Deutz Ag · XETR:DEZ
Deutz — FY2020 Earnings Presentation
48 slides from Deutz's earnings presentation, Mar 18, 2021
Slide 1: Analyst conference – 2020 results
Analyst conference – 2020 results – March 18, 2021
Slide 2: Disclaimer
Disclaimer Unless stated otherwise, all the figures given in this presentation refer to continuing operations. The details given in this document are based on the information available at the time it was prepared. This presents the risk that actual figures may differ from forward-looking statements.
Slide 3: Agenda: Strategy
Agenda Agenda Strategy Dr. Frank Hiller | CEO 3
Slide 4: Our challenge: a market environment with many moving parts
Our challenge: a market environment with many moving parts... Emissions Hybridization Efficiency Electrification reduction gains Noise E-fuels Downsizing cancellation Hydrogen Optimization of LPG/CNG drive solutions Zero-emissions Sustainability & target NOx 'well-to-wheel' view Need for sustainable
Slide 5: Meets a highly diversified customer base
…meets a highly diversified customer base Broad customer base with different power requirements 5
Slide 6: Open-minded approach to technology
Open-minded approach to technology Synthetic fuels Biodiesel Multi-fuel Hydrogen Sustainable fuels H Green electricity 48V 360V Battery-powered Mild hybrid full hybrid drives Fuel cell DEUTZ is tackling the challenges in off-highway applications by ensuring compatibility with different technologies
Slide 7: Piston engines have come a long way
Piston engines have come a long way… 1999 2004 2006 2012 2014 2019 EU STAGE I EU STAGE II EU STAGE III A EU STAGE III B EU STAGE IV EU STAGE V US Tier 1 US Tier 2 US Tier 3 US Tier 4i US Tier 4 NOX Particulate emissions NOx and particulate emissions reduced by around 97% since 1999 7
Slide 8: … and still have a long way to go
… and still have a long way to go… DEUTZ TCD 5.2 L4 All new <4L engine co-development with John Deere SCR system Turbocharger Bifuel and LPG ready Optional weight- balancing shafts ▪ Construction machinery application segment ▪ Contract signed end of 2020 ▪ First pilot engines shipped to customer in
Slide 9: …especially with alternative fuels
…especially with alternative fuels DEUTZ G 2.9 L4 DEUTZ TCG 7.8 hydrogen engine 53 kW power H2 ignition system H2 supply system ECU (electronic control unit) LPG/gasoline/bifuel ready ▪ Base engine DEUTZ 2.9 L Diesel ▪ Base engine DEUTZ 7.8 L Diesel ▪ Lower emissions levels allow indoor use ▪ A hydr
Slide 10: We are prepared for electrification
With we are prepared for electrification HV hybrid power pack 360V Fully electric drivetrain 360V TCD 2.2 (55.4 kW) On-board charger 42 kWh li-ion battery pack Clutch module Electric motor 40 kW Hybrid gearbox Electric motor ▪ Applicable to all DEUTZ combustion engines <4L ▪ DEUTZ's own li-ion batte
Slide 11: Our goal: the optimal technology for each application
Our goal: the optimal technology for each application Piston engines Freeways, (diesel, LPG, CNG, e-fuel, H2) fields, construction sites Operating range / energy supply Distance to Hybrid powertrains Factory sites, Electric cattle sheds powertrains low Energy demand / cycle high Competitive powertra
Slide 12: Agenda: Overview & highlights of 2020
Agenda Agenda Overview & highlights of 2020 Dr. Frank Hiller | CEO 12
Slide 13: Overview
Overview ▪ Sharp decline in sales figures and EBIT before exceptional items in 2020 compared with 2019 due to coronavirus ▪ Noticeable upward trend in the market – significant improvement in business performance in the final quarter of 2020 compared with previous quarters ▪ Successful launch of the
Slide 14: Successful launch of Transform for Growth
Successful launch of Transform for Growth ▪ Substantial reduction in jobs by 2022: − Workforce reduced by 477 in 2020, partly through a reduction in the number of temporary workers, fixed-term contracts coming to an end, Our target: and natural attrition − Voluntary redundancy program for the German
Slide 15: Focus for growth: China
Focus for growth: China Relevant off-highway market1 Serviceable addressable market, broken down by region1 Units (millions) Americas EMEA Asia-Pacific 15% 29% 56% China 39% Markets relevant to DEUTZ: agriculture, construction, material handling, and stationary equipment 1 Source: PSR – Power System
Slide 16: Ramp-up of capacity in China on track
Ramp-up of capacity in China on track DEUTZ Hunan (SANY JV) output planning DEUTZ Tianjin output planning Units (thousands) Units (thousands) 250 40 200 Our target for China: 30 150 100 CAGR 125% 20 CAGR > 200% approx. €800mn 10 revenue in 20221 50 - - 2019 2020 2021e 2022e .. 202x 2021e 2022e 2023e
Slide 17: Localization of purchasing in China
Localization of purchasing in China ▪ New purchasing organization established for the world's biggest engine market ▪ Supplier audits mainly carried out by local teams during coronavirus-related travel restrictions ▪ Significant reduction in the cost of materials and logistics costs thanks to highes
Slide 18: Progress with implementation of E-DEUTZ strategy
Progress with implementation of E-DEUTZ strategy ▪ The aim is for four core drivetrains to be market-ready by the Our E-DEUTZ target: end of 2023 ▪ Marketing of an all-electric 360V base system planned for 2021 – prototype agreement signed in 2020 approx. 5-10% share of revenue in 2023/2024 2021 End
Slide 19: Ongoing expansion of the profitable service business
Ongoing expansion of the profitable service business Revenue from the service business € million CAGR +4.6% Our service target: 352.4 €400mn 348.3 329.9 309.2 approx. 287.3 278.4 revenue in 2021 2015 2016 2017 2018 2019 2020 ▪ New distribution channels and expansion of existing network: expansion of
Slide 20: Continual optimization of production processes
Continual optimization of production processes ▪ New assembly line at the main Cologne site for engines of less than 4 liters brought on stream in Q4 2020 ▪ Based on lean manufacturing philosophy and implementation of Industry 4.0 applications ▪ Significant increase in quality, efficiency, and capac
Slide 21: Expansion of sustainability efforts
Expansion of sustainability efforts ▪ Application to join UN Global Compact submitted at the end of 2020 ▪ Commitment to upholding ten universally accepted principles relating to human rights, labor standards, environmental protection, and the fight against corruption ▪ Support for the 17 sustainabl
Slide 22: Agenda: Sales figures for 2020
Agenda Agenda Sales figures for 2020 Dr. Frank Hiller | CEO 22
Slide 23: Sales figures for 2020, yoy
Sales figures for 2020, yoy New orders Unit sales Revenue € million Units € million -20.1% -28.7% -29.6% 211,667 1,840.8 1,654.3 1,322.5 20,942 < 150,928 1,295.6 < 29,894 < < < thereof < Torqeedo 2019 2020 2019 2020 < 2019 2020 < ▪ Huge fall in new orders due to the coronavirus crisis and the result
Slide 24: Sales figures for Q4 2020, qoq
Sales figures for Q4 2020, qoq New orders Unit sales Revenue € million Units € million +25.5% +22.1% +19.2% 42,369 388.9 34,700 < 5,837 367.4 310.0 7,813 < 308.2 < < < thereof < Torqeedo Q3 2020 Q4 2020 Q3 2020 Q4 2020 Q3 2020 Q4 2020 < < ▪ Clear signs of a gradual economic recovery – double-digit p
Slide 25: Coronavirus-related fall in revenue in all major regions
Coronavirus-related fall in revenue in all major regions 2020 (2019) Africa and Middle East 4% (3%) Europe (excl. Germany) 41% (42%) €54.8 million €532.8 million +0.7% -31.4% Asia-Pacific 19% (16%) €1,295.6 million €243.9 million (€1,840.8 -17.2% million) Americas 17% (22%) Germany 19% (17%) €222.5
Slide 26: Revenue down in all application segments
Revenue down in all application segments 2020 (2019) Miscellaneous 8% (6%) Construction Equipment 29% (29%) €103.3 million €378.5 million -2.3% -29.3% Stationary Equipment 9% (8%) Material Handling 13% (22%) €1,295.6 €114.3 million million €172.5 million -26.6% (€1,840.8 -56.8% million) Agricultural
Slide 27: Agenda: Key financials in detail
Agenda Agenda Key financials in detail Dr. Sebastian C. Schulte | CFO 27
Slide 28: Significant improvement in operating profit in Q4 2020
Significant improvement in operating profit in Q4 2020 Operating profit (EBIT before exceptional items) ▪ Operating loss of €74.7 million (2019: operating profit of €78.8 EBIT margin before exceptional items million) (€ million) − Coronavirus leads to sharp fall in revenue with related -74.7 | -5.8%
Slide 29: Business performance in the segments 1/2
Business performance in the segments 1/2 DEUTZ Compact Engines (DCE) DEUTZ Customized Solutions (DCS) € million 2020 2019 YoY change € million 2020 2019 YoY change New orders 954.3 1,268.4 -24.8% New orders 324.5 341.7 -5.0% Unit sales (units) 102,054 164,677 -38.0% Unit sales (units) 18,980 26,048
Slide 30: Business performance in the segments 2/2
Business performance in the segments 2/2 Other € million 2020 2019 YoY change New orders 46.4 47.8 -2.9% Unit sales (units) 29,894 20,942 +42.7% Revenue 44.4 35.5 +25.1% EBIT before exceptional items -12.9 -21.7 +40.6% EBIT margin before exceptional items (%) -29.1 -61.1 – ▪ Slight decrease in new o
Slide 31: R&D: spending and capital expenditure
R&D: spending and capital expenditure R&D spending (after deducting grants) Capital expenditure (after deducting grants)2 € million € million 6.3% -3.6% 5.2% 108.2 104.3 95.8 81.4 10.4 < 32.4 < < < < thereof additions as a result of leases3 2019 2020 2019 2020 < R&D ratio 1 < < ▪ Disproportionately
Slide 32: Cash flow from operating activities & working capital
Cash flow from operating activities & working capital Cash flow from operating activities Working capital € million € million 21.8% 17.4% 115.6 293.2 235.0 44.9 2019 2020 Dec. 31, 2019 Dec. 31, 2020 Working capital ratio (average)1 ▪ Decrease in cash flow from operating activities caused by the shar
Slide 33: Free cash flow and net financial position
Free cash flow and net financial position Free cash flow1 Net financial position € million € million -15.2 -36.6 -35.8 -83.8 2019 2020 Dec. 31, 2019 Dec. 31, 2020 ▪ Proactive management of capital expenditure and working capital clearly helped to offset the coronavirus-related decrease in cash flow
Slide 34: Sufficient medium- and long-term funding options
Sufficient medium- and long-term funding options Equity ratio Funding € million € million Long-term bank loans and syndicated credit lines Lease liabilities 1,301.2 1,180.5 160 50.1% 150 45.3% 652.4 535.2 75.6 36.4 13.6 14.0 7.6 Dec. 31, 2019 Dec. 31, 2020 up to 1 year 1 to 5 years up to 1 year 1 to
Slide 35: Agenda: Outlook
Agenda Agenda Outlook Dr. Frank Hiller | CEO 35
Slide 36: 2021 outlook for key end-customer markets
2021 outlook for key end-customer markets1 Change in unit sales compared with 2020 (%) Europe North America China Construction equipment 0 to +5 +5 to +10 0 to +10 Material handling 0 to +5 +5 to +10 0 to +10 Agricultural machinery 0 to +5 +5 to +10 -5 to 0 ▪ Key customer industries are expected to
Slide 37: Group guidance for 2021
Group guidance for 2021 Actual 2020 Guidance for 2021 Unit sales 121,034 engines1 at least 130,000 engines1 Revenue €1,295.6 million at least €1.40 billion EBIT margin (before exceptional items) -5.8% to at least break even Free cash flow minus €35.8 million negative low- to mid-double-digit million
Slide 38: Medium-term targets for 2023/2024
Medium-term targets for 2023/2024 ▪ Technology-neutral approach to development of the product portfolio and expansion of the high-margin service business Our targets for 2023/2024: ▪ Implementation of regional growth initiatives ▪ Systematic implementation of the Transform for Growth efficiency prog
Slide 39: Annex
DEUTZ Annex
Slide 40: Overview of segments, Q1–Q4
Overview of segments, Q1–Q4 New orders YoY Revenue YoY € million 2020 2019 change € million 2020 2019 change (%) (%) DEUTZ Compact Engines 954.3 1,268.4 -24.8 DEUTZ Compact Engines 943.8 1,446.4 -34.7 DEUTZ Customized Solutions 324.5 341.7 -5.0 DEUTZ Customized Solutions 310.1 362.5 -14.5 Other 46.4
Slide 41: Overview of segments, Q4
Overview of segments, Q4 New orders Q4 2020 Q4 2019 YoY Revenue Q4 2020 Q4 2019 YoY € million change € million change (%) (%) DEUTZ Compact Engines 293.9 248.9 +18.1 DEUTZ Compact Engines 275.2 366.7 -25.0 DEUTZ Customized Solutions 83.2 74.5 +11.7 DEUTZ Customized Solutions 84.3 86.0 -2.0 Other 12.
Slide 42: Income statement
Income statement € million 2020 2019 Revenue 1,295.6 1,840.8 Cost of sales -1,105.9 -1,510.5 Research and development costs -97.7 -95.3 Selling and administrative expenses -146.5 -151.8 Other operating income 15.0 29.0 Other operating expenses -68.3 -24.3 Write-downs of financial assets -1.3 -1.7 Pr
Slide 43: Balance sheet: assets
Balance sheet: assets € million Dec. 31, 2020 Dec. 31, 2019 Property, plant and equipment 361.7 347.2 Intangible assets 197.2 216.2 Equity-accounted investments 50.3 51.1 Other financial assets 4.4 5.0 Non-current assets (before deferred tax assets) 613.6 619.5 Deferred tax assets 74.2 68.6 Non-curr
Slide 44: Balance sheet: equity and liabilities
Balance sheet: equity and liabilities € million Dec. 31, 2020 Dec. 31, 2019 Issued capital 309.0 309.0 Additional paid-in capital 28.8 28.8 Other reserves -3.9 0.1 Retained earnings and accumulated income 201.1 314.3 Equity attributable to shareholders of DEUTZ AG 535.0 652.2 Non-controlling interes
Slide 45: Cash flow statement (condensed)
Cash flow statement (condensed) € million 2020 2019 EBIT -106.6 88.1 Cash flow from operating activities 44.9 115.6 Capital expenditure on intangible assets, property, plant and equipment and investments -75.9 -145.6 Proceeds from the sale of non-current assets 0.8 4.2 Acquisition of subsidiaries -1
Slide 46: Thank you for your attention!
Thank you for your attention! 46
Slide 47: Questions & answers
Questions & answers 47
Slide 48: Financial calendar and contact details
Financial calendar and contact details Financial calendar 2021 DEUTZ online annual report for 2020 Including a KPI tool and interactive features: Annual General Meeting April 29 www.deutz.com/gb2020 (virtual) Quarterly statement for Q1 2021 May 6 Interim report for H1 2021 August 12 Quarterly statem