Bossard Holding AG

SIX:BOSN

Earnings Call Transcript 2021-Q4

[Daniel Bossard, Chief Executive Officer, Bossard Holding AG]

Thank you.

I

will

also

say

something.

Welcome

to

our

Annual

Financial

Analyst

and

Media

Conference

2022.

I'm

very

happy

that

we

are

back

to

a

physical

meeting.

We

are

streaming

this

event

and

it

will

be

available

on

our

website

later

today.

Stephan

Zehnder,

our

CFO

and

I

would

like

to

guide

you

through

the

following

agenda.

I

will

start

with

some

highlights

2021.

Stephan

Zehnder

will

then

navigate

through

the

financials

before

I

will

close

with

a

strategic

focus

and

outlook

2022.

So

let me

start

with

the

highlights.

The

Bossard

Group

closed

with

a

record

sales

of

CHF

995

million

and

an

EBIT

of

CHF 123

million.

The

economic

tailwind

throughout

the

year

helped

us

to

achieve

these

numbers

whereas

the

ongoing

pandemic,

global

supply

disruptions

and

cost

inflation

posed

unprecedented

challenges

to

the

organization.

Our

proven

supply

chain

resilience

through

double-sourcing

of

key

products

from

different

sources

and

regions

and

safety

stock

up

to

eight

months

helped

us

to

respond

to

increasing

customer

demand

without

significant

shortages.

Our

proven

productivity

services,

namely

Smart

Factory

Logistics

and

Smart

Factory

Assembly,

were

in

high

demand

to

reduce

total

cost

for

our

customers.

They

opened

opportunities

for

new

business

and

for

creating

customer

loyalty.

Throughout

the

year,

we

continued

to

implement

our

Strategy

200,

particularly

our

digitalization

and

cultural

transformation

plans

to

improve

our

internal

efficiency.

In

October,

we

announced

the

acquisition

of

Jeveka,

a

high-quality

distributor

in

the

Netherlands,

which

posed

us

in

a

strong

market

position

in

a

former

market

[ph]



white

spot (00:02:01),

the

Benelux.

And

last

but

not

least,

we

conducted

our

first

Capital

Markets

Day

where

we

had

the

opportunity

to

communicate

our

strategy

and

business

model

in

more

detail

to

interested

investors

and

analysts.

All

this

was

only

possible

with

a

motivated

organization.

What

you

see

here

is

a

picture

from

our

last

three

corona

leadership

conference

in

Portugal.

Stephan

Zehnder,

our

CFO

will

now

guide

you

through

the

financial

review

2021.

Stephan,

please.

[Stephan Johannes J. Zehnder]

Good

morning,

ladies and

gentlemen.

Bossard

looks

back

on

another

extraordinary

business

year.

The

COVID-19

pandemic

continued

to

create

major

challenges

for

the

group

from

a

variety

of

angles

in

2021.

However,

one

could

almost

say

with

completely

different

signs

than

in

the

prior

year,

but

those

not

less

demanding.

When

in

2020,

the

group

was

challenged

by

the

maximum

extent

to

prove

its

operational

efficiency

and

thus

to

guarantee

the

delivery

capability

to

its

customers

as

a

result

of

the

lockdowns

and

global

interrupted

supply

chains,

in

2021,

the

global

economic

upturn

and

the

resulting

high

demand

led

to

supply

bottlenecks,

capacity

restrictions

and

longer

delivery

times,

which

were

coupled

with

significant

price

increases

for

raw

materials

and

freight

costs.

The

fact

that

Bossard

was

able

to

hold

its

own

and

to

take

advantage

of

the

market

opportunities

even

in

this

challenging

environment

is

impressively

demonstrated

by

the

2021

annual

results.

We

are,

therefore,

pleased

to

present

to

you

today

results

that

are

exceptionally

in

the

Bossard

history.

We

were

able

to

simultaneously

increase

sales,

EBIT

and

net

income

to

new

record

levels

in

2021

and

hence

not

only

to

significantly

surpassing

the

results

from

the

prior

year,

but

also

those

prior

pandemic.

The

Bossard

Group

achieved

sales

of

CHF

995.1

million

in

2021,

an

increase

of

22.4%

compared

to

prior

year,

whereby

the

currency

effect

of

0.2%

was for

once

neglectable.

Organically,

sales

growth

was

disproportionately

high

compared

to

the

prior

year,

with

an

increase

of

21.1%.

The

newly

acquired

Dutch

company

Jeveka,

consolidated

since

October

2021,

contributed

1.1%

to

the

group's

sales

increase.

Thanks

to

its

consistently

high

delivery

capability,

Bossard

benefited

from

the

strong

global

economic

upturn.

As

a

result,

Bossard

was

able

to

report

double

digit

growth

rates

not

only

in

all

three

market

regions,

but

actually

in

all

the

countries.

There

is

no

doubt

that

the

investment

backlog

caused

by

the

pandemic

in

2020

and

the

high

resulting

dynamic

demand

in

2021

helped

us

to

significantly

increase

sales

and

profits.

However,

the

growth

is

also

an

expression

of

our

internationality

and

the

group's

broad

customer

base

in

a

wide

range

of

industrial

segments.

The

focus

on

growth

industries

such

as

robotics,

electromobility,

railway

and

medical

technology

paid

off

and

those

segments

developed

particularly

well.

The

EBIT

amounted

to

CHF 123.3

million,

representing

an

increase

of

42.8%.

At

the

same

time,

EBIT

margin

improved

from

10.6%

in

the

prior

year

to

12.4%,

which

means

that

the

group's

earnings

power

has

again

improved

markedly.

Despite

the

volatile

market

conditions

paired

with

significant

cost

increases

both

in

raw

material

prices

as

well

as

operating

expenses,

we

managed

to

keep

the

EBIT

margin

in

the

upper

part

of

the

targeted

range

of

10%

to

13%.

This

shows

how

solid

our

group

performed

in

this

very

challenging

environment.

The

positive

underlying

condition

also

had

an

impact

on

profit.

Compared

to

prior

year,

net

income

increased

from

CHF 67.8

million

to

CHF 98

million.

The

return

on

sales

amounted

to

9.8%

compared

to

8.3%

in

2020. With

that,

the

Bossard

Group

can

report

the

best

annual

results

in

its

history;

hence

we

are

proud

of

that.

Three

key

factors

were

decisive

for

the

success

over

the

last

two

years.

Firstly

and

foremost,

the

flexibility

of

our

2,700

employees

around

the

globe

who

did

a

tremendous

job

and

whose

performance

was

exceptional

under

difficult

conditions.

Secondly,

the

purchasing

strategy

we

have

practiced

for

years,

which

is

based

on

several

procurement

sources.

And

finally,

our

generous

stock keeping.

Although

this

represents

the

largest

balance

sheet

item

with

a

high

capital

commitment

of

over

CHF

338

million,

it

was

of

central

importance

in

order

to

ensure

the

best

possible

delivery

capability

to

our

customer

in

this

exceptional

demand

situation.

In

addition,

the

strong

performance

is

also

preceded

by

various

upfront,

far-sighted

investments and expenditures

made over

the last

years.

Worth mentioning

are here,

the

investments

in

people and

the

organization,

the

expansion

of

office

and

warehouse

capacities

in

various

markets,

as

well

as

our

targeted

acquisitions.

Also,

our

focus

on

special

parts,

engineering

services

and

smart

factory

solutions,

as

well

as

our

investments

in

digitalization

of

our

processes

and

services

supported

the

strong

sales

and

profit

growth

in

2021. Examples

are

our

new

e-commerce

platform

or

our

real-time

manufacturing

service,

which

enables

our

customers

to

obtain

milled

and

turn

prototype

parts

quickly

and

reliably

at

a

reasonable

price.

Another

example

is

our

new

service,

Smart

Factory

Assembly,

which

is

supporting

our

customers'

digitalization

of

their

assembly

processes.

Now,

let's

have a

look

at

the

sales

developments

in

the

individual

market

regions.

In

America,

sales

increased

by

12.4%

to

CHF

226.2

million

or

15.3%

in

local

currency.

This

gratifying

development

continued

due

to

the

ongoing

diversification

of

our

customer

base,

among

other

things,

in

the

field

of

electromobility.

The

digitalization

accelerated

by

the

pandemic

had

a

supporting

effect,

which

also

led

to

sustained

high

demand

in

the

electronics

segment

in

2021.

In

Europe,

sales

increased

by

23.1%

to

CHF

574 million

compared

to

last

year,

while

in

local

currency,

the

increase

was

22.1%.

Especially

in

Europe,

we

benefited

from

the

broad

customer

base

in

industries

such

as

medical

technology

and

railway.

The

acquisition

of

Etanco

contributed

for

the

gratifying

sales

performance.

Adjusted

for

acquisition,

annual

sales

totaled

CHF

564.4

million.

In

Asia,

we

remained

on

a

growth

path.

The

continued

strong

demand

throughout

the

year

resulted

in

a

sales

increase

of

34%

to

CHF 194.9

million.

In

local

currency,

growth

amounted

to

31.8%,

but

this

growth

was

broad

based

is

reflected

in

the

increase

in

sales

of all

business

units,

some

of which

were

well

into

the

double-digit

range.

Malaysia,

India

and

Taiwan

are

particularly

worth

mentioning

at

this

point.

As

for

the

industrial

segments,

it

was

primarily

robotics,

automation

and

electronics

that

recorded

strong

growth

rates.

Now we

review

on

the

balance

sheet

the

above-average

growth

rate

also

and

also

the

investment

activities

of

the

group

led

to

significant

increase

in

total

assets.

Compared

to

the

prior

year,

total

assets

increased

by

20.5%

to

CHF

773

million.

Despite

the

high

profitability,

the

equity

ratio

fell

from

50.3%

in

the

prior

year

to

45.2%.

This

decline

can

be

explained

by

the

fact

Bossard

offsets

the

goodwill

from

acquisition

in

2021,

CHF 38

million,

directly

against

equity.

The

market

increase

in

total

assets,

it's

driven

by

higher

customer

receivables

as

a

result

of

the

substantial

increase

in

sales

on

the

one

hand

and

on

the

other

hand

by

the

higher

inventory

levels.

While

the

increase

in

receivables

was

in

line

with the

sales

growth,

the

increase

in

inventories

was

above

average.

Besides

the

higher

sales

volumes,

the

increase

was

due

to

higher

raw

material

prices

and

freight

costs.

Furthermore,

inventories

were

deliberately

increased

to

ensure

the

best

possible

delivery

capabilities

of

our

customers,

in

view

of

the

continuing

market

uncertainties

and

long

delivery

times.

Last

but not

least,

the

acquisition

of

Jeveka

also

contributed

to

the

increase

in

total

assets.

In

relation

to

net

sales,

the

operating

net

working

capital

increased

slightly

from

42.7%

in

the

prior

year

to

43.8%.

As

a

result

of

the

high

level

of

investment

activity

and

accelerated

growth,

net

debt

increased

from

CHF

156

million

in

2020

to

CHF 270

million

in

2021.

The

gearing

net

debt

measured

against

equity

recorded

a

slight

increase

from

0.6

versus

0.5

in

the

prior

year.

The

debt

factor,

the

net

debt

in

relation

to

EBITDA

nevertheless

remained

at

the

prior

year's

levels,

1.5

times,

thereby

Bossard

continues

to

have

solid

balance

sheet

ratios,

which

allow

room

for

further

growth

and

investments.

[indiscernible]

(00:13:11)

in

2021, we

invested

in

various

areas

in

order

to

keep

pace

operationally,

but

also

technologically

with

the

current

planned

growth

ahead.

In

total,

we

invested

CHF 35.3

million.

Thereof,

around CHF

6

million

relates

to

two

ongoing

infrastructure

projects.

In

France,

we

are

currently

expanding

existing

capacities

and

in

Taiwan,

we

are

investing

in

a

completely

new

office

and

warehouse

building.

Hereby,

we

more

than

doubled

our

logistics

capacities

in

both

cases.

We

invested

CHF 11

million

in

digitalization.

The

biggest

share

of

this

investment

was

dedicated

to

our

new

group-wide

ERP

system.

The

first

rollouts

are

planned

in

Denmark

and

Sweden

in

the

second

quarter

of

this

year.

In

total,

we'll

invest

about

CHF 70

million

into

the

new

ERP

system

and

the

global

roll-out

of

it

over

the

next

six

years.

About

CHF 14

million was

spend

for

replacement

investments

in

ongoing

operations.

Particularly,

I

would

like

to

mention

the

investments

of

CHF

4.5

million

into

smart

pin,

which

we

invested

– which

we

installed

at

our

customer

premises

and

are

the

core

of

our

smart

factory

logistics

solutions.

This

means

that

we

sold

quite

a

few

smart

logistics

solutions

in

2021

or

in

other

words,

every

Swiss

franc

spent

increases

business

volume

and

process

efficiency,

and

at

the

same

time

boosts

the

competitiveness

of

our

customers

and

therefore

is

the

basis

for

long-term

partnerships.

Now,

the

business

growth

and

the

investment

may

have had

an

impact

on

the

cash

flow

too.

Cash

flow

from

operating

activities

before

change in

the

net

working

capital

increased

by

striking

39.7%

to

CHF

126

million.

By

contrast,

cash

flow

from

operating

activities

of

the

changes

in

net

working

capital

fell

from CHF

91.6

million

in

the

prior

year

to

CHF 65.9

million.

As

already

mentioned,

this

is

mainly

due

to

the

higher

inventory

levels.

Cash

flow

from

investing

activities

increased

quite

a

bit

from CHF

41.2

million

in

2020

to

CHF

92.3

million

in

2021.

On

the

one

hand,

this

is

due

to

the

acquisition

of

Jeveka

last

October

– in October

2021

and on

the

other

hand,

due

to

higher

investments

in

property,

plant

and

equipment

and

intangible

assets,

as

already

mentioned.

While

the

group

reported

a

positive

free

cash

flow

of

CHF

50.4

million

in

the

prior

year,

a

negative

free

cash

flow

of CHF

26.4

million

resulted

in

2021

due

to

the

significant

growth

and

the

investments

made.

Finally,

a

word

on

the

dividend.

As

you

know,

our

dividend

policy

provides

for

a 40%

payout

of

net

income

to

shareholders.

After

two

extraordinary

years

influenced

by

the

pandemic,

we

will

return

to

our

normal

payout

ratio.

Accordingly,

the

Board

of

Directors

will

propose

a

gross

dividend

of

CHF

5.10

for

registered

A

share

at

the

2022

Annual

General

Meeting

of

Shareholders

compared

with

CHF

4.40

in

the

prior

year.

This

corresponds

to

an

increase

of

almost

16%.

Ladies

and

gentlemen,

with

this

preview,

I

conclude

my

remarks.

I

thank

you

very

much

for

your

attention

and

with

pleasure,

I

hand over

the word back

to Daniel.

Thank

you.

[Daniel Bossard, Chief Executive Officer, Bossard Holding AG]

Thank

you,

Stephan.

An

amazing

year

behind

us.

I

would

now

like

to

elaborate

on

our

strategic

focus

and

what

we

expect

for

2022.

As

we

have

communicated

earlier,

we

have

developed

the

Strategy

200,

which

is

a

strategic

journey

we

follow

until

2031,

when

Bossard

turns

200

years

old.

We

aim

for

accelerated,

profitable

and

sustainable

growth

based

on

our

proven

business

model

organically

and

through

acquisitions

to

achieve

relevant

market

shares

in

our

key

markets

through

seven

strategic

initiatives.

We

have

elaborated

on

them

at

our

Capital

Markets

Day

in

October

last

year.

What

is

now

the

focus

for

2022?

One

of

the focus

areas

is

the

sunrise

industries.

Those

are

industries

which

we

expect

to

grow

above

average

in

the

next

years,

particularly

we

talk

about

railway,

electric

and

electronics,

healthcare

and

electric

vehicles.

To

make

it

more

tangible,

I'd

like

to

give

you

some

examples

for

each

industry.

We

have

been

working

with

railway

companies

for

decades.

This

is

particularly

interesting

because

we

see

a

lot

of

global

government

spending

on

railway

infrastructure,

namely

in

USA

and

Asia,

China

and

India

and

on

top,

railway

is

considered

a

sustainable

mobility

technology.

A

prominent

customer

example

is

Alstom

Bombardier,

which

we

are

serving

globally

as

an

engineering

and

smart

factory

partner.

Similarly,

we

are

engaged

with

Stadler

Rail

around

the

globe,

Hyundai

roped

them

in

Korea

or

CRRC

China

North

Railway

in

China

and

in

the

United

States.

To

our

acquisition

in

the

Netherlands,

we

became

the

key

fastener

supplier

for

ASML,

the

global

leader

in

the

development

and

production

of

semiconductor

equipment,

with

a

global

market

share

of

around

85%,

growing

exponentially.

Besides

ASML,

we

are

a

strategic

supplier

for

Dell

in

the

US

and

Ireland

with

the

rapid

acceleration

of

global

digitalization.

We

are

happy

to

be

positioned

well

in

a

number

of

electronics

companies

around

the

world.

With

the

globally

growing

demand

for

healthcare

services

and

sales

diagnostics

devices,

our

focus

on

the

healthcare

industry

continues.

A

good

example

of

a

long-term

partnership

is

Roche

Diagnostics,

where

Bossard

is

supplying

the

majority

of fasteners,

but

is

also

engaged

as

an

engineering

and

smart

factory

partner.

Similarly,

we

work

with

other

global

customers

in

the

segment

such

as

GE

Healthcare,

[ph]



EBrown (00:19:54),

Siemens

or

Metrohm,

a

Swiss-based

global

producer

of

chemical

analytics

devices.

Electric

vehicle

manufacturers,

from

startup

companies

to

mass

production

companies

have

been

and

will

be

in

our

growth

focus.

Lucid

Motors

is

a

prominent

example

of a

customer

where

Bosshard

was

engaged

in

engineering

from

the

very

beginning

some

four

years

ago.

Last

year,

Lucid

chose

Bossard

as

the

key

supplier

for

fasteners

for

the

ramp

up

in

steel

production

in

Casa

Grande,

Arizona.

Lucid

is

producing

a

luxury

sedan,

targeting

the

global

markets.

Another

example

of

a

new

project

in

the

ecosystem

of

electric

vehicles

is

our

engineering

collaboration

with

Northolt

in

Sweden.

Northvolt

is

a

six-year

old

Swedish

startup

company

who

joined

with

Volvo,

Volkswagen

and

Porsche

to

develop

their

own

battery

systems,

with

the

ambition

to

serve

the

global

market

with

batteries

for

electric

mobility.

Last

year,

Bosshard

was

chosen

as

the

engineering

partner

and

key

supplier

for

fasteners.

Looking

at

electric

vehicles,

our

product

solutions

are

used

in

the

body,

in

the

interior,

in

the

exterior,

in

the

chassis,

in

the

battery,

as

well

as

in

the

powertrain

and

inverters.

We

have

created

an

industry-specific

product

solution

assortment,

which

allows

us

to

run

focused

marketing

campaigns

globally.

Dedicated

industry

assortments

have

not

only

been

developed

for

electric

vehicles,

but

for

all

other

previously

mentioned

sunrise

industries

for

electronics,

healthcare

and

railway

as

well.

Another

strategic

focus

in

2022

is

our

proven

productivity

promise

to

our

customers.

Our

product solutions,

assembly technology

experts and

smart

factory services

are

key enablers

to

make

our

customers

more

productive.

When,

if

not

now,

when

wages

and

overall

costs

are

skyrocketing,

should

we

promote

our

solutions

that

enable

customers

to

reduce

their

total

costs

in

C-part

management

and

assembly

significantly.

What

do you

see here

is

a

exemplary,

but

typical

smart

factory

layout,

in

this

case,

of a

white

goods

or

washing

machine

producer

working

with

Bossard

on

multiple

levels.

Through

our

smart

factory

assembly

technology

services,

we

advise

customers

in

selecting

the

right

products.

What

you

see

here

is

a

tear-down

project

where

we

take

a

customer

product

apart,

here,

a

washing

machine

drum

and

proposed

optimization

potential

in

the

design

by

reducing

fastener

varieties

or

by

applying

more

innovative

product

solutions.

The

benefits

for

customers

are

higher

safety,

higher

efficiency

and

assembly

and

finally

increased

productivity.

Our

smart

factory

logistics

solutions

enable

customers

to

manage

their

C-parts

automatically,

ensure

an

optimized

and

real-time

inventory

management

and

a

smooth

flow

of

parts

through

the

factory

from

the

central

storage

location

to

the

points

of

assembly.

The

main

benefits

are

higher

availability

at

lower

total

cost,

and

again,

increased

productivity.

With

our

smart

factory

assembly

services,

we

secured

customers'

assembly

processes

by

providing

smart

tools

and

digital

work

instructions.

These

enable

assembly

workers

to

avoid

mistakes,

speed

up

the

assembly

process

and

onboard

new

unskilled

staff

very

efficiently.

Consequently,

smart

factory

assembly

services

are

another

lever

to

make

our

customers

more

productive.

The

Bossard

Group

sales

volume

is

driven

by

product

sales

whereas

the

services

are

creating

customer

value,

trust

and

loyalty.

While

we

sell

product

solutions

to

purchasing,

which

look

for

the

lowest

price,

we

promote

smart

factory

services

to

production

and

logistics

specialists

which

want

a

lean

production

and

logistics

flow.

Likewise,

we

sell

assembly

technology

expert

services

to

designers

and

developers

who

need

innovative

and

safe

solutions

instead

of

just

low-cost

products.

And

finally,

we

aspire

to

sell

our

complete

service

package

to

[ph]



P&L (00:24:30)

owners,

usually

the

C-level,

to

demonstrate

the

full

potential

of

total

cost

savings

and

to

underline

that

by

applying

the

complete

portfolio

of

services,

customers

typically

save

three

times

more

in

process

costs

than

they

actually

spend

on

products.

Some

of

you

may

remember

the

iceberg

model.

So

services

can

be

regarded

as

a

shoehorn

to

sell

products.

In

our

view,

an

absolutely

indispensable

shoehorn

because

we

would

not

be

where

we

are

today

had

we

not

focused

on

services

in

the

past.

In

summary,

our

strategic

focus

for

2022

is

to

run

the

business

and

ensure

we

achieve

profitable

growth

by

focusing

on

sunrise

industries.

Retain

and

penetrate

existing

customers,

but

also

win

new

business

through

our

strategic

services,

especially

now.

We

will

sharpen

our

view

on

sustainability,

both

socially

and

environmentally

and

for

the

latter,

collect

data

and

set

realistic,

short,

mid-

and

long-term

targets.

Besides

running

the

business,

we

are

fostering

change

by

implementing

our

strategic

initiatives,

one

of

them

being

our

operations

engine,

where

we

will

be

introducing

the

first

release

of

our

new

ERP

system

this

year.

The

sales

engine

will

help

to

provide

us

with

a

joint

structure,

processes

and

systems

to

acquire

new

business,

while

the

Together

We

Create

initiative

is

the

foundation

of

our

cultural

transformation

journey

for

better

and

more

efficient

internal

collaboration

through

the

application

of

our

new

guiding

principles,

leadership

development

and

talent

management.

This

leads

me

to

the

outlook

for

2022.

Looking

at

the

purchasing

manager

indices,

they

still

indicate

a

very

strong

global

demand.

The

current

global

supply

chain

situation

looks

a

bit

more

challenging.

The

war

in

the

Ukraine

does

not

help

to

stabilize

the

current

supply

chain

challenges.

Yet

we

have

no

dependency

neither

on

Ukraine

nor

on

Russia.

The

EU

has

imposed

anti-dumping

taxes

for

steel

fasteners

from

China

as

of

February

17.

This

means

we'll

need

to

forward

20%

to

80%

higher

product

cost

depending

on

specific

suppliers

to

our

customers

in

the European

Union.

In

general,

fastener

prices

are

on

the

rise

again.

Lead

times

went

up

to

30 weeks

to 50

weeks

with

12

weeks

in

normal

times.

So

you're

waiting

one

year

for

fasteners.

Freight

costs

are

still

peaking

at

around

$30,000

per

container

from

Asia

to

Europe.

Prices

tenfolded

in

the

last

12

months.

We

are

currently

facing

scarce

ports

and

container

capacities

all

around

the

globe.

And

then

we

see ongoing

inflationary

trends

on

wages

and

raw

materials.

In

a

nutshell,

this

means

we

are

still

in

a

strong

seller's

market

and

will

act

accordingly.

Our

stock

levels

are

sufficient,

so

we

are

not

expecting

significant

shortage

in

the

short

or

mid-term

and

we

will

continue

with

price

increases

and

ask

customers

for

longer

commitments

to

secure

their

supply.

In

summary,

the

strong

global

demand

and

the

great

market

potential

in

sunrise

industries

sent

very

optimistic

signals.

The

volatile

environment

with

the

ongoing

pandemic

waves,

the

war,

the

supply

chain

disruptions

may

pose

unexpected

challenges

to

our

business

development

this

year.

Since

we

think

long

term,

we

will

continue

to

invest

in

our

future,

namely

in

our

operations

engine,

our

new

ERP

system

and

in

our

Strategy

200

initiatives.

With

this,

we're

still

optimistic

for

2022

and

focus

on

what

we

can

influence.

And

part

of

what

we

can

influence

is

our

attitude

and

spirit.

Together

We

Create

is

the

motto

of

our

cultural

journey.

Through

better

collaboration

across

regions,

functions

and

hierarchies

and

also

with

suppliers

and

customers,

we

strongly

believe

we

can

be

more

efficient

as

an

organization,

not

reinventing

wheels,

collaborating

on

global

projects

and

sharing

best

practices

much

more

than

in

the

past.

We

want

to

unleash

the

potential

of

all

our

employees

by

applying

our

new

guiding

principles,

which

are

summarized

and

described

in

the

first

Bossard

comic

that

each

one

of

you

can

find

on

your

table.

The

comic

serves

as

our

global

employee

handbook,

we

have translated

it

into

eight

languages.

Please

feel

free

to

take

one

with

you.

With

this,

I

would like

to

thank

you

for

your

attention

and

Stephan

Zehnder

and

I

will

now

gladly

try

to

answer your

questions. Thank

you.

[Daniel Bossard, Chief Executive Officer, Bossard Holding AG]

Okay.

So

now

I

was

advised

that

we

first

take

the

questions

from

the

room

and

then

in

the

second

stage,

we

will

address

the

questions

from

the

online

platform.

All

right.

Yes.

Good

morning.

And

I

have

a

question

first

on

the

Russian

invasion.

You

said

you

have

no

exposure,

but

you

have

really no

exposure

to

the

Ukraine,

neither

to

Russia,

nor

to

Belarus.

[Daniel Bossard, Chief Executive Officer, Bossard Holding AG]

It's

when

you

talk

about

the

supply

chain,

we

have

no

exposure

in

the

sense

that

we're

not

buying

from

Ukraine

or

Russia.

When

it

comes

to

sales,

Stephan,

maybe

you

want

to say

too

who,

he

in

that...

[indiscernible]

[Stephan Johannes J. Zehnder]

(00:30:24).

[Daniel Bossard, Chief Executive Officer, Bossard Holding AG]

So

we

have

some

sales

about,

CHF

300,000

in

Russia

and

it's

about CHF

0.5

million in

Ukraine.

But

we

have

no

physical

assets,

we

have

no

employees.

It's

just

export

sales

into

these

countries.

And

Belarus?

[Daniel Bossard, Chief Executive Officer, Bossard Holding AG]

Belarus,

it's

about

CHF

100,000.

Thank

you.

May

I

ask

a

second

one?

[Daniel Bossard, Chief Executive Officer, Bossard Holding AG]

Yeah.

Sure.

Okay.

[Daniel Bossard, Chief Executive Officer, Bossard Holding AG]

Please

go

ahead.

You

have

inventory

increase

by CHF

80

million

in

2021,

and you're saying

inflation

is

increasing.

How

do

we

have

to

think

about

inventory

in

2022?

So

do

you

expect

that

this

is

going

to

increase

further?

[Daniel Bossard, Chief Executive Officer, Bossard Holding AG]

We

will

expect

further

increase.

I

mean,

if

we

would

say

just

the

business

remains

that

it

is,

it

will

still

increase

because

there

is

different

reason

for

that.

It's

still

we

receive

goods,

which

are

to

a

higher

price

because

the

way

we

bought

and

also when

we

placed

orders

last

year,

it

was

already

to

a

higher

price,

so

these

goods

coming

in

only

now.

The

other

one

is

still

we work

on

the

service

level,

which I was

also

mentioning.

So

we

also

have

the

plan

to

bring

it

up again.

It's

not

an

issue

today

we

can

serve,

but

it's

not

where

we

want

it

to

be.

And

the

other

part

is

also

that

we still,

based

on

the

supply

chain,

you

also

place

a

big

order

technically

from

that

perspective

and

hopefully,

yes,

we

will

increase

the

business,

so

by

higher

volume

also,

the

inventory

will

increase.

So

the

expectation

we

need

to

expect,

it's

increasing.

I

would

say

mid-term

when

the

supply

chain

normalizes,

then

also

the,

let's

say,

the

capital

commitment,

as

I

also

mentioned

in the

percentage

of

sales,

should

normalize

and

should

rather

come

again

in

the

range

of

40%.

[Stephan Johannes J. Zehnder]

Maybe

if

we

can

add

to

that,

the

worst

thing

that

can

happen

to

us

is

that

we

cannot

deliver.

That's

truly

the

worst

thing.

So

– and

now

the

prices

have

been

increasing

and

it's

kind

of

a

natural

cycle

that

we're

getting

in

higher

cost

products,

but

increases

our

availability.

So

that's

why

it's

kind

of

a

normal

cycle.

Of

course,

prices

have

been

going

up

maybe

more

than

in

the

past,

but

still

availability is

high

and

we're

managing –

trying

to manage

this

balance

of

how

much

do

we

order

now?

When

is

it

going

to go

down?

Okay.

Tell

us.

[Daniel Bossard, Chief Executive Officer, Bossard Holding AG]

I

mean,

if

we

see

the

clouds

or

the

slides

or

the

points,

I

mean, we

have

to

plan

cautiously

ahead.

Any

other

question?

[Bernd Pomrehn, Analyst, Bank Vontobel AG (Research Firm)]

Bernd Pomrehn

from

Vontobel.

You

talked

about investments

in

Taiwan

and

France.

Could

you

talk

a

little bit about

your

investment

and

growth

initiatives

in

2022?

Where

you

do –

where

do

you

plan

investments,

both

in tangible

and

intangibles?

And

could

you

maybe

provide

for

modeling

CapEx

guidance?

Thank

you.

[Stephan Johannes J. Zehnder]

Yeah

I

answered

on

the

CapEx

one.

So

the

plans

is

about

CHF

50

million

to

CHF

52

million.

If

you

break

it

down,

then

it's

about

CHF 12

million

dedicated

to

the

ERP

system.

We have

about CHF

14

million

dedicated

to

the

two

infrastructure

projects,

and

the

remaining,

about

CHF 26

million

is

for

ongoing

replacement

investments.

Again,

as

I

always

said,

it's

[indiscernible]



(00:33:57).

We

will

be

cautiously

always

look

– and

we

always

work

on

the

principle

kind

of

pay

as

you

go,

but

that's

the

kind

of

the

framework

which

we

have

for 2022

in

our

plans.

[Marta Bruska]

Good

morning. Marta

Bruska

from

Berenberg

and

thank

you

for

taking

the

question.

Fantastic

results.

Congratulations.

I

was

wondering

whether

you

could

give

us

a

little

bit

of

a

feeling

in

terms

of

the

inflationary

environment

in

2022.

With

price

increases,

whether

you

have

any

expectation

to

know

how

much

of

the

growth

in

2022

for Bossard

would

come

from

price

increases

and

then

I

have

two

follow-ups?

[Stephan Johannes J. Zehnder]

Well,

maybe

on

the

price

increases,

one

element

that

we

haven't

talked

too

much

in

the

past

is

wage

increases.

And

we

see

in

Eastern

Europe,

wage

increases

double-digit,

10%,

12%

Czech

and

Poland.

We

see,

in

US

also

wage

increases

going

more

towards

10%.

So

those

wage

increases

somehow

also

obviously

turn

into

higher

costs

and

we

want

to

provide

– to

convey

that

to

customers.

So

part

of

our

price

increase

discussions

is

because

of

wage

increase.

Give

you an

example, John

Deere,

some

six

months

ago,

they

striked.

So

their

employees

got

like

12%

more

salary. Now,

the

whole

region of

Iowa, they

were

kind of

under

pressure, so

people asked

for

higher

salaries also

at Bossard.

Now

we

have to

pay

higher

salaries. We

went now back

to

John

Deere

and

said,

hey,

now

we

need

to

increase price.

So

they shoot

themselves in

the foot.

I

mean,

wage

increases

are part

of

the

overall increase

and

it's significant

now. So

and

raw

material

prices

will

still

increase

and

it's

the

seller's

market.

And

what

we

try

to

do

is,

of

course,

ask

customers

for

longer

term

commitments.

But

I

guess

for

this

year,

there

will

be

another

round

of

at

least

10%-20%

in

two

steps,

maybe

throughout

the

year.

I

would

expect.

So,

prices

are

still

steadily

going

up.

Besides

the

fact

that

we

have

EU

anti-dumping

taxes

up

to

80%

for steel fasteners

and

with

the

European

Union,

which

we will

pass

on

straight

away.

So

there

will

be

no

[indiscernible]



(00:36:11)

just

added

40%,

50%,

60%

only

for

the

European

Union.

So

we

will

continue

in

the

range,

10%

to

20%,

I

guess

we

will

have

to

do.

Do

they

all

come

through

the

whole

year?

No,

it's

a

process.

But

it's

a

seller's

market

and

the

question

is

for

the customer,

can

they

get

the

goods?

[Marta Bruska]

So,

10%,

at

least

of

growth

in

2022

just

from

price

increases.

Thank

you.

And

I

have

one

follow-up,

if

you

could

please

contextualize

a

little

bit

your

growth

in

the

smart

factory

assembly

and

how

the

project

pipeline

is

developing

there,

that

would

be really

appreciated.

Thank

you.

[Stephan Johannes J. Zehnder]

Yes,

we're

currently

scaling

our

smart

factory

assembly

services.

We

have

started

some

three

years

ago

with

ramping

up

the

system.

We

currently

have

12

pilot

customers

around

Europe,

which

we're

serving,

which

is

RUAG,

Metrohm, Komax,

Hilti

and

we're

now

scaling

into

China,

Denmark,

Germany,

and

so

the

pipeline

is

and

we're

now

scaling

into

China, Denmark,

Germany.

And

so,

the pipeline

looks

very promising.

Now we

have

more

of the challenge

that

we

can actually

manage

the projects.

We

have much

more demand

than

we

can

actually

manage the

projects.

So,

we're

very,

very

optimistic

and

the

challenge

is

now

not to

stumble

over

our

own

feet

to

make

this

system

truly

stable

and

scalable

and

then

continue

our

rollout.

I

don't

know

if

that

answered your

question.

[Daniel Bossard, Chief Executive Officer, Bossard Holding AG]

More

questions?

You're

still

operating

in

a

very

fragmented

market.

Your

balance

sheet

is

pretty

strong.

Could

you

talk

just

a

little

bit

about

your

– your

M&A

pipeline,

what

opportunities

do

you

see,

how

do

you

see

current

multiples

for

acquisition

targets,

just

qualitatively,

obviously?

[Daniel Bossard, Chief Executive Officer, Bossard Holding AG]

No.

No,

we

cannot

talk

about

any

names

or

potentials,

but

in

general,

we

see,

of

course,

as

we

said,

our

acquisition

plans

are

to

grow

another

one-third

over

the

next

10 years

through

acquisitions.

There

is

a

few

targets

in sight,

which

always

–

always

the

goal

is

to

make

us

better

and

not

just

bigger.

So,

in

the

Netherlands,

it

was

that

it

was

a

white

spot

for

us

and

we

saw a

great

industrial

environment.

So,

we

said,

okay,

that's

good

or

we

invest

into

technology

companies,

which

provide

new,

innovative

technologies.

So,

we're

looking

into

these

and

it

will

be

going. As

you

know,

we

have

also

now

a

function,

Head of

M&A,

Mr.

Rolf

Ritter.

So,

be

sure

he

is

not

going

to be

bored.

Okay.

Should

we –

yeah.

[indiscernible]

(00:39:29)

I

have

two

questions,

first,

the

EU

anti-dumping,

will

that

change

your

sourcing

strategy

going

forward?

[Daniel Bossard, Chief Executive Officer, Bossard Holding AG]

Well,

first

of

all

the

short

answer

is

no,

not

dramatically.

We

have

always

had

anti-dumping

taxes

in

the

past

and

we

already

have

sources

outside

China.

Now,

of

course,

we're

shifting

more

procurement

to

non-Chinese

countries;

that's

true.

But

we

have

also

done

that

in

the

past,

and

our

sourcing

strategy

has

always

been

to

source

from

multiple

sources,

not

only

single

source.

So

for

us,

it's

relatively

easy

to

switch

to

others.

The

problem

now

is,

of

course,

everybody

else

does

the

same.

So

yes,

we're

switching

some

of

the

suppliers,

but

no,

we're

not

changing

strategy.

Okay.

And

my

second

question

will

be

the

effect

of

inflation,

so

there

are

various

effect,

high

raw

material

prices,

wages

and

so

on,

what

have

been

the effect on

the

margin

in

2022?

[Stephan Johannes J. Zehnder]

Well, that's

a

difficult

question

to

answer

[ph]



besides

to

calculate (00:40:40). And

I

think

we

have

to

put

this

into

perspective.

I

mean,

we

serve

more

than

30,000

customers

with

more

than

1 million

items

and

some

of

which

we

sell

to

different

customers

and

we

have

11

ERP systems.

So

that's

not

a

number

which

we

can

provide,

I'll

give

you

a

split

in

that

one.

It's

for

sure

that

with

the

price

increases

we

have

done

in

2021

that

the

share

of

the

growth

was

for

sure

bigger

than

in

the

past.

But

I

cannot give

you

any number.

Okay.

Thanks.

[Daniel Bossard, Chief Executive Officer, Bossard Holding AG]

Okay

let's

switch – sorry.

I

would

like

to

ask,

in

the

past,

there

were

certain

differences

in

profitability

per

region.

I

know

you

don't

disclose

the

details,

but

just

in

general

terms,

have

you

seen

any

catch-up

maybe

in

the

Americas,

how

is

it

developing

with

the

new

General

Manager

there?

[Daniel Bossard, Chief Executive Officer, Bossard Holding AG]

Yes,

we

have

refocused

the

strategy

in

the United

States,

so

we

have

refocused

on

growing

industries,

East

and

West

Coast.

We

have

changed

the

organization

fundamentally

from

a

sales

structure,

namely,

and

we

have

a

new

management

in

place

with

some

more

ambitious

targets,

I

would

say.

So

we're

following

that

path.

I

cannot

give

you

any

numbers,

but

we're

so

far

happy

with

the

development.

Okay,

let's

switch

to

the

online.

[Operator]

Yeah,

ladies

and

gentlemen,

we

will

now

begin

the

question-and-answer

session

on

the

phone.

[Operator Instructions]



The

first

question

is

from

Sebastian

Vogel,

UBS.

Your

line

is

now

open

for

you.

Good

morning,

can

you

hear

me?

[Daniel Bossard, Chief Executive Officer, Bossard Holding AG]

Yes,

yes,

Sebastian.

[Sebastian Vogel, Analyst, UBS AG]

Perfect.

I

got

three

questions.

The

first

one

is

on

electric

vehicle

side

of

things.

You

have

shown

this

slide

with

the

different

pieces

and

fasteners

going

into

an

electric

vehicle.

And

just

can

you

quickly

remind

maybe

– of

course

my

past

understanding

was

that

you

have

been

mainly

active

in

the

interior

side

of

automotive

and

that's

like

sort

of

conveys

the

impression

that

you

would

be

all

over

the

vehicle

in

that

regard.

Is

that

a

change

or

was

it

just

a

wrong

perception

on

my

side

in

the

past?

That

would

be

the

first

question.

And

the

second

– sorry,

[indiscernible]



(00:43:33) go

further?

[Daniel Bossard, Chief Executive Officer, Bossard Holding AG]

Yeah,

maybe

I

can answer

to

that.

It's

not

a

change.

Maybe

we

haven't

made

it

that

transparent

in

the

past,

but

it's

not

a

change.

We're

expanding

also

into

the

ecosystem,

which

is

batteries,

charging

stations,

and

so

on,

which

is

then

more

the

ecosystem

of

electric

vehicle. So it's

not

new

in

that

sense,

but

maybe

we

haven't

made

it

transparent

in

the

past.

[Sebastian Vogel, Analyst, UBS AG]

Understood.

And

with

regard

to

the

smart

solutions,

can

you

sort

of

give

us

a

rough

ballpark

figure,

what

is

the

sort

of

revenue

contribution

you

have

seen

so

far

in

2021

and

what

are

your

ambitions

for

2022

given

the

decent

ramp

up

plans,

what

you

have

outlined

as

well

there?

[Daniel Bossard, Chief Executive Officer, Bossard Holding AG]

So,

that

one

that we

have

talked

about

earlier

many

times,

the

contribution

of

services

is

minor.

So,

it's

a

few

percent

of

total

sales,

but

that's

not

the

point.

And

so,

the

goal

is

not

to

make

that

whatever

50%

share

of

our

sales.

The

goal

is

to

use

this

as

a

shoehorn

to

create

customer

value.

And

again,

had

we

not

sold

those

services

in

the

past

or

serve

customers

to

services,

we

would

not

have

created

the

loyalty

and

stickiness

with

our

customers.

So,

in

that

sense,

it's

marginal

and

the

targets

are

to

continue

using

them

as

a

tool

to

create

product

solution

sales.

[Sebastian Vogel, Analyst, UBS AG]

Understood.

Then, my

last

question

there with

regard

to

the

customer

mix.

In

the

past,

you

mentioned

that

you

have

two

major

customers

and

then

all

the

others

that

are

on

average,

at

least

the

business,

what

they

do

with

you

is

rather

small

and

does

that

also

apply

to

the

other

large

names

that

you

have

mentioned

throughout

the

presentation,

[indiscernible]



(00:45:09) et

cetera?

[Daniel Bossard, Chief Executive Officer, Bossard Holding AG]

Well,

those

are

key

accounts.

But

still

we're

very

broadly

diversified.

We

intentionally

now

didn't

bring

up

the

variety

of

customers

we

have.

What

we

showed

today

is

more

of

a

focus

that

we

said

those

are

growth

industries

that

we

can

join

and

join

forces.

So,

they

are

key

accounts,

but

we're

not

dependent

on

them.

[Sebastian Vogel, Analyst, UBS AG]

And

they

are

not

mostly

depend

on

you

because

they

are

outsourcing

also.

That's

why

– is

that the

right

reading?

[Daniel Bossard, Chief Executive Officer, Bossard Holding AG]

For

some,

we

are

almost

single

source,

which

is

a

nice

problem

for

us.

[Sebastian Vogel, Analyst, UBS AG]

Thank

you very

much.

Many

thanks.

That

were

my

questions.

[Daniel Bossard, Chief Executive Officer, Bossard Holding AG]

Thank

you.

[Operator]

The

next

question

is

by Andreas

Müller.

The

line

is

now

open

for

you.

[Andreas Müller, Analyst, Zürcher Kantonalbank]

Yes,

thank

you

very

much, Andreas Müller from ZKB.

Thanks

for

taking

my

questions.

I've

got

two

or

three –

two

questions.

One

is

on

the

margin

progression

this

year,

I

mean,

you

mentioned

you

can

pass

on

price

increases

and

also

the

tax

increases,

the

latter

immediately,

the

rest

probably

with

some

delays.

And

with

that,

also

with

the

investments

in

ERP

and

so

forth,

would

you

be

able

to

increase

margin

this

year

or

should

we

rather

look

for

margin

decline

with,

say,

high

revenue

progression?

[Stephan Johannes J. Zehnder]

Here,

I

would

refer

to

the

second

half

of

2021.

I

mean,

we

have

seen

growth,

but

we

also

have

seen

cost

increases.

And

as

we

already

talked

about

and

elaborated,

I mean we

see

further

cost

increase,

input

costs

on

the

product

side

and

freight

costs,

but

we

will

also

see

further

increase

also

on

the

operational

costs.

Also

here

to

mention

is

that

we have –

we

had

120

employees

more

and

we

have

added

60 in

the

second

half.

So

the

annualized

– just

the

annualized

cost

will

have

an

impact

too.

So

I

would

say

that

for

the

whole

year,

if

you

look

at

the

second

half

of

2021,

that

surrounds

what

we

see

also

continuing

this

year.

But

again,

there's

a

lot

of

uncertainties

right

now

around

this

topic.

[Andreas Müller, Analyst, Zürcher Kantonalbank]

Okay.

I

understand.

And

did

I

hear

that

right,

so

you're

thinking

that

at

least

– that

the

price

increases

are

going

to

grow

top

line

at

least

10%,

just

this

factor,

is

that

right?

[Stephan Johannes J. Zehnder]

I

wouldn't

bet

on

that.

The

question

was

are

we

going

to

go

out

with

price

increases

again

this

year?

And

this

is

probably

going

to

be

like

10%

again

and

then

we

will

see

what

happens.

Maybe

another

10%

during

the

year.

Now

will

the

impact

come

directly

through

to

the

sales?

A,

there

will

be

a

time

lag,

so

we

don't

do

that

from

1st

of

January.

B,

you

can

imagine

with

large

customers,

it's

kind

of

a

negotiation

to

do

that

and

it

could

take

even

many

months

before

that

comes

to

effect.

The

effect

for

the

whole

year,

I

would

rather

expect

around

a

few

percent than

the

full

10%.

But

again,

this

is

very

difficult

to

say

how

it

continues

for

the

rest

of

the

year.

And

in

that

sense,

it's

hard

to

give

you

a

number

here,

but

those

are

indications

that

we

see

right

now.

We

need

to

at

least

go

out

with

another

price

increase

around

of

10%

and

maybe

another

10%

later.

That's

what

we

see

today.

Will

the

impact

be

10%

or

20%

on

the

top

line?

No,

because

of

time

lags,

because

of

negotiation

rounds?

Because

maybe

we

can

only

convey it

partially,

but

there

will

be

a

part

of

that

impacting

our

sales.

So

I don't

know,

that

was

probably

too

vague

for

you,

but

that's

how

it

is.

[Andreas Müller, Analyst, Zürcher Kantonalbank]

It's

okay.

That

was

giving

some

indication,

I

think.

And

my

last

question

is

on

America's

growth

dynamic

in

Q4.

I

mean,

they

came

down

a

bit

relative

also

to

the

still

strong

other

regions.

What

was

the

reason

there?

[Stephan Johannes J. Zehnder]

The

main

reason

is

that

we

had

quite

a

good

performance

in

the

last

quarter

of

2020,

so

we

had

a

basis

impact.

Besides

that,

if

you

look

again,

the

cost

of

the

base

we

have,

also

we

have

– the

way

we

have

started

into

the

year,

so

we

are

happy

with

that

development

so

far.

[Andreas Müller, Analyst, Zürcher Kantonalbank]

Thank

you

very

much.

[Operator Instructions]

[Daniel Bossard, Chief Executive Officer, Bossard Holding AG]

Finished.

Okay.

[Daniel Bossard, Chief Executive Officer, Bossard Holding AG]

Good.

If

there

is

any

more

questions,

no

more

question

here.

It

doesn't

look

like,

then

we

would

like

to

thank

you

very

much

for

your attention

and

wish

you

a

great

day

ahead.

Thank

you.

[Stephan Johannes J. Zehnder]

Thank you.