SFS : Presentation Investor Day 2020

SFS Investor Day 2020

Heerbrugg, 9 September 2020

Agenda

1.	SFS DNA and business update (9:00 am)	Jens Breu
2.	Financial update	Jens Breu/Rolf Frei
	Financial update
	Q&A
3.	Divisional focus (9:45 am)
	Automotive division	Alfred Schneider
	Electronics division	George Poh
	Construction division	Arthur Blank
	Medical division	Jens Breu
	Q&A
4.	Plant tour/buffet lunch (11:15 am)

SFS Investor Day 2020 | 9 September 2020

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SFS DNA

SFS Investor Day 2020 | 9 September 2020

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Mission critical products for selected niche applications We are by your side - 24/7

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Mission critical products for selected niche applications We are by your side - 24/7

Drug Delivery

& Fluid Mgmt.

CAGR 7.6%

In-Vitro

Diagnostics

CAGR: 5.3%

	Total market size 2019
Orthopedics	$440bn
CAGR: 4.4%	2019 - '25e CAGR
	6.8%

Cardio-

vascular

CAGR: 7.6%

Surgical

Devices

CAGR: 6.9%

Other Devices

CAGR: 8.6%

Respiratory

Care

CAGR: 5.3%

Medical

Imaging

CAGR: 4.4%

Source: MassMEDIC

Medtech market snapshot on SFS position

• Well positioned within 6 of 8 global medtech markets
• Broad customer base whereas 10 of the top 15 global Medtech OEM's are buying customers
• Positioned as development and manufacturing partner for new devices, implants or complex components

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Mission critical products for selected niche applications We are by your side - 24/7

Key drivers of outsourcing decisions

Scalability

Cost savings

Vertical integration

• Access to scalable capacity to ensure reliable production in support of the market's demand
• Cost containment via automation and pursuit of economies of scale
• Vendor optimization by consolidating multiple phases of the product life cycle with "one- stop-shop" suppliers

Quality

Technology know-how

• Consistent compliance to required quality standards
• Enhancement of non-core technical competences

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Relevance of Additive Manufacturing (AM) Potential in product development and operations

Potential

• Rapid prototyping
• No tooling costs
• Realization of difficult geometries
• Continued market penetration leading to technology enhancements and sinking prices

Current limitations

• Limited material availability
• Output rate in serial production
• Material characteristics (surface, density, porosity)
• Post processing requirements

Machine parts		Tooling		Prototyping		Part of technology networks

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SFS Value Engineering - Reference Case D&L

Creating sustainable benefit

Large D&L product offering in tools and fasteners (>150,000 items) allows customer to source more than 5,000 articles from SFS, leading to reduce supplier base

Efficient supply processes and global footprint offer stable supply chain for customer's Swiss and international facilities

SFS logistic systems (eLogistics, eShop, toolLog) created for tailor made order processes, resulting in increased efficiency, reduced invent- tory and lower risk of shortages

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SFS Value Engineering - Reference Case Dental

Creating sustainable benefit

In depth plastics injection molding know-how allowed to fulfill custom- er's material requirements for the dental industry. High market acceptance resulting 110m parts in 2019

Labelling, packaging and storage directly at SFS' site and shipments to customer's distribution hub allow for significantly reduced handling

Leverage Industry 4.0 opportunities of digitization to constantly improve processes

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Business update

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Key takeaways updated

Priorities of 1H 2020 driven by COVID-19 pandemic

• Priorities of 1H 2020 driven by COVID-19 pandemic
• • Turning attention to employee safety
  • Balancing manufacturing capacity
  • Cost management while maintaining innovation activities
• 1H 2020 with an organic decline of -10.4%
• • 1st quarter: solid organic growth of 0.9% y-o-y
  • 2nd quarter significantly impacted by the pandemic: organic growth of -21.0%
  • Despite decline in revenue healthy EBIT margin of 9.2% and EBITDA margin of 15.5%
• 2H 2020 - Expectations
• • Organic growth in Medical and Electronics to continue compared to 1H
  • Expect solid further recovery step, especially in Automotive and Construction markets
  • Industrial customers in Switzerland and Germany to have slightly slower recovery
  • Aircraft business to remain challenging, further visibility on new "normal" not yet given

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Headlines Engineered Components segment updated Automotive stimulated | Industrial remains weak

• COVID-19with significant impact on demand:
• • 1H 2020 organic sales -13.5%y-o-y
  • Electronics and Medical with organic growth
• Acquisition of T&M adds deep drawing to the North American manufacturing capabilities
• Temporary measures taken to offset impact on profitability from decline in end market sales, resulting in EBIT of CHF 35.1m (9.1%)
• In order to realize the acquired growth projects at Industrial and Medical divisions, significant investments in site expansions are made in Switzerland and the USA

Key figures Engineered Components
	2020	2020	2019
in CHF million (unaudited)	Jul/Aug	1H	1H
Third party sales		380.1	454.2
Sales growth comparable	-9.1%	-13.5%
EBITDA		69.1	96.4
As a % of net sales		17.9	21.0
Operating profit (EBIT) adjusted		35.1	73.9
As a % of net sales		9.1	16.1
Average Capital Employed		710.3	680.6
Investments		48.6	44.3
Full-time equivalents (FTE)		6,978	7,310
ROCE in %		9.9	21.7

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Headlines Fastening Systems segment updated Continued investments in expanding market reach

• Less pronounced impact of COVID-19 on construction market and scope effects limit- ing decline of segment sales to -10.0%y-o-y
• Investments into expansion of market reach with acquisition of MBE
• Development at Riveting division significantly impacted by low demand from automotive and industrial customers
• Impact of weaker demand on operating re- sults offset by temporary capacity reductions and tight cost management
  • 1H EBIT margin at 9.5% (CHF 22.7 m)

Key figures Fastening Systems
	2020	2020	2019
in CHF million (unaudited)	Jul/Aug	1H	1H
Third party sales		234.0	248.3
Sales growth comparable	-2.7%	-10.0%
EBITDA		32.2	34.1
As a % of net sales		13.5	13.4
Operating profit (EBIT)		22.7	24.0
As a % of net sales		9.5	9.4
Average Capital Employed		288.5	294.8
Investments		4.3	9.1
Full-time equivalents (FTE)		2,386	2,459
ROCE in %		15.7	16.3

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Headlines Distribution & Logistics segment updated Positive results despite difficult environment

• Organic sales of CHF 159.6 m representing a decline of -2.6%y-o-y
• Multi-channelapproach particularly beneficial during COVID-19 induced lockdown with e-commerce site being an effective alternative
• EBIT margin at 8.9% supported by cost meas- ures
• Iso Raunjak who joined SFS in 1992 ap- pointed new head of the segment, taking over from Josef Zünd who retired

Key figures Distribution & Logistics
	2020	2020	2019
in CHF million (unaudited)	Jul/Aug	1H	1H
Third party sales		159.6	165.3
Sales growth comparable	-2.4%	-2.6
EBITDA		17.2	21.2
As a % of net sales		10.6	12.6
Operating profit (EBIT) adjusted		14.5	13.3
As a % of net sales		8.9	7.9
Average Capital Employed		129.0	138.5
Investments		1.9	1.6
Full-time equivalents (FTE)		595.0	618.0
ROCE in %		22.4	19.2

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Financial update

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Historical background

1H20 EBITDA stronger than during crisis in 2009

Sales in CHF million

EBITDA margin adjusted

		19.1%						20.7%
2'000				18.9%								20%
1'600									1633	1739	1781	15.5%	16%
1'200 11.7%			1193	1331	1383	1376	1437		12%
800	1122	1093	1068		8%
400													4%
0	2009	2010	2011	2012	2013	2014	2015	2016	2017	2018	2019	1H20	0%
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KPI summary 1H 2020

Solid performance in challenging times

In CHF million		1H 2020	%	1H 2019	%	yoy
Sales		773.7		867.8		-10.8%
EBITDA	margin	120.3	15.5%	152.6	17.6%	-21.2%
EBIT adjusted	margin	71.0	9.2%	109.2	12.6%	-34.9%
Net income	margin	53.9	7.0%	88.6	10.2%	-39.1%
Equity	ratio	1,169.0	72.7%	1,139.2	75.5%	2.6%
Net cash		-11.4		-51.9
Capex	% net sales	56.6	7.3%	56.4	6.5%	0.4%
Free cash flow	conversion rate	46.0	38.2%	48.7	31.9%	-5.5%
ROCE		12.6%		19.5%

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Organic sales development end markets July & August better than expected

Organic growth in % yoy
10%		Weakening global economy
5%	7.5% 6.7%		COVID-19
0%	4.1%	1.4%	0.9%
	0.7%
-5%		-1.0%	-6.1%
	-3.1%-1.7%
-10%

-15%

-20%
2018	2019	-21.0%2020
-25%
Q1 Q2 Q3 Q4	Q1 Q2 Q3 Q4	Q1 Q2 J / A

Jul/Aug

-6.1%

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Organic sales development segments

Strong impact in Q2 | Improvement in July & August

Organic growth in % yoy	SFSG	EC	FS	D&L
5%	0.9%	2.1%
	0.4%
0%
-5%		-1.3%					-2.7%-2.4%
					-5.6%
-10%						-6.1%
						-9.1%
-15%
-20%					-17.1%
		-21.0%
-25%
-30%				-29.0%
-35%		Q1.2020		Q2.2020		Jul/Aug

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Organic sales development

Q4 with limited visibility | We stay cautious

Organic growth in % yoy
10%				Weakening global economy
5%	7.5% 6.7%							COVID-19
4.1%
0%						1.4% 0.7%	0.9%
									•	Q4 uncertain
				-1.0%
-5%				-3.1%	-1.7%							due to low visibility
-10%													 "shortened" V-curve
												 upside potential
-15%													possible
-20%									-21.0%2020
-25%		2018			2019
Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4

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Operating profitability

Q4 with limited visibility | We stay cautious

EBIT adjusted in CHF million	EBIT adjusted margin in %

	14.2%	14.3%	13.6%	14.4%		14.2%			16%
				12.6%
150							Upside potential	12%
				127.1		129.9	9.2%	Guidance
100	110.9	122.4	116.0
109.2			8%
	71.0
50								4%
0	1H2017	2H2017	1H2018	2H2018	1H2019	2H2019	1H2020	2H2020	0%
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Guidance 2H2020

Q4 with limited visibility | We stay cautious

	2020 G	1H2020 A	2H2020 G
	(March*)		(July**)
Gross sales CHF million		773.7	> 773.7
Gross sales growth	0-2%	-10.8%
Organic	-1.5%-0.5%	-10.4%
Scope	1.5%	3.4%
FX	n/a	-3.8%
EBIT adjusted	12-14%	9.2%	~ 9.2%

• In March we were not in a position to assess the impact of COVID-19
• SFS assumes no second wave of COVID-19 in 2H2020

A = Actual G = Guidance

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Mid-Term guidance

Maintained potential to outgrow global GDP

	Mid-term guidance	Mid-term guidance
	(dated 2014, IPO)	(dated 2020)
Gross sales	5-7%	3-6%
(in local currency, incl. bolt-on M&A)
EBIT margin adjusted	15-17%	13-16%

Remarks for update:

• Global GDP growth decelerated
• Mix effects (share FS increased)
• Widening the range due to increased volatility

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Q&A

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Divisional focus

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Automotive division

Alfred Schneider, Head of Automotive division

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Positioning and market trends

Positioned to serve above average growing segments

Position within automotive market

• Supplying the automotive industry and its supply chain with precision components
• Focus on areas of
• • Active and passive safety
  • Autonomous driving
  • Engine efficiency and electrification
• Activities focused on EU, NA, CN and IN
• Major key accounts served world-wide

Key trends in industry

Global light vehicle production forecast (2018-'25)

100																											20%
80																											10%
60																											0%
40																											-10%
20																											-20%
0																									-30%
2018	2019	2020	2021	2022	2023	2024	2025
											Cars build		vs. PY							Source: IHS, July 2020

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Growth drivers Automotive division

Growth largely independent from specific drive concept

Combustion engine	Combustion engine markets (90%) &
markets	EV (10%) by 2025
~15% India	~50% Europe
~30% Americas	~5% China/RoW

• mid-termnot at risk  mid-term at limited risk
  ~45%~55%

2019 Interior

2012 Interior

Powertrain

Restraint

ABS/ESP

~20%	Sensors
Power-	Restraint	ABS / ESP
train

Electric Braking

Growth: >70%

CAGR: >8%

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Car with conventional hydraulic brake system SFS value content in ABS/ESC only

Anti blocking system (ABS)/ Electronic stability control (ESC)

ABS Parts	ABS/ESC

System components

1. Brake booster
2. Vacuum pump
3. ABS/ESC
4. Brake caliper
5. Brake caliper with park brake
6. Park brake lever

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Car with modern 'brake by wire' brake system Potential SFS value content up to ~5x higher

Global light vehicle production forecast

• 2020: 70m vehicles
• 2025: 95m vehicles

Source: IHS, July 2020

ABS/ESC

ABS/ESC

ABS Parts

Electric Parking Brake (EPB)

EPB Module

EPB Actuators

Integrated Brake System

Power	Power
Break Module	Break Actuators

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Expansion of production capacities at Heerbrugg Realization of new projects for braking applications

• Continued new project wins from key customers in the area of electric braking applications require expansion of production capacity in Heerbrugg
• Planned investment into first step of build-out estimated at CHF 25-30m, providing necessary production space until 2027
• Customers will benefit from the site's leading position in production of know-how intensive and innovative products based on highly efficient and automated processes
• Investment allows to serve global key customers with components in EU (CH, Heerbrugg), NA (US, Medina) and Asia (CN, Nantong)

Visualization of planned building expansion at Heerbrugg; realization of part to the right expected to start in 2021

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Cameras/sensors for autonomous driving Significant growth potential for the years to come

Surround view camera (4x/car)	Ultrasonic parking
Market penetration: <5%	sensor (8-12x/car)
	Market penetration: <30%

Camera housings

	Membrane pots
Front camera (1x/car)	Radar (1x/car)
Market penetration: <10%	Market penetration: <10%

	Long-Range Radar
	LIDAR
Lens holder	Camera	Brackets
Short-/Medium - Range Radar

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Automotive division priorities

Key initiatives to grow top and bottom line

Capacity	Leverage on	Employees	Leader in BSD	Global
management	innovations	technology	platform

Match production	Maintain focus	Continue with	Foster global	Leverage global
capacity and	on identified	preventive meas-	leading market	platforms to deploy
demand situation	innovation trends	ures to protect	position in actuator	key products and
		employee health &	technology	technologies in
		safety		Asia and US

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Electronics division

George Poh, Head of Electronics division

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Positioning and market trends

Positioned to serve above average growing segments

Position within electronics market

• Supplying the electronics industry based on 7 core technologies and with 8 core products
• Focus on end market segments
• • Mobile Devices
  • Lifestyle Electronics
  • Hard Disc Drive
• Manufacturing activities focused on Asia
• Global marketing including North America
• Major key accounts served world-wide

Key trends in industry

Mobile Lifestyle

device Electronics

growth growth

Growth driven by emerging markets demand, technology upgrades, customer product ecosystem growth & accessories expansion

HDD

replacement

Cloud data storage to drive demand for Nearline HDD but SSD will replace certain HDD applications

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New Nantong facility

Platform to expand SFS' business in Asia

• Located one hour north of Shanghai, second largest site (77,000 m2) of SFS after Heerbrugg
• All SFS core technologies combined under one roof
• License for comprehensive in-house plating solution
• Platform for development of other SFS busi- nesses (Automotive, Industrial, D&L) in Asia
• Home base of Electronics' mobile devices and lifestyle electronics businesses
• Abundant potential for further growth (space and utilization rate), land reserves of approx. 20,000 m2

Surface treatment	Waste Water Plant
	Stamping
Plastic injection	Cold forming
Precision machining
molding
Warehouse	Office / Canteen

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Multilevel customer penetration

Growth across product ecosystem and technologies

	AR/VR
	Wireless Charger
	Wireless Earbuds/
	Headphones	Increase
penetration	Power Adaptor
Smart Speaker	application
engagement
Smart Watch
Accessories	Increase value
Product
TV Set Top Box	content
Tablet	through cross-
	Notebook	selling
	Portable Media Player
	Smart Phones

Continued penetration for future generation devices

	Fasteners	Inserts	Stamped Parts	Optics	Plastics	Machined	Wire Formed	Cold Formed
	Parts	Parts	Parts
Component penetration
Comment: Excluding HDD

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Hard Disk Drives (Malaysia Plant)

Freed-up capacity leveraged for other growth projects

• Growth in High Capacity Enterprise Drives (Near Line, "NL") applied in data centers and by cloud service providers
• > 30% higher SFS value content in NL HDD than other applications
• Freed-upcapacity used for
• • Manufacturing of medical components
  • Support Lifestyle Electronics customer expansion in South East Asia

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Electronics division priorities

Key initiatives to grow top and bottom line

Nantong		Customer	HDD
Employees	ecosystem
platform	replacement
	penetration

Support other	Human capital	Increase share of	Leverage
SFS divisions to	development at all	wallet in lifestyle	Malaysia plant for
leverage Nantong	levels and ensuring	electronics and	medical business
platform and grow	employee health &	mobile devices	and other
their Asia business	safety		applications in
			electronics

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Construction division

Arthur Blank, Head of Construction division

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Construction division in a nutshell Clear orientation in a fragmented market

Position within construction market

• "The building envelope specialist"
• Supplying fastening technology to the building envelope, quality hinges and fall arrest systems with high customer benefit
• Activities focused on EU and NA
• Local market organizations in order to respond quickly to specific customer needs
• Major key accounts served worldwide

Peculiarities of business

• No dependence on individual large customers
• Regional rules, norms and habits
• Time-criticalorders - often next day delivery

Anticipated market development (2019-'24)

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Top 3 key drivers for change and innovation More green, efficient and safe = market growth

Energy

Efficient building envelope

• Energy saving
• Sustainability
• New buildings and renovation

Produc-		Health
and
tivity
Safety

New methods drive efficiency	Safety at height
•	Modular building (off-site)	•	Avoid falling of buildings
•	Building Information Modelling	•	Safe work conditions
• Robotics	• Compliance

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Value generation at high quality façade

Increase value take per square meter

Fasteners

Services

Rainscreen façade

Subframes

Example: 2,000 m² rainscreen façade

• In the past "only" fasteners
• Today painted fasteners and subframes

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Value generation with safety systems

Broad, focused product portfolio for building envelope

• Received order for fastenings to the building envelope
• Additional business with the same contractors for roof fall protection systems
• • 2,200 support units (customer-specific, SFS made)
  • 18 km stainless steel cable
  • Training on site
  • Reliable delivery

Istanbul Grand Airport

Fall protection system

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Value generation at installation process

Innovation to increase installation process efficiency

Innovative and patented fastener for the invisible fastening of façade panels. Compared to other solutions simpler installation and lower costs

Efficient installation process with in- house developed setting tool from

GESIPA

Technical values, BIM data and sales via eShop

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Construction division priorities

Key initiatives to grow top and bottom line

eCommerce

Employees

Supply chain

Innovation

Further	Human capital	Adapt supply	Continue to
expansion of	development and	chain to optimize	develop value
eCommerce	ensuring employee	product availability	adding solutions
activities with focus	health & safety	at the point of
on e-shop		sales

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Medical division

Jens Breu, Head of Medical division

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Positioning and market trends

Focus on high-growth market segments

Position within medical market

• End-to-endcontract manufacturer of components and complete medical devices for OEM customers
• Focus on applications areas
• • Medical
  • Dental
  • Pharma
• Activities focused in North and Central America with expanding presences in Europe and Asia
• ISO 13485 certified at all sites, FDA compliant as required

Key trends in industry

Outsourc-	Supplier	Vertical
ing through	consoli-
integration
OEMs	dation

Value chain structure

OEM

Vertically integrated CDMOs

CDMOs with specialization

Complex component manufacturer

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Positioning of Tegra Medical

Vertically integrated, true end-to-end solutions provider

Design for	Pilot	Assembly
Manufacture and	Production
Assembly
Cost-effective,	Low-volume	Full device
scalable refinement	manufacturing under	assembly
of product designs	tight deadlines

Prototyping

Accurate prototypes

to help increase

speed to market

Full Scale	Packaging
Production	and Sterilization
Manufacturing	Complete packaging
Ramp-up, full scale	and sterilization
production	service

Prototyping and Product Development (GENESIS Tech Center Services)	Manufacturing Capabilities (at production sites)

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Selected products and applications "Where medical devices come to life."

Catheterization suturing device

Pedicle screws

and holderMeniscus suture anchoring device

Bone marrow device	Spinal retractor

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Global sales & manufacturing platform in development Local presences and capabilities to serve global OEMs

* **

* GTC = Genesis Technology Center

*

*

Cold forming

Precision

Precision Laser

Grinding

EDM

Injection

Assembly

Clean room &

Machining

Molding

sterilization

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Medical priorities

Key initiatives to grow top and bottom line

Globalization

Employees

Organization

Branding

Increase engage-	Continue with	Develop global	Use Tegra
ment and partici-	preventive meas-	SFS medical	Medical brand for
pation in European	ures to protect	organization to	global activities
and Asian medical	employee health &	establish and
markets	safety	leverage global
		platform capabilities

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Divisional focus Q&A

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Thank you for your attention

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Disclaimer

This presentation includes forward looking statements. These statements reflect the SFS Group's current assessment of market conditions and future events. The statements are therefore subject to risks, uncertainties and assumptions. Unforeseen events may lead to deviations of the actual results from the forecasts and estimates made in this presentation and in other published information. To this extent all forward looking statements in this presentation are subject to such limitations.

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