2018 FIRST-HALF FINANCIAL REPORT M ERSEN 2018 fi rst-half fi - PDF document

2018 FIRST-HALF FINANCIAL REPORT

M ERSEN 2018 fi rst-half fi nancial report page 1 Management report 3 2 Consolidated financial statements 9 3 Notes 17 4 Statutory Auditors’ report 35 5 Statement of the officer 37 This document is a free translation of the original prepared in French. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of information, views or opinions expressed therein, the original language version in French takes precedence over this translation. 1 MERSEN | 2018 FIRST-HALF FINANCIAL REPORT

2 MERSEN | 2018 FIRST-HALF FINANCIAL REPORT

1 M ANAGEMENT REPORT C ONSOLIDATED RESULTS Y Sales Consolidated sales for Mersen amounted to €430 million in the fi rst six months of 2018, a like-for-like increase of 11% compared with the same period last year. Including the negative impact of exchange rates for approximately €23 million and the effect of the fi rst-time consolidation of Idealec, reported growth amounted to 5.2%. H1 2017 Like-for-like Reported In millions of euros H1 2018 restated (1) growth (2) Scope effect Currency effect growth Advanced Materials 240.1 227.2 11.7% -6.0% 5.7% Electrical Power 190.2 182.3 10.2% 0.3% -6.0% 4.3% Europe 146.9 135.9 8.5% 0.3% -0.7% 8.1% Asia-Pacific 124.7 110.3 19.2% -6.1% 13.1% North America 141.8 146.3 7.4% -10.5% -3.1% Rest of the World 16.9 17.0 9.3% -10.0% -0.7% GROUP 430.3 409.5 11.0% 0.3% -6.1% 5.2% (1) Adjusted for the high-power switch and contactor business sold in October 2017. (2) Like-for-like growth: determined by comparing sales for the year with sales for the previous year, restated at the current year’s exchange rate, excluding acquisitions and/ or disposals and the impact of IFRS 15. Sales in the Advanced Materials segment rose by 11.7% like-for- In Europe, growth was robust in both business segments, in the like to €240 million, led by strong growth in the solar, electronics, transportation and process industries markets. In Asia, the Group aeronautics and process industries markets. recorded strong like-for-like growth in fi rst-half sales of more than 19%. China and South Korea were particularly dynamic thanks In the Electrical Power segment, first-half sales exceeded notably to the solar, electronics, chemicals and process industries €190 million, up 10.2% like-for-like. The increase was driven by markets. Growth in North America was led by sales to electrical gains in renewable energies, process industries and, to a lesser distribution, electronics and process industries customers. extent, electrical distribution. 3 MERSEN | 2018 FIRST-HALF FINANCIAL REPORT

1 MANAGEMENT REPORT Consolidated results Y EBITDA and operating income before non-recurring items H1 2017 In millions of euros H1 2018 (restated) Operating income before non-recurring items 45.8 36.0 as a % of sales 10.6% 8.8% Depreciation and amortization 18.6 18.8 EBITDA 64.4 54.8 as a % of sales 15.0% 13.4% Consolidated EBITDA totaled €64.4 million (15% of sales), up an increase in prices that was greater than the increase in raw close to 18% year-on-year. materials costs. Operating income before non-recurring items came to Operating income before non-recurring items from the Electrical €45.8 million, yielding an operating margin before non-recurring Power segment stood at €19.3 million, resulting in an operating items of 10.6% that represented a sharp improvement on the fi rst margin before non-recurring items of 10.2%, in line with the 10.1% half of 2017 (8.8% restated). reported for fi rst-half 2017. The segment’s performance re fl ects the favorable impact of productivity gains and the unfavorable Operating income before non-recurring items for the Advanced impact of exchange rates and higher payroll and raw materials Materials segment was €33.9 million, resulting in an operating costs. Recent price increases are expected to partly offset this margin before non-recurring items of 14.1% of sales, compared rise in costs in the second half of the year. to 11.1% for the same period in 2017. The improvement was attributable to a favorable volume effect, productivity gains and H1 2017 In millions of euros H1 2018 (restated) Consolidated sales 430.3 409.5 Gross income 141.0 129.2 as a % of sales 32.8% 31.6% Selling, marketing and other expenses (41.0) (41.5) Administrative and research expenses (53.6) (51.1) Fixed costs (excluding production) (94.6) (92.6) Amortization of revalued intangible assets (0.6) (0.6) Operating income before non-recurring items 45.8 36.0 as a % of sales 10.6% 8.8% Gross income widened by one point thanks to the growth in Fixed costs (excluding fi xed production costs recognized in gross volumes, in particular in the Advanced Materials segment, and income) rose by around 5% at comparable exchange rates, well to the impact of the competitiveness plans. below the revenue growth rate. 4 MERSEN | 2018 FIRST-HALF FINANCIAL REPORT

1 MANAGEMENT REPORT Consolidated results Y Net income Net income attributable to shareholders totaled €27.9 million compared with €18.1 million in fi rst-half 2017. H1 2017 In millions of euros H1 2018 (restated) Operating income before non-recurring items 45.8 36.0 Non-recurring income and expenses (1.5) (2.0) Operating income 44.3 34.0 Net finance expense (4.7) (5.4) Current and deferred income tax (10.3) (9.3) Net loss from operations held for sale (0.2) Net income for the period 29.3 19.1 - Attributable to Mersen shareholders 27.9 18.1 The main items of Mersen’s consolidated statement of income ■ Net fi nancial expense came to €4.7 million in fi rst-half 2018, up break down as follows: slightly from the previous year thanks primarily to a favorable currency effect. ■ Non-recurring income and expense amounted to an expense of €1.5 million and corresponded to restructuring costs related to ■ Income tax expense totaled €10.3 million for the period, the competitiveness plans announced in 2016 and to acquisition representing an effective tax rate of 26%, versus 33% in fi rst- costs. In fi rst-half 2017, the net expense, also corresponding half 2017, with the Group bene fi ting from US tax reform. to restructuring charge, stood at -€2.0 million for the period. 5 MERSEN | 2018 FIRST-HALF FINANCIAL REPORT

1 MANAGEMENT REPORT Cash and debt C ASH AND DEBT Y Condensed statement of cash fl ows H1 2017 In millions of euros H1 2018 (restated) Cash generated by operating activities before change in working capital requirement 61.5 46.6 Change in working capital requirement (40.9) (23.8) Income tax paid (2.5) (6.8) Cash generated by continuing operating activities 18.1 16.0 Cash used in discontinued operating activities (0.2) (0.2) Net cash generated by operating activities 17.9 15.8 Capital expenditure (19.6) (12.3) Cash generated by operating activities after capital expenditure (1.7) 3.5 Acquisitions (7.9) 0 Other (0.9) 0.2 Cash generated by operating and investing activities (10.5) 3.7 Operating activities generated nearly €18 million in net cash As expected, capital expenditure was higher than in fi rst-half fl ow in the fi rst half of 2018. This fi gure takes into account an 2017, coming in at €19.6 million. Of that amount, one-third is unfavorable change in working capital requirement (WCR) of related to speci fi c growth projects, such as the increase in graphite €40 million, driven by strong growth in sales and a seasonal effect. production capacity. The working capital to sales ratio stood at 22.6%, up 1.7 points on As a result, cash fl ow from operating and investing activities the prior-year period, due notably to contracts that are in progress represented an out fl ow of €1.7 million, compared with an in fl ow in the chemicals market and the increase in bonuses paid for of €3.5 million in the fi rst half of 2017. 2017. Y Balance sheet Net debt at June 30, 2018 stood at €205 million, up €27 million Despite these significant investments, the Group’s financial on the €178 million reported at December 31, 2017. It includes structure remained robust, with a net debt-to-EBITDA (1) ratio of €13 million in acquisition costs, of which €8 million in cash outlays 1.53 versus 1.58 at December 31, 2017. The net debt-to-equity and €5 million in debt (corresponding primarily to a potential ratio stood at 40%. earn-out payment), €7 million in share buybacks and €7 million for speci fi c investment projects. June 30, 2018 Dec. 31, 2017 Total net debt (in millions of euros) 204.8 178.1 Net debt/ EBITDA 1.53 1.58 Net debt/ equity 40% 37% (1) Ratio calculated using the method required by the covenants contained in Mersen’s confirmed loans. 6 MERSEN | 2018 FIRST-HALF FINANCIAL REPORT