LEM with solid performance for full year 2023/24 in weakening markets

LEM HOLDING SA / Key word(s): Annual Results
LEM with solid performance for full year 2023/24 in weakening markets

28-May-2024 / 07:00 CET/CEST
Release of an ad hoc announcement pursuant to Art. 53 LR
The issuer is solely responsible for the content of this announcement.

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Geneva, 28 May 2024 - LEM (SIX: LEHN), a global leader in electrical
measurement for automation, e-mobility, renewable energy, power network and
railroad applications, announces its results for the full year of 2023/24
(April-March):

  * LEM maintained sales at prior year level with CHF 405.8 million (full
    year 2022/23: CHF 406.4 million). At constant exchange rates, sales
    increased by 7.2%.

  * LEM achieved the strongest growth in the EMEA region with 22.6% and Rest
    of Asia reached 15.9%. Americas decreased 5.0% while China was down
    24.2% year-on-year due to the economic slowdown. At constant currencies,
    growth in Rest of Asia was 26.0%, while the decline in China was only
    15.3%.

  * Starting from the previous year's peak, bookings further normalized to
    CHF 243.3 million (CHF 465.2 million); the book-to-bill ratio was 0.60.

  * EBIT declined by 12.1% to CHF 81.1 million (CHF 92.2 million); the EBIT
    margin amounted to 20.0%. Net profit decreased to CHF 65.3 million,
    resulting in a net profit margin of 16.1% (CHF 75.3 million; 18.5%).

* Operating cash flow amounted to CHF 74.4 million (CHF 87.0 million).

  * The Board of Directors proposes a dividend of CHF 50 per share,
    representing a payout ratio of 87.3%.

* Dr. Libo Zhang proposed as new member of the Board of Directors.

  * Sustainability strategy driven forward and first standalone
    Sustainability Report published.

  * LEM expects market development to be moderate in the current financial
    year. The main reason for some headwind is that it will still take time
    for customers to reduce their inventories, particularly in the Renewable
    Energy and Automation markets. Based on forecasts from customers, LEM
    expects the situation to improve during the second half of 2024/25.

Frank Rehfeld, Chief Executive Officer, said: 'LEM operates in markets in
which the currency was devaluated against the CHF. The growth of more than
7% in constant currencies confirms the opportunities in our markets,
however, remains below our ambition. In 2023/24, we saw two different trends
in the two half-year periods, which were characterized by both cyclical and
structural developments. We were able to successfully develop our businesses
and benefit from fundamental, environmentally friendly trends in the
increasingly competitive areas of electrification, renewable energies and
e-mobility. These megatrends will remain dominant in the future. In addition
to our usual high level of investment in R&D, we further expanded our
research and development capacities and opened two new R&D centers in
Munich, Germany and Sofia, Bulgaria, and expanded the site in Shanghai,
China, to also host R&D activities. The pleasing result was reflected in the
launch of 11 new products from our expanded R&D pipeline.'

Andrea Borla, Chief Financial Officer, commented, 'The fourth quarter showed
a significant decline in order intake of 46.3%, in sales of 14.8% and an
EBIT margin of 13.2%, which was negatively impacted by 3-percentage-points
due to severance costs. The measures introduced to increase our agility and
improve our cost positions were stepped up and have shown initial success
but will only take full effect over a longer period of time. However, the
fundamental growth drivers remain intact.'


Sales by business
-----------------

  in CHF millions  Scope               2023/-  2022/-  Ch-  Change at
  Business                             24      23      an-  constant
                                                       ge   exchange rates
  Automation       drives, robots,     120.0   136.3   -1-  -5.5%
                   tooling machines,                   1.-
                   elevators, HVAC                     9%
  Automotive       battery (EV & CE),  98.6    100.7   -2-  +6.8%
                   motor control,                      .1-
                   onboard charging                    %
  Renewable        solar, wind         70.8    67.0    +5-  +14.8%
  Energy                                               .6-
                                                       %
  Energy           charging stations,  60.9    59.4    +2-  +8.2%
  Distribution &   smart grid, energy                  .6-
  High Precision   storage, high                       %
                   precision
  Track            trains, metro,      55.5    43.0    +2-  +35.4%
                   trackside                           9.-
                                                       1%
  Total                                405.8   406.4   -0-  +7.2%
                                                       .1-
                                                       %

Automation

The business largely developed in line with the global economic trend. The
first half of the year was relatively solid. Among other factors, the
automation business benefited from the trend towards sustainable and
customer-oriented solutions in manufacturing, particularly in EMEA. In the
second half of the year, the automation business slowed down in more
difficult economic conditions as well as due to high inventories. In China,
sales weakened slightly due to declining exports.

Automotive

Sales in the Automotive business showed moderate growth year-on-year with
weaker momentum in the second half of the year. Growth was driven by good
sales in EMEA and South Korea. In contrast, sales in China, the single most
important market, declined against the backdrop of an increasingly
competitive environment. However, the cost initiatives introduced, and the
enhanced customer focus began to show the desired improvements.

Renewable Energy

Renewable Energy recorded a good overall business performance, albeit with
regional variations. The business saw strong demand from EMEA, Americas,
Japan and India in the first half of the financial year. This compensated
for declining business in China, where exports of solar energy generation
equipment have slowed down, and destocking was taking place at Chinese
manufacturers and their distributors. Starting from this good level in EMEA,
Americas, Japan and India, there was a slowdown from the third quarter
onwards. Demand in domestic installations declined seasonally, while
customers in Europe also had high stock levels. Price pressure was
noticeable in both China and Europe.

Energy Distribution & High Precision

Energy Distribution & High Precision achieved steady growth in an
increasingly competitive environment that also affected OEMs. The DC meter
for charging stations continued to sell very well, although growth slowed
significantly in the second half of the year. Products for smart grid
developed solidly due to the favorable growth rates in these markets,
although customers were rather reluctant to invest at the end of the
financial year. The testing and measurement business for laboratory
equipment performed well in the first half of the year due to good demand
from the e-mobility sector, which invested in the development of batteries.
The second half of the year was weaker, which is in line with the general
slowdown in e-mobility. In medical technology, the first half of the year
was also good, followed by a slowdown in the second half of the year.

Track

Starting from a weak prior-year base, the Track business achieved a jump in
sales. Momentum was exceptionally high in the first half of the financial
year, settling into solid growth in the second half. The renewal of energy
meters for locomotives in various EU countries generated additional demand
in EMEA. Track also recorded robust growth in China, supported by a positive
market environment.


Sales by region

  in CHF        Scope            2023/-  2022/-  Cha-  Change at constant
  millions                       24      23      nge   exchange rates
  Region
  China                          119.7   157.9   -24-  -15.3%
                                                 .2%
  Rest of Asia  Japan, South     82.3    71.0    +15-  +26.0%
                Korea, India,                    .9%
                South-East Asia
  EMEA          Europe, Middle   156.5   127.7   +22-  +26.7%
                East & Africa                    .6%
  Americas      NAFTA & Latin    47.3    49.8    -5.-  +1.9%
                America                          0%
  Total                          405.8   406.4   -0.-  +7.2%
                                                 1%

China

LEM was confronted with a difficult environment on the Chinese market, which
was also reflected in a significant decline in sales. This was due to slow
economic growth, declining exports of solar inverters, lower sales of
products for e-mobility and significantly negative currency effects. LEM
also saw some market share loss in the highly competitive e-mobility and
renewable energy sectors. Increased speed and competitive pressure are the
biggest challenges in China. In this environment, LEM implemented measures
to become more agile, focusing on greater customer proximity, increased
local R&D and strengthened regional decision-making.

Rest of Asia

The other Asian markets, particularly Korea and Japan, recorded a
broad-based upturn and solid business, partially offsetting the decline in
China. In sensors for electric and hybrid vehicles, LEM achieved strong
growth in South Korea and to a lesser extent in Japan. Automation and
renewable energy solutions were also performing well in Japan. In India,
there was good demand from the infrastructure sector for track and energy
distribution solutions, as well as for solar and wind power generation
products. LEM's customers today are having increased focus on the resilience
of their suppliers and are looking for dual sourcing options. To meet these
needs, LEM has expanded its manufacturing capabilities with a new production
facility in Penang, Malaysia. The new production site enables LEM to supply
the Asian markets as well as the USA and Europe from Asia. The site is also
well positioned in proximity to major semiconductor manufacturers.

EMEA

Business in EMEA went extremely well, driven by strong demand in all
business areas and a normalization of supply chains. LEM was able to reduce
order backlogs in the first half of the year, after which the market
weakened noticeably. DC Meters saw a jump in sales due to extensive
investments in the expansion of charging infrastructure. Automotive,
Renewable Energy and Track also performed well.

Americas

The Americas region delivered a decent performance in the face of overall
subdued investment activity from the second quarter onwards and a negative
currency impact. One focus in the reporting period was on expanding the
sales and field service team to broaden the customer base and accelerate
growth, particularly in e-mobility.


Profitability maintained at a high level

Gross profit for the financial year 2023/24 decreased by 1.6% to CHF 189.2
million (CHF 192.2 million). The gross profit margin decreased slightly from
47.3% to 46.6% and was in line with the long-term average. The gross margin
was impacted by higher costs for electronic components, provisions for slow
moving stocks and positively influenced by the improved business mix.

SG&A costs were 9.3% higher at CHF 74.4 million (CHF 68.1 million) due to
LEM's investments in digitalization projects, such as the first successful
launches of the new ERP system, and build-up costs for the new production
facility in Malaysia. In addition, severance costs resulted from the layoff
of 40 employees. Overall, SG&A costs as a percentage of sales increased to
18.3% (16.8%). LEM continued its investments in future applications and
opened two new R&D centers in Germany and Bulgaria, expanded the R&D site in
China and increased the headcount overall by 30 engineers. This build-up is
reflected in the increase in R&D costs by 5.3% to CHF 33.9 million or 8.3%
of sales (CHF 32.2 million; 7.9%).

The EBIT declined by 12.1%, from CHF 92.2 million to CHF 81.1 million. The
EBIT margin was down from 22.7% to 20.0% due to the increased SG&A and R&D
expenses.

Financial expenses increased from CHF 1.3 million to CHF 2.8 million due to
an increase in interest rates and higher average debt. Exchange rate effects
due to the Swiss franc appreciation had a negative impact of CHF 3.3 million
(CHF 1.9 million).

The effective tax rate was 12.9% due to the increase in deferred tax assets
as a result of the increase in the Canton of Geneva tax rate from 1 January
2024 and the sale of an IP in China. Without these one-off effects, the tax
rate would have been at 15.5%.

Net profit decreased from CHF 75.3 million to CHF 65.3 million, mainly due
to the lower operating result, while lower taxes had a slightly supportive
effect. As a result, the net profit margin decreased to 16.1% (18.5%).

The Board of Directors will propose to the Annual General Meeting on June
27, 2024 that a dividend of CHF 50 per share be distributed for the 2023/24
financial year.

Dr. Libo Zhang to be elected as new member of the Board of Directors

Furthermore, the Board of Directors will propose to the Annual General
Meeting the election of Dr. Libo Zhang as member of the Board of Directors.
Dr. Libo Zhang is an independent Board Professional and Corporate Finance
Advisor. Among other mandates, she is a member of the Board of Directors of
the Swiss technology group VAT. Previously, Ms. Zhang was CFO of the
automotive manufacturer Borgward Group AG in Germany and of FFG Europe &
Americas, a worldwide specialist in the tooling machine industry. She has
many years of experience in management positions in the areas of finance,
controlling and commercial processes in international industrial companies.
Ms. Zhang is German citizen and holds a PhD in Economics and an MBA from
Georg-August University in Göttingen, Germany. The Board of Directors is
convinced that with her background, know-how and experience Ms. Zhang will
be a very valuable contributor to the future of LEM.


Sustainability strategy driven forward

Over the financial year 2023/24, LEM is proud to report a strong improvement
on Sustainability to continue helping customers and society accelerate the
transition to a sustainable future. Solid foundations have been grounded to
build up the LEM sustainability strategy. On the governance side, a
dedicated team has been created with clear roles, responsibilities, and
accountabilities throughout the organization. The ESG topics on which LEM
will focus have been identified and KPIs for measuring target achievement
have been defined. Furthermore, concrete actions were implemented to improve
LEM's ESG posture and reduce its carbon footprint such as management
remuneration linked to Scope 1 and 2 emission reduction. Detailed
information can be found in the standalone Sustainability Report published
for the first time.


Outlook

LEM expects market development to be moderate in the current financial year.
The main reason for some headwind is that it will still take time for
customers to reduce their inventories, particularly in the Renewable Energy
and Automation markets. Based on forecasts from customers, LEM expects the
situation to improve during the second half of 2024/25.


Investor, analyst and media conference
--------------------------------------

Andreas Hürlimann, Chairman of the Board of Directors, Frank Rehfeld, CEO,
and Andrea Borla, CFO, will explain the 2023/24 full-year results and
provide an outlook for the current financial year today at 10:30 am CET at a
conference for investors, analysts and media at the Widder Hotel in Zurich.

Conference call and audio webcast

The conference for investors, analysts and the media will be broadcast via
conference call and audio webcast.

To participate in the conference call, please register via this link. You
will then receive a confirmation e-mail with individual dial-in data. As a
participant in the conference call, you can follow the presentation here.

To access the audio webcast, please use this link. Questions can be asked
via the chat function. A recording of the webcast will be available 2 hours
after the call from LEM's website or using the same link.

Download link

The ad hoc announcement, Annual Report and presentation are available in the
Investor Relations section of the LEM website ( www.lem.com/en/investors),
where the webcast recording will later also be archived.

Financial calendar

The financial year runs from 1 April to 31 March

     27 June 2024       Annual General Meeting for the financial year
                        2023/24
     2 July 2024        Dividend ex-date
     4 July 2024        Dividend payment date
     26 July 2024       First quarter results 2024/25
     11 November        Half year results 2024/25
     2024
     7 February 2025    9 months results 2024/25
     27 May 2025        Full year results 2024/25
     26 June 2025       Annual General Meeting for the financial year
                        2024/25
     1 July 2025        Dividend ex-date
     3 July 2025        Dividend payment date

LEM - Life Energy Motion
------------------------

A leading company in electrical measurement, LEM engineers the best
solutions for energy and mobility, ensuring that our customers' systems are
optimized, reliable and safe.

Our 1'800 people in 17 countries transform technology potential into
powerful answers. We develop and recruit the best global talent, working at
the forefront of megatrends such as renewable energy, mobility, automation
and digitization. With innovative electrical solutions, we are helping our
customers and society accelerate the transition to a more sustainable
future.

Listed on the SIX Swiss Exchange since 1986, the company's ticker symbol is
LEHN.

www.lem.com

   Investor contact Andrea    Media contact Dynamics Group Thomas Balmer,
   Borla, Chief Finance       +41 79 703 87 28, (1)tba@dynamicsgroup.ch
   Officer +41 22 706 1250    Christian Wolf, +41 79 457 72 05,
   (1)investor@lem.com  1.    (2)cwo@dynamicsgroup.ch  1.
   mailto:investor@lem.com    mailto:tba@dynamicsgroup.ch 2.
                              mailto:cwo@dynamicsgroup.ch

Appendix

ATTACHMENTS:

Press Release (pdf): LEM FY Results 2023/24

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End of Inside Information

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   Language:       English
   Company:        LEM HOLDING SA
                   Route du Nant-d'Avril 152
                   1217 Meyrin
                   Switzerland
   E-mail:         investor@lem.com
   Internet:       www.lem.com
   ISIN:           CH0022427626
   Listed:         SIX Swiss Exchange
   EQS News ID:    1912163

End of Announcement EQS News Service
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1912163 28-May-2024 CET/CEST