Half Year Results
2011/128 November 20111

Agenda1. LEM at a Glance
2. Business Review
3. Financial Review
4. Outlook

1. About LEM■ LEM is the global market leader in providing innovative and high quality
solutions for measuring electrical parameters.
■ The current and voltage transducers are used in a broad range of industrial
and automotive markets.
■ LEM is a high growth global company with approximately 1’300 employees.
Production plants are in Beijing (China), Geneva (Switzerland), Machida(Japan) and Copenhagen (Denmark). With regional sales offices close to
the clients locations, LEM provides a seamless service.
■ LEM is listed on the SIX Swiss Exchange since 1986 and has a market capof CHF 443 million per 30.09.2011.

3
8 November 2011

1. LEM Production & Logistics World-Wide

Production Centers (PDCs)
Adaptation Centers
Sales Offices
Agents / Distributors
4
8 November 2011

1. LEM at a Glance - Businesses
Industry segment
Drives & welding
Motor drives■ Welding■ Miscellaneous■

Renewable energies &power supplies

Automotive segment
Conventional cars■

Lead battery management

Green cars (HEV, EV)■

Battery pack management■ Electric motor control

Solar■ Wind■ UPS■ Battery monitoring, processcontrol, energy metering■

TractionOn-board applications■ Trackside■ Energy monitoring■High precision
Medical scanner■ Test & measurement■

8 November 20115

2. Highlights and Business Review

2. Highlights H1 2011/12
H1 2011/12(in CHF millions)H1 2011/12 to
H1 2010/11

Q2 to Q1 2011/12

Orders received

80.4-56.4%-37.7%

Sales

125.5

-11.5%-14.5%

Operational EBIT

19.2

-36.7%-34.5%Net earnings

15.0-24.1%

8.4%■

LEM is impacted by the economic weakness starting in Q4 2010/11■

Strong start of the drives & welding business, but weakening trend■

Renewable below last year especially in the solar market■

Stability in traction and high precision businesses■

Growth in automotive businesses■

Restructuring measures were implemented to adjust cost base to the weak markets■

Continued investment in R&D
7

8 November 2011

2. Net Sales

Sales(in CHF
million)In CHF millions

GrowthH1 to H1asreportedat constantcurrencies

GrowthQ2 to Q1

Total Sales

125.5-11.5%

2.9%-14.5%

275

Industry

113.3-13.4%-0.1%-17.2%

250

Automotive

12.3

11.8%

38.2%

14.3%

300

225
200
175

■

150
125

■

General economic situation and strong
Swiss franc affected sales
Sales growth at constant currencies

100
75
50
25
0
2007/08

2008/09

8 November 20112009/102010/11

HY 2011/12

8

2. Quarterly view
In CHF millions

Book‐to‐bill ratio
1.6

100
90

1.4

80

75.0

77.0

77.4

57.9

58.4

60

1.2

67.7

66.8

70

48.3

50
40

■ Weakening economy

1.0
0.8

43.2
35.6

0.6

■ Customers continue to reduceinventory■ Customers order book
reduction; cancellation of orders
received of CHF 24.5 million in
H1 2011/12

30
0.4
20
0.2

10

■ Orders received significantly
impacted by strength of Swiss
franc

0.0

0
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
09/10 09/10 09/10 09/10 10/11 10/11 10/11 10/11 11/12 11/12

Orders received

Sales■ Q2 book-to-bill ratio 0.53

Book-to-Bill ratio

9
8 November 2011

2. Cost and Capacity ManagementFirst signs of market weakness visible in Q4 2010/11
Growing exposure to solar markets increases volatility of LEM’s businessEconomic weakness impacts mainly industry businesses while automotive
businesses continue to growOn 22 September LEM 2011 announced a step-up of cost reduction
measures Adjustment of cost base to current sales levels
 Reduction of worldwide headcount to below 1’100 employees
 Restructuring cost of CHF 0.7 million; quarterly savings of CHF 1.1
million fully applicable from Q4 2011/12



LEM expects to remain profitable while keeping its ability to benefit from arebound

8 November 201110

2. Industry Segment: Regional Markets
Sales

H1 to H1Q2 to Q1
2011/12(in CHF million)
EuropeNorth America
Asia
Rest of the World2%

Europe58.5-16.1%-16.6%

N. America

13.4

-5.4%

-16.2%

Asia

38.6-13.4%-17.9%

ROW

2.7

16.5%

-23.0%

Total

113.3

-13.4%-17.2%

34%
52%■ No major change in regional split■ All regions impacted, US and ROW to alesser degree

12%118 November 2011

2. Industry Segment: Business Development
In CHF millions

Op. EBIT in % of sales
25

300

260
20
220

180

Drives & welding
Weakened across all regions during
summer reflecting uncertainties about thedevelopment of the global economy

15

140
10

100

60
5
20

‐20

Businesses and Applications

2007/08

8 November 20112008/09

2009/102010/11 HY 2011/12

0

Renewable energies & power supplies
Reversed growth trend due to reduced
subsidies und reduction of customers’
inventories
Traction
Growth in Asia despite stopped projects in
China
High precision
Stable development

122. Automotive Segment: Regional Markets
Sales(in CHF million)
EuropeNorth America
Asia and Rest of World
9%

H1 to
H1

Q2 to Q1
2011/12Europe1.1-20.1%-2.2%

N. America

6.5

14.1%

7.8%

Asia and
ROW

4.7

20.0%

28.7%

Total

12.3

11.8%

14.3%

38%

■ Growth with existing and new customers■ Improved diversification of customer
base
53%

■ Sales growth despite adverse exchange
rate impact
13

8 November 2011

2. Automotive Segment: Business Development
In CHF millions

Op. EBIT in % of sales

25

25

20

20

15

15

10

10

5

5

0

0
2007/08

2008/09

2009/102010/11

Businesses and Applications
Conventional cars
LEM increased market share in Asia andNorth America.
Green cars (HEV, EV)
Positive trend continues.
Majority of green cars projects launchedglobally are designed with LEM
transducers.

HY 2011/12

‐5

-5

‐10

-10

‐15

-15

14
8 November 2011

2. Business Development - China
Sales• Market share over 50%• Sales impacted by slowing activity
specially in solar and wind
In CHF millions

Production• LEM China expands its #1 position aslargest manufacturing site of the Group(41% of total)• “Made by LEM” quality
In CHF millions
120

55
100
45
80
35
60
25
40
15
20
5
0
‐5

2007/08

8 November 20112008/09

2009/102010/11 HY 2011/12

2007/08

2008/09

2009/102010/11

HY 2011/12

15

3. Financial Review

3. Financial Highlights
Strong balance sheet
 Dividend payment of CHF 45.5 million to shareholders in July 2011
 CHF 21 million loan taken up to finance dividend Equity at CHF 60 million, equity ratio 48% (60% per 31.03.2011)
 High inventory on 30 September 2011 due to incoming raw material/
components ordered 6 months earlier

Maintained profitability
 Gross margin of 42.5%
 Operating EBIT margin of 15.3%

Strong cash generation
 Free cash flow CHF 9.1 million (CHF 7.6 million in H1 2010/11)



Step up cost reduction plan Expected quarterly savings of CHF 1.1 million, fully applicable from Q4
2011/128 November 201117

3. Consolidated Balance Sheet
31.03.2011

30.09.2011

Cash and cash equivalents

27’231

10’615

Accounts receivable

60’02646’794Inventories

34’18739’087

Income tax receivable

1’310

150

Other current assets

1’717

3’000

Total non-current assets

37’50838’809Total assets

161’979

138’455

Accounts payable

29’617

21’271Other current liabilities

28’85045’055

Total non-current liabilities

6’599

6’135

Equity96’91365’994

Total liability and equity

161’979

138’455

13.3%

17.4%

 Days of inventory outstanding

67

106

 Equity ratio in %

60%

48%

 Net financial assets (CHF millions)

26.5

-10.5

In CHF thousands

 Avg. net working capital in % sales

8 November 201118

3. Income Statement
In CHF thousands

H1
2010/11

H1
2011/12

ChangeQ1
2011/12Q2
2011/12

ChangeSales

141’780

125’511-11.5%

67’65957’852-14.5%

Gross margin

43.7%

42.5%

-1.2%pt

42.4%

42.6%

0.1%ptOperating Cost

-31’666-34’130

7.8%-17’101-17’029-0.4%

Operational EBIT

30’32719’194-36.7%

11’600

7’594-34.5%

Additional SOP
income / costs

-429

619

N/A

-121

740

N/A

EBIT

29’89919’813-33.7%

11’4798’334-27.4%Net financial
expense (net)-2’650-1’162-56.2%-2’339

1’177

N/A

Income tax-7’439-3’624-51.3%-1’928-1’696-12.0%Net profit

19’810

15’028-24.1%

7’212

7’816

8.4%

8 November 201119

3. Results by Quarter
In CHF millions% of sales
30%

100
90

25%

80
70
66.8

60

75.0

77.4

20%

67.7

77.0
57.9

15%

■ Q2 2011/12 positive impact on net profit
due to foreign exchange impact andadditional SOP income

58.4

50
48.3

10%

43.2

40
30

■ Operational EBIT of 13.1% in Q2 2011/12
maintained despite lower sales

35.6

5%

20
0%

10
0

-5%
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
09/10 09/10 09/10 09/10 10/11 10/11 10/11 10/11 11/12 11/12

Orders received
8 November 2011

Sales

Op. ROSNet Profit in % of sales

203. Gross Margin Development
In CHF millions

GM % of sales
48%

135
47%

Gross margin

H1
2010/11

H1
2011/12Q1
2011/12Q2
2011/12

62.0

53.3

28.7

24.6

43.7%

42.5%

42.4%

42.6%

in CHF million

120
46%

105

Gross margin
in % of sales

90

45%

75

44%

60

■ H1 2011/12 gross margin heavily impacted byforeign exchange

43%

45
42%
30

■ Increased production efficiencies allowed to limit
the impact to -1.2%pt

41%

15

40%

0
2007/08

2008/09

8 November 20112009/102010/11 HY 2011/12

21

3. Operating Expenses
In CHF millions% of sales

90

50%

80
40%

70

Operatingexpenses

30%
50

H1
2011/12Q1
2011/12Q2
2011/12

31.7

34.1

17.1

17.0

22.3%

27.2%

25.3%

29.4%

in CHF million

Operatingexpenses60

H1
2010/11in % of sales■ Q2 2011/12 includes restructuring cost of CHF
0.7 million

40
20%
30
20

10%

■ Excluding restructuring cost operating expenses
in Q2 2011/12 were 5% lower than in Q1 2011/12■ Operating expenses expected to further
decrease in Q3 and Q4 2011/12

10
0

0%
2007/08

2008/09

8 November 20112009/102010/11 HY 2011/12■ Savings from restructuring of CHF 1.1 million will
fully materialize in Q4 2011/12
22

3. R&D Expenses
CHF millions% of sales
10%

15

8%

12

9

6%

6

4%

R&D
expenses

H1
2010/11

H1
2011/12Q1
2011/12Q2
2011/12

6.1

7.0

3.7

3.2

4.3%

5.5%

5.5%

5.6%

in CHF million

R&D
expenses
in % of sales■ R&D exempted from restructuring exercise■ High R&D efforts as an investment into the future
maintained
2%

3

0%

0
2007/08

2008/09

8 November 20112009/102010/11 HY 2011/12

23

3. Operational EBIT
In CHF millions

Op EBIT % of sales
24%

70

22%

60

Operational
EBIT

H1
2010/11

H1
2011/12Q1
2011/12Q2
2011/12

30.3

19.2

11.6

7.6

21.4%

15.3%

17.1%

13.1%

in CHF million
50

20%Operational
EBIT
in % of sales

40

18%

30

16%

20

14%

10

12%

10%

0
2007/08

2008/09

8 November 20112009/102010/11 HY 2011/12■ Excluding additional SOP cost/income■ Exceptionally good profitability in 2010/11■ Q2 2011/12 below target corridor

24

3. Legacy SOP Programs Expire per 31.03.2012
■

■
■
■

LEM’s legacy stock option plans (SOP) are cash settled; their cost isdriven by the share price development (31.3.2011: CHF 570;
30.9.2011: CHF 389)
Valuation according to IFRS; time value of option decreases over time
Significant reduction of volatility in 2011/12; ended per 31.03.2012
Currently LEM has no further option based compensation programs# outstanding
options

31.03.2008

31.03.2009

31.03.2010

31.03.2011

30.09.2011

31.03.2012

70’45766’20740’794

4’952

3’876

0
max.

Closure of

SOP 5

SOP 6

25
8 November 2011

3. Financial Expense

Exchange effect*
Other financial expense +incomeTotal

H1
2010/11

H1
2011/12Q1
2011/12Q2
2011/12-2’406-1’035-2’309

1’274

-244

-127

-30

-97

-2’650-1’162-2’3391’177

 Q2 2011/12 exchange effect mainly driven by EUR and USD appreciation
following the SNB intervention
 Foreign exchange hedging policy: 50% of net exposure on a rolling 3-9month basis*

The line “exchange effect” in the financial result is mainly due to currency volatility during the time between booking andsettling a receivable/payable. Over and above this line, foreign exchange rates impact every P&L line through the rate at
which each transaction is booked and at which it is consolidated into CHF.

8 November 201126

3. Income Taxes
In CHF thousands

H1
2010/11

H1
2011/12Q1
2011/12Q2
2011/12EBT

27’24918’651

9’140

9’511

Income taxes-7’439-3’624-1’928-1’696

Effective tax rate

27.3%

19.4%

21.1%

17.8%

In %

H1
2010/11

H1
2011/12Q1
2011/12Q2
2011/12

Expected income tax rate

24.2%

19.8%

20.6%

19.1%

Expected withholding tax rate

3.1%

2.6%

0.5%

4.7%

Expected tax rate

27.3%

22.4%

21.1%

23.8%

-3.0%

0

-6.0%

19.4%

21.1%

17.8%

Adjustments in respect ofprevious periods’ income tax
Effective tax rate

27.3%

 Reduction/increase of the expected tax rate with increasing/decreasing volumes in low
tax entities
8 November 201127

3. Net Profit
In CHF millions% of sales

Net profit
in CHF million

16%

45

Net profit
in % of sales

40

H1
2010/11

H1
2011/12Q1
2011/12Q2
2011/12

19.8

15.0

7.2

7.8

14.0%

12.0%

10.7%

13.5%

14%
H1 2010/11

-0.4
35

-2.7

12%

-7.4

30.3

30
10%

19.8

25
8%
20

Operational
EBIT

SOP inc./cost

FinancialexpenseIncome tax

Net profit

6%15

H1 2011/12
4%

10

0.6
2%

5
0

-1.2
-3.6

19.2

15.0

0%
2007/08

2008/09

8 November 20112009/102010/11 HY 2011/12

Operational
EBIT

SOP inc./cost

FinancialexpenseIncome tax

Net profit28

3. Cash Flow Statement

H1
2010/11

H1
2011/12Q1
2011/12Q2
2011/12Net profit

19’810

15’028

7’212

7’816

Non-cash items

5’676

3’454

1’172

2’282

Cash flow from changes in net working capital-15’044-4’112-3’867-246

Cash flow from operating activities
Cash flow from investing activities

10’442-2’871

14’369-5’2394’517-2’1699’852-3’070Free cash flow

7’571

9’130

2’348

6’782

Cash flow from financing activities-17’590-25’1215-25’126

Change in cash and cash equivalents-10’019-15’991

2’353-18’344

Cash and cash equivalents at the end of
the period

19’387

10’61128’265

10’611

In CHF thousands29

4. Outlook

4. Market Factors and Strategy■ We firmly believe in our strategic
direction and the 4 drivers for ourbusiness remain unchanged■ We will continue to capitalize on
the drivers of LEM’s markets
throughpure play components company
diversification across geographiesand markets

31
8 November 2011

5. Outlook
For the financial year 2011/12, we are cautious regarding our markets, inthe second half of 2011/12 we expect: Orders in the Industry segment to stabilize on a low level and sales tofurther decrease compared to the first half of 2011/12.
 The Automotive segment to benefit from the current growth
momentum.
 With the cost adjustment implemented, our cost base is aligned to thecurrent sales levels.
 We forecast sales to reach CHF 200 to 230 million.

32
8 November 2011

5. Financial Calendar and Contact Details
Financial calendar
14 February 2012
6 June 201228 June 2012

Q3 2011/12 results
2011/12 year-end results media and analyst conference
Ordinary shareholders’ meeting for the year 2011/12

For further information
Julius Renk, CFO
Tel.: +41 22 706 12 50
E-mail: investor@lem.com

33
8 November 2011