Investing in a global industry leader with profitable growth and a transforming portfolio

Transcription

1 Investing in a global industry leader with profitable growth and a transforming portfolio Investor Presentation February 2018

2 Agenda 1 Investment Proposition 2 Surface Solutions Segment 2.1 Attractive End Markets 2.2 Leading Technologies 2.3 Diversified Business Models 2.4 Profitable Growth Drivers 3 Manmade Fibers Segment 4 Drives Systems Segment 5 Financials 5.1 Group overview 5.2 Latest quarterly results 6 Appendix Page 2

3 Oerlikon s investment proposition A UNIQUE PROPOSITION Oerlikon creates innovative surface solutions, advanced materials and polymer processing, addressing customers challenges and helping them succeed in their industries. Over 1000 engineers are dedicated to continuously develop new solutions, materials and technologies with and for our customers. Oerlikon is a leading global technology and engineering group serving its customers in 37 countries, generating CHF 2.3bn sales (FY 2016) and distributing a sustainable dividend to its shareholders. Oerlikon has a net cash position and an unleveraged balance sheet allowing for organic and inorganic investments WITH TWO ATTRACTIVE INVESTMENT PILLARS PROFITABLE GROWTH PORTFOLIO TRANSFORMATION OPPORTUNITY Page 3

4 Enable organic growth at attractive margins in Surface Solutions PROFITABLE GROWTH 4-6% revenue CAGR with sustainable EBITDA margin profile of 20-22%* Leader with unique competences #1 and #2 market positions Attractive end markets Diversified industry exposure ~2-3% premium to global GDP Presence across entire surface solutions value chain Dedicated business models to match customer needs Aviation, automotive, tooling, power generation, general industry Build on trusted customer relations Technological leadership & innovation > customers >40 R&D sites & >50 global partnerships Global OEMs and tier 1 clients in all end markets Top 10 customers: ~16% of sales Widest ranging portfolio of surface technologies, advanced materials, coating equipment and services Proven and diversified business model with global network 1 excl. investments in Additive Manufacturing >60% service revenue 145 sites in 37 countries Client-facing model offering engineering, coating services and solutions in materials & equipment ADDITIONAL GROWTH OPPORTUNITY: RECOVERY IN LEADING MANMADE FIBERS SEGMENT AND SUCCESSFUL REPOSITIONING OF DRIVE SYSTEMS SEGMENT Page 4

5 Oerlikon s strategic portfolio priorities PORTFOLIO TRANSFORMATION OPPORTUNITY Surface Solutions Segment CHF million World market leader with widest ranging portfolio of surface technologies, advanced materials, coating equipment and services CHF million sales (2016) Manmade Fibers Segment CHF 481 million From melt to yarn, fibers and nonwovens - world market leader for systems/plants used in the production of manmade fibers Drive Systems Segment CHF 612 million Worldwide leading supplier of complete drive systems as well as gear systems and single components for transmissions Creating a global surface solutions and advanced materials powerhouse Organic investments: innovation, markets, applications and technologies Additive Manufacturing M&A Manage market cycle Execution of capacity adoptions for recovery period Repositioning to allow for valuecreating options Drive innovation and market share Benefit from end market recovery REDEPLOY CASH AND BALANCE SHEET IN PROFITABLE GROWTH Page 5

6 Agenda 1 Investment Proposition 2 Surface Solutions Segment 2.1 Attractive End Markets 2.2 Leading Technologies 2.3 Diversified Business Models 2.4 Profitable Growth Drivers 3 Manmade Fibers Segment 4 Drives Systems Segment 5 Financials 5.1 Group overview 5.2 Latest quarterly results 6 Appendix Page 6

7 Attractive end market exposure Diversified exposure to early and late cycle markets Solving customer problems at center of value proposition

8 Diversified industry exposure Delivering customer value by delivering unique functionality to surfaces CUSTOMER VALUE Oerlikon s surface solutions are used to enhance material and surface properties to serve a diverse array of functions to address industry challenges. Separating form and function and giving a purpose to the surface With Oerlikons capabilities in engineering, material processing and surface solutions we enhance performance of industrial components and empower customers do to things they could not do before Advancing industrial innovation AEROSPACE Key challenge: Increasing turbine efficiency and use lighter weight materials Contribution example 5% overall efficiency increase in engine at improved safety AUTOMOTIVE Key challenge: increase manufacturing productivity & improving fuel efficiency to comply with regulation 2-4% Reduced fuel consumption Contribution example up to 40% Friction reduction TOOLING Key challenges: Improving tool quality, performance and durability at lower service times and reduce costs environmental friendly 2.5x increased drilling speed Contribution example ~67% tool lifetime extension POWER GENERATION Key challenges: Improved gas turbine efficiencies with less service intervals to improve client s cost curve position maintenance free solutions (oil & gas) Contribution example 2% overall efficiency increase at a 530MW gas turbine GENERAL INDUSTRY Hardly any industry where Oerlikon Technologies cannot add value through its dedicated competencies Serving: consumer goods, medical, pulp/paper & print, steel & metal processing, food/packaging, engineering Contribution example Coatings can prolong the service life by a factor of up to 50 Page 8

9 Leading Technologies

10 Oerlikon builds on a leading, wide-ranging portfolio of surface technologies HARDENING NITRIDING Plasma nitriding Gas nitriding ~CHF 0.5bn market Depth: mm THIN-FILM COATING PVD PECVD (PACVD) ~CHF 3bn available market ~CHF 0.6bn insourced Thickness: 0.1µm 50µm THICK-LAYER COATING Thermal spray Laser Cladding ~CHF 8bn available market ~CHF 2bn insourced Thickness: 20µm 10mm Comprehensive surface functionalities Oerlikon offers > 20 different surface properties Page 10 corrosion protection environmental protection strength abrasion protection thermal protection safety hardness chemical stability conduction control permeability control clearance control anti-reflection anti-sticking color flexibility decorative enhancement thermal stability easy cleaning wear resistance antibacterial bio-compatibility magnetism control insulation control erosion protection

11 Diversified business model serving customer needs Range of ways to market across service, equipment and materials Continued focus on technological leadership to foster market leading positions

12 Business model Matching customer challenges with standard and customized solutions Materials solutions Powders and consumables used in thermal spray Large formula portfolio in specialty & commodity products Equipment solutions Engineered thermal spray & coating systems Spray guns Sales through key accounts and channel partners Service solutions Providing engineering, surface coatings and pre-and posttreatment as a service Global network of 145 centers with 600 machines Spray gun System USP in application know-how of equipment and material Oerlikon s IP sits in the specific process know-how and materials competence Client relations have an R&D to R&D character Long-lasting client relationships due to design-in and certification processes High level of recurring customer demand for materials, equipment and consumables USP in proximity to customers Logistics competence (fast delivery times) Network scaling effects Flexible, low investment to further expand existing sites and network Supporting customers throughout life-cycle Competitors Materials HC Stark, Praxair, Höganäs Competitors Equipment Praxair, Progressive Surface, GTV Competitors Service Ionbond (IHI), Eifeler, Praxair, Chromalloy Page 12

13 Service Equipment Material Business model Leading positions and priorities FY 17E Revenue & market position Revenue CAGR E Strategic priorities CHF 0.53bn revenue >30% market share in materials (Aero & Defense) ~20% market share in materials (Power Generation) >40% market share in equipment (Aero & Defense) ~35% market share in equipment (Power Generation) +3% +3% Expand materials portfolio & reduce time to market (Scoperta acquisition) New launch of thermal spray coating system Increase tailored solutions approach in materials and equipment CHF 0.80bn revenue ~30% PVD market share (#1) ~40% friction systems market share (#1) ~15% nitriding market share (#1) +6% Strengthen #1 position by expanding network, application and product range Accelerate service growth / leverage current momentum Page 13

14 Business model Global coating center network 145 SERVICE CENTER FOR GROWTH Diversified regional exposure allows servicing of global and local customers +1.7% +2.2% Ongoing network expansion aligned to customer demand and regional dynamics +2.1% +1.0% +5.4% +13.4% Asset light capacity expansion through both additional on-site capacity and new centers Outperform growth in Asia and Europe GLOBAL NETWORK - DIVERSIFIED SALES Europe 5% North America Asia / Pacific 31% Sales Q % RoW 18% GDP* OERL Regional GDP growth versus Surface Solutions growth E 1 Source: IMF; average Page 14

15 Driving profitable growth Levers of growth in customer alignment, innovation, regional expansion and M&A Additive Manufacturing as adjacent structural growth opportunity

16 Three drivers of profitable growth 1. MID-TERM MARKET GROWTH 2. OERLIKON STRUCTURAL GROWTH 3. M&A OPPORTUNITIES Unlevered balance sheet Net cash position of ~CHF 400m Continued FCF generation End market exposure to cyclical but growing markets Aero +4-5% Automotive +2-3% Tooling ~+3% Power Gen ~+2% Gen. industry ~+3% Oerlikon has the ability to outgrow end market trends Customer alignment Innovation Regional expansion Value chain Additive Manufacturing Supporting structural growth with acquisitions Access new customers & industries New & adjacent tech. & materials Geographical expansion Value chain integration Thermal spray service business Targeted EBITDA margin profile of 20-22%* 1 excl. investments in Additive Manufacturing Page 16

17 AERO AUTO TOOL POWER Structural growth drivers in detail Achievements (Examples) Potentials Customer alignment Leverage existing customer relationships and industry expertise GROUP Building a client facing structure along industries Alignment in sales and management structure Moving to more key account management Identify and address untapped markets and applications Top-Selling CUSTOMER Innovation Leverage leading technological capabilities 2010 introduction special carbides for aero applications 5 year qualification period with leading OEMs 50% increase year-over-year expected for 2017 Innovation pipeline for coating solutions, materials and equipment Regional expansion Expand and leverage network Follow development of new industrial poles (SEA), i.e. Malaysia, Philippines, South Korea Today 36 centers in Asia (24 in 2010 and 12 in 2005) 8 focus countries defined 3-4 new coating centers p.a. Value chain Expand value added offering 1x 10x E 2013 acquisition of Rox regrinding technology - an important backward integration step in recoating tools Today, Rox systems in >15 centers established Grew revenue 10x since acquisition Expansion into additional preand post treatment activities Increasing service value per tool/component Page 17

18 From surface to structure Leveraging Oerlikon s core competencies to scale the entire AM value chain LEVERAGING LEADING CAPABILITIES OF SURFACE SOLUTIONS IN AM OFFERING: 1. AM-specific metal powders including, Ni, Co, Cu, Fe, Ti & Al alloys 2. Application engineering and R&D to support customer s AM development 3. Prototype production metal and plastic 4. Series production of advanced metallic components using AM and state of the art post-processing technologies DELIVERING ADVANCED MATERIALS & COMPONENTS GLOBALLY HELPING OUR CUSTOMERS REALIZE THE VALUE OF ADDITIVE MANUFACTURING Additive Production AM Equipment Inspection & Quality Applications Engineering Testing & Assembly Post-Processing Atomization & Materials Page 18

19 AM Investment Case AM Investments Strategic AM investment case Industrialize AM become an integrated service player and a leading materials manufacturer: Expand in high volume manufacturing of specialized powders/alloys (CapEx & M&A) Enlarge service market shares gaining economies of scale and scope (CapEx & M&A) Increase applications engineering & design (Organic & M&A) Sales (incl. M&A) CapEx EBITDA margin CHF M CHF M In % Currently ~100 development projects with leading OEMs (including GE) to identify potential applications/parts ~300 Currently ~50% of capex target committed into footprint and capacity ~300 cum. >100 ~170 cum. Deliver >20% <10 ~ E 2019E 2021E E 2019E 2021E Page 19 Invest

20 Divestitures Acquisitions Oerlikon Transformation Streamlining the portfolio and focus on Surface Solutions Coating Segment: Rox acquisition Coating Segment: Metco acquisition Surface Solutions Segment: Laser Cladding Services acquisition Manmade Fibers Segment: Trützschler Nonwovens acquisition Surface Solutions Segment: Citim & DMX acquisition Recentis & Scoperta acquisition Premateria & DiaPac acquisition Solar Segment: Segment sold Textile Segment: Natural fibers businesses sold Advanced Technologies Segment: Segment sold Vacuum Segment: Segment sold Page 20

21 Agenda 1 Investment Proposition 2 Surface Solutions Segment 2.1 Attractive End Markets 2.2 Leading Technologies 2.3 Diversified Business Models 2.4 Profitable Growth Drivers 3 Manmade Fibers Segment 4 Drives Systems Segment 5 Financials 5.1 Group overview 5.2 Latest quarterly results 6 Appendix Page 21

22 KEY FACTS Manmade Fibers Supplying Industry Solutions from Melt to Yarn, Fibers and Nonwovens #1 IN CONCENTRATED MARKET The polyester chain is quite consolidated on both the customer and competitor front largest competitor is Japanese TMT Machinery 25 companies represent over 60% of global manmade fibers capacity 22 of which are Oerlikon customers UNIQUE CUSTOMER BENEFITS FOR MANMADE FIBER APPLICATIONS Long-term engineering competencies ensure highly reliable processes Compact machine design an efficient use of space including control elements embracing Industry % of Q317 Group revenue Expected growth rate ~2-3% FOCUS ON CYCLE MANAGEMENT Current market improvement driven by market consolidation, performance and technology upgrades ahead of 13th Chinese five-year plan Lean in terms of vertical integration and corporate setup Continuous improvement in energy efficiency achieving energy savings of up to 50% Low production cost (labor, downtime and maintenance cycles) High-quality output Leading technology from melt to yarn, fibers and nonwovens Through cycle target of average: CHF750m to CHF850m sales Mid-teens EBITDA margin Spinning plants (~45% of sales) POY, FDY, IDY spinning plants produce endless multifilament yarn for textile & technical applications Texturing machines (~15% of sales) DTY texturing machines crimp the pre-oriented yarn (POY) to give a cotton-like touch BCF carpet (~15% of sales) BCF plants produce endless multifilament yarn for home textile & carpet applications Plant engineering (~10% of sales) Plant engineering for continuous polycondensation and staple fiber plants Customer services (~15% of sales) Original parts supply, installation, training, surface and material testing Page 22

23 naphtha CRUDE OIL polyester melt naphtha Oerlikon in the middle of the polyester value chain ENERGY AND UPSTREAM PETROCHEMICALS POLYESTER CHAIN END MARKETS px SPINNING PLANT POLYESTER YARN PTA PLANT MEG PLANT textile processing APPAREL REFINERY HOME TEXTILES polyester melt TECHNICAL TEXTILES AROMATICS PLANT ethylene STEAM CRACKER POLYMER PROCESSING (POLYCONDENSATION) Oerlikon focus POLYESTER CHIPS PET-PACKAGING PX = paraxylene; PTA = purified terephthalic acid; MEG = monoethylene glycol; PET = polyethylene terephthalate. Page 23

24 Customer example Spinning plant DAILY OUTPUT: BOBBINS (15 KG EACH) t/d polycondensation 504 WINGS POY 144 WINGS FDY 648 spinning positions 1 TRAIN WITH 275 WAGONS (TOTAL LENGTH OF 4 KM) Winder Page 24

25 Agenda 1 Investment Proposition 2 Surface Solutions Segment 2.1 Attractive End Markets 2.2 Leading Technologies 2.3 Diversified Business Models 2.4 Profitable Growth Drivers 3 Manmade Fibers Segment 4 Drives Systems Segment 5 Financials 5.1 Group overview 5.2 Latest quarterly results 6 Appendix Page 25

26 KEY FACTS Drive Systems Leading supplier of transmission systems, gears and drive solutions HIGH PERFORMANCE APPLICATIONS Drive Systems is a leading provider of gear, drive and shifting solutions Focus on difficult-to-produce, high-performance products in high-end applications Network of sales, manufacturing, engineering and R&D sites supports local needs of Oerlikon s globally active customers 5 KEY MARKETS The segment is mainly active in Agriculture, Construction, Transportation, Automotive and Energy (mining, oil & gas) end markets Applications with limited exposure to the commoditized gear component market GROWTH OPPORTUNITIES FOLLOWING REALIGNMENT 26% of Q317 Group revenue SELECTED CUSTOMERS Roll out of product portfolio in new end markets Increasing penetration of e-drives market Successful realignment of Drive Systems has shown in margin improvement Streamlining of the product portfolio with focus on key product lines and reduced product depth Implementation of a focused factory concept with clear lead factories for product lines & resizing of workforce Improve order quality and focus on key customers and higher-value-added projects Achievements -3% to >10% EBITDA margin improvement between 2015 and 2017 Page 26

27 Drive Systems Segment Wide range of gear and drive solutions GEAR COMPONENTS broad range of gears, shafts and gear components of all types SHIFTING SOLUTIONS a wide range of synchronizers, clutches and clutch packs PLANETARIES (TORQUE-HUB ) Torque-Hub planetary drives DRIVE ASSEMBLIES on/off-highway drive assemblies AUTOMOTIVE AND E-DRIVES manual, AMT & DCT transmissions, electric & hybrid transaxles, PTU s & differentials, control systems ATV s / UTV s differentials for All Terrain Vehicles and electric axles for golf cars Page 27

28 Agenda 1 Investment Proposition 2 Surface Solutions Segment 2.1 Attractive End Markets 2.2 Leading Technologies 2.3 Diversified Business Models 2.4 Profitable Growth Drivers 3 Manmade Fibers Segment 4 Drives Systems Segment 5 Financials 5.1 Group overview 5.2 Latest quarterly results 6 Appendix Page 28

29 Oerlikon Group Key financial figures in CHF million Key financial figures Order intake Sales EBITDA margin 14.3 % 12.7 % % Cash flow from operations Net working capital R&D Total equity Net cash ROCE 5.7 % % % EPS (reported) Dividend Incl. one-time restructuring costs of CHF 112 million and impairments of CHF 476 million Page 29

30 Oerlikon Segments Key financial figures in CHF million Key financial figures Surface Solutions Order intake Sales EBITDA margin 22.2 % 21.4 % 18.8 % Net operating assets Manmade Fibers Order intake Sales EBITDA margin 3.3 % 10.6 % % Net operating assets Drive Systems Order intake Sales EBITDA margin 8.4 % -3.0 % % Net operating assets Incl. one-time restructuring costs (CHF -43 million) 2 Incl. one-time restructuring costs (CHF -68 million) Page 30

31 R&D and CapEx on Segment level R&D expenses H CapEx H Surface Solutions (6%) Manmade Fibers (4%) Drive Systems (2%) 19% 12% CHF 57m Surface Solutions (8%) Manmade Fibers (2%) Drive Systems (5%) 8% 23% CHF 79m (% of Segment sales) 69% (% of Segment sales) 69% Depreciation & Amortization H CapEx / Depr. & Amort. H Surface Solutions Manmade Fibers Drive Systems 11% 23% CHF 94m Surface Solutions Manmade Fibers Drive Systems % Segments Group average Reported, 2 Excluding CHF 16 million amortization of acquired intangible assets in Surface Solutions Segment Page 31

32 Asset allocation and employees on Segment level Net operating assets H Employees (FTE) by Segment H Surface Solutions Manmade Fibers Drive Systems 8% 18% CHF 1 918m 74% Surface Solutions (8%) Manmade Fibers (2%) Drive Systems (5%) Corporate 35% 2% % 47% Operating Assets H Employees (FTE) by Region H Surface Solutions Manmade Fibers Drive Systems 21% 20% CHF 2 938m 59% Europe North America Asia / Pacific RoW 37% 2% % 48% Page 32

33 Agenda 1 Investment Proposition 2 Surface Solutions Segment 2.1 Attractive End Markets 2.2 Leading Technologies 2.3 Diversified Business Models 2.4 Profitable Growth Drivers 3 Manmade Fibers Segment 4 Drives Systems Segment 5 Financials 5.1 Group overview 5.2 Latest quarterly results 6 Appendix Page 33

34 Positive performance continues across all Segments Guidance raised Q at a glance EXECUTION OF GROUP STRATEGY (INVEST MANAGE FIX) Smaller acquisition in Surface Solutions (pre- & post-treatment for tool optimization) Opening of Technology and Innovation Center for Additive Manufacturing in Munich Disciplined Manmade Fibers capacity ramp up to execute strong project order book Continued repositioning efforts in Drive Systems Segment delivered double-digit EBITDA profitability Executive Committee realigned Managing Board established OPERATIONAL PERFORMANCE Strong order growth in all Segments Group order intake up 29.2 % yoy Group sales increased by 31.5 %, or 30.1 % excluding FX Group book-to-bill of 1.02 The Surface Solutions Segment saw double-digit growth in orders and sales Group EBITDA margin of 15.5 %, driven by recovery in Manmade Fibers Segment Share of service revenues amounting to 33 % of total Group sales (Q3 2016: 38 %) GUIDANCE 2017 RAISED Group order intake expected to exceed CHF 2.8 billon and sales to come in around CHF 2.75 billion for the full year 2017 (vs. CHF 2.6 billion previously) Group s EBITDA margin is expected to be around the same level as in 2016 (14.3 %), even after absorbing the significant investments in the ramp-up of its additive manufacturing business Page 34

35 Overall Group performance builds on good performance in all Segments in CHF million 1 Q3 17 Q3 16 y-o-y 9M 17 y-o-y Order intake % % Sales (3 rd parties) % % EBITDA % % Surface Solutions Segment with continued strong order and sales growth and sustainable profitability 12th consecutive quarter with EBITDA margin >20% Manmade Fibers and Drive Systems Segments with improved order and sales sentiment Group book-to-bill >1 In % of sales 15.5% 14.7% 0.8 pp 14.4% 0.6 pp EBIT % % In % of sales 8.7% 6.8% 1.9 pp 7.3% 1.2 pp Top-line development at constant FX (y-o-y) Sales growth Q3 17 vs. Q3 16 (y-o-y) Q3 17 vs. Q2 17 (q-o-q) Reported 31.5% 4.8% +27.6% +30.1% Performance 30.1% 3.2% FX translation 1.4% 1.6% Order intake Q Order intakeq at constant FX Sales Q Sales Q at constant FX 1 Margins calculated on unrounded figures Page 35

36 Surface Solutions Segment Strong underlying profitable growth OPERATIONAL PERFORMANCE MARKET DEVELOPMENT North America Europe RoW Asia / Pacific 31% 5% Sales Q % 46% Profitable growth in orders and sales driven by Tooling, Automotive and General Industry Acquisitions and material surcharges in total added ~CHF 6 m to top-line in Q3 Growth in coating services for tooling, precision components, automotive as well as thermal spray materials and equipment EBITDA profitability above 20 % incl. AM ramp-up costs 2016 EBITDA included one-off of ~CHF 8 m (pension plans) Tooling market with strong demand in all regions, especially in Japan and Europe Maintained dynamic in general industries (IP1) Continued positive trend in the automotive business in Asia Aerospace market with continued growth; Power Generation flattish Europe and Asia maintained positive momentum Munich Technology Conference on Additive Manufacturing in CHF million Q3 17 Q3 16 y-o-y y-o-y ex FX 9M 17 y-o-y y-o-y ex FX Aviation 5% Order intake % 15.9% % 14.1% Automotive Tooling General Industry Power Generation 26% 12% Sales Q % 34% Sales (3 rd parties) % 10.1% % 10.7% EBITDA % % In % of sales 20.3% 24.1% -3.8 pp 20.6% -1.9 pp EBIT % % In % of sales 10.4% 14.8% -4.4 pp 11.4% -1.8 pp 1 IP = Industrial Production Page 36

37 Manmade Fibers Segment Market recovery continues / Margin improvement OPERATIONAL PERFORMANCE MARKET DEVELOPMENT North America Europe RoW Asia / Pacific 5% 31% Sales Q % 18% Large filament project orders from China, India and Turkey Orders in BCF1, CP², texturing, staple fibers Strong increase in sales as a result of increased capacity and project timings Successful ramp-up in production capacities and efficiency improvements increased profitability EBITDA margin of 11.1 % in Q3 Project activities by Tier 1 customers in filament market in China continue into 2018 Pricing and lead times as key challenges in market recovery Positive market sentiment in staple fibers maintains BCF 1 business in the US and Turkey remains solid Stable project landscape in texturing Attractive projects for Melt-to-Yarn / Fiber solutions in CHF million Q3 17 Q3 16 y-o-y y-o-y ex FX 9M 17 y-o-y y-o-y ex FX Staple fiber / Nonwoven BCF carpet yarn / Polymer processing Filament spinning / Texturing 21% 14% Sales Q % Order intake % 38.8% % 48.7% Sales (3 rd parties) % 90.1% % 40.9% EBITDA 22 1 >100% 26 >100% In % of sales 11.1% 0.6% 10.5 pp 5.5% 3.2 pp EBIT 17-4 >100% 11 >100% 1 Bulked continuous filament (carpet yarn) 2 Continous Polymerization In % of sales 8.4% -4.1% 12.5 pp 2.2% 4.0 pp Page 37

38 Drive Systems Segment Reshaping initiatives and end markets drive top-line and profitability OPERATIONAL PERFORMANCE MARKET DEVELOPMENT North America Europe RoW Asia / Pacific 26% 30% 3% Sales Q % New customers and projects in the agriculture, transportation, automotive and construction markets Sales growth mainly driven by transportation (public transport in China) and agricultural (Brazil), construction and automotive (incl. e-mobility) All regions contributing to sales growth Double-digit EBITDA margin sustained higher volumes and reshaping measure Continued improvement in agricultural; exception still a decline in 100+ HPT 1 and large combines demand in the US Construction market positive in the US, Europe and China; slowdown in India (tax driven) Transportation market mixed rail weak in the US; CV 2 strong in the US, China and India, moderate in Europe Energy and mining market maintain at low level Automotive / e-vehicles positive Transportation Construction Agriculture Automotive Energy / Mining 16% 12% 4% Sales Q % 32% in CHF million Q3 17 Q3 16 y-o-y y-o-y ex FX 9M 17 y-o-y y-o-y ex FX Order intake % 42.2% % 24.3% Sales (3 rd parties) % 29.7% % 14.5% EBITDA % % In % of sales 10.7% 7.3% 3.4 pp 10.0% 3.3 pp EBIT 11 1 >100% 22 n.a. 1 HPT = horsepower tractors; 2 CV = Commercial Vehicles In % of sales 5.7% 0.5% 5.2 pp 4.1% 4.1 pp Page 38

39 Business split Improvement in Manmade Fibers / Drive Systems reflected in Group split Segment sales split Segment EBITDA split Q % 19% 26% Q % 91% 1% 12% Q % 27% 26% Q % 19% 18% in % of sales in % of EBITDA 1% Surface Solutions Drive Systems Surface Solutions Drive Systems Manmade Fibers Manmade Fibers Other Regional sales split Service business Q % 31% 21% 6% Q % 62% Q % 41% 17% 6% Q % 67% in % of sales in % of sales Europe North America Service & Spare Parts APAC RoW Goods, Equipment & Components Page 39

40 FX impact on Orders, Sales and EBITDA in Q Order intake Q Sales Q EBITDA Q In CHF million In CHF million In CHF million -1.2% -1.0% +0% Q reported Transaction effects Translation effects Q FX impact adj. Q reported Transaction effects Translation effects Q FX impact adj. Q reported Transaction effects Translation effects Q FX impact adj. Top-line impact mainly related to currency translation as a result of reporting currency CHF Devaluation of CNY & JPY against CHF vs. appreciation of USD & INR against CHF Impact on EBITDA margin insignificant Page 40

41 EBITDA to EBIT bridge for Oerlikon Group EBITDA to EBIT bridge Q EBITDA to EBIT bridge Q In CHF million In CHF million EBITDA Depr. & Imp. EBITA Amor.of acquired intangibles Other Amor. EBIT EBITDA Depr. & Imp. EBITA Amor.of acquired intangibles Other Amor. EBIT Amortization of identified acquired intangible assets mainly attributable to Metco transaction Page 41

42 EBITDA to EBIT bridge per Segment Q Oerlikon Group Surface Solutions Segment EBITDA Q Depr. & Imp. EBITA Amor.of acquired intangibles Other Amor. EBIT Q EBITDA Q Depr. & Imp. EBITA Amor.of acquired intangibles Other Amor. EBIT Q Manmade Fibers Segment Drive Systems Segment EBITDA Q Depr. & Imp. EBITA Amor.of acquired intangibles Other Amor. EBIT Q EBITDA Q Depr. & Imp. EBITA Amor.of acquired intangibles Other Amor. EBIT Q Page 42

43 EBITDA margin CapEX Sales Order intake 2017 Group guidance further increased Positive sentiment continued in Q3 >+17% Underlying Group / Segment assumptions 2,413 Exceeding 2, E Oerlikon Group Macro-economic and global political environment to remain uncertain Manmade Fibers Segment Order intake to increase to CHF 750 m to CHF 800 m 2,331 >+17% around 2,750 Over 17 % order and sales growth Reported EBITDA margin around prior-year level 2 Smaller acquisitions included in guidance Sales up around CHF 700 m Margin expected at 7.5 % as result of operating leverage and operational improvements E Surface Solutions Segment Drive Systems Segment ~ 8% organic order and ~ 7 % organic sales growth (excluding AM and smaller acquisitions, reported ~ 8 9 %) Order intake to grow ~ 20 % due to new business wins and initial recovery of end markets E 14,3% Around prior-year level 2 Reaching upper end of EBITDA margin in corridor of % excluding AM investments (reported upper end of % corridor) Sales increase to around CHF 700 m Double-digit EBITDA margin as a result of continued execution of repositioning initiatives and increased volume E 1 Including around CHF 50 m related to Additive Manufacturing (AM); 2 Including full absorption of all related unchanged investment expenses in AM Page 43

44 Agenda 1 Investment Proposition 2 Surface Solutions Segment 2.1 Attractive End Markets 2.2 Leading Technologies 2.3 Diversified Business Models 2.4 Profitable Growth Drivers 3 Manmade Fibers Segment 4 Drives Systems Segment 5 Financials 5.1 Group overview 5.2 Latest quarterly results 6 Appendix Page 44

45 KEY FACTS Aerospace Making aerospace safer, more powerful and more efficient INDUSTRY CHALLENGES Focus on turbine efficiency: both cost and 2020 emission reduction goals drive the reduction of the specific fuel consumption Engine trends: Lighter weight materials have to withstand erosion, corrosion and extreme temperatures (>1500 C) Enhanced gas path sealing to increase safety and efficiency with less emissions Stringent process and material certification to ensure safety SOLUTIONS Customized solution of materials and equipment for better performance, greater efficiency and absolute reliability for our customers Thermal spray and thin film coatings extend part lifetime and improve efficiency and safety of jet engines Thermal barrier coatings on blades and vanes allow for higher temperature in the turbine Abradable coatings are used in engines to seal the gas path and improve performance and efficiency PVD coatings for wear protection in structure parts and landing gears 13% of Q317 Surface Solutions revenue Expected growth rate 4-5% Oerlikon covers all coating needs of the industry - from powder development and application engineering to equipment and process know-how Decorative coatings for cockpit and interior components Client needed to increase turbine efficiency while at the same time reducing their service intensity Using a combination of thermal spray and thin film coating improves performance Oerlikon delivered materials and equipment for thermal spray and provided coating services Achievements Fan Turbine 5% Combustion chamber Compressor overall efficiency increase in engine at improved safety Page 45

46 KEY FACTS Automotive Advancing productivity, sustainability and profitability in the industry INDUSTRY CHALLENGES Focus on increasing manufacturing productivity and operating efficiency of cars & reduce environmental impact Reduce fuel consumption, emissions and weight SOLUTIONS Delivering solutions and equipment for thin film and thick layer coatings to the whole automotive value chain Coatings lead to better performance and durability due to wear protection and reduced corrosion and friction 24% of Q317 Surface Solutions revenue Expected growth rate ~2-3% Engine downsizing (e.g. using less cylinders under higher pressure) causes higher stress on smaller parts More corrosion issues from exhaust gas recycling, start-stop systems, turbo-chargers Higher torque transmissions with more gears (therefore more synchronizer rings) Reducing friction, wear and mechanical losses Demand for ecofriendly cars and environmentally friendly solutions (e.g. replacing hexavalent chromium) Oerlikon technologies permit the use of new and lighter material that reduce weight or friction losses in the engine Coatings support the development of new and suitable design parts the number of car parts coated by Oerlikon increased by a factor of 10 since 2008 Coatings increase reliability and quality of material such as brake disc coatings to support manufacturers in their effort to increase car safety further while significantly reducing fine dust and fuel consumption Innovative custom designed solutions and global presence enable reliable operational performance to address our customers needs Client needed to increase fuel efficiency of engines due to emission regulation Using a combination of thermal spray and thin film coating to improve performance Oerlikon delivered PVD solutions for piston pins and TS SUMEBORE coating for cylinder walls DLC, 2 µm Support layer Substrate 2-4% Reduced fuel consumption Achievements up to 40% Friction reduction Page 46

47 KEY FACTS Tooling Enabling sharper, stronger and more durable tools INDUSTRY CHALLENGES Focus on quality, cost and overall factory output of any product Productivity: increasing tool throughput and solving production bottlenecks Durability: reduced service cycles, enhanced corrosion and adhesion protection Performance: better production reliability, higher temperatures, higher speed and quality of output Environmental challenges i.e. dry machining, REACH compliance SOLUTIONS Delivering over 35 different thin film coatings extend service life, lower manufacturing costs and increase production reliability of tools at enhanced corrosion and adhesion protection Joint solution development with customers special coatings to withstand extremely high temperatures, erosion, oxidation and other harmful effects or to lower friction and wear Productivity gains by achieving extremely fast cutting speeds at high temperatures Lower tool costs due to significantly prolonged tool service life 33% of Q317 Surface Solutions revenue Expected growth rate ~3% Technological and market leadership with global availability of solutions enable unique full service performance in terms of quality, process stability, delivery time and consistency Client needed to increase tool efficiency while at the same time extend replacement cycle Using a thin film coating to improve performance reduce friction and wear, increase removal rates Oerlikon provided coating services by a global network for leading tool manufacturers Achievements 4mm 2.5x ~67% increased drilling speed tool lifetime extension Page 47

48 KEY FACTS Power Generation Empowering the way to effectively generate energy INDUSTRY CHALLENGES Focus on increased efficiency to improve client s cost curve position Maintenance interval reduction in gas turbines, hydropower and oil & gas Oil & gas applications in challenging environments require maintenance free solutions Corrosion and erosion cause efficiency losses SOLUTIONS Delivering highly productive and reliable customized solution of coatings, materials and equipment for gas and steam, hydro and wind turbines and oil & gas applications With Oerlikon products that reduce distortion and wear, turbines last longer and perform more efficiently and reliably Thin film and thick layer solutions protect against abrasive wear, erosion, corrosion, fatigue, high fluid pressure, vibrations, jar impact loads, extreme torque and many more 7% of Q317 Surface Solutions revenue Expected growth rate ~2% Oerlikon offers all required coating solutions and is the strongest European manufacturer of cooling paths in blades and vanes Client needed to increase turbine efficiency while increase time between overhaul & reduce emission Using thermal barrier coatings (hot section) and thin film coatings (erosion) Oerlikon delivered materials and equipment for thermal spray and provided coating services Achievements 2% overall efficiency increase at a 530MW gas turbine Page 48

49 KEY FACTS General Industry Enable industries to build more powerful, complex and efficient products INDUSTRY CHALLENGES Consumer Goods: Providing design, reliability and scratch-resistance for product differentiation. Coatings of watches to washing machines, of consumer electronics to sanitary fittings improve their performance, quality and service and make their production more efficient Medical: Medical coatings include antimicrobial functionality to ensure fast wound healing, biocompatibility to support the integration of an implant into the bone or non-reflection of surgical instruments Pulp/Paper & Print: Coatings applied to anilox rolls or corrugating rolls for the paper industry significantly extend the useful life of the rolls Steel & Metal processing: Components used in the production and processing of steel/metals need to resist the high temperature and corrosive effects of molten and hot metals. Clients need abrasion- and scratch-resistance to housing and to enhance the look of exterior parts Food/packaging: hygiene, productivity and reliability are critical for FMCG clients. Coatings help maintain hygiene, reduce wear, extend the service life or improve manufacturing process for food processing, plastic film and foils, labelling, bottling, paper production and more Engineering: Coatings minimize friction, wear corrosion and enhance the reliability of instrument panels, air vents, batteries, semiconductors, agricultural machinery, construction equipment to printing industry The growth potential for Oerlikon s technologies is broad and diverse as there is hardly any industry where Oerlikon technologies can not add value Using amorphous carbon coatings protect the watch parts from wear and corrosion and adding colors in-fashion Oerlikon provided coating services throughout a global network for leading watch manufacturers 13% of Q317 Surface Solutions revenue Dedicated competences to define customized surface solutions via a global network Achievements Coatings can prolong the service life by a factor of up to 50 Page 49

50 Oerlikon shares Oerlikon shares Oerlikon shareholder structure 1 Listed on Swiss Exchange (SIX) since 1973 Securities symbol: OERL Securities number ISIN: CH No. of shares outstanding: shares Re-entry to Swiss SMIM (April 17, 2012) Addition to STOXX Europe 600 (June 18, 2012) Addition to SPI Select Dividend 20 (Mach 20, 2017) Renova Group Baillie Gifford & Co. Black Creek IM Others (incl %treasury shares) Oerlikon share price development 49.8% 43.0% 3.2% 4.0% as of December 31, 2017 as of December 31, 2017, indexed; 100 percent = closing price per December 31, Oerlikon SMI SMIM STOXX Europe 600 STOXX Europe 600 Industrial Based on latest notification by Renova (as of November 13, 2017 of shares), Black Creek (as of April 11, 2017 of voting rights) and Baillie Gifford (as of July 25, 2017, of voting rights) Page 50

51 Coverage 6 Buy / Add 7 Hold / Neutral - 0 Sell / Underperform Broker Analyst Recommendation Date of last update Target price AlphaValue Heinz Steffen Add Baader Helvea Reto Amstalden Buy Berenberg Bank Sebastian Künne Hold Credit Suisse Patrick Laager Neutral Jefferies Graham Phillips Hold Kepler Cheuvreux Torsten Sauter Hold MainFirst Sven-Erik Schipanski Neutral Mirabaud N.N. Hold Octavian Alessandro Foletti Buy RBC Capital Markets Wasi Rizvi Outperform Societe Generale Christophe Quarante Hold UBS Fabian Haecki Buy Vontobel Michael Foeth Buy ZKB Armin Rechberger Marketweight Consensus Page 51

52 Financial Calendar 2018 March 6, 2018 FY / Q4 results and publication of Annual Report Media & Analyst Conference in Zurich April 10, 2018 May 2, 2018 Annual General Meeting of Shareholders - KKL Lucerne Q results - Media & Analyst Conference Call August 7, 2018 Q2 / HY 2018 results and publication of Interim Report Media & Analyst Conference Call October 30, 2018 Q3 / 9M 2018 results - Media & Analyst Conference Call Page 52

53 Investor Relations Contact OC Oerlikon Management AG, Pfäffikon Churerstrasse 120 CH 8808 Pfäffikon SZ Switzerland Andreas Schwarzwälder Head of Investor Relations Senior Vice President Phone: Mobile: Page 53