Mersen Sa · EURONEXT:MRN
Mersen Sa — Investor Day (December 2014)
80 slides from Mersen Sa's investor day presentation, Dec 4, 2014
Slide 1: Mersen Investor Day
Core expertise in technology MERSEN INVESTOR DAY DECEMBER 4TH, 2014
Slide 2: Program
PROGRAM 9:00 – 9:20 Strategic Vision Luc Themelin 9:20 – 9:40 Financial Business Model Thomas Baumgartner Break 10:00 – 10:40 The Electrical Segment Laurent Marcenac Break 3 Case Studies Gabriel Ledru 11:15 – 12:30 Surge Windpower Power Marc Charlebois Protection solutions converters Emmanuel Carmie
Slide 3: Strategic Vision
STRATEGIC VISION LUC THEMELIN CHAIRMAN OF THE MANAGEMENT BOARD
Slide 4: Mersen's Medium-Term Strategic Vision
MERSEN’S MEDIUM-TERM STRATEGIC VISION Maximize growth Optimize potential in our markets our manufacturing facilities Customers Shareholders Employees 3 Investor Day 2014
Slide 5: Securely Anchored Growth Potential
SECURELY ANCHORED GROWTH POTENTIAL Reported figures in €m ~1,000* 830 811 739 741 CAGR: 6% 762 720 715 587 659 Solar revenue 535 Reported revenue CAGR: 7.5% excluding solar 2009 2010 2011 2012 2013 2018 excluding automotive revenue * In a favorable economic environment 4 Investor Day 2014
Slide 6: Competitive Strengths to Drive Growth
COMPETITIVE STRENGTHS TO DRIVE GROWTH 1 Strong market positions 20-25% market share 2 Solar A presence in high-potential markets Electronics Segments with high barriers to entry 3 Expertise in key applications Application expertise in materials and components Proficiency in power conversion componen
Slide 7: Three Dynamics to Sustain Growth
THREE DYNAMICS TO SUSTAIN GROWTH 1 A more powerful innovation drive A major contribution coming 2 A deeper local presence To capture growth, from the new product pipeline especially in Asia ~€100 million in 2018 ~30% of 2018 revenue from Asia 3 A sustained, targeted acquisitions drive Acquired reven
Slide 8: Optimizing Manufacturing Facilities
OPTIMIZING MANUFACTURING FACILITIES The Transform plan Objectives Comprehensive, worldwide plan Make our centers of excellence more efficient To streamline the manufacturing base, Streamline operations and enhance mainly in Europe flexibility Reduce dependence on cyclical chemicals To optimize facil
Slide 9: The Transform Plan
THE TRANSFORM PLAN Closure of Chemical plant Resizing of Chemical plant DETAILS Closure of other plant Resizing of other plant Closure of 6 plants in Europe and the United States and resizing of 1 plant in Europe Discontinuation of the carbon steel equipment business in China Operational deployment
Slide 10: An Improving Cash Flow Profile
AN IMPROVING CASH FLOW PROFILE FCF yield: 7.7% 7.9% Free cash flow/revenue Free cash flow: Operating cash flow - capex (€m) 59 55 2.7% 17 Average 2004-2008 Average 2009-2013* 2013* * Continuing activities ACTION PLANS 2009-2013: cash initiative plan (centralize inventory, reduce number of SKUs, S&OP
Slide 11: Uses of Cash Flow
USES OF CASH FLOW Sustained, targeted Dividend payments acquisitions, mainly in the Electrical Segment [30%-40%] payout Average valuation: 7 to 9 times before non-recurring items EBITDA While maintaining debt at an average of [1.5-2.5] times EBITDA 10 Investor Day 2014
Slide 12: Creating Shareholder Value
CREATING SHAREHOLDER VALUE OVER THE MEDIUM TERM ROCE before tax* Assuming a favorable economic [12%-14%] environment Revenue of around €1 billion in 2018 Recurring operating margin of >12%, i.e. recurring operating profit of 6.9% around €120m (vs. €60m in 2013) 2013 2018 * Before non-recurring items
Slide 13: Conclusion
CONCLUSION Powerful market drivers Solid industrial fundamentals Robust finances 12 Investor Day 2014
Slide 14: Financial Business Model
FINANCIAL BUSINESS MODEL THOMAS BAUMGARTNER CHIEF FINANCIAL OFFICER
Slide 15: 2 Strategically Related Segments
2 STRATEGICALLY RELATED SEGMENTS ELECTRICAL SEGMENT 41% €739m 59% 2013 revenue MATERIALS SEGMENT 14 Investor Day 2014
Slide 16: Materials Segment: Raising Barriers to Entry
MATERIALS SEGMENT: RAISING BARRIERS TO ENTRY AND INCREASING VALUE-ADDED Materials Segment revenue, €m 300 % volume of graphite sold 273 70% High value-added CAGR 68% finished products 8% 62% Up to €3,000/kg Semi-finished CAGR products 1% 32% 30% 38% From €6/kg 2008 2013 2018 BARRIERS TO ENTRY Upstre
Slide 17: Global Market Coverage to Ensure a Competitive Local Presence
GLOBAL MARKET COVERAGE TO ENSURE A COMPETITIVE LOCAL PRESENCE St. Marys Solar Chongqing Electronics Solar Solar Electronics Electronics Solar Electronics 2013 Materials 33% 31% 36%* Segment revenue by region 2 highly competitive graphite semi-finished product fabrication plants (upstream) * Includin
Slide 18: Materials Segment: Leverage in Place
MATERIALS SEGMENT: LEVERAGE IN PLACE Materials Segment, in €m 366 Growth potential 346 Electronics, solar 325 300 256 Revenue 24.0% 19.4% 19.7% 18.2% EBITDA 15.9% High EBITDA margin margin Major leverage Capex 43.1 36.4 32.0 Period of heavy capex 24.0 completed 16.8 2009 2010 2011 2012 2013 17 Inves
Slide 19: Electrical Segment: Shifting the Portfolio
ELECTRICAL SEGMENT: SHIFTING THE PORTFOLIO TO FASTER GROWING PRODUCTS €440m Expand GROWTH PRODUCTS 60- Renewable energies €350m 50% Energy efficiency Power electronics components 38% Power quality CAGR Windpower 25% 12% Services and maintenance solutions Surge protection devices Maximize MATURE PROD
Slide 20: Electrical Segment: High Cash Flow and EBITDA
ELECTRICAL SEGMENT: HIGH CASH FLOW AND EBITDA Electrical Segment, in €m Growth potential Renewable energies 450 464 Energy efficiency 440 Power quality 416 Services and maintenance 331 Revenue 15.3% 15.4% 13.8% 14.2% 14.3% EBITDA margin Resiliently high margin Capex 12 Low capital intensity 10.2 10.
Slide 21: An Optimized Profile for the Group
AN OPTIMIZED PROFILE FOR THE GROUP Global position Close to the customer Extensive expertise MATERIALS ELECTRICAL High market share Short-run BTO High value-added specialty High-potential segments: Identical marketing materials market, with an power electronics, power quality and end markets unrival
Slide 22: Questions?
QUESTIONS ?
Slide 23: Electrical Segment
ELECTRICAL SEGMENT LAURENT MARCENAC VICE PRESIDENT, GLOBAL SALES FOR THE ELECTRICAL SEGMENT
Slide 24: Mersen: Expertise in Three Key Functions
MERSEN: EXPERTISE IN THREE KEY FUNCTIONS Power supply Caron Power Current brushes slip rings Brush-holders collection Electrical protection Surge protection devices Fuse holders Fuses Power conversion Coolers Busbars Fuses 23 Investor Day 2014
Slide 25: A Presence Across the Electricity Value Chain
A PRESENCE ACROSS THE ELECTRICITY VALUE CHAIN Mersen Generation Transmission Distribution Use revenue* Power supply €140m Electrical protection €170m Power conversion HVDC €130m €440m * Based on 2013 revenue 24 Investor Day 2014
Slide 26: A Market with Many Drivers
A MARKET WITH MANY DRIVERS Generation Transmission Distribution Use Electricity demand Development of alternative energies Power grid interconnection Energy efficiency Energy storage Power quality 25 Investor Day 2014
Slide 27: Proficiency in Every Sales Channel
PROFICIENCY IN EVERY SALES CHANNEL, OFFERING THE RIGHT SOLUTION FOR EACH TYPE OF CUSTOMER OEMs End-users/MROs* Electrical Segment 50% of revenue 20% of revenue Distributors (broadline or specialty) 30% of revenue A strong key relationship with OEMs, specifiers and partners * MRO : Maintenance, Repai
Slide 28: Competitive Strengths to Meet Needs of Demanding OEMs
COMPETITIVE STRENGTHS TO MEET THE NEEDS OF THE MOST DEMANDING OEMS Generation Transmission Distribution Use MERSEN’S ADVANTAGES Global network Technical expertise, Product portfolio specifier capabilities 27 Investor Day 2014
Slide 29: Worldwide Market Coverage, to Support OEMs
WORLDWIDE MARKET COVERAGE, TO SUPPORT OEMS AS THEY EXPAND IN THE GLOBAL MARKETPLACE Mersen’s Design, Manufacturing and Commercial Capabilities Examples of OEM Centers of Expertise Worldwide 28 Investor Day 2014
Slide 30: Leveraging Distributors to Capture Value of Product Portfolio
LEVERAGING DISTRIBUTORS TO CAPTURE THE VALUE OF OUR BROAD PRODUCT PORTFOLIO MERSEN’S ADVANTAGES Catalogue covering every Global logistics application (Distribution hub on each Brand recognition continent, fulfillment rate) 29 Investor Day 2014
Slide 31: Access to a Stable, Profitable Replacement Market at End-Users
ACCESS TO A STABLE, PROFITABLE REPLACEMENT MARKET AT END-USERS Process industries Transportation Energy MERSEN’S ADVANTAGES Global network Application expertise Services portfolio Locally based capabilities 30 Investor Day 2014
Slide 32: A Three-Priority Strategy
A THREE-PRIORITY STRATEGY Sustain the growth dynamic in all regions Maintain our strong, profitable position in mature products Drive faster expansion in growth products 31 Investor Day 2014
Slide 33: Sustain the Growth Dynamic in All Regions
SUSTAIN THE GROWTH DYNAMIC IN ALL REGIONS Electrical Segment revenue, in €m CAGR CAGR CAGR 2009-2013 CAGR 4% 9% 10% 2009: €330m 2013: €440m 169 170 142 122 99 67 2009 2013 2009 2013 2009 2013 Europe North America Asia and RoW Growth in Germany Growth in the region Strong growth in the (exporter OEMs
Slide 34: A Differentiated Strategy According to Products' Life Cycle
A DIFFERENTIATED STRATEGY ACCORDING TO THE PRODUCTS POSITION ON THE LIFE CYCLE GROWTH STRATEGY MATURE PRODUCTS 38% Brushes, brush- €440m holders 62% 2013 revenue GROWTH PRODUCTS Fuses, fuse blocks Power electronics components Windpower solutions CASH FLOW/PROFITABILITY Surge protection dev
Slide 35: Maintaining Our Strong Competitive Position in Mature Products
MAINTAINING OUR STRONG COMPETITIVE POSITION IN MATURE PRODUCTS Graphite brushes [20-25%] [20-25%] [10-15%] Industrial fuses [15-18%] [22-25%] [5-6%] BARRIERS TO ENTRY: Power supply: formulation, specifiers, regulatory approval Electrical protection: ability to interact with distributors, importance
Slide 36: Optimizing the Production Base in Mature Products
OPTIMIZING THE PRODUCTION BASE TO MAINTAIN A PROFITABLE POSITION IN MATURE PRODUCTS Amiens Boonton Kaposvár Saint-Bonnet Nanhui Songjiang Tunis Yueqing Juarez/Monterrey Bommanahalli Cabreuva RESULT Automated plants Low-cost plants Nearly 40% of revenue derived from products made in low-cost countrie
Slide 37: Opportunistic Acquisitions to Consolidate Mature Products
OPPORTUNISTIC ACQUISITIONS TO CONSOLIDATE OUR POSITIONS IN MATURE PRODUCTS Fuses MV fuses 2010 Fuses MV fuses 2008 2007 2008 Positioning in the DIN market Positioning in the fast Cost synergies growing Chinese market Strengthening positions in the MV market Cost competitiveness Cost synergies 2013 R
Slide 38: Driving Expansion in Growth Products
DRIVING EXPANSION IN GROWTH PRODUCTS 1 Positioned in high value- added products BTO, short run products 2 Effective market drivers Energy efficiency, Power quality, Key capabilities Energy storage, Alternative energies High market share Asia deployment Innovation capacity 3 Pursue accretive acquisit
Slide 39: 3 Examples of Growth Products
3 EXAMPLES OF GROWTH PRODUCTS SURGE POWER WINDPOWER protection SOLUTIONS ELECTRONICS components components Energy efficiency Power quality Alternative energies Energy storage 2013 revenue: 2013 revenue: 2013 revenue: €10m €30m €130m 38 Investor Day 2014
Slide 40: Questions?
QUESTIONS ?
Slide 41: Surge Protection
SURGE PROTECTION GABRIEL LEDRU VICE PRESIDENT, SURGE PROTECTION DEVICES
Slide 42: Lightning strikes and electrical damage
5,000,000 lightning strikes a year 30 kA average current density of a lightning strike 61% of electrical damage is due to voltage spikes 41 Investor Day 2014
Slide 43: Voltage Spikes
VOLTAGE SPIKES Impact Causes (e.g.: Spain 2012*) Lightning 12 million tonnes of electronic waste Switching between transformer stations €60m in electrical damage Disconnecting electric motors repairs * Source: Cirprotec 42 Investor Day 2014
Slide 44: The Benefits of Surge Protection
THE BENEFITS OF SURGE PROTECTION Can extend equipment service life The solution: SPDs* by more than 20% A device that shorts to ground any unwanted voltage Service continuity Cost savings Less electronic waste Safety *Surge Protection Devices 43 Investor Day 2014
Slide 45: A Fast Growing Market
A FAST GROWING MARKET Expanding by around 8% a year Stage of SPD Market Development By Region Growing amount of electronic equipment to Demand protect (data centers, solar, windpower, etc.) Europe Faster standardization USA (process industries, etc.) China India Embryonic Early cycle Sustained Matur
Slide 46: A Market Structured by Standards
A MARKET STRUCTURED BY STANDARDS 100% 80% 60% 40% 20% 0% Mersen historical presence Cirprotec expertise Market approx. €500m* * Source: Mersen 45 Investor Day 2014
Slide 47: Still a Highly Fragmented Market
STILL A HIGHLY FRAGMENTED MARKET: OPPORTUNITIES FOR CONSOLIDATION The two market leaders Mersen in the top 10 Many local players (Dehn, Phoenix Contact) Cumulated market share: Mainly in the IEC segment 20-25% Market share: <5% Primarily present in the IEC Market share: 1-3% segment Consolidation is
Slide 48: The Alliance with Cirprotec
THE ALLIANCE WITH CIRPROTEC Cirprotec World’s leading independent manufacturer of IEC SPDs Mainly in the Spanish market (50% of revenue) Acquisition rationale Strengthen the Electrical Segment’s presence in an expanding market segment Access the IEC market (Europe and Asia) Access testing and innova
Slide 49: Testing and Innovation Capabilities
TESTING AND INNOVATION CAPABILITIES Test center Innovation capabilities Competitive advantage to capture Technological platform to drive market growth faster growth in every geography 48 Investor Day 2014
Slide 50: Innovation Capabilities Will Enable Us to Capture New Markets
INNOVATION CAPABILITIES WILL ENABLE US TO CAPTURE NEW MARKETS LED public lighting market* 1,000,000 31% forecast CAGR through 2017 (in volume) More energy efficient, for the same Street light units performance Smaller carbon footprint Less light pollution *Source: Strategies Unlimited Sensitive comp
Slide 51: Mersen Positioned in High Value-Added Segments
MERSEN POSITIONED IN HIGH VALUE-ADDED SEGMENTS Development of a new Critical components for generation of LED lighting special environments Instant on Uninterrupted service is mission-critical Luminous efficacy Safety Improved dimming Requirements of TV broadcasting Easy luminous flux adjustment Sur
Slide 52: Strategy
STRATEGY Position ourselves as the global specialist by continuing to expand in both standards Forge alliances in Asia Step up innovation around competency centers Develop a global manufacturing base 51 Investor Day 2014
Slide 53: Objective: Outperform the Market
OBJECTIVE: OUTPERFORM THE MARKET €25-35m EXCLUDING Mersen SPD revenue, €m ACQUISITIONS CAGR 2013-2018 [9-18%] €18m Cirprotec €3m 2007 2014 2018 52 Investor Day 2014
Slide 54: Questions?
QUESTIONS ?
Slide 55: Mersen's Windpower Solutions
MERSEN’S WINDPOWER SOLUTIONS MARC CHARLEBOIS GENERAL MANAGER, NORTH AMERICA, ELECTRICAL SEGMENT
Slide 56: Mersen in the Windpower Market
MERSEN IN THE WINDPOWER MARKET 55 Investor Day 2014
Slide 57: Mersen's Windpower Offering: End-to-End Solution
MERSEN’S WINDPOWER OFFERING: AN END-TO-END SOLUTION AROUND THE WORLD Fuses Busbar Cooler ENERGY CONVERSION OEM + OEM replacement 56 Investor Day 2014
Slide 58: OEM Market: On-Grid Windpower Growing by More Than 7% a Year
OEM MARKET: ON-GRID WINDPOWER GROWING BY MORE THAN 7% A YEAR LONG-TERM Worldwide forecast of on-grid windpower, 2013-2023e Mersen’s accessible market Number of wind turbines growing by 5% a year China: more limited access (national sourcing of certain components) MERSEN’S ADVANTAGES Source: MAKE A w
Slide 59: The Replacement Market: Installed Base of 250,000 Wind Turbines
THE REPLACEMENT MARKET: AN INSTALLED BASE OF 250,000 WIND TURBINES IN 2013 Rest of the world Denmark 15% China Canada Mersen’s 29% 2% accessible market France 2% 3% Italy 3% 550,000 wind turbines United 3% 320 GW* installed worldwide by Kingdom 6% 2023 India 7% 19% Brushes have to be Spain 11% Unite
Slide 60: Significant Market Share for Mersen
SIGNIFICANT MARKET SHARE FOR MERSEN, THANKS TO A POWERFUL MANUFACTURING BASE 20% market share 59 Investor Day 2014
Slide 61: The Partnership with ABB
THE PARTNERSHIP WITH ABB: AN EXAMPLE OF MERSEN EXPERTISE Development of a generator to equip the vast majority of wind turbine models in the world (1.5 to 3.2 MW unit capacity) Experts in slip-ring design (sizes, materials, etc.) Experts in brush-holder design (configuration optimization, pressure,
Slide 62: The Partnership with ABB
THE PARTNERSHIP WITH ABB: AN EXAMPLE OF MERSEN EXPERTISE A complete Collaboration solution combining Development of a with ABB engineers the power slip-ring, custom solution for five years brush-holder and graphite brush Three-year Global production: framework Reduces the need Germany, agreement mak
Slide 63: Strategy
STRATEGY Strengthen our position in the growing OEM market Consolidate the replacement market through grid managers Develop our redesign solutions to offer operators compelling alternatives Capture growth in the energy conversion market, thanks to our range of key components available in the three m
Slide 64: Objective: Outperform the Market
OBJECTIVE: OUTPERFORM THE MARKET Mersen windpower revenue, €m >50 CAGR >10% 30 Replacement sales 7 OEM sales 2006 2013 2018 63 Investor Day 2014
Slide 65: Questions?
QUESTIONS ?
Slide 66: The Efficiency of Power Converters
THE EFFICIENCY OF POWER CONVERTERS EMMANUEL CARMIER VICE PRESIDENT, POWER ELECTRONICS
Slide 67: Power Electronics: Converting Electrical Power
POWER ELECTRONICS: CONVERTING ELECTRICAL POWER CONVERSION AC/DC POWER AC/DC GENERATION POWER USE Current Voltage Frequency Basic function: to convert electrical power as efficiently as possible into a form suitable for a very wide variety of applications and users MERSEN’S FOCUS High-power applicati
Slide 68: A Need Across the Entire Electric Power Value Chain
A NEED ACROSS THE ENTIRE ELECTRIC POWER VALUE CHAIN 67 Investor Day 2014
Slide 69: A Market Growing by More Than 6% a Year
A MARKET GROWING BY MORE THAN 6% A YEAR… The power semiconductor market (in $bn)* Segments accessible to Mersen 3.0 2.8 2.9 2.8 2.6 Other 2.5 Industries Speed drives Transportation Renewable energies 2013 2014 2015 2016 2017 2018 * Source: Yole 2013 68 Investor Day 2014
Slide 70: Led by Renewable Energies, Transportation and Energy Efficiency
… LED BY RENEWABLE ENERGIES, TRANSPORTATION AND THE NEED FOR ENERGY EFFICIENCY… Renewable energies Mobility needs Growing demand for energy Urbanization Carbon emissions reduction Traffic congestion Carbon emissions reduction Energy efficiency Carbon emissions reduction Energy use reduction 69 Inves
Slide 71: Mersen Stands Apart for Its Comprehensive Offering
… IN WHICH MERSEN STANDS APART FOR ITS COMPREHENSIVE OFFERING SEMICONDUCTOR BUSBARS COOLING DEVICES FUSES EATON SIBA LYTRON AAVID ROGERS METHODE Market share [30% - 40%] [10% - 30%] <10% 70 Investor Day 2014
Slide 72: Mersen's Power Electronics Portfolio
MERSEN’S POWER ELECTRONICS PORTFOLIO: BUILDING AN UNIQUE SOLUTION Busbars: Acquisition of Eldre (2012) Entered China (2013) Semiconductor fuses: Traditional expertise Coolers: Ferraz Date Industries JV (1998) Acquisition of R-Theta (2008) Entered China (2009) Strong interaction among these component
Slide 73: Efficient Manufacturing and Sales Organization
AN EFFICIENT MANUFACTURING AND SALES ORGANIZATION, LOCATED CLOSE TO OEM DESIGN CENTERS Busbars Fuses Coolers 72 Investor Day 2014
Slide 74: Growth in Revenue Despite Unfavorable Economic Environment
GROWTH IN REVENUE DESPITE THE UNFAVORABLE ECONOMIC ENVIRONMENT 2007-2013 CAGR 10% 2009-2013 CAGR Mersen power 12% electronics revenue, €m 128 128 110 115 91 80 73 2007 2008 2009 2010 2011 2012 2013 73 Investor Day 2014
Slide 75: The Eldre Acquisition
THE ELDRE ACQUISITION Eldre in 2011 Global leader in busbars Production facilities in Europe and the United States Mainly serving the process industry market in the United States and the transportation and windpower markets in Europe Acquisition rationale Extend the product portfolio in a growth seg
Slide 76: Eldre Two Years Later: Growing the Business
ELDRE TWO YEARS LATER: GROWING THE BUSINESS In Asia: busbar production facility near Shanghai (2013) Gain market share in Asia: Rotem, Advanced Energy, Fuji Kobe Seize opportunities with new entrants: Destin Power, RXPE, Tianxin New customer entry points A wider array of addressed markets (power con
Slide 77: Eldre Two Years Later: New Technological Developments
ELDRE TWO YEARS LATER: NEW TECHNOLOGICAL DEVELOPMENTS Circular busbars Smart busbars Replace motor windings with a busbar Flexible design suited to battery specifications, with an additional Efficient, reliable, quicker to assemble monitoring capability (voltage and temperature control) Applications
Slide 78: Strategy
STRATEGY Continue to expand the product portfolio > Be the PREFERRED RESOURCE for designers Develop partnerships with OEM customers and semiconductor manufacturers > Be the SPECIALIST in optimizing components to improve converter efficiency Innovate in products and services > Be the EXPERT source of
Slide 79: Objective: Outperform the Market
OBJECTIVE: OUTPERFORM THE MARKET Mersen power 2013-2018 EXCLUDING electronics revenue, €m CAGR ACQUISITIONS 7-10% 180- 200 128 80 2009 2013 2018 78 Investor Day 2014
Slide 80: Questions?
QUESTIONS ?