Media- & Financial Analyst-Conference 2014 Zehnder Group Review - - PDF document

Media- & Financial Analyst-Conference 2014 Zehnder Group Review 2013

Hans-Peter Zehnder, Chairman & CEO Josef Brügger, CFO 7 March 2014

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We strive to find the right balance between improving results in the short term and optimising earnings in the long term.

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Agenda

• 1. Business Review 2013
• 2. Financial Results 2013
• 3. Outlook 2014
• 4. Q&A

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Flat sales and higher costs squeezed our results.

• Weaker market resulted in unchanged sales and missing our profit targets.
• Prices were under pressure (mainly RAD).
• Costs were on level as planned.
• Sales of EUR 522.4 million (PY: 523.8) and EBIT of EUR 32.3 million

(PY: 38.5) were achieved.

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• Investments in fixed assets of EUR 35.1 million (PY: 37.3)
• Cash flow from operating activities EUR 37.9 million (PY: 44.0)
• Net cash position of EUR 32.2 million (PY: 26.3)
• Net income EUR 18.2 million (PY: 26.8)
• Equity ratio 62% (PY: 61%)

Financial situation is solid. New residential buildings in Europe declined in most countries and grew only in RU, DE, CH and BE.

6 Source: Total housing completions, EUROCONSTRUCT, November 2013; BRG Consult, October 2013

Refurbishment of residential buildings in Europe overall declined.

7 Source: Total housing completions, EUROCONSTRUCT, November 2013

New commercial and industrial buildings in Europe declined in nearly all countries.

8 Source: Total housing completions, EUROCONSTRUCT, November 2013

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Europe net sales 2013: ongoing growth in ventilation, small decline in radiators.

2011 2012 2013 FX-adj/organic Radiators Europe 307.7 304.6 295.7 Change from prior year 4%

• 1%
• 3%
• 2%

Ventilation Europe 153.4 164.7 168.1 Change from prior year 16% 7% 2% 3% Total Europe 461.1 469.3 463.8 Change from prior year 8% 2%

• 1%

0%

EUR million

Sales of radiators in Europe varied.

• Growth in France, UK and Russia
• Decline in Germany, Italy and Switzerland
• Cold winter affected 1st quarter sales.
• Product group ceiling panels for heating and cooling grew again.

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There was no medal ceremony at the Winter Olympic Games in Sochi without Zehnder.

Zehnder ZIP radiant ceiling panels are attached to the ceiling of the open ceremonial hall at Medal Plaza to provide warmth to the happy athletes.

Despite sales decrease in the key markets NL and CH, ventilation sales in Europe increased by 2%.

• NL suffered from the continuous drop in residential new built.
• CH sales were affected by cold winter and delayed product introduction.
• Growth in IT, FR, UK and DE
• Strong growth of product group Clean Air Solutions

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Highlights FR: We increased sales in France despite difficult economic situation.

• Market share radiators kept
• Significant growth of towel radiators
• Strong growth in ventilation
• Merger of 3 companies into 1 sales company
• New regulations HPE (haute performance énergétique) and THPE (très

haute performance énergétique) as of 2014 will favour demand for energy efficient solutions.

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Highlights FR: Kuehne + Nagel, Paris, goes for our Clean Air Solutions.

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Massive dust reduction after installation of air cleaning units

Highlights DE: In the flattish German market our sales slightly decreased.

• Ventilation sales increased whereas radiator

sales decreased

• Successful new product launch in ventilation

business (ComfoAir 180)

• New partnership with leading supplier of

HVAC integration software

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Highlights CH: The construction market was stable on high level.

• Cold temperatures in 1st quarter resulted in

temporary stop at many construction sites.

• Successful, but delayed introduction of a new

slim heat recovery ventilation unit.

• Service offer strengthened
• Merger of 2 sales companies into 1 company

and successful introduction of SAP

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Highlights UK: We achieved over performance in a recovering market.

• UK residential building market grew in new

build as well as in refurbishment.

• Decorative and towel radiators grew.
• Very strong growth in radiant heating and

cooling.

• Successful launch of renewed heat

recovery ventilation product range.

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Highlights IT: The construction market declined again.

• Decline in radiators sales but market share increased.
• Strong growth of ventilation leads to strengthened leader position.
• Successful launch of various new radiators and ventilation units.
• Merger of all 3 sales companies into 1 company and successful

introduction of SAP.

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Highlights NL: The market suffered from severe recession in new build residential.

• Collapse 2012 of residential market continued – no recovery in 2013
• Radiators sales declined
• Ventilator sales declined but market leader position was kept.
• Strong growth of the product group Clean Air Solutions

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Highlights NL: The ComfoSchool solution provides a perfect indoor climate.

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Benefits:

• Ensures healthy air quality
• Avoids a too high CO₂

concentration

• Avoids temperature
• vershoot in the classroom
• Provides fast response time

to changing occupation

We developed new markets: Example Turkey - Spine Tower, Istanbul developed new markets e developed new markets

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• Strong growth in new private residential homes (+18%), whereas private

non residential and public construction on previous year’s level.

(Source: U.S. Census Bureau)

• Heat recovery ventilation grew significantly, whereas fan coils suffered

from a very competitive environment.

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Highlights North America: We outperformed in the ongoing recovery of the residential construction market.

2011 2012[1] 2013 FX-adj/organic Radiators North America 20.8 27.1 30.6 Change from prior year

• 4%

31% 13% 16% Ventilation North America 7.0 2.2 2.1 Change from prior year 34%

• 69%
• 9%
• 6%

Total North America 27.8 29.4 32.6 Change from prior year 3% 6% 11% 15%

[1] movement between the radiator and ventilation segments mainly due to product reclassification

EUR million

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Highlights USA: The Mansions at Aqualina & Oceana in Miami

Dual Tunnel Vertical Hi-Stack Fan Coil for high rise luxury condominium buildings Order size: 600 units

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Highlights USA: Lake Hotel Yellowstone National Park, Wyoming

Runtal RF and RV panels 120 pieces for the 1st phase; total order 450 pieces

• Government took measures to calm down overheated residential building

market.

• Despite this, radiators sales grew significantly.
• Ventilation sales decreased due to postponed big construction projects.
• Successful relocation of Beijing factory with minimal impact on operations.
• Sale of office building results in additional EBIT.

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Highlights China: We progressed in many respects.

2011 2012 2013 FX-adj/organic Radiators CN 19.7 17.7 19.5 Change from prior year 10%

• 10%

10% 12% Ventilation CN 6.7 7.4 6.5 Change from prior year 127% 10%

• 12%
• 11%

Total CN 26.5 25.1 26.0 Change from prior year 26%

• 5%

4% 5%

EUR million

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Highlights China: Qujiang Wudong Garden in Xian is one

• f many residential buildings we equipped with our products.

Extract ventilation unit G-VENT-3S

We increased expenses for process improvements. We strongly believe that our investments in the future will pay-off

• Pro memoria: SAP is a comprehensive process and organisational project

to improve

• Efficiency by a uniform IT platform
• Transparency of transactions
• In 2013 introduction of SAP in several sites
• January: Sales organisation Germany
• April: Logistics HUB Germany
• October: Sales organisations Italy and Turkey
• January 14: Sales organisation Switzerland, Production Lahr (DE)
• Preparation of further roll-outs 2014 in NL, BE and UK initiated

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After a difficult start the logistics hub Lahr achieved its performance goals. We strongly believe that our investments in the future will pay-off

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• Difficult start delayed shipments during May

and June and impacted 1st half year sales.

• Since July the processes in the hub were
• stable. Further optimisation is in progress.
• Hub Lahr plays a very important role in our
• rganisation:
• streamlines entire European logistics

chain;

• reduces logistic costs;
• shortens delivery time.

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We achieved further process improvements resulting from the Kaizen (Zmile) program.

• Zmile initiative based
• n Kaizen philosophy
• Gain of momentum

with strong involvement

• f employees in all

manufacturing sites

• Considerable savings

in production achieved

• Zehnder Vitalo
• Runtal Cosmopolitan (iF product design award)
• ComfoAir 180
• Comofo Air 330 Slimline
• ComfoAir XL
• ComfoSchool
• ComfoBox A/W
• Vireo
• ….

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New products were successfully launched.

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New products were successfully launched: Example ComfoAir 330 Slimline

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New products were successfully launched: Example ComfoAir 180

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New products were successfully launched: Example ComfoBox Air-Water Hand-over of CEO position will take place as of 1 November 2014. Hand-over of CEO position will take place as of November 1, 2014

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Hans-Peter Zehnder

• Will step back as CEO of the Zehnder Group as of

31 October 2014.

• Will continue to be involved in the company as

full-time chairman of the Board of Directors. Dominik Berchtold

• Was appointed deputy chairman of the Group

Executive Committee as of 1 January 2013.

• Will take over as CEO of the Zehnder Group as of

1 November 2014.

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Agenda

• 1. Business Review 2013
• 2. Financial Results 2013
• 3. Outlook 2014
• 4. Q&A

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Key figures 2013: Sales on previous year’s level; lower profitability; improved net cash position

2012 2013 ∆ in % Net sales 523.8 522.4

• 0.3

EBIT 38.5 32.3

• 16.0

EBIT margin 7.3% 6.2%

Net income 26.8 18.2

• 32.0

Net income margin 5.1% 3.5%

Cash flow from operating activities 44.0 37.9

• 13.8

Cash flow margin 8.4% 7.3%

Net cash position 26.3 32.2 22.5

EUR million

France, Germany and Switzerland remain our most important markets.

1 France 2 Germany 3 Switzerland 4 United Kingdom 5 Italy 6 Netherlands 7 United States 8 China 9 Belgium 10 Austria

(88.8%) (6.2%) (5.0%)

37 38

Net sales increased in 2nd half of 2013 compared to previous years.

EUR million

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Net sales: Reduced ventilation growth rates – slight decline of radiators sales

EUR million

Investments in fixed assets are significantly higher than depreciation.

• Investments in fixed assets EUR 35.1 million (2012: 37.3)
• Depreciation in fixed assets EUR 18.0 million (2012: 16.9)
• Divestment of building in China

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Major investments in fixed assets in 2013

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Project Why CAPEX 2013 Picture

New production and innovation facility near Beijing, China New logistics hub/warehouse in Lahr, Germany Further modernization step

• f multi column

production in Lahr, Germany Additional space for growth necessary; current area is becoming a residential area 8.4 EUR million Streamline European value chain, cost reduction, shorter delivery time 4.8 EUR million Increase productivity 1.4 EUR million

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Ongoing investments in research & development in order to remain highly innovative

EUR million

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1.9% rise of personnel cost mainly for salary increases.

• Personnel costs EUR 174.4 million (2012: EUR 171.2 million)
• Headcount 31 December (incl. temporary)

2012 2013 Europe 2'128 2'187 Switzerland 363 371 China / North America 644 725 Total employees 3'135 3'283

Major impacts on EBIT 2013

38.5

• 2

9

• 6
• 3
• 2
• 2
• 1

32.3

44

EUR million

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Net cash position and equity ratio improved.

Balance sheet (EUR million) 2011 2012 2013 Current assets 246 230 229 Fixed assets 160 178 184 Total assets 406 407 413 Current liabilities 101 116 116 Long-term liabilities 65 44 41 Equity 240 248 256 Total liabilities & equity 406 407 413 Net cash position 32 26 32 Ratios (in %) 2011 2012 2013 Equity ratio 59 61 62 Return on capital employed (ROCE) 25 17 14

Cash flow: Cash position increased mainly due to divestments.

18.2 19.1 0.4 11.5

• 35.1
• 1.0
• 0.8
• 8.6

3.0 1.4 8.4

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EUR million

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Solid net cash position provides operational flexibility.

EUR million

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The Zehnder Group share price underperformed 2013 against the Swiss Performance Index.

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The Board of directors proposes a stable payout ratio.

CHF

Agenda

• 1. Business Review 2013
• 2. Financial Results 2013
• 3. Outlook 2014
• 4. Q&A

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Long term growth drivers remain valid.

• Trend towards energy efficiency remains unchanged (EPBD/2020 targets).
• Building regulations in Europe continue to move towards this target.
• Comfort and health in buildings is a priority in the building industry.
• High potential for ventilation in renovation.
• Market penetration of energy recovery ventilation in Europe is still low.

10 20 30 40 50 60 70 80 2020 2019 2018 2017 2016 2015 2014 PL UK CH NL IT DE/AT FR BE

Heat recovery ventilation in residential new buildings: Expected stronger market penetration drives growth.

% of new builds

Source: Zehnder Group management estimation

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Short term economic outlook is uncertain.

• European economic development is uncertain, in particular given the
• Sovereign debt problem;
• Tapering of expansive monetary policy.
• New builds slightly declining.
• Recovery signs for renovation.
• Stable economy with up-side potential in North America.
• High volatility in China, but upside potential in residential building market.

Short term outlook for 2014

• Sales Europe
• Radiators sales remain flat.
• Ventilations sales further grow, albeit at a low rate.
• Sales China and North America
• Further mid-single-digit sales growth.
• Profitability
• Modest improvement in operating profit in 2014 compared with 2013

(not including the one-off effect of the sale of the property in China)

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Thank you! Agenda

• 1. Business Review 2013
• 2. Financial Results 2013
• 3. Outlook 2014
• 4. Q&A

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Q&A

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While Zehnder Group is making great efforts to include accurate and up-to-date information, we make no representations or warranties, expressed or implied, as to the accuracy or completeness of the information provided in this handout and disclaim any liability for the use of it. The statements in this presentation relating to matters that are not historical facts are forward-looking statements that are not guarantees of future performance and involve risks and uncertainties, including but not limited to: future global economic conditions, foreign exchange rates, regulatory rules, market conditions, the actions of competitors and other factors beyond the control of the company.

Disclaimer