Rheinmetall Ag · XETR:RHM
Rheinmetall — Investor Day (November 2014)
31 slides from Rheinmetall's investor day presentation, Nov 26, 2014
Slide 1: Capital Markets Day 2014
R H E I N M E TA L L A G T H E T EC H N O LO GY G RO U P FO R S EC U R I T Y A N D M O B I L I T Y Capital Markets Day 2014 | Düsseldorf | November 26, 2014 Armin Papperger, CEO © RHEINMETALL AG 2014
Slide 2: Maintaining the two-pillar structure
Rheinmetall Group Maintaining the two-pillar structure Minimizing risks and counterbalancing economic cycles Rheinmetall AG Defence Automotive Defence Automotive Contributing <50% of Group sales Contributing >50% of Group sales and negative earnings in 2014 and 100% of Group earnings in 2014 T W O F
Slide 3: Rheinmetall 2015
Rheinmetall Group “Rheinmetall 2015” Automotive fully on track, in Defence time shift of full realization — Strong development of Automotive in China and Mexico Internationalization — Export license delays affect international Defence orders and thus, the development of certain hubs, e.g. in Russia
Slide 4: Automotive
Rheinmetall Automotive AUTOMOTIVE © RH E I N M ETAL L A G 2 0 1 4 | C A P I TAL M A RK E TS D A Y | A RM I N P A P PERGER | N OV E M BER 2 6 , 2 0 1 4 4
Slide 5: Profitable growth
Rheinmetall Automotive Profitable growth Successful strategy to develop the segment Operational earnings in EUR million Operational margin in % of sales 1 1 Significant growth in Chinese 2 business 3 2 Optimized location and 180 employment structure 158 4 146 151 139 5 3 High share of contracted bus
Slide 6: Long-term perspective
Rheinmetall Automotive Long-term perspective Tailwind by a continuously growing market Global LV production in million units 120 CAGR 85.5 +2.3% Rest of 110 the World 100 90 Asia* 80 70 China 60 50 Japan 40 30 NAFTA 20 Europe** 10 Germany 0 2000 2005 2010 2015 2020 2025 We are here: 2014 * Without C
Slide 7: Defence
Rheinmetall Defence DEFENCE © RH E I N M ETAL L A G 2 0 1 4 | C A P I TAL M A RK E TS D A Y | A RM I N P A P PERGER | N OV E M BER 2 6 , 2 0 1 4 7
Slide 8: Deterioration of earnings
Rheinmetall Defence Deterioration of earnings A set of internal and external factors impacts Defence business Operational earnings in EUR million 1 Potential warranties in a navy weapon Internal 1 contract 2 2 Cost overruns and sales decline in 238 3 Norwegian subsidiary 217 211 4 3 Product mix effe
Slide 9: External and internal impacts on earnings
Rheinmetall Defence External and internal impacts on earnings Situation analyzed, countermeasures initiated External impacts Internal impacts / Product mix (EUR 10 million) Delayed export Provisions for Withdrawal of order licenses, Sales decline potential warranties Cost overruns in export license
Slide 10: National perspective: The Magic Square of German defence industry
Rheinmetall Defence National perspective The “Magic Square” of German defence industry Key technologies National procurement Definition of key defence Clarification of national technologies in Germany 1 2 demand and procurement by German government Exogenous in order to set up programs Export licens
Slide 11: Definition of key defence technologies in Germany
Rheinmetall Defence The “Magic Square” of German defence industry (1) Definition of key defence technologies in Germany Definition of key defence — Fundamental for long-term German technologies in Germany security policy 1 2 — Key question: Which competencies Exogenous will the German government def
Slide 12: Definition of national demand for security products
Rheinmetall Defence The “Magic Square” of German defence industry (2) Definition of national demand for security products Clarification of national — After a period of “peace dividend” and in demand and procurement the light of rising global conflicts, we now see a change in mind of public opinion a
Slide 13: Definition of national demand for security products
Rheinmetall Defence Definition of national demand for security products First requests and drafts show rethinking of national procurement Fuchs Boxer − Budget request for further 131 Boxer vehicles recently approved Leopard Puma − Continuation of upgrade program for Fox tanks − Equipping forces by f
Slide 14: Export license policy
Rheinmetall Defence The “Magic Square” of German defence industry (3) Export license policy — Currently continuation of previous practice of case-by-case decisions,… 1 2 — …but high uncertainty and costly delays Exogenous in the process of issuing licenses — Thus, reliable and sustainable guidelines
Slide 15: National and European consolidation of the defence industry
Rheinmetall Defence The „Magic Square“ of German defence industry (4) National and European consolidation of the defence industry — Discussion opened by announcement of KMW/Nexter JV and intended divestments of Airbus Defence & Space 1 2 Exogenous — Other way for a successful consolidation: First st
Slide 16: National consolidation first step
Rheinmetall Defence National and European consolidation of the defence industry First step: Priority of a national consolidation TK National consolidation Marine Systems Atlas — only makes sense, if complying Elektronik with political and economic conditions (key technologies, procurement, export po
Slide 17: Consolidation of a fragmented European market
Rheinmetall Defence National and European consolidation of the defence industry Second step: Consolidation of a fragmented European market — European defence industry still broadly fragmented — Large public shareholding in Nammo* many European defence players Patria* Cobham Saab complicate a possibl
Slide 18: International perspective
Rheinmetall Defence International perspective Defence is a growing market due to globally increasing need for security Global defence spending in USD billion 1,800 1,606 Rest of 1,600 the World 1,400 1,200 MENA/Asia 1,000 800 600 North America 400 200 Europe* Germany 0 1990 1995 2000 2005 2010 2015
Slide 19: Future markets and hub development
Rheinmetall Defence Future markets and hub development Main factors for intensifying our internationalization Export restrictions implying obstacles for R&D spending in Germany Stagnating defence Unbalanced relation budgets in traditional between domestic sales markets share and value creation Unequ
Slide 20: Unbalanced relation between domestic sales share and value creation
Rheinmetall Defence Future markets and hub development Unbalanced relation between domestic sales share and value creation Development of international sales share in % Value creation 2013 (gross margin split by regions) in % Sales Germany Sales abroad Sales Rest of Europe 9% 34% 40% 32% 52% 88% 82%
Slide 21: Realizing growth potential in international hubs
Rheinmetall Defence Future markets and hub development Realizing growth potential by more value creation in international hubs Scandinavia Russia UK Canada Netherlands Switzerland USA Italy Algeria Israel India Saudi Arabia UAE Indonesia Brazil Australia South Africa Hub with substantial growth pote
Slide 22: Intensifying today's hub structure
Rheinmetall Defence Future markets and hub development Intensifying today‘s hub structure by covering global markets Defence spending of top 50 countries 2013 Next 20 Rest of the World Iraq, Sweden, Greece, Kuwait, Thailand, Ukraine, Switzerland, Chile, Belgium, Angola, Argentina, South Africa, Port
Slide 23: Mitigating compliance risks
Rheinmetall Defence Mitigating compliance risks Compliance is an essential element of Rheinmetall’s corporate culture — Due to current cases in India and Greece, we completely reshuffled our compliance system — Countermeasures initiated Supporting official investigations Additional external investig
Slide 24: Perspective 2015 and beyond
Rheinmetall Group PERSPECTIVE 2015 AND BEYOND © RH E I N M ETAL L A G 2 0 1 4 | C A P I TAL M A RK E TS D A Y | A RM I N P A P PERGER | N OV E M BER 2 6 , 2 0 1 4 24
Slide 25: Defence tomorrow
Rheinmetall Group Defence tomorrow Strategic orientation for Rheinmetall Defence − Improving operational performance to resolve earnings trough in the short term − Minimizing project risks and corresponding one-offs by strengthening project management capabilities − Reassessing investment strategy i
Slide 26: Earnings trough in Defence
Rheinmetall Group Earnings trough in Defence Original margin target not to be achieved in the short to medium term Operational earnings in EUR million Operational margin in % of sales 11.4 9.9 8.7 238 7.5 217 211 7-9% 174 153 146 2.8 105 100 -0.4 60 -10 2005 2006 2007 2008 2009 2010 2011 2012 2013 2
Slide 27: Automotive tomorrow
Rheinmetall Group Automotive tomorrow Strategic orientation for Rheinmetall Automotive − Growth with existing products in emerging markets, e.g. Mexico, China − Growth with new products in existing markets, e.g. variable valve train − Expanding Aftermarket business − Safeguarding restructuring succe
Slide 28: Sustainable improvement in Automotive
Rheinmetall Group Sustainable improvement in Automotive Optimistic to succeed the original margin target in time Operational earnings in EUR million Operational margin in % of sales 7.5 7.0 7.1 8% 6.5 5.3 180 151 158 146 139 113 120 -3.2 81 61 -49 2005 2006 2007 2008 2009 2010 2011 2012 2013* 2014e*
Slide 29: Appendix
Rheinmetall Group APPENDIX © RH E I N M ETAL L A G 2 0 1 4 | C A P I TAL M A RK E TS D A Y | A RM I N P A P PERGER | N OV E M BER 2 6 , 2 0 1 4 29
Slide 30: Definition of key defence technologies in Germany
Appendix Definition of key defence technologies in Germany First draft by German Ministry of Defence © RH E I N M ETAL L A G 2 0 1 4 | C A P I TAL M A RK E TS D A Y | A RM I N P A P PERGER | N OV E M BER 2 6 , 2 0 1 4 30
Slide 31: Disclaimer
Rheinmetall Group 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