RESULTS
3RD QUARTER AND NINE MONTHS OF 2017/18
1 APRIL 2017 TO 31 DECEMBER 2017

8 February 2018

Agenda1. LEM at a Glance

François Gabella

2. Highlights and Business Review

François Gabella

3. Financial Review

Andrea Borla

4. Strategy and Outlook

François Gabella

HOY / HOYA

2

Results 3rd quarter and nine months of 2017/18

1. Global Market Leader in Current and Voltage Transducers
Market Position

Performance

Perspectives
LEHN

SMI
Source: SIX Swiss Exchange

•
•

•
•

3

Global market shareof 50+% in Industry
Strong market
position in the green
cars business4 production sites in
Europe and Asia
Benchmark inservice and productquality•••

Sales of CHF 264.5
million in 2016/17
Continued sales
growth and strong
margins
High and steady
dividend payout-ratio

Results 3rd quarter and nine months of 2017/18•••

Solid growth perspectives due tounderlying trends
Reinforced investment in innovation
Strong foothold in
China and the rest ofAsia

1. LEM Applications: Hybrid-electric vehicles / electric vehicles

1 High voltage battery

A DHAB V2

2 Charger
3 Motor controller
D CAB500

4 Electric motor and transaxle

D

5 DC/DC converter

C HSN

1
B

2

A

D

3
A

C

4
A

C
5

4

B HAH3

Battery management
The battery management system (BMS)
adjusts the charging process through the
combustion engine in a hybrid-electricvehicle or gives the information for external
charging of the high-voltage battery (1) inan electric vehicle. CAB (D), DHAB (A)provide all necessary current information athigh accuracy level to the BMS to improvethe efficiency of the charging process.
Motor control
The motor controller (3) takes power fromthe batteries and delivers it to the electricmotor (4). The accelerator pedal gives thesignals. HAH3 (B), HSN (C) are integrated
in the inverter modules (5) and provide
current signals at very high speed in order
to assure a smooth and jerk-freeacceleration.

Results 3rd quarter and nine months of 2017/18

1. Application: Super Charger Station for Electric Vehicles
A super charger (1) operates using several
400V DC chargers in parallel. 1MW would
be required from the grid (5) if 10 cars werecharged simultaneously. Charging stations
therefore often include a photovoltaic plantwith solar panels (2) and a battery storage
system (4). Stored energy is used toreduce energy peaks and to best use
photovoltaic energy.

A HO 250-P

2

The chargers use the HO 250-P (A) tomeasure the DC current while thephotovoltaic inverter (3) uses up to 7
transducers, such as CASRs, HLSRs and
CTSRs to measure DC, AC and residual
currents.

A
1
A
3
A
1 Super charger

A

4

2 Solar panels
3 Photovoltaic inverters

5

4 Battery storage
5 Grid5

Results 3rd quarter and nine months of 2017/18

1. Application: CNC Milling-Turning 5-Axis Machine Toollinear Y-axis

linear X-axis
1

rotary B-axis
1linear Z- axis

1

1

2
3
A

rotary C-axis

LEM transducers are key components inside
the inverter that controls the 5 electrical
motors driving the 5 axes. LEM’s LF 210 and
LF 310 measure the current that powers the
motors and generates their torque.

1

1 Motors
2 Inverter
3 Numeric control

6

Producing mechanical parts is faster andmore profitable when using a 5-axis
machining center. In addition to the usual
linear X-axis, Y-axis, and Z-axis, two
additional axes are rotating. The B-axis
rotates around the Y-axis and the C-axis
around the Z-axis.

A LF 210/310

The efficiency and quality of a CNC millingturning machine depends of its speed, its
accuracy and of the control quality of all its
axes. These high control performances areachieved thanks to the very high accuracy,
linearity, and low thermal drift of LEM's
transducers.

Results 3rd quarter and nine months of 2017/18

1. Application: Smart Grid Medium Voltage Line Monitoring
With new Internet of Things telecom
networks, monitoring overhead power lines ismade possible. Thanks to an ammeter,
installed between two poles, the grid operator
can visualize in real-time the current flow inorder to optimize the power line capacity to
distribute more electricity.

4
5

3

1
A

2

The wireless ammeter sends data over atelecom relay to a secured database in thecloud. The energy management platform canregulate, alert and notify the maintenanceteam if needed.
A ART
1 Ammeter
2 MV power line
3 Telecom relay
4 Cloud and database

The ammeter uses the rogowski coil ART tomeasure the current, detects line aging
depending on the level of current, and helps
prioritizing line capacity and regular
maintenance.

5 Energy management

7

Results 3rd quarter and nine months of 2017/18

1. Diverse Target Markets – Diversified Businesses

Businesses

Share of sales
9M 2017/18 Cyclicality

Green Cars
Conventional Cars

Macro drivers

Consumer durables Technology adoption (electrification)
20%

Fuel savings

High precision
Late cycle

Infrastructure investments

Mid cycle

Energy prices, subsidies

Early cycle

Industrial investment

Traction
Renewable energies& power supplies
80%

Drives & welding

Automotive segment
Industry segment
8

Results 3rd quarter and nine months of 2017/18

Agenda1. LEM at a Glance

François Gabella

2. Highlights and Business Review François Gabella
3. Financial Review

Andrea Borla

4. Strategy and Outlook

François Gabella

ATO

9

Results 3rd quarter and nine months of 2017/18

2. Continued sales growth
In CHF millions, %10

9M 2017/18

9M 2017/18 vs.
9M 2016/17

Q3 2017/18 vs.
Q3 2016/17

Orders235.5+17.7%+16.2%

Sales

225.0

+13.8%+11.8%

EBIT

46.5+11.6%+3.1%

Net profit

38.1+16.5%+9.7%•

Strong global economy•

All businesses but the conventional cars contributed to strong sales growth•

Increased price pressure•

Ongoing strategy execution•

Adding R&D capacities in all locations•

Strengthening Automotive organization•

Adding production lines in Sofia and Beijing•

Investment in “Industry 4.0” automated production lines

Results 3rd quarter and nine months of 2017/18

2. Net Sales
In CHF millions

In CHF millions, %300

9M vs. 9M
Sales

asreported275

Q3 vs.
atQ3
constant
currencies

250

Industry

180.6+13.2%+12.8%

225

Automotive

44.4+16.1%+17.4% +25.9%

200

Total

225.0

+13.8%+13.7% +11.8%

+8.4%

175

•

150
125

•

100
75

•

50

•

25

Positive economic sentiment translated into
sales growthAsia, particularly China, driving sales
growth in most businesses
LEM business development in North
America remains soft
Balanced net effect of currency fluctuations

0
13/14

11

14/15

15/16

16/17

9M 17/18

Results 3rd quarter and nine months of 2017/18

2. Quarterly View
In CHF millions

Book-to-bill ratio
75.9

80
70.0
70

61.5

67.2

62.7

66.9

65.7

65.1

76.3

66.8

1.2
72.8
1.0

60
0.8
50

40

0.6

30
0.4
20
0.2
10

0.0

0
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
2015/16 2015/16 2015/16 2015/16 2016/17 2016/17 2016/17 2016/17 2017/18 2017/18 2017/18

Orders received (left-hand scale)

Sales (left-hand scale)Book-to-bill ratio (right-hand scale)

12

Results 3rd quarter and nine months of 2017/18• 6th consecutive quarterwith book-to-bill ratio
higher than 1• Book-to-bill ratio
increased to 1.08 in
Q3 of 17/18• Shrinking inventories atcustomers translating
into short-term bookings

2. Industry Segment: Business Development
In CHF millions

Op. EBIT in % of sales

240

25%

200
20%

160
15%
120
10%
80

Businesses and Applications
Drives & welding (9M vs. 9M: +9%)
• Strongest growth in China, Japan andGermany• Driven by automation and robotics industries
Renewable energies & power supplies (+16%)• High demand from solar in China and Europe;
weak US business• US manufacturing moving to Europe and Asia
Traction (+22%)• Energy metering, trackside and retrofit ordersin Europe and India• Light rail and locomotive projects in China and
India

5%
40

0%

0
13/14

13

14/15

15/16

16/17

9M 17/18

High-precision (+4%)• HVDC projects in China completed 2016/17;
no follow-up projects• Growth in test & measurement market, mainly
for green cars test benches

Results 3rd quarter and nine months of 2017/18

2. Industry Segment: Regional Markets
In CHF millions, %Sales

Growth9M vs. 9M

GrowthQ3 vs. Q3

Europe68.7+12.3%+13.9%

N. America

19.5

-2.0%

-1.9%

Asia andROW

92.4+17.8%

+7.0%

Total

180.6

+13.2%+8.4%

EuropeNorth America
Asia and RoW

38%• Strongest growth in China, India andGermany• China the single most important country
representing 33% of sales

51%

11%

14

Results 3rd quarter and nine months of 2017/18

2. Automotive Segment: Business Development
In CHF millions

Op. EBIT in % of sales

60

30%

55
50

25%

45
40

20%

35
30

15%

Businesses and Applications
Green cars (HEV, EV) (9M vs. 9M: +70%)• Asian green cars market growing fast
• Trends to electrification and strong
commitment to green cars from automakers
around the world• Increasing consumer acceptance andgovernment support globally for green cars tounderpin future growth• Increasing attractiveness of the market lures
new competitors and affects margins

25
20

10%

15
10

Conventional cars (-17%)• Weaker US business linked to expected
technology change

5%

5
0

0%
13/14

15

14/15

15/16

16/17

9M 17/18

Results 3rd quarter and nine months of 2017/18

2. Automotive Segment: Regional Markets
In CHF millions, %Sales

Growth9M vs. 9M

GrowthQ3 vs. Q3

Europe2.6-13.0%+5.5%

N. America

12.5-15.1%-9.5%

Asia andRoW

29.2+42.8%+48.8%

Total

44.4

+16.1%+25.9%

EuropeNorth America
Asia and RoW

6%
28%

•
•
66%

•

16

Sales numbers reflect destination of
product shipment, not OEM
Performance driven by growth of green
cars business across all regions
LEM strengthens Automotive
organization to cope with growing
volumeResults 3rd quarter and nine months of 2017/18

2. Business Development Bulgaria

Production
In CHF millions40+31.8%
35

30

25

Development of the site
•
•
•
•
•

Added 20% workshop surface
Added R&D capacities
Develop shared services for LEM Group
16% of total production“Made by LEM” quality

20

15

10

5

0
13/14

17

Results 3rd quarter and nine months of 2017/18

14/15

15/16

16/17

9M 17/18

2. Business Development China
Sales

Production•••

Market share of over 50%
Most important market with 35% of
total sales

LEM China stabilizes its #1 position aslargest manufacturing site of the Group(59% of total production, compared to
59% in financial year 2016/17)“Made by LEM” quality•
In CHF millions

In CHF millions

90

180

80

160

70

140

60

120

50

100

40

80

30

60

20

40

10

20
0

0
13/14

18

14/15

15/16

16/17

9M 17/18

13/14

Results 3rd quarter and nine months of 2017/18

14/15

15/16

16/17

9M 17/18

Agenda1. LEM at a Glance

François Gabella

2. Highlights and Business Review

François Gabella

3. Financial Review

Andrea Borla

4. Strategy and Outlook

François GabellaGO

19

Results 3rd quarter and nine months of 2017/18

3. Financial Highlights• Robust profitability• EBIT of CHF 46.5 million, up from CHF 41.7 million• Net profit of CHF 38.1 million, up from CHF 32.7 million• Support sales growth• Increased investment in innovation and in production capacities• Strengthened Automotive organization

20

Results 3rd quarter and nine months of 2017/18

3. Income Statement
In CHF millions

21

9M
2016/179M
2017/18

ChangeQ3
2016/17

Q3
2017/18

Change

Sales

197.8

225.0

+13.8%

65.1

72.8+11.8%

Gross margin

47.0%

45.7%

-1.3pt

48.4%

46.0%

-2.4ptOperating expense

-51.3

-56.5

+10.1%

-17.4

-18.9

+8.6%

EBIT

41.7

46.5

+11.6%

14.1

14.6

+3.1%

Net financial exp.

-0.8

1.6

NM

-0.7

0.2

NM

Income tax

-8.2

-10.0

+21.9%

-2.9

-3.2

+9.6%

Net profit

32.7

38.1

+16.5%

10.6

11.6

+9.7%

Results 3rd quarter and nine months of 2017/18

3. Results by Quarter
In % of sales
24%

22%

20%

18%

16%

14%

12%
Q1
2015/16

Q2
2015/16

Q3
2015/16

Q4
2015/16

Q1
2016/17

EBIT (in % of sales)

22

Q2
2016/17

Q3
2016/17

Q4
2016/17

Q1
2017/18

Net Profit (in % of sales)

Results 3rd quarter and nine months of 2017/18

Q2
2017/18

Q3
2017/18

3. Gross Margin
In CHF millions

In % of sales
48%

140

Gross margin47%

in CHF millions

120

9M
2016/179M
2017/18

Q3
2016/17

Q3
2017/18

92.9

102.9

31.6

33.5

47.0%

45.7%

48.4%

46.0%

46%

Gross margin
100

in % of sales

45%
44%

80
43%

•

60
42%

•
41%

40

40%
20
39%
38%

0
13/14

23

14/15

15/16

16/17

9M 17/18•

Price pressure and changing product mix
negatively affected the gross margin
Footprint optimization program costs
impacted gross margin by -0.3% in 9months of 2017/18
Increasing share of cost competitive
production and efficiency improvements
counteract negative effects

Results 3rd quarter and nine months of 2017/18

3. SG&A
In CHF millions

In % of sales
25%

60

SG&A
in CHF millions

50

SG&A

20%

in % of sales

9M
2016/179M
2017/18

Q3
2016/17

Q3
2017/18

39.4

41.0

13.5

13.6

19.9%

18.2%

20.7%

18.7%

40
15%

•

30
10%
20

•

Sales growth achieved with stablestructure cost
SG&A in percent of sales dropped by
1.7%pt

5%
10

0

0%
13/14

24

14/15

15/16

16/17

9M 17/18

Results 3rd quarter and nine months of 2017/18

3. R&D Expense
In CHF millions

In % of sales

18

10%

R&D
expense16

9M
2016/179M
2017/18

Q3
2016/17

Q3
2017/18

11.8

15.4

4.0

5.3

6.0%

6.9%

6.1%

7.3%

in CHF millions
8%

14

R&D
expensein % of sales

12
6%
10

8
4%

•
•

6

•
4

2%

•

2

0

0%
13/14

25

Ongoing renewal of product portfolio
Acquire new technologies to address
new markets
Increase R&D team by 20% in four
locations
Inaugurated LEM Tech France SA (newR&D center in Lyon, France)

14/15

15/16

16/17

9M 17/18

Results 3rd quarter and nine months of 2017/18

3. Financial Expense
In CHF millions

26

9M
2016/179M
2017/18

Q3
2016/17

Q3
2017/18

Exchange effect

-0.7

+1.7

-0.7

+0.2

Other financial expense &income

-0.1

-0.1

-0.1

-0.0

Total

-0.8

+1.6

-0.7

+0.2

•

Exchange gain mainly due to USD hedges and foreign exchange gains withaccounts receivables (mostly EUR)•

Foreign exchange hedging policy unchanged for EUR, USD and JPY

Results 3rd quarter and nine months of 2017/18

3. Income Taxes
9M
2016/17
18.1%
1.2%

9M
2017/18
18.7%
1.7%

Expected tax rate

19.4%

20.4%

Other differences

0.7%

0.4%

Effective tax rate

20.1%

20.8%

Expected income tax rate
Expected withholding tax rate

• Increased tax rate driven by higher profitability in the high tax locations

27

Results 3rd quarter and nine months of 2017/18

3. Net Profit
In CHF millions

In % of sales
20%

50

Net profit
in CHF millions

45

18%

Net profit
in % of sales

40

9M
2016/179M
2017/18

Q3
2016/17

Q3
2017/18

32.7

38.1

10.6

11.6

16.5%

16.9%

16.2%

15.9%

16%

9M 2016/17

35

-0.8

14%

30

-8.2

41.7
25

32.7

12%

20

10%

EBIT

Financial expense

Income tax

+1.6

15

Net profit

9M 2017/18

8%
10

-10.0
6%

5
0

38.1

4%
13/14

28

46.5

14/15

15/16

16/17

9M 17/18

EBIT

Results 3rd quarter and nine months of 2017/18

Financial expense

Income tax

Net profit

Agenda1. LEM at a Glance

François Gabella

2. Highlights and Business Review

François Gabella

3. Financial Review

Andrea Borla

4. Strategy and Outlook

François Gabella

HAM

29

Results 3rd quarter and nine months of 2017/18

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 businesses

30

Results 3rd quarter and nine months of 2017/18

4. Outlook

31•

Trends:• Industry business supported by positive global economic
environment• Growth in the green cars business to over-compensate
slowing conventional cars business• Seasonality to impact sales in Asia in financial Q4 (Chinese
New Year)•High number of product launches•

Ongoing adaptation of the international footprint of all activities•

Expectation for the full financial year 2017/18• Sales of CHF 290 to 300 million• EBIT margin around 20%
Results 3rd quarter and nine months of 2017/18

Q&A

Financial Calendar and Contact Details

Financial calendar
The financial year runs from 1 April to 31 March

23 May 2018
28 June 2018
3 July 2018
5 July 2018

Year-end results 2017/18
Annual General Meeting of Shareholders for the year 2017/18
Dividend ex-date
Dividend payment date

For further information
Andrea Borla, CFO
Phone: +41 22 706 12 50
E-mail: investor@lem.com

33

Results 3rd quarter and nine months of 2017/18