OC Oerlikon Corporation AG

Good afternoon, ladies and gentlemen, and welcome to Ehrlichon's full year results presentation. I am Éric Jamin, Head of Investor Relations. I have here with me Michael Suss, our Executive Chairman, Marco Freidel, CFO, and Dirk Lindsmeyer, COO. Michael will start with a strategy update and an overview of 2025. Marco will then highlight our financials and outlook. We will end with a Q&A. With that, I would like to open our presentation and hand over to Michael. Michael, the floor is yours.

Thank you. Good afternoon, ladies and gentlemen. Let me take the opportunity to get with you through a little bit to the year 25, what we have done, what we have achieved, and give us a little outlook for 26. So as announced in 2024 in February, two years ago, We have executed by February this year with the closing of the cell of Baumark along a way to become a pure play company. Pure play company means that we are a material science engineering company. We're doing PVD, CBD coatings, 3D printing, building the machines for all these procedures. and produce our own and develop our own materials this out of a widely spread out organization um internationally 37 countries we are covering with a lot of service centers so this transformation is somehow where the cell of biomark is done what's still what's still on the way is where we have started with three industries. We are now in 11 industries. We deepened our relation in industries, and we're sharpening our setup of the management team by profession and by age in the right way. We built a pretty resilient value growing from our markets. Not all our markets moving in the same direction as we will show you later on, And everything is built on a strong innovation pipeline where we have, especially in that industry where we are still remaining, we have always invested 5% or 6%. As a group, you remember maybe the four, but the investments we have done in OSS in the past was closer to the six. Meanwhile, with a more efficient way of R&D, we are somehow in the 5%, but we have not lacked any innovation power. What's as well important is that the strategy to become more agile and leaner as well in administration, but not only. We're still working on getting our sales forces leaner and closer to the customers in other areas where we use all kind of the technologies which are available. from our ERP systems, which we have harmonized the last couple of years, CRM and others. But we have almost half, and maybe Mark will touch that point a little later, we have almost half of the costs for administration since 2019. So taking that, having a look on where we are and where we want to go. You remember as well that we embarked with mainly tooling and cutting tools and forming tools story, some automotive. but not too much else. And we had PV decoding, not really CBD, not thermal spray, not that much material science, which we all built in the last years together as a core of a company which is unique. Sometimes it's good to be unique, sometimes it's a disadvantage, because especially for you, to compare us with someone is always difficult, because we are the white unicorn. With that technology strength, with that technology combination, There is no one out there. There are some people who are playing in the field of material. Others are building machines. Others have some thermal spray services. But the combination of technologies in that way as we are doing it, if I'm allowed to say, is awesome. And there is no one else. And as we have spread out the last couple of years and diversified, this competence is in more fields now. We are today with energy, which stays for oil and gas industry and power generation, tooling, as I mentioned, forming tools and cutting tools, automotive, aviation, including aerospace, channel industry, which today as well covers semiconductors, medical, and others. We have embarked now to make semiconductor medical more visible. by a better size and by a better accessibility for us to the markets now. So generally industry will always cover that industries which are not big enough yet to show them as on their own. Luxury, we will touch that a little later in my presentation. And last but not least, defense. We are since decays in the defense industry. in the past directly with early control drivers indirectly over decades as well with the coatings and the powders for the jet engines and for some some stealth technologies where we supply powder as well but not so much directly which we are which we are now more considering but we have to see where our competences and our capabilities could contribute in the best way to defense, and I have to reiterate, we're talking about defense and not attack, to defense a society where we are living in or we want to keep it livable. So to get closer to the customers, we have embarked in 2022. So we started in 2021, the process. In 2022, we rolled it out. And within Asia Pacific, Americas, and Europe, We have the three major hemispheres. Europe still is bigger than the other two. You should consider that Hariri, for example, with its revenue is fully in Europe and is not spread out in Asia Pacific and Americas, and as well Inglas has a certain proportion in Europe. So if you take more of the core of the core business, they are already more comparable between Europe and Asia Pacific. America is still a little smaller. One of the major reasons is we are a long time in America with thermal spray. We are probably 20 years now in America with the PVD business, and there is more service business to come on PVD. But as US was never strong in tooling industry, or let's say not never, but at least in the last two or three decades, there are more other areas, like semiconductor industry, where these competences and capabilities will play a role in the future. By that saying, as I mentioned in the third bullet and introduction, innovation for us and to be leader in innovation is key for everything what we are doing. And you have here some examples on equipment, on components, and on codings. By the way, this is the way how we in future as well want to present the company. But maybe Marco as well, you will touch that point later a little bit. The equipment and materials business is mainly driven by thermal spray equipment as well for pvd but the most pvp equipment stays in our own service centers components either it's aircraft components by album or its components by hrs flow or others and then the coatings and the coatings a lot of the of these coatings are pvd coatings or cvd coatings for our service centers with all that and with and in line with the digitalization strategy where we can use new ways of technology to strengthen our footprint. I give you only two examples. One example is that we have a virtual coding center program, which means we link in real time the coders together, the ones who are not that capable to do that. We have it at least on a daily basis. End of this year, we'll have 200 out of our 450 coders real-time linked. And then to use these technologies to optimize the utilization, the way of maintenance, the forward-looking planning, and to get – this will have a strong contribute as well in the way how we use our capital. The other one, total different way, we have in San Diego as both Coperta – In 2016, Scoperto was a carve-out of the University of San Diego and was at that time already leading in the AI-based development of materials. Now, in our geopolitical days where Yttrium, for example, sits on the export control list in China since April, it makes a lot of difference if you have the capabilities, as we do actually, to develop 16 new alloys per week and to test them. and figure out what kind of elements and what kind of alloys could help us to reduce or even to eliminate yttrium as a rare earth material in a lot of our applications. And why are we talking about yttrium? Most of you may never heard about that. That's one of the 17 rare earths And it's the material which you need in any hot segments of gas turbines. So either gas turbines for power generation or gas turbines for commercial flights or gas turbines for military flights. All the hot sector has thermal barrier coatings and bond coatings based on yttrium. And these are life-limited parts. So it's not that you have it built once and then it's done forever. You need them on a consistent base. And in 25, we had significant issues to get deetium for our customers, but we could make it. For 26, we're almost assured that we can make it, so we have it covered. But nevertheless, we have now entered a way to find different elements and different alloys to either, as I mentioned, to reduce or even to compensate deetium. rare earth materials, which are today mainly coming from China, and it's not because China is the only place to have these materials, but as well that China has, the last 20-25 years, took the opportunity to get all the refinery processes into China. So even if you have each from other countries, they're typically moving through China. So I don't want to deepen that more, but it shows you how important this material science competence is and how long-term we have thought about that when we already entered that field in 2016, 10 years before people even have thought about that this may have a strategic value to secure our supply chains in the future. And based on these competences, our customers gave us this year, we cannot mention them, but big customers in the U.S., gave us a supply award. Our customer helped us to come with Naval. Naval is the laboratory of the Navy to help us and it will be financed by the US Navy and US Marine. to finance a new group of alloys, high entropy oxides. It's a coating which helps you to reduce significantly on airfoils the erosion, and in parallel you get, on top of that, you get high turbine intake, which is more power. So I give you some examples only to understand, because we are a tech-driven company, and a lot of things what we are doing is not very obvious for people. So I just bypassed at my office the flame for the Olympic Games, which we have coded, but we couldn't talk about. Otherwise, the Olympic administration would have charged us a huge amount of money. But it's where we're behind. So there is not, as we always say, there's not a single day in life without Erlikon, but maybe you're not even aware about. But that makes our story that strong. So why we bought in 2023 Riri and why we have bought Cordura in 2021? Because we are convinced that the luxury coatings, the coatings in luxury products, which are today almost, not 100%, but mainly by electroplating, is a fantastic field for us to transfer that into PVD technologies, to replace that with PVD technologies. And there's two major reasons behind. The one reason is a simple one. You need up to 90% less material, which is simply a cost question. The second one is that these materials are dirty materials. So to get a kilo gold, or even a gram of gold, you need one ton of gold ore. By the way, in rare earth, it's similar. You have 3 to 5% of rare earths in a ton. So you need, for 30 kilos, you need one ton of ore. That shows you that to avoid these procedures, and even to think about to use it in much thinner layers, has an economic, but as well an environmental effect. And last but not least, why we use tungsten today out of recycling is because tungsten is one of some arts of tungsten. or on the export control list as well from China. And here we have found solutions to take the recycling methodology, change them from drill heads and to use it to rework it. So these are all various where we are in. So luxury we bought. We had to restructure somehow a little bit because after COVID-2022, and I have to mention, the timing was probably not the most luckiest one because when we bought the company after COVID, everybody was expecting that the luxury market bounces back and comes back strongly. But unfortunately, the real estate bubble, which is still a big issue in China for the consumers, in combination with a lot of small and mid-sized companies, suffered a lot or even disappeared in the way of how China was handling the COVID pandemic. is led to the situation that there is not the highest consumer trust in the market in China yet. So the growth you see in China today is probably by two-thirds driven by infrastructure investments and less by consumer. This will come back, probably not in 26, but there is a certain indication that in 27, 28, this story comes back, and then we are very well positioned, and in between we do our homework. As we typically always have done, if markets be not in favor for us, we made our homework. So some markets as aerospace, as energy are in favor for us. Some markets like automotive and some parts of the general industry and the tooling are under pressure. To one extent, because of the tariff policy, it probably slipped to the next one, you have the markets. Tariff policy is never good because tariffs are not good for trust, and if there's no trust, it's not good for economy. And I'm actually convinced that a tariff doesn't help nobody. It makes a strong economy weaker and it makes a weak economy even more weaker and more dependent. So there will be finally a better understanding that this doesn't help, but it will take a while. In between, we suffer by that indirectly because the tooling industry, the channel industry, the automotive industry, they are taken by some unsecurity. They don't know where to go. But this is not only the tariffs. This is as well what happened the last five years from EU, giving total different directions in the way how we want to handle our energy policy, how we want to handle our car policy. To get out by 2035 and say we don't drive ICEs anymore is simply ridiculous. It's nonsense. I don't say it's stupid. That would be way too harsh, but it's nonsense. And it's not well thought through. And it's harming massively our own industries in Europe. It doesn't help anybody. But nevertheless, it's impacting markets. So the tariffs, this EU story, in combination then with the question mark, who is with whom in a partnering process in the future? Is it China, Europe, China, U.S., U.S., Europe? Who is together in which sense? This has an impact of our business. And if there's no trust, people keep their money a little bit more together. That has an impact on luxury. It has no impact on aviation because aviation is driven by recovery and more demand on aviation and commercial, but as well by aviation and military. Only Boeing and Airbus wants to go higher in their monthly production rate for narrow-body aircrafts that shorten mid-term range from 60 to 75, if you sum that up, that's 1,500 engines additionally per year, which all of that needs coatings, a lot of them. And they need equipment, which is driving, actually, somehow our business on the fuel side and our equipment side. Same is for big industrial turbines. There was the last 10 years, and there wasn't that industry until 2015. At the peak, we had in 2008, 300 plus. Then it dropped, and the last 10 years was around 100, 110. Now we are above 200, and this is for several years now. If you talk with the GE, if you talk with Mitsubishi or Siemens, that's the big three industrial gas turbine players, they all confirm. We are 200 plus, and this will last for a while, because gas-fired power plants, even in a combined cycle or even combined heat and power, are the best alternative to replace coal and to have a massive impact on carbon emissions, because they are not zero, but they are low, and they're always available. So taking all that, it's a mixed picture, but still, that's why we went plain and not up in ourselves' top line. On top of that, I would like to say, without a strong Swiss franc, we would be a half a billion stronger. And some people could say, but that counts for all companies in Switzerland. Yes, but we, as different to some others, have even a certain cost position in Switzerland. We still employ, in Switzerland and Liechtenstein, more than 1,200 people. So this is a certain amount of money. We do our R&D mainly in Switzerland. We have a lot of our equipment manufacturing in Switzerland and Liechtenstein. So Swiss franc harms us somehow. On the other hand, it gives us benefit when we do refinancing and other stories. But is it a tailwind? For us, it's not. So very often we've been growing 5%, 10% the last couple of years in certain markets, and it was more or less eliminated, not because only of dollar weakness, but because of dollar, euro, rupee, RMB, yen, and whatever you have. Let's face it, they're all somehow even towards the euro, but especially to the Swiss franc, they all have reduced significantly the currency rate. And this is an effect which we managed. And by that, we can even consider it very strong that we kept our top line in sales neutral. And we gained 6.5% of our intake, which gives a positive outlook. We're still a little bit careful. That's why we said what we said. But throughout the year, there's a certain optimism that in 26, we maybe start running, and in 27, we start even running faster. By that, the key figures, you will touch them even more. The only important part of that is 6.5% more order intake, almost flat in sales. Leverage ratio comes down from 3.4 to below 2.5 band of the year. But here again, Marco Flavio will explain that more later. And the book to build is with our 1.08. For the given market environment, in a very good level. So ESG-wise, not too much to add. We are a company where ESG is part of our DNA. Why? Because we make products better. Either less consuming, a softer, a better surface, harder. Whatever the case is, whatever we do and we use our products, It drives the sustainability of our customer products. And this is then expressed in the way how we do when you compare that, that we're saving only with efficiencies in aircrafts. We're saving almost one year of Swiss carbon emissions. But as you have a significant amount of by the tooling industry, simply on metal coatings, what we do here. But this is sometimes difficult to understand. You should go a little bit deeper in the strong way of our sense of sustainability. Finally, I would like to conclude, and then we have more time for the Q&As. We successfully devastated Bamak. I have to say probably we could have made it even a little faster, but there was some dispute what is the best way to. But in the end, we did it. And we closed it by February this year. There was a chance even to close it in August, September last year. Not last year, in 24. But we did it in a very difficult market environment for a more than fair value, and we helped both for us with the QPlay and for Rita to get a real future with their technologies, because being only in cotton business is not a real future. So we helped another Swiss company, which is important and high traditional, and we helped Dirtica. The Clear track now on pure play execution, I think I mentioned a lot. We can deepen that when we have the Q&A's. The strong one, insect 25, is at least a certain, a little tailwind, where there's more to come. But with our cost measures, with everything what we have driven the last couple of years, And sorry to say, there is sometimes some restructuring and some write-offs. When you're in Europe, and when you have sites to correct in Europe, in France, as we have closed the site in France, we have closed the site in Germany, this doesn't go in line without spanning. So now we could simply stay with that and live a little longer and leave it to someone else, or we discover it and resolve it. And sometimes maybe it's not super nice. But it's necessary. We have always done that what was necessary in this company. In the last 10 years, with all the divestments and differentiation into different markets with our core technologies, all that didn't came for free. All the engagements and digitalization, that did not came for free. The 3D printing capabilities where we are nowadays strategic partner for Northrop Grumman and others are to come in the U.S. Where we make money now in the U.S. after learning all that, developing an industry, making mistakes as well, but it's an R&D program. But this is what describes future. If you don't do that, you can harvest, you can have nice numbers, but then some when you don't have a future. And we are here having a historical obligation. We are celebrating this year 150 years of Erlikon. And Erlikon was up and down in these 150 years, but it was not only surviving, it was always contributing to the Swiss society. And this is what's our intention as well. That's why we invest in Switzerland, despite the strong Swiss strike. That's why we have R&D and machine building in Switzerland. And we are sure that we can afford it, even if it's sometimes harming. Is it always nice? No, it's not. Is it doable? Yes, it is. And if a tech company like us cannot do that, then we can give up Switzerland as an industrial base. We are not ready to do so. That's why we are here. And in the end, we are paying a dividend where some of you may say that's too high. We say, as we have done the last 10 years, when we sell a big asset, a huge portion, two-thirds typically, stays in the company. And either it helps to grow, but with some of the dividends in the past, not the dividends, with some of the money of the past of divestments, we bought new stuff, and some of the money went into dividends. And I think that's more than fair and reasonable, because as a shareholder, our shareholders own a part of the company. If you sell it out, it doesn't belong to the company anymore. And they have the right to take a part of that. that we contribute to them. And the logic to give one-third to the shareholders and to keep two-thirds in the company was a very healthy one in the past and is a very healthy in the future. And that's why we came to the 85 Rappen for this year. You can say maybe even because of 150 years, but it would mainly insist on we sold something. It's not ours anymore. Part of that is the shareholders, and part of that stays with the company. And, Marco, you will deepen that thought as well. But we have taken almost $500 million of that to dilute or to reduce our debts. And with that, what we have seen, we are on the right way to get by 27 on a 2.1, sorry, 2.0 EBITDA debt ratio. We are absolutely clear that this is not only achievable, that we can make that. And that's why we are as well very convinced that we have to and we want to pay that dividend. So because the company, now with the book value gain we made, with more than 40% equity, with a strong cash generation base, with a fully filled pipeline on innovation, with a strong position internationally in the different regions, in the gross markets, in all the industries we are in, this is a very resilient company, and this is why we can pay the dividend. Thank you so much. for now. Now, Marco, maybe you go deeper in numbers. And then we are already, and Dirk as well, he is here today with us because Dirk is since one year now on board at CIO. CIO has to do a lot of this operational stuff, so if you have one or the other question to him as well, highly welcome.

Thank you.