LEM Holding S.A.

LEM reported H1 FY2025-'26 sales of CHF 148 million, down 5% year over year in Swiss francs but up 0.5% at constant exchange rates. Q2 sales were down 4% in CHF and up 1.2% at constant exchange rates. Gross margin fell to just over 40% in H1, down 400 bps year over year, though it recovered 150 bps in Q2 to CHF 30 million, down roughly 10% year over year. EBIT was CHF 11.4 million in H1 and CHF 7.2 million in Q2; H1 return on sales was 7.7% and Q2 was just under 10%, with pre-restructuring margin above 11%. Net profit was CHF 6.8 million in H1, and financial results showed a CHF 30 million loss, improving by CHF 1 million year over year. Free cash flow to the firm was CHF 5.6 million versus a CHF 11.6 million burn in the prior year. For FY2025-'26, management guided to sales of CHF 265 million to CHF 290 million and a high-single-digit EBIT margin. Midterm guidance was updated to 4% to 7% annual sales growth in constant currencies and a 10% to 15% EBIT margin.

Frank Rehfeld said the business environment remains volatile, with tariffs, geopolitics, and renminbi depreciation weighing on reported growth. He emphasized that LEM is still seeing long-term demand tied to sustainability, electrification, renewable energy, and energy efficiency, but expects a market adjustment and stabilization through '26-'27 before growth reaccelerates. He also highlighted strategic work on closer customer proximity in Asia, the Malaysia footprint, integrated current sensing/TMR, and the Fit for Growth program, while saying the old CHF 600 million and 20%+ EBIT ambitions are not gone but would take longer and may be more realistic only later.

Antoine Chulia said the H1 gross margin decline was driven by FX, price, and mix, with price pressure especially in China and renewable/industrial markets, but that Q2 showed a 150 bps recovery as the company became more selective commercially and improved manufacturing and sourcing variances. SG&A fell to CHF 31.5 million in H1, down 13%, and R&D spending was reduced by more than 20% through personnel and footprint changes, helping EBIT rise to CHF 11.4 million in H1 despite lower gross profit. He also said free cash flow improved to CHF 5.6 million, cash discipline will remain a priority, and the company expects positive free cash flow going forward as working capital, capex, and restructuring cash outflows improve.

Analysts focused on whether the old CHF 600 million sales and 20% EBIT margin targets were still valid; management said they are not abandoned, but the timeline is now longer and 15%-20% EBIT is likely too early to call. Questions also probed whether 40% gross margin is enough to reach the new 10%-15% EBIT range; management said 40% is the new floor, but 15% EBIT would require gross margin above that floor. On cash flow, management said second-half free cash flow should remain positive, and on Fit for Growth, they said no additional restructuring is currently planned, though it cannot be excluded if geopolitics worsen. They also said Nexperia has not affected them so far, and that order visibility has become more cautious because of cancellations, pushouts, and noise in customer behavior.