Slide 1: Fourth-quarter and full-year 2018 results
Fourth- quarter and f ull - yea r 2018 r es ults F OURTH Q UARTER AND F ULL -Y EAR 2018 R ESULTS No. 1 global market position in high-end vacuum valve technology March 8, 2019 1
Slide 2: Agenda
PASSION. PRECISION. PURITY. Agenda Fourth- quarter and f ull - yea r 2018 r es ults 1 Highlights Mike Allison, CEO 2 Fourth-quarter and full-year 2018 financial review Stephan Bergamin, CFO 3 2019 priorities, conclusion and outlook Mike Allison, CEO 2
Slide 3: Stable results despite softer market in the second half of 2018
PASSION. PRECISION. PURITY. Stable results despite softer market in the second half of 2018 Fourth- quarter and f ull - yea r 2018 r es ults Record net sales and Investments in innovation Operational EBITDA despite softer yield record number of performance measures market in second half of specifi
Slide 4: Performance supported by all market segments
PASSION. PRECISION. PURITY. Performance supported by all market segments Fourth- quarter and f ull - yea r 2018 r es ults Segment VAT Group AG Valves Global Service Industry (% of total (15%) (6%) net sales) (79%) Net sales CHF 698m / +1% CHF 551m / -1% CHF 106 / +7% CHF 41m / +5% EBITDA / margin1 C
Slide 5: Market trends mixed across major business segments
PASSION. PRECISION. PURITY. Market trends mixed across major business segments Semiconductors Fourth- quarter and f ull - yea r 2018 r es ults WFE investments up 16% in 2018; substantial slowdown in H2 especially in memory Technology inflections in logic / foundry continue Display OLED investm
Slide 6: All growth dimensions took a breather in H2 2018
PASSION. PRECISION. PURITY. All 3 growth dimensions took a breather in H2 2018 Fourth- quarter and f ull - yea r 2018 r es ults 1st dimension: End market growth Digitalization continues with medium-term secular growth drivers such as IoT, AI, AR, etc. Slowing memory market 5G build-up key for
Slide 7: No. 1 market position further strengthened
PASSION. PRECISION. PURITY. No 1 market position further strengthened, driven by Solar, General Vacuum and Global Services Market share All Industries 1 Market share Semi & Related 2 Market share Semi 3 Fourth- quarter and f ull - yea r 2018 r es ults Total vacuum valve market size Total vacuum valv
Slide 8: VAT Market share All Industries
PASSION. PRECISION. PURITY. VAT Market share All Industries 1 Market share All Industries 1 Fourth- quarter and f ull - yea r 2018 r es ults Total vacuum valves market size 2014: USD 767m 2015: USD 804m 49% 2016: USD 969m 2017: USD 1’179m 2018: USD 1’1399m 2014 2015 2016 2017 2018 20% 6% 5% 5% 4% 4%
Slide 9: Agenda
PASSION. PRECISION. PURITY. Agenda Fourth- quarter and f ull - yea r 2018 r es ults 1 Highlights Mike Allison, CEO 2 Fourth-quarter and full-year 2018 financial review Stephan Bergamin, CFO 3 2019 priorities, conclusion and outlook Mike Allison, CEO 9
Slide 10: Full-year 2018 – Group key figures
PASSION. PRECISION. PURITY. Full-year 2018 – Group key figures Fourth- quarter and f ull - yea r 2018 r es ults EBITDA margin Third party net sales EBITDA 30.8% (-30bps1) CHF 698 m CHF 215 m EBIT margin 25.7% +1% (unchanged1) (-10bps) Free cash flow margin Net debt/EBITDA Free cash flow 18% 0.7x CHF
Slide 11: Order intake reflects moderation of semiconductor activities
PASSION. PRECISION. PURITY. Order intake for both Q4 and full year 2018 reflect moderation of semiconductor activities in CHF million Fourth- quarter and f ull - yea r 2018 r es ults Full-year 2018 order intake -12% 736 648 Q4 2018 order Year-end intake 2018 order -28% backlog -31% 186 166 135 114 Q
Slide 12: Sales Bridge
PASSION. PRECISION. PURITY. Sales Bridge Fourth- quarter and f ull - yea r 2018 r es ults (83) 93 (5) 3 698 692 2017 Volume Product mix Price FX 2018 Product mix gains more than offset general volume decline; highlight the importance of continuous product and solution innovation Volume discounts
Slide 13: Record sales and strong EBITDA margin despite market moderation
PASSION. PRECISION. PURITY. Record sales and strong EBITDA margin despite market moderation in H2 2018 in CHF million 31.1% EBITDA margin* 30.8% Fourth- quarter and f ull - yea r 2018 r es ults 692 698 +1% 199 215 215 149 2017 2018 Q4 net sales Full-year net sales Full-year EBITDA* Significant mar
Slide 14: Flexible business setup protects EBITDA margin in H2
PASSION. PRECISION. PURITY. Flexible business setup protects EBITDA margin in H2 despite substantial sales decline in CHF million Fourth- quarter and f ull - yea r 2018 r es ults 698 31.6% EBITDA margin* 29.9% 387 -19% 312 215 122 93 H1 2018 H2 2018 FY 2018 Net Sales EBITDA Swift reaction to chang
Slide 15: Full-Year 2018 net sales
PASSION. PRECISION. PURITY. Full-Year 2018 net sales CHF 698 million Fourth- quarter and f ull - yea r 2018 r es ults Net sales by market segment Net sales by region 79% Valves 50% Asia 33% North America 15% Global Service 6% Industry 17% EMEA 15
Slide 16: Valves – 79% of net sales
PASSION. PRECISION. PURITY. Valves – 79% of net sales in CHF million Q4 2018 Q4 2017 Change Semiconductors & Modules Fourth- quarter and f ull - yea r 2018 r es ults Order intake 97.7 152.7 -36.0% Investment slow-down in H2 Net Sales 112.7 159.7 -29.5% Memory capex down substantially, logic and
Slide 17: Global Service – 15% of net sales
PASSION. PRECISION. PURITY. Global Service – 15% of net sales in CHF million Q4 2018 Q4 2017 Change Strategic focus on service Fourth- quarter and f ull - yea r 2018 r es ults Order intake 28.7 21.5 33.5% Focused service strategy plus growing installed Net Sales 27.6 28.6 -3.6% base led to record
Slide 18: Industry – 6% of net sales
PASSION. PRECISION. PURITY. Industry – 6% of net sales in CHF million Q4 2018 Q4 2017 Change Business model adjustments generate first Fourth- quarter and f ull - yea r 2018 r es ults Order intake 8.1 11.6 -30.2% successes Net Sales 8.6 10.8 -20.2% Stronger focus on a larger variety of industry- i
Slide 19: Net income and Net income margin increase
PASSION. PRECISION. PURITY. Net income and Net income margin increase in CHF million 2018 2017 Change Fourth- quarter and f ull - yea r 2018 r es ults EBIT 179.7 178.7 1% Finance net -13.2 -44.1 -70% EBT 166.5 134.7 24% Income tax expenses -30.8 -19.0 Effective Tax Rate -18.5% -14.1% Net income 135.
Slide 20: Cash flow conversion recovers but trade working capital still above target
PASSION. PRECISION. PURITY. Cash flow conversion recovers but trade working capital still above target Free cash flow Free cash flow conversion Fourth- quarter and f ull - yea r 2018 r es ults 172 (48) +10% +2% 88% 156 86% (47) 124 (14%) 109 58% 51% 2017 2018 2015 2016 2017 2018 Cash flow from opera
Slide 21: Year-end net debt stable and well within our target
PASSION. PRECISION. PURITY. Year-end net debt stable and well within our target Net debt development 2.5 Fourth- quarter and f ull - yea r 2018 r es ults 2272 (79) 2.0 (72) +5% +10% 2161 1.5 1.9 148 144 +3% Target level of 1.0x 1.0 0.5 0.9 0.7 0.7 0.0 Dec 31, 2015 Dec 31, 2016 Dec 31, 2017 Dec 31, 2
Slide 22: Summary of financial results
PASSION. PRECISION. PURITY. Summary of financial results Achievements 2018 Fourth- quarter and f ull - yea r 2018 r es ults Record results despite a significant moderation of business activity in H2 2018 Swift and decisive response to changing environment in H2 to safeguard profitability; cost r
Slide 23: Agenda
PASSION. PRECISION. PURITY. Agenda Fourth- quarter and f ull - yea r 2018 r es ults 1 Highlights Mike Allison, CEO 2 Fourth quarter and full-year 2018 financial review Stephan Bergamin, CFO 3 2019 priorities, conclusion and outlook Mike Allison, CEO 23
Slide 24: External market factors volatile; semiconductor
PASSION. PRECISION. PURITY. External market factors are volatile and unlikely to improve in H1 2019 Fourth- quarter and f ull - yea r 2018 r es ults Semiconductor Semiconductor order activity continues to slide as caution dominates at all levels Memory activity at cyclical low point as chipmaker
Slide 25: External market factors volatile; display and solar
PASSION. PRECISION. PURITY. External market factors are volatile and unlikely to improve in H1 2019 Display Fourth- quarter and f ull - yea r 2018 r es ults Samsung and Huawei launched foldable smartphones; transition to OLED displays continues ; 5G to start fuelling smartphone demand in 2020/21
Slide 26: Focus on three key levers to strengthen competitive position
PASSION. PRECISION. PURITY. Focus on three key levers to strengthen competitive position and emerge stronger from current market moderation Fourth- quarter and f ull - yea r 2018 r es ults Growth 1 Innovation & market share 2 Internal 3 priorities Cost manage- Working ment capital Free Cash Profitab
Slide 27: Innovation is key to success
PASSION. PRECISION. PURITY. 1 Innovation is key to success • VAT invests over CHF 30 million per year Specification wins Fourth- quarter and f ull - yea r 2018 r es ults in R&D • About 20% of workforce working in innovation; more than 150 R&D engineers and scientists • Success measured by number of
Slide 28: VAT is the clear leader in the Patent Asset Index
PASSION. PRECISION. PURITY. 1 VAT is the clear leader in the Patent Asset Index™ and has further extended this position in 2018 Strength of Patent Asset Index™ Development of Patent Asset IndexTM Fourth- quarter and f ull - yea r 2018 r es ults 5.0 today Average quality (competitive impactTM) 420 VA
Slide 29: Flexible operational structure coupled with targeted cost measures
PASSION. PRECISION. PURITY. 2 Flexible operational structure coupled with targeted cost measures to protect profitability CAGR H2 EBITDA margin of 29.9% vs H1 despite (CHFm) 860 858 Fourth- quarter and f ull - yea r 2018 r es ults 9.6% CAGR 7.8% 630 substantial sales decline due to flexible 426 45
Slide 30: Measures to generate cost savings
PASSION. PRECISION. PURITY. 2 Measures to generate cost savings Operational improvement and cost savings Sources of operational improvements 2019 Fourth- quarter and f ull - yea r 2018 r es ults identified in bottom-up process; will 7% contribute to future margin support Purchasing 13% 2019 purc
Slide 31: Working capital management and lower capex support free cash flow
PASSION. PRECISION. PURITY. 3 Working capital management and lower capex support free cash flow generation Year-end 2018 net trade working capital at Capex Development Fourth- quarter and f ull - yea r 2018 r es ults 6.9% 6.9% 23% of net sales above mid-term target of 4.7% 3.8% 20% 3.1% Further
Slide 32: Conclusion
PASSION. PRECISION. PURITY. Conclusion Fourth- quarter and f ull - yea r 2018 r es ults Fundamental medium-term growth drivers (e.g., the Internet of Things, cloud computing and storage, artificial intelligence) are expected to fuel further demand for semiconductors and advanced displays over the
Slide 33: Qualitative outlook for full-year 2019; guidance for Q1 2019
PASSION. PRECISION. PURITY. Qualitative outlook for full-year 2019; top line guidance for Q1 2019 VAT expects 2019 net sales1 to be lower compared with 2018 Fourth- quarter and f ull - yea r 2018 r es ults VAT also expects EBITDA and EBITDA margin to be lower than 2018 VAT maintains its EBITDA
Slide 34: Q&A Session
Fourth- quarter and f ull - yea r 2018 r es ults F OURTH Q UARTER AND F ULL -Y EAR 2018 R ESULTS Q&A Session 34
Slide 35: Initiatives to mitigate foreign exchange exposure
PASSION. PRECISION. PURITY. Initiatives to mitigate foreign exchange exposure FX Status on FX exposure initiatives Fourth- quarter and f ull - yea r 2018 r es ults Ongoing initiative to increase global sourcing (mainly Asia and Eastern Europe) USD Nomination of debt in USD FX hedging of up to
Slide 36: Information
PASSION. PRECISION. PURITY. Information Fourth- quarter and f ull - yea r 2018 r es ults Investor information Contact information Listing: SIX Swiss Exchange Michel Gerber Currency: CHF Head of Investor Relations & Ticker symbol: VACN Corporate Communications ISIN: CH 031 186490 1 Phone: +41 81 772
Slide 37: Forward looking statements
PASSION. PRECISION. PURITY. Forward looking statements Fourth- quarter and f ull - yea r 2018 r es ults Forward-looking statements contained herein are qualified in their entirety as there are certain factors that could cause results to differ materially from those anticipated. Any statements contai