Transforming Oerlikon for success – From an … Oerlikon for success – From an industrial...

Transforming Oerlikon for success – From an industrial conglomerate to a global leader in surface solutions

Jefferies 2016 Industrials Conference Andreas Schwarzwälder, Head of IR New York, August 10, 2016

Key facts Oerlikon Group FY 2015

20160810_Oerlikon presentation_Jefferies 2016 Industrials Conference

>13 500 employees

2.7 CHF billion sales

>170 locations

37 countries

3 segments

Creating a global surface solutions and advanced materials powerhouse

Initial major step with acquisition of Metco

String of pearls: Acquisition of Laser Cladding Services

Clear priorities defined for each Segment in line with Group strategy


Surface Solutions

Manmade Fibers

Drive Systems Vacuum

Signed an agreement on Nov. 20, 2015,

to divest Vacuum Segment to Atlas Copco

(closing expected for Aug. 31, 2016)

Reorganization to allow for value- creating options

Structural adaptation to successfully

manage artificial market cycle

Surface Solutions

(Reporting unit)

Surface Solutions

Transformation of organizational structure in line with Group strategy


Manmade Fibers

Drive Systems

Tooling

Automotive

Materials & Technology

Additive Manufacturing

Integration

The Oerlikon Group’s headquarters and the Surface Solutions Segment will be integrated into one single organization (new structure effective January 2017)

Dr. Roland Fisher takes on the added role of CEO of the Surface Solutions Segment; Dr. Roland Herb appointed Chief Commercial Officer of the surface solutions business

Reporting structure unchanged (3 Segments) Manmade Fibers and Drive Systems Segments not affected

by organizational changes

(Oerlikon Headquarters)

Surface Solutions Segment


What we do – Surface Solutions Segment


Starting point

Thin-film (job) coating

Investing in technology

expansion & growth

Thermal spray services, equipment & materials

Global surface solutions & advanced materials powerhouse

i.e. additive manufacturing

Oerlikon Balzers as Oerlikon’s primary surface solutions business

Oerlikon Balzers is a global leader in thin-film coatings for reduction of wear and friction mainly for tools and automotive industry

Global footprint with more than 140 coating centers

Acquisition of Sulzer Metco in 2014 to expand technology portfolio

Metco is a global leader in Thermal Spray, a thicker layer coating technology mainly for thermal protection of e.g. aero and gas turbine blades

Foundation of a new business unit “Additive manufacturing” in 2015 to address the promising 3D printing market

Oerlikon already today providing metal based powders; Leverage global footprint for production incl. post treatment (coatings)

Oerlikon covers a broad range of complementary surface technologies


Surface treatment

THIN-FILM COATING PVD PECVD (PACVD)

THICK-FILM COATING Thermal spray

NITRIDING Plasma nitriding

Bulk treatment

HARDENING


1 ePD = embedded PVD (thin-film coating on plastic substrate).

Surface technologies add a broad range of surface properties to a substrate

Wear resistance E.g. PVD coatings for cutting and forming tools

1 Thermal resistance E.g. thermal spray coatings for turbine blades

2 Friction reduction E.g. DLC coatings (Diamond-like-coatings) for engine parts

3

Electrical properties E.g. oxide coatings for fuel cells

4 Corrosion / erosion resistance E.g. coatings for pump impellers

5 Decorative enhancement E.g. DLC coatings for watches; ePD1 for decorative parts in cars

6

Reconditioning = regrinding and recoating

Reconditioning Conventional coat vs. BALINIT coat

Customer example – Coatings on cutting tools significantly increase productivity & tool life


BALINIT Pertura coat from Oerlikon Balzers …increases drilling speed by factor of

2.5 from 80 m/min to 210 m/min and therefore increases productivity by 85%

…extends tool life time by ~67% (1 000 holes instead of 600 holes)

+ + + + + +

4 new tools 100%

total costs

1 new tool reconditioned 3×

50% cost savings

A used tool can be reconditioned up to three times (some tools up to eight times) and has the same performance as a virgin tool but at 50% of the costs

37

20

0

10

20

30

40

BALINIT® PERTURA

+85%

Conventional coat

Holes/minute

1,000

750

250

0

500

BALINIT® PERTURA

Conventional coat

+67%

600

1,000

Tool life time (# of drilled holes)

Grow additive manufacturing business (powders & post-treatment)

Complement technology portfolio

Develop new products / applications / end markets / regions

Grow service business Grow equipment & materials business Business development

Continue expansion of thin-film and thermal spray service business

Increase number of thermal spray powders

Continue expansion of thermal spray equipment

We will grow the Segment along three strategic directions – organic and inorganic


Leverage combined strength and interdependencies between coating services, equipment & materials

Oerlikon driving additive manufacturing development

Production services Application engineering

Production processes

Development and certification of additive manufacturing (AM) tailored materials

Complete powder portfolio in large & small batch sizes

Distribution competence serving different routes to market

Strong material handling competence

Product design engineering for AM (design for function)

Application engineering competence

Optimized production process chain through end-to-end management

Customer understanding through partnerships

Global service network

Optimized machine parameters and software solutions

End-to-end coverage of digital process parameters

Automation of process (linkage of hardware and software tools)

Conventional and tailored AM finishing technologies

Materials

1 3

Value proposition: End-to-end offering with strong interface management

Industrialization of AM value chain is key to reach series production level

Systems

Software Hardware

2


Only scratching the surface so far … Big growth potential in all areas


Market development New

customers New regions New

industries

Market penetration

Diversification New applications Multilayer coatings Etc.

Product development New coatings / technologies New materials More efficient equipment

New products

Exis

ting

mar

kets

Existing products

New

mar

kets

Increasing number of coated parts in existing applications

New applications / end markets providing substantial growth potential

E.g. the number of thin-film coated parts in a car increased from ~15 parts to up to 100 parts ─ 1990s: first applications of thin-film

coatings in diesel injector systems ─ Since 2008: coatings also applied on

piston pins (starting with a small number; in 2015 more than 22 million coated piston pins)

─ 2015: whole piston group, oil actuation, ESP / brake systems and engine peripheral parts are coated

─ Future serial applications include transmission parts, differential gears, cooling systems, turbochargers etc.

Also an increasing number of thermal spray coated components in a car

Surface Solutions Segment – Back to top-line growth and strong profitability in Q2

RoW 5%

Asia / Pacific

28%

North America

19%

Europe 48%

Power Generation

8%

24% General Industry

Aviation 12%

Automotive

24%

Tooling 32%

Sales Q2 16

Sales Q2 16


Market development: Tooling in Europe/Asia stable,

strong in India and softer in the US – major tool manufacturers with negative growth Automotive market overall

stable with some weakness in Europe, slight growth in the US and positive momentum in Asia Aviation picking up slightly

(new engine generations) - MRO3 activity remains low Power Generation with positive

signals in IGT4 from new generation turbine programs Oil & Gas remains on low level

Operational performance: Order intake and sales with

slight growth, despite low to negative growth in industrial production (IP)

Lower commodity prices in materials business still impacting top-line

Good growth in TF1 service business, lower equipment sales volume and strict cost management strong profitability

AM2 with good growth albeit at a low base & development of strategic partnerships

1 TF = Thin-film; 2 AM = Additive Manufacturing (3D printing); 3 MRO = Maintenance, Repair & Overhaul; 4 IGT = Industrial Gas Turbines

in CHF million Q2 16 Q2 15 y-o-y y-o-y ex FX H1 16 y-o-y y-o-y

ex FX Order intake 311 299 4.0% 1.2% 617 0.2% -1.8% Sales (3rd parties) 315 309 1.9% -0.7% 609 0.0% -2.1% EBITDA 71 69 2.9% – 133 2.3% – In % of sales 22.4% 22.2% 0.2 pp – 21.7% 0.4 pp – EBIT 43 42 2.4% – 76 0.0% – In % of sales 13.4% 13.6% -0.2 pp – 12.4% -0.1 pp –

Manmade Fibers Segment


What we do – Manmade Fibers Segment


Main business

Filament spinning equipment

Value chain expansion

Polycondensation

Reducing filament equipment exposure

i.e. staple fiber equipment

Global market and technology leader in filament spinning equipment

Project business with average order size of CHF 20-50 million (up to CHF 200 million)

Key markets are China, India, US and Turkey

“From melt to yarn” strategy Joint venture with Huitong

Chemical to provide polycondensation plants for either direct spinning process or PET production

Acquisition of Trützschler’s staple fiber technology portfolio to strengthen areas outside Chinese filament business

Business opportunities in nonwovens area

Operational performance: Order intake sequentially flat

driven by DTY1 business mainly in China and large Staple Fiber orders (Turkey)

Sales impacted by timing of projects and shifting of some projects expected to pick up in H2

Slightly negative EBITDA low sales level not fully absorbable by restructuring and strict cost control

Manmade Fibers Segment – Continued challenges in filament market in China

RoW

57%

Asia / Pacific

Europe

North America

24%

13%

6%

14%

Filament spinning/Texturing

83%


BCF carpet yarn/

Polymer processing

Staple fiber/Nonwoven

Market development: 3 phase model from China’s

13th 5-year plan confirmed first 1-2 years focusing on increasing capacity utilization DTY1 and Staple Fibers

continue positive trend from Q1 Demand for specialties / niche

products increases limited top-line potential BCF2 markets in North America

and Europe show some recovery projects under negotiation

Sales Q2 16

Sales Q2 16


ex FX Order intake 125 197 -36.5% -38.4% 249 -37.9% -39.4% Sales (3rd parties) 98 209 -53.1% -54.4% 237 -43.2% -44.5% EBITDA -2 37 >-100% – 7 -90.4% – In % of sales -1.6% 17.6 % -19.2 pp – 3.0% -14.6 pp – EBIT -6 32 >-100% – -2 >-100% – In % of sales -6.1% 15.6 % -21.7 pp – -0.8% -16.4 pp –

3%

1 DTY = Draw-textured yarn (during texturing, pre-oriented yarn is permanently crimped using friction); 2 BCF = Bulked continuous filament (carpet yarn)


Drive Systems Segment

What we do – Drive Systems Segment


Drive Systems Segment

«Broad and complex technology portfolio»

Streamlined product portfolio

Gears, shifting solutions & planetary drives

Business opportunities

i.e. e-drives/hybrids

Very broad and complex product portfolio with several product lines and more than 15 000 part numbers

Suboptimal geographical footprint and organizational structure

Diverse end markets with sometimes high cyclicality

Streamlining of product portfolio with main focus on product lines gears, shifting solutions and planetary drives

The Segment’s latest innovations for electric and hybrid vehicles are targeted at reducing emissions and environmental pollution

Drive Systems Segment – Order intake gaining momentum and profitability sequentially up

North America

RoW

49% Europe

33%

Asia/Pacific

14%

34% Agriculture

26%

15%

17%

Transportation

8% Performance

Automobile Energy/Mining

Construction


4%

Operational performance: Good recovery of order intake

due to incremental new business wins despite negative end market development

Slight sequential improvement of sales and operational excellence/restructuring profitability sequentially improved (year-on-year impacted by product mix)

Voluntary retrenchment programs 110 FTE contracts signed in Italy

Market development: Continued low demand for

agricultural equipment (larger tractors & combines); Turkey however with strong growth & India showing signs of recovery Construction in Europe at

reduced levels, China remains weak and US mixed, India showing signs of recovery Transportation in US and

China with significant decline in heavy freight rail Oil and mining equipment

markets remain depressed

Sales Q2 16

Sales Q2 16


ex FX Order intake 158 143 10.5% 7.2% 315 0.0% -2.4% Sales (3rd parties) 164 171 -4.1% -6.5% 323 -8.8% -11.1% EBITDA 12 17 -29.4% – 21 -40.0% – In % of sales 7.1% 10.0 % -2.9 pp – 6.4% -3.6 pp – EBIT 1 7 -85.7% – -1 >-100% – In % of sales 0.6% 4.0 % -3.4 pp – -0.2% -4.4 pp –


Outlook Oerlikon Group

2016 outlook confirmed – Focus to protect profitability in challenging environment


Short term: Continued competitive market environment / no improvement in world economic growth anticipated

Mid/long-term: Attractive growth markets with confirmed underlying drivers Continued organic growth in Surface Solutions Segment supported by market growth,

increasing number of applications and market penetration New market reality in manmade fibers industry impacting Segment and Group top-line Demand slowly recovering from trough levels in Drive Systems Segment U

nder

lyin

g as

sum

ptio

ns

and

mar

ket c

ondi

tions

:

Oerlikon expectations for financial year 2016: Order intake and sales within the range of CHF 2.3 billion to CHF 2.5 billion EBITDA margin around mid-teens

Gro

up

Gui

danc

e

Summary – 3 key messages of today’s presentation


1 Positive results from the Surface Solutions Segment endorse the strategic direction and course of the Group

2 Organizational structure transformed in line with Group strategy

3 Full-year guidance for 2016 confirmed

Thank you.


Investor Relations Contact


OC Oerlikon Management AG, Pfäffikon Churerstrasse 120 CH – 8808 Pfäffikon SZ Switzerland Andreas Schwarzwälder Head of Investor Relations Phone: +41-58-360-9622 Mobile: +41-79-810-8211 E-mail: [email protected]

OC Oerlikon Corporation AG, Pfäffikon, (together with its affiliates hereinafter referred to as “Oerlikon”) has made great efforts to include accurate and up-to-date information in this document. However, Oerlikon makes no representation or warranties, expressed or implied, as to the truth, accuracy or completeness of the information provided in this document, Neither Oerlikon nor any of its directors, officers, employees or advisors, nor any other person connected or otherwise associated with Oerlikon, shall have any liability whatsoever for loss howsoever arising, directly or indirectly, from any use of this document. The contents of this document, including all statements made therein, is based on estimates, assumptions and other information currently available to the management of Oerlikon. This document contains certain statements related to the future business and financial performance or future events involving Oerlikon that may constitute forward-looking statements. The forward-looking statements contained herein could be substantially impacted by risks, influences and other factors, many of which are not foreseeable at present and/or are beyond Oerlikon’s control, so that the actual results, including Oerlikon’s financial results and operational results, may vary materially from and differ than those, expressly or implicitly, provided in the forward-looking statements, be they anticipated, expected or projected. Oerlikon does not give any assurance, representation or warranty, expressed or implied, that such forward-looking statements will be realized. Oerlikon is under no obligation to, and explicitly disclaims any obligation to, update or otherwise review its forward-looking statements, whether as a result of new information, future events or otherwise. This document, including any and all information contained therein, is not intended as, and may not be construed as, an offer or solicitation by Oerlikon for the purchase or disposal of, trading or any transaction in any Oerlikon securities. Investors must not rely on this information for investment decisions and are solely responsible for forming their own investment decisions.

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