Results
First half year 2014/15
1 April 2014 to 30 September 2014

13 November 2014

Agenda1. LEM at a Glance
2. Highlights and Business Review
3. Financial Review
4. Strategy and Outlook2

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

Performance

Perspectives

 Continued sales
growth and margin
improvements
 Dividend yield >5% ineach year since 2009

 Reinforced investment in innovation
 Solid growth perspectives due to underlying trends
 Strong foothold inChina
 EBIT margin target of
15 to 20%Source: Swissquote Global market shareof 50% in Industry
 Benchmark in service
and product quality
 4 production sites inEurope and Asia
 Sales of CHF 245.6
million in 2013/14

3

1. LEM Applications: Robot
Industrial robots require movements in 3-6
axes in order to move the end of the arm inevery position. Applications are accomplishedwith high endurance, speed and precision.
The robot arm is moved by electrical motors:
usually one motor for each axis. The power
inverter (2) the motor (3) from one position tothe next and stops precisely in position. To doso, an accurate measurement of the current
is needed.

A CASR
1 Control Unit
2 Inverter
3 MotorTransducers (A) are used to measure thecurrent and, together with the position
sensor, they are responsible for controllingthe fast movement and the precision to stop
the arm in the new position.
4

1. LEM Applications:
Formula 1 Energy Recovery System

4A

HC5 FW
5
6
1

1 Pedals (accelerator, break)
2 Turbocharger
3 MGU-K
4 MGU-H
5 Battery
6 ERS break pressure valve
7 Engine control unit

37 A

22014 Formula 1 cars include a revised energy
recovery system (ERS). Engine specificationsimpose a 440 kW turbocharged (2) engine
combined with an ERS (3, 4) providing
additional 120 kW for over 30 seconds per lap.
The ERS uses two distinct energy sources toprovide the extra power: kinetic energy frombraking and thermal energy from the exhaustgases. The energy is converted into electricity.
The electricity is fed into a battery (5) andcontrolled by the ERS control unit (7).
LEM's HC5 FW (A) family of automotive current
transducers measure the electric currents
generated by each source, and allow thecontrol unit to make the best decision of howand where to direct the available power.
5

1. LEM Applications: Locomotive

A LTC 100

B DVL

1A5A
31

B

Additional inverters are used for heating, airconditioning and ventilation. Transducers (A)are used to measure the motor currents inorder to optimize their efficiency.

42
4Inverters (3) are used to transform the energy
into the right voltage and current to drive themotors (4). Voltage and current transducers(A,B) are used to measure the current and thevoltage on the secondary side of thetransformer (2) and on the DC-side. Specialdifferential transducers are implemented at
the secondary side of the transformer todetect any leakage current flowing in the train.

1Pantograph

2 Transformer
43 Inverters
4 Motors
5 Auxiliary inverter61. LEM Applications:
Sewing Machine/Embroidery Machine47

Accuracy and speed of the table movements, aswell as the correct, accurate and regulated
rotation speed of the main axis for the needles
are directly linked to the currents provided to themotor (5) through a servo drive (1). The working
table (7) is moving in horizontal X and Y
directions thanks to linear motors (6) controlled
by two position servo drives (1).

352

661A

1 Servo drives
2 Control unit
3 Head4 Main axis
5 Motor6 Linear motors
7 Working table

Full servo control allows for speed and precision
in industrial sewing/embroidery machines.

A HLSR 10-P

Current transducers (A) are used in each servo
drive to measure two of its three phase output
AC currents. Their accuracy, high performance,high temperature working environment, lowtemperature drift contribute to a very stable,
quick, reactive, reliable and precise system.
71. Diverse Target Markets – Diversified Businesses
Businesses

Share of sales
H1 of 2014/15

Green Cars
Conventional Cars

14%

High precision
Traction
Renewable energies& power supplies

Cyclicality

Macro drivers

Consumer durables

Technology adoption
Fuel savings

Late cycle

Infrastructure investments

Mid cycle

Energy prices, subsidies

Early cycle

Industrial investment

86%

Drives & welding

Automotive segment
Industry segment

8

Agenda1. LEM at a Glance
2. Highlights and Business Review
3. Financial Review
4. Strategy and Outlook9

2. Highlights H1 of 2014/15: Strong EBIT Margin
In CHF millions, %H1 2014/15

H1 2014/15 vs.
H1 2013/14

Q2 2014/15 vs.
Q1 2014/15

Orders

126.6

+1.9%

-4.4%

Sales

131.5+3.6%

+2.2%

EBIT

29.6-2.1%+18.4%Net profit

21.5-12.4%

+0.4%

■

Effective strategy execution turning into tangible results■

Sales growth across most businesses and strong EBIT margin above target
range of 15-20%■

Expanded activities in Bulgaria■Continuing growth in China■

Asia the biggest region for LEM in terms of sales, for the first time102. Product Launches H1 2014/15
HO 150 NP Proprietary ASIC
 High performance, over-current detection
 Compact size
 Low costIndustry

HO 250-P
 Proprietary ASIC
 High performance, over-current detection
 Replaces older products

Industry

HAH3 DR S02
 3-phase transducer
 Improved performance at lower cost
 For drive applications in hybrid cars

Automotive
11

2. Net Sales
In CHF millions
In CHF millions, %300

Sales

H1 vs. H1
asreported

275
250
225200175

Industry

113.6

+3.4%

+6.8%

+1.0%

Automotive

17.9

+5.0%

+9.7%

+9.8%

Total sales

131.5

+3.6%

+7.2%+2.2%■

150125■10075■50

Q2 vs.
Q1at constantcurrencies

Sustained growth from Industry businesses;
increased market share
Growth in Automotive businesses
supported by improved performance in thegreen cars markets
Negative currency impact on sales

250
10/11

11/12

12/13*

13/14

HY 14/15
12* Restatement following IAS 19R application (pensions)2. Quarterly View
In CHF millions

Book-to-bill ratio
1.2

80
70
63.1
60

61.8
61.1
55.0

66.5

65.0

65.1
57.6

55.8

1.0

61.1
0.8

500.6

4030

 Booking down by 4.4%
Q2 vs. Q1
 Seasonal low inbookings
 Customers’ requested
lead times and stocklevels continue to trend
downwards

0.4
200.2
100.00
Q1
Q2
Q3
Q4
Q1
12/13 12/13* 12/13 12/13* 13/14

Orders received* Restatement following IAS 19R application (pensions)

Q2
13/14

Q3
13/14

Sales

Q4
13/14

Q1
14/15

Q2
14/15

Book-to-Bill ratio13

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

Growth
H1 vs. H1

GrowthQ2 vs. Q1

Europe

48.6

+2.2%

+5.7%

N. America

11.8-17.0%+7.3%

Asia andRoW

53.1+10.7%

-4.3%

Total

113.6+3.4%+1.0%

North America
Asia and ROW
43%

47%

10%

 Growth and market share gains
across most businesses Japan: local industry’s export-ledgrowth Asia the most important sales region
 Success with recently launchedproducts
14

2. Industry Segment: Business Development
In CHF millions

Op. EBIT in % of sales
30280
25240

20200

160

15120
1080

Businesses and Applications
Drives & welding (growth H1 vs. H1: +1%)
 Sustained transfer of customers’ production toAsia
 Weakening trend in Europe and North America
Renewable energies & power supplies (-3%)
 Growing investments in renewable energies inChina, India and Japan
 Support from offshore wind projects in EuropeTraction (+35%)
 High activity in light rail applications
 Success with high speed train projects in China
and with energy metering in Europe

540

High-precision (-26%)
 Weak demand across all businesses
00
10/11

11/12

12/13*

13/14* Restatement following IAS 19R application (pensions)

HY 14/15

15

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

Growth
H1 vs. H1

GrowthQ2 vs. Q1Europe1.2-14.5%+17.5%

N. America

9.1-2.2%+9.2%

Asia andRoW

7.7+19.7%

+9.1%

Total

17.9+5.0%+9.7%

North America
Asia and Rest of World

9%

38%

Focus on Asian and North Americanmarkets
 Conventional cars business driving
performance New projects in green cars
businesses in China


53%
16

2. Automotive Segment: Business Development
In CHF millions

Op. EBIT in % of sales

402535
2030

25

1520

Businesses and Applications
Conventional cars (growth H1 vs. H1: +2%)
 Consistent battery management business Some growth in USA, China and Japan
Green cars (HEV, EV) (+20%)
 Pick-up of activity with hybrid carapplications
 Successes with new products

1015105500
10/11

11/12

12/13*

13/14

HY 14/15
17* Restatement following IAS 19R application (pensions)2. Business Development China
ProductionSales■■

Market share of over 50%
Most important market with 27% oftotal sales■■

LEM China stabilizes its #1 position aslargest manufacturing site of the Group(58% of total production, compared to
56% in financial year 2013/14)“Made by LEM” quality

In CHF millions

In CHF millions

1606014050120401003080602040
102000
10/11

11/12

12/13

13/14

HY 14/15

10/11

11/12

12/13

13/14

HY 14/15
18

2. New Production Site in Sofia (Bulgaria)
 Objectives of the new site Diversify LEM’s cost-competitive production
 Increase production capacity close toEuropean customers
 Increase natural hedge of operations
 Absorb major part of LEM’s future growth Achievements
 Investment of CHF 2 million into new site
 Production started 1 October 2013
 Delivery approvals from customers received
 Expansion since October 2013
 Headcount from 27 to 96
 Production lines from 1 to 3
 30 products in production
 Production represents 4% of global output in Q2 of 2014/15

19

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

20

3. Financial Highlights H1 of 2014/15
 Strong balance sheet
 Dividend payment of CHF 45.6 million to shareholders in July 2014
 Equity at CHF 73.8 million, equity ratio 52.7% (57.3% per 30.9.2013)

 Increase in net working capital of CHF 2.3 million (since 31.3.14) toprepare movement of production lines
 Robust profitability
 Gross margin of 46.3% (46.5% in H1 of 2013/14)
 EBIT margin of 22.5% (23.8% in H1 of 2013/14)
 Net profit CHF 21.5 million (24.5 million in H1 of 2013/14)

 Strong free cash flow of CHF 21.6 million(CHF 10.9 million in H1 of 2013/14)

21

3. Balance Sheet Analysis
In CHF millions

30.9.201431.3.2014

Net working capital

41.0

38.7

Fixed assets

38.4

37.8

Noncurrent liabilities

-6.9

-6.9

Net operating assets

72.5

69.6

Net cash / (debt)

1.3

24.6Equity

73.8

94.2

52.7%

65.1%

Days of sales outstanding

6865

Days of inventory outstanding

8380

Days of payables outstanding

4549

Equity ratio22

3. Income Statement
In CHF millions

H1
2013/14

H1
2014/15

ChangeQ1
2014/15

Q2
2014/15

Change

Sales

126.9

131.5

+3.6%

65.0

66.5

+2.2%

Gross margin

46.5%

46.3%

-0.1pt

45.3%

47.4%

+2.1ptOperating expense

-28.7

-31.3

+9.0%

-15.9

-15.4

-2.8%

EBIT

30.2

29.6

-2.1%

13.6

16.0

+18.4%Net financial exp.

-0.7

-1.8

+144%

+0.1-2.0

N/A

Income tax

-4.9

-6.3

+27.3%-3.0-3.3+12.3%Net profit

24.5

21.5

-12.4%

10.7

10.8

+0.4%

23

3. Results by Quarter
In CHF millions

In % of sales
30%

80
65.1
70
63.1

61.8

61.1

60

55.0

57.6

55.8

61.1

65.0

66.5

25%

20%

50
15%
40
10%
30
5%

20

 Sixth consecutive
quarter with EBIT
margin above 20%
 Positive volume
leverage effect onmargins
 Q4 of 2012/13 included
a restructuring charge ofCHF 1.9 million

0%100-5%
Q1
12/13

Q2
12/13*

Q312/13Orders received

Q4
12/13*

Q1
13/14

Sales

Q2
13/14

Q3
13/14

Op. ROS

Q4
13/14

Q1
14/15

Q2
14/15

Net Profit in % of sales
24* Restatement following IAS 19R application (pensions)3. Gross Margin
In CHF millions

In % of sales

14048%
47%

120

100

Gross margin46%

in CHF millions

45%

Gross margin

H1
2013/14

H1
2014/15

Q1
2014/15

Q2
2014/15

59.0

60.9

29.4

31.5

46.5%

46.3%

45.3%

47.4%

in % of sales
44%

80

43%
60

42%
41%

4040%
20

 Gross margin in line with last years'
margin, in accordance with seasonal sales
mix Q2 impacted by increased volumes,continued cost reductions

39%
038%
10/11

11/12

12/13*

13/14

HY 14/15
25* Restatement following IAS 19R application (pensions)3. Operating Expense
In CHF millions

In % of sales
40%

70

Operatingexpense

60
30%
50

H1
2013/14

H1
2014/15

Q1
2013/14Q2
2014/15

28.7

31.3

15.9

15.4

22.7%

23.8%

24.4%

23.2%

in CHF millions

Operatingexpensein % of sales

4020%
30

2010%
100 Higher administration expense driven byLEM Bulgaria development and strategyconsultancy
 Ongoing strict cost control measures
 Operating expense as a percentage ofsales remain on low levels

0%
10/11

11/12

12/13*

13/14

HY 14/15
26* Restatement following IAS 19R application (pensions)3. R&D Expense
In CHF millions

In % of sales

168%

R&D
expense14126%

10H1
2013/14

H1
2014/15

Q1
2014/15

Q2
2014/15

7.3

7.4

3.9

3.5

5.8%

5.6%

6.0%

5.3%

in CHF millions

R&D
expensein % of sales

84%

642%

2

 Maintained high investment in R&D for
both segments
 Ongoing renewal of product range withfocus on optimized cost, higher
accuracy, easier integration intocustomers’ systems and new functions

0%

0
10/11

11/12

12/13*

13/14

HY 14/15
27* Restatement following IAS 19R application (pensions)3. EBITIn CHF millions

In % of sales

60

26%
24%

50

40

EBIT

22%

in CHF millions

20%

EBIT
in % of sales

H1
2013/14

H1
2014/15

Q1
2014/15

Q2
2014/15

30.2

29.6

13.5

16.0

23.8%

22.5%

20.8%

24.1%

18%
3016%
14%

2012%

 Continued cost control and high grossmargins Profitability above target range of 15 to20%10%

108%
06%
10/11

11/12

12/13*

13/14

HY 14/15
28* Restatement following IAS 19R application (pensions)3. Financial Expense
In CHF millions

H1
2013/14

H1
2014/15

Q1
2014/15

Q2
2014/15

Exchange effect*

-0.7

-1.8

+0.1

-2.0

Other financial expense &income

-0.0

+0.0

+0.0

+0.0

Total

-0.7

-1.8

+0.1

-2.0



H1 2014/15 exchange effect mainly driven by hedge losses following
appreciation of CNY and USD vs. CHF

Foreign exchange hedging policy*EUR: 100% of net exposure 12 months forward

USD: 100% of net exposure 12 months forward

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.

29

3. Income Taxes
H1
2013/14

H1
2014/15

Expected income tax rate
Expected withholding tax rate
Expected tax rate

14.1%
2.2%
16.3%

19.7%
2.6%22.3%

Other differences

0.4%

0.3%

Effective tax rate

16.7%

22.6%

 Higher expected tax rate due to the decision to abandon the HNTE
status in China (+3.2%-pts for half year) Expect positive evolution in H2 of 2014/15 linked to lower withholding
tax rate in China
30

3. Net Profit
In CHF millions

In % of sales
20%

50

Net profit
in CHF millions

4518%

Net profit
in % of sales

40

H1
2013/14

H1
2014/15

Q1
2013/14Q2
2014/15

24.5

21.5

10.7

10.8

19.3%

16.3%

16.5%

16.2%

16%

H1 2013/143514%

30-0.7

-4.9

30.2

24.5

12%

252010%EBIT

Financial expense

Income tax

Net profit

H1 2014/15

158%

-1.8

106%

54%

0
10/11

11/12

12/13*

13/14

HY 14/15

29.6

EBIT-6.3
21.5

Financial expense

Income tax

Net profit
31* Restatement following IAS 19R application (pensions)3. Cash Flow Statement
In CHF millions

2013/142014/15

Profit before taxes

29.5

27.8

Adjustment for noncash items and taxes paid

-5.4

4.0

Cash flow from changes in net working capital

-8.6

-6.6

Cash flow from operating activities

15.525.2

Cash flow from investing activities

-4.6

-3.6

Free cash flow

10.9

21.6

Cash flow from financing activities

-25.3

-33.6

Change in cash and cash equivalents

-14.3

-12.0

Cash and cash equivalents at the end of the period

12.8

13.3
32

Agenda1. LEM at a Glance
2. Highlights and Business Review
3. Financial Review
4. Strategy and Outlook33

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 marketsthrough pure play components company
 diversification across geographiesand businesses34

4. Executing Strategy
Strategic priorities
Increase technology leadership■ Reinforce multidisciplinary innovation team■ Increase number of product launches■ Constantly improve performance of products
Increase efficiency■ Reduce product cost through costcompetitive sourcing and manufacturing■ Reduce complexity of organization
Increase production flexibility■ Develop systems to better forecast demand
fluctuations■ Improve supply chain management

Achievements in H1 2014/15■■■■■■Launched 3 new products
Started development &engineering team in Sofia,
Bulgaria
Doubled activities in Sofia,
Bulgaria
ERP upgrade in progress
Increased production capacity
Maintained high level offlexibility and on-time delivery
35

4. Outlook■For H2 of 2014/15 we expect■ Slowing activity in Industry segment due to seasonality in thesolar business during the winter months, weaker Q3 due tofewer working days and slowing activity in Europe■ Continuing sales growth in the Automotive segment due tostart of production of new platforms■ High number of product launches■ Continuing product price pressure across all businesses■Financial year 2014/15 outlook■ Sales of CHF 250 to 260 million■ EBIT margin above 20%
36

Q&A37

Financial Calendar and Contact Details
Financial calendar
17 February 2015 Third quarter 2014/15 results
4 June 2015
Year-end 2014/15 results
25 June 2015
Ordinary Shareholders’ Meeting for thefinancial year 2014/15
Dividend ex-date
30 June 2015
Dividend payment date2 July 2015

For further information
Julius Renk, CFO
Phone: +41 22 706 12 50
Email: investor@lem.com

38