Results
Q4 of 2013/14
Financial Year 2013/14
Media and Analyst Conference
Zurich, 4 June 2014

Agenda1. 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 to Shareholders Meeting

Andreas Hürlimann

2

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

Performance

Perspectives

 Global market shareof 50% in Industry
 Benchmark in service
and product quality
 4 production sites in
Europe and Asia
 Sales of CHF 245.6
million in 2013/14

 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 in
China
 EBIT margin target of
15 to 20%3

1. LEM Applications: Hybrid Loader
A HTFS 800-P

6

1

2

3

4
4

1 Diesel engine
2 Generator
3 Inverter
4 Electrical motor
5 Transmission
6 BatteryA

A hybrid loader boosts fuel economy by up to
25%, increases the system performance and ishalf as loud as a conventional loader.
The special internal combustion engine (1)drives an AC generator (2) for the bucket
moves. The generator converts the engine's
mechanical energy into electrical energy, whichis converted by the inverter (3) to supply theelectrical motor (4) to drive the transmission andthe wheels.
The currents are measured with current
transducers (A) to control the inverter. The
accuracy of the current measurements allows to
maximize the motor torque and overall motor
efficiency. The transducers also enable thecontrol system to sense over-current situations
signaling a potential defect.
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

3
7 A

2

2014 Formula 1 cars include a revised energy
recovery system (ERS). Engine specifications
impose 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 how
and where to direct the available power.
5

1. LEM Applications: Roller Coaster
Roller coasters use less and less traditional
chain lift. The ride is maintained by gravity.

1
2

The initial acceleration energy is provided via
one or several linear motors (4), catapults, orother mechanisms replacing hydraulic or
pneumatic power. In case of linear motors the
propulsion of the carts (1) along the track atvarious stages is managed using electromagnetic fields that require high currents.

4

3
5

A

1 Train / cart
2 Drive tire

A LF 1005-S

3 Inverter for drive tire
4 Linear motor
5 Inverter for linear motor and control unit

These electrical linear motors enable the various
torques and accelerations in time and duration.
The motors are controlled by electrical drives via
the currents supplied. The current transducers(A) give the feedback to the control loop (5) inorder to ensure the right accelerations independently of the load and friction of the train.
61. LEM Applications:
Sewing Machine/Embroidery Machine
4
7

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).

3
5
2

6

6
1

A

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
2013/14

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

François Gabella

2. Highlights and Business Review

François Gabella

3. Financial Review

Julius Renk

4. Strategy and Outlook

François Gabella

5. Proposals to Shareholders Meeting

Andreas Hürlimann

92. Highlights 2013/14: Record Profitability
In CHF million, %2013/142013/14 vs.
2012/13*

Q4 vs. Q3 2013/14

Orders

246.4

+6.9%

+8.2%

Sales

245.6

+4.5%

+6.1%

EBIT

55.7

+36.5%+14.3%Net profit

45.6+40.9%+45.3%■

All-time highs for EBIT margins and net profit■

Solid sales growth in a fragile economic environment■

Ramp-up of production in Sofia, Bulgaria, on track■

Strong price and competitive pressure globally■

Constant high number of product launches

10* Restatement following IAS 19R application (pensions)2. Eight Product Launches 2013/14 (1/3)
ITL 1200-T

RT 500TOP 90-S
confidential

 Extended current range from 900 to 1200 A
 High accurate fluxgate closed loop technology
 Accuracy is expressed in ppm
 Designed for latest versions of MRI

Industry Rogowski coil measurement technology
 Split-core current sensor for easy installation
 High accuracy regardless the position of the primaryconductor by eliminating coil-clasp discontinuity
 High immunity against surrounding perturbations

Industry

 Split-core current sensor for easy mounting Cost effective solution for AC non-contact isolated
current measurement
 Ideal tool for use with power meters, energy
sub-metering in industrial applications

Industry11

2. Eight Product Launches 2013/14 (2/3)
HO xx-P

HFWS
confidential

DVL Voltage Output

 ASIC with twice improved accuracy New functionalities: over-current detection, fault
reporting function
 PCB-mount design and contactless measurement
 Big hole for cable Customer specific transducer
 Higher current range launching (125 A)
 Communication with microcontroller andserial interface
 Very small size for the current measured
 New technology to create digital isolation
 Improved sensitivity to external magnetic fields
 Robust design for harsh environments intraction applications
 Voltage output

Industry

Industry

Industry12

2. Eight Product Launches 2013/14 (3/3)
HC5 FW Open loop transducer
 For inverters, starter generators, converters
 Improved performance at lower price

Automotive

DHAB V2
 Cost effective management of lithium batteries
 For electric and hybrid vehicles
Automotive13

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

Sales

YoY
as
reported

275
250
225
200
175

Industry

211.1

+5.6%

+7.9%

+8.6%

Automotive

34.6

-1.2%

+2.9%

-7.2%

Total sales

245.6

+4.5%

+7.1%

+6.1%

■

150
125

■

100
75
50

Q4 vs.
Q3
at constantcurrencies■

Growth contribution from Industry
businesses
Disappointing sales performance inAutomotive businesses due to below
expectation growth in green cars market
Negative currency impact on sales

25
0
09/10

10/11

11/12

12/13

13/14
14

2. Quarterly View
In CHF millions

Book-to-bill ratio
1.2

80.0
70.0
60.0

67.7

63.1
57.9 55.0

61.1

55.7

61.8
55.0

65.1
57.6

61.1

1.0

55.8
0.8

50.0

 Stable book-to-bill ratio Lead times requested
by customers remain
short

0.6

40.0
30.0

0.4

20.0
0.2

10.0

0.0

0.0
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
11/12 11/12 11/12 11/12 12/13* 12/13* 12/13* 12/13* 13/14 13/14 13/14 13/14

Orders received

Sales

Book-to-Bill ratio
15* Restatement following IAS 19R application (pensions)2. Industry Segment: Regional Markets
EuropeIn CHF million, %Sales

GrowthYoY

GrowthQ4 vs. Q3

Europe

94.4

-0.9%

+17.5%

N. America

27.1

-4.9%

+17.1%

Asia andROW

89.6+17.4%

-2.8%

Total

211.1

+5.6%

+8.6%

North America
Asia and ROW

42%

45%

13%

 Tailwind from improving economic
environment towards end of financial
year 2013/14
 Strong growth in China, China
expands its #1 position in Industry
 Rebound in Q4 after seasonal
decrease in Q3 across Europe and
16
North America

2. Industry Segment: Business Development
In CHF millions

Op. EBIT in % of sales
25

280

240

20

200
15
160

120

10

80
5
40

0

0
09/10

10/11

11/12

12/13** Restatement following IAS 19R application (pensions)

13/14

Businesses and Applications
Drives & welding (growth YoY: +10%)
 Market growth in China, good performance inother regions
 Stable market share
Renewable energies & power supplies (+6%)
 Investments in renewable energies in China
 Good performance in Wind and UPS
 Pick up of activities in smart-grid applications
Traction (-1%)
 Contract wins in India, energy metering inEuropa, growth in China
 Low investments in rail infrastructure in Europa
High-precision (-10%)
 Weak test and measurement markets
 Medical applications slowed down17

2. Automotive Segment: Regional Markets
In CHF million, %Sales

GrowthYoY

GrowthQ4 vs. Q3

Europe3.0+3.1%-24.7%

N. America

18.0

-0.0%

-5.9%

Asia and
ROW

13.6

-3.6%

-4.4%

Total

34.6

-1.2%

7.2%

EuropeNorth America
Asia and Restof World

9%39%

Focus on Asian and North American
markets
 Negative currency impact in USD and
JPY Strong growth in China, most othermarkets stable Below expectation growth in green
18
cars


52%

2. Automotive Segment: Business Development
In CHF millions

Op. EBIT in % of sales

40

40

35

35

30

30

25

25

20

20

15

15

10

10

5

5

0

Businesses and Applications
Conventional cars (growth YoY: +4%) Performance reflects global car markets: flatin Europe, robust performance in Asia andthe US
 Solid demand for battery management
applications
 Stable start/stop application
Green cars (HEV, EV) (-19%)
 Weak general trend
 Higher activity in hybrid cars applications in
Europe

0
09/10

10/11

11/12

12/13*

13/14

-5

-5

-10

-10

* Restatement following IAS 19R application (pensions)19

2. Business Development China
Production

Sales
■
■

Market share of over 50%
Biggest market with 23% of totalsales

LEM China expands its #1 position aslargest manufacturing site of the Group(57% of total production, compared to
51% in financial year 2012/13)“Made by LEM” quality■■
In CHF millions

In CHF millions

60

140
120

50

100
40
80
30
60
20

40

10

20

0

0
09/10

10/11

11/12

12/13

13/14

09/10

10/11

11/12

12/13

13/14

20

2. New Production Site in Sofia (Bulgaria)
Achievements







Objectives of the new site







Investment of CHF 2 million into new site
Production started 1 October 2013
Delivery approvals from customers received
First products delivered to customers

Diversify LEM’s cost-competitive production
Increase production capacity close to European
customers
Increase natural hedge of operations
Absorb major part of LEM’s future growth

Continuation of strategy initiated in 2004
Production lines to be relocated from Machida (Japan) and Geneva (Switzerland)
to cost-competitive countries
Geneva (Switzerland) site strengthened with investment in R&D and marketing
Machida (Japan) site to focus on local Japanese market
21

Agenda1. 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 to Shareholders Meeting

Andreas Hürlimann

22

3. Financial Highlights
 All-time high operational profitability at 22.7% on 245.6 million sales
 All-time high net profit for the year at CHF 45.6 million (18.6% ofsales)
 Low tax rate of 16.0%
 Strong free cash flow of CHF 31.9 million
 Increase in inventories of CHF 4.9 million to facilitate on-time
deliveries

23

3. Balance Sheet Analysis
In CHF millions

31.3.2013*

31.3.2014

Net working capital

23.2

38.7

Fixed assets

36.8

37.8

Noncurrent liabilities

-3.5

-6.9

Net operating assets

56.4

69.6

Net cash / (debt)

27.6

24.6

Equity

84.0

94.2

61.9%

65.1%

Days of sales outstanding

60

65

Days of inventory outstanding

63

80

Days of payables outstanding

41

49

Equity ratio24* Restatement following IAS 19R application (pensions)3. Income Statement
In CHF millions

2012/13*2013/14

ChangeQ3
2013/14Q4
2013/14

Change

Sales

235.0

245.6

+4.5%

57.6

61.1

+6.1%

Gross margin

41.9%

47.0%

+5.0pt

46.5%

48.4%

+1.9ptOperating exp.

-57.7

-59.6

+3.3%

-14.9

-16.0

+7.6%

EBIT

40.8

55.7

+36.5%

11.9

13.6+14.3%Net financial exp.

-1.5

-1.4

-8.9%

-0.9

+0.3

N/A

Income tax

-6.9

-8.7

+26.0%-2.4-1.4-43.1%Net profit

32.4

45.6

+40.9%

8.6

12.5+45.3%

25* Restatement following IAS 19R application (pensions)3. Results by Quarter
In CHF millions

In % of sales

80

30%
67.7

70

63.1
57.9

55.0

55.8

61.8

61.1

60

55.0

55.8

25%

65.1

61.1
57.6
20%

50
15%
40
10%
30
5%

20

 2013/14 includes rampup cost for Sofia site Fourth consecutive
quarter with EBIT
margin above targetrange
 Q4 of 2012/13 includes
a restructuring charge of
CHF 1.9 million

0%

10

-5%

0
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
11/12 11/12 11/12 11/12 12/13* 12/13* 12/13* 12/13* 13/14 13/14 13/14 13/14
Orders received
Op. ROSSales
Net Profit in % of sales
26* Restatement following IAS 19R application (pensions)3. Gross Margin
In CHF millions

In % of sales
48%

135

2012/13*2013/14Q3
2013/14Q4
2013/14

98.6

115.4

26.8

29.6

41.9%

47.0%

46.5%

48.4%

47%

120

46%

105

45%

90

44%

75

43%

60

42%

45

41%

30

40%

15

39%

0

38%
09/10

10/11

11/12

12/13*

Gross margin
in CHF million

Gross margin
in % of sales

 Positive impacts on gross margin due tofocus on
 Raw material sourcing
 Internal productivity
 Relocation to cost-competitive
manufacturing sites

13/14
27

* Restatement following IAS 19R application (pensions)3. Operating Expense
In CHF millions

In % of sales

70

30%

Operatingexpense60

2012/13*2013/14Q3
2013/14Q4
2013/14

57.7

59.6

14.9

16.0

24.6%

24.3%

25.8%

26.2%

in CHF million
50
20%Operatingexpensein % of sales

40

30
10%
20

10

 Ongoing strict cost control measures
 Operating expense as a percentage ofsales remain on low levels compared tohistorical average Includes ramp-up cost for Sofia site

0%

0
09/10

10/11

11/12

12/13*

13/14
28* Restatement following IAS 19R application (pensions)3. R&D Expense
In CHF millions

In % of sales
8%

15

R&D
expense12
6%

2013/14Q3
2013/14Q4
2013/14

14.7

14.4

3.6

3.5

6.3%

5.9%

6.2%

5.7%

in CHF million

R&D
expense9

2012/13*in % of sales
4%

6

2%
3

0

0%
09/10

10/11

11/12

12/13*

13/14

 Maintained high investment in R&D for
both segments
 Ongoing renewal of product range withfocus on optimized cost, higher
accuracy and new functions
 Above the long term average of 5.5% of
sales
29

* Restatement following IAS 19R application (pensions)3. EBITIn CHF millions

In % of sales

60
25%

50
20%

EBIT
in CHF million

2012/13*2013/14Q3
2013/14Q4
2013/14

40.8

55.7

11.9

13.6

17.4%

22.7%

20.7%

22.2%

40

EBIT
15%

in % of sales

30

10%
20

5%

10

 Continued cost control and high grossmargins
 In Q3 EBIT margin impacted by lower
volumes Profitability above target range of 15 to
20%

0%

0
09/10

10/11

11/12

12/13*

13/14

30* Restatement following IAS 19R application (pensions)3. Financial Expense
In CHF millions

2013/14Q3
2013/14Q4
2013/14

-1.5

-1.4

-0.9

0.2

Other financial expense & income

-0.0

+0.0

-0.0

0.1

Total

-1.5

-1.4

-0.9

0.3

2012/13*
Exchange effect**

2013/14 exchange effect mainly driven by appreciation of CHF vs. USD
and JPY

Foreign exchange hedging policy adapted

EUR: 100% of net exposure 12 months forward

USD: 100% of net exposure 18 months forward* Restatement following IAS 19R application (pensions)** 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.

31

3. Income Taxes
2012/13*2013/14

Expected income tax rate
Expected withholding tax rate
Expected tax rate

15.5%
2.3%
17.8%

16.8%
2.0%
18.8%

Effect of changes in tax rates on deferred tax

0.1%

-2.9%

Other differences

-0.4%

0.1%

Effective tax rate

17.5%

16.0%

 Slightly higher expected tax rate due to the decision to abandon the
HNTE status in China (+0.6%-pts for one quarter) One-time positive revaluation effect of change in HNTE tax rate on
deferred tax assets
32 Substantial reduction of tax rate over the last five years* Restatement following IAS 19R application (pensions)3. Net Profit
In CHF millions

In % of sales

Net profit
50

20%

45

18%

in CHF million

Net profit
in % of sales

2012/13*2013/14Q3
2013/14Q4
2013/14

32.4

45.6

8.6

12.5

13.8%

18.6%

14.9%

20.4%

40

2012/13

16%
35

-1.5

14%

30

40.8

25

-6.9
32.4

12%

20

10%

EBIT

15

Fin. exp.

-1.4

8%
10
6%

5
0

Income tax

Net profit
2013/14

-8.7

55.7

45.6

4%
09/10

10/11

11/12

12/13*

13/14

EBIT

Fin. exp.

Income tax

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

2012/13*2013/14

Profit before taxes

39.3

54.4

Non-cash items

5.1

-5.1

Cash flow from changes in net working capital

1.8

-8.7

Cash flow from operating activities

46.2

40.6

Cash flow from investing activities

-10.4

-8.7

Free cash flow

35.8

31.9

Cash flow from financing activities

-29.9

-34.0

Change in cash and cash equivalents

5.9

-2.2

Cash and cash equivalents at the end of the period

27.6

24.6
34

* Restatement following IAS 19R application (pensions)

Agenda1. 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 to Shareholders Meeting

Andreas Hürlimann

35

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 businesses36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 2013/14■■■

Launched 8 new products
Worldwide technology survey
Developed network ofpartnerships■

Established new site in Sofia,
Bulgaria■

Introduced new forecasting
systemMaintained high level offlexibility and on-time delivery■37

4. Outlook■

Economic perspectives improving with modest pick-up in Europe
and North America and robust performance in China■

For 2014/15 we expect■ Industry segment: well positioned to capitalize on economic
improvements and support from new products■ Automotive segment: resume growth backed by growing
global vehicle production and market share gains in thegreen cars business■ Competition to remain fierce due to overcapacities in our
industry as well as in those of our customers■

Further implementation of our strategic initiatives
38

Agenda1. 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 to Shareholders Meeting Andreas Hürlimann

39

5. Dividend Proposal
LEM Dividend History

■

40**

40*

■

30
25
20

■

High trust in the company’s
capability to generate strong
cash flows
Ordinary dividend of CHF 40
per share
Payment corresponds to apayout ratio of 99.8%

2009/10 2010/11 2011/12 2012/13 2013/14* Including CHF 10 from early termination of share buy-back** Proposal to AGM of 26 June 201440

5. “Minder” Implementation at LEM – Guiding Principles

LEM specifics
 Medium sized company with a matching lean Board of Directors andmanagement structure Board of Directors committees prepare decisions and provide
recommendations only, the entire Board of Directors decides and remains
responsible
 Financial year runs from 1 April to 31 March

Clarify the principles in the Articles of Association and address thedetails in regulations
Maintain a sense of proportion, implement pragmatic solutions andconsider shareholders’ interest holisticallyCompensation principles
 Be an attractive and reliable employer for the Executive Management
 Pay Executive Management for performance and results at market level Board of Directors compensation reflects time dedicated and responsibility

41

5. Say-on-Pay – Proposed Approval Process
FY 2013 | 14
31.3. |1.4.

FY 2014 | 15

30.9.|1.10. 31.3. |1.4.

AGM
2013

30.9.|1.10.

FY 2015 | 16

FY 2016 | 17

30.9.|1.10. 31.3. |1.4.

30.9.|1.10.

31.3. |1.4.

AGM
2014

AGM
2015

FY 2017 | 18

31.3. |1.4.

AGM
2016

30.9.|1.10.

FY 2018 | 19
31.3. |1.4.

AGM
2017

30.9.|1.10.

AGM
2018

BoD compensation
ExM compensation: STI

ExM compensation: Fixed
ExM compensation: LTI
BoD compensation
ExM compensation: Fixed
ExM compensation: STI
ExM compensation: LTI
BoD compensation
ExM compensation: Fixed
ExM compensation: STI
ExM compensation: LTI

Compensation report

Compensation report

Compensation report

Compensation report42

5. Proposed Implementation of Other Important ProvisionsPowers and duties of the Compensation Committee Details to be addressed at committee regulation level Compensation Committee can assume other duties, given the small Boardof Directors

Maximum number of external mandates of members of the Board of
Directors and Executive Management
 Board of Directors: maximum 10, of which 4 in listed companies; maximum
6 pro-bono Executive Management: maximum 3, of which 1 in listed company;
maximum 3 pro-bono; all subject to Board of Directors approvalMaximum notice period for contracts with indefinite term is 12 months

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Q&A

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Financial Calendar and Contact Details
Financial calendar
26 June 2014
1 July 2014
4 July 201412 August 2014
13 November 201417 February 2015
4 June 2015
25 June 2015
30 June 2015
3 July 2015

Ordinary Shareholders’ Meeting for the year 2013/14
Dividend ex-date
Dividend payment date
First quarter 2014/15 results
Half-year 2014/15 results
Third quarter 2014/15 results
Year-end 2014/15 results
Ordinary Shareholders’ Meeting for the year 2014/15
Dividend ex-date
Dividend payment date

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

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