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Edited Transcript of CON.S earnings conference call or presentation 17-Mar-20 10:30am GMT

Full Year 2019 Conzzeta AG Earnings Call

Zürich Mar 26, 2020 (Thomson StreetEvents) -- Edited Transcript of Conzzeta AG earnings conference call or presentation Tuesday, March 17, 2020 at 10:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Kaspar W. Kelterborn

Conzzeta AG - Group CFO

* Michael Stäheli

Conzzeta AG - Head of IR & Corporate Communications

* Michael Willome

Conzzeta AG - Group CEO

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Conference Call Participants

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* Alexander Koller

Zürcher Kantonalbank, Research Division - Research Analyst

* Andy Schnyder

zCapital AG

* Daniel Koenig

Mirabaud Securities Limited, Research Division - Analyst

* Tobias Fahrenholz

MainFirst Bank AG, Research Division - Director

* Dominik Feldges

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Presentation

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Michael Stäheli, Conzzeta AG - Head of IR & Corporate Communications [1]

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Good morning. Welcome to our Annual Media and Analyst call. I'm Michael Stäheli, Head IR and Corporate Communications at Conzzeta. I'm joined by our group CEO, Mike Willome; and Group CFO, Kaspar Kelterborn. They will lead you through our 2019 results presentation. They will also give you a business update and comment on the outlook for 2019. After the presentation, we are available to answer your questions.

On Slide 2, I draw your attention to our disclaimer. You obviously noticed that we canceled our physical conference on short notice given developments and instead invited for this webcast. Thank you for your understanding and flexibility. With this, over to you, Michael.

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Michael Willome, Conzzeta AG - Group CEO [2]

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Thank you very much, Michael. Thank you very much for your interest in our company in these very special times. I will go through the 2019 results and business updates, then our CFO, Kaspar Kelterborn, will go into the financial details. And at the end, I will give you an update of the situation as it stands today.

I go now to Page #4. We have achieved last year net revenues of almost CHF 1.6 billion that is comparable level, 4.9% less than the previous year. We have an operating result of CHF 167.2 million, which is exactly stable compared to 2018, despite the reduced volumes that we have faced. This logically implies that our EBIT margin is up. We are 50 basis points up. We're at 8.7%, and it is comforting to notice that in all segments, our profitability went up. This excludes CHF 29.9 million gain -- onetime gain from the disposal of our Glass business. Our group results is 19% up compared to 2018, and our EPS is 30% up. The difference you see is because we have less minorities because we took over 19% of DNE in September that explains the difference between the 19% and the 30%.

We have an operating cash flow, which is clearly lower than the previous year of CHF 40.6 million, that is mainly due to increase in net working capital, inventory and receivables and mainly in the business units, Bystronic and in the Mammut. All these results, they lead us to a dividend proposal of CHF 42. That is CHF 18, same level like previous years, also explained by the results, which are on a very similar level, and is CHF 24 addition because we were looking at our cash position, at our liquidity position, and we proposed an additional CHF 24 as a special distribution to our shareholders. That means, altogether, CHF 42 per share, and that means an amount of CHF 87 million, which we would pay out to the shareholders.

I go to Page #5. We have successfully divested Schmid Rhyner end of February 2020, and we are now left with our biggest division, Bystronic Sheet Metal Processing, which last year contributed about 60% of net revenue and 88% of EBIT, so you see it's still a very dominant position of Bystronic within the Conzzeta Group.

In Bystronic, we believe to have leading positions. We believe to have critical mass, and we have the growth potential to bring Bystronic into a next chapter in the next 2 or 3 years. That is one part of the explanation of our focused growth strategy. If you look at the other 2 businesses, Mammut and FoamPartner, actually within Chemicals which is left, we already disclosed it as discontinued operations. We have clearly made progress in both divisions. You can see this on the higher profitability level. We have good positions in Europe. But as we have explained on December 9, we will bet our future now on Bystronic.

I go to Page #6. Page #6, the indicative timeline to our group transformation. I think it is clear to say that this is an indicative time line. In these days, everything is a bit more difficult than usual to predict. However, we will absolutely stick to our plan. Our process is in place and will remain in place, we are doing now for the 2 business units to be divested. We do all our internal preparation work, so the market is not involved yet. We plan, as we always plan, to go in May to the market, and we should be in a position to receive some offers by summer of 2020. I again would like to insist that we are driving this process as planned, but we cannot foresee what are the impacts of the current situation. So if either there will not be enough interest in our businesses by summer or the valuation is not to our satisfaction, we might be forced to delay the process by a certain period of time. At this moment in time, I do not foresee this. I see a high level of interest for both Mammut and FoamPartner, so the statement is really that we are driving the process as planned.

For Bystronic, we planned in October, November -- October, probably in fall of 2020, to make a Capital Markets Day, where you're all invited and we would present the new strategy or the adjusted strategy as an independent, self-sufficient group company to you.

I will come to Bystronic a little bit later. The corporate functions, we are in the process of transitioning from Conzzeta headquarters, and we will furnish Bystronic with all the capabilities that we need in the future as an independent company.

I go to Page #7. You know this framework. We established it in 2016. We have our 7 competencies, which are all very valid, and all these principles will guide us also through the process which is coming now in 2020 or in early 2021. If I can draw your attention on the competencies. I think in days like these, entrepreneurship and collaboration and diversity are of very high interest and of very high importance. That's how we drive the business under these specific situations. If you look at the 4 priorities, they also remain enforced. Market orientation, you all the time need, it's served us well, and it will continue to do so. Innovation, by the way, is part of market orientation.

Internationalization, I will come to this. We have achieved several of our targets to increase our shares in the U.S. and in Asia. People development is and will remain, especially in these times, at the core of our activities and business excellence is the same in the world where you mainly have to focus on cash, cost and complexity reduction. The outcome of this -- all this framework is growth, profitability and capital efficiency, as we have announced the targets in 2016 in September, which is 5% growth, which is 8% to 10% EBIT profitability, and which is the capital efficiency expressed in RONOA of 15%.

That leads me to Page #8. I can say that we have delivered on these aspirations of these promises. We have a CAGR over the last 4 years of almost 9%. We have increased our share in Asia and America by 290 basis points, and this is despite the clear losses we had to face in 2019. Our EBIT margin gradually improved, last year, 2018, entered our group target range, and now we could increase it again by 50 points, standing now at 8.7%.

I have mentioned the importance of people development. We have made programs for senior management. We have made programs and this I'm especially proud of and deeply and personally involved. On our talent development programs, so about 350 people of our company went through this. We have business excellence programs, which we established also in 2016, 2017. We will have benefits there of accumulated CHF 50 million in 2021. And especially in our situation, last but not least, we have a structured department of strategy and M&A, and that ensures a seamless deal execution. You have seen outbound side. We have very good results, and I'll come to this later on. And a little bit more financial terms of Glass and Schmid Rhyner. These were 2 very successful disposals. And I'm very happy that, also, we found not only somebody who paid the right valuation, but also somebody who will take care -- and that's already proven in the case of Glass, of our people.

On the inbound side, our strategy and M&A department handled 7 acquisitions. One of them, Otto Bock, a very big and transformational one for FoamPartner in an absolutely smooth and organized way.

I go now into the business units. So I would go to Page #10, Bystronic. You have seen Bystronic, it has a decline in net sales of 6.5%. We believe that this is a reasonable number given that years before, 3 years, we had a CAGR of 21%. So last year, we have to face a decline of 6.5%. That is part, in many, many segments, I think this industry, just like many other industries in this sector, was calming down, the volumes went slightly back. We had growth in the U.S., but we had clearly a decline in Asia. We had a growth in Bending and Service. And some of you who know our story, we always bet in Bystronic on service automation and software. All 3 of these segments, service, automation and software, they have higher profitability levels and they have higher growth rates.

So definitely, if you look at the result of 12.9% in EBIT margin, that could be even improved compared to the 12.8% in 2018, definitely the growth in Service and in the other mentioned areas helped us to increase this profitability. We had a decline in Cutting. These are mainly the single machines, the laser machines, there we had a decline, which is mainly due to the changed economic conditions.

Our CapEx programs, our investments in the future, they are on track. Our expansion and professionalization in Netherlands, in our headquarters in Switzerland, we have completed this extension program to increase our productivity midterm. We have progressed on our investment in the U.S. in Chicago, and we will have an opening as it still stands today. We have an opening in June of 2020. We are right now ramping up the operations in Chicago, so the people have moved to the new premises and are operational and active there in the north of Chicago.

So this is all according to the plan.

We will come up, as I have mentioned. We will come up with a new strategy or an adjusted strategy for Bystronic in fall of this year. I cannot tell you all the details because I don't know it yet. The only things I know is that we will continue with the growth strategy, that is number one. Number two is we will come up with stronger regional capabilities. We will have to expand. We have plenty of opportunities to further expand in Asia and in the U.S., so this will be reflected in our new strategy. And we have a third point of high interest, and this would lead me to Page #11. We will have to increase our coverage. Our coverage, that means that the customers that we can approach, that the projects we have access to in investments of our customers.

I draw your attention here on the right upper side. In the growth segment, we will have further inputs into client segmentations, and we will have to review our service offering. Do we go toward smart factory? I think this is a clear statement, we will. Again, automation, service, software, connectivity are most important in this industry, but we will have to evaluate. Would we also enter adjacent segments in the Sheet Metal industry? This is something which will be part of the strategy and will be announced in fall of this year.

I can also draw your attention on Page 11 on talent. I really think it is kind of a DNA in our company. And so will it be in Bystronic later on, that we will relentlessly develop our people also in more difficult times, we see the advantages now. Our people are motivated, our people are in difficult days, the internal reasons because of the whole restructuring of the whole new organization of Conzzeta and on the external reasons, which we all know. The people are committed, motivated and they are on board and performing all their duties and even more.

The last point I would like to make to this side is on the differentiation side. I mentioned it before, innovation rate, smart factory and solutions and especially pushing service into really world-class service is a project which will continue and will have also enjoy a higher attention also in the new strategy.

So I think this is what I can say now. There are no details yet. But please, if you heard what I said about Bystronic, these are the big lines which will be entering into the new strategy.

I would go then to Page #12, still about Bystronic. What you see here is that we have several launches of new products. They have been received by the market very nicely, and they will give us a big potential also for the months and years ahead. One thing that's very interesting, we were always famous in many, many years on the high end portfolio offering. We acquired then DNE in 2016, so we had access to the 20% -- we have access to the entry-level segment. But we still were never really a player in the silver segment. If you take Olympic terminology, the silver segment was mainly not served by our company, so these new offerings will exactly target the silver segment.

Now if you look, we have a market share of about 15%. In the premium segment, we have a market share with DNE and the enlarged offerings we did over the past 3 years in the entry level or bronze segment of about 20%, and we have only about 5% market share in the silver segment.

Now if you look that our estimate is that the market is about 40% high end, is about 30% entry level and is about 30% silver. So you can see that with our 5% share in the 30% segment, we have a very high potential for additional sales and additional margins, and it is a highly profitable segment.

I will go then to Page #13. Our regional hubs, also point that we have invested a lot over the last few years, and we will continue to do so. Our new state-of-the-art flagship site, lighthouse site will be in Chicago. The one I mentioned before, that's in Hoffman Estates, Illinois. You can see the picture there, this is a really nice state-of-the-art facility, which enables us also, finally, and I believe that this was a bit of a white spot on our strategic map to have a really brand experience center, and we can perform assembly of parts like we do in other parts of the world. So here, we have to catch up. We are ready now. I told you, the people have moved in, and we are ramping up the production.

I mentioned before, in Europe, we have upgraded our converting center, cutting laser in Netherlands, in Switzerland. We are very active in our 2 factories in Brescia and San Giuliano in Italy. I can also tell you in brackets, I will come to this later, but those factories are operating as we speak today, and we have our bending converting center in Gotha, which is also under expansion.

We have in China a dual approach. We have in Tianjin, our, let's say, old manufacturing center for all the -- for the silver and partially gold segments in Tianjin for the Chinese markets, but also for exports, and we have in Shenzhen, our DNE.

In Asia, the rest of Asia, I personally believe that there's a lot of potential for Bystronic. We have quite a reasonable market position in China, but we are not yet where we should be in countries outside of China, such as Korea. I see a big potential in Vietnam. In Thailand, we are not big enough and potentially also Taiwan, even so it is traditionally and structurally a lower-margin market.

Korea, we have invested now. We have mentioned this once, some CHF 8 million, CHF 9 million into a brand experience center, which is also a nice piece of marketing, of investments for this important market in Korea, where we do have a good presence already right now with more than CHF 60 million of sales. Korea is not in an easy situation right now. We know this, but Korea has a strong automotive industry, which will prevail. It has shipbuilding industry and we have electronics. So these are excellent segments for us to be present. So this investment is under construction right now. It will open in Q1 of '21, and I think it will increase our profile substantially in the rest of Asia.

I come then to Page #16 to chemical specialties, which is basically FoamPartner, that is left right now. I would just like to go through chemical specialties tier -- sorry, I missed one page. Here on Page #15, we have now CHF 347 million of sales there. We have 8% less sales than last year, and that is mainly due to the automotive industry slowdown. We do have about a 50% exposure towards automotive industries in FoamPartner. And the other part was that the decline in China last year set in quite early, and this resulted for us in this net revenue decline of 7.9%.

We had this decline across all regions and segments, which is mainly, as I mentioned, driven by the automotive industry. But we could react, partially helped by lower input costs, but partially also by operational -- big operational progress, which mainly attributes to FoamPartner to pass on the raw material increases, which you said Schmid Rhyner, there we were unfortunately less successful. But as you can see, our margin improved substantially. If you now go -- or maybe in FoamPartner, you see we are on track on all this. Footprint optimization. We have CHF 1.8 million cost in 2019, onetime cost, and we will be opening in April in Duderstadt, our new state-of-the-art converting center, which will enhance our productivity substantially.

If you go now to Page #16, a few important information about FoamPartner stand-alone because it's all what we have left now in a way. We push innovation. We have now new products, as you see on the left side, there's the new RegiSeal. We have the new OBoSky product. These are products, which were greeted very, very friendly by the market. It's a lot of interest and the sales also started to increase there. It is less weight. It is noise reduction, and for instance, if you look at e-vehicles, which is our main target there, you have an increased mileage of 7%.

We drive on our business excellence. We have several large sales projects in addition in the pipeline for all these new products, our excellence efforts. I mentioned the new Duderstadt center, and this will offer us also the opportunity for the consolidation in the rest of the European footprint.

If you look at numbers of FoamPartner, it's almost CHF 300 million. We have an EBITDA of 8.6%. We have clearly a target EBITDA of 12%. And I think if you look at all our innovation efforts, and you look at our footprint, we are clearly and straight on the way to achieve this target. If you look at EBIT, it's 4.7%, so there is a recovery. And if you take the onetime cost I just mentioned before, we're at 5%, which is exactly where we would like to be for 2019.

If you look now at Mammut on Page #18. In Mammut, we have a mixed picture. We have a very positive development on the sales side. We are 6.8% up in a difficult market last year. That is encouraging. We have now gross profit due to our premium strategy of more than 50%. We have growth in digital of more than 50%, which especially, in times of corona, helps you a lot because obviously the stationary trade is down for now.

So these are the encouraging and positive marks. But then we have a too high cost position or at least a too high cost position in terms of this CHF 268 million in sales, which makes the EBIT progress from 2.1% to 2.8%. That is substantial, that is CHF 7.5 million EBIT, but this is definitely not enough. And here, we are still underperforming the market.

We will continue all our efforts to rectify this situation besides and in parallel to the divestment process we have running right now. As you can see, we're on the right track. Since 2015, it was always upwards, we always progressed. But as I mentioned, on EBIT level, not to the extent we would have wished.

I go now to Page #19, that is the 5-year strategy, which actually, at the end of this year, is coming to an end. I have mentioned all the progress we have made. I have mentioned my judgment of the situation. You can also see something which will help us in the future. We have gained ISPO awards. We have this laser jacket, which personally I find a really fascinating piece of equipment. That is something on the innovation side, which we have not had before and is something that will help the business to improve the situation. As I said right now, you can see the results, and that is part of the 6.8% growth, which we had in a not easy year of 2019.

With this, I would like to hand over to Kaspar Kelterborn. He will give us more insight on our financial situation in 2019, and then we'll come back to you then with the outlook and the description of the current situation as of today.

Kaspar, please.

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Kaspar W. Kelterborn, Conzzeta AG - Group CFO [3]

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Well, thank you, Michael. And ladies and gentlemen, also from my side, a warm welcome to our conference call this morning. As for every year, I would talk you quickly through the numbers of our annual closing 2019.

Let me start with Slide #21, where you see as an overview, our profit and loss statement. We achieved net revenue of CHF 1.57 billion. And as Michael Willome mentioned, this corresponds to a reported decline of close to 12%, considering, however, the changes in business, growth and currency effects, the organic decline was minus 4.9%. Out of this, we achieved a reported EBIT of CHF 167 million, which corresponds to an EBIT margin of 10.6%. It is evident that in this number, the onetime gain of the Glass disposal of CHF 29.9 million is included. You see this in the line Other Operating Income, which is significantly higher than previous year.

Now without this effect, our adjusted EBIT was CHF 137 million, and the adjusted EBIT margin, 8.7%. The net result without this one-time gain is CHF 107 million, which corresponds to an adjusted net profit margin of 6.7%.

Overall, I think this is a good achievement despite the more challenging market conditions compared to 2018. So let me move on and give you some more detail on our number.

On Slide 22, you see the net revenue bridge. It is very obvious that also Conzzeta was impacted from the challenging market conditions in 2019. Compared to previous year, we lost around CHF 88 million on volumes, which corresponds to this negative organic growth of minus 4.9%. Then you can see, we also have a substantial change in scope of CHF 91 million, which largely corresponds, of course, to the Glass transaction. And finally, we also had some headwinds from the currency side, with a translation effect of close to CHF 30 million, mainly relating to the euro.

I move on to Slide 23. Here, you see a short overview of the net revenue development of our segments. You see the organic, or as we call it, comparable revenue decline of Sheet Metal Processing and Chemical Specialties. Both segments were fighting with challenging market conditions, impacted by the uncertainties due to the U.S.-Chinese trade war and in case of FoamPartner as well as by a difficult automotive segment. On the other hand, our Outdoor segment grew by 6.7% despite the delivery problems we faced in the third quarter of 2019. And you also see, as a reminder, our glass business, which recorded a turnover of CHF 22 million in the first quarter of 2019. Overall, I would say that our segments performed well, given the economic environment in 2019.

I move on to the next slide, where I present the EBIT bridge. First of all, you can see that our EBIT without the onetime gain of the Glass transaction was slightly down in absolute terms. However, we could increase the EBIT margin to 8.7%. What you also see is the mix and margin impact, which corresponds, of course, to the volume losses. Despite the difficult environment and the strategic reorientation, we continued to invest in our businesses and offerings, especially in Sheet Metal Processing and Outdoor, which resulted in an increase in our personnel costs. These costs, in relation to the total revenue and on a comparable basis, increased, therefore, to the level of 24%. On the other side, we also implemented some cost savings and business excellence measures, and you see a nice development of our operating expense.

On a comparable basis, our operational expense in percentage of total revenue remained more or less on previous year's level of around 19%. Admittedly, we benefited, to some extent, from nonrecurring items at Sheet Metal Processing, where we could release some provisions, for example, for settled legal and warranty issues. On the other hand, we also faced some nonrecurring additional costs with respect to the footprint project at FoamPartner and the new group strategy communicated in early December last year. The net effect of these nonrecurring items is slightly positive with CHF 3.9 million. And finally, adding up from the adjusted EBIT of CHF 137 million the onetime gain of CHF 29.9 million, we end up at the reported EBIT of CHF 167 million.

I move on to Slide #25. On this chart, we look at the group result. One important note here relates to the financial result. The improvement compared to previous year is mainly due to a positive impact from the employer contribution reserve of CHF 4.9 million. Other than that, the financial expenses were around CHF 6.6 million, mainly driven by hedging costs and some currency losses, and the financial income was about CHF 6.5 million. The taxes remained on previous year level, and the effective tax rate decreased to around 18%.

Please keep in mind that the gain from the Glass divestments was free of tax. A short note also to the minorities, which decreased substantially compared to previous year. This can be attributed to 2 facts; first, our China JV, DNE, had a lower net result in 2019; and second, we have increased our participation from 51% to 70% in the third quarter of 2019. The purchase price for this additional space was around CHF 62 million.

I move on to Slide 26 to comment on the half year comparison. As you can see from these figures, we have a seasonal business pattern, and typically, the second half of the year shows a stronger performance than the first half. This seasonality is mainly driven by our Outdoor segment, but we also see it at Bystronic, here, however, to a lower extent.

Now if we make the comparison on reported numbers but without Glass, you can see such a comparison on the bottom of the chart. Then the second half of 2019 was 7.4% above the first half of 2019. Also, this shows that our segments performed well in that given difficult market environment. And if you compare to the second half of 2018, you see a deviation also on the bottom of the chart of minus 6.4%. Here, please keep in mind that the second half 2018 was at absolute record levels, as we communicated at that time.

I move on to Slide 27, where I would like to share with you an analysis with respect to the quarterly trends. If you look at the fourth quarter 2019 and we take out the Glass business, then we even had a slight growth compared to the previous year quarter. This was mainly driven by a resilient performance at Sheet Metal Processing as well as by 16.3% growth of Mammut, which partially compensated the delivery problems we faced in the third quarter of 2019.

Let's go over to Slide 28. The cash flow statement shows the operating free cash flow, which was CHF 40.6 million, about half of what we achieved in 2018. On the one side, this can be explained by our ongoing high level of CapEx, with our key projects, such as the new assembly and customer experience center in the U.S. or the modernization of Bystronic's manufacturing site in Switzerland, which was completed in 2019. Accordingly, the reinvestment rate 2019 of 1.8 remained on an elevated level. On the other side, our operating cash flow was driven by, of course, by lower business volumes but also by an increase -- excuse me, increased level of net working capital. I told you at our conference last year that we would expect a certain increase, especially at Bystronic, which operated at too low net working capital at end of 2018. However, I have to admit that the rebound was now a bit stronger than expected, and this happened mainly in our Outdoor segment.

Now you also see the free cash flow of CHF 165 million, which was mainly driven by the Glass disposal as well as some changes in securities, which was switched back to ordinary cash.

Let's look at the development of our cash position on Slide 29. From the free cash flow of CHF 165 million, we have been able to pay the ordinary dividend for 2018 and the 2019 special dividend, altogether CHF 99 million in total. We also paid the DNE step-up and the minority dividends, both included, among some other smaller numbers in the position of CHF 104 million.

I think all in all, it is fair to say that we actively manage our liquidity and that we return obvious excess cash to shareholders, also consistent with our statements in December in the context of the strategic reorientation of our group.

With this, I continue on Slide 30. Here, we show the balance sheet, and I just want to make one comment. It is maybe of interest to know that Conzzeta continues to be very well capitalized with an equity ratio of close to 70%, even somewhat higher than compared to previous year.

Let me move on to Slide 31 to comment briefly on the capital returns. In 2019, we achieved a return on net operating assets of 20%, which was below the very strong previous year but still significantly higher than our midterm aspiration level of 15%. The development is driven mainly by the increase of net working capital, as I commented earlier. Net working capital now is around CHF 290 million or 18.3% of total revenue. Now for the group, this looks like a decent level compared to the 16% in the previous year, which we commented as being too low at the time. As you know, capital productivity is an important KPI for us, and we will keep managing it also during the current ongoing turbulent 2020.

Let me move to my last slide on Page 32. What you see on Slide 32 is the EPS as well as our dividend proposal. Our 2019 EPS, obviously benefited from the divestment gain of the glass processing segment. Without this one-time gain, our group result was CHF 96 million with an EPS of CHF 46.38, just slightly above the previous year.

With respect to our dividend proposal, you see on this chart that this contains 2 elements: first of all, a base component of CHF 18 per A share. Given the improved operating margin, despite the current uncertain environment, we believe that the base component equal to previous year can be justified. On top of this, we added a second element of 24% (sic) [CHF 24] per A share. This follows the assessment of our liquidity after the sale of the Schmid Rhyner business unit. Together, the 2 elements add up to the proposed CHF 42 per A share, or a total payment of CHF 86.9 million for all A and B shares together.

Ladies and gentlemen, this concludes my presentation. Thank you for your attention, and I give the word back now to Michael Willome.

Thank you.

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Michael Willome, Conzzeta AG - Group CEO [4]

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Thank you very much, Kaspar. I come to page number 34, the impact of corona and our measures. First of all, I would like to assure you that we do everything to keep our employees and their families safe. As of today, we have no confirmed corona case across the 5,000 people of the Conzzeta organization. We did face 6 to 7 weeks of production interruption in China, like everybody did. We are now in the process of normalization. The people are back to work, but the whole supply chain is ramping up, and it will take, I guess, a few more weeks until everything is really back to normal, if nothing comes back. But factories are operational, people are fully staffed.

Our European sites are also operational. All sites are running. There might be 1 small site in FoamPartner in France, which might close next week. All the rest is running. Even the factories in Italy are running. What is not running is installation of equipment in Italy. Customers do not want to see us. We don't want to go there. As you know, life is disturbed, so installations are currently not done. We only manufacture within our own sites, and we will have to do the installations later during the year, or later in the coming weeks, months, depending on the development.

We definitely face steel supply chain challenges across all the segments. We have delays and we have shipment constraints in line with the whole market. What do we do about all this situation? We have from a governance point of view, we have, on group level, on business unit level and site-specific, we have teams, we have a formal crisis organization. We are actively communicating with the employees and with the clients. We have early implemented travel restrictions, which helped the overall situation, but also the cost position. We have supported digital engagement from the very beginning, 7 weeks ago, and we applied home office, if possible, feasible and if it makes sense, which is right now the case in most of the facilities.

We still try to maintain our sales offers. There are always ways to prepare also for the future. The upswing will come. We push our sales digital. This is mainly valid for Mammut. There is a big opportunity, which we have seen in the first 2 months, showing positive effects. And most important, we work with active capacity management. We take out capacities. We work in Bystronic in many years, with outsourcing the peaks that our organization, our fixed costs are geared for a certain volume. And if we have over volumes, we outsource them and make this cost flexible and variable. That is something which we have now, of course, very much in the focus.

We have applied an absolute hiring freeze over the whole organization, and our mantra currently is cash, cost and complexity. I think these issues are what you need in a difficult situation. Even though Conzzeta is a very cash-rich company, very nicely capitalized in the balance sheet, but I think during difficult days, cash is your prime target.

Number 2 is costs. Obviously, it also helps the cash. It is a position where we can take costs out where we have to take cost out. We are working on programs in many -- in all of the business units.

My third point, cash, cost, complexity. Complexity, it is not the moment to be complicated. With complexity reduction, I mean, complexity in structures. I mean also complexity in communication. In these days, communication is one of the most important topics, I mentioned before to employees and to clients, and we will also reduce -- or we did reduce the complexity in communication. Again, it's the moment to be straight, short and clean.

I come then to Page #35, priorities and Outlook 2020. We know what you all know, the difficult situation right now. We still believe that there is a chance of a normalization in H2, if this virus will pass, like we see it in Asia now, where life is becoming back to a certain normalization. Supply chains will come into gear. So we are hopeful to see a certain normalization in H2. But the start into 2020 was definitely weak. I will come to this with a few more detailed explanations in a minute.

I mentioned before in point number 2, we remain focused and committed to our strategic agenda as announced in December 9 of last year. We drive the progress at FoamPartner and Mammut. We will not stop the internal preparations, and we will see when we go to the market what happens. We will definitely not give away our businesses below its well-deserved value.

But as I mentioned also on the positive side, as of today, we have high interest in both our businesses. It is clear that under these current conditions, we cannot give a financial outlook for 2020. I think to give you one and to target how much results would be, I think this would not be serious, and we will not do this.

We have 2020 as a transition year for Conzzeta, that is actually not new due to corona, but this was already clear after December 9 of last year. We have the internal reasons. We have 3 big projects, which is number one, the positioning of Bystronic as an independent, self-sufficient public quoted company; and we have number 2, the disposals of the 2 big business units, Mammut and FoamPartner. And now we face the external situation with corona. So it's very clear, 2020 is a transition year for Conzzeta.

The only guidance we would like to give, we are very confident looking at how the market develops, how the market dynamics evolve that we will continue to outperform all the relevant markets in the area of Bystronic. I think this is the only kind of fact we can give you for 2020.

I will now give you a few more details on the situation as it is right now, which you will not find in the slide, but I will give you some verbal explanation. Some of the questions I anticipate you might want to ask them, so I can give you the answer straight away.

Schmid Rhyner. We have closed the situation, we have closed the deal end of February. You have read it. I can tell you the anticipated value was CHF 80 million for Schmid Rhyner. The proceeds were around CHF 75 million, and we do expect a divestment onetime gain of roughly 45 minutes -- CHF 45 million, sorry. It's clearly -- it's subject to closing accounts, which are currently under preparation, but we expect around CHF 45 million.

I mentioned before to the subject of the planned divestment, I mentioned before, there is no impact right now. We are in the internal preparation phase, which we are continuing -- which we continue to do as planned. I mentioned before that we will not give businesses away, and we are not strictly under time pressure. We said from the beginning when corona was not on the horizon last year in December that we will sell these businesses according to market conditions. But again, we are on time, we are exactly on schedule in our progress as we have planned it. We expect the situation to have no impact on the planning process for Bystronic. We are now working on our strategy exactly as planned. So here, we will come up, as I mentioned, in fall of this year.

I have then another point. How did the year start? You won't probably ask. I just can't tell you the numbers. I told you, I cannot predict the 12 months of 2020, but I can tell you what happened in the first 2 months of 2020. In all our businesses -- or in all our 3 remaining businesses, our sales dropped around 10% to 15% across the segment that is year-to-date February. I can tell you that the order entry in Bystronic is down by 10% compared to previous year. And I can also tell you that the backlog in Bystronic end of February is slightly higher than previous year. I think this is a highly encouraging number. I do not want to mention now to speculate on the next few months. I just want to give you these numbers as a guidance because these are high numbers, which we have in the books for the first 2 months.

I can go back to the corona issues, what we are doing? I mentioned before, active communication. We have travel restrictions. We have home office. We started to close, in Mammut, our Outdoor retail shops in the whole of Europe. This is mainly in line with all the government indications which we have to follow. So these shops, they will be closed according to the rules. I mentioned that all our manufacturing sites in FoamPartner and in Bystronic are up and running. We do have actually good order books and utilization levels at Bystronic. We do, at Bystronic, have to postpone these installations, as I mentioned. And we do in all the businesses, provide digital services as much as possible. These are sales in Mammut, but this is also in the Service side of Bystronic digital support these days. And we invested a lot into digital support and service over the past 3 years. That is something which will pay off for us now in this difficult times, where you cannot physically see the customer.

We have preparations done for requests -- for reduced working hours, I think like many people in this country and in Germany are doing. Here, we are under preparation. We did not apply yet because for now, there's no reason, but we will be ready immediately when we need to. We started to save costs and preserve cash. I mentioned before, cash, cost, complexity. We have the hiring freeze, we postpone projects if needed, and we'll make everything to safeguard the cash.

I think this will be the conclusion of my explanations, and Kaspar and I would be very happy to take your questions now.

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Questions and Answers

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Operator [1]

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(Operator Instructions) We have received the first question.

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Unidentified Analyst, [2]

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Are you talking to me (inaudible)?

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Operator [3]

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Yes.

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Unidentified Analyst, [4]

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Okay. Sorry, didn't get it. We learned that you want to inform closer -- about your plans with Bystronic in fall. But you may have -- could give us an idea what you see as a critical mass for Bystronic. Is this CHF 1 billion of sales you have at the moment, more or less, is this okay? Or you think it had -- it should be quite bigger?

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Michael Willome, Conzzeta AG - Group CEO [5]

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Thank you, Charlie, for the question. I have a clear answer for this, we are at now around CHF 1 billion of sales. We mentioned that we will have a growth strategy. And I think in our thinking right now, we talk about CHF 1.5 billion, and that would be without major M&A activities. M&A activities, like it was in the past, will also be definitely an important pillar of our new strategy. That's also something which we know already now. But our aspiration level without having any details, any clean plans yet -- because I mentioned, we have to go into adjacent segments potentially. But our aspiration level, I would put at CHF 1.5 billion as of today.

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Operator [6]

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The next question is from Daniel Koenig, and please introduce your company as well.

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Daniel Koenig, Mirabaud Securities Limited, Research Division - Analyst [7]

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I have 1 question, and this is concerning the cash flow on Bystronic. And then I have also another question on the RONOA of Bystronic because I noticed the net operating assets of Bystronic has gone up a little bit. But now on cash flow, I was wondering what is the -- of the overall cash flow expenses of Conzzeta, how much is cash flow on Bystronic? And then on the RONOA, I noticed that if you adjust the EBIT from the onetime gain, the RONOA has dropped to 50%. Can you tell me what to expect? How much RONOA will be added at Bystronic?

And then even another question is what is your explanation for the higher return on net -- on RONOA of Bystronic versus other industrial companies?

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Kaspar W. Kelterborn, Conzzeta AG - Group CFO [8]

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Okay. Thank you, Mr. Koenig. I'll try to give you the answers. First -- I'll start with the last question. First, the high level of RONOA compared to others. I mean there are several elements. If you look at our net operating asset at Bystronic, you'd see that compared to the business volume, they've managed relatively low net operating assets.

Currently at CHF 248 million, as you correctly said, that was your -- I guess your second question, it went up a little bit from the previous year. So having such an asset base and having a profitable business model like Bystronic, that is the main reason or the main explanations for having such a good return on net operating assets. It's always also, if you compare this with other companies, with peers, it always has also to do a little bit with the definition of the RONOA. You find the definition of our RONOA clearly listed in our annual (foreign language) in our annual financial report.

Then you did ask me about the increase, the CHF 44 million increase of the asset -- of the net operating asset at Bystronic. Now that has basically 2 elements. One element is the property plant and equipment, of course, increased. That increase in 2019 was around CHF 20 million. That has to do with the strong CapEx cycle. If you remember in the last 2 to 3 year, we had strong CapEx cycles at Bystronic. That is the 1 reason. And the other reason is the net working capital which, at end of 2018, I explained this last year was 12% of total revenue. That was by far too low. So we had the risk that we are not able to deliver any more. So we clearly had, and we knew that we had to increase a little bit that networking capital, which currently is on a decent level.

And with respect to cash flow, that risk always comes a little bit along with the business cycle. You have seen 2018, we have had a decent cash flow at 2019, it is about half. And the main part, of course, comes from our biggest business unit, which of course is Bystronic. But also there it goes a little bit up and down. Yes. So I hope that answered your 3 questions.

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Operator [9]

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(Operator Instructions) The next question is from Andy Schnyder of zCapital.

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Andy Schnyder, zCapital AG [10]

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Could you give us some insight on how you see the sale of FoamPartner in light of the, again, very weak automotive market, which is probably even weaker this year than last year? Can you -- in such an environment, can you get enough interest at a price evaluation you're happy with? Or asked another way around, are potential buyers ready to look through this difficult environment and the multiple contraction? I can see that for Mammut, that's your main outdoor brand, but how does it look like for FoamPartner?

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Michael Willome, Conzzeta AG - Group CEO [11]

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Andy, I can really confirm that we have very high interest from various parties from all over the world, from Asia, from the U.S. and from Europe. We have strong interest in FoamPartner from PE side, but also from strategic side. I can really confirm it. I do not know the valuations that will come in summer on the table. Indications, I do have, and they're very positive if I compare them to my expectations. I cannot promise anything, obviously, but if you look in our track record to sell Schmid Rhyner for CHF 80 million, to sell Glass for CHF 78 million, I think our track record is not bad, and that is for one sole purpose, because we have nice businesses to sell.

FoamPartner is massively investing into innovation. I mentioned a little bit of the pipeline of innovation. This is something which you can use in the automotive industry, even if the general cycle of the automotive industry is not favorable right now. There is always room for innovation. We are known in the industry as an innovation company. There is a lot of business still up there. The next few years, automotive industry will not be on peak times, but it will still be existing. There is a whole topic of electromobility. And most specifically, we are not kind of a base commodity supplier. I think our offering is niche market, our offering are specialties. And we see very strong markets for this.

I can tell you that what I tell you now is what I hear from potential interested parties. I talk to these people. I know most of the strategic people, and that is exactly what they do accept as a positive of our FoamPartner business, and that's why they are interested. And that's why I'm really comfortable on this process as I was on Glass and as I was on Schmid Rhyner. Mammut, I think you have mentioned, such a strong brand is attracting a lot of attention and a lot of positive and financially inspiring attention.

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Andy Schnyder, zCapital AG [12]

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Perfect. And another question. With CHF 80 million coming in from Schmid Rhyner and the dividend you're paying, so the net cash position after the dividend payment will be around to CHF 300 million. Is that correct, roughly?

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Kaspar W. Kelterborn, Conzzeta AG - Group CFO [13]

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Well, I think the cash position, that will remain on that level for time being. We don't have enough visibility to give any guidance, also not on the liquidity, but yes, something is coming in. And the dividends, we will pay out, as I said, close to CHF 87 million. That's correct.

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Michael Willome, Conzzeta AG - Group CEO [14]

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But definitely, when we have the discussion on the dividend payment, definitely, we were taking the current situation into account. We are nicely capitalized. We do have the CHF 300 million cash, but we do face, in this world, difficult times right now. So definitely, we took this into consideration when we defined the CHF 42, which I still want to repeat, CHF 42 is a very nice dividend. And it is CHF 87 million, which we are going to distribute. But the current situation, not only talking about Schmid Rhyner proceeds, that's just 1 element of it, but we analyzed our whole excess liquidity, and that's why we came to this CHF 87 million, taking the big picture. But I would agree that we were potentially a bit more careful now since this new situation arise.

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Andy Schnyder, zCapital AG [15]

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Understand. And then the last question, and I'm sure you made or thought about a guidance back at the end of 2019 in your budgeting process. A few words on growth and margin evolution for the 3 businesses pre-corona would be helpful for modeling purposes.

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Michael Willome, Conzzeta AG - Group CEO [16]

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I am sorry, you are breaking. I can't -- we cannot hear you. I heard something about guidance, but can you repeat or maybe change your position? I couldn't hear you.

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Andy Schnyder, zCapital AG [17]

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Wait a moment. Hello? I'm not sure if you're hearing me. I had some problems before, too, here understanding the presentation.

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Michael Willome, Conzzeta AG - Group CEO [18]

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Now that's much better. Could you repeat?

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Andy Schnyder, zCapital AG [19]

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It's better?

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Michael Willome, Conzzeta AG - Group CEO [20]

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Yes.

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Andy Schnyder, zCapital AG [21]

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Okay. So I'm sure you have made or thought about a guidance back at the end of 2019, a few words on growth and margin evolution for the 3 business pre-corona would be helpful for modeling purposes, and how we should think about 2021 and beyond. And also about potential sale prices that we want to calculate for the businesses. So if you could comment on that a little bit, that would be helpful.

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Michael Willome, Conzzeta AG - Group CEO [22]

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I think you should go on our financial aspiration. I think that's where we oriented ourselves. Now barring this unforeseen corona events, we have our target of 5% growth. I think that is something which guided us nicely over the last few years. So there would have been probably no reason to go away from this 5%. We have made progress step-by-step on the EBIT side. So there would have been no reason to divert from this another progress on EBIT, like we have shown over the past 4 years. So I think without corona, you could safely assume that we would just like to fulfill our financial aspirations, and our progress as we have proven over the past few years. So I think that would be the guidance before corona.

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Operator [23]

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The next question is from Tobias Fahrenholz of MainFirst.

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Tobias Fahrenholz, MainFirst Bank AG, Research Division - Director [24]

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Coming back to the effective start into the year, the first 2 months of 2020. You mentioned your 10%, 15% sales decline. Could you tell us was it fully organic? Or is it as before, fixed or not? And on profitability within these 2 months, these 2 tough months, how did it develop so far? I think margins...

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Operator [25]

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We cannot hear you at the moment, I'm very sorry.

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Tobias Fahrenholz, MainFirst Bank AG, Research Division - Director [26]

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Hello?

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Operator [27]

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Yes.

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Michael Willome, Conzzeta AG - Group CEO [28]

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I think I -- we couldn't hear you, but I heard a little bit, I think, or maybe I could anticipate. Our -- your first question was about organic or not organic. This 10% to 15% by segment or 12% to 15% by segment, they're absolutely organic. The statement, it's absolutely organic. And your second question on profitability, you can assume that it also has an impact in lower sales on our profitability. But I think for this, we do not give the guidance until we come out with the official number. But I wouldn't -- you -- just go with the sales and you will have the indication.

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Tobias Fahrenholz, MainFirst Bank AG, Research Division - Director [29]

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But maybe in general indication, I mean, in the last crisis, I think your reported revenues went down organically, 33 and EBITDA, 77. Would you say that over the years, you have become significantly more flexible that such a drop wouldn't happen again?

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Michael Willome, Conzzeta AG - Group CEO [30]

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Look, that's the question, I guess, of the breakeven point. We are always working on to become more productive, more flexible. We are working on the mix, like I always say, more profitable, more growth-oriented businesses. We do have business excellence. I think we have proven it over the last 2 years that we were able to implement such measures for higher productivity. We have made last year with minus 4.9%. We have made 50 basis points more EBIT. So I think we are able to work exactly under these lines. And right now, in the corona situation, we do the same effort just emphasized and accelerated in a rather dramatic way.

We will we be able to push the costs in line with the revenue, I think, of course, not like nobody will. And also, one thing, it's important to mention, I mean, we are looking at our cost positions. We are looking at our cash. And also in a crisis, always, you shouldn't say this, but you can do things which maybe you should have done already before. So that is a good opportunity for us now. But I think we shall just not speculate what is going to happen. But I can guarantee you, and I think really, our track record is in line with this, that we work on radical solutions on our cost position. But also here, the upswing will come, and I personally believe more in a V-shape than in some L-shape. But this, the jury is still out. But if I look what happens in Asia, where a normalization is clearly in place, visibly in place, in the P&L visible in place, so I believe if something like this in Europe and maybe with a few weeks' delay in the U.S. can happen, I think it is also at the same time important that we are ready for the upswing and we can capitalize once this world is going on again.

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Tobias Fahrenholz, MainFirst Bank AG, Research Division - Director [31]

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Good. And on Chemical Specialties, do I get it right that within the 2019 results, you also had already some smaller restructuring costs? Can you quantify? And what is left here for 2020?

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Kaspar W. Kelterborn, Conzzeta AG - Group CFO [32]

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Maybe I can -- shall I do the first part, you do the second part? Oh, you do it the -- yes. I think you're talking about the corporate restructuring, correct?

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Michael Willome, Conzzeta AG - Group CEO [33]

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It's CHF 3.9 million net.

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Tobias Fahrenholz, MainFirst Bank AG, Research Division - Director [34]

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I didn't get you, but the German operations, was referring to them.

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Kaspar W. Kelterborn, Conzzeta AG - Group CFO [35]

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Yes. At the footprint, we communicated earlier, you remember that we will have a CHF 4 million to CHF 5 million impact of the footprint project. 2019, we have around CHF 1.8 million we have in, and this was -- this you'll see on my slide on the EBIT bridge. And the rest will come in the next -- in '20 and '21, as we communicated earlier, when we introduce the footprint project. That is the only one, then we had some additional costs for the reorganization of the group, around CHF 1 million, which we had in the books as well for 2019.

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Operator [36]

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The next question is from Alexander Koller of the Zürcher Kantonalbank.

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Alexander Koller, Zürcher Kantonalbank, Research Division - Research Analyst [37]

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Could you please give us an indication about the investment requirements for Bystronic for the coming years on a stand-alone standpoint?

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Michael Willome, Conzzeta AG - Group CEO [38]

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Yes. That said, we are going to work on the strategy. We are publishing this in fall. But major project for now, we have definitely handled. We have done the center in the U.S. which was, as we always disclosed, some CHF 28 million. We are finishing Korea, as I have mentioned. We have already finished in Netherlands, an upgrade. And all these asset upgrades, they cost you money or they cost you CapEx. So I would say a big, big portion is done. I cannot tell you exactly, but I think we are going back to more a normal level closer to depreciation. We are now at over the group at 1.8. I think for Bystronic, we do not have substantial big ones, so we will go back closer to our 1:1 relation. Or if you have a growth strategy, we'll always be at 1.2, 1.3, probably, but I would take this as the guidance.

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Operator [39]

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The next question is from Dominik Feldges of NZZ.

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Dominik Feldges, [40]

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I wanted to -- could you please elaborate a bit on how you have changed the communication you've said that, I mean, you need to be straight and clean now? I mean so how exactly do you now communicate?

And the second question would be, I mean, what do you do actually to protect your employees from being -- from catching the virus? I mean are you maybe also thinking to distribute masks or I mean might you have to take further measures because, I mean, obviously, there's a clear risk that people also get infected in, especially those who still go to work and who don't stay in their home office, who might work next to each other and on a shop floor, for instance.

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Michael Willome, Conzzeta AG - Group CEO [41]

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Your first part on the communication, I think what we have changed compared to normal time is that we have intensified the communication. We have updates. We have made an initial statement, I think, on the 22nd of February. Initial statement to all employees. We have updates every 1, 2, 3 days. We are very active in the communication. I think that is important. We are always in line, of course, with the government of Switzerland, but also of the other companies where we are -- or other countries where we are active. So this is always our top guidance, and then we break it down on the site and on the specific situation. I think communication is very important now that you are -- do it frequently and that you are honest and straight and clear. And I also believe it is important that management is showing presence. And this sounds like a contradiction when people are in head office, but I think it is important that you show the presence and that you support the people because everybody has a certain stage of uncertainty right now. We recognize this, and I think also management, nobody is immune to this. We all don't know exactly what happened and what is going to happen. So I think, a direct, straight, honest and clean communication is important. If you ask for the means, we have the traditional means by e-mail. We have the means by newsletters. We have a formal update of the situation process. We have our social media channels. We have a streamer for the company, for our global management team, which is then cascaded further down. So the people there is these streamer messages from us and from the business units. I think here, we are on a really -- very, very close to our employees but also to our customers.

Your second question is related to protection. Here, I have to say, again, we follow all the guidelines of the countries. We do have, for instance, in China, all our people are equipped with masks. I think in Switzerland, we do not have such extensive program with masks, but we follow the guidelines that we have heard yesterday, the mask question from Daniel Koenig from the authorities. I think we are following all those guidelines. We have the people in home office. We have all our disinfectants on the table. We have defined rules on -- oh, no, 2 4 -- I just looked at them, 2, 4, 5 to 6 rules from the government, which we are really strictly, I would say, strictly applying all over our sites. So I think this is the maximum protection we can do.

We have our group of several Swiss companies which is kind of an experienced group. We share there on a daily basis, we share the opinion, we share the experience, we share the guidelines, and this helps us a lot because always, 1 company of some 15 companies in our network has another good idea. So this group can immediately adopt it. And I think we are really doing the utmost right now. Our office now in Zurich, there are like 3 or 4 people here right now. So the people, I hope they stay home and safe.

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Operator [42]

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The next question is a follow-up from Daniel Koenig.

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Daniel Koenig, Mirabaud Securities Limited, Research Division - Analyst [43]

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Yes. One more question. The word ESG hasn't been mentioned in the presentation. Can you spend some thoughts on ESG on Conzzeta and ESG for Bystronic? What are your thoughts? Do you want to improve that? You want to get some sustainability ratings? What are your thoughts?

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Michael Willome, Conzzeta AG - Group CEO [44]

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Daniel, maybe I can briefly comment on that. If you read our section in the annual report on responsibility, we described in quite some detail on what we have done in 2019. We developed a reporting concept on the material topics that we had identified in 2019 at group level. And we also conducted a CO2 footprint assessment for the outdoor segment, where we published also in the annual report concrete results. Given -- yes, and for Mammut now, we are in 2020 working -- based on the CO2 footprint assessment, we are now working on specific mitigating measures how we can improve this CO2 footprint of Mammut. And we will report on the findings and conclusions, certainly with our next report.

With regard to Bystronic and given obviously the strategic announcement, back in December, we decided that we, during 2020, migrate the efforts that we've done at group level to Bystronic, which means, concretely, specifically for Bystronic, we have taken a decision already that we're going to update the assessment of the material topics for Bystronic on a stand-alone basis during 2020, and we will report on findings of the material topics with the report 2020 in spring 2021. In addition, we also decided that we're going to replicate the CO2 footprint assessment that we've done for Mammut in 2019. We replicate that during 2020 for 1 or 2 of the major sites for Bystronic. So the idea is that we get a clear understanding where are the CO2, what is the CO2 balance or footprint across the various scopes, scope 1, 2, 3 so that we first understand it for Bystronic. And that we then develop measures to address it, to improve it, and this, with a view that it should generate a win-win situation for Bystronic but also for the clients of Bystronic. So we have a very clear idea how we move this topic forward.

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Operator [45]

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As there are no further questions, I hand back to the speakers for the conclusion.

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Michael Willome, Conzzeta AG - Group CEO [46]

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Good. I thank you very much for your interest, and everybody, please, stay healthy. Thank you.

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Operator [47]

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Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect now.