This article first appeared on GuruFocus .
-
Revenue:CHF 287.7 million, a decline of 6.3% in CHF, stable in constant currencies.
-
Free Cash Flow:Improved to $31.7 million from a negative cash flow of minus $11.6 million 18 months ago.
-
Cost Savings:Achieved $20 million savings in '25-'26 through the Fit for Growth project.
-
Gross Profit:$115 million, representing 40% of sales.
-
Operating Profit:Up almost 30% from the prior year.
-
Net Debt:Reduced to below $60 million from $90 million a year ago.
-
Gross Margin:Stabilized after a hit in Q1 due to price pressures and U.S. import tariffs.
-
SG&A Reduction:Decreased by 12% due to cost optimization measures.
-
R&D Spend:Reduced to under 10% of revenue, with a focus on efficiency and strategic alignment.
-
Income Tax Charge:$8 million, with an effective tax rate of 45% due to one-time hits.
-
Order Intake:$80 million in Q4, showing positive momentum.
-
Sales in Q4:Stabilized just south of $70 million.
-
Warning! GuruFocus has detected 6 Warning Signs with XSWX:LEHN.
-
Is XSWX:LEHN fairly valued? Test your thesis with our free DCF calculator.
Release Date: May 26, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
-
LEM Holding SA ( XSWX:LEHN ) reported stable sales in constant currencies, achieving CHF 287.7 million despite a 6.3% decline in CHF.
-
The company successfully implemented its Fit for Growth program, achieving $20 million in cost savings and improving free cash flow to $31.7 million.
-
Order intake showed improvement towards the end of the financial year, indicating potential growth momentum.
-
The automation business experienced significant growth, driven by demand from data centers and depleted inventory levels.
-
LEM Holding SA expanded R&D activities in Asia and strengthened production capabilities in Malaysia and Bulgaria, aligning with market shifts towards Asia.
Negative Points
-
The company faced market uncertainty and currency headwinds, with ongoing pricing pressure in China impacting gross margins.
-
Sales declined by 6.3% in CHF, and the automotive and traction businesses experienced a slowdown in the second half of the year.
-
The renewable energy segment declined by 6.7% in constant currencies, with competitive pressure from Chinese manufacturers affecting margins.
-
The energy distribution and high precision business continued to shrink by 8.4% year-on-year in constant currencies.
-
The Board of Directors proposed not to declare a dividend for the '25-'26 financial year due to economic uncertainty, impacting shareholder returns.
Q & A Highlights
Q: Why is there a sudden focus on data centers for LEM, and is this due to specific products or inventory management? A: Frank Rehfeld, CEO: The focus on data centers is due to consistent demand and investments that have been made over time. Initially, there were stocks in the pipeline, but now we see a steady demand as these investments are realized.
Q: With the pricing pressure in China, is there a risk that this will spread to Europe? A: Frank Rehfeld, CEO: While competitiveness will remain a constant topic, the situation in Europe is different due to varying innovation and market dynamics. However, increased competition from China in Europe is possible, and we must remain vigilant.
Q: How significant is the data center business in LEM's current sales and future outlook? A: Frank Rehfeld, CEO: Currently, data centers are a small part of our business, but their importance is expected to grow as they move towards hybrid models. We are working with customers on future infrastructures, which will increase the relevance of data centers for LEM.
Q: Why is LEM shifting its R&D focus to Asia despite higher pricing pressure there? A: Frank Rehfeld, CEO: To maintain gross margins in China, it's crucial to work closely with customers from the start. This proximity allows us to innovate and capture higher margins in the early product lifecycle, necessitating R&D presence in Asia.
Q: Can you provide more details on the restructuring and its impact on the workforce? A: Frank Rehfeld, CEO: The Fit for Growth program targeted $20 million in savings, achieved through personnel and non-personnel measures. The net headcount reduction was about 150 people, with European locations more affected as we build up in China.
Q: What is the outlook for LEM's growth and margins in the coming years? A: Frank Rehfeld, CEO: We expect growth to start from 2027-28, with a 4-7% annual growth in constant currencies. Margins are under pressure, but we are working on improving gross margins through pricing strategies and operational efficiencies.
Q: How does LEM plan to defend its market position in China amid structural pricing pressures? A: Frank Rehfeld, CEO: We are focusing on reducing component costs and increasing regional decision-making power to act competitively in China. Our strategy includes maintaining a strong local presence and leveraging our production capabilities.
Q: What are the strategic options being considered by the Board, and what are the non-negotiable criteria? A: Andreas Hurlimann, Chairman: The Board is evaluating strategic options that could benefit the company, shareholders, employees, and other stakeholders. We are considering these options alongside our standalone value creation plan.
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
