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The Schaffner GroupCorporate presentationfiscal year 2010/11
The Schaffner Group
Daniel Hirschi
Alexander Hagemann
Kurt Ledermann
Chairman of the Board
Chief Executive Officer
Chief Financial Officer
Corporate presentation fiscal year 2010/11
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2
Agenda
• Well‐positioned for growththrough strategic groundworkdone
• Financial highlights
• Conclusion
• Q&A
The Schaffner Group
Alexander Hagemann
Kurt Ledermann
Alexander Hagemann
3
The Schaffner Group
Highlights 2010/11
• Sales CHF 183.7 m (CHF 188.9 m)
• Book‐to‐bill 0.97 (1.10)
• EBIT margin on 7.0 (7.9%)
• Net profit CHF 10.2 m (CHF 12.0 m)
• EPS CHF 16.03 (CHF 18.87)
• Proposal to the AGM to pay‐out CHF 4.50 per share
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Alexander HagemannWell‐positioned for growththrough strategic groundwork done
5
The Schaffner Group
Highlights of FY 2010/11
• Organic growth of 9% in local currencies despite economic headwind in HY2
• Some impact from currencies, but not catastrophic
• Suspension of China rail projects
• Weakness of European PV market
• Harmonic Filter sales doubled
• Significant Automotive projects in SOP
• Acquisition of dry‐type transformer division of MTC Transformers, Inc.
• New Shanghai factory
• Introduction of divisional organization
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• Power electronic devices convert electrical energy
Direct current (DC) to alternate current (AC), e.g. UPS, PV
AC to AC with different frequency, e.g. motor drives, wind turbines
The Schaffner Group
• Schaffner Components guarantee safe and reliable operation of power electronics
Filtering of harmful electrical noise
Increasing the stability of electric power grids
Ensuring compliance with standards and regulations
Increasing lifetime of electrical machines
One‐stop shop for EMC and power quality solutions
7
The Schaffner universe – markets of the Schaffner Group
88
5
Global footprint
99
Sales to strategic markets continue to grow
• Automotive identified as strategic market
• Balanced risk profile
• Telecom market loses significance
The Schaffner Group
22%
17%
16%10%
16%
13%
4%2%
Markets in %
Strategic markets: 65% (63%)
Energy‐efficient drive systems
Renewable energy
Rail technology
Automotive electronics
Historic growth markets: 33% (34%)
Power supply systems for electronic devices
Machine tools & robotics
Telecommunications
Other markets: 2% (3%)
Other
10
6
The Schaffner Group
Dynamic development in all regions
• Asia/Pacific sales growth with Harmonic Filters
• Market share gains in North America
• Europe suffers from weak PV inverter demand
57%
8%
35%
FY 2010/11Asia/Pacific
Americas
Europe
Share of Asia/Pacific sales (in %)
0%
10%
20%
30%
FY
05/06
FY
06/07
FY
07/08
FY
08/09
FY
09/10
20%
17%18%
27%
33%
FY
10/11
35%
Sales by regions (in %)
11
10%
57%
33%
AM EMC PQ
9%
59%
32%
AM EMC PQ
Net sales FY 2010/11 (in%)
The Schaffner Group
Business segments
• Electromagnetic Compatibility (EMC)
• Power Quality (PQ)
• Automotive (AM)
Net sales FY 2009/10 (in %)
12
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The Schaffner Group
EMC: Leadership in global market
• Number one supplier in the global EMC market
• Strong position in growth markets, e.g. photovoltaics and motor drives
• Strong technology base, operating leverage, distribution
Market share EMC
1.Addressed market: approx.
CHF 480m(in 2010)
13
The Schaffner Group
EMC in FY 2010/11: Operational excellence
• Growth of 5% (local currencies) despite weakness in European PV, Japan
• Operational improvements drive operating margin to 18.1% (16.4%)
• Expanded distributor coverage: DIGIKEY, Pan‐European contract with ARROW
• Continued market share gains in North America
Net sales (CHFm) Segment results (CHFm)
111.5
104.5
95
100
105
110
115
FY 09/10 FY 10/11
18.3 18.9
0
5
10
15
20
FY 09/10 FY 10/11
14
8
• Objective to become number one or two competitor in 2015 (incl. M&A) with operating margin in high single digit range
• Schaffner is the first global supplier of power quality solutions
• Rapid expansion of product and technology portfolio
• ECOsineTMHarmonic Filters are a big success
• Margin expansion expected when suspension of China rail projects will be lifted
The Schaffner Group
Power Quality: Schaffner‘s growth engine –despite China project delays
Market share Power Quality
6.
Addressed market:
approx. CHF 1.4bn (2010)
15
The Schaffner Group
Power Quality in FY2010/11: Missing EBIT targets after suspension of China rail projects
• 13% organic growth (local currencies), mostly from ECOsineTM Harmonic Filter sales
• Suspension of rail projects in China led to underutilization of China and German factories in HY2, adversely impacting operating results
• Move to new factory in Shanghai establishes best‐in‐class processes
Net sales (CHFm) Segment results (CHFm)
60.961.6
55
60
65
FY 09/10 FY 10/11
3.1
1
0
1
2
3
4
FY 09/10 FY 10/11
16
9
• All Schaffner China operations were moved to new location in Shanghai Pudong during FY2010/11
• First‐time implementation of lean manufacturing for power magnetics
• Well positioned for next growth cycle in Chinese rail and solar markets
The Schaffner Group
Power Quality strategy: Setting the benchmark for leanproduction at new factory in Shanghai
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• Acquired Dry Type Transformer operations of MTC Transformers, Inc., as of September 1, 2011, for approx. USD 13.5 m
• 75 employees in Wytheville and Roanoke, VA, strong management
• CY 2011 stand‐alone sales of USD 16 m (FC), attractive EBIT margins
• US manufacturing base to serve Schaffner’s customers in the renewable energy, motor drive, traction industries
• Expanded offering to higher power and medium voltage solutions
The Schaffner Group
Power Quality strategy: Expansion into North America
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The Schaffner Group
Automotive: Growth in E‐mobility and Keyless Entry
• Keyless entry is becoming a widely accepted feature
• New customers, and added value strategy for keyless entry lead to sustained growth
• Tripling of engineering resources to cope with project demands from electro‐mobility customers
• E‐mobility expected to contribute CHF 5 m sales in FY 2011/12
• Objective to achieve CHF 40 m sales with Automotive solutions in FY 2014/15
EMC filter applications for:Converter in hybrid applications.Converter in electric vehiclesMotor management and turbo charger
Trunk antenna
Doorhandleantenna withtouch sensor
Immobilizer antenna on keylockhousing
Low frequency antenna for initiating tire pressure measuring cycle
Tire pressure sensor housing with integratedRF antenna
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The Schaffner Group
Automotive in FY2010/11: Investing to establish a newstrategic business for Schaffner
• 20% organic growth, mostly with components for Keyless Entry• Stable supply to customers despite natural disasters in Japan and Thailand• Segment result impacted as expected by ramp‐up of engineering and launch costs related to SOP in e‐mobility
Net sales (CHFm) Segment results (CHFm)
16.617.6
0
5
10
15
20
FY 09/10 FY 10/11
1.5
‐0.4
‐0.5
0
0.5
1
1.5
2
FY 09/10 FY 10/11
20
11
• Simplified management structure, streamlined Group Executive Board (GL)
• Allocation of Harmonic Filters from Division Power Quality to EMC because of similar business models
Schaffner Strategy 2015
• Focus of management towards specific strategic objectives
• Strengthening of middle management during FY2010/11
Introduction of Divisional Organization (as of October 1, 2011)
Kurt Ledermann
DivisionAutomotive
Jean-Michel Calleri
Chief OperatingOfficer
Ah Bee Goh
Division PowerMagneticsEduardHadorn
Division EMC
GuidoSchlegelmilch
Chief FinancialOfficer
Chief Executive Officer
Alexander Hagemann
Board of Directors
21
Kurt LedermannFiscal year 2010/11
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12
Fiscal year 2010/11
Financial highlights
• Sales CHF 183.7 m (CHF 188.9 m)
• Growth in local currencies 9%
• Book‐to‐bill 0.97 (1.10)
• EBIT margin on 7.0% (7.9%)
• Net profit CHF 10.2 m (CHF 12.0 m)
• EPS CHF 16.0 (CHF 18.9)
• Stable cash‐to‐cash cycle of 91 days (92 days)
• Strong free cash flow CHF 9.7 m (CHF 0.7 m)
• Solid balance sheet with 42% (30.09.10: 44%) equity ratio
• Proposal to the AGM to pay‐out CHF 4.50 per share
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CHFm
Fiscal year 2010/11
Bookings & Sales
94.7 93.8
69.363.2
98.3
109.0102.3
75.8
86.2
96.2
71.9
61.4
84.6
104.399.2
84.5
0.0
20.0
40.0
60.0
80.0
100.0
120.0
HY1 07/08 HY2 07/08 HY1 08/09 HY2 08/09 HY1 09/10 HY2 09/10 HY1 10/11 HY2 10/11
Bookings Sales
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13
60%
70%
80%
90%
100%
110%
Okt.07 Okt.08 Okt.09 Okt.10
USD/CHF
EUR/CHF
‐24%
‐27%
80%
90%
100%
110%
120%
130%
Okt.07 Okt.08 Okt.09 Okt.10
EUR/THB
EUR/HUF
‐7%
+15%
Fiscal year 2010/11
Currencies – short and mid‐term development
2007/08 ‐2010/11
2010/2011
2007/08 ‐2010/11
2010/2011
75%
80%
85%
90%
95%
100%
105%
Okt.10
Nov.10
Dez.10
Jan.11
Feb.11
Mrz.11
Apr.11
Mai.11
Jun.11
Jul.11
Aug.11
Sep.11
USD/CHF
EUR/CHF
‐9%
‐9% 90%
95%
100%
105%
110%
Okt.10
Nov.10
Dez.10
Jan.11
Feb.11
Mrz.11
Apr.11
Mai.11
Jun.11
Jul.11
Aug.11
Sep.11
EUR/THB
EUR/HUF
+1%
+5%
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FY comparison in CHFm
Fiscal year 2010/11
Sales & Currencies
HY comparison in CHFm
86 9672 61
85104 99
85
23
54
2017 21
16
0
50
100
150
HY1 07/08 HY2 07/08 HY1 08/09 HY2 08/09 HY1 09/10 HY2 09/10 HY1 10/11 HY2 10/11
Currency effect
Actual
182
133
189 184
5
9
37 37
0.0
50.0
100.0
150.0
200.0
250.0
07/08 08/09 09/10 10/11
Currency effect
Actual
26
14
Fiscal year 2010/11
Income statement
in CHFm
4.9 8.9
EBIT Gross margin EBIT margin
HY1 08/09 HY2 08/09 HY1 09/10 HY2 09/10 HY1 10/11
‐7.1
5.6
9.4
HY2 10/11
EBIT margin FY 08/097.9%‐6.9%
EBIT margin FY 09/10 EBIT margin FY 10/117.0%
9.0
3.8
‐2.1
HY2 07/08HY1 07/08
EBIT margin FY 07/087.6%
‐9.9%
‐3.4%
6.6%9.0% 9.1%
4.5%
9.3%5.8%
22.5% 30.4% 31.4% 31.4% 31.8% 30.7%30.2%29.3%
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Fiscal year 2010/11
Cash flow
in CHFm
28
15
Fiscal year 2010/11
Financial result
in CHFm
Interest expenses net -0.8
Currency gain & loss -1.0
Other financial expenses -0.2
Financial result -2.0
29
Fiscal year 2010/11
Tax
in CHFm
Earnings before taxes 10.8
- Applicable tax rate 17%
Expected tax -1.8
Effect of unrecognized tax losses 1.0
Others 0.1
Income taxes as per income statement -0.7
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16
Fiscal year 2010/11
Proposal for the appropriation of retained earnings
The Schaffner Board of Directors proposes to the AGM a distribution of CHF 4.50 per share (entitled to dividends) out of the reserve for additional paid in capital.
Proposal of Board of Directors in CHFm
Share capital 20.7
Legal reserve 4.1
Reserve for treasury shares 1.6
Reserve for additional paid in capital 47.5
Retained earnings 13.9
Net profit of FY 2009/10 -1.2
Sharehoders Equity Schaffner Holding 86.6
31
Alexander HagemannConclusion
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Conclusions
Implementing strategy in challenging times
• Strategic drivers for Schaffner remain highly relevant:
Energy efficiency
Alternative energy generation
Sustainable transport
• Schaffner has proven in FY2010/11 that it can deliver about 10% annual organic growth (in local currencies) also in a more challenging environment
• Despite not unaffected, Schaffner has shown resilience against appreciation of CHF
• Double‐digit operating margins continue to be a clear objective, to be achieved after current macroeconomic challenges will be overcome
• A strong balance sheet enables Schaffner to grow organically and by acquisitions
• Confidence in cash flow generation underlined by proposal of unchanged dividend
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Conclusions
Outlook
• Customers are cautious, leading to inventory reduction throughout the supply chain
• However no crisis such as 2008‐2009 expected (based on book‐to‐bill rate of 0.9 in HY2 of FY2010/11 and recent order trends)
• Recovery of China rail market and PV inverter market expected around the middle of Schaffner FY2011/12
• Given the macroeconomic and global political uncertainties, it is not possible to forecast the Group’s results for FY2011/12 at this time
• Medium‐term targets of an operating margin (return on sales) of 10% and sales of more than CHF 200 m remain unchanged
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The Schaffner Group
Caution regarding forward‐looking statements
This communication contains statements that constitute “forward‐looking statements”, including, but not limited
to, statements relating to the implementation of strategic initiatives, and other statements relating to our future
business development and economic performance.
While these forward‐looking statements represent our judgments and future expectations concerning the
development of our business, a number of risks, uncertainties and other important factors could cause actual
developments and results to differ materially from our expectations.
These factors include, but are not limited to, (1) general market, macro‐economic, governmental and regulatory
trends, (2) movements in currency exchange rates and interest rates, (3) competitive pressures,
(4) technological developments, (5) changes in the financial position or credit worthiness of our customers, and
counterparties and developments in the markets in which they operate, (6) legislative developments,
(7) management changes and changes to our Business structure and (8) other key factors that we have indicated
could adversely affect our business and financial performance which are contained in other parts of this document
and in our past and future filings and reports, including those filed with the SIX Swiss Exchange.
More detailed information about those factors is set forth elsewhere in this document and in documents furnished
by Schaffner Group, including Schaffner Holding's Annual Report for the year ended September 30, 2011 Report.
Schaffner Group is not under any obligation to (and expressly disclaims any such obligations to) update or alter its
forward‐looking statements whether as a result of new information, future events, or otherwise.
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