Dksh Holding Stock

Ladies and gentlemen, welcome to DKSH Half Year 2026 Results Conference Call and Live Webcast. I am Valentina, the Chorus Call operator. [Operator Instructions]

And the conference is being recorded. [Operator Instructions]

The conference must not be recorded for publication or broadcast.

At this time, it's my pleasure to hand over to Mr. Till Leisner, Head of Investor and Media Relations. Please go ahead.

Thank you, Valentina, and good morning, everyone. Welcome. I'd like to extend a very warm welcome to all of our participants in the call today. I'm Till, Head of Investor Relations at DKSH, and I'm delighted to be joined today by Ido, our CFO; and Stefan, our CEO.

Before we begin, the usual comments on -- please take a review on the disclaimer regarding forward-looking statements in today's presentation. You find the presentation on the Investor Relations web page at dksh.com.

Before we continue, I also would like to address a correction regarding the first half 2026 earnings per share calculation. Following publication, we identified and corrected an error in the earnings per share calculation. The correction has no impact on the reported financial results or on the underlying performance of the company. The correct first half 2026 earnings per share figure is CHF 1.56 per share and not CHF 1.67 as initially stated.

The corrected media release and the related documentation have all been distributed and are available on the DKSH web page. With that, I'm pleased to hand over to Stefan to get us started. Thank you very much.

Hello, everyone, and welcome to the presentation of our half year results 2026. Thank you for joining us today as we review the highlights and progress our company has achieved during the past couple of months.

Today's agenda foresees a short recap of our highlights of the first half of 2026. I will then continue with the progress we have seen in our 4 business units. After that, Ido will follow up with the financial update. To conclude, I will provide the outlook statement before we open the Q&A session.

Our half year results once again demonstrate the resilience of DKSH business model and the consistent execution of our strategy amid continued global uncertainty. We again delivered a solid operating performance, strong cash flow generation and higher earnings per share in the first half of 2026, while building the growth engines of the future.

Looking at the midterm road map presented, we have consistently delivered across our 4 strategic priorities, growth, margin expansion and M&A. Our semiannual growth rate has increased steadily, reaching an impressive 4.9% in the first half of 2026, up from 3.6% in the second half and 2.1% in the first half of 2025. While our core EBIT margin slightly declined in the first half of 2026, reflecting investments in business development, AI capabilities and some FX impacts that Ido will explain in more detail later on, we remain focused and confident on our ability to deliver long-term margin expansion.

We have continued to execute on our well-developed M&A pipeline, announcing 12 acquisitions since the beginning of 2025 and are very confident about the second half of the year. Through this consistent execution of our midterm road map, we remain committed to delivering sustainable Core EBIT growth in the years to come.

As usual, I will comment on our results using constant exchange rates as this better shows the operational performance and ensures comparability to previous results. DKSH delivered a resilient performance in the first half of 2026 despite continued global uncertainty and headwinds. The result was driven by accelerated organic growth, successful business development and the continued execution of strategic initiatives.

Net sales increased by 4.9% to CHF 5.5 billion. This is the strongest first half revenue growth we have achieved in 3 years. In a challenging environment, Core EBIT grew 3.6% to CHF 163.4 million, resulting in a core EBIT margin of 3%, which was impacted by unfavorable FX headwinds. Earnings per share stood at CHF 1.56, which represents an increase of 10.6%. Our free cash flow remained strong at CHF 147.7 million with a cash conversion of over 130%. This exceeds our target for the fourth consecutive year.

Alongside these results, we have increased ordinary dividend by 6.4% to CHF 2.5 per share and announced 3 acquisitions in higher-margin areas this year, namely AIC Ingredients and Kinematic Resources, both in Malaysia, and Gale & Cosm in Italy. With a robust pipeline, business development, M&A opportunities and operational excellence initiatives, we enter the second half of 2026 with expected growing momentum and confidence.

Let me now focus on the highlights of the first half of the year, which underline our commercial momentum and improvements. We continue to drive our business development by enlarging our client portfolio across all business units in various markets. We recently signed our largest deal with Lilly in Hong Kong, which we expect to generate over CHF 100 million sales contribution per year. We also entered into new material partnerships or expanding existing ones with Bayer, Pfizer, BridgeBio, Sanofi, Kemin, just to mention the ones in health care.

Advancing operational excellence and fostering a high-performance culture remains important. With a strong employee engagement score and Great Place to Work certification in 16 markets, we continue to strengthen our position as an employer of choice. We expanded our capabilities through investments in our network, including the opening of an innovation center in Spain and the upgrade of our distribution center in Thailand.

We further strengthened our AI capabilities across all business units to drive growth, enhance operational excellence, increase workforce productivity and unlock new business opportunities. In a moment, I will share how we are already benefiting from rising demand across AI-related industries and the initiatives we are undertaking.

Before doing so, I would like to emphasize that we also made good progress on our sustainability agenda. Our emission reduction targets were approved by the Science Based Target initiative, while we rolled out ISO certifications for Environmental Management and Occupational Health & Safety across 13 markets. We expanded our human rights due diligence activities. These efforts were reflected in improved sustainability ratings included an upgraded AA rating from MSCI ESG and a gold medal from EcoVadis with an increased score.

With these activities in the first half of 2026, we are well positioned for stronger momentum in the second half of the year and especially beyond. AI seamlessly integrates with our existing processes and is becoming an integral part of our business model. It acts as an enabling factor in terms of growth, operational excellence, workforce transformation and business opportunities.

On the growth side, we will launch Polaris, our AI-driven sales force optimization and customer prioritization system. It will initially be launched in Singapore, followed by a regional rollout. This solution increases sales productivity, delivers actionable shelf insights and improves customer coverage.

We continue to advance workforce transformation by scaling AI adoption across the organization. This enables our employees to focus on higher-value activities that drive innovation, customer value and business growth while building the capabilities needed for a digital future. For example, we have implemented several AI-powered applications and agents such as Legora, which supports our legal system with research, contract review, and document drafting. This enables the team to handle greater volume of work more efficiently and focus on higher-value strategic matters. Supporting these efforts is our dedicated corporate AI team of already 16 specialists.

AI also supports operational excellence. We have initiated a project to automate high-volume order management and fulfillment processes, reducing manual handling and increasing processing efficiency. This initiative is expected to generate the initial cost savings from 2026 onwards while improving scalability and very important, service quality.

Beyond improving existing processes, AI is creating new business opportunities. As part of the transformation of our technology business, we continue to expand our data center business and leverage proprietary consumer data on generate actionable insights. This enables us to broaden our client offering and develop additional high-value revenue streams. These continued investments in AI capabilities were one of the factors affecting the group Core EBIT margin within the first half of 2026. While these investments had a temporary impact, they are expected to strengthen our competitive position, unlock new growth opportunities, enhance productivity and support the creation of sustainable long-term value.

Let me now provide you with an update on the progress in our business units, starting with Healthcare. Business Unit Healthcare sustained its growth momentum and once again delivered above GDP growth. The Business Unit delivered broad-based growth with net sales increasing by 4.9% to CHF 2.9 billion. Under the new leadership, Healthcare accelerated its strategy, execution and unlocked growth beyond its midterm road map. It further increased the share of the commercial outsourcing business and achieved continued success in business development with partners like Eli Lilly, Pfizer, Sanofi and BridgeBio. I will elaborate on this in due course.

In addition, Healthcare invested in innovative therapeutic areas such as rare and cardiovascular diseases, strengthening its long-term growth platform. While Core EBIT amounted to CHF 86.5 million, the Core EBIT margin declined slightly to 3%. This was primarily driven by the ramp-up effect of new client wins, temporary mix and shift effects within the portfolio and a particularly strong comparison base in the first half of 2025. This Business Unit enters the second half with a very strong business development pipeline across geographic and therapeutic areas and is well positioned to pursue value-accretive M&A opportunities in higher-margin segments and services.

Let me provide further insights into these future growth drivers of the Business Unit Healthcare. Business development remains a key growth driver as the pipeline has increased material with roughly 80% of opportunities linked to commercial outsourcing. As mentioned, we are prioritizing larger and more strategically relevant partnerships such as the recently announced collaboration with Eli Lilly, which will elevate our healthcare business.

During the last 6 months, we have signed a handful of such new very sizable contracts that are each expected to contribute a double-digit or even triple-digit million turnover to our top line in the years to come. We, therefore, expect our top line momentum to gradually pick up with the potential to accelerate our medium-term growth rate by approximately 2% per year.

While these contracts require some upfront investments to introduce and scale new products in different markets, they will elevate our Healthcare business to the next level over the next 48 months. We maintain our focus on higher-growth pharma, biotech and medical device segments, especially in sophisticated therapeutic areas such as rare disease. This momentum is supported by attractive market fundamentals, including a growing middle class and an aging population as well as favorable industry trends such as rising health care spending.

We also continue to expand our healthcare platform through selective acquisitions in Asia and beyond. Our focus remains on high commercial outsourcing and own brands assets that strengthen our value proposition, expand capabilities and create shareholder value. We maintain a very active M&A pipeline and currently have several opportunities in the due diligence phase.

Moving to our Business Unit Consumables. We achieved accelerated net sales growth of 3.4% to CHF 1.7 billion. At 4.7%, organic growth was the highest recorded in recent years. This result was driven by strong momentum across key markets, including Malaysia, Thailand, Vietnam and Singapore as well as new client wins with expansions with clients at Nestlé, Kellanova, Kraft Heinz, and Unicharm. Profitability was temporarily affected by mix effects, increased marketing investments, stronger growth in low-margin markets and value-oriented consumer demand. As a result, Core EBIT stood at CHF 34.1 million.

However, the Business Unit regained momentum during the period with decisive commercial and efficiency initiatives contributing to a stronger performance in the second quarter of 2026. Core EBIT is expected to improve further in the second half of the year, supported by continued net sales growth, a robust business development pipeline, profitability initiatives, including cost-saving programs and some M&A opportunities.

Business unit Performance Materials delivered a net sales growth of 8.4% to CHF 707.9 million. The Asia Pacific region, which accounts for around 60% of the business unit's net sales delivered the strongest performance with growth of 15.2% at constant exchange rates. Europe also delivered growth of 3.6%. Acquisitions contributed to the positive performance. Following a softer start to the year, we returned to organic growth in the second quarter. Core EBIT growth was even stronger, increasing by an impressive 10.1% to CHF 59.8 million. We further increased gross and Core EBIT margins supported by favorable portfolio mix, higher shares of digital sales and an effective price pass-through mechanism.

In addition, we improved our working capital terms, mainly through diligent inventory management. In sum, the business unit grew its top line, increased margins and improved working capital terms. Given the current market uncertainties, we remain cautiously optimistic about the growth trajectory. The business unit remains committed to continuing its progress in the second half of the year.

Finally, let us please focus on our business unit Technology. We achieved solid net sales growth of 4.7%. Performance was robust across key business lines, led by Scientific Solutions and Semiconductor and Electronics. The Precision Machinery business also delivered strong results, while the share of consumables and service revenue continued to increase slightly. The business unit delivered exceptional Core EBIT growth of almost 90% to CHF 13.4 million in the first half of 2026.

We benefited from increased demand in the data center business, where we provide the supply, installation and servicing of backup power solutions. This not only drove Core EBIT growth, but also margin expansion from 3.1% to 5.6% supported by a continued strong business development pipeline, including additional opportunities in the data center business, technology is well positioned for a stronger second half of the year.

Now I hand over to Ido, our CFO, who will guide you through our financial results in the first half of 2026 in more detail. Thank you.

Thank you, Stefan. It's a pleasure, as always, to be with you today and walk you through our financial performance in the first half of 2026. As usual, I will refer to our results at constant exchange rates, which provide the most meaningful basis for assessing operating performance.

As you are aware, the first half of 2026 was marked by ongoing geopolitical tensions and disruptions to key global trade routes. Against this backdrop, DKSH has once again delivered a solid operating performance, demonstrating the resilience of our business model and the safety that is inherent in our diversified portfolio. Not only did we maintain the pace of the last few years, we even accelerated top line organic growth, meeting our goal of exceeding GDP growth. This was achieved by successful business development and the continued focus on executing our strategic priorities, and it is reflected in our key financial metrics.

Net sales increased by 4.9% to CHF 5.5 billion, marking our strongest first half growth over the past 3 years. Growth is broad-based across all 4 business units, reflecting continued trend in the market to outsource business services. Core EBIT increased by 3.6% to CHF 163.4 million, marking the 11th consecutive semester of Core EBIT growth versus the comparative period. Core EBIT margin stood at 3.0%, 10 basis points lower than in the first half of 2025.

Against an exceptionally strong prior half year, profitability was impacted by 2 effects. The first is related to translational FX rates, amounting to approximately half of the drop, and it is not operational. The FX effect on Core EBIT was 7.1% compared to a smaller 5.9% impact on net sales. This is because the Swiss franc has appreciated further against currencies in markets where we make more profit.

The second effect is operational, but temporary in nature. It is related to channel mix and investments in selected business units to kick-start our accelerated net sales growth. It is important to note that while currency movements had an adverse impact on our reported operating results, they have been more than offset by significantly lower net finance expenses in the period.

As a result, profit after tax and earnings per share are both up double digits, thereby securing overall shareholder return. Specifically, core profit after tax stood at CHF 112.9 million, up 12.9% compared to last year. Earnings per share grew by 10.6% to CHF 1.56.

Our asset-light business model and disciplined working capital management continue to support strong cash generation, resulting in free cash flow of CHF 147.7 million and a cash conversion rate of 130.8%, exceeding our target of at least 90% for the fourth consecutive year.

In conclusion, we delivered our strongest first half net sales growth in 3 years, increased earnings per share by double digits and generated excellent cash flows, demonstrating the resilience of our business model and the continued successful execution of our strategy.

Let us now take a closer look at the drivers behind our net sales and Core EBIT development. We are particularly pleased with the acceleration of our top line growth. Net sales increased by 4.9%. Demand was healthy across the group with all 4 business units contributing positively to growth. Organic growth remained the primary driver of performance, contributing 4.1 percentage points, while acquisitions, net of divestments and business closures added a further 0.8 percent points.

We are particularly encouraged by the continued momentum in business development across the group, a key driver of our broad-based growth. FX movements had a significant translational impact on our reported results, especially earlier in the year. The appreciation of the Swiss franc reduced reported net sales by approximately 5.8%.

Turning to Core EBIT. We increased operating profit by 3.6%, supported by both organic expansion, which contributed 1.1% and contributions from recent acquisitions, contributing 2.5%, underscoring our investments in higher-margin businesses. Both Performance Materials and Technology business units have been particular contributors to our M&A. These positive operating developments have been more than offset on a reported basis by translational FX movements, which reduced Core EBIT by CHF 12 million or 7.1%.

As a result, reported core EBIT amounted to CHF 163.4 million. Noncore items amount to CHF 5.4 million and primarily related to one-off costs of restructuring, business disposals or in associates in which DKSH does not have a majority stake. Net of those items, reported EBIT stood at CHF 158 million.

While FX weighed on our reported results in the first half, the underlying development of the business remains very encouraging. This becomes even more apparent when viewed over a longer time frame.

Looking at our performance since 2022, we have consistently translated strategy execution into profitable growth and value creation. Since the first half of 2022 in constant FX, our net sales increased by a compounded annual growth rate of 4.3%, which is higher than the average annual weighted GDP of our markets.

Over the same period, Core EBIT increased at an even faster rate of 8.2%, demonstrating our ability to translate top line growth into disproportionate earnings growth. This progress is also reflected in our profitability metrics. Since the first half of 2022, our conversion margin defined as Core EBIT as a percentage of gross profit has increased from 18.0% to 20.6%, a level we successfully maintained in the first half of 2026.

Similarly, our Core EBIT margin has improved by 30 basis points since the first half of 2022 and remained at a strong level of 3.0% in the first half of 2026. I would like to highlight the significant progress we have achieved in logistics and distribution over the past 5 years. Our relentless focus on operational excellence, supply chain optimization and the increased use of digital and AI-enabled tools reduced logistics and distribution costs by more than CHF 20 million per year, equivalent to 0.4% of margin improvement.

As you know, a key foundation of our resilience and agility is our low-risk, asset-light business model. Across the group, we operate predominantly through lease offices, lease distribution centers and lease transfer fleets. In IT, we typically leverage Software-as-a-Service agreements avoiding more costly in-house developments. As a result, capital expenditure consistently remains at a very low level. In the first half of 2026, it amounted to merely 0.3% of net sales.

At the same time, disciplined working capital management remains a key focus area. Working capital stood at a respectfully lean level of 7.8% of annualized net sales, in line with the strong level achieved in recent years. Together, these factors drive our ability to consistently convert earnings into cash. Free cash flow amounted to CHF 147.7 million in the first half of 2026, corresponding to a cash conversion rate of 130.8%, comfortably exceeding our target of at least 90%.

Looking at the past 5 first half cycles, we delivered an average cash conversion rate of 124.5%. This strong cash generation provides substantial financial flexibility to fund organic growth, pursue value-accretive acquisitions and maintain our progressive shareholder return policy.

To conclude this section, our consistent cash generation over the years once again underlines the quality and predictability of our earnings, supported by an asset-light business model, disciplined capital allocation and rigorous working capital management.

Let us now move on to our balance sheet. Building on our continued focus on disciplined capital allocation, we maintained a strong balance sheet and high returns in the first half of 2026. Core RONOC remained at a high level of 18.7%, demonstrating our continued ability to generate attractive returns on the capital employed in the business.

Core return on equity increased by 70 basis points year-on-year to 12.7%, reflecting stronger earnings and our continued focus on capital efficiency. Similar to last June, we concluded the first half with a minor net debt position of CHF 10.8 million, given the strength of our cash generation. This remains a very insignificant leverage position.

Our equity ratio increased by 20 basis points to 31.9% at the same time, providing a solid capital base and significant financial resilience.

Let me conclude with a few additional financial indications for the remainder of the year. Regarding M&A, we estimate that acquisitions announced or completed to date will contribute approximately 1 percentage point to net sales growth in 2026. As this estimate only reflects transactions already announced, additional acquisitions would naturally provide further upside.

We are currently viewing a number of attractive acquisition opportunities across our markets and remain committed to our disciplined approach to value-accretive M&A. While foreign exchange markets remain volatile, we currently anticipate a moderately negative translation impact for the full year, assuming prevailing exchange rates remain broadly unchanged. That would translate into materially improved FX situation during the second half of the year.

Our expectation for the tax rate to remain within the range of 27% to 29%. Capital expenditure is expected to remain within our historical range of 0.3% to 0.4% of net sales, reflecting the continued strength of our asset-light business model.

Overall, we are encouraged by the momentum achieved in the first half of the year, supported by a strong balance sheet, substantial financial flexibility, and a healthy pipeline of business development and M&A opportunities. We remain well positioned for the remainder of 2026. Thank you for your attention. And Stefan, back to you.

Thank you, Ido, for your commentary on our financials. To conclude, let us move to the outlook now, please. Despite ongoing geopolitical tensions and market uncertainty, recent forecasts continue to point to a resilient global GDP growth in 2026. Emerging and developing Asia remains particularly attractive with projected growth of 4.9%, underlining the long-term potential of many of our key markets.

While we continue to closely monitor developments in the Middle East, the direct impact on our business has been very limited so far, demonstrating once again the resilience of our business model.

Looking ahead, we remain very confident to deliver sustainable Core EBIT growth and reconfirm our midterm road map with an acceleration in health care over the next years. We expect Core EBIT 2026 to be higher compared to 2025. As always, this outlook assumes economic growth in Asia Pacific, exchange rates to prevail at current levels and exclude any unforeseen events.

We are very well positioned for a stronger second half of 2026, supported by improving commercial momentum, continued growth in our data center business and acceleration of our M&A activities.

To sum it up, DKSH demonstrated the resilience of its business model in the first half of '26 and remains confident for the second half of the year. Our business model allows us to benefit from favorable long-term market industry and consolidation trends in Asia Pacific in the future.

With that, I thank you all for your attention and invite you now to address your questions in our Q&A session. Thank you.

[Operator Instructions] The first question comes from Gian-Marco Werro from Zürcher Kantonalbank.

I have 2 questions in relation to the EBIT growth expectations for the second half of the year. As I sum it up on the call, I see 4 drivers like you have like the health care growth, you have M&A, the cost cuts you mentioned, and also then the tech supply orders that you have to the data centers as the moving part for the EBIT growth in the second half.

And I want to touch on 2 of them. So the healthcare growth you mentioned, the acceleration of 200 basis points versus normal growth. Can you specify that a bit what time period you're looking at because in the last 3 years, it was a little bit volatile. So the base for your organic growth in healthcare more 4.5% or 5% where you want to now bring up the 200 basis point acceleration? That's the first question.

And the second question is the tech, income from associates. I assume it has been around CHF 5 million in the first half year. Can you quantify here also just your best guess about the tailwind in the second half might this be even double-digit EBIT contribution from the associates in the second half?

Okay. Maybe let me answer the Healthcare question first, and then Ido is going into the EBIT question. Thank you very much, Gian-Marco. Look, yes, in healthcare, as I was indicating, we were very successful with our business development activities. And over the last couple of months, we signed a few material contracts, which are going to materialize over the next 12 to 36 months.

And what I'm talking about is you have seen the growth rate in health care in the past, which always delivered GDP plus was around, let's call it, over the last 2 years, around 4%. And I'm talking here about an acceleration of 2% on top of those 4%. And this business is technically signed and sealed and need to be delivered.

But what we are talking here about is some new products, innovative products which do require some upfront investments. So the market needs to be built, and that is putting a little bit of pressure on our healthcare EBIT margin. But I think it's a very good investment for the future to take healthcare completely to a new level.

Ido, you want to say a few words?

My pleasure, yes. Yes, regarding tech and share of profit from associates, I think your question, we indicated it's about CHF 5 million in the first half year and your question is what we can expect for the full year. Yes, we are shooting for double-digit numbers there. These are large data center projects. There could be some 1 or 2 months delay. That's not unusual, but we estimate it to be double digit by the end of the year in absolute profit.

The next question comes from Chiara Di Giammaria from Berenberg.

The first one is on the Performance Materials. If you can share with us more color on the market development and any impact from the Middle East situation. And then on the second one on M&A, if you can comment on the M&A environment now versus 6 months ago. So if you see any changes in trends here and the expectation from owner developing?

Yes, with pleasure. Look, I think in regarding Performance Materials, we mentioned that we have seen some very good development in Asia, where we delivered an uplift of 15%. We also returned to a very slow and light growth in Europe. The business in North America is definitely more challenging.

Impact from the Middle East, direct impact from the Middle East is very, very limited. There are some price increases in the market because there are still some concerns about deliverability of a few products. We don't really see that or any limitations there in our portfolio. So we are cautiously optimistic looking into the second half of the year after we have seen that the second quarter was plus 2%, whereas the first quarter was minus 2%. But at the end of the day, it's the impact of the Middle East on the underlying industries, and it's hard to predict now what is going to happen there in the second half of the year.

On M&A, as indicated, we will definitely have a much stronger M&A contribution in 2026 than in 2025. I think we were referring to a few projects which are also slightly more sizable, which are under due diligence and where we are optimistic to deliver them in H2 and maybe a few will be announced in a much shorter time period. But there's always this uncertainty with M&A only if it's signed and sealed, you can be very sure, but we are very confident in that regard.

What we see in the market is, I think I shared after the full year that multiples are coming slightly down. I think we are finding a stabilizing ground right now. So normally for the smaller deals, we continue to pay around 7x for those small deals. And there is availability on the market. And in PM, in particular, I think we see a little bit less activity from some of the other players in the marketplace. which is good for us. So yes, we have a very solid M&A pipeline on hand, which is the reason that we are expressing this confidence.

The next question comes from Nicole Manion from UBS.

Just one, please, on consumer. Obviously, this is a business that you've restructured quite significantly over the last 5 years or so, a lot of which was focused on strengthening the profitability by streamlining SKUs and other things. So can you help us understand a bit more about the areas of the portfolio where you're maybe still seeing pressure and how you thought about the decision to increase the marketing versus some of the -- any kind of other efficiency measures that you then took through the half?

Yes. Maybe I can take this question. Good to have you back on the call. Yes, there's a very dynamic situation in the consumer goods environment, I think, definitely in Asia Pacific, but also as far as I know in the rest of the world. First, as we count our blessings, the organic growth of 4.7% is something that we have not seen since 2018 for our CG business, reflecting some very strong BD pipeline, which Stefan mentioned earlier in his part of the presentation and also that are winning market share and a solid demand.

I think last year, when we closed 2025, we sort of were quite celebratory closing a margin of 2.6%, which was ahead of our target of 2.5%. And we said that or at least alluded that future growth will be more balanced between margin and sales because what we see is we see solid demand, but the demand is very price conscious. And we also see that many of our suppliers try to be very price competitive. And therefore, there's more promotional fairly across the board. It's not just in one category. It's food, beverages, it's also in beauty care. I think the consumer is more selective on the price they pay pretty much across the entire industry. So I cannot signify one of them for you.

Okay. And maybe I can point out on top of that, Nicole, that Q2 was already better than Q1, and we expect that trend to continue.

Yes. We have seen specific very focused -- thank you, Stefan. Price competition between various suppliers in Q1 where you have the Chinese New Year, you have the Ramadan and of course, coming into Easter in the countries that celebrate those, but that has sort of declined later on in Q2.

The next question comes from Anil Shenoy from Barclays.

So just 2 questions from me, please. The first one is on Performance Materials. Now you said that Q1 was down 2% and Q2 is up 2% organically. Just wanted to understand if you've seen any kind of prebuying in Q2? I'm asking this specifically because one of your competitors in commodity chemicals have reported an exceptionally strong Q2 and guided for a really weak H2.

So I'm just trying to understand if the growth that you've seen in Q2, are there any one-off elements to it? Or do you see that kind of growth continuing in H2 as well? So that's my first question.

And second is on the negative operating leverage, which we have seen in 1H. So revenue was up 4% organically, whereas EBIT was up just 1%. And you explained that it's mainly because of the upfront costs for new contracts in healthcare and marketing spends in consumer goods. So are these the only factors impacting that? Or is there something else as well? And also, are most of these costs behind us now? And do we see that operating leverage could be back to normal or maybe even positive in H2?

Yes. Thank you very much for your questions. In terms of Q2 versus Q1, yes, there was a pickup from minus 2% to plus 2%. Was that -- was there some prebuying in there? Yes, maybe. But again, I would really like to highlight this has nothing to do with what we have seen during the days coming out of COVID. Maybe there is a little bit.

But again, in Asia, where the majority of our growth is coming from, we still see an underlying demand across different industries. So maybe we are also differently impacted than some of other players, which have the majority of their business here in Europe. Well, we definitely have seen that there is some price tailwinds in Q2 as well. I think I did mention it that pricing was up around 2%. Again, I think our specialty business with the spread we have is very, very resilient. And that's the reason why we look cautiously optimistic in H2. And can you help me again with your second question in Healthcare?

So it was about the operating leverage. I mean, the upfront costs, are they behind us now? And do you -- or do you expect more costs to come in H2 and EBIT growth will again be lower than revenue growth in H2?

Okay. So I mean, look, the investments in building those new brands, those innovative products across Asia, they will continue. They will definitely continue in H2, and they will also continue going into 2027, while we are scaling up the top line of those products. But there is also own brands business, which we expect is going to pick up in a few countries. There were some tailwinds -- headwinds, sorry, around the border issue between Thailand and Cambodia, et cetera.

So I expect that the healthcare margin is continue to grow over the years to come, maybe slightly slower than what we have seen in the past. But you rightfully point out, those significant contracts are going to deliver some operational leverage. And each one of those contracts is at the end when the investment phase is behind us, is margin accretive. Therefore, we expect a slightly better margin in H2 than in H1 and an increase also of margin moving forward.

And as I mentioned earlier, based on the FX rates that we know today, of course, they can change. We expect the translational impact that we saw, especially in Q1 to subside towards the second half of the year, which will also help margins.

But I would really like to point out, I mean, there will be a significant acceleration in the healthcare business over the next 36 months on the back of what we have signed. This is not to underestimate. That was a very successful streak and very strong confidence of our clients into DKSH Healthcare, whichever is going to materialize.

[Operator Instructions]

The next question comes from Jon Cox from Kepler.

I have a couple of questions and sort of follow-ups related to what my colleagues were asking. Just on the consumer side of things, it's great to see organic growth accelerating again. But of course, some people maybe start to get worried that you're going sort of a bit towards the lower-margin businesses. You say there's a lot of business there, but there's price pressure.

Should we be worried that actually you're going to start getting this growth, but actually the margin in consumer goods won't recover. We've obviously lost 50 basis points in H1. Do you think that's going to recover in H2? What are your thoughts about chasing maybe only delivery business or logistics business in consumer?

Second question on healthcare, you're talking about pressure on margin again. So are you saying that actually the healthcare business will be sort of flat margin for a while or slightly lower as that growth picks up? And what I'm trying to get to, of course, is obviously, your margin was down in H1 for a group. How confident are you of reaching this minimum 10 basis points margin improvement this year given the headwinds in consumer and given the headwinds in healthcare? And I could even say the same about the following year, if you're talking about these ongoing investments in healthcare, how confident are you that you can actually move margin in the next 1 or 2 years? So that's sort of like a margin question.

Second one, just on FX, and you've talked about it a lot. But historically, you've always said it's only translation, it's only translation, it's only translation. And suddenly, we're starting to see an impact on your margin from the FX headwinds. I wonder if you could just talk about that a little bit. Obviously, we can see that your financials line was far better, which obviously reflects what's happening with currency. Maybe just you can talk a little bit more about that and the currency headwinds.

And should we be worried because clearly, over the last 4 or 5 years, you've seen substantial currency headwinds, and that's probably not going to go in a way you guys being a Swiss franc reporter.

And then just the last one on this EPS. You tend to report net for profit after tax and then you give an EPS for that and then you do it for shareholders and there's an EPS and then you do call for shareholders with an EPS it would be great if you could, in your release, just tell us what you were using there because I was amongst those analysts probably thinking, well, how did you get to that EPS figure? And just as a suggestion, it would be nice just to have core for shareholders. I think that's the one everybody is focusing on rather than all this profit after tax and all this stuff. And what was the share count you actually used in H1?

Okay.

So you start with consumer...

Okay. Thank you for the many questions. So I'm just trying to recall exactly the first one. Overall, yes, as I mentioned before, it's evident we have taken a few step backwards in the CG margin business. This comes while increasing the top line and it was part of the strategy going forward.

We also see some -- especially in the consumer goods, there's a lot that is happening in the consumer part of the market. I made a small search in my favorite AI engine this morning and of the number of consumer goods companies that are reporting promotional pressure, and the list is very, very long.

We also operate in a certain environment that we can so much influence in order to impact and continue to grow margins. As we mentioned, Q2 margin was stronger than Q1, and we expect half 2 margin to be stronger than half 1. We are adjusting some of our cost structures to get there. We also expect to have less promotional pressure. So we expect it to be better.

Will this be the year in which we -- another year in which we grow 10 basis points or 20 basis points in the case of CG margin? Probably not. But we are targeting to be flat versus last year after the second half. It is an ambitious target, to be honest, because we are where we are, and we are influenced by the market. So that's about the consumer goods. I would not worry about deterioration, and it's not change of strategy. We're going to adjust based on the current situation of the business.

I think -- sorry, just to come back on that -- just on that consumer. So you're saying that H2 margin will be in line with H2 last year margin. You're talking about a flat? Or are you saying after H2, you'll start to see an improvement again, i.e., this year, it will be down in H2 versus H2 last year?

Yes. I think we will see in the second half equal to last year.

Say that again, repeat, sorry?

Repeating that we are targeting in the second half year to have similar margin to last year's. Similar.

Okay. Maybe I'll take the next one on Healthcare and then Ido come back to your FX and EPS. So Jon, no, I'm really not worried about the margin pressure in Healthcare. I mean, let's take the bigger picture very, very briefly across all business units. I think over the last couple of years, I think very consistently, we improved the margin by 10 bps.

If now for like 6 months or maybe even 12 months at one point of time, the margin is stable or dropping by 10 bps. I would not read too much into that. There are significant growth opportunities materializing in healthcare, as I was saying. And on the other hand, we were all in the past, not very happy with the overlying top line acceleration, right, what we have seen over the last couple of years.

And now this is materializing, but it does need to require some investment. So those investments are done for a really good reason. It's a business model with strong operational leverage. So automatically, the margin will be driven forward by the sites we are adding in the top line.

And top of that, in healthcare, in particular, coming back to your question, we see an acceleration of the commercial outsourcing, which is higher margin. We see an acceleration in own brands, which will support the margin enhancement and the other thing also the M&A we have on hand.

How this exactly falls every 6 months, it's a little bit up, flat or whatever, it's really hard to predict also when do we need to launch what kind of investments when the product is ready being launched. But clearly, I don't foresee, as you were provoking in 2027, a flat margin. That margin will continue to grow over the years to come. But the big acceleration you will see in the top line. I hope that was clarifying.

Sorry. And then so what about for the group margin for this year? Can you get 10 basis points after what happened in H1? Or you think that that's a bit of a stretch...

Investments? That is our objective, and we are reasonably confident about that with the investments we have on hand.

I can pick up the questions on FX. First of all, there was the question about the translational FX. And indeed, we repeat that the -- on our EBIT margin, there is an impact which relates to translational effects. The math of the matter is that in markets in which we are more profitable than others, the deterioration -- the translation deterioration of the local currency versus Swiss franc has been stronger than the others. So there's a mix effect within the translational FX that is impacting EBIT more than it does net sales because in those markets, we have more money, the local currency has just declined further. So it's a mathematical impact of within our translational FX. And I repeat that this is the main impact.

On the net finance cost, as we always said, in the PM business and tech business, we are hedging the -- each transaction we make above CHF 10,000 to be precise. And last year, we saw a very significant deterioration or appreciation of the Swiss franc in the beginning of the year. Those transactions were hedged. But from accounting perspective, we took the help and the protection that the hedge was given below EBIT and not within the P&L.

After a while, when we saw that those countries depreciate, the market depreciated, we have adjusted prices accordingly. So the future deal is giving us the margin that we target. This has happened in this year and with less appreciation of the Swiss franc, we see a lower impact of FX cost below the EBIT. I know it's a bit technical, happy to explain further. But this is the effect that you see in net finance costs below EBIT.

And any best guess for net financials for the year?

We will probably duplicate in absolute the first rate of the first half rate. Again, it depends on -- assuming that there's no major volatile FX movements in the second half.

Right. And then on the EPS?

Yes. On EPS, we are very pleased to -- we will be very pleased to provide both numbers, EPS as reported and adjusted for noncore items. Actually, the figure that was published this morning corresponds to the core EPS, that was $1.67. So yes, it is a straightforward calculation because we do provide all the adjustment from reported to core earnings, we will add the earnings per share of both measures.

And do you have the share count the hands you used...

Yes, it's 65,006,033, or 65,006,053 -- 65,006,313. So -- 6-5-0-0-6-3-1-3.

The next question comes from Andrew Noël from chemicalESG.

I've got a couple, please. I just wanted to come back on something you said about on PM that some of your competitors are sort of taking their foot off the gas when it comes to M&A. I mean one of the themes that your competitors always talk about is that they build these relationships with companies over months, years. And so my question is, to what extent can you sort of jump in there and overturn those relationships if it's the case that they are there doing less?

And also, I noticed that on the slide decks, Performance Materials was the only one that didn't mention M&A. And so I'm just wondering if there's the level that you expect this year.

The second question, I don't know if it applies better to technology or what. But I wonder what's the opportunity in sort of electronic materials as opposed to equipment supplies? I mean I imagine that your customers sort of buy directly from Solstice and DuPont as well. But over time, do you think it will become an interesting area for you on the distribution front?

Okay. Thank you very much. So on Performance Materials, I mean, all I can say is, look, I mean, we have good relationships across the areas. We have no limitation in terms of leverage we have on the balance sheet. So yes, we can act. We can move fast on those transactions. And yes, we signed a material one in H1 in Malaysia, a blending business in the food section, which is going to be closed, if I'm informed correctly, by the end of this month.

There will be also another one most likely being announced during July. So there is M&A activity. I don't know what you're referring for when you said we don't mention it. I need to double check, to be honest. No, there is an M&A pipeline. We also announced the one in Italy, I almost forgot most recently, I think last week. So don't worry about, there is M&A activity, and we will continue to deliver M&A also in Performance Materials in a responsible way on responsible multiples.

In terms of electronic materials, we already accelerate, I think, the sales of consumables because with all -- with enlarging the installed bases we have across the different sectors because we also do installation and aftersales services, which includes spare parts, et cetera. This is a business stream which is continuously growing. I don't know how exactly you define electronic materials, if you are talking about ingredients going, this is more on the PM side. But normally, with smaller spare parts outside of our equipment base, normally, we don't deal.

Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Till Leisner for any closing remarks.

Yes. Thank you so much, everybody, for joining today's call. Appreciate to stay in contact with you. The Investor Relations team remains available also after the call, and I'm just handing over to Stefan for some closing remarks.

Yes. Thank you. Thank you very much for your interest. And the team really look forward seeing and meeting you guys over the next couple of days and to continue our conversations. Thank you very much, and have a great weekend in the meantime.

Thank you, Sandra, and good morning, everyone, and welcome. It's a pleasure to see so many of you here again in Zurich at the Metropol. I'd also like to extend a very warm welcome to all of the participants joining via our live webcast. It's great to have the opportunity to connect with such a broad audience across the globe. I'm Till Leisner, Head of Investor Relations, and I'm delighted to be joined today by our CFO, Ido Wallach; and our CEO, Stefan Butz.

Before we begin, the general reminder to look at the presentation and the including disclaimer, which you find on our web page in the Investor Relations section. For those who are attending virtually, again, you find that on the web page at dksh.com. With that short introduction, I'm very happy to see all of you again, and I hand over to Stefan to get us started. Thank you so much.

Thank you very much, Till. Hello, everyone. Good morning, and welcome to the presentation of our 2025 full year results. Joining me here today is our CFO, Ido, as well as our Investor and Media Relations team. As today marks the first day of the Chinese New Year, I wish especially all our Asian colleagues a Happy Lunar New Year. So today's agenda foresees a short recap of our highlights of the past year. I will then continue with a review of the business units in 2025. After that, Ido will follow up with a more detailed financial update. And to conclude, I will provide an outlook before we then open the Q&A session.

We are very pleased to report that DKSH achieved another year of improved results with an even better acceleration of growth in the second half of 2025. We continue to translate our strategy into consistent execution in 2025, delivering growth, increased margin and high cash generation in a muted market environment. As in previous year, I will primarily be commenting on our results using constant exchange rates as this better shows the operational performance and ensures better comparability with previous years or results. Despite a very challenging environment, net sales increased by 2.9% at constant exchange rates to CHF 11.1 billion in 2025.

In the second half of the year, net sales grew even faster at 3.6% with a pickup in growth in the business units Healthcare and Consumer Goods, thereby achieving GDP growth. Core EBIT amounted to CHF 349 million, 6.7% higher than in 2024. Core EBIT margin increased from 3.1% to 3.2%, in line with our midterm goal to expand core EBIT margins by at least 10 basis points year-on-year on average. In the second half of 2025, we delivered improved profitability with a core EBIT increase of 8.1% faster than the first half of the year. Our free cash flow remained high at CHF 215.5 million with a cash conversion of 95.2%. This marks the sixth year where we achieved a cash conversion above our target of 90%.

We also delivered on our midterm road map regarding capital allocation as we announced 9 accretive M&A transactions in 2025 and proposed to increase the ordinary dividend by 6.4%, which corresponds to CHF 2.50 per share. This resilient performance in challenging times once again demonstrates DKSH ability to consistently create value for our clients, customers, employees and shareholders. Based on the acceleration of growth in the second half of 2025, we will continue to deliver on our midterm road map in 2026, driven by our focused strategy execution and resilient business model.

Let me now focus on the highlights of 2025. We executed our accelerated M&A strategy and announced 9 transactions across the business units, Technology, Performance Materials and Consumer Goods in various markets. We continue to drive our business development by enlarging our client portfolio across all BUs and various markets. We signed a strategic partnership with Bayer for their pharma business in Singapore, Malaysia, Thailand and in the Philippines. In Singapore, we began collaborations with Eli Lilly, started working with Nestle in Malaysia, Thermo Fisher in Japan and Polygal in Europe and the United States. Additional highlights include the achievement with respect to our high-performance culture. Being recognized as a great place to work in even more markets and as one of the Fortune 100 best companies to work for in Southeast Asia 2025 highlights our continuous ambition to create an excellent work environment.

We remain committed to talent development and diversity as reflected in our representation of women in leadership roles. We achieved several milestones in our sustainability efforts. We have been recognized as an industry leader in the ISS ESG Corporate Rating 2025. The science-based target initiative validated our targets, and we are on track to achieve net 0 greenhouse gas emissions across the value chain by 2050, having already reduced our CO2 emissions by 65%. With these achievements across multiple areas, we demonstrate our diligent strategy execution and commitment to creating value for our clients and customers in Asia, Europe and North America.

We also create sustainable value by implementing AI initiatives across all our business units in key areas such as M&A, finance, IT and supply chain management. To support these efforts, we have established a dedicated team. AI acts as an enabling factor that seamlessly integrates with our existing processes by continuously leveraging our extensive data resource through AI we create additional opportunities for growth and enhanced operational efficiency. AI on the one hand, enhances demand forecasting or optimizes pricing, which drives top line growth. On the other hand, AI enhances our operational efficiency. For example, in our consumer goods business unit, we utilize a modular commercial excellence AI platform. This enables us to perform forecasting and segmentation, gain additional customer insights, obtain route optimization data and plan shelf layouts more efficiently -- effectively sorry.

As a result, we achieved sales force excellence through increased customer revenue, improved client acquisition and retention and optimized cost to serve. Our business benefits from high entry barriers. By leveraging our strong sales force, extensive distribution network and robust cash collection processes together with advanced AI initiatives, we further evaluate these entry barriers, giving larger distributors like us the competitive edge. As in previous years, we continue to invest our capital in business with above average margins. We follow an accelerated high-impact M&A strategy backed by leverage headroom for approximately 2x net debt to EBITDA.

Last year, we explored major transactions that ultimately did not materialize. Despite the volatile M&A environment, we announced 9 transactions surpassing the average number closed annually in previous year. Over the past 6 years, we accelerated our M&A activity as we have more than doubled the number of transactions. From 2012 to 2019, we completed 16 acquisitions whereas between 2019 and 2025, the total rose to 35%.

As a result of these acquisitions made in 2025 and our existing deal pipeline for 2026, we expect increasing EBIT contributions from M&A in 2026. Looking ahead, our strong balance sheet allows us to pursue a wide range of strategic options. We remain committed to accelerating our M&A strategy, including the potential for expansion beyond Asia Pacific in our Business Unit Performance Materials, Healthcare and Technology. Our strong cash generation not only allows us to accelerate our M&A activity but also to continue our progressive dividend policy. Therefore, our Board proposes an increase of the ordinary dividend to CHF 2.50 per share, which is equivalent to a growth of 6.4%. For U.S.-based investors, this represents an increase in dividends, by the way, of more than 25%. This proposal marks our 13th consecutive year of dividend increase confirming our dividend aristocrat status. Notably, our ordinary dividend per share has achieved an average growth of 5.1% in the last 5 years.

Let me now provide you with an update on the progress in our business units, starting with Healthcare. Our largest business unit, Healthcare, maintained its track record of profitable growth in 2025. We continued our development above GDP grades as net sales increased by 4.6% to CHF 5.8 billion. especially in the second half of the year, we accelerated organic growth. Core EBIT achieved CHF 174.2 million with a core EBIT margin of 3%, an improvement compared to the previous year. This marks the fourth consecutive year of margin increase on our full year results. These strong results were driven by broad-based growth across multiple markets and by new, as well as existing clients. We entered new partnerships with notable companies like Bayer, Eli Lilly, Reckitt, et cetera.

Patrick Grande, a well-seasoned leader with more than 20 years of experience in the global pharma industry and part of DKSH since 2022 has been appointed as the new head of the business unit following Bijay Singh's planned transition into retirement. Under this new leadership, the business unit will continue to focus on higher-value segments and services. We will increase the share of commercial outsourcing while maintaining a strong focus on our own brands business.

Moving to the Business Unit Consumer Goods. Business Unit Consumer Goods achieved net sales growth of 1.2%, with a marked acceleration of 2.8% in the second half of 2025. This growth was driven by strong performance in Malaysia, Vietnam and Singapore, alongside improved business development, especially in higher-margin business with new clients such as Nestle and Del Monte. Core EBIT increased to CHF 89.7 million, reflecting a growth rate of 5.4% and resulting in an approximately 10 basis point margin expansion. While core EBIT declined by 4.3% in the first half of 2025 growth recovered strongly in the second half. In the past 6 months, we achieved core EBIT growth of 14% and a core EBIT margin of 3%, reflecting improved earnings momentum and operational leverage. The exit of our business in Indonesia as well as the acquisition of Zircon-Swis Fine Foods in Singapore, which delivered performance ahead of the business plan further supported those results.

In our Business Unit Performance Materials, net sales grew by 1.4% to CHF 1.4 billion. The Asia Pacific region, which accounts for around 60% of the business unit net sales delivered the strongest performance with growth of 5.5%, demonstrating a clear outperformance in an overall declining market. The resilient performance of the business unit was reinforced by strong business development with key clients such as Synthomer, Kronos, Polygal alongside 3 M&A acquisitions and a very strong pricing discipline supported by gross margin expansion. Core EBIT increased by 1.9%, with the core EBIT margin improving to 8.2%. The core EBITA reached CHF 120.4 million driving the core EBITA margin to 8.9%. Looking ahead to 2026, streamlined leadership with Natale Capri as the sole head of the business unit, cost optimization initiatives and already signed M&A transaction will provide additional growth momentum in 2026.

Last but not least, let us focus on our business unit technology. Against the macroeconomic backdrop characterized by short-term uncertainty and delayed investment decisions, the business unit delivered resilient results around 2024 levels. The business unit further focused its portfolio. We completed 5 strategic acquisitions within the Scientific Solutions segment. The share of our business line, semiconductor and electronics increased highlighted by the integration of CLMO in Malaysia and Taiwan, while the business line precision machinery also grew, driven by the strong performance with key clients. We also divested our cable business in Australia and Taiwan, focused more on consumables and services, and it's achieved very strong digital sales growth.

In 2026, the business unit will continue to capitalize on consolidation opportunities in Asia Pacific and other regions. With a promising business development pipeline, the business unit is well positioned for a stronger year ahead. Now I hand over to Ido who will guide you through our financial results in more detail. Thank you very much.

Thank you, Stefan. Thank you, Till. I would like to extend my warm welcome to all of you also from my side, especially for those of you who are able to join us today. I know that your time is valuable, and thank you for spending it with us. I am very pleased, as Stefan was to share more details about our 2025 results. As always, to best reflect the comparability of our operating performance, I will also focus on our results at constant exchange rates. The global economic environment in 2025 was marked by heightened uncertainty, particularly in the first half of the year. Against this backdrop, we are particularly pleased to have once again demonstrated the resilience of our business model and our ability to navigate challenging conditions.

We have proven this during the pandemic shutdowns in the postpandemic inflationary environment, and we confirm it once more throughout 2025, as reflected in our key financial metrics. Net sales growth amounted to 2.9% at constant exchange rates. Core EBIT increased by more than twice the rate of net sales at 6.7%. Core EBIT margin increase of 0.1 percentage points to 3.2%. This represents the fifth consecutive year of core EBIT margin expansion. Core profit after tax stood at CHF 226.4 million, an increase of 3.3% at constant exchange rates. Building on our asset-light business model, we generated CHF 215.5 million in free cash flow. This represents a cash conversion of 95.2%, the sixth consecutive year above our target of at least 90%. To sum up this section, we have once again delivered as predicted, top and bottom line growth, margin expansion and substantial cash generation.

Let us now examine the composition of our net sales and core EBIT development in more detail. Organic net sales growth reached 2.5% marking growth acceleration in the second half. The step up from 2.1% in the first half to 3.6% in the second half was particularly evident in business units health care and consumer goods. M&A contributed 0.4% to our growth. Combining organic and M&A, our net sales growth at constant exchange rates totaled 2.9%. The appreciation of the Swiss franc negatively affected net sales by 3.1%. This figure however is slightly smaller than 3.8% negative impact recorded in 2024.

Let us continue with the development of our core EBIT. We are pleased with our continued core EBIT growth. We grew our core EBIT organically by 5%, twice the rate of our organic net sales growth and driven by our intentional focus on high-margin businesses, cost efficiencies and the scalability of our business model. M&A added 1.7% to core EBIT growth, also ahead of its contribution to top line growth, and validation of our strategy to acquire higher-margin businesses. All business units contributed to core EBIT expansion throughout M&A, and we are confident that profit contribution for M&A in 2026 will exceed that of 2025.

Net sales growth, combined with continued strong focus on value-added services, operational excellence and resource optimization delivered an overall core EBIT margin improvement of 0.1 percentage points. Similarly to net sales, the translational FX had a meaningful and negative impact on our core EBIT amounting to minus 5%. The investment materials that we published on our website today include details of the items that we consider nonoperational of a one-off nature or in short, noncore. The main items that fall into this category in 2025, our restructuring cost of $7 million, onetime project cost of CHF 3.9 million and disposal of trademark licenses to the tune of CHF 1.8 million.

To wrap up the core EBIT section, it stood at CHF 349 million, representing another landmark achievement in the 160 years history of DKSH. The sustained long-term effects of our diligent strategy execution, the attractiveness of the business we're in and the resilience of our business model become very evident when we review performance metrics over a 5-year period. We successfully and consistently convert our operational achievements into financial value creation for business growth, cost controls and return on invested capital. Since 2021 in constant exchange rates, our net sales increased by a compound annual growth rate of 4.2%. This is higher than the average annual weighted GDP of our markets. Our core EBIT rose at an even faster upward trajectory of 11.6% CAGR.

Consequently, our core conversion margin defined as core EBIT as a percent of gross profit increased sequentially. Having exceeded the 20% mark in 2024, we lifted by further 70 basis points to 21.4% in 2025. Furthermore, our core EBIT margin followed a similar upward trend. The 3.2% core EBIT margin in 2025 correspond to a total of 60 basis points margin that we delivered sequentially over the last 5 years.

I would also like to highlight to you today the significant improvements that we have achieved over the past 5 years in the area of logistics and distribution. By diligently focusing on operational excellence and leveraging digital tools, including AI technologies, we decreased our logistics and distribution costs by around CHF 35 million, thereby supporting our core EBIT margin by 30 basis points over the past 5 years. A key source of our resilience and agility to respond to ever-changing market conditions lies in our low-risk asset-light business model. We operate primarily with leased offices, lease distribution centers and leased transport fleets. This becomes apparent when looking at our capital expenditure. It's still between 0.3% and 0.5% of net sales across the last 5 comparative periods, with a very lean level of 0.3% maintained over the last 3 years.

Building on our ongoing efforts to drive efficiencies across the organization, we are proud to report that we optimize our working capital even further in this reported period, matching the 8.6% of annual sales recorded 2 years ago. Subsequently, over the same period, we delivered constant and high free cash flow, exceeding our objective of 90% conversion in each one of the last 5 years. To sum up, our year-by-year results demonstrate once again the high quality and predictability of our earnings, sustainable in nature, repeatable in execution, and mirrored by strong cash generation.

Let us now move on to our balance sheet. Building on the financial performance achieved in 2024, we further enhanced the quality of our balance sheet and returns in 2025. Core return on equity increased by 30 basis points year-over-year to 12.4%, reflecting stronger profitability and very disciplined capital allocation. We continue to operate with a positive net cash position supported by an efficient and disciplined deployment of liquidity. At the same time, we maintained a high core RONOC close to 20% evidencing our sustained focus on value creation and capital efficiency.

We operate a low-risk asset-light business model that drives a high and consistent free cash flow for our capital allocation. In 2025, we funded 9 acquisitions while distributing a higher ordinary dividend to our shareholders, all with existing cash. 2025 was a 12th consecutive year of progressively higher ordinary dividend. We also reduced our gross debt position by almost CHF 50 million, which resulted in more than CHF 4 million savings on interest expenses in 2025. With an improved equity ratio of a 1 full percentage point to 33.1%, we maintained a significant leverage headroom to grow our platform through industry consolidation. As we already shared in the past, we continue to carefully assess deals and only acquire if we find them value accretive, scalable and available for a reasonable price.

Let me also provide you with some additional financial indications before we return to Stefan to elaborate on future prospects. In terms of M&A, we estimate that our recent acquisitions will contribute around 0.8% to net sales in 2026. This is based on acquisitions which we have closed until now. We expect more deals to materialize in 2026 and naturally, those will provide further growth upside. While the currency development remains volatile, we expect a slight negative FX translation impact, assuming December rates prevail for the remainder of the year. Tax rate, our 28.7% tax rate on core earnings in 2025 was at the upper end of our midrange of 27% to 29%. We continue to guide this range for 2026. Capital expenditure is expected to remain between 0.3% to 0.4% of net sales for the full year.

With that, I would like to thank you again for your attention today and then over back to Stefan.

Thank you, Ido, for the comments on our financials. Our results reaffirm the robustness of our business model and reinforce our role as a reliable anchor for clients and customers even in times of change and challenges. Before we come to the outlook, I would like to comment on the changes in our Board of Directors. Andreas Keller, Member of the Board of Directors since DKSH founding in 2002 will not stand for reelection at the next AGM. Andreas Keller joined Diethelm & Co in 1976. He initiated and led the merger of the 2 Swiss trading companies Diethelm and Edward Keller in 2000 and supervised the creation of DKSH in 2002 together with Adrian, Keller and others.

The Board members and all my colleagues from the Executive Committee wish him continued success in his future endeavors and delighted that he as the Chairman of the Board of Directors of the Diethelm Keller Holding, will continue to be connected to DKSH. We are all very pleased to propose Julie von Wedel-Keller as a new member of the Board of Directors. As a direct descendant of the Keller family, her election as the fifth generation would ensure continuity and stability, underlying the family's long-term commitment to DKSH.

Looking ahead, we remain confident to deliver sustainable core EBIT growth and reaffirm our midterm road map. We expect core EBIT in 2026 to be higher compared to 2025. As always, this outlook assumes economic growth in Asia Pacific exchange rates to prevail at current levels and excludes any unforeseen event. Asia Pacific remains the most attractive region for global trade, highlighted by Asia's resilient growth of expected 4.6% in 2026. Recent GDP forecasts indicate strong economic growth in Asia Pacific, driven by less significant tariff impacts and Asia's pivotal role in transforming global trade. With 2/3 of the world's middle class expected to reside in Asia by 2030 and its leadership in future industries like AI, the region is well positioned to reshape global trade alliances.

Strong export dynamics and intraregional trade will continue to support the economic momentum across the rapidly growing Asian economies. DKSH remains very confident in Asia Pacific's long-term potential. Supported by its resilient business model, we are well positioned to benefit from favorable long-term market industry and consolidation trends in Asia Pacific and beyond.

With that, I thank you for all your attention and invite you now to address your questions in our Q&A session. Thank you very much.

Thank you very much, Stefan and Ido. We will start the Q&A session, and we'll begin here in Zurich, give Gian-Marco on the first floor, the opportunity to kick it off. Thank you.

Thank you. Three questions from my side, if I may. The first one is on the consumer segments. There, we can really see a trend in the change -- a change in the trend about the top line development, also the margin development. I remember from recent discussions that there was quite a bit of an issue that Western consumer companies had a problem really to diversify themselves, especially in the food business. Is this also related now to trend change that you observed maybe in APAC that those brands become more powerful again?

And then the second question is on the cost optimization, interesting that you mentioned efficiency improvements with AI on the growth as well. So I would really wonder if you could quantify maybe at this point in time already from a growth perspective, what opportunities you see there to increase your revenues? And then also, of course, your improvements in the logistics costs have been impressive, I think, with the CHF 35 million that you mentioned. But on the other side, you also had some FX tailwind in this perspective, reducing your FX overall weight. So I would wonder this question by how much have your logistic costs have really reduced organically? And how much tailwind did you have from FX?

Okay. Thank you, Gian-Marco. Good to see you, and I'll start with -- because many of the questions were more on the financial side, and Stefan will chip in. On the consumer goods we -- well we serve more than Western suppliers. We have a fair bit of Japanese Asia Pacific suppliers. So it's no longer the case of just Western DKSH bringing Western goods into Asia. We have -- I think the change that you see is coming out of the strategy pivot that we announced in Capital Markets Day where we said that gradually, we'll move from better before, bigger to better and bigger business for consumer goods.

We have done -- we have said that we are going to look at increasing our distribution, increasing our sales force efficiency, focus on higher premium categories. And what you see in the last 6 months is realization of the strategy. We still expect the consumers to be muted to foreseeable future. We know what's going on in the world. It's also what the big consumer goods companies are publishing so far, those that are published for this year. So perhaps not yet declaring victory, but very, very encouraged by the results that we see in the last 6 months.

On the profit side, I think it's not new news because if you go back to 5 years ago or 2019, so that's 6 years ago, the consumer goods was at 1.7% margin. We are now at 2.7%. We have then launched a strategy to get to 2.5%. We've already delivered that last year at 2.6%. So I think on the EBIT side growth, that's not new news, and that we have achieved through the various savings focusing on more profitable clients and what brings me to your second question, which was logistics and distribution, which, of course, being one of our bigger business units with the one that is delivering the bigger boxes because the health care tends to be -- medicine tends to come in smaller boxes. This is where the bulk of the saving was made.

It is true that the number reflects FX, but if you look at our annual reports over the last few years, you'll see that the -- unfortunately, because of the strong Swiss franc the -- in Swiss franc level, the sales are at CHF 11 billion over the last few years. And the improvement is of 30 basis points over this CHF 11 billion, which means that these are pure 35 at current exchange rate savings to our bottom line from logistics and distribution. We have done that from significantly automating and digitalizing our warehouses.

We have done it for rerouting into more efficient and packing more into each truck which reduce our costs overall. And this is the main story behind those savings. I think your other question on AI was how it can translate also into revenue growth. And that's a very rich opportunity out there, which we are yet to fully capitalize.

Maybe a few remarks on that one, Gian-Marco. As you know, we are sitting on a ton of data with the hundreds and hundreds of clients. We have thousands and thousands of customers and almost millions of different SKUs. This creates a huge amount of complexity on a daily basis. If you want to optimize which products go in what stores, what are the perfect sales routes and customer visits for our thousands and thousands of sales agents. And here, clearly, AI is an opportunity to look into the data and within minutes, give recommendations how you -- how a salesperson can optimize the visits of customers, what products he or she best recommends to our clients, give recommendations in terms of pricing on shelf location, et cetera.

And that is where we believe there's a significant opportunity to further accelerate our top line growth. And then on top of that, obviously, we have many internal processes which can, in an accelerated way, digitized and supported by AI at the end of the day to save manual labor. But it's too early to tell. We have now 14 pilots, which are already running within the organization and another 15 will be rolled out in Q2 and maybe in the second half of the year, we can give you further feedback in terms of potential, especially the saving potential, which could be achieved by those projects.

I am Michael Foeth, Vontobel. My first question is on the health care business and the shift towards more or higher margin businesses? If you can comment on that and where you stand in that road map. And if at one point, you should see a further acceleration here actually in the -- in that progression? And the second one, actually very much similar to what was just asked on AI. On the real results in terms of efficiency or productivity gains, if that is something that you expect to be reflected on the margin progress in future years because you're still basically obviously at the same midterm ambition there? Or if those gains are effectively then basically passed through to your customers over time, how do you expect that to play out?

Okay. Let me start with the first question regarding healthcare. I think you have seen that over the last 5 years, continuously, we were able to increase the margin in the healthcare business by 10 bps. And that is rightfully as you say, driven by a higher focus on high-margin business in the portfolio. The trend for outsourcing, full commercial outsourcing, that means that we also run the full sales and marketing function on behalf of the client is continuously increasing, and we are gaining some very strong market share and new business with our client base.

A few years back, the contribution from commercial outsourcing to EBIT was 40%. Last year, it was slightly over 50%. In 2025, we moved that to 55%. And on top of that, the contribution of our own brands business is also continuously growing. So right now, we don't foresee an end. We rather believe that we can further accelerate the share of commercial outsourcing over the years to come and can confirm the midterm outlook that every year, we are accelerating the margin also in healthcare by 10 bps year-over-year.

Yes. On the AI potential for cost, revenue and ability to pass on some of the savings to our suppliers. A key component of our business is to manage complexity that our suppliers don't want to or cannot at the same economic efficiency that we can. In many of our jurisdictions in Southeast Asia, bureaucracy is still part of daily life. A lot of paperwork when we sell, buy, when you file for taxes, when you do everything, which is regularly required. So our business has a fair bit of administration of those things.

And over the years, even before the AI revolution, which has just started, we have moved a lot of those repeatable tasks into our shared services center in KL. Our global IT team is based there and also the financial services are based there, where we process a big part of what is happening in the countries over there. The AI revolution offers us to make that a lot more efficient than before because we now apply all those tools and machine learning on paperwork. And we honestly -- the full potential is yet to be understood and realized but it is going to be big because by definition, this solves what human repetitive tasks are currently doing.

It is probably too early for us to increase the guidance of 10 basis points per year, which has been our guidance for several years now. We have delivered this year. We have delivered the year before. We actually delivered for 5, 6 years now. And we also delivered in 3 of the business units in -- out of the 4 in 2025. So we'd like to continue with this guidance. Some of those savings, we will invest back in our business also in IT and in other elements that we would like to invest. And in the future, if we see more, we will, of course, communicate a change of that guidance.

Chiara Di Giammaria from Berenberg. I have 2 questions, if I may. The first one is on Performance Materials. So I guess, in the industry in general, one of the main concern is the Chinese competition. Can you explain how you are protected from this? And the second question is on the USD denominated sales. If you can share a split -- so how much more or less of your sales come from the USD sales?

Yes. Thank you very much. Look, if you -- very clearly, the chemical markets are being challenged now since 3 years. The difference between our setup and the setup of many of our dear competitors is that 2/3 of our business is in Asia. We have very good and very strong connections to Chinese suppliers, and we also distribute business within China. So close to 8% of our overall PM business is within China. And we are very successful in Asia across the board because we have a very broad customer base and very deep and long relationship with those customers. So we currently don't see significant challenges of Chinese player in Asia. And that was the reason why also in Asia, we were able not only in this challenging end market environment to deliver over 5% of growth.

As you might have recognized, we were also able across the full globe of our operations to increase the gross margin and to increase the EBIT margin. In terms of the sales in North America, this is under 8% of the total business. But obviously, if you do the math, you will see that also in Europe and in North America, our chemical business is also being challenged. But Asia is very strong, and we expect a very solid performance also in 2026 in Asia in Performance Materials.

With regard to the share of U.S. dollar sales, it's actually very small. It's about 1% to 2%. But I would also like to add that we -- our currency risk is a translational risk. In terms of transactional, we hedge all our -- everything that we buy in non-U.S. dollars and sell in U.S. dollar, we hedge on the rate that ensures the margin that we make on the deal. So we only suffer translational, which has an impact.

The next question in the room, please. For the time being, no question in the room, operator, can we please have the questions from the call.

The first question comes from Nicole Manion from UBS.

A couple for me, please. Firstly, just a follow-up on Performance Materials. Could you comment maybe on how trends developed through Q3 and Q4 and how you've seen things evolve so far in early 2026. And then the next question, could you talk a bit about the tariff environment in, I guess, in India and China within APAC, particularly on the pharma side? Anything you're sort of seeing there in terms of impacts? And then perhaps just more generally on inventory levels. It looks as though group stock turns are still 7x to 8x. But within that, can you comment on any regions or products that you think are still elevated? That would be very helpful.

Nicole, can you please repeat your second question on was that the impact of tariffs? Did I understand that correctly?

Exactly. Yes, if you could just comment on anything that you've seen particularly, I guess, in the region in India and China, maybe on the pharma side, if there's any impacts that you can call out there? And then, yes, the related question was just about inventory levels in general.

Okay. Maybe then I start with the first 2, and then Ido is commenting on the inventory. So yes, I mean, Performance Materials, it was a very rocky year 2025. I'll start with Q1 where we have seen some good developments. In Q2, we discussed it during the half year results was a complete disaster after the uncertainty being created with all the tariff discussion. Then in Q3, actually, there was a bounce back happening. So we had a very strong Q3, whereas then in Q4, there was a more normalization and the results were slightly negative across the full portfolio. Looking into 2026 and maybe a few of you have seen that there is some very light optimism coming back to the market also triggered by a report from Goldman Sachs last week. We are optimistic, especially for our Asian business in 2026.

Regarding the tariffs, I would like to summarize it in a way that at the end of the day, I think everyone recognized that the impact, especially for Asia will be more limited than what was originally feared towards the end of Q2. What we do see is that the supply chains are moving slightly and there is a decoupling from China into Southeast Asia. You just have to look into the GDP growth rates in Southeast Asia for the second half of 2025 as well as the outlook for 2026 where you see there's a very strong development in Vietnam, which is out of the material economy, the fastest-growing one, where I think we can expect up to 8% GDP growth this year but also Malaysia is doing very well.

Singapore is doing very well. Taiwan is forecasted to do very well in 2026. And what I would really like to highlight is also Japan. We have high expectation in terms of Japan. I think there is a giant which is being re-waked and we have seen already some good development in 2025. And I say with the political environment there, we can expect a further acceleration coming out of Japan. And yes, then I would hand over to Ido regarding the inventory level.

Nicole, just specifically on your question on the pharma business in India and China, we actually had a very solid year in those jurisdictions in this category. So we don't see the effect, as Stefan just mentioned. I did not quite get the question about the inventory. Can you please repeat it? I'm sorry that the line is not great today.

Yes. Sorry, no, I was just asking it looks as though stock turns for the group are around, I think, 7.5x. But I was just asking if there are any regions or products that you think are kind of elevated within that or anything interesting to call out on a regional or product basis, essentially, just any detail?

No, I think that overall, our inventory level is a very healthy level. And so is our working capital, as I mentioned before in our -- in my speech. There's -- if there's anything in particular to report is that it's very lean. And I think we're going to start the year with the right level of inventory and good quality inventory, meaning low level of excess or bad inventory. So we're quite pleased with the achievements there across all the business units.

The next question comes from Jon Cox from Kepler Cheuvreux.

Just on consumer, just to come back to that, you're talking about encouraging results coming through in consumer in the second half. Can you just talk us through that a little bit just in terms of maybe the countries you're seeing improvement or which parts of consumer is seeing the improvement? Because obviously, the overall economy and a lot of your big markets, notably Thailand hasn't been great. And I'm just wondering if you could talk a little bit about what those improvements are a bit more specifically.

And then just to come back to Performance Materials, you're talking about Asia should be pretty decent this year. I can see you're a bit loath to talk about the U.S. and Europe. Are you seeing any signs of improvement there at all. And I'm just wondering, is the weakness really in the industrial segment, and it's really about the Chinese competition. Or is it across the board and it's not just the Chinese competition, it's just businesses in general, being pretty nervous.

Thank you, Jon. I will start with the CG question. Stefan will follow on PM. I think in the same countries as Stefan mentioned before, that have been quite successful for us in both PM and Healthcare also successful in CG. These are core markets. Vietnam, Malaysia and Singapore had a particularly strong year for CG. You're right to point out that things are a little bit more lukewarm in Thailand. But I would also like to say that over the last 3 years, we have outperformed the overall GDP in Thailand. So some slowdown is something that we were going to expect in 2025.

Certain categories, I think Beauty Care is coming back. Also, food and beverage are coming back. What we see is consumers are going back to brands that they can trust and value, okay? So we're not talking necessarily about higher value, lower value. But after a certain shock 2 years ago from the inflationary pressure, they're coming back to brands because they -- this is what they trust. So overall, slightly stronger consumer confidence, but it's very volatile times. I mean we cannot be overly optimistic at this stage. We are optimistic though.

Yes, Jon. I'm talking about Performance Materials. First of all, in the U.S., we see really very, very light indications of -- you might recall that our business there is primarily an industrial specialty chemical business related to the so-called K segment, which heavily goes into the housing market. There are some very soft early indications that there is actually a shortage on housing in the market and some investments are rolling into the market also in terms of renovation. So I would say maybe we see the light at the end of the tunnel, but there is still some -- there's still some tunnel right?

In terms of our European business in Europe, we have a very healthy life science business across the board, which is in Europe, more resilient than the industrial business, which is further hit by the overall economic environment and the production is just diverting out of Europe, which is also an effect. I think just focusing on some Chinese materials or ingredients is a little bit shortcoming. And in that summary here, I would also like to point out that we have a very healthy client base across our portfolio from American or North American clients, European clients as well as Asian clients, which is also giving us some healthy stability. And by the way, one last comment is that within Asia, our industrial specialty chemical business was in Asia, even growing slightly faster than our Life Science business, which is underlying my statement before that there is some production is moving into Asia.

Just want to just keep going. Just on the technology business, that seemed to have a pretty soft second half. And I know maybe your exposure is somewhat limited. Taiwan is doing really well. There's a lot of stuff going into AI and CapEx and that sort of stuff. Are you not really exposed to that, and that's why you're not seeing much of a pickup in that technology business?

We do have some exposure in our -- with our semiconductor business into those markets. not only in Taiwan, but also in Singapore and Malaysia, and that is where we still have seen some business growth but there was just a huge amount of uncertainty in the technology sector in 2025 and many investments and orders were delayed and canceled. Having said that, if we look in our pipeline of 2026, what we have signed up for 2026 and the business, which is moving from '25 into '26 because of the delays or the pushover plus some additional business coming out of the investments in data centers, even in data centers in Thailand is giving us the optimism that in our presentation here, we talk about a strong rebound of our technology business in '26. But '25 was, yes, was not a great year for them.

Thank you for the questions, Jon. Operator, is there any further question in the call?

So far, there are no further questions from the phone.

And an opportunity here in Zurich. Gian-Marco has a few more questions.

Gian-Marco, Zürcher. I'll just take the opportunity to ask 2 more questions, if I may. First one is you mentioned for the Technology business, some promising business development pipeline for a better 2026. So can you elaborate a little bit on that, that would be interesting. And then your own Healthcare business, I assume according to your slides that you kept the EBIT margin there quite on a high level, over 20%. And if I assume also that this grew by around 5% or so, then, however, this would mean over CHF 2.5 million additional EBIT for Healthcare. Is that a fair assumption? And why then despite the strong performance that you had in Healthcare was the EBIT growth in Healthcare not stronger?

Okay. Let me start with technology and then Ido can drill down into the EBIT margin analysis. In technology, as I was just saying before, there are 2 things or a few things happening. One is we have seen some projects, some investments, which were being delayed into 2026. So that is obviously giving us some good backlog for this year. Secondly, especially in scientific instrumentation, where many of our customers were a little bit cautious we have some good order intake for 2026.

And then last but not least, as mentioned already in the question from Jon, there is significant investments also going into data centers where we supply, obviously, not the core business, but some equipment down to even generators and whatnot, where significant investments are going to happen in '26. And if you put those 3 together that is building the strong backlog and pipeline we have for '26, giving us the confidence that we say this business is bouncing back material from the, yes, disappointing results in 2025.

On the own brands in Healthcare, first of all, we always welcome your questions, so you can do even more than 2. We are being a little bit victim of our success also in the other categories because we had a very good year in commercial services and full agency in healthcare that are growing proportionately as much as own brand. Hence, the overall mix did not change. In specific own brands, we had some difficulties. Myanmar had been traditionally a very strong market for us for own brands, and that is a very soft market at the moment for geopolitical reasons that I'm sure you're aware. So we have lost some business there.

The rest of the own brand portfolio has performed quite well, but that's why it explains it didn't grow overall from the mix. The math that you made is correct. If we can grow that at the proportion that you mentioned, we will grow disproportionately our EBIT. And yes, those are fine jewels that we are constantly searching to buy and expand. And when we have the opportunity, we do that. We did it a couple of years ago with one of our acquisitions. And hopefully, we'll find something in 2026.

Thank you, Gian-Marco. Any more questions in the room? Seems not the case. Then from our side, big thank you for all of the participants today here in Zurich, but also in the conference call. Wishing you all a good rest of the day, and we are all available also here in Zurich for questions afterwards. There's a little bit of catering. So please stay with us, and we are happy to engage. Thank you so much.