MERSEN 2018 Reference Document

2018 REFERENCE DOCUMENT MERSEN 2018 Reference Document page 1 Group Profile 3 2 Corporate governance report 19 3 Management report 75 4 Social responsibility and sustainable development 99 5 Information about the share capital and share ownership 131 6 Consolidated financial statements 151 7 Parent company financial statements 209 8 Additional information 239 This document is a free translation into English for convenience purposes only of the French reference document fi led with the Autorité des Marchés Financiers on March 12, 2019. 2018 REFERENCE DOCUMENT | MERSEN 1 2 MERSEN | 2018 REFERENCE DOCUMENT 1 GROUP PROFILE 2018 HIGHLIGHTS 5 2018 KEY FIGURES 6 GROUP BUSINESS MODEL 8 2018 REFERENCE DOCUMENT | MERSEN 3 GROUP PROFILE 1 4 MERSEN | 2018 REFERENCE DOCUMENT GROUP PROFILE 2018 Highlights 1 2018 HIGHLIGHTS 2018 was another very strong year for Mersen. Strong sales in 2018 drove Mersen’s operating margin before Combining robust markets with seamless execution, the Group’s non-recurring items up 120 points year-on-year to 10.4%, for an successful growth strategy saw it exceed the fi nancial objectives EBITDA margin of 15%. This increase was primarily due to a set at the beginning of the year. positive volume/mix effect. Higher prices and the positive impact of our competitiveness plan also offset the increase in payroll and Against an upbeat economic backdrop, the Group enjoyed like- raw materials costs. for-like growth of 10% ─ a remarkable performance across the year, across all regions and across all end-markets. The Group’s 2018 saw exceptional growth of 48% in net income. In addition performance illustrates its capacity to harness expanding markets to the increase in operating income before non-recurring items, wherever they are, and markets that are particularly buoyant, the Group signifi cantly reduced its non-recurring expenses and such as solar energy, semiconductor and green transportation. its effective tax rate following tax reforms in the United States. External growth also featured strongly in 2018 as the Group Mersen’s ROCE rose 200 points year-on-year to reach 11.8% looked to the future with the acquisition of FTCAP in Germany and despite the Group’s investments in its future to meet very high Idealec in France to strengthen its position in power electronics, demands in growing markets including solar energy, which which is one of its growth markets. Its partnership with the has excellent potential due to its competitive prices and easy start-up Caly Technologies brings new expertise in the design installation, industrial and electric vehicle power storage, of silicon carbide semiconductors for electrical protection, LGI and silicon carbide semiconductors, which are crucial power is an important addition to develop the Group’s services for the components for renewable energies and electric vehicles. The chemicals industry in the United States and the acquisition of a Group intends to pursue its investments and acquisitions program minority stake in Cirprotec will enable Mersen to step up global in 2019. sales in certain product ranges. Lastly, the Group also set up a Despite the increase in net debt in 2018 as a result of these joint venture in China to capitalize on the buoyant growth of the acquisitions and investment, Mersen’s fi nancial base remains solar market around the world. solid, with a stable leverage ratio of 1.6, the same as in 2017. Mersen’s performance in 2018 means its Board of Directors will be proposing a dividend of €0.90 per share at the General Meeting of Shareholders, an increase of 26% on last year. 2018 REFERENCE DOCUMENT | MERSEN 5 GROUP PROFILE 1 2018Key Figures Key Figures 2018 KEY FIGURES SALES 33% 34% € Europe 879 M North America +10% VS 2017 organic growth 2% South 2% 29% America Africa Asia-Pacific 34% 19% 19 % 17% 11% PROCESS ENERGY ELECTRONICS TRANSPORTATION CHEMICALS INDUSTRIES RESULTS €130 M €92 M €59 M in EBITDA Operating income before Net income non-recurring items +14% vs 2017 +23% vs 2017 +48% vs 2017 FINANCIAL STRUCTURE DIVIDENDE PER SHARE* 11.8% 1.6 €0.95 Return on Leverage capital employed * Subject to shareholders’ approval at the General Meeting. 6 MERSEN | 2018 REFERENCE DOCUMENT GROUP PROFILE 2018 Key Figures 1 MERSEN WORLDWIDE 6 917 EMPLOYEES 53 INDUSTRIAL SITES WITH 15 > 125 EMPLOYEES 15 R&D CENTERS NORTH EMPLOYEES 2 102 EMPLOYEES 2 363 AMERICA INDUSTRIAL SITES 13 EUROPE INDUSTRIAL SITES 22 SOUTH EMPLOYEES 672 MPLOYEES AMERICA- ASIA- E 1 780 INDUSTRIAL SITES 5 NDUSTRIAL SITES AFRICA PACIFIC I 13 50% 90% of Sales geared of Plant managers towards sustainable recruited locally development markets A signatory of the United Nations Global Compact since 2009 2018 REFERENCE DOCUMENT | MERSEN 7 GROUP PROFILE 1 2018Group Key B usiness Figures M odel MISSION We provide manufacturers all over the world with innovative solutions to enhance the performance of their off er RESOURCES EXPERTISE MANUFACTURING Provide greater effi ciency and reliability of products 53 sites in 35 countries and industrial processes €58 m of industrial capex RM ANSFO ATION TR / ASSEMBLY perature tem pro h ces ig ing, graphitiz se H ak ati s b cation, b on : ENVIRONNEMENT N rifi raz , pu ing IG S 3 T 50 % of sites certifi ed E R D E ISO 14001 M A a T c M h (Environmental reporting) 2 E i n N i n T g / , 4 S F BUSINESS LINE c o S L I N L a A I I t A PROCESSES S i I S R 1 n H T R E PEOPLE g I E R T N T A A G A P TRANSPORTATION SERVICES M 6,917 M W employees A R 5 DELIVERY DEVELOPMENT P S RO N DU TIO 15 R&D centers CTS AND SOLU FINANCIAL Robust fi nancial structure WORLD LEADER IN TWO Equity: €530 m AREAS OF EXPERTISE ETHICS Advanced Materials Electrical Power Code of Ethics • Graphite specialties • Electrical protection Relationships built on trust • Anti-corrosion & control equipment • Power management • Power transmission solutions technologies All fi gures related to 2018. 8 MERSEN | 2018 REFERENCE DOCUMENT GROUP PROFILE Group2018 B usiness Key Figures M odel 1 MARKETS VALUE CREATION Present in high-potential markets OUR EMPLOYEES (in % of sales) €245 m in fi xed salaries 19% Energy €20 m in profi t-sharing plans 70, 000 19% Electronics hours of training 17% Transportation OUR SHAREHOLDERS €15 m in dividends paid, 11% Corrosive chemicals i.e., 38% of net income 34% Process industries OUR PARTNERS €400 m in purchases Balanced presence across €8 m in interest paid all regions (in % of sales) to banks €10 m in income tax 33% North America 24% eff ective tax rate 34% Europe SOCIETY 29% Asia-Pacifi c €879 m in sales, of which 50% linked to sustainable development 2% South America 2% Africa 2018 REFERENCE DOCUMENT | MERSEN 9 GROUP PROFILE 1 Vision,Group Bmission usiness and M odel values VISION, MISSION AND VALUES At Mersen, our vision, mission and values inspire the decisions electronics, energy storage and green transportation with rail and actions that drive our development. networks and electric vehicles. Our ambition is to contribute to technological progress 3. Improved efficiency through the competitiveness and across the globe performance program Mersen designs innovative solutions tailored to its customers’ Like its customers, Mersen also wants to gain in operational needs that enable them to leverage their manufacturing effi ciency while constantly improving the security and safety performance in sectors such as energy, transportation, electronics, of its plants and the people who work there. The Group has corrosive chemicals and process industries. implemented a global operational excellence initiative for all parts of the Company, from operations through to sales. To implement our vision and fulfi ll our purpose, the Group adheres The initiative places particular emphasis on safety and is to a set of shared values: Excellence, because it enhances accompanied by the development of a “lean” culture, which our competitiveness and protects our flexibility and future; will enable the Group to improve customer service and optimize Collaboration, because by pooling our skills and working together inventory levels. we will progress together more rapidly and more effectively; People-Conscious, because our people are part of our culture; 4. The optimization of human capital development by Agility & Entrepreneurial Spirit, because they are a game providing a motivating working environment changer in today’s complex environment; and Partnering with Developing Mersen’s human capital is something to which our Customers, because they are the strategic allies for whom all Group employees can contribute. Mersen is committed we develop innovative products. to sharing and developing its expertise, both technical and managerial, and to promoting and transferring the values that underpin its identity throughout the world while still taking care to protect local cultures. The Group also strives to strengthen Group strategy synergies between segments and geographic areas. As a global expert in electrical power and advanced materials, Mersen is a key player in manufacturing industries around the world. Its strategy is anchored by four major pillars: Resources 1. The development of high value-added expertise Mersen works side-by-side with its customers all over the world. As well as being our two areas of expertise, electrical power The Group draws on its production base of 53 sites in 35 countries, and advanced materials are two areas in which we can help our the majority of which are overseen by local managers to facilitate customers provide a more competitive offering. By anticipating interaction with local stakeholders. market trends and ensuring that all the necessary means and resources are in place, Mersen Group is able to deliver bespoke The Group leverages its knowledge of its customers’ challenges solutions that meet the highest expectations.

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