Fuchs Se · XETR:FPE
Fuchs — Fuchs Petrolub — UBS Pan European Small & Midcap Conference, London (May 2019)
60 slides from Fuchs's conference presentation, May 2019
Slide 1: FUCHS Group Investor Presentation
FUCHS GROUP Investor Presentation | May 2019 | Thomas Altmann, Head of Investor Relations
Slide 2: Agenda
Agenda 01 | The Leading Independent Lubricants Company 02 | Q1 2019 03 | Shares 04 | Appendix l2
Slide 3: The Leading Independent Lubricants Company
01 The Leading Independent Lubricants Company
Slide 4: FUCHS at a glance
FUCHS at a glance The Fuchs family holds No. 1 among the independent 55% of suppliers of lubricants ordinary shares Established 3 generations ago as a €2.6 bn family-owned business sales in 2018 A full range of over 10,000 Around 5,500 Preference share is listed lubricants and related employees in t
Slide 5: Top lubricants manufacturers
Top 20 lubricants manufacturers A top-10 ranking lubricants manufacturer Number 1 among the independent lubricants companies l5
Slide 6: Our unique business model is the basis for our competitive advantage
Our unique business model is the basis for our competitive advantage Technology and innovation leadership in strategically important product areas FUCHS is fully focussed on lubricants FUCHS is a full-line supplier Independency allows reliability, customer & Global presence, R&D strength, market pro
Slide 7: We are where our customers are
We are where our customers are 58 Operating Companies 33 Production Sites As of Dec. 2018 l7
Slide 8: Full-line supplier advantage
Full-line supplier advantage Sales 2018: €2.6 bn (~80% international) by customer location Automotive lubricants Industrial lubricants ~45% ~55% e.g. Engine & gear oils, hydraulic oils, shock absorber fluids, etc. e.g. Industrial oils, MWF/CP* and greases 100,000 customers in more than 150 countries
Slide 9: Well balanced customer structure
Well balanced customer structure Top 20 Customers account for ~ 25% sales Engineering / Machinery construction Agriculture and construction Industrial goods manufacturing 7% 6% 19% Sales 2018: Trade, transport and services 28% €2.6 bn Vehicle manufacturing 31% 9% Energy and mining l9
Slide 10: Organic growth potential in emerging countries
Organic growth potential in emerging countries Market Demand FUCHS Sales (by customer location) 0% +185 % 36.4 mn t 36.4 mn t € 902 mn € 2,567 mn 19% 27% 54% (1,375) 27% 34% 16% (409) 54% 59% (531) 39% 30% (783) 24% (219) 17% (152) 2000 2018 2000 2018 Asia-Pacific & MEA Americas Europe l 10
Slide 11: FUCHS' Strategy
FUCHS‘ Strategy Profitable Growth: Internationalization of core activities Local production in 33 plants Utilize disruptions like e-mobility, digitalization, etc. People: as an opportunity Employer Branding Global Culture Agile network structure based standards, Talent- on common values proces
Slide 12: Investment in the future
Investment in the future R&D expenses and Capex R&D expenses 2018: €52 mn Capex 2018: €121 mn € mn 60 140 121 120 50 105 100 93 40 80 30 58 60 52 50 53 47 11 PPA 20 39 11 40 10 30 10 20 0 0 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 Capex Scheduled amortisation/depreciation l 12
Slide 13: Investment initiative
Investment initiative Capex 2016-2021 €700+ mn € mn 200 In 2016 - 2018 over €300 mn capex was spent with focus on the expansion of Mannheim, Kaiserslautern and Chicago as 150 well as new plants in China, Australia and Sweden Capex will peak in 2019 at €180 mn. In 100 2020/2021 more than €100+ mn
Slide 14: Strong track record of integrating businesses
Strong track record of integrating businesses Revenues (p.a.) 2019 Nulon Products (AUS) € 25 mn 2016 Ultrachem (US) € 15 mn Chevron Lubricants (US) € 11 mn 2015 Statoil Fuel & Retail Lubricants AB (SVE) € 140 mn Deutsche Pentosin-Werke GmbH (GER) € 135 mn 2014 Lubritene (ZA) € 15 mn Batoyle (UK) € 1
Slide 15: Q1 2019
02 Q1 2019
Slide 16: Highlights Q1 2019
Highlights Q1 2019 Sales stable at €643 mn EBIT down by 16% to €77 mn Growth initiative results in costs increasing as planned Decline in sales in Europe and Asia due to Outlook 2019 unchanged weakness of automotive markets in Germany and China Sales +2% to +4% EBIT -8% to -5% North and So
Slide 17: Q1 2019 Group sales
Q1 2019 Group sales € mn 800 -3 0 +3 (- 1%) (0%) (+1%) 643 643 0 (0%) 300 Q1 2018 Organic Growth External Growth FX Q1 2019 l 17
Slide 18: Regional sales growth Q1 2019
Regional sales growth Q1 2019 New segment reporting as of 2019: EMEA, APAC, Americas Q1 2019 Q1 2018 Growth Organic External FX (€ mn) (€ mn) Europe, Middle East, Africa 400 415 -4% -3% - -1% Asia-Pacific 171 178 -4% -5% - +1% Americas 106 95 +12% +8% 0% +4% Consolidation -34 -45 - - - - Total 643 6
Slide 19: Income statement Q1 2019
Income statement Q1 2019 € mn Q1 2019 Q1 2018 Δ € mn Δ in % Sales 643 643 0 0 Gross Profit 217 225 -8 -4 Gross Profit margin 33.7 % 35.0 % - -1.3 %-points Other function costs -142 -136 -6 4 EBIT before at Equity 75 89 -14 -16 At Equity 2 3 -1 -33 EBIT 77 92 -15 -16 Earnings after tax 55 67 -12 -18
Slide 20: EBIT by regions
EBIT by regions Q1 2019 (Q1 2018)1 € mn 100 14 4 77 (13) (1) (92) 80 21 (28) 60 38 (50) 40 20 0 EBIT margin EMEA Asia-Pacific Americas Holding/cons. Group before at equity1 9.0% (11.3%) 12.3% (15.7%) 13.2% (13.7%) 11.7% (13.8%) 1 2018 comparable l 20
Slide 21: Cash flow Q1 2019
Cash flow Q1 2019 € mn Q1 2019 Q1 2018 Δ in % Earnings after tax 55 67 -18 Amortization/Depreciation 18 14 29 Changes in net operating working capital (NOWC) -17 -33 48 Other changes -9 -9 - Capex -34 -18 89 Free cash flow before acquisitions 13 21 -38 Acquisitions 0 -1 - Free cash flow 13 20 -35 l
Slide 22: Q1 2019 earnings summary
Q1 2019 earnings summary Decrease in sales in EMEA and Asia-Pacific due to weakness of the automotive market in China and Germany North and South America continues to grow organic and offsets sales decrease in APAC and EMEA Positive FX effects North- and South America due to a strong US dollar
Slide 23: Outlook 2019 unchanged
Outlook 2019 unchanged Presupposing a growth of the automotive industry by 1% Performance indicator Actual 2018 Outlook 2019 Sales € 2,567 mn +2% to +4% EBIT comparable (before one-off effect) € 371 mn -5% to -2% EBIT € 383 mn -8% to -5% FUCHS Value Added € 251 mn ~ € 200 mn Free cash flow before ac
Slide 24: Shares
03 Shares
Slide 25: Breakdown ordinary & preference shares
Breakdown ordinary & preference shares (December 31, 2018) Ordinary shares Preference shares MDAX-listed Free Symbol: FPE Symbol: FPE3 Free float Fuchs ISIN: DE0005790406 ISIN: DE0005790430 float 45% family WKN: 579040 100% WKN: 579043 55% Basis: 69,500,000 ordinary shares Basis: 69,500,000 preferen
Slide 26: Stable dividend policy
Stable dividend policy Dividend per Preference Share Market Capitalization € € mn 7,000 Payout Ratio 2018: 46% 0.95 1.00 6,000 0.80 5,000 4,000 0.60 3,000 0.40 0.27 2,000 0.20 1,000 0.00 0 Our target: Increase the absolute dividend amount each year or at least maintain previous year’s level. l 26
Slide 27: Appendix
04 Appendix
Slide 28: Top lubricant countries
Top 20 lubricant countries KT 8,000 2007 2018 China and the USA cover more than one third of 7,000 the world lubricants market FUCHS is present in every important lubricants 6,000 consuming country 5,000 4,000 3,000 2,000 1,000 0 l 28
Slide 29: Regional per-capita lubricants demand
Regional per-capita lubricants demand kg 25 2007 2017 20 15 10 5 0 l 29
Slide 30: Base oil / additives value split
Base oil / additives value split Base oil prices do not necessarily follow crude oil 20% prices No direct link between additives and crude oil 60% prices. We even face price increases for certain raw materials where supply/demand is not balanced or special situations occur 80% Special lubrican
Slide 31: Base Oil Price Outlook H1/2019
Base Oil Price Outlook H1/2019 Prices expected to stabilize, but Risks remain Aspects supporting downward pressure on base oil prices Aspects supporting upward pressure on base oil prices Dip of crude oil pricing from December last year Crude oil pricing recovered to a significant extent in Ma
Slide 32: Workforce Structure
Workforce Structure 5,446 employees globally Regional Workforce Structure Functional Workforce Structure Other Germany European Marketing 1,634 (30%) Countries & Sales Production 1,948 2,303 1,681 (36%) (43%) (32%) 2018 2018* Asia- R&D Pacific, 523 Africa (10%) Americas Admin 1,174 690 (21%) 815 (13
Slide 33: Challenges & Opportunities
Challenges & Opportunities Global Networked & Agile Company Profitable Growth Structures Digitalization E-Mobility l 33
Slide 34: FUCHS' 3C grease commitment
FUCHS‘ 3C grease commitment Germany / USA / China Globally identical production equipment Globally identical finishing equipment Globally identical quality control test devices Globally similar raw materials Globally identical quality standards l 34
Slide 35: Digitalisation will fundamentally change our value creation
Digitalisation will fundamentally change our value creation development logistics With our “think tank“ in the FUCHS family, inoviga GmbH, we created a unit aiming computational integrated approaches logistics to deliberately engage in new ways of thinking and to be the driving force behind producti
Slide 36: Smart services
Smart services How FluidVision fits into FUCHS’ digitalization strategy smart services: objectives Make the lubricant talk in real-time by introducing online condition monitoring via sensors Empower customers to take immediate actions to keep the lubricant and the machine healthy, preventing unp
Slide 37: Electrification of cars creates new applications
Electrification of cars creates new applications Global light-duty vehicles sales forecast (in mn units) Powertrain ICE HEV BEV 144 131 Applications 14 RoW 117 107 10 96 Σ EU, USA, China 93 29 40 17 Electric Vehicle 32 34 40 44 49 Vehicle w/ combustion Engine Engine oil ✓ ✓ – 53 RoW Transmission oil
Slide 38: Lubricant applications in passenger cars
Lubricant applications in passenger cars In modern cars there are more than 30 different types of greases Central hydraulic system Skin parts / washing oils Corrosion prevention for wire cables Processing seat components Axle drive Power steering Air conditioning Engine handling Engine Transmission
Slide 39: Lubricant applications in passenger cars
Lubricant applications in passenger cars Electrification brings a variety of opportunities for FUCHS Coolants for power electronics Corrosion preventive for battery housing Greases for bearings in E- Coolant for battery Motor MTF in machining of E-Motor a. Cleaners in battery gearbox production Draw
Slide 40: Electric cars – new technology calls for new lubrication
Electric cars – new technology calls for new lubrication Electrification of cars will lead to new applications and higher requirements for existing applications Regardless of the powertrain type, every car needs a variety of other lubricant applications Combustion engines will face further eff
Slide 41: Further market consolidation to be expected
Further market consolidation to be expected Manufacturers High degree of fragmentation 130 Major oil companies Concentration especially amongst smaller companies Independent lubricant manufacturers* 590 Market Shares Differences are enormous Other 710 > 50% manufacturers Top 10 manufacturers <
Slide 42: M&A 2019 NULON in Australia
M&A 2019 NULON in Australia Acquisition of NULON Products Australia Pty Ltd Closing on April 1, 2019 Sales AUD 40 mn (~ € 25 mn) 65 employees Automotive Retail Business l 42
Slide 43: Long-term objective: Focus on Shareholder Value
Long-term objective: Focus on Shareholder Value Organic growth through strict customer focus, geographic expansion and product innovation Drive returns Improve operating profitability through margin and mix management, operating cost management and efficiency improvements Capex with returns ab
Slide 44: Cash allocation
Cash allocation Cash allocation priority Reinvest in the business Return cash to shareholders Capex Stable Dividends Acquisitions Share Buyback l 44
Slide 45: Unique track record for continued profitability and added value
Unique track record for continued profitability and added value Sales (in € mn) Earnings After Tax (in € mn) 2,567 288 2,500 300 2,000 200 1,500 1,178 121 1,000 100 500 0 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 EBIT (in € mn) FVA (in € mn
Slide 46: Development EBIT – Cost of Capital – FVA
Development EBIT – Cost of Capital – FVA € mn 450 400 383 EBIT 371 373 Cost of capital 342 350 FVA 312 313 293 300 264 257 250 246 250 251 250 230 222 208 195 200 180 183 186 172 161 150 129 137 110 117 100 132 100 86 123 71 113 90 96 78 85 83 50 37 61 62 63 67 58 59 49 0 2004 2005 2006 2007 2008 20
Slide 47: Stable EBIT in 2018
Stable EBIT in 2018 € mn 2014 2015 2016 2017 2018 Δ 17/18 Sales 1,866 2,079 2,267 2,473 2,567 3.8% Gross Profit 693 791 851 882 899 1.9% Gross Profit margin 37.2% 38.1% 37.5% 35.7% 35.0% -0.7%-points Other function costs -400 -467 -499 -526 -542 3.0% EBIT before at Equity 293 324 352 356 357 0.3% EB
Slide 48: Solid balance sheet and strong cash flow generation
Solid balance sheet and strong cash flow generation € mn 2018 2017 2016 2015 2014 Total assets 1,891 1,751 1,676 1,490 1,276 Goodwill 174 173 185 166 88 Equity 1,456 1,307 1,205 1,070 916 Equity ratio 77% 75% 72% 72% 72% € mn 2018 2017 2016 2015 2014 Net liquidity 191 160 146 101 186 Operating cash
Slide 49: EBIT by regions
EBIT by regions 2018 (2017)1 € mn 59 11 383 (61) (9) (373) 400 121 350 (128) 300 250 192 (175) 200 150 100 50 0 EBIT margin Europe Asia-Pacific, Africa Americas Holding/cons. Group before at equity1 11.5% (11.4%) 13.9% (15.4%) 14.4% (15.5%) 13.9% (14.4%) 12017 comparable l 49
Slide 50: Cash flow 2018
Cash flow 2018 € mn 2018 2017 Δ in % Earnings after tax 288 269 7 Amortization/Depreciation 58 59 -2 Changes in net operating working capital (NOWC) -48 -78 -39 Other changes -30 -3 - Capex -121 -105 15 Free cash flow before acquisitions1 147 142 4 Acquisitions1 12 -2 - Free cash flow 159 140 14 1 I
Slide 51: Net Liquidity 2018
Net Liquidity 2018 € mn 500 450 -63 400 350 -48 -30 300 288 250 Free cash flow before acquisitions -126 200 €147 mn 10 150 100 160 191 50 0 Net liquidity Earnings after tax Depreciation ./. NOWC Other changes Dividend Other changes Net liquidity Dec 2017 Capex Dec 2018 l 51
Slide 52: Net operating working capital (NOWC)
Net operating working capital (NOWC)* 650 23.5% 24.0% 23.4% 600 22.3% 21.8% 22.5% 550 86 21.3% 85 500 21.0% 81 21.0% 450 79 19.9% 78 400 19.5% 350 77 73 300 18.0% 2013 2014 2015 2016 2017 2018 Q1 2019 NOWC (in € mn) NOWC (in %)* NOWC (in days) Inventories/days 75 76 80 84 84 93 89 Debtors/days 53 56
Slide 53: FUCHS Value Added (FVA)
FUCHS Value Added (FVA) Ø Capital Employed € mn 1,317 1,227 Cost of Capital 1,134 132 (123) 960 786 833 737 EBIT FVA 383 251 (373) (250) 2012 2013 2014 2015 2016 2017 2018 2018 (2017) Cost of Capital = CE x WACC (10%) l 53
Slide 54: FY 2018 earnings summary
FY 2018 earnings summary Mainly volume driven organic sales growth coming from Asia-Pacific, Africa and North and South America; Europe driven by price and product mix changes Strong negative FX effects in North and South America as well as in Asia-Pacific, Africa Although higher raw material
Slide 55: Adjusted 2018 quarterly figures under new segment reporting
Adjusted 2018 quarterly figures accounting for the new segment reporting structure EMEA Asia-Pacific North and South America 2018 comparable Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Sales by company location 415 414 408 381 1,618 178 191 173 164 706 95 104 105 105 409 EBIT before at equity incom
Slide 56: Quarterly income statement
Quarterly income statement 2016 2017 2018 2019 € mn Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Sales 550 586 567 564 618 629 615 611 643 668 642 614 643 Gross Profit 206 221 214 210 226 226 215 215 225 239 222 213 217 Gross Profit margin (in %) 37.4 37.7 37.8 37.1 36.6 35.8 35.0 35.2 35.0 35.8
Slide 57: The Executive Board
The Executive Board Changes of responsibilities as of 2019 Stefan Fuchs: CEO; Americas (until Sept. 30, 2019), Dr. Lutz Lindemann: CTO; R&D, Technology, Product Dr. Timo Reister: Asia-Pacific, Americas (as of Oct. 2019), Corporate Group Development, HR, PR & Marketing Management, Supply Chain, Susta
Slide 58: Executive Compensation & FUCHS Shares
Executive Compensation & FUCHS Shares Executive Board Supervisory Board 25% 50% of variable compensation of variable compensation must be invested in FUCHS preference shares with must be invested in FUCHS preference shares with a 3 year lock-up period a lock-up period of 5 years. The vesting period
Slide 59: Financial Calendar & Contact
Financial Calendar & Contact Financial Calendar 2019 Investor Relations Contact March 20, 2019 Full Year Results 2018 FUCHS PETROLUB SE Friesenheimer Str. 17 May 3, 2019 Quarterly Statement Q1 2019 68169 Mannheim www.fuchs.com/group/investor-relations May 7, 2019 Annual General Meeting 2019 Thomas A
Slide 60: Disclaimer
Disclaimer The information contained in this presentation is for background purposes only and is subject to amendment, revision and updating. Certain statements and information contained in this presentation may relate to future expectations and other forward-looking statements that are based on man
Fuchs Petrolub — UBS Pan European Small & Midcap Conference, London (May 2019) on 6ix