Kemet Corporation (KEM)

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Kemet Corporation (KEM)

UBS Global Technology and Services Conference

November 14, 2012 11:00 AM ET

Executives

William Lowe – EVP and CFO

Analysts

Amitabh Passi – UBS

Presentation

Amitabh Passi – UBS

Okay. Thank you everybody, we’ll go ahead and get started. My name is Amitabh Passi, I’m the Supply Chain and Networking Analyst at UBS. And it’s my pleasure to welcome KEMET. And presenting on behalf of KEMET is Mr. William Lowe, the Chief Financial Officer. Thanks Lowe.

William Lowe

Thank you and good morning everyone and thank you for attending the KEMET’s presentation today. I’m going to start out, just a little bit of a company overview for those who may not know us very well, would be around quite a while.

We do have global manufacturing sites around the world. We have about 22 manufacturing locations in about 10 countries, a little over 10,000 employees. And we have a global sales force, it’s broken up by region in the America and India and Asia.

We have three business segments that we report, we report in a Tantalum business unit as Ceramic as well as our Film & Electrolytics business group. The purpose of this slide really is to show, there is some cross over and the market segments, primarily between Tantalum and Ceramics, so you can see between the computer and gaming and health in the TV area and as well as some of the military and aerospace products that we make cross-over between both Tantalum and Ceramics. And then Film & Electrolytics business unit, primarily big focus on industrial automotive and then renewable energy products.

Just again, looking at our global reach, we have a production base as I said, that’s around the globe, a large concentration in Mexico and China. We also have major sales locations throughout, both the US, Asia and throughout Germany – and sorry, throughout Europe.

Looking into the market overview, I want to start with a slide that we’ve actually put for the first time on our last earnings call to demonstrate, we’ve talked over the last several quarters about what has moved our revenue up and down a little bit and directions over the last several quarters, as primarily we talked about the distribution channel. And what I would demonstrate by this chart really is, you can see in the blue line which is the top-line here, how much it has moved up and down dramatically over the course of, quite a few quarters, compared to say our OEM channel or our EMS channel, they’ve certainly not been flat but they certainly haven’t moved up and down as much as the distribution channel.

We think that either the blue line as you see, as it declined into the last quarter, we expect again to see a bit of a de-stocking still occurring through this December quarter. And as we said in our earnings call, we expect potentially we expect to see – they started coming back as we get into our final fiscal quarter ended March of next calendar year.

From a – looking at the revenue, breaking it down between the segment, the channel, our regions and then our business groups, looking at last year’s revenue broken down this way, you can see that we have from a segment standpoint about 19% of our revenues in transportation, that primarily is light vehicle. About 11% last year in Defense and Medical, that’s fairly consistent usually runs around 10% or 11%.

And then Telecom, which is primarily base stations for us, that’s around 19%, computer at 15%, consumer at 10% and then Industrial & Lighting at 26%. And channels again, you saw on our line short, distributions around 42% last year, OEM around 43% and EMS at 15%.

From a regional standpoint fairly evenly split, last year Americas around 28%, the European region at 38% and Asia at 34%. And then again our largest business group, the Tantalum Business Group, and they were about 42% of our revenues last year, Ceramics business group around 22% and Film & Electrolytics at 36%.

I’m not going to go through all the customer list here but just a point that we do a strong customer relationships on the OEM side with a lot of names that all of you would recognize immediately when you look at this chart. As well as our distribution channel with where our largest distribution goes through those folks as well as the EMS channels with Flex and Foxconn and JBL, I think just presented before I came on today.

We’ve been focused a lot over the last couple of years on restructuring and moving into a low cost locations in Europe and I want to cover a little bit about what we’re doing there and what our status is. We just recently opened a facility in Skopje, Macedonia, this last month in October, that facility is – we’re moving – we have moved equipment in there from other locations within Europe to have a low cost manufacturing facility to serve Europe as we’re doing our restructuring.

In addition, we currently have three facilities in Italy, we are constructing a new facility where we will close the three facilities we have today. And move into one facility in Pontaccio Italy, it’s actually just down the road a little bit from one of our facilities so it’s fairly close by on one of them. We expect this instruction to be completed and our stuff to be completed with that Film & Electrolytics Group some time next summer and move into this new facility and lower our fixed overhead, with 586 people are remaining in Italy when we’re completed this construction.

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