Gurit Holding AG

After our most recent M&A activity, we want to provide today additional information on the background and the strategic rationale of the acquisition and how this impacts GURID's 2025 long-term plan. Also, we want to introduce Fiverr Line as well as the management to our shareholders, investors and analysts. We have foreseen the agenda as you see here on the slide. So we will start with me giving some backgrounds on the transaction, followed by Lars, CEO of FiberLine, who will explain and introduce FiberLine and give a little insight in the technology background and the carbon protrusion market in general. Again, followed by me and in conclusion on the strategic rationale and the link to GURID's 2025 strategy. We will then end the session with the Q&A. Let me start by providing a couple of details on the transaction in general. We acquired on the 27th of April a 60% share of Five Line Composites. And last week, we successfully closed that transaction. ABN Emerald has the Sustainability Impact Fund, and they were a minority owner before. So with that transaction, they obviously and consequently stepped out. So now Gurit holds 60% of the shares, and the Torning families, the remaining 40%. Gurit and FiberLine will form a strong player to the wind turbine blade industry. I will show you that a little bit more in detail, but apparently one of the major reasons for why this whole transaction makes a lot of sense for us is that Gurit has invested in global presence and global footprint and on the other hand we see a strong pull for the products FiberLine Composites is producing. So matching those and leveraging customer access, global footprint and technology capabilities we feel makes really a lot of sense to the industry. Organizationally, FiberLine will operate as a separate company until 2025. We have a dedicated board where GURID has the majority. And I actually, since last Friday, I'm chairman of the board and took over from Peter Torning. Internally, Firebyline will report into GURID as a new business unit called Structural Profiles. We anticipate synergies in multiple areas. Again, I will come to that in a few slides. But this is obviously related to operational footprint, purchasing, customer and technology. I think a highlight is that we already, in the second half of this year, will manufacture the first carbon spar caps in our new plant in India. So this is what we really think is a strong signal towards time to market of this transaction. The integration of FiberLine we will manage internally through a dedicated post-merger integration structure. We on purpose say let's integrate what makes sense, otherwise keep the strengths and the agilities of both parties. And also to add here, last week was the biggest composite show, the JEC in Paris. We used that opportunity to talk to most of our key customers and business partners. And I can say we unisono received a positive and encouraging response. feedback and already dove into specific project requests with certain customers. So overall, the feedback was highly positive from the market so far. Few more details on the transaction. Nothing which you haven't seen in the announcement. Purchase price for 60% was 58 million Swiss. Fully consolidated, we acquired a debt of 22 million. And what is important to add here is that we also have an option to purchase the remaining 40% from the Torning family in the year 2025 based on predefined commercial conditions. We fully debt financed the deal um and now also again not mentioning too much because lars will obviously introduce fiberline and also sales development but last year uh roughly 100 million euro sales for fiberline and last message here on that slide we will review the Gurid's guidance and also the impact the transaction has on Gurid's guidance together with the half year results in the middle of this year. Now let me look a little bit more into synergies as I already promised. And again, we see a multitude of synergetic points, which we are now in the PMI structure I highlighted are going to capture. Let's start with technology. The ones who know us know that Gurit is an innovation and technology company. And FiberLine is as well. Part of the selection for us to conclude on this transaction was that we perceive FiberLine as a leader in carbon protrusion design and manufacturing engineering. And this, again, is a perfect fit also culturally to Gurit's DNA. And we feel that this will enable us or to technologically to jointly develop new higher integrated products. This is also what we hear from our customers. This is what they want. They want competent suppliers who are able to solve problems with them instead of, I would say, waiting for specification where a problem is already solved. Footprint wise, I will show you in the next slide a visualization of the footprint. And I already mentioned we are planning a rapid expansion of fiber line products by leveraging GURIT's global footprint in particular in the regions which are highly relevant for the wind industry, which is India in particular and Mexico. And we both have pretty good and long-standing relationships to the major Western wind customers. Some more with one customer, some others more with another customer, but this will be purely complimentary. And again, I mentioned already, we saw no positive feedback from those customers. Gurit is also strongly engaged with Chinese OEMs, which is today not the major focus of FiberLine. So again, we see here an opportunity as well to penetrate products from FiberLine's product portfolio through Gurit's sales channels into China. Purchasing. Majority of the purchasing volume on fiber line side is obviously carbon, carbon fibers. They have long established, well established relationships with major carbon suppliers. Gould also buys carbon less than a fiber line. Nevertheless, we see opportunities here by jointly procuring in key commodities, also not limited to carbon, resin systems, glass fiber, and also in the whole area of indirect purchasing. So finding synergies through joint purchasing activities, again, will be one of the top key synergy projects we are going to start as we speak. And lastly, fiber light is focused today on wind, 100%. GURIT also has a sizable and strongly growing position in the marine and in particular industrial segment. Competitors of fiber line also sell, for example, glass fiber pulled through the profiles into the transportation, the construction, or the civil engineering industry segments. So we see also here an opportunity to cross-sell and leverage GURID's sales access into these segments, and by doing that, driving sales and profitability. Let me now go to the footprint slide, which I just mentioned we have prepared for you. You see the orange circles, these are the two plants FiberLine has today. the major plant for carbon protrusion, the headquarter of FiberLine in Middelfart, Denmark. And there is a facility focused on glass fiber protrusion in Tianjin. Gurit has a facility in Tianjin as well. Gurit has four other facilities in China. So of course, we are now looking into how can we create footprint related synergies for the Chinese market. But more importantly, I want to highlight the green circles, which we have visualized here, beginning with India and Chennai. As I said, we already have both teams on the ground in Chennai preparing an industrialization. So we're targeting SOP of carbon fiber protruded profiles, spark caps for a specific customer already in the second half of this year. And we are in joint discussions already with other customers in the North American market to also here leverage Gurit's footprint and considering decision is not finally done, but considering to also launch manufacturing in the second half of 2023 in Mexico. That sums up a little bit my introductionary part here, and I will now hand over to Lars, CEO of FiberLine, to introduce FiberLine in a little bit more detail to you.

Thank you, Mitja. Good. So, FiberLine is a Danish company founded in 1979 by the Toning family. We have Peter Torning here with us on the call, the former chairman, now member of the board. We are just about 300 employees, a turnover of around 100 million swish, as you saw on the map before. We have production facilities in Denmark. This is also where we have our quite significant R&D, and we have a production facility in Tianjin, China as well. As Mietje said, we are serving the most major Western customers. It would be customers like Nordex, Siemens, Vestas, GELM. And the service that we provide is really protrusions. It is carbon protrusions and glass protrusions, and it is split into three main product groups. We have the carbon protrusions, which last year was around 75% of our business, wind turbine structures around 5% and blade root enforcement, which is around 20%. Where we clearly see the growth is in the carbon protrusion market. And we have growth in general. Last year, we were looking into 40% growth year on year. And we will also be seeing significant double-digit growth in 2022. A little more on the products on this slide here. When we say turbine structures, it is platforms like what you see here on the back of the nacelle. It is lightweight, corrosion-resistant structures. This is what we call the heli-hoist. We also have, say, flooring for nacelles. We have tower internals as part of this product group. We have also the root connections. the different types of root connections. The one shown here, you see the blue graphic there, which is really protruding segments sitting between the bushings, creating a solid and good connection between the bolts and the blade structure. And then we have the carbon protrusion, which we will look into more details here on the next slide. So what you see there to the left is, say, a protrusion. It is really a plank. It is around five millimeters thick up to around 200 millimeters wide. And then it can have any lengths between 100 and 400 meters. So quite long. The protrusion process is rather complex. It entails everything from getting the carbon fiber wetted, the chemistry, the temperature profiles, the curing, the shrinkage, and you need to create a stable geometric form without defects coming out. And all that is happening within a tool of around one and a half meter. So a lot of physics going on and a rather complex process with a lot of IP embedded. As I mentioned, the protrusions comes out, say, somewhere between 100 and 400 meters. And in order to be able to ship them, we coil them, as you see here on the center picture, and we ship it to the OEM's plate workshop. at this place workshop the coils are decoyed they are cut into length they are stacked they are fused together in order to form the carbon spark cap and the carbon spark cap is the main load carrying element of a turbine blade The key with carbon protrusions is that it enables the turbine manufacturers to design a blade that is longer, slender and stiff. And the reason why it is meaningful to say softitude, the low cost glass with carbon is really that you can deliver the same energy from this blade with less load on the turbine structure. And less load means that you can save materials in the hub, in the nacelle, in the tower and the foundations. And the net sum of this is that the savings are bigger than the incremental money that you spend on the carbon in the turbine blades. So it is a good business case. And that is the reason why this is the prevailing and winning design process that all the main OEMs are applying today. And this is what we see here on this market slide. We have onshore to the left, we have offshore to the right. If you look at the most left table there, the yellow part is the glass infusion, which is the conventional technology, and the green is the carbon protrusions. And you can see that today we are looking at somewhere around 60%. going towards 90% of the market being carbon protrusions in 29. This is, by the way, numbers from Wood Mackenzie. So it's not our numbers. It is Wood Mackenzie's numbers. What you have in the second graph there is who are the OEMs that are using carbon protrusions. And the blue on the top is Vestas. They have been using carbon protrusions for many years. Also you have Nordex, which is the dark green. So these are the two trendsetting OEMs. And what you see here in 21, 22 is that the other big OEMs like GE and Siemens are also say emerging or coming into this technology followed by the Chinese. And this is really the say story behind why we see growth in this market. Offshore is the same, even say to even more. 100% carbon protrusion is the prediction, which is really related to the fact that carbon protrusion is becoming even more an improvement when you go into the very long offshore blades. On the OEMs in offshore, Vestas, same thing. They've been using it for quite some time. And then you see Siemens Gamesa and GE transitioning right now to carbon protrusions and bringing in significant scale. And we have the Chinese OEMs following. So this is the technology trend. This is the market numbers. And that is why we in FiberLine, being part of GURID, see that we will have a potential to grow with a revenue of more than 300 million swish yearly. These were the words. Miguel, back to you.

Thank you, Lars. So let me now continue and conclude with a view on First of all, to summarize what we just learned and to translate this now in an updated GURIT product offering, we feel that with adding FiberLine's capabilities, we will enable the GURIT group to offer the most complete and comprehensive product portfolio to our Windblade customers. We have access to all wind OEMs, so everyone who was just on the chart before, as well as 90% of the global wind blade manufacturers. And we spoke about footprint already. So we feel this is a pretty strong offering to the market. And when we go to the next slide, we try to put that a little bit more also into numbers. And let me clear that slide for you. On the right hand side, you see in that circle our understanding of the cost distribution of a 80 to 90 meter blade into the different value streams. And on the left hand side, that's a new visualization in what value streams GURID is today already active and the blue circled ones are the ones which now FiberLine brings incrementally to the table. Long story short, we could theoretically offer up to 50 percent of the blade value to our customers if we would supply every component which GURID has in the portfolio into one specific blade type. I mean obviously this will not be the future average unfortunately but I think it just demonstrates the capabilities Gurit now has and brings to our customers. And I think what is more or equally important, I would say, besides the critical mass and global reach combined with local manufacturing is that we now also enable us with the R&D and design and technology know-how both teams bring to the table to work on new higher and more modularized integrated product solutions we see that today due to the sheer size of wind turbine blades customers already asking for pre-fabricated parts which they can then lay into the molds and no longer doing all the mold lay up by themselves. That means you need to combine certain composite technologies, a core materials together with a glass fiber infused probably in combination with the spark caps. So newly high advanced root systems. So again combining these technologies does not only mean scale through just an extended product offering but also the capabilities to further integrate and work on new product solutions together with our customers let me now come to the final flight and this is a review, a slide I've shown to most of you already last year during our Capital Markets Day, where we introduced the highlights of GURID's Strategy 2025. And I just in a few words want to explain how we think the acquisitions we most recently did will pay in to GURID fulfilling the Strategy 2025, which we have created. And just let me start with the industry segment. And you see we crossed out the aerospace business. We were subcritical in the aerospace business. We found a better owner for that business. And we are now focusing on the one hand to be a world class supplier to the wind industry with a very strong portfolio, as you just heard. But we are also going to further grow and strengthen our marine and industrial business because we want to strategically have a stronger second leg, if you will, supporting Gurit's growth going forward. Technologically, we highlighted last year a lightweighting industry 4.0, sustainable products, but also a further trend for modularization and integration. And I just on the slide before explained to you that we feel now is having more engineering horsepower and more capabilities. We can also here support our customers even stronger than we do today. When you look into the different markets where we are active today, then I can say we probably did a lot already over the last 12 months in establishing a global one-face-to-the-customer wind organization with supporting, for example, strong China team being dedicated in China with a separate organization. We put more focus on the industrial segment because we see that this is, from our perspective, strongly growing. And the acquisition of FiberLine, again, will, on the one hand, I think, benefit from that wind customer access. On the other hand, as I mentioned already, offer incremental cross-selling opportunities in non-wind sectors. segments. And lastly, we tried to quantify our ambitions for 2025. And I would now say we were a little bit more cautious last year by saying we want to grow with single digits plus acquisitions. But to put us a little bit into perspective, I think considering the market developments and what we've just also seen with FiberLine, that 750 to 800 million top line for 2025 should be absolutely in reach for GURID. And this is what we are aiming for and this is what we are going for. And this in line with the other KPIs as we have outlined here. That more or less concludes the presentation, the slides we have. prepared for you. Again, just to summarize, we feel that with our strategy, we are still on the way to achieve what we've outlined. We feel that the acquisition of FiberLine or 60% of FiberLine will really pay in the fulfillment of the strategy and ticks a lot of boxes here. and now I'm really looking forward to your questions, and I'm already thanking you for your participation.

The first question comes from Mark Kutmayer from Bader Helvea. Please go ahead.

Good morning, gentlemen. I have two questions, if I may. The first one is on the synergies. Can you quantify the synergies or at least tell us what it is in terms of acquired revenues, cost synergies, and And also the split of the synergies cost versus sales synergies. I understood that there is a kind of a sales portion that you basically can lever your platform, but at the same time, there are also purchasing synergies. So more flavor on this would be helpful. And then the second question is on the remaining 40% stake of FiberLine. Are there any options to purchase this remaining 40% stake? And if so, at what terms? Thank you.

Okay, so let me first start with the synergy question. We are, from today's perspective, not probably able to fully quantify the synergies which we are aiming for. As I said, we just started a post-merger integration phase. We have structured that to go to focus on basically all relevant business areas, purchasing, meaning, comparing conditions, looking into leverage opportunities by combining volumes, for example. We see on the customer side, of course, opportunities and also here we are comparing our framework conditions jointly and develop certain strategies out of that. Operationally, I mentioned that already, we are going to anticipate synergies, but this will be then rather, I would say, cost avoidance related because FiberLine will be able to industrialize, for example, in our plant in Chennai, where I would say most of the legwork has been done already. And obviously, they do not need to hire a fully fledged plant organization because that is available. This will certainly help us to overall make the location in China more competitive. And sales-wise, also here, as I alluded to, we are at a very early stage still to evaluate what product opportunities, for example, outside of the wind segment, we have to cross-sell into industrial applications, for example. But it's still too early to come out with, I would say, really tangible numbers here. We have given ourselves the goal to work in this PMI structure now for the next three months. Obviously, starting from day one already to go for synergies which are identified, but I would now anticipate that in the next couple of months, we should have a better

more quantified a more tangible view on on on the financial impact of those of those synergies and to your second question might have a question to the first one but um as i understood this could be basically a really a step change for your company so um is this then are the potential synergies more in the range of Let's say 3% of the acquired revenues or is it more where we have sustainable and structural shifts in the chemical industry which are more than over 6% of acquired sales or even higher, up to 9% of acquired sales synergies. Where on this range would you see this kind of acquisition? Maybe this would be helpful to more.

As I said, please give us a little bit more time to come back with tangible numbers. You can imagine that obviously in our own business plan and part of the acquisition, we factored in synergies which we see, which we feel are realistic. But today, I think that the major focus will be now on better understanding not only how much, but also when will we be able to really go for those synergies. And so I ask you for probably a couple of moments patience and then happy to shine more light into that topic.

Okay, great.

To your second question, as I outlined and as we also communicated, we have the option to buy the remaining 40% from the Torning family. There is a straightforward mechanism defined between us based on certain financial fulfillments and conditions. And this is then the baseline for this will be the year 2024. And this is also why we are saying once the results of the year 2024 are available, then we can call that option. This is also our intention to do that, obviously. and to fully take over the business.

Okay, thank you so much.

The next question comes from Jörn Ifrit from UBS. Please go ahead.

Yes, thanks very much for taking my questions. The first one would be please to the selling family, if I may. Why is the setting family not taking, for example, an equity stake in GURID, in particular considering the strong growth prospects of the wind industry in the medium to long term, so why not remaining committed to the overall business beyond 2025? The second question would be, please, can you comment on the EBIT margin development over the last couple of years of Highland, and when do you expect it to be attractively profitable, maybe in line with the medium-term targets, of course, and what does it need? Does it need 30% more volume? Does it need cost efficiency to get a better feeling about the profitability and development of the target, please? And the last question, if I may, you highlighted by 2025 you want to reach sales of $750 to $800 million. Let's assume in 2022 you're ending up around $500 plus minus, and this would imply quite strong organic sales growth. for the next three, three and a half years. What is giving you confidence here? Has the wind market outlook changed after 2025? Or do you have any concrete signs now that 2023 will be much better? So just to learn more about the basis of this assumption. Thanks a lot.

Let me start with the third question. You broke up a couple of times, but I think I got your question. It was a little bit related to the confidence level we have in the 2025 sales number. I think two things to consider here, and just referring back to the presentation from Lars. And you see there are, I would say two determining factors impacting the sales growth. One is obviously the wind market. And I think we all read the same publications from the Woodmax of this world. And we also hear the same, let's say, comments from our key customers, the Western key customers, the Chinese key customers. And I would say that the global picture here is right now that probably 22 and 23 will be rather flattish on an average. on or below a 21 market level for western customers china was about to to do better this year now i think everyone is a little bit cautious what now really happens uh driven by the covet impacts and the strong regulations and impacting impacting life and business in china um i think Everyone also foresees with stronger offshore beginning mid 24 and 24 that there will be an incremental market impact. So yes, market will certainly at least in 24, 25 help driven by a strong offshore penetration. But secondly, I think we need to consider, again, referring to last slide, that we see a technology change totally independent from, let's say, the overall market volumes that plate designs gradually integrate more more carbon spark caps. Lars gave the technical explanation for that, driven by the growth of the turbine. And that penetration is also strong, as we've seen, and also as third-party market institutes like Woodmec and communicate. So this will obviously also help and we've seen that we feel that it is realistic to grow the fiber line business to a range of 300 million and when you add that up then we feel with the range I've given that this is ambitious but realistic for the year 2025. Profitability, I think that's also a good question before I hand over to Peter. Profitability, the business is right now just driven by the extreme growth trajectory we have ahead of us. The business currently has, and also the profitability, probably more startup character. And why is that? Because we are scaling, we are investing in new production sites, ramping up. That means additional people, additional structural investments, networking finance, networking capital financing. But we anticipate that longer term, so let's say once the next two years are done and these investments are being made in India and in China, we anticipate a longer term profitability, which we think will be on the level of our kidding profitability because the business model is quite similar. It's conversion business with actually a pretty high share of carbon in it. So we feel that the anticipated EBIT margins will be probably on the lower end of what you typically know from Gurit's range. And that said, I'm coming to your first question and I would hand over to Peter.

Yes, thank you. Well, I think the family remains very committed with the 40% share. We had 65 until this transaction, now 40 of a significantly growing business. And we will not rule out at all that we will remain invested in this kind of activities also beyond 2025. We think this will continue to be a growing market also beyond that time, as you could see. So I don't think that our integration into Guret, which is the right thing to do for the company, says anything about our commitment to the wind business.

Thank you very much. answering the questions.

The next question comes from Daniel Koenig from Mirabeau. Please go ahead.

Yes, good morning. Can you hear me?

Yes, we can hear you, Daniel.

Yes, good morning. I had some basic questions because can you tell us how the market share is of fiber line in this carbon protrusion market? who the other market participants are and then I was wondering how pricing has developed of the product because from the graph I looked at it seems like Vestas is pretty much the dominant customer and if there's only one dominant customer it normally is not good news for prices and then And then I had a third question on raw materials. Like, can you tell me how raw materials have developed that fiber line? Is that exploding as well? Or just give me some kind of indication what to expect. That's it for the moment.

Okay. Daniel, let me start with the third question before I then hand over to Lars, who can certainly say something about a market share of FiberLine and let's say the development of pricing with carbon protrusions over the last years. Obviously, we are part of the same value chain than everyone else. So yes, also we see inflationary impacts for energy, for raw materials, for transportation and so on. Absolutely. And yes, this is also absolutely impacting us. We are able to push portions of that to our customers through either, let's say, more or less automated contractual agreements or through individual agreements which we are negotiating with customers. Classically, those agreements are linked to let's say, for example, raw materials and commodities, which are somehow publicly traded or where there is a certain transparency. Classically, you do not have automated acceleration or escalation models to your customers for things like like energy or gas, right? These are things we are discussing individually with our customers. And these are tough discussions, in particular with the wind customers. I mean, everyone has seen also how those guys are doing right now. So, yes, it's absolutely a topic for Gurit as well. The teams are working super hard here to to mitigate and discuss with our customers, as well as with our suppliers, and to further reduce energy consumption and gas consumption, for example. But yes, there is clearly an impact also to Gurit. It would be awkward if it wouldn't be. And that said, I would probably hand over to Lars. The question was on market share and probably price or cost development for culturutions.

Yes, let me maybe start with the price development question. It is true that the launching partner here, leader was Vestas followed by Nordics. We have not seen a declining price development. On the contrary, as you also saw on the market share graphs that we just shown here, the need for protrusions is increasing. The capacity available is rather limited. And for that reason, we have been able to keep price. And also we have been able to pass through the major part of the same material inflation that we have seen lately. The carbon market in general is say impacted by energy prices, but not to an extent where we say it is it is perceived as a as a massive roadblock we have two main categories material categories that are say impacted it is resin and it is carbon and we have good pass-through closures on on on both which is part of the way that we drive our business Peter, would you have, say, a comment on market share for FiberLine?

No, you can comment on market share, obviously. Sure.

I don't have the recent figures, actually. So I'm actually not able to.

Okay, I have the figures here in the overview, then I will quickly pitch in here, Daniel. I mean, as we had seen, FiberLine is today supplying to all the major customers and the market share is in the neighborhood of 20 to 25% today, but we feel that this can grow further because we see that there is a stronger penetration now particular with With it was the offshore segment and here fiber line is pretty strong So that is that is let's say probably also going forward a reasonable a reasonable Expectation somewhere between 20 and 30 percent. This is what we what we also have in the strategic plan for the next couple of years Hope that answers your question Thank You media

Okay, thanks.

Gentlemen, so far there are no more questions.

Okay. Then I want to say thank you very much for attending. I wish everyone a fantastic remaining week, sunny in Zurich. Talk to you next time, and again, thank you very much for your attendance.