the
electronic
side.
For
instance,
we
see
customers
trying
to
break
out
left
and
right
with
initiatives
to
maybe
try
to
establish
on
a
lower
basis,
on
a
much
lower
basis
a
value-added
activities
outside
of
China,
but
usually
after
two,
sometimes
three
years,
they
slow
those
initiatives
down
[indiscernible]
(01:11:15)
completely,
because
the
efficiencies
as
observed
in
China
cannot
be
met
and
cannot
be
copied
and
pasted
to
other
regions
due
to
strong
knowledge
and
scale
effects
in
China.
Then
we have
the
next
question
from
[ph]
Thorsten
Zoucher (01:11:35),
but
how
about
Hoffmann's
exposure
to
Russia,
Ukraine,
whether
we
can
give
there
an
update?
We
cannot
give
you
an
update
about
the
Hoffmann
in
detail
about
their
exposure.
This
will
need
to
wait
until
we
have
the
closing
and
then,
we'll
be
able
to
give
you
a
more
detailed
update
on
the
exposure
of
Hoffmann
in
Eastern
Europe
and
the
impact
of
the
Ukrainian
crisis
on
the
development
there.
J
Jens Breu
Chief Executive Officer, SFS Group AG
The next
question
comes
from
[ph]
Christian
Obst (01:12:09).
Can
you
give
us
an
update
on
the
Hoffmann
takeover
timeline
discussion
with
[ph]
cartel
(01:12:12) authorities
expected
2022
impact
on
top
and
bottom
line?
V
Volker Bernhard Dostmann
Chief Financial Officer, SFS Group AG
I
certainly
can
give
you
an
update
on
the
timeline.
The
discussions
with
the
[ph]
cartel (01:12:27)
authorities
are
working
very
well.
We
are
on
time
and
we
got
questions
back.
We
got
first
green
light
already.
So,
when
we
say
first
half
year,
we
are
firm
and
we
have
a
very
good
level of discussion
with
the
sellers on
the
process
and
are
proceeding
as
planned. And
as
said
before,
expectations
for
2022
and
guidance,
we
will
update
that
as
soon as
closing
happens,
as
we
have
issues
talking
about
Hoffmann
outlook
before
that
date.
J
Jens Breu
Chief Executive Officer, SFS Group AG
Then
there's
another
question
from
[indiscernible]
(01:13:14).
How
many
people
are
involved
in
the
integration
of
Hoffmann which
regards
top
management
as
well
as
middle
management?
Did
you
already
had
the
first
get
together
meetings
of
the
top
management?
Here,
we
can
update
that
we
have,
I
would
say,
very
high
level
discussions
at
this
point
in
time,
where
we
define
the
work
stream
topics
and
the
work
streams,
which
all
work
on
the
integration
side.
We
believe
those
will
be
around
8
to
10
key
topics,
which
we'll
focus
on
the
top
and
some
mid-level
management
side.
We
do
not
expect
that
this
will
be
a
broader
topic
for
all
of
the
organization
to
be
involved
into
the
integration.
We
expected
the
top
management
topic
8
to
10
key
initiatives,
which
we
will
start
in
the
year
2022
and
which
will
continue
into
the
year
2024,
which
will
keep
us
busy
there.
Besides
that,
on
the
lower
level,
on
the
tactical
daily
level
activities,
we
do
not
expect
much
of
a
change.
We
already
worked
together
since
we
are
their
partner
in
Switzerland
and
we
expect
this
cooperation
to
continue
as
lean
and
as
efficient
as
we
have
done
it
throughout
the
previous
years.
So,
meaning
there
will
still
be
bandwidth
of
Volker,
myself, the
Hoffmann management
team, the
SFS management
team to
focus
on
the
existing
business.
And
this
will
be
an
additional
project
which
we'll
be
able
to
manage
with
the
resources
and
bandwidth
we
have
already.
V
Volker Bernhard Dostmann
Chief Financial Officer, SFS Group AG
Besides
that,
it's
important
to
note
that
as
long
as
we
do
not have
the
official
[ph]
go
from
the cartel
(01:15:05)
authorities,
we
are
not
in
a
position
to
go
any
deeper
in
management
discussions
and/or
gatherings,
et cetera,
alike.
J
Jens Breu
Chief Executive Officer, SFS Group AG
So,
since
there
are
no more
questions
on
the
chat
and
on
the
phone,
maybe
we
go
to
the
next
slide
before
we
close
and
give
you
an
update
on
what's
coming
next.
We
see
the
general
assembly,
annual
general
assembly
on
April
27,
which
will
be
without
physical
presence.
Then, we
will
publish
the
Sustainability
Report
towards
the
end
of
May.
After
closing,
we'll
announce
a
specific
date
for
an
Investor
Day
in
Nuremberg
where
we
focus
on
Hoffmann.
Expect
this
towards
second
quarter
or
most
likely
happening
in
June.
Then,
due
to
the
expected
closing
and
integration
of
Hoffmann,
we'll
communicate
our
first
half
2022
results
in
August
this
year,
August
26.
And
then,
for
all
the
other
SFS
divisions,
we
plan
to
do
an
SFS
Investor
Day
again
in
most
likely
Q3,
maybe
in
Q4.
We
also
will
announce
the
date.
With
that,
we
close
the
information
on
the
full year
2021
results.
We
thank
you
for
your
attention.
Wish
you
all
the
best,
good
health,
and
talk
to
you
soon.
Bye-bye.
Ladies and gentlemen, welcome to the Presentation of Full Year Results 2021 Investors and Analyst Conference Call and Live Webcast. I am Alice, the Chorus Call operator. I would like to remind you that all participants will be in listen-only mode and the conference is being recorded. The presentation will be followed by a Q&A session. [Operator Instructions] The conference must not be recorded for publication or broadcast.
At this time, it's my pleasure to hand over to Mr. Jens Breu. Please go ahead, sir.
Thank you very much and good morning and welcome to the presentation on our full year 2021 results. Today's speakers are Volker Dostmann, CFO and Jens Breu, CEO of the SFS Group. The agenda for the presentation of the fiscal 2021 results cover positioning of SFS key takeaways of the year 2021, development by segment, development of key financials, the outlook for 2022, as well as the opportunity for Q&A before closing.
I start now with the positioning of the SFS Group. SFS [ph] are companies you usually unnoticed (00:01:25) 24 hours a day, seven days a week, reliably through everyday life. Our mission-critical precision components, mechanical fastening systems, and tools for selected niche applications are embedded in the successful products and value creation activities of our customers and fulfill their service with high reliability in the required precision and cost effectiveness. Our value proposition, sustainably inventing success together. Sustainability is important to us. It is part of our DNA. Sustainable thinking and acting is also an important innovation driver and gives us the opportunity to question our processes and products on a daily basis and to constantly improve them for the benefit of all stakeholders.
The development of more sustainable products and solutions, our customers gives us, as a value engineering specialist, a variety of opportunities to offer our customers added value with our know-how, true to the mission statement, inventing success together. In doing so, we strive in close cooperation with customers and suppliers to continuously increase cost transparency and also to include other aspects of sustainability in the calculations.
In addition, the value proposition is supported with our vision statement, every employee, a co-entrepreneur, and achieving sustainable success together, which has shaped our path over the years. This striving for sustainable success through true partnership is important to us. It is firmly anchored in our core values and actively pursued inside and outside the company on a daily basis. While the business model and customer groups of our three segments differ depending on the end-market, the organization is designed in such a way that the natural synergies generated are maximized across all areas.
These primarily relate to technology, technological competence and potential cross-selling opportunities with customers. So, for instance, in the segment Engineered Components, we industrialize tools, in the segment Fastening Systems, we sell installation tools, and in the segment, Distribution & Logistics, we trade with tools.
New with the Hoffmann Group, after closing also in the segment distribution logistics internationally. With acquisition, we are making substantial progress in building in each segment a global business platform for the benefit and value generation of our customers and SFS. Other strategic core pillars which have been proven for effectiveness during COVID-19 pandemic include: our local for local strategy, because customer proximity is essential for our value proposition and it allows us to achieve a more reliable delivery performance, as evidenced by the many customers we have gained, especially the construction division, during the period under review; the diversification in end markets, regions and sales channels with the benefit of having better balance revenue development; the solid financial position and through that the ability to continue the investments in innovation and realization of growth projects and opportunities even during crisis times.
Focused technologies like with our core set of tooling-based technologies, relevant secondary operations and standardized machine park allow us to reduce risk and maximize flexibility. Our focus on relevant megatrends like the digital revolution, economy globalization, evolving consumption in health and wellness, resource constraints and demographic asymmetries create strong underlying demand patterns even during crisis.
I continue with the key takeaways, which can be best summarized as record results and inclusion of Hoffmann. In a dynamic market environment, characterized by high demand, supply chain bottlenecks, and the COVID-19 pandemic, SFS boosted its sales by 11% to CHF 1.893 billion. All segments and regions contributed to the growth, enabled by robust supply chains and the ability to continuously fulfill customer orders. High capacity utilization drove profitability and resulted in an EBIT margin of 15.9%.
Focusing on mainly temporary adjustments of production capacity during COVID-19 pandemic allowed to benefit from high demand situation. Prudent cost and price management further supported profitability, investments into projects, including production capacity expansion, a new generation ERP system and cyber security defense continued and amounted to CHF 121.4 million, ongoing focus to achieve the set goals and targets in sustainability, release of a CO2 roadmap containing measurable targets for reduction of CO2 emissions.
With the inclusion of Hoffmann, we are setting, as mentioned, the prerequisites for the internationalization of the D&L segment and establish international presence in quality tools with Hoffmann. Both companies are positioned as leading providers in their industries, share similar value proposition and value systems, and look back on a longstanding and successful partnership. Inclusion at the shareholder, board of directors and executive management levels at SFS establishes continuity and the basis for successful future development.
The transaction will have a positive impact on the earnings per share from the first year on. In 2021, Hoffmann generated around €1 billion in sales with a workforce of around 3,000 passionate employees. Joining forces will mark a milestone and result in attractive growth opportunities through cross-selling of mechanical fastening systems and electronic procurement solutions, leverage benefits and digitization, logistics, software and purchasing, getting access to Europe's largest tool logistics center. Transaction closing is expected in the first half 2022.
Continuing with the development by segment where I will start with the headlines of the Engineered Component segment in which greater profitability through higher capacity utilization could be achieved through sustained substantial recovery driven by pent-up demand in automotive-related areas and the industrial sectors, however, negatively impacted by supply chain bottlenecks in the second half of the year. Leading to a reported sales in the fiscal year 2021 of CHF 975.2 million, up by 8.6% versus fiscal year 2020.
The Electronics division profited from positive market environment. The Medical division enjoyed only a slightly positive development, reflecting demand in their respective niche markets. However, this was partially offset by the good progress made in the development of our global medical production platform. In general, good demand situation led in Engineered Components segment to high capacity utilization thus resulting in an EBIT margin of 17.1%.
The key messages of the automotive division, market recovery, lost momentum in the second half of the year brings to light after good recovery in the first half year driven by strong pent-up demand, the second half year was increasingly impacted by shortages in semiconductor supply chain, large project wins in electric brake systems testimony to a strong competitive position.
Growth projects require investments into manufacturing capacity in Heerbrugg, Switzerland and Nantong, China. Stable market conditions and a step-wise recovery of semiconductor supply is expected over the course of the year 2022. The Automotive division is well positioned to continue to significantly outpace market growth in fiscal year 2022. The key message of the Electronics division, good development with record results in the first half year follow the same pattern as previously outlined for the division Automotive. Record high results in the first half year. The second half year was troubled by supply chain bottlenecks on the supply side of our main customers.
Good development in Lifestyle Electronics and Accessories, stable demand in smartphones. Unexpectedly strong demand for high-capacity hard disk drives further supports the business activities in Malaysia. High capacity utilization in Nantong, China, besides the platform requires [indiscernible] (00:11:30) announced an expansion to cope with increasing demand also from other divisions. The Electronics division expects for fiscal year 2022 a moderate development on a high level.
The Industrial division observed a significant recovery in demand throughout the year where the recovery that began in the second half of 2022 (sic) [2020] (00:11:55) and encompassed nearly every niche market served by the division. Luckily, not materially impacted by supply shortages by our customers, many business areas achieved revenues above pre-pandemic levels. The stabilization of the Aircraft business was achieved at low level. The situation remains challenging with only initial signs of recovery. Overall, the Industrial division expects market demand to remain good in fiscal year 2022 than the reporting year 2021, realized new projects will further underpin the positive market development.
In the Medical division, only a slightly positive development was achieved considering the most important financial KPIs. Overall, the division was able to achieve a slightly positive organic sales trend, however, varying across product categories. Demand for instruments and implants for orthopedic surgeries were still negatively impacted by COVID-19 pandemic. Applications in production ramp-up for sports medicine, however, showed good growth development. Substantial progress was made on filling the attractive project pipeline, particularly also in Asia, high attention to efficiency gains and operational excellence yielding initial results. The Medical division expects an overall positive development in the fiscal year 2022.
In the Fastening Systems segment, record results were achieved. In a dynamic market environment, good market positioning and robust supply chains led to a record sales of CHF 574.9 million or 17.4% year-over-year. High market demand put supply chains and material prices under considerable strain. Ongoing efforts to expand Construction's market access were supported with the acquisitions of Jevith in Denmark and GLR Fasteners in the US. The successful relocation of the Riveting's Chinese production site to Nantong was completed. High capacity utilization and efficiency gains resulting in a record EBIT margin of 17.4%.
Looking into the details of the Construction division, we can state that the division benefited from consistently high market demand. Strong demand led to exceptionally good growth in all application areas in Europe and North America. Market share gains were achieved, thanks to robust supply chains, good material availability, and a high degree of in-house value-add. Global trends towards energy-efficient building envelopes, streamlined fastening processes, and accident prevention remain intact and provide a solid basis for future innovation, activities, and growth. Market access has been expanded with two smaller add-ons. The Construction division expects in fiscal year 2022 market conditions to remain positive and a further growth in organic terms.
The Riveting division experienced as well dynamic demand, however, in the second half dampened by semiconductor shortages. Nevertheless, stable growth has been achieved driven by industrial and construction-related areas. Reduced demand from automotive customers was observed in the course of the year due to semiconductor shortages. Innovative product solutions such as network tools and sustainability-related applications offered substantial growth potential. The successful relocation from Nansha, China to the Nantong platform will further benefit the division's development in Asia by becoming more attractive for customers and allowing to reduce costs by using the synergies of the technology platform. The Riveting division expects continued market recovery and overall growth in organic terms in the fiscal year 2022.
In the Distribution & Logistics segment, we have worked intensively in establishing an international presence in quality tools. Stable growth throughout the year resulting in reported sales of CHF 343 million or 8.2% year-over-year. The segment focused intensively on maintaining a broad focus on customer needs through the continued offering of innovative solutions and strategic organizational alignments to be even more customer-centric.
The envisioned addition of Hoffmann will lend the D&L segment an internationally strong position in the attractive area of quality tools. Strong, occasionally volatile demand led to good capacity utilization and an EBIT margin of 9.4%. The Swiss market conditions in fiscal year 2022 are expected to remain stable, leading to an overall positive development. Besides, we're already looking forward to the closing of the Hoffmann acquisition expected in the first half 2022, allowing us to even more leverage on the combined SFS-Hoffmann growth potential
The targeted strategic growth initiatives can be summarized in the following four dimensions. Dimension number one, use of the new platform through further penetration of key accounts, targeted acquisitions of customers with high potential, development of regional growth strategies based on local expertise along our local for local mindset.
Dimension number two, focus on innovation, new products and product lines, which includes continuous market launch of new products and innovative supply chain solutions, joint development together with our customers and thus deeper customer integration.
Dimension number three, further regional expansion. Here, we target the expansion in the growth markets in the US and China, besides supporting existing growth initiatives for broader market access, for instance, in Europe and other existing activities.
And then dimension number four, driving forward customer-centric digitization initiatives, which include the expansion of diverse e-commerce solutions, as well as the further development of digital service products for connected manufacturing.
With that, I conclude the presentation on the development by segments and hand over to Volker for the development of the key financials.
Thank you, Jens. Good morning, everybody. Warm welcome from my side. The positive start into the year 2021 gave us a solid base to build on. Our teams managed to balance the constraints like supply chain issues and cost pressure, whilst winning new customers and living our value proposition. In the second half year, fast adaptation on capacity had to be managed. Always there was a focus on the finding of new opportunities and realizing these potentials decisively. We are happy to present to you today the financial results 2021, which we deem as document of the dedication of more than 10,500 employees in an impressive manner.
Sales pattern 2021 were characterized by distinct rebound in first half year, which had its beginning in the latter of 2020. Organically, we grew by 10.3% or CHF 178 million throughout all segments as described. Currency impacts were relatively small and balanced out based on a favorable currency mix. [indiscernible] (00:20:46) effects were limited to the base effect from the acquisition of Truelove & Maclean in 2020 and the acquisition in 2021 of Jevith in Denmark and GLR Fasteners on the West Coast of the USA.
Sales dynamic faded as supply chain issues in our customer base and the pandemic impacts came to light. The flexible and fast reaction of these shifts have sheltered our performance. Decisive seizing market opportunities and winning new customers have further underpinned the development. Our teams managed to maintain delivery capacity towards the end markets to a large extent, thus, underpinning our reputation for being a reliable partner. The local for local strategy helped to secure supply chains of our suppliers and managing logistics in a difficult environment. Seasonal patterns in 2021 were distinctively different, mainly due to the very strong base effect of 2020, but also due to a slightly slower demand in the second half when the supply chain issues started to show in our customer base. Therefore, growth in first half year 2021 versus prior year's 23.6% second half is negative 0.5%.
The sales breakdown by end market shows a strong demand in Europe which slightly shifts the relative [ph] weight (00:22:28) to the other geographical areas. From an end market view, construction was important contributor, but also capital equipment and general industries were driving factors. Electronic end markets slightly improved on a nominal basis, which is due to an extraordinary 2020 characterized by the strong demand from the work from home change. Medical end markets, as described, remained a bit slower and during the period [ph] where (00:23:03) mainly elective surgeries delayed, so that impacted [ph] a bit (00:23:07).
For 2021, we managed to report a compound average growth rate for the group in the upper part of our mid-term guidance at 5.9% CAGR and a normalized EBITDA of 21.3%. We reconfirm our statement that the growth through the cycle holds firm and we report a record high EBITDA margin above the targeted bandwidth. Capacity utilization paired with a distinct cost discipline gave the whole group a boost in 2021. As mentioned before and also discussed during the first half year presentation, the uneven demand was a big [ph] ask (00:23:57) to our organization in the second half. The significant pent-up demand of the pandemic normalized to some extent. This was paired with the expected cost increase in the second half.
The seasonality, which we have reported over the years comparing first half year, second half year, therefore did not materialize. Overall, it even shifted. Shown to the right of the slide, you see the breakdown into first half year, second half year. Despite all we mentioned before, the challenges in the second half year, we report in the second half year is still very attractive levels of EBIT.
For the full year, we report an EBIT of CHF 301.7 million, 15.9% or an EBITDA of CHF 407.1 million, 21.5%. To optimize production footprint, division Riveting transferred its production from Nansha to Nantong. Subsequently, we have managed to sell off the plant and the respective land rights.
And with that, we record a book gain of CHF 3.1 million. Details are given to the upper left of the slide. Rising cost levels were predominantly coming from production cost. We're talking about tooling and energy, but also workforce, transportation and other selling cost. Raw material price increases and higher [ph] factory (00:25:42) costs were successfully passed on to our customers.
The net working capital side, along with the [ph] livelier (00:25:50) top line, inventory turns increased and the net working capital came down to 29.9% of net sales or 109 days. Selectively, inventory levels were replenished and raw materials stock was built up, while DIO came down almost four days. Further, the receivables management successfully reduced [ph] debtors (00:26:19) risk and collected successfully. Infrastructure projects at Stamm in Hallau, Switzerland and for automotive here in Heerbrugg, Hall 6, are making good progress along the planned levels.
Parallel to that, constant renewal and improvement in the machinery [ph] part (00:26:45) take place. The project of migrating the ERP system from the existing SAP to the S/4HANA platform is underway and is partially recognized as CapEx. With investments of CHF 121.4 million or 6.4% of sales, we are within the expected CapEx range. However, we see ourselves at the beginning of a new investment cycle, having launched the announced expansion in Nantong, which will start in 2022, parallel with investments into machinery and capacity expansion in other areas.
Our free cash flow is at CHF 203 million, which is a plus of 5.75%, reflecting a conversion out of EBITDA of 50%, which is within the targeted bandwidth. This is, of course, including the before mentioned nominal buildup of the net working capital and including the cash flows from our sell-off in Nansha [ph] and/or (00:27:49) the dividend payout. As a result of that, the equity base has further been strengthened and is at – and our equity is at 78.9%. Our net cash position increased by CHF 135 million to a level of CHF 279 million.
Looking into returns on capital employed, we see the increase to 26.1% on the back of the strengthened EBIT, reflecting the utilization of our infrastructures. Calculating on a flat tax rate of 17.5%, we show a return on invested capital of 11.2%, which brings us into the targeted range of returns. Differentiation between return on invested capital and capital employed can be broken down into a tax effect of 4.6 percentage points and the capital impact from goodwill of 10.3 percentage points.
The effective tax rate came slightly up to 17.8% and remains within the targeted range. Underlying factors are the shift in taxable results from higher tax – into higher tax rate countries, which is counterbalanced by the tax effective depreciations, which we take profit from.
The board of directors suggest to the general assembly payout of a dividend per share of CHF 2.20, which is a payout of 33.3%. [ph] Depending of (00:29:41) the authorized capital of 1.6 million shares, the maximal cash-out is at CHF 86 million or would reflect a payout of 34.7%.
Let me summarize the KPI overview with the statement that I deem this as a demonstration of stability, [ph] consistent (00:30:07) growth and a demonstration – demonstrated ability to adapt the capacity to the current needs. The group is generating attractive levels of cash with reliability and standing on a very solid balance sheet.
With this, I thank you for the attention and the interest and the subsequent questions and give back to Jens who will take you through the outlook and the priorities.
Thank you, Volker, and welcome back as I continue with outlook 2022. The guidance for fiscal year 2022 reflects the expectation for SFS standalone without Hoffmann. Performance in the 2022 financial year will remain characterized by major uncertainties as a result of geopolitical developments like the current war in the Ukraine, trade conflicts, and sustained disruptions in supply chains. Uncertainties in the mentioned international supply chains, which should gradually subside as the COVID-19 pandemic abates, are expected to persist until early 2023. In this environment, ensuring the highest possible focus on customer service takes top priority.
Investments in the selective expansion of our production capacity and [ph] boost (00:31:33) the implementation of ambitious growth projects will continue. Major projects during the current financial year include the [ph] staff (00:31:42) to expand the production plant from Nantong, China moving into the new production hall at the Heerbrugg site, Switzerland and the first larger go-live of S/4HANA, the new generation ERP system. Expansion of our global production platform for medical device application remains strategic priority as well. Besides, we expect the successful closing of the transaction with Hoffman to take place in the first half of 2022 once the usual closing conditions have been met.
Looking out further, SFS expects product call-offs to be partially subdued in the first half of the year, but for this to pick up over the course of the year. Given the solid project pipeline, we are confident that the development will be positive in all end markets. Based on that, SFS expects standalone sales growth of 3% to 6% for the 2022 financial year at an EBIT margin of 13% to 16%. The outlook will be updated once the transaction with Hoffmann has been closed.
On the operational side, we continue to focus on specific priorities tailored to be most relevant and beneficial to reach maximum performance for the end markets and customers we serve. These are strengthen innovation, especially in the megatrends of demography, digitization and autonomous driving; investments in future growth projects, namely in engineered components; establish international presence with Hoffmann in the segment distribution and logistics; ensure reliable supply capabilities despite the current global sourcing challenges and disruptions; continue improving the customer centricity of the organization; balance production capacity with demand, while ensuring supply capabilities and keeping costs under control; integrate sustainable acting and thinking holistically
in the business model and corporate strategy, and protect employee health and safety.
With that, we are approaching the end of the active presentation of the full-year 2021 results. And now, [ph] we're all (00:34:00) available for your questions. First, we take the questions from participants on the phone before we take the questions from the [indiscernible] (00:34:11).
We will now begin the question-and-answer session. [Operator Instructions] Our first question from the telephone comes from the line of Joern Iffert with UBS. Please go ahead.
Good morning, and many thanks for taking my questions. The first question will be, please, on the margins in Engineered Components in the second half 2021 falling to 15%, I think this was the weakest margins I can remember for the second half. Is there any special in this? Is there a lack of pricing power and also would you expect that for the full-year 2022, you can keep margins relatively flattish year-over-year in Engineered Components around 17%?
The second question would be, please, on your average selling prices in Fastening Systems and also the margins which doubled during the crisis. Is this something that you think, okay, look, the average selling prices are [ph] now sustainable given the strong construction sector (00:35:33)? Would you expect average selling price to decline again in the next two to three years [ph] if (00:35:37) margins are normalizing? And if normalizing, what is a reasonable level, please, in Fastening Systems?
And the last question, if I may, I mean, the cash conversion was pretty strong in the last two years. Is the free cash flow to sales margin of around [ph] 10% something (00:35:51) which is structural now and also considering the rising CapEx needs over the next two years? Thanks a lot.
Okay. Good morning, Joern. Thank you for your questions. And the first question about the EBIT margin in Engineered Components, you are absolutely right. We have seen an increased volatility in the Engineered Component EBIT margin due to higher and lower utilization, and there is different divisions having a different impact on the margin, as you see it in the Engineered Components.
Overall, we have achieved a 17% margin, which we deem as okay. We would certainly expect [indiscernible] (00:36:31) throughout the year, a good utilization of the capacity. We should see EBIT margins of 18% and slightly higher. Looking out into the year for 2022, we certainly expect that the volatility will remain first half year, probably a little bit lower utilization; second half year, much better utilization. I would say we expect a similar EBIT margin in the year 2022 as we have seen it in the year 2021, plus/minus, based on utilization of the capacity we provide to the end markets.
Certainly, uncertainties out there, and we expect a fully loaded second half of the year and probably a little bit lighter loaded first half of the year. Hopefully then in 2023, we will see a more even utilization of Engineered Components capacity throughout the year.
On the other hand, I have also to mention that, for instance, in electronics, we had the best year ever in terms of utilization. We had a well-loaded [ph] plan (00:37:45) situation in the first half and second half of the year. So, the swing down in the second half of the year 2021 mainly came through the lack of order calls from our automotive customers and in some areas, also from our industrial customers, and in medical, also due to orthopedics, and in aerospace, also due to the lack of demand on those customers.
So, you see plenty of upside potential. I think we've managed the year very, very well last year. We expect 2022 to probably fall into a same or similar pattern. And in the future, we expect increased utilization of capacity.
The second question is then on the selling price sustainability within division Construction in the segment Fastening Systems. Also here, we have seen increased price increases on a quarterly level, at least, and we also would expect that this will continue in the year 2022. Prices will – depending on the region, on the country, will be changed or increased on a quarterly basis, at least. In some countries, we even increased prices on a monthly basis due to increased inflation and due to increased cost in the supply chain.
So, I would not expect that we will see a slowdown of price increases in Construction in the year 2022, maybe even 2023, we will see increasing pricing momentum due to supply chain issues, as we observe due to COVID, but also now we have the Ukrainian conflict and the tight involvement of Russia, we'll probably see more disruptions in the supply chains, which will then increase prices and which will be an absolute necessity for us to maintain our EBIT margin, that we follow those price increases and push them through to customers, which is one of the top priorities we have within the organization.
So, for the next two years, it will remain volatile in the supply chains, cost will increase and we will certainly do the maximum to forward those cost increases to our customers and they will forward to the consumers.
With that, I hand over to Volker for the third question?
Your question regarding the free cash flow to sales, 10% is certainly, kind of an area we strive for. We have certainly learned a lot in improving the inventory management. I alluded to the faster turns in inventory. We see also the upside of normalizing of the supply chains in raw materials, which certainly would help. What goes in contrary to that is the choppy demand situation from the large customers, these call-offs, they are very difficult to plan for. That could be a counter trend. The second topic that we see is that we have a very close and good working receivables management, which we further [ph] hone, but which will be or (00:41:15) come under pressure once interest rates should pick up. I mean, we will see what that is. [ph] Certainly, the biggest factor is our investment side (00:41:29) where we see for 2022, a pickup in investment activity. Hall 6 is going to be finalized [ph] in – to the latter (00:41:38) of this year, and machinery will be invested. In parallel, we have the Nantong platform that is going to be built that will certainly put the strain, but the mentioned 10%, I think, is a good target to strive for.
Thanks a lot for this. And if you allow me a follow-up to Jens' answer on Fastening Systems. So, with [ph] ever selling (00:42:07) prices further going up to mitigate rising costs, then you're looking for an EBIT margin relatively flattish in 2022 versus 2021 in Fastening Systems?
Certainly, in Fastening Systems, we would expect a more flattish development of the EBIT margin.
Thanks a lot.
The next question comes from the line of Andreas Müller with ZKB. Please go ahead.
Yes. Good morning, gentlemen. Thanks for taking my questions. I've got also questions on the raw material price increase, which you expect is going to continue in the Construction sector. You mentioned already that you can pass it on pretty well. But can you talk about the auto segments or end markets, how the ability to pass it on this is here? That's the first question.
Good question, yeah, Mr. Müller. And overall, we see this as the top priority in the organization and already made it as a top priority also in the previous year. We see in the Fastening Systems and Distribution & Logistics segment where we have usually thousands of customers, usually with smaller purchasing power than, for instance, in Engineered Components. We see there the need to ongoingly increase prices because also due to the supply chains and the nature of products, we get more frequent price increases. So, in Fastening Systems and Distribution & Logistics, we usually see three to five price increases throughout the year. [ph]
Certainly, it's an effort. Certainly, it will (00:43:56) keep people busy to do so, but I think there's also a broad acceptance within those customer and end market groups that this is absolutely necessary to secure. Also that the supplies, and especially, in the Construction division, for instance, we see that half of the growth is achieved through new customers because they do not get the products, they do not have the availability within their existing sources. So there's a high willingness there also to pay the increased prices, and with that or through that, secure the materials they need to have.
In the Engineered Components segment, it's a little bit different. There, the price is usually increased maybe two times a year. That's mainly driven by the raw material supply side, which also has then usually two, sometimes maybe three price rounds, price increase rounds. There's a higher visibility out because of the raw material – [ph] or (00:45:02) the nature of the raw material which are secured there. So, for instance, today, we secure raw materials for the year 2023 and already make allocations with suppliers and tell them what we expect for 2024. So, there's a much longer buying cycle and a much longer visibility, higher visibility on that side. So, due to that, we see less increases, maybe with stronger customers, larger customers, maybe the price discussions are more intensive. On the other hand, we have proven over time that we also are able to increase prices there as long as we don't see any swift changes overnight, like currency fluctuations up and down by 5% to 10% we are usually able to maintain the margins because we start the discussions early.
So, I think, overall, we are optimistic about the capability of pushing through prices, but we are certainly very careful in terms when we see swift changes overnight fluctuations of currencies. Then we usually would see an immediate impact, which usually then takes six, sometimes nine months to cover for and to adjust again for.
Okay. Thanks.
I hope I was able to answer your question.
Yes. I have another one if I may about...
Sure.
...it seems that you're a bit more relaxed about – in the second half about the supply chains and all the issues, strains in the supply chain. And what is that based that it's going to be better going forward relative to the first half?
It's mainly based on the discussions we have with our customers. We certainly see that material changes have been implemented in the supply chains. We see that capacity has also been build up. And I think that the lessons learned cycle we had to all go through happened. So we would expect that the necessary precautions are put into place. And due to that in the second half, we will see better availability, especially in the semiconductor side where – which was kind of the halting or the stopping or the braking costs for lower utilization of capacities in the second half of last year because our customers did not have the semiconductors they needed to keep also their products in the market.
So, overall, I think the supply chain learned a lot, adjusted a lot, became more flexible, also increased the capacity bandwidth a step up. So, that's certainly a plus. On the other side, as we see with the Ukrainian crisis currently that there will be also some indirect movements in the supply chains probably in the first half of this year, which also need to be absorbed. But overall, we see also that the closer you come to the OEMs, the more flexible the capacities are. So we also would expect that a catch-up of pent-up demand will be, again, happening in the second half of this year which would see good utilization, again, probably similar to what we have seen in the first half of 2021 overall in the industry.
Okay. Thank you on that. And then really on this sad conflict, you just mentioned the indirect kind of impact. I don't know if you addressed that at the beginning, but do you have employees in these conflicting countries? And also what's the exposure – sales exposure directly to, say, Russia, Belarus, Ukraine. Do you have assets over there as well? That's my question.
Very good question. No, we have not addressed it yet. In the three countries, as you mentioned, Belarus, Ukraine, Russia, we do sales of slightly below CHF 10 million. We do not have employees on the ground in those countries. We do not have a strong exposure in Eastern Europe anyhow. So, from that point of view, we have a limited impact certainly. Indirectly, we'll see a slowdown. We may have customers which do business in those regions there, and they will certainly also be impacted.
So, on some customer, some segments, we'll see probably a weaker demand pattern in the first half of the year and as we expect all the Ukrainian war probably to last a while from today's perspective. Also, second half of the year, there will be an impact on the demand. On the other hand, we also have heard and seen that the rest of world is reacting. We see material initiatives to build up and improve the defense side of the countries which then, on the secondary side, not on the primary side, on the secondary side, will then also generate additional needs and demands, especially with the segment Distribution & Logistics and probably Fastening Systems and also in some Industrial customers because infrastructure improvements will need to happen.
And also the need for production and ancillary products will be needed to improve and increase the output off of those goods, which will be more in demand when the Western world increases their defense infrastructure and capabilities overall. So, luckily, nobody on our side impacted. We expect some secondary impact, some downs, some ups. Overall, this is the current state of view.
Okay. Thank you very much.
The next question comes from the line of Tobias Fahrenholz with Stifel. Please go ahead.
Yes. Hello, gentlemen. Hi. Thanks for taking my questions. First one on the H1 outlook. Trying to understand your H1 cautions a little bit, to which extent this is driven by just the high basis, or do you really see here an ongoing volatile and challenging environment at the moment? Maybe to clarify this, I mean, maybe you can say something [indiscernible] (00:51:58) 2022 was in reality, so did you see some growth and remained margin flattish or did they even drop?
Hi. Good morning, Tobias. We see for the first half of 2022, we see both effects. As you just have mentioned, we see a strong base which we run against due to excellent utilization in the previous year. Currently, some of the supply chains on the customer side have improved compared to the second half of last year, but probably are still not as affluent as they were in the first half of last year, so we are running against the strong base. That's certainly true and we will – we expect that in the second – probably, the second issue to be kept in mind is the volatility overall in the supply chains. So, it's not just the base, it's also – there's still existing volatility. We see patterns of strong demand and we see patterns of weaker demand as customers getting their supply. And as we just mentioned in the current environment of the Ukrainian conflict, we don't – we will probably see more challenging situations than most situations where problems have been solved. So overall, first half of the year, challenging, second half of the year, we expect a smoother right.
Okay. And on the 2022 growth outlook, you're giving us the typical targets, including your 3% to 6% sales growth. Normally, there's kind of a 1% to 2% M&A part in there. Is this still the case for the running year? And if you split it up, especially the organic growth targets between volumes and prices, which should be both in there, how's the split looking there? So what's the – at the end, what's the pure volume target for the current year?
I think that what we can do is look a little bit back and tell you what we have experienced in the past and you may be able to apply that to the future. Overall, we are not in a position to be more precise about the year because there're many uncertainties out there. But I think overall, we can say that in past times, we were able to grow a little bit more than 3% organically and the difference between the 3% to the 6% where we stay right now has been inorganically. But in those years, we did not see a lot of price increases. So maybe this year, if we maybe don't see an additional M&A activity, we see between the organic normal portion and the gap to the 3% to 6% is probably price increases. Last year, growth was driven by two thirds volume and one-third prices. So, we may or you may apply a similar model to the year 2022. That on the expectation side for next year.
Okay. Thank you.
The next question comes from the line of Remo Rosenau at Helvetische Bank. Please go ahead.
Yes. Thank you. On the price increase questions, I mean, in an environment where input costs go up, obviously you always have a time lag effect. So you pass on these high input costs to your customers, but there might be or there is more or less a larger or smaller time lag. So, could you define how long it takes in your three divisions in order to compensate the – these input cost increases?
Yeah. Good question, and as I alluded a little bit before, we see two types of price increases. We see the ones with longer visibility. And this is what we have seen last year and the year before. So we had pretty good indication what the wrongful prices will be doing, what overall energy prices will be doing to – throughout the year and build it into the model and we're able to announce price increases pretty much tailored to when we see actually the goods coming into house and into inventory overall. So, we were able due to good visibility to match that pretty well, increase on the sales side pricing-wise, and the incoming goods with a higher pricing point.
Looking out into the year 2022, we still believe that this will be the case, so that there will be no time lag or time delay. On the other hand, if we see shifts in currencies overnight, as I mentioned before, then it will take us six to nine months to restore or recover the margin again or normalize the margins again to the previous level if an overnight shift is happening into one – into the downside direction for the EBIT margin overall.
So, I think we are prepared for the year, but once again, I think we all look forward and hope that we'll not see a major shift in currency.
And probably for your...
Okay.
...model point of view factoring that we see roughly 15% to 17% of raw material price in our bill of material, and that a large portion of this can be planned due to the specialized raw material that we need can be planned ahead quite well and is contracted ahead quite well. So, we have not only a short time lag, as Jens explained, we have also the ability to plan ahead what our cost levels are looking.
Okay. Great. Thank you. Then another one. I mean, the whole world talks only about higher prices, higher prices, higher prices. Are there any spots where there are no price increases? I mean, for instance, I heard that steel has become cheaper specifically in the US, not so much in Europe. Things like that always at least didn't increase that much.
We don't see – in our materials and goods which we secure and buy, we have not seen a leveling off of pricing levels. Maybe we had selective suppliers, which had a short-term gap because maybe some I'd say automotive customers did not call off products, then they maybe came to us and offered us products for construction market or wired to – for construction market to be used, but that will be a very spotty development. This would not be something which would subside in a P&L to a large degree, that may be a small tactical gain here and there where we see a sportiness due to a weakness in a certain end market and due to overcapacity of a supplier who is very much exposed to a specific end market.
So overall, not we see on the labor side, on the energy side, on the raw material side, we see price increases happening on a daily basis.
Okay. Then my last question. If the whole situation would sometimes change again, difficult to imagine at the moment, but things change and you have seen different cycles in the past. So, if raw materials, go down, what happens at your side? I mean, do you proactively go back to your customers and say, okay, now, we can reduce our prices or do your customers then need to come up to you or their mechanisms or how is this [indiscernible] (01:01:01)?
I think usually, yes. Customers – certainly the larger customers, which are more organized and have a sizable purchasing departments, they monitor that very specifically. And they come instantly back to us and will tell us about their view and demands in our direction, so. And there may be smaller customers which maybe do not have such a concern on the raw material they buy in because it's a smaller portion of their value-added, which they have in-house. So, it varies a lot between customer groups.
Overall, I think we also need to take a look and keep in mind what happens around it. If, let's say, on the raw material prices start to stagnate or slightly start to reduce but cost of labor and cost of energy is still going up, then there will not be much of a shift in pricing. It may be kept stable or maybe only slightly increase, or maybe only slightly decrease. I think, overall what we can say is, there's no falling off the cliff. We have never experienced before in a cycle that [ph] all in a sudden, raw material (01:02:17) prices drop by 20% or 30%. And due to that, we see an immediate demand from customers to reduce prices. This only happens in currency shifts that maybe overnight the Swiss franc appreciates 10% or 15% then customers would comment and request an immediate adjustment.
But on the raw material side, usually things happen in a slower pace. Usually developments are seen in advance and so usually suppliers, the supply chain customers are aware of it and start building it into their models. And there's usually visibility, I say, between three to nine months before it happened. So, there will be a soft landing if the change comes from the supply [ph] raw material (01:03:08) side, there will be a little bit harder landing if the change to fluctuation comes from the currency side.
Okay. Great. Very clear. Thank you very much. [Operator Instructions]
The next question comes from the phone and it's from Alessandro Foletti with Octavian. Please go ahead.
Yes. Good morning. I just have a couple small follow-ups. On the wording in your outlook, yes, you went through all the divisions and then you gave some sort of outlook for 2022. And like, for example, for Construction and Riveting, you said we expect organic growth. And then for a couple of others, including Medical, Electronics, et cetera, you said we expect positive development. What's the meaning? Is there a difference in the meaning of these two wordings?
Good morning, Alessandro. No, there's no difference in the meaning. We trust, right, not to be too boring as an industrial organization and use always the same term, [ph] but you were (01:04:27) pretty specific in picking that up. Yeah.
All right. Good. Then, on the depreciation, it went up. If I calculate correctly, depreciation and amortization together like [ph] CHF 6 million is about 6% (01:04:43) less than sales. [indiscernible] (01:04:45) anything special [indiscernible] (01:04:50) like the new level and like in percentage of sales, it will continue that direction?
It's reflecting the normal investment cycle, there is no particular extraordinary effects in that.
All right. [indiscernible]
(01:05:06)
Thank you. And then, on your CapEx plan. Yeah. Perfect. Thank you very much.
As we said, we are looking into a CapEx plan that is slightly elevated, that goes more to the tune of the 8%. If we're looking out into next year just because of the parallel ramping-up of [indiscernible] (01:05:28) and ramping up in China, Nantong. So we see ourselves at the beginning of a new investment cycle like we've seen it probably in the last time when we had a larger platform building. This time probably not as pronounced [indiscernible] (01:05:49).
Right. But probably 2022 and 2023, up to 8% of sales and then back down or how should I...?
Yeah. Yeah, that could be a proxy.
All right. And then, my last one, I think yesterday or the day before, BMW announced the closure of the factories in Munich, because of the lack of cables. So, I imagine at some point there will be some disruptions there as well. I wonder if this type of situation is already including in the statements you made today or if this is new?
I think the volatility in the first half of the year as we build into our plan can be manifold. We do not expect that the first half of the year will be smooth. We also expect continued shutdowns on the OEM side and we believe, in our guidance, we believe that there's ample capacity on the OEM and tier side to make up for any closings in the first half of the year and the second half of the year. Pretty similar to what we have seen last year, first half, loaded; second half, lighter. We expect this year, first half, lighter; second half, loaded.
Okay. Thank you.
There are no more questions on the telephone at the moment.
So, since we have no questions, we maybe go over and ask – answer the questions in the chat. So, first question we have from [indiscernible] (01:07:40). The question is, what do you expect for labor cost increases in the different countries?
If we look into what our projections are, then we go into an overall labor cost increase, which is very patchy and regionally not only country-wise, but even within countries regionally different. If we look overall, we see a labor cost increase of 3.5%, which – given the time lag that this is cranking in for next year, will come down to some 2% plus on our P&L.
Then the next question also from [indiscernible] (01:08:35) is, can you please also give some flavor regarding the US business? Is it also very difficult to find good people and the salary costs are strongly increasing?
Yeah. I mean, that neatly goes into the first part of my answer. Yes, we see that. We see that regionally within the US differently. Certainly, the market there is hotter, but we still are able and managed to find the talents we need to keep our organization growing and on the market.
And third question, same source. What is your observation regarding the out of China production trend for certain products?
No. I mean, that is the – we mentioned it quite a couple of times, the local for local strategy allows ourselves to have a production in China for Chinese direct customers, which helped a lot. And certainly the production out of China, logistics we mentioned it is a constant topic. That includes customs and logistics as such, certainly not a more – an easier market at the moment.
Overall, when we take a look at our customers, we see as Volker said the local for local is becoming more vital. So, Chinese OEMs on the car side, they localize even more heavily than what they have done before which falls right into the direction as we said, local for local. We have a local footprint [ph] due to that are (01:10:30) better capable in receiving and getting new products, which we can produce in Europe for Europe, China for China, North America for North America overall.
In automotive side, this is helping us very strongly to further expand our footprint in China with other customer groups on the electronic side. For instance, we see customers trying to break out left and right with initiatives to maybe try to establish on a lower basis, on a much lower basis a value-added activities outside of China, but usually after two, sometimes three years, they slow those initiatives down [indiscernible] (01:11:15) completely, because the efficiencies as observed in China cannot be met and cannot be copied and pasted to other regions due to strong knowledge and scale effects in China.
Then we have the next question from [ph] Thorsten Zoucher (01:11:35), but how about Hoffmann's exposure to Russia, Ukraine, whether we can give there an update?
We cannot give you an update about the Hoffmann in detail about their exposure. This will need to wait until we have the closing and then, we'll be able to give you a more detailed update on the exposure of Hoffmann in Eastern Europe and the impact of the Ukrainian crisis on the development there.
The next question comes from [ph] Christian Obst (01:12:09). Can you give us an update on the Hoffmann takeover timeline discussion with [ph] cartel (01:12:12) authorities expected 2022 impact on top and bottom line?
I certainly can give you an update on the timeline. The discussions with the [ph] cartel (01:12:27) authorities are working very well. We are on time and we got questions back. We got first green light already. So, when we say first half year, we are firm and we have a very good level of discussion with the sellers on the process and are proceeding as planned. And as said before, expectations for 2022 and guidance, we will update that as soon as closing happens, as we have issues talking about Hoffmann outlook before that date.
Then there's another question from [indiscernible] (01:13:14). How many people are involved in the integration of Hoffmann which regards top management as well as middle management? Did you already had the first get together meetings of the top management?
Here, we can update that we have, I would say, very high level discussions at this point in time, where we define the work stream topics and the work streams, which all work on the integration side. We believe those will be around 8 to 10 key topics, which we'll focus on the top and some mid-level management side. We do not expect that this will be a broader topic for all of the organization to be involved into the integration. We expected the top management topic 8 to 10 key initiatives, which we will start in the year 2022 and which will continue into the year 2024, which will keep us busy there. Besides that, on the lower level, on the tactical daily level activities, we do not expect much of a change. We already worked together since we are their partner in Switzerland and we expect this cooperation to continue as lean and as efficient as we have done it throughout the previous years.
So, meaning there will still be bandwidth of Volker, myself, the Hoffmann management team, the SFS management team to focus on the existing business. And this will be an additional project which we'll be able to manage with the resources and bandwidth we have already.
Besides that, it's important to note that as long as we do not have the official [ph] go from the cartel (01:15:05) authorities, we are not in a position to go any deeper in management discussions and/or gatherings, et cetera, alike.
So, since there are no more questions on the chat and on the phone, maybe we go to the next slide before we close and give you an update on what's coming next. We see the general assembly, annual general assembly on April 27, which will be without physical presence. Then, we will publish the Sustainability Report towards the end of May. After closing, we'll announce a specific date for an Investor Day in Nuremberg where we focus on Hoffmann. Expect this towards second quarter or most likely happening in June. Then, due to the expected closing and integration of Hoffmann, we'll communicate our first half 2022 results in August this year, August 26. And then, for all the other SFS divisions, we plan to do an SFS Investor Day again in most likely Q3, maybe in Q4. We also will announce the date.
With that, we close the information on the full year 2021 results. We thank you for your attention. Wish you all the best, good health, and talk to you soon. Bye-bye.
Thank you. Bye-bye.