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Edited Transcript of LEHN.S earnings conference call or presentation 31-Jan-20 9:00am GMT

Nine Months 2020 Lem Holding SA Earnings Call

Plan-les-Ouates Feb 5, 2020 (Thomson StreetEvents) -- Edited Transcript of Lem Holding SA earnings conference call or presentation Friday, January 31, 2020 at 9:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Andrea Borla

LEM Holding SA - CFO

* Frank Rehfeld

LEM Holding SA - CEO

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Conference Call Participants

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* Andres Gujan

Carnot Capital AG - Partner & Portfolio Manager

* Charles Bordes

Kepler Cheuvreux, Research Division - Equity Research Analyst

* Jolanda Stadelmann

zCapital AG

* Marc E. Possa

VV Vermögensverwaltung AG - CEO and Partner

* Michal Lichvar

Bank Vontobel AG, Research Division - Analyst

* Miro Zuzak

JMS Invest AG - Investment Professional

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Presentation

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Operator [1]

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Ladies and gentlemen welcome to the 9 months results 2019/2020 conference call and live webcast. I am Alessandro, the Chorus Call operator. (Operator Instructions) The conference is being recorded. (Operator Instructions) The conference must not be recorded for publication or broadcast.

At this time, it's my pleasure to hand over to Frank Rehfeld, CEO of LEM Holding. Please go ahead.

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Frank Rehfeld, LEM Holding SA - CEO [2]

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Good morning, everybody. Welcome to the review of LEM's 9-month results of our financial year '19/'20, and thanks a lot for your interest in LEM. Please excuse my voice, this is coming from a normal garden cold, all right? So I'm here together with the CFO of LAM, Andrea Borla, and we will guide you through the presentation.

For those who are not yet familiar with LEM, LEM is leading the world in electrical measurement and engineers the best solutions for energy and mobility, ensuring that our customers' systems are optimized reliably and safe.

Now the agenda for today will be as follows. After my opening remarks, I will give you more detail on the business performance of our 2 segments, Automotive and Industry. Andrea will introduce the financial results, and I'm going to conclude how we see the future.

Now moving to the recent announcement. Here in Geneva, we have announced that we have been laying off 21 of our people here in our headquarter, within the framework of -- sorry. Sorry, I missed the first -- sorry.

Now first of all, our sales performance in Q3 increased against Q3 last year. Although a slight improvement of 0.8%, it is still worth noting in the current rather difficult market circumstances. Despite the fact that we are about 4% behind on 9-month sales year-to-date, about CHF 10 million in absolute terms, and minus 2% on constant exchange rates, we managed to keep our EBIT level very close to 20%, while still further increasing on R&D investments.

I would, therefore, conclude on the overall LEM situation that despite the headwinds that we see, the business is fundamentally robust. And even in those times, we can afford to prepare for our new headquarter in Geneva and invest into a new manufacturing site in Penang, Malaysia.

At the moment, we are on track with the full year outlook. However, we see a possibility that the outbroke -- outbreak of the coronavirus in China could negatively impact our full year numbers.

Now with this, moving to the next slide. In Geneva, we've been recently announcing the layoff of 21 people in our headquarter, within the framework of improving our processes and moving activities closer to our customers. These layoffs reflect the changing role of our headquarter with a stronger focus on strategy, setting standards on innovation and the coordination of the global sites.

The evolution of our global footprint is evident by our decision to invest in the production site in Penang, Malaysia, which will reduce our Chinese share of global production from today above 60% to below 50%, provide further space to grow both our Automotive and Industry business, and for sure, also to tap the talent pool in the region, which is with respect to competencies in the semiconductor area, critical for LEM's growth path.

Moving on. Here, you see a simulation of our new headquarters in Meyrin, in the Canton of Geneva. We are moving to this impressive facility after nearly 40 years in our current location, which we have outgrown and which no longer suits our purpose. This new headquarter will be located in a campus called The Hive in which you also find, for instance, Hewlett-Packard, and the building will be built to suit for LEM purposes.

The total space will be 7,000 square meter, slightly less than our today's headquarters, and will allow better collaboration between the different functions. Most importantly, it will be the hub of our R&D and global innovation teams. Construction will start next month and LEM will invest in this building about CHF 10 million.

Having a look to the agenda, I would like to move on to the business performance now. LEM is delivering products and solutions into motors and drives business, the area of power storage, generation and conversion as well as energy measurement. We are organized in 2 business segments, Auto and Industry, that have about 20%,80% share of the total LEM turnover. At constant exchange rates, both segments' sales over 9 months have declined slightly by about 2%.

Looking at the geographic spread of our business, you can see that the global distribution has not significantly changed and remains nicely balanced. China and Europe are most important markets for LEM, and both have been impacted by the economic slowdown. Our third most important market, Rest of World, has been growing mainly due to positive effects in the automotive business.

Now coming to the Industry segment, providing you here a bit deeper insight. In the Industry segment, our drives business is the biggest business. This business has been suffering most in comparison to last 9 months. The main driver was the postponement of major investments in China, Japan and also Europe. Important to note here is that the more volatile renewable business as well as our long-cycle traction business have helped to compensate for the drives sector at least partially.

Also moving here into the regional distribution. You see that China is slightly positive in terms of growth in the first 9 months against last year. However, that all other markets showed a weaker performance. The North American market looks here worse than it actually is because in the last year's period we had to pay import taxes that were waived in this financial year.

Moving on to the Automotive segment. Now our Automotive business developed less well than expected. We see there 2 main reasons. On one hand, China has changed its subsidy policy and the subsidies were reduced coming from up to USD 10,000 per car to $0 by the beginning of 2021. This puts an enormous cost and margin pressure to all OEMs and the tiers in between that this is going to get passed on to the supply chain. Only part of this can be absorbed in the same technical solution. Therefore, to find alternative concepts redesign is a consequential step.

On the other hand, there's a huge variety of cars getting launched and not all OEMs make the promised volumes and are in time with their solutions, also this impact our business. The conventional car business is, as foreseen, further shrinking.

Looking at the regional distribution also here. However, the Q3 sales, despite these negative effects, have been about 4% going up, and this mitigated actually the somewhat decline of the first half. So for sure, we are not happy with the overall year or year-to-date performance in China and U.S., and we will move further R&D activities in the market to counteract this development.

I would like to draw your attention to the nice growth performance in Europe, although starting from a small level, and the rest of world, mainly Japan and Korean performance.

With this, I would like to hand over to Andrea who will detail us the financial results.

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Andrea Borla, LEM Holding SA - CFO [3]

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Ladies and gentlemen, good morning also from my side. As already mentioned by Frank, we have been faced with a challenging market environment. This was specifically reflected in the sales, which came in lower than last year by 4%, and in local currency by 2% percent. We could witness the sales slowdown in many of our peers actually.

The good news, though, is the Q3 sales uptick, in which the sales grew slightly compared to last year's Q3. Those lower sales impacted logically the EBIT, which is behind last year's performance. In contrast, net profit actually rose substantially compared to last year and this due to a one-off tax impact.

Let's now have a closer look on to the various P&L elements. The gross margin in absolute value dropped by close to CHF 4 million from CHF 113.7 million to CHF 110.9 million. This is the consequence of the sales drop. The good news is that in spite of the sales drop, we could manage to further increase the gross margin rate by 60 basis points.

How did we achieve that? Several ongoing efficiency programs, optimizing the supply chain, the purchasing and the production contributed to that improvement. Our 2 low-cost locations situated in China and Bulgaria cover now 80% of all sensors produced by LEM. The production located in low-cost countries shall further increase in the near future.

In view of the soft top line, we have rapidly taken up and implemented contingency measures. We are very vigilant on the recruitment of overheads and continue to optimize the scope at our head office in Geneva, which led as well to the head office restructuring announced last week. As a result, we succeeded to keep the SG&A stable at close to CHF 43 million. The cost for the Geneva restructuring of CHF 1.5 million will be reflected in the Q4 financials.

In contrast to the SG&As, we continue to grow our R&D expenses by CHF 1.6 million from CHF 20.3 million to CHF 21.9 million. We focus not only on renewing our current product portfolio but as well on developing new product families, addressing new markets and applications in the future. For that, we have hired additional engineers and worked together as well with third parties in order to speed up the product development. Going forward, R&D expenses are expected to remain in the 8% to 10% range.

The currency evolution was unfavorable for LEM during the first 9 months, and we had to suffer losses, both on the U.S. dollar and euro caused by losses on hedges, and the lowering exchange rates between the invoice date and the payment date. Financial expenses cover mainly interest costs on leases, which is following the new IFRS 16 norm.

We come on the income taxes and following the technical IP sale from LEM IP based in Fribourg to both LEM International and LEM China in November 2019. And LEM realized a one-off positive tax impact of CHF 14 million. This is basically the difference between the deferred tax asset setup of CHF 48 million on the one side and the CHF 34 million tax payables on the other side. Excluding the effects from the tech IP sale and other minor nonrecurring elements, the year-to-date tax rate was at 17.2%, and this is in line with our expectations.

As a summary, here you see the whole full profit-and-loss statement. We have been faced with a challenging market environment, but we managed to protect our overall profitability. And even if we exclude the onetime nonrecurring tax benefit, the overall net profit margin would have actually slightly improved from last year's 15.9% to 16.2%.

You may now wonder what the future will bring. And for that, I'm very happy to hand back to Frank.

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Frank Rehfeld, LEM Holding SA - CEO [4]

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Thank you, Andrea. So to conclude, for the outlook in term -- the development we see is that, unfortunately, we don't see a fast improvement of the global business environment. Based on our performance in the first 9 months, and also expecting no growth in the second half against last year, our guidance for the full year figures is unchanged at CHF 310 million in sales, which means about a 4% decline against last year.

With all the activities that we've been launching to secure our EBIT, we foresee an underlying margin of close to 20%. Unfortunately, the coronavirus is adding additional uncertainty to the Chinese market and probably also, consequentially then, the global market. But at the moment, it is too early to quantify here any effect.

However, the fundamentals remain strong based on the megatrends affecting many aspects of the global economy and society. This applies both to the Automotive green cars as well as our activities also in the Industry business. Therefore, we continue to substantially invest in new product developments and prepare our organization to do more development closer to our customers.

Thank you very much for your attention, and I would like to open now the Q&A.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question comes from Michal Lichvar from Bank Vontobel.

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Michal Lichvar, Bank Vontobel AG, Research Division - Analyst [2]

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I would have several ones. I would ask them one by one. So the first question would be in green cars. The third quarter really was a record year when you look at the sales. So pretty strong coming mainly from Korea and Japan as growth drivers despite the headwinds in China. So how do you see kind of the future in Korea and Japan? Could you hold the sales at these kind of levels and even further grow here? Can you give us a bit more color here? And maybe also for some additional drivers that you've seen in green cars that helped you achieve this record result.

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Frank Rehfeld, LEM Holding SA - CEO [3]

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Right. Thank you very much, Michal, and also good morning to you. The automotive world consists of global supply chains. And here, it's important to understand that the growth that happens in our Rest of World area is actually driven by growth in the European markets because the global supply chain is basically deliver here through the Korean market. As you probably know that, in particular, important suppliers and important producers of battery systems are all located in the Asian area.

So that means, since we see rather positively the development in Europe, and you have seen the growth rates that we have in the Automotive business there despite starting from a low base, we assume that this is going to continue and we will see there further growth, yes.

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Michal Lichvar, Bank Vontobel AG, Research Division - Analyst [4]

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Okay. Then the second question just would be in terms of margins. We've seen kind of margins in the different segments going kind of different directions compared to what we've seen in the first half of the year. Is this mainly because of the allocation of the R&D between Automotive and Industry? Or is it a mixed effect? Can you maybe give us a bit more color there why Automotive was so strong, and on the other side, Industry kind of weak in third quarter?

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Andrea Borla, LEM Holding SA - CFO [5]

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Okay. I take this. Of course, the EBIT margin from the auto in a quarter alone, I would also be careful not to over-interpret too many signals there. It is on the one side, let's say, the main driver was that, let's say, the Q3 sales in auto were pretty good. And then, of course, the overall operating expenses and also, let's say, the direct cost allowed to have a pretty good EBIT margin.

Now we -- and that's -- we repeated that on several occasions over the past quarters and years, is we believe when really the volume picks up and we really get big, big orders and we will be able to convert them into the sales, we will not be able, let's say, to defend the current gross margins. We will have to lower that. But if, of course, the volume picks up, then the overall EBIT margin may remain overall at the current EBIT level.

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Michal Lichvar, Bank Vontobel AG, Research Division - Analyst [6]

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And third question, regarding orders in the Industry, where we've seen a pickup. Can you tell us where did this come from? Was it also from drives? Have you seen some pickup there? Or was it more on the renewable side?

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Frank Rehfeld, LEM Holding SA - CEO [7]

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Yes. The orders were actually both in renewable and drives. So we see there some positive signs. However, I would also at the moment not encourage to over-interpret this. Because we also saw in the past and also sometimes push out then into next months and also next quarters. So there is -- there are some positive signals, and this is also the reason why we see the overall development rather positive. But I think it would be too early to derive signals only from quarterly results and quarterly bookings.

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Michal Lichvar, Bank Vontobel AG, Research Division - Analyst [8]

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Okay. And the last question, just in terms of kind of the CapEx forecast for this year and for the next one. How does the new investments influence this? Can you give us kind of a timing where you expect the bulk of these investments and, therefore, CapEx improvement to come in place?

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Andrea Borla, LEM Holding SA - CFO [9]

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Yes. So as you know, we have not provided the balance sheet and the cash flow in this Q3 results. We never do that. We do that at half year and year-end. Now having said that, I think you referred to the investments announced on the one side with our new head office and with the Malaysia production. But the main investments will occur during the year 2021, and also partially still on '21, '22. So there will be clearly an investment increase compared to what you have been used to in the last couple of years on our CapEx rate.

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Frank Rehfeld, LEM Holding SA - CEO [10]

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Good. Michal, does this clarify the open topics that you had?

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Michal Lichvar, Bank Vontobel AG, Research Division - Analyst [11]

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Yes, it is clarified.

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Frank Rehfeld, LEM Holding SA - CEO [12]

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Thank you very much.

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Operator [13]

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The next question comes from Charles Bordes from Kepler Cheuvreux.

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Charles Bordes, Kepler Cheuvreux, Research Division - Equity Research Analyst [14]

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Frank, happy to know that your sickness is just a normal one. I know it's maybe too early to say, but what could be the consequences of this coronavirus outbreak on the business? What are your local customers currently seeing? And do you already suffer from some kind of disruption? Next question would be -- or maybe should I ask them one by one?

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Frank Rehfeld, LEM Holding SA - CEO [15]

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Probably, it's a bit easier to then follow also for the audience.

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Charles Bordes, Kepler Cheuvreux, Research Division - Equity Research Analyst [16]

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Okay.

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Frank Rehfeld, LEM Holding SA - CEO [17]

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Now the coronavirus happened in a time where China is also in the New Year end period. So that means everybody is now on the way back to work. And therefore, to eventually talk about real impact would be too early. What I can tell you is that, for instance, in the area where we are located in Beijing, the New Year's holidays have been prolonged by 3 days. But this is not an order of magnitude that would impact our ability to deliver because, for sure, we would have stocks to buffer that out. So that would not be at all an issue.

One needs to really see the whole Chinese impact also are longer than the Beijing area, right? So this is difficult to make a concrete forecasts and proposals. But we need to see and follow really the development. You can imagine that LEM has set up a team that closely communicates both in the direction of our customers and also in the direction of our supply chain in order to make sure that we have here a maximum of transparency and information in time.

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Charles Bordes, Kepler Cheuvreux, Research Division - Equity Research Analyst [18]

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Right. My next question would be regarding your OpEx. So weakness mostly weakness in R&D, which was expected; but also in SG&A, which was not expected. Is it possible to have some comment on it? What is the cause of the SG&A increase?

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Andrea Borla, LEM Holding SA - CFO [19]

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Okay. There was a slight uptick. I also hear -- sorry to repeat. I would not read too much into that. I think we have our -- we have some, let's say, minor nonrecurrent elements, which were affecting the Q3 SG&As. And I think we -- if you take an average over the first 9 months, that's probably a good indicator of what you can expect now, let's say, in the Q4, Of course, excluding the reorganization severance costs, which we will have to set up and charge into the Q4 financials.

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Charles Bordes, Kepler Cheuvreux, Research Division - Equity Research Analyst [20]

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Understood. Regarding your traction business, could you elaborate a bit on the government policies which helped the business during Q3? And is the rebound observed during Q3 to (inaudible) in time? Or is it just more short term?

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Frank Rehfeld, LEM Holding SA - CEO [21]

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The traction business has been growing extremely nicely in the last year. And for sure, you can see that, there, our closeness to the customers and the development is very nice and a very close one. And the main areas in which that has been growing is basically in the Indian and in the Chinese market. Now these are governmental investment policies that eventually lead to these decisions. When I see mid-term, then I see at the moment that this is not simply continuing at this sort of level. So we will probably see rather some little bit sort of downturn in this development because we have been growing at very, very high level in an industry that typically grows by about 1% to 2% annually.

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Charles Bordes, Kepler Cheuvreux, Research Division - Equity Research Analyst [22]

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Okay. Understood. And my next question would be regarding your investments in Malaysia. Given the current production rhythm, what would be the new capacity utilization rate once the plant there is up and running?

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Frank Rehfeld, LEM Holding SA - CEO [23]

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So capacity, you can imagine, when you look a bit more mid to long term and that we look into a size -- of the size of our Bulgarian plant, that is the order of magnitude that we planned for Malaysia. We will produce there both Automotive and Industry business, and the focus will be on high-volume business and the new technologies, in particular also this part that we call this semiconductor part of the business.

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Charles Bordes, Kepler Cheuvreux, Research Division - Equity Research Analyst [24]

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Okay. I wish you get better.

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Frank Rehfeld, LEM Holding SA - CEO [25]

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Thank you very much, Charles.

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Operator [26]

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(Operator Instructions) The next question comes from Jolanda Stadelmann from zCapital.

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Jolanda Stadelmann, zCapital AG [27]

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I'd like to ask again about your dividend policy. You have different investment projects ahead. What could we expect for your dividends in the next years?

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Andrea Borla, LEM Holding SA - CFO [28]

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Okay. So this is, of course, a decision of, let's say, the proposal will be elaborated by the Board of Directors which then will be submitted for approval to the general assembly. Now the policy itself of LEM has not changed in the last few years, is to pay out a substantial part of the net profit of the year. Now -- so you could -- I would expect that this will persist in the future. Now for this current year, I would also review and have a look at it where you expect our net profit to land. So don't expect any major shifts on the dividend policy over the next coming years.

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Operator [29]

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Next question comes from Marc Possa from VV.

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Marc E. Possa, VV Vermögensverwaltung AG - CEO and Partner [30]

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I just had an understanding question concerning your R&D spend, this CHF 21.9 million spent so far in the first 9 months. Could you elaborate a bit how many double costs they were since you're trying to build up an R&D center based in France, in Lyon, and have still operations in Geneva, and maybe even in China and Bulgaria in Sofia? How should we take that into consideration? You mentioned the range of 8% to 10% to sales. Will we see some -- is it depending on the amount of projects that you have? Are there still some kind of double costs that will eventually phase out? Could you elaborate on that?

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Frank Rehfeld, LEM Holding SA - CEO [31]

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I'm not 100% sure, Marc, whether I understand your point, this double cost. Maybe you can quickly explain what you have behind with this expression.

What I can already tell you is that for the growth in which we invest, we see also -- you're right, there are certain, let's say, structural costs that are connected to that. But we see ourselves remaining in this ballpark from 8% to 10%. So we think that this is the necessary investment quarter that we need in order to make sure that we are having the right products available also for the future. But maybe you can shortly elaborate what you meant with this double cost?

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Marc E. Possa, VV Vermögensverwaltung AG - CEO and Partner [32]

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These were these structural costs that you mentioned. Since you have a footprint, a duplication of the actual footprint, given that you're trying to really ramp up France compared with the other operations. But is there a tendency that basically the need to spend more, i.e., the marginal francs spend into R&D leads to less kind of improvements, and therefore, there is a need to spend higher amounts to basically have the degree of innovation? Or -- and can you put that into context to maybe your peers, your competitors, since you command a market share of above 50% and probably, by far, the biggest player in that field? How does that compare on a relative basis to others?

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Frank Rehfeld, LEM Holding SA - CEO [33]

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Yes. Thanks a lot for the clarification. I think the doubling, yes, there is maybe some effect when you, on the one hand, basically move certain competencies to a new location, that there is some, let's say, structural effort. But I would not overestimate this impact. I would really see that the majority of these investments really go into product output.

How do we compare ourselves with the peers? Looking into the traditional current sensing business, where we, in the past, came from order of magnitude of 5% to 6%, I think we are now at a level where, I think, we are significantly above also what others who rather focus on this traditional business. So this is where we would be rather higher.

When you look in the business of semiconductors, we would be rather at the lower end. And this is what you eventually see with the investments into software, the topics, the product mainly developed in LEM tech France in Lyon today. And looking into the semiconductor road map that we have ahead of us, these are, I think, order of magnitudes that are above even 10%. So what we will see is a balancing out of this in the order of magnitude of 8% to 10% for our total portfolio. Did this clarify a bit the picture that you wanted to get?

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Marc E. Possa, VV Vermögensverwaltung AG - CEO and Partner [34]

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It does. And maybe if I may ask another question concerning your market share developments. What we observed in other industries is that the market leaders tend to increase market shares in times of rather difficult environment of crisis. Do you observe the same? Is there some smaller peers that do disappear, given that they don't have the global footprint, that they are not designed into these bigger projects of German OEMs in the car industry, for instance, for green cars? Do you observe that at all?

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Frank Rehfeld, LEM Holding SA - CEO [35]

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Yes, very good question. And I need to already excuse myself for not easy answer to this question. I think in our home turf, I would completely agree, we are winning market share due to the fact that we have a strong dominant position that we can use to leverage this development.

You remember that the reason for the investments into the integrated current sensor business, the investments into the DC meter business and also the smart grid business, and all this is also linked to investments in the Automotive business, in particular, also looking into the semiconductor parts where we see important developments, we see new market opportunities on top of what we've been looking at in the past, right? And for sure, in this new market -- and you probably remember, in Industry we said the new total available market is probably rather 75% bigger than what we've been looking in the past as our new market. There are further growth potential, but at the same time, when you look at the total market share, the market share goes down.

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Operator [36]

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(Operator Instructions) The next question comes from Miro Zuzak from JMS.

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Miro Zuzak, JMS Invest AG - Investment Professional [37]

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I only have one. I've heard from a solar inverter company that they are able to reduce the size and footprint of their inverters by roughly 2/3 due to the development of silicon carbide-based semiconductor materials, which they use in their inverters. Can you give us an update on what that means for your business?

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Frank Rehfeld, LEM Holding SA - CEO [38]

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Thank you very much, Miro. Now this is a very exciting question, looking into the technological developments in the future. And it shows well where we strategically come from. I think the solar business, this is important to understand, is probably one of the most demanding businesses that you have worldwide. I would judge it's even more demanding than the Automotive business. Because the reaction time you have in this market to really fulfill your final customer demand are extremely short, the cost pressure and the innovation demand is extremely high and the payback periods are rather short because there is a constant pressure on innovation in order to achieve grid parity for solar power. So that means all major solar power inverter producers are in a situation that they constantly need to reduce their cost, and reducing cost means reducing size.

And you are completely right, Miro, that we very clearly see that silicon carbide is coming and silicon carbide is coming in not only the solar area, but it will also come in the drives area. So that means the compactness of the inverter products will have to increase. And this exactly explains the reason why we also need to go into smaller products, and this explains the reason why we've put ahead a semiconductor road map for them.

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Miro Zuzak, JMS Invest AG - Investment Professional [39]

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Okay. My second question, if I may, regarding the Automotive business. In the beginning of the call, you made some, let's say, rather muted comment about the development. Also in the slides, you see that China is influenced by policies and so on. Did you change anything to your plans regarding like the ramp-up plans and the resources that you have to deploy for the ramp-up in the EV car business? Or is this just like caution -- a cautious comment because of the situation that everybody sees? Or do you really see changes in -- like from a bottom-up perspective with your clients?

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Frank Rehfeld, LEM Holding SA - CEO [40]

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Yes. I think it's a good question. Also here, there is not 3-words, 1-sentence answer. And we see that the green car market was seen as easily developing in the next years, and it was almost hyped. Now one needs to understand that a lot of this short-term, high double-digit growth, in particular in China, was driven by incentives. And we see that, on the one hand, by -- due to the incentive cuts, on the other hand, due to the tensions between U.S. and China that, for instance, with Chinese green car market or new energy vehicle market has been basically not growing in 2019 against 2018.

Do we have any doubt that this growth will come again? No, we don't have any doubts. But it might come a little bit slower than it was originally predicted. Still, the Chinese market is and will remain the most important market in the foreseeable future. And we just need to basically follow, for sure, now, the ramp-up volumes of our customers in the way they are eventually now coming, despite the fact that we have to realize the one or the other product doesn't come in time and the one or the other product also doesn't come in the volume it was originally predicted.

Can we change it now? No, we cannot change that now. We have, unfortunately, no impact on their success rate in the market. What we can change is our strategic approach towards the market rather in the midterm. And you can be assured that we are looking at our automotive strategy in very, very great detail to discuss here what will be the impact of this development for the future.

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Operator [41]

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(Operator Instructions) There are no further questions at this time.

We have a last-minute registration from Andres Gujan from Carnot Capital.

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Andres Gujan, Carnot Capital AG - Partner & Portfolio Manager [42]

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type="A" />

Just a quick question. Will you eventually present what kind of new markets you will -- you are talking about concerning R&D and what type of new products there are in the pipeline?

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Frank Rehfeld, LEM Holding SA - CEO [43]

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Right. We have been presenting that in previous investor information. When you look back -- when I recall that correctly in the Q4 call last year, we've been going in a considerable amount of detail. And if you would be referring to that, you could also refer to our annual review where, I think, there are more details on in which areas we are already investing.

To summarize it, high level, it's the semiconductor business. It's the business where we go beyond pure current measurement, the focus here is on DC meters for faster charging stations. And it is the smart grid business that is an important business that is going to further grow because of the consumer behavior in the net. It is high level, minimum, give you a satisfactory picture of where the investment is going to.

Good. So if there are no further questions, again, thank you very much for your attention, for the time you've been investing. We're looking forward to seeing most of you, hopefully, in the Widder Hotel on May 19 for the presentation of our full year results. Thank you very much, and have a great time until then. Thanks. Bye-bye.

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Operator [44]

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Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.