In interview: a hidden champion reinvents itself

Interview with wallstreet:online and Von Roll CEO Dr. Christian Hennerkes

When Christian Hennerkes took over as CEO of Von Roll AG in 2016, not much was left of the glamor of the
venerable Swiss industrial group. Von Roll was making losses of 20 to 50 million euros a year, and most of
its 19 sites were in deficit. Since then, the former BCG manager has turned the company around.
Today, Von Roll is debt-free and all locations are operating profitably, as Hennerkes reports in an interview
with wallstreet:online.

After years of building up the company, the time has come for the manager to talk about what he has achieved
and provide an insight into the company’s future projects. He talks to the w:o editorial team about the emerging
automotive business, possible acquisitions and the great potential of Von Roll shares.

wallstreet:online: Mr. Hennerkes, Von Roll is a household name for many people, especially in Switzerland,
as a steel manufacturer with a long history. In the meantime, however, the focus has shifted to a completely
different area.

Christian Hennerkes: Our current core business no longer has anything to do with steel, but with power generation
and global electrification. We are the world market leader for electrical insulation systems, which are needed in every
electrical application. Our biggest sales markets are products for industrial motors and large electricity generators
in power plants and wind turbines. We supplied these systems to China 40 years ago for large hydroelectric power
plants. Swiss quality is highly appreciated on the Chinese market.

There is also the area of industrial resins, which are used to protect electronics in everything from cell phones to cars.
These are specialty chemicals that are used on many production lines. Often invisible to the user, but essential to
improve performance.

wallstreet:online: Now, with the energy transition and the rapidly advancing electrification of transport, a completely
new business area is opening up. What role does this topic play for Von Roll?

Christian Hennerkes: The automotive sector is still small, but it is growing at a rapid pace. Meanwhile, the demands
on e‑motors and batteries are growing just as fast: Long ranges, fast charging, and, if possible, ever lighter and more
powerful. But as performance increases, so do the technical challenges, for example with regard to battery cooling
and partial electrical discharges in the motor.

The trend is toward high-voltage systems. This is an area in which Von Roll has traditionally been very well versed.
Our systems for use in large power plants often have to withstand higher loads for decades.

wallstreet:online: What does Von Roll do those large car manufacturers such as Volkswagen cannot produce themselves?

Christian Hennerkes: The electric powertrain consists of numerous components. The manufacturer does not have
its own expertise for every component. The materials for the electrical insulation system have been developed, produced
and tested by us for more than 100 years. Our customers benefit from this experience.

wallstreet:online: The shift toward electromobility is, above all, supposed to be sustainable. How does Von Roll,
as part of the value chain, manage to meet these requirements?

Christian Hennerkes: Sustainability is indeed a regular focus in discussions with our customers. This involves
both environmental impacts and ethical working conditions across the entire supply chain. What lithium is for
the battery, mica is for the insulation. We have been mining this raw material — which is often associated with
child labor in the media — in our own mines under close control for over 30 years. This gives us an important
competitive advantage over the competition.

wallstreet:online: For many investors, Von Roll is literally a “hidden champion.” It has been quiet around
the company in recent years. Why hasn’t the stock been on the radar of investors and analysts for a long time?

Christian Hennerkes: We spent five years turning the company around, and during that time we also gained
many new, talented employees. We are now in a very good position, profitable, debt-free and have an equity ratio
of over 75 percent. However, with sales of around EUR 220 million, we are probably still too small to be on
the radar for many investors.

I am sure that will change. We have great products that are important for the future of electrification. We were an
early player in the electromobility market, including being one of the first suppliers to Tesla. We estimate that our
products are now in almost every second electric car in Europe. Von Roll also produces the electrical insulation
system for the world’s largest offshore wind turbine.

Our products are very technical and require a lot of explanation. But now that the topics of energy transition and
electromobility are gaining so much importance, I believe that many investors are also looking at our markets.

wallstreet:online: What growth are you aiming for in the coming years?

Christian Hennerkes: We want to grow at a clear double-digit rate every year. We have many exciting projects
in the pipeline. But the approval cycles for our customers until they are ready for the market are often lengthy.
So new projects will only be reflected in sales in one to three years’ time.

The Von Roll share is therefore a stock that requires a little patience. In return, investors have the chance to get in early.

wallstreet:online: In recent years, the share has become a penny stock and thus also a kind of plaything for investors.
How would you like to make the share palatable to investors?

Christian Hennerkes: The stock is also highly volatile because of the low free float of around 20 percent. However,
in the von Finck family, which holds around 80 percent of the shares, we have a strong anchor investor who is interested
in the long-term success of the company. In principle, there is also the possibility of combining shares in order to get
out of the penny-stock area.

wallstreet:online: Are acquisitions also planned for future growth?

Christian Hennerkes: Absolutely! We are debt-free, in good health and intensively looking for takeover targets.
But in recent years it has often not been possible to find takeover targets at reasonable prices. With the turnaround in
interest rates and the economic slowdown, we hope that conditions and thus prices will return to some degree of normality.

wallstreet:online: So how are the interest rate turnaround, the commodity crisis and the threat of recession affecting Von Roll?

Christian Hennerkes: Commodity prices have also increased significantly for us. But we have been able to pass on a large part
of this to our customers thanks to our strong position in the market. In view of the disrupted supply chains around the world,
many carmakers are once again relying more heavily on local suppliers. Here we can score points with our global presence
and have a clear advantage over low-cost suppliers from Asia.

Despite the global political turbulence, we have so far not felt any decline in demand due to the boom in the energy transition.
If, on the other hand, there were to be a deep recession and our customers were to stand still, we would certainly not be completely spared.

wallstreet:online: Thank you very much for the interview, Mr. Hennerkes.

The interview was held by Julian Schick, wallstreet:online Central Editorial Office.