Schaeffler AG · XETR:SHA0
Schaeffler — Q3 2020 Earnings Presentation
43 slides from Schaeffler's earnings presentation, Nov 10, 2020
Slide 1: Results Q3 and 9M 2020 Schaeffler AG Conference Call
Results Q3 and 9M 2020 Schaeffler AG Conference Call Nov 10, 2020 Herzogenaurach
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 Q3 and 9M 2020 3 Financial Results Q3 and 9M 2020 4 Outlook Nov 10, 2020 Results Q3 and 9M 2020 Schaeffler AG 3
Slide 4: Overview: Q3 2020 with strong sequential recovery led by China
1 Overview Q3 2020 with strong sequential recovery led by China – Covid-19 pandemic situation remains challenging Key messages Sales growth1 Q3 Gross margin Q3 Group sales with sequential recovery in Q3 – Automotive divisions 1 leading the recovery with Automotive Technologies -1%1 and -2.6% 23.8% A
Slide 5: Schaeffler Group Q3 2020 – Highlights and lowlights
1 Overview Schaeffler Group Q3 2020 – Highlights and lowlights Substantial business improvement in Q3, sales recovery Sales development in Region Europe negative across all led by Greater China with 16.5%1 growth yoy, Americas divisions, Industrial impacted the most with -23.4%1 yoy with slight grow
Slide 6: Agenda
Agenda 1 Overview 2 Business Highlights Q3 and 9M 2020 3 Financial Results Q3 and 9M 2020 4 Outlook Nov 10, 2020 Results Q3 and 9M 2020 Schaeffler AG 6
Slide 7: Automotive Technologies – Strong sequential recovery, Q3 EBIT margin above prior year
2 Business Highlights Q3 and 9M 2020 Automotive Technologies – Strong sequential recovery, Q3 EBIT margin above prior year Sales in EUR mn -18.2%1 Sequential sales improvement in Q3 driven by market recovery; strong -1.1%1 outperformance of 500 bps in 9M driven by all regions 6,772 2,254 2,165 5,429
Slide 8: Automotive Technologies – Accelerating the Transformation for future Powertrain and Chassis Technologies
2 Business Highlights Q3 and 9M 2020 Automotive Technologies – Accelerating the Transformation for future Powertrain and Chassis Technologies Business Highlights Executing RACE E-Mobility Competence Center Executing RACE • Optimize portfolio and grow along eco-friendly drives and chassis application
Slide 9: Automotive Aftermarket – Q3 with sequential sales recovery, strong operational performance
2 Business Highlights Q3 and 9M 2020 Automotive Aftermarket – Q3 with sequential sales recovery, strong operational performance Sales in EUR mn -9.7%1 Sequential sales recovery across all regions; Growth in Independent Aftermarket 5.5%1 yoy -0.2%1 1,386 1,203 482 456 Robust profitability supported b
Slide 10: Logistics – AKO1 Europe production completed successfully
2 Business Highlights Q3 and 9M 2020 Logistics – AKO1 Europe production was completed successfully; cost of double warehouse structure during relocation Logistically optimized location Agile processes & advanced & integrated storage, kitting technology increases flexibility and distribution reduces
Slide 11: Industrial – Sales gradually improved, margin impacted by lower volume and higher provisions
2 Business Highlights Q3 and 9M 2020 Industrial – Sales gradually improved, margin impacted by lower volume and higher provisions Sales in EUR mn -11.3%1 Greater China with almost 25%1 growth yoy in Q3, driven by sector cluster Wind -8.0%1 and closely linked Power Transmission 2,681 2,338 877 Overhe
Slide 12: Industrial – Strengthening our customer relationship and growing our business
2 Business Highlights Q3 and 9M 2020 Industrial – Strengthening our customer relationship and growing our business with bearings and Industry 4.0 products Business Highlights Digital Distributor Days Existing and new growth in Offroad • For the first time, Distributor Days • Strong order book develo
Slide 13: Cost management – Flexing of costs continued
2 Business Highlights Q3 and 9M 2020 Cost management – Flexing of costs continued Schaeffler Headcount Key aspects as per month end Key aspects • Divisional improvement programs RACE, GRIP and FIT resulted in selected site divestments and a voluntary severance scheme with 1,900 92,478 HCO reduction
Slide 14: Capital allocation – Prioritization and differentiated steering
2 Business Highlights Q3 and 9M 2020 Capital allocation – Prioritization and differentiated steering resulting in Capex ratio2 of 5.4% in 9M Investment1 allocation | in EUR mn Key aspects • Capex in FY 2020 reprioritized and to be reduced by at least one third compared to previous year (Capex FY 201
Slide 15: Agenda
Agenda 1 Overview 2 Business Highlights Q3 and 9M 2020 3 Financial Results Q3 and 9M 2020 4 Outlook Nov 10, 2020 Results Q3 and 9M 2020 Schaeffler AG 15
Slide 16: Key figures Q3 and 9M 2020
3 Financial Results Q3 and 9M 2020 Key figures Q3 and 9M 2020 Q3 2020 9M 2020 in EUR mn Q3 2019 Q3 2020 vs. Q3 2019 9M 2019 9M 2020 vs. 9M 2019 -6.0% -17.2% Sales 1 3,613 3,396 10,839 8,971 -2.6%1 -15.4%1 Gross Profit 917 810 -107 mn 2,729 1,947 -782 mn 2 Gross Margin 25.4% 23.8% -1.6pp 25.2% 21.7%
Slide 17: Sales growth – Greater China with strong growth, Americas flat, Europe still negative
3 Financial Results Q3 and 9M 2020 1 Sales growth – Greater China with strong growth, Americas flat, Europe still negative Sales | in EUR mn Key aspects • Sales in Q3 sequentially improved in all regions; China (+16.5%2) and -6.0%1 Americas (+0.8%2) growing yoy, Europe still down double digit -2.6%2
Slide 18: Gross Profit – Stable in Automotive divisions, lower in Industrial
3 Financial Results Q3 and 9M 2020 2 Gross Profit – Stable in Automotive divisions, lower in Industrial Gross Profit Q3 2019 vs. Q3 2020 | in EUR mn Key aspects • Normal negative price effect in Automotive Technologies, Aftermarket with favorable effect as a result of initiatives within GRIP program
Slide 19: EBIT margin – Strong Q3 margin of 9.4% driven by Automotive divisions
3 Financial Results Q3 and 9M 2020 3 EBIT margin1 – Strong Q3 margin of 9.4%1 driven by Automotive divisions EBIT1 | in EUR mn Key aspects • Strong Q3 EBIT margin1 of 9.4% as a result of market recovery as well as +30 bps temporary (e.g. short-time work) and structural measures • Automotive division
Slide 20: Automotive Technologies – Outperformance in all regions except Europe
3 Financial Results Q3 and 9M 2020 Automotive Technologies – Outperformance in all regions except Europe, EBIT margin above prior year Sales by business division | yoy growth EBIT2 Q3 2019 vs. Q3 2020 | in EUR mn Q3 2019 Q3 2020 ∆1 E-Mobility 190 180 -3.9% Engine Systems 700 650 -4.8% Transmission S
Slide 21: Automotive Aftermarket – Positive development in Independent Aftermarket, strong margin
3 Financial Results Q3 and 9M 2020 Automotive Aftermarket – Positive development in Independent Aftermarket, strong margin Sales by region | yoy growth EBIT5 Q3 2019 vs. Q3 2020 | in EUR mn Q3 2019 Q3 2020 ∆1 Europe 351 334 -3.4% +3 +2 +4 Americas 86 80 +12.9% -116 +1 Greater China 22 21 -0.2% Asia/
Slide 22: Industrial – Polarized sales development continued
3 Financial Results Q3 and 9M 2020 Industrial – Polarized sales development continued, margin impacted by lower volume and higher provisions Sales by region | yoy growth EBIT2 Q3 2019 vs. Q3 2020 | in EUR mn Q3 2019 Q3 2020 ∆1 Europe 388 296 -23.4% Americas 159 127 -12.9% Greater China 193 231 +24.6
Slide 23: EBIT before special items – Reconciliation Q3 2020
3 Financial Results Q3 and 9M 2020 3 EBIT before special items – Reconciliation Q3 2020 Reconciliation Q3 2020 | in EUR mn Key aspects • New restructuring program announced in September leading to EUR 485 mn provisions in Q3, allocated divisionally on top of the programs RACE, GRIP and FIT 320 • EUR
Slide 24: Net income Q3 2020 EUR -172 mn – EPS at EUR -0.26
3 Financial Results Q3 and 9M 2020 4 Net income1 Q3 2020 EUR -172 mn – EPS2 Q3 2020 at EUR -0.26 (PY: EUR 0.31) Net income1 | in EUR mn Key aspects • Q3 Net income1 decreased by EUR -384 mn, mainly due to restructuring -384 mn provisions • EPS2 in Q3 decreased to EUR -0.26 (Q3 19: EUR 0.31) • In 9M
Slide 25: Free Cash Flow before M&A Q3 at EUR 333 mn
3 Financial Results Q3 and 9M 2020 5 Free Cash Flow before M&A1 Q3 at EUR 333 mn (PY: EUR 362 mn) Free Cash Flow before M&A1 | in EUR mn Key aspects • FCF1 in Q3 amounted to EUR 333 mn, mainly driven by Capex discipline -29 mn and proactive Working Capital management; provisions for new restructurin
Slide 26: Free Cash Flow details Q3 2020
3 Financial Results Q3 and 9M 2020 5 Free Cash Flow details Q3 2020 – Strong FCF supported by proactive inventory management FCF1 Q3 2019 vs. Q3 2020 | in EUR mn Key aspects • Negative EBITDA development yoy mainly due to EUR 485 mn provisions for new restructuring program • Proactive inventory mana
Slide 27: Working Capital ratio 20.6% – Capex ratio 5.3% in Q3
3 Financial Results Q3 and 9M 2020 6 Working Capital ratio 20.6% – Capex ratio 5.3% in Q3 Working capital1 | in EUR mn Capex2 | in EUR mn -168 mn -48 mn 2,579 2,734 2,749 2,530 2,452 2,584 2,581 373 221 229 222 164 136 181 Q1 19 Q2 19 Q3 19 Q4 19 Q1 20 Q2 20 Q3 20 Q1 19 Q2 19 Q3 19 Q4 19 Q1 20 Q2 20
Slide 28: Net debt of EUR 2,688 mn – Leverage ratio at 1.6x
3 Financial Results Q3 and 9M 2020 7 Net debt of EUR 2,688 mn – Leverage ratio1 at 1.6x Net financial debt and Leverage ratio1 | in EUR mn Key aspects Leverage ratio1 • Net financial debt decreased to EUR 2.7 bn, Leverage ratio1 1.6x • Successful bond transaction of EUR 1.5 bn issued on October 5, 2
Slide 29: Agenda
Agenda 1 Overview 2 Business Highlights Q3 and 9M 2020 3 Financial Results Q3 and 9M 2020 4 Outlook Nov 10, 2020 Results Q3 and 9M 2020 Schaeffler AG 29
Slide 30: New Guidance 2020 – FY 2020 guidance specified
4 Outlook New Guidance 2020 – FY 2020 guidance specified Group Guidance Divisional Guidance Actuals Guidance Automotive Automotive Industrial Technologies Aftermarket 9M 2020 FY 2020 Actuals Guidance Actuals Guidance Actuals Guidance 9M 2020 FY 2020 9M 2020 FY 2020 9M 2020 FY 2020 Sales growth1 -15.
Slide 31: Conclusion & Outlook
4 Outlook Conclusion & Outlook – Strong Q3 performance, Covid-19 uncertainty managed with preparedness and speed Sequential top line recovery in Auto divisions – Industrial with gradual 1 improvement but environment remains muted Strong earnings quality in both Automotive divisions – Industrial impa
Slide 32: Financial calendar 2020 / 2021
4 Outlook Financial calendar 2020 / 2021 – Virtual Capital Markets Day November 18 Roadshows Regular capital market communication Nov 10 9M 2020 Earnings Release Nov 18 Virtual Capital Markets Day – 1pm CET Nov 26 Virtual Roadshow J.P. Morgan Nov 30 Virtual Roadshow Berenberg Dec 3 Virtual Roadshow
Slide 33: IR Contact
IR Contact Investor Relations Phone: + 49 9132 82-4440 Email: ir@schaeffler.com Web: www.schaeffler.com/ir
Slide 34: Gross Profit 9M – Severe volume losses could not be compensated by cost flexing
Backup Gross Profit 9M – Severe volume losses could not be compensated by cost flexing Gross Profit 9M 2019 vs. 9M 2020 | in EUR mn Key aspects • Normal negative price effect in Automotive Technologies, Industrial still with slightly positive price momentum • Negative volume effects across all divis
Slide 35: Automotive Technologies 9M – Strong Outperformance in most regions
Backup Automotive Technologies 9M – Strong Outperformance in most regions, EBIT reached break-even level Sales by business division | yoy growth EBIT2 9M 2019 vs. 9M 2020 | in EUR mn 9M 2019 9M 2020 ∆1 E-Mobility 496 451 -8.0% Engine Systems 2,088 1,638 -20.6% Transmission Systems 3,021 2,438 -17.8%
Slide 36: Automotive Aftermarket 9M – Sales decline in all regions
Backup Automotive Aftermarket 9M – Sales decline in all regions, strong earnings quality Sales by region | yoy growth EBIT5 9M 2019 vs. 9M 2020 | in EUR mn 9M 2019 9M 2020 ∆1 Europe 983 874 -9.7% Americas 269 216 -9.1% Greater China 64 57 -8.0% +7 -1 Asia/Pacific 71 56 -17.8% +2 +22 -696 Total 1,386
Slide 37: Industrial 9M – Sales decline in all sector clusters except Wind
Backup Industrial 9M – Sales decline in all sector clusters except Wind, earnings quality robust Sales by region | yoy growth EBIT2 9M 2019 vs. 9M 2020 | in EUR mn 9M 2019 9M 2020 ∆1 Europe 1,248 976 -21.5% Americas 481 396 -15.5% Greater China 539 638 +20.2% Asia/Pacific 414 328 -17.5% Total 2,681
Slide 38: EBIT before special items – Reconciliation 9M 2020
Backup EBIT before special items – Reconciliation 9M 2020 Reconciliation 9M 2020 | in EUR mn Key aspects EUR 798 mn special items • New restructuring program announced in September leading to EUR 485 mn provisions in Q3, allocated divisionally on top of the programs RACE, GRIP and FIT 385 • Goodwill
Slide 39: Free Cash Flow details 9M 2020
Backup Free Cash Flow details 9M 2020 – Net Working Capital and Capex prioritization FCF1 9M 2019 vs. 9M 2020 | in EUR mn Key aspects • Negative EBITDA development yoy due to EUR 549 mn provisions for divisional programs RACE, GRIP and FIT and weaker operational result ∆ Net Working Capital EUR +255
Slide 40: Liquidity position of more than EUR 2.7 bn at the end of September
Backup Liquidity position of more than EUR 2.7 bn at the end of September – Successful bond transaction of EUR 1.5 bn issued on October 5, 2020 to refinance upcoming maturities Liquidity Maturity Profile4 • Cash balance Schaeffler Group as per end of September 2020 • Bond issuance with 5- and 8-year
Slide 41: Automotive Technologies outperformance by quarters
Backup Automotive Technologies (AT) outperformance by quarters YTD 20 Q1 20 Q2 20 Q3 20 Outperformance: +5.0pp Outper- Outper- Outper- IHS1 AT2 formance IHS1 AT2 formance IHS1 AT2 formance World -22.2% -12.0% +10.2pp -44.5% -42.0% +2.5pp -3.5% -1.1% +2.4pp New regional Europe -16.1% -13.5% +2.6pp -6
Slide 42: Key figures by Group and division
Backup Key figures by Group and division Adjusted comparative figures 2019 Group | in EUR mn Automotive Aftermarket | in EUR mn Q1 19 Q2 19 Q3 19 Q4 19 Q1 20 Q2 20 Q3 20 Q1 19 Q2 19 Q3 19 Q4 19 Q1 20 Q2 20 Q3 20 Sales 3,622 3,604 3,613 3,588 3,282 2,292 3,396 Sales 443 461 482 462 446 301 456 Sales
Slide 43: Overview Corporate and Financing Structure
Backup Overview Corporate and Financing Structure Corporate structure (simplified) | as of September 30, 2020 Financing structure | as of September 30, 2020 A IHO Verwaltungs GmbH INA-Holding Schaeffler Debt instrument Nominal Nominal Interest Maturity Rating GmbH & Co. KG (USD m) (EUR1 m) (Fitch/Mo