Results
First half year 2016/17
1 April 2016 to 30 September 2016

10 November 2016

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

HAH32

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

Performance

Perspectives
LEHN

SMI

Source: Swissquote Global market shareof 50+% in Industry
 Benchmark in service
and product quality
 4 production sites inEurope and Asia
 Sales of CHF 261.5
million in 2015/16

 Market capitalizationof CHF 1.25 billion
 Dividend yield >4% ineach year since 2009
 Continued sales
growth and strong
margins Reinforced investment in innovation
 Solid growth perspectives due to underlying trends
 Strong foothold inChina
 EBIT margin target of15 to 20%3

1. LEM Applications:Super Charger Station for Electric Vehicles
A super charger (1) operates using several
400V DC chargers in parallel. 1MW would berequired 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 to reduceenergy peaks and to best use photovoltaic
energy.

A HO 250-P

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

1A3A
1 Super charger

A

42 Solar panels
3 Photovoltaic inverters

54 Battery storage
5 Grid4

1. LEM Applications:Hybrid-electric vehicles / electric vehicles
1 High voltage battery2 Charger

A DHAB V2

3 Motor controller
D CAB500

4 Electric motor and transaxle

D5 DC/DC converter

C HSN

1AB

2

D3A

C4AC
5

B HAH3

Battery management
The battery management system (BMS)
adjusts the charging process through thecombustion engine in a hybrid-electric vehicle
or gives the information for external charging
of the high-voltage battery (1) in an electricvehicle. CAB (D), DHAB (A) provide allnecessary current information at highaccuracy level to the BMS to improve theefficiency of the charging process.
Motor control
The motor controller (3) takes power from thebatteries and delivers it to the electric motor(4). The accelerator pedal gives the signals.
HAH3 (B), HSN (C) are integrated in theinverter modules (5) and provide current
signals at very high speed in order to assure
a smooth and jerk-free acceleration. 5

1. LEM Applications:
Magnetic Resonance Imaging (MRI)A ITL 900-T

2
1
67
A

MRI scanners use strong magnetic fields,
radio waves, and field gradients to form
images of the body. The specific magnetic
field is generated by 3 gradient amplifiers(x,y,z) (4) that enhance the current to supply
the gradient coils (1). The coils create aprecise magnetic field that will need to varydepending on the location.

24385

1 Gradient coils

5 Shim control

2 Magnet & shim

6 Radio frequency coil

3 Generator

7 Radio frequency amplifier

4 Gradient amplifier

8 CPU & display

One LEM ITL 900 transducer (A) is used ineach gradient amplifier to measure very
accurately the electrical current flowing
through the gradient coils, which generate themagnetic field. The accuracy of the current
measurement directly influences the qualityof the image.

6

1. LEM Applications:
MV/LV substationHigh voltage (HV) is adapted twice along its
way to consumers in order to simplify its
transmission and also in order to supply
applications with the right levels of voltage.

A ARTAThe last adaptation is realized inside a MV/LVsubstation adapting the voltage from medium
voltage (MV) to low voltage (LV).

534

2

1
1 Medium voltage (MV) side

4 Low voltage panel

2 Medium voltage switchgear

5 Smart meter3 Transformer

6 Low voltage (LV) side

6Within the MV/LV substation, the incoming
power flow from the MV side (1) is managed
by the MV switchgear (2) before being
converted by the transformer (3) into LV (6).
The smart meter (5) installed in the LV panel(4) measures the transformer's (3) health withthree independent ART (A) current sensors. Its
design allows safe commissioning of the smart
meter on an operating transformer.
71. Diverse Target Markets – Diversified Businesses
Businesses

Share of sales
H1 2016/17 Cyclicality

Green Cars
Conventional Cars

19%

Macro drivers

Consumer durables Technology adoption (electrification)
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

8Agenda
1. LEM at a Glance
2. Highlights and Business Review
3. Financial Review
4. Strategy and Outlook

LF201092. Robust Performance
In CHF millions, %H1 2016/17

H1 2016/17 vs.
H1 2015/16

Q2 2016/17 vs.
Q2 2015/16

Orders

132.3

+4.3%

+1.6%

Sales

132.6

+0.8%

-6.2%

EBIT

27.5

+10.6%-1.8%

Net profit

22.1+11.6%

+3.8%

■■■
■

In total stable sales, but mixed underlying sales performance
By business

By regions+Drives & welding, green cars

North America, rest of Asia-Traction, renewable energies China, Europe

Maintained robust margins
Launched five new products
Decision taken to increase significantly investment in R&D
10

2. Product Launches H1 2016/17 (1/2)
GHS
 LEM's first integrated primary sensor
in SO8 IC packaging; surface mounted
 Package and magnetic coupling innovations
 High immunity against external fields
 For low power drives in solar applications

IndustryDVM
 LEM patented insulating digital technology
 Improved accuracy and temperature stability
Industry 30 % lower profile - 25 % less volume - 54 % lighter Low sensitivity to magnetic fields for traction applications
ART LEM patented Rogowski loop technology
 Accuracy class 1 without calibration, rated insulation
voltage 1 kV CATIII, electrostatic shield, IP 67
 Flexible, thin, split-core For smart grid applications

Industry11

2. Product Launches H1 2016/17 (2/2)
LH Proprietary ASIC for Closed Loop Hall effect technology
 High performance, matching fluxgate performance High performance in broad temperature range
Industry Designed for drives and solar markets
HAH2
 2-phase motor control sensor
 High accuracy and speed Small, compact, light, easy to integrate Customer specific product for hybrid-electric vehicles

Automotive

12

2. Net Sales
In CHF millions

In CHF millions, %Sales

275
250
225
200

H1 vs. H1
asreportedQ2 vs.
Q2
at constantcurrencies

Industry

107.0

-3.0%

-4.5% -10.5%

Automotive

25.6+20.4%+18.2% +15.1%

Total sales

132.6

+0.8%

-0.8%-6.2%

175■150125■100■7550

Weakening Industry and strong growth inAutomotive businesses
Positive currency impact on sales
Q2 of 2015/16 sales with positive one-offeffects due to technical factors (going liveof new ERP system)

250
12/13*

13/14

14/15

15/16

HY 16/17
13* Restatement following IAS 19R application (pensions)2. Quarterly View
In CHF millions

Book-to-bill ratio

80

1.2
70.0

70

65.0

66.5

67.2

64.7
61.5

62.7

66.9

65.7
1.0

61.5

60
0.8
50

0.6

4030
0.4
200.2
10 Booking increased by
2.9% Q2 vs. Q1 Currency impact on sales
and bookings
 Market uncertainties andshrinking inventories atcustomers translating
into shorter termbookings
 Book-to-bill ratio stable ataround 1 for the pastquarters

0.00
Q1
14/15

Q2
14/15

Q3
14/15

Q4
14/15

Orders received

Q1
15/16

Q2
15/16

Sales

Q3
15/16

Q4
15/16

Q1
16/17

Book-to-Bill ratio

Q2
16/17

14

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

Growth
H1 vs. H1

Growth Q2
vs. Q2Europe

42.1

-4.9%

-16.9%

N. America

13.4+6.4%+4.2%

Asia andROW51.5-3.6%

-8.2%

Total

107.0

-3.0%

-10.5%

North America
Asia and RoW
39%

48%

12%

 Sales in China and most of Europeslowed China the single most important country
representing 31% of sales
 Repeated success with recently
launched product families; ramp-up ofproduction15

2. Industry Segment: Business Development
In CHF millions

Op. EBIT in % of sales

240

25%

20020%

160
15%
120
10%
80

5%
400%

0
12/13*

13/14

14/15

15/16

HY16/17

Businesses and Applications
Drives & welding (growth H1 vs. H1: +11%)
 Robust business in China Better market environment in Germany and USA
 Higher sales in all regions
Renewable energies & power supplies (-15%)
 Less pronounced seasonality than previously Slowing activity in Europe due to relocation ofproduction capacities to China
 Consolidation in the Chinese marketTraction (-13%)
 Strong sales in Germany and India Drop of sales in China
 Stable market share
High-precision (-5%)
 Upturn in US medical applications
 HVDC projects in China completed16* Restatement following IAS 19R application (pensions)2. Automotive Segment: Regional Markets
In CHF millions, %EuropeSales

Growth
H1 vs. H1

Growth Q2
vs. Q2Europe2.2+46.7%+72.2%

N. America

10.4+4.3%+3.1%

Asia andRoW

13.0+32.6%+19.1%

Total

25.6+20.4%+15.1%

North America
Asia and RoW
9%

51%
40%

 Performance driven by growth of green
cars business across all regions
 Managed growth with high productquality and delivery performance Won award from customer for overall
performance172. Automotive Segment: Business Development
In CHF millions

Op. EBIT in % of sales

30%

5045

Businesses and Applications
Conventional cars (H1 vs. H1: -2%) Weaker US market

25%403520%
3015%

2520

Green cars (HEV, EV) (+102%)
 Increasing consumer acceptance andgovernment support for green cars to underpin
future growth LEM well represented in newly launchedelectric and hybrid-electric vehicles

10%
15
105%
500%
12/13*

13/14

14/15

15/16

HY 16/17
18* Restatement following IAS 19R application (pensions)2. Business Development ChinaSales

Production■■■

Market share of over 50%
Most important market with 31% oftotal sales

LEM China stabilizes its #1 position aslargest manufacturing site of the Group(61% of total production, compared to64% in financial year 2015/16)“Made by LEM” quality■In CHF millions

In CHF millions
9018080

16070

1406012050

1004080

3060

2040

102000
12/13

13/14

14/15

15/16

HY 16/17

12/13

13/14

14/15

15/16

HY 16/17
19

2. Business Development Sofia (Bulgaria)
Production
15 production lines relocated fromJapan and Switzerland to Bulgaria
Headcount at 226 FTEIntroduced a local development
team and shared services



In CHF millions
30

Objectives of the siteDiversify LEM’s cost-competitiveproduction
Increase production capacity close toEuropean customers
Increase natural hedge of operations
Absorb major part of LEM’s future
growth25
20151050
13/14

14/15

15/16

Q1 16/1720

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

HLSR21

3. Financial Highlights
 Robust profitability
 Gross margin of 46.3%
 EBIT margin of 20.7%
 Net profit CHF 22.1 million
 Reduced operating expenses
 Free cash flow of CHF 18.5 million
 Equity ratio of 43.1% after dividend payment of CHF 39.9 million inJuly 201622

3. Balance Sheet Analysis
In CHF millions

31.3.2016

30.9.2016

Net working capital

42.3

44.1

Fixed assets

39.4

41.1

Noncurrent liabilities

-9.4

-11.5

Net operating assets

72.3

73.7

Net cash / (debt)

13.6

-8.0

Equity

85.9

65.8

61.3%

43.1%

Days of sales outstanding

6970

Days of inventory outstanding

7276

Days of payables outstanding

4543

Equity ratio23

3. Income Statement
In CHF millions

H1
2015/16

H1
2016/17

ChangeQ2
2015/16

Q2
2016/17

ChangeSales

131.6132.6

+0.8%

70.0

65.7

-6.2%

Gross margin

45.5%

46.3%

+0.8pt

46.0%

46.8%

+0.9ptOperating expense

-35.0

-33.9

-3.3%

-17.8

-16.7

-6.5%

EBIT

24.9

27.5

+10.6%

14.4

14.1

-1.8%

Net financial exp.

0.5

-0.1

--0.0

-0.1

-Income tax

-5.5

-5.3

-3.7%

-3.4

-2.7

-21.6%Net profit

19.8

22.1

+11.6%

10.9

11.4

+3.8%

24

3. Results by Quarter
In CHF millions

In % of sales
24.1%

8025%

23.5%
22.1%

70

20.8%

60

16.8%
16.5%20.0%
20%

19.1%
17.4%

16.2%

16.2%

19.6%

17.1%

18.0%
50

21.5%

20.5%

17.3%
16.1%

15.6%

15%

14.4%

4010%

30

205%
10

00%
Q1
14/15

Q2
14/15
Orders received

Q3
14/15

Q4
14/15
Sales

Q1
15/16

Q2
15/16
Op. ROS

Q3
15/16

Q4
15/16

Q1
16/17

Q2
16/17

Net Profit in % of sales25

3. Gross Margin
In CHF millions

In % of sales
48%

14047%

Gross margin

H1
2015/16

H1
2016/17

Q2
2015/16

Q2
2016/17

59.9

61.4

32.2

30.8

45.5%

46.3%

46.0%

46.8%

in CHF millions

12046%

Gross margin

10045%

in % of sales

44%

80

43%
60

42%
41%

4040%
20

 Positive impacts on gross margin due torelocation to cost-competitive
manufacturing sites and optimized
sourcing and foreign exchange
development
 Continuous price pressure

39%
38%

0
12/13*

13/14

14/15

15/16

HY 16/17
26* Restatement following IAS 19R application (pensions)3. SG&A
In CHF millions

In % of sales
25%

60

SG&A
in CHF millions

50

H1
2015/16

H1
2016/17

Q2
2015/16

Q2
2016/17

27.8

26.0

14.3

12.8

21.1%

19.6%

20.5%19.5%

20%

SG&A
in % of sales

4015%
3010%
205%

 One-off cost in H1 of 2015/16 due toOrganizational changes, introduction of
new ERP release, build-up of European
logistics and distribution platform Ongoing recruitment in Beijing and Sofia

1000%
12/13*

13/14

14/15

15/16

HY 16/17
27* Restatement following IAS 19R application (pensions)3. R&D Expense
In CHF millions

In % of sales

167%

146%

R&D
expenseH1
2015/16

H1
2016/17

Q2
2015/16

Q2
2016/17

7.2

7.9

3.5

3.8

5.5%

5.9%

5.0%

5.8%

in CHF millions
125%
10R&Dexpensein % of sales

4%
83%
6

 Ongoing renewal of product range
 Develop new technologies to tap newmarkets

2%
41%

20%

0
12/13*

13/14

14/15

15/16

HY 16/17
28* Restatement following IAS 19R application (pensions)3. EBITIn CHF millions

In % of sales

6026%
24%

EBIT
in CHF millions

50

H1
2015/16

H1
2016/17

Q2
2015/16

Q2
2016/17

24.9

27.5

14.4

14.1

18.9%

20.7%

20.5%

21.5%

22%
20%
40

EBIT
in % of sales

18%
30

16%
14%

2012%

 Operational profitability increased Continued cost control and productivity
improvements One-time operating expenses in H1 2015/16

10%108%06%
12/13*

13/14

14/15

15/16

HY 16/1729* Restatement following IAS 19R application (pensions)3. Financial Expense
In CHF millions*Q2
2015/16

Q2
2016/17

-0.0

0.1

-0.0

-0.1

-0.0

-0.1

-0.0

0.5

-0.1

-0.0

-0.1

H1
2015/16

H1
2016/17

Exchange effect*

0.5

Other financial expense &incomeTotalForeign exchange hedging policy (unchanged)
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.

30

3. Income Taxes

Expected income tax rate
Expected withholding tax rate
Expected tax rate
Other differences
Effective tax rate

H1
2015/16
19.2%
2.1%
21.2%
0.6%
21.8%

H1
2016/17
16.8%
1.4%
18.2%
1.2%
19.4%

 Lower tax linked to changed composition of revenues and profits313. Net Profit
In CHF millions

In % of sales

50

H1
2015/16

H1
2016/17

Q2
2015/16

Q2
2016/17

19.8

22.1

10.9

11.4

15.1%

16.7%

15.6%

17.3%

20%

Net profit
in CHF millions

4518%

40

Net profit
in % of sales

16%

+0.5

35
14%

30

H1 2015/16
-5.5

24.9
25

19.8

12%
EBIT

20

Financial expense

Income tax

Net profit

10%

15

H1 2016/17

8%

-0.1

10-5.36%

54%012/13*

13/14

14/15

15/16HY 16/17

27.5

EBIT

22.1

Financial expense

Income tax

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

H1
2015/16

H1
2016/17

Profit before taxes

25.3

27.4

Adjustment for noncash items and taxes paid

-4.8

-1.6

Cash flow from changes in net working capital

-20.0

-2.9

Cash flow from operating activities

0.6

22.9

Cash flow from investing activities

-2.0

-4.4

Free cash flow

-1.4

18.5

Cash flow from financing activities

-6.1

-12.0

Change in cash and cash equivalents-7.4

6.5

Cash and cash equivalents at the end of the period

13.2

20.1
33

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

ATO

34

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 businesses35

4. Executing Strategy
Strategic priorities
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

Achievements in H1 2016/17
■
■
■

■
■
■

■
■
■

Launched 5 new products
Increased focus on new technologies
Decision taken to increase investment
in R&D
Increased production in cost effective
sites to 79% of total sales
Across the board productivity increases
Started to develop shared services inSofia
Maintained high delivery performance
Added production capacity forsuccessful products
Initiated program to reduce lead times
36for complex products

4. Extend LEM’s leadership position and accelerate growth■■

Significantly increase investment in R&D■ Focus on new technologies in areas of ASIC, embedded
software, Internet of Things■ Enhance R&D capacities in Beijing and Sofia■ Establish new R&D center in the Lyon/Grenoble* (F) hightech cluster
Geneva to remain R&D hub* Decision taken after evaluation of several locations
 Strong in relevant competencies
 High-tech cluster with presence of major players and strong research labsand universities
 Cultural and geographical proximity37

4. Outlook■

Expectation for the full financial year 2016/17■ Sales of CHF 260 – 270 million■ EBIT margin around 20%■

Sales trends for H2 2016/17■ Steady development of industry businesses, Automotive
businesses to keep the momentum going■ Seasonality to impact sales in Europe in Q3 (Christmasseason) and in China in Q4 (Chinese New Year)■ Customers to maintain pressure on prices and short termordering policy38

Q&A39Financial Calendar and Contact Details
Financial calendar
The financial year runs from 1 April to 31 March

16 February 201723 May 2017*29 June 2017*
4 July 2017*
6 July 2017*

Third quarter results 2016/17
Year-end results 2016/17
Ordinary General Meeting of Shareholders for thefinancial year 2016/17
Dividend ex-date
Dividend payment date

* New dates

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

40