Kemet Corporation (KEM)

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KEMET Corporation (KEM)

Deutsche Bank 20th Annual Leveraged Finance Conference

October 11, 2012 7:10 pm ET

Executives

Bill Lowe - Executive Vice President and Chief Financial Officer

Analysts

Presentation

Bill Lowe

Good afternoon, and welcome to KEMET's presentation here at the Deutsche Bank Conference. I'm Bill Lowe, KEMET's Chief Financial Officer. I'm going to spend some time going through some general slides with you about the business and introducing you to KEMET. Some of the things we have going on at the company, and then we'll have time for a question-and-answer session after the end of my general remarks.

KEMET has been around for quite a while. We actually have 22 manufacturing locations in 10 countries. We're a manufacturer of capacitors in all shapes and forms, tantalum, ceramics, film, aluminum, electrolytic and paper. We'd like to say we offer about 95% of dielectric solutions that are possible in the [capacent] space.

We manufacture in key manufacturing facilities in Mexico, China, Indonesia and mostly throughout Europe, and as well as United States. About 10,000 employees and we have a global sales force covering split up amongst the Americas EMEA and Asia.

When we look at the business segment, again, we're broken up into maybe business types by type of materials being used in our capacitor. We have the Tantalum business unit, our Ceramic business unit and Film and Electrolytic.

In this slide, what I'd like to point out as you can see that there is some overlap between the Tantalum in the Ceramics business unit as far as the market segments that the two business group sell into from the computer, all the way into military and aerospace and medical.

Film and Electrolytics is very industrial based. Also, sells into automotive sector and is also the business group that deals mostly with our alternative energy sector and we'll talk about that in a moment as well.

Again, looking at a global reach, we can see we do have production and sales facilities across the globe. And when we look at our market, this is how our fiscal '12 revenue split between the segments, in the channels, the regions and our business groups.

Our period ended March 31st, last year, we were in our current fiscal'13 year today. So, let's start first with our channels. We were fairly evenly split last year between our OEM business and distribution business, and 15% into the EMS sector. And segments, industrial and lighting was about 26% last year. Transportation, which is primarily light automotive, it was 19%. Again, defense and medical and military and medical was about 11%, and has been consistently 10% or 11% in most annual periods.

Telecom, which for us is mostly base stations, it was 19% last year, and computer which is primarily notebooks, laptops, tablets about 15% and consumer at 10%, which goes across broad spectrum of everything from gaming consoles to some minor into TVs and things like that.

From a region, last year we had a substantial portion of business in EMEA or in Europe; it's generally split about this way with Asian and European being the two with higher percentages and the Americas, last year at 28%. Many years we see Asia and the EMEA at about the same rate 33% or 34% each and the Americas being the difference.

From a BG standpoint, business group standpoint, Tantalum is our largest business group at 42% last fiscal year, and they traditionally have been. The Ceramics business, see on this chart 22% and Film and Electrolytics at 36%.

We have a strong customer relationship. I am not going to spend a lot of time on this slide, but you can see that most of these names I am sure you're familiar with, especially in the OEM space and then in our distribution space are many of our key distributors that are listed here such as TTI, Avnet, Arrow, etcetera.

I did mention alternative energy. We do have reduced on alternative energy market both, all the way from hybrid vehicles, although way to electric motors and motor starts, wind, solar, thermal and storage as well as the smart grid. And, again, another sampling of some of the customers we sell into. You'll recognize most of these names as well in the green energy space, and we recently in the last year or so we've actually put production back in United States.

It was nice to bring some jobs back into the United States in the Simpsonville, which is basically manufacturing facility that is bringing some of our technology we have in Europe and our Italian operations supplying parts to the hybrid vehicle market in the U.S., where we not supplying before and are working on generating more revenue from that facility as we go forward, and we do try to walk the talk. We do have electric vehicle at the facility as a part of our company cars that we use for local use.

One of the things we've been involved with over the past couple of years is the restructuring of our general business in Europe, and I'm talking primarily about the Film and Electrolytics business group. We've been in the process. I've you've listened to any of our calls in the past about moving production from various locations in Europe to China and Mexico, and then also into different locations within Europe, so we are in the process actually next weekend. I believe on the 18th of October, actually having opening ceremonies at this facility in Skopje Macedonia, which we built to move production from various locations within Europe, which were closing as a part of the restructuring process to get into lower-cost restrictions and one of the locations was in Macedonia, where we are starting up here very shortly.

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