Rheinmetall Ag · XETR:RHM

Rheinmetall — Investor Presentation (August 2020)

66 slides from Rheinmetall's investor presentation, Aug 12, 2020

  1. Slide 1: Rheinmetall Group Corporate Presentation

    Rheinmetall Group Corporate Presentation August 2020

  2. Slide 2: Mobility and security form the DNA of the business model

    Rheinmetall Group Mobility and security form the DNA of the business model RHEINMETALL GROUP INTEGRATED TECHNOLOGY GROUP FOR SECURITY AND MOBILITY Automotive Our heart beats for your engine Defence Force protection is our mission  Tier 1 supplier  System house for land based operations Business Mo

  3. Slide 3: Highlights

    Rheinmetall Group Highlights Group performance indicator Strategy roadmap Grow sales ~8% op. Organic International around 8% margin RHEINMETALL growth expansion Targeted 2-4% Cash on sales 30-35% payout ratio GROUP Leading by innovations Targeted acquisitions AUTOMOTIVE Our heart beats for your engi

  4. Slide 4: Financial overview - Growth in all relevant KPI

    Rheinmetall Group Financial overview - Growth in all relevant KPI Sales, operating result and operating margin Operating FCF and operating FCF to Sales In €m In €m / in % 4,7% 5,0% 6.500 6.255 12 400 5 6.148 314 5.896 10 300 276 4 2-4% 6.000 5.602 8 3 OFCF 200 161 5.500 5.183 8,0% 8,1% TARGET 6 2,9%

  5. Slide 5: Rheinmetall Automotive Products per division

    Rheinmetall Automotive Products per division MECHATRONICS HARDPARTS AFTERMARKET PUMP TECHNOLOGY SMALL BORE PISTONS HARDPARTS AUTOMOTOVE EMISSION SYSTEMS BEARINGS MECHATRONICS SOLENOID VALVES LARGE BORE PISTONS COMMERCIAL DIESEL SYSTEMS CASTINGS ACTUATORS Corporate Presentation August 2020 5

  6. Slide 6: Rheinmetall Defence Products per division

    Rheinmetall Defence Products per division WEAPON AND ELECTRONIC VEHICLE AMMUNITION SOLUTIONS SYSTEMS HX-FAMILY MID & LARGE CALIBER AMMO INTEGRATED ELECTRONIC SYSTEMS TACTICAL VEHICLES MID & LARGE CALIBER WEAPONS AIR DEFENCE & RADAR SYSTEMS LOGISTIC VEHICLES TECHNICAL PUBLICATIONS Medium wheeled Medi

  7. Slide 7: One Rheinmetall

    One Rheinmetall Realization of growth in changing market conditions  Positioning as integrated technology group for Mobility and Security  Realization of growth potentials in changing market environments ONE  Leveraging strengths by bundling and channeling our expertise and RHEINMETALL competenci

  8. Slide 8: Automotive – A changing world

    Automotive – A changing world Corporate Presentation August 2020 8

  9. Slide 9: Automotive Leading technology and market positions

    Automotive Leading technology and market positions Key Figures 2019 Sales by division* Sales by region Sales Total Management View Sales: €2.7bn Aftermarket Hardparts Asia 4% RoW China JV-Sales 13% in €bn 33% 18% 1.1 Op. result: €184m 43% USMCA 16% Europe 54% w/o 2.7 Op. margin: 6.7% Mechatronics Ge

  10. Slide 10: Automotive Leading technology and market positions

    Automotive Leading technology and market positions Sales driver Segment Structure Key Competitor Differentiator Hardparts Hardparts  Strong brand  Megatrend mobility  Pistons Mahle, Nemak, GGB,  Growing demand for  Castings Tenneco (Federal  Global footprint  Bearings Mogul), Dong Yang  Stro

  11. Slide 11: Automotive overview

    Automotive overview Product portfolio by division and engine type VACUUM PUMPS EXHAUST CONTROL FUEL TANK ISOLATION THERMAL MANAGEMENT HRB eCATHODE VALVE MECHATRONICS VALVE VALVE GEN. 3 ELECTRICAL COOLANT GASOLINE EGR HIGH-VOLTAGE E-MOTOR COOLING EGR MODULE SC AIR SYSTEM eWastegate PUMP COOLANT PUMP

  12. Slide 12: Drivers for growth

    Drivers for growth Rising global fleet and regulatory restrictions are supporting our growth  LV production forecast*  Further regulatory pressure***  Automotive sales distribution [mUnits] by engine type** CO2 NOx Fuel Cell AP 101 in g/km in mg/km 93 Core Diesel 89 Electric 15% -24% -56% Others

  13. Slide 13: Automotive Market trends

    Automotive Market trends The growth drivers remain strong NT E 3+ Efficiency (CO2 Reduction) Emission (Reduction) Electrification Outside powertrain The innovation pipeline is packed! Corporate Presentation August 2020 13

  14. Slide 14: Efficiency CO2 reduction with Automotive products

    Efficiency CO2 - reduction with Automotive products – gasoline engine vehicle 130 g 95 g CO2/km CO2/km 2015 2021 -1 g -3 g -3 g -7 g -2 g -2 g CO2/km CO2/km CO2/km CO2/km CO2/km CO2/km Variable Tribology Electr. control Variable Electr. Lightweight oil pump system valve and variable valve train EGR

  15. Slide 15: Facing technological disruption

    Facing technological disruption Rheinmetall needs to manage the transition Corporate Presentation August 2020 15

  16. Slide 16: Electrification Rheinmetall Automotive products

    Electrification Rheinmetall Automotive products Life time order value of €1.3bn booked* * Rheinmetall Automotive and Joint Ventures, incl. BEV and Hybrid Corporate Presentation August 2020 16

  17. Slide 17: Innovative products for a variety of applications

    Innovative products for a variety of applications High El. Vapor El. Climate El. Cooling High Voltage Multi Purpose Compact Door Voltage Pump Compressor Pumps Recirculation Valve Actuator 4,000 Contactor Blower Book to bill 3,000 Sales Order intake    1.7x 1.9x ratio  1.5x 1.5x 1.5x 2,000   

  18. Slide 18: Micro Mobility

    Micro Mobility Starting with competitive product into a booming market High growth market Unique selling proposition  European market with 10% CAGR between 2018 and  Smooth phasing of engine support 2030  Excellent freewheeling  High market concentration with Bosch representing  Low weight and

  19. Slide 19: Diversification

    Diversification Increasing portfolio for non-LV applications Trucks Large bore pistons Bearings & Aftermarket continuous casting Diverse portfolio for E.g. ship and locomotive truck applications pistons Sanitary application Global supply of spare parts Corporate Presentation August 2020 19

  20. Slide 20: Trucks

    Trucks Diverse portfolio for truck applications Permaglide bearings for truck compressors and truck hydraulics Main coolant pumps Aluminum pistons Auxiliary coolant pumps Steel pistons Electrical oil pumps Piston rings Cooperation with Riken Bushings for injection pumps Main-bearings Sales Connectin

  21. Slide 21: Automotive China

    Automotive China Outperforming the market Highlights  Sales China 1,149 in €m 972 1,003 871 934 WFOEs  Partner of local big players SAIC and HASCO (50/50 528 681 joint ventures) 401 JVs (100%)  Biggest casting capacities in China – technology leader  Regulation (China 6) – provides substantial g

  22. Slide 22: Defence – Managing the super cycle

    Defence – Managing the “super cycle” Corporate Presentation August 2020 22

  23. Slide 23: Defence Leading supplier with an increasing international presence

    Defence Leading supplier with an increasing international presence Key Figures 2019 Sales by division* Sales by region Order backlog by region Sales: €3.5bn Aus/NZ RoW RoW Weapon and 13% Germany 1% USMCA 1% Germany 27% 22% 27% Ammunition 3% Aus/NZ Op. result: €343m 41% 48% USMCA 23% 3% Asia / 28% Ve

  24. Slide 24: Defence Leading technology and market position

    Defence Leading technology and market position Sales driver Structure of Corporate Segments Key Competitor Differentiator  Increasing demand Vehicle Systems Vehicle Systems  Reputation as trustful and for security  Tactical Vehicles General Dynamics, reliable company  Logistic Vehicles BAE, KNDS

  25. Slide 25: Defence Managing the super cycle

    Defence Managing the super cycle Demand for next generation 1990 Upscaling of systems forces and Downscaling Inflection modernization Return to treaty of forces and point and territorial armament NATO Out of area defence missions 2% target 2014 Annexation committment Crimea Corporate Presentation Au

  26. Slide 26: Defence super cycle: our home markets

    Defence super cycle Successful internationalization provides diverse sources of growth Our home markets Germany Australia United Eastern Kingdom Europe  Largest customer  Established „home  JV with BAE serves  Modernization to  Budget increase: market“ „home market“ NATO standards Commitment to

  27. Slide 27: Defence tender overview

    Defence tender overview High demand could lead to promising super cycle UK Eastern Europe MIV Boxer Lithuania: Boxer Challenger Poland: Leopard II Hungary: Leopard, Howitzer, France IFV(wheeled/tracked) Trucks Czech Rep: IFV (tracked) MGCS Slovakia: IFV Germany Bulgaria: IFV (wheeled) USA Trucks Rom

  28. Slide 28: German defence

    German defence NATO commitment key driver for German demand Lead role in Very High Readiness Joint Task Force ( VJTF) Bundeswehr ‘19 ‘23 ‘27 ‘31 ’32+ 2016 White paper 04/2018 VJTF´23 1x Division 3x Division 3x Division Concept VJTF´19 (1 Brigade) (3x Brigade) (8x Brigade) (10x Brigade) Bundeswehr 09

  29. Slide 29: German defence budget

    German defence budget Investment expenses and Rheinmetall-share - budgets become sizeable in €m Expense increase based on 3 pillars:  More budget, investment share increased by 36% from 2018 to 2019: if political 8.263 1.5% commitment is to be achieved in 2024 this could lead to €~12 bn 6.011 6.063

  30. Slide 30: German Defence structural demand

    German Defence Additional structural demand of German armed forces Vehicles Fox Boxer Trucks Puma Leopard 2 (>500 vehicles) (~150 vehicles) (>10.000 vehicles) (~250 vehicles) (>200 vehicles) Programs and ammunition NNBS TLVS/Next Gen. Patriot DLBO TEN Ammunition Military Camps (Short range air defen

  31. Slide 31: Australia: new home market

    Australia Successful establishment of a new “home market” 2020 MilVehCoE Military Vehicle 2018 Center of Excellence Land 17: 155mm Munition  Framework Contract:  2017 EUR 60m p.a. Supashock 2018-2023  49% Rheinmetall „Brain-Trust“ 2022/2023 T  2017 LYNX 2018 Land 400 Phase 3 JV Rheinmetall NIOA

  32. Slide 32: United Kingdom - Joint Venture with BAE

    United Kingdom - Joint Venture witch BAE Creating a new “home market” and strengthening our position LEGACY BUSINESS EXPANSION OF PRODUCT PORTFOLIO  BAE UK business Future  Armoured engineering vehicles and  Boxer Mechanized Infantry Vehicle (MIV) bridge-laying tanks - 500 vehicles @ € 1.4bn + 

  33. Slide 33: System house for land based operations

    System house for land based operations Integrating components to systems VJTF System-of-Systems System house Systems Armored Infantryman Puma Gladius Platforms Key Components Lance turret Protection Ammunition Laser opto-sensoric Corporate Presentation August 2020 33

  34. Slide 34: Total life cycle potential

    Total life cycle potential Platform sales are just the tip of the iceberg – success creates opportunities 1X SALES OF PLATFORM 2X LIFECYCLE SPENDINGS Rheinmetall creates additional business opportunities over the entire life cycle of 50 years  Ammunition  Spare parts  Service & Maintenance  Trai

  35. Slide 35: Financials

    FINANCIALS Corporate Presentation August 2020 35

  36. Slide 36: Ad-hoc summary

    Ad-hoc summary Management took action to cope with industry changes  Corona with heavy negative impact on automotive production and demand Market  Global LV production is expected to decline by 21.9%* in 2020  Return to 2019 levels delayed by 3-4 years  Impairment test of Rheinmetall’s Automotiv

  37. Slide 37: Restructuring details

    Restructuring details First measures of restructuring in Automotive communicated  Evaluation of strategic options in the Automotive segment ad-hoc announced July 27th  Total accrual volume of €40m will be booked in Q3 with cash-effect between 2020-22 Hardparts [~€24m]:  Closure of US small bore p

  38. Slide 38: Crisis management with focused activities

    Crisis management with focused activities Smooth restart from lockdown  Health and safety first!  Daily Corona board-reports Protect our  Ensuring protection for our employees  6 CEO letters  Global Corona incident monitoring  Hygiene concept was successful people  Internal communication of m

  39. Slide 39: Q2 2020 Group: Key financial data

    Q2 2020 Group: Key financial data Corona impact overshadowed excellent Defence performance  Sales  Operating result and EBIT in €m  Earnings per share in €m Operating margin in % in € -15.8% -67.3% -439% 1,471 110 1.70 -244 1,239 0.46 -14 26 -78 7.4% -17% -1% +2% Adjusted EPS 36 Reported EPS 4 0

  40. Slide 40: Q2 2020 Group: Operating free cash flow

    Q2 2020 Group: Operating free cash flow Automotive earnings drop main cause for weak cash flow generation in Q2  Operating free cash flow per quarter in €m 2016 2019 2017 2020 2018  Low operational performance and impairment charges, both in Automotive Q1 Q2 Q3 Q4  D&A inflated by corresponding i

  41. Slide 41: Active capex management in both segments

    Active capex management in both segments  Capital expenditure in €m Capex review yields strong cash reduction  Both segments will reduce capex in 2020  Automotive to contribute most with a reduction between 25 to 30%  H1 Automotive capex already cut by €31m or 46% Automotive -25 to -30% IFRS 16

  42. Slide 42: Q2 2020 Group: Group key financials

    Q2 2020 Group: Group key financials Balance sheet and financials remain solid after impairment  Equity and Equity ratio Equity ratio  Maturity profile Ʃ 1.172 in €m and % Total equity in €m 50 Commercial Paper 208 Other & Leasing 3,000 28.5 30.6 30.3 40 2020 2021 2022 2023 2024 2025 2026ff. 27.9 2

  43. Slide 43: Q2 2020 Automotive: Highlights

    Q2 2020 Automotive: Highlights Management implemented extensive and fast-acting saving measures  Summary savings measures in €m 52 Global measures  Hiring freeze in all Automotive entities  Total Automotive staff reduced by 11%  “Kurzarbeit” savings of €19m Total: €55m -153 Country specific meas

  44. Slide 44: Q2 2020 Automotive: Highlights

    Q2 2020 Automotive: Highlights Fast-acting cost cutting helped Q2 performance Quarterly sales and margin development Comments on quarterly performance In €m and %  Smooth restart of production after lockdown 7.2 6.5 6.2 1.7  Sales volumes declined as expected, with sequential monthly improvement -

  45. Slide 45: Q2 2020 Automotive: Divisional highlights

    Q2 2020 Automotive: Divisional highlights Dramatic volume decline drove results negative  Sales Automotive  Operating result Automotive in €m in €m Margin Margin Mechatronics -200% -53% Q2 2019 52 Q2 2020 • Massive volume decline 726 7.2% -15.3% 8.6% 35 Hardparts 407 3.8% 10 • Massive volume decli

  46. Slide 46: Q2 2020 Automotive: Highlights

    Q2 2020 Automotive: Highlights All end-markets impacted by volume drop  Sales split LV/ Non-LV  Sales split Non-LV in €m / in % in €m / in % Delta absolute in % -53% Diesel -102 -63.8% 726 Gasoline -146 -57.5% other LV -32 -61.8% 160 -41% 260 LV Business -280 -60.2% LV: Truck -68 -57.8% 64% 254 11

  47. Slide 47: Q2 2020 Automotive: China performance

    Q2 2020 Automotive: China performance Sales recovery and positive margin development  Sales*  Comments on the quarter in €m +3% 271 280 13 -4  Sales increase of +3% compares to a market 248 recovery of 9% (IHS Markit 4 August, 2020) 239 32 31  Sales development held back by customer mix Q2 Oper-

  48. Slide 48: Q2 2020 Automotive: Regional sales split

    Q2 2020 Automotive: Regional sales split Automotive with stronger performance in Europe and USMCA -45%  Regional sales in % vs. IHS Global IHS LV production +9% -62% -53% -7% Q2 19 Q2 20 -48% -62% +3% JV JV Relevant Q2 19 Q2 20 Q2 19 Q2 20 Q2 19 Q2 20 Q2 19 Q2 20 global IHS Germany China** LV produ

  49. Slide 49: Q2 2020 Defence: Highlights

    Q2 2020 Defence: Highlights Outstanding performance Quarterly sales and margin development Comments on quarterly performance In €m and %  Resilient demand environment 1,324 15.8  Order intake above expectations 823 901 746 740  Strong sales and operating result increase driven by WA and VS 10.3 8

  50. Slide 50: Q2 2020 Defence: Divisional highlights

    Q2 2020 Defence: Divisional highlights Favorable volume growth and product mix  Sales Defence  Operating result Defence in €m in €m Margin Margin Weapon & Ammunition Q2 2019 Q2 2020 • Early shipment on customer +21% 55% request helped Q2 901 8.1% 93 10.3% • Unplanned first deliveries of PPE* 746 2

  51. Slide 51: Q2 2020 Defence: Order overview

    Q2 2020 Defence: Order overview Stronger than expected order intake  Order intake by division  Order backlog profile in €m in €m +22% +50% 1,786 96 10,125 752 -64 8,307 295 501 €1,8bn €2,1bn €6,2bn 102 265 Weapon and Ammunition 69 411 Electronic Solutions Vehicle Systems 199 Consolidation -31 -56

  52. Slide 52: Logistic vehicles – a success story

    Logistic vehicles – a success story German framework contract for 2.000 load handling systems with first order Total Framework value* Thereof already* Remaining order potential delivered €0.5bn €4.2bn booked €0.6bn €3.1bn Germany: €2.4bn Others: €0.7bn 2021 2022 2023 2024 2025 2026 * As of 30 June 2

  53. Slide 53: Stronger than average first half helps to meet FY guidance

    Stronger than average first half helps to meet FY guidance  Sales Distribution in €m H2 +6% +7% H1 3,522 3,221  Stronger than average first half 2020 (+19%) H2 H2  Customer induced shift of sales into Q2 at the -3% -1% 2,147 expense of Q3 1,958 (61%) (61%)  Confirmation of FY sales growth of 6-7

  54. Slide 54: Outlook 2020

    OUTLOOK 2020 Corporate Presentation August 2020 54

  55. Slide 55: 2020 Guidance update

    2020 Guidance update Trading update FY 2020 Guidance Sales decline of ~15% in Q3 with Management still refrains to provide a detailed AUTOMOTIVE an operating leverage expected Automotive FY guidance. Automotive is currently around 30% targeting an operating result corridor between €-30m and break-ev

  56. Slide 56: Appendix

    Appendix Corporate Presentation August 2020 56

  57. Slide 57: Sustainability: Path to CO2 neutrality

    Sustainability Path to CO2 neutrality already started 2040 CO² neutral 2020 - 2040 2021 Milestone plan re Reporting CO2 neutrality analogous to 3 years increments 2023 UN Global CDP 2020 Compact 2017 GRI-Report 2022 First CSR ratings selection TCFD (Task Force on Climate-related Financial MSCI: BBB

  58. Slide 58: Sustainability ESG @Rheinmetall

    Sustainability ESG @Rheinmetall E Automotive Product portfolio actively reduces CO² emission 2040 Reduction energy intensity (MWh/EUR m revenue) 2015: 229,4 | 2019: 157,2 Reduction THG intensity (tCO2/EUR m revenue) 2015: 101,2 | 2019: 65,7 CO2 Revenue coverage ISO 14001 72,4 % Revenue coverage ISO

  59. Slide 59: Active board remuneration schemes

    Active board remuneration schemes Current and new remuneration policy for contracts starting in 2020 Current policy New policy 100% annual target salary 100% annual target salary Fixed annual remuneration Fix 39% 33% Fixed annual remuneration Fix over 12 months, 60% over 12 months, 60% including fri

  60. Slide 60: European Defence Consolidation landscape

    European Defence Consolidation landscape  Governmental shareholding restricts room for cross-border consolidation  Big common armament programs could be catalysts for further consolidation 49.9% Kongsberg Nammo 50% Rheinmetall’s approach: Patria Saab  JV partnerships with companies in different C

  61. Slide 61: Capital allocation policy geared towards growth

    Our capital allocation policy is geared towards further growth Funding of growth (organic and M&A) 9.4% Dividend to shareholders (Payout ratio 30-35%) Q3 ‘19 level Improvement of pension funding via CTA (target 50-60%) level Corporate Presentation August 2020 61

  62. Slide 62: Group 2015 – 2019 Key figures (as reported)

    Group 2015 – 2019 Key figures (as reported) in €m 2015 2016 2017 2018 2019 Balance Sheet Total assets 5.730 6.150 6.101 6.759 7.415 Shareholder's equity 1.562 1.781 1.870 2.173 2.272 Equity ratio (in %) 27,3 29,0 30,7 32,1 30,6 Pension liabilities 1.128 1.186 1.080 972 1.169 Net financial debt -81 1

  63. Slide 63: Segments 2015 – 2019 Key figures

    Segments 2015 – 2019 Key figures Automotive Defence 2015 2016 2017 2018 2019 in €m 2015 2016 2017 2018 2019 2.621 2.670 2.922 2.888 2.705 Order intake 2.693 3.050 2.963 5.565 5.186 445 458 520 478 447 Order backlog (Dec. 31) 6.422 6.656 6.416 8.577 10.399 2.592 2.656 2.861 2.930 2.736 Sales 2.591 2.

  64. Slide 64: Continuing ROCE improvement

    Continuing ROCE improvement  ROCE in % 25% 20.2% 19,6% 20% 19.0% 18.8% 18.7% 16.7% 17.1% 15.9% 15,4% 15% 12.3% .13,4% 13,1% 9.8% 11.8% 11,0 % Group 10.7% 10.6% 10% 6.1% 4.7% 5% 3.9% 0.3% 0% -5% -4.6% 2013 2014 2015 2016 2017 2018 2019 Group Defence Automotive Corporate Presentation August 2020 64

  65. Slide 65: Next events and IR contacts

    Next events and IR contacts  Next Events  IR Contacts Bankhaus Lampe Deutschlandkonferenz Dirk Winkels All investor meetings Head of IR Commerzbank Corporate Conference will be conducted as Tel: +49-211 473-4749 telephone conferences Email: dirk.winkels@rheinmetall.com Morgan Stanley Industrials C

  66. Slide 66: 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

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