Results
Q4 and Year 2010/11
Media & Analyst Conference
Z i h 9 JJune 2011Zurich,Agenda
1. LEM at a Glance

François Gabella

2. Highlights and Business Review

François Gabella

3. Financial Review

Julius Renk

4. Strategy and Outlook

François Gabella

5. Proposals Shareholders’ Meeting

Felix Bagdasarjanz

21

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 ofapplications 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). Regional sales offices are close to theclients’ locations.
■ LEM (SIX: LEHN) has been listed on the SIX Swiss Exchange since 1986
and has a market cap of CHF 656 million per 31.3.2011.
3

1. LEM Production & Logistics World-Wide

Production Centers (PDCs)
Adaptation Centers
Sales Offices
Agents / Distributors42

1. LEM at a Glance - Markets Served
Traditional Markets

New MarketsIndustry
Motor drives, power conversion
psupplies,pp, UPS,,AC/DC,, power
welding, medical scanner, newenergies, leakage current■ Test & measurement

Automotive■

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

Conventional Cars
B tt
BatteryManagementMt■■

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

Energy & Automation■■■

Process control

B tt
Battery
monitoring
it i■Energy metering5

2. Highlights and Business Review
François Gabella
Gabella, President & CEO63

2. Highlights 2010/11
2010/11 vs. 2009/10

Q4 vs. Q3 2010/11

Orders

55%

-12%

Sales

60%

0.5%

O
Operationaltil EBIT

134%

-8.9%
8 9%

Net earnings

276%

64%

■

Solid growth in all sectors and regions■

Spectacular growth of renewable energy business, particularly solar■

Fast build-up of capacity to meet demand■

Automotive segment becoming profitable■

Investment in R&D and organization strengthening7

2. Net Sales
CHF millions(in CHF million)

Year toyear

Industrial

272.7

59.7%

-1.1%

Automotive2323.5

59.8%
9 8%

19.6%

Total sales

296.2

59.7%

0.5%

Sales300250

Q4 vs. Q3200■150

Strong recovery after the recession

1005002006/07

2007/08

Automotive Segment

2008/09

2009/102010/11

Industrial Segment84

2. Book-to-bill ratio
In CHF millions

Book‐to‐bill ratio

100

1.60

90
75.0

77.0 77.4

66.8

7060

55.5 55.5

50

48.3

45.1

40

Industrial

272.7

59.7%

-1.1%

Automotive

23 5
23.5

59 8%
59.8%

19.6%

Total sales

296.2

59.7%

0.5%

Q4 vs.Q3

0.80

43.2

40.7

1.20
1.00

58.4

Year toyear

Sales

1.4080(in CHF million)

35.6■ Order book normalizing0.60300.40■ Q4 book-to-bill ratio 0.89

200.201000.00
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q408/09 08/0908/0908/0909/10 09/1009/1009/10 10/1110/1110/1110/11
Orders received

Sales

Book-to-Bill ratio
9

2. Industrial Segment: Business Split
Sales

Year to year

(in CHF million)

2%

33%

EuropeEurope

146.2

55.5%

North America

N. America

30.3

51.0%

Asia

91.0

69.8%

ROW

5.1

68.0%

Total

272.7

59.7%

Asia
Rest of the World

53%

11%



Sales growth across all regions
Asia becoming more important(33% share vs. 31% last year)1052. Industrial Segment: Results
CHF millions

Op. EBIT in % of sales
25280240
20200
15160

120

1080

Markets and Applications
Industry:
Yearly sales increase of 75%. Strong
growth in renewable energy markets,
now a third of total sales (FY 2009/10
was 18%). Robust growth in electricmotor drives.
Traction:
Stable sales. Strong position in China /delayed projects in Europe and USA
USA.

540

00
06/07

07/08

08/09

09/10

Energy & Automation:
Increase in sales by 61%. Growth
mainly in Asia and North America.

2010/11112. Automotive Segment: Business Split
Sales

Year to year

(in CHF million)

Europep and Russia
12%36%

North America
Asia and Rest of WorldEurope

2.999%

N. America

12.675%Asia and RoW

8.032%

Total

23.560%52%

126

2. Automotive Segment: Results
CHF millions

Op. EBIT in % of sales

25252020

1515

1010

5500
06/07

07/08

08/09

09/10

Applications■ Conventional Cars:- Battery Management■ Green Cars (HEV, EV)- Battery Pack
- Electric Motor ControlMarket■ Upswing of the market in general■ Majority of green cars shown at worldcar shows are designed with LEM
transducers

2010/11‐5-5‐10-10‐15-15Results■ Profitability reached thanks to volume
increase and production transfer toChina
13

2. Business Development for the Automotive Market
New Business> CHF 0.5 million

Application

In volume

China

BMx

China

Green Carx

JapanBMx

Japan

Green Carx

Korea

Green Carx

Addedplatforms
2010/11

Addedplatforms
2011/12
Q2

Q4
Q3
Q3

Q4
Q3

EuropeBMx

Q3

EuropeGreen Carx

Q2/Q4

USABMx

Q3

Q3

USA

Green Carx

Q3

Q3

BM:battery management
Green Car: electric vehicle + hybrid electric vehicle + fuel cells
1472. Business Development ChinaProduction■Beijing LEM confirms its #1 position aslargest manufacturing site of the Group(38% of total)■“MadeMade by LEM”
LEM qualitySales■■Year to year sales growth of 62%
Market share of 50+%

CHF millions
70

CHF millions
120

60

100

50
80
40
60
30
40
20
20
100006/07

07/08

08/09

09/10

2010/11

06/07

07/08

08/09

09/10

2010/1115

2. Innovation and R&D
Investment in R&D■ Jean-Marc Peccoux appointed VP of R&D■ Increase of R&D spend to CHF 1414.00 million (+21(+21.6%)6%) in 2010/11; to be
increased further■ Significant efforts towards new technologies to enhance transducer
performances in terms of accuracy and cost
■ R&D is directed to penetrate new applications where transducers have thepotential to enhance system performance
9In May 2011, LEM launched the CTSR familyof transducers, specifically designed to meetthe latest safety standards issued for solar
installations and inverters
1683. Financial review
Julius Renk, CFO

3. Financial Highlights■ Strong balance sheet■ Equity ratio 60% (63%)■ CashC h andd cashh equivalents
i l t CHF 27
27.2
2 million
illi (CHF 2929.88 million)
illi )■ Strong Profitability■ Operating EBIT margin of 20.4%■ Strong cash generation■ Free cash flow CHF 20.7 million ((CHF 13.0 million))■ Net working capital investments in line with business growth

1893. Consolidated Balance Sheet
In CHF thousands

31.03.2010

31.03.2011

Cash and cash equivalents

29’75627’231

Accounts receivable

43’45460’026Inventories

21’74434’187

Income tax receivables

01’310

Other current assets

1’989

1’717

Total non-current assets

35’71937’508

Total assets

132’662

161’979

Accounts payable

23’41629’617

Other current liabilities

19’77528’850Total non-current liabilities

6’092

6’599

Equity83’37996’913T t l liability
Total
li bilit andd equity
it132’662

161’979

12.9%

13.3%

 Avg. net working capital in % sales
 Inventory turns

6.2

5.3

 Equity ratio

63%

60%

 Net financial assets (CHF millions)

29.7

26.5
193. Income Statement
In CHF thousands

2009/102010/11%

Sales

185’512296’203

60%

Gross margin %

43.4

42.6

-0.8 ppt

Operating costs(54’629)(65’886)

21%

Operational EBIT

25’80760’413134%

Additional SOP income/costs(8’285)(5’426)35%

EBIT

17’52254’987214%

Net financial expenses(1’355)(4’622)-241%

Income taxes(5’635)(10’722)-90%

Net profit

10’53239’643276%
2010

3. Results by Quarter
In CHF millions% of sales

10030%

9077 477 0 77.4
75.0 77.0

80

60

20%

66.8

70
58.4

55.5 55.5

5025%

45.1

15%

48.3
43.2

40.7

10%

35.6

40305%■ Orders normalizing, sales
stabilizingg■ RoS normalizing through lastquarters■ High net profit in % of sales,
resulting from significantly
decreased tax charge

200%

100-5%Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q408/09 08/09 08/09 08/09 09/10 09/10 09/10 09/10 10/11 10/11 10/11 10/11
Orders received

Sales

Op. ROS■ In 2010/11, net profit is stilli
impactedt db
by additionaldditi
l stockt koption plan cost. This legacy
program will run out in 03/2012

Net Profit in % of sales

21

3. Gross Margin Development
CHF millions% of sales

13548%

12047%

105

Gross margin

2009/102010/11

80.4

126.3

43.4%

42.6%

in CHF million

Gross margin% sales

46%

9045%
7544%
6043%
4542%

3041%

15

■ Impacted by strongly negative exchange
rate developments (EUR, USD)
■ Partly compensated by leverage effects
on fix cost in COGS

40%006/07

07/08

08/09

09/10

2010/112211

3. Operating Expenses
CHF millions

2009/102010/11

54.6

65.9

29.4%

22.2%

% of sales

7050%

Operating expenses
in CHF million

Operating expenses

6040%

in % Sales30%■ Significant leverage:
Operating expenses increased by 20.6%,compared to sales increase of 59.7%

50403020%■ Organizational strengthening to cope withgrowth

2010%
10

■ Operating expenses as a percentage ofsales at a record low in LEM (22.2%)

00%
06/07

07/08

08/09

09/10

2010/1123

3. R&D Expenses
CHF millions

2009/102010/11

11.5

14.0

6.2%

4.7%

% of sales

1512%

R&D expenses
in CHF million

R&D expenses
in % Sales

129%

9

■ R&D effort significantly increased6%■ R&D expense closing in on long-term
average of 5.5%

63%
30

■ Including CHF 0.7m one-off impairment ofLEM Danfysik patent0%
2006/07

2007/08

2008/09

2009/102010/1124

12

3. Operational EBITCHF millions

2009/102010/11

25.8

60.4

13.9%

20.4%

% of sales

Operational EBIT

7024%

in CHF million

Operational EBIT

6022%

in % Sales

5020%■ Excluding additional SOP cost/income

4018%

3016%

2014%

10

■ Exceptionally good profitability in2010/11■ Measures to strengthen the structure ofthe organization have impacted Q3/Q4

12%

010%
06/07

07/08

08/09

09/102010/1125

3. Legacy SOP Programs Running out per 31.3.2012■■■■

LEM’s legacy stock option plans (SOP) are cash settled; their cost isdriven by share price development (31.3.2010: CHF 340;
31.3.2011: CHF 570)
SOP 5 closed, all 17’350 remaining options exercised
Special offer to SOP 6 option holders in July 2010
– Goal: diminish number of outstanding options– 1’385 shares sold to employees at market value less CHF 15
Significant reduction of volatility in 2011/12; ended per 31.3.2012# outstandingoptions

31.03.2008

31.03.2009

31.03.201031.03.2011

31.03.2012

70’45766’20740’794

4’952

0max.

Closure ofSOP 5

SOP 626133. Financial Expense
2009/102010/11

Foreign exchange effect*(1’308)(4’263)

Other financial expense + income

(47)

(359)

Total(1’355)(4’622)

In CHF thousands Bank loans generated interest expense; loans reduced from CHF 8 million
per 30.9.2010 to CHF 0 million as at 31.03.2011
 Foreign exchange effect mainly driven by EUR and USD devaluation
 Foreign exchange hedging policy: 50% of net exposure on a rolling 3-9month basis* The foreign exchange effect is mainly due to currency volatility
during the time between booking and settling a receivable/payable.

27

3. Income Taxes
In CHF thousands / %2009/102010/11EBT

16’16750’365

Income taxes(5’635)(10’722)

Effective tax rate

34.9%

21.3%

In %

2009/102010/11

Expected income tax rate

25.7%

19.8%

Expected withholding tax rate*

6.2%

1.0%

Expected tax rate

31.9%

20.8%

Withholding
g tax for results from p
prior yyears

3.0%

Non-deductible expenses and other impacts
Effective tax rate*

0.5%34.9%

21.3%

 Reduction of the expected tax rate, mainly with increasing volume in low tax entities
28143. Net Profit
CHF millions% of sales

4520%

4018%

3516%

3014%

2512%

2010%

158%

106%

54%

Net profit
in CHF million

Net profit
in % sales

EPS dilutedin CHF

2%
06/07

07/08

08/09

09/10

2010/11

10.5

39.6

5.7%

13.4%

9.17

34.51
2009/1025.8

02009/10

Op. EBIT

8.3

1.4

5.6

10.5

SOP
inc./costs

Financialexpenses

Income tax

Net profit

5.4

4.6

10.7

2010/1160.4

2010/1139.6

 Net profit nearly quadrupled vs. prior year Net profit as a % of sales more thandoubled, resulting from lower tax and SOP
charge and despite FX losses

Op. EBIT

SOP
inc./costs

Financialexpenses

Income tax

Net profit29

3. Cash Flow Statement
In CHF thousands

2009/102010/11

Net profitN
Non-cashh ititems

10’532
7’676

39’643
11’855

Cash flow before changes in NWC
Cash flow from changes in net working capital

18’208
8’091

51’498(21’452)

Cash flow from operating activities
Cash flow from investing activities

26’299(13’275)

30’046(9’383)

Free cash flow

13’02420’663

Cash flow from financing
g activities((10’572))((23’209))

Change in cash and cash equivalents
Cash and cash equivalents at the end of the period

2’452
29’756(2’546)
26’61330153. Summary Financial Results■ Strong sales growth combined with high operating expenses leveragelead to an exceptionally high operational profitability in 2010/11■ Highg foreigno eg eexchangec a ge losses
osses fromo US
USD aandd EUR
U rateate dedevelopmente op e t■ Significantly decreased tax charges■ Solid balance sheet■ Strong cash flow
■ Reduced SOP volatility with clear termination date 31.3.201231

4. Strategy and OutlookFrançois
çGabella,, President & CEO16

4. Market Factors and Strategy■ We firmlyy believe in our Strategic
gDirection and the 4 drivers for ourbusiness remain unchanged■ We will continue to capitalize on thedrivers of LEM’s markets through■ Pure play components company■ Diversification across geographiesand markets

33

4. Areas of Focus
1.

Strengthen the organization:■ Organization in place■ Key managers on board

2.

Match market demand fluctuations■ Additional flexibility secured from our components suppliers■ Increase machine capacity

3.

Emphasis on innovation■ Increasing R&D efforts

4.

Focus on operational excellence
34174. Outlook■ Following a rally in first three quarters of 2010/11, we see a decline insales and in bookings for the start of the year 2011/12■ CoCorrections
ect o s oon tthee sosolara marketa et■ Compensation of over-booking and over-stocking in previousquarters■ For 2011/12 we expect■ Our drives business to remain strong■ A possible rebound of the renewable business later in the year
■ A ramp-up of production for various projects in the AutomotiveSegment■ Increasing competitive pressure■ The instability of exchange rates will continue to impact business35

5. Proposals Shareholders’ Meeting
Felix Bagdasarjanz,
Bagdasarjanz Chairman of the Board

18

5. Proposals for the Shareholder’s Meeting■

New dividend policy■■■

As a consequence of the company’s strong balance sheet and theconfident outlook for further profitable growth,
growth LEM will target toreturn significantly more than 50% of the consolidated net profit for
the year to the shareholders.
Consequently the Board of Directors will propose the payment of an
ordinary dividend of CHF 40.00 per share.

Termination of share buy-back program■

LEM has successfully bought back 10’000 shares for a total amountof CHF 4.0 million as of 31 March 2011. The Board of Directors
d id d tto tterminate
decidedi t ththe sharehbbuy-backb k program andd proposes tto
cancel the repurchased shares.

375. Proposals for the Shareholder’s Meeting■■■

The board of directors proposes to elect Andreas
Hürlimann (M Sc EE ETH) as a new member.
After more than ten years in industry, followed byseveral years as a managing partner at the global
technology & management consulting firm Arthur D.
Little as well as managing director at SpencerStuart
board & executive talent advisory, Andreas
Hürlimann works as an independent entrepreneur
and advisor.
Based on his experience and expertise in strategic
leadership and talent management he will be able tomake important contributions to the board.

3819Financial Calendar and Contact Details
Financial calendar
1 July 2011
6 July 2011
8 July 201111 July 2011
9 August 2011
8 November 201114 February 2012
6 June 201228 June 2012
For further information
Julius Renk
CFO
Tel: +41 22 706 12 50
Email: jrk@lem.com

Ordinary shareholders’ meeting for the year 2010/11
Dividend ex-date
Dividend record date
Dividend payment dateQ1 results
Q2 results
Q3 results
Year-end results and media and analyst conference
Ordinary shareholder's meeting for the year 2011/123920