Slide 1: Future Challenges of the Lubricants Industry
Future Challenges of the Lubricants Industry FUCHS Capital Market Day 2018 18 June 2018 | Dr. Lutz Lindemann, CTO
Slide 2: 01 Markets
01 Markets
Slide 3: Development Global Lubricants Demand
Markets Development Global Lubricants Demand (million tons)* 36.1 35.9 35.7 35.7 35.5 35.6 35.4 35.1 35.1 34.4 31.9 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 *Without Marine Oils l3
Slide 4: Development Regional Lubricants Breakdown
Markets Development Regional Lubricants Breakdown Demand (Million Tons)* Middle East Asia-Pacific & MEA Americas Europe Africa 5% (4%) Asia 6% (6%) Pacific 35.9 36.1 Western 43% (35%) Europe 23% 19% 11% (13%) 27% Eastern 2017 32% Europe (2007) 8% (10%) Latin 54% America 45% 9% (10%) North America 20
Slide 5: Development Regional Lubricants Demand
Markets Development Regional Lubricants Demand 2017 : 2016 *Variance (% ) North America -0.1 Latin America -2.0 Western Europe 1.4 Eastern Europe 0.5 Middle East -0.3 Africa -3.0 Asia-Pacific 2.8 World 1.0 l5
Slide 6: Regional Per-Capita Lubricants Demand
Markets Regional Per-Capita Lubricants Demand (kg) 25 20 15 10 5 0 2017 2007 l6
Slide 7: Ranking Top Lubricants Countries
Markets Ranking Top 20 Lubricants Countries (KT) CAGR 4.1% -1.2% 2.6% -1.0% 8.000 7.000 6.000 5.000 4.000 3.000 2.000 1.000 0 2017 2007 l7
Slide 8: Development European Lubricants Breakdown
Markets Development European Lubricants Breakdown Demand (Million Tons)* Western Europe Eastern Europe Russia Germany 18% (19%) 14% (13%) 8.4 UK 10% 6.8 (10%) 43% Ukraine 5% (5%) 45% 2017 Poland (2007) 4% (3%) France 8% (9%) 57% Other 55% Eastern Europe Other 18% (16%) Western Europe 2007 2017 23% (
Slide 9: Top lubricants manufacturers
Top 20 lubricants manufacturers ▪ A top-10 ranking lubricants manufacturer ▪ Number 1 among the independent lubricants companies l9
Slide 10: Global Lubricants Market
Global Lubricants Market Global Industry Structure l 10
Slide 11: Product Split
Product Split Global Lubricants Market better efficiency Worldwide car population approx. 750 mn t Worldwide car population approx. 1,143 mn t 2000 -36% reduction yearly consumption/ car 2017 Each year additional 40 mn vehicles Greases Process Greases Process Oils 3% Oils 3% 12% 8% MWF/ CP 6% Automo
Slide 12: Analysis of Tribosystem – the way
Analysis of Tribosystem – the way Lubrication problem Any reference? yes Design, loads, environment etc recommendation no Analysis of the tribosystem Rheology Tribology Chemistry Physics Environment - Shear viscosity - friction - Material - Mech. stability - toxicology compatibility - Viscosity elas
Slide 13: Technology Regions
Technology Regions US Japan Europe l 13
Slide 14: Organizational Structure
Organizational Structure Product R&D IT EH&S Management Industrial Marketing Sales Purchasing KHT Quality Sustainability Manufacturing HR Management l 14
Slide 15: Organisational concept – Globalisation and Networking
Organisational concept – Globalisation and Networking Matrix structure with global Key Working Groups (16 + 3) KWG- Forming KWG- KWG- Greases Forging KWG- KWG- Industrial Mining Oils KWG- KWG- Rolling Digital Oils Methods KWG-AT KWG- KWG- Driveline Engine Fluids Oils KWG- KWG-CP Cleaners Kickoff KWG
Slide 16: 02 Challenges and Market Impact
02 Challenges and Market Impact
Slide 17: Future Trends – 3.5 disruptions at a time
Future Trends – 3.5 disruptions at a time Digitalization 3D printing Sustainability E-Mobility ▪ Simulation/ ▪ Aerospace Industry ▪ Raw materials availability ▪ Impact on the industrial Modelling ▪ Car manufacturing ▪ New sources and and automotive ▪ Sensor Techniques ▪ Medical engineering synthesis
Slide 18: Future Trends – 3.5 disruptions at a time
Future Trends – 3.5 disruptions at a time Digitalization 3D printing Sustainability E-Mobility ▪ Simulation/ ▪ Aerospace Industry ▪ Raw materials availability ▪ Impact on the industrial Modelling ▪ Car manufacturing ▪ New sources and and automotive ▪ Sensor Techniques ▪ Medical engineering synthesis
Slide 19: 03 Digitalization
03 Digitalization
Slide 20: Digitalization
Digitalization 1. Sensoric – condition monitoring, control, prediction 2. Statistics / Simulation ▪ Explorative statistics (Data Mining, Big Data) ▪ System modelling (chemical, tribological, logistic, manufacturing) 3. Business Models l 20
Slide 21: New Technologies
New Technologies CPS (Cyber Physical Systems) Lubricants Field Data Customer Supplier Manufacturer Third Party ? l 21
Slide 22: inoviga
inoviga inoviga
Slide 23: Digitalization will fundamentally change our value creation
Digitalization will fundamentally change our value creation …to a more integrated value chain due to data integration and feedback loops l 23 23
Slide 24: technologies to be integrated
technologies to be integrated Internet of Things Big Data Analytics Machine Learning Blockchain Connecting things Manage vast amounts Insights that enable Intelligence enabled Blockchain services with people and of big data transformative actions by learnings from data embedded into processes busine
Slide 25: inoviga
inoviga development logistics application service 125
Slide 26: digitized product development & lubricant production
digitized product development & lubricant production • From empirically-driven product development to simulation approaches • Application-linked data such as field data or test field results serve as a statistical/Big Data backbone • Circle the application-linked data back into the development proce
Slide 27: inoviga
inoviga development application service 127
Slide 28: eCommerce
eCommerce • eCommerce involves facilitation of the sale of goods and services via electronic networks such as the internet • Our eCommerce vision is driven by the idea that more than 80% of our customer create less then 20% of revenue. Therefore, transforming the interaction with these 80% to a stre
Slide 29: eCommerce
inoviga eCommerce big data oy 1 2 3 @o (Q» @ A subsidiary’s Master Microsite: Webshop voice order bot Web-Shop: Shop in Shop Concept as a service Concept aut.re-order bot dash button, etc. interface ‘A Customer's Exclusive Log-In © e-shop solutions .-ways to order... Ag Who? Who? Who? : Any Customer
Slide 30: inoviga
inoviga A=b—RB-a development production sales logistics application service 130
Slide 31: smart services: objectives
smart services: objectives • Make the lubricant talk in real-time by introducing online condition monitoring via sensors • Combine lubricants data with machine data (e.g. vibration or load) to generate a holistic view • Empower customers to take immediate actions to keep the lubricant and the machin
Slide 32: FVT - Fluid Vision Technologies
FVT - Fluid Vision Technologies • Fluid Vision Technologies started with the idea to provide an easy and economical inline measurement of coolants • The sensor-part is in the validation phase l 32 32
Slide 33: DMG Mori – mwf monitoring
DMG Mori – mwf monitoring • DMG wants to include the lubricant status into their condition analyzer app • FUCHS is asked to provide a sensor l 33 33
Slide 34: FUCHS Meter
FUCHS Meter • FUCHS Meter so far is a prototype • Converting the prototype to a product is the next step • Design will be reviewed • Aspects like connectivity, automated asset recognition and many more need to be developed l 34 34
Slide 35: bringing it all together for new business models
bringing it all together for new business models
Slide 36: Delivering new value propositions through sensors smart services
Delivering new value propositions through sensors smart services Online sensors and data analytics tools allow for new, data driven (“smart”) services • Monitoring the lubricants in real-time • Monitor the health status of the machine through monitoring the lubricant • Take immediate actions to keep
Slide 37: In Short
In Short ▪ Connecting Value chains incl. condition monitoring will result in new business models ▪ Today we sell technical solutions to our customers ▪ Today we offer excellent customer service in logistics and customer service ▪ Tomorrow we offer availability, performance or availability of syst
Slide 38: 04 Sustainability
04 Sustainability
Slide 39: Sustainability is substantial part of our industry
Sustainability is substantial part of our industry ▪ Raw material choice ▪ Additional regulatory from EU and China – Life Cycle Assessment ▪ Upcycling to be considered as part of our business model ▪ Customer requirements ▪ CO2 Footprint as part of product specifications ▪ KEY to quantify sustain
Slide 40: Code of Responsible Conduct for Business
Code of Responsible Conduct for Business Subscriber l 40
Slide 41: Sustainability Cross Initiatives
Sustainability Cross Initiatives Responsible Care Chemie³ Wittenberg-Zentrum für Globale Ethik/econsense FUCHS is a signatory to FUCHS is engaged in the the Responsible Care Chemie³ sustainability initiative FUCHS is engaged in a cross- Global Charter of the of the German Chemical industrial initiat
Slide 42: Engagement with Academic Institutions
Sustainability Engagement with Academic Institutions University of Mannheim Cooperation with Student Initiatives Presentations / Lectures at the Sustainable Business Summit Financial support of the endowed chair of CSR at the University of Mannheim l 42
Slide 43: Sustainability Initiative Lubricants Industry
Sustainability Initiative Lubricants Industry ▪ Proposed and named by FUCHS, the lubricants industry sustainability initiative NaSch* was established in Germany in 2016 ▪ Founding Members: FUCHS, BANTLEON, ROWE, KLÜBER LUBRICATION, ZELLER+GMELIN, Lube/Oil associations VSI&UNITI ▪ Objective: Creation
Slide 44: Sustainability Awards
Sustainability Awards 144 cfi... SUSTAINABILITY AWARDS 2015 a GERMAN SUSTAINABILITY AWARD Germany's Most Sustainable Medium-sized Company 2016 RESSOURCENEFFIZIENZ 100 BETRIEBE =RESSOURCEN- EFFIZIENZ es Unternehmen * FUCHS SCHMIERSTOFFE GMBH ‘aes Mannheim wurde ait dem Projekt Lnergetscha nd stoffich
Slide 45: FUCHS Corporate Carbon Footprint
Sustainability FUCHS Corporate Carbon Footprint* (in kilogramm CO2e per ton produced) l 45 *FUCHS Production Locations 2014
Slide 46: FUCHS Corporate Carbon Footprint
Sustainability FUCHS Corporate Carbon Footprint (in kilogramm CO2e per ton produced) 3000 2500 2000 1500 1000 500 0 Own energy Purchased Purchased raw Transport Production Business trips Employee Company car Transport End-of-life generation energy materials and (incoming raw waste commuting fleet (o
Slide 47: Raw Materials
Sustainability Raw Materials ▪ Petrochemical industry will see a significant change ▪ Sustainability aspects will become part of future requirements ▪ Paris Agreement ▪ EU-Ecolabel – includes sustainability requirements ▪ Customer requirements i.e. OEM’s require CO2 Footprint must ▪ Availability of
Slide 48: Project: Advanced Biomass Value / Idea: Green Gold
Project: “Advanced Biomass Value” / Idea: “Green Gold” The "Advanced Biomass Value (ABV) “ project is a joint inter- disciplinary initiative with 8 partners, focused on isolating lipids from rapidly growing algae and turning them into high-quality lubricants. The remaining algae biomass is used to p
Slide 49: Project ZeroCarbFP / Idea: Waste2Value
Project “ZeroCarbFP” / Idea: “Waste2Value” In the “ZeroCarbFP (Zero Carbon Footprint)” alliance, 14 partners from various industries are working on a project to convert carbon containing industrial waste streams into valuable materials, using microorganisms. The project is supported by the German Fe
Slide 50: 05 E-Mobility
05 E-Mobility
Slide 51: Technologies to reduce automotive CO2-emission
Technologies to reduce automotive CO2-emission l 51
Slide 52: New Technologies – e-Mobility
New Technologies – e-Mobility ▪ Politics, legislation and industry require and push the e-mobility ▪ VW-Strategy: Together 2025: 30 % of the cars will be e-cars by 2025 ▪ Netherlands and Norway decided, that starting with 2025 no new car with combustion engines will be approved anymore ▪ China: 10%
Slide 53: China EV-Sales 2016: Est 2017 +70%
China EV-Sales 2016: Est 2017 +70% 507.000 cars (+53%), Market Share 1.8% 23 mn passenger cars 2017 0.8 mn EV cars 3.4% market share 10% (2019), 12% (2020) quota by law 507,000 cars sold 336,000 passenger cars 171,000 commercial vehicles (esp. busses) 409,000 battery electric vehicles (= 80%) 98,000
Slide 54: E-mobility ramp up scenario
E-mobility ramp up scenario ▪ Paris Climate Agreement „COP21“: from 2050 on, CO2 emissions shall not exceed CO2 absorption ▪ Existing world car fleet 2017: 1000 Mio cars ▪ Annual production 2016: 72 Mio cars – in 2030 81 Mio cars ▪ Time to replace conventional cars with „clean“ cars: 14 years (20 ye
Slide 55: E-mobility ramp up scenario - Europe
E-mobility ramp up scenario - Europe ▪ Not only new cars shall meet CO2 emission targets by 2050, but also the existing car fleet at this time need to comply accordingly ▪ As a consequence: By 2028, e-cars will have 30-35% market share in the EU, combustion 28%, Hybrid 40% ▪ Car population stable 25
Slide 56: E-mobility ramp up scenario - USA
E-mobility ramp up scenario - USA ▪ USA car population around 270 Mio cars – stable car population ▪ no predictability of political behavior ▪ terminates the “Paris Climate Agreement” ▪ Average reduction of market demand by 2%/a the past 5 years ▪ Next 4-8 years no dramatic change due to e-mobility
Slide 57: E-mobility ramp up scenario - China
E-mobility ramp up scenario - China ▪ China e-mobility share given by law eff. 2019 10%, 12% from 2020 onwards expectation 30-40% to come due to massive urbanization push ▪ In 15 years 38-40 mn cars produced thereof 16 mn EV cars – 24 mn ICE (2016 22 mn) – CAGR 6-8% ▪ 172 mn cars registered in China
Slide 58: ICE- vs. EV-Powertrain: Different Value Creation
ICE- vs. EV-Powertrain: Different Value Creation (€) Example: VW Golf 2016 vs. VW e-Golf 2025 lost value chains 7000 Electric Drive 6000 2025 130 kw 5000 Battery 70 kwh 8,900 € 4000 Gasoline Engine 2016 3000 1.4 L, 110 kw 7speed DCTF 2000 4,400 € 1000 0 l 58 Source: FEV/FAZ, 29.11.16
Slide 59: What's different
What‘s different Powertrain ICE Hybrid Battery Applications Engine oil ✓ ✓ – Transmission oil ✓ ✓ ✓/– Greases ✓ ✓ ✓ Specialty ✓ + + greases Lubricants for ✓ + + Auxiliary systems Cooling & ✓ + + functional liquids – Omitted ✓ Required + Increased l 59
Slide 60: E-Mobility/New Materials/Efficiency: Impact on demand
E-Mobility/New Materials/Efficiency Impact on demand next 15 years ▪ Europe decrease automotive: 18% decrease metal processing oils 30% stable : industrial 0% decrease total market: 10% = 400 KT ▪ USA decrease 20% (efficiency, e-mobility) = 1200 KT l 60
Slide 61: E-Mobility/New Materials/Efficiency: Impact on demand
E-Mobility/New Materials/Efficiency Impact on demand next 15 years ▪ China automotive increase 15-20% metal processing stable in MPO industrial increase 15% increase overall: 10% = 700 KT ▪ ROW unchanged or not predictable Ø decrease in demand worldwide by 900 KT – 5% overall l 61
Slide 62: 06 E-Mobility – set up
06 E-Mobility – set up
Slide 63: E-Mobility @ FUCHS
E-Mobility @ FUCHS Coordination of all R&D activities with E-Mobility perspective: ▪ Cross functional project development work ▪ Holistic coordination over all applications and project segments ▪ Regional R&D support on the 3 main R&D hubs with coordinative responsibility Supplies for car Products r
Slide 64: E-Mobility Drives New Technologies
E-Mobility Drives New Technologies Electrified Converter Automatic Electrical Steering Transmissions Hybridized Automatic Electrified Electric transmissions Double Clutch Electric Oil pumps Aggregates Transmissions Electrified E-Mobility Constant Velocity Electric Compressors transmissions E-Clutch
Slide 65: E-mobility: Impact on lubricants
E-mobility Impact on lubricants Automotive Industrial applications • Decline of engine oil- and gear oil-usage • General trend to weight reduction • Increase in grease demand as new • Lightweight materials - car body will applications come up change from steel to more Aluminum, thermoplastics and CF
Slide 66: FUCHS – Quo Vadis
FUCHS – Quo Vadis ▪ FUCHS with a broad range of abilities in many fields sees a lot of opportunities to develop the business especially in the digital world ▪ The changes in the market environment will create new opportunities due to our technical level, international set up, high flexibility, our c
Slide 67: Thank you for your attention
Thank you for your attention