Schaeffler Group. BNP Paribas High Yield and Leveraged Finance Conference London January 14, 2014

Transcription

1 Schaeffler Group BNP Paribas High Yield and Leveraged Finance Conference London January 14, 2014

2 Disclaimer This presentation contains forward-looking statements. The words "anticipate", "assume", "believe", "estimate", "expect", "intend", "may", "plan", "project", "should" and similar expressions are used to identify forward-looking statements. Forward-looking statements are statements that are not historical facts; they include statements about Schaeffler Group's beliefs and expectations and the assumptions underlying them. These statements are based on plans, estimates and projections as they are currently available to the management of Schaeffler AG. Forward-looking statements therefore speak only as of the date they are made, and Schaeffler Group undertakes no obligation to update any of them in light of new information or future events. By their very nature, forward-looking statements involve risks and uncertainties. These statements are based on Schaeffler AG management's current expectations and are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Actual results may differ from those set forth in the forwardlooking statements as a result of various factors (including, but not limited to, future global economic conditions, changed market conditions affecting the automotive industry, intense competition in the markets in which we operate and costs of compliance with applicable laws, regulations and standards, diverse political, legal, economic and other conditions affecting our markets, and other factors beyond our control). This presentation is intended to provide a general overview of Schaeffler Group s business and does not purport to deal with all aspects and details regarding Schaeffler Group. Accordingly, neither Schaeffler Group nor any of its directors, officers, employees or advisers nor any other person makes any representation or warranty, express or implied, as to, and accordingly no reliance should be placed on, the accuracy or completeness of the information contained in the presentation or of the views given or implied. Neither Schaeffler Group nor any of its directors, officers, employees or advisors nor any other person shall have any liability whatsoever for any errors or omissions or any loss howsoever arising, directly or indirectly, from any use of this information or its contents or otherwise arising in connection therewith. The material contained in this presentation reflects current legislation and the business and financial affairs of Schaeffler Group which are subject to change and audit. Page 2

3 Agenda Business Results 9M 2013 Capital structure Outlook Page 3

4 1 Business Schaeffler at a glance Key characteristics 4 Leading manufacturer of high-precision components and systems for automotive and industrial applications 4 Global footprint with approx. 78,000 employees in more than 50 countries 4 Above industry average profitability and revenue growth 4 Strategic participation in Continental AG Key financials (in EUR mn) M 2013 Sales growth in % 7, % 9, % 10, % 11, % 8, % EBIT in % of sales % 1, % 1, % 1, % 1, % EBITDA in % of sales 1, % 2, % 2, % 2, % 1, % Sales by business¹ ) Sales by region 1) Automotive Aftermarket 13% Industrial Aftermarket 10% Asia/Pacific 23% South America 5% Germany 25% Industrial OEM 17% Automotive OEM 60% North America 16% Europe w/o Germany 31% 1) 9M ) 9M 2013, by location of customers Page 4

5 1 Business Two divisions with top three positions in core market sectors¹ ) Automotive Industrial Transmission Systems Engine Systems Production Machinery Aerospace Chassis Systems Energy and Raw Material Mobility Aftermarket Aftermarket 1) Company estimates Page 5

6 1 Business Automotive Components and systems for a broad customer base Customers Sales with TOP 10 customers Other customers ~45% TOP 10 customers ~55% of Automotive sales Product spectrum Page 6

7 1 Business Industrial Highly diversified product and customer base Customers Sales with TOP 10 customers Other customers 85% TOP 10 customers 15% of Industrial sales Product spectrum smallest bearing: 1 millimeter largest bearing: 4 meters Page 7

8 1 Business Why we are successful 3 main success factors 1 Continuous global expansion: Growing into attractive markets 17 new plants and plant extensions (e.g. Russia) Doubling share in Asia 2 Superior products and services: Offering the right components and systems based on best-in-class innovation platform Best-in-class innovation platform Best positioned for future mobility trends Best customer service through global network 3 Outstanding operational excellence: First-class quality and manufacturing Special know-how in materials, design, and manufacturing Outstanding quality recognized by our customers Page 8

9 1 Business 1 Global expansion 17 new plants and plant extensions New plants and plant extensions Key aspects 70 plants worldwide Germany Irapuato, Mexico Kysuce, Slovakia Skalica, Slovakia Szombathely, Hungary Brasov, Romania Ulyanovsk, Russia Savli, India Pune, India Hosur, India Rayong, Thailand BienHoa City, Vietnam Nanjing, China Jangan, Korea Yinchuan, China Taicang 5, China Taicang 6, China Suzhou, China Europe 19 Asia / Pacific 13 North America 12 South America 2 Page 9

10 1 Business 1 Global expansion Doubling share in Asia and increasing local content North America 13.6% 5.3% South America North America 15.0% 5.0% South America North America ~15% ~5% South America Asia / Pacific 13.5% 67.6% Europe Asia / Pacific 23.1% 56.9% Europe Asia / Pacific 25-30% 50-55% Europe Total sales: EUR 9.0 bn Total sales: EUR 11.1 bn Page 10

11 1 Business 2 Products and services Best positioned for future mobility trends Efficient Future Mobility Schaeffler North America Demonstration Vehicle Fuel reduction in % Technology City Highway Belt Drive Friction Optimization Valve Train Friction Optimization Balance Shaft Bearings Thermal Management Module Adaptive Grill Shutters Engine Start-Stop AWD Disconnect Developed in North America for market-specific demands and customer requirements 4 Showcases Schaeffler solutions for optimizing North American combustion engines and drive trains 4 Additional fuel savings potential of up to 14-15% Wheel Bearings Optimization TC with Centrifugal Pendulum-type Absorber Total: ~15 ~14 Page 11

12 1 Business 2 Products and services Increasing content per car Example: Fiat 500L Schaeffler products Engine 4 Water pump bearing 4 MultiAir system 4 Exhaust Hydraulic tappets 4 Vehicle assembled in Serbia and exported to NAFTA market 4 1.4l turbo engine built by Fiat in Termoli, Italy 4 Start of production Q door "Italian designed" urban utility vehicle Transmission 4 Thrust bearing 4 Caged needle bearings 4 HK radial bearings 4 Taper bearing 4 Inner ring 4 Synchronizer hub unit 4 Shifter 4 Clutch release ring 4 Clutch set 4 Dual mass flywheel Chassis 4 Throttle body bearing 4 Strut bearing 4 HK Radial bearing Page 12

13 1 Business 2 Products and services Successful cooperation with Continental Product Development Advanced Development Research Transmission Systems Honda Double Clutch Transmission Mechatronics for Drivetrain Actuation Engine Systems Electric Cam Phasing Systems Turbo Charger Chassis Systems Anti Roll Stabilizer Hybridization Electric Axle Drives Automotive Concepts Gasoline Technology Car Diesel Eco Drive 48V Democar Industrial Concepts Initiative "Farming 2025" emobility Wheel Hub Drive Mechanics/ Mechatronics Excellence System-orientated approach creating customer value Electrics/ Electronics Expertise Page 13

14 1 Business 2 Products and services Joint turbo charger project with Continental Project Content / Period Ford Fox BMW B38 Product Development Ford: Start April 2010 / SOP Dec BMW: Start Nov / SOP Dec Advantage of Cooperation with Continental Open cooperation on R&D level between Schaeffler and Continental Schaeffler excellence for assembly and mechanics of complex turbocharger systems Continental expertise for turbocharger electronics, control units and high end measuring systems Cooperation triggers new business opportunities Purchasing cooperation with Continental enables easy access to suppliers Technical Details Temperature 1050 C; High speed U/min 3-cylinder engine Pneumatic and electrical actuating elements Water cooled aluminum housing (BMW) Engine power up to 185 KW Page 14

15 1 Business 3 Operational excellence First-class quality and manufacturing Special know-how in Highlights basic materials (steel) inhouse tools design 32 Awards for best supplier in 2012 a.o. from Nissan, Toyota, GM, Gildemeister, Goldwind surface treatment low cost precision manufacturing Page 15

16 1 Business A strong history of above average growth and sector leading margins Sales ) in EUR bn 9M 2013: EUR 8.4 bn EBIT and EBITDA ) in EUR bn EBIT 9M 2013: EUR 1.0 bn ~6% CAGR EBIT ~8% CAGR Sales growth -0.1% 7.2% 8.7% 4.7% 8.4% -1.2% -17.6% 29.4% 12.6% EBITDA 4.0% 18.7% 19.0% 19.5% 19.9% 19.4% 19.4% 15.0% 22.1% 21.0% 18.3% 18.8% margin 1) according to German Commercial Code (HGB), according to IFRS EBIT margin EBIT 9.8% 10.8% 12.2% 12.9% EBITDA 12.6% 11.7% 6.1% 15.9% 15.8% 12.7% Page 16

17 1 Business Proactive cash flow management over the cycle Capital expenditures ) in EUR mn M 2013: EUR 343 mn Cash Flow available for debt service ) (before investments in Continental AG shares in 2008/2009 and interest payments, in EUR mn) 1,064 1,210 9M 2013: EUR 1,033 mn 1, in % of sales % 8.3% 9.6% 11.2% 10.2% 10.7% 4.4% 4.1% 7.9% 7.4% Interest paymens ) according to German GAAP, according to IFRS 2) : Simplified and unaudited derivation from financials according to German GAAP Interest payments Page 17

18 Agenda Business Results 9M 2013 Capital structure Outlook Page 18

19 2 Results 9M M group sales on prior year level, Q3 sales up Sales in EUR mn 9M 2013 sales by region 1) in EUR mn and y-o-y growth 1.5% 1) vs. Q Asia/Pacific 1,914 / +1.1% 2,697 2,682 2,703 2,612 2,858 2,794 2,770 2,703 2,858 2,756 2,811 23% South America 406 / -5.4% 5% 56% Europe 4,733 / -0.8% North America 1,372 / +3.3% 16% 8,422 10,694 11,125 8,425 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q Gross profit margin 32% 30% 31% 28% 31% 30% 31% 27% 29% 29% 27% 31% 30% 30% 29% 28% Sales by division in EUR mn 9M M 2012 D Automotive 6,129 5, % Industrial 2,296 2, % Total 8,425 8, % 1) Includes negative FX effects of 3.6% 1) Market view (= location of customers) Page 19

20 2 Results 9M 2013 Automotive Sales growth strongly outpacing market growth Regional development Automotive 1) Key aspects Asia/Pacific +13% Europe 4% Schaeffler Automotive significantly outgrew global automotive production in 9M % -3% Positive development in all regions except for South America World Production: + 2% Schaeffler Automotive: + 7% [organic sales growth: + 10%] North America South America All business units contributed to overall growth Sales in Europe a.o. driven by non-european demand and strong aftermarket business 5% +9% Production of light vehicles 9M 2013 vs. 9M 2012 (IHS Global Insight) +11% -1% Sales growth Schaeffler Automotive 9M 2013 vs. 9M 2012 (by location of customer) Strong operational growth (+12%) in South America negatively impacted by FX effects General growth trend is supported by both established (e.g. camshaft phasing units) and innovative products (e.g. double clutch with hybrid technology) 1) Schaeffler Automotive sales growth by region is not necessarily an indication of actual end-customer demand by region (e.g. European sales include components and systems sold to customers in Europe who ultimately export the final product to customer locations in North and South America as well as Asia/Pacific). Page 20

21 2 Results 9M 2013 Industrial Challenging market conditions remain Sales of key industrial business units Key aspects Other ~16% Industrial Aftermarket ~37% Sales 9M 2013 vs. 9M 2012 Aftermarket Production Machinery Power Transmission Heavy Industries Off-Highway Equipment Renewable Energies Production Machinery Power Transmission Renewable Energies Off-Highway Equip. Aerospace Heavy Industries Aerospace Sales decreased in all sectors apart from Aerospace Aftermarket: Strong inventory reductions of distributors led to significant sales decrease, especially in Asia/Pacific Production Machinery: Significant cool-down of demand in all regions Power Transmission: Significant cool-down of demand, especially in Asia/Pacific and Europe Off-Highway Equipment: Decrease of demand especially in construction machinery Renewable Energies: Overcapacities and strong pricing competition in all regions Aerospace: Growth in civil aircraft engine bearings continues Page 21

22 2 Results 9M 2013 EBIT margin 12.9% before one-off restructuring provisions EBIT in EUR mn Net income in EUR mn -106 mn vs. 9M ,689 1,413 1, ,020 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q EBIT margin Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q %15.3%17.2%13.0% 14.0% 13.6%13.1%10.0% 12.9%12.9% 11.2% 1) 16.4% 15.2% 13.8% 11.6% 12.3% 2) 1) Without restructuring provisions, Q EBIT margin was 12.9% 2) Without restructuring provisions, 9M 2013 EBIT margin was 12.9% Page 22

23 2 Results 9M 2013 Solid free cash flow generation of EUR 589 mn FCF Q3 at EUR 203 mn EBITDA in EUR mn Free cash flow 9M 2013 in EUR mn , Q1 Q2 Q3 Q Q1 Q Q ,243 2,031 1,514 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q EBITDA margin in % LTM EBITDA 2,226 2,225 2,285 2,243 2, , , , ,994 1,994 1,946 Q EBITDA Δ Net working capital Capex Dividends Interest payments Taxes/ other Free cash flow Page 23

24 2 Results 9M 2013 Net financial debt significantly reduced after ABO transaction Net financial debt / Leverage ratio¹ ) in EUR mn -1.1 bn vs. 12/12 Available funds in EUR mn 7,145 7,088 7,164 7,094 6,940 6,828 6,834 6,475 6,124 6,069 5,729 1,376 1,243 1,244 1,049 1,093 1,140 1,141 1,165 1,503 1,401 1, x 2.7x 2.9x 3.0x 3.2x 3.2x 3.2x 3.2x 3.3x 3.1x 2.8x Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Gross debt ,482 6,422 7,645 7,485 7,455 7,412 7,238 7,261 7,292 7,037 6,089 Cash position Leverage ratio (Net financial debt / LTM EBITDA) Shareholder loans 1) Excluding shareholder loans Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q Revolving Facility and Ancillary Lines Cash and cash equivalents Page 24

25 Agenda Business Results 9M 2013 Capital structure Outlook Page 25

26 3 Capital structure Overview corporate and capital structure Corporate structure Schaeffler Holding HoldCo Bonds Schaeffler Group Senior Bonds S Holding Finance B.V. Senior Term Loans RCF Schaeffler Finance B.V. Junior Term Loans Junior RCF 100% 100% Schaeffler NewCo Schaeffler Holding 100% Schaeffler AG Schaeffler Technologies AG & Co. KG 100% Schaeffler Verwaltungs GmbH 100% 100% 34.2% Chart simplified for illustration purposes 11.8% Free float 54.0% Continental AG Capital structure Schaeffler Holding Schaeffler Group Debt instrument Nominal in EUR mn Interest Maturity Rating 6.875% SSNs 2018 (EUR) 1) % Aug 18 B1 / B 6.875% SSNs 2018 (USD) 1) 3) ~ % Aug 18 B1 / B Junior Term Loan B1 937 E+5.75% Jun-17 Not rated Junior Term Loan B % PIK Jun-17 Not rated Junior Term Loan B3 148 E+1.25% % PIK Jun-17 Not rated Junior Term Loan B4 263 E+5.75% Jun-17 Not rated Junior RCF (200mn) - E+5.75% Jun-17 Not rated Schaeffler Holding Debt 3,269 Senior Term Loan D 730 E % Jul 16 Not rated Senior Term Loan C (EUR) 299 E+3.75% 2) Jan 17 Ba2 /BB- Senior Term Loan C (USD) 3) 1,307 L+3.25% 2) Jan 17 Ba2 /BB- Senior RCF (EUR 1,000 mn) - E % Jul 16 Not rated Total Senior Facilities 2, % SSNs 2017 (EUR) % Jul-17 Ba2 / BB- 7.75% SSNs 2017 (EUR) % Feb-17 Ba2 / BB- 7.75% SSNs 2017 (USD) 3) ~ % Feb-17 Ba2 / BB- 4.25% SSNs 2018 (EUR) % May-18 Ba2 / BB- 8.75% SSNs 2019 (EUR) % Feb-19 Ba2 / BB- 8.50% SSNs 2019 (USD) 3) ~ % Feb-19 Ba2 / BB- 4.75% SSNs 2021 (USD) 3) ~ % May-21 Ba2 / BB- Total Outstanding Bonds 3,626 Schaeffler Group Debt 5,962 Total Total Debt 9,231 1) Senior Secured PIK Toggle Notes 2) Floor of ) Assuming EUR/USD = 1.30 Page 26

27 Agenda Business Results 9M 2013 Capital structure Outlook Page 27

28 4 Outlook Challenging market conditions will remain Growth Profitability Target 2013 Target 2013 Sales growth ~ 1-2 % 1) EBIT margin ~13 % 2) Capex ~ 5 % of sales Free cash flow Sustainably positive (three digit million range) Quality Innovation Target 2013 Target 2013 Quality policy Further improve R&D expenses ~ 5 % of sales Employees ~ 2,000 new jobs Innovation Maintain leading position in patent applications 1) Incl. FX effects on prior year level 2) Before one-off effects Page 28

29 Schaeffler IR contact Investor Relations phone: fax: ir@schaeffler.com Financial Calendar 2014 Q results: March 20, 2014 Q results: May 21, 2014 Q results: August 27, 2014

30 Backup Results 9M 2013 Automotive and Industrial division show different growth dynamics Sales Automotive in EUR mn 7.0% 1) vs. Q Sales Industrial in EUR mn 1,821 1,768 1,814 1,754 1,933 1,904 1,918 1,903 1,988 2,088 2, % 2) vs. Q ,755 2,617 7,157 7,658 6,129 3,463 3,405 2,296 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q Gross profit margin 29% 27% 28% 25% 28% 28% 29% 26% 27% 28% 27% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q Gross profit margin 39% 36% 38% 35% 39% 36% 36% 28% 33% 32% 29% 28% 26% 28% 28% 27% 38% 36% 37% 32% 31% 1) Includes negative FX effects of 3.4% 2) Includes negative FX effects of 4.3% Page 30

31 Backup Results 9M 2013 Automotive EBIT strong Industrial EBIT weak EBIT Automotive in Mio. EUR EBIT Industrial in Mio. EUR Including FX effects and restructuring expenses +12 mn vs. Q ) mn vs. Q ) EBIT margin 1, Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 EBIT margin 16.5% 14.8% 16.2% 12.4% 12.6% 13.6% 13.6% 12.3% 13.9% 14.5% 13.2% 2) 20.0% 17.0% 19.6% 14.4% 17.3% 13.8% 12.4% 4.4% 10.2% 8.7% 15.7% 14.3% 13.1% 12.9% 13.9% 18.5% 17.1% 15.6% 8.5% 8.1% % 3) 1) Q EBIT before one-off restructuring expense 2) Q EBIT margin before one-off restructuring expense: 14.0% 3) Q EBIT margin before one-off restructuring expense: 9.9% Page 31

32 Backup Results 9M 2013 Working capital stable Capex adjusted to market needs Working Capital in EUR mn Capex spent 2) in EUR mn 2,547 2,562 2,667 2,411 2,642 2,723 2,677 2,616 2,613 2,650 2, Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 in % of sales 1) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q in % of sales % % 7.7% 4.1% 1) Calculation based on LTM sales Inventories 2) Cash view Page 32

33 Backup Capital structure Cash interest payments of EUR 45 mn to HoldCo New structure Chart simplified for illustration purposes Key aspects Schaeffler Holding Schaeffler Holding GmbH & Co. KG 100% Solid cash flow generation on Schaeffler Group (FCF in 9M 2013: EUR 589 mn) Sufficient Restricted Payment Basket to serve Holding cash needs for permitted uses HoldCo Debt Service Schaeffler Verwaltungs GmbH Conti Dividend Permitted HoldCo Purposes in 9M 2013 of EUR 96 mn 100% 11.8% Cash payment to HoldCo of EUR 45 mn per September 2013 FY 9M Free Cash Flow OpCo RPB 1) Permitted HoldCo Purposes 2) Cash to HoldCo 3) 89 4) 45 Upstream Cash Payment Schaeffler Group Schaeffler AG Continental AG 1) RPB = Annual Restricted Payment Basket 2) Permitted purposes are administration cost, interest and taxes 3) Cash upstreamed to HoldCo under permitted purposes 4) Excluding withholding tax on Schaeffler AG dividend of EUR 79 mn Page 33

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