OC Oerlikon Corporation AG

Ladies and gentlemen, welcome to the Erlikon Q1 2021 results conference call and live webcast. I am Alice, the Chorus Call Operator. I would like to remind you that all participants will be in listen-only mode and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and 1 on your telephone. For operator assistance, please press star and 0. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Stefan Gieck, Head of Investor Relations. Please go ahead, sir.

Good afternoon, and welcome to Ehrlichon's Q1 Financial Results Call. With me in the call, I have Roland Fischer, CEO, and Philipp Müller, CFO of Ehrlichon. Also joining us for the Q&A is Georg Stahlsberg, CEO of our Polymer Processing Solutions Division. We start the call with a business update done by Roland, then Philipp will go through the financials, which we will then follow up with a Q&A. Roland, the floor is yours.

Thank you, Stefan. Good afternoon to everyone and welcome to our first quarter results presentation. Quarter one was a solid operational quarter. Besides financial growth, we demonstrated technology leadership and executed on discipline capital allocation by acquiring Inglas. Let's go into some more details on the quarter with a short summary on page three. The first quarter represents a solid start into the year with early corn returning to top-line growth. Sales at 568 million Swiss francs were up 7% and order intake at 643 million Swiss francs increased by 35%. Growth was driven by a strong performance of polymer processing solutions. In the service solution division, we saw trends improving throughout the quarter and achieved at the end a book-to-bill ratio well above 1. Our group operational APTA increased by almost 50% year-over-year to 88 million Swiss francs, leading to a margin of 15.6%. Continued cost containment and operating leverage supported our solid operational APTA margin expansion. All in all, it was a start into the year broadly in line with our expectations. We therefore confirm our full year guidance after the first quarter. On the next few slides, I will give you a business update before Phil goes into the financial details for the quarter. And now let's move on to the market updates on the next page, page four. Our end markets continue to face varying recovery profiles. In polymer processing solutions, we continue to enjoy stability in the filament market. The order books for 2023 are currently getting filled. Key players in China continue their downstream vertical integration into filament. Outside of filament, we see the nonwoven market growing, driven not only by the facial masks, but also by wipes, filters and other applications. For the full year, we reiterate our expectation of stable filament sales while non-filament is expected to grow our service solution division is operating across the tooling automotive aviation and general industry and markets the tooling and general industries and markets see shorter cycle services recovering at the right rates we expect them to recover by a mid to high single digit percentage number this year we introduce some new tooling products in the market in the first quarter. They have been well received with our industrial customers as they are continuing to look for improved performance to differentiate. In automotive, we experienced a high level of activity to date. Automotive demand was strong with good coverage across all our OEM and tier one customers. In particular, we are seeing strong demand for our immobility and sustainability solutions. We see this continuing in the coming quarters. However, considering the current supply chain challenges, market production expectations might be impacted and might vary. And finally, last but not least, in aviation, the travel restrictions caused by the global pandemic continue to last. Our aviation sales were down 45% year-over-year in the first quarter. We expect to see the draft now and to return to a very moderate growth in the second half of the year at the earliest, supported by easing comparables. We have seen some very early signs of improvement in MRO with demand for coating materials. So, summing up, we see a resilient market environment for polymer processing solutions, while service solutions markets are recovering at varying rates. And now let's move on to page five, where we provide an update on our strategic priorities. Our strategy to drive profitable growth and expand market share is unchanged. As a result, we are focused on three key strategic priorities, sustainable innovation, cost containment, and disciplined capital allocation. In terms of sustainable innovation, we launched in Q1 an innovative heat shield for battery packs in e-mobility applications. We also developed new materials used in semiconductor industry to process highly reactive gases, and we launched the Ballora thin film coating, which prevents hot corrosion for gas turbines. In terms of cost containment, we achieved a solid 420 basis points operation every day, margin expansion this quarter. And finally, Discipline capital allocation has been a key priority for Ehrlichon since many years. By acquiring InGlass, we have found an excellent way to diversify our polymer processing solutions division and to support growth over the cycle. I can provide some more details on the next page. InGlass is a market leader in hot runner systems, which are essential in the production of high-end lightweight plastic components. The company has about 135 million Swiss francs sales and is margin accretive to Oerlikon. The acquired technologies are complementary to Oerlikon's existing polymer flow control equipment. The addressable market for hot runner systems across all applications like automotive consumer goods and others is around 2.5 billion Swiss francs and nearly doubles the existing addressable market of our division. With around a 5% market share, we have substantial room to grow our share in a market that organically grows above GDP. Our strategic rationale for the deal is obvious. InGlass diversifies polymer processing solutions into non-filament markets and opens up markets outside of China. The deal enhances our growth profile by giving us access to growth areas such as e-mobility and pharma. The existing technology leadership enables InGlass to grow market share and organically expand in the UN markets. We can further extend technology leadership by combining our R&D efforts across our polymer flow control business. And finally, the deal is financially very attractive, as we expect earning per share accretion. We are truly excited about this opportunity and see it as a transformational catalyst for the group. There are also excellent cross-selling opportunities. For instance, the former tool business of Service Solutions codes the metal surfaces of tools and moldings used to create high-quality polymer parts. With polymer flow control, we also can consider further M&A into a fragmented market. We expect the closing of the deal to happen towards the end of the second quarter. And now, I will hand over to Phil, who will take you through our financials in more details.