M ERSEN : A SUSTAINABLE GROWTH TRAJECTORY 2018 H1 R ESULTS July 31, 2018
M ERSEN : A SUSTAINABLE GROWTH TRAJECTORY 1 2018 H1 RESULTS H1 2018 results – July 31, 2018 2
H1 2018: ANOTHER SEMESTER OF GROWTH 1 2 3 4 Operating income Sales before non- Net income Net debt € 430m € 29m € 205m recurring items € 46m HY like-for-like growth Operating margin before Includes: € 13m acquisition costs non-recurring items up +11% Up 53% € 7m share buy-backs 180 basis points (Q1 : 11.0% ; Q2 : 10.9%) € 7m specific investments Effective tax rate: 26% Currency effect: - € 23m Operating income before vs 33% in 2017 Net debt/EBITDA: 1.5 non-recurring items Growth in Asia vs 1.6 at YE 2017 up 27% +19% H1 2018 results – July 31, 2018 3
A SEMESTER THAT SAW A ROBUST GROWTH IN ALL GEOGRAPHIES +7% +8% NORTH AMERICA EUROPE Growth in electronics and Good performance from process industries transportation and process industry sectors Increase in electrical 33% distribution (however lower 34% than Group’s growth) € 430m +19% 4% +9% ASIA SOUTH AMERICA & AFRICA Improvement of the situation in Brazil Growth in renewable energies, electronics and chemicals 29% Sales H1 2018 in € m – organic growth vs H1 2017 H1 2018 results – July 31, 2018 4
S HARP INCREASE IN PROFITABILITY … + 27% 10.6% + 180 bps in % of sales Restated H1 2017 operating margin before 8.8% 8.8% non-recurring items Price/raw Volume / mix effects +2.3% materials: Price impact +1.6% net positive 45.8 Raw materials impact -1.2% Impact of competitiveness plans +1.7% Inflation 36.0 offset by the Cost Inflation -1.4% competitiveness Currency, perimeter and other -1.2% plan H1 2018 operating margin before 10.6% non-recurring items H1 2017 H1 2018 restated H1 2018 results – July 31, 2018 5
… THANKS TO THE AM SEGMENT ’ S SIGNIFICANT CONTRIBUTION … 33.9 + 35% Operating income before non-recurring items( € m) 25.1 19.3 + 5% 18.5 14.1% 11.1% Operating margin 10.2% 10.1% before non-recurring items (%) H1 2017 S1 2018 H1 2017 H1 2018 restated restated ELECTRICAL H1 2018 ADVANCED H1 2018 POWER EBITDA MARGIN MATERIALS EBITDA MARGIN Productivity gains Productivity gains 12.5% 20% Rise of some raw material Price increase higher than costs (to be offset by price raw material increase increases) Positive volume effect Negative currency effect H1 2018 results – July 31, 2018 6
… A ND THE COMPETITIVENESS PLAN , ON SCHEDULE 2018 TOTAL 2016 2017 H1 2018 estimated Cost savings ( € m) 16.5 16 7 >45 [12-14] P&L impact before tax (22) (9) (1) (2) (33) ( € m) Cash-flow Impact ( € m) (5) (11) (6) (14) (35) Including Capex (1) (3) (7) (8) H1 2018 results – July 31, 2018 7
S TRONG INCREASE IN NET INCOME H1 2017 In € m H1 2018 restated Operating income before non-recurring 36.0 45.8 items Lower financial expenses (currency effect) Non-recurring income and expense (2.0) (1.5) Net financial income/(loss) (5.4) (4.7) Strong decrease in the effective income tax rate Income tax (9.3) (10.3) 26% vs 33% Net income/(loss) on assets held for sale (0.2) 0.0 (impact of US tax reforms) +53% 19.1 29.3 Net income Attributable to owners of the parent 18.1 27.9 H1 2018 results – July 31, 2018 8
S OLID OPERATING CASH - FLOW Cash flow before capital expenditure ( € m) Operational cash flow increase in a context of growth in 64 business activity Increase in WCR in line with business activity growth and seasonality effect 18 16 WCR at 22.6% of sales (impact of contracts in progress in the chemical business) H1 2017 2017 H1 2018 H1 2018 results – July 31, 2018 9
D ELEVERAGING DESPITE SIGNIFICANT INVESTMENT (C APEX , ACQUISITIONS AND SHARE BUY - BACKS ) in € m 178 3 20 13 7 2 205 -18 Including € 7m related to EV, graphite manufacturing capacity and capex in Asia Dec. 2017 Cash flow from Competitiveness Capex Acquisitions Shares buyback Other June 2018 operations plan* 1.6 1.5 NET DEBT /EBITDA * Excluding Capex NET DEBT/ 37% 40% EQUITY H1 2018 results – July 31, 2018 10
M ERSEN : A SUSTAINABLE GROWTH TRAJECTORY 3 FY 2018 OUTLOOK H1 2018 results – July 31, 2018 11
M ARKETS WITH HIGH GROWTH POTENTIAL SUPPORTED BUSINESS GROWTH IN H1 Chiffre au centre HIGH POTENTIAL MARKETS 40% of total sales +16% Organic growth E NERGY 21% RENEWABLE ENERGIES P ROCESS 34% INDUSTRIES € 430m 19% SEMICONDUCTORS E LECTRONICS +11%* POWER ELECTRONICS C HEMICALS 9% AERONAUTICS T RANSPORTATION 17% ELECTRIC VEHICLES * Organic Sales growth in H1 2018 vs H1 2017 H1 2018 results – July 31, 2018 12
T HIS TREND SHOULD CONTINUE IN THE MID - TERM A N UNFAVOURABLE BASE EFFECT IN H2 E NERGY E LECTRONICS T RANSPORTATION ENERGY EFFICIENCY URBANIZATION M ID - TERM RENEWABLE DIGITIZATION MOBILITY TREND ENERGIES PROCESSING POWER ELECTRIFICATION Strong growth in semicon PV Solar in China : project Electric vehicles: qualification of manufacturing 2018 H2 rescheduling under discussion samples in progress TREND A large number of projects in power Wind: recovery in orders in H1, Aeronautics/Space: on-going conversion after a very low H2 2017 growth H1 2018 results – July 31, 2018 13
S OLAR POWER : MAJOR POTENTIAL FOR THE LONG TERM INSTALLATIONS PROGRESSING AT A SUSTAINED LEVEL THE LOWEST ENERGY PRODUCTION COST DESPITE RECENT ANNOUNCEMENT FROM THE CHINESE GOVERNMENT -20% Annual (GW) vs natural gas Total (GW) 160 1200 3x cheaper 140 1000 120 than nuclear energy 800 100 Source: Lazard’s 2017 Levelized Cost of Energy Analysis 80 600 CHINESE GOVERNMENT ANNOUNCEMENT (JUNE 1 ST 2018) 60 400 40 Reduce subsidies on certain solar projects in 2018 200 20 Installations in China should reach about 35GW vs 0 0 50GW in 2017 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 est. est. est. est. est Source : IHS Markit, Global Solar Market Outlook 2018-2022, scénario median H1 2018 results – July 31, 2018 14
M ERSEN ’ S STRENGTHS IN THE SOLAR POWER MARKET POLYSILICON PRODUCTION INGOTS PRODUCTION ELECTRICAL PROTECTION ENERGY CONVERSION Bus bars Fuses for semiconductors Cooling solutions Graphite anticorrosion DSS Technology CZ Technology Insulation Graphite Fuses and Surge Smart systems for electrodes fuse holders protection switches Graphite resistance, graphite machined HCl synthesis parts and crucible; Furnace linings and insulation. S TRONG PRESENCE IN A SIA (70% of customer base) in particular on G LOBAL PRESENCE (local market of panel builders) CZ technology, more efficient and using more graphite 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 P RODUCTION CAPACITY (no 1 worldwide) which can be used in other energy storage markets H1 2018 results – July 31, 2018 15
T HE ELECTRONICS MARKET DRIVEN BY 2 MAIN FACTORS GLOBAL SEMICONDUCTORS MARKET Growing digitization Big data, mobility, Smartphone, IoT, Artificial intelligence Forecast $bn 500 2 GROWTH 250 DRIVERS 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Source: WSTS +20% i +12% Energy savings and power conversion IN 2017 IN 2018 (estimate) H1 2018 results – July 31, 2018 16
M ERSEN ’ S STRENGTHS IN THE ELECTRONICS MARKET SI AND SIC INGOT PRODUCTION WAFER EPITAXY ENERGY CONVERSION Graphite Bus bars machining Graphite Semiconductor Graphite crucible fuses resistance Graphite Electrosatic Wafer carriers in Cooling solutions Furnace Insulation windows for chucks for ultra-pure graphite linings Ion implant photo-lithography for plasma etching Capacitors High-purity SiC coated graphite carriers Power semiconductor Photo : Semikron Diode SiC Photo : Cree UNIQUE EXPERTISE for SiC semiconductor manufacturing, UNIQUE OFFERING a very high-growth market for power electronics of passive components for OEMs PRESENCE IN THE UNITED STATES for the OEM market (semiconductors) DESIGN CAPABILITIES PRESENCE IN ASIA for the replacement parts market (semicon fab in Taiwan and South Korea) for OEMs H1 2018 results – July 31, 2018 17
T HE LATEST ACQUISITIONS WILL SUPPORT THE POWER ELECTRONICS MARKET AT MEDIUM TERM IDEALEC FTCap High speed fuses 100% acquisition 100% acquisition E XTENSION of the product C ONSOLIDATION in the offer to capacitors bus bars segment I MPACT IN 2018 I MPACT IN 2018 2018 sales: € 10m (6 months) 2018 sales: € 4m (9 months) Debt: € 23m Debt: ns Cooling devices Power conversion module H1 2018 results – July 31, 2018 18
H IGH - END EV: AN IMPORTANT MILESTONE REACHED High voltage circuit Photo Porsche Macan Protection 800V Illustration courtesy of Renault™ T O COME Manufacturing of Certification of the Deliveries? qualification samples production line 2019 2018 2020 C OMPLETED Mersen has been nominated in the frame of the Porsche-VW PPE program to develop Sample-A battery protection solution H1 2018 results – July 31, 2018 19
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