Annual Report Innovation for success

Transcription

1 Annual Report 2015 Innovation for success

2 KEY FIGURES in CHF unless otherwise specified 2012 in % 2013 in % 2014 in % 2015 in % Net sales Change compared to previous year (%) EBITDA before restructuring costs Change compared to previous year (%) Operating profit before restructuring costs (EBIT) Restructuring costs Operating profit (EBIT) Earnings before taxes (EBT) Income taxes Net profit before restructuring costs Net profit/(loss) Earnings per share Number of employees (FTEs at end of period) SALES BY INDUSTRY 2015 / 2014 SALES BY EXPORT REGION 2015 / % 12% 9% 11% 5% 4% 8% 9% 9% 9% 18% 17% 6% 7% 1% 1% 40% 39% 27% 28% 30% 27% 35% 36% Aerospace and defense Communication Industry Medical Automotive and transport Watches and consumer Other Switzerland Europe (excluding Switzerland) Asia North America Other Division results 2012 in % 2013 in% 2014 in% 2015 in% AMS Division Sales EBITDA before restructuring ES Division Sales EBITDA before restructuring Cicor Annual Report 2015 At a Glance

3 NET SALES BY DIVISION AND EBITDA MARGIN BEFORE RESTRUCTURING in Mio. CHF 240,0 200,0 160,0 in % GLOBAL FOOTPRINT Cicor is a globally active group of leading companies in the electronics industry. It is organized into two Divisions: Advanced Microelectronics & Substrates (AMS) and Electronic Solutions (ES). 120, , , , Net Sales AMS Net Sales ES EBITDA margin before restructuring in CHF unless otherwise specified in % in % in % in % Non-current assets Current assets Total assets Equity Financial liabilities Cash and cash equivalents Net debt Gearing ratio (net debt in % of equity) Inventories Trade receivables Trade payables Net working capital in % of sales Capex in tangible assets in % of sales Cicor Annual Report 2015 At a Glance 3

4 KENNZAHLEN PROFILE Cicor Sales Offices Cicor Productions sites Switzerland Bronschhofen, Boudry, Wangs Germany Radeberg, Ulm Romania Arad China Suzhou Vietnam Province of Binh Duong Singapore Singapore Indonesia Batam With employees at 10 production sites worldwide, the Group supplies high-quality custom-made solutions to its clients in Europe, America and Asia. 4 Cicor Annual Report 2015 At a Glance

5 AT A GLANCE 2 Key figures 4 Profile Milestones 8 Coverstory 10 The Cicor Group 12 Cicor Technologies Ltd. shares 13 Agenda, communication KEY STATEMENTS 14 Board of Directors and Report of the Chariman and the CEO 20 Electronic Solutions Division 21 Advanced Microelectronics & Substrates Division 23 CORPORATE GOVERNANCE 33 REMUNERATION REPORT FINANCIAL REPORT 41 Consolidated Financial Statements of the Cicor Technologies Group 72 Financial Statements of the Cicor Technologies Ltd. 80 Addresses Cicor Annual Report 2015 At a Glance 5

6 2015 MILESTONES AWARDS Cicor wins the Outsourcing Partner accolade at the high-profile Medical Design Excellence Awards 2015, and also secures the Innovation for Medical Technology Award from the specialist publisher DeviceMed EXPANSION OF PRODUCTION CAPACITIES Cicor resolves to boost the production capacities in Arad, Romania, and to expand the product development and industrialization capabilities at its competence center Bronschhofen, Switzerland, by bringing activities together in a new production and administrative building CONSOLIDATION OF COMPANY SITES The consolidation of company sites* in Switzerland led to extraordinary restructuring costs of CHF 4.7 million, but will also boost the efficiency of existing production sites *Moudon in Boudry and Quartino in Bronschhofen 6 Cicor Annual Report 2015 At a Glance

7 NEW CHAIRMAN OF THE BOARD OF DIRECTORS AND NEW CEO The new Chairman of the Board of Directors Heinrich J. Essing, and the new CEO Dr. Ju rg Du bendorfer, assumed responsibility for the Cicor Group in the second quarter SUCCESSFUL EXPERT PLATFORM With the two Cicor Innovation Insights symposiums at the end of January and the beginning of December, the Cicor Group established a platform for experts to hold discussions with top speakers and qualified podium discussions STRATEGIC PRIORITIES At the end of November, the Cicor Group announced targeted measures associated with the strategic realignment. The Group will more strongly differentiate itself from its competitors by leading-edge technologies, and comprehensive manufacturing services ( box-building ) in fast-growing niches and segments INVESTMENT In 2015, the Cicor Group invested a total of CHF 8.5 million in pioneering and leading-edge infrastructure, confirming its determination to lead technology-intensive market segments, as well as to provide comprehensive solutions Cicor Annual Report 2015 At a Glance 7

8 MODERN CONTROL PLATFORMS FOR SOPHISTICATED APPLICATIONS Connectivity is the great technology trend of the current decade. Industry 4.0 has also entered into the field of medical technology. Networked devices simplify processes and ensure quality standards. Development expertise, know-how and experience are required to ensure the optimal coordination of safe networking as well as the control and operation of electronically controlled machinery and equipment. Hardware is only effective if the control software performs well and the operating interfaces use attractive graphics, and if it can be operated intuitively. The Cicor Group develops control platforms for sophisticated applications based on current technologies. Cicor supports its clients through all development phases, from the design of control concepts, user interaction and graphic concepts, through implementation, verification, industrialization and production. Belimed is one of the world s leading providers of system solutions for cleaning, disinfection and sterilization in the medical and life science fields. Belimed offers a wide range of equipment, from infection control in the CSSD (central sterile services department), or for instant processing in the operating theater. The need for low error rates, efficient service intervals and low throughput times is addressed by the networking of machinery, and thus the automation and documentation of entire preparation processes. The control platform developed in conjunction with the Cicor Group offers an API Application Programming Interface that is tailored to the specific requirements of Belimed. Device data and features can therefore be made available to the user, other machines, superordinate systems, mobile devices or even a global service center. 8 Cicor Annual Report 2015 At a Glance

9 The new industrialization has huge potential on the way to the fourth industrial age, we support our customers with extensive development expertise and know-how. Cicor Annual Report 2015 At a Glance 9

10 THE CICOR GROUP COMPELLING SOLUTIONS ELECTRONIC SOLUTIONS Electronics play an important part in most areas of our lives. Technology is steadily improving thanks to continuing innovations, and many devices have now evolved into everyday helpers we would not want to go without. Design and lifestyle aspects certainly play their part, and applications are optimized to deliver maximum benefits. Computer-assisted traffic control systems help us every day by guiding steadily increasing traffic, while on-board computers assist us inside our cars. Smart living networked household appliances, home automation and multimedia devices increases both our comfort and security. Mobile payment systems, car connectivity, Internet-enabled electronic devices the list of new developments is long. In medical technology, innovations are improving patients treatment and quality of life. The use of microelectronics in proton therapy is becoming ever more important in the battle against cancer. Aviation and space flight would be impossible without electronics. Microelectronics play a vital part in satellite research projects. Globalization and the unrelenting evolution of information and communication technologies are opening new avenues for collaboration. Companies that focus on their core business and make effective use of external specialists can secure a competitive edge through operational and strategic partnerships. Cicor is a solutions provider with worldwide operations and a unique portfolio of services and technologies. The latest discoveries combined with many years of experience, stateof-the-art technologies and exceptional expertise make Cicor a dependable and innovative partner in the development and production of compelling solutions in the area of electronics. INNOVATIVE TECHNOLOGICAL SOLUTIONS IN THE AREA OF ELECTRONICS The Electronic Solutions Division is an internationally active full-service provider offering a wide range of production options for PCB assembly, system assembly, box building, control cabinet construction, cable assembly, toolmaking and injection molding. Its offering comprises outsourcing solutions for the development and manufacture of electronic PCBAs as well as complete devices and systems. Its global operations and production sites in Switzerland, Romania and Asia (Singapore, Vietnam, Indonesia and China) enable the company to exploit synergies and offer solutions based on extensive know-how. ADVANCED MICROELECTRONICS & SUBSTRATES TECHNOLOGICAL LEADERSHIP THROUGH INNOVATION As a leading manufacturer of sophisticated microelectronics and high-quality substrates, the Advanced Microelectronics & Substrates (AMS) Division offers a broad range of products and services of the highest standards. The microelectronics area offers state-of-the-art assembly and interconnect technologies as well as packaging technologies, while the manufacture of highly complex rigid, rigid-flex and flex circuit boards and thinand thick-film interconnect devices is what marks out the substrate manufacture and processing area. In close collaboration with customers and partners, the Advanced Microelectronics & Substrates Division develops and produces sophisticated products from prototype to large-scale production and guarantees a high degree of process stability, state-of-the-art production facilities, consistent quality and absolute delivery reliability. Customized Box Building solutions 10 Cicor Annual Report 2015 At a Glance

11 ADVANCED MICROELECTRONICS & SUBSTRATES ELECTRONIC SOLUTIONS Markets Medical technology Security equipment Traffic and transport technology Automotive Industrial Consumer Communication Building automation Competencies and services Development Test engineering Industrialization Production After-sales service Applications Defibrillators Lung ventilators Breast pumps Shockwave therapy equipment Electronic dosing systems for self-medication Endoscopy capsules Line-of-sight radio devices Security access systems Audiovisual systems for vehicles Cable harnesses for vehicles Data recording systems Signal control systems Door sensors Measuring and regulating equipment Human-machine interfaces Process monitoring equipment Sensors and sensor control systems Machine controls Sewing machines and embroidery systems Telecommunication devices Markets Medical Diagnostics Sensors and biosensors Optoelectronics Industrial Telecommunication Aerospace / defense Automotive Watchmaking Competencies and services Highly specialized technologies for thin-film and thick-film substrates Full range of construction and connection technologies Rapid prototype construction Delivery of tested and certified PCBAs Applications Communications and radar technology Radio communications networks, HF equipment Navigation systems Satellite technology Avionics Position sensors Building detectors Camera systems Laser printers Optical sensors Particle detectors Security systems in nuclear power stations Control assemblies in the energy sector and solar power technology Airbag igniters Medical implants (cochlear and retina implants) Pacemakers and defibrillators Medical sensors (intraocular pressure, respiratorygas, blood pressure sensors) Ventilator systems Hearing aids Insulin pumps Catheters Endoscopes Diagnostic imaging equipment Ultrasound devices Cicor Annual Report 2015 At a Glance 11

12 CICOR TECHNOLOGIES LTD. SHARES CICOR SHARES NUMBER OF SHARES Number of shares as at 31 December Share capital Number of registered shares issued par value of registered shares (in CHF) Of which treasury shares Number of outstanding registered shares KEY FIGURES PER SHARES Key figures as at 31 December Profit/loss per share (in CHF) Equity per share (in CHF) Gross dividend (in CHF) * *Distribution from capital contribution reserves SHARE PRICE Stock market price in CHF per share High Low Year-end Average number of shares traded per day Market capitalization at year-end (in CHF 1 000) The registered shares of Cicor Technologies Ltd. are traded on the domestic segment on the SIX Swiss Exchange in Zurich. Securities symbol: CICN/sec. no.: /ISIN Code CH /Bloomberg: CICN SW/Reuters: CICN.S. SHARE PRICE PERFORMANCE In CHF 40 Number of shares Jan. Mar. May June Sept. Nov Last price (in CHF) Volume (Number of shares) 0 12 Cicor Annual Report 2015 At a Glance

13 AGENDA, COMMUNICATION CALENDAR AND CONTACTS AGENDA Financial calendar General Assembly: Thuesday, 19 April 2016 Half Year Report 2016: Wednesday, 17 August 2016 Annual Report 2016: March 2017 MAJOR SHAREHOLDERS The following shareholders, known to Cicor Technologies Ltd. from its share register and from published disclosures of shareholdings in the Swiss Official Gazette of Commerce, each held more than 3% of the total share capital as at 31 December 2015: HEB Swiss Investment AG % Quaero Capital (vormals ARGOS Funds) 5.00 % Escatec Holdings Ltd % Free float (according to SIX Swiss Exchange) % OVERVIEW OF SHAREHOLDERS AS PER SHARE REGISTER AS AT 31 DECEMBER 2015 Shares entered in the Register Shareholders entered in the Register 950 Shareholders with 1 1,000 shares 838 Shareholders with 1,001 10,000 shares 91 Shareholders with over 10,001 shares 21 DIVIDEND POLICY Cicor Technologies generally pursues a conservative dividend policy aimed at increasing the value of the company. The Board of Directors proposes dividend payments in line with the business s long-term and sustainable development, taking into account investments to be made into growth and the further development of the Group. COMMUNICATION Cicor Technologies Ltd. follows an open and transparent information policy in the interests of its shareholders and the general public. In its periodic and ad hoc reporting, the company is committed to equal treatment in terms of timing and content of all shareholders and members of the public who take an interest in the company s business. The Group informs its shareholders, the media, financial analysts and other interested parties through the following publications and communication instruments: annual report, half-year report, investor and media presentations, and press releases. Price-sensitive events are published on an ad hoc basis. Additional information about Cicor Technologies Ltd. and its subsidiaries can be found on the Group s website at The company can be contacted at any time at investor@ cicor.com or media@cicor.com. Interested parties can also sign up to a mailing list on the website to receive all new press releases immediately. Contact address Cicor Technologies Ltd. c/o Cicor Management AG Leutschenbachstrasse Zurich, Switzerland Phone investor@cicor.com Cicor Annual Report 2015 At a Glance 13

14 The Cicor Group looks back on a difficult 2015 financial year, with lower sales and lower operating results than in the previous year. The abandonment of the minimum Swiss franc exchange rate against the euro unsettled many Swiss customers and caused orders to be delayed. The Board of Directors and the Group Management lined up targeted measures in accordance with the Group s strategic focus. These measures are designed to establish the foundations for the Group s renewed and sustainably profitable growth. The price pressure caused by the currency situation had an impact on sales and results, and the measures initiated had only a limited positive effect on the results. The Advanced Microelectronics & Substrates (AMS) Division continued to struggle with a difficult market environment in its core markets. The Electronic Solutions (ES) Division was hit above all by falling sales at two major customers. Investments continued to be made in highly-promising technologies and expanded services. Due to the results in the 2015 financial year, the Board of Directors will propose to the Annual Shareholders Meeting to forego the distribution of earnings. Andreas Dill, Heinrich J. Essing (Chairman), Robert Demuth (Vice President), Erich Haefeli 14 Cicor Annual Report 2015 Key statements

15 DEAR SHAREHOLDERS, During the 2015 financial year, the Cicor Group saw its business activities contract. This was caused by a difficult market environment in Switzerland, compounded by a decline in sales at two major customers. Immediate measures, programs to increase efficiency, restructuring, as well as targeted measures in terms of the strategic focus were adopted and implemented, or are currently in the process of being implemented. These are designed to ensure that the Group can return to the path of growth. Nevertheless, in this difficult year, the Cicor Group put its implementation skills to the test and was able to increase customer satisfaction. Important new customers were acquired, thus strengthening the focused segments of medical and industry. The joint market presence of the two Divisions was well-received by global customers and has already attracted the first joint orders. The services and capabilities of the ES Division were also carefully expanded, in order to meet the very high regulatory requirements for product development and production in the field of medical technology. The technology road map of the AMS Division was focused even more sharply last year on the technological challenges of customer applications. This is a decisive factor for the future growth of the Division. AMS technology experts are now more frequently involved in customer development activities. Its proven ability to develop new products in close collaboration with its customers and then to produce these cost-effectively for these customers determines the Group s strategic focus. Cicor Annual Report 2015 Key statements 15

16 LOWER SALES The operating conditions for the market segments addressed by the Cicor Group varied in the 2015 financial year. Due to the abandonment of the minimum Swiss franc exchange rate against the euro, the Group s key Swiss market segment was hit hard. By contrast, there was higher demand for production capacities in Eastern Europe. Demand in the focused markets of the USA and Asia remains much stronger than in Europe. Net Sales in the year 2015 of CHF million fell by 10.8% relative to 2014 (CHF million). In local currency terms, sales contracted by 6.9%, the Cicor Group grew in local currency terms at its Romania and Singapore sites. Healthy growth was also posted by the Engineering Unit at the site in Bronschhofen near Wil in Switzerland. This confirms the importance of Switzerland as a center of excellence for product development and engineering. The growth achieved by the industrial segment, which saw its share in sales increase from 27% in the year 2014 to 30% in the year 2015, was particularly noteworthy. For Cicor, this segment, together with the consistently strong medical market segment, is the main focus of its activities, as this is where demand for engineering support and expertise in product launches and production design is continuing to grow. For all market segments, many original equipment manufacturers (OEM) are following the outsourcing trend, due to the challenging requirement to uphold certifications, the need for state-of-the-art production facilities, and increasingly complex supply chain operations. They are looking for a partner able to cover the entire product life cycle management, which consequently offers opportunities for companies such as Cicor that are able to offer corresponding development, technology, and production expertise. The net sales of the ES Division fell by 9.7% to reach CHF million. In addition to lower sales for two large-scale customers, competitive pressure in the European electronics manufacturing business remained high in A substantial project secured at the end of 2014 as well as the customer projects obtained in 2015 were not able to offset the fall in sales. Particularly noteworthy growth was achieved by the industrial segment, which saw its share in sales increase from 27% in the year 2014 to 30% in the year Sales recorded by the AMS Division in the year 2015 reached CHF 49.5 million, which is 13.0% lower than in the year The relatively poor sales seen during the first half of 2015 weakened even further during the 2 nd half of the year, due to a fall in demand among a number of customers. In particular, orders from the watchmaking sector declined, confirming the long-term trend in this segment. As a consequence, the watches and consumer goods segment accounted for only 12% of Group sales (2012: 20%). At the end of 2015, targeted measures were introduced to strengthen profitability and achieve the desired EBITDA margin. For example, the AMS Division s two Swiss printed circuit board production sites (Moudon and Boudry sites) are to be merged in Boudry. Customer support, provided by the ES Division in Switzerland, will be relocated from the existing two sites to a joint site of the ES Division in Bronschhofen. These mergers of Swiss sites will boost efficiencies and reduce costs in both Divisions. The restructuring costs associated with this move totaled around CHF 4.7 million. Within the globally positioned Cicor Group, with its production sites in Germany, Romania, China, Vietnam, Indonesia, and Singapore, the Swiss sites continue to play a central role. 16 Cicor Annual Report 2015 Key statements

17 ORDER BACKLOG AT THE END OF THE YEAR There was a particular emphasis on winning new customers in the year The acquisition of new, international customers during the past financial year remained below expectations and for this reason a variety of additional activities were launched at an early stage in order to intensify sales activities. The Group s positioning was adjusted, and the portfolio of technologies and services of the entire Cicor Group was emphasized, thereby underscoring the Group s unique profile. In Swiss franc terms, order intake recorded in the year 2015 (CHF million) declined relative to 2014 by 9.4% to (2014: CHF Mio.). In local currencies, order intake fell 4.7% year-on-year. Despite lower order intake, at the end of 2015 the Group had a order backlog with a delivery volume of CHF million from 2016 onwards. REDUCTION IN RESULTS During the course of 2015, the year under review, the Cicor Group switched its financial reporting from IFRS to Swiss GAAP FER. The switch took place retrospectively to 1 January 2014, and the figures for the previous year were adjusted correspondingly in the consolidated financial statements. The use of Swiss GAAP FER ensures that the Cicor Group will continue to present high-quality and clear financial accounts that provide an accurate picture of the asset, financial and earnings situation, in accordance with the true and fair view principle. The retrospective amortization of the goodwill over five years led to a reduction in equity. Additionally, the pension liabilities recognised in context with the existing pension schemes are significantly lower under Swiss GAAP FER than they were under IFRS. In overall terms, the effect of the switch reduced the balance sheet total and the equity ratio. The effects of the switch relating to the previous year, 2014 are detailed under Note 2.1 in the notes to the consolidated financial statements. Together with the reduction in sales and due to falling margins profitability fell at a disproportionally higher rate than sales. Operating result before interest and taxes (EBIT) as well as net profit fell sharply. The operating profit (EBIT) reached CHF 1.7 million or 0.9% of net sales (2014: CHF 10.2 Mio./ 5.1%), the operating profit before restructuring costs reached CHF 3.1 million. The ES Division recorded a positive EBIT, but the figure at AMS was negative. Cicor achieved an EBITDA before restructuring of CHF 12,1 million (2014: CHF 19.7 million); the EBITDA margin before restructuring declined to 6.7% (2014: 9.7% ) of net sales. Net profit reached CHF 0.7 million in the 2015 financial year (Net profit 2014: CHF 7.0 million) before restructuring costs of CHF 4.7 million, or CHF 4.1 million after taking account of restructuring costs. Many factors contributed to the fall in results: The cost-cutting measures implemented were unable to fully offset the decline in profit from reduced sales. Exchange rate movements also meant that the dependence on the Swiss franc had a major impact on the results, despite the fact that the Cicor Group had steadily reduced this factor in recent years. In addition, the result was also negatively impacted by the altered product mix. In general terms, excess market capacity had the effect of depressing prices. EXTENSION OF TECHNOLOGICAL LEADERSHIP AND THE PORTFOLIO OF SERVICES The Cicor Group s business is highly technology-based and entails the operation of a large number of complex, costly devices and processes. To be positioned in the market as a comprehensive solution provider, a comprehensive portfolio of technologies and services are specifically required for the development and production of customer products. During the 2015 financial year, the Cicor Group invested a total of CHF 8.5 million (2014: CHF 10.6 million) into key projects related to the updating and modernization of production facilities in all regions. Particularly worthy of mention is the newly-acquired capability to manufacture medical products under heightened clean-room conditions, obviating the need for subsequent sterilization. This helps customers to reduce costs and boosts the competitiveness of their products. Thanks to this and other investments, Cicor is continuing to consolidate its technological leadership. Cicor Annual Report 2015 Key statements 17

18 NO DISTRIBUTION OF EARNINGS On account of the results recorded in the 2015 financial year, the Board of Directors will propose to the Annual Shareholders Meeting that no distribution of profits should be made for the past financial year. BALANCE SHEET REMAINS SOUND The consolidated balance sheet remained sound for the year 2015 as a whole, including after the switch from IFRS to Swiss GAAP FER. With equity of CHF 59.7 million and a balance sheet total of CHF million, the equity ratio was 39.5%. Net working capital at the end of 2015 was CHF 1.9 million lower than in 2014 and totalled CHF 47.4 million. Net debt on 31 December 2015 was CHF 20.5 million, compared to CHF 21.2 million as at 31 December Free cash-flow for 2015 totaled CHF 0.5 million (2014 CHF 7.8 million). Thanks to the syndicated bank loan signed in December 2014, with a funding framework amounting to CHF 65 million, Cicor retains the long-term financial flexibility it needs to return the Group to growth. PERSONNEL CHANGES At the Annual Shareholders Meeting in April 2015, Cicor Group shareholders elected Erich Haefeli as a new member of the Board of Directors. Antoine Kohler and Hans Knöpfel did not stand for reelection at the Annual Shareholders Meeting. Heinrich J. Essing assumed the position of Chairman of the Board of Directors from Antoine Kohler. On 1 June, the new CEO, Dr. Jürg Dübendorfer, joined the Group. He has extensive experience from his international activities. Jürgen Steinbichler joined the Cicor Group in August 2015 and assumed overall responsibility for the AMS Division from Pascal Keller who left the Group in Novmeber Jürgen Steinbichler has extensive specialist expertise in the semi conductor field as well as in the electronics industry, and long-standing business experience from a number of senior positions at internationally-operating corporations. OUTLOOK: CHALLENGES IN THE 2016 FINANCIAL YEAR Over the past three years, Cicor has intensively invested in expanding its global footprint and production capacities abroad. In comparison to earlier years, its global focus helped to significantly reduce the dependency on Switzerland as a production site as well as the impact of exchange rate movements. During the final quarter of 2015, our market environment cooled markedly. The falls on international stock markets in January 2016 further unsettled the electronics industry and reinforced the usual seasonality of the first quarter of the year. It remains unclear what impact this uncertainty will have on our order intake and, as a consequence, the sales and earnings performance of the Cicor Group is difficult to forecast for the 2016 financial year. Assuming the macroeconomic operating conditions remain the same as those that prevailed in the 2015 financial year, we expect the results of the internal changes to produce growth in sales and results during the 2 nd half of The Cicor Group will do everything it can in the year 2016 to return to a sustainable growth course. On behalf of the Board of Directors and the Group Management, we would like to thank all those who contributed towards the performance in the 2015 financial year: our employees for their commitment and dedication, our customers for their loyalty and our shareholders and business partners for the confidence they have shown in us. Heinrich J. Essing Chairman of the Board of Directors Dr. Jürg Dübendorfer CEO 18 Cicor Annual Report 2015 Key statements

19 HEINRICH J. ESSING, CHAIRMAN The Cicor Group will do everything it can in the year 2016 to return to a sustainable path of growth. DR. JÜRG DÜBENDORFER, CEO The Cicor Group invested in a targeted way in the extension of technological leadership and the portfolio of services on the way to becoming a comprehensive solution provider. Cicor Annual Report 2015 Key statements 19

20 ELECTRONIC SOLUTIONS DIVISION CHALLENGING FINANCIAL YEAR Sales at the ES Division during the 2015 financial year were CHF million, which is 9.7% below the respective figure for the previous year (2014: CHF million). In local currency terms, the decline was 5.8%. On account of the lower sales, the currency effects and the pressure on prices, EBIT reached CHF 5.1 million, which was clearly lower than in the previous year (2014: CHF 10.0 million). At the EBITDA level before restructuring, the result was CHF 9.4 million, corresponding to a decline of CHF 4.5 million relative to the previous year The situation during the second half of the year remained unchanged in comparison with the first half of The pressure on prices caused by the currency situation remained stubbornly high. The electronic production capacities available in the market exceeded market demand. This situation led to pressure on prices, affecting not just series and mass production, but also prices for the production of prototypes, zero series, and very small series. Production capacity utilization at the site in Arad in Romania remained high, as did demand for Romanian production services, confirming the importance of the planned construction project in Romania. The performance of the business in the Asia region remained unchanged during the second half of 2015 in comparison to the first half However, there is increasing demand for smaller unit volumes with greater product variety, which calls for greater flexibility at the production sites. A major project secured at the end of 2014, as well as the customer projects acquired in 2015, were unable to offset the decline in sales at two major customers. While the decline for one of these two customers was brought about by a strategic realignment, the reason for the decline for the other customer was a delay in the market launch of its latest product. Sales of its existing product were already considerably lower. The newly-acquired customer projects relate to highly-complex products. The products are at an early stage in the product life cycle and are being produced only in low numbers. Demand for engineering services remained high throughout In this field, a trend towards early involvement in the technical product design at the customer is apparent, although this also imposes greater demands on feasibility studies. On the one hand, the advantage of this very early involvement is that production aspects can be introduced earlier and more effectively. At the same time, however, it also extends the time between winning the order and manufacturing the product. MARKET ENVIRONMENT OPPORTUNITIES THANKS TO DEVELOPMENT EXPERTISE AND KNOW-HOW The fourth industrial age has huge potential for companies such as the Cicor Group in a variety of market fields. The major technology trend of networking (IoT, Internet of Things) is also increasingly influencing the design and the features of our customers products. This trend will lead to new business opportunities, both for our customers as well as for the ES Division. The situation in the market segments of Switzerland and Europe is set to remain difficult, and competitive pressures remain high. The highest quality in the field of services and production processes as well as flexibility are important preconditions for success in this environment. Asia remains the market segment with the highest expected growth rates. OUTLOOK FOCUS ON BOOSTING EFFICIENCY AND THE INTERNATIONAL SALES ORGANIZATION Construction of the new building in Bronschhofen is proceeding according to plan. The first offices are set to be occupied during the third quarter of 2016, and the production facilities are scheduled to become operational at the beginning of the fourth quarter. With the move into the new building interfaces within order processing and product productions will be reduced or even eliminated which will lead to an improved efficiency. Planning activities for the new building in Romania continue. It is expected to move into the new building in The production site in Arad will then be able to double its current production capacities. In addition to the two building projects, targeted activities in the individual sites, promoting box building services, boosting sales growth, and improving efficiency will be persued during the 2016 financial year under the heading of Business Excellence. Another key measure will be the strengthening of the global sales organization. This will support and promote the necessary growth in the regions of Asia and Europe. 20 Cicor Annual Report 2015 Key statements

21 ADVANCED MICROELECTRONICS & SUBSTRATES DIVISION DIFFICULT BUSINESS ENVIRONMENT The results reported by the AMS Division in the past financial year were characterized by the demanding economic environment. A large proportion of the market segments stagnated during the period under review. The Swiss watchmaking industry, in particular, continued to disappoint. Due to this situation in the watchmaking industry, at the end of 2015, the Cicor Management Team took the decision to merge the two Swiss printed circuit board production sites in Moudon and Boudry to create a single facility in Boudry. In addition, the decision of the Swiss National Bank to abandon the minimum exchange rate for the Swiss franc against the euro also had a negative impact. Over the year as a whole, year-on-year sales fell by 13.0% to CHF 49.5 million (2014: CHF 56.9 million), this was influenced by the decline in sales at several customers. With the exception of the communications market segment, sales declined in line with the market trend. Sales generated within the communications segment actually rose, thanks to a major customer. In the printed circuit board production field, sales declined in percentage terms less sharply than in the thin-films and micro-assembly field. The AMS Division recorded an EBIT of CHF 4.4 million (2014: CHF 2.3 million) after restructuring costs from consolidating the Cicorel SA site in Moudon with the Boudry site. Before restructuring costs, the operating result at the EBIT level was CHF 0.2 million and CHF 4.9 million at the EBITDA level (2014: CHF 7.6 million). MARKET ENVIRONMENT STRATEGIC POSITIONING IN THE HIGH-TECH FIELD The market strategy of the AMS Division, which specializes in technological high-end applications with a focus on the market segments of medical, industry, aerospace, and defense, will be rigorously maintained. Thanks to the unique set-up of the production sites in the fields of microelectronics and thin-films, with state-of-the-art machinery that also includes clean-room fittings, as well as the combination of processes and materials using thin-film and printed circuit board technologies, the AMS Division is ideally positioned to develop innovative applications with combined technologies for various highly demanding applications in the focus market segments. The Group is optimistic about the industry market segment, driven by current megatrends such as e-mobility, miniaturization of electronic devices and components, as well as the expansion of the broadband network. These trends are boosting demand for innovative PCB systems and solutions. The division is expected to profit in particular from its high development expertise in the fields of interconnect devices, microelectronics, and assembly. In this regard, with its high-end applications, the market sees the AMS Division as the technology leader, particularly when it comes to the development of such products. The AMS Division remains dependent on individual projects and large customers. In addition, the printed circuit board market is highly fragmented. For this reason, the strategic focus of the AMS Division on high-end applications and technologically challenging solutions plays a crucial role. Close cooperation on the development side, as well as in respect of the protection of intellectual property, is often the decisive competitive factor. Here too, the AMS Division has established itself on the market as a proven and trustworthy business partner. The strength of the Swiss franc has already been kept in check by the efficiency rises initiated. The watches and consumer goods market segment is again likely to contract or stagnate in Demand for high-quality printed circuit boards in the high-end field will rise and these will be produced in Europe and in the USA. OUTLOOK FOCUS ON IMPROVING PROFITABILITY The new projects acquired in the year 2015 will begin to generate sales during the 2016 financial year and these will have a positive impact on the results. The focus on high-end projects within the customer portfolio will continue to be pursued rigorously, and the technology leadership will continue to be extended. The AMS Division will concentrate on technologically challenging niches in Europe and in the USA. Considerable potential for this challenging and profitable field is also to be found in the medical, aerospace, and defense market segments. The turnaround will be achieved and the Division will return to the path of growth by concentrating on strengths and maintaining a clear focus on leading-edge technologies. Cicor Annual Report 2015 Key statements 21

22 22 Cicor Financial Report 2015 Corporate Governance

23 CORPORATE GOVERNANCE 24 Group structure and shareholders 24 Capital structure 26 Board of Directors 29 Group Management 30 Compensation, shareholdings and loans 30 Shareholders rights 30 Changes of control and measures 31 Auditors 31 Information policy Cicor Financial Report 2015 Corporate Governance 23

24 1. GROUP STRUCTURE AND SHAREHOLDERS Cicor Technologies Ltd. is committed to meeting the high standards of Corporate Governance that seek to balance entrepreneurship, control and transparency whilst ensuring efficient decision-making processes. This report explains how the management and control of the Company are organized and provides background information on the Group s executive officers and bodies, effective 31 December The report complies with the SIX Swiss Exchange Directive on Information relating to Corporate Governance. In addition, the report considers Cicor Technologies Ltd. s Articles of Incorporation as well as the Company s organization regulation. In the following Corporate Governance Report, the terms Cicor and Company shall be used alternatively to Cicor Technologies Ltd. and the term Group for the company and its subsidiaries. 1.1 GROUP STRUCTURE Cicor Technologies Ltd. is registered in Boudry, Switzerland, and is operationally organized into the AMS and ES Divisions. Cicor Technologies Ltd. is the parent company and is listed on the SIX Swiss Exchange. Market capitalization as of 31 December 2015 Security symbol CHF 73.1 Mio. CICN Security number ISIN Without consideration of the treasury shares, see section 2.1. An overview on the Group s affiliated companies is shown on page 51. CH PRINCIPAL SHAREHOLDERS The following shareholdings correspond to the ones reported according to the regulations of the Swiss Stock Exchange (SIX Swiss Exchange) and updated as in the shares register per year-end: Shares Total in %* Shares Total in %* HEB Swiss Investment AG, Zurich, Switzerland Quaero Capital (vormals ARGOS Funds), Luxembourg Escatec Holdings Ltd. Port Vila, Vanuatu * in % of the total outstanding shares of the company 1.3 CROSS-SHAREHOLDINGS Cicor Technologies Ltd. has no cross-shareholdings with any other company exceeding a reciprocal 3% of capital or voting rights. 2. CAPITAL STRUCTURE 2.1 ORDINARY CAPITAL As of 31 December 2015, the ordinary share capital of Cicor Technologies Ltd. is CHF divided into fully paid-in registered shares with a par value of CHF 10 each. As of 31 December 2015, the Company held (previous year 1 500) of its own shares as Treasury Shares. For a detailed description, please refer to section 18 of the notes to the consolidated financial statements. 2.2 AUTHORIZED AND CONDITIONAL CAPITAL Authorized capital At the Shareholders Meeting at 24 April 2014, the shareholders decided to renew the authorization of the Board of Directors to increase the share capital by a maximum of fully paid-in shares at a nominal value of CHF 10 until 24 April Conditional capital At the Shareholders Meeting of 13 May 2009, the shareholders decided to increase the conditional share capital up to fully paid-in registered shares with a total nominal value up to CHF for the exercise of stock option rights granted to officers and other key employees under an employee stock option plan established by the Board of Directors. As of 31 December 2015, according to the stock option plans approved by the Board of Directors on 3 January 2008, 3 January 2009 and 26 November 2009, options (previous year ) were outstanding. At the Shareholders Meeting of 13 May 2009, the shareholders decided to create additional conditional share capital of up to fully paid-in registered shares with a total nominal value of up to CHF for the exercise of conversion rights granted to holders of convertible debt securities to be issued by the company. Such conversion rights would have to be exercised within five years of the issuance of such convertible debt securities. Cicor Technologies Ltd. has received no notice of any shareholders agreement regarding its shares. As of 31 December 2015, a total of 950 (previous year 1 061) shareholders with voting rights were registered in the share register of Cicor Technologies Ltd. 24 Cicor Financial Report 2015 Corporate Governance

25 2.3 CHANGES IN CAPITAL During 2015, the Company s share capital was increased by CHF from the previous CHF to CHF by issuing (2014: ) registered shares from conditional capital with a par value of CHF 10 for the exercise of stock options. Ordinary capital Registered shares Ordinary share capital (in CHF) Authorized share capital Authorized shares Authorized share capital (in CHF) Conditional share capital Conditional shares Conditional share capital (in CHF) Further information about changes in capital for the last two years can be found on pages 64 and 75/ SHARES AND PARTICIPATION CERTIFICATES With the exception of the shares held by the Company it s elf, each ordinary share is entitled to the same share in the Company s assets and profits and bears one voting right at the Annual Shareholders Meeting, provided the shareholder is registered with voting rights in the Company s share register. Provided that a shareholder does not request the printing and delivery of share certificates for their investment, the shares of the Company are held in collective deposit at SIX SAG AG rather than issued as physical certificates. At the request of some shareholders, the Company has issued a number of physical certificates. As of 31 December 2015, the Company has not issued any participation certificates. 2.5 PROFIT-SHARING CERTIFICATES As of 31 December 2015, the Company has not issued any profit-sharing certificates. 2.6 LIMITATIONS ON TRANSFERABILITY AND NOMINEE REGISTRATIONS All shares of Cicor Technologies Ltd. are registered shares and freely transferable without any limitation. Entry in the Company s share register with voting rights requires evidence that the shares have been transferred for ownership or beneficial interest. There are no registration provisions for nominees. The share register is kept by the SIX SAG AG. 2.7 CONVERTIBLE BONDS AND WARRANTS/OPTIONS The Company has not issued any convertible bonds or similar equity-linked debt instruments as of 31 December Based on the Company s conditional capital (see section 2.2 Authorized and conditional capital ), a first stock option plan for members of the management was established on 3 January Under this plan (Plan 1), a total of call options on shares were allotted to members of the Group Management and certain other key employees. An option is the right to buy one share at a price of CHF 78 during the exercise period. The options are granted free of charge. One third of the options may be exercised as from one year after the grant date, i.e. after 3 January 2009; another third of the options may be exercised as from two years after the grant date, i.e. after 3 January 2010; the last third of the options may be exercised as from three years after the grant date, i.e. after 3 January The exercise period has ended seven years after the grant date, i.e. on 3 January None of the options have been exercised. A second stock option plan for members of the management has been established on 3 January Under this plan (Plan 2), a total of call options on shares were allotted to the members of the Group Management and certain other key employees. An option is the right to buy one share at a price of CHF 32 during the exercise period. The options were granted free of charge. One third of the options may be exercised as from one year after the grant date, i.e. after 3 January 2010; another third of the options may be exercised as from two years after the grant date, i.e. after 3 January 2011; the last third of the options may be exercised as from three years after the grant date, i.e. after 3 January The exercise period ends seven years after the grant date, i.e. on 3 January To date, (2014: ) options have been exercised. A third stock option plan for executive directors and members of management was established on 26 November Under this plan (Plan 3), a total of call options on shares was allotted to executive directors and members of management. An option is the right to buy one share at a price of CHF during the exercise period. The options were granted free of charge. Half of the options may be exercised as from 27 November 2009; another 25% of the options may be exercised as from one year after the grant date, i.e. as from 27 November 2010; the last 25% of the options may be exercised as from two years after the grant date, i.e. as from 27 November The exercise period ends seven years after the grant date, i.e. on 26 November To date, (2014: ) options have been exercised. Cicor Financial Report 2015 Corporate Governance 25

26 3. BOARD OF DIRECTORS 3.1 MEMBERS OF THE BOARD OF DIRECTORS On 31 December 2015, the Board of Directors (Board) of the Company consisted of the following persons: Name/position/ nationality Heinrich J. Essing Chairman Non-executive, German Robert Demuth Non-executive, Swiss Andreas Dill Non-executive, Swiss Erich Haefeli Non-executive, Swiss First election Current term ends Other significant board memberships Managing Director of HEB Swiss Investment AG, Zurich, Member of the Advisory Board of HSBC Trinkaus & Burkhardt AG, Dusseldorf None Member of the Board of Tec-Sem Group, CEO of Evatec Advanced Technologies until 31. August Owner and President of Mariposa Immobilien AG 3.2 OTHER ACTIVITIES AND VESTED INTERESTS Information about other activities of the Board members in addition to their functions for Cicor Technologies Ltd. is listed in the table above. Unless otherwise described in the curriculum vitae, the non-executive members of the Board do not have any material business connections with the Group. 3.3 ELECTIONS AND TERMS OF OFFICE According to the Company s Articles of Incorporation, the Board consists of one or more members. The members of the Board as well as the Chairman of the Board are elected by the Annual Shareholders Meeting for a term of office of one year. There are no limits as to how many times a member can be re-elected, or any upper age limit for election. According to the Company s Articles of Incorporation, at least one member must be domiciled in Switzerland. 3.4 INTERNAL ORGANIZATIONAL STRUCTURE The Board constitutes itself at its first meeting after the Annual Shareholders Meeting except for the appointment of the Chairman of the Board and the members of the Remuneration Committee. It appoints if necessary its Vice Chairman, the Presidium and the Audit Committee as well as a Secretary, who does not need to be a member of the Board. The Board meets as often as the Company s affairs require or upon the written request of one of its members. The Board approves resolutions and holds elections with the majority of its votes. The Board is the highest executive instance within the Group Management structure and takes responsibility of the overall governance of the Company and the Group. It oversees the management of their affairs. The basic principles regarding the definition of the areas of responsibility between the Board and the Group Management are described in section 3.5. The Chairman of the Board of Directors The Chairman heads the Meetings of the Board, the Presidium, and the Shareholders Meeting. He supervises the implementation of the resolutions passed by the Board and coordinates the work of the Committees ensuring that the Board as a whole operates as an integrated, cohesive body. The Chairman of the Board of Directors is Heinrich J. Essing. The Presidium The Presidium consists of the Chairman of the Board and up to two additional designated Board members. The following members have been appointed to the Presidium: Heinrich J. Essing, Chairman Robert Demuth, Vice Chairman It is the first priority of the Presidium to supervise the duties and functions undertaken by the CEO and CFO as well as the other members of the Group Management and to act as an intermediary between the Board and the officers entrusted with the management of the Group. The Presidium takes decisions on financial and other matters delegated by the Board in accordance with the Regulations regarding the Delegation of Management. In particular, the Presidium is responsible for: preparing resolutions of the Board and overseeing their implementation where this function is not carried out directly by the CEO or by a Committee of the Board; planning for the replacement of outgoing members and evaluating candidates for positions on the Board; proposing to the Board for approval the members of the Committees of the Board, the members of the Presidium, the CEO, the CFO, the members of the Group Management; appointing members to the Boards of subsidiaries and appointing the Unit Managers proposed by the CEO; discharging other duties in the area of Corporate Gover nance, where such duties are not assigned to a Committee or Committee of the Board under the revised Regulations; 26 Cicor Financial Report 2015 Corporate Governance

27 Andreas Dill Born 1954, graduated as an electrical engineer (MEng) from the ETH Zurich. He started his professional career in the semiconductor industry at Zevatech AG where he took on various re sponsibilities from R+D engineer to General Manager. From 1998 to 2015, Andreas Dill has worked in various management positions at the Oerlikon Corporation, last as CEO of the Advanced Technologies Segment and a member of the Oerlikon executive committee. Andreas Dill is the owner of the Consulting Company Andreas Dill Strategic Business Consulting. He is also a board member of Tec-Sem Group. Robert Demuth, Vice Chairman Born 1947, holds a degree in mechanical engineering (dipl. Ing. HTL Maschinenbau) from the Hochschule für Technik & Architektur Luzern as well as an Executive MBA from the University of St. Gall. Robert Demuth started his career with Rieter before being appointed head of R&D of Bühler AG. Robert Demuth then served as CEO and delegate of Dyconex AG, a Swiss company active in the field of high-tech PCBs, MCMs and electronic interconnection technology. From 2005 to 2007, Robert Demuth held executive functions within the Group. Robert Demuth is owner of the Consulting Company Robert Demuth Industrial Investment Management. Heinrich J. Essing, Chairman Born 1949, has acted as private secretary and manager of various family offices for more than 20 years. He is currently CEO of HEC Group and of its subsidiaries in Germany and abroad like Sydney or Toronto. Heinrich J. Essing also acts as managing director of HEB Swiss Investment AG which is one of the Company s larger shareholders. Heinrich J. Essing is also a member of the Board of Directors of HSBC Trinkhaus & Burkhardt AG, Düsseldorf. Erich Haefeli Born 1950, studied law at the University of Zurich. For many years, he headed the legal and patent department of OC Oerlikon Balzers AG and was also a member of the company s Executive Management. In addition, he served on the Board of Directors of many firms in the Oerlikon-Bührle Group, which is today the industrial group Oerlikon. Erich Haefeli is owner and President of Mariposa Immobilien AG. supervising and performing the ad hoc and regular information requirements, especially under the SIX Swiss Exchange regulations and guidelines; approving expenditures, investments or divestments of property, plant and equipment whose total value exceeds CHF 0.5 million. In case of investments and divestments whose total value exceeds CHF 2 million, the Presidium submits a report and a proposal to the full Board. In addition, the Presidium assists the Board on matters relating to finance, investment and capital assets, and in evaluating risks pertaining thereto. It prepares proposals on such issues for a vote by the Board. Specifically, the Presidium reviews: financial planning, budgets and budget execution; investments of liquid assets and financial investments, including investments of assets by the Company s postemployment benefit plans; long-term business plans and strategy as well as their communication in the Company s annual reports; reporting of non-operational results. The Presidium also makes decisions and takes preliminary action on behalf of the full Board in urgent cases. Audit Committee The Audit Committee consists of three Board members elected by the Board of Directors. The following members have been appointed: Robert Demuth, Chairman Andreas Dill Erich Haefeli The Audit Committee assists the Board in supervising the management of the Company, particularly with respect to financial and legal matters as well as in relation to compliance with internal business policies and codes of practice. Cicor Financial Report 2015 Corporate Governance 27