RESULTS
FIRST HALF-YEAR 2017/18
1 APRIL 2017 TO 30 SEPTEMBER 2017

9 November 2017

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

5. CEO Succession Plan

Andreas Hürlimann

HOY / HOYA

2Results first half-year 2017/18, 9 November 2017

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

Performance

Perspectives

LEHN

SMI
Source: Swissquote••••3Global market shareof 50+% in Industry
Benchmark inservice and productquality
4 production sites
and 4 R&D centersin Europe and Asia
Sales of CHF 264.5
million in 2016/17•••

Market capitalizationof CHF 1.4 billion
Dividend yield >3.5%
in each year since
2009Continued sales
growth and strong
margins

Results first half-year 2017/18, 9 November 2017•••

Reinforced investment in innovation
Solid growth perspectives due tounderlying trends
Strong foothold inChina

1. Application: Mild Hybrid Car

12487
A
A HSN

1 AC/DC converter
2 Lithium-ion battery
3 Battery controller
4 DC/DC converter
5 12-volt battery
6 12-volt electrical distribution center
7 Electric motor/generator
8 Electric supercharger
43B

65

Mild hybrids are internal combustion engines
equipped with an electric drive. They employ
regenerative brake and some level of power
assist to the internal combustion engine.
Mild hybrids provide the benefits of hybrid
technologies, with less of the cost–weightpenalty of a full hybrid series-parallel
drivetrain.
In electrical mode, LEM’s HSN families
control the power transmitted by the inverterto the electrical motor. CAB families monitor
the transfer of the generated energy to thebattery pack while driving and braking with
best-in-class accuracy. LEM’s transducers
are compact, easy to integrate and theirsuperior accuracy allows the system tocontribute to reduce vehicle emission andimproves the hybrid car’s electrical range.

B CAB
Results first half-year 2017/18, 9 November 2017

1. Application: Induction Heating

1A
1
3

A

2

3

2

1 Power supply
2 Copper coil (inductor)
3 Work piece

Induction heating is used to bond, harden
or soften metals or other conductive
materials. It offers an attractive combinationof speed, consistency, control and energy
efficiency.
In a basic induction heating setup, a power
supply sends an AC current through aninductor, and the part to be heated is placed
inside the inductor. The inductor serves as
the transformer primary and the part to beheated becomes a short-circuit secondary.
An LF 510 transducer is built inside thepower supply.
The LF 510 allows a very accurate controlof the workpiece's temperature. It featureshigh immunity to external interferences
generated by adjacent currents or external
perturbations, and provides excellent
reliability to the induction heating process.

A LF 510

5Results first half-year 2017/18, 9 November 2017

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.

4531
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 regularmaintenance.

5 Energy management

6Results first half-year 2017/18, 9 November 2017

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

2The chargers use the HO 250-P (A) tomeasure the DC current while thephotovoltaic inverter (3) uses up to 7
transducers, such as CASRs, HLSRs andCTSRs to measure DC, AC and residual
currents.

A1A3A
1 Super charger

A

42 Solar panels
3 Photovoltaic inverters

54 Battery storage5 Grid7
Results first half-year 2017/18, 9 November 2017

1. Diverse Target Markets – Diversified Businesses

Businesses

Share of sales
H1 2017/18 Cyclicality

Green Cars
Conventional Cars

Macro drivers

Consumer durables Technology adoption (electrification)
19%

Fuel savings

High precision
Late cycle

Infrastructure investments

Mid cycle

Energy prices, subsidies

Early cycle

Industrial investment

Traction
Renewable energies& power supplies
81%

Drives & welding

Automotive segment
Industry segment
8Results first half-year 2017/18, 9 November 2017

Agenda1. LEM at a Glance

François Gabella2. Highlights and Business Review François Gabella
3. Financial Review

Andrea Borla

4. Strategy and OutlookFrançois Gabella

5. CEO Succession PlanAndreas Hürlimann

ATO

9Results first half-year 2017/18, 9 November 2017

2. Double-digit Sales and Profit Growth
In CHF millions, %10

H1 2017/18

H1 2017/18 vs.
H1 2016/17

Q2 2017/18 vs.
Q2 2016/17

Orders

156.8+18.5%+16.3%

Sales

152.2

+14.8%+16.1%

EBIT

31.9+15.9%+12.7%Net profit

26.5+19.7%+16.5%•Improving market conditions•

All but conventional car business contributed to strong sales growth•

Maintained robust profitability•

Ongoing strategy implementation•

Adding R&D capacities in all locations•

Adding production lines in Sofia and Beijing•

Investment in “Industry 4.0” automated production lines

Results first half-year 2017/18, 9 November 2017

2. Product Launches H1 2017/18
ITN 1300-s••••

1300 A high accuracy current transducer
Compact size
Low sensitivity to external magnetic fields
For medical application requiring higher current• Pipeline of product innovations to be launched in the second half of the year11Results first half-year 2017/18, 9 November 2017

Industry2. Net Sales
In CHF millions

In CHF millions, %H1 vs. H1300

Sales

asreported

Q2 vs.
atQ2
constantcurrencies

Industry

123.7+15.6%+16.6% +17.3%

Automotive

28.5+11.3%+13.2% +11.6%

Total

152.2

+14.8%+15.9% +16.1%

275
250
225
200
175150

•

125

•

10075

•

Positive economic sentiment translated intosales growthAsia, particularly China, driving sales
growth in most businesses
Negative currency impact on sales

5025013/14

1214/15

15/1616/17

HY 17/18

Results first half-year 2017/18, 9 November 2017

2. Quarterly View
In CHF millions

Book-to-bill ratio

80

75.9
70.0

70

67.2

66.9

65.7

65.1

76.3

1.2

66.8
1.0

61.5

62.7

60
0.8
50

0.6

40

30
0.4
20
0.2
100.0

0
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
2015/16 2015/16 2015/16 2015/16 2016/17 2016/17 2016/17 2016/17 2017/18 2017/18
Orders received (left-hand scale)Book-to-Bill ratio (right-hand scale)

13Sales (left-hand scale)

Results first half-year 2017/18, 9 November 2017• 5th consecutive quarterwith book-to-bill ratio
higher than 1• Uptrend of book-to-billratio pointing tocontinued positivemarket conditions• Shrinking inventories atcustomers translating
into short-term bookings

2. Industry Segment: Business Development
In CHF millions

EBIT in % of sales

240

25%

20020%

16015%

12010%
80

5%
40

00%
13/14

14

14/15

15/16

16/17

HY 17/18

Businesses and Applications
Drives & welding (H1 vs. H1: +9%)
• Higher sales in all regions• Increased investment in automation industries• Won market share
Renewable energies & power supplies (+25%)• High demand from solar energies in China andEurope; weak US business• High feed-in tariffs for Chinese solar energy
producer inflated sales in Q1 of 2017/18• Won market shareTraction (+23%)• Individual short term projects support growth• Energy metering, trackside and retrofit ordersin Europe and India• Light rail and subway projects in China
High-precision (+3%)• Pick-up in test & measurement market• HVDC projects in China completed; no followup projects

Results first half-year 2017/18, 9 November 2017

2. Industry Segment: Regional MarketsIn CHF millions, %SalesGrowth
H1 vs. H1Growth
Q2 vs. Q2

Europe47.0+11.5%+18.5%

N. America

13.1-2.0%-0.9%

Asia andROW

63.6+23.5%+21.2%

Total

123.7+15.6%+17.3%

EuropeNorth America
Asia and RoW
38%

51%

• Strong growth in China, India andGermany• China the single most important country
representing 34% of sales
11%

15

Results first half-year 2017/18, 9 November 2017

2. Automotive Segment: Business Development
In CHF millions

EBIT in % of sales

Businesses and Applications

30%

605525%504520%403515%302510%

20Green cars (HEV, EV) (H1 vs. H1: +63%)• Asian green cars market growing fast
• Strong commitment to green cars fromautomakers around the world• Increasing attractiveness of the market lures
new competitors and affects margins• Increasing consumer acceptance andgovernment support globally for green cars tounderpin future growth
Conventional cars (-18%)• Weaker US market linked to technology
change and lower US car sales

155%

10
50%

0
13/14

16

14/15

15/16

16/17

HY 17/18

Results first half-year 2017/18, 9 November 2017

2. Automotive Segment: Regional Markets
In CHF millions, %SalesGrowth
H1 vs. H1Growth
Q2 vs. Q2

Europe1.8-19.8%-25.7%

N. America

8.6-17.4%-30.7%

Asia andRoW

18.2+39.4%+51.8%

Total

28.5

+11.3%+11.6%

EuropeNorth America

6%Asia and RoW
30%

•64%

••

17

Sales numbers reflect destination
product shipment, not OEM
Performance driven by growth of green
cars business across all regions
Increased marketing and sales
capacities trade show participation

Results first half-year 2017/18, 9 November 2017

2. Business Development Bulgaria

Production
In CHF millions
40353025

Development of the site•••••18

Added 20% workshop surface
Added R&D capacities
Develop shared services for LEM Groupand build a local development team
299 FTE18 production lines+23.8%

2015

1050
13/14

Results first half-year 2017/18, 9 November 2017

14/15

15/16

16/17

HY 17/18

2. Business Development ChinaSales

Production•••

Market share of over 50%
Most important market with 34% oftotal sales

LEM China is the largest manufacturingsite of the Group: 59% of total
production (59% in financial year
2016/17)“Made by LEM” quality•
In CHF millions

In CHF millions

901808016070

14060

12050100

4080

3060

2040

102000
13/14

1914/15

15/16

16/17

HY 17/18

13/14

Results first half-year 2017/18, 9 November 2017

14/15

15/16

16/17

HY 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 Gabella

5. CEO Succession PlanAndreas Hürlimann

HLSR

20

Results first half-year 2017/18, 9 November 2017

3. Financial Highlights• Robust profitability• Gross margin of 45.6%, down from 46.3%• EBIT margin of 20.9%, up from 20.7%• Net profit of CHF 26.5 million, up from CHF 22.1 million• Support sales growth• Increased net working capital• Increased investment in innovation and in production capacities• Free cash flow of CHF 6.5 million, down from CHF 18.5 million

21

Results first half-year 2017/18, 9 November 2017

3. Income Statement
In CHF millions

22

H1
2016/17H1
2017/18

ChangeQ2
2016/17

Q2
2017/18

ChangeSales

132.6

152.2

+14.8%

65.7

76.3+16.1%

Gross margin

46.3%

45.6%

-0.7pt

46.8%

45.2%

-1.6ptOperating expense

-33.9

-37.5

+10.9%

-16.7

-18.6

+11.6%

EBIT

27.5

31.9+15.9%

14.1

15.9

+12.7%Net financial exp.

-0.1

+1.4

NM

-0.1

+0.8

NM

Income tax

-5.3

-6.8

+28.6%-2.7-3.5+29.5%Net profit

22.1

26.5

+19.7%

11.4

13.2+16.5%

Results first half-year 2017/18, 9 November 2017

3. Results by Quarter
In % of sales
24%

22%

20%

18%

16%

14%

12%
Q1
2015/16

Q2
2015/16

Q3
2015/16Q4
2015/16
EBIT (in %)23

Q1
2016/17

Q2
2016/17

Q3
2016/17

Q4
2016/17

Net Profit (in %)Results first half-year 2017/18, 9 November 2017

Q1
2017/18

Q2
2017/18

3. Gross Margin
In CHF millions

In % of sales

140

H1
2016/17H1
2017/18

Q2
2016/17

Q2
2017/18

61.4

69.4

30.8

34.5

46.3%

45.6%

46.8%

45.2%

48%

Gross margin47%

in CHF millions

46%

Gross margin

120

in % of sales
10045%
44%

80
43%

•60
42%
41%

40

•

Footprint optimization program affected
gross margin by -0.5% in H1 of 2017/18
Increasing share of cost competitive
production compensated continuous pricepressure

40%
2039%
038%
13/14

24

14/15

15/16

16/17

HY 17/18

Results first half-year 2017/18, 9 November 2017

3. SG&A
In CHF millions

In % of sales

6025%

SG&A
in CHF millions

50SG&A20%

in % of sales

H1
2016/17H1
2017/18

Q2
2016/17

Q2
2017/18

26.0

27.4

12.8

13.2

19.6%

18.0%

19.5%

17.3%

4015%

•3010%•

Sales growth achieved with stablestructure cost
SG&A in % of sales dropped by 1.6%pt

205%
100%

0
13/14

25

14/15

15/16

16/17HY 17/18

Results first half-year 2017/18, 9 November 2017

3. R&D Expense
In CHF millions

In % of sales
10%

16R&D
expense

14H1
2016/17H1
2017/18

Q2
2016/17

Q2
2017/18

7.9

10.1

3.8

5.4

5.9%

6.7%

5.8%

7.1%

in CHF millions
8%

R&D
expense12in % of sales
106%

••

84%

6•
42%
200%
13/14

26

•

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

14/15

15/16

16/17

HY 17/18

Results first half-year 2017/18, 9 November 2017

3. Financial Expense
In CHF millions

27

H1
2016/17H1
2017/18

Q2
2016/17

Q2
2017/18

Exchange effect

-0.0

+1.5

-0.0+0.8

Other financial expense &income

-0.0

-0.1

-0.0

-0.1

Total

-0.1

+1.4-0.1+0.8•

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 first half-year 2017/18, 9 November 2017

3. Income Taxes
H1
2016/17
16.8%
1.4%

H1
2017/18
18.3%
1.9%

Expected tax rate

18.2%

20.2%

Other differences

1.2%

0.3%

Effective tax rate

19.4%

20.5%

Expected income tax rate
Expected withholding tax rate•

28

Increased tax rate driven by higher profitability in the high tax location China

Results first half-year 2017/18, 9 November 2017

3. Net Profit
In CHF millions

In % of sales

H1
2016/17H1
2017/18

Q2
2016/17

Q2
2017/18

22.1

26.5

11.4

13.2

16.7%

17.4%

17.3%

17.3%

20%50Net profit
4518%

in CHF millions

Net profit

40in % of sales
16%

H1 2016/17

3514%

30-0.1
-5.3

27.5

22.1

12%

25EBIT

20

Financial expense

Net profit

H1 2017/18

15+1.48%
10-6.85013/14

29

Income tax

10%

14/15

15/16

16/17

6%

31.9

4%

EBIT

HY 17/18

Results first half-year 2017/18, 9 November 2017

26.5
Financial expense

Income tax

Net profit3. Balance Sheet Analysis

In CHF millions

31.3.201730.9.2017

Net working capital

40.6

56.9

Fixed assets

44.4

48.8

Noncurrent liabilities-7.4-6.9

Net operating assets

77.7

98.9

Net cash / (debt)

12.8

-20.1

Equity

90.5

78.7

60.7%

46.1%

Days of sales outstanding

7279

Days of inventory outstanding

8780

Days of payables outstanding

54

37

Equity ratio

30

Results first half-year 2017/18, 9 November 2017

3. Cash Flow Statement
H1
2016/17

In CHF millions

31H1
2017/18

Profit before taxes

27.4

33.3

Adjustment for noncash items and taxes paid

-1.6

-0.7

Cash flow from changes in net working capital

-2.9

-18.0

Cash flow from operating activities

22.9

14.5Cash flow from investing activities

-4.4

-8.0

Free cash flow

18.5

6.5

Cash flow from financing activities

-12.0

-5.6

Change in cash and cash equivalents

6.5

0.9

Cash and cash equivalents at the end of the period

20.1

13.9

Results first half-year 2017/18, 9 November 2017

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

5. CEO Succession Plan

Andreas Hürlimann

HAM32

Results first half-year 2017/18, 9 November 20174. Executing Strategy
Strategic priorities

Achievements in H1 2017/18

Increase technology leadership−
Reinforce multidisciplinary innovation team−
Increase number of product launches−
Constantly improve performance ofproducts
Increase efficiency−
Reduce product cost through costcompetitive sourcing and manufacturing−
Reduce cost of marketing, administration
and R&D−
Reduce complexity of organization
Increase production flexibility−
Develop systems to better forecast demand
fluctuations−
Improve supply chain management

−−−−
−

−
−
−

33

Increased R&D team by almost 20% andR&D spend by almost 30%
Inaugurated LEM Tech France SA

Increased production in cost effective
sites to 80% of total sales
Grew teams in Sofia and Beijing
Constant productivity increases

Maintained high delivery performance
Added production capacities andmanaged supply chain
Invested in new generation of “Industry4.0” automated lines

Results first half-year 2017/18, 9 November 2017

4. Outlook34•

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 Europe in Q3 (Christmasseason) and 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 around CHF 290 million• EBIT margin above 20%
Results first half-year 2017/18, 9 November 2017

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

5. CEO Succession Plan

Andreas Hürlimann

PCM35

Results first half-year 2017/18, 9 November 2017

5. Frank Rehfeld new LEM CEO as of 1 April 2018•

Since 1 January 2016 SVP Industry at LEM•

Key achievements: advancing technology leadership, driving growthand addressing new market segments•

Held multiple leadership positions in China at Siemens VDO, Hella andBrose•

Started his career in R&D and sales in Body Electronics at Siemens
VDO Germany•

Holds a Master degree in Electrical Engineering from University ofErlangen-Nürnberg, Germany•36

Age 49, German nationalResults first half-year 2017/18, 9 November 2017

Q&A

Shareholder Structure per 30 September 2017

Other
35.2%
Werner O. Weber andUeli Wampfler**
49.0%

LEM Board andManagement*
0.2%
J. Safra Sarasin
Investmentfonds AG
3.2%

38

Ruth Wertheimer / 7Industries Holding
12.4%

Results first half-year 2017/18, 9 November 2017

* Excludes shareholdings of Ueli Wampfler** Opting out clause introduced in LEM’s articlesof incorporation by the shareholders' meeting on
25 June 2010

Financial Calendar and Contact Details

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

8 February 201823 May 201828 June 2018
3 July 2018
5 July 2018

Third quarter results 2017/18
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

39Results first half-year 2017/18, 9 November 2017