Conference Call on Q3 2018 November 6, 2018
Q3 2018 Headlines Top line growth of +0.5% to EUR 405.8 million, organically up by +5.3% EBIT pre PPA at EUR 23.8 million, EBIT margin pre PPA at 5.9% Solid order book ensures future growth: order intake of EUR 412 million (+8%) and order backlog with EUR 1,027 million again at a high level Sharpening the focus in the area of fuel cell technology Future emphasis on PEM low-temperature fuel cell systems used in mobile applications Interests in new enerday GmbH sold to Dresden-based sunfire GmbH Successful closing effective from September 30, 2018 External and internal factors are weighing on ElringKlinger market environment still characterized by uncertainties Updated guidance for FY 2018 confirmed Conference Call Q3 2018 November 6, 2018 2
Status quo A number of external and internal factors External Ongoing accusations of fraud as well as discussions about diesel bans in cities WLTP impact in Europe, esp. Germany International trade disputes US tariffs on steel and aluminum Surging raw material prices Risk of market decline in China Internal High follow-on costs in NAFTA region due to continuously high demand Cost optimization potential at Swiss location (to be finalized by end of 2019) Conference Call Q3 2018 November 6, 2018 3
Markets European auto market particularly impacted by WLTP Production Light Vehicles Q3 2018/Q3 2017 in % China Trade conflict and tariffs start to show negative effects on new registrations Production volumes still strong, but demand becoming slower and weakening expected going forward European Union Introduction of WLTP leads to decreasing production volumes, especially in Germany (-13%) France and Spain growing UK and Italy down North America Slight growth on high prior-year level Ongoing strong demand for SUVs +11% -1% +2% Japan Production fell short again after a year of recovery India Growth on more normalized level after pre-emptive effects in Q2 due to looming tax increase in H2 Brazil Ongoing strong market development on low levels -5% +9% +10% Source: PWC Autofacts, ElringKlinger research Conference Call Q3 2018 November 6, 2018 4
Financials
Q3 2018 Sales expand by 5.3% organically Order intake in EUR million 381 443 +8.1% (FX adj.: +11.5%) 474 459 412 Order backlog in EUR million 977 1,001 +5.2% (FX adj.: +6.6%) 1,027 1,038 1,027 Q3 2017 Q4 Q1 Q2 Q3 2018 Q3 2017 Q4 Q1 Q2 Q3 2018 Sales in EUR million +0.5% Sales in EUR million +0.5% 404 419 431 431 406 403.6-7.1-1.8% -12.1-3.0% 21.4 +5.3% 405.8 Q3 2017 Q4 Q1 Q2 Q3 2018 Q3 2017 FX M&A Organic Q3 2018 Conference Call Q3 2018 November 6, 2018 6
Q3 2018 Earnings still affected by high NAFTA demand and raw material prices EBITDA in EUR million 59.4 55.9-18.5% 61.1 49.3 48.4 Q3 2017 Q4 Q1 Q2 Q3 2018 EBIT pre PPA in EUR million 34.8 8.6% 30.7-31.6% 38.4 Oneoff Hug 17.3 Q3 2017 Q4 Q1 Q2 26.3 23.8 5.9% Q3 2018 EBIT margin pre PPA (Q1 adjusted for one-off) Net income (attr. to shareholders) in EUR million Earnings per share in EUR -32.9% 25.7-32.0% 0.41 16.1 10.3 8.5 10.8 0.25 0.16 0.13 0.17 Q3 2017 Q4 Q1 Q2 Q3 2018 Q3 2017 Q4 Q1 Q2 Q3 2018 Conference Call Q3 2018 November 6, 2018 7
Q3 2018 Comprehensive measures in NAFTA region start to unfold ElringKlinger NAFTA sales in EUR million (left-hand side) LV production NAFTA in thousand units (right-hand side) 100 90 80 82 81 80 76 89 92 5,000 4,500 0 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 [ ] 0 Production Installation of additional production lines Logistics Personnel Optimization of logistics processes Hiring additional personnel and implementing trainings programs Sales Gradual adjustment of product prices EBIT improvement due to enhanced execution Cost Optimizing fixed cost base Conference Call Q3 2018 November 6, 2018 8
Q3 2018 Global sales split reflecting strong growth in NAFTA region Sales by region in EUR million resp. in % South America/Rest of World 18.9 Asia-Pacific 76.7 19% (20%) 5% (5%) 25% (26%) Germany 103.0 NAFTA 92.3 23% (20%) 28% (29%) Rest of Europe 114.8 Previous year s Q3 figures in brackets Conference Call Q3 2018 November 6, 2018 9
Q3 2018 OE: Lightweighting division increases sales share Sales by segment in EUR million Share of total sales in % Aftermarket 37.6 (40.2) 9% (10%) 5 Engineered Plastics 30.2 (28.9) 7% (7%) Services 2.3 (2.4) 1% (1%) Industrial Parks 1.0 (1.0) <1% (<1%) Original Equipment (OE) 334.6 (331.1) 83% (82%) Cylinder-Head Gaskets: 12% (12%) Specialty Gaskets: 19% (18%) Lightweighting/Elastomer: 27% (24%) Shielding Technology: 23% (24%) Exhaust Gas Purification: 1% (3%) E-Mobility: 1% (1%) Other OE business: <1% (<1%) Previous year s Q3 figures in brackets Conference Call Q3 2018 November 6, 2018 10
Segments Strong performance by Engineered Plastics Sales in EUR million EBIT margin in % Original Equipment (OE) Aftermarket +1.1% -6.5% 331 354 354 355 335 40.2 36.2 42.9 42.3 37.6 6.0 3.1 20.1 15.7 Q3 2017 Q4 Q1 Q2 Q3 2018 Q3 2017 Q4 Q1 Q2 Q3 2018 Engineered Plastics Services & Industrial Parks +4.5% 28.9 26.4 30.6 30.0 30.2 19.7 21.9 3.4 3.2 3.5 3.5 3.3 1.0 1.0 2.4 2.3 Industrial Parks Services Q3 2017 Q4 Q1 Q2 Q3 2018 Q3 2017 Q4 Q1 Q2 Q3 2018 Conference Call Q3 2018 November 6, 2018 11
Q3 2018 Continued disciplined capex approach despite increase in Q3 Net working capital in EUR million Capex (in PPE) in EUR million 596 +3.7% 553 583 606 618 +28.0% 42.1 41.4 29.4 38.4 53.9 Q3 2017 Q4 Q1 Q2 Q3 2018 Q3 2017 Q4 Q1 Q2 Q3 2018 Operating free cash flow in EUR million Net financial debt in EUR million +47.6% +13.1% -32-13 -23-19 644 655 625 683 729-47 Q3 2017 Q4 Q1 Q2 Q3 2018 Q3 2017 Q4 Q1 Q2 Q3 2018 Conference Call Q3 2018 November 6, 2018 12
Balance sheet Well-balanced debt structure Net financial debt in EUR million Maturity structure of financial debt in EUR million +11.1% 655 221 728 236 Current financial debt 313 479 535 Non-current financial debt 179 127 152-45 Dec. 31, 2017-43 Sep. 30, 2018 Cash and cash equivalents -43-192 Cash and Credit cash lines equivalents unused Credit lines used Current (2018/19) Noncurrent (2020-23) Noncurrent (beyond 2023) Conference Call Q3 2018 November 6, 2018 13
Strategic remarks
Group strategy ElringKlinger s sales structure of products will change Sales split (actual and ambition) in % of total sales Actual 2017 Ambition 2030 Structural lightweight and e-mobility products Aftermarket 4% Non-Automotive products 9% 5% Aftermarket Non-Automotive products ~10% ~10% 82% Functional components Structural lightweight and e-mobility products >25% <55% Functional components Conference Call Q3 2018 November 6, 2018 15
Group strategy Nominated e-mobility volumes create a healthy basis for future sales Nominated volumes* in EUR million 1,000 ~10% ~20% ~10% ~30% ~10% ~30% Strong growth particularly in the battery business Acceleration especially after ramp-up year 2019 ~20% ~20% ~60% ~70% ~60% ~60% Includes systems as well as components nominations by different OEMs worldwide 2019e 2020e 2021e 2022e 2023e EDU Fuel cell systems Battery systems and components * Scheduled revenues in e-mobility products according to received OEM nomination letters, final revenues dependent on definitely called volumes Conference Call Q3 2018 November 6, 2018 16
Group strategy Generating future growth in new business areas Battery systems Fuel cell systems Electric drive unit Structural lightweighting Established e-mobility supplier due to series orders for cell contacting systems Cooperation with battery manufacturers Next step: industrialization PEM fuel cell stack ready for marketing Components available as well Next step: installation of automated production line Strategic minority stake in engineering service provider hofer powertrain Next step: small series production Unique production technology Launching order in full-delivery phase, further contracts ramping up Next step: further ramp-up of new contracts Focused capex spending Strong growth of e-mobility areas from 2020/21 on with lightweighting further ramping up Conference Call Q3 2018 November 6, 2018 17
Group strategy Managing the growth in classical business areas Cylinder-head gaskets Specialty gaskets Shielding technology Plastic housing modules Strong market positions associated with technological niches Benefitting from global production network Utilizing profound and detailed product and process know-how Concentrating on improved processes to avoid additional costs Optimizing inventories Reducing financial debt Disciplined investments for managing the growth Stable growth path of sales according to market development Conference Call Q3 2018 November 6, 2018 18
Outlook
Expectations for 2018 Global production growth expected to slow down due to weaker H2 Light vehicle production growth in % vs. 2017 + 1% NAFTA Rising truck market LV market flat on high level +10% South America Low basis Turnaround achieved +1% Europe WLTP impact in Germany Growth in Spain and France UK down +1-2% Global Slight growth to be expected Supported by Europe, India and China +2% Asia-Pacific Slowdown in China Upturn in India Japan taking a breather Source: PWC Autofacts, OICA, JP Morgan, ElringKlinger research Conference Call Q3 2018 November 6, 2018 20
Group Outlook 2018 2018 Mid-term 2 4 percentage points above global market growth Organic sales Above global market growth ~ 7% EBIT margin pre PPA Successive improvement Conference Call Q3 2018 November 6, 2018 21
Group Further indicators for FY 2018 FY 2017 actual FY 2018 updated ROCE in % 8.2% Slightly below prior-year level Mid-term Increasing based on earnings and NWC improvements R&D costs in % of total sales 4.6% ~ 5-6% ~ 5-6% Capex (in PPE) in % of total sales 9.3% ~ 9-10% Continuation at comparable level Net working capital (NWC) in % of total sales 33.3% Slightly above prior-year level Operating FCF in EUR million -66.6 Slightly below prior-year level Slight step-by-step improvement Steady improvement Equity ratio in % of total assets 44.0 40-50% Continuation at comparable level Conference Call Q3 2018 November 6, 2018 22
Q&A
Appendix
Group Consolidated statement of financial position Assets As at Sept 30, 2018 As at Dec 31, 2017 Intangible assets 187 191 Property, plant, and equipment 980 930 Investment property 17 17 Financial assets 3 1 Shares in associates 26 29 Non-current income tax assets 0 0 Other non-current assets 4 4 Deferred tax assets 18 17 Contract performance costs 3 0 Non-current contract assets 1 0 Non-current assets 1,237 1,188 Inventories 411 370 Current contract assets 5 0 Trade receivables 328 303 Current income tax assets 8 7 Other current assets 54 48 Cash and cash equivalents 43 46 Current assets 850 773 Assets held for sale 0 62 Total assets 2,087 2,022 Liabilities and equity As at Sept 30, 2018 As at Dec 31, 2017 Share capital 63 63 Capital reserves 118 118 Revenue reserves 720 711 Other reserves -59-40 Equity attr. to shareh. of ElringKlinger AG 843 852 Non-controlling interest in equity 36 37 Equity 879 890 Provisions for pensions 127 126 Non-current provisions 12 12 Non-current financial liabilities 535 479 Deferred tax liabilities 13 14 Other non-current liabilities 3 4 Non-current liabilities 691 635 Current provisions 24 23 Trade payables 122 119 Current financial liabilities 236 222 Tax payable 16 15 Other current liabilities 119 96 Current liabilities 517 474 Liabilities in connection with assets held for sale 0 24 Total liabilities and equity 2,087 2,022 All figures in EUR million unless otherwise describe, differences due to rounding Conference Call Q3 2018 November 6, 2018 25
Group Income statement Q3 2018 Q3 2017 Sales revenue 406 404 Cost of sales -313-300 Gross profit 93 104 Gross margin (in %) 22.9 25.7 Selling expenses -35-34 General and administrative expenses -21-20 Research and development costs -18-16 Other operating income 5 3 Other operating expenses -2-3 Operating result (EBIT) 23 34 EBIT margin (in %) 5.6 8.4 Finance income 7 6 Finance costs -7-14 Share of result of associates 0 0 Net finance costs -1-8 Earnings before taxes 22 26 Income tax expense -10-9 Net income 12 17 of which: attributable to non-controlling interests 2 1 of which: attributable to shareholders of ElringKlinger AG 11 16 Basic and diluted earnings per share (in EUR) 0.17 0.25 All figures in EUR million unless otherwise describe, differences due to rounding Conference Call Q3 2018 November 6, 2018 26
Group Consolidated statement of cash flows Q3 2018 Q3 2017 Earnings before taxes (EBT) 21.8 25.9 Depreciation/amortization (less write-ups) of non-current assets 25.6 25.5 Net interest 4.0 3.5 Change in provisions -4.6-1.0 Gains/losses on disposal of non-current assets -0.1 0.9 Share of result of associates 0.4 0.4 Change in inventories, trade receivables and other assets not resulting from financing and investing activities -18.0-34.8 Change in trade payables and other liabilities not resulting from financing and investing activities 7.4 6.2 Income taxes paid -8.9-16.6 Interest paid -5.7-2.0 Interest received 0 0 Other non-cash expenses and income -9.2 5.0 Net cash from operating activities 12.8 13.0 Q3 2018 Q3 2017 Proceeds from disposals of PPE, intangible assets and investment property 0.4 0 Proceeds from disposals of financial assets 2.8 0 Payments received for the disposal of subsidiaries 1 0 Payments for investm. in intangible assets -5.8-2.4 Payments for investments in PPE and investment property -53.9-42.1 Payments for investments in financial assets -2.3 0 Net cash from investing activities -57.8-44.5 Dividends paid to shareholders and to noncontrolling interests -1.9-2.3 Proceeds from addition of financial liabilities 69.0 200.6 Payments for the repayment of financial liabilities -56.2-3.8 Changes in current loans 27.4-172.2 Net cash from financing activities 38.3 22.3 Changes in cash -6.7-9.1 Effects of currency exchange rates on cash -1.4-1.0 Cash at beginning of the period 50.7 53.2 Cash at end of period 42.6 43.1 All figures in EUR million unless otherwise describe, differences due to rounding Conference Call Q3 2018 November 6, 2018 27
Q3 2018 Key figures Q3 2018 Q3 2017 D abs. D rel. Order intake 411.8 381.0 +30.8 +8.1% Order backlog 1,027.2 976.5 +50.7 +5.2% Sales 405.8 403.6 +2.2 +0.5% EBITDA 48.4 59.4-11.0-18.5% EBIT pre PPA 23.8 34.8-11.0-31.6% EBIT margin pre PPA (in %) 5.9 8.6-2.7pp - EBIT (reported) 22.9 33.9-11.0-32.4% EBT 21.8 25.9-4.1-15.8% Net income attributable to shareholders 10.8 16.1-5.3-32.9% Earnings per share (in EUR) 0.17 0.25-0.08-32.0% Capex (in PPE) 53.9 42.1 +11.8 +28.0% Operating free cash flow -46.5-31.5-15.0-47.6% Net working capital 617.9 595.7 +22.2 +3.7% Equity ratio (in %) 42.1 44.1-2.0pp - Net financial debt 728.6 644.4 +84.2 +13.1% Employees (as at quarter-end) 10,231 9,376 +855 +9.1% All figures in EUR million unless otherwise described Conference Call Q3 2018 November 6, 2018 28
Last 5 quarters Key figures Q3 2018 Q2 2018 Q1 2018 Q4 2017 Q3 2017 Order intake 412 459 474 443 381 Order backlog 1,027 1,038 1,027 1,001 977 Sales 406 431 431 419 404 EBITDA 48.4 49.3 61.1 55.9 59.4 EBIT pre PPA 23.8 26.3 38.4 30.7 34.8 EBIT margin pre PPA (in %) 5.9 6.1 8.9 7.3 8.6 EBIT (reported) 22.9 25.3 37.4 29.7 33.9 EBT 21.8 20.3 32.1 21.6 25.9 Net income attributable to shareholders 10.8 8.5 25.7 10.3 16.1 Earnings per share (in EUR) 0.17 0.13 0.41 0.16 0.25 Capex (in PPE) 53.9 38.4 29.4 41.4 42.1 Operating free cash flow -46.5-19.0-23.3-13.3-31.5 Net working capital 618 606 583 553 596 Equity ratio (in %) 42.1 42.8 44.9 44.0 44.1 Net financial debt 729 683 625 655 644 Employees (as at quarter-end) 10,231 9,954 9,618 9,611 9,376 All figures in EUR million unless otherwise described Conference Call Q3 2018 November 6, 2018 29
Last 5 quarters Segmental figures Q3 2018 Q2 2018 Q1 2018 Q4 2017 Q3 2017 Group Sales 405.8 430.8 430.7 419.3 403.6 EBIT (reported) 22.9 25.3 37.4 29.7 33.9 EBIT margin (in %) 5.6 5.9 8.7 7.1 8.4 Original Equipment Sales 334.6 354.9 353.7 353.5 331.1 EBIT (reported) 10.3 12.7 25.5 18.1 19.9 EBIT margin (in %) 3.1 3.6 7.2 5.1 6.0 Aftermarket Sales 37.6 42.3 42.9 36.2 40.2 EBIT (reported) 5.9 7.4 7.5 7.1 8.1 EBIT margin (in %) 15.7 17.5 17.5 19.6 20.1 Engineered Plastics Sales 30.2 30.0 30.6 26.4 28.9 EBIT (reported) 6.6 5.1 4.1 4.7 5.7 EBIT margin (in %) 21.9 17.0 13.4 17.8 19.7 Services Sales 2.3 2.5 2.4 2.0 2.4 EBIT (reported) 0.0 0.1 0.4 0.1 0.3 EBIT margin (in %) 0.0 4.0 16.7 5.0 12.5 Industrial Parks Sales 1.0 1.0 1.1 1.2 1.0 EBIT (reported) 0.1 0.0 0.0-0.3 0.0 EBIT margin (in %) 10.0 0.0 0.0-25.0 0.0 Conference Call Q3 2018 November 6, 2018 30
IR calendar and contact Date Event Mar 27, 2019 Annual Report 2018 May 7, 2019 Q1 2019 May 16, 2019 Annual General Meeting From left to right: Heiderose Mall, Christoph Staib, Kathrin Graf (on maternity leave), Sabrina Haufler, Dr. Jens Winter ElringKlinger AG Strategic Communications Max-Eyth-Str. 2 72581 Dettingen/Erms Germany E: investor-relations@elringklinger.com Investor contacts Dr. Jens Winter Head of Strategic Communications E: jens.winter@elringklinger.com T: +49 7123 724 88335 M: +49 151 1181 1184 Sabrina Haufler Senior Manager Strategic Communications E: sabrina.haufler@elringklinger.com T: +49 7123 724 137 M: +49 175 228 1666 Conference Call Q3 2018 November 6, 2018 31
Disclaimer Forward-looking statements and predictions This presentation contains statements about the future. These statements are based on current expectations, market evaluations and predictions by the Management Board, and on information that is currently available to them. The statements about the future should not be interpreted as guarantees of the future developments and results that they refer to. Whilst the Management Board is convinced that the statements that have been made, and the convictions and expectations on which they are based, are realistic, they rely on suppositions that may conceivably prove to be incorrect; future results and developments are dependent on a multitude of factors, they involve various risks and imponderabilities that can affect whether the ongoing development deviates from the expectations that have been expressed. These factors include, for example, changes to the general economic and business situation, variations of exchange rates and interest rates, poor acceptance of new products and services, and changes to business strategy. Conference Call Q3 2018 November 6, 2018 32