ElringKlinger - Conference Call Presentation Financial Year 2013

1

Analysts’ and Investors’ Conference

Results Financial Year 2013 – Outlook and Strategy

March 28, 2014

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Financial Year 2013: Highlights

Organic sales growth (ex scope changes and at constant exchange rates) of

6.0% within the target range of 5-7%, clearly exceeding market growth of

3.1%; OE business remains growth driver

Adjusted EBIT increased to EUR 144.7 (135.8) mn – Adjusted EBIT margin

improved to 12.3% from 12.0%;

EBIT burdened by minus EUR 4.6 mn in FX effects

Earnings improvement driven by underlying sales growth and advanced

turnaround of acquisitions, particularly Hug

Adverse earnings effects from start-up losses in E-mobility, losses at

Freudenberg France, and as yet weak capacity utilization of new truck facility

at Dettingen, Germany

Reported EBIT boosted by significant one-off gain in Q4 arising from

assumption of control at ElringKlinger Marusan Corporation (EUR 17.6 mn)

Financial year 2013: Uneasy Markets – Western Europe at

25-year low, BRI markets shrink

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23,1%

7,5%

-0.2%

-1.5%

-1.9%

-5.5%

-7.5%

-10,0% -5,0% 0,0% 5,0% 10,0% 15,0% 20,0% 25,0%

India

Russia

Western Europe

Brazil

Japan

USA

China

New car registrations 2013 (yoy change)

4

2013: Effects from assumption of control of ElringKlinger

Marusan Corporation – strategic reasoning

in € mn

FY 2013

(at 50%)

FY 2014

(forecast at 100%)

Sales 23.4 ~50.0

2

EBIT 0.6 3.0

One-off gain 17.6 --

PPA -- -2.2

Control of ElringKlinger Marusan Corporation was assumed with effect from

December 31, 2013

Fully included in statement of financial position in FY 2013, in P&L as of 2014;

Remaining 50% recognized as "other current liabilities" (not non-controlling

interests) at fair value (EUR 37.1 mn)

5

Sales revenues driven by sustainable long-term organic growth

€ mn

459 475528

6086581

579

796

1,033²

1,1271,175

0

200

400

600

800

1000

1200

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

1 Incl. acquisitions of SEVEX (~ EUR 46mn sales) and Marusan (~EUR 14 mn sales)

² Incl. acquisitions of Flat gaskets business of Freudenberg (~ EUR 53 mn sales) and Hug Group (~ EUR 29 mn sales)

6

Earnings before taxes

65.2 70.9

87.6

114.9

60.0

49.4

94.0

113.91

123.6

131.62

0

30

60

90

120

150

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

€ mn

1 Excl. one-time gain of EUR 22.7 mn from sale of industrial park 2 Excl. one-time gain of EUR 17.6 mn resulting from the assumption of control of ElringKlinger Marusan Corporation

7

Group sales by segment 2013 (py)

OE share higher due to new product ramp-ups (incl. Hug CARB)

and structural growth

Engineered Plastics

7.8% (8.1%)

OEM

80.9% (80.4%)

Services

0.7% (0.6%)

Aftermarket

10.2% (10.5%)

Industrial Parks

0.4% (0.4%)

8

Group sales by region 2013 (py)

Asia and exports drive growth

Germany

30.7% (30.1%)

NAFTA 17.1% (17.5%)

incl. exports: ~25% of OE sales

South America and Rest of World 5.6% (6.1%)

Rest of Europe 30.5% (30.4%)

Asia-Pacific 16.1% (15.9%)

incl. exports: ~25% of OE sales

9

Employees of ElringKlinger Group worldwide –

strong increase in Asia due to consolidation effects

AG

2,301 (2,059)

Domestic

subsidiaries

754 (859)

International

subsidiaries

3,661 (3,345)

as of December 31, 2013 (py)

Group

6,716 (6,263)

+7.2%

Germany

3,055 (2,918)

10

FY 2013: Sales and operating result

1 Incl. amortization of capitalized development cost of EUR 6.3 mn previously reported under R&D cost

² Incl. currency effects 3 Excl. EUR 17.6 mn one-time gain from assumption of control of ElringKlinger Marusan Corporation, EUR 1.4 mn one-

time gain from step acq. of ElringKlinger Korea Co., Ltd., EUR 1.8 mn restruct. charge Nantiat, EUR 1.5 mn except.

expense Aftermarket

in € mn

FY

2013

(reported)

FY

2013

(adjusted3)

FY

2012

Change in

%

(adjusted)

Sales 1,175.2 1,175.2 1,127.2 +4.3%

2

Cost of sales 846.21 846.21 815.0 +3.8%

EBITDA2 236.3 220.6 215.2 +2.5%

EBIT2

160.4 144.7 135.8 +6.6%

Operating result 164.9 149.2 138.6 +7.6%

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FY 2013: Financial result and net income

in € mn

FY

2013

(reported)

FY

2013

(adjusted1)

FY

2012

Change in

%

(adjusted)

Net finance cost 15.7 15.7 15.0 +4.7%

EBT 149.2 131.6 123.6 +6.5%

Taxes 38.0 33.1 34.4 -3.8%

Net income 111.2 98.5 89.2 +10.4%

Profit attributable to

EK shareholders 105.4 92.7 85.7 +8.2%

EPS (in €) 1.66 1.46 1.35 +8.1%

1 Excl. one-time gain of EUR 17.6 mn before taxes and EUR 12.7 mn after taxes resulting from the

assumption of control of ElringKlinger Marusan Corporation

Sales by quarter

283.8 286.0 279.8 277.6286.8

303.3294.0 291.1

100

150

200

250

300

350

Q1 Q2 Q3 Q4

2012 2013

€ mn

37.5

41.2

0

10

20

30

40

50

60

Q1 Q2 Q3 Q4

2012 2013 13

Adjusted operating result by quarter

€ mn

36.5

1 Excl. one-time effects: Charges of EUR 1.8 mn in Q1 and EUR 1.5

mn in Q3, gains of EUR 1.4 mn in Q1 and 17.6 mn in Q4

34.21

39.0

33.71

25.6

40.11

0

10

20

30

40

50

60

Q1 Q2 Q3 Q4

2012 2013 14

Adjusted EBIT by quarter

€ mn

36.0

1 Excl. one-time effects: Charges of EUR 1.8 mn in Q1 and EUR 1.5

mn in Q3, gains of EUR 1.4 mn in Q1 and 17.6 mn in Q4

32.61

37.3 36.21

24.2

36.61

38.3 39.3

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Sales of OE business up 5.4% yoy in Q4

€ mn

906.6951.0

227.3 239.6

0

200

400

600

800

1000

1200

FY 2012 FY 2013 Q4 2012 Q4 2013

Adjusted EBIT +10.0%

2012: 93.1

2013: 102.4 +4.9%

+5.4%

16

Aftermarket sales down slightly yoy in Q4

€ mn

117.8 119.3

26.6 26.4

0

30

60

90

120

150

FY 2012 FY 2013 Q4 2012 Q4 2013

Adjusted EBIT -2.5%

2012: 24.4

2013: 23.8 +1.3%

-0.8%

17

Sales of Engineered Plastics up 8.3% yoy in Q4

€ mn

91.3 92.6

20.5 22.2

0

20

40

60

80

100

120

FY 2012 FY 2013 Q4 2012 Q4 2013

Adjusted EBIT +1.9%

2012: 15.7

2013: 16.0 +1.4%

+8.3%

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Consistent cash flow generation

148.8

126.2

74.5

112.3120.0

0

40

80

120

160

200

2009 2010 2011 2012 2013

Net cash from operating activities

€ mn

19

Development cash flows 2014

€ mn

-4.7

20

Balance sheet structure as of December 31, 2013

Equity ratio stable at above 50%

40.8 41.425.8 22.3

59.2 58.6

23.6 27.2

50.6 50.5

December 31,

2012

December 31,

2013

December 31,

2012

December 31,

2013

Assets in %

Non-current liabilities

Current liabilities

Equity Non-current assets

Current assets

Liabilities and Equity in %

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Consistent dividend policy: 5th consecutive increase of regular

dividend

0.150.20

0.35

0.4010.45

0.50

2008 2009 2010 2011 2012 2013

€

1 Regular dividend

1.00

0.80

0.60

0.40

0.20

0

22

2013: Effects of Freudenberg acquisition

in € mn Freudenberg in € mn Freudenberg

Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY

Sales 13.4 12.9 11.5 12.6 50.4 EBIT -1.3 0.5 1.1 2.7 3.0

PPA - - - - - EBT -1.5 0.3 0.9 2.4 2.1

German and Italian Freudenberg sites have reached Group margin

French site: Loss-making in FY 2013 due to weak French car production (-13.6%)

and restructuring costs of EUR 1.8 mn booked in Q1

Overall dilutive effect of 0.3% on Group EBIT margin in 2013 from former

Freudenberg locations

23

2013: Turnaround at Hug – mission accomplished

Strong y-o-y growth of 57.4%

Drivers: CARB retrofit, inland waterway vessels and exhaust gas purification

systems for large natural gas engines

Successful turnaround and earnings swing

in € mn Hug in € mn Hug

Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY

Sales 11.0 18.2 13.1 15.3 57.6 EBIT 1.1 3.9 2.3 6.0 13.3

PPA -0.5 -0.2 -0.3 -0.3 -1.3 EBT 1.0 3.8 2.2 5.9 12.9

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Every engine needs a Hug: boosted by US retrofit

Buoyant demand from US retrofit business

for Hug diesel particulate filter systems

CARB legislation requires retrofit of on-

road vehicles above 6.34 tons operating in

California

Hug market share tops 30%

USP: Hug ceramic substrate & EK

precious-metal free catalytic coating

Expansion of production capacity in

progress

Hug 2014: single-digit growth in revenues,

EBIT margin above Group average

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Every engine needs a Hug: off-road, on rails and

on the high seas

Large-scale non-automotive markets

Diesel locomotive retrofit in the US

Strong increase in demand for nauticlean

exhaust abatement systems (DPF/DeNOx/

HC) for inland water vessels

Public awareness and expected emission

legislation open up opportunities in ocean

ships – new filter system for bunker oil

Shale gas North America:

Exhaust abatement systems for natural gas

engine-based power plants

Product pipeline: recuperation catalyst to

avoid methane slippage

Hybrids: Combination of combustion engine & electric

drivetrain boosts value sold in

Optimized Combustion Engine

Core business:

Turbocharger sealing

Advanced HT gaskets

Thermal shielding parts

Plastic housing modules

Electric Drivetrain

Lithium-ion battery components

> Cell contact systems

> Pressure exchange systems

> EMR shielding

Fuel-cell components,

APUs/ complete stacks

Hybrid

Value sold in

max. Euro 40 to 60 Value sold in

Euro 100 to 150

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E-Mobility: Fit for Future - Battery Components and Fuel Cell

Technology

Sales up 27.3% in 2013 at EUR 8.4 mn

Start of in-series production of cell contact

systems for first fully battery electric vehicle

from German premium OE

Over 100 engineers and specialists in R&D

and production, plus prototyping and SGA

High pre-expenses and ramp-up cost

Break-even possible already in 2015

Fuel-cell: auxiliary power units for trucks in

development (SOFC)

First small in-series contract for PEM fuel

cell stacks for material handling equipment

with large German logistics Group

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Growing Asia strategy: Opportunities from stricter CAFE/

Euro-like emissions standards

Growing demand for EK product portfolio

focusing on downsizing and hybridization

Global LV sales growth in future will be

driven primarily by Asia

Capacity expansion in China: New plant

for PHM at Suzhou, extension in

Changchun (invest ~ EUR 25 mn)

ASEAN: At 3.5 million car production in

2013, ASEAN clearly outflanks e.g. India

Stepping stones in Indonesia and Thailand:

First production plant operating in Greater

Jakarta area

Foundation of sales company in Bangkok

New plant built in Gumi, Korea (invest ~

EUR 10 mn) following full takeover of JV

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ElringKlinger enabling efficiency: Downsizing and lightweight

design key to CO2 reduction

27 mpg

Downsizing/

Powertrain

improvement

Body and

accessories

advancements

47 mpg

2011 2020 2030 2040

Lightweight

construction

Hybridization

Source: www.plugincars.com

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Entry in new market lightweight body components

Combining metal&plastic: Hydro-Formed Hybrid technology

Largest contract in company history from

German premium OE for innovative body

parts in hydro-formed hybrid technology

SOP at EK in 2015 in PHM division

Projected lifetime sales volume (6y) to reach

EUR 120-130 mn + tooling

Substantial follow-up market potential

Market entry in high-growth market for

lightweight body and chassis components

EK Hummel features unique tooling expertise

and know-how in lightweight plastic designs

and composite laminates

Additional capex of up to EUR 20 mn in

2014/15; some pre-investments 2013

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Capex going forward back within 8 to 10% of sales range

134.3121.6 114.3

82.296.8

79.4

0

40

80

120

160

200

2010 2011 2012 2013 2014e

127.2

76.0

Investments in property, plant and equipment and intangible assets

Depreciation and amortization

€ mn

Incl. new lightweight components project

~120-130

incl. PMH

~100-110

32

Outlook 2014: Markets show a mixed picture

EK expects overall worldwide car production to increase by 2-3% in 2014

Demand once again driven by China, ASEAN and to a lesser extent North

America; yet lower growth in percentage terms when compared to 2013

Europe to grow moderately in 2014, possibly a further pick-up in momentum

in 2015

Mixed picture in emerging markets: Mid single-digit decline percentagewise

in Brazil, Russia; India to recover from 2013 double-digit dip

Truck segment in Europe likely to be volatile in H1 due to pre-buying ahead

of Euro VI in Q4 2013; yet sales – better than feared – up 4% in Jan. 2014

Full year 2014: moderate decline

North American truck market continues to show solid growth, expected to

achieve an increase of almost 10% driven by economic recovery

33

Outlook 2014: Financial performance

in € mn FY 2013

Guidance

FY 2014

Sales 1,175.2 5-7% organic growth

(plus 25 mn scope change) 2

Adjusted EBIT 144.7 160 - 165

Investments 127.2 100 - 110

(+ up to 20 mn HFT)

Net debt 295.3 reduction

Full consolidation of EKMA to contribute additional EUR 25 mn in sales, but

Group EBIT margin dilution of 0.3 percentage points due to PPA

As of 2014, EBIT will no longer include currency effects and will – as is standard –

correspond to the operating result shown in the income statement

Order intake up 15.4% taking the figure to EUR 1,309.8 mn with order backlog 30.6%

higher at EUR 595.4 mn

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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 are 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.