Efore Annual General Meeting March 30, 2016

Review by the CEO Heikki Viika

EFORE overview

EFORE – The trusted power partner Efore Plc is an international group specialised in design, development and production of demanding power products.

Key facts • • • • •

Net Sales 89,9M € (2015) 737 employees (end 2015) Established in 1975 2700 shareholders (end 2015) Quoted on Nasdaq Helsinki

Major shareholders * 1 2 3 4 5 6 7 8 9 10

Efore designs and manufactures cutting edge power conversion products; that offer superior energy efficiency, reliability, more intelligent designs, flexibility and creativity for the telecommunications including networks and broadcasting, industrial, medical, LED lighting and transportation markets.

% of shares

Sievi Capital Oyj Evli Pankki Oyj Efore Oyj Danske Bank Plc (Nom. reg.) Jussi Invest Oy Nordea Bank Finland Plc (Nom. reg.) Tammivuori Leena Rausanne Oy Ilmarinen Ulkomarkkinat Oy

* Status Feb. 29, 2016

21,8 9,4 6,3 5,0 3,4 3,3 3,1 2,9 2,8 2,0

Efore competences and know-how are embodied in the solutions we provide to our customers: high efficiency and high reliability.

Efore worldwide

Stockholm, Sweden

Stroudsburg, USA

Tunis, Tunisia

Tampere, Finland Espoo, Finland

Castelfidardo, Italy

Hong Kong, China

Suzhou, China

Headquarters

Technology and Development Production Sales office

Efore Plc is headquartered in Espoo, Finland, with major offices in Italy, China and Sweden, production units in China and Tunisia, and Sales and Marketing organizations in Europe, North America and Asia.

We’re proud of our worldwide customers Industry leading customers globally recognize EFORE Group as a reliable and trusted partner for their power supply applications. DEFENCE

INDUSTRIAL DC SYSTEM

DIGITAL POWER

TELECOM

LIGHTING

MEDICAL

HOUSEHOLD APPLIANCES

Awarded supplier

2013

2014

2015

SUPPLIER OF THE YEAR ABB Substation Automation Products

SUPPLIER OF THE YEAR & BEST IN CLASS SUPPLIER National Instruments

BEST IN CLASS SUPPLIER National Instruments

SUPPLIER OF THE YEAR Ericsson

Financial statements 2015

Financial development in 2015 did not meet the expectations Key indicators, EUR million

FY/2015 FY/2014

Net sales - Telecommunication sector - Industrial sector Results from operating activities without one-time items Results from operating activities Results before taxes Net result Return on equity (ROE), % Return on investment (ROI), %

89,9 44,8 45,1 -1,6 -2,0 -3,3 -3,4 -16,8 -9,2

85,3 46,0 39,3 0,1 -2,0 -3,1 -2,6 -11,8 -6,7

Earnings per share, EUR Solvency ratio, % Gearing, % Cash flow from business operations Share price on Dec. 31, 2015 Market capitalization on Dec. 31, 2015 Personnel, average

-0,07 34,2 24,5 1,8 0,77 40,2 887

-0,05 38,1 9,0 3,8 0,81 42,3 914

FY 2015 (2014) Net sales by sector 50,2 % 49,8 %

2015

46,1 % 53,9 %

Telecommunication

Industrial

FY2015 (2014) Net sales by region* 11,0 % 16,1 % 41,6 % 14,0 % 15,1 %

2015

49,0 %

27,2 % 26,0 %

EMEA

APAC

Americas

Finland

Despite the poor financial performance a good progress was made in several areas

• Net sales increased 5.4% year-on-year despite the decline of the telecommunication sector. • The Industrial sector growth trend continued throughout the whole year. • The new strategy focusing on being The Trusted Power Partner was published. • The partner network was strengthened with several new sales representative firms and distributors in the U.S.A and in Europe. • The company structure was streamlined and the organization was flattened to support more efficiently the Group’s strategic and financial targets. • A great number of R&D investments were made in the development of future products

Net sales and operating profit

85

88,1

89,9

85,3 78,1

70

74,5

55 40 25 10 -5

MEUR

* 4,1

2011

-2,6

2012 Net Sales

-2,0

-4,5

2013

2014

Results from operating activities

-2,0

2015

Net Sales and EBIT in 2015 25

1

0,7

0,5

20

13,1 15

0

12,1

0

0

12,0

7,7 -0,5 -1

10

5

10,4

11,6

10,9

12,1

-1,5 -2

-2,3 0 MEUR

-2,5

Q1/2015

Q2/2015

Q3/2015

Q4/2015

MEUR

Telecom Industrial EBIT

Solvency ratio

50

48,3 40

47,7

38,1 34,2

39,7 30 20

10 % 0

2011

2012

2013

2014

2015

Balance sheet: assets 60 50 19,0

17,7

Non current assets

40 30

14,5

Inventories

16,6

Trade & other receivables

6,3

7,8

Cash and cash equivalents

Dec. 31, 2015

Dec. 31, 2014

14,9

20 10

0 MEUR

15,4

Balance sheet: equity and liabilities 60 50

19,0

21,5

40 3,8 30 20

4,9

Non-current liabilities Current liabilities 32,8

30,1

Dec.31, 2015

Dec. 31, 2014

10 0 m€

Equity

Personnel by geographical area 1200 1000 800

9 213

90

358

8 352

America

600 400

7 315

694

714

EMEA APAC

568

616

2013

2014

415

200 0 2011

2012

2015 Status on Dec. 31, 2015

Strategic plan 2015 - 2018

Efore strategy in a nutshell Solution driven – we focus to fulfil our customers’ needs at high pace (TTM)

Cost efficiency – we provide our products and services cost efficiently (TCO)

Reliability – our product lasts longer and our delivery is on time

Customer intimacy – we are approachable at all levels, from individual to individual

CUSTOMER FOOTPRINT

COMPETENCY ALIGNMENT

EFORE STRUCTURE

Evaluation

MARKET NEEDS

Alignment

MARKET INTELLIGENCE

TECHNOLOGY TRENDS

GO-TOMARKET STRATEGY

PRODUCT ROADMAP

Merchant power supply market

25000

25000 19942

20239

20467

20711

20000

Military and aerospace Transportation Medical

15000 Industrial and Instrumentation 10000

Networking/telecom/ equipment Computer/office/ equipment

5000

19943

LED Lighting

m$

2016

2017

2018

2019

20467

20712

20000

15000

Modified & Customized Standard

10000

Standard

5000

Consumer/retail/ equipment 0

20239

0

m$

2016

2017

2018

2019

Source: Global Switching Power Supply Industry, Market Analysis, Micro-Tech Consultants

20

Competitive landscape - Current strengths/weaknesses Efore vs. competitors

Competitors

EFORE

•

•

Our competitors have the following main advantages due to their larger size – – – – –

•

Well recognized brand Larger standard product offering, Geographic proximity with the customer base (office locations and bigger sales force) Scale of new product development Economy of scale due to very large volume BUT

Same customers are concerned about their dimension especially when the power spend is not big enough to receive the highest level of attention, flexibility and service

•

We know how to reach the highest level on Intimacy with our Tier 1 customers In 2013, 2014 and 2015 we have been awarded as ”Supplier of the year” from ABB, Ericsson and National Instrument and the selection provided the following motivation: – – – –

•

Superior quality, Lower than average cost of doing business (TCO) On time delivery Technology Added Value for their final products to guarantee our customer’ customers satisfaction

Long term business with our customers is a clear representation of the HIGH RETURN OF INTIMACY (RofI)

Our customers trust Efore

Standard & custom strategy EFORE is a power supply design and manufacturing company that is serving both custom and standard markets. Working with both business models EFORE will: 1. Use the standard platform as a starting point for customization 2. Mitigate the payback risk of R&D investments by developing new features for custom products

CUSTOM

STANDARD

Custom specifications Non-recurring cost contribution Specific custom volume Tier1 Competitor Direct Single market destination

Benchmark market performances Own development costs Broader customer base Wide competition Distribution Multiple market destination

Customization/ Standardization

Strategic plan 2015 – 2018

Main actions in 2015 • Contracts signed with four sales agency chains to strengthen sales force in USA • New dual dimming LED driver series CIELO launched • Quick S.p.A. selected Efore Plc's Italian subsidiary to jointly develop a LED luminaire for marine and industry applications • National Instruments awarded Efore’s Italian subsidiary again – This was the fourth time ROAL was awarded by National Instruments after after

Strategic plan 2015 – 2018

Main actions in 2015 • Efore invested in several R&D projects, a major new product line has been launched at end of the year for a telecom customer, and development nearing completion for products intended for small cell market, launching mid 2016. • Efore designed a next generation of AC/DC power supply product for industrial markets. This new technology features Efore’s proprietary full digital control and communications. • Besides the power conversion technology - also new manufacturing techniques were explored and evaluated to reduce product cost and further improve power supply capabilities. • Efore is involved in several research projects related to all these fields of activities. • Efore designed new dual dimming LED driver series CIELO ideal for track, downlights and other architectural lighting applications.

Strategic plan 2015 – 2018

Main actions in 2015 •

New corporate brand “The Trusted Power Partner” released

•

Product naming structure updated

•

Corporate naming harmonised, Roal entities joined the Efore family also with the company names

Strategic plan 2015 – 2018

Main actions in 2015 •

Savings programme conducted in Italy

•

Cost improvement programme initiated in China and Finland

•

Manufacturing process in Suzhou has been reorganized in to improve factory throughput time

•

Cost structure of certain products has been improved

•

New flatter organization structure implemented to reduce duplications

Changes in ownership, Suzhou plant

A

As an important step of creating a cost efficient manufacturing platform Efore is evaluating a possibility to sell out its Suzhou factory to an external company.

C

Efore will have an office in Suzhou taking care of R&D activities, NPI activities as well as of the daily supply/ manufacturing activities. Efore will remain as the supplier to its customers.

E

With this action Efore can release needed capital to invest in its core capabilities.

B

The plan is that manufacturing will continue as such but owned and managed by the chosen company. This company will act as Efore’s trusted supplier for products manufactured in Suzhou plant.

D

The new owner shall have a strategy to further develop the production site to be a modern , competitive and high quality production plant.

Efore will invest in capabilities to further improve its competitiveness and time to market in product development

Background to strategic action Ability to invest in Efore Core Competencies and to improve the time to market

Securing Cost Competiveness also in the long run

• Global Product management • Global Sales • Technology • Product Development • Production Engineering team in Suzhou • NPI • Dedicated team in Suzhou supporting EMS • Tunisia NPI factory

Securing our ability to supply reliably

• Utilization rate of production line • Modernization of manufacturing technology • Yield/Quality • Concern of China cost level • Maintain cost leverage • EMS 2nd Sourcing to maintain cost pressure • Component Supplier leverage through EMS partner volume

Taking this action will allow us to take a leap forward

• Capability to meet the demand • Manage EMS locally in China • Quality resouces near supplier • Flexibility and Agreements • Inhouse mfg • Second Source • Contractual agreements with main suppliers • Recovery Management

Strategic plan 2015 – 2018

Main actions in 2015 • Organization was renewed to correspond to the business structure • The head of both HR and Quality functions were included in the Executive Management Team • Strategic actions are being cascaded throughout the organisation as personal targets • Senior level succession planning for first two levels has been implemented

Conclusions An updated vision for the company: The trusted power partner • Four strategic cornerstones encapsulate the strategy • Growth is aimed through – Securing current large accounts at current high level or increasing the volumes – Capturing selected new major accounts through planned approach – Opening new sales channels including Internet – Bringing new technologies to the market

• Improvements in profitability to reach 10% EBIT by end of planning period are aimed through optimising overhead costs, efficiency improvements in manufacturing and product development, and ensuring a competitive materials cost base • We are aiming at energising the company through management commitment to leadership, empowering our employees and ensuring we have the right competencies and rewards system for the future

• Detailed information on annual accounts can be found in Annual Report 2015 - Group level from page 19 - Parent company from page 53 - Auditor’s report from page 73

Financial estimate for 2016

• The Company estimates its net sales of financial year 2016 to be higher than 2015, and the results from operating activities without one-time items to be positive. • The estimate of the development of Efore's net sales and results from operating activities is based on current business structure as well as partly on forecasts and delivery plans received from the customers.

Thank you for your attention HEIKKI VIIKA