Schindler N Stock

Ladies and gentlemen, welcome to the Schindler Half Year Results 2026 Conference Call and Live Webcast. I am Valentina, the Chorus Call operator. [Operator Instructions] At this time, it's my pleasure to hand over to Lars Brorson, Head of Investor Relations. Please go ahead.

Thank you, Valentina. Good morning, ladies and gentlemen, and welcome to our first half 2026 results conference call. My name is Lars Brorson. I'm the Head of Investor Relations at Schindler. I'm here together with Paolo Compagna, our CEO; and Carla D. De Geyseleer, our CFO. As usual, Paolo will discuss the highlights of our first half results and our 2026 market outlook, and Carla will take us through the financials. After the presentation, we're happy to take your questions. We plan to close the call at 11:00.

With that, I hand over to Paolo. Paolo, please.

Yes. Good morning, everyone. Glad to be back to report on our first half year results. Overall, I'm very pleased with our operational execution in the first half of the year as we reached another record operating profit. But let us start with our top line development. In the first half of the year, our order intake grew 2.9% in local currencies, similar to recent quarters with a strong contribution of Modernization business with a growth close to 13% in local currencies and a strong contribution from all regions.

And that is on a tough comparison from last year when we grew already 22% in the first half of the year. Order intake in New Installation business in the first half of this year has an encouraging trend outside of China, particularly in EMEA and Asia Pacific. Outside of China, we grew high single digit in value and low double digit in units. In EMEA, we grew order intake by over 12% in units in a market which we estimate grew low single digit. And it's a broad-based strength in Europe, including Germany, our biggest market, while China continues to be a headwind, leading to the overall low single-digit down in order intake.

Also, our Modernization business is performing well in EMEA. Here, we grew orders by 16%, and that was on a tough comparison too from first half of the year '25 when we grew over 20%. And we see plenty of room for growth, both on and off portfolio, and we also believe we can continue to deliver above-market growth here. Let me say a word on revenue growth, which came in at 1.4% in the first half of the year. This is not a growth level we are happy with. But as Carla will explain shortly, we maintain our full year guidance, which implies an acceleration in the second half of the year. We have the backlog, which is up 5.8% versus year-end '25. And we are seeing favorable order trends outside the Chinese New Installation business. And we also believe our Modernization business can and will accelerate further in the second half of the year.

Now let me turn to our operating performance in the first half of the year. We saw our operating margin expand by another 90 basis points to 13.2%, a record level for the group. And this improvement is broad-based across our regional businesses. Globally, we are executing well across our manufacturing and supply chains as well as our field operations. At the center of that is our product strategy. We are seeing a good traction of our modular platform in the New Installation markets that were early in our global rollout, notably Europe. Not only is growth picking up here, but we are also seeing very visible improvements in terms of field installation efficiencies.

Our new mid-rise product in the U.S. is also leveraging the modular platform. And here, we are seeing continued good momentum, too. Not at least, we expect that the rollout of our standardized Modernization packages will also facilitate further gains in competitiveness of our Modernization offering. Looking at the additional cost inflation we are facing this year from logistics, fuel and commodities, Carla will later provide more details on the expected cost impact, but I can already say that we are actively working on mitigating -- the mitigation measures, including pricing actions in order to offset these cost pressures, both these prices as well as surcharges across our New Installation, Modernization and Service businesses. And we are working with our supply chain to manage efficiencies on the supplier side as well.

Now a word on our strategy in light of the recent news in our industry. Let me say, there is no change to our strategy. This is working. We have strong operational momentum and are committed to pursue with discipline and determination on profitable growth. As competitors merge, we remain focused on delivering on our promises to our partners and to all our customers to ensure they can count on us for stability and consistent long-term support. Does that bring commercial opportunities? I believe so, yes. And I look forward to discussing our midterm strategy with those of you who are able to join us at our Capital Market Day in November.

And that leads me to conclude by highlighting 3 recognitions we received in recent months. Schindler was recognized by Fortune as one of the Europe's most innovative companies, and we received the prestigious Red Dot and IF Design Award for the outstanding product design of the Schindler X8. Why is that important? You will remember, we launched the X8 last year in selected markets in Europe, and we are now starting to see the impact this innovation is having on the industry, on our customers and partners. And we believe this is another good example of how Schindler continue to lead the industry in terms of innovation.

Moving to our market outlook for '26 on Slide 4. While we do see potential for outlook upgrades in certain segments and regions, given the continued geopolitical uncertainty, we have opted for keeping our outlook unchanged for the time being. We continue to closely monitor the implication of the situation in the Middle East on inflation, the construction and real estate markets and the overall speed of decision-making, while higher energy prices increase construction costs and reduce housing affordability, which ultimately can have an impact on demand. In spite of these headwinds, we continue also to witness vibrant activity Modernization markets across almost all regions with particularly robust growth in the areas where Modernization is supported by government programs such as the example of China and Spain.

With the number of elevators ripe for an upgrade approaching worldwide soon 10 million units, there's no shortage of Modernization opportunities in all our sales. In New Installation, the markets continue to develop positively across the regions. The only exception being China, where the key lead indicators for elevator demand such as floor space starter and real estate investment not only did not improve, but in fact, deteriorated sequentially again in June, reconfirming our outlook for another double-digit NI market contraction this year.

In Europe, while the latest building permit statistics continue to show a gradual pickup across the major markets such as Germany, the more high-frequency indicators such as construction PMI and other sentiment indices to signal some hesitation to launch new projects and therefore, some softness in new order by builders. Activity in Brazil remains good, driven by the social housing segment. In the U.S., multifamily permits and starts continue to rise, but the architectural building index in multifamily remaining slipped below 50 again during the second quarter. Asia Pacific continues to see healthy growth driven by India and most Southeast Asian countries with activities picking up in Australia too.

Turning to Slide 5 and our order intake in the first half of the year. In Service, our maintenance portfolio continued to expand with accelerated growth recorded in China, followed by Asia Pacific, excluding China. In Americas, we saw growth in value terms, while we continue to be selective in terms of the units we decided to recapture from the market. The Modernization second quarter marked the sixth consecutive quarter of double-digit growth. So we are very pleased with our consistently strong performance in this high-growth, high potential part of the business.

Our average growth rate over those 6 quarters reached 17% and was well above the overall market growth. EMEA truly shined, driven by some of the largest Northern European markets as well as Spain, where the ITC regulation supports delivery of safety upgrades to our customers. We also continue to enjoy high double-digit growth in China, driven by the bond program for equipment replacement. While in New Installation, China was the only region to have seen declining order volumes. In the rest of the world, our NI orders grew double digit in units and similar to Modernization. Europe was the standout region with above-market growth in all key markets. We are pleased to have seen share gains also in Asia Pacific outside of China, according to our internal market estimates.

And with that, happy to turn over to Carla for financial details.

Thank you, Paolo. Good morning, ladies and gentlemen. Happy to have you on the call. So let's start as usual with Slide 7 that provides you with the current -- the performance of the current quarter compared to the last 4. As Paolo said already, we are very pleased with the operational momentum in the second quarter with EBIT margins up 90 basis points compared to quarter 2 last year and up 40 basis points on an adjusted basis. Our net profit, we passed the 10% margin level in quarter 1 and continued to move higher in quarter 2. Now in terms of our top line development, order growth improved slightly to 2.9% in local currency in quarter 2, clearly, still not where we want it to be. Revenue growth was at the lower end of what we expected in quarter 2. So let me give you some detail on the drivers behind this.

So moving to the next slide, where you have our order and revenue bridge for quarter 2. So we grew order intake in local currency in all regions outside of China. And it is really the New Installation segment in China, which continued to be a significant headwind to growth. So excluding China, New Installation order grew high single digit in value and low double digit in units in quarter 2, driven by EMEA and APAC, ex China, as Paolo mentioned before. So in Europe, we saw a strong contribution from some of our key markets, including Germany and Spain.

Now Modernization, that continued its nice growth journey and contributed strongly to the order intake in quarter 2, growing at 11% on a reasonably tough comparison from quarter 2 last year when Modernization grew 24%. Again, here, EMEA contributed positively to growth in the quarter. China also grew strongly, but on a tough comparison from last year when the Chinese Modernization market saw a big step-up in the government's bond program, as you will recall. Now finally, growth in our Service business was accretive to group overall.

Moving on to our revenue, which grew 1.1% in local currency in quarter 2. That was slightly lower than what we had expected, driven by a softer development in our NI segment as well as timing of some of our larger projects in the Modernization. But to be clear, we expect to catch up on these projects in the second half, which is partly why we are maintaining our full year guidance of low to mid-single-digit growth, which I will discuss shortly. Regionally, to complement Paolo's earlier comments on Europe, it's very pleasing to see our revenue growth gradually picking up here, now at mid-single digit in the first half, and we expect that to continue to gradually accelerate in the second half.

Now a quick note on currency impact. We have been facing significant FX headwind in H1 with a revenue impact of CHF 233 million. In quarter 2, the impact was CHF 48 million. So based on current spot rates, however, we do see that the FX headwind would ease in the coming quarters. Now finally, a note on our order backlog, which was up 3% year-on-year in local currencies compared to quarter 2 last year, but up 6% year-to-date. And that is driven by the backlog in Modernization, which was up 13% year-on-year. And from a regional perspective, the total backlogs in EMEA and APAC grew mid-single digit and by high single digit in the Americas. So that was partly offset by China, where backlog was down mid-teens. Our backlog margin continued to improve sequentially, which is also a very positive message.

Now moving on to the next slide, operating profit. So clearly, the highlight of our first half. Our EBIT margin was 13.2% in H1 and 13.5% on an adjusted basis. We continue to make good progress on operational improvements, which was CHF 45 million in our H1 EBIT bridge, which we are happy with after the strong improvement last year. Overall, price mix were contributors, but less so than efficiency. So it's the efficiency improvement that continues to be driven by SG&A, by procurement, by supply chain as well as efficiency in NI and Mod activities. But we are also seeing a bit more cost inflation coming through in quarter 2 and expectedly also in H2, which I will touch on shortly when I turn to our full year guidance.

Now moving on to the net profit on the next slide. As I mentioned, a good development in net profit driven by our operational improvements, which are more than offsetting a decline in financial income as well as FX headwinds. Margins into double digit in H1, which we are also very pleased about.

Now moving to the cash flow. Operating cash flow in H1 came in below last year's strong level despite the uptake in our operating earnings. And here, it is the net working capital, which we were not able to improve to the same level compared to the strong performance in H1 last year and hence, a headwind in our year-on-year bridge. Now this was related to 2 factors. First, a decline in our Chinese New Installation business, which is driving lower down payments. And secondly, we had an adverse impact on the net working capital from the implementation of the ERP system in our U.S. operations. We spoke about that earlier this year. So we expect this to be ironed out in the coming months, and therefore, the adverse working capital development should reverse partly or completely in the second half.

Now moving on to Slide 12 and our full year guidance. So we confirm the full year guidance. So first note, on our revenue growth guidance of low to mid-single digit in local currencies in '26. So clearly, that implies an acceleration from the 1.4% growth level in H1. So we expect a strong double-digit growth in Modernization, a mid-single-digit growth in Service and a gradual easing of the headwind in the New Installations from the high single-digit decline in the first half.

Now on to the margin guidance of 13% in '26. So we were at 13.2% in H1. So very much on track to deliver on the guidance of 13% for the full year. Obviously, the question will be, why not be a bit more ambitious for the full year given the good performance for the first half year. Now let me comment on that. First of all, we had slightly more margin tailwind from mix in the first half than expected. This was partly due to the lower New Installation revenue contribution as well as timing of revenue recognition on some of the larger projects in our Modernization business shifting from H1 to H2. Secondly, we are facing slightly more cost inflation in H2. So based on our current assessment for the full year '26, we expect the additional inflation from energy and commodity pricing to be circa CHF 35 million, split approximately 2/3 in the second half, 1/3 in the first half.

Now on commodity inflation, this is primarily associated with higher copper and aluminum prices is broadly in line with what we have communicated in April. Now we are working hard on mitigating actions to offset these in terms of pricing and in terms of efficiency. Now let me also say a brief word on tariffs. Tariffs remain a moving picture, but our estimate of the annual gross P&L impact remains largely unchanged from what we communicated in April, so approximately CHF 15 million.

And finally, before I close, I want to touch on an accounting topic, which will be important going forward, and that's the implementation of IFRS 18. As you might know, this is an accounting change, which will be effective from 1st of January '27 and affect the presentation and disclosure of our financial statements in '27. We have a detailed note in our interim financial report, which I will refer you to as well as the backup slide in this presentation deck.

Now to give you an idea about the financial impact on us, if IFRS 18 would have been applied on January 1, '26, the operating profit would have been approximately CHF 20 million lower. So that is circa 40 basis points of EBIT margin. So a level of margin impact you should expect going forward from this accounting change once it is effective, so in '27.

Obviously, this will all be taken into consideration when we communicate at a later point about our midterm targets. Now I'm reaching at the end of my presentation. So it's important, I think, that you allow me to thank together with my colleagues in the Executive Committee, our close to 70,000 employees across the group for their efforts. And many of them, and unfortunately, more of them continue to operate in exceptionally challenging circumstances.

And with that, I hand back to Lars.

Thank you, Carla. Let me remind you of our Capital Markets Day, which has been rescheduled for the 19th of November this year at our headquarters in Ebikon, Switzerland. We look forward to seeing as many of you there as possible here on our campus. Please note that the registration for this event closes on the 30th of October and the number of participants is limited.

Now with that, Paolo and Carla are happy to take your questions. I would ask you please to limit yourself to 2 questions given the limited time we have available. With that, operator, please.

[Operator Instructions] The first question comes from Daniela Costa from Goldman Sachs.

I'll stick to 2. The first one, I think you mentioned sort of on the original equipment outside of China, you had high single-digit growth in value and low double digit in volume. Can you talk about sort of is the difference most that we're getting negative price in some of the regions, maybe where? Or is it just down to mix -- to regional mix?

And then the second question relates to -- I guess you've kind of mentioned the savings or the efficiencies had a bigger impact in 2Q, if I heard correctly. How should we think about sequentially the efficiencies impact into the second half? Will it accelerate? Or have we now reached sort of a run rate at which it will be more stable and then that's why you don't get to offset the inflation and upgrade guidance?

Daniela, Paolo here. First of all, to the order intake outside of China, if I got your question right about pricing, there, we don't see a specific zone outside of China with a significant price decline, price pressure above the, let's say, normal competitive environment we are used to have. So the development is, you can say, across all the regions. Yes, I was also mentioning Europe with standing out at least in this first half of the year, especially also in Q2, where we saw a pickup of our order intake also, and I said it before, based on our modular platform, you remember, which was introduced first in Europe when we started the rollout.

So therefore, not a special comment on pricing. It's more normal development, I would say, competitive environment if we exclude China. On the effective -- efficiency before I hand over to Carla for more details, I mean, the development so far, it goes also hand-in-hand when we talk about field efficiencies with the modular platform, right? When we introduced it, we were talking about, there is one big component, which is the field efficiency, which we were striving to gain and improve 3, 4 years back, right? And now obviously, with the increased portion of those new products coming into what we say fulfillment, it means as well in installation and handover to customers, then this portion of the benefit comes in. And obviously, this is not a one-off. This continues to stay as we then continue to sell and install this type of products. But please, Carla, if you like to complete the picture on efficiencies.

Yes, I think you actually said that when we look, Daniela, the overall efficiency story, it continues to be pretty strong. So we are actually foreseeing also a good increment in the second half. And you know our building blocks very well. So yes, there is a certain maturity in the procurement savings, but they are still at a solid level. But the operational efficiency, as Paolo pointed out, they actually are expected to further increase because that is really the result now of the implementation of the modular platform. And I think that is very encouraging.

So yes, then your question will be, I guess, with respect to the margin in H2, but it is really for the factors that I mentioned that we actually confirm the guidance because there might be costs coming our way in H2, yes.

Next question please.

The next question comes from Andre Kukhnin from UBS.

Can I just do 2 clarifications first quickly. Firstly, on IFRS 18, that change in operating profit by CHF 20 million, is that on a full year basis or for H1?

This is for H1. So you could double it for the full year, to be clear.

Great. And back to the comment on orders growth. So you saw high single-digit growth ex China in value and low double digit in units. Did I get that right?

You got that right, yes.

And sorry, I probably have to ask the same question again, but was there -- is it just mix then that resulted in that lower growth in value versus units if you're saying there's no price pressure anywhere?

The figures you mentioned, sorry to break, to be reconfirm, these relate to NI. So New Installations only. The order growth is the total order growth that you see on the slides.

Great. So if in new equipment, the orders grew faster in units than in value and you said there was no pricing pressure anywhere given that we're talking about ex China. Was it just purely mix then?

Andre, probably you're absolutely right. It's the mix, right? It's a mix between large projects and in that case, modular platform, which kicks in -- sorry, contributes more into the low-rise and mid-rise. Absolutely, yes.

Next question please.

The next question comes from Phil Buller from JPMorgan.

I have 2. They're quite different, so I'll ask them one at a time. The first one is on market share. You talked about gains in Europe, and I also understand the focus on selectivity elsewhere. But it seems like that competitive intensity isn't going away anytime soon, including in North America on the Service side. So what's driving the gains in Europe? And how do you intend to address the competitive situation in North America on Service, please? That's question one.

Phil, I'll take the question. Well, if we look at Europe, as mentioned before, the modular platform, which was introduced for everything, which is low-rise, mid-rise, it's absolutely supporting us also in gaining market shares. So without going to the individual markets, this is, I think, broad-based supportive argument in Europe. And you remember, the modular platform was introduced in sales. 1.5 years ago, we were starting selling in Europe, starting, by the way, also in some selected stages -- sorry, markets. So therefore, that's one part of the answer. You assume it right. It's about the modular platform supporting our low and mid-range in Europe.

On the North America, especially Service, I mentioned before, in value terms, we do a good progress. In unit term, we stayed in the second half -- sorry, first half of this year, second quarter, very much to our strategy of not pulling in big tenders, which come with high number of units and very low values. which actually looks good in numbers of units, but don't add, let's say, meat to the bone. Going forward, and we also mentioned introduction of the mid-rise product, equal modular platform in the U.S., which actually going forward will also help us having a better position. It was your question, how do we think to gain back on market shares in the U.S., the modular platform, especially in the mid-range will help us also in New Installation and sub-sequentially also in Modernization and Service.

That's helpful. And the second question is in relation to the Capital Markets Day, which was delayed, obviously, to November. I assume that, that was because the KONE TKE announcement was just beforehand. So the November time frame -- is that set in stone and purely focused on organic topics? Or was it in any way predicated on some internal views on timelines of potential remedies or M&A from your side, in which case perhaps the date could move again? Just any kind of color on the assumptions behind the date in November would be great.

Yes. In November, we will be happy to share with you our midterm plans focused on what we aim to do and what is in our hands.

Next question please.

The next question comes from Lewis Merrick from BNP Paribas.

Just going back to the Americas order intake Service. I mean, from Q3, you'll start to annualize that negative order intake. So based on the actions you've taken to be more selective, do you think that, that can inflect positively in the second half?

Yes, that's absolutely our intention. First of all, we see already in the new order intake also in Modernization, first signs of picking up there. And if you ask about Service, our intention is also to have a gradually improving recovery also in terms of units, not only value, which we already did in Q2. So Q3, Q4, we intend to further progress also in units in North America, absolutely, yes.

Okay. Clear. And just on China, the pace of New Installation decline in orders continues to be in excess of 10%. I mean some of your peers have started to see those declines moderate somewhat sort of high single-digit levels. Do you see that based on the current order run rate and the comps you are facing, we can see the pace of those declines start to moderate in the second half as well?

Well, that's philosophical now, Lewis. I mean I was in the past always looking a bit more on the dark side of the Chinese development, market development, while competitors were more positive. And unfortunately, I must say, we were proven right in the past. If you ask now about the second half of the year, difficult to say. However, every leading indicator right now would indicate we would be rather at a double-digit, low double-digit decline rather than on a single-digit decline, which would indicate, as you mentioned, a recovery or, let's say, softening situation. However, no one has a glass -- sphere glass ball. However, it will be between high single digit and low double digit so or so. Chinese New Installation, we say -- New Installation remains, yes, challenging.

Next question please.

The next question comes from Delphine Brault from ODDO BHF.

I have 2, and I'll ask them one at a time. First, can you provide some color on Modernization by region, maybe in terms of growth? And if I may, how big is your Modernization business now in percentage of sales?

Delphine, well, let me answer for the first question answer, then normally, we don't disclose individual business lines in their individual contribution. But where Modernization is growing, I'm happy to share it's growing in every part of the world. We call it zones. So in every of our zones, the Modernization business is growing well double digit. And you can say there's no part of the world. Let me include here explicitly also China in that regard, which is not contributing on high levels to the growth. By the way, let me repeat, compared to a tough -- comparison to the first half year of last year, where we were already growing all over the place double digit. So here, we have a continued acceleration of growth, you can say. And this is in all zones, North America, South America, Europe, China, Asia Pacific. And the second question, I have to leave open as we don't disclose single business lines.

I tried. The next one is -- and sorry, I may have missed it, but did margin in backlog grow sequentially?

Yes. The backlog margin grew sequentially. It's actually quite a nice development. And obviously, that is related to the healthy intake from a profitability perspective.

Next question please.

The next question comes from Martin Hüsler from Zürcher Kantonalbank.

So my 2 questions. First of all, on the Chinese market again, what is the situation regarding payment terms and bad debt allowances among Chinese customers? Do you make any concessions with down payments here?

I will -- I confirm we don't make any concessions with down payments because it would expose us too much, because we also see a bit overall a deterioration in the credit risk. So we stick to our policy in a very disciplined way, I can tell you.

Is this the same for Mod orders and NI orders? Or is there something which we should take into consideration?

No. We actually stayed, we are very -- we apply the same rules for Modernization as for the New Installation.

Okay. Then the second question is on U.S. tariffs. And obviously, we saw first companies that reported some tax or tariff refunds. What is your view here? And are there any tax refunds being taken into H1 results or not at all yet?

Well, we started actually in the first half to file for refunds. And on the first filing, we got already a refund back, but it's not a significant amount. But yes, we see definitely that the process is working, yes.

Okay. Any indication on the possible full refund over the next couple of quarters?

Difficult to say. So I mean it's obviously -- it will be something that, yes, a couple of millions, but it's not something that now really will change our results overall. But yes, it's true that the refunds are started. Yes.

Next question?

The next question comes from Aron Ceccarelli from Bank of America.

I have 2 and will ask one at a time. The first one is on EMEA New Installation orders, which appears to be materially ahead of the market. To what extent is Schindler's competitive position changed to drive this such outperformance compared to the market? And is there any evidence that current industry consolidation is creating opportunities to win business from distracted competitors? This would be the first one.

All right. Let's take me. Well, competitiveness, I can talk about ourselves. As I mentioned before, the modular platform, which we launched is helping us absolutely also in competitiveness, but also in efficiency and in internal processes, which is the second part of efficiencies even is an internal gain, right? So on this one, one could assume it has a benefit -- but I think it's -- I would leave it to the market to decide.

On the second part of the question, do we see opportunities by distracted competitors? I don't know what competitors will do, but I know what we do, and we stay fully focused, I said it before, on delivering to our customers the best Service we can. This we always did, and we do now even more. So actually, for us, it's no change to our dedication to our customers. And this includes obviously also New Installation customers, which also includes, for sure, the low and mid-range part of the business.

Got it. And the second one is on Americas' Services. Perhaps can you elaborate a bit further on what gives you the confidence besides the easier comps of around the improvement in Americas Services in the -- when we look at the second half of this year?

We look forward to our bids we have out there. For now, we know what is in the pipeline. We know how the quality of our offers in the pipeline is and the customers we have in as we have now offered to. And here, we have a bit of a confidence that we can continue on our dedication to, as Carla was mentioning before, making sure that our order intake stays on positive levels, but also in Service with an increased trajectory on units.

Next question.

The next question comes from John Kim from Deutsche Bank.

I'm wondering if we could drill down a bit into Europe. Sorry if I missed this, but could we get some color on NI in the European markets? I know EMEA was quite strong for you and well done on that, but I'm looking for color on Europe itself. I seem to remember Southern Europe was quite strong as markets, but you spoke about Germany, I believe. Any color in what I'd characterize as Central or Northern Europe?

Happily, we can say in the quarter 2 was confirming for us a strong order intake, New Installation all over Europe, what we call Europe, right? So that's, first of all, the first part of your question and assumption is right, it's all over Europe. And if we look to mid or Northern Europe, I was mentioning Germany. Germany is a big market. And we were -- in the last few years and also last year, we were looking at, yes, how to say, slow paced market in Germany, which -- well, it is now not exploding to be crystal clear, but we see that our order intake also in Germany is picking up nicely, and this leads us to the well assumption of the market share gains.

However, the market itself is developing now in a better trajectory than it was in the past. Remember, we were looking also in Germany for years on a declining market, then stagnating market. And here, one has to say it has slightly improved and has some signs of recovery, a bit different between low-rise and commercial projects. However, we see our position here strengthened and also gaining in the market.

Fantastic. And a second unrelated question. If we think about dynamics in China, as the market continues to contract, do you have a view as to when your revenue mix will come into balance in the sense that Modernization and Service are growing and NBS or NI continues to contract. Is that journey or market rebalance within the next few years, you could argue?

Yes, Aron, I think the argumentation, it's a bit of philosophical pre assumption. However, if it continues at that pace, that New Installation declines high single, low double digit every year and the market in Modernization grows every year double digit, one could do a calculation and assume rightly so, you say, that one day Modernization and Service will be the bigger part of the business. So well, difficult to say no, this will not take place. Should NI pick up again, then the story changes. But you are right, I think looking forward, this is the scenario which could happen that Modernization and Service become bigger than New Installation. This cannot be excluded over the next years to come.

Next.

The next question comes from Nick Housden from RBC Capital Markets.

My first one is on New Installations in the Americas region. We saw it was down in the quarter. I'm just wondering if that's a comps effect or if there's anything else in there? And then I guess, more broadly on Americas NI, I think order intake in '24, '25 and H1 '26 is generally quite good. So just any comments on backlog conversion there and whether we could see some kind of an acceleration into 2027 would be great.

Nick, let me take the first one on Americas. And I know that the numbers might not be giving the right impression at the beginning. We compare Q2 to a super -- to a very strong Q2 last year in Americas. So actually, we don't look at all unhappy on the OIT or order intake in Americas on Q2 this year. The comparison was very tough for us as last year, we had some large jobs booked in. So therefore, I would like to give you a second view of your assumption. And when it comes to the backlog conversion, Carla, I don't know if you'd like to elaborate. But yes, backlog is growing nicely with -- by the way, good C1s. Carla, please?

Yes, definitely. And that is what we will focus on is the pull-through in the fulfillment in the second half, and that is also one of the reasons why we are comfortable with confirming the guidance for the full year.

Okay. Great. And then my quick follow-up is just on China Service units, which grew 5% to 10% in the quarter, which looks slightly out of keeping with the sharp declines in the New Installation market. I was just wondering if you could provide a comment on why that is and what we should expect in the next few quarters.

Yes, Nick, as you mentioned or a colleague mentioned before, in China, we see also quite a substantial inflow in the units from different angles than only New Installation conversion. And obviously, the New Installation conversions are declining as we speak, right, as the New Installation went down for us and for the market but also for us sub-sequentially. So what are the inflows? Number one, it is Modernization. Modernization inflow into Service from Modernization is also increasing as we speak nicely. So it's one source of additional units.

And the second one is recoveries from the market, where we remain, as Carla mentioned before, very diligent to all our rules. However, the market is and remains the largest market on this planet. And there, we also gain some recoveries, call them. And these 2 inflows into the portfolio is what you see in number of units, which absolutely doesn't reflect only the NI inflow, which obviously, for all of us was the normality in the very past. You remember, it was only NI 2 years or a 1-year gap, it was EI inflow. Now it has changed. Now we got Modernization, we got recoveries, and this is what you see in the numbers.

Next question please.

The next question comes from Vivek Midha from Citi.

My first question is a follow-up on backlog margin and price cost. You've commented that the backlog margin was up sequentially. You've also commented that you're not really seeing price pressure. And given that the backlog margin is improving, then clearly, you should be -- you're able to pass on some of the cost pressures. But nonetheless, we can see that steel costs continue to rise. So given that you're not flagging price pressure, but equally, it doesn't sound like there are big price improvements coming through. Could you maybe give us some color on how you're seeing your ability to pass on cost inflation?

Thank you very much. Your observations are right. But when it comes to the cost inflation in the second half, I think where there is some uncertainty is definitely in the raw materials. or call it, the commodities, so the aluminum, the copper and the steel. And yes, we pretty successfully passed them on, especially in the New Installation business, but also in the Service when it comes to the other elements like the energy and the logistics. But for the second half, as I said, we expect a bit of an acceleration of this cost.

And yes, we will continue to work on the passing on. But of course, I mean, it requires work and mitigation factors, and I don't want to preempt the potential successful passing on, yes or no. And that's why we kept that caveat there. But pricing overall, especially in the commodity, I reconfirm was outside of China, I need to say, was pretty solid.

Understood. And just to follow up on that. You commented about the second half. It's clearly far too early to guide on 2027. But just with one eye to beyond the second half into next year, how are you feeling about your ability to mitigate the impact of steel as we go into next year?

Well, I mean, we obviously continue to work on it and how you own it's always a combination, first of all, in the supply chain, supply chain efficiency, but also, of course, try to negotiate better prices with the suppliers. I mean, that remains. And of course, a big part is also the increased pricing to the customer. And that works not only for the new projects, but also for the backlog through the variation orders that we try to pass on to the customer. So it's always a combination of different elements.

Understood. My second question is around China New Installations. Just how we should think about that development as we go through the second half because there are 2 sort of factors here. As you say, the market remains very challenging. At the same time, you had a much weaker second half last year, and so the comparison should get easier. So is there a sense you can give us on how that decline rate should develop as we go through the year, particularly if some of your newer launches or self-help measures are able to get a little bit of traction and you could see some sequential improvement?

Your assumption is right. So first of all, if we look at the Chinese market is one part of the story and our deliberate decisions, which we were talking also second half of last year are the second part of the story. In all transparency, we told you that we are working on ourselves and resetting the way we do, especially new install or we sell a New Installation in China was done second half of last year and surely continued within this year. So now if you compare on -- as you do rightly on our second half of last year, one could expect an easier comparison, yes.

And for sure, the products we are launching, the first we just launched, as you might have heard, more to come in the second half of the year, plus all the efficiency measures we have initiated second half of last year, first quarter of this year are expected to start to support -- how much this now really helps already in Q3, but an assumption which is absolutely in line with our expectation is that in the course of the second half of this year, we should see a bit of an easing of the NI Installation order intake in Schindler, which is on our side. And I repeat, it's not based on glorious or positive or whatever expectation from the market. But our own internal part, I would confirm your expectation.

Next question please.

The next question comes from Vlad Sergievskii from Barclays.

I'll start with China. Is there any line of sight on when new equipment demand there can bottom? Or it is fair to assume that it just continues to decline well beyond this year, given all macro and demographic trends that we are seeing over there? And how you are positioning your China business for what is ahead, not just this year, but in the coming years?

Okay. Let me take the first part. So talking China NI market, as I mentioned before, let's hope that we get proven wrong this time. Again, in the past, we were the most, yes, how to say, conservative looking forward, and we were proven right. So I'm not proud of that, absolutely not, and I would wish myself to see the market picking up, it would help. This being said, as I also mentioned before, there's a part of how we act in this market. And Carla mentioned before, we stay very diligent in making sure we don't go into projects, jobs, which then would cost later our results and our future.

This being said, this leads me to the second part of your question or the second question, how do we look forward in the future years? And happy that we don't talk now only 1 quarter. Let's look quarters and years to come. Here, I always say China is and remains, for the moment, the largest market not only New Installation, it's also Modernization, it's also business of this planet. So therefore, for us, there is a business. There's a good business to be done, and this is not at least the reason why last year towards end of the year or second half of the year, we were starting our own recovery and reassessing and resetting the organization there. So looking forward, China remains a key market to be looked at and going forward also with a big portion of business to be done.

That's great. The second one will be on accounting impact. Could you provide a bit more detail on what are those CHF 20 million actually are that are currently sitting in operating profit, but will not be part of it as accounting rules change?

Yes, I'm happy to do that, Vlad. So I mean, the main part of this CHF 20 million that are actually operating finance costs. Obviously, that were below the line before. So you have to think about bank fees, you have to think about credit card fees. You have to think about fees, financial costs that are related to financing of Modernization activities. And obviously, they were below the line, which was consistent with the previous, call it, a pre-IFRS 18 rules, which promoted and still promotes a clear distinction between operating and financing results. So we applied that consistently since the first time application of IFRS decades ago.

So now obviously, there is the change. And then there is a smaller part, which is actually related to FX gain and FX losses. And that part, although it's only a couple of millions, that definitely will cause a bit of volatility going forward because obviously, the nature of it is inherently volatile, and it depends both on the underlying FX exposure and the exchange rate movements at the reporting date. So I'm not so happy that we move that above the line because it will create a bit of volatility. But look, it is what it is. Yes. It's now -- I must say this smaller part is not material. So it will not potentially derail our results, but it is what it is, yes.

We'll take one final question, please.

The final question comes from Andre Kukhnin from UBS.

Sorry if it's not going to be a short one, but I just wondered if you could put some numbers on the operating profit bridge for H1 and expected H2 between savings, i.e., what you achieved in H1? And are we on track to get to that close to CHF 200 million in the second half? And then you very helpfully quantified the expected impact from inflation of CHF 35 million being split 1/3, 2/3. Could you give some indication of what's happened to pricing in H1 and whether that can follow that kind of 2x pattern in the second half?

Yes. I'm happy to take the parts in the impact bridge. So as Paolo pointed out, I mean, pricing in the first half was definitely solid, but I have to mention ex China. So that is clear. And when it comes to the NI business. With respect to Service, repair, very much in line where we expected it to be, and we also believe that, that part will continue in the second half. When it comes to the -- well, that the progress is actually solid and that we are well on track to deliver the CHF 200 million. So it might be even a bit, I would say, yes, stronger than that, let's see. Where is it coming from?

Well, clearly, because the procurement savings are holding up quite nicely. And now we see the effects in the field operation coming from the modular platform in all the countries where we rolled it out. And obviously, it comes gradually and incrementally. So I expect that to also track nicely. Now in terms of inflation, also in line with where we expected it to be, but we have that uncertainty, I repeat now for the second half when it comes to energy and commodity, but it's mainly actually the volatility in the commodity. So these are a bit the major blocks as -- and you know them well in our impact bridge.

If I may just double check, the CHF 200 million or CHF 200 million plus of efficiency, would you expect that now to be more H1 or H2 weighted given is this over-delivery in H1? Or is it looking better for second half?

To be honest with you, if our plans are executed properly, I would rather see a bit of a stronger H2 than H1 to be honest with you. But of course, in field operations in so many countries, you need to be careful because there is always a bit of volatility. And it's always also impacted by the rollout of the large projects. And that's where sometimes you have lesser visibility. If some of these large projects move to Q1 '27, you can already have quite a big impact. And that's why I'm careful.

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

Thank you, Valentina. Thank you very much for attending today's call. Please feel free to reach out to me and the IR department for any follow-ups you might have. The next scheduled event is the presentation of our Q3 results on October 22. With that, thank you, and goodbye.

Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.

Ladies and gentlemen, welcome to the Schindler Q1 Results 2026 Conference Call and Live Webcast. I am Valentina, the Chorus Call operator. [Operator Instructions] the conference is being recorded. The presentation will be followed by a Q&A session. The conference must not be recorded for publication or broadcast.

At this time, it's my pleasure to hand over to Lars Brorson, Head, Investor Relations. Please go ahead.

Thank you, Valentina. Good morning, ladies and gentlemen, and welcome to our Q1 2026 results conference call. My name is Lars Brorson. I'm Head of Investor Relations at Schindler. I'm here together with Paolo Compagna, our CEO, and Carla De Geyseleer, our CFO. As usual, Paolo will discuss the highlights of our Q1 results and our 2026 market outlook, and Carla will take us through the financials. After the presentation, we are happy to take your questions. We plan to close the call at 11:00.

With that, I hand over to Paolo. Paolo, please go ahead.

Thank you, Lars. Good morning, everyone. Glad to be back to report on our Q1 results. And overall, I'm pleased with the start we made in '26, continuing our strong operational momentum from the last year. At the same time, we faced a very volatile macro environment, which we are responding to more during this call.

Let me start with growth. In terms of order intake, we grew close to 3% in Q1. Well, this is still not the growth level we would be happy with, but let us look together at 3 important points. First, we are pleased with our product momentum. We are seeing very good traction with our new modular platform and the new installation markets. You remember this was started to be rolled out '24 in Europe, and continued in other zones in '25. Not only is growth picking up here, but we are also seeing very visible improvements in terms of field installation efficiencies, which helps.

Secondly, the ramp-up in our new mid-rise product in the U.S. continues to exceed our expectations. And thirdly, the rollout of our standardized modernization packages is gathering pace. Also increasingly facilitating growth in modernizations outside of our existing maintenance portfolio.

And finally, in terms of large projects, we are seeing some improvements here, too. Large projects grew in Q1 versus the first quarter of last year, and our project pipeline looks promising for the rest of '26.

An additional word on modernization. Growth here continues to stand out. Order intake was up 15% in the quarter. And I'm really pleased to see that our revenue growth was even higher. Our backlog execution continues to move in the right direction globally, and all our regions grew modernization revenue by double digits in the first quarter.

We continue to expand our supply chain and field installation capacities which make us confident that we will continue to execute our modernization backlog successfully throughout '26.

Looking at total group revenue growth, we were off to a slightly softer start in '26 growing 1.7% in Q1. Revenue in our new installations business was down high single digits in the quarter, with China still the main headwind. But we confirm our full year guidance of a low to mid-single-digit growth as Carla will share with you the details later.

Now operationally as I said, I'm very pleased with the quarter. Our operating margin expanded by another 100 basis points to 13% in Q1. Seasonally, our lowest margin quarter of the year. And operating cash flow was strong again this quarter at over CHF 500 million. But let me briefly also talk about the broader operational environment as we see it today.

It is clear that the crisis in the Middle East brings some challenges we need to respond to. As the revenue contribution from the Middle East makes up less than 2% of the Schindler Group, the top line actually -- the top line impact actually remains modest. But serving our customers in this region has been met with some challenges in the past 2 months, particularly for the new installation deliveries.

We have currently around 200 units produced, which I don't hold or in transit and which we are actively looking to deliver to customer sites via alternative routing to still active parts. But outside of that, even the broader impact on our supply chain remains limited, we are facing some additional cost inflation in terms of logistics, fuel and energy costs and commodities.

Carla will provide you all the details on the expected cost impact. In terms of mitigation measures, we are actively working on pricing actions in order to offset this cost pressure. Both list prices as well as surcharges across new installation, modernization and our service businesses. as well as working closely with our supply chain to manage efficiencies on the supplier side as well.

Currency translation is significantly impacting our financial performance with the continued appreciation of the Swiss franc. This quarter, we faced an FX headwind of over CHF 200 million to our order intake at 7%. And Q1 match with that 1 of the highest hit quarters on record in terms of FX headwinds.

Last but not least, a word on sustainability and our consistent effort in product development. We are pleased to be awarded the ESG Award '26 for our low carbon emission steel elevator pilot at the MIPIM '26. Many of you know the MIPIM is one of the leading real estate events globally in the annual calendar.

The award comes at a time when we all are reminded of the importance of energy efficiency, and we are proud to be leading the industry with the first ever low carbon emission steel elevator installation. Turning now to Slide 4 and our order intake in the first 3 months of the year. In service, our maintenance portfolio continued to expand with the strongest growth in Asia Pacific, excluding China.

In Americas, while we saw growth in value terms, our selectivity was leading in units recaptured to a modest decrease, confirming our overall strategy. But next, we expect to see a gradual improvement over the coming quarters. In modernization, we have been able to continue with the strong momentum recorded in '25, with the only exception being Asia Pacific, excluding China, where orders marginally decreased primarily due to lack of large projects in the quarter.

China again was the standout with growth well into double digits as we continue to benefit from the bond program further scaled up from '26 -- up for '26 from the 120,000 elevators units replaced last year. In new installations, our global order volumes declined by more than 5% to China. In the rest of the world, our NI, New Installation orders grew double digit, driven by EMEA and Asia, again, excluding China.

Moving to the market outlook on Slide 5. We have decided to keep our outlook unchanged for the time being, while continuing to closely monitor the effects from heightening geopolitical tensions on construction markets, both in Middle East and globally. Foreign investment has played a significant role in driving growth within Middle Eastern real estate markets in recent years.

Therefore, we remain attentive to any potential impact on investment flows to the region. Construction input costs were still at elevated levels already prior to the onset of the conflict in Iran 8 weeks ago. These, together with rising oil and gas prices are likely to contribute to further cost increases placing burden on builders and subsequentially on homebuyers.

The surge in inflation has also altered the global interest rate outlook from a trajectory of steady reductions to one that now carries an increased risk of further rate hikes with implication for both demand and supply within the real estate sector. In spite of these challenges, we did observe robust activity modernization markets across nearly all regions.

However, at this time, we are not revising our outlook upwards, preferring to await confirmation of the continued strength in the coming quarters. In installation, just to call out a few selected markets, construction activities continued to gradually pick up in Germany with multifamily building permits up close to double digits on the 12-month rolling basis and strong growth in new orders recorded by builders in the residential sector.

Activity in Brazil remains solid, driven by affordable housing. And in the U.S., there have been mixed signals as multifamily permits and starts have risen in spite of Architectural Billings Index remaining below 50 for 33 consecutive months. In China, construction remains under pressure with all key lead indicators such as floor space started and real estate investment down by more than 10% again in Q1.

With that, let me turn over to Carla to walk us through our financial results in more details.

Thank you, Paolo. Good morning, everybody. A pleasure to have you on the phone. So let's take a look at the financial results. So Slide 7, so the usual summary slide of the current quarter compared to the last 4 quarters. As Paolo said, we are pleased with the operational momentum in the first quarter.

Margins up 100 basis points year-on-year, both reported and adjusted EBIT. And another quarter with a very good operating cash flow, even if we didn't quite hit last year's exceptional high level for the first quarter. Finally, we moved our net profit margin into double digits, which is also a very pleasing development.

Now a quick word on currency. As mentioned, we have been facing accelerating FX headwind in recent quarters. And in terms of the revenue impact, it amounted to more than CHF 180 million in the first quarter, so close to 7%. And this obviously comes from the appreciation of the Swiss franc versus our main currency exposures, particularly the dollar.

But the headwinds from some of our smaller exposure such as the Indian rupee are also having a notable impact. Now looking back over the last 10 years, the cumulative FX impact shaved off over CHF 3 billion of our top line and over CHF 350 million of EBIT.

Now moving to our top line development on Slide 8. So giving you some insights what we see in our different regions and in our different segments. So first of all, regionally, we grew the order intake and the revenue in local currencies in all regions outside of China.

At the order level, China cut 1.5 percentage points of group growth in the quarter with order growth as a result, 4.3%, excluding China compared to the reported 2.8%. The standout region was Europe, particularly Northern Europe, which showed high single-digit order growth in the first quarter on a reasonably tough comparison from last year.

So overall, very pleasing to see growth here, including a very good development in Germany. Now looking at our business segments, as Paolo mentioned already, modernization contributed strongly to the order intake and the revenue in the first quarter, both growing at 15%.

New installations saw order intake stabilized this quarter, but revenues declined high single digit with China down over 20%. And finally, growth in service business continues to be accretive to the group growth overall. From this slow start of the year, now we expect to see a modest but gradual improvement over the next 3 quarters, consistent with our full year guidance of low to mid-single-digit growth.

Growth in our order backlog was up 2.5% year-on-year, 3% sequentially in local currency, driven by modernization, which was up 15% year-on-year and the backlog margin improved somewhat sequentially. Now moving to EBIT and EBIT adjusted. So you can see here on the slide, the FX impact is also hitting our EBIT bridge.

This quarter, minus CHF 23 million. Now the good news is that we are more than offsetting this by operational improvements, which was plus CHF 33 million in the first quarter, which is in line with the quarterly levels we saw throughout '25. So we are maintaining our productivity momentum with savings coming from SG&A, procurement, supply chain and field efficiencies. Particularly, the latter has picked up in recent quarters, which is pleasing.

Now price and mix were contributors to the CHF 33 million operational improvement, but less so than efficiencies. So our equation, pricing plus efficiency outweighing inflation remains firmly positive with both inflation and pricing likely to gradually increase over the coming quarters.

Now moving on to the net profit and the operating cash flow on Slide 10. So good development in net profit driven by our operational improvement, which is more than offsetting a decline in financial income as well as FX headwinds. And now margins into double digits. And operating cash flow was good, reaching CHF 532 million for the quarter, just shy of last year's exceptionally strong performance.

Again, uptick in our operating earnings drove the strong performance whilst net working capital improved, but less so than in the first quarter last year and hence, a bit of a headwind in our year-on-year bridge. We will continue making progress on our net working capital initiatives, and I expect us to have another good year for operating cash flow in line with the last 2 years.

And I expect as a result that we continue to show industry-leading cash conversion levels that means converting well above 100% again in '26. Now moving to the next slide. In terms of full year guidance, obviously, we confirm the full year guidance. So in terms of our revenue growth guidance of low to mid-single digits in local currency in '26, we expect a modest gradual acceleration in -- from the 1.7% in quarter 1.

And that assumes continued strong double digit in modernization, stable mid-single-digit growth in service and a gradual easing of the headwind in new installation from the high single-digit decline in quarter 1. Now on to the margin guidance of 13% in '26. So the improvement versus '25 is clearly driven by continued productivity improvement, increasingly from field efficiencies.

So we expect an acceleration here to offset a moderation in procurement and SG&A savings such that we can achieve the same overall level of incremental savings in '26 as we did in '25. Now a little reminder on the mix, which we have as a headwind in '26. Mix was a tailwind in quarter 1, but we expect that to neutralize over the coming quarters. Let me also say a few words on cost inflation.

So based on our current assessment, we face some additional inflation from energy, commodity and commodity. So firstly, on logistics and fuel cost, we estimate that each of these add approximately CHF 15 million, 1-5, to our annual cost. So CHF 30 million in total on a 12-month basis. Outside of that, energy is a small cost category for Schindler and the inflation would amount to less than CHF 1 million.

That is electricity usage in building and so on. And finally, on raw materials, there is no change to the CHF 15 million, CHF 20 million annual cost inflation estimate that we shared with you in February. And so that is primarily associated with the higher copper and aluminum prices. So putting all of this together, we face up to CHF 50 million of additional cost inflation on an annual basis from the elements I just outlined.

And obviously, we are working hard on mitigating to offset these elements. Now touching on tariffs. It remains a bit of a moving picture, but our estimate of the annual gross P&L impact remains largely unchanged from what we shared in February. That is approximately CHF 15 million, 1-5, based on current tariff levels. And again, we continue to work hard at mitigating the impact, including making appropriate price adjustments.

So in conclusion, let me end by thanking together with my colleagues in the Executive Committee, all our employees around the world. And as you know, unfortunately, many of them are operating in exceptionally challenging circumstances, not least in the Middle East currently. So a big thank you to our colleagues there.

And with that, I hand over to Lars.

Thank you, Carla. Let me remind you of our Capital Markets Day, which is scheduled for the 3rd of June this year at our headquarter in Ebikon. Switzerland. We look forward to seeing many of you here as our campus.

Please note that the registration to the event closes on the 15th of May, and the number of participants are limited. So with that, we are happy now to take your questions. I would like you please to limit yourself to 2 questions only, given the limited time we have available. With that, operator, please.

[Operator Instructions] The first question comes from Andre Kukhnin from UBS.

Really, the main question I have is that now we are heading into this, again, heightened inflation environment. And given the track record across the whole industry of, say, 2022.

Can you really confirm to us that the industry attitude towards pricing has changed structurally and now that you have the contract price escalation clauses in place and that you can price proactively as inflation ramps up and therefore, avoid that kind of gap in potential gap in profitability. If we could talk about that, that would be great. And then yes, I have a quick follow-up on U.S. service orders as well, if that's okay.

Andre, thank you for the good question. Yes, obviously, we can confirm your expectation that the lessons learned in '22, how to face inflationary jumps up and down has shaped the industry as well as ourselves. So number one.

Number two, in the actual situation, what is happening is a very proactive pricing, number one, you mentioned yourself, following the -- in the meantime, established discipline in contracts and all that as well as, as I mentioned before, that we are applying where possible, surcharges to address the super high-speed increasing gasoline, oil costs, energy costs. which maybe was not very much the case in '22, right? It was more on commodities and material.

So well, to summarize, your assumption is right. We are executing pricing according to the contracts, yes. And obviously, all of you know, there might be also a timing effect how these pricing actions will come to the books as when you price NI, it comes then when you build NI with a longer term, right? Modernization somewhere in between. And on services, the timing to see the pricing and the subsequent benefit of it might be shorter.

That's really helpful. My second question is just on the U.S. service orders in your slides that showed us down in Q1. I think that's in units. Could you just talk about how it's done and how it's performed in value? And how do you see the outlook for this segment for the rest of the year, please?

Yes, very good question. Thank you for that. That helped me clarifying something which I was mentioning before. In value, important to know, we grew in Americas and U.S., too. So service value is growing. On units, as we report on units, we have a slightly decrease, which is mainly due to some -- yes, I call it, selectivity, some larger accounts we on purpose didn't rebook as we didn't pursue to continue to fully stick with our overall strategy we have.

So now to the second part of your question, Andre, very clear. We and also myself expect in the course of the year also to -- not to recall to recap or to catch up on unit growth. So value is already and units should follow during the year.

The next question comes from Daniela Costa, Goldman Sachs.

Just wanted to ask you sort of on the path of light savings and efficiency from here and also on mix, you gave great detail on the whole inflation items and commented already a lot on price.

I wonder on those 2 elements and the cadence from here. That's the first question. And the second question, just for an update on where -- how do your view stand regarding when service regulation could change in China?

Maybe, Carla, you can elaborate on the efficiency gains, and then we can come back on China.

Daniela, so happy to take your question. So yes, as I said earlier, it is clear that we have these inflationary impacts, but we expect them to be offset by the pricing. Paolo just outlined our view in terms of pricing. There might be here or there a bit of a timing effect, but that clearly will not realize.

So from that perspective, the increased inflation will be offset by the pricing. Coming to the real efficiency, there is not as such a big change to what we shared before. So we are still looking for the approximately CHF 200 million of efficiency coming in, mainly the 4 pillars that you're well aware of. So it's clear that the composition slightly changed, but the overall numbers, they stay in line with the projections that we shared. Does that answer your question, Daniela?

Yes. Maybe just of the CHF 200 million sort of how much is left?

Well, I mean, it's clearly that the main contributions are coming from supply chain and procurement saving and what is currently picking up is the field efficiency savings.

So whatever now in the future will be a bit going on the moderate side in terms of incremental from supply chain procurement or the SG&A will be picked up or will be offset by the pickup in the field efficiency, both in the -- well, actually in the 3 activities and NI, Mod and in the service.

Coming -- let me catch up on China. That's a very good question. And so regulation in China, let me start. Whenever it will come, I said it also before, you remember, this will have a positive and welcome impact to the industry and also to us. However, it has been just postponed for another 6 months.

Now it's expected that it would be published earliest, end of this year and being enforced end of next year. So well, if we put these 3 informations together, it's become obvious that any impact can only be expected in the course of '28. Well, now we can be philosophical and it's quarter 2, quarter 3, I don't know.

So hence, we have to be a bit more patient, then I think we can have a full insight into the expected benefits first when we have studied documents, again, maybe Q1 next year, we have a better insight. However, it's important to know that by now, in all our plans, expectation outlooks, we didn't include yet any significant contribution of it already now.

So therefore, yes, we have all to be patient and catch up on this in my personal opinion, in 1 year from now. Unfortunately, we can see.

The next question comes from Midha Vivek from Citi.

I have 2 questions. My first is on the order intake, particularly in Europe, EMEA up double digits for the quarter. The market outlook is still for 0% to 5% growth on a full year basis.

I was wondering if you might be able to give us some color maybe breaking that down between how much you think was underlying market developments in the quarter itself? How much was a pickup in the larger project orders and whether you think there was any contribution from any market share gains?

Vivek, thank you for the question. I'll address all the points one after the other. Number one, EMEA up, yes. It's not a big secret, maybe with some differences between Central, Northern European countries and yes, most famous EMEA at the moment. But we are pleased to see that Europe, as EMEA for us, or Europe is contributing positively to our order intake, which was a bit expected, so number one.

Number two, how it is between pickup on large projects and rest of the business. This is also, I must say, different country by country, as you can imagine, we see now also to be anticipated a bit of a slowdown in large projects signed in the whole Middle East region is not a secret, the large project pipeline list was or is including also a portion of those projects. And we are always a bit more on the conscious side.

Now we don't have to say we keep it on the list, but we don't count on them short term, while the rest of the projects still look promising. Talking countries and markets, well, I was mentioning before, we are happy to see Germany picking up as we were saying last year, let's keep the fingers crossed that now the darkest period is behind us in Germany, and we can confirm at the moment, everything is confirming is right. But also other markets are coming nicely in Spain, Italy, there's many more.

So summarizing on the commodity sector going well in the commercial segment, different country by country, large projects, as you can imagine yourself, is now a bit in the light of geopolitical movements, different between infrastructure projects, which continues and private finance projects, which one could say, they might be a bit delayed until the financial situation now globally speaking, has been clarified.

Very clear. My second question is a follow-up on the cost inflation topic. One cost item you didn't mention, particularly on the raw material side with steel. Would you be able to give us a quick summary of your exposure there and what sort of assumptions you've made around that?

When it -- Actually, when it comes to the steel, we locked in actually for the longer term. So it creates less volatility for us for the remainder of the year, to be honest. That's why I didn't mention it.

Very clear. So is there a -- how much of a price increase do you need to put through just relating to the steel on the new orders?

That's a good question. But actually, the price increases placed in the new orders now are less related to one single component, right? It's a more general price increase you place, right, to the customers. At the moment, obviously, there are more items contributing to the price increases.

And I was mentioning before to Andre, we have learned in '22, I guess, the whole industry, but we Schindler -- we also learned in '22 how to address pricing much better than ever done in the past. So that here, I must say it's a bit difficult to assign to each inch of the price increase, one component. And we also have copper moving, we have oil moving, we have energy moving.

We have wage inflations moving, very different country by country. So actually the pricing you set in the new orders now is a combination of all these and also not a secret, is also a bit different country by country as reflecting on especially wage inflation, this varies a lot among the countries.

The next question comes from Nick Housden from RBC Capital Markets.

Firstly, I was just hoping you could comment on the growth components in service, so kind of the mix of unit growth, price net of mix and churn and then also dynamics in the repair business, which from competitors, it sounds like that's been quite strong recently.

Well, looking at value growth in service, I must say the unit growth and the value growth, one could say is quite aligned. So it's not that we are generating an additional value growth by overpricing anything.

So at the moment, we can confirm that our growth in value is, if you look to the different markets, very much in line with our growth in business -- sorry, in units. Carla, something?

Yes. Well, I mean maybe just adding when it comes to the portfolio and in units, we definitely are positioned very favorable when it comes to the churn rates when we see what is going on in the market. And I think that is a very, very good point. And we still are on a neutral basis when we compare the churn with the recoveries overall.

So that is -- yes, that is where we are in terms of portfolio evolution. And as Paolo mentioned already, in terms of pricing, I think we remained also very disciplined there, and we will continue. So whatever comes from inflation, we will definitely make sure that it is recovered.

Okay. Great. And then my second question revolves around the sequencing of growth for sales in Americas new installations. I think we've had a couple of decent years of order intake in units.

And I would imagine that pricing has also been quite solid there. So I'm just curious as to when we start to see that feeding through a bit more meaningfully into new equipment sales growth.

Well, difficult to say in which months we see it, but we can confirm that at the moment, the positive trend we were also referring in the past continues. So now let us keep the finger crossed, nothing changes, right? So now very soon, we will also see it contributing subsequentially to our order intake as well as I was also mentioning last quarter, and it is unchanged.

We are also participating more and more in large projects, which then going forward will also contribute on both order intake. And then yes, with the time line you have for -- to generate -- sorry, to create the revenue also contributing there. So we don't change our constructive positive outlook on the U.S. in terms of new installations.

So yes, your observation is right. Revenue will be subsequently generated large projects a bit slower, commodities coming linear, not to forget modernization, which is also coming very strongly and with a shorter delivery time, obviously, right, between the order intake and contribution to revenue.

The next question comes from Martin Flueckiger from Kepler Cheuvreux.

First one is on your remarks regarding building permits ramping up in Europe over the last few quarters. Now I appreciate those comments, but I've recently also checked that according to ECB, European Central Bank data, the mortgage volumes in Europe have started to turn more or less flattish. They were down in January, but slightly up in February.

If you compare that to the growth we have seen, which was clearly double digit, up to 40%, 50% or more percent in 2025, depending on the month, that seems to be noteworthy. I was just wondering whether you had any thoughts on that development with regards to financing decisions in Europe being postponed, which ultimately could hit your residential exposure to the region? That's my first question.

And my second question is on CapEx. I noticed CapEx was up sharply year-on-year in Q1. Just curious how we should think about that number going into the remaining quarters and what kind of comments you could make on CapEx guidance for the full year?

Martin, let me take the first one and the second one, I will happily pass to Carla for the CapEx. That's a good one. How would we expect the financing structures, availability, especially in Europe, I think, is your question, might impact the green shoots we have seen coming, especially let's talk about the largest markets we have like Germany, Spain, Italy and so on.

So first of all, by now, in the residential segment, and allow me to split briefly in 20 seconds in segments, then we and we personally expect in the worst case, a bit of a different scenario in residential, one could expect based on the strong demand we have in all large markets and already made decisions on financing, on building permissions and so on, we would expect a more resilient new installation order intakes going forward.

So other words, the expected growth rates in commodity -- sorry, in residential, we might still expect. When it goes to large projects, I was moving -- mentioning before, I would move to a more differentiated picture. We see at the moment everything which is more related to infrastructure, public investments is continuing as planned. So here, I would also -- I see your point of volatile mortgages and so on, but it doesn't play a big role here for the moment.

And yes, you have a good observation. Fully private finance developments might see a bit of a delay. However, if I look over Europe at the moment, day-to-day, still decisions made to progress on projects, excluding Middle East. So all in all, if we have to expect some changes going forward, I think it's appropriate to be more conscious on large projects, private finance, followed by large projects, infrastructure which we see more safe kind of sort of saying.

And residential, we would expect for '26, more or less flat. I hope this addresses your first question, and Carla takes up on CapEx.

Yes, Martin. So thank you for the question. Good observation. So yes, our CapEx investments in Q1, they amount to CHF 46 million versus indeed CHF 18 million last year. And that is actually a replacement -- a real estate replacement investment.

So it comes from the purchase of a land plot in Switzerland, yes, for replacement of a factory. So that is actually what's there. So it's not like a trend to further increase now the CapEx going forward. So it's actually, I would say, a one-off that you see there.

The next question comes from Martin Husler from Zurcher Kantonalbank.

I have 2 questions. The first one, when it comes to claiming a refund of overcharged U.S. tariffs, what is your approach here?

Yes. Obviously, we are looking into that. We are doing our homework, and then we will conclude at the right time to file for it.

But your guidance of impact of U.S. tariffs doesn't actually include any, let's say, payback of what you paid?

No, no, absolutely not given the uncertainty about the timing, et cetera. So when it comes, it comes, yes. So it's an upside, but we don't count on it in the numbers that I shared.

And then the next question, maybe a bit of a broader one. When it comes to consolidation in the sector and the opportunities to expand your service footprint, mainly, I guess, what is the reason for a rather cautious approach for external growth that we see for Schindler?

Martin Well, conscious approach, I leave it to you to judge. What we said and we are working on is, yes, we like to expand our portfolio footprint also by inorganic investments, I think, is what you referred to, right? What we said is, at the same time, we would not jeopardize our overall strategy, which we call profitable growth. by doing things which afterwards look good but aren't.

So this being said, when we look at external opportunities, is what Carla always calls the bolt-on acquisitions and even maybe large acquisitions, we always prove them against our midterm strategy, and we will talk a lot also on the upcoming Investors Day with you guys. So therefore, I would not confirm that we are not interested in expanding our footprint inorganically, you were saying externally.

But yes, I would confirm that we still make sure it fits to us and it fits to what we promise to every one of our investors we intend to do in the next many years with the portfolio.

Yes. If I just -- Martin, we have our own criteria for actually assessing opportunities and if they fit our plans, yes or no. So we stick to this criteria. What is clear for us, what we are not going after that is overpriced assets and also loss-making business. So there, we are -- stay away from because we -- I think we would -- if we acquire things, we want to actually generate a return on it.

The next question comes from John Kim from Deutsche Bank.

On modernization, I'm wondering if you could characterize what you see as the trajectory on contribution margins over the next 2 to 3 years? And also maybe a bit of color here, given the strength of China on unit counts and the bond program, how you see kind of mix geographically evolving from current level, I suppose?

John, let's take the second part first. Now do we see a geographical mix. First of all, well, I must say, if we look at the distribution of the installed units on this planet, obviously, there will be over the years, an increasing contribution also modernization coming from China.

So the longer term, we look at the modernization business, and I'm talking 5 to 10 years, the more the contribution will be out of China, obviously, right, as the half of the units installed on this planet are, for whatever reason, installed in China. So this is anticipated at the moment, obviously, the biggest potential for the very next years in terms of value, in terms of margins is obviously there where the installed base is much more aged and the market is much more mature.

So obviously, you can -- it's the Americas, Europe and Asia Pacific outside of China. This is the second part of the question. So the first one, and then I will leave to Carla to give more color, if you like. Well, we expect the modernization business also in terms of contribution to the bottom line to continuously improving and continuously evolving.

As mentioned before, we are doing a lot in terms of products, in terms of processes, in terms of expanding capacities, production as well as installation. We talked about in the past also here, we will have some more points for you when we see us in June. So there, we can only expect over the course of the next years, an increasing contribution. But Carla, please, anything to add on that? No? Okay.

And one follow-up, if I may. Historically, you provided some very useful color on segmentation in Chinese real estate markets, tiers of cities and so forth. I'm wondering if there's anything you could help us on here in the current outlook.

I think with more details, we can also touch on China. But for now, we have segmentation in tiers, I must say one has to ask if we -- if you focus on profitability, and we have reassessed a lot of our organization in China and also going forward, there's still a big difference between Tier 1, Tier 2, Tier 3 cities.

Segmentation remains very similar in terms of business opportunities. And hence, when we will share with you where we like to go in the next couple of years, you will also understand what we plan to do in which segment within China to secure that China contributes to our overall plan going forward.

The next question comes from Lewis Merrick from BNP Paribas.

You mentioned wanting to grow in the U.S. service market and reverse the trend you've seen in 1Q. One of your peers is also seeing challenges growing there.

I'm just wondering, are you seeing the competitive environment potentially heat up in the U.S. market? Or are there any early green shoots you can point to supporting a turnaround?

Yes. Lewis, that's a very good question. Now I think you're referring more to the service segment, right? U.S. to U.S., and allow me that I talk about us and not about competition. In the U.S., what we see is a clear trend of increasing presence, let me do it very politely this way, of the ISPs, very active in the market, which are shaping kind of, if I may say, the service business in the U.S.

It's not Americas, it's the U.S. There's a lot of contribution into that from private equity going into that segment in the ISPs. And hence, yes, the service market environment is changing in the U.S. Is it changing for stay there forever? I don't know. But what I can confirm is that we are adjusting and working on it heavily and in high speed. And it's the reason why before I was confirming that we expect our numbers to catch up and continue to improve throughout the year.

The next question comes from Philip Buller from JPMorgan.

I have 2 questions, please. Firstly you're obviously working very hard to mitigate input cost inflation. Is your policy regarding hedging on some of those costs changing in any way given the volatility? And the same on FX. The underlying results are obviously good, but FX has been overshadowing that now for quite a long time. So is there anything you plan to do differently in relation to hedging, be that on the cost or FX side?

And the second question, I know you don't want to front run the CMD, but can you remind us of what the right level of leverage is for Schindler. I appreciate the comments on M&A needing to have the right returns profile. So how does that pipeline look today and the valuation of those assets? Is that screening well for you relative to potential cash returns to shareholders?

Yes. Thank you very much for the multiple questions. So I try to take them one by one. So obviously, we have -- when it comes to the hedging of the raw materials, there is no change in policies because I believe that we hedge what we can hedge. Now in terms of the FX impact there, of course, we did quite some work over the prior periods and especially then contracts that are in our -- yes, strong Swiss franc.

I mean we convert most of them already in non-Swiss currency. So quite a lot of energy went into that. So in order to de facto come to a hedge. And when it comes to the capital allocation question, I'm actually yes, looking forward to give you more insight into the Capital Markets Day, also what the next follow-up is because, yes, our share buyback program advances very well. So if you can give a bit of patience there, I will definitely give full insight into that topic.

The next question comes from Rizk Maidi from Jefferies.

Just maybe a little bit of clarification on the pricing element when it comes to service. It doesn't feel like this according to my calculations that pricing was not a big component within the service growth. Maybe if you could just shed a bit of light there and give us a flavor on how do you see it sort of by region?

And then secondly, I would like to shift away, hope you don't mind me doing this from -- away from the results, but just take your view on potential large consolidation in the industry. We know this is quite a very consolidated industry. So what kind of impact do you see in the market in terms of density pricing if 2 of the largest -- your largest peers merge?

Maybe, Carla, I'll take this one. So the first one. The first one on the contribution of the pricing to the service and bear with me that we don't go now into region by region. But overall, we can say the contribution from pricing is in the mid-single-digit range. So therefore, I was saying the overall growth is not overinflated by pricing. This was my message before, and thank you for helping me clarifying it.

So -- but nonetheless, the pricing contribution is in the mid-single-digit area, and that's actually what normally you do every year as you cope normally also with inflation. We did in the past, we do now and maybe now actually right now with an additional component to offset the Middle East crisis FX, as mentioned before.

Coming to your second question about larger consolidations and without looking at any specific one, our view is, first of all, if there's a consolidation on highest level, and we can name it, if the 1, 2 of the big 4 would go together, I personally already expressed our opinion and my personal opinion very clearly in the past, one has to ask mid-first and long first, where is the benefit for whom.

And this explains for me also the subsequential impact on what you were just mentioning, pricing and movement in the markets. Consolidation on high level always, we have to ask, is there a benefit for the customer? Yes, no, the answer you can give yourself. Is a benefit for employees? You can give your benefit -- the answer yourself. Is there a benefit on underlying efficiencies by consolidation, which could bring some benefits to the bottom line?

Well, here, one can speculate and say, yes. Good. Let's take this one. To get to these benefits, you have to do a lot before. And here, I like to share our and my very personal opinion. You have to put it in the timing. It is quite often intense time, which is not 1, 2 years. It will be longer until you can at all generate these underlying efficiency benefits in your books.

In all that period, this consolidation would just work against benefits for customers and employees. If you put it on this high level, then the answer is, for me, quite subsequentially logical that it might have a short-term impact on pricing. However, the opportunity also for others to grow and expand customer and business baseline would also increase. So here, I must say for the industry, there might be a reshaping, there might be changes.

However, this also bears opportunities for the others. Different when you look at consolidation on lower levels is what we have talked a lot about in the past is what then has a totally different consequence to the market. But you were explicitly mentioning, I think, the larger scale consolidations.

The next question comes from Aron Ceccarelli, Bank of America.

My first one is on tariffs. I understand the situation remain extremely fluid at the moment. You highlighted the CHF 15 million that you announced at the beginning of the year.

Could you perhaps elaborate a little bit on the new 232 regime, perhaps expanding on your exposure to Mexico and Canada? And if this CHF 15 million, you think could be revised upward because of these new changes? That would be my first question.

Thank you. Talking exposure to tariffs for us, it remains unchanged since the last adjustments, which you know they were adjusted for Switzerland. So there is no change. And Carla has mentioned before, in our numbers, we are sharing with you today and in the outlook we don't foresee any downside at all and also, for the moment, no upside. So first part of the answer.

Second part of the answer, special exposure to Canada and Mexico. This is for us quite limited as we have our supply chain base distributed in other markets. So it's not Canada and Mexico. It's 5 other places in the world. And this actually reduced our exposure to tariffs a lot. So for the moment, no impact to our bottom line and to the numbers presented by Carla.

Yes. Just maybe to add and to be concrete on numbers. So initially, we talked about around CHF 20 million. This CHF 20 million, they came down now to CHF 30 million. So yes, so we go clearly as it just decreases the impact for the reason mentioned here.

That's clear. The second question is on pricing and your backlog. I understand there will be a lag on the effect of pricing on new orders. I wanted to understand to what extent if there's any kind of ability to go and reprice some of your existing orders in new equipment and perhaps maybe modernization eases because of the churn.

But trying to understand, considering the current situation, if there's any chance you are able to go to your customers with an existing orders and say, look, things have changed, we might have to revise price upward.

Thank you. First of all, do we do it where it is possible? Yes. Is it everywhere possible and in every contract? No. So therefore, do we expect some impact on the backlog positively from pricing? Yes, but it might remain minor that it is not critical to be now disclosed here, right?

So therefore, the effort we are doing, and I said before, we are quite diligent in our pricing discipline, I must say. However, looking explicitly at new installation orders, it also plays a role how old this order is. So therefore, it's quite of -- not volatile, it's quite of a diverse picture. So -- but I can confirm where possible and together with the customers, we address it. In some cases, it's obvious, it doesn't work.

Thank you, Aron. Thank you. We'll take the final question, please, and then we'll close out for today.

Last question comes from Midha Vivek from Citi.

It's a follow-up on one of the questions on CapEx, just more broadly on cash conversion. You mentioned earlier, this should be again a year of over 100% cash conversion. Your cash conversion has been very strong over the last few years.

For how long can you continue with this sort of level of cash conversion? And what should we bear in mind regarding the moving items within that?

Well, I'm actually, yes, very convinced that we can continue with this nice cash generation. Yes, first of all, I mean, we believe or we are clear, I think, where we go in terms of profit. And when I look at the net working capital, I can tell you, I still see my pockets where I can further optimize and I will not let go.

So based on the combination of the 2, I feel comfortable making that statement. So I don't know if that answers your question, but I'm very passionate, I must say, about it.

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

Thank you very much, operator, and thank you all for attending this call today. Please feel free to reach out to me and the Investor Relations team for any follow-ups you might have.

The next scheduled event is our Capital Markets Day on the 3rd of June, and we look forward to seeing many of you there here in Ebikon, of course. With that, thank you, and goodbye.

Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.

Ladies and gentlemen, welcome to the Schindler Full Year Results 2025 Conference Call and Live Webcast. I am Valentina, the Chorus Call operator. [Operator Instructions]

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 Lars Brorson, Head of Investor Relations. Please go ahead.

Thank you, Valentina. Good morning, ladies and gentlemen, and welcome to our full year 2025 results conference call. My name is Lars Brorson. I'm Head of Investor Relations at Schindler. I'm here together with Paolo Compagna, our CEO; and Carla De Geyseleer, our CFO.

As usual, Paolo will discuss the highlights of our 2025 results and our 2026 market outlook, and Carla will take us through the financials. After the presentation, we are happy to take your questions. We plan to close the call at 10:30 local time. And with that, I hand over to Paolo. Paolo, please go ahead.

Good morning, everyone. I'm pleased to be back to report on our '25 results. But today, before I dive into the results, let me take this opportunity to take a step back and reflect on the journey over the last few years. You have seen we have titled our first slide, operational recovery completed as we see 2025 as marking the final year of our operational recovery.

For those of you who have followed us for a while, you will recall that in '22, we faced severe supply chain challenges, steep declines in many of our major new installation markets and a significant drop in earnings and cash flow, and the company had to perform an emergency landing. Four years on, after some very difficult decisions taken by our majority shareholders and the Board at the end of '21, and thanks to the hard work and dedication of nearly 70,000 employees, I'm pleased to say that we have emerged from this period as a stronger and more resilient company.

Well, one could say Schindler is back. We have made clear structural improvements to our supply chain. We have enhanced our product competitiveness and innovation and strengthened our global footprint and maintenance portfolio, including exiting smaller markets where returns were not aligned with our objectives.

And from a financial perspective, the company has delivered 12 consecutive quarters of year-on-year EBIT margin improvement with high cash conversion. That is something we are really proud of.

Now looking ahead to '26 and beyond, accelerating growth becomes our key priority, but without compromising on our commitment to the continuous improvement in operating margins. This I'd like to underline. An important part of the strategy is the commercialization of innovative standardized New Installation and Modernization products and our industry-leading digital offering for our Service customers. More on that shortly.

Now let me touch on the highlights of 2025. Firstly, we delivered on our promises by achieving our financial targets. Growth was a little softer than we would have liked, but it was another year of a strong operating performance with a reported EBIT margin coming in at 12.6% versus our initial expectation of around 12%.

I'm pleased to see that the efficiency initiatives launched over the last few years yielded good results, something we will build on in '26. Second, I'm comfortable saying that we are back in Modernization. I was very open with you 2 years ago that we were behind and having to catch up.

Today, I believe we are increasingly leading in terms of competitiveness and momentum of our product portfolio, and I'm very optimistic about '26. In '25, Modernization orders were up 19%. And importantly, revenue was up 12% as backlog execution accelerated in the final quarter of the year. I'm confident that we can continue to expand our capacity and execute successfully also in '26.

Third, a word on product momentum. We see signs that our efforts on product portfolio in the last years are starting to yield commercial results. And this will support us executing our strategy to accelerate profitable growth. The rollout of our standardized modular platform has been completed according to plan, positioning us well for NI recovery in our key markets. The rollout of our U.S. mid-rise product has clearly exceeded our plans in '25 and sets us up, I believe, for a continued market share gain in '26, too.

And in Modernization, we continue to industrialize our operation and standardize our product portfolio. We are seeing very good traction with our standardized packages, and it is not only driving growth, but also enhancing our competitiveness and supporting our journey towards higher profitability in Modernization going forward.

Fourth, despite the pressure in '25 from lower NI conversions and our decision to be more selective in recaptures, we continue to make good progress on our maintenance portfolio, which was up mid-single digit in value terms in '25. I believe we have an industry-leading retention rates on our portfolio, but I still see potential for this to improve. That will come in part as we leverage connectivity to improve the offering for our customers and to drive incremental digital revenue streams.

Fifth, we delivered on operating cash flow of CHF 1.5 billion for the year, a second year of very strong cash conversion. Carla will elaborate on this. But this strong cash flow allows us to invest back into the business whilst also accommodating our shareholders with an increased payout. And I'm pleased to announce that the Board has proposed a dividend of CHF 6 for '25 as well as an extraordinary dividend of CHF 0.80.

Let me touch on our China operations. I told you at the beginning of '25 that we had to take some tough decisions in order to realign our organization and set us for the future growth opportunities, especially in Modernization and Service. Now we are starting to see encouraging signs of operational improvement as we enter '26. A big thank you to our Chinese colleagues for all the effort in '25.

Finally, a word on sustainability. We continue to make a good progress on our agenda. In 2025, Schindler's sustainability management system was recognized with an EcoVadis Platinum medal, ranking Schindler in the top 1% of the more than 150,000 companies worldwide. In addition, Schindler was once again included in the CDP A list of companies operating according to the highest environmental standards.

So let us now look back at the global elevator and escalator market development in '25. Turning to Slide 4. Focusing on our updates on what we said in October after our Q3 results versus the year ended. First, we saw a strong Q4 in the U.S. new installation market, while demand in Brazil also developed slightly better than anticipated.

Therefore, our assessment for Americas in 2025 has been revised to low single-digit growth from earlier flat. Second, we witnessed a strong finish to the year in India and Southeast Asia, lifting the Asia Pacific market growth comfortably above 5%.

And finally, the Service and Modernization markets saw a good development in line with our expectations. So how did we perform in this market environment last year? Turning to Slide 5. First, in Service, our maintenance portfolio units continued to expand with the strongest growth in Asia Pacific, excluding China.

In Americas, we saw a modest decrease as indicated already in October. This was a result of our increased selectivity when it comes to recaptures that we decided to pursue as well as from softer conversions. Given the normally longer lead time, especially in North America, the decline in our NI orders from 2023 was still having some impact last year.

In Modernization, we have been able to maintain the strong momentum and saw double-digit order growth across all regions, except for Asia Pacific, excluding China, due to a lower level of large project bookings in both Q4 and full year.

China was the standout with growth of close to 50% as we benefited from the massive equipment renewal program with well over 100,000 elevators replaced throughout the country. In New Installations, our global order volumes declined by over 10% due to China, where, as mentioned before, we have been repositioning our operations to be ready for capturing future growth opportunities.

In the rest of the world, our NI orders grew mid-single digits, driven by solid growth across the Americas as well as in Asia, excluding China and notably in India.

Now moving to our market outlook for '26 on Slide 6. We expect the Service markets to continue to expand across all regions with the lowest growth rate in the Americas and the highest in Asia Pacific, driven by India. The Modernization markets will continue to see robust mid- to high single-digit growth across the world.

In China, the so-called bond program is expected to continue on an even larger scale, and we currently estimate another double-digit growth for the Chinese market also in 2026.

In new Installations, we anticipate the global market to decline by more than 5% due to China, where the market is expected to suffer another contraction of more than 10%. While key real estate statistics saw double-digit declines with home starts by floor area falling around 20%, and this is now following at 3 years of 20% plus declines and also to be considered the higher tier cities, which earlier in the year performed relatively better than smaller cities, deteriorated sharply, especially in the final quarter of '25.

Across the EMEA region, we expect good development in the Middle East to be coupled with important German market returning more firmly to growth as already evident from the double-digit pickup in multifamily building permits based on latest data available. Significant state support is aimed at easing the chronic housing shortage and stimulating investment, including increased funding for social housing, fiscal incentives such as the 5% aggressive depreciation for new rental residential buildings as well as the so-called Bau-Turbo initiative to fast-track housing projects. And we anticipate Asia Pacific, excluding China, to continue to expand by high single digit with broad-based growth across the region, led by India and Southeast Asia.

With that, let me turn over to Carla to walk us through our financial results in more details.

Thank you very much, Paolo. Good morning, everybody. So I propose we start with Slide 8. So that is our usual summary slide of the quarter compared to the last 4. So overall, Paolo mentioned it already, very pleased with the progress that we have made on the profitability over the recent years as well as our continued high cash conversion.

I also acknowledge, as Paolo mentioned, that there is room for improvement in terms of growth, something I will touch on shortly when we discuss the '26 guidance. Firstly, reflecting on '25, Q4 marked the 12th consecutive quarter of year-on-year improvement for operating margins. So our reported EBIT margin was up 180 basis points versus quarter 4 in '24 and our adjusted margins up 100 basis points.

For the full year, our reported EBIT margin landed at 12.6% versus our initial expectation for the year of 12%. So a very satisfactory performance, and I'm pleased to see that the efficiency initiatives launched over the last few years yielded good results in '25.

Secondly, we had a strong end of the year for operating cash flow. Quarter 4 came in at CHF 523 million and the full year at CHF 1.5 billion, just shy of what we have seen the year before. Finally, our net profit continues to increase versus last year in both absolute and margin terms despite the decline in financial income as well as the FX headwinds.

Now moving to our order intake development on Slide 9. You heard Paolo saying that our global New Installation order volumes declined by over 10% in '25. In quarter 4, our NI order volumes declined by over 15%. So clearly, a soft quarter for our New Installation business, driven primarily by China, down mid-30s in the quarter as we remain -- and we remain committed to our strategy of pricing discipline and as we continue to reposition our operations here towards future growth opportunities. So even though China made up less than 10% of our group order intake in '25, it continues to be a burden to our growth.

We also had slightly softer development in the quarter in some of our Southern European and Middle Eastern markets, partly due to fewer larger projects here. So overall, a quarter with limited organic growth as a decline in New Installation almost fully offset the growth in Service and Modernization.

Now if you look at the full year '25, order growth in local currencies came in at 3.1%. Excluding China, however, order intake grew 5.4%. So our growth in '25 was very much driven by Modernization, which grew 19% for the full year and 15% in quarter 4. Growth here was broad-based in '25 with strong double-digit growth across our 3 regions: EMEA, Americas and APAC, with China clearly a standout, up close to 50% in '25, driven by the government's bond program.

Service orders grew mid-single digits organically in which combined with the strong MOD growth offset the decline in New Installations. Now finally, a word on currency. So the FX translation headwinds amounted to more than CHF 450 million on our order intake in '25 due to the strength of the Swiss franc versus major currencies, notably the dollar. And it's worth noting that these FX headwinds are not abating. Rather based on current FX spot rates, they will intensify in the short term. Now in terms of order backlog, it was up 1.2% in local currency at the end of '25, driven by Modernization, which was up double digit.

Our backlog margin was stable sequentially in quarter 4, but still clearly up year-on-year. Especially the backlog margin in our U.S. business was stable sequentially in Q4, and we are starting to make progress on repricing our backlog here for the tariffs implemented in '25. We expect these repricing measures to continue over the coming quarter.

Now moving on to our revenue development on Slide 10. The organic growth, both in the quarter and the full year, was driven by Modernization, up 22% in quarter 4, 12% for the full year '25.

You will recall that we spoke of some operational challenges during '25 in terms of scaling up our delivery capabilities in Modernization, so we were pleased with how the year ended. And going forward, we continue to make good progress on scaling our capabilities and driving more efficient backlog execution.

Now outside of Modernization, revenue in New Installation was down high single digit in '25, driven by China, which was down mid-20s, whilst other regions were down low single digit for our New Installation business. Service was up mid-single digit in '25.

Now moving to Slide 11, operating profit performance. Let me say that I'm proud of what the organization achieved in '25 in terms of efficiencies. We have spoken over the last few years of shifting the corporate culture towards a mindset of continuous improvement, and we are really starting to see that more clearly, which is driving our financial performance.

We delivered 12.6% reported EBIT margin in '25 and 13% in the final quarter of the year. And you can see the operational improvement of CHF 35 million in quarter 4 and CHF 163 million for the full year. That reflects primarily good progress in SG&A savings, but also supply chain and procurement savings, which continued to deliver in '25. Price and mix were contributors, but less so than efficiencies.

One important operational achievement in '25, which I want to flag was the implementation of the ERP system in our U.S. operations. The U.S. is now fully integrated with the rest of our global organization. And as we complete this integration, leverage our global ERP platform, this should yield further operational efficiencies.

Now restructuring costs in '25 came in at CHF 54 million, slightly lower than the up to CHF 70 million we had guided to initially, partly as some of our initiatives shifted into '24. So that meant that restructuring costs were below the level of '24 and hence, a small positive in the EBIT bridge.

Now moving to the net profit. You can see that net profit grew to CHF 277 million in quarter 4, reflecting a 9.9% margin, close to CHF 1.1 billion for the year with a margin of 9.8% despite lower interest income and onetime financial gains in last year's period. So I'm very pleased with that result.

Now moving to the operating cash flow on Slide 13, which reached CHF 523 million for the quarter and CHF 1.5 billion for the year, just shy of last year's exceptionally strong performance. Again, the uptake in our operating earnings drove the strong performance in '25, whilst net working capital improved, but less so than in '24 and hence, a headwind in our year-on-year bridge. This moderation in net working capital came partly as a result of less down payments for our New Installation business in '25.

Now moving to Slide 14. So happy to share that the strong cash generation in '25 also allows for further distribution to our shareholders. So I can report, Paolo mentioned it already, that the Board has proposed an ordinary dividend of CHF 6 per share for '25 as well as an extraordinary dividend of CHF 0.80, reflecting a payout ratio of 72%. This higher dividend should also be seen in light of our solid balance sheet with our net liquidity position further boosted in '25 from the reduction in our Hyundai stake and the lower interest rate environment in Switzerland as well as our continued focus on delivering a more competitive yield for our shareholders.

Now let me also mention a word on the share buyback program, which we launched in November '24. And this program has been running according to plan with the total number of shares, both registered and participation certificates bought back during '25 amounting to over just 700,000 shares for an amount of CHF 200 million.

Now before I move on to discuss our '26 guidance, allow me a moment to zoom out a bit to give you a bit of a broader perspective on our financial performance. So if you look at the bottom 3 charts on this slide, I think you'll appreciate the quality of our business model. Cash conversion and return on capital compared to most other industrial sectors, both are high and stable. I'm very pleased to see the progress that we made since '22. That means that our balance sheet continues to strengthen, ending the year with a net liquidity of CHF 3.9 billion.

Now this cash compounding wouldn't be possible without a stable and a growing top line. And as you can see from the top 3 charts, our long-term growth level is really healthy, led by a strong Service growth and with a balanced regional exposure. I think that is very important to remember at a time when we and the broader industry go through a bit of a softer patch in terms of growth.

Now being a Swiss company has also meant facing significant currency headwinds over the past decade with FX shaving off over CHF 3 billion cumulatively of our top line over the last 10 years.

Now moving towards the end and giving a bit of perspective on the '26 guidance. So for this year, we expect to achieve low to mid-single-digit revenue growth in local currency and an EBIT reported margin of 13%. As Paolo said, we are looking to accelerate the profitable growth and believe we have the right strategy to do so. In terms of revenue growth in '26, we expect to see continued strong growth in MOD, up double digits in local currency in '26, whilst New Installation should start to stabilize, consistent with our market outlook of recovering new installation markets ex China. But of course, with some lead time before that impacts our revenue.

Going forward, in '26 and beyond, we also see an opportunity to complement our organic growth with inorganic initiatives across key strategic markets. Looking back over the last 3 years, we acknowledge the contribution from M&A has been lower than usual as our efforts have been more internally focused. But going forward, with the benefit of a sound financial position, I expect us to increase the pace of selective bolt-on acquisitions.

Now as for the margin guidance of 13% in '26, it's very much driven by continued productivity improvements, increasingly from field efficiency. We expect an acceleration here to offset a moderation in procurement and SG&A savings such that we can achieve the same overall level of incremental savings in '26 as we did in '25.

Now let me touch on the midterm margin guidance, which we will update later in the year. But let's be clear, we continue to expect a continued improvement of current levels over the midterm. One important difference to '25, however, will be the impact from mix. As you know, we have benefited significantly over the last few years from positive mix as our Service business grew strongly, whilst New Installations declined. But as our New Installation business expectedly starts to stabilize and Modernization grows strongly, the margin tailwind from mix will neutralize in '26 or perhaps even turn modestly negative.

And finally, in terms of restructuring costs, we expect up to CHF 60 million in '26 on a par with the level in '25 and still burdening our reported EBIT margin.

Now a word on tariffs, which I believe we have managed well in '25. As I mentioned, with the U.S. tariff costs now reflected in our backlog, we will continue to work hard at mitigating the impact, including making price adjustments to offset the impact. In terms of the annual gross P&L impact from tariffs, we estimate that to be around CHF 18 million based on current tariff levels, so lower than the initial estimate of CHF 33 million, which we provided to you in April last year. Again, we expect to offset most, if not all, of that with pricing and cost mitigating actions.

So to conclude, let me end by thanking together with my colleagues in the Executive Committee, our close to 70,000 employees across the globe for their tremendous efforts in '25. And as we start out in '26, I believe we are in a great position to execute on our strategy, which we look forward to sharing with you at our upcoming Capital Markets Day.

And with that, I hand back to Lars.

Thank you, Carla. Yes, as Carla mentioned, let me remind you of our Capital Markets Day scheduled for the 3rd of June this year at our headquarter here in Ebikon in Switzerland. We look forward to seeing as many of you as possible here on the day.

Now with that, Paolo and Carla are happy to take your questions. In the interest of time, please, can I ask you to limit yourself to 2 questions only. And with that, operator, please, let's take the first question.

[Operator Instructions] The first question comes from Daniela Costa from Goldman Sachs.

I will take two, but I'll take them one at a time. The first one in terms of your order organic growth rate, it seems significantly lower, I think, than some of the peers that we have seen reporting recently. You mentioned China, but some of them also have pretty big China businesses. You mentioned large projects. Can you give us a little bit more of a color? Was it unintended, you didn't take some of those large projects. Did you lose some market share for some other reasons? Just breaking down the competitive landscape context to understand this lower number than peers?

Well, there's a very simple answer to a complex question. There are 2 main reasons for the development of our OIT, which you see. Number one, yes, China was down for us. And this we have communicated. One reason is also the adjustment in structure we have initiated last year. We talked about it was mid of the year, and this kept us quietly busy till end of the year.

So yes, in China, for us, it was kind of expected that we would take less of the market than possibly, I don't know, our competitors. There's a second and rightly so, you said, a second momentum, which had an impact on our OIT, and it is the deliberate, more selective approach when it comes to large projects. And here, I'd like to be very clear. We have to separate, let's say, the mass business in NI, residential, commercial and selected large, large projects, which -- we shared this in Q3 and also over Q4, we were very selective in also key markets not to take things which would feed what we call the boa constrictor, you remember, 3 years ago once again. And both had the impact, which you see, especially in NI.

Got it. And then the second question is just on margins. So you've hit the 13%, and you've exceeded what you've expected earlier in 2025. And I think in the press release, you call it that the operational recovery phase is completed. I believe some time back, you talked about getting your margins over the long run to best-in-class peers, which are still a bit higher. So should we interpret this that the route to get there is just more dependent on just operating leverage? Or are there still any idiosyncratic actions? Just how do we read this operational phase is completed and the ambition to get to best-in-class peer margins over the long run, how do we get there?

Yes. So my statement is clear. The operational recovery, which we started mid of '22, this we see as completed as we gave ourselves a target, which was also shared with the market, and we aim to be there in the course of this year finally. So hence, bear with us until we meet at our Investors Day in summertime, where we will then share with you also what are our next steps and plans. But as Carla mentioned before, very clearly, and I said it before, our intention, our plan, our commitment is to continue a journey of margin expansions while we accelerate growth is what we internally call now '26, the profitable growth agenda, which then we will share more details in June when we meet. But thank you for your question. It's very important to be mention here and today that the journey is not an end. We have just moved now from one phase to the next. But yes, the recovery we started. Remember, factories, key markets, we shared this all with you. This we see as completed.

Next question comes from Vivek Midha from Citi.

I have one question and one follow-up, please. On the order intake, still a similar development to the third quarter on the Americas Service business, the slight decline in the unit growth. Just thinking ahead to 2026, is this something we should expect to persist through the first half of 2026, given your continued selectivity, maybe some lingering effects from the weaker 2023 NI order intake. When does this start to fade out in your view, in your orders?

Vivek, we shared in Q3 the impact of our strategy, especially on portfolio selectivity in recaptures, right? These are recoveries from the market, which we don't intend to change. However, the soft contribution from NI conversions from '23, this we expect to be over in the course of this year. So hence, to your question, we would not expect the same trend continuing in '26.

Understood. Just following up on that. When you say for 2026, so should we already expect that to be visible by the first quarter?

That's a valid assumption. Now Q1 is always -- I think Q2, Q3 is where we should see a change in the trend in the U.S. market in portfolio for us.

That's very clear. My other follow-up, if I may, is on the 2026 margin guide. How much are you assuming as raw material or commodities headwind within your guidance?

Thank you for that question, Vivek. Of course, we will see some headwinds when it comes to the raw materials, especially in the copper and aluminum, also to a certain degree, steel in the U.S., but that has all been included in our guidance, yes. So we consider that.

Okay. Understood. Do you have a number? Could you maybe quantify that for us, please?

Yes. I mean this could go up to CHF 15 million, even CHF 20 million depending on the scenario that will pack out, yes.

The next question comes from Andre Kukhnin from UBS.

I'll start with one on the growth guidance, the low to mid-single digit. You've got 3% orders growth in 2025. I guess that underpins the lower end of the low to mid-single digit. Could you just talk about what kind of variables are out there? And how do they need to evolve for you to land in the higher end in that kind of mid-single-digit mark for 2026, please?

Andre, if I look back to '25, the order intake growth was a mixed picture between what we could have in China, which was, as I shared before, lower than expected. And I must say, in the rest of the world, our growth was significantly higher. So now looking to '26, your question is how confident can we be to get to a higher growth rate? And why can we talk about profitable growth? The answer is very clear. Outside China, and allow me to do this separation for all transparency, we expect to further grow a bit higher than last year.

And in combination with a little recovery in China, this would lead to the guidance we have shared this morning. So we are quite confident that we can get to OIT growth we have communicated. So a combination of China little recovery and further expansion outside of China.

Great. And my second question is kind of a follow-up, but I just wanted to see if we could build a couple more pieces of the profit bridge for 2026. Carla, could you help us with how much was the mix help in 2025 that you now guide to be neutral or slightly negative? And also for Service growth for 2026, what would you anticipate compared to the mid-single digit in 2025?

Look, I mean, first important, I would say, contribution will come also in '26 from the efficiency. So that will continue. And I clearly outlined that. So it's not because, let's say, procurement and SG&A saving and supply chain savings are maturing that we will see less incremental because, obviously, it is our intention to monetize more on the other efficiency, mainly in the New Installation, Modernization and to a certain degree also in the Service business. So that is definitely one important element.

The other important element is that we see also more stable markets when it comes to pricing, especially in NI and MOD and I'm really talking about outside China. So that goes, of course, hand-in-hand with the recovery, although, I mean, a gradual recovery that we see in some of our key markets. So that definitely will also play a role. In terms of mix -- well, in the overall margin uptake, we said always, well, in some of the prior years, it could have gone -- it was around 1/3 of margin uptake. We are fully aware of that. So we consider that, that full neutralizes actually in 2026. It could be even, as I said, slightly negative depending then on how the growth of the Modernization goes and the recovery of the New Installations.

The next question comes from John Kim from Deutsche Bank.

Two questions, if I may. Can you comment on your Modernization order book versus capacity? I know in Q3, there were some issues on kind of throughput and delivery. I'm just wondering where you are on that journey. And then the second question, just a clarification around the tariff number. So CHF 18 million, is that a number we should be using in our bridge? Or should we think about that against the backlog, i.e., more than 1 year?

John, let me elaborate on MOD, which is a very good question. As last year, and I was saying before, you remember, we had to catch up on Modernization growth, which now in '25, we could do. And as I said, we intend to continue in '26. If we look at the execution, which is nothing else than the translation into capacity to execute the backlog, we could accelerate throughout '25 as we were able to build up resources in almost all key markets. And we continue to do so. Hence, as of the top line contribution, the execution is supposed to continue to accelerate. And our resources, which you say is capacity, will be continuously adjusted. However, for the backlog execution of '26, we are quite already prepared.

But we continue to invest as we expect, as I said before, Modernization also beyond '26 to be a significant business driver. But for '26, the resources are almost there.

John, Carla, I will take the question on the tariffs. The CHF 18 million that I referred to, that's actually the gross impact. So as we are going through the usual mitigation measures, I expect very little to impact our P&L.

The next question comes from James Moore from Rothschild & Co Redburn.

Carla, I think I've got one for Paolo and one for Carla. Maybe product momentum first, if I could. And just going back to your comments, Paolo, in terms of the standardized modular platform rollout and also the kind of standardized MOD packages. Is there any way you could say what percentage of the way through the rollout we are for NI and MOD? And what proportion of revenue in '25 was already attributing to the new standardized? And what you'd expect it to be when it's all rolled out and when you think you get to that point? I guess that's the first question. And maybe I'll come back with the second.

James, now connection was a bit weak. Is this about the level of standardization.

It's very -- you are difficult to understand.

We got it. It's about the level percentage of standardized solution, right, within NI, right?

Yes, If I -- just to repeat, so you can hear it. Just if you could say what proportion of revenue was standardized in '25 for NI and MOD? And what you think it will be when you get to the end of the journey and when that is?

Okay, very good. So we've got -- actually in our own program, we have progressed, I would say, NI, more than the half. In Modernization, we have to separate between full replacements and partial replacements. In the full replacement, we have a very high level of standardized solution already. In partial replacement, we are already 50% of it, and it's continuing to increase.

Second part of your question, by when do -- or what could be the ultimate target of standardization in both businesses? Well, we would love to see one day in New Installation, a standardization level of 85%, 90%, one could say, and similar one day Modernization, while admitting for everyone to remind that Modernization is also due to the complexity -- we were talking about this last year, remember, of the complexity of the existing portfolio, which makes it much more difficult to get to a high level of standardization. So here, I think the whole industry is working hard to get to this level, also to have 80% plus of standardization will take longer. But ultimately, it's what we have to get to.

Very helpful. I wondered if I could ask about margin mix in 2 dimensions, really. Just behind the 130 basis point expansion in your adjusted EBIT margin in the full year, could you provide some qualitative color on margins by type and region? I guess, would it be possible to say if NI, MOD and Service margins all expanded? And if you could rank them, that would be great. And I'm trying to avoid asking for a number. But equally, could you do the same regionally? Did all move forward? Or did we see China stepping back? And what really drove the uptake regionally as well?

Yes. So first of all, what is important to share that is that the uptake of the margin is really based on a big number of operations. So it is globally spread. So it's not a few that are fueling the uptake. It's really globally, you can say that the -- everybody is contributing to the uptake of the margin, I would say, with the exception clearly of China, which is anyway a bit of a different market now. So that's from a market perspective. Secondly, when you look at, okay, where is the efficiency really coming from? Well, our 4 building blocks, they are not new. They have been clearly communicated on a regular basis.

So still in '25, the major impact is coming from supply chain and purchasing savings. That is number one, followed by the SG&A savings because there clearly, our restructuring plans are paying off and are yielding results and then followed by the efficiency in NI, MOD and EI. And obviously, they had quite a good basis already this, what I call operational efficiencies. In '25, we can really see them accelerating. And obviously, that will continue in '26 and that increment in that area will offset the less increment that will be generated in terms of the SG&A.

So that is to give you a bit of flavor where it is coming from. Obviously, I referred already to pricing. Pricing was healthy outside of China. So that clearly has also a contribution. So that's, in a nutshell, how the bridge actually looks like between '24 and '25.

The next question comes from Martin Flueckiger from Kepler Cheuvreux.

Two questions. Firstly, I would just like to get back to the slides, I think the first one, yes, operational recovery completed, it's called, where you described the growth in your maintenance portfolio being mid-single digit in local currencies. Just wondering whether you could break that down in terms of units and pricing growth as well as also that more than 40% of equipment being cloud connected. I was just wondering how much of that is just connection without customers paying for it? Or put differently, how much of that more than 40% is actually paying clients? That's my first question. I'll come back with the second one.

Yes. Without going now to which market has developed how, the mid-single-digit growth, Martin, on portfolio is actually well distributed everywhere. And I like in all [indiscernible] with may be a bit difference on China as always. As obviously, the big reduction in NI sales of the last year is hitting also the growth of the portfolio. But for the rest of the world, the development, especially in value was equally distributed. So I would not have any region or country to say, oh, there we did a big either pricing or whatever increase. So it's well distributed, and we are very happy about that. Then considering...

Sorry, I think there's a misunderstanding here. I was referring to the split between unit growth and pricing within that mid-single-digit growth rate in local currencies. It's not the geographic contributions I'm interested in. I'm more interested in the volume pricing effects there.

No. Well, it's -- I think it's both low single digit -- it's low single-digit growth in both. So it's quite equal. So it's not that we have a significant unit growth with low value. I can say -- and this is maybe also important to understand that the portfolio growth came also with a quite equal price and value development. So it's both similar.

That's helpful. And with regards to the more than 40% connectivity, are all of these paying for connectivity or just a part? And if yes, what's that part?

Well, difficult to say in detail which part it is. Then also the connectivity, I must say a larger part is contributing with a paid service, but by end, the level of paid services is very different country by country. So then if we have to say the number of the percentage of the connected units, how many do contribute, I would say the percentage is significant. The magnitude of the contribution of the connectivity is very different country by country.

Okay. That's very helpful. And then my second question would be on BuildingMinds. I think a topic we haven't touched upon in any of the quarterly calls for quite a while. Just wondering how happy are you with the developments? And how much longer are you going to invest into BuildingMinds? And what are the operational, let's say, improvements or developments that you have seen in connection with the start-up?

Yes. So well, it's two questions in one. Let me summarize. BuildingMinds is now in the phase of scaling up the business model. As shared before, the platform has been completed and the team in BuildingMinds is now working on scaling up the business model, hence, in growing the business.

The second part of the question, connectivity as a contributor. Connection to Schindler in the business, this is limited to some countries in which we have joined or shared customers. But on a broader base, this remains a separate entity.

Next question comes from Martin Husler from Zurcher Kantonalbank.

I also have two questions. First question, could you please share your ideas on M&A, maybe in terms of segments and regions? And up to what size would you consider M&A transactions?

Yes, Martin, as Carla was sharing before, we were all the time looking at very selective bolt-on M&As. And here, I have to also add in some selected markets. What we like to do now more in '26 and beyond is to expand the number of markets we will be ready to invest. And coming to the size, well, a bolt-on acquisition can have different size, right? It depends of the target. So there might be no direct limit. However, for us, it was always important to identify targets in whatever specific country, which do fit to our organization. This is what made our M&A strategy in the past successful, and it is something we aim to keep in mind.

And then maybe the second one on cash returns to investors. Why do you flag an extraordinary dividend of CHF 0.80 and not just increased your dividend to CHF 6.80. Maybe can you also expect a new share buyback program after November '26?

Well, I mean, thank you, Martin. I very much appreciate the question. But if you allow me, I would like to give more insights on shareholder return policy and share buyback programs in the Capital Markets Day later on in the year.

The next question comes from Rizk Maidi from Jefferies.

I'll keep them quite short. If I start with the order intake, I mean, I take the China drop and you're being quite selective. But even outside of China, it's quite a big difference versus what we've seen from some of your peers. I'm just wondering if you could just elaborate on the competitive dynamics around large projects and how competitive pricing is? And if you don't think you can get the returns expected on these large orders, then why perhaps some of your peers could actually take them on? I'll stop there.

Well, we normally don't comment on what competitors take in. But let me explain what we have done in '25 and what we intend to do in '26. And this is a clear combination of reaction to markets, which, by the way, Carla was mentioning some of our key markets, let us also look at Europe. And you remember, I was quite concerned the last years when it came, by example, to Germany. Now we see also Germany coming to a more positive momentum. What does it mean?

In terms of order intake, yes, it's clear, '25, we were selective. We were more selective in the range of the large projects, especially in countries, mainly China, where we were on top of it also reorganizing our structure.

In terms of pricing development, here, I'd like to distinguish between these large projects and, let's say, the residential commercial day-to-day business, let's call it this way, in which we see in many markets, pricing opportunities coming up for '26, which will allow also to work more intensively on order intake without jeopardizing our commitment to margins. How much this will be possible to complete? The answer, when it comes to large projects, well, some large projects we do and we will continue to do. Would we accept everything which some of competitors might accept in there. This, I don't like to say we would do. However, all in all, I think the '25 order intake, yes, was very much driven by these 2 decisions and '26 without changing the strategy that much, we are quite confident that we can generate a higher OIT just also by, let's say, business outside of large projects.

Understood. And then very quickly, a follow-up. Can you, Carla, maybe comment on the incremental savings in '25? So roughly ballpark, is it CHF 150 million to CHF 170 million. And same thing, if you could just quantify the mix impacts. I'm getting roughly to 40 to 60 basis points, just if you can comment on those.

I would say you're in the right direction, yes.

Next question comes from Vlad Sergievskii from Barclays.

My first one would be on Modernization growth into '26. Obviously, you are building the delivery capabilities, and we see accelerating top line growth in MOD in Q4 already. As you continue to grow it in '26, would you expect MOD backlog to actually decline in '26 or the new demand will still be strong and MOD backlog will still grow? So that's my first question.

Vlad, that's a very good question. So first, your assumption should be right. We intend to further grow in Modernization, OIT, but also top line, it means revenue. So hence, we are working to also expand our execution capabilities. Will the backlog continue to grow? Well, I think a little backlog growth should be there, but this will depend very much of how much we can accelerate execution. So therefore, both assumptions are right. Yes, we continue to grow. Yes, we expect higher top line contribution from modernization and maybe a slightly backlog growth, too, as we expand also the execution capability.

Okay. That's very clear. The second one is a very quick one. How do you see the bridge between adjusted EBIT and reported EBIT in 2026? You mentioned CHF 60 million of restructuring costs. Is there anything else in this bridge?

Yes. Well, I mean, it's very restricted to the restructuring costs and the BuildingMinds. And obviously, BuildingMinds has become, I mean, less of a drag also compared to 2025. So yes, there are only duty elements, and I would like to keep it like that. You remember that a couple of years ago, we said, look, I mean, if it's recurring cost, it needs to go into the pure operational, and we like to keep the adjustments to a minimum.

We will take one final question, operator, please.

The last question for today comes from Aron Ceccarelli, Bank of America.

My first one is on cost savings. You've clearly done a remarkable job over the last 3 years on executing on these efficiencies. If I take your slide of EBIT bridge for 2025, could you perhaps strip out the numbers of cost savings out of this CHF 163 million operational improvement, please? And when you look at 2026, you talked about operational efficiency to basically be the same ballpark of what you deliver on procurement. Can you maybe talk a little bit about in the real world, what are you accelerating there? That would be my first question.

Yes. Thank you for the question. So in '25, I mean, a major part from these operational improvements are coming from what we call the SG&A savings and the supply and procurement savings. So these are the 2, I would say, major ones because they matured already these initiatives and obviously, they yielded very, very well. It doesn't mean, of course, that there were, of course, also efficiency savings in the operation, as I just mentioned before, in the New Installation and in the Modernization, and obviously, they will accelerate in '26.

So overall, when we talk about these savings, we aim to go for a similar level in '26 than what we have seen in '25. However, the composition is slightly different.

And if I look at the CHF 163 million, is it fair to assume that 50% of those kind were savings? Or is it less -- just to have a rough idea?

Yes, yes, absolutely. Yes, I confirm that, yes.

Around 50%, okay. And my second question is on China. You changed management, I think, at the end of the first half. Clearly, we saw a deterioration on orders and sales there in a tough market. Perhaps could you talk a little bit on real world, what are you guys doing now there? And where are we in the process of the restructuring, please?

Yes. The restructuring we have announced last year has been executed, and it consisted in a reset of the leadership team, which has been done. So this was done in the second half of last year, and it has been completed as well as a reorganization of the branches, which has been executed to a large extent last year. So actually, the restructuring we have announced in Q3 last year has been executed in Q4 with some minor actions still to come now in Q1. So hence, we expect in the course of this year,to see first impacts coming out of those actions.

Yes, ladies and gentlemen, that was the last question. Back over to you, Lars Brorson for any closing remarks.

Thank you very much, operator. Thank you all for attending today's call. Please feel free to reach out to me and the IR team for any follow-ups you might have. I know there are a couple of follow-up questions in the queue. So please do reach out. The next scheduled event is our presentation of the Q1 results on April 23. You'll also find our reporting calendar for 2026 at the end of today's presentation deck. So with that, thank you very much, and goodbye.

Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.

Ladies and gentlemen, welcome to the Schindler Conference Call and Live Webcast on Q3 Results 2025. I am Valentina, the Chorus Call operator. [Operator Instructions] 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 Lars Brorson, Head of Investor Relations. Please go ahead.

Thank you, Valentina, and good morning, ladies and gentlemen. Welcome to our Q3 2025 results conference call. My name is Lars Brorson. I'm Head of Investor Relations at Schindler. I am here together with Paolo Compagna, our CEO; and Carla De Geyseleer, our CFO. As usual, Paolo will discuss the highlights of our quarterly results and our market outlook, and Carla will take us through the financials. After the presentation, we're happy to take your questions. We plan to close the call at 11:00 in an hour's time.

With that, I hand over to Paolo. Paolo, please go ahead.

Good morning, everyone. I am pleased to be back to report on our performance in Q3. And as Lars said, let me start by giving you some highlights on Slide #3. Firstly, let me say that we continue to face some growth headwinds in major new installation markets around the world, particularly in China. I will share our order trends in more detail shortly. But before, let me remind what we discussed back in February. A key pillar to our strategy of profitable growth is the pricing discipline. And we demonstrated it again this quarter on a few major projects where the economics were just not consistent with our return expectations.

That said, we see good growth momentum in many parts of our organization and particularly in modernization. Here, orders were up over 16% in the quarter despite the strong growth we had in Q3 last year, allowing us to show another quarter of order growth for the group. Second, revenue slowed in the quarter, down 0.5%, whilst our year-to-date revenue is up 0.8%. Also here, the headwind from China intensified in the quarter. But our backlog is growing, up 1.5 percentage points year-on-year in local currency, driven by our modernization business, and we are confident that continuing to expand our capacities, we will execute successfully on this backlog.

So I expect us to deliver our full year '25 revenue guidance of a low single-digit growth. Although this is likely to be a very low single digit, similar to what we delivered in '24, as Carla will discuss. Third, we delivered another strong operating margin in Q3 at 13%, up 130 basis points from Q3 last year. And we are now able to revise our full year '25 margin guidance, which we see coming in at around 12.5%. That compares to 12% previously. Carla will provide the detail on that, but I'm very pleased to see that the efficiency initiatives launched over the last couple of years are yielding their results.

Now beyond our financial performance, let me touch on some of the other highlights of the quarter. First, we are making very good progress on the rollout of our new U.S. mid-rise product. This product was launched in '24, and we have now successfully delivered and handed over the first units. And our order intake so far in '25 is exceeding our plans. You will remember that this product launch was about leveraging our standardized modular platform and enhancing our mid-rise offering in the commercial and high-end residential segment, a key pillar to our strategy in the U.S. market. Now we are starting to see the results in terms of share gain in the U.S. mid-rise market, which is really encouraging.

On to modernization, where we continue to industrialize our operations and standardize our product portfolio. We are seeing very good traction with our standardized packages, which now make up close to 17% of our modernization business. And that is not only driving growth, but also enhancing our competitiveness and supporting our journey towards higher profitability in modernization going forward. Then on the topic of sustainability, I'm very pleased to announce that we are installing the industry's first ever low carbon emission steel elevator. The steel used in this elevator reduces carbon emissions up to 75% compared to conventional production and marks an important step towards our 2040 net zero target.

And finally, I'm also proud that we have been recognized by Forbes again this year as being among the world's best employer. In the engineering and manufacturing sector, Schindler was ranked third globally. We have close to 70,000 employees and attracting and retaining talent is absolutely essential to our competitiveness and overall health of the company. Well, so you can imagine this recognition is important for us.

Moving to our market outlook for '25 on Slide 4. We expect the service markets to continue to expand across all regions, with the lowest growth rate in the Americas and the highest in Asia Pacific, driven by India. The modernization markets continue to offer a clear growth opportunity across the world with mid- to high single-digit growth outside of China and growth well into double digits in China, with around 100,000 aging elevators approved this year for an upgrade within the government's equipment renewal program. To put the scale of this initiative in the perspective, just imagine replacing all elevators in Australia in a single year. In installation, we continue to expect the global market to decline by high single digits, mainly due to a low teens contraction in China, where home starts by floor area continue to fall by close to 20% year-on-year in the January to September period, following a 3 years of 20-plus percent declines.

Home sales have dropped 5% overall with only the 4 Tier 1 cities showing a slight increase with all other cities facing steep declines. Across the EMEA region, in addition to good growth in countries such as Spain, now also the important German market appears to have found a bottom and is expected to gradually recover going forward. The so-called Bau-Turbo initiative to fast-track housing project recently approved by the German government should be seen as a positive development overall as it aims to simplify planning, shorten approval times to 3 months and allowing flexibility in building rules to tackle the housing shortage in the coming quarters and years. Asia Pacific, excluding China, is projected to grow by mid-single digits, led by India and Southeast Asia with conditions improving in Australia and the U.S. new installation market has shown remarkable strength, further increasing from a tough Q3 '24 comparison point.

In addition, we saw better data coming from Brazil in Q3 '25. And we have, therefore, decided to revise our Americas new installation market outlook to stable from slight down previously. So how did we perform in this market environment in the third quarter of the year. Turning now to Slide 5. Starting with service. Our portfolio units continue to expand, showing the strongest growth in Asia Pacific, excluding China. In Americas, we saw a slight decrease as a result of our increased selectivity when it comes to recaptures that we decide to pursue as well as from softer conversions. As a reminder, we saw a decline in our NI orders in '23, and this still has an impact given to the normally longer lead times, especially in North America.

On modernization, we have maintained the strong momentum seen in the previous quarters and saw a double-digit growth across all regions, except for Asia Pacific, excluding China, with fewer large projects booked in this particular quarter, Year-to-date, our MOD growth in the region remains in double digits. Finally, on new installation, our global order volumes decreased by double digits due to China, where, as mentioned back in July, we are responding to the prolonged weakness in the NI market by resetting and repositioning our China business towards future growth opportunities. Outside of China, our NI orders grew mid-single digit, driven by an upswing in orders in our Europe, South and South America zone. And it is worth flagging the comparison from quarter 3 last year, which was the best quarter in '24 for NI, particularly due to our strong performance in the Americas. But the U.S. continues to develop well. And as mentioned, we are pleased with the customer reception of our new mid-rise product.

With that, let me turn over to Carla to walk us through our financial results in more details.

Thank you very much, Paolo. Good morning, everybody. Pleased to take you through our financials related to quarter 3. So let me start with Slide 7. And as a simple summary of the quarter, we continue to see headwinds to our top line, but we are executing very well on the bottom line. So starting with the headwinds at the top line. So they are particularly severe in China, and we remain committed to our strategy of pricing discipline, as Paolo just mentioned. Now it's also important to note that FX headwinds are definitely not declining. We had a hit of over CHF 100 million this quarter to both the order intake and the revenue. I will elaborate on the top line trends shortly. Now before doing so, let me point 3 highlights for this quarter. Firstly, we had another very strong quarter in terms of operating margins, up 130 basis points for both reported and adjusted EBIT margin.

So we continue to make very good progress operationally, and that is obviously translating into a margin expansion, which is coming in slightly better than expected, which is also why we are revising our full year margin guidance. Secondly, our operating cash flow improved both sequentially and compared to last year. And now looking at the operating cash flow year-to-date, we are also up versus '24. So just shy of CHF 1 billion for the first 3 quarters and setting us up for another strong year for cash conversion. Finally, our net profit continues to increase versus last year in both absolute and margin terms, despite the decline in financial income as well as FX headwinds and higher restructuring costs.

Now moving to Slide 8 and taking a look at our top line development. Let me first say that we don't see any material shift in order trends overall, even though growth in Q3 came in somewhat lower than in our first half. Now large projects are lumpy, and we had fewer of them this quarter compared to the prior 2 quarters. And if you look at the underlying trends by region and segments, there are 2 things that stand out. First, the continued steep decline in China; second, the strength in modernization. So on China, here, our new installation orders declined by over 30% in value in quarter 3, driving the group new installation orders down mid-single digits in the quarter and more than offsetting the growth we saw in new installation orders outside of China.

So even as China becomes or became a smaller part of the overall group orders, it continues to materially impact our growth profile, notably in new installations. However, organic growth was still positive in the quarter due to the growth in service and modernization. So in modernization, order intake was up 16.4% in quarter 3 and this on a tough comparison versus quarter 3 last year when we grew at 20%. And growth was broad-based with strong double-digit growth in Europe and Americas, whilst China had a standout quarter, up well over 50%. Year-to-date, China is up close to 40%. Now this strong order growth in modernization also presents some operational challenges for us in terms of scaling up our delivery capabilities. So the execution of our MOD backlog was not as efficient in quarter 3 as it could have been. So we recognize that, which meant that revenue growth came in at mid-single digits in the quarter, albeit on a tough comparison from last year when MOD revenue grew over 12%.

I should say that the slightly longer backlog rotation times are also a reflection of the project mix in the backlog. That said, we expect MOD revenue growth to accelerate in the coming quarters from the level that we have seen now in quarter 3. But it is still the new installation, which is actually burdening our revenue growth, down 10% in Q3, driven by the steep decline in China, which was down over 20%. And with MOD and Service, both growing mid-single digits, that left the total group revenue down 0.5 percentage point in the quarter, but up 0.8% year-to-date.

Now as of the quarter end, our backlog was up 1.5% in local currencies, driven by MOD, driven by Service, which had backlogs up mid-teens and mid-single digit, respectively. So our backlog in new installations declined by low single digit. Now in terms of backlog margin, this quarter was slightly down sequentially, but still clearly up year-on-year. And the weaker sequential development was entirely due to the tariffs being reflected in our U.S. backlog. So as our backlog gets repriced over time, you will see the offset to backlog margins. And importantly, excluding the tariff impact, backlog margins continue to improve also sequentially.

Now moving on to Slide 9 and looking at our EBIT performance. As I shared already, it's a really strong development now to 13% reported margin in quarter 3 and 13.9% on an adjusted basis. Now the operational improvement of CHF 35 million this quarter primarily reflects the good progress in SG&A savings, but also next to that, the procurement savings continue to deliver. Price and mix were contributors, but less so than the efficiency savings this quarter. Our reported EBIT was burdened by CHF 25 million of adjustments in quarter 3, of which CHF 21 million of restructuring costs, translating to minus CHF 2 million in our Q3 EBIT bridge compared to last year and minus CHF 13 million in our year-to-date bridge compared to last year.

Now taking a look at the net profit on Slide 10. Net profit grew to CHF 265 million in quarter 3 reflecting a 9.9% margin and to CHF 796 million year-to-date with a margin of 9.8% despite lower interest income, despite higher restructuring costs and despite onetime financial gains in last year. So we are very pleased with this result.

Moving to the operating cash flow on the next slide. So our operating cash flow grew in the quarter as well as on a year-to-date basis. So operating cash flow reached now CHF 967 million for the first 3 quarters of the year, and that sets us on the path to deliver another strong performance in '25, even if we might not hit the exceptional level of last year. The improvement of the operational cash flow is coming from our operating earnings, supported by higher noncash impacts, offsetting a minor headwind of net working capital after the strong improvement in '24 and the missing positive net cash flow from financing income.

So that brings me to the guidance for the remainder of the year. And as Paolo mentioned already, we are now specifying our full year EBIT reported margin guidance at 12.5%. So this compares to the previous 12%. And as Paolo and I have discussed, this revision comes primarily on the back of the efficiency initiatives that we have been executing and which are yielding savings slightly ahead of our expectations. We also now have an increased visibility on the impact of the tariffs this year, while the measures also taken to restructure our Chinese operations are partly offsetting the end market headwinds that we are facing here.

Finally, the mix headwinds associated with growth in modernization in H2 are somewhat less than we expected in July at the time of our H1 results. And on mix, it is also important to recognize that we are benefiting from the continued outgrowth in our service business. And this revision to our full year '25 guidance also implies that we expect to see continued strong margin improvement year-on-year in the final quarter of the year.

Now a small word on tariffs, which I think we have managed well so far in '25. So the U.S. tariff cost now reflected in our backlog. So I just mentioned, we will continue to work on this hard in the coming period to mitigate the impact, including making price adjustments to offset the impact. Now it's fair to say that the U.S. tariff environment remains very dynamic. So let me give 3 additional comments as we see the impact today. First of all, you will recall that with our H1 results in July, we provided you with an estimated annual gross tariff impact of approximately CHF 30 million. What happened since then? Since then, we have had the changes to the reciprocal tariffs, which has taken U.S. tariff levels on Switzerland to 39%.

That takes our estimated impact to CHF 35 million from the initially CHF 30 million. So we also had the expansion of the Section 232 tariff list in mid-August, but that had no material impact on our estimate. Finally, we had the recent escalations by the U.S., including a possible 100% tariff on Chinese imports starting 1st of November. If this were to be implemented, that would take the annual gross tariff impact to CHF 72 million. Now we will come back in February with our full year '25 results and update you then on the '26 impact. But I expect us to make good progress on continuing to offset the tariff impact with our mitigating actions.

Now with regards to the '25 revenue outlook, I confirm that we expect to deliver on our full year '25 revenue guidance of low single-digit growth, albeit this is likely to be very low single digit, so similar to '24. So in conclusion, let me take the opportunity to thank all our colleagues around the world for their efforts so far in '25, not at least our colleagues in the field who are operating in some exceptionally challenging circumstances in many places around the world. And it's a clear testimony of their contribution to our strong results in the third quarter of this year.

And so with that, I hand back to Lars.

Thank you, Carla. With that, Paolo and Carla are now happy to take your questions. Can I ask you please to limit yourself to 2 questions only, given the limited time we have available.

With that, operator, please.

[Operator Instructions]

The first question comes from Daniela Costa from Goldman Sachs.

I will have 2, but I'll ask them one at a time. The first one is regarding sort of your organic order growth rate today, quite a bit lower, I guess, than one of your peers yesterday. I understand from what you said sort of a much bigger drop in China from you. Can you talk to what extent that is just the regional or the product mix? Or it was more an intended effort to try to control your backlog margin or something else? I'll start there.

Daniela, Paolo here. Very clear, China order intake in the quarter is driven by 2 factors. One is obviously our clear dedication in pricing discipline that we watch out what we take into the books as part of our China program we discussed with you back in February. And the second one is also a quarter in which we still see a decline in the market, and we just follow here the trend. So this has impacted our Q3 numbers for the China order intake.

And then just in terms of sort of the Americas service trend, which seems sort of weak and down. Can you elaborate a little bit? From one side, you're upgrading on the original equipment, but the delivery on the service side seems a little bit on the weak side. What's going on, on the service?

Yes. So let me elaborate on the topics. And our upgrade is on new installation going forward, we were not conservative. We were back in July looking at the market trends, and we saw some signs of cooling down in North and South America, which now for the reasons discussed, we say, well, market might stay stable, especially as in North America, we don't see yet a significant negative trend, which would require this adjustment downwards on new installation. But your question was about service, and let me elaborate on this one. Here, there is a mix of 2 factors and also a bit different between North and South America. What we see in Q3 in this quarter is a combination of 2 things.

Number one, in the recaptures, we call it recoveries, these are the new service contracts we take on board. We moved to a more diligent way of assessing their economics. This led now in a comparison quarter-on-quarter, quarter to the quarter to a slightly negative trend. And the second one is that you might remember in '23, we were facing a couple of quarters with a slower NI new installation order intake. What we see now is the combination of the slower conversions, which means the contracts, right, which come into service after new installation is finished. And due to the lead time of the NI order backlog from '23, and it's the combination of these 2 factors leads to this mathematical slow Q3 in Service Americas.

The next question comes from Andre Kukhnin from UBS.

I've got 2 and one of them actually dovetails nicely with what Daniela asked about just now. So I'll start with that. I wanted to also ask about the dynamics between modernization and service growth in North America, but also in Europe, where you're seeing such a substantial divergence. And I presume at some point, this strong growth in modernization in all those projects that you execute on in MOD will help converting into service. Is that the case? And could you give us some idea on the kind of lead time on that? And maybe -- sorry to pile them on, but while we're on service, could you give us an idea of what the unit growth was for you globally in the quarter?

Thank you, Andre. Let me elaborate on both. Number one was about modernization, how it works into service. So here, obviously, yes, modernization captures as long as they are outside of our portfolio would obviously lead to portfolio gains. So here, the answer is yes, there will be a certain positive contribution to the portfolio, and that's clear one of our targets. This being said, the second part of the first question was about lead times. Here, I must say, a bit different geography by geography, but actually, overall trend is that the lead times on modernization are also going up. So it means the time to convert this modernization, I repeat outside of portfolio. So it's not that entire modernization would add portfolio, but the portion which adds portfolio might start to contribute between end of '26 and going forward. So there is a positive momentum. Yes, there is a time in between, yes, and we expect to contribute from Q4 next year going forward. The second question was about the growth in the portfolio, which we can share on a good low single-digit number.

Great. And I appreciate it more than one question already. So I'll just ask a short one. On the tariffs and the backlog repricing, could you confirm that this is just purely mechanical that's kind of triggering the escalation clauses are already in contracts and it's just a matter of working through that? Or are there new renegotiations to be had with customers?

Yes, Andre. We have done, as we shared in July back a little program on it, which is showing good effect. But Carla, you might elaborate on that.

Yes, yes. No, you're absolutely right. Andre, thanks for the question. Yes, I confirm it's rather a mechanical exercise that you need to work through. So because, of course, there is a pricing towards the customer, and there is also a piece in our supplier management side.

The next question comes from Vivek Midha from Citi.

I have 2 questions. My first is a follow-up around your comment around the margin drag from modernization growth not being as large as you thought. Is that because of that slower conversion of modernization growth that you highlighted, which potentially might then have more of an impact in 2026? Or is it also because of the improved modernization profitability as you've grown?

Well, it's a bit of a combination between margin and the rollout of the backlog, and I will leave Carla to come through the details. But actually, the margin within modernization are not deteriorating. The opposite is the case. So your observation, we are improving on modernization margins is right. And is this one of the reasons for having a slower conversion into operating revenue. It's not the case. But Carla, please, would you like to elaborate on this?

Yes, I want to be clear. I mean -- so we have the strong growth in the order intake and a slower realization of the projects itself, but we don't have pressure on the MOD margin. So just to be very clear there.

Totally understood. My next question is just looking at the headcount, the number of employees. It looks like it's gone down by over 1,000 relative to the second quarter. Is that the effect of your efforts to reposition in China? Or is there something else driving that reduction in the headcount?

That's a very good observation. Yes, we announced back in July that we are repositioning our -- especially new installation business in China. And what you see in the overall numbers is mostly that. That's true.

Yes. But this comes on the combination. If you look at the year-on-year versus December, it comes on top of the initiative that we took to reduce our cost levels in the -- mainly in the back office in the indirect part of the headcount, and that is actually what you see coming through. So we are just executing on this. So it's a combination of the 2.

The next question comes from James Moore from Rothschild & Co Redburn.

Could I ask one on service? I mean if we're talking about a sort of 5% constant currency growth for service, would it be possible to split that between maintenance and repair? Are they at a similar pace? And tied to that, if they're at a similar pace and we're at 5% maintenance growth, is that to say with your good low single-digit comment? 2.5% unit growth and 2.5% price. And I ask because I'd like to unpack that to another level, if I could. And behind the price piece, would it be possible to say how much of that is kind of a wage escalator pass-through versus any other form of premium over and above that, whether digital or other initiatives? And behind the unit growth, is that basically just the past orders coming through? Or have you got any conversion topics like is conversion getting better or worse? Or have you got any win-loss retention topics? And how do you think about maintenance growth going forward for the next couple of years?

Good question with some components into it. Let me combine them. So on the first part of your question, service, repair without going to the details of both as we never do. But it's obviously that both are growing together. So as repair, you can only execute on the portfolio you have and with the customers we are happy to serve. So there is obviously a certain correlation between the repair business expansion and the portfolio growth itself. So this is very fair to be assumed.

Second part of the first question, are there components of digitalization, monetization of the digital business? Surely, yes. As we announced also previously, we continue our efforts in digitalizing for our customers our services. So we don't only digitalize for ourselves for the beauty of technology. We also have an increased and steadily increasing offering on digital services for our customers, which obviously, yes, starts to get some traction and contribute to this overall picture. So that's absolutely right.

And your second question, how we expect this whole service/repair/digitalization business to move. Here, we expect, as mentioned before, that we see at least a steady continuation of this growth in which we absolutely intend to participate.

And can I just follow up on the NI margin, new equipment? My sense was you were doing better than others in China, and you had some topics in the West, which you're addressing with your standardization program. And we've seen some procurement savings, and I'm sure next year is more about efficiency savings and we're doing amazing things there. But are you seeing a scenario in which is the NI margin down year-on-year? And is it that the Chinese revenue decline is more than offsetting some of the organic actions on the other side or vice versa?

Your first assumption, I don't like to comment, as I don't have it. But in terms of margins in new installation, let me share in all clarity that our efforts in improving efficiency in the field, and we have talked about now the last couple of years and intensified last year and this year as now we see -- we start to see really traction in the field, this improvement of margins in new installation in the execution we see everywhere. So now to distinguish between China specific and rest of the world, I would say the improvement in the execution, I would say, is everywhere the same. And to assume that the picture has reverted between rest of the world and China, well, I would say China is more under pressure in terms of margins than the rest of the world.

The next question comes from Rizk Maidi from Jefferies.

Just maybe start with a clarification on the full year guidance when it comes to revenues. I think now you're talking about very low single digit, which also means very low single digit for the Q4. How should we think about this? Is still these bottlenecks when it comes to modernization is still going to be there? And how should we also think about the service growth in Americas? You talked about recapture weak NI back in 2023. Does that still means that it's going to be a drag again in Q4 and potentially even 2026?

Let me start maybe with the second part on the service in the Americas. Obviously, right to observe that we are now on a level which we also compare to previous year growth rates, right? So is it expected to stay at that level? Maybe we will see not now in the next quarter, but we expect in the quarters to come to see growth again also -- more growth again also in service in Americas. When we get our backlog executed and as I was sharing before, we see certain delays in delivering on the project, which then it's a question of time, we will come back on that. So therefore, if you ask specific on Q4, we expect to be on that level. But going forward, we would also expect to see growth rates again also in Americas.

Talking now the order -- revenue for the full year, we expect Q4 to be in line with our plans. So hence, if we see the year-to-date numbers in the Q3, we like to be super transparent in what would be the full year expectation. So we don't worsen it, but we also don't see room to get euphoric on additional revenues. To your observation, is it a timing issue? Is it projects and kind of delays? Yes. So why we still are quite confident for the future to come is that the backlog is promising. We are building up resources to execute on modernization. So your observation is absolutely spot on with the time, and we will see also this OR then picking up.

Carla, anything you'd like to add?

No, I think I confirm perfectly. I think we are complete.

And then the second one is really just to understand your cost efficiency. We're now getting towards year-end. Maybe if you could just please correct me if I'm missing anything. But my understanding is you're running with different programs. One of them is procurement. The other one is SG&A. There's an FTE sort of reduction or repositioning of your China business. Maybe can we talk about what has been achieved year-to-date? And what should -- how should we think about these -- each component heading into 2026?

Yes. Thank you very much for the question. I will take it. So first of all, the plan has not changed. So we are still working on the same 4 building blocks that we have always been super transparent on. So first of all, starting with the procurement and the supply chain savings, that is the more mature one, and this is now the second year that it continues to fully deliver, and that is also the one with the biggest impact. Now what clearly scaled up during the first 3 quarters, that is the second initiative, the reduction of the SG&A cost. And of course, driving efficiency in the back office, that's what you see also coming through in the headcount reduction. So we started with that in quarter 4 last year, and that is now really delivering. And that will also, yes, I would say, continue to deliver, obviously, not with the same incremental savings, but we have not completely come to an end of that initiative.

What is rather new, I would say, in the quarter 3, that is we have also been focusing on driving efficiency in the NI and the MOD business. And that is the third initiative where we see now in quarter 3, the first benefits coming through. So that is, in a nutshell, what you -- what is also flowing through to the bottom line. Now immediately making the step a bit to the period to come. So we definitely still have potential for these building blocks. And there will still be significant amounts coming through. However, the composition will change because, as I said, the procurement savings become more mature. So their relative weight will decline. And of course, also going forward with the SG&A. But then if we execute according to plan, the incremental savings coming from the efficiency in the NI and the MOD will further increase.

And also on top of that, efficiency in our service business. So that is, in a nutshell, what is happening and what will -- or what is expected to happen going forward. What is also interesting to see is that we came now to a situation where the efficiencies are actually really offsetting the inflationary effects and becoming even more important than some of the pricing elements in some of the areas. And that was the whole initial target, why we have set up these 4 building plans. And that's why you see the nice uptick in the margins and in the profit.

Does that answer your question?

Yes.

Thank you, Rizk. The next question, please, operator?

The next question comes from Vlad Sergievskii from Barclays.

I'll ask 2 and start with modernization. You disclosed standardized MOD solution was 17% of total modernization orders now. Do you think there is a natural limit of how big standard solutions could be in the future compared to the total MOD market? And are those standardized solutions opening new market niches for you in any way? Are they addressing customers that would have perhaps otherwise not ordered at all or ordered it a bit late?

Yes. Vlad, to the first part, is there a limitation in the creation of standard solutions? Well, there will be a logical limitation one day as if you recognize that the installed base is a kind of 160 years of elevator technologies built many, many times in many countries by very local companies. So you've got 10,000s of different elevators to be modernized. So let's talk that. With that, you can imagine you cannot have a standard solution for 10,000s of different elevators around the globe. So you're going to fix it by group of similar technologies you can address. So to the first part of your question, is there a limitation? Yes. Are we already there? No.

To the second part, -- does it open new opportunities? I personally believe, yes. Then when you get to a standard solution, which could offer to a customer to improve safety, quality and also maybe user experience by having affordable costs, I think there might be a group of customers who today can only go for a full replacement of the elevator, which comes with certain cost and also civil works around it. Now having this opportunity. So to the second question, I personally believe there might be a segment, is it incredibly big? I think it depends from country to country, coming back to my first part of the answer. Then in some countries, we have a bigger number of local products, as we call them, and we have some countries with less number of local products. So in those countries, this opportunity might be bigger.

Excellent. That's very clear. Second one is on the sales mix. Sales mix has been a tailwind to profitability for quite some years. Is there a chance that this tailwind eases or completely stops in '26 when MOD growth accelerates when perhaps new equipment decline slows and maybe grows outside of China and service keep growing as it does.

Well, for sure, I mean, this mix will change. Will it go as fast as you point out? I don't think so. But we definitely -- yes, we definitely have that in our -- calculated that in our plans. So yes.

The next question comes from Martin Flueckiger from Kepler Cheuvreux.

I've got 2, and I'll take one at a time. First one is for Carla. Just coming back to your general comments regarding incremental cost savings from restructuring and operational efficiency going forward. I was wondering whether you'd quantify those for '25 and '26 to -- basically to understand whether there's been any changes? That's my first question. I'll come back to the second one.

Well, as I said, there are no changes in the components that are driving this cost savings, but the relative weight of the components, that, of course, changes because, as I said, if you talk about procurement and supply chain, it's a very mature initiative. So your incremental obviously decreases. This year, we put a lot of focus on the SG&A savings. And together with that, we start up more and more the efficiency -- driving the efficiency in the new installation and in the MOD. But for -- going forward, we still have a significant incremental amount of potential sitting there, and we will work through that as we did over the last 2 years.

Okay. And my second question is regarding the press reports with respect to TK Elevator being either up for sale or going for an IPO possibly. I was just wondering, thinking back, if I remember correctly, to 2020, I seem to remember press reports regarding Schindler's Board making statements about potentially suing KONE at the time if the deal had gone through, which, of course, it didn't. But I was just wondering if a major competitor were to take over TK Elevator, and I suppose Schindler is also interested. But just thinking if a major competitor were to get the bid, would Schindler's Board again consider legal actions?

Martin, let me take this one. Well, first of all, we don't intend to comment on competitors' decision about what they do in M&A. And in the same, as you know, we never disclose our M&As and what we do there. I must say what the reaction will be in the market, no one can predict. What will happen may be also difficult to predict. And with that, I must say, let's see what happens. With regard to ourselves, I mean, we always look at acquisitions which happens, and we look at our own opportunities in smaller and midsized and large acquisitions. So I would say there's no answer to your question in the form what will be a reaction. The market will show what happens.

The next question comes from Walter Bamert from Zürcher Kantonalbank.

Could you please comment which part of the 130 basis point margin improvement stems from the positive mix effect?

Well, it is not the major part. So we will -- yes, we don't give the exact breakdown. But if you just -- I would say, yes, approximately, yes, up to 1/3, approximately is there [indiscernible] effect, yes. But we are very clear on that, and it's also part of our plans going forward if the mix effect changes.

Perfect. And then nevertheless, coming back to the M&A question and that just generic, what's your assessment of the Asian market, which is still somewhat more fragmented? Do you think there is still room for globalization of those players? Or do you expect that the markets will remain fragmented somewhat?

Well, no one of us, Walter, has a glass sphere to look at for the future. If we would have then we would have to stop the call, go and make some decisions. But this being said, obviously, when you look into fragmented but interesting market, which you say -- if you say AP is it and it is, then one could assume things could happen in the next years to come. So this would be maybe my careful assumption. Then we talk about a still promising market, promising market for the future. And yes, as you rightly assess, there's a high fragmentation in that specific part of the world still. So therefore, one could assume there will be some movements, whatever type, difficult to say. When it happens, difficult to say. Could it happen? I would not exclude it, but it's a very personal assumption away from any detailed study.

The next question comes from John Kim from Deutsche Bank.

I'm wondering if we could go back to the order backlog and the revenue delivery in Q3. If I remember correctly, there was going to be a bit of legacy overhang on Q3 and Q4 deliveries and negative mix from Chinese exposure. Did Q3 progress as planned? Or were there delays to that mix or margin dilutive delivery set, I suppose?

To Q3 specifically, the revenue development might have been partially impacted by some projects which see a bit of a delayed execution. And obviously, when it comes to installation and larger modernization jobs, right? If you got a job which then is not completed for whatever reason and often, you know how it goes on construction side, then you might even see it in the books. This has, for sure, an impact in Q3. So therefore, I was mentioning before, in going forward, this will be flattening out by itself as the jobs will be completed, will be then built and then it moves on. So your assumption is right, I think, in saying in Q3, there is a certain impact by larger projects not completed. Yes.

Okay. And just as a quick follow-up to a comment you made about modular. In terms of supply chain, OpEx and perhaps CapEx, do you have what you need to deliver your backlog and modernization? Or is further investment needed from here you think?

So for now, we shared in February, you remember when we were sharing our dedication now to move on the modernization business with some of you, we were even discussing in detail what is behind. And one part was the development, production and rollout of those standardized, we call it packages, we call it kits, right? And here, the investment in supply chain, supplier base have been done. So is there any major investment, not specifically, but I like also in all transparency to share that we continue to invest and develop on our supply chain as obviously with the modernization piece growing and the new installation piece being where it is, it's a kind of logical consequence that you keep developing, we call it upgrading internally, the supply chain.

And we work now with the internal program in upgrading our supply chain. We don't talk much about, but this takes place. Does it come with major investments? No. Is it partially in the one or the other supply chain. We have different in different continents. There will be some adjustments, but no major investments. And yes, what we deliver now, we are ready to deliver, and this work has been done. It was part of our program in the last 12 months backwards.

The next question comes from Kulwinder Rajpal from AlphaValue.

So just wanted to come back on MOD orders in China. So if I heard Carla correctly, she said 50% growth in Q3 and 40% year-to-date. So would it be fair to assume that this business faces tough comps as we go into 2026? So any commentary on growth in the MOD market in China in 2026 will be helpful. And just tied to it, is the share of standardized MOD higher in China compared to other geographies?

Let me take your question. So China MOD '26, well, modernization business in China is growing nicely, as shared before, and we don't see any change in trend at all. As I mentioned before, there are even some governmental programs, which are supposed to give some support, and we will also participate there. Allow me also here a very personal note. We have seen in the past also massive supportive programs in new installation in China, which afterwards came with a limited real impact. So now the modernization ones are out, but we are still to see what is the impact. This said, I must say that beside of this stimulus, the modernization business in China is going well and is supposed to continue going well.

On the second part of your question, which is the percentage of the packages in China, here, we must say we have to see the market. So if I would say percentage-wise, in that specific market, you could say yes. However, it's logical that in more mature markets in which for longer decades, more products were installed, one could assume that the number of kits, so standard solution kits is higher than in a country in which growth for MOD, you can say more of a homogenic market in terms of technology, right, in terms of installed base. So therefore, is it strategically different? No, in number of pieces of solutions, yes. I hope this answers your question. It's a bit technical, but unfortunately, in that case, it's a technical background.

Yes, absolutely. And then just to come back on wage inflation. So I wanted to understand the assumptions for your wage inflation in 2025 and 2026.

So it was a bit of disturbed connection here. I think it was about wage inflation.

Yes, wage inflation, the assumptions in 2025? And how should we think about it in 2026?

Well, I will say that. So thank you for the question. Wage inflation in '26, I think it will be on a level that is comparable with '25. So that is how we currently see it.

Thank you, Kulwinder. We'll take one last question, please.

We now have a follow-up question from Rizk Maidi from Jefferies.

I'll be very brief. Just clarifying some of the points just on China new installations. Am I correct in thinking that the orders here are down 30%, where I think in the P&L, you talked about 20% decline. So perhaps a little bit more drag here going forward? And then more generally, we're now 4 years into this downturn, we thought pricing is not going to be as bad because local players, competitors, including yourself, are doing much lower margins in this downturn than in previous ones, but it feels like it's not getting any better. I'm just wondering who is actually taking on these badly priced sort of projects?

And number two, how should we think about -- and also pricing pressure, how do you see it by geography? And how do you think -- how are you thinking about 2026 here?

Let me take this one, which is a complex follow-up question. So let me start with this decline in order intake, which I always have to remind might be different between units and value. Then in units, the market is down, as you assume, close to 30% and in value even above that. So for us. So therefore, your assumption is right. There's a bit of a mismatch between units and value, but in value, it has declined a lot. So part of your second question, who is taking on all these bad jobs? I cannot talk about who is taking bad big jobs. However, as we see it also in our numbers, the pricing in China was very tough in the last years, you are fully right. And by now, well, to be very optimistic about pricing in China is not us.

So if you ask me how do we look going forward, we would hope to see a stabilization of the pricing. And if we get there, it's already an improvement then till now, pricing has shown to be very tough. So therefore, as soon as we get to stabilization of the pricing, one could say, well, from that point, we can start all to work on it. So -- and this is what we see for '26, right? So we don't expect any special magic. And Carla was referring to our plans for '26. And when we meet in February, you will look -- you know us, we are always very -- we try to be and are very down to earth in our plans. So on China, there's no euphoric assumption for what will happen in '26. I hope this answers your question.

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

Thank you, operator, and thank you all very much for attending the call today. Please feel free to reach out to me for any follow-ups you might have. The next scheduled event is the presentation of our full year results on the 11th of February 2026. You'll also find our reporting calendar for '26 at the back of our presentation today.

With that, thank you all, and goodbye.

Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.