S HAREHOLDERS ’ A NNUAL G ENERAL M EETING M AY 18, 2017
A GENDA I NTRODUCTION 2016 R E SULTS S TRATEGY R EPORT BY THE B OARD AND THE C OMMITTEE R EPORT BY THE STATUTORY A UDITORS S UMMARY PRESENTATION OF RESOLUTIONS D IALOG WITH SHAREHOLDERS V OTE OF RESOLUTIONS 2 2 Shareholders’ Annual General Meeting – May 18, 2017
2016 R ESULTS A CTIVITY R ESULTS O UTLOOK D IVIDEND PROPOSAL
A POSITIVE YEAR IN 2016 S ALES IN LINE WITH 2015 F IRM OPERATING MARGIN , THANKS TO THE COMPETITIVENESS PLANS H IGHER NET INCOME AFTER SIGNIFICANT NON - RECURRING COSTS V ERY HIGH CASH FLOW DRIVING A SHARP REDUCTION IN DEBT 4 Shareholders’ Annual General Meeting – May 18, 2017
A SIGNIFICANT IMPACT FROM THE COMPETITIVENESS PLANS … As a % 2015 operating margin before non-recurring items 7.9% Volume/mix effects -0.5% Price effect -0.6% Impact from the competitiveness plans* +2.3% Inflation and other -1.3% 2016 operating margin before non-recurring items 7.8% *Net impact of the Transform plan and the operational excellence plan 5 Shareholders’ Annual General Meeting – May 18, 2017
… THAT WILL CONTINUE IN 2017 AND 2018 2017 2018 Initially 2016 Total estimated estimated projected Cost savings ( € m) 16.5 [13-16] [11-13] [42-45] [40-45] Impact on the P&L before (22) (10) (32) (35) tax ( € m) Impact on cash flow* (5) (25) (5) (35) (35) ( € m) *Including capex 6 Shareholders’ Annual General Meeting – May 18, 2017
H IGH OPERATING MARGIN BEFORE NON - RECURRING ITEMS IN EP, A MORE CHALLENGING SITUATION IN AM 40.6 Operating 39.5 34.5 income before 32.1 non-recurring items ( € m) Operating 11.5% 11.3% margin 8.2% before non- 7.8% recurring items 11.7% 11.5% (%) 7.6% 6.5% 2015 adjusted 2016 2015 adjusted 2016 Electrical Power Advanced Materials Productivity gains Productivity gains Negative price/mix effects Negative price/mix effects Improvement in H2 2016 EBITDA margin: 13.9% 2016 EBITDA margin: 14.6% 7 Shareholders’ Annual General Meeting – May 18, 2017
G ROWTH IN CONSOLIDATED MARGIN IN THE SECOND HALF OF 2016 , WITH A NOTICEABLE IMPROVEMENT IN THE AM SEGMENT 60.9 59.9 H2 2016 AM: 110 bps-improvement in operating margin before non-recurring items Consolidated EP: relative stability operating income before non- recurring items 33.8 ( € m) 34.6 30.6 29.3 27.1 Consolidated operating 7.9% 7.8% 7.9% 8.6% margin 7.8% 7.2% before non-recurring items (%) H1 2016 2016 H1 2015 H2 2015 H2 2016 2015 adjusted 8 Shareholders’ Annual General Meeting – May 18, 2017
H IGHER NET INCOME FOR THE YEAR In € m 2016 2015 adjusted Operating income before 59.9 60.9 non-recurring items % of sales 7.8% 7.9% Of which € 22m Non-recurring income and expense (26.5) (21.6) for the operational Amortization of intangible assets (1.2) (1.1) excellence plan Net financial income/(costs) (11.0) (12.5) Effective tax rate Income tax (11.9) (19.1) excluding the operational excellence Net income from continuing plan: 30% 9.3 6.6 +41% operations Net income/(loss) on assets held for Mainly the high-power (6.1) (4.0) sale/discontinued operations switches business Net income 3.2 2.6 +23% Net income attributable to Mersen shareholders 1.8 1.3 9 Shareholders’ Annual General Meeting – May 18, 2017
V ERY HIGH OPERATING CASH FLOW ... O PTIMIZED INVENTORY LEVELS L OW INCOME TAX PAID Cash flow before capital 94.0 expenditure C APEX DISCIPLINE ( € m) 83.2 73.0 48.2 Free cash flow yield (1) 8.1% 2015 2015 excl. 2016 2016 excl. NRI* NRI* *Excluding non-recurring items (operational excellence plan and Transform) and cash-flow from discontinued operations (1) Operating cash flow after capital expenditure before non-recurring items/sales 10 Shareholders’ Annual General Meeting – May 18, 2017
... DRIVING A SHARP REDUCTION IN DEBT 2.1 Net debt/EBITDA 41% Net debt/Equity 236 In € m -83 203 12 8 30 Dec. 2015 Operating cash flow Capex Financial Interest Dividends, discontinued Dec. 2016 operations and other 11 Shareholders’ Annual General Meeting – May 18, 2017
S LIGHT GROWTH IN ROCE 832 Capital employed A DVANCED M ATERIALS 789 in € m < 10% Overcapacity in graphite 7.6% ROCE* Chemicals in the trough of the 7.3% cycle E LECTRICAL P OWER > 15% Low capital intensity High operating margins 2015 2016 * Operating income before non-recurring items and tax/Capital employed 12 Shareholders’ Annual General Meeting – May 18, 2017
R ECOMMENDED DIVIDEND OF € 0.50 A SHARE 0.50 0.50 (1) P AY - OUT RATIO BEFORE NON - RECURRING ITEMS (2) 34% P AY - OUT € 10 M 2015 2016 (1) Subject to shareholder approval at the Annual General Meeting (2) Net income from continuing operations excluding the operational excellence plan 13 Shareholders’ Annual General Meeting – May 18, 2017
M EDIUM - TERM STRATEGY A N ORGANIZATION NOW IN PLACE AND DELIVERING INITIAL BENEFITS O VER THE MEDIUM TERM , CAPITALIZE ON OUR MARKETS AND OUR GEOGRAPHIES 2017 GUIDANCE : GROWTH IN SALES AND MARGIN IN THE CURRENT MARKET ENVIRONMENT
O UR STRATEGIC PILLARS Improve synergies within and between the business segments Build on our 3 new positions Asia Technology & Operational Innovation Excellence Improve performance thanks to the new organization Expanding markets Solar Wind Electronics Transportation More efficient innovation Maintain best safety Improve practices (TRIR <1) Targeted acquisitions efficiency Increase sales Continue to deploy the Operational Excellence plan 15 Shareholders’ Annual General Meeting – May 18, 2017
A N ORGANIZATION MORE ALIGNED WITH OUR MARKETS NOW IN PLACE AND DELIVERING INITIAL BENEFITS Anticorrosion equipment A DVANCED M ATERIALS Electrical Protection E LECTRICAL P OWER & Control Graphite Solutions specialties for Power Management Power transfer technologies INDUSTRIAL SYNERGIES MARKETING & SALES SYNERGIES Alignment with two Knowledge of the Lower capex Production transfers sales models electrical market 16 Shareholders’ Annual General Meeting – May 18, 2017
A TECHNOLOGY POSITION TO IMPROVE THE EFFICIENCY OF THE G ROUP ' S R&D T RANSFORMING R&D PROJECTS INTO COMMERCIAL SUCCESSES Hybrid switch and Optical mirrors DC fuse for EVs for laser technologies T YPICAL EXAMPLES Flexible and rigid felt UL-standard surge insulation for protection semiconductor solutions for the electronics US market 17 Shareholders’ Annual General Meeting – May 18, 2017
O PERATIONAL EXCELLENCE : A WAY TO DEPLOY OUR STRATEGY WHILE BEING MORE COMPETITIVE I MPROVING COMPETITIVENESS 2016 OUTCOMES Operational excellence which Reducing purchasing costs allowed a productivity gain of € 17m Enhancing product design-to-cost process net Reducing fixed costs Capex discipline (< € 30m) Lean = workshop efficiency Fixed costs cut by 5% Step up of the operational D EPLOYING OPERATIONAL EXCELLENCE excellence plan at mid-year in STANDARDS Pagny and Saint-Bonnet Improving the efficiency of our production processes Optimizing WIP and inventory to maintain excellent cash management (- € 16m) Get every employee engaged in continuous improvement 18 Shareholders’ Annual General Meeting – May 18, 2017
M AJOR POTENTIAL OVER THE MID - TERM IN OUR EXPANDING MARKETS 38%* ELECTRONICS ENERGY 19% 19% € 764m 17% PROCESS INDUSTRIES TRANSPORTATION 35% 10% CHEMICALS 2016 sales in € m *Including power electronics 19 Shareholders’ Annual General Meeting – May 18, 2017
S OLAR : A YEAR OF TRANSITION IN 2017 BEFORE RESUMING GROWTH Worldwide Annual Cumulative Forecast installed power (GW) 80 600 70 500 60 1. Polysilicon 2. Ingot 400 50 manufacturing production 40 300 Bus bar 30 200 Fuse 20 100 10 Cooling 3. Panel 4. Power 0 0 protection electronics 2008 2010 2012 2014 2016 2017 est 2019 est Sources: Photon Consulting (Dec. 2016); GTM Research (Dec. 2016); Mercom Capital (Dec. 2016) 2016 sales: € 40m Late-2016 inventory "New" countries Significant potential build-up at solar cell getting involved ahead for Mersen, led manufacturers is in solar power: by investment needs temporarily impacting India, Middle East, for solar industry Mersen etc. players 20 Shareholders’ Annual General Meeting – May 18, 2017
W INDPOWER IS DRIVING G ROUP SALES , THANKS TO A VERY BROAD INSTALLED BASE Worldwide installed power (GW) 70 700 Annual Cumulative 60 600 1. Generator power supply 50 500 and signal transfer systems 40 400 Bus bar 30 300 Fuse 20 200 Cooling 10 100 2. Lightning 3. Power protection electronics 0 0 2008 2010 2012 2014 2016 2017 est 2019 est Sources: Make - 2016 2016 sales: € 45m A steadily growing Mersen is Major potential to positioned with all market, with a very capitalize on our large installed of the generator after-market base manufacturers , expertise in every geography 21 Shareholders’ Annual General Meeting – May 18, 2017
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