3rd Quarter Results
2010/1115 February 2011

1Agenda1. LEM at a Glance
2. Business Review
3. Financial Review
4. Outlook

21 About LEM
1.
■ LEM is the global market leader in providing innovative and high quality
solutions for measuring electrical parameters■ Th
The currentt andd voltage
lttransducers
td
are usedd iin a bbroadd range off
applications in Industrial, Traction, Energy & Automation and Automotivemarkets■ LEM is a high growth global company with approximately 1’300 employees
Production plants are in Geneva (Switzerland), Beijing (China), Machida(Japan), Copenhagen (Denmark), and regional sales offices close to theclients locations■ LEM (SIX: LEHN) has been listed on the SIX Swiss Exchange since 1986
and has a market cap of CHF 659 million per 31.12.2010
315 February 2011

1. LEM Production & Logistics World-Wide

Production Centers (PDCs)
Adaptation Centers
Sales Offices
Agents / Distributors4

1. LEM at a Glance - Markets Served
Traditional Markets

New Markets

Industry
Motor drives, power conversion
AC/DC, power supplies, UPS,welding, medical scanner, newenergies,illeakagekcurrentt■ Test & measurement

Automotive■

Traction & Trackside
On-board applications,inverters■ Trackside and energy
monitoring

Conventional Cars
Battery Management■■Green Cars (HEV, EV)
Battery Pack
Electric Motor Control

Energy & Automation■■■

Process control

Battery monitoring■

Energy metering

5

2. Business Review

2 Highlights Q3 2010/11 – Start of Normalization2.
9 months results 2010/11 achieved exceptional profitability■ After very strong bookings in Q1 & Q2 due to fears of shortages on
the market, now normalization of order development in Q3 (book-tobill 11.09)
09)■ Demand remaining strong in most markets except in Solar where adecline due to market adjustments is forecasted■ Sales of CHF 218.8 million (+72.2% compared to 9M 2009/10)■ Gross margin slightly decreased to 43.2% (43.6% 9M 2009/10)■ Operational EBIT of CHF 46
46.0
0 million (+187(+187.4%4% compared to 9M2009/10),■ Net profit of CHF 27.3 million (CHF 5.5 million for 9M 2009/10)
Operational milestones■ New organization now in place and operational

72 Net Sales
2.
In CHF millions
200175

In CHF millions

SalesGrowth
9M to 9M

GrowthQ3 to Q2

Industrial

202.1

72.7%

3.0%

Automotive

16 716.7

65 9%
65.9%

-00.3%
3%

Total Sales

218.8

72.2%

2.7%

150125■ Strong recovery vs. last year
■ Stabilization of quarterly sales at ahigh level

100
7550
250
2006/07

2007/08

2008/09

2009/109m. 10/118

2 Book2.
Book-to-bill
to bill ratio
In CHF millions

Book‐to‐bill ratio

100

1.490

■ 6 consecutive sales growthquarters

1.2

80
1.07060■ Order intake normalizing

0.850■ Q3 book-to-bill ratio 1.09

0.640300.4

200.21000.0
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
08/09 08/09 08/09 08/09 09/10 09/10 09/10 09/10 10/11 10/11 10/11
Orders received

Sales

Book to bill ratio
Book-to-bill

92 Industrial Segment: Regional Markets
2.

North
America
11%

Asia
34%

Sales growth
ratestRest of theWorld
1%

Europe andRussia
54%

9 months

Q3 to Q2

Europe

68.8%

4.6%

Asia

88.3%

2.2%

N. America

50.9%

-3.0%

ROW

67.7%

7.7%

Total

72 7%
72.7%

3 0%
3.0%

■ Normalization visible in all regions■ Total sales CHF 202.1 million for 9 months 2010/1110

2 Industrial Segment: Business Development
2.
In CHF millions

Op. EBIT in % of sales
25240

Market and Applications
20020160
15120
10Industry■ Increased
Id byb 94% specially
i ll iin th
the areasof motor drives and applications forsolar energy
Traction■ Increased at a pace of 8% mainly due
to applications on board of trains

80540

Energy & Automation■ Increased by 73% mainly due toBatteryy Monitoringg in Asia and EnergygyMonitoring in Europe

0006/07

07/08

08/09

09/10

9m. 10/11

11

2 Automotive Segment: Regional Markets
2.
Europe,p ,incl. Russia
12%Asia andRest ofWorld35%

North
America
53%

Sales growthrates
t9 months

Q3 to Q2N. America

74.8%

-3.1%

Asia and ROW

40.6%

3.3%

Europe136.5%

3.1%

Total

65.9%

-0.3%

■ Growth mainly driven by NorthAmerica■ Long term trends remain unchanged
for Asia and Europe■ Total sales of CHF 16.7 million for 9 months 2010/11122 Automotive Segment: Business Development
2.
In CHF millions

Op. EBIT in % of sales

2525202015151010550Applications■ Conventional Cars:- Battery Management■ Green Cars (HEV,(HEV EV)- Battery Pack
- Electric Motor ControlMarket■ Upswing of the market in general■ Start of production for several HEV inUSA Asia and Europe
USA,006/07

07/08

08/09

09/10

9m. 10/11‐5‐5‐10‐10‐15‐15Results■ Confirmation of profitability

13

2. Business Development - ChinaSales■ Sales growth of 75% over same period
last year■ MarketM k t sharehover 50%
In CHF millions

Production■ Beijing LEM confirms its #1 position aslargest manufacturing site of the Group■ “Made“M d bby LEM” qualitylit
In CHF millions

9090

80

80

70

70

60

60

50

50

40

40

30

30

20

20

10

10

00
06/07

07/08

08/09

09/10

9m. 10/11

06/07

07/08

08/09

09/10

9m. 10/11

14

3. Financial Review

3. Income Statement
In CHF thousands

9 months
2009/109 months
2010/11

ChangeQ2
2010/11Q3
2010/11

ChangeSales

127’082

218’82472.2%

74’99477’043

2.7%

43.6

43.2

-0.4%pt

43.8

42.4

-1.4%pt

SG&A(39’454)(39454)(48’650)(48650)(23 3%)(23.3%)(16’253)(16253)(16’985)(16985)(4 5%)(4.5%)

Operational EBIT*

16’00145’985187.4%

16’59215’658(5.6%)

Additional SOP
income / costs(5’613)(4’958)

11.7%

(40)

(4’530)nm

EBIT

10’38841’027295%

16’552

11’128(32.8%)Net financial
expense(1’051)(4’268)(306.1%)(982)(1’618)64.8%

Income taxes(3’844)(3844)(9’441)(9441)(145.6%)(3’970)(3970)(2’002)(2002)(49.6%)Tax rate in %

41.2

25.7

-15.5%pt

25.5

21.0

-16.4%pt

Net pprofit

5’493

27’318397.4%

11’6007’508(35.3%)

Gross margin %16

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

10030%

9025%■ 2.7% sales increase vs Q28020%

706015%■ Q3 EBIT margin impacted byinvestments in organization andforeign exchange

5010%

40305%■ Q3 net profit margin impacted
by additional SOP costs linked
to share price appreciation

200%

100-5%
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
08/09 08/09 08/09 08/09 09/10 09/10 09/10 09/10 10/11 10/11 10/11
Orders receivedSales

Op. ROSNet profit in % of sales

173 Gross Margin Development
3.
In CHF millions

GM % of sales
47%

Gr. margin

9045%
75

9 months
2010/11

Q2
2010/11Q3
2010/11

55.5

94.6

32.8

32.6

43.6%

43.2%

43.8%

42.4%

CHF million

Gr. margin
43%

9 months
2009/10% of sales

60
41%
45

■ Gross margin down by 1
1.4%
4%-pt
pt in Q3
39%

30

■ Driven by exchange rate developments(EUR, USD)

37%

1535%

0
06/07

07/08

08/09

09/10

9m. 10/11

18

3 Operational EBIT
3.
I CHF millions
InilliO EBIT % off sales
Opl25%Op EBITCCHF
million3020%

Op EBIT% of sales

9 months
2009/109 months
2010/11

Q2
2010/11Q3
2010/11

16.0

46.0

16.6

15.7

12.6%

21.0%

22.1%

20.3%

15%
20

■ Excluding additional SOP cost/income10%■ Exceptionally good profitability in Q3

105%

0

■ Measures to strengthen the structure of theorganizationi ti hhave iimpacted
t d Q3

0%
06/07

07/08

08/09

09/10

9m. 10/11

193 Additional Stock Option Plan Income / Costs
3.
In CHF thousands

9 months
2009/109 months
2010/11Add. SOP Income / costs(5’614)(4’958)Additional SOP Income / Costs

 SOP costs driven by exercise and revaluation at period-end
 Valuation according to IFRS; time value of option decreases over time Reminder: SOP 5 will be closed per 31.3.2011, SOP 6 per 31.3.2012 as the last plan
 Stock price CHF 340 per 31.3.2010 Æ CHF 573 per 30.12.2010

340367 75
367.75573

31.3.2010

30.9.201030.12.201020

3. Financial Expense
p
9 months
2009/109 months
2010/11

Foreign exchange effect*(817)(3’910)

Other financial expense + income(234)

(359)

Total

(1’051)(4’268)In CHF thousands Bank loans generated interest expense; loans reduced from CHF 8 million
to CHF 2 million as at 31 December 2010
 Foreign exchange effect mainly driven by EUR and USD devaluation
 Foreign exchange hedging policy: 50% of net exposure on a rolling 3
3-9
9month basis* The foreign exchange effect is mainly due to currency volatility during the time between booking and settling a receivable/payable.
21

3. Income Taxes
In CHF thousands

9 months
2009/109 months
2010/11

EBT9’336

36’759

Income taxes(3’844)(3844)(9’441)(9441)

Effective tax rate

41.2%

25.7%

In %

9 months
th2009/10

9 months
th2010/11

Expected income tax rate

32.8%

22.8%

Expected withholding tax rate*

8.4%

2.9%

Effective tax rate*

41.2%

25.7%

 Reduction of the expected tax rate with increasing volume in low tax entities* Including CHF 486 thousand adjustment on prior year withholding tax

22

3. Net Profit
In CHF millions% of sales

2525%

In CHFmillions

9 months
2009/109 months
2010/11

Net profit5.5

27.3

Q2Q3
2010/112010/11
11.6

7.5

9 months 2009/10
20%

20

16.0

5.6

1.1

3.8

Financialexpenses

Income taxes

5.515%
15Operating
EBIT

SOP cost

46.0

5.0

Net profit

10%

9 months 2010/11

105%

4.3

9.4
27.3

50%

0-5%
06/07

07/08

08/09

09/10

Operating
EBIT

SOP cost

Financialexpenses

Income taxes

Net profit

9m. 10/11

23

3 Share buy back3.
■ S
Successfully
f ll llaunchedh d1S
Septemberb 2010■ Runs for 18 months, for a volume of up to CHF 15 million on asecond tradingg line
■ Initiated in anticipation of future growth and considering high net
cash position■ GoalG l iis tto iincrease fi
financiali l lleverage andd fi
finance ththe company
through a healthy mix of equity financing and loans■ Per 31 December 2010,, 8’250 shares have been bought
g for a total
amount of CHF 2’926 thousand24

3 Dividend policy
3.
■ P
Previousi
policy:lib
between 25% andd 50% off theh consolidated
lid d netprofit for the year as a dividend■ In view of− positive outlook for the company andgp
potential to increase the financial leverageg in the balance− significantsheet■ New policy: LEM will target a pay-out ratio significantly above 50%
off theth consolidated
lid t d nett profit
fit forf theth year25

4. Outlook

4 Areas of Focus
4.
1 Strengthening
1.
S
h i theh organization:i i■ Jean-Marc Peccoux now in charge of R&D
g; of increasingg■ Luc Colombel to focus on the Automotive segment;
importance for LEM■ Hans Dieter Huber to lead the Industrial Segment, maximizing thesynergies between the businesses■ Recruitment of several key people for second line of management

2 Match2.
M t h market
k t demanddd flfluctuations
t ti■ Secure additional sourcing volumes of key components
py and reactivityy■ Increase capacity

3. Continued emphasis on innovation
27■ Increasing
Ii R&D effort
ff t

4 Market Factors and Strategy
4.

■ We firmly believe in our Strategic
Directionec o aandd thee4ddrivers
e s foro ou
ourbusiness remain unchanged■ We will continue to capitalize on thedrivers of LEM’s markets through− Innovation− Operational Excellence− Cost leadership28

4 Market Outlook
4.
■ CConsolidation
lid i off IIndustrial
di l sales
l on a hihighh llevell− Robust business perspectives in industry markets, mainly drives
and UPS− Stagnation in the traction market− Renewables, energy applications continued volatility expected
d tto:
due− Evolution of the legislation
playersy− Consolidation of the solar industryy p■ Automotive− Continued
C ti
d growth
th iin conventional
til andd green cars marketsk t29

4. Outlook
We are confident for Q4 2010/11 but remain alert as currencyy
fluctuations continue to impact the company’s financial performance.
■ Confirmation of previous sales expectation: CHF 285 to 295 million for
the full year 2010/11■ EBIT estimated to be about CHF 58 million for the full year 2010/11

30

Financial Calendar and Contact Details
Financial calendar

15 February
9 June1 July2011
2011
2011

For further information
Jan Gregor
IRF Communications+41 (0)43 244 8154
lem@irfcom.ch

Q3 2010/11 results
Full yyear 2010/11 results
Shareholders’ Meeting

Julius Renk
CFO+41 (0)22 706 1250
jrk@lem.com

31