Core expertise in technology MERSEN INVESTOR DAY DECEMBER 4 TH, 2014

Transcription

1 Core expertise in technology MERSEN INVESTOR DAY DECEMBER 4 TH, 2014

2 PROGRAM 9:00 9:20 Strategic Vision Luc Themelin 9:20 9:40 Financial Business Model Thomas Baumgartner Break 10:00 10:40 The Electrical Segment Laurent Marcenac Break 11:15 12:30 Surge Protection 3 Case Studies Gabriel Ledru Windpower solutions Power converters Marc Charlebois Emmanuel Carmier 1 Investor Day 2014

3 STRATEGIC VISION LUC THEMELIN CHAIRMAN OF THE MANAGEMENT BOARD

4 MERSEN S MEDIUM-TERM STRATEGIC VISION Maximize growth potential in our markets Optimize our manufacturing facilities Customers Shareholders Employees 3 Investor Day 2014

5 SECURELY ANCHORED GROWTH POTENTIAL Reported figures in m ~1,000* Solar revenue CAGR: 6% Reported revenue excluding solar CAGR: 7.5% excluding automotive revenue * In a favorable economic environment Investor Day 2014

6 COMPETITIVE STRENGTHS TO DRIVE GROWTH 1 2 Strong market positions A presence in high-potential markets 20-25% market share Segments with high barriers to entry Solar Electronics 3 Expertise in key applications Application expertise in materials and components Proficiency in power conversion components Surge protection expertise to maintain power quality 5 Investor Day 2014

7 THREE DYNAMICS TO SUSTAIN GROWTH 1 A more powerful innovation drive 2 A deeper local presence A major contribution coming from the new product pipeline To capture growth, especially in Asia ~ 100 million in 2018 ~30% of 2018 revenue from Asia 3 A sustained, targeted acquisitions drive Acquired revenue stream million by Investor Day 2014

8 OPTIMIZING MANUFACTURING FACILITIES The Transform plan Objectives Comprehensive, worldwide plan To streamline the manufacturing base, mainly in Europe To optimize facilities dedicated to the chemicals market Make our centers of excellence more efficient Streamline operations and enhance flexibility Reduce dependence on cyclical chemicals markets Improve competitiveness while maintaining local sales teams close to customers Improve the supply chain RESULTS Full-year benefits expected in 2016: an additional 150 bps of recurring operating margin compared with 2013 Provisions for restructuring costs and impairment recognized in 2014: 30 million 7 Investor Day 2014

9 THE TRANSFORM PLAN DETAILS Closure of Chemical plant Closure of other plant Resizing of Chemical plant Resizing of other plant Closure of 6 plants in Europe and the United States and resizing of 1 plant in Europe Discontinuation of the carbon steel equipment business in China Operational deployment in H and in Investor Day 2014

10 AN IMPROVING CASH FLOW PROFILE 7.7% 7.9% FCF yield: Free cash flow/revenue 2.7% Free cash flow: Operating cash flow - capex ( m) 17 Average Average * 2013* ACTION PLANS : cash initiative plan (centralize inventory, reduce number of SKUs, S&OP methods, incentives, capabilities) Beginning in 2014: continuous improvement, lean manufacturing processes in each plant, limited capex 9 Investor Day 2014 * Continuing activities

11 USES OF CASH FLOW Sustained, targeted acquisitions, mainly in the Electrical Segment Average valuation: 7 to 9 times EBITDA Dividend payments [30%-40%] payout before non-recurring items While maintaining debt at an average of [ ] times EBITDA 10 Investor Day 2014

12 CREATING SHAREHOLDER VALUE OVER THE MEDIUM TERM ROCE before tax* 6.9% [12%-14%] Assuming a favorable economic environment Revenue of around 1 billion in 2018 Recurring operating margin of >12%, i.e. recurring operating profit of around 120m (vs. 60m in 2013) * Before non-recurring items 11 Investor Day 2014

13 CONCLUSION Powerful market drivers Solid industrial fundamentals Robust finances 12 Investor Day 2014

14 FINANCIAL BUSINESS MODEL THOMAS BAUMGARTNER CHIEF FINANCIAL OFFICER

15 2 STRATEGICALLY RELATED SEGMENTS ELECTRICAL SEGMENT 59% 739m 2013 revenue 41% MATERIALS SEGMENT 14 Investor Day 2014

16 MATERIALS SEGMENT: RAISING BARRIERS TO ENTRY AND INCREASING VALUE-ADDED Materials Segment revenue, m % volume of graphite sold % High value-added finished products Up to 3,000/kg 62% CAGR 8% 68% Semi-finished products From 6/kg 38% CAGR 1% 32% 30% BARRIERS TO ENTRY Upstream: Full control over the material (integrated model) Downstream: In-depth application capabilities (model similar to the Electrical Segment s) 15 Investor Day 2014

17 GLOBAL MARKET COVERAGE TO ENSURE A COMPETITIVE LOCAL PRESENCE Solar Electronics St. Marys Solar Electronics Chongqing Solar Electronics Solar Electronics 2013 Materials Segment revenue by region 33% 31% 36%* 2 highly competitive graphite semi-finished product fabrication plants (upstream) High-tech finished product plants (downstream) providing access to every major market Manufacturing or sales facilities covering every geography * Including Sabic 16 Investor Day 2014

18 MATERIALS SEGMENT: LEVERAGE IN PLACE Materials Segment, in m Growth potential Electronics, solar Revenue EBITDA margin % 19.7% 24.0% 18.2% 15.9% High EBITDA margin Major leverage Capex Period of heavy capex completed Investor Day 2014

19 ELECTRICAL SEGMENT: SHIFTING THE PORTFOLIO TO FASTER GROWING PRODUCTS 440m Expand GROWTH PRODUCTS Power electronics components Windpower solutions 350m 25% CAGR 12% 38% 60-50% Renewable energies Energy efficiency Power quality Services and maintenance Surge protection devices Maximize MATURE PRODUCTS Fuses/fuse blocks 75% CAGR 0% 62% Brushes/brushholders 40-50% Historic Western leaders who are maintaining their market share replacement business High standards barrier limits the number of new entrants Little need for new capex Optimized manufacturing model Investor Day 2014

20 ELECTRICAL SEGMENT: HIGH CASH FLOW AND EBITDA Electrical Segment, in m Growth potential Renewable energies Energy efficiency Power quality Services and maintenance 331 Revenue EBITDA margin 13.8% 15.3% 15.4% 14.2% 14.3% Resiliently high margin Capex Low capital intensity Investor Day 2014

21 AN OPTIMIZED PROFILE FOR THE GROUP ELECTRICAL High-potential segments: power electronics, power quality Low capital intensity Stable, high operating margins Global position Close to the customer Extensive expertise High market share Short-run BTO Identical marketing and end markets MATERIALS High value-added specialty materials market, with an unrivaled position in graphite for expanding technological markets Capital programs completed Major leverage to drive strong operating cash flow FOR THE GROUP High EBITDA and cash flow 20 Investor Day 2014

22 QUESTIONS?

23 ELECTRICAL SEGMENT LAURENT MARCENAC VICE PRESIDENT, GLOBAL SALES FOR THE ELECTRICAL SEGMENT

24 MERSEN: EXPERTISE IN THREE KEY FUNCTIONS Power supply Caron brushes Power slip rings Brush-holders Current collection Electrical protection Surge protection devices Fuse holders Fuses Power conversion Coolers Busbars Fuses 23 Investor Day 2014

25 A PRESENCE ACROSS THE ELECTRICITY VALUE CHAIN Generation Transmission Distribution Use Mersen revenue* Power supply 140m Electrical protection 170m Power conversion HVDC 130m 440m * Based on 2013 revenue 24 Investor Day 2014

26 A MARKET WITH MANY DRIVERS Generation Transmission Distribution Use Electricity demand Development of alternative energies Power grid interconnection Energy efficiency Energy storage Power quality 25 Investor Day 2014

27 PROFICIENCY IN EVERY SALES CHANNEL, OFFERING THE RIGHT SOLUTION FOR EACH TYPE OF CUSTOMER Electrical Segment OEMs 50% of revenue End-users/MROs* 20% of revenue Distributors (broadline or specialty) 30% of revenue A strong key relationship with OEMs, specifiers and partners * MRO : Maintenance, Repair, Operations 26 Investor Day 2014

28 COMPETITIVE STRENGTHS TO MEET THE NEEDS OF THE MOST DEMANDING OEMS Generation Transmission Distribution Use MERSEN S ADVANTAGES Global network Technical expertise, specifier capabilities Product portfolio 27 Investor Day 2014

29 WORLDWIDE MARKET COVERAGE, TO SUPPORT OEMS AS THEY EXPAND IN THE GLOBAL MARKETPLACE Mersen s Design, Manufacturing and Commercial Capabilities Examples of OEM Centers of Expertise Worldwide 28 Investor Day 2014

30 LEVERAGING DISTRIBUTORS TO CAPTURE THE VALUE OF OUR BROAD PRODUCT PORTFOLIO MERSEN S ADVANTAGES Catalogue covering every application Global logistics (Distribution hub on each continent, fulfillment rate) Brand recognition 29 Investor Day 2014

31 ACCESS TO A STABLE, PROFITABLE REPLACEMENT MARKET AT END-USERS Process industries Transportation Energy MERSEN S ADVANTAGES Global network Application expertise Locally based capabilities Services portfolio 30 Investor Day 2014

32 A THREE-PRIORITY STRATEGY Sustain the growth dynamic in all regions Maintain our strong, profitable position in mature products Drive faster expansion in growth products 31 Investor Day 2014

33 SUSTAIN THE GROWTH DYNAMIC IN ALL REGIONS Electrical Segment revenue, in m CAGR 4% CAGR 9% CAGR 10% CAGR 2009: 330m 2013: 440m Europe North America Asia and RoW Growth in Germany (exporter OEMs) Acquisition of M-Schneider (2010) and Eldre (2012) Growth in the region Acquisition of Eldre (2012) Strong growth in the region Start-up of local cooler and busbar production lines 32 Investor Day 2014

34 A DIFFERENTIATED STRATEGY ACCORDING TO THE PRODUCTS POSITION ON THE LIFE CYCLE GROWTH STRATEGY MATURE PRODUCTS Brushes, brushholders Fuses, fuse blocks 62% 440m 2013 revenue 38% GROWTH PRODUCTS CASH FLOW/PROFITABILITY STRATEGY Power electronics components Windpower solutions Surge protection devices 33 Investor Day 2014

35 MAINTAINING OUR STRONG COMPETITIVE POSITION IN MATURE PRODUCTS Graphite brushes [20-25%] [20-25%] [10-15%] Industrial fuses [15-18%] [22-25%] [5-6%] BARRIERS TO ENTRY: Power supply: formulation, specifiers, regulatory approval Electrical protection: ability to interact with distributors, importance of standards 34 Investor Day 2014

36 OPTIMIZING THE PRODUCTION BASE TO MAINTAIN A PROFITABLE POSITION IN MATURE PRODUCTS Boonton Juarez/Monterrey Amiens Kaposvár Saint-Bonnet Tunis Nanhui Songjiang Yueqing Bommanahalli Cabreuva RESULT Automated plants Low-cost plants Nearly 40% of revenue derived from products made in low-cost countries Automated plants: centers of excellence and R&D 35 Investor Day 2014

37 OPPORTUNISTIC ACQUISITIONS TO CONSOLIDATE OUR POSITIONS IN MATURE PRODUCTS MV fuses 2007 MV fuses 2008 Strengthening positions in the MV market Cost synergies Fuses 2010 Fuses 2008 Positioning in the DIN market Cost synergies Positioning in the fast growing Chinese market Cost competitiveness * Excluding exceptional items 2013 ROCE* on acquisitions: 15% 36 Investor Day 2014

38 DRIVING EXPANSION IN GROWTH PRODUCTS 1 Effective Positioned in high valueadded products BTO, short run products Key capabilities High market share Innovation capacity 2 market drivers Energy efficiency, Power quality, Energy storage, Alternative energies Asia deployment 3 Pursue accretive acquisitions 2018 revenue: m CAGR: 8-11% (excluding acquisitions) Technological input in unique capabilities Synergies with the Mersen network 2013 revenue: 170m 37 Investor Day 2014

39 3 EXAMPLES OF GROWTH PRODUCTS SURGE protection components WINDPOWER SOLUTIONS POWER ELECTRONICS components Power quality Alternative energies Energy efficiency Energy storage 2013 revenue: 10m 2013 revenue: 30m 2013 revenue: 130m 38 Investor Day 2014

40 QUESTIONS?

41 SURGE PROTECTION GABRIEL LEDRU VICE PRESIDENT, SURGE PROTECTION DEVICES

42 5,000,000 lightning strikes a year 30 ka average current density of a lightning strike 61% of electrical damage is due to voltage spikes 41 Investor Day 2014

43 VOLTAGE SPIKES Lightning Causes Switching between transformer stations Disconnecting electric motors Impact (e.g.: Spain 2012*) 12 million tonnes of electronic waste 60m in electrical damage repairs * Source: Cirprotec 42 Investor Day 2014

44 THE BENEFITS OF SURGE PROTECTION The solution: SPDs* Can extend equipment service life by more than 20% A device that shorts to ground any unwanted voltage Service continuity Cost savings Safety Less electronic waste *Surge Protection Devices 43 Investor Day 2014

45 A FAST GROWING MARKET Expanding by around 8% a year Growing amount of electronic equipment to protect (data centers, solar, windpower, etc.) Faster standardization (process industries, etc.) Demand Stage of SPD Market Development By Region Europe China USA India Embryonic Early cycle Sustained growth Mature Current market growth is being led by Europe and the United States China and India will be future drivers 44 Investor Day 2014

46 A MARKET STRUCTURED BY STANDARDS 100% 80% 60% 40% 20% 0% Mersen historical presence Cirprotec expertise Market approx. 500m* * Source: Mersen 45 Investor Day 2014

47 STILL A HIGHLY FRAGMENTED MARKET: OPPORTUNITIES FOR CONSOLIDATION The two market leaders (Dehn, Phoenix Contact) Cumulated market share: 20-25% Primarily present in the IEC segment Mersen in the top 10 Market share: <5% Many local players Mainly in the IEC segment Market share: 1-3% Consolidation is coming, especially in the IEC segment 46 Investor Day 2014

48 THE ALLIANCE WITH CIRPROTEC Cirprotec World s leading independent manufacturer of IEC SPDs Mainly in the Spanish market (50% of revenue) Acquisition rationale Strengthen the Electrical Segment s presence in an expanding market segment Access the IEC market (Europe and Asia) Access testing and innovation capabilities Generate synergies by using our network in Asia and Europe Majority stake acquired in early 2014 Valued at 7 times EBITDA 47 Investor Day 2014

49 TESTING AND INNOVATION CAPABILITIES Test center Innovation capabilities Competitive advantage to capture market growth Technological platform to drive faster growth in every geography 48 Investor Day 2014

50 INNOVATION CAPABILITIES WILL ENABLE US TO CAPTURE NEW MARKETS LED public lighting market* 1,000,000 Street light units 31% forecast CAGR through 2017 (in volume) More energy efficient, for the same performance Smaller carbon footprint Less light pollution *Source: Strategies Unlimited Sensitive components like LEDs need extensive protection against voltage spikes 49 Investor Day 2014

51 MERSEN POSITIONED IN HIGH VALUE-ADDED SEGMENTS Development of a new generation of LED lighting Critical components for special environments Instant on Luminous efficacy Improved dimming Easy luminous flux adjustment Intelligent management Uninterrupted service is mission-critical Safety Requirements of TV broadcasting Surge protection is essential 50 Investor Day 2014

52 STRATEGY Position ourselves as the global specialist by continuing to expand in both standards Forge alliances in Asia Step up innovation around competency centers Develop a global manufacturing base 51 Investor Day 2014

53 OBJECTIVE: OUTPERFORM THE MARKET Mersen SPD revenue, m CAGR [9-18%] 25-35m EXCLUDING ACQUISITIONS 18m Cirprotec 3m Investor Day 2014

54 QUESTIONS?

55 MERSEN S WINDPOWER SOLUTIONS MARC CHARLEBOIS GENERAL MANAGER, NORTH AMERICA, ELECTRICAL SEGMENT

56 MERSEN IN THE WINDPOWER MARKET 55 Investor Day 2014

57 MERSEN S WINDPOWER OFFERING: AN END-TO-END SOLUTION AROUND THE WORLD Fuses Busbar Cooler ENERGY CONVERSION OEM OEM + replacement 56 Investor Day 2014

58 OEM MARKET: ON-GRID WINDPOWER GROWING BY MORE THAN 7% A YEAR LONG-TERM Worldwide forecast of on-grid windpower, e Mersen s accessible market Number of wind turbines growing by 5% a year China: more limited access (national sourcing of certain components) MERSEN S ADVANTAGES A worldwide network of experts Comprehensive solutions and specification capabilities Source: MAKE 57 Investor Day 2014

59 THE REPLACEMENT MARKET: AN INSTALLED BASE OF 250,000 WIND TURBINES IN 2013 Rest of the world United Kingdom Denmark Canada France Italy 2% 2% 3% 3% 3% 6% 15% 320 GW* 29% China Mersen s accessible market 550,000 wind turbines installed worldwide by 2023 India Spain 7% 11% 19% United States Brushes have to be replaced every months Germany MERSEN S ADVANTAGES *Source: GWEC, installed base at end-2013, in GW Unrivalled field experience Dedicated team Comprehensive solutions (including services and maintenance) 58 Investor Day 2014

60 SIGNIFICANT MARKET SHARE FOR MERSEN, THANKS TO A POWERFUL MANUFACTURING BASE 20% market share 59 Investor Day 2014

61 THE PARTNERSHIP WITH ABB: AN EXAMPLE OF MERSEN EXPERTISE Development of a generator to equip the vast majority of wind turbine models in the world (1.5 to 3.2 MW unit capacity) Experts in slip-ring design (sizes, materials, etc.) Experts in brush-holder design (configuration optimization, pressure, etc.) 60 Investor Day 2014

62 THE PARTNERSHIP WITH ABB: AN EXAMPLE OF MERSEN EXPERTISE Collaboration with ABB engineers for five years Development of a custom solution A complete solution combining the power slip-ring, brush-holder and graphite brush Reduces the need for maintenance Global production: Germany, China, India Three-year framework agreement makes Mersen an ABB preferred supplier 61 Investor Day 2014

63 STRATEGY Strengthen our position in the growing OEM market Consolidate the replacement market through grid managers Develop our redesign solutions to offer operators compelling alternatives Capture growth in the energy conversion market, thanks to our range of key components available in the three major regions 62 Investor Day 2014

64 OBJECTIVE: OUTPERFORM THE MARKET Mersen windpower revenue, m >50 CAGR >10% 30 Replacement sales 7 OEM sales Investor Day 2014

65 QUESTIONS?

66 THE EFFICIENCY OF POWER CONVERTERS EMMANUEL CARMIER VICE PRESIDENT, POWER ELECTRONICS

67 POWER ELECTRONICS: CONVERTING ELECTRICAL POWER CONVERSION AC/DC POWER GENERATION AC/DC POWER USE Current Voltage Frequency Basic function: to convert electrical power as efficiently as possible into a form suitable for a very wide variety of applications and users MERSEN S FOCUS High-power applications (excluding the consumer electronics and low power supply market) 66 Investor Day 2014

68 A NEED ACROSS THE ENTIRE ELECTRIC POWER VALUE CHAIN 67 Investor Day 2014

69 A MARKET GROWING BY MORE THAN 6% A YEAR The power semiconductor market (in $bn)* Segments accessible to Mersen Other Industries Speed drives Transportation Renewable energies * Source: Yole Investor Day 2014

70 LED BY RENEWABLE ENERGIES, TRANSPORTATION AND THE NEED FOR ENERGY EFFICIENCY Renewable energies Mobility needs Growing demand for energy Carbon emissions reduction Urbanization Traffic congestion Carbon emissions reduction Energy efficiency Carbon emissions reduction Energy use reduction 69 Investor Day 2014

71 IN WHICH MERSEN STANDS APART FOR ITS COMPREHENSIVE OFFERING SEMICONDUCTOR FUSES BUSBARS COOLING DEVICES EATON SIBA LYTRON AAVID ROGERS METHODE Market share [30% - 40%] [10% - 30%] <10% 70 Investor Day 2014

72 MERSEN S POWER ELECTRONICS PORTFOLIO: BUILDING AN UNIQUE SOLUTION Busbars: Acquisition of Eldre (2012) Entered China (2013) Semiconductor fuses: Traditional expertise Coolers: Ferraz Date Industries JV (1998) Acquisition of R-Theta (2008) Entered China (2009) Strong interaction among these components 71 Investor Day 2014

73 AN EFFICIENT MANUFACTURING AND SALES ORGANIZATION, LOCATED CLOSE TO OEM DESIGN CENTERS Busbars Fuses Coolers 72 Investor Day 2014

74 GROWTH IN REVENUE DESPITE THE UNFAVORABLE ECONOMIC ENVIRONMENT Mersen power electronics revenue, m CAGR 10% CAGR 12% Investor Day 2014

75 THE ELDRE ACQUISITION Eldre in 2011 Global leader in busbars Production facilities in Europe and the United States Mainly serving the process industry market in the United States and the transportation and windpower markets in Europe Acquisition rationale Extend the product portfolio in a growth segment (power electronics) Access key expertise upstream from the design of power converters Develop the business in Asia Acquisition completed in late 2011 Valued at 7.4 times EBITDA 74 Investor Day 2014

76 ELDRE TWO YEARS LATER: GROWING THE BUSINESS In Asia: busbar production facility near Shanghai (2013) Gain market share in Asia: Rotem, Advanced Energy, Fuji Kobe Seize opportunities with new entrants: Destin Power, RXPE, Tianxin New customer entry points A wider array of addressed markets (power conversion systems for solar, data centers, defense) Customer synergies: Bombardier, Siemens Wind Power, Power One/ABB 2014 RESULTS Revenue in Asia: 2m Revenue from customer synergies: ~ 4m (including all power electronics components) 75 Investor Day 2014

77 ELDRE TWO YEARS LATER: NEW TECHNOLOGICAL DEVELOPMENTS Circular busbars Smart busbars Replace motor windings with a busbar Efficient, reliable, quicker to assemble Applications: windpower, traction, industrial motors Flexible design suited to battery specifications, with an additional monitoring capability (voltage and temperature control) Efficient, compact Applications: Li-ion batteries (energy storage) 2018 OBJECTIVES Potential revenue generated from these two examples: 5-10m 76 Investor Day 2014

78 STRATEGY Continue to expand the product portfolio > Be the PREFERRED RESOURCE for designers Innovate Develop partnerships with OEM customers and semiconductor manufacturers > Be the SPECIALIST in optimizing components to improve converter efficiency in products and services > Be the EXPERT source of new ideas and solutions thanks to our simulation software 77 Investor Day 2014

79 OBJECTIVE: OUTPERFORM THE MARKET Mersen power electronics revenue, m CAGR 7-10% EXCLUDING ACQUISITIONS Investor Day 2014

80 QUESTIONS?