Slide 1: Commented Slides / Conference Call Q4 and FY 2021 Earnings
COMMENTED SLIDES / CONFERENCE CALL Q4 AND FY 2021 EARNINGS 1 PUBLIC
Slide 2: Company Representatives and Call Participants
Company Representatives Klaus Rosenfeld, CEO Claus Bauer, CFO Renata Casaro, Head of Investor Relations Conference Call (Active) Participants Akshat Kacker, JP Morgan Chase Christoph Laskawi, Deutsche Bank Edoardo Spina, HSBC Sanjay Bhagwani, Citi Stephanie Vincent, JP Morgan Chase 2 PUBLIC
Slide 3: Opening remarks and statement on Ukraine
Renata Casaro Thank you very much Stewart. Dear investors, dear analysts. Thank you for joining the Schaeffler Group 2021 Earnings Call. As usual, our call will be conducted under the disclaimer. Without further ado, I will pass the floor on to Mr. Klaus Rosenfeld, CEO of the Schaeffler Group, and M
Slide 4: Agenda: Business Highlights
SCHAEFFLER Agenda 1 Overview 2 Business Highlights Q4 and FY 2021 3 Financial Results Q4 and FY 2021 4 Outlook Mar 8,202 6 and F¥ 2021 Senasttar AG osenings a psu 4 PUBLIC
Slide 5: Summary of full year 2021
Klaus Rosenfeld If you follow me on page four, that’s the usual summary page. And while it may not be appropriate in this environment to talk too much about successes, I think I can say the full year 2021, for Schaeffler, was a successful year. With strong performance, 10% growth, above 9% EBIT marg
Slide 6: Four box model and diversification
position to give you, also for the year 2021, an indicative sales split for this new four box model. We will also see that the Powertrain scenario before the war, and before the crisis has been revisited, and that we have decided to further accelerate our assumptions with an earlier and faster adopt
Slide 7: Guidance of the last year
Page number five has the guidance of the last year. I think I can skip that. 7 PUBLIC
Slide 8: Highlights and lowlights
The page number six has highlights and lowlights. Also, here, some already mentioned, good outperformance in Automotive Technologies. 400 basis points for the full year, 2021. You all know that you can’t judge outperformance by quarter. But if you look at the trend and the information in the backup,
Slide 9: Outlook uncertainty
Once again, the macroeconomic, but also the environment in the different sectors is very difficult to predict. So, we cannot really tell you at the moment what we’re expecting for the rest of the year. 9 PUBLIC
Slide 10: Agenda: Business Highlights
SCHAEFFLER Agenda 1 Overview 2 Business Highlights Q4 and FY 2021 3 Financial Results Q4 and FY 2021 4 Outlook Mae 8,2022 Q&and FY 2021 Senaottor AG aaenings 7 pave 10 PUBLIC
Slide 11: Group sales growth and EBIT margin
Page number eight, I think I can take the liberty here to do this very quickly. You can read all the numbers. Sales growth for the year, 7.4%. EBIT margin after the difficult year 2020 back to 6.9%. I think that is a good achievement. Keep in mind that certainly the first quarter was important for t
Slide 12: Automotive Technologies order intake
Page number nine gives you a little bit more insight on the business highlights. Order Intake for the full year, for the full scope of the Automotive Technologies division in line with the previous year of 10.2 billion; 5.4 billion in the first half, 4.8 billion and in the second half, the real inte
Slide 13: Automotive Aftermarket
Page number ten, Aftermarket. After the year 2020, a growth of 13%, what is clearly strong. Also supported by the Asian region and Americas. Positive price development already in 2021 to offset some of the increasing input cost. However, a margin down to nearly 14%, 13.8%. And despite the improvemen
Slide 14: Aftermarket digitalization
In terms of product development, and offering, I don’t want to spend too much time. But the whole idea of further digitalizing the division, creating more digital positive customer experience is vital to the success of the future. 14 PUBLIC
Slide 15: Industrial division
Let me come to page number 12. Our Industrial division, good and positive development in the year 2021. You see it from growth, 13.6%. Broad economic recovery continued also in Q4. Most sectors growing double digit. Some of the sectors that were lagging, like Railway, are returning to positive growt
Slide 16: Industrial orderbook
Last point here on page 13. The Orderbook. You see, once again, a development for the three months Orderbook in the year 2021. Orderbook increasing, sales coming down a little bit in the fourth quarter. So, that means continuous growth in the future. Whatever this crisis now will mean for this chart
Slide 17: Capital allocation
Page number 14 is your usual slide on Capital allocation. Let me say here, I mean you can read all these numbers. We are clearly at the moment doing what we can to analyse and monitor the situation to also revisit our plans. I can say that our strategy going forward remains, for the time being, in p
Slide 18: Portfolio management Automotive Technologies
Now let me come to three topics that I would like to mention before I hand over to Claus for the details on the numbers. The first one is on Portfolio Management Automotive Technologies. You see here this new chart. You all know the idea of these metrics with mature versus new, and Powertrain-specif
Slide 19: Updated powertrain scenario
On this page number 16, you have the old Powertrain scenario. The one that was in place until year end. And you all remember the famous 30-40-30. 30% ICE, 30% BEV, including fuel cell, and then 40% HEV. What we’re seeing from customers, what we’re seeing globally is that electrification will further
Slide 20: New Industrial market clusters
Now second point that I would like to share is the new setup for Industrial. You have this on page number 17. You all look at us as an Automotive supplier. You’re all, rightfully so very interested in the transformation there. In Industrial it’s not so much a transformation. For my point of view, we
Slide 21: Industrial market cluster growth 2021
And you see it’s for 2021, consistently, so that all the areas have grown quite significantly. 21 PUBLIC
Slide 22: Sustainability and climate neutrality
Third point I would like to make, and there’s a lot more to say. You saw the Sustainability report we published. You all know that we take this very serious, and we are strongly committed to turn Schaeffler into a climate neutral company. We have our targets out. We have working in our climate actio
Slide 23: Agenda: Financial Results
SCHAEFFLER Agenda Overview Business Highlights Q4 and FY 2021 Financial Results Q4 and FY 2021 mh WN Outlook Mar 82022 Q&and FY 2021 Schaattlar AG earnings puauc 23 PUBLIC
Slide 24: Sales development Q4 and FY 2021
Yes, thank you very much, Klaus. If you go to the next slide, you’ll see, as Klaus already alluded to, the sales in Q4 developed solidly. Remember Q4 2020 was the peak of the V-shaped recovery after pandemic shutdowns in Q2. So therefore, the 5.6% foreign adjusted sales decrease is to see in relatio
Slide 25: Gross profit development
Go to the next slide you’ll see the Gross Profit development. And I think based on our Q3 call, and then our follow up call in January with most of you, it shouldn’t be a surprise that you see the cost inflation for input cost phasing in. You see that in the waterfall chart on the left side in the m
Slide 26: Overhead costs
Let’s go to the next slide. Then you see the most important message on that slide is that Overhead costs are increasing. But that is also now due to the fact that prior years are impacted by the management of the Corona crisis. You know that we used extensive short-term work capabilities in Europe a
Slide 27: EBIT development
EBIT, no surprise, it’s following pretty closely the Gross Profit trend, 7.8% for the last quarter in 2021 is clearly a strong sign. It’s still lower than the 11.6% of prior year. 11.6 I would say is an anomaly based on for Q4 unprecedented volume in Q4 of last year. I said why that was. We were in
Slide 28: Automotive Technologies margin
Let’s go to the next slide to dive a little bit deeper now into the divisions. First Automotive Technologies, I start on the right side this time. In the waterfall chart you see how the margin developed from prior year. And as I already said, some of that is due to the fact that we had an extraordin
Slide 29: Automotive Aftermarket margin
Automotive Aftermarket, I start also with the waterfall chart. You see also a significant margin decrease that has similar reasons than in Automotive. There’s still a little gap between our cost impact, and price recovery that we obviously tried to close as we go deeper into year 2022. And the other
Slide 30: Industrial sales and margin
And last but not least, Industrial. You see that first of all, all regions have grown. Most of them significantly. China a little bit lower in the growth rate. You already heard in the summary slides, and you also see it on the left bottom, that Wind is one of the drivers for that, Wind in Greater C
Slide 31: Net income bridge
Coming to Net Income. For us the message here, you’ll see there’s not a very significant impact on a group level between the reported EBIT and the EBIT before special items. And then you see in the waterfall chart the further development. Financial result – not spending too much detail here, but tha
Slide 32: Special items
adjusted EBIT neutralized. Therefore, all the pluses and the other big topic in 2020 was an impairment that we booked in the Automotive Technologies division. 32 PUBLIC
Slide 33: Net income, EPS and dividend
Net Income on the next slide follows completely what I have presented so far. You see on the bottom on the left side that we have achieved 22 cents per share in result for the quarter. And for the total year, € 1.14. The Net Income for the total year of € 756 million or € 748 million after special e
Slide 34: Free cash flow
Free cash flow, on the next slide, is for the quarter characterized by seasonal related personnel cash outflows. Most prominently the Christmas bonus mainly in the European and Latin American localities. We have reported already in Q3 a continued technical increase of inventory. Offsetting partly th
Slide 35: Leverage and liquidity
That leads, obviously, then as a consequence, as you see here, to a very comfortable situation in regard to Leverage ratio. The Leverage ratio is below one. And there’s no maturities in our financing until March 2024 after we paid back a “Schuldschein” in November of last year. And then also a bond
Slide 36: Reporting changes reconciliation
Now I’m closing with the last slide. It’s a little bit technical. But I think it’s needed. We adjust our reporting going forward a little bit. So that is now the reconciliation for this reporting going forward of the last year. There are two significant changes. One I already hinted on with the at e
Slide 37: Schaeffler Paravan Technologies reporting within EBIT
And with our reconfiguration, and reclassification of our Automotive business, and making the Chassis business really some important cluster that we want to report in future. And that we also want to drive significant growth in. We thought due to that, we now also report especially Schaeffler Parava
Slide 38: Agenda: Outlook
SCHAEFFLER Agenda 1 Overview 2 Business Highlights Q4 and FY 2021 3 Financial Results Q4 and FY 2021 4 Outlook Mar 8,202 6 and F¥ 2021 Senasttar AG osenings 2 psu 38 PUBLIC
Slide 39: Guidance suspended
Thank you, Claus. And I will now finish the presentation with the outlook. On page 33 there’s nothing that I have not said before. We suspended guidance. I can only stress again that’s the only responsible way to deal with this. And you know from the rules, when suspension is possible, that we have
Slide 40: Outlook conclusion
My conclusion, the outlook is on page 34. We can cut that short. I think you heard all the news. We are facing another war-driven crisis. We need to understand that we will navigate in the next weeks and months through a very dynamic, very unpredictable environment. Our main task is to ensure operat
Slide 41: Capital market activities and financial calendar
Last page is then on the capital market activities. There are two small roadshows tomorrow and on Thursday. We will then progress with our Annual General Meeting. You have the financial calendar on the right-hand side. And I’m sure that you can have that in your calendars already. With that I would
Slide 42: Start of Q&A
Renata Casaro Thank you very much Mr. Rosenfeld and Mr. Bauer. And dear operator, we can open now the Q&A section. 42 PUBLIC
Slide 43: Q&A Session: Akshat Kacker, JP Morgan
Q&A SESSION Akshat Kacker, JP Morgan Chase Good afternoon. Thank you. Akshat from JPM. Thank you for the presentation, and all the new details in there. I have three questions please. The first one on Automotive Technology margins. I know it is a difficult environment, very volatile. And we have the
Slide 44: Q&A: margins and capex answers
We are doing our work at the moment. Your question is spot on. But, again, I cannot give you a simple volume number that says from this onwards, it’s four, from this onwards, it’s five. There’s a drop through rate that needs to be calculated through the different divisions. And we are on it at the m
Slide 45: Q&A: raw material exposure and OEM demand
more or less running smoothly, and the impact will be more on, say, secondary effect which causes production stops at OEM? The second question then on your open exposure, currently, to prices like for raw mats which are increasing. Could you just give us a reminder on how long you are currently lock
Slide 46: Q&A: supply, gas and steel
any case, there is a backlog from the last years where I think cars are ordered, and that could smoothen it a little bit. In terms of material, gas supply, and all these kinds of things, I can say we started our taskforce already before the invasion on the 24th. So, for the Russian exposure, but als
Slide 47: Q&A: currency exposure
Klaus Rosenfeld Edoardo, thank you very much for your questions. You were a little bit difficult to understand. If we have not understood them correctly, please jump in and ask them again. Let me start with the last one, and Claus, you can take over. I think your last question was on currency exposu
Slide 48: Q&A: strategy and priorities
continue with our strategy. There’s no need to turn in circles now, or to change direction. Look, we’ll stay the course. What is necessary, and that’s what’s happening at the moment, all major strategic initiatives, all major strategic projects, all major Capex projects, all major Overhead spend wil
Slide 49: Q&A: acquisitions
Edoardo Spina, HSBC Investment acquisitions. Klaus Rosenfeld Acquisitions. So maybe on the acquisition strategy, I mean you - sorry, I didn’t hear that well. We have been, if I may say so, looking backwards, quite lucky that we have not engaged in any significant high-volume acquisition that we woul
Slide 50: Q&A: steel prices
expecting the steel prices to normalize. So, if you could provide us some update on that as well. That’ll be very helpful. Klaus Rosenfeld Okay, let me start with the last one, and Claus, you support me if you want to add something. The main commodity that we need to do our business is steel. I thin
Slide 51: Q&A: thermal management
of the year at the fairs. And that would mean that you basically have to split this business. I don’t know where the 400 million are coming from. That’s something that I cannot confirm at this call without going back to Matthias and his team. But in future, we will see this Thermal Management, the m
Slide 52: Q&A: liquidity and debt
2021, consider going back to the debt market either through the revolver route, or adding additional cash over this timeframe, given the uncertainty? Klaus Rosenfeld Well, I think Claus said it, we have a very comfortable liquidity position with 25% of our sales being available in liquidity. Be it c
Slide 53: Backup: IR Contact and Market Assumptions
Backup SCHAEFFLER IR Contact Investor Relations Phone: + 499132 82-4440 Email: ir@schaeffler.com Web: — www.schaefflercom/ir Backup Market assumptions as of 22"4 February! — Under review Automotive Technologies — Global LVP? 2022 24.1 774 Around -4 mn discount vs. IHS estimates 207 488 166 211 a3 a
Slide 54: FY 2022 Guidance - Suspended
Backup SCHAEFFLER FY 2022 Guidance as of 22" February! — Suspended Adjusted comparative figures 2021 Group Guidance Divisional Guidance Automotive Automotive Industrial Actuals Guidance Technologies Aftermarket FY 2021 Fy 2022 Actuals Guidance Actuals Guidance Actuals Guidance Sales growth? 10.2% 7-
Slide 55: Equity Story and Key Figures Q4 and FY 2021
Backup SCHAEFFLER Equity Story — Positioning Schaeffler for long-term value creation Roadmap 2025 in execution — Focus on capital allocation, portfolio management and FCF generation Automotive Technologies — Conquer leadership positions in New Business for electrified Powertrains and Chassis applica
Slide 56: Free Cash Flow details FY 2021
Backup SCHAEFFLER Free Cash Flow details FY 2021 — FCF supported by good operational performance FCF! FY 2020 vs. FY 2021 | in EUR mn O Net Working Capital EUR -277 mn -t—_ i +1.119 0 +298 694 +119 523 Key aspects Positive EBITDA development yoy due to good operating performance and prior year restr
Slide 57: Automotive Technologies - Outperformance and EBIT margin
Backup Automotive Technologies — Good Outperformance and EBIT margin? SCHAEFFLER Sales by business division | yoy growth EBIT? FY 2020 vs. FY 2021 | in EUR mn FY 2020 FY 2021 a 1,047 1,245 2,056 2,156 3,508 3,741 “62 na 1,204 1,294 <p -39 17 +70 816 8,436 Outperformance: Sales! vs. market developmen
Slide 58: Industrial - Double-digit growth in all regions
Backup Industrial — Double-digit growth in all regions, strong EBIT margin? Sales by region | yoy growth EBIT? FY 2020 vs. FY 2021 | in EUR mn SCHAEFFLER FY 2020 FY 2021 at Europe 1,312 1,473 5 Americas 528 588 39 — +194 - + Greater China 340 982 16 Asia/Pacific 451 525 fotal 3,132 3,568 Industrial
Slide 59: Key figures by Group and division
Backup Key figures by Group and division Group | in EUR mn Automotive Aftermarket | in FUR mn SCHAEFFLER Adjusted sures 2020 parative Qi20 Q220 «©9320 =©Q420 Qi21 a?21_ 321 120 Q220 9320 Q420 Qi21 Q?21 321 Sales 3,281 2,291 3,391 3,626 3,560 3,454 3,332 Sales 446 301 456 438 444 467 500 ‘Sales Growt