Slide 1: Results FY 2018 Schaeffler AG
Results FY 2018 Schaeffler AG MainFirst Conference March 28, 2019 Copenhagen
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 2018 2 Business and Strategic Update 3 Financial Results FY 2018 4 Outlook March 2019 3
Slide 4: Overview 2018 – Mixed results in a challenging environment
1 Overview 2018 Mixed results in a challenging environment Key messages Sales growth1 EBIT margin2 1 Group sales growth1 of 3.9% following a weak second half +3.9% 9.7% EUR 14,241 mn EUR 1,381 mn Automotive divisions with lower EBIT margin, 2 strong Industrial business 3 Free Cash Flow of EUR 384 mn
Slide 5: Group Guidance 2018 achieved – Automotive OEM guidance missed
1 Overview 2018 Group Guidance 2018 achieved – Automotive OEM guidance missed Group Results Divisional Results FY 2018 Automotive Automotive Guidance FY 2018 Actual FY 2018 Industrial OEM Aftermarket Sales growth1 ( 4 - 5% ) 3.9% ( ) Guidance Actual Guidance Actual Guidance Actual 3.5 - 4.5% 2.1% 1.
Slide 6: Schaeffler Group FY 2018 – Highlights and lowlights
1 Overview 2018 Schaeffler Group FY 2018 – Highlights and lowlights Sales growth of +3.9% despite difficult market driven by Sales affected by overall weak Automotive OEM division, very strong growth in Industrial division especially in China and Europe in Q4 The very strong EBIT margin in Industria
Slide 7: Agenda
Agenda 1 Overview 2018 2 Business and Strategic Update 3 Financial Results FY 2018 4 Outlook March 2019 7
Slide 8: Automotive OEM FY 2018 – Results below expectations
2 Business and Strategic Update Automotive OEM FY 2018 – Results below expectations Sales +2.1%1 Consistent Outperformance of LVP3 by 320 bps, even with decreasing in EUR mn 8.991 8.997 momentum in Q4 Good progress in the new E-Mobility business division (Sales: +18.1%) 2017 2018 Gross profit Order
Slide 9: Automotive Aftermarket FY 2018 – Mixed sales and margin performance
2 Business and Strategic Update Automotive Aftermarket FY 2018 – Mixed sales and margin performance Sales +2.2%1 Independent Aftermarket with strong growth rate of 5.7%; in EUR mn all regions contributed 1.880 1.859 Successful ramp-up of the new Bearing & Seals full range program in Americas account
Slide 10: Industrial FY 2018 – Very strong performance for sales and margin
2 Business and Strategic Update Industrial FY 2018 – Very strong performance for sales and margin Sales +10.1%1 Continued high growth dynamics throughout all quarters. Double-digit growth in in EUR mn sector clusters Offroad, Power Transmission, Raw Materials, Railway as well as 3.150 3.385 +9.7% gr
Slide 11: Transformation continues – Environment to remain challenging
2 Business and Strategic Update Transformation continues – Environment to remain challenging Today 1 Environment remains challenging Subdued growth, low visibility Macroeconomic and geopolitical risks Technological changes 2 We concentrate on our strengths Mobility for Automotive and Indus
Slide 12: Drive continuous improvement – Execution of efficiency initiatives progressing
2 Business and Strategic Update A Drive continuous improvement – Execution of efficiency initiatives progressing Overview initiatives Cost HCO1 Full Start Efficiency Reduction Restructuring Financial Completion Completion Date Target Target Cost Impact Focus Ratio at CMD2 Ratio now CORE I 10/2015 ~
Slide 13: Enhance competitiveness in Auto OEM – RACE program
2 Business and Strategic Update B Enhance competitiveness in Auto OEM – RACE program 1 An Efficiency and Portfolio optimization program 2 Led by Matthias Zink, CEO Automotive OEM, started end of 2018 Aimed at structurally improving competitiveness of the Automotive OEM division 3 in three waves Prog
Slide 14: Efficiency and Portfolio Optimization – Execution in three waves
2 Business and Strategic Update B Efficiency and Portfolio Optimization – Execution in three waves Business portfolio | Automotive OEM Execution | Program RACE Growth Impact New business Wave 3 + Wave 2 Core business Wave 1 Capital 2019 2020 2021 2022 2023 Mid- Efficiency and beyond term Time March
Slide 15: RACE Wave 1 – 100 bps EBIT margin improvement
2 Business and Strategic Update B RACE Wave 1 – 100 bps EBIT margin improvement Wave 1 – Levers and Targets Financial impact | in EUR mn Footprint EUR 90 mn2 1 Consolidate up to five Automotive plant locations in Europe Europe Cost 2 Reduce around 900 jobs, thereof around 700 in Germany efficiency D
Slide 16: Program RACE – Growth prospects, order intake and outperformance
2 Business and Strategic Update B Program RACE – Growth prospects, order intake and outperformance Vision Powertrain World Light Vehicle Production in mn Key aspects 117 102 110 Technological competence and innovative strength complemented via 30% Electric Vehicle bolt-on acquisitions High Poten
Slide 17: We take action – Improve cost and Capex discipline, optimize portfolio
2 Business and Strategic Update C We take action – Improve cost and Capex discipline, optimize portfolio Cost discipline Capex discipline Overhead cost to be harmonized with sales growth development Capex to sales ratio limited to 6-8% of sales, stricter allocation to growth areas (“earn the rig
Slide 18: Agenda
Agenda 1 Overview 2018 2 Business and Strategic Update 3 Financial Results FY 2018 4 Outlook March 2019 18
Slide 19: Key figures Q4 2018 and FY 2018
3 Financial Results FY 2018 Key figures Q4 2018 and FY 2018 FY 2018 Q4 2018 in EUR mn FY 2017 FY 2018 vs. FY 2017 Q4 2017 Q4 2018 vs. Q4 2017 +1.6% -0.4% Sales 1 14,021 14,241 3,541 3,527 +3.9%1 +0.3%1 Gross Profit 3,846 3,683 -163 mn 929 816 -113 mn 2 Gross Margin 27.4% 25.9% -1.5%-pts. 26.2% 23.1%
Slide 20: Sales growth – Q4 Group Sales impacted by weak Automotive OEM sales
3 Financial Results FY 2018 1 Sales growth – Q4 Group Sales impacted by weak Automotive OEM sales Sales | in EUR mn Key aspects Q4’18 growth impacted by Automotive OEM (-4.2% FX-adjusted), +3.9%1 mainly driven by weak demand in China (-17.4% FX-adjusted) vs. FY 2017 Despite weak Q4, Greater Chin
Slide 21: Gross Profit – Gross margin lower due to negative price, mix and missing flexibility
3 Financial Results FY 2018 2 Gross Profit – Gross margin lower due to negative price, mix and missing flexibility in production Gross Profit Q4 2017 vs. Q4 2018 | in EUR mn Key aspects Negative price effect mainly driven by persistent price pressure 1 1 in major Automotive OEM end markets, especial
Slide 22: EBIT margin – Q4 impacted by weaker Automotive business
3 Financial Results FY 2018 3 EBIT margin – Q4 impacted by weaker Automotive business EBIT1 | in EUR mn Key aspects Lower Q4 EBIT margin triggered by weak end markets -203 mn and operational performance in Automotive OEM vs. FY 2017 Automotive Aftermarket in Q4’18 temporary with weaker EBIT marg
Slide 23: Automotive OEM – Weak Q4 performance driven by lower sales and productivity
3 Financial Results FY 2018 Automotive OEM – Weak Q4 performance driven by lower sales and productivity Sales by business division | in EUR mn EBIT2 Q4 2017 vs. Q4 2018 | in EUR mn Q4 2017 Q4 2018 ∆1 Engine Systems 719 670 -6.5% Transmission Systems 1,087 1,022 -5.6% E-Mobility 105 137 +31.2% Chassi
Slide 24: Automotive Aftermarket – Q4 with good growth momentum, profitability lower
3 Financial Results FY 2018 Automotive Aftermarket – Q4 with good growth momentum, profitability lower mainly due to higher warehousing costs Sales by region | Y-o-y growth EBIT4 Q4 2017 vs. Q4 2018 | in EUR mn Q4 2017 Q4 2018 ∆1 Europe 328 339 +4.5% +1 Americas 93 89 +3.6% -65 Greater China 14 18 +
Slide 25: Industrial – Q4 with continued strong sales and earnings momentum
3 Financial Results FY 2018 Industrial – Q4 with continued strong sales and earnings momentum Sales by region | Y-o-y growth EBIT2 Q4 2017 vs. Q4 2018 | in EUR mn Q4 2017 Q4 2018 ∆1 Europe 436 480 +11.4% +443 +3 Americas 135 156 +14.9% -3 -7 Greater China 122 139 +14.1% -10 Asia/Pacific 77 75 -3.2%
Slide 26: Net income FY 2018 EUR 881 mn – EPS at EUR 1.33
3 Financial Results FY 2018 4 Net income1 FY 2018 EUR 881 mn – EPS FY 2018 at EUR 1.33 (PY: EUR 1.48) Net income1 | in EUR mn Key aspects Net income decreased to EUR 881 mn (PY: EUR 980 mn), -10.1% driven by lower EBIT vs. FY 2017 EPS decreased to EUR 1.33 (PY: EUR 1.48) ROCE for 2018 at 16.7%
Slide 27: Free Cash Flow before M&A FY at EUR 384 mn
3 Financial Results FY 2018 5 Free Cash Flow before M&A1 FY at EUR 384 mn (PY: EUR 515 mn) – Capex Ratio FY 18 at 8.7% Free Cash Flow before M&A1 | in EUR mn Key aspects FCF before M&A1 at EUR 257 mn in Q4’18 (PY: EUR 268 mn), -131 mn FCF conversion ratio 17% vs. FY 2017 Lower EBIT as main drive
Slide 28: Working Capital ratio 15.6% per year end – Capex ratio 8.7%
3 Financial Results FY 2018 6 Working Capital ratio 15.6% per year end – Capex ratio 8.7% for the full year Working capital1 | in EUR mn Capex3 | in EUR mn 2.820 2.756 2.733 2.342 2.575 2.737 2.672 2,219 299 295 279 400 306 289 262 375 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 17 Q2 17 Q3 1
Slide 29: Net debt of EUR 2,547 mn – Gearing ratio at 83%
3 Financial Results FY 2018 7 Net debt of EUR 2,547 mn – Gearing ratio at 83% Net financial debt and Gearing ratio | in EUR mn Key aspects Net debt increased to EUR 2,547 mn (FY’17: EUR 2,370 mn) mainly driven by capital needs for M&A activities Net leverage ratio2 slightly increased to 1.2× 2,7
Slide 30: Reported and adjusted comparative figures FY 2018 – BCT integration
3 Financial Results FY 2018 Reported and adjusted comparative figures FY 2018 – BCT integration triggers adjustments FY 18 – Reported and adjusted comparative figures Key aspects FY 18 – adjusted BCT (“Bearing & Components Technologies”), which had previously Group FY 18 – Reported comp. figures ∆
Slide 31: Agenda
Agenda 1 Overview 2018 2 Business and Strategic Update 3 Financial Results FY 2018 4 Outlook March 2019 31
Slide 32: Cautious Guidance 2019 – Financial Ambitions 2020 abandoned
4 Outlook Cautious Guidance 2019 – Financial Ambitions 2020 abandoned Group Guidance Divisional Guidance Automotive Automotive Actual FY 181 Guidance FY 19 Industrial OEM Aftermarket Sales growth2 ( 3.9%) 1 - 3% FY 181 FY 19 FY 181 FY 19 FY 181 FY 19 2.1% 1 - 3% 2.2% 1 - 3% +10.1% 1 - 3% 7.5% 6 - 7%
Slide 33: Executive Board Schaeffler Group – Team for the future established
4 Outlook Executive Board Schaeffler Group – Team for the future established Current changes Matthias Zink (49) Uwe Wagner (54) Marc McGrath (52) Dharmesh Arora (51) CEO Automotive OEM Chief Technology Officer Regional CEO Americas Regional CEO Asia/Pacific Contract extended by 5 years A
Slide 34: Conclusion – Building on our strengths and taking action
4 Outlook Conclusion – Building on our strengths and taking action to enhance our competitiveness 1 We have a consistent strategy – We stay the course 2 Competitiveness improvement imperative – RACE program in Automotive OEM Adapting execution Growth potential in all our businesses – 3 Become more f
Slide 35: Financial calendar 2019
4 Outlook Financial calendar 2019 Roadshows Regular capital market communication Mar 7th London Apr 24th Annual General Meeting Mar 8th Frankfurt Apr 25th Ex-Dividend Date Mar 10th New York May 8th Q1 2019 Earnings Release Mar 11th Boston Aug 6th Q2 2019 Earnings Release Apr 8th Hong Kong Sep 18th C
Slide 36: IR Contact
IR Contact Investor Relations Phone: + 49 9132 82 4440 Email: ir@schaeffler.com Web: www.schaeffler.com/ir
Slide 37: Appendix
Appendix A1 Agenda 4 plus One A2 Automotive OEM A3 Automotive Aftermarket A4 Industrial A5 Backup March 2019 37
Slide 38: Agenda 4 plus One – Progressing on schedule with completion ratio of 55%
A1: Agenda 4 plus One Agenda 4 plus One – Progressing on schedule with completion ratio of 55% year-end 2018 Ø 55% 10% 25% 95% 100% Initiate Plan Implement Close Initiatives ►1 Customer Excellence 65% ►2 E-Mobility 60% ►3 Industry 4.0 45% ►4 Quality for Tomorrow 45% ►5 Global Footprint 55% ►6 Factor
Slide 39: Automotive OEM – FY 2018 overview
A2: Automotive OEM Automotive OEM – FY 2018 overview Sales by business division | in EUR mn EBIT2 2017 vs. 2018 | in EUR mn FY 2017 FY 2018 ∆1 Engine Systems 2,786 2,783 +2.1% Transmission Systems 4,204 4,170 +1.4% E-Mobility 416 486 +18.1% -2583 6 -14 -30 16 Chassis Systems 1,585 1,558 +0.1% Total
Slide 40: Vision Powertrain – Market moving towards the accelerated scenario
A2: Automotive OEM Vision Powertrain – Market moving towards the accelerated scenario Accelerated Scenario Regionalized Accelerated Scenario 2030 ICE HEV BEV ICE HEV BEV Global vehicle production (in mn units) Global vehicle production (in mn units) 38 CAGR 2010/2030 120 111 29 101 37% 2% 30% 15% 89
Slide 41: Vision Chassis – Market shifting towards autonomy
A2: Automotive OEM Vision Chassis – Market shifting towards autonomy Vision Chassis Steer-By-Wire Systems ≤L2 L3 L4 L5 Global vehicle production (in mn units) Key growth technology for automated vehicles by allowing the steering wheel to disappear 117 117 conditionally or being eliminated entirely 1
Slide 42: E-Mobility – Content per vehicle
A2: Automotive OEM E-Mobility – Content per vehicle excl. Aftermarket, Heavy Duty & Motorcycles Content per Vehicle1 2 HEV 1 ICE 3 BEV in EUR x 1.5 x 2.5 ~150 x 4.0 ~125 ~100 ~90 ~60 ~25 2016 2025 2016 2025 2016 2025 No. of light vehicles2 90 mn 56 mn 3 mn 39 mn 0.5 mn 16 mn Average Content per Vehi
Slide 43: Schaeffler e-Axle transmission is driving the brand new Audi eTron Quattro
A2: Automotive OEM Schaeffler e-Axle transmission is driving the brand new Audi eTron Quattro E-Axle subsystems 2018 Schaeffler‘s new Lightweight E-Axle Transmissions for the Audi eTron Quattro SOP Q3/2018 Schaeffler supplies both E-Axle Power Electronics Transmissions for the new Audi eTron Quatt
Slide 44: E-Mobility – Production technology gap closed
A2: Automotive OEM E-Mobility – Production technology gap closed Stator Manufacturing Processes in series production at Schaeffler today Rotor Manufacturing Processes prototyping machines available at Schaeffler ext. supplier technology as of today Production Technology Elmotec Statomat with wave-wi
Slide 45: Automotive Aftermarket – FY 2018 overview
A3: Automotive Aftermarket Automotive Aftermarket – FY 2018 overview Sales by region | y-o-y growth EBIT4 2017 vs. 2018 | in EUR mn FY 2017 FY 2018 ∆1 Europe 1,375 1,393 +2.5% -325 0 -19 Americas 403 340 -5.2% -6 15 Greater China 57 76 +36.5% Asia/Pacific 45 50 +12.5% Total 1,880 1,859 +2.2% Automot
Slide 46: Business in 2025 is shaped by today's registrations – 20+ years lifecycle
A3: Automotive Aftermarket Business in 2025 is shaped by today's registrations – 20+ years lifecycle 6 – 8 years OE lifecycle followed by 20+ years in the Aftermarket Key aspects Annual Volumes Lifetime revenue potential in Independent Aftermarket typically near half of revenues OE Independent in
Slide 47: Our markets continue to grow – Great potential in China
A3: Automotive Aftermarket Our markets continue to grow – Great potential in China Vehicle population Million units (PC/LCV) 1.2 1.4 bn Key growth drivers Global vehicle fleet will grow 2016 2022 425 at 3.4% CAGR 2016-2020 390 381 335 Vehicle age will continue to grow, especially 400 310 in Ch
Slide 48: Growth drivers in the Independent Aftermarket – Components and Solutions
A3: Automotive Aftermarket Growth drivers in the Independent Aftermarket – Components and Solutions Components Solutions Outlook Traditional business with replacements parts Complete sets and kits for Trends in OEM business fuel future Growing with global vehicle fleet plug n' play repair so
Slide 49: Industrial – FY 2018 overview
A4: Industrial Industrial – FY 2018 overview Sales by region | y-o-y growth EBIT2 2017 vs. 2018 | in EUR mn FY 2017 FY 2018 ∆1 -7 -1 -9 9 Europe 1,804 1,906 +7.3% Americas 575 596 +9.7% Greater China 472 575 +25.4% 1273 Asia/Pacific 299 308 +5.6% Total 3,150 3,385 +10.1% Industrial sales growth by s
Slide 50: Industrial portfolio – Broad range of standard and customized products
A4: Industrial Industrial portfolio – Broad range of standard and customized products Standard product business Ball Bearings Cylindrical Spherical Tapered Needle Roller Linear Plain bearings Mechatronics Systems Roller Bearings Roller Bearings Roller Bearings Bearings Technology Ball bearing Cylind
Slide 51: Portfolio evolution – From components to Industry 4.0
A4: Industrial Portfolio evolution – From components to Industry 4.0 Portfolio Region Sector split Channel Wind Raw Materials Europe Aerospace OEM & MRO Railway Offroad Two Wheelers Americas Power Transmission Greater Distribution China Industrial Automation Asia Pacific March 2019 51
Slide 52: Key figures by Group and division – As reported FY 2018
A5: Backup Key figures1 by Group and division – As reported FY 2018 Group | in EUR mn Automotive Aftermarket | in EUR mn Q1’17 Q2’17 Q3’17 Q4’17 Q1’18 Q2’18 Q3’18 Q4’18 Q1’17 Q2’17 Q3’17 Q4’17 Q1’18 Q2’18 Q3’18 Q4’18 Sales 3,574 3,472 3,434 3,541 3,551 3,642 3,521 3,527 Sales 484 444 506 446 446 479
Slide 53: Automotive OEM Outperformance by quarters
A5: Backup Automotive OEM Outperformance by quarters FY 18 Q1 18 Q2 18 Q3 18 Q4 18 Outperformance: +3.2pp Outper- Outper- Outper- Outper- IHS1 Auto OEM2 formance IHS1 Auto OEM2 Formance IHS1 Auto OEM2 formance IHS1 Auto OEM2 formance World -0.2% +3.2% +3.4pp +4.6% +6.5% +1.9pp -2.8% +3.2% +6.0pp -5.
Slide 54: Impact of IFRS 16 accounting standard
A5: Backup Impact of IFRS 16 accounting standard IFRS 16 Definition of Free cash flow (FCF) after IFRS 16 IFRS 16 – Leases is a new financial reporting standard Modification of FCF definition to keep comparability to FCF used for the accounting of lease agreements under IFRS 15 and before As o
Slide 55: Overview Corporate and Financing Structure
A5: Backup Overview Corporate and Financing Structure Corporate structure (simplified) | as of December 31st, 2018 Financing structure | in EUR2 mn, as of December 31st, 2018 INA-Holding Schaeffler IHO Verwaltungs GmbH GmbH & Co. KG Nominal Nominal Rating Debt instrument (USD mn) (EUR mn) Interest M