We shape electrical power

What is the Strategic Priorities of North America?
What type of economy is Schaffner trying to build?
What market is Schaffner Schaffner from?

Transcription

1 Investors Day 2015 The Schaffner Group We shape electrical power Agenda Introduction to Schaffner Strategy Group Strategy 2020 Finance Division EMC Business Unit Power Quality Division Power Magnetics Division Automotive Summary Alexander Hagemann Alexander Hagemann Kurt Ledermann Guido Schlegelmilch Stefan Melly Alexander Hagemann Alexander Hagemann Alexander Hagemann SLIDE 2

2 Investors Day 2015 Introduction to Schaffner Schaffner: a Leader in Electromagnetics and Power Electronics Key figures FY 2013/14 Net Sales: CHF million EBIT margin: 7.0% 3,140 employees worldwide Market cap as of : CHF 140 million Net sales growth above GDP 200% 100% Divisions with leading market positions FY 2013/14 FX Balanced sales and global footprint Reported Electro Magnetic Compatibility Filters (EMC) No 1 in EMC filters Power Magnetics (PM) No 3 in transformers/inductors Automotive (AM) No 2 in keyless entry antennas USA 18% Europe 47% Asia 35% Production Sites 4

3 Schaffner Mission Schaffner provides manufacturers and users of electrical and electronic equipment worldwide with components, systems and services that enable efficiency and reliability by applying leading knowledge in electromagnetics and power electronics. We shape electrical power 5 Business Model Client and Market Needs Competence Center Products Solutions Services Global Footprint Unique Position in Power Electronics Innovation Center Global Talents Research Network EMC Power Quality Power Magnetics Automotive USA Europe Asia-Pacific 6

4 Broad Market Mix Marine Motor Drives Renewable Energy Smart Grids Rail Transportation Water Treatment Health Care Oil + Gas LED Robotics Automotive 7 Solutions from Schaffner Eliminate Distortions of Electrical Power SLIDE 8

5 Served by Three Divisions Electro Magnetic Compatibility Power Magnetics Automotive No. 1 in EMC filters 1 Sales: CHF 110 mn EBIT: CHF 15.9 mn Market Size: CHF 330 m No. 3 in Transformers/Inductors 2 Sales: CHF 67.3 mn EBIT: CHF 4.3 mn Market Size: CHF 2 bn No. 2 in Keyless Entry Antennas 3 Sales: CHF 37.3 mn EBIT: CHF 2.5 mn Market Size: CHF 120 mn Market share in % 24 Market share in % 4 Market share in % 25 1) No. 2: TDK (Japan/Germany) 2) No. 1: Hammond Power Solutions (Canada) 3) No. 1: Sumida Corporation (Japan) All financials: ACT FY 2012/14. Market sizes and shares are Schaffner estimates Investors Day 2015 Strategy Group

6 Strategic Priorities Exploit growth opportunities through organic growth and acquisitions Margin improvement through continued efforts for operational excellence Strengthen market penetration in North America 11 Strategic Priorities: Organic Growth and Acquisitions Focus on markets with long-term growth drivers, e.g. air conditioning and motor drives New technologies and product pipeline, setting Schaffner apart from competition Build on solid M&A track record and increase external growth 12

7 Strategic Priorities: Operational Excellence to Expand EBIT Margin Past improvements driven by: Lean manufacturing Restructuring of logistic flows Factory consolidation in Europe Focus areas for future improvement: Optimized global footprint Zero defect manufacturing Quick response manufacturing Automation in Asian operations 13 Strategic Priorities: Accelerated Expansion in North America Reshoring of production, modernization of infrastructure and robust economy drive demand Schaffner coming from a base of lower market share compared to Europe and Asia-Pacific Critical mass achieved to establish a strong presence: management, marketing, engineering, production 14

8 Schaffner Aims to Exceed CHF 400 million in Net Sales in 2020 CHF million > CHF 400 m AM Automotive: Establish a robust business CHF 215 m AM PM PM: Achieve market leadership PM EMC EMC EMC: Grow in a mature market Accelerate growth with Power Quality 0 FY 2013/14 FY 2019/ Financial Targets Across the Cycle Net Sales Growth, organic EBITA Margin ROCE EMC > 3% > 12% PM > 7% > 8% AM > 5% > 10% Group > 5% > 8% > WACC Leverage ratio target: Net Debt/EBITDA < 3 Long term equity ratio > 40% Dividend policy: pay-out ratio 25-35% of Net Income 16

9 Investors Day 2015 Strategy Finance Financial Highlights H1 2014/15 Net sales CHF million (CHF million) Growth -0.1%, in local currencies +1.4% Book-to-bill 0.99 (1.06) EBIT margin on 3.6% (4.8%) Net profit CHF 1.9 million (CHF 3.2 million) EPS CHF 3.02 (CHF 5.08) Free cash flow CHF -2.8 million (CHF -2.2 million) Sound balance sheet with 40% ( : 43%) equity ratio SLIDE 18

10 Profit & Loss Statement 2012/ /14 H1 2014/15 Net Sales Cost of sales Gross profit 27.0% % % 28.2 R&D, Application engineering 7.8% % % 7.8 Others EBITA 5.4% % % 4.8 Amortization EBIT 4.7% % % 3.7 Financial result Tax Net Profit 3.1% % SLIDE 19 Balance Sheet 2012/ /14 H1 2014/15 Intangible assets, Goodwill Property, plant and equipment Others Total non-current assets 37% % % 54.5 Inventories Trade Receivables Cash & Equivalents Others Total current assets 63% % % 94.1 Equity 42% % % 59.2 Non-current liabilities 27% % % 51.0 Current liabilities 31% % % 38.3 SLIDE 20

11 Cashflow Statement 2012/ /14 H1 2014/15 Net profit Depreciation and amortization Change in net working capital Change in provision Others Cashflow from operating activities Cashflow from investing activities Cashflow from financing activities CAPEX Free cashflow SLIDE 21 Innovation and Portfolio Diversification Lead to Sustainable Growth Net sales growth above GDP Net sales 200% 100% / / / / /14 AM PM EMC FY 2013/14 FX Reported Capital employed by division / / / / /14 AM PM EMC Gross margin 50% 40% 30% 20% 10% 0% 2009/ / / / /14 Total EMC PM AM SLIDE 22

12 Strong Operational Leverage Break-even point and operating leverage Every CHF 1. in additional sales will result in CHF 0.30 additional EBIT SLIDE 23 Currency Exposure Cash Flow (in CHFm) Highest currency exposure in Thai Baht, natural hedge in all other regions CHF CNY USD EUR THB Rest Inflow (Sales) Outflow (operating expenses) SLIDE 24

13 Overview Distribution to Shareholders SLIDE 25 Financial Key Performance Indicators Sales growth > 5 % Operational EBITA margin > 8 % Equity ratio > 40 % Economic Value Added, ROCE > WACC Pay-out to shareholders % of net income SLIDE 26

14 Measuring Performance of Divisions Operational EBITA Operational earnings before interest, taxes and acquisition-related amortization represents Income from operations excluding acquisition-related amortization, restructuring and restructuring related expenses, gains and losses from sale of businesses and acquisition related expenses. SLIDE 27 Schaffner Earnings Sustainably Exceed Capital Costs Target: ROCE > WACC 10.6% ROCE 25.0% 15.0% 5.0% 5.6% WACC -5.0% -15.0% WACC ROCE SLIDE 28

15 Investors Day 2015 Schaffner Divisions We shape electrical power The Schaffner Group Markets of the Schaffner Group 30

16 Investors Day 2015 Division EMC SLIDE 31 EMC Division Net sales (in CHFm) Markets Operating profit (in CHFm) Global Footprint Production Sites Sales markets SLIDE 32

17 Main Products and Solutions AC Filter DC Filter Inlet Filter Output Filter MF Filter Chokes SLIDE 33 Growing Market Share in a Challenging Environment with EMC Filters Market size CHF 330m with future CAGR of 2% Market decline for traditional EMC filters since 2011 due to CHF appreciation, volume and price reduction in Photovoltaics Already 25 % of division sales in high growth areas: Output filters, Middle Frequency filters, Power Quality filters High market shares in several regional and vertical markets Only very few truly global competitors, Local competition addressed by strengthening local presence (e.g. sample center and business development team USA) SLIDE 34

18 EMC Division Update Schaffner EMC is pursuing profitable growth by: Gaining market share in existing markets like motor drives and machine tool & robotics Participating in the growth of new markets like quick charger and 3D printing Exploiting an innovative and growing product portfolio Building up new customers with strong FAE presence Continuously improving cost structures and organization processes SLIDE 35 Application Example: Home Automation Sales of home automation have been growing substantially since 2009 and this trend is expected to gain momentum through 2020 The simplicity of management of home automation systems suggests they will be available for the masses in the near term. Targeted companies who have invested in product development: Crestron, Lutron, Savant, Sonos, Control 4, Marantz, Integra, Bower & Wilkins, JBL, Leon. Schaffner won first key customers with chokes, 1phase and inlet filters SLIDE 36

19 Application Example: 3D Printing The global 3D printing market is expected to reach $20.2 billion in 2019 The three major manufacturers of 3D printers include 3D Systems, Stratasys, and ExOne Schaffner won projects at leading customers with 1phase and inlet filters SLIDE 37 Cooperation With Key Leaders in the Market Siemens Solution Partner Automation Drives Fulfilment of globally standardized tests and audits Market- and application specific products and tools complementing Siemens system solutions Benefiting from global Siemens sales channels Regular technical trainings on latest product developments of entire Schaffner portfolio 38

20 Strategic Priorities Will Create Growth in Classical EMC Filter Business while supporting new filter businesses. Smaller businesses for output filters, middle frequency filters and PQ filters will grow >15% p.a. Major business for EMC filters shows slower growth with leading market position Use robust and well performing organization to support engineering, sales, manufacturing and logistics worldwide Create EMC filter growth by strategic priorities: focus on organic market share growth increase existing trading and distribution business acquire and consolidate smaller competitors SLIDE 39 Strategic Priority: Focus on Organic Market Share Growth Organic market share growth for market leader requires focused approach in several areas New product introduction Adequate pricing strategy Shorten time to market and introduce quick response manufacturing Selected vertical markets are Drive OEM, elevator, machinery & robotics SLIDE 40

21 Strategic Priority: Increase Existing Trading and Distribution Business with new products and partners. Provide access for third party suppliers to different markets Leverage our existing organization Growth after new product introduction Strong growth opportunities Today already single digit MCHF trading business with attractive margins Extension of existing product portfolio Several new opportunities under discussion SLIDE 41 Investors Day 2015 Business Unit Power Quality

22 Power Quality Net sales (in %) Markets 405% >30% CAGR 100% Global Footprint Production Sites Sales markets SLIDE 43 Products and Solutions Active filters Solutions Passive filters SLIDE 44

23 Competitive Environment Harmonic filter market data Addressable market m CHF Schaffner market share % CAGR % Schaffner YoY growth +14% (YTD August 2015) Competitors 3 major global players > 30 smaller regional players SLIDE 45 Power Quality Business Unit Update Dedicated business unit organization since April 2014 which supports growth ambitions Strong application engineering and customer service for differentiation and customer intimacy Pre- and after-sales service for supporting customers over the entire product life cycle Global sales partner network with representation in > 25 countries Full product pipeline and technology roadmap SLIDE 46

24 Project Example: Lee Kong Chian Natural History Museum (Singapore) Compliance with IEEE-519 Power Quality standard for the building s HVAC system. 164 ECOsine passive harmonic filters installed. SLIDE 47 Project Example: Amusement Park Plohn (Germany) Increased reliability of roller coaster «Miniwah» power electronics. 2x 100A ECOsine active harmonic filters installed. SLIDE 48

25 Project Example: Offshore Oil & Gas Outdoor Application (USA) 3x 100A ECOsine active harmonic filters integrated in outdoor-grade NEMA enclosure. Electrical installation incl. fuses and mains breaker according to North American standards. SLIDE 49 Strategic Priorities 1. Sales network 2. Vertical markets 3. Product innovation 4. After-sales service Accelerate growth SLIDE 50

26 Strategic Priority 1: Strengthen Global Sales Partner Network Added in USA Added in Norway >70 PQ sales partners >25 countries +5 added in 2015 Added in Ireland Added in India Added in Germany SLIDE 51 Strategic Priority 2: Focus on Selected Vertical Markets Water Treatment HVAC Oil & Gas Factory Automation Building Technology SLIDE 52

27 Strategic Priority 3: Drive Product Innovation Innovation network involving partners from industry and universities Development of second product generations Design to cost, quality and service-ability Implementation of Power Quality technology roadmap SLIDE 53 Strategic Priority 4: Establish Profitable After-Sales Service Roll-out of global service partner network Schaffner Maintenance Partner Level 1 Schaffner Premium Installer Level 2 Schaffner Service Partner Level 3 Services offered: Installation, commissioning and training Scheduled maintenance and repairs Spare and wear part management Extended warranty SLIDE 54

28 Investors Day 2015 Division Power Magnetics SLIDE 55 Power Magnetics Division Key Facts Net sales (in CHFm) Markets Operating profit (in CHFm) Global Footprint 4.3 z Production Site Sales markets

29 Power Magnetics Product and Solutions Overview Water-cooled inductors for motor drives Filter inductors for heavy-duty freight locomotives Medium voltage transformers for extended requirements Transformer/ inductor combinations for photovoltaic inverters 57 PM Division Update Focus: Dry-type transformers and inductors for motor drives, renewable energy and traction Challenging market conditions worldwide Footprint optimization by consolidating US production Establishment of competence center in Germany while moving more production to Hungary 58

30 Application Example: Value Selling A new development in downtown Manhattan requires transformers with superior electrical, mechanical and environmental performance Schaffner s Magne-Seal technology offers unique robustness at a compact size Avoid commoditized mass markets by focussing on profitable niches 59 Application Example: Unique Value Proposition to Globally Active Customers Schaffner supplies a longstanding customer with components for use in propulsion systems of high-speed trains Driven by end customer demand, a split of production between Europe and China became necessary Customer testimonial: «The best production transfer I have experienced in my career» Same processes are applied to other customers with local content requirements, e.g. supporting Japanese train makers in America SLIDE 60

31 Power Magnetics Competitive Environment Weakness of Oil & Gas market affects the whole industry A highly fragmented field of competitors Globalization, technological, quality and cost requirements can only be met by the strongest players Market share of competitors by class (approximation) ~ 6 Global Players > 100 Local Suppliers ~ 12 Regional Leaders SLIDE 61 Power Magnetics Strategic Priorities Continue to focus on motor drive, renewable energy and traction markets Strengthen technology platform for existing and new applications Leverage unique global capabilities and synergies with EMC division Drive industry consolidation Constantly optimize manufacturing footprint and processes 62

32 Investors Day 2015 Division Automotive Automotive Division Key Facts Net sales (in CHFm) Markets Operating profit (in CHFm) Global Footprint Production Site Sales markets 64

33 Automotive Products and Solutions Overview Low Frequency Antennas (LFA) for keyless entry systems EMC filters for electric and plug-in hybrid vehicles (EV/PHEV) 65 Automotive Division Update Continued double-digit growth with LFA for keyless entry Entry into EMC filter business for EV/PHEV Exit from commoditized applications Operational excellence at high levels Mid-term business secured through long-term supply agreements Productivity gains through design to cost, automation 66

34 Demand for Keyless Entry Systems is Driven by Increased Penetration Rate 67 EV/PHEV Have Reached ~0.5% of Global Vehicle Production Soon to be 1% SLIDE 68

35 Competitive Environment: Being a Leader in an Automotive Niche Market Schaffner with market share gains through customer diversification Schaffner and Sumida strongest, ~3 x larger than next competitor Differentiation through best quality and delivery performance at competitive cost Market share LFA 30% Sumida 25% Schaffner SLIDE 69 Automotive Strategic Priorities Grow with the market for keyless entry systems by leveraging Schaffner s excellent design and manufacturing capabilities Develop complementary products to LFA antennas Prepare the EMC filter business for electric and plug-in hybrid vehicles SLIDE 70

36 Investors Day 2015 Investment Rationale We shape electrical power and create value Leader in technological and application know-how Most complete solution portfolio Most global amongst all competitors Excellent growth opportunities in expanding market Attractive capital returns 72

We shape electrical power

What is the Strategic Priorities of North America?

What type of economy is Schaffner trying to build?

What market is Schaffner Schaffner from?