Rheinmetall Ag · XETR:RHM

Rheinmetall — Investor Day (November 2019)

25 slides from Rheinmetall's investor day presentation, Nov 20, 2019

  1. Slide 1: CMD 2019 Financial Update

    CMD 2019 Financial Update Helmut Merch Unterlüß | 20 November 2019 CMD 2019

  2. Slide 2: Segments perform with different momentum

    Segments perform with different momentum Group  Independent business cycles  Increase synergistic potential by leveraging technologies Defence Automotive  Super cycle with sustainable momentum  End markets with flat/negative growth  Long-term project cycles with backlog  Engine cycles with cur

  3. Slide 3: Automotive

    Automotive © Rheinmetall AG / Capital Markets Day 2019 3

  4. Slide 4: Industry is wary of likely mid-term flattish development

    Industry is wary of likely mid-term flattish development Continental AG, CFO W. Schaefer: “Like other market participants, we do not Bosch Group, CEO V. Denner: expect global production to pick up “We are cautious and assume significantly in the next five years. In the best that automobile productio

  5. Slide 5: IHS revised 2019 LV volumes repeatedly and provides weak outlook

    IHS revised 2019 LV volumes repeatedly and provides weak outlook  IHS 2019 forecast  IHS Mid-term outlook with growth on low level IHS swings almost 8% within last 12 months ? +2.3% CAGR +2.0% -6.7% 102 100 Oct Nov Dec Jan Feb Mrc Apr May Jun Jul Aug Sep Oct -5.8% 97 2018 2019 95 94 94 92 89 89 -5

  6. Slide 6: Automotive impacted by special effects beyond market deterioration

    Automotive impacted by special effects beyond market deterioration  Sales bridge  Operating result in €m in €m and % 731 69 9.4% Q3 ’19 level ~5% Q4 2018 Market GM Strike Negative Q4 2019 Q4 2018 Market GM Ramp Malware Q4 2019 decline Ramp effect effect © Rheinmetall AG / Capital Markets Day 2019

  7. Slide 7: 2019 reports biggest market decline post the financial crisis

    2019 reports biggest market decline post the financial crisis Avg. cycle margin ~7.5% Operating margins -2.5% 7.0% 8.4% 8.9% ~6.5% 5-7% ~8% 2009 2013 2016 2018 2019 2020/21 2024/25 Market Financial crisis market decline -12.2% Growth in CAGR 6.4% -1.0% -5.8% 2.3% Market trend Recovery Growth Decline

  8. Slide 8: Early installation of self help in 2018 successful

    Early installation of self help in 2018 successful  Self help measures to protect the margin  General cost reduction programs Efficiency  Eliminate quality issues improvements  Prioritization of R&D projects Selective R&D  Reduction of external R&D  But: Pedelec R&D affects P&L 2020 with €12-1

  9. Slide 9: From internal innovations project to market entry

    From internal innovations project to market entry One Rheinmetall Design make Production award for Pedelec over setup 2016 2017 2018 2019 2020 2021 2022 First market Presentation at Start of presentation at Eurobike production Eurobike Customer acquisition Total -€12-15m Development in 2020 cost ~€3

  10. Slide 10: Defence

    Automotive Defence © Rheinmetall AG / Capital Markets Day 2019 10

  11. Slide 11: New record year ahead for Defence

    New record year ahead for Defence  Defence sales and operating margin Sales in €m and % Margin +9% sales 15 4.000 growth  Growth across all three divisions 3.221 3.000  Margin improvement continues 10  Project pipeline is filled and diversified ~9.5% 2.000 7.9% 5 1.000 Prepare for solid program

  12. Slide 12: Project delays or shifts are part of the business

    Project delays or shifts are part of the business 2018 2019 2020 2021+ 2018 - late formation of German government German KSA ban Italian export ban RSA export issues Challenger order intake delayed into 2020 plan actual potential © Rheinmetall AG / Capital Markets Day 2019 12

  13. Slide 13: Military procurement projects enjoy long lead times

    Military procurement projects enjoy long lead times Large orders typically turn into sales after 12-24 months! 2018 2019 2020 2021 2022 2023 2024 Activity Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Request for tender Phase 24.08.18 Risk Mitigation 1.4.19 Phase Order v

  14. Slide 14: German commitment to increase defense budget affirmed

    German commitment to increase defense budget affirmed  German Defence Budget in €bn and % of GDP 1.2% 1.4% 1.5% 2% Trough! November 2019: Chancellor Merkel* and Defence secretary Kramp-Karrenbauer** renew commitment to 1.5% ~80 defence spending in 2024 and a ~55 further increase to 2% in 2031 45 32

  15. Slide 15: Promising super cycle pipeline

    Promising super cycle pipeline UK: Sweden Lithuania: Boxer  MIV Boxer Trucks Poland: Leopard II  Challenger Hungaria: Leopard, Howitzer,  France: IFV (wheeled/tracked) MGCS Germany: Czech Rep: IFV (tracked) Trucks  Slovakia: IFV IDZ  Bulgaria: IFV (wheeled) USA: Romania: IFV (wheeled) VJTF Pu

  16. Slide 16: Mastering the challenge for smooth execution of large programs

    Mastering the challenge for smooth execution of large programs  Programme execution Capacity Personnel Supplier base expansion  Set up MilVehCoe ~€100m  Recruitment of  Smooth in Australia thereof 1.600 personnel in integration of new ~€60 IFRS 16  Ammo plant 2019/2020 supplier base into Austra

  17. Slide 17: Profitable growth lasts into the next decade

    Profitable growth lasts into the next decade  Operating margins in % 11.7% 6.7% -0.4% 5.0% 7.9% ~9.5% >9% 9-10% Avg. cycle margin ~4.4% Avg. cycle margin ~5.5% Market 2021/22 2010 2020  Super cycle intact 2019  Favorable book to bill ratio 2012 2018 Increase of global  Steady top line growth Ann

  18. Slide 18: Group

    Group © Rheinmetall AG / Capital Markets Day 2019 18

  19. Slide 19: Capex peak in 2020 due to IFRS 16 effect in Australia

    Capex peak in 2020 due to IFRS 16 effect in Australia  Capital expenditure in €m resp. margin in % Ratio 4.6% 5.6% 4.4% ~5.0% ~6.3% Average `13-19 4.8% 5.6% 263 262 204 5.5% 5.5% 5.6% 6.3% 7.0% UBA UBD 2.9% 3.7% 3.1% IFRS 16 4.2% IFRS 16 IFRS 16 €24m ~€50m ~€85m 2013 2015 2018 2019e 2020e © Rheinme

  20. Slide 20: R&D remains in the 5-6% range

    R&D remains in the 5 ̶ 6% range  R&D expenditure in €m resp. margin in % Ratio 5.2% 5.0% 5.0% ~5.6% ~6.0% Average `13-19 5.1% 309 259 ~7.0% 228 5.8% 6.8% 4.8% 5.0% ~5.0% UBA Net R&D expenses with 4.4% 4.4% Defence figures incl. 5.3% 5.1% UBD Research&Technology 2013 2015 2018 2019e 2020e © Rheinmet

  21. Slide 21: OFCF within target range

    OFCF within target range  Operating Free Cash Flow in margin in % Ratio 2.9% 4.7% -0.5% >2% >2% OFCF 2-4% TARGET 2016 2017 2018 2019e 2020e © Rheinmetall AG / Capital Markets Day 2019

  22. Slide 22: Our capital allocation policy is geared towards further 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 © Rheinmetall AG / Capital Markets Day 2019 22

  23. Slide 23: Group margin guidance held stable

    Group margin guidance held stable Sales Operating margin 2018 2019e 2018 2019e Growth y/y in % at Growth y/y in % at in % in % constant FX constant FX GROUP 6.1 Slightly above 1 8.0 Around 8 AUTOMOTIVE 4.2 Around -7 8.9 Around 6.5 DEFENCE 7.9 Around 9 7.9 Slightly above 9.5 Operational growth at con

  24. Slide 24: Sales growth and earnings improvement targeted

    Sales growth and earnings improvement targeted Mid-term Mid-term Sales growth Operating margin Short-term setback to 5-7% AUTOMOTIVE Flat to slow growth (incl. Pedelec -€12-15m in 2020); mid-term recovery to around 8% DEFENCE 6-8% 9-10% Operational growth at constant FX © Rheinmetall AG / Capital Ma

  25. Slide 25: © Rheinmetall AG / Capital Markets Day 2019

    © Rheinmetall AG / Capital Markets Day 2019 25

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