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The Future of Vacuum TechnologySustainable Growth
Thomas Babacan, CEO Oerlikon Vacuum
Oerlikon Capital Market Days 2008Zurich, September 25-26, 2008
Page 2 Oerlikon Capital Market Days 2008
Disclaimer
This presentation is based on information currently available tomanagement. The forward-looking statements contained herein could be substantially impacted by risks and influences that are not foreseeable at present, so that actual results may vary materially from those anticipated, expected or projected.
Page 3 Oerlikon Capital Market Days 2008
Oerlikon Textile
Oerlikon Drive Systems
Oerlikon Coating
Oerlikon Solar
Oerlikon Components
Oerlikon Vacuum
Page 4 Oerlikon Capital Market Days 2008
§ Segment Description§ Technology
§ Market Description
§ Strategy
§ Financials
§ Summary & Outlook
Agenda
Page 5 Oerlikon Capital Market Days 2008
Oerlikon Leybold Vacuum Today’s Positioning
We are the leading Total Vacuum Solution Provider with best Application Know How and Service Capabilities
We deliver Premium Quality Products for mid- and high-end Applications
Time Tested products lead to Excellent Brand ImageWe innovate Vacuum Technology
Customer Proximity - We are close to the Customer with our Global Sales & Service Footprint
Page 6 Oerlikon Capital Market Days 2008
At a glance
Sales 2007: CHF 458m
Employees: 1,511 as of June 30, 2008
Products: Dry and oil-sealed fore vacuum pumps,roots pumps, pumping systems,turbomolecular pumps,cryo pumps, cryostats,gauges, leak detectors,accessories
Market Segments:
Process IndustryCoating TechnologyAnalytical & MedicalResearch & DevelopmentSemiconductor
Page 7 Oerlikon Capital Market Days 2008
Production locations in Germany, France and China
Dresden, Germany Tianjin, China
Valence, France Cologne, Germany
CoC Cryo: Coolvac
CoC Dry (HQ):
Screwline, Ruvac, Turbovac, Solutions
CoC Rotary Vane Pumps:
Sogevac, Trivac NT
Manufacturing Site Asia:
Ruvac, Trivac C, Sogevac, Solutions
Oerlikon Leybold Vacuum Production Sites
Page 8 Oerlikon Capital Market Days 2008
§ Segment Description
§ Technology§ Market Description
§ Strategy
§ Financials
§ Summary & Outlook
Agenda
Page 9 Oerlikon Capital Market Days 2008
Importance of vacuum technology
Enabling Technology for many Manufacturing Processes & Analytical Methods
Decorative Coatings
Solar Cell Production
Wear Protection
Process Industry
Space Simulation
Research & Development Analytics & Life Style
Large Area Coatings
Page 10 Oerlikon Capital Market Days 2008
We are focusing R&D and operations on four technologies targeted on five application segments
§ Solar Technology § Architectural Glass, Coatings§ Data Storage§ Displays
Coating Technology
Analytical§ Mass Spectrometers § Electron Microscopes § Leak Detectors and
Residual Gas Analyzers
R & D§ R&D Equipment Manufacturers§ Universities & National Labs§ Space & Defense
Process Industry
§ Industrial Furnaces & Metallurgy§ Automotive, Lighting, Refrigeration§ Laser, Energy & Electro§ Chemistry & Pharmacy§ Industrial Machinery
Semiconductor § Manufacturers & End Users of Chip Production Equipment
Dry Fore Vacuum PumpsScrew and Booster Technology
Rotary Vane PumpsOil-Sealed Displacement Pump
Turbomolecular PumpsTurbines at Ultrasonic Speed
System Solutions
Page 11 Oerlikon Capital Market Days 2008
Solutions and services complementing our offer
Components Solutions ServicesRotary Vane Vacuum Pumps
Scroll and Piston Vacuum Pumps
Diaphragm Vacuum Pumps
Screw Vacuum Pumps
Roots Pumps
Turbomolecular Pumps
Oil Diffusion Pumps
Cryo Pumps
Turboradial Blowers
Valves und Fittings
Total Pressure Gauges
Worldwide Service Network
After Sales Service
Installation and Training
Maintenance and Repair,on-site or in our Service Centers
Replacement and Back-up Pool
Service Across All Brands
Decontamination
Calibration of Measurement Systems in our DKD Certified Laboratory
CustomizedExperimentation Systems
Customized Vacuum Solutions
Standard Vacuum Pump Systems
Page 12 Oerlikon Capital Market Days 2008
§ Segment Description
§ Technology
§ Market Description§ Strategy
§ Financials
§ Summary & Outlook
Agenda
Page 13 Oerlikon Capital Market Days 2008
Total vacuum pump market 2007 by application
Total Market = CHF 4.6bn
ProcessIndustry
Coating
R&DAnalytics
Solar
Semi
Focus Markets§ Industry Profit Pool§ Accessible with Oerlikon
Vacuum’s Four Core Technologies
§ Differentiation via Application Know-how
Non-Focus Markets:§ Low-Margin Markets
§ Non Oerlikon Vacuum Technologies(Side Channel Blower, Liquid Ring Pump)
§ Differentiation via Price
Non-FocusMarket
CAGR 2008 – 2011: 4-5%
Pick & Place
Print & Paper
Wood
Page 14 Oerlikon Capital Market Days 2008
High growth potential in Asia and Americas
Europe27%
Americas23%
Asia50%
Addressed Market = CHF 3.6bn Oerlikon Vacuum Sales = ~ CHF 500m
Europe59%
Americas17%
Asia24%
CAGR 2008 – 2011: ~ 4-5% Grow double market
Page 15 Oerlikon Capital Market Days 2008
Solar, PI, and analytical most attractive marketsbasic growth drivers very healthy
Process Industry Analytical Instruments / R&DSolar / Coating
Key IndustryDrivers
CHF ~ 930mCHF ~ 530mMarket 2007
Key Attractions
~ + 5-6%~ + 13%
Analytical Driven by Rising Demand for Health Care, Life Style Products and Environmental Control
R&D Market Based on Government Funding
Technology Driven with High Entry Barriers in Analytical
Stable Growth Rate
Few Players in Analytical Broad Customer Base in R&D
Overall Medium Price Sensitivity
Strong Growth in Renewable Energies, Solar biggest Opportunity
Key Players inside Oerlikon Group (Solar and Wear Protection)
Few Customers with Global Footprint
CHF ~ 1,400m
~ + 3-4%CAGR (08-11)
Source: Frost & Sullivan; VDMA; Gartner; Oerlikon; Bain Analysis
High Oil & Gas Prices
Global Warming
Need to Save Energy due to Limited Fossil Energy Resources
Global Government Incentives
Growth of Producing Industries in Asia, Eastern Europe
Largest Market, Solid Growth
Lower Price Pressure due to Broad Customer Base
Premium Price Level in Chemical
Page 16 Oerlikon Capital Market Days 2008
Main industry trends coincide with Oerlikon vacuum strengths
§ Industry Entry Barriers intact due to Advanced Technology, Global Distribution & Service Network and High Qualification Cost in OEM Business
§ No Disruptive Replacement Technology for Vacuum Equipment in Sight
§ Importance of Cost of Ownership will Increase in Line with our Product Roadmap> More Request for Dry Technology> Trend to Small / Mid-Size MAG Technology in Coating Applications
§ Increased Demand for Complete Vacuum Solutions fits to our Core Competence
§ Price Pressure to be addressed by Expansion of China Factory which is also a Hub for Low Cost Country Sourcing
§ Overcapacities in Semi Down cycles give Opportunities to Drive Industry Consolidation
Page 17 Oerlikon Capital Market Days 2008
Source: Oerlikon, Company and analyst reports, Bain analysis
SEMI
OthersOLV
Busch
Adixen
Brooks / CTI / GP
Ebara
Shimadzu
EdwardsEdwards
OLV
Busch
Ulvac
Others
Solar
Oerlikon vacuum on track to become #2 in growth markets
Market Share by Addressed Market Segments 2007
Busch
OLV
Pfeiffer VacuumVarian
Edwards
PI
Others
Pfeiffer
OLV
Adixen
Busch
Shimadzu
Others
COA
Pfeiffer
Varian
OLV
Edwards
Others
R&D
Adixen
Edwards
Pfeiffer
OLV
Varian
ANA
Others
OLV: Oerlikon Leybold Vacuum
Page 18 Oerlikon Capital Market Days 2008
§ Segment Description
§ Technology
§ Market Description
§ Strategy§ Financials
§ Summary & Outlook
Agenda
Page 19 Oerlikon Capital Market Days 2008
Focused organic growth drives scale and profitability Based on Innovative Products & Cost Competitiveness
EBIT Growth by Almost 100%
Focusing on Product Innovations and Core Market Segments
§ Product Innovations
§ Become No. 1 in Solar
§ Gain Market Share in PI, R&D and ANA
§ Positioning as Total Solutions Provider
§ Screening for Industry Consolidation
Simplification Drives Cost Reduction
§ Platform Based Cost Reduced Product Portfolio
§ Supply Chain Management (Supplier & Logistics)
§ Extend China Production Site
§ Streamlined Overhead Structure
Ü CAGR = 2 x Market Growth Ü Substantial Cost Reductions
Page 20 Oerlikon Capital Market Days 2008
Innovation at the edge of physics:the vacuum systems of the CMS detector at CERN
Challenges for the Pumping System:
§ Operation in a magnetic field of 4T(50,000 times stronger than natural field of earth)
§ extremely complicated installation behind a 7mthick wall of concrete for radiation protection.
Based on our experience with the Large HadronCollider and the ATLAS detector, Oerlikon Leybold Vacuum mastered this challenge and obtained the CMS Gold Award 2008 for the successful design and installation of the requested vacuum system
Page 21 Oerlikon Capital Market Days 2008
Product innovations Enhancement of four Core Technologies in order to meet Future Market Needs
30 - 40% Complexity and up to 50% Cost Reduction with
new Product Platforms
§ System Solutions
§ Dry Fore Vacuum Pumps § Turbomolecular Pumps
§ Rotary Vane Pumps
- TRIVAC NT
- Generic platforms for sizes
- Customer Benefit throughdesign and applicationKnow-How
- SOLAR Systems
- Mechanical Turbopumps
- MAG Pump series
- Generic platforms for sizes
- Customizing requirementsfor vacuum processes
- Optimizing capacities
Page 22 Oerlikon Capital Market Days 2008
Vacuum - key technology for solar
Production of Silicon Ingots & Wafers Production
Coating of Wafers
Production of Modules incl. Lamination
Installation of Modules
Generation of TCO & Photo Electric Layers
Cleaning of Glass
Crystalline Silicon
Thin Film Technology
Vacuum required
Page 23 Oerlikon Capital Market Days 2008
Vacuum – systems for sustainability
§ All solar modules require vacuum processing at multiple stages of production
§ Oerlikon Leybold Vacuum has specially engineered products that are helping to make solar modules more affordable by reducing equipment downtime and improving process performance
§ Our industry experience and vacuum innovations have enabled us to make design decisions, large and small, that directly address the needs of the solar power market
Enabling Customers in Seeking Grid ParityVacuum Solutions Meeting Demands Fast and Efficiently
Page 24 Oerlikon Capital Market Days 2008
Strengthening customer proximity / customer interfaces
Grow Double than MarketGain Share
in PI and R&D, Market Leader
in Solar§ Increasing Customer
Proximity and Loyalty by enhanced Sales Support
- Increase local engineering and application Know-how
- Roll-Out of worldwide customer training program (Vacuum Academy)
§ Solutions
- Build up hubs in the regions
- Establish global processes and workflows to secure cost and quality
- Roll out engineering know-how and synergies to strengthen the customer interface
§ Further Market Penetration in Process Industry, R&D and Solar
- Additional direct sales force esp. in Asia (+50%) and USA (+30%)
- Expansion of distributor networkand E-Shop implementation
§ Services
- Increase of services & repair facilities and local customer approach
- Increase of market share in spare parts business with new pricing strategy
Page 25 Oerlikon Capital Market Days 2008
Realizing sales growth with lower breakeven and costs
Realizing Sales Growth
with a Simplified
Supply Chain
§ Locations
- Factory Expansion China in order to Double Volume by 2011
- Reduction of Manufacturing Depth by 10 %
§ Sourcing
- Enhancement of LCC Sourcing from 7% to 20%
- Reduction of Supplier Baseby 30%
§ Key Investments
- Solar Growth
- Facility Expansion China
§ Optimized Worldwide Logistics Concept
- Establishment of a worldwide Logistic Concept focussing on:> Freight Cost Reduction> Delivery Performance> Complexity Reduction
Page 26 Oerlikon Capital Market Days 2008
Buildings extension in Tianjin (CN) for local production
2,400 square meters
10,200 square meters under roof
Page 27 Oerlikon Capital Market Days 2008
§ Segment Description
§ Technology
§ Market Description
§ Strategy
§ Financials § Summary & Outlook
Agenda
Page 28 Oerlikon Capital Market Days 2008
Strategic target - accelerate organic growth
250
464434
387389
265547
-5
6
2004 2005 2006 2007 1HY 2008
Total SalesEBIT
+6%
1,5%
-1,3%
10,8%11,8%
10.3%
EBIT Margin [%]
(in CHF m)
Page 29 Oerlikon Capital Market Days 2008
Operational target – improve working capital (WC)
WC Management Initiatives started mid 2007
• Project “Inventories” ww (lifetime project)
• Achievements YTD 2008• DIO - 11%
• DPO + 27%
• DSO +2 % vs. Sales +7%
DIO
2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 a c t
DPO
20 0 5 20 0 6 2 0 07 2 0 08 ac t
DSO
20 0 5 20 0 6 2 0 07 2 0 08 ac t
Page 30 Oerlikon Capital Market Days 2008
§ Segment Description
§ Technology
§ Market Description
§ Strategy
§ Financials
§ Summary & Outlook
Agenda
Page 31 Oerlikon Capital Market Days 2008
Executive summary – key take aways
Increase profitability to 16% EBIT
Oerlikon Vacuum Sustainable Strategic Position Strengthened with New Products in Dynamic Markets
Top Line Growth at Twice the MarketMainly Driven by Solar and Enforced Market Penetration in Fragmented Markets like Process Industry and R&D
Expansion of China Factory (100% Output Increase by 2011)
Complexity Reduction by New Product Platforms
Sustainable Level of Double Digit Profitability