OC Oerlikon Corporation AG

Ladies and gentlemen, welcome to the EarlyCon QT H1 2021 Results Conference Call and Live Webcast. I am Samza, the Chorus Call Operator. I would like to remind you that all participants will be in this and 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 Gick, Head of Investor Relations. Please go ahead, sir.

Good morning and welcome to EarlyCon Q2 Financial Results Call. With me in the call, I have Roland Fischer, CEO, and Philipp Müller, CFO of EarlyCon. 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 morning to everyone, and welcome to our Q2 results presentation today. The second quarter was a strong operational quarter. Besides financial growth, we demonstrated technology leadership and executed on-discipline capital education by acquiring the two companies Inglas and Kurdor. And now let's go into some more details on the quarter with a short summary on page three. Verticon achieved solid order intake and sales growth both on a year-over-year and quarter-over-quarter perspective. Sales of 628 million Swiss francs were up 23%, and order intake at 647 million Swiss francs increased by 7% year-over-year. Growth was driven by a strong performance in both of our divisions. In service solutions, we saw trends improving compared to Q1. and we expect further sequential sales growth in the second half of the year. This is supported by a book-to-bill ratio above one. In polymer processing solutions, we continue to experience a very strong market environment and are currently making excellent progress filling up all the books for 2023. Our group operational APTA of 111 million doubled compared to last year, and further improved compared to Q1. Continued cost containment and operating leverage supported a strong operational EBITDA margin expansion. All in all, we had a strong start into the year, supported by a solid operational execution and two accretive acquisitions. I am therefore pleased to increase our full-year sales guidance to approximately 2.65 billion Swiss francs. We are also expecting a higher EBITDA margin, around 16.5% for the year. This brings the group already in 2021 into our EBITDA margin target corridor. On the next few slides, I will give you a business update before Philip goes into the financial details for the quarter. And now let's move on to the market update on page four. Our end markets continue to face Orion recovery profiles. In polymer processing solutions, we continue to make good progress with our structural shift into more non-filament business. We see strong demand for plant engineering solutions in China, such as stable fiber and continuous polycondensation plants. We also see the BCF industry revitalizing in the U.S. Our shift into more non-filament is supported by a strong focus on innovation, on service business, and on accessing new growth markets. On top of that, demand in the filament market is also increasing. Key players in China continue their downstream integration. For the full year, we raised our expectations both in filament and non-filament sales, as Philip will present later on. We expect to reach a positive book-to-fill ratio by year-end. This should support a growth trajectory also in 2022, while we are currently filling order books for 2023. In the service solution division, we are operating across the tooling, automotive, aviation, and general industries and markets. The market recovery continues to vary by end markets. The tooling and general industries and markets see shorter cycle services recovering well. We expect them to recover by a mid to high single digit percentage number this year. We introduced some new tooling products for the market this year. They have been well received by our industrial customers as they are continuing to look for improved performance to differentiate. The recovery in general industries is broad-based. and we also see oil and gas gaining momentum. In automotive, we experienced a high level of activity in H1, driven by automotive production. We also were affected by a two-week shutdown of a major customer due to supply chain shortages. We see supply chain interruptions due to semiconductor and commodity shortages to intensify in Q3. Finally, In aviation, the travel restrictions caused by the global pandemic continued to impact our sales. Our aviation sales were down 14% year over year in the second quarter. We expect aviation to be stable on low levels in H2, with new COVID variants to potentially extend the recovery profile. And if we look historically, then it can take up to 12 months until a recovery in flights arrives in the supply chain. And in this context, I'm pleased that we have already now evidence of first customer inquiries coming back. We signed a 10-year contract with NTU and Q2 to code some of their next-generation aero engine components. While volumes are not material on group sales level, it is a very positive sign that leading aviation players put long-term trust into our technologies. So, summing all up, we see a strong market environment for polymer processing solutions. In service solutions, short cycle business is recovering and we see positive signs in the longer cycle markets, which is a positive indication for 2022. 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 Q2 a new machine for deposition of diamond coatings. It has two times higher productivity and capability to produce nano and micro grain diamond films for applications in aerospace. We also launched new powders for thermal barrier and bond coatings. In terms of cost management, we have achieved a 660 basis points expansion in operational APDA margin this quarter. And finally, disciplined capital allocation has been a key priority for Erlikon since many years. We paid again a stable dividend in Q2. Furthermore, by acquiring Inglas and Cordova, we have found an excellent way to diversify our business and position it in growth markets. We paid attractive multiples, and the acquisitions are accretive from day one. And now I will provide some more details about our acquisitions on the next slide. InGlass is a market leader in hot runner systems, which are essential in the production of high-end lightweight polymer components. The company has around 135 million sales generated in multiple industries, including automotive and customer goods. The acquired technologies are very complementary to Erlikon's existing polymer flow control equipment. Our gear pumps focus on precise thermal control, pressure management, and continuous flow of molten polymer. Together with the know-how of InGlass, we can further extend technology leadership by combining our R&D efforts in flow control. The acquisition also helps us to diversify our business beyond filament, where we reached already a high market share. In 2020, filament accounted for 70% of polymer processing solution sales. This number becomes 60% with InGlass. Our midterm ambition is a balanced ratio of 50-50. We target to reach that by organic growth initiatives and bolt-on M&A in non-filament areas. The addressable market of InGlass is around 2.5 billion CISRAMs. This nearly doubles the existing addressable market of our division. The acquisition gives us substantial room to grow share in a market that organically grows above GDP. We see in Inglas an annual high single digit percentage sales growth potential. And last but not least, Inglas opens up excellent cross-selling opportunities between our two divisions. For instance, the forming tool business of Service Solutions coats the metal surfaces of tools and moldings used to create high-quality polymer parts. We are truly excited about this opportunity and see it as a transformational catalyst for the division. The closing of the deal happened in the beginning of June, and Inglas already contributed positively to our second quarter. And now let's move on to the next page where we highlight Godor. Godor is the leading supplier of metalware to the luxury fashion industry. Customers include leading luxury brands producing leather goods such as leather bags and belts. While we are already present in high-end deco applications such as pants and watches, we want to expand beyond that. A key feature of the high-end deco industry is that trusted long-term customer relations and design expertise are very important. The deal is therefore strategically attractive for us as it allows us to leverage our technology through the Codor brand. EarlyCorn's leading technology and global footprint makes us a perfect match for Codor. Besides end-market diversification, the acquisition provides EarlyCorn access to further growth. The luxury leather goods market has an attractive mid- to high-single-digit percentage market growth. And finally, in terms of ESG, the combination of EarlyCorn and Codor will accelerate the luxury goods industry's shift to PVD as a much more greener technology. And with that, I now will hand over to Philipp, who will take you through our financials in more details.