Ladies and gentlemen, welcome to the Schindler's conference call on Q1 results 2021. I am Sandra, the conference call operator. I would like to remind you that all participants will be in listen-only mode, and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Marco Knuchel, Head of Investor Relations. Please go ahead, sir. Good morning, ladies and gentlemen, welcome to our first call, the 2021 results conference call. My name is Marco Knuchel. I'm Head of Investor Relations at Schindler. I'm here together with Thomas Oetterli, CEO of the Schindler Group, Urs Scheidegger, our CFO. As usual, Thomas will set the scene and summarize the first quarter, Urs will then lead us through the financials. After the presentation, we are happy to take your questions. I would like to ask you to limit your questions to two questions only. Thank you very much. With that, I would like to hand over to Thomas. Thomas, please go ahead. Thank you, Marco. Good morning, ladies and gentlemen, and a warm welcome from me, too. Before we take a closer look at our quarter one 2021 results, I would like to highlight the factors that continue to impact our business. I think we are facing a unique environment at the moment. Geopolitical uncertainties, slowing global trade, a volatile economic recovery underpinned with historically low interest rates, and increasing national debt will continue to affect markets. Equally, the continued Swiss franc appreciation continues to impact Schindler and our business negatively. Looking at the past 10 years, we lost CHF 2.7 billion in revenue and CHF 400 million in EBIT due to the strong Swiss franc. This led to longer-term circumstances and their effects on businesses drive our cautious market assessment. With that, please turn to slide number three. In the first quarter, we saw improved results in all line items supported by the gradually improving economic environment and especially a favorable prior year comparison, particularly related to the lockdown in China in Q1 last year. However, first quarter 2021 key figures are broadly only in line with quarter one 2019 pre-pandemic performance. At the same time, we have a cautious assessment for the markets in the longer term, despite the fact that we currently see recovery signs in some geographies. In the first quarter of 2021, increasing pricing pressure and cost inflation also continued to weigh on the order backlog margin. Meanwhile, uncertainty remains, and we expect pricing pressure and commodity price inflation to accelerate. Hence, we continue to be cautious. Against this backdrop, we will launch our new program to accelerate digitalization, boost product innovation, and address profitability gaps. I will elaborate on this later in the presentation. For now, let me pause here, and I would like to hand over to our CFO, Urs Scheidegger, for the financials in Q1. Over to you, Urs. Thank you, Thomas. Good morning to all of you. Please move to slide number four, the order intake development. In the first quarter of 2021, order intake increased by 8% to CHF 2.9 billion, equivalent to 10.6% in local currencies. Growth was supported by favorable prior year comparison, particularly related to the first quarter 2020 lockdown in China. In absolute terms, first quarter 2021 order intake was still slightly below 2019 level, strongly impacted by unfavorable foreign currency impacts. The following slide five provides you an overview of order intake growth versus the first quarter of 2020. Order intake includes all product lines, new installation, modernizations, repairs, and maintenance. All regions and product lines, except for repairs, generated growth versus the first quarter of 2020. Overall, China was the driver for growth, strongly up, high double-digit growth, also supported by the first-time consolidation of our joint venture, Volkslift, in July 2020. Asia-Pacific, other than China, grew low single digits. The EMEA region generated mid single- digit growth, mainly driven by Northern Europe and the solid performance in Southern Europe. The Americas region recorded mid single- digit growth, both the North and the South contributing to the positive development. New installations overall were up more than 20% in both units and value terms. Across all regions, maintenance continued on its solid growth pattern. Our portfolio of maintained units increased mid single- digits. Modernization and repairs are showing an improving trend, particularly in North America. I move on to slide number six, which shows the revenue development. In the first quarter of 2021, revenue increased by 6.3% to CHF 2.6 billion, corresponding to an increase of 8.9% in local currencies. With that, revenue reached about the level of Q1 2019. All regions generated growth driven by high double-digit growth in China. The other regions were up low single digits. New installation revenue were up about 20%. Modernization and maintenance recorded mid single- digit growth. Repairs, though, were still below previous year's level. M&A activities contributed 2.6 percentage points to growth. Foreign exchange translation effect due to the strong Swiss franc, mainly against the U.S. dollar, the Brazilian real, the Indian rupee, and the Turkish lira, a negative impact of CHF 62 million. The next slide shows you the order backlog development. Our order backlog includes new installation, modernization, and repairs, but no maintenance contracts. As of March 31st, order backlog increased despite strong revenue conversion during the quarter by 5.8% to CHF 9.5 billion. It corresponds to an increase of 3.3% in local currencies. Total order backlog, including maintenance margin, remained about 50 basis points below previous year's level, but didn't get worse sequentially. It goes without saying that margin erosion will translate into operating margin headwinds in the coming quarters. In addition, we will have higher raw material and logistic costs in the rollout of backlog to revenues in the future. I move on to slide number eight. EBIT adjusted reached CHF 301 million, with a margin of 11.6%, supported by operating leverage, effects of the cost optimization program and the modularity program, and supported by lower operating expenses due to COVID-19, as well as operational measures. These factors were compensating pricing and backlog margin pressure, as well as material and wage cost inflation and incremental expenses for strategic initiatives. Foreign currency exchange effects had a negative impact of CHF 8 million. Restructuring costs were CHF 8 million, and expenses for BuildingMinds amounted to CHF 5 million, translating into an operating profit of CHF 288 million, with an EBIT margin of 11.1%. Please keep in mind that previous year quarter was also impacted by restructuring costs of CHF 51 million for the factory closure in Spain and other efficiency initiatives. Slide number nine shows the development of net profit and cash flow from operating activities. Net profit totaled CHF 213 million, supported by higher operating profit and substantially reduced restructuring costs. While the financial result line was more negative than in the previous year, due to comparatively less foreign currency gains. Cash flow from operating activities increased to CHF 457 million as a result of rigid net working capital management and cost-saving measures implemented across the group. Networking capital further improved strongly to more than - 10% of revenue. With that, I hand over back to Thomas. Thank you, Urs. Let's move to slide number 10. Our quarter one results should be viewed in the context of the base effect created by the COVID-19 onset last year. We at Schindler remain cautious, particularly as the environment continues to be challenging due to the strong Swiss franc, increasing commodity pricing, and pricing pressure. We also face a changing competitor landscape, contracting segments in strategic markets, and increased speed and scope of digitization. Schindler has a 147-year-old heritage of entrepreneurship, and it is key to stay on top of such changing conditions. There is no better moment than the present to accelerate digital transformation, boost product innovation, and address profitability gaps. Schindler launches the Top Speed 23 program. Please move to slide number 11. With Top Speed 23, we aim to strengthen our position in key markets, create an industry-leading customer experience, and further integrate sustainability into our business model. We will spend up to CHF 270 million until 2023 to accelerate new installation and portfolio growth, especially in key markets and segments. To drive mass connectivity and sustainable modernization solutions. To accelerate the digital twin for escalators and for our modular elevator product range. To boost product innovation for selected markets and to foster procurement excellence. Let me move on to slide 13 and the outlook for 2021. I just mentioned the challenges of a fast changing environment we are facing in 2021, and also beyond that. For 2021, barring unexpected events, Schindler updates the outlook for revenue growth to levels between 4%-7% in local currencies. The guidance for the 2021 net profit will be provided with the publication of the half-year results in July. With this, I would like to hand over back to Marco. Thank you, Thomas. We are happy to take your questions now. I would like to remind you to limit yourself to two questions only. Thank you very much. Sandra, please. We will now begin the question- and- answer session. Anyone who wishes to ask a question or make a comment may press star and one on the touch-tone telephone. You will hear a tone to confirm that you have entered a queue. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use only one handset while asking a question. Anyone who has a question may press star and one at this time. The first question comes from Andre Kukhnin from Credit Suisse. Good morning. Thank you very much for taking my questions. I'll start with the obvious one on the new program. Could you please help us in thinking about the savings from this program, or should we think about it in terms of a certain margin level that you're looking to attain? How does that program relate to the existing programs that you're running? Is this completely different or is this something that overlaps, and therefore, should we adjust our savings expectations for any other programs? In terms of costs and the adjustment for that, how do you view this as a, maybe on a five, 10-year view, is this something that's beginning of a series of programs for Schindler, and therefore, should we think about that level of restructuring or certain level of restructuring that reoccurs? Is this one very dedicated, clear program, and then after that, you expect a clear decline in costs? Thank you very much, Andre. In fact, it has been many questions, so I try to answer them in the best way. With Speed 23, we aim to create an industry-leading customer experience, and we try to strengthen our position in key markets. Of course, also sustainability plays a major role. At the end, Speed 23, or with Speed 23, we aim to become faster future-ready. It's very important to say faster, because some of the elements we already have discussed in the past when we talked about the digital twin, when we talked about connectivity, when we talked about certain product innovation. What we have seen is that now it is the right moment to accelerate those progress. It's not another program in the sense that all those elements are now brand new. Also we have seen that the world is changing faster than in the past. There is more uncertainty around. We decided together with the board of directors that we accelerate existing programs and that we also add the one or the other, maybe on top of our existing programs. Speed 23 or Top Speed 23 is an acceleration program. I do not expect that this is the next program, and then there will be another program and another program. If you look at our actual situation, we are able to improve incrementally. We have headwinds, and we are fighting against that with our normal speed we had in the past. With Top Speed 23, we want to be even more future-ready and bring our performance in the long term to a new baseline. That's in fact what we are aiming for. As you have seen, strategic markets, investment in our portfolio connectivity, so we call it mass connectivity, are major parts of that. We also have seen that modernization will play an even stronger role in the future, and we want to accelerate our solutions in the modernization business. I think the digital twin we have discussed for a couple of years already, and we saw that we would like to close this chapter until the end of 2023, beginning of 2024, in order to create this unique customer experience. Product innovation is an element where we have learned out of our modularity program how strong we can act with new tailor-made, future-oriented solutions. The modularity program did not cover all the markets, and it did not cover all the market segments. Now we want to take our learnings and accelerate for the remaining parts in the market, our product innovations. Last but not least, procurement excellence becomes even more important, especially now in those challenging times. We want to drive that initiative also faster than in the past. Now, the CHF 270 million distributed over this year and the next two years, and maybe Urs can say afterwards how you should expect the distribution of those costs, are one-time costs. These are costs on top of what we have done. It does not include costs we already had. I remember in some of the discussions in the last quarters that people said, well, you always talk about strategic costs. In fact, these are almost running costs. I think we have to change the way how we looked at this. We have a one-time additional cost block of CHF 270 million, and then we should not talk anymore about the strategic costs once we have finalized this acceleration program. Maybe, Urs, you can highlight a little bit what we expected in the sense of distribution of those costs. Yes, Thomas. These incremental expenses of up to CHF 270 million, you can expect about CHF 60 million, CHF 50 million-CHF 70 million in 2021, expenses for accelerated programs, and thereafter, about CHF 100 million for each of the following years. Maybe the last comment regarding profitability or expectation. We have seen, of course, that there are certain elements or certain segments where we are not competitive enough. We want to close, in those segments, our competitiveness gap. Where we will end at the end, in terms of overall EBIT margin, this I think is far too early to say. As I have mentioned before, we want to come to a new baseline of performance from which we can then further develop incrementally in the years to come after the Top Speed 23 program. Thank you very much. That's very exhaustive. May I just ask last question on this, that new baseline that you talk about, how would that compare to your historic performance? Is it right to think about that being above the historic 12% that you've printed? I think it's too early to give now such an outlook. I think let's first manage now 2021. This year is challenging enough. We have mentioned that we are facing tremendous commodity price increases to come in the next couple of months, and also freight costs are really challenging us. It's difficult to say where you exactly land at the end of the year to make a good comparison where we would like to be at the end. We always said that Schindler is aiming to be also in the overall margin on a competitive level. We have to admit that in the last year, we had an increase in gap to some of our major competitors, and this is definitely something we are not happy with. Great. Thank you very much. I'll respect the number of questions, so I'll go back in the queue. Thank you. Thank you. The next question comes from Martin Flückiger from Kepler Cheuvreux. Please go ahead. Morning, gentlemen. Thanks for taking my questions. Starting off with my first one. I was just wondering, you've been talking about the high raw material prices and your key European competitors been talking about higher steel and copper prices. We also know that logistics costs are higher. I was just wondering, if I remember correctly, at the full year reporting stage, I think Urs mentioned an incremental total hit from those two items, raw materials and logistics, of about CHF 50 million. I was wondering what your latest best estimate is for this year in terms of headwind from these two elements. Also with respect to this, are you trying to offset this with higher selling prices going forward? My second question is on last year's orders received prices in new installations, which I remember, and correct me if I'm wrong, were down quite significantly as a result of the changed competitive landscape following the onset of the pandemic. I was just wondering, when do you expect these lower order received prices in new installations from last year to impact your profitability this year? I'll go back into the queue after these two. Thanks. Thank you, Martin. I start more a little bit with an explanation, then Urs can give some more details. Commodity prices, in fact, have skyrocketed in the last quarters and probably overall increased, if you take a basket, between 30%-40% within 12 months. We mentioned that in the past, that we somehow fixed prices for a couple of months. Quarter one was not yet severely impacted by commodity price increases. The freight cost is a little bit different because usually the freight cost, you do not make long-lasting contracts. It's much more short-term. There we saw already the first negative impact in quarter one. Maybe Urs can elaborate a little bit. What is our new baseline we see? I can add some numbers. You are right, Martin, that we said we have an impact originally of about CHF 40 million on material costs, so from the raw material inflation and about CHF 10 million logistics. In the meantime, indeed, those prices have further increased and peaked, and we are now newly estimating P&L impact this year of CHF 80 million-90 million in total, compared to the CHF 50 million you mentioned. As a consequence, additional headwind of roughly CHF 30 million -CHF 40 million compared to what we already announced with the full year results 2020. The second question, OIT prices. It is true, we have seen last year definitely pricing pressure and, also, with a certain boom we saw in some markets coming back in the second half. Everybody tried somehow to catch up compared to what they had as a personal target, prices were under pressure. I can say that the pricing from quarter one through maybe the last quarter of last year has been rather stable. It has not further deteriorated. All those sales we have now will come to the backlog rollout in the next coming months. Now, it depends a little bit on the countries. I would say in some countries, it is between 9 - 12 months, especially the residential sector has a faster turn, and more in the commercial sector, large projects, but also public transport, it's probably even beyond two years. It will start to hit us in the second half of this year, and then it will even more impact us in 2022. It will put pressure on our new installation margins. On top, of course, now you have the further increase in commodity prices, which then will even more put pressure on our margins. For that, I think we have to prepare ourselves operationally, and we are working very hard on that. We are benefiting, I have to say, from our modularity program, which really has compensated a lot of these additional costs. It just demonstrates how fragile the future is at the moment, how uncertain. I want to come back. That's one good reason now, out of a moment of strength, seeing the clouds at the horizon, to launch this Top Speed 23 program. Okay, great. Thanks. When you're talking about pricing, were you talking about pricing across all three businesses or just new installations being stable in Q1? No, it's mainly prices in the new installation, partially also in the modernization business. Our service or maintenance business, we were able to further achieve price increases because most of the contracts are linked to inflation clauses. Now, inflation is not that high as it was in the past. We were able to increase our prices in the maintenance business. It is very resilient. Again, customers are willing to accept such a price increase if you can create a special customer experience. We also saw that. Yeah? Sorry. That price increase in maintenance is related to Schindler Ahead? Not only. No. The basic maintenance price is increased. Okay. Very good. Thanks. Thanks. The next question comes from Andrew Wilson from JP Morgan. Please go ahead. Hi. Good morning, everyone. Thanks for taking my questions. I just wanted to start on the Top Speed project. I'm just interested in your thinking in how much of introducing this program is motivated by what you see as a change in the market, and obviously you've talked to that a little bit. How much of it is linked to a change in the market, and how much of it is internally driven? Are you identifying areas that you feel that you've been underperforming and therefore can improve? I'm just trying to get a sense of the motivation for introducing that program today and whether that's internally or externally driven. Thank you, Andrew, for that question. I think it's both. We see a change in the customer landscape, or maybe in a wider sense, we see that the environment is changing. When you think about the digital twin as an example, this is not a weakness we have. We are, in fact, a pioneer in our industry to go for the digital twin. We see that our customers are changing also the way how they work. They want to have integrated suppliers into their building models. They want to have the possibility to digitally interact with us because they are also moving on the digitization path. Here we just want to be a pioneer and a frontline runner in terms of supporting our customers on their journey. Others are very similar. Mass connectivity, maybe to mention that. We have elaborated on that also in the past, that we saw that mass connectivity, in fact, we tried to generate with all our new installation equipment. We equipped all our new sales with Schindler Ahead. Now we have seen that in fact, the perception by the customers is very good. We have seen that we can increase our retention rate for units which are connected compared to units which are not connected. We came to the decision that we have to adjust our plan, not only looking forward, but also looking backwards on our installed base. Of course, we have to cluster our installed base, in terms of age and technology, where does it really make sense to get information? A 50-year-old elevator, you don't get information out of the control. We now have decided to connect also our installed base wherever it makes sense, and to accelerate that within the next two and a half years, then we tick the box, and then it is done. This is a one-time investment where we believe it's also driven by the environment. We have a very strong Ahead solution. I would say it's really top-notch. Now we want to make this one-time sprint, very fast to connect whatever we can connect, and then we will go back to the normal, let's say, connectivity run rate we have with our new installation equipment. Some others are maybe also based where we don't believe we are good enough at the moment, where we see that maybe we have not done a good enough job in the past. Instead of now investing the next five years in incremental improvements, we've said, okay, let's squeeze all those efforts into two and a half years to be much faster in providing good solutions. I would say probably in modernization, this is the case that we have good products, but we are not somehow competitive enough. Also in our procurement excellence, for example, I think we still have room to improve. Both sides, covering and eliminating certain weak spots we have identified, but on the other side, also very much future-ready solutions. What we see is required by our markets and by our customers. Thank you. That's very helpful. For my second question, I wanted to ask you, on the first of the two slides on Top Speed 23, you've talked about it a couple of times as well in the words, the changing competitor landscape. I'm interested as to specifically what you mean by that. I can think of sort of numerous things it could mean, I'm interested as to if there's anything specific that you'd highlight there or if that's just a broader general comment. Well, it's in fact a general comment, but of course, we all are observing how our competitive landscape is changing. We have seen that there has been, among, let's say, the global OEMs, really substantial changes. With the spin-off of Otis out of the UTC group and also TK Elevator becoming independent. Of course, we are observing, and we are also forecasting what could that mean for us. I think it will increase competition. We have to run faster, and we have to run in a better way. That's one side. On the other side, we also have discussed in the past that there are maybe new entrants into our competitive landscape. Those new entrants are mainly driving technology. They are not elevator companies. These are more technology companies. We see and we take them very seriously. We also see how they market themselves. We see if or if not they have at the moment success, but you should never underestimate if you have a new entrant into a market. Now, the good thing is whatever they do, we also are able to do, and we already do. We might have to speed up the things we do. Coming back to this topic of connectivity and digital twin, which are really technology-driven initiatives. We want to protect ourselves. We want to be a first mover. With that, I think we will be ahead of others in the competition race. Thank you. That is very helpful. The next question comes from James Moore from Redburn. Please go ahead. Hello, everyone. Thomas, Urs, I trust you're all well. My first question is on the order backlog margin and the negative impacts for 2022, not this year. Can you help us think a little bit about, I guess two aspects of that, what the raw material might be at current spot? I was wondering if it's another CHF 50 million-CHF 100 million, once hedges roll off and we move forward, and what sort of EBIT margin decline we might have seen without the Top 23? That's my first question. Maybe we go one at a time. Okay. Good morning, James. Yes, we are all doing well. I hope you are doing well as well. By the way, I hope everybody's doing well in this very critical time. We elaborated on the order backlog that we have seen, let's say, pricing pressure, especially also last year, and we somehow stayed on that level. Maybe, Urs, we can elaborate a little bit, what will be the impact also beyond 2021? Yes. If we assume we have now a burden of CHF 80 million-CHF 90 million in the P&L this year for raw material and logistics, this is mainly for the second half year, this year. As we have locked in our raw material prices last year, and we benefit still now in Q1 and Q2, but not anymore starting from second half year. We have a spillover into 2022, and if prices are remaining at these high levels of today, we need to assume we have a run rate cost impact next year of approximately CHF 150 million. On the backlog margins, I said, right, we have a drop of about 50 basis points overall, including maintenance. Of course, the margin prices are eroding mostly in the NI business, where the margin drop is clearly higher than 50 basis points, and this mostly will hit us in 2022. Very helpful. Thank you. My second question is really back on the Top Speed 23 program. Could you split the CHF 270 million a little bit? Basically, I'm trying to understand how much is for connecting the installed base, which to me seems a very sensible and direct move to respond to some of the, how can we put it, newer, nimbler digital service entrants, and how much is other buckets. At the moment, we do not yet provide a detailed split, but you are absolutely right. The biggest impact will come from the installed base connectivity program. This is clearly the case. It is the biggest cost block we will have. You always have to remember, these are one-time on-top costs, what we usually have. Of course, also in the past, we have developed products. We now do not just say, well, if we had X million in the past, we now declare them as Top Speed, and we somehow make a beauty case out of our P&L and balance sheet. That's not the case. It's really on-top costs. Acceleration of certain programs which are on top of our normal run rate of costs we have. The major share is, in fact, the connectivity piece. This I can confirm, because this is a global program everywhere, and it depends, of course, on the age and on the composition of our installed base in the different countries, how much you really can connect and how much you cannot connect. It's the biggest cost block in those CHF 270 million, and especially in 2022 and 2023, this acceleration will really be huge in terms of connectivity. The detailed split, we are not showing today. Thank you very much. Thank you. The next question comes from Daniela Costa from GS. Please go ahead. Hi. Good morning. I have two questions. The first question I just wanted to clarify back tying what you said before about the new program being to establish a new baseline. Historically, you always talked more about a focus on top line and absolute earnings rather than on margin. You mentioned several headwinds now in the last few questions to margins. What do you mean by new baseline? Is it new absolute baseline or a new margin baseline? These headwinds are more just temporary, but longer term, you want a higher margin? Thank you, Daniela, for that question. Probably these both. We are not changing our strategic targets. Our key target priority number one is to grow faster than the market. When you look on those elements of Top Speed 23, so pushing the growth of new installation and of our portfolio in strategic markets, this is a clear growth ambition. If you look into mass connectivity, it's probably both. Also in modernization, it's probably both. You try to push the top line because you have a higher portfolio retention, and you have additional modernization business, but you also want to do it more profitable. Because with connectivity, you can have so-called adaptive services, where you can use a Schindler Ahead to fulfill certain tasks, where today you need a service technician to do that. The digital twin, I think is primarily also something which will differentiate us from competition in the eyes of the customers. In the long term, of course, it will also make our internal processes more efficient, so we will save cost. It's mainly the second ambition there. The first ambition is really to be much more customer-centric, to be fast in product adaptions. Time to market is very important there. Product innovation, again, is probably also both. It is more, on one side, tapping into market segments or improving our position in certain market segments where we saw we are not that good at the moment, and maybe also historically. Of course, if you have a very good, innovative, and cost-competitive product and you enter into that market, you also will add something to your bottom line. The procurement excellence, I would say is more a cost improvement program. It's a little bit of both. I also say at the end, I mentioned that many times, with the growth, you will add absolute profits, clearly. We also want to improve our profitability, our margin. I think we have to be honest to ourselves, 2020, I think the second half of the year, we have done an okay job. When I look on the total year, there was an increase of the gap to some of our competitors in terms of margin. I think it cannot be our ambition that we want to have an increase. We further would like to have a narrowing of this gap. Whether it is exactly on that level, I think it's far too early to say that. Yes, top line, absolute bottom line, we also want to continue with our now already started margin improvement. Thank you. My second question relates to how shall we think about capital allocation during this period. Will you have to invest more organically? I know in the last few quarters, you had actually talked of being organic a bit. You didn't mention too much about that in this call. Can you talk about that dichotomy, organic versus inorganic investment? I guess shareholders, you used to historically have a buyback for quite so many years, but you haven't had that for a while. Is that out of the question now as you go through this transformation? You have seen in the quarter one, yes, the group is doing smaller and medium-sized M&A as in the past, and we see the effect this year, what we have done last year. We certainly will continue to grow as well our service portfolio with smaller M&A. This is an important element of our growth strategy. For anything else, I cannot comment. Okay, thank you. The next question comes from Singh Madhvendra from Bank of America. Please go ahead. Yes, hi. Thanks for taking my questions. A couple of them. Firstly, on the EBIT bridge, if you could give some breakdown of the CHF 88 million operational bucket you have there. If you could give the breakdown details around operating leverage, modularity. Basically all the five items you have listed on the slide, if you could give some indications how much each of them actually contributed there. Secondly, just clarifying on the raw material cost headwind you're expecting for next year, and the backlog margin impact. You were talking about over 50 basis point headwind there. Is the 50 basis point headwind inclusive of the raw material price increases you are seeing, or the raw material price increase can actually be on top of the 50 basis point lower margin you already have there? Thank you. Thank you. Urs, I think this would be good for you to answer that. Sure. We really have a strong operating leverage, quarter one versus quarter one 2020. Clearly, in the magnitude, this is strong. With our volume growth, we see this about 200 basis points from operating leverage. We also have a good modularity and the COP, cost of personnel savings. Both programs are as well doing and materializing together with more than 100 basis points. We have a lower OpEx. We are really working with very rigid cost discipline and operational efficiency. Which is also significant. The negative two elements, pricing backlog, margin pricing pressure, that's more than 100 basis points. The strategic costs in the Q1 are about 10 basis points. That's overall the improvement of 260 basis points. The second question was about the raw material cost increase impact in our orders on hand. I think we can say whatever the order that we had, as a cost increase, we have in our order backlog. If the material cost should further increase, then of course, this would come on top of our deterioration we have on the orders on hand backlog. That's right, Urs. Yeah. Correct. It is fair to assume that you have around 50 basis point negative impact, which you had already flagged, let's say, at the Q4 earnings. Since then, you have raised your raw material cost headwind estimate by about CHF 30 million-CHF 40 million. The impact on backlog margin could be around the same line because of that. Yes, you're right. In the rollout for this year, this is correct. As I said before, this will further spill over for another six months into 2022 of this CHF 150 million. Those headwinds, we will have to work to compensate those headwinds of backlog margin erosion, raw material costs in particular. With the completion of the cost of personnel program, modularity program comes to an end, and we need to leverage it. Of course, also field efficiency in new installation and in service. Those headwinds shall compensate these negative elements. Okay. Thank you very much. The next question comes from Daniel Gleim from Stifel. Please go ahead. Yes. Good morning, Thomas and Urs. Thank you very much for taking my questions. Thomas, maybe you can walk me a little bit through how you see the order intake momentum developing in the coming months. Specifically, I was wondering about APAC without China. You previously commented you expect the strongest end market growth in that area. I understand in the first quarter, China was still growing stronger for Schindler. Is that something we should expect from the second quarter? This is my question number one. Secondly, on the products, we think about modernization in EMEA. I read your slide. The order intake was still negative modernization in EMEA. I was just wondering from the discussions with customers and what you witness in the market, when do you expect inflection point for EMEA modernization to take place this fiscal? Thank you. Thank you. Thank you very much for those questions. OIT momentum, I think, it is true when you look on the last year. We had the biggest trough in Asia Pacific, but also in North America as a market development. The question was, which market is coming back as the fastest? I have to say that Asia Pacific without China, yes, the market was coming back slightly by the low and mid-rise residential. This is also a market where you have a lot of commercial programs and commercial projects. Also quite a lot is entertainment and tourism, especially in Southeast Asia. Last but not least, we should not underestimate India. In fact, India at the beginning of the year was coming back very strong, I have to say. The market was coming back very strong. Now in April, everything has been put upside down. The whole country at the moment has come to a halt. This is a little bit what I see overall in Asia, that some markets come back, then there is an increase in COVID, and then there is an immediate drop down again. It's quite volatile. There are not many countries where I see consistently that the markets are coming back. It's more a roller coaster. In Europe, we had surprisingly quite strong markets and resilience in 2020. Somehow we saw that 2021, especially Northern Europe, was good. Markets are good. They are not exploding, but they are good. Also Europe, the Southern European countries, some of them really came back. Europe, I would call is stable. Of course, besides Asia Pacific, it's also North America. I think North America has come back, especially in the residential market. What I still see is that large project decisions, like in Asia Pacific, the projects are there, but they are not yet decided. Somehow there is a postponement of decisions. One element I see is that for those who plan and want to execute those large buildings, they're also impacted by commodity price increases. They suddenly realize that the whole building becomes much more expensive than what they had maybe in their original business case. They postpone, at the moment, certain decisions because of the uncertainty what the total cost of construction will be. Those large projects are still high activity, but low decision criteria. Now, modernization in Europe. Modernization in Europe is more a residential business. I believe that in the second half of this year, modernization should start to come back and compensate the drop we had in 2020. I'm quite confident that the modernization will be coming back towards the end of this year. Very clear. Urs, if I may, could you give us a very rough indication what share EMEA modernization has in group total modernization, and what's your latest estimate in the lead period order intake to revenue conversion for that business is? I take the second question, Daniel. In modernization, here in Europe, the cycle times are a bit shorter than normal new installations, of about six to nine months, in that range. To your first question, we are not providing those detailed geographical information. Very clear. Thank you very much to both of you. The next question comes from Rizk Maidi from Jefferies. Please go ahead. Yes. Good morning, gentlemen. Thank you for taking the question. I'll speak to two again. Firstly, on the margin, can you just perhaps help us with the phasing of the savings from Top Speed 23? You talked about the saving of the costs, maybe just on the savings. Last quarter, you mentioned that you're aiming to stay above 11% adjusted EBIT margin for this year. Given the changes in raw material headwinds and logistics costs, is that sort of soft guidance still valid? Maybe to the savings, we are not giving a detailed breakdown, what exactly then the savings will be. First of all, the first saving is, at the end of 2023, we don't have the CHF 270 million anymore. That's the first saving we have, because these are really one-time costs. Of course, we are working on the business cases, but you always have to see that as some of those initiatives are really future-oriented, they will have a long-term impact on what I also discussed with Daniela Costa. They will have a long-term impact on top line, on absolute profit, and they will also long-term improve our margin. The detailed, let's say, saving like we had that in the modularity program, we are not communicating. On the second question, you have seen the group reported now the 11.6% EBIT adjusted for the first quarter. Obviously, we are having the benefit of not yet seeing this large material cost inflation. That will come in the second half year. Wage inflation will realize in the second half year a lot. When the economies are recovering and our service portfolio has more traffic on it, we will see higher expenditures on the maintenance business going forward. Of course, we have saving measures, as I explained it in the annual conference. The cost of personnel program, the modularity saving program, also the field efficiency programs have to compensate those impacts for 2021. We continue to aim for an EBIT adjusted margin above 11% for this year. Okay. Thank you very much. The second one is just on China. If you could just give us an update on the Three Red Lines policy and how quickly the Chinese government wants real estate developers to comply with those regulations. Any early indications you're seeing there, and what's your outlook for China this year? Thank you. I think overall, China is very strong. As an economy, it is very strong. The construction market, the real estate market remains strong. We believe that for our industry, the market will be something between flattish to slightly up. Quarter one somehow is a little bit misleading because we had a very weak quarter one last year. Last year, starting somewhere in May until December, it was not only going back to a normal level, it was also catching up some of the misses we had for two or three months early in the year. If I look on the total year, I believe it will be strong again. In new installation, I think there are also increased modernization opportunities. Of course, as we always do, a key focus we have is also to focus on our portfolio or installed base growth. The Three Red Lines policy that has been put in place, they also have been communicated. It is valid now for certain large developers. We see, of course, that this has created some disturbance, I would say, at the beginning, because everybody has somehow to adapt and adjust. They have to manage now much stronger also the balance sheet, with liability ratios, what kind of net debt do they have, what is their cash position. We see, of course, that there was some turbulences. I still believe in the long term, we are happy if we have healthy customers, because it is one thing to sell. One thing to build. At the end, cash is king. We have to get the cash into our pocket. I am supporting that policy. We saw some hiccups, honestly. Yes, we saw that. The more developers are getting into this Three Red Lines policy environment, they will also be challenged at the beginning, but I'm sure, mid and long term, this is a good initiative for the whole industry. Thank you very much. The next question comes from Patrick Rafaisz from UBS. Please go ahead. Thank you. Good morning, everyone. A couple of follow-ups from me, please. The first one is on your new guidance for local currency growth. With such a start to the year, makes sense to adjust the guidance. I was just wondering if you can share some more insights into what developed differently than planned or budgeted maybe earlier in the year. If I recall correctly, at the full year 2020 conference call, you said modernization and repair, and the timing of the comeback here was a key question mark you had. The second question, coming back to the EBIT bridge, and you've already discussed especially the costs in quite detail, but now to the savings, can I assume that what you've communicated so far around the cost savings, CHF 50 million and also incremental CHF 70 million from the modularity program, do these still hold? The Top Speed program, I realize you're not quantifying, but will that already have an initial benefit this year already, or is that too early? Thank you. Maybe I start. Good morning. Local currency growth, maybe to start with that. Let's not be over-enthusiastic about quarter one. To be very clear, because when we compare ourselves with quarter one 2020, we were in the middle of disaster in China and other markets. The baseline comparison makes no sense at all. Now, when you compare with 2019, the picture already looks a little bit more realistic. In fact, it is flattish. We have worked two years to be at the same point where we have been two years ago. Of course, it has a negative impact from currencies, but I just would like to say, hey, the baseline was really low. Interestingly enough, when you look ahead, the baseline might become very high, because especially in the Chinese market where we had a fast recovery, especially in the second half of the year, the baseline is very high. Because it was back to normal level, plus catching up some of the misses we had in the first couple of months. To top that baseline, this will be very challenging to achieve, because when you look on our order intake we had last year, we had in fact a drop compared to 2019. This makes us cautious looking ahead for the next three quarters to come in terms of top line. Yeah, absolutely. You explained it. There is this low comp baseline of last year. Don't forget indeed that we have this newly consolidated joint venture Volkslift since July that gives us tailwind now still for the first half year, but then not anymore for the second half year. New installation revenue were a bit stronger now in the first quarter than we assumed. A bit faster activities on construction, particularly in China again, which certainly will calm down going forward when this baseline effect is fading away. On your questions on savings, yes, I do confirm that these two programs are on track. We will finish the modularity program by end of the year, and that incrementally will support the P&L with CHF 70 million. Also the cost of personnel program, we confirmed a CHF 50 million savings for 2021. Maybe to add on top, I assume most of you are at home in the home office. There is also savings we still have because there's no travel, there's no entertainment. There are much less costs also, operational costs. We will continue with that, and of course, we also can compensate or we have a better impact from this compared to the first quarter last year, where, let's say, COVID was impacting mainly Asia in quarter one, and then quarter two, it was Europe and the Americas. This year, we have the savings from lower operating expenses all over the globe. This also has a positive impact that we did not have those operating expenses anymore. Thank you for that. On just 2021, on savings as well or not, please? No, you cannot expect savings from Top Speed 23 in 2021. In all fairness, we have worked on all the initiatives. We have worked on all the modules you have seen on this slide 11. We are now more ramping up the teams. It's very, very important if you want to do, in such a fast way, such impactful programs, then you need very strong project leads. You need a very strong commitment from senior management. You need the right people on board to accelerate. Even if we accelerate as fast as we want, the impact will not come this year and also not early next year. Maybe starts then towards the end of 2022, slightly. Full impact should start then in the years 2024, 2025. Some of the programs will not have on day one already a positive momentum, but it will take us a mid or long term perspective to really see all the benefits from that, but not in 2021. Great. Thank you. The next question comes from Lars Brorson from Barclays. Please, go ahead. Great. Thank you. I was a bit late, Thomas, on the call, so apologies if this is a bit repetitive, but I have to come back to the CHF 270 million investment plan. I thought the big investment phase for you and indeed the industry was behind us, not ahead of us. I wonder whether you can help us reflect a little bit on your digital strategy over the last three years. I'm not really looking for a [Non-English content] here, but I'm just trying to understand why now. You talk about connectivity. You've been working with Huawei, I guess, since 2016, I presume. You've been adding some partners there. What's going on as far as that partnership is concerned? On digital, you've been working with GE Predix. I guess you're now moving over to Azure. Is this part of what's going on here? What are the competitive implications here? I guess Schindler Ahead is built around Azure. Maybe you can help us understand that a little bit better, and I will come back and maybe ask again around payback and communication around the program. Let me start there. Good morning, Lars. Let's come back to the CHF 270 million and the remark you thought it is behind and not Ahead. There are two different type of investments when you look on the digitization. One is you generate the product, the platform, the infrastructure. This we have always shown a so-called part also of our strategic cost in the past. I remember very well that I have been confronted with the question many times, hmm, why do you always have this increasing run rate of strategic costs? We said last year, now we have achieved the level where we are, and we don't have special additional on top investments for our remote monitoring platform, for our Ahead platform, for our digital services platform. We have to maintain, and there is sometimes replacement costs, but this is not included in the CHF 270 million. Clearly not. CHF 270 million. This is a change or maybe an adaptation in our strategy. When we talked about Schindler Ahead, we always said we will connect all our units we sell to the market with new installations. We thought this is the easiest way, as we are fast-growing new installation, over time, we will have higher and higher and higher share of connected units in our overall installed base. The results we have seen and the feedback from customers we have seen are just so convincing that we have to say, hey, it's now the time not only to look ahead, but also looking behind or back on our installed base. You might remember the one or the other discussion where we have been asked, well, do you want to connect the overall portfolio? We said, well, we are now focusing mainly on the new equipment. The feedback is so good, we said, okay, we want to equip as much as we can of our installed base. We see that the retention rate from our customers is higher than if we do not have connected units. We have seen that the perception of our customers is so good that they like also the digital services we can offer to them. Why should we only have those digital services looking forward with new installation sales? Let's give them also backwards that service in order to increase our retention rate. The topic is this is like a retrofit you do of an installed unit. You have to spend a little bit more time and spend a little bit more money, because you go back to an installed installation. We are convinced this one-time investment will pay off definitely because we have efficiency gains we will be able to implement. We also are able to have really future-ready customer solutions which they like. This is really an investment where I'm totally convinced this will definitely create a big differentiation to existing competitors, but also to new entrants into our market. Sorry for that. We have this one time investment, but we are sure, first of all, end of 2023, it's over, and we don't have another one going in 2024. I mean, we cannot use that. The last really big program we had was in fact the program LEAP 10 years ago. Another one we had was R03 20 years ago. Don't expect that now our frequency will increase to every three years we come with something new. That's it. We have achieved a new level. Understood, Thomas. Sorry, I was also just trying to get a bit of clarity around your partnership program, to the extent that you can talk about that. I mean, we've heard you have since rollout five years ago globally with Huawei. Is there a rethink there? Who are you working with now? Also as far as GE Digital is concerned or GE Predix, am I right to assume you're now rebuilding around Azure? Can you help me understand what the competitive implications might be around that? It is correct, we have moved away from GE Predix. We have a very strong relationship with Microsoft, but also with other tech players in the market, because we have learned that it is important to have a very broad base of partners. Because we are a lot co-creating with our technology partners. Whether this is Microsoft or other partners we have, we want to benefit also from their experience they have. It is correct, we have moved away from Predix. We also have increased the number of suppliers for our cubes in the Schindler Ahead solution. For quite obvious reasons, we were a little bit under pressure having only a Huawei solution. I do not want to elaborate more on that. We had to open up new suppliers, and we have done that. We still are delivering in certain markets Huawei cubes, but we now have also two additional suppliers. Because we now go into mass connectivity, we might even have to increase the number of suppliers to be able to fulfill our ambition of mass connectivity. Understood. If I can, finally, just on communication around this, I'm sorry to press the point a bit, I find it quite rare for a company to come out and launch a multi-hundred million plan with zero detail, frankly, on payback and expected returns. I wonder whether I can just clarify your EBIT margin ambition is to bring it to the high level of the industry's long-term margin level, which I understand you define as 12%-14%, so high end of that. Is that a correct understanding? When should we expect to hear from you? More generally, if I can, Thomas, did you learn much around how you launched your EUR 150 million investment plan for BuildingMinds, how to communicate around some of these big investment programs? Anything learned from that, in terms of how to communicate on this going forward, if you like? Good point. Of course, it was the question whether when do you announce such a program, at which stage of maturity? We have worked very hard in the last couple of months to fine-tune what exactly we want to do, what are the necessary resources, what are our project plans, what are the different milestones. Of course, we will also in the future report more on that. This definitely we will be able to do so whenever it does not jeopardize, let's say, our competitive situation. We can maybe not share everything in detail. You are right, it's always easier to work on the cost. This is also internally exactly the same. It's much easier for them to calculate what it costs than to calculate what it brings. Of course, we have done a high-level impact or business case calculation. You're probably not totally wrong with your assessment, but it will depend a lot on how overall the market will develop. What I can say is we want to narrow the gap. This I can say. Wherever, let's say, competition is, we will have to narrow the gap because we all face the same environment. We all face commodity, we all face freight, we all face the rangers, we all face, let's say, the political turmoil. What is definitely not acceptable for us is that the gap is widening. We have to work on narrowing this gap. We don't want to give a margin target in three years of X. This we don't want to do, but let's say to have a substantial step up, this definitely you can assume. Thank you. The last question for today's call is from [Jörg Rohner] from AWP. Please go ahead, sir. Yes, good morning. This is [Jörg Rohner]. My question is, with the new program, what effects will it have on employment, especially in Switzerland? Where will you build up employment and where will you make cuts? Thank you for this question. Of course, it is a program which is very much future-oriented. It talks about digitization. It talks about product innovation. It talks about sustainability. It talks about the customer experience. It's more an investment into the future and it's not a personal reduction program. This is not the aim of this program, definitely not. However, I have to say, we have done the cost optimization program, or we have announced the cost optimization program mid of last year, which is really focused on getting cost out of the organization. This is an ongoing exercise. We are well on track, but we said this will be something which will accompany us in 2021, 2022. We are continuing with that program, but here Top Speed 23 is really more being industry-leading in customer experience and not so much reducing jobs, honestly. I do not say that there is not a single case, what can happen, but definitely this is not at all our main purpose. Schindler is a company that really cares for the well-being of the current and also of the future generations in our workforce. We are thrilled by the long-term health of the company. When we have to take such decisions, we don't take them really lightly. For us, this is also difficult to do. Again, Top Speed is future-oriented, technology-based, new products and not cost-cutting. Mm-hmm. The cost-cutting program that is ongoing, that entails a reduction of the workforce in Switzerland, and there's nothing changed there? There's nothing changed. We said we talked about roughly 2,000 jobs, and we said up to 10% will be in Switzerland. The 2,000 are worldwide. We are well on track with that. Yeah. Always are very, let's say, employee-centric in the solutions to find. Okay. Thank you. Thanks very much for attending this conference call. We'd like to close now, and we are looking forward to our next event, our half year result on July 23rd. Thank you, take care, 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.