M ERSEN : A SUSTAINABLE GROWTH TRAJECTORY 2017 R ESULTS AND O UTLOOK March 7, 2018
M ERSEN : A SUSTAINABLE GROWTH TRAJECTORY 1 2017 RESULTS 2 2017 results - March 7, 2018
2017: A YEAR OF GROWTH 1 2 3 4 Operating income Sales: before non- Net income: Net debt: € 809m € 40m € 178m recurring items: € 75m Like-for-like growth Operating margin before Year-on-year growth: Down 12% vs 2016: non-recurring items up 170 basis points x12.5 8% High level of operating cash Dividend at € 0.75 Operating income before flow Growth in Asia: non-recurring items up 50% 20% up 30% Net debt/EBITDA: 1.6 Faster pace of growth ROCE up 150 basis as the year progressed points at 9.8% 3 2017 results - March 7, 2018
A YEAR THAT SAW VERY STRONG GROWTH IN A SIA , AND GOOD PERFORMANCES IN E UROPE AND N ORTH A MERICA +5% +5% NORTH AMERICA EUROPE Growth in electronics and process Strong performance from the industries aeronautics and space sectors Stable performance overall for 33% electrical distribution, with sales 35% picking up in the course of the year € 809m +20% -9% ASIA SOUTH AMERICA & AFRICA 4% Adversely affected by Brazil’s economic Growth in renewable energies, situation electronics and process industries 28% Unfavorable effects linked to large contracts booked in 2016 2017 sales in € m - Like-for-like growth vs. 2016 4 2017 results - March 7, 2018
S HARP INCREASE IN PROFITABILITY ... +30% 9.2% +170 bps Adjusted 2016 operating margin 7.5% 7.5% before non-recurring items Volume/mix effects +2.4% 74.6 Price impact -0.2% Impact of competitiveness plans +2.0% 57.3 Inflation (costs, raw materials) -1.7% Other (including bonuses) -0.8% 2017 operating margin before non-recurring 9.2% items 2016 adjusted 2017 5 2017 results - March 7, 2018
… THANKS TO THE AM SEGMENT ’ S SIGNIFICANT CONTRIBUTION … 49.6 Operating income 39.9 38.4 before non-recurring items ( € m) 31.6 Operating margin 11.0% 11.1% 11.1% before non-recurring items (%) 7.7% 2016 adjusted 2017 2016 adjusted 2017 2017 2017 ELECTRICAL ADVANCED EBITDA MARGIN EBITDA MARGIN POWER MATERIALS Productivity gains Productivity gains 13.5% 17.8% Negative mix effects Price increase during the year Neutral price effects Volume effect (organic growth: +9.6%) 6 2017 results - March 7, 2018
… AND THE COMPETITIVENESS PLAN 2018 Plan on schedule in terms of 2016 2017 TOTAL estimated cost savings and P&L impact Cost savings ( € m) 16.5 16 [12-14] >45 Time lag for cash outflows P&L impact before tax ( € m) (22) (9) (2) (33) in 2018 (particularly capex Cash flow impact ( € m) (5) (11) (14) (35) and restructuring costs) Including Capex (1) (7) (8) 7 2017 results - March 7, 2018
S TRONG INCREASE IN NET INCOME In € m 2016 adjusted 2017 57.3 74.6 Operating income before non-recurring items Strong 12.5x increase in net income Non-recurring income and expenses (26.5) (10.3) Net financial income/(costs) (11.0) (10.0) Contained non-recurring expenses - Income tax (11.5) (15.1) (competitiveness plan) x5 8.3 39.2 Net income from continuing operations - Lower financial expenses Net income/(loss) on assets held for sale and (5.1) 0.8 discontinued operations Effective income tax rate: 32% - (excluding more than € 2 million of x12.5 Net income 3.2 40.0 impact of non-recurring items) Attributable to owners of the parent 1.8 37.6 8 2017 results - March 7, 2018
S OLID OPERATING CASH FLOW , WITH WCR/S ALES RATIO STABLE AT 20% Cash flow before capital expenditure ( € m) 94 83 High level of cash flow 74 following a record high in 2016 73 64 Includes - in 2017 - USD5 million of exceptional contribution to US pension 48 Increase in WCR in line with the high business volumes at the year-end WCR/Sales ratio stable at 20% 2015 2015 * 2016 2016* 2017 2017* *Excluding (i) non-recurring cash flows (related to the Transform and competitiveness plans) and (ii) cash flows from discontinued operations. 9 2017 results - March 7, 2018
N ET DEBT SCALED BACK SIGNIFICANTLY In € m 203 12 178 8 37 (18) (64) Including € 7m related to the sale of Gorcy Dec. 2016 Operating cash flow Capex Interest payments Dividends Currency effect and Dec. 2017 other movements 2.1 1.6 NET DEBT/EBITDA NET DEBT/ 41% 37% EQUITY 10 2017 results - March 7, 2018
R ECOMMENDED DIVIDEND OF € 0.75 PER SHARE 0.75 (1) +50% PAY-OUT RATIO EXCL. NON-RECURRING ITEMS (2) 0.5 38% TOTAL DIVIDEND PAYOUT € 15m 2016 2017 (1) Subject to shareholder approval at the Annual General Meeting (2) Net income from continuing operations excluding the effect of the competitiveness plan and tax impact of non-recurring items 11 2017 results - March 7, 2018
M ERSEN : A SUSTAINABLE GROWTH TRAJECTORY 2 PROFITABLE GROWTH DRIVERS 12 2017 results - March 7, 2018
M ERSEN : AN EFFICIENT GROUP AND LEADER IN ITS MARKETS SHARED SHARED BUSINESS LEAN MANUFACTURING SHARED END-MARKETS R&D MODEL Operational excellence leveraging the Group’s SITES Cross fertilization, Small production batches, Business processes expertise and resources Central coordination leader in niche markets, AND SALES NETWORK Project-based organization high cash generation Resource allocation ELECTRICAL POWER ADVANCED MATERIALS ELECTRICAL SOLUTIONS FOR ANTICORROSION GRAPHITE POWER TRANSFER PROTECTION & CONTROL POWER MANAGEMENT EQUIPMENT SPECIALTIES TECHNOLOGIES World’s no. 2 in World’s no. 1-2 in World’s no. 1 -2 in World’s no. 2 in World’s no. 1 -2 in passive components for power high-temperature brushes for industrial industrial fuses graphite equipment electronics applications motors 13 2017 results - March 7, 2018
M ARKETS WITH HIGH GROWTH POTENTIAL HIGH GROWTH POTENTIAL MARKETS ~ 40% OF TOTAL SALES 19% ENERGY Solar power RENEWABLE ENERGIES PROCESS 35% INDUSTRIES Industrial GDP € 809m 18% ELECTRONICS SEMICONDUCTORS POWER ELECTRONICS Manufacture of semiconductors CHEMICALS 11% 17% TRANSPORTATION Electric AERONAUTICS vehicles ELECTRIC VEHICLES 14 2017 results - March 7, 2018
D RIVEN BY FAVORABLE UNDERLYING MARKET TRENDS P ROCESS E NERGY E LECTRONICS T RANSPORTATION INDUSTRIES URBANIZATION ENERGY EFFICIENCY RENEWABLE MOBILITY INDUSTRIALIZATION ENERGIES DIGITIZATION ELECTRIFICATION Reducing energy consumption Electric vehicles (including eBuses and eTrucks) Converting electrical power (speed drives) Solar and wind power General growth Batteries for electric vehicles LED lighting for process industries Battery-based energy storage Aeronautics in Asia (solar power, electricity grid) Calculation and storage power Public transportation (tramways, subways) Electronics/semiconductors 15 2017 results - March 7, 2018
M ERSEN ’ S PROFITABLE GROWTH DRIVERS IN THE MEDIUM TERM 1 2 3 4 Accelerating growth Speeding up Developing our Enhancing by leveraging a growth high value-added the efficiency unique position in In Asia expertise of the whole organization growth markets Renewable energies, Renewable energies, China, India, Innovation, R&D, acquisitions Operational excellence electronics, electronics, South Korea Mersen Excellence Journey electric vehicles electric vehicles 16 2017 results - March 7, 2018
M ERSEN ’ S PROFITABLE GROWTH DRIVERS IN THE MEDIUM TERM 1 2 3 4 Accelerating growth Speeding up Developing our Strengthening by leveraging a growth high value-added the efficiency unique position in in Asia expertise of the whole organization growth markets Renewable energies, Renewable energies, China, India, Innovation, R&D, acquisitions Operational excellence electronics, electronics, South Korea Mersen Excellence Journey electric vehicles electric vehicles 17 2017 results - March 7, 2018
S OLAR POWER : M AJOR POTENTIAL FOR THE LONG TERM A VERY BRISK PACE INSTALLATIONS PROGRESSING AT THE LOWEST ENERGY PRODUCTION COST Annual (GW) Total (GW) 250 1200 Further acceleration probable 1000 200 with the arrival of energy storage 800 150 600 -20% vs natural gas 100 400 50 3x cheaper 200 than nuclear 0 0 energy 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 est. est. est. est. est. Source: IHS Markit Source: Lazard’s 2017 Levelized Cost of Energy Analysis 18 2017 results - March 7, 2018
M ERSEN ’ S STRENGTHS IN THE SOLAR POWER MARKET Polysilicon production Ingot production Electrical protection Energy conversion Graphite machining Graphite Bus bars Graphite crucible resistance Fuses for Furnace cladding semiconductors Insulation Cooling solutions Graphite anticorrosion Insulation Graphite Fuses and Surge Smart systems for HCI electrodes fuse holders protection switches synthesis G LOBAL PRESENCE (local market of panel builders) P RESENCE IN A SIA (70% of customer base) R ELATIONS with energy conversion OEMs F ORMULATION of graphite applications C OMPREHENSIVE PROTECTION OFFERING for solar power E XPERTISE in increasingly large parts I NNOVATIVE PRODUCTS for a market of the future: battery-based energy storage P RODUCTION CAPACITY (no. 1 worldwide) 19 2017 results - March 7, 2018
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