Rheinmetall Ag · XETR:RHM
Rheinmetall — Q3 2018 Earnings Presentation
109 slides from Rheinmetall's earnings presentation, December 2018
Slide 1: Rheinmetall AG Corporate Presentation Q3 2018
Rheinmetall AG Corporate Presentation Q3 2018 December 2018
Slide 2: Rheinmetall: Meeting demand for mobility and security
Rheinmetall Group Rheinmetall Meeting demand for mobility and security Sales €5,896m Key Op. result €400m Strategy Organic growth Performance Order backlog €6,936m roadmap International expansion Indicators Operating FCF EPS €276m €5.24 2017 Leading by innovations Targeted acquisitions DPS €1.70 AUT
Slide 3: More than 100 production sites and offices on all continents
Rheinmetall Group More than 100 production sites and offices on all continents Germany UK Defence Russia USA Netherlands Norway Singapore Sites Canada Switzerland Sweden South Saudi Arabia Malaysia Mexico Austria Poland Africa UAE Australia Italy USA Mexico Japan China Germany India France Spain Aut
Slide 4: Markets have acknowledged operational development 13-to date
Rheinmetall Group Markets have acknowledged operational development 2013-to date Share price RHM Margin Sales Margin: 5.5 6.3 6.8 >7 +9.4pp 3.4 Sales: 4,500 4,688 5,183 5,602 5,896 ~40% -2.6 2013 2014 2015 2016 2017 2018c 2019c 2020c 2021p Share price: Restructuring Phase ONE Rheinmetall Phase I ONE
Slide 5: Top five technology cluster identified
Rheinmetall Technology Cluster Top five technology cluster identified Automation Digitalization Next Sensors E-Mobility Artificial Intelligence Advanced assistant New, digitalized vehicle New LIDAR* / Hybrid drive AI supported technologies systems for driving, architectures Radar sensors E-drive - t
Slide 6: Q3 2018 Group Commercial Highlights
Q3 2018 Group Commercial Highlights Stable performance in a challenging quarter Order backlog Sales Operating result EPS €9.3bn +29% €1.4bn +5% CER* €98m +1% €1.80 +117% Order backlog on new record level boosted by Australian contracts Sales climbed 5.0% at constant exchange rates* (reported 3.3%) t
Slide 7: Top line growth and accelerated EPS development
Top line growth and accelerated EPS development Sales Operating result in €m Earnings per share in €m Operating margin in % in € adjusted EPS 1.80 +5.0% +2.0% 97 98 reported EPS 117% 2 -24 -1 1,411 1.33 69 -1.0% 1.18 -1.7% 1,366 0.83 7.1% 6.9% +3.3% +1.0% Q3 Operational FX Q3 Q3 Operational FX Q3 Q3
Slide 8: Cash flow still negative but improving quarter by quarter
Cash flow still negative but improving quarter by quarter Cash flow development 2018 Operating free cash flow bridge in €m in €m 9 0 42 5 167 -116 -140 5 -287 -116 Q1 Q2 Q3 Q3 2017 EAT D/A Delta Delta WC Invest Q3 2018 Pensions and others © Rheinmetall AG / Corporate Presentation December 2018 8
Slide 9: Further improvement of equity ratio despite net debt increase
Further improvement of equity ratio despite net debt increase Net debt Equity ratio in €m in % of total assets IFRS 16 effect Restated for Restated for leasing leasing liabilities IFRS 15/16 liabilities and effect 32.6% 230 €158 m cost to obtain contract 72 31.6% unadjusted 30.6% 30.4% -242 -514 30.
Slide 10: Outlook on Q4 2018 confirmed
Outlook on Q4 2018 confirmed From today´s point of view in line with expectations Automotive Defence Ramp-ups in line with our expectations Order entry FY 2018 expected ≥ €5bn Market uncertainties not yet disappeared: Truck export approvals blocked WLTP, Diesel, conflicts on tariffs, China Profitabi
Slide 11: FY Guidance: Higher profitability in light of more realistic sales expectations
FY Guidance Higher profitability in light of more realistic sales expectations Sales Operating margin 2017 2018e 2017 2018e Growth y/y in % Reported growth y/y in % in % in % 5.2 ~5 6.8 clearly above 7.0 Group (previously: ~8) (previously: ~7.0) 7.7 2-3 8.7 slightly above 8.5 Automotive (Global LV:
Slide 12: Automotive Q3 2018
Rheinmetall Automotive AUTOMOTIVE Q3 2018 © Rheinmetall AG / Corporate Presentation December 2018 12
Slide 13: Q3 2018 Summary: Automotive
Q3 2018 Summary: Automotive Automotive resilient in a contracting market Quarterly sales and margin development Comments on quarterly performance Sales climbed to €708 million with a strong FX-adjusted growth 684 712 751 740 708 of 5.2% (rep 3.5%), largely driven by non-LV performance 9.2 Q3 support
Slide 14: Robust sales and margin improvement
Robust sales and margin improvement Sales Automotive Operating result Automotive in €m in €m growth in % / (FX adjusted) Margin Mechatronics Diesel business decline +3.5% +5.3% compensated, especially in (+5.2%) Commercial Diesel Systems and 684 708 57 60 8.5% some SOP (e.g. electrical pumps) Result
Slide 15: Europe affected by Diesel and WLTP uncertainties
Europe affected by Diesel and WLTP uncertainties Regional sales development Automotive in €m 3.5% 708 684 0.9% 5.5% 0.9% 10.1% Effect 9.7% 9.8% 3.9% Diesel sales declined, 3.4% 16.5% especially in Germany and Europe RoW 16.7% China WLTP induced production cuts in Europe Asia (excl. CN) South America
Slide 16: China: Strong sales performance helped by product starts
China Strong sales performance helped by product starts in a negative market Sales in €m +6.4% -1.7% 236 15 247 4 Sales increased by 6.4% to €247m (4.7% reported) 206 214 +4.7% vs. a negative LV-market growth of -4.2% 30 33 Result development held back by ramp-ups Q3 2017 operational FX Q3 2018 sche
Slide 17: Q4 2018 outlook: Automotive
Q4 2018 outlook: Automotive Market uncertainties responsible for growth adjustment Sales cumulated in €m New H2 supported by product starts 2,861 guidance Ramp-ups in Germany and China 2.3% (e.g. electrical pumps) 2017 2018 but: 2,149 2,199 multiple issues unsettle the market 1.8% Global tariffs WLT
Slide 18: 1. China: Greater market share and more content per car
1. China Greater market share and more content per car MARKETS AND CUSTOMERS 2018: PERFORMANCE AND GROWTH Market -1% 2019: 2018: INNOVATION AND PRODUCTS Market outlook looks ~6% growth for gloomier than expected Rheinmetall Automotive WHY do we grow? expected (in local currency) BUT: More content pe
Slide 19: 2. Diesel: Future of the passenger car diesel engine
2. Diesel Future of the passenger car diesel engine MARKETS AND CUSTOMERS Diesel market in Europe Diesel-Bild still under pressure PERFORMANCE AND GROWTH WLTP-related backlog Core diesel products are just 7% of Rheinmetall INNOVATION AND PRODUCTS will be reduced by the end of the year total sales Di
Slide 20: 3. Legislation: Growth drivers of Rheinmetall Automotive
3. Legislation The growth drivers of Rheinmetall Automotive Efficiency Emission Plus: (CO2 Reduction) (Reduction) Electrification © Rheinmetall AG / Corporate Presentation December 2018 20
Slide 21: 3.1 Legislation / Efficiency Innovation Roadmap
2021 3.1 Legislation / Efficiency Innovation Roadmap Rheinmetall Automotive Multi OSV ORV Efficiency CSVs OSV Gen2 CRVi (CO2 Reduction) INLINE-CSV cCSV, cCRV Gearbox cSUV Gen 5 HD VWP housing low cost CSV New casting Digital material VWP TH HD VOP Digital Piston EAM HiRed VWP SR Delta Pressure Valve
Slide 22: 3.2 Legislation / Emission Innovation Roadmap
2021 3.2 Legislation / Emission Innovation Roadmap Rheinmetall Automotive Emission RV EGR FlexVent (Reduction) Gen-II EGR EC Gen-2 EGR Twinflap EC Gen-2 RV HD EGR High Flow Twinflap RV Gen-1 HP-P-EGR HD EGR PCV Gen I tbd. HD BPV EC -Driven Hot BPV K&S body HD BPV BPV HD BPV EC-Driven SS body EC Gen-
Slide 23: 3.3 Electrification: E-Mobility@Rheinmetall Automotive
3.3 Electrification E-Mobility@Rheinmetall Automotive Various electric auxiliary units Thermal management Batterie pack of components & systems Electric traction unit © Rheinmetall AG / Corporate Presentation December 2018 23
Slide 24: 4. Electrification: Share of BEV sales increased again in 2018
4. Electrification Share of BEV sales increased again in 2018 € ~800 m Lifetime Order Value € ~250 m BEV, € ~550 m Hybrid © Rheinmetall AG / Corporate Presentation December 2018 24
Slide 25: Truck: Our current product portfolio
Truck Our current product portfolio Maincool Coolant Variable valve ant pumps valves control Aluminum pistons Auxiliary coolant pumps Steel pistons Electrical oil pumps Piston rings Cooperation with Cylinder Riken bore coating Bearings for seat Main-bearings adjustments and doors Connecting rod bear
Slide 26: TCO Total Cost of Ownership
TCO Total Cost of Ownership Global engine production: trucks and buses Diesel 4,000,000 Gasoline 3,500,000 3,447,228 Electric 3,000,000 2,500,000 For the foreseeable future, 2,000,000 approx. 92% the diesel engine will remain 1,500,000 Diesel the dominant drive technology for commercial vehicles! 1,
Slide 27: Focus China & India
Focus China & India Dynamic growth in Asian markets for our truck components € 135 m after 2020 CAGR ~ 50% € 20 m 2018 © Rheinmetall AG / Corporate Presentation December 2018 27
Slide 28: Innovation Roadmap Truck & Offroad
Innovation Roadmap Truck & Offroad Products stable in Products for Products for production (EU-VI) MY 2021 updates EU-VII regulation 2018 2019 2020 2021 2022 2023 Lead-free Bearings for Truck Brakes HD BPV Hot BPV HP-P-EGR TM HD BPV Steel TM HD BPV BPV SS body Gen I tbd. Gen-I EC-Driver K&S body Pis
Slide 29: Rheinmetall Automotive Innovation Roadmap is fully packed
Rheinmetall Automotive Innovation Roadmap is fully packed Efficiency Emission Electrification (CO2 Reduction) (Reduction) Non- Piston © Rheinmetall AG / Corporate Presentation December 2018 29
Slide 30: Defence Q3 2018
DEFENCE Q3 2018 © Rheinmetall AG / Corporate Presentation December 2018 30
Slide 31: Q3 2018 Summary: Defence
Q3 2018 Summary: Defence Slower start to H2 because of additional burdens Quarterly sales and margin development Comments on quarterly performance Record order intake of €3bn, driven by AUS vehicle orders 1,011 682 754 703 Sales grew to €703m with an operational improvement of 4.9% 11.3 6.7 509 (3.1
Slide 32: Strong performance of Vehicle Systems and Electronic Solutions
Strong performance of Vehicle Systems and Electronic Solutions Sales Defence Operating result Defence Weapon and Ammunition in €m in €m Negative operational leverage growth in % / (operational) Margin Explosion in South Africa +3.1% Missing export permits (+4.8%) 46 -4.3% 682 703 44 6.3% Delayed cus
Slide 33: Record order intake in Vehicle Systems driven by Australian orders
Record order intake in Vehicle Systems driven by Australian orders Order intake by division Order backlog profile in €m in €bn change in % Weapon and Ammunition +30.5% Electronic Solutions 3,044 Vehicle Systems 185 8.8 241 ~1.1 ~2.5 ~5.2 +250% Consolidation 6.7 2,808 870 284 197 434 -45 -190 30.09.1
Slide 34: Vehicle Systems propelled backlog to €8.8bn
Vehicle Systems propelled backlog to €8.8bn Order backlog by Division Order backlog by Region in % in % RoW Weapon & Germany Ammunition 11% Vehicle 22% Systems 22% MENA 22% €8.8bn €8.8bn 13% Europe 58% (excl. GER) 20% 32% Electronic Solutions Australia All 9/2018 excl. consolidation © Rheinmetall AG
Slide 35: Q4 2018 outlook: Defence
Q4 2018 outlook: Defence FY guidance too ambitious on the back of recent risk development Sales cumulated in €m New guidance Progressive closure of sales gap in the course of the year 3,036 2017 but: 2018 -3% pending export approvals 2,025 1,966 FY sales impact of South Africa -6% 1,343 1,263 -17% a
Slide 36: Q4 2018 outlook: Defence, high confidence for catch-up in Q4
Q4 2018 outlook: Defence …but high confidence for catch-up in Q4 Sales Defence Operating margin Defence Weapon and Ammunition in €m in % on sales ~€70-80m higher sales level than PY Q4 2017 Q4 2018 Better operating leverage due to a higher share of pure ammunition business WA 17.9% ~25% Beneficial p
Slide 37: Positive market environment
Positive market environment International defence markets at the beginning of a “super cycle” 1990 2035 “Peace dividend” Upscaling of forces and modernization Downscaling of forces and INFLECTION Return to treaty and armament POINT territorial defence Out of 2014 area NATO 2% target missions Annexat
Slide 38: German defence budget
German defence budget Turnaround in German budgets become seizable German defence expenditure Turnaround based on three pillars: in € bn More personnel (4th division) Expected commitment authorizations More equipment (100% equipment level) More finance (Financial plan with +10% already in 2019) Addi
Slide 39: German Defence: Future requirements beyond 2030
German Defence: Future requirements beyond 2030 NATO commitment is the key trigger for demand Bundeswehr Lead nation roles and planning milestones ‘19 ‘23 ‘27 ‘31 ’32+ 2016 White paper “where to” Filling of hollow structures VJTF´23 VJTF´19 1x Division 3x Division 3x Division (1 Brigade) Level of co
Slide 40: Strong German project pipeline lining up
German Defence Strong German project pipeline lining up – upcoming tender until 2021 Major mid-term potentials NNBS ~€4bn TLVS <€1bn STH ~€1bn D-LBO ~€2bn INCLUDED IN RHM PLAN MaKaBo PiPz3 Logistic vehicle div. Puma upgrades 2018 2019 2020 2021 © Rheinmetall AG / Corporate Presentation December 2018
Slide 41: German Defence: Growing importance of home markets
German Defence Growing importance of home markets German sales share development Germany Europe Australia RoW Germany Germany Germany 1990 2015 2021 Commitment to VJTF is the main short-term driver for German demand © Rheinmetall AG / Corporate Presentation December 2018 41
Slide 42: European Defence: key beneficiary of vehicle programmes
European Defence Rheinmetall is a key beneficiary of large European vehicle programmes Current or expected tenders tactical vehicles Drivers for European vehicle programmes − Return to territorial and treaty defence UK MIV Challenger upgrade Lt − Standardization of NATO equipment − Modernization and
Slide 43: Defence International: Foundation of two new hubs in 2018
Defence International Foundation of two new hubs in 2018 SKANDINAVIA EASTER EUROPE CANADA GREAT BRITAIN POLAND NETHERLANDS New TURKEY New Acquire a share in the single largest defence market NORTH AFRICA UAE Participate in growth USA ASIA Middle East RHEINMETALL INTERNATIONAL SOUTH AFRICA AUSTRALIA
Slide 44: Global market growth
Global market growth Strong growth supported by booked large projects Defence sales plan 2018-2021 *Cagr: ~10% Top 10 booked projects Land 400 Boxer Land 121 5b Puma VJTF Trucks Bundeswehr Gladius Fox Kits Air Defence Systems 3x Ammunition 2017 2018e 2019p 2020p 2021p contracts © Rheinmetall AG / Co
Slide 45: Mission Australia
Mission Australia Establishing a new “home market” down under Australia timing and order size of Land programmes Trucks 1st & 2nd order 2016-2024 €2.0bn & €0.4bn Boxer CRV 2019-2026 €2.1bn Ammunition 2018/19 €65m* Lynx tender 2024-2031 €4-5bn Integrated tbd Training System Technical publication tbd
Slide 46: Land 400 Phase 3: Rheinmetall joins competition with LYNX
Land 400 Phase 3 Rheinmetall joins the competition with the custom designed LYNX Background Land 400 Phase 3 tracked infantry fighting vehicle (IFV) Platform LYNX KF41 with LANCE turret, designed to meet programme requirements Order size around 467 vehicles in multiple variants Budget €3-6bn Competi
Slide 47: Strategy update: Consequent shift towards systems and services
Strategy update Consequent shift towards systems and services - Illustrative - 25% 38% Components 52% Driven by large projects in Electronic Systems 75% Driven by Vehicle Systems 62% Air defence Extension of portfolio to Gladius Systems logistic vehicles TLVS 48% & Services Increase of service DLBO
Slide 48: Automotive
Rheinmetall Automotive AUTOMOTIVE © Rheinmetall AG / Corporate Presentation December 2018 48
Slide 49: Automotive with leading technology and market positions
Rheinmetall Automotive Automotive with leading technology and market positions Key Figures Structure Sales by region Sales by division Sales: €2.9bn RoW Hardparts Asia 4% Aftermarket Op. result: €247m 15% 12%-3% Pistons Large-bore Pistons 32% Hardparts 45% Europe Op. margin: 8.7% NAFTA 16% w/o Beari
Slide 50: Drivers for growth
Rheinmetall Automotive Drivers for growth Rising global fleet and regulatory restrictions are supporting our growth Light vehicle production grows Emission thresholds decrease Stricter emission testing million vehicles per year WLTP CO2 NOx Mainly EU! 151 in g/km in mg/km +2% 124 -24% -56% 112 102 7
Slide 51: E³ - Our portfolio addresses three basic drivers
Rheinmetall Automotive E³- Our portfolio addresses three basic drivers Mechatronics Hardparts Aftermarket Coolant pumps Emission Bearings Pistons Leverage Exhaust gas recirculation platform Coolant pumps Increase regional Efficiency presence Lightweight products Variable Valve train Coolant pumps Ap
Slide 52: FY 2017 Highlights: Automotive
Rheinmetall Automotive FY 2017 Highlights: Automotive Successful launch of innovative products Electronic vacuum pump Vapor pump Market introduction of new ICE products Electric throttle and control valve in synthetic materials Variable valve train Catering to the demand for lightweight parts Struct
Slide 53: Strategic goal to reduce ICE exposure
Rheinmetall Automotive Strategic goal to reduce ICE exposure Actual sales split Strategic sales split Combustion Engines Combustion Engines 67% LV 50% 13% Truck 40% LV 10% Truck E-Mobility ICE related: Electric Drive pistons Hybrid Drive 2017 engine blocks 2040 e.g.: EGRs E-engine housing non-ICE re
Slide 54: Overview Rheinmetall Automotive
Rheinmetall Automotive Overview Rheinmetall Automotive Legislation is driving the business Gain bigger share in NEV market 1 International market offer great Growth strategy outperforming 2 growth potentials Chinese market development E-Mob and Diesel impacts Build up strong local engineering / Pres
Slide 55: Rising global light vehicle production
Rheinmetall Automotive Rising global light vehicle production Light vehicle production 2017-2021 CAGR in % / in million units Europa** Germany NAFTA Asia* +1.1% +0.5% +0.8% +4.0% Japan +2.1% China Global -1.5% 104 NAFTA 95 17 +3.1% Europe 17 17 Germany 16 6 6 17 Asia 14 Japan 28 31 * without China a
Slide 56: Governments will continue to demand reduction of CO2 emissions
Rheinmetall Automotive Governments will continue to demand reduction of CO2 emissions CO2 emission in g/km India 113 122 117 Europe 95 97 2020 *Note that Japan has already exceeded its 2020 statutory target, as of 2013 Source: ICCT © Rheinmetall AG / Corporate Presentation December 2018 56
Slide 57: Efficiency: CO2 reduction with Automotive products
Rheinmetall Automotive Efficiency CO2 - reduction with Automotive products – gasoline engine vehicle 130 g 95 g CO2/km CO2/km 2015 2020 -2 g CO2/km -2 g CO2/km Reference model -7 g CO2/km Lightweight design parts Electr. 1.4L 4-cylinder -3 g CO2/km Variable valve train EGR system TC DI gasoline engi
Slide 58: LV Diesel exposure limited; powertrain neutrality is the target
Rheinmetall Automotive LV Diesel exposure limited; powertrain neutrality is the strategic target Combined global engine production forecast* Automotive sales distribution by engine type** 100 30 LV Non Diesel units 80 25 Core Diesel 20 60 LV Diesel share in % Others 15 7% 40 18% 10 Fuel 20 LV Diesel
Slide 59: Broad product range for alternative drive systems
Rheinmetall Automotive Broad product range for alternative drive systems Enlarging the traditional product portfolio for combustion engines … + … by products for hybrid and electric engines Solenoid valves Actuators Structural components Electric throttle bodies Engine bearings Battery boxes (as fro
Slide 60: E-mobility competence underlined by contracts and initiatives
Rheinmetall Automotive E-mobility competence underlined by contracts and by initiatives for new solutions Contract volume for electric vehicles (EV)* Product Volume Contract duration (Ø) E-Taxi London Battery EV ~€300m 6 – 8 years Pump technology for pure electric taxis (Plugin) Hybrid EV ~€200m 4 –
Slide 61: Electrification and downsizing require more sophisticated products
Rheinmetall Automotive Electrification and downsizing require more sophisticated products Price factor (estimated) Coolant pump Exhaust gas recirculation Valve, cooler, bypass and Mechanical >6x Electrical Valve >3x bypass actuator Oil pump Piston Mechanical >3x Variable Aluminum >3x Steel © Rheinme
Slide 62: Automotive in China
Rheinmetall Automotive Automotive in China 50/50 joint ventures Wholly Foreign-Owned Enterprises JV subsidiary with HASCO (SAIC group) (100% Rheinmetall Automotive) Castings (KSHA) Pistons (KSSP) Castings (KPSNC) Pumps (PHP) Aftermarket Pierburg Large-bore pistons Pumps (PMP Ch.) 2014 1997 2001 2012
Slide 63: More than 40 locations with high focus on local needs
Rheinmetall Automotive Markets with different growth focus: More than 40 locations with high focus on local needs Germany USA Tamm Auburn Hills Berlin Greensburg Dormagen Greenville (Fountain Inn) Hartha Marinette Langenhagen Neckarsulm (Headquarter) Mexico Neuss Celaya Neuenstadt Papenburg Brazil C
Slide 64: Summary Automotive
Rheinmetall Automotive Summary Automotive Markets and Customers: Markets in better shape than anticipated, global LV production will grow by >2% Our global production and technology footprint will follow local needs Rheinmetall Automotive intends to outperform markets in future, too Performance and
Slide 65: Defence
DEFENCE © Rheinmetall AG / Corporate Presentation December 2018 65
Slide 66: Defence is a leading supplier with increasing international presence
Rheinmetall Defence Defence is a leading supplier with an increasing international presence Key Figures Structure Sales by region Sales by division Sales: €3.0bn Weapon and Ammunition Vehicle Systems RoW Weapon and Protection Germany Op. result: €174m 26% -8% Weapon and Ammunition Systems 29% 32% Am
Slide 67: Strategic goals of Rheinmetall Defence
Rheinmetall Defence Strategic goals of Rheinmetall Defence Strategic goals Entering new markets Enlarging internationalization Strategic partnerships to gain Form partnerships with local access to new markets suppliers to provide local content Target markets close to traditional markets, e.g. public
Slide 68: Defence at the beginning of long-lasting market growth
Rheinmetall Defence Defence at the beginning of long-lasting market growth Rising awareness of military threats …. Changes in macro Investment Islamist Crimea Geopolitical environment… backlog Terror Annexation tensions Growing project portfolios and rising budgets Germany announced Franco-German NA
Slide 69: Expected defence budgets development 2017-2021
Rheinmetall Defence Defence at the beginning of long-lasting market growth …stimulates readiness to invest more in security Expected Defence budgets development 2017 – 2021 in % p.a. Europe Germany North America +3.5% +3.8% +1.0% MENA Asia +3.4% +4.9% Latin America Global Australia +3.8% +2.1% Globa
Slide 70: Germany: Drivers behind budget increase
Rheinmetall Defence Germany: Drivers behind budget increase “Turnarounds” in Germany Framework nation concept triggers standardization of Personnel: equipment Mid-term return to 220,000 soldiers Material: 100% equipment level and additional division Finance: Increase of defence budget 24% from 2016
Slide 71: German defence policy: additional structural demand
Rheinmetall Defence German defence policy: Additional structural demand of German army under discussion Vehicles – mid-to-long term potential Fox (400 vehicles) Boxer (300-400 vehicles) Trucks (> 10.000 vehicles) Puma (~250 vehicles) Equipment and ammunition – multi billion programs NNBS (Short rang
Slide 72: Trend reversal en route with few NATO members complying
Rheinmetall Defence Trend reversal en route with few NATO members complying with targets German defence expenditure* NATO expenditure as % share of GDP vs in €m 74 equipment share in defence expenditure in % CAGR +3.5% 55 +5.3% 48 35 Luxembourg Romania 42.9 42.9 43.9 43.9 Bulgaria * Lithuania 30 Uni
Slide 73: Vehicle portfolio highly competitive thanks to state-of-the-art technology
Rheinmetall Defence Vehicle portfolio highly competitive thanks to state-of-the-art technology Successful participation in domestic and international vehicle tenders Land 121 - AUS Puma - D Boxer – NL/D Trucks - D Large potential from multiple tenders (top projects only) Challenger upgrade Land 400
Slide 74: 2017 marked by important strategic partnerships
Rheinmetall Defence 2017 marked by important strategic partnerships Joint bid for MoTaKo /MoTIV Focus on cooperation regarding Complete solution consisting of the CH-53K project the successor system for the helicopters as well as further services in Scope German tactical air defence maintenance, rep
Slide 75: Army 4.0: Digitization of Land-based operations (D-LBO)
Rheinmetall Defence Army 4.0: Digitization of Land-based operations (D-LBO) will propel the German Army into the digital future JV-share and core capabilities Rheinmetall (74.9%): Rohde & Schwarz (25.1%): Command systems Communication system Cross-functional operator architecture, IP based solution
Slide 76: Army 4.0: D-LBO: What supports our ambition?
Rheinmetall Defence Army 4.0: D-LBO: What supports our ambition? Exclusive Rohde &Schwarz is the key partner partnership for all communication equipment Top competency: Long-term partnership for all kind of Vehicle upgrades system upgrades Integrated Our infantry fighting vehicles come battle manage
Slide 77: Lockheed/Rheinmetall: partnership for the full package
Rheinmetall Defence Lockheed /Rheinmetall: Lockheed Martin partners with Rheinmetall to offer the “full package” Strategic teaming agreement Rheinmetall teams up with Lockheed Sikorsky to introduce the CH-53K as the heavy lift helicopter for the Bundeswehr Tender scope and volume Rheinmetall contrib
Slide 78: Raytheon/Rheinmetall: System house approach for air defence
Rheinmetall Defence Raytheon/Rheinmetall*: System house approach for ground based air defence Rheinmetall is a system provider for NNBS** and Raytheon‘s national partner for the modernization of Patriot is the only provider of supplier independent effector integration accompanies the lifetime servic
Slide 79: Defence industry in Europe
Rheinmetall Defence Defence industry in Europe Governmental shareholding restricts room for cross-border consolidation 49.9% Kongsberg Big common armament programs could be 50% Nammo Patria catalysts for further consolidation Saab Cobham BAE Systems Chemring Rheinmetall CH PL TUR RO Rheinmetall’s ap
Slide 80: Summary Defence: Growing with improved performance
Rheinmetall Defence Summary Defence: Growing with improved performance Growth Long-term growth trend fully intact Defence business growth returns to double digit %-rate Performance Profitability improved on product mix and higher leverage Lagging business in Electronic Solutions is stabilizing Outlo
Slide 81: Group Appendix
GROUP APPENDIX © Rheinmetall AG / Corporate Presentation December 2018 81
Slide 82: Changing into an integrated technology group
Changing into an integrated technology group Technology borders between Automotive and Defence will begin to fade Sales in % of total sales Automotive: 53% Automotive: ~47% Automotive Combustion engines Combustion engines Combustion engines Pumps Pumps Hybrid engines EGR EGR E-engines Pistons Piston
Slide 83: Robust and flexible business model of Automotive
Robust and flexible business model of Automotive Well prepared to maintain profitability in a changing environment Markets Challenges Strengths Light vehicles Macro picture/Business cycles Balanced product portfolio Private customers, global light Global LV production Broad spectrum of pumps and val
Slide 84: Defence: Innovative products unfold their business potential
Defence: Innovative products unfold their business potential Staying on the path of growth and rising profitability Markets Challenges Strengths Germany Managing “super cycle” Product management Expanding size of German army Turning high order intake into Roll-out phases of large-scale with better e
Slide 85: Research and Development
Research and Development …medium-term increasing budgets due to external funding R & D Group Research and development in % of total R & D volume rising, 27% backed by German development budgets 23% Defence externally funded 17% Stable R & D / sales ratio Defence-self-funded 27% for Automotive and De
Slide 86: Use of operating Free Cash Flow
Use of operating Free Cash Flow Creating potential for growth and fair participation of shareholders M&A Up to €1bn potential “fire power” Dividend Debt reduction Free operating Payout ratio of Further funding of ~30-35% of Cash Flow pensions; operational EPS (CTA 2015-18: €85m) Present status of tr
Slide 87: Management structure
Appendix: Rheinmetall Group Management structure Board of Directors (Group) Peter S. Krause Horst Binnig Armin Papperger Helmut P. Merch Human Resources Board Member CEO CFO Management Board Management Board (Automotive) (Defence) Armin Papperger CEO Horst Binnig Olaf Hedden Peter S. Krause Dr. Alex
Slide 88: Board remuneration based on three building blocks
Appendix: Rheinmetall Group Board remuneration based on three building blocks Annual target salary (100%) Fixum (60%) Performance-related variable remuneration (40%) Twelve equal portions of monthly Short term incentive Long-term incentive payments Fringe benefits: • KPI: EBT, ROCE (each 50%) • KPI:
Slide 89: ESG with high importance for Rheinmetall
Appendix: Rheinmetall Group ESG with high importance for Rheinmetall Environment Social Governance • Reduction of the ecological footprint • Clear statement against cluster munition • Transparency towards customer, • Decrease of energy needed • Promoting education and training investors and other st
Slide 90: Financial strength materially improved
Appendix: Rheinmetall Group Financial strength materially improved Drivers Equity and Equity ratio % EUR m 2.000 40 1.500 30 30% 31% 31% Confidence increased by delivery on our targets 1.000 27% 29% 20 23% Capitalizing on our restructuring efforts 500 10 0 0 Equity ratio further improved 2014 2015 2
Slide 91: Continuing ROCE improvement
Appendix: Rheinmetall Group Continuing ROCE improvement ROCE in % Pre-tax WACC 20% (2017): 19.0% 18.8% 18.7% 15% 16.7% 13.4% 12.3% 10.6% 10.5% Group 11.8% 10% 10.7% 9.8% 4.7% 5% 3.9% 6.1% 0.3% 0% -4.6% -5% 2013 2014 2015 2016 2017 Group Defence Automotive © Rheinmetall AG / Corporate Presentation De
Slide 92: Rheinmetall is a consistent dividend payer
Appendix: Rheinmetall Group Rheinmetall is a consistent dividend payer Dividend and payout ratio Dividend In % of in € EPS 1.80 1.80 1.8 64 1.70 70 1.6 1.50 1.45 60 Targeted payout ratio is 53 1.4 30-35% of net income 50 1.2 40 1.10 1.0 35 40 32 31 32 0.8 28 30 0.6 0.40 20 0.4 0.30 0.2 10 0.0 0 2010
Slide 93: Cash expected to improve in Q4
Appendix: Rheinmetall Group Cash expected to improve in Q4 Debt composition Maturity profile in €m in €m ∑ 863 174 Other & Leasing 2018 2019 2020 2021 2022 2023 2024ff. 139 Bank loans 28 300 Promissory notes 53 98 122 *€250 m EIB loan 250 EIB loan* (0.962% coupon) maturing Aug 2023 250 Q3 2018 Net f
Slide 94: Estimates: Selected key data
Rheinmetall Group Estimates Selected key data Rheinmetall Group In % of Automotive Defence sales 2017 2018 2017 2017 Holding cost €23m ~€30m Capex €154m ~5.5 - 6.0% €89m ~3.5 - 4.5% Tax rate 27% <30% D&A €140m ~5.5% €96m ~3 - 3.5% Interest result €39m Previous year´s level R&D €151m ~5 - 5.5% €73m ~
Slide 95: Group 2013 – 2017: Key figures
Appendix: Rheinmetall Group Group 2013 – 2017: Key figures In €m 2013 2014 2015 2016 2017 Balance sheet Total assets 4,866 5,271 5,730 6,150 6.186 Shareholder‘s equity 1,339 1,197 1,562 1,781 1,955 Equity ratio (in %) 27.5 22.7 27.3 29.0 31.6 Pension liabilities 891 1,121 1,128 1,186 1,080 Net finan
Slide 96: Segments 2012 – 2017: Key figures
Appendix: Rheinmetall Group Segments 2012 – 2017: Key figures AUTOMOTIVE DEFENCE 2013 2014 2015 2016 2017 in EUR million 2013 2014 2015 2016 2017 2,270 2,466 2,621 2,670 2,922 Order intake 3,339 2,812 2,693 3,050 2,963 392 416 445 459 520 Order backlog (Dec. 31) 6,050 6,516 6,422 6,656 6,416 2,262 2
Slide 97: Quarterly development Group
Appendix: Rheinmetall Group Quarterly development Group Sales Operational results in €m in €m 1,722 169 1,493 1,411 1,366 1,260 1,011 114 107 754 97 98 682 703 509 44 46 47 60 684 712 751 740 708 63 65 68 57 44 -1 -1 0 -6 -8 -13 -5 -6 -5 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q3 2017 Q4 2017 Q1 201
Slide 98: Free Cash Flow summary Group
Appendix: Rheinmetall Group Free Cash Flow summary Group Q3 Q4 Q1 Q2 Q3 Δ Q2 in €m 2017 2017 2018 2018 2018 '17/'18 Group Net Income 43 130 27 65 85 42 Amortization / depreciation 59 70 64 91 68 9 Change in pension accruals 1 -8 -42 1 1 - Cash Flow 103 192 49 157 154 51 Changes in working capital -8
Slide 99: Quarterly development Automotive
Appendix: Rheinmetall Group Quarterly development Automotive Sales by division Operational result by division in €m in €m 751 740 712 708 65 68 684 63 57 60 429 417 382 407 387 44 46 46 38 40 232 236 254 250 251 13 18 17 15 14 95 87 92 97 92 9 8 8 9 9 -25 -18 -24 -24 -22 -5 -5 -5 -4 -2 Q3 2017 Q4 20
Slide 100: Free Cash Flow summary Automotive
Appendix: Rheinmetall Group Free Cash Flow summary Automotive Q3 Q4 Q1 Q2 Q3 Δ Q2 in €m 2017 2017 2018 2018 2018 '17/'18 Net income 25 44 45 52 42 17 Amortization / depreciation 37 39 36 38 39 2 Change in pension accruals - - -20 -1 - - Cash Flow 62 83 61 89 81 19 Changes in working capital 21 72 -6
Slide 101: Quarterly development Defence
Appendix: Rheinmetall Group Quarterly development Defence Sales by division Operational result by division in €m in €m 114 1,011 44 46 77 44 431 754 682 703 10 23 249 28 19 8 248 196 509 247 5 139 197 170 165 6 30 126 25 23 13 11 370 423 375 395 297 -1 -4 -7 -7 -19 -101 -90 -53 -67 -58 -1 Q3 2017 Q4
Slide 102: Free Cash flow summary Defence
Appendix: Rheinmetall Group Free Cash flow summary Defence Q3 Q4 Q1 Q2 Q3 Δ Q2 in €m 2017 2017 2018 2018 2018 '17/'18 Net income 32 76 -21 23 27 -5 Amortization / depreciation 21 29 26 52 27 6 Change in pension accruals 2 -2 -2 2 2 - Cash Flow 55 103 3 77 56 1 Changes in working capital -16 266 -200
Slide 103: Income Statement Group
Appendix: Rheinmetall Group In €m In €m Income Statement Group Q3 9m Q3 9m 2017 2018 Δ 2017 2018 Δ 2017 2018 Δ 2017 2018 Δ Sales 1,366 1,411 45 4,174 4,164 -10 41 70 29 142 230 88 Total operating performance 1,407 1,481 74 4,316 4,394 78 Earnings before interets and taxes (EBIT) 75 127 52 206 273 19
Slide 104: Cash Flow Statement Group
Appendix: Rheinmetall Group In €m Cash Flow Statement Group 9m 2017 9m 2018 Δ 9m 2017 9m 2018 Δ Net income 122 177 55 Dividends paid out by Rheinmetall AG -62 -73 -11 Amortization, depreciation and impairments 171 223 52 Other profit distributions -10 -7 3 -30 Allocation of CTA assets to secure pens
Slide 105: Balance Sheet Group
Appendix: Rheinmetall Group In €m Balance Sheet Group In €m 31.12.2017 01.01.2018 30.09.2018 Δ 31.12.2017 01.01.2018 30.09.2018 Δ Non-current assets 2,712 2,939 2,972 33 Equity 1,955 1,950 2,089 139 Goodwill 550 550 550 0 Share capital 112 112 112 0 Other intangible assets 229 229 192 -37 Additional
Slide 106: Glossary
Appendix: Rheinmetall Group Glossary bn billions m million bp basis points NNBS Short range air defence CAGR compounded average growth rate NWC Net working capital CER Constant Exchange Rates OEM Original Equipment Manufacturer CTA Contractual trust agreement Operating FCF Operating free cash flow D
Slide 107: Next events and IR contacts
Next events and IR contacts Events 2018/19 IR Contacts Berenberg Pennyhill Conference London 4 December Franz-Bernd Reich Head of IR GIS Commerzbank Conference New York 15-16 January Tel: +49-211 473-4777 GCC Kepler Cheuvreux Conference Frankfurt 21-22 January Email: franz-bernd.reich@rheinmetall.co
Slide 108: Disclaimer
Disclaimer This presentation contains “forward-looking statements” within the meaning of the US Private Securities Litigation Reform Act of 1995 with respect to Rheinmetall’s financial condition, results of operations and businesses and certain of Rheinmetall’s plans and objectives. These forward-lo
Slide 109: © Rheinmetall AG / Corporate Presentation December 2018
© Rheinmetall AG / Corporate Presentation December 2018 109