Results
Q4 of 2012/13 andFinancial Year 2012/13
Media & Analyst Conference
Zurich, 5 June 2013

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 Shareholders’ Meeting

Felix Bagdasarjanz

2

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 of industry
and automotive markets.
■ LEM is a high growth global company with 1’137 employees per 31 March
2013. Production plants are in Beijing (China), Geneva (Switzerland),Machida (Japan) and from October 2013 Sofia (Bulgaria). With regionalsales offices close to the clients’ locations, LEM provides a seamlessservice.
■ LEM (SIX: LEHN) has been listed on the SIX Swiss Exchange since 1986
and has a market cap of CHF 672 million per 31.3.2013.
3

1. LEM Applications: Elevator
2
2
3
B
A LTS

B LA 150-P

1

A

The controller moves the motor in the right
direction and lets it stop exactly at the rightposition to the floor ground, independent of
the weight in the elevator car. The current
transducers take care that the motor is
powered with the correct current.
Elevator doors are controlled by a control unitthat integrates the motors of the sliding
doors. The current transducer measures thecurrent in the motors to run the panels
smoothly and to discover if something (e.g., afinger, a leg) obstructs the doors.

1 Door control unit
2 Motor3 Controller

41. LEM Applications: Start-Stop System for Cars

A CAB

C

D HAH3

HC5

A

B

B
1

B HAB

The current sensors (HAB, CAB) allow thebattery management system to decide if
enough energy is available in the battery tooperate the accessories (such as airconditioning, headlights, and radio) while theengine is off, and still have ample charge left
to restart the engine.

5 C

2
3
4

1 BatteryD

The “power-control unit” will instruct the“starter generator” to restart the engine orrecharge the battery, as needed, and current
sensors (HC5, HAH3) used in the converters
and inverter modules allow it to operatesmoothly, improving the driver experience
while helping the environment.

2 Power control unit
3 Internal combustion engine
4 Starter generator
5 Rectifier

51. LEM Applications: Container Gantry Crane
A crane can be moved on rails over the groundsurface normally driven by four motors. The
trolley runs along rails that are located on top
or sides of the boom and girder. The movement
is done with two motors located on the trolley.
Once the spreader locks onto a container, thecontainer is lifted and moved. The lift of thecontainer is done normally by one axis by avery sophisticated rope system and driven by
one motor.

A LF 1005
A

4

3
2

5
1
1

Current transducers are used in all motor
inverters to satisfy all requirements for safe andaccurate movements.

1 Ground surface move motors
2 Hoist motor

1
1

3 Trolley motor
4 Inverter and control cabinet
5 Spreader

61. LEM Applications: Locomotive

A LTC 100

B DVL

1
A
5

A
3

1

B

Additional inverters are used for heating, airconditioning and ventilation. Transducers areused to measure the motor currents in orderto optimize their efficiency.

424Inverters are used to transform the energy
into the right voltage and current to drive themotors. Voltage and current transducers areused to measure the current and the voltage
on the secondary side of the transformer andon the DC-side. Special differential
transducers are implemented at thesecondary side of the transformer to detect
any leakage current flowing in the train.

1 Pantograph
2 Transformer

4

3 Inverters
4 Motors
5 Auxiliary inverter71. LEM Production & Logistics World-Wide

Production Centers (PDCs)
Adaptation Centers
Sales Offices
Agents / Distributors
8

1. LEM at a Glance - Businesses
Industry segment
Drives & welding

Automotive segment
Conventional cars

Motor drives■ Welding■ Miscellaneous■■

Renewable energies &power supplies
Solar■ Wind■ UPS■ Battery monitoring, processcontrol, energy metering■

Lead battery management■ Start-stop application

Green cars (HEV, EV)
Battery pack management■ Electric motor control■ Embedded charger■

TractionOn-board applications■ Trackside■ Energy monitoring■High precision
Medical scanner■ Test & measurement■

9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 Shareholders’ Meeting

Felix Bagdasarjanz

10

2. Highlights 2012/13: Increased Margins with Stable Sales
In CHF million, %2012/132012/13 vs. 2011/12

Q4 vs. Q3 2012/13

Orders230.6+26.1%+14.3%

Sales

235.0

-0.6%

+1.4%

Operational EBIT

41.0

+20.1%-37.9%Net earnings

32.6+14.5%-51.6%■

Second-best result in LEM’s history after record year 2010/11■

Depressed sales development in Industry businesses, but stabilization since Q3of 2012/13■

Automotive businesses delivering sustainable growth■

Investment in R&D leading to record number of product launches and patents■

Decision to launch a low-cost production site in Sofia, Bulgaria■

Planned start of production in October 2013■

Restructuring provision booked in Q4 of 2012/13

11

2. Net Sales
In CHF millions

In CHF million, %

Sales

YoY

YoY

QoQ

at constantcurrencies

300
275

Industry

200.0

-4.0%

-6.6%

+2.5%

250

Automotive

35.0+24.8%+18.0%-4.5%

225

Total sales

235.0

-0.6%

-3.7%

+1.4%

200
175

■

150

■

125
100

■

Industry business slowed down
Strong performance of automotive
businesses
Positive currency impact

75
50
25
0
08/09

09/10

10/11

11/12

12/13
12

2. Quarterly View
In CHF millions

Book‐to‐bill ratio
1.6

100
90

1.4

80
70

75.0
66.8

77.0

77.4
1.2
67.7
63.1

60

57.9 55.0

61.1

55.0

55.7

1.0
55.8

50

0.8

40

0.6

 Recovery of bookings:
Q4 of 2012/13 withbook-to-bill ratio 1.05
 Short lead times
requested by customers
 Customer service
reached all-time highlevels of on-time
delivery ratios

30
0.4
20
0.2

10

0.0

0
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
10/11 10/11 10/11 10/11 11/12 11/12 11/12 11/12 12/13 12/13 12/13 12/13
Orders received

Sales

Book-to-Bill ratio13

2. Industry Segment: Regional Markets
In CHF million, %

Sales

YoY

QoQ

Europe95.2-11.3%+17.2%

N. America

28.5

+3.2%

-8.2%

Asia and
ROW

76.3

+4.0%

-9.7%

Total

200.0

-4.0%

+2.5%

EuropeNorth America
Asia and ROW

38%
48%

14%

 Slow growth in Asia and North
America while Europe being slow
 China was #1 industry market in
2012/13
 Volatile economic environment
 Increasing price pressure across all
markets14

2. Industrial Segment: Business Development
Businesses and Applications
In CHF millions

Op. EBIT in % of sales
25

280

20

240

200
15
160

10

120

80
5
40

0

0
08/09

09/10

10/11

11/12

12/13

Drives & welding (growth YoY: -12%)
 Weak markets, mainly in Europe
 Stabilization in Europe and North America in
H2 of 2012/13
Renewable energies & power supplies (+7%)
 Volatile business Consolidation in solar and wind markets
 Increased demand for large power installations
Traction (-0%)
 Weak demand in Europe and Japan
 North America and China growing slowly
High-precision (-4%)
 Weak demand in Europe and Asia
 Increased market share15

2. Automotive Segment: Regional Markets
EuropeIn CHF million, %

Sales

YoY

QoQ

Europe2.9+9.2%+45.9%

N. America

18.0+24.5%-1.6%

Asia andROW

14.1+28.9%-17.0%

Total

35.0

+24.8%-4.5%

North America
Asia and ROW

8%

40%

Strong sales growth YoY, third
consecutive year with double-digit
growth Conventional cars business driving
performance Strongest growth in China and USA
 Focus on Asian and North American
16
markets

51%

2. Automotive Segment: Business Development
In CHF millions

Op. EBIT in % of sales

35

35

30

30

25

25

20

20

15

15

10

10

5

5
0

0
08/09

09/10

10/11

11/12

12/13

‐5

-5

‐10

-10

‐15

-15

Businesses and Applications
Conventional cars (growth YoY: +33%)
 World car demand resumed
 Strong growth in battery management
application
 Increasing interest in start-stopapplication
 Price erosion compensated withincreased volume
Green cars (HEV, EV) (-4%)
 Market burdened by high vehicle
prices Limited success of electrical cars17

2. Business Development China
Production

Sales
■
■

Market share of over 50%
Sales impacted by slowing activity
especially in solar, wind and traction

LEM China expands its #1 position aslargest manufacturing site of the Group(50.8% of total production, compared to43.2% in 2011/12)“Made by LEM” quality■■

In CHF millions

In CHF millions
55

120
45
100
35

80

25

60
40

15

20
5
0
‐5

08/09

09/10

10/11

11/12

12/13

08/09

09/10

10/11

11/12

12/13
18

2. LEM Perceived as the Global Leader in Providing
Transducers to Measure Electrical Parameters2012 customer satisfaction survey conducted in all territories■ LEM rated as high as in a 2009 study■ LEM most valued for■ Focus on customer demands and requests■ Ease to work with
■ Trustworthiness■ Professionalism in solving issues■ Highest ratings for reliability, performance and quality of products

19

2. Product Launches 2012/13 (1/2)
CAB

HAH3 DR

HC 20

HLSR

 Digital bus output and embedded microcontroller
 Highest accuracy for battery monitoring application
 State of charge measurement for hybrid vehicles

Automotive

 Customer specific transducer
 Communication with microcontroller / serial interface
 Adapted for tri-phase machine for HEV and EV

Automotive High current range: 1’000 to 2’000 A
 Small size Designed for battery monitoring in conventional cars

Automotive New ASIC with twice improved accuracy
 Very cost effective with new design Designed for drives and solar market

Industry20

2. Product Launches 2012/13 (2/2)
HO New ASIC with twice improved accuracy New functionalities: over-current detection,
stand-by mode
 First programmable transducer

DVL New technology to create a digital isolation
 Improved sensitivity to external magnetic fields
 Robust design for harsh environments intraction applications

HFWS
confidential

LA130-150

 Customer specific transducer
 Communication with microcontroller andserial interface
 Very small size for the current measured
 Design for cost to replace older versions
 Proven technology based on closed loop hall Designed for industrial applications

Industry

Industry

Industry

Industry21

2. New Production Plant in Sofia (Bulgaria)
 Objectives of the new siteDiversify LEM’s low cost 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 low cost countries
 Geneva (Switzerland) site strengthened with investment in R&D
and marketing Machida (Japan) site to focus on local Japanese market

 Plan Investment of CHF 2 million into new site
 Ramp-up production as from October 201322

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 Shareholders’ Meeting

Felix Bagdasarjanz

23

3. Consolidated Balance Sheet
31.3.2012

31.3.2013

Cash and cash equivalents

21’12127’629Accounts receivable

42’14043’080Inventories

26’60523’619

Income tax receivables

2’009

1’264

Other current assets

2’956

3’250

Total non-current assets

37’68341’026

Total assets

132’514139’867

Accounts payable

17’863

16’766

Other current liabilities

29’77431’264

Total non-current liabilities

5’316

4’510

Equity79’56187’328

Total liability and equity

132’514139’867

12.3%

9.9%

5.4

5.8

60.0%

62.4%

18.1

27.6

In CHF thousands

 Avg. net working capital in % sales
 Inventory turns
 Equity ratio Net financial assets (CHF millions)24

3. Income Statement
Q4
2012/13

Change54’98955’770+1.4%+2.9%pt

44.3%

37.6%

-6.7%pt-57’608-0.9%-13’742-14’392+4.7%

34’17141’036+20.1%

10’618

6’589-37.9%

315

0

N/A

0

0

N/A

EBIT

34’48641’036+19.0%

10’618

6’589+37.9%

Financial expense (net)-1’962-1’489-24.1%-948-1’257+32.6%

Income tax-4’037-6’931+71.7%-1’526-1’389-9.0%

Net profit

28’48732’616+14.5%

8’144

3’943

-51.6%

2011/122012/13

Change236’634

234’953-0.6%

Gross margin

39.1%

42.0%

Operating costs-58’128

Operational EBIT
Additional SOP
income / costs

In CHF thousands,%

Sales

Q3
2012/1325

3. Change in Classifications on Income Statement
In CHF thousands

Managementcompensation

Operation
Facility cost support
cost

Total
impactSales
Cost of goods sold0
-1'649-1'295-1'243Gross margin-4'187-4'187

Sales expense-1'401-229

159-1'471

Administration expense

3'650

1'395

1'050

6'096

Research & development
expense

-601

128

34

438

0

0

0

0

Operational EBIT

26

3. Results by Quarter
In CHF millions

In % of sales

100

30%
77.0

90
80

75.0
66.8

77.4

25%
67.7
20%

70

63.1

57.9

60

55.0

55.8

61.1
55.0

55.8

 Margins in Q4 of
2012/13 affected by
restructuring charges
due to relocation of
production to Bulgaria

15%

50
10%

40
30

5%

20
0%
10
0

-5%
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
10/11 10/11 10/11 10/11 11/12 11/12 11/12 11/12 12/13 12/13 12/13 12/13

Orders received
Op. ROSSales
Net Profit in % of sales

27

3. Gross Margin
In CHF millions

In % of sales

135

45%

Gross
margin2011/122012/13

Q3
2012/13

Q4
2012/13

92.3

98.6

24.4

21.0

39.1%

42.0%

44.3%

37.6%

in CHF million

120
43%

105

Gross
marginin % of sales

90
41%

75
60

39%
45
30

37%

15
35%

0
08/09

09/10

10/11

11/12

12/13

 Positive impacts on gross margin
 Continued operating savings in COGS
 Continued relocation to low cost
manufacturing sites
 Consolidation of high-precision
manufacturing in Geneva
 Ongoing price erosion more thancompensated by the savings283. Operating Expense
In CHF millions

In % of sales

70

30%

60

25%

50
20%
40
15%
30
10%
20

Operatingexpense2011/122012/13

Q3
2012/13

Q4
2012/13

58.1

57.6

13.7

14.4

24.6%

24.5%

25.0%

25.8%

in CHF million

Operatingexpensein % of sales■ Ongoing strict cost control measures■ Operating expense as a percentage ofsales remain on low levels compared tohistorical average

5%

10

0%

0
08/09

09/10

10/11

11/12

12/13

29

3. R&D Expense
In CHF millions

In % of sales

15

2011/122012/13

Q3
2012/13

Q4
2012/13

13.4

14.7

3.8

3.9

5.7%

6.2%

6.9%

7.1%

8%

R&D
expensein CHF million
12
6%

R&D
expensein % of sales

9

4%

6

2%
3

0%

0
08/09

09/10

10/11

11/12

12/13

 Increased investment in R&D for bothsegments
 R&D expense above the long-term
average of 5.5%
 Renewal of product range with focus on
optimized cost, higher accuracy andnew functions30

3. Operational EBIT
In CHF millions

In % of sales
22%

70

60

20%

Operational
EBIT

18%
40
16%
30
14%
20

2012/13

Q3
2012/13

Q4
2012/13

34.2

41.0

10.6

6.6

14.5%

17.5%

19.3%

11.8%

in CHF million

Operational
EBIT

50

2011/12in % of sales

 Profitability within target rangeof 15 to 20%
 Q4 of 2012/13 operational EBIT
decreased vs. Q3 of 2012/13 due torestructuring charge of CHF 1.9 million

12%

10

0

10%
08/09

09/10

10/11

11/12

12/13

31

3. Legacy SOP Programs Expired per 31.03.2012
■
■
■

■

With the closing of fiscal year 2011/12, all legacy stock option plans are closed
LEM will not record any additional stock option plan cost/income going forward
LEM has no further option based compensation programs
In financial year 2013/14, LEM will abandon the notion of operational EBIT andcommunicate on the EBIT exclusively# outstanding
options

31.03.2008

31.03.2009

31.03.2010

31.03.2011

30.09.2011

31.03.2012

70’45766’20740’794

4’952

3’876

0

Closure of

SOP 5

SOP 6

32

3. Financial Expense
In CHF thousands

Exchange effect*

2012/13-1’704-1’484-954-1’253

-258

-5

6

-4

-1’962-1’489-948-1’257

Other financial expense &incomeTotal

Q4
2012/13

Q3
2012/13

2011/12

 2012/13 exchange effect mainly driven by depreciation of CHF vs USD,
CNY and JPY
 Foreign exchange hedging policy
 EUR: 100% of net exposure 18 months forward
 USD: 50-100% of net exposure 6-18 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.

33

3. Income Taxes
FY
2011/12
Expected income tax rate
Expected withholding tax rate
Expected tax rate
Expense not deductible for tax purposes
Permanent differences
Effect of changes in tax rates on deferred tax
Adjustment in respect of previous period's income tax
Recognition of previously unrecorded tax losses
Other differences
Effective tax rate

16.5%
1.3%
17.8%
1.8%
1.1%
-2.7%
-4.1%
-1.4%
-0.1%
12.4%

FY
2012/13
15.5%
2.3%
17.8%
0.0%
0.2%
0.1%
-0.4%
0.0%
-0.2%
17.5%

34

3. Net Profit
CHF millions% of sales

16%

45

Net profit
in CHF million

Net profit

40
14%

in % of sales

2011/122012/13

Q3
2012/13

Q4
2012/13

28.5

32.6

8.1

3.9

12.1%

13.9%

14.8%

7.1%

0.3

- 2.0

- 4.0

2011/12

35

12%

30

34.2

28.5

25
10%
20

Operational EBIT SOP inc./cost

8%

15

10

0

FinancialexpenseIncome tax

- 1.5

- 6.8

41.0

Net profit

2012/1332.6

6%
5
Operational EBIT SOP inc./cost
0

4%
08/09

09/10

10/11

11/12

12/13

FinancialexpenseIncome tax

Net profit
35

3. Cash Flow Statement
In CHF thousands

2011/122012/13

Profit before taxes

32’52439’547

Non-cash items

2’892

3’561

Cash flow from changes in net working capital

11’2383’083

Cash flow from operating activities

46’65446’191

Cash flow from investing activities-9’120-10’410

Free cash flow

37’53435’781

Cash flow from financing activities-42’922-29’894

Change in cash and cash equivalents-5’388

5’887

Cash and cash equivalents at the end of the period

21’12127’62936

3. Financial Highlights in 2012/13 - Summary
Strong balance sheet
 Equity ratio 62.4% (60.0%)
 Net financial assets CHF 27.6 million (CHF 18.1 million)
 No interest bearing financial liabilities
Profitability within target range
 Increased investment in R&D
 Stable operating expense Improved gross and operating EBIT margin
 Net profit margin at record level
Strong cash generation
 Free cash flow CHF 35.8 million (CHF 37.5 million)
37

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 Shareholders’ Meeting

Felix Bagdasarjanz

38

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 markets

39

4. Strategic Initiatives to Extend Leadership Position
Key strategic initiative

Achievements 2012/13

Increase technology leadership■■■■

Reinforce multidisciplinary innovation team
Increase number of product launches
Constantly improve performance of products
Establish dedicated team of experts to manage LEM’s IP■■■

Increased investment in R&D
Launched 8 new products,
secured 11 new patents
Established LEM IP in
Fribourg

Increase efficiency■■

Improve product cost through low cost sourcing andmanufacturing
Reduce complexity of organization■■

Centralized high precisionbusiness in Geneva
Establish LEM Bulgaria

Increase production flexibility■■

Develop systems to better forecast demand fluctuations
Improve supply chain management■■

Improved S&OP
Improvements in cycle
management404. Outlook■

Economic climate expected to remain volatile■

For 2013/14 we expect■ Industry segment: progressive restart of sales in North
America and Asia, Europe to remain weak
■ Automotive segment: continued growth■

Further implementation of key strategic initiatives■

Operating margins to remain within target range of 15 to 20%

41

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 Shareholders’ Meeting

Felix Bagdasarjanz

42

5. Dividend Proposal
LEM Dividend History

■

40
■

30**
■

25
20

High trust in the company’s
capability to generate strong
cash flows
Ordinary dividend of CHF 30
per share
Payment corresponds to apayout ratio of 105%10

2008/09

2009/10 2010/11* 2011/12

2012/13* Including CHF 10 from early termination of share buy-back** Proposal to AGM of 27 June 201343

5. Changes in the Board of Directors■

Felix Bagdasarjanz, member of the Board of Directors of LEM Holding
SA since 2002 and Chairman since 2004, announced resignation■

Anton Lauber, member of the Board of Directors since 2004, will notstand for re-election■

Andreas Hürlimann to be nominated as new Chairman of the Board of
Directors, subject to re-election at the upcoming annual shareholders’meeting■

Dr. Norbert Hess proposed as new member

44

5. Designated New Chairman

Andreas Hürlimann (M. Sc. Electrical Engineering)
■
■
■
■
■
■

Independent board professional and entrepreneur
Board member of LEM since 2011
Managing Director at Spencer Stuart in Zurich from 2005 to 2010
Global Director of Industry Practices and a member of the
Executive Board at Arthur D. Little in London and Paris
Held international management positions at Oerlikon, ABB and
Siemens
Wide range of industrial management experience combined withstrategic management and executive leadership advisory45

5. Proposed New Board Member

Dr. Norbert Hess (Dr.-Ing. TU Berlin)
■
■
■
■

■

German national
25 years engineering and management career with Siemens AG
and EPCOS AG
Member of the Executive Committee and Chief Operations
Officer at EPCOS AG
Breadth of professional experience in material & technology,
operations and business management in the electricalcomponents field
Deep insights into customer segments such as automotive,
industry, energy and telecoms
46

Financial Calendar and Contact Details
Financial calendar
27 June 2013
Ordinary shareholders’ meeting for the year 2012/13
2 July 2013
Dividend ex-date
5 July 2013
Dividend payment date
7 August 2013
First quarter results of 2013/14
13 November 2013 Half-year results of 2013/14
18 February 2014 Third quarter results of 2013/14
4 June 2014
Year-end results and media and analyst conference
26 June 2014
Ordinary shareholders’ meeting for the year 2013/14
1 July 2014
Dividend ex-date
4 July 2014
Dividend payment date
For further information
Julius Renk, CFO
Tel: +41 22 706 12 50
Email: investor@lem.com

47