Schaeffler Ag · XETR:SHA0
Schaeffler — Deutsche Bank dbAccess Berlin Conference 2019
55 slides from Schaeffler's conference presentation, Jun 5, 2019
Slide 1: Results Q1 2019 Schaeffler AG
Results Q1 2019 Schaeffler AG dbAccess Berlin Conference 2019
Slide 2: Disclaimer
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 ar
Slide 3: Agenda
Agenda 1 Overview 2 Business Highlights Q1 2019 3 Financial Results Q1 2019 4 Outlook 3
Slide 4: Overview: Q1 2019 with mixed results
1 Overview Q1 2019 with mixed results – Market environment still subdued Key messages Sales growth1 Gross margin 1 Group sales growth1 of +0.4% with an expected slow start into the year, Auto OEM Outperformance of 500 bps +0.4% 25.2% Gross margin 25.2% (Q1’18: 27.0%), down y-o-y in Automotive EUR 3,
Slide 5: Schaeffler Group Q1 2019 – Highlights and lowlights
1 Overview Schaeffler Group Q1 2019 – Highlights and lowlights Automotive OEM: LVP1 outperformance of 500 bps Weak Automotive OEM business in Greater China driven by strong growth in Americas (+12.4%2) (-14.5%2) and Europe (-3.3%2) Automotive Aftermarket sales impacted by weak OES Strong growth in I
Slide 6: Automotive OEM – Strong Outperformance, earnings quality still unsatisfactory
2 Business Highlights Q1 2019 Automotive OEM – Strong Outperformance, earnings quality still unsatisfactory, albeit stabilized Sales -1.7%1 Strong Outperformance of LVP3 by 500 bps, driven by strong growth in Region in EUR mn Americas with 12.4%1 2,280 2,286 Business division E-Mobility growing by 3
Slide 7: Automotive OEM – Successful Auto Show Shanghai and projects pipeline
2 Business Highlights Q1 2019 Automotive OEM – Successful Auto Show Shanghai and projects pipeline building up Business highlights u Successful Auto fair in Shanghai (16 - 25 April, 2019) § Showcasing Schaeffler’s Powertrain Matrix and SpaceDrive Technology § E-Axle Production Launch Ceremony parall
Slide 8: Automotive Aftermarket – Slow start with mixed sales and lower EBIT margin
2 Business Highlights Q1 2019 Automotive Aftermarket – Slow start with mixed sales and lower EBIT margin Sales -1.1%1 Good growth in Independent Aftermarket with +3.0%1, driven by strong in EUR mn performance in Region Americas (in particular South America) 447 441 Price increases for selected parts
Slide 9: Automotive Aftermarket – Chassis Specialist and additional NAPA business
2 Business Highlights Q1 2019 Automotive Aftermarket – Chassis Specialist and additional NAPA business Portfolio re-positioning: Portfolio expansion: FAG brand, the chassis specialist Entering the North American bearings & seals business u Re-positioning of RUVILLE steering u Bearings & seals progra
Slide 10: Industrial – Strong growth and slightly lower earnings quality
2 Business Highlights Q1 2019 Industrial – Strong growth and slightly lower earnings quality Sales +6.9%1 Above average sales growth with positive contribution from all regions (China in EUR mn +14.1%1) 824 895 Continued double digit growth in Wind, Raw Materials and Railway sector clusters Q1 2018
Slide 11: Industrial – Continued growth in key sectors
2 Business Highlights Q1 2019 Industrial – Continued growth in key sectors Sector Wind u Significant sales growth with key customer for multi-megawatt turbines Further localization & in China growth in China u Local production ramp-up of large size bearings in Nanjing, China Sector Rail u New orders
Slide 12: Capital allocation – Focus increased and discipline strengthened
2 Business Highlights Q1 2019 Capital allocation – Focus increased and discipline strengthened Investment1) allocation | in EUR mn Mid-term target: Investment priorization going forward Capex ratio: 6-8%2) u Automotive OEM: Strategic growth fields E-Mobility and Chassis Mechatronics – clearly linked
Slide 13: Transformation continues – XTRONIC and European footprint
2 Business Highlights Q1 2019 Transformation continues – XTRONIC and European footprint Automotive Acquisition of XTRONIC OEM Divestment of Barden plant, UK Industrial u Backward integration for recently acquired u Signing of agreement to sell The Barden Corporation (UK), Plymouth Paravan technology
Slide 14: Key figures Q1 2019
3 Financial Results Q1 2019 Key figures Q1 2019 Q1 2019 in EUR mn Q1 2018 Q1 2019 vs. Q1 2018 +2.0% Sales 1 3,551 3,622 +0.4%1 Gross Profit 960 913 -47 mn 2 Gross Margin 27.0% 25.2% -1.8%-pts. EBIT2 391 272 -119 mn EBIT Margin2 3 11.0% 7.5% -3.5%-pts. Net income3 238 137 -101 mn 4 EPS4 (in EUR) 0.36
Slide 15: Sales growth – Region Americas with double-digit growth rates
3 Financial Results Q1 2019 1 Sales growth – Region Americas with double-digit growth rates Sales | in EUR mn Key aspects u Group sales up by +0.4%1 (Q1’18: +3.9%1) +0.4%1 u Sales growth1 mainly driven by Americas (+11.9%), offsetting negative growth in Greater China (-8.0%) and Europe (-1.5%) u Str
Slide 16: Gross Profit – Gross margin lower on negative price, mix and higher production costs
3 Financial Results Q1 2019 2 Gross Profit – Gross margin lower on negative price, mix and higher production costs Gross Profit Q1 2018 vs. Q1 2019 | in EUR mn Key aspects Negative price effect driven by continued price pressure in major 1 1 AOEM end markets, especially in China; Industrial division
Slide 17: EBIT margin – Sequential improvement, but still subdued earnings quality
3 Financial Results Q1 2019 3 EBIT margin – Sequential improvement, but still subdued earnings quality EBIT1 | in EUR mn Key aspects u Even if sequentially improving, Automotive OEM division’s Q1 2019 -119 mn EBIT margin is the main driver of the Group’s EBIT margin y-o-y erosion u Automotive Afterm
Slide 18: Automotive OEM – Q1 with strong outperformance; low quality of earnings
3 Financial Results Q1 2019 Automotive OEM – Q1 with strong outperformance; low quality of earnings RACE update: Reported EBIT includes EUR 55mn restructuring Sales by business division | y-o-y growth EBIT2 Q1 2018 vs. Q1 2019 | in EUR mn expenses Q1 2018 Q1 2019 ∆1 Engine Systems 710 699 -3.4% Tran
Slide 19: Automotive Aftermarket – Slow start driven by weaker OES business
3 Financial Results Q1 2019 Automotive Aftermarket – Slow start driven by weaker OES business and higher product costs Sales by region | y-o-y growth EBIT4 Q1 2018 vs. Q1 2019 | in EUR mn Q1 2018 Q1 2019 ∆1 Europe 338 321 -4.2% Americas 78 88 +14.1% +0 -105 -1 Greater China 19 20 +1.1% -2 -4 Asia/Pa
Slide 20: Industrial – Q1 with continued growth momentum
3 Financial Results Q1 2019 Industrial – Q1 with continued growth momentum, gross margin increase offset by higher overhead costs Sales by region | y-o-y growth EBIT2 Q1 2018 vs. Q1 2019 | in EUR mn Q1 2018 Q1 2019 ∆1 Europe 482 501 +4.4% +333 Americas 141 162 +9.1% -4 Greater China 131 155 +14.1% -
Slide 21: Net income Q1 2019 EUR 137 mn – EPS at EUR 0.21
3 Financial Results Q1 2019 4 Net income1 Q1 2019 EUR 137 mn – EPS Q1 2019 at EUR 0.21 (PY: EUR 0.36) Net income1 | in EUR mn Key aspects u Net income decreased to EUR 137 mn (Q1’18: EUR 238 mn) -42.4% u Decrease driven by lower EBIT u EPS decreased to EUR 0.21 (Q1’18: EUR 0.36) 238 268 256 119 137
Slide 22: Free Cash Flow before M&A at EUR -235 mn – Capex Ratio 10.3%
3 Financial Results Q1 2019 5 Free Cash Flow before M&A1 FY at EUR -235 mn (PY: EUR -69 mn) – Capex Ratio Q1 19 at 10.3% Free Cash Flow before M&A1 | in EUR mn Key aspects -166 mn u FCF before M&A decreased to EUR -235mn (PY: EUR -69mn) u Lower profitability and higher Capex u FCF before M&A impacte
Slide 23: Working Capital ratio 18.0% – Capex ratio 10.3% in Q1
3 Financial Results Q1 2019 6 Working Capital ratio 18.0% – Capex ratio 10.3% in Q1 Working capital1 | in EUR mn Capex3 | in EUR mn 2,575 2,737 2,672 2,219 2,579 306 289 262 375 373 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 1,232 in % of sales (LTM) in % of sales 18.4% 19.3% 18.7%
Slide 24: Net debt of EUR 2,805 mn – Gearing ratio at 89%
3 Financial Results Q1 2019 7 Net debt of EUR 2,805 mn – Gearing ratio1 at 89% Net financial debt and Gearing ratio | in EUR mn Key aspects u Net debt increased slightly to EUR 2,805 mn (FY’18: EUR 2,547 mn) due to seasonally negative FCF; Net leverage ratio2 at 1.3x u Successful placement of Invest
Slide 25: Guidance 2019 confirmed on Group and divisional level
4 Outlook Guidance 2019 confirmed on Group and divisional level Group Guidance Divisional Guidance Actuals Guidance Automotive Automotive Industrial OEM Aftermarket Q1 2019 FY 2019 Actuals Guidance Actuals Guidance Actuals Guidance Q1 2019 FY 2019 Q1 2019 FY 2019 Q1 2019 FY 2019 Sales growth1 +0.4%
Slide 26: Conclusion & Outlook – Full focus on cost and capex discipline
4 Outlook Conclusion & Outlook – Full focus on cost and capex discipline, cash generation and transformation Q1 sales development impacted by subdued market conditions, better second 1 half expected in the Automotive divisions, but visibility remains low Automotive OEM: Program RACE on track, on top
Slide 27: Financial calendar 2019 – CMD moved to September 11th
4 Outlook Financial calendar 2019 – CMD 2019 moved to September 11th, 2019 Roadshows Regular capital market communication May 9th London May 8th Q1 2019 Earnings Release May 10th Frankfurt Aug 6th Q2 2019 Earnings Release Capital Markets Day 2019, Deutsche Bank IAA May 16th Paris Sep 11th Conference
Slide 28: IR Contact
IR Contact Investor Relations Phone: + 49 9132 82 4440 Email: ir@schaeffler.com Web: www.schaeffler.com/ir
Slide 29: Appendix
Appendix A1 Business and Strategic Update A2 Automotive OEM A3 Automotive Aftermarket A4 Industrial A5 Backup 29
Slide 30: Transformation continues – Environment to remain challenging
A1: Business and Strategic Update Transformation continues – Environment to remain challenging Today 1u Environment remains challenging w Subdued growth, low visibility w Macroeconomic and geopolitical risks w Technological changes 2u We concentrate on our strengths Mobility for w Automotive and Ind
Slide 31: Agenda 4 plus One – Progressing on schedule with completion ratio of 60%
A1: Business and Strategic Update Agenda 4 plus One – Progressing on schedule with completion ratio of 60% Ø 60% 10% 25% 95% 100% Initiate Plan Implement Close Initiatives ►1 Customer Excellence 70% ►2 E-Mobility 60% ►3 Industry 4.0 60% ►4 Quality for Tomorrow 50% ►5 Global Footprint 65% ►6 Factory
Slide 32: Drive continuous improvement – Execution of efficiency initiatives progressing
A1: Business and Strategic Update A Drive continuous improvement – Execution of efficiency initiatives progressing Overview initiatives Cost HCO1 Full Start Efficiency Reduction Restructuring Financial Completion Completion Date Target Target Cost Impact Focus Ratio at CMD2 Ratio now CORE I 10/2015
Slide 33: Enhance competitiveness in Auto OEM – RACE program
A1: Business and Strategic Update B Enhance competitiveness in Auto OEM – RACE program 1 An Efficiency and Portfolio optimization program 2 Led by Matthias Zink, CEO Automotive OEM, started end of 2018 Aimed at structurally improving competitiveness of the Automotive OEM division 3 in three waves Pr
Slide 34: Efficiency and Portfolio Optimization – Execution in three waves
A1: Business and Strategic Update B Efficiency and Portfolio Optimization – Execution in three waves Business portfolio | Automotive OEM Execution | Program RACE Growth Impact New business Wave 3 + Wave 2 Core business Wave 1 Capital 2019 2020 2021 2022 2023 Mid- Efficiency and beyond term Time 34
Slide 35: RACE Wave 1 – 100 bps EBIT margin improvement
A1: Business and Strategic Update B RACE Wave 1 – 100 bps EBIT margin improvement Wave 1 – Levers and Targets Financial impact | in EUR mn Footprint EUR 90 mn2 1 Consolidate up to five Automotive plant locations in Europe Europe Cost 2 Reduce around 900 jobs, thereof around 700 in Germany efficiency
Slide 36: Program RACE – Growth prospects, order intake and outperformance
A1: Business and Strategic Update B Program RACE – Growth prospects, order intake and outperformance Vision Powertrain World Light Vehicle Production in mn Key aspects 117 110 u Technological competence and innovative strength complemented via 102 30% Electric Vehicle bolt-on acquisitions Hybrid Ele
Slide 37: We take action – Improve cost and Capex discipline, optimize portfolio
A1: Business and Strategic Update C We take action – Improve cost and Capex discipline, optimize portfolio Cost discipline Capex discipline u Overhead cost to be harmonized with sales growth development u Capex to sales ratio limited to 6-8% of sales, stricter allocation to growth areas (“earn the r
Slide 38: Automotive OEM – FY 2018 overview
A2: Automotive OEM Automotive OEM – FY 2018 overview Sales by business division | in EUR mn EBIT2 2017 vs. 2018 | in EUR mn FY 2017 FY 2018 ∆1 Engine Systems 2,786 2,783 +2.1% Transmission Systems 4,204 4,170 +1.4% E-Mobility 416 486 +18.1% -2583 6 -14 -30 16 Chassis Systems 1,585 1,558 +0.1% Total
Slide 39: Product portfolio – Broad drivetrain know-how
A2: Automotive OEM Product portfolio – Broad drivetrain know-how Engine systems Transmission systems 31% 46% of Automotive OEM sales in 2018 of Automotive OEM sales in 2018 u Valve train components & u Clutch systems, E-clutches systems u Damping technology u Variable camshaft timer (e.g. dual mass
Slide 40: Vision Powertrain – Market moving towards the accelerated scenario
A2: Automotive OEM Vision Powertrain – Market moving towards the accelerated scenario Accelerated Scenario Regionalized Accelerated Scenario 2030 ICE HEV BEV ICE HEV BEV Global vehicle production (in mn units) Global vehicle production (in mn units) 38 CAGR 2010/2030 120 111 29 101 37% 2% 30% 15% 89
Slide 41: Vision Chassis – Market shifting towards autonomy
A2: Automotive OEM Vision Chassis – Market shifting towards autonomy Vision Chassis Steer-By-Wire Systems ≤L2 L3 L4 L5 Global vehicle production (in mn units) Key growth technology for automated vehicles by allowing the steering wheel to disappear 117 117 conditionally or being eliminated entirely 1
Slide 42: E-Mobility – Content per vehicle
A2: Automotive OEM E-Mobility – Content per vehicle excl. Aftermarket, Heavy Duty & Motorcycles Content per Vehicle1 2 HEV 1 ICE 3 BEV in EUR x 1.5 x 2.5 ~150 x 4.0 ~125 ~100 ~90 ~60 ~25 2016 2025 2016 2025 2016 2025 No. of light vehicles2 90 mn 56 mn 3 mn 39 mn 0.5 mn 16 mn Average Content per Vehi
Slide 43: Schaeffler e-Axle transmission is driving the brand new Audi eTron Quattro
A2: Automotive OEM Schaeffler e-Axle transmission is driving the brand new Audi eTron Quattro E-Axle subsystems 2018 Schaeffler‘s new Lightweight E-Axle Transmissions for the Audi eTron Quattro SOP Q3/2018 u Schaeffler supplies both E-Axle Power Electronics Transmissions for the new Audi eTron Quatt
Slide 44: E-Mobility – Production technology gap closed
A2: Automotive OEM E-Mobility – Production technology gap closed Stator Manufacturing Processes in series production at Schaeffler today Rotor Manufacturing Processes prototyping machines available at Schaeffler ext. supplier technology as of today Production Technology Elmotec Statomat with wave-wi
Slide 45: Automotive Aftermarket – FY 2018 overview
A3: Automotive Aftermarket Automotive Aftermarket – FY 2018 overview Sales by region | y-o-y growth EBIT4 2017 vs. 2018 | in EUR mn FY 2017 FY 2018 ∆1 Europe 1,375 1,393 +2.5% -325 0 -19 Americas 403 340 -5.2% -6 15 Greater China 57 76 +36.5% Asia/Pacific 45 50 +12.5% Total 1,880 1,859 +2.2% Automot
Slide 46: Business in 2025 is shaped by today's registrations – 20+ years lifecycle
A3: Automotive Aftermarket Business in 2025 is shaped by today's registrations – 20+ years lifecycle 6 – 8 years OE lifecycle followed by 20+ years in the Aftermarket Key aspects Annual Volumes u Lifetime revenue potential in Independent Aftermarket typically near half of revenues OE Independent in
Slide 47: Our markets continue to grow – Great potential in China
A3: Automotive Aftermarket Our markets continue to grow – Great potential in China Vehicle population 1.3 1.6 bn Key growth drivers Million units (PC/LCV) 2017 2023 u Global vehicle fleet will grow at 3.2% CAGR 619.7 531.2 2017-2023 453.3 420.2 u Vehicle age will continue to grow, especially in 33
Slide 48: Growth drivers in the Independent Aftermarket
A3: Automotive Aftermarket Growth drivers in the Independent Aftermarket – Components and Solutions Components Solutions Outlook u Traditional business with replacements parts u Complete sets and kits for u Trends in OEM business fuel future u Growing with global vehicle fleet plug n' play repair so
Slide 49: Industrial – FY 2018 overview
A4: Industrial Industrial – FY 2018 overview Sales by region | y-o-y growth EBIT2 2017 vs. 2018 | in EUR mn FY 2017 FY 2018 ∆1 -7 -1 -9 9 Europe 1,804 1,906 +7.3% Americas 575 596 +9.7% Greater China 472 575 +25.4% 1273 Asia/Pacific 299 308 +5.6% Total 3,150 3,385 +10.1% Industrial sales growth by s
Slide 50: Industrial portfolio – Broad range of standard and customized products
A4: Industrial Industrial portfolio – Broad range of standard and customized products Standard product business Ball Bearings Cylindrical Spherical Tapered Needle Roller Linear Plain bearings Mechatronics Systems Roller Bearings Roller Bearings Roller Bearings Bearings Technology Ball bearing Cylind
Slide 51: Portfolio evolution – From components to Industry 4.0
A4: Industrial Portfolio evolution – From components to Industry 4.0 Portfolio Region Sector split Channel Wind Raw Materials Europe Aerospace OEM & MRO Railway Offroad Two Wheelers Americas Power Transmission Greater Distribution China Industrial Automation Asia Pacific 51
Slide 52: Key figures by Group and division
A5: Backup Key figures by Group and division Adjusted comparative figures 2018 Group | in EUR mn Automotive Aftermarket | in EUR mn Q1’18 Q2’18 Q3’18 Q4’18 Q1’19 Q1’18 Q2’18 Q3’18 Q4’18 Q1’19 Sales 3,551 3,642 3,521 3,527 3,622 Sales 447 480 476 459 441 Sales Growth1 +3.9% +7.9% +3.7% +0.3% +0.4% Sa
Slide 53: Automotive OEM Outperformance by quarters
A5: Backup Automotive OEM Outperformance by quarters FY 19 (YTD) Q1 19 Outperformance: +5.0pp Outper- IHS1 Auto OEM2 formance World -6.7% -1.7% +5.0pp Americas -2.7% +12.4% +15.1pp Europe -7.0% -3.3% +3.7pp Greater China -13.7% -14.5% -0.8pp Asia/Pacific -0.1% +2.4% +2.5pp FY 18 Q1 18 Q2 18 Q3 18 Q4
Slide 54: Impact of IFRS 16 accounting standard
A5: Backup Impact of IFRS 16 accounting standard IFRS 16 Definition of Free cash flow (FCF) after IFRS 16 u IFRS 16 – Leases is a new financial reporting standard u Modification of FCF definition to keep comparability to FCF used for the accounting of lease agreements under IFRS 15 and before u As o
Slide 55: Overview Corporate and Financing Structure
A5: Backup Overview Corporate and Financing Structure Corporate structure (simplified) | as of March 31, 2019 Financing structure | as of March 31, 2019 INA-Holding Schaeffler A IHO Verwaltungs GmbH Nominal Nominal Rating GmbH & Co. KG Debt instrument (USD mn) (EUR1 mn) Interest Maturity (Fitch/Mood
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