OC Oerlikon Corporation AG

Ladies and gentlemen, welcome to the Erlikon Q1 2022 results conference call and live webcast. I'm Alice, the course call operator. 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 morning, ladies and gentlemen, and welcome to Erlikon's Q1 results call. With me in the call, I have Roland Fischer, CEO and Philipp Müller, CFO of Erlikon. We start the call with a business update from Roland, then Philipp will highlight the key financials. We will then follow up with Q&A. With that, I would like to open our presentation and hand over to Roland. The floor is yours.

Thank you, Stefan. Good morning to everyone and welcome to our first quarter results presentation. Q1 was a strong operational quarter. Besides profitable financial growth, we demonstrated technology leadership and further drove sustainability progress for our customers and our employees. But let's go into some more details on Q1 with a short summary on page 3. VertiCoin achieved strong order intake and sales growth of 23%. This resulted in an order intake of 790 million Swiss francs and almost 700 million Swiss francs of sales. Growth was driven by strong performance in both of our divisions. In service solutions, we increased our sales in general industries, and we also saw trends in aviation continuing to improve. Impact from supply chain shortages were in line with our expectations. We expect sales growth throughout the year, with a strong second half of the year. This is supported by a book-to-bill ratio above 1. In polymer processing solutions, we significantly increased sales by 40% and margins by 330 basis points. This confirms our strategy of enhancing technology leadership in filament and extending ad markets into non-filament. Our group operational APTA of 119 million Swiss Francs increased by 31% compared to last year. This actually represents the highest first quarter EBITDA since we refocused our business on two divisions. Continued cost containment and operating leverage support the margin expansion year over year. Summing up, we as a team have delivered a robust Q1 supported by our solid operational execution. Based on Q1 and current visibility, we confirm the 2022 group guidance. On the next few slides, I will give you a business update before Philipp goes into the financial details for the first quarter. Now let's move on to the market update on page four. Our end markets recover at different speeds. In polymer processing solutions, we experience strong demands. In the filament market, key filament producers continue the vertical integration. Our latest technologies save significant energy for our customers and are a strategic priority. Overall, the filament equipment market has more than doubled in the last 20 years. The market growth is driven by growing population and man-made fibers having better availability and lower resource intensity than natural fibers. Erlicon is the technology leader in the filament equipment market, and we are about to leverage this knowledge into new non-filament markets. In Q1, we continued with substantial organic growth in non-filament. We see strong demand for plant engineering solutions, such as polycondensation plants. We also see a positive market development for carpet yarns, particularly in the US. Flow control, which includes our recent acquisition of InGlass, continues to perform strongly. In automotive, flow control benefits from the need to reduce vehicle weight through lightweight polymer components. In non-automotive, we are capitalizing on customer synergies with service solutions. Overall, Tim Erlichon is well on track in transforming polymer processing solutions into a growth platform. Our order books are filled for 2023 and firmly on track for 2024. In the service solutions division, We are operating across the tooling, automotive, aviation and general industries and markets. The recovery continues to differ by end markets. We achieved combined 15% order growth in Q1. The general industries and markets saw solid growth as our longer cycle business starts to recover. The recovery in general industries is broad-based, including strong demand in luxury, semiconductors and energy. In automotive and tooling, we saw supply chain interruptions due to the shortages in the first quarter. As such, we were indirectly affected by temporary shutdowns of major customers. We are closely managing our operations and production capacities in order to efficiently deal with this situation. We see supply chain interruptions as transitory. The strong demand environment alongside sustainable megatrends give us confidence for underlying medium-term growth. We also see strong development in forming tools and polymer coatings, where we have a common customer base and synergies with polymer processing solutions flow control business. Finally, in aviation and space, sales continue to recover in Q1. Aviation remains still substantially below pre-pandemic levels. The initial recovery is mainly driven by demand for MRO services. So, summing up, we see a strong market environment in polymer processing solutions. In service solutions, we are closely monitoring and mitigating the impact of transitory supply chain bottlenecks. We expect them to continue in Q2 and to ease in the second half of the year. Overall, the strong demand environment across our end markets is a very positive indication of medium-term growth. In terms of the Ukraine-Russia war, we are monitoring the situation closely. We do have no employees in the Ukraine, and our annual sales in Russia were below 5 million Swiss francs last year. We are right now in the process of discontinuing our Russian operations. And now, let's move on to page five, where we highlight progress and our strategic priorities. Our strategy to drive profitable growth extended receivable markets and gain market share is unchanged. As a result, we are focusing our strategic priorities on growth, profitability and sustainability. In terms of growth, we continue to drive technology leadership and innovation in Q1. For instance, we launched new coatings for plastic processing tools in automotive. Also in e-mobility, we continue to successfully pioneer coating solutions for battery electric and fuel cell cars. With regard to diversification, we almost doubled sales for non-filament in polymer processing solutions. In service solutions, we achieved growth in luxury semiconductors and additive manufacturing. In terms of profitability, we achieved a further expansion in operational APDA margin. We paid a stable dividend in April and continue to have a solid balance sheet. And finally, sustainability has been a key priority for Oerlikon since many years. We continued with the implementation of energy management systems in Q1. Our products are clearly at the core of improving the sustainability and efficiency of our customers. We highlight this in the 2021 sustainability report that was recently published. Summing up on the slide, Team Erlikon consistently executed on its strategic priorities. This is driving top and bottom line growth. And now before I hand over to Philipp, we have to take a look at some takeaways from our 2021 sustainability report on the next page. I am pleased that external agencies are beginning to recognize our progress in sustainability. we had positive momentum with several rating upgrades in 2021. This is backed by a clear sustainability roadmap to 2030, for which we highlight our commitments on the left side. Our ambition is to become climate neutral on scope one and two emissions. We also launched a project to define the calculation of scope three emissions in 2021. This will provide us with a base to formulate an action plan for future emission reduction. And I'm also pleased to see that we are already progressing well towards our targets. Fifty-four percent of our group energy consumption is already today regulated with energy management systems. We also reduced disposed waste from 42 percent to 31 percent. And last but not least, 72 percent of our R&D is already today aligned to ESG criteria. We intend to improve that to 100% by 2030. We show this as a direct benefit to our customers on the next slide. Besides improving our environmental footprint, we want to help customers to match their own greenhouse gas and energy reduction objectives. In service solutions, our coatings are improving the sustainability footprint of our customers. They reduce weight, increase efficiency and extend component lifetime. For instance, they extend the lifetime of metal tools up to 160 times. In planes, they increase efficiency of turbine engines by 5%. It means planes can fly 5% longer with the same amount of fuel. In polymer processing solutions, our new equipment allows for up to 40% energy savings, which has already become a key requirement of our customers. Furthermore, our flow control solutions enable lightweight materials which are used in e-mobility. It's important to note that man-made fibers enable water savings as they are much less resource-intensive than natural fibers. Summing up, both divisions help our customers to reach their sustainability objectives. As such, we are well positioned to benefit from sustainability megatrends. This, alongside improving commercial activity and strong operational execution, provides a positive backdrop for our mid-term outlook and profitable growth. Tim Ehrlichorn has done a fantastic job in preparing the organization for the next stage of structural growth. With that, I will now hand over to Philipp, who will take you through our financials in more detail.