Mersen: 2016 Half-Year Results

PRESS RELEASE

• OPERATIONAL EXCELLENCE PLAN ENHANCES THE GROUP'S COMPETITIVENESS

• OPERATING MARGIN BEFORE NON-RECURRING ITEMS ABOVE H2 2015 LEVEL

• STRONG CASH GENERATION DURING THE FIRST HALF

• FULL-YEAR GUIDANCE REITERATED

  PARIS, JULY 28, 2016 - Mersen (Euronext FR0000039620 - MRN), a global expert in electrical power and advanced materials, has today released its second-quarter sales and interim results for the period ended June 30, 2016.

  "Mersen returned to organic growth this quarter, enabling us to post a very small increase in organic growth for the first half of the year. Inspite of a persistent mixed environment we were able to leverage the effectiveness of our new organizational structure and our realigned teams. Trends in our growth markets- renewable energies, electronics and transportation- remain very firm. Over the period, our operating margin before non-recurring items came to 7.8%, an improvement on the second half of 2015. We generated substantial cash flow through optimized management of our inventories and our capital expenditure. These results represent the first stage in the Operational Excellence plan unveiled in March, which will run until 2018. All of our teams are mobilized to accelerate the implementation of initiatives to boost our competitiveness so that we can reap the rewards over the coming periods." stated Luc Themelin, Mersen's Chief Executive Officer.

  KEY FIGURES FOR H1 2016

  2015 restated*		2016
  H1	H2	H1
  Sales (€ m)	393.7	378.6	389.9
  Operating margin before non-recurring items	8.6%	7.1%	7.8%
  Net income (€ m)	16.7	(14.1)	12.3
  Cash generated by operating activities (€m)	2.3	44.5	28.5

  *To facilitate comparisons with groups in its sector of activity, Mersen has decided to reclassify the financial portion of its employee benefit expense under financial items. In addition, the brazing technologies business sold at the beginning of 2016 was classified under discontinued operations.

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  SECOND-QUARTER 2016 SALES

  Mersen recorded second-quarter 2016 consolidated sales of €198 million. On a like-for-like basis, the top line grew by 1.4% compared with the second quarter of 2015 and rose by over 4% compared with the first quarter of 2016. Including an unfavorable currency effect (-2.8%) and the positive impact of the first-time consolidation of ASP, sales were almost stable compared with the previous year.

  In € million	Q2 2016	Q2 2015(2)	total growth	organic growth(1)
  Advanced Materials	109.2	109.9	-0.7%	3.1%
  Electrical Power	89.1	89.5	-0.5%	-0.6%
  Group total	198.3	199.4	-0.6%	1.4%
  Europe	69.8	68.9	1.2%	2.3%
  Asia-Pacific	47.8	44.6	7.2%	6.9%
  North America	70.3	75.7	-7.2%	-4.2%
  Rest of the world	10.4	10.2	2.2%	14.4%
  Group total	198.3	199.4	-0.6%	1.4%

• On a like-for-like basis

• The brazing technologies business sold at the beginning of 2016 was classified under discontinued operations.

In Asia, organic growth ran at close to 6.9% despite a negative effect attributable to the chemicals market. Performance in China was highly satisfactory with double-digit organic growth powered by the electronics, transportation and renewable energies markets. India was the region's top performer thanks to wind energy and rail transportation.

Sales in North America contracted, with the chemicals and oil industry markets posting another decline, albeit offset partly by encouraging performances in energy and transportation.

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Mersen posted first-half consolidated sales of €390 million, with organic growth running at 0.2% compared with the year-earlier period.

1. On a like-for-like basis

2. The brazing technologies business sold at the beginning of 2016 was classified under discontinued operations.

In Europe, the situation was mixed. Sales in Germany and France continued to lag behind, while significant increases were recorded in other countries, driven primarily by the rail transportation market. In Asia, performance was very healthy in China, as it was in India and Japan. In North America, the chemicals and oil industry markets posted another decline, as did electrical distribution.

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Mersen's operating income before non-recurring items1 came to €30.5 million, representing an operating margin before non-recurring items of 7.8% of sales. This was a decline on the level recorded in the first half of 2015 (8.6% restated2) and a significant increase on the second-half level of 2015 (7.1%).

The Advanced Materials segment's operating income before non-recurring items came to €16.8 million, representing 8.0% of sales, compared with 9.8% in the same period of 2015. This trend was attributable to the negative impact on prices, an unfavorable product mix and cost inflation against the backdrop of low growth, which was partially offset by significant productivity gains. Even so, the margin was almost 1.5 point higher than in the second half of 2015.

The Electrical Power segment's operating income before non-recurring items came to €20.6 million. Its operating income before non-recurring items came to 11.5% of sales, representing an improvement of 0.7 points on the previous year. This achievement was attributable to productivity gains.

Mersen's3 EBITDA totaled €49.1 million (12.6% of sales).

Non-recurring income and expenses was a charge of €3.5 million. They mainly consisted of restructuring charges associated with the productivity improvement plans. The equivalent figure in 2015 was a charge of

€1.1 million. Mersen's net financial expense came to €6 million in the first half of the year, in line with its year-earlier level. Income tax expense totaled €7.0 million in the first half of the year. This represented an effective tax rate of 34%, on a par with its level in the previous year.

Mersen's first-half net income came to €12.3 million compared with €16.7 million in the previous year.

In the first six months of the year, Mersen generated cash flow from operating activities of close to

€29 million. This represented a significant improvement on the previous year, which included substantial outflows related to the Transform plan. Cash flow included a €5.3 million charge in the working capital requirement, an improvement compared with the previous year through optimized inventory management, despite the top-line growth. Another factor contributing to this improvement was the low level of tax paid, as certain payments in the United States were made in advance in 2015.

Capital expenditure totaled €12.9 million, down slightly on the previous year, as certain investments were postponed until the second half.

1 Based on the definition laid down in CNC regulation 2009.R.03.

2 To facilitate comparisons with groups in its sector of activity, Mersen has decided to reclassify the financial portion of its employee benefit expense under financial items.

3 Operating income before non-recurring items + depreciation and amortization

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