THE G ROUP ' S R&D T RANSFORMING R&D PROJECTS INTO COMMERCIAL - PowerPoint PPT Presentation

G LOBAL EXPERT IN E LECTRICAL P OWER AND A DVANCED M ATERIALS M ARCH , 2017

M ERSEN : OUR MISSION W E DEVELOP W E PROVIDE INDUSTRIAL COMPANIES AROUND THE THE BEST TECHNOLOGIES FOR WORLD WITH INNOVATIVE SOLUTIONS ENHANCING THE THE INDUSTRIES OF THE FUTURE PERFORMANCE OF THEIR PRODUCTS AND SERVICES 2 2016 Results – March 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 3 2016 Results – March 2017

… WITH A LARGE CUSTOMER PORTFOLIO  C LIENT PROXIMITY KEY CUSTOMERS (>65% “ ON - DEMAND ” PRODUCT )  R EGULAR AFTER MARKET REPLACEMENT (~65% OF SALES )  H IGH BARRIER OF ENTRY  High quality  Homologation & standards  Worldwide presence  L ARGEST CUSTOMER : < 4% OF SALES  10 LARGEST CUSTOMERS : < 13% OF SALES Non exhaustive List 4 2016 Results – March 2017

… WITH FINANCIAL COMPLEMENTARY MODEL A DVANCED M ATERIALS E LECTRICAL P OWER QUICK ADAPTABILITY TO ECONOMIC  C APITAL INTENSIVE ( DEPRECIATION : 7,4%  L OW CAPITAL INTENSIVE ( DEPRECIATION : ENVIRONMENT OF SALES ) 2,4% OF SALES )  H IGH E BITDA ON AVERAGE (5 Y ): 17%  H IGH E BITDA ON AVERAGE (5 Y ): 14% S TRONG CASH GENERATION  L OW CURRENT EBIT MARGIN BUT STRONG  S TABLE HIGH MARGIN LEVERAGE ( OVERCAPACITY IN GRAPHITE + O PERATIONAL  C ASH RICH WITH SOME CASH COW LOW LEVEL IN CHEMICAL ) EXCELLENCE  C ASH RICH WITH SOME CASH COW PROGRAM 5 2016 Results – March 2017

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 6 2016 Results – March 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 Flexible and rigid felt UL-standard surge insulation for protection semiconductor solutions for the electronics US market 7 2016 Results – March 2017

T RANSFORMING R&D PROJECTS INTO COMMERCIAL SUCCESSES B Y 2020 3-5%* 3-8% * OF SALES REVENUE FROM ADJACENT TARGETED POTENTIAL INNOVATIONS CAPABLE OF GENERATING SALES FROM DISRUPTIVE NEW SALES INNOVATIONS *Compared with 2016 sales 8 2016 Results – March 2017

O PERATIONAL EXCELLENCE : A WAY TO DEPLOY OUR STRATEGY WHILE BEING MORE COMPETITIVE  I MPROVING COMPETITIVENESS 2016 OUTCOMES  Operational excellence plan  Reducing purchasing costs ahead of schedule  Enhancing product design-to-cost process  Capex discipline (< € 30m)  Reducing fixed costs  Fixed costs cut by 5%*  D EPLOYING OPERATIONAL EXCELLENCE STANDARDS  Shorter time-to-market in the  Improving the efficiency of our production aeronautics business processes  Inventory reduced by € 16m  Optimizing WIP and inventory to maintain like-for-like excellent cash management Get every employee engaged in continuous improvement * Excluding bonuses 9 2016 Results – March 2017

… THAT WILL CONTINUE IN 2017 AND 2018 2017 2018 Initially 2016 Total projected estimated estimated 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 10 2016 Results – March 2017

L EADING TO A VERY HIGH OPERATING CASH FLOW ...  O PTIMIZED INVENTORY LEVELS  L OW INCOME TAX PAID Cash flow before capital expenditure 94.0  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 11 2016 Results – March 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 12 2016 Results – March 2017

S OLAR : A YEAR OF TRANSITION IN 2017 BEFORE RESUMING GROWTH Worldwide Annual Forecast Cumulative installed power (GW) 80 600 70 500 60 400 1. Polysilicon 2. Ingot 50 manufacturing production 40 300 30 200 20 100 10 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 13 2016 Results – March 2017

W INDPOWER IS DRIVING G ROUP SALES , THANKS TO A VERY BROAD INSTALLED BASE Worldwide installed power (GW) Annual Cumulative 70 700 60 600 50 500 1. Generator power supply and signal transfer systems 40 400 30 300 20 200 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 market, with a very positioned with all capitalize on our large installed of the generator after-market base manufacturers , expertise in every geography 14 2016 Results – March 2017

M AJOR POTENTIAL IN THE ELECTRONICS MARKET + 4-6%/year Power device LED 1. Production of silicon single crystals Data centers 2. Active layer deposition CMOS MEMS CCP CPU NAND 2016 sales: > € 40m  A more than  Mersen is the  Extensive ability to € 350-billion traditional engineer new market, driven by supplier to products tailored to new applications semiconductor demand fabs 15 2016 Results – March 2017

A COMPREHENSIVE RANGE OF PRODUCTS FOR PREMIUM ELECTRIC VEHICLES Estimate of the number of electrical vehicles per year (in 000’s) Annual Cumulative 2000 9000 1800 8000 1. Battery management 1600 7000 1400 6000 1200 5000 1000 4000 800 3000 600 2000 400 1000 200 2. Battery 3. Power conversion 0 0 protection/safety 2015 2016 2017 2018 2019 2020 2021 2022 2023 2016 sales: € 10m  A booming market ,  Our technology/market  R&D and innovation with growth potential intelligence has has led to the design of of above 20% a year identified potential the disruptive Xp market opportunities for technology, with major Mersen potential Sources: IDTechEx & Yole reports, 2015 16 2016 Results – March 2017

A POTENTIAL SUPPORTED BY OUR GLOBAL FOOTPRINT , A SOURCE OF STABILITY AND OPPORTUNITIES E UROPE 34% 2,200 people F RANCE 9% G ERMANY 9% U NITED K INGDOM 3% S PAIN 3% N ORTH A MERICA 36% U NITED S TATES 31% 1,850 people A SIA -P ACIFIC 25% C HINA 10 % J APAN 4 % S OUTH K OREA 4 % I NDIA 3 % 1,600 people R EST OF THE WORLD 5% 500 PEOPLE Number of employees at December 31, 2016 Sales as a % of 2016 figures 17 2016 Results – March 2017

U NITED S TATES : A MARKET FULLY COVERED BY OUR LOCAL PLANTS Montreal Toronto Bay City Rochester Greenville Newburyport St Marys Boonton Salem El Paso (logistics) Juarez Baton Rouge (maintenance) EP production facility AM production facility 18 2016 Results – March 2017

U NITED S TATES : A MAJOR POTENTIAL IN HIGH - TECH MARKETS AND A POSSIBLE REBOUND IN OIL & GAS E NERGY E LECTRONICS W IND P OLYSILICON P OWER ELECTRONICS S EMICONDUCTORS 14% O IL & GAS 22% 16% IN 2014 7% € 236 m TRANSPORTATION 10% PROCESS INDUSTRIES and OTHER  Ceramics 7%  Heat treatment 40%  Sintering  Die-casting CHEMICALS  Metals processing  Optical fibers  Glassmaking Based on 2016 sales in the United States 19 2016 Results – March 2017

D YNAMIC SCOPE OF ACTIVITY MANAGEMENT C URRENT TARGETS  Power electronics (bolt-ons and consolidation)  Fuses (consolidation)  Materials (expertise)  ACQUISITIONS  DISPOSALS O VER THE PAST FIVE YEARS € 30m  2012: Eldre  2013: Non-core businesses in anticorrosion € 20m € 10m  2014: Cirprotec  2016: Brazing technologies € 5m  2016: ASP € 5m € 2m  2017: Harbin  2017: High-power switches € 5m 20 2016 Results – March 2017