Analysts and Investors Conference

Bilanzpressekonferenz
Fiscal2014
Year 2014
Outlook
and Strategy
zum Geschftsjahr
Ausblick
und Strategie
March 31, 2015
31. Mrz 2015
1

Financial Year 2014: Highlights

Organic sales growth (ex scope changes and at constant exchange

rates) at 11.2% exceeds target range of 5-7% and tops car markets
growth of 3%
Full consolidation of EK Marusan Corporation adds EUR 23.1 mn in
sales, (minor earnings contribution before ppa; 0.3% margin dilution)
Clean EBIT adjusted for one-offs and EUR 3.4 mn ppa increased to EUR
162.3 (149.8 mn) mn Clean EBIT margin 12.2%
E-Mobility clearly below original expectations: Due to sluggish demand
for BEVs negative earnings contribution of EUR 8.1 mn (7.3 mn)
Brazilian subsidiary EUR 4 mn below budget due to market breakdown
Sixth consecutive year of dividend increase EUR 0.55 (0.50) per share

2014: Global car production driven by China, NAFTA and

European recovery Brazil and Russia down sharply
Car production 2014 (yoy change)

Brazil
Russia

-14.7%
-13.0%

India

0.1%

Japan

0.8%

W. Europe

3.6%

USA

5.0%

China
-20%

13.2%
-10%

0%

10%

20%

2014: Effects from assumption of control of ElringKlinger

Marusan Corporation
FY 2013
(as originally
reported)

FY 2013
(as restated;
at equity)

FY 2014
(at 100%)

25.1

--

46.2

EBIT

0.8

--

1.3

One-off gain

17.6

17.6

--

--

--

-2.2

in mn
Sales
2

PPA

Control of Marusan Corporation was assumed with effect from Dec. 31,
2013; due to retrospective application of IFRS 11, Marusan was
consolidated at equity in 2013 and fully consolidated in 2014
Margin dilution effect of 0.3 percentage points at Group level
Marusan sales in 2014 stable at constant exchange rates

Sales revenues driven by long-term organic growth

mn
1,400

1,326

1,200

1,127

1,1503

2012

2013

1,0332
1,000
796

800
608
600
475

6581
579

528

400
200
0
2005

2006

2007

2008

2009

2010

2011

2014

1 Incl. acquisitions of SEVEX (~ EUR 46mn sales) and Marusan (~EUR 14 mn sales)
2 Incl. acquisitions of flat gaskets business of Freudenberg (~ EUR 53 mn sales) and Hug Group (~ EUR 29 mn sales)
3 Marusan excluded with retrospective effect (~ EUR -25 mn sales) due to IFRS 11

Earnings before taxes

mn
180
153.1
150
126.6
114.9

120

113.91
94.0

87.6

90

131.32

70.9
60.0

60

49.4

30

0
2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

1 Excl. one-time gain of EUR 22.7 mn from sale of industrial park

2 Excl. one-time gain of EUR 17.6 mn resulting from the assumption of control of ElringKlinger Marusan Corporation

Group Sales by segment 2014 (py)

OE share up driven by structural growth and new products

Industrial Parks
0.3% (0.4%)

Services
0.6% (0.7%)

Engineered Plastics
7.0% (8.0%)
Aftermarket
9.9% (10.4%)

OE
82.2% (80.5%)

OE segment by division 2014 (py)

Strong growth in Exhaust Abatement and Specialty Gaskets

Exhaust
Abatement
7% (6%)

E-Mobility
1% (1%)

Shielding Technology
31% (32%)

Cylinder-Head Gaskets
17% (18%)

Specialty Gaskets
19% (18%)

Housing Modules
25% (25%)

Group Sales by region 2014 (py)

Recovery in W. Europe, Asia driven by EKMA consolidation

South America & Others

4.4% (5.7%)
Asia-Pacific
17.0% (14.3%)
incl. exports:
~25% of OE sales
Rest of Europe
32.7% (31.2%)

NAFTA
16.6% (17.4%)
incl. exports:
~25% of OE sales

Germany
29.3% (31.4%)

Employees worldwide 54% outside Germany

as of December 31, 2014 (py)
Group
7,255 (6,716)
+8.0%

Germany
3,342 (3,055)
+9.4%

AG
2,488 (2,301)
International
subsidiaries
3,913 (3,661)

Domestic subsidiaries
854 (754)

10

Financial Year 2014: One-offs

One-off expenses affecting Q4 performance:

EUR 2.0 mn of inventory corrections and adjustments at ElringKlinger
Korea related to plant relocation to the newly built site at Gumi
EUR 1.5 mn in warranty-related charges to settle insurance case from
2008 (allowance for receivables);
EUR 8.5 mn cash proceeds from insurance payments; no longer any
risks associated with this matter
EUR 1.4 mn one-time allocation to provisions due to amendments to
Management Board contracts of service in respect of long-term variable
incentive components of compensation (LTI II) related to prior years

11

FY 2014: Sales and EBIT (=operating result)

2014

2013
(restated)1

Change
in %

1,325.8

1,150.1

+15.3

Cost of Sales

967.4

824.5

+17.3

EBITDA

233.4

221.02

+5.6

EBIT
(operating result)

154.0

146.62

+5.0

Clean EBIT pre PPA

162.33

149.82,4

+8.3

in mn
Sales

1
2
3
4

Previous year's figures adjusted due to retroactive application of IFRS 11,

resulting from at equity consolidation of ElringKlinger Marusan Corporation in 2013
Excl. EUR 17.6 mn one-time gain from assumption of control of Marusan
Excl. EUR 2.0 mn of adjustments at ElringKlinger Korea, EUR 1.5 mn in warranty-related charges, EUR 1.4 mn
provisions for Mgt. Board compensation relating to prior periods, EUR 3.4 mn PPA
Excl. EUR 1.4 mn one-time gain ElringKlinger Korea, EUR 1.8 mn restruct. charge Nantiat, EUR 1.5 mn one-offs
Aftermarket, EUR 1.3 mn PPA

12

FY 2014 : Financial Result and Net Income

2014

2013
(restated) 1

Change
in %

-0.9

-15.3

+94.1

EBT

153.1

131.32

+16.6

Taxes

42.5

32.82

+29.6

Net income

110.6

98.52

+12.3

Profit attrib. to EK
shareholders

105.7

92.72

+14.0

EPS (in )

1.67

1.462

+14.4

in mn

Net finance cost

1
2

Previous year's figures adjusted due to retroactive application of IFRS 11,

resulting from at equity consolidation of ElringKlinger Marusan Corporation in 2013
Excl. EUR 17.6 mn one-time gain from assumption of control of Marusan
13

Sales by quarter

mn
400

350
324.0
303.3
300

286.8
296.11

250

340.9

333.5

281.01

327.4
294.0

291.1

287.51

285.51

2013
2014

200

150

100
Q1

Q2

Q3

1 Previous year's figures adjusted due to retroactive application of IFRS 11;

at equity treatment of ElringKlinger Marusan Corporation in 2013

Q4

14

EBIT by quarter (= operating result)

mn
60

50
42.1

41.01 41.5

41.2

38.21

40

34.61,2

32.81

29.2

30

2013
2014

20

10

0
Q1

Q2

Q3

Q4

1 Previous year's figure adjusted due to retroactive application of IFRS 11; at equity treatment of ElringKlinger Marusan Corporation
2 excl. EUR 17.6 mn one-time gain

15

Clean EBIT pre PPA

mn
60

50
43.0

41.2 42.3

40

40.1

42.1
34.81 34.9

33.7

2013

30

2014
20

10

0
Q1

Q2

Q3

Q4

1 Previous year's figure adjusted due to retroactive application of IFRS 11; at equity treatment of ElringKlinger Marusan Corporation
16

Q4 2014: OE sales up 20.6 % driven by core

business, higher tooling sales, EKMA scope change
FY EBIT +5.3%
111.2 (105.62)

mn
1,200
+17.7%
1,000

1,089.7

925.91

800

600

400

+20.6%
233.91

282.2

200

0
FY 2013

FY 2014

Q4 2013

Q4 2014

1 Previous year's figures adjusted due to retroactive application of IFRS 11; at equity treatment of ElringKlinger Marusan
Corporation (- EUR 25.1 mn in FY 2013; - EUR 5.6 mn in Q4 2013)
2 excl. EUR 17.6 mn one-time gain

17

Q4 2014: Aftermarket sales up by 26.5%

Strong performance in Eastern Europe
FY EBIT +11.6%
25.1 (22.5)

mn
150
+9.6%
120

130.7

119.3

90

60
+26.5%
33.4
26.4

30

0
FY 2013

FY 2014

Q4 2013

Q4 2014

18

Q4 2014: Sales Engineered Plastics down 0.5%

FY EBIT -4.3%
15.4 (16.1)

mn
120
+0.3%
100

92.6

92.9

80

60

40
22.2

-0.5%

22.1

20

0
FY 2013

FY 2014

Q4 2013

Q4 2014

19

2014: Exhaust Gas Purification division

Good yoy growth but H2 below H1 level

in mn

Hug Group
Q1

Q2

Q3

Q4

FY
14

FY
13

Sales

20.7

19.5

17.1

13.8

71.1

57.6

EBIT

7.6

4.0

2.0

1.5

15.1

13.6

PPA

0.3

0.3

0.3

0.3

1.2

1.3

Project-related and product-mix related business implies higher

sales/earnings volatility over the quarters also in 2015
Hugs EBIT margin (21.2%) to remain above Group average

Disproportionately high comparison basis in Q1

20

EBIT bridge financial year 2014

mn

154.0

EBIT
reported

3.4

PPA

2.0

1.5

1.4

162.3

4.0

Inv. corr., Charges Provisions Clean EBIT EBIT dev.

adj. EKKO warr. case
LTI II
pre ppa
Brazil

5.0

Earnings
diff.
E-Mob
21

Net cash from operating activities up 26.0% in 2014

mn
200

160

149.9
126.2
112.3

120

119.0

74.5

80

40

0
2010

2011

2012

2013

2014

22

Cash flow bridge 2014

mn
250
149.9

-163.1

200

150

100
62.9
50

52.9

-1.1

68.7

Change in
financial
liabilities

Others

Cash at
Dec 31,
2014

-32.8

0
Cash at
Dec 31,
2013

Net cash Investments Dividends

from
paid
operating
activities

23

Capex rate going forward expected at 7-9% of sales

mn
200
163.1
160
134.3
125.6

121.6

114.3

120

~110 ppe

96.8
82.2

79.4

80

74.4

79.2

Investments in
property, plant and
equipment and
intangible assets
Deprecation and
amortization

40

0
2010

2011

2012

2013

2014

2015

24

Balance sheet structure as at December 31, 2014

Equity ratio remains solid
Assets
in %

58.9

41.1

Dec 31,
2013

Liabilities and
shareholders equity in %

50.4

49.7

59.1

27.2

28.2

22.4

22.1

Dec 31,
2013

Dec 31,
2014

Shareholders equity
Non-current assets / liabilities
Current assets / liabilities

40.9

Dec 31,
2014

25

Consistent dividend policy

6th consecutive increase of regular dividend

1.00

0.80

0.60

0.55
0.45
0.401

0.40

0.20

0.50

0.35
0.20
0.15

0.00
2008

2009

2010

2011

2012

2013

2014

1 Regular dividend
26

Cutting CO2: Legislation a long-term driver for structural

growth
EU

US

China

2011: 135.7 g/km

2010: 255.6 g/km

2008: 185 g/km

CO2 limit in g/km

200

~178
~160

160

120

112

102

95
prop. 75-65

80
40
0
2020

2025

2015

2025

2015

2025

Source: A.T. Kearney, VDA, EK research

27

Its All About Emissions: Downsizing the combustion

engine versus E-Mobility

CORE
BUSINESS
Downsizing/ Lightweight

HUG: EAT Division

Exhaust abatement

New business areas

long-term potential
E-Mobility
28

Structural growth: Downsizing and Turbocharging

Improving efficiency in combustion engines

will clearly remain a key driver in the
foreseeable future
EK provides key technology enabling
engine for downsizing/ turbocharging
EK features a leading market position in
turbocharger gasketing
Projected market demand growth
CAGR > 10%

V-ring
Flap

Inlet gasket

Heat shield
Light-weight
resonator
Outlet gasket
29

Hug: Sustainable exhaust abatement off-road, on rail and

on water

Manifold applications: stationary engines,

material handling, oil and mining, natural
gas power plants
Driver: Stricter emission legislation for
non-road applications
US DPF truck retrofit market still solid:
Hug market share tops 30%
Significant sales potential with nauticlean
systems (DPF/DeNOx/HC) for ships (IMO
Tier 3)
Following promising tests, installation of
first DPF system for bunker oil powered
high sea ship engine

30

Growth with HFHT: New lightweight technology ramping

up in 2015
Unique process of combining lightweight
metal with plastics in cooperation with
premium OE
First products in high-growth area lightweight body/chassis components (carriers)
Largest contract in company history
ramping up in 2015 (EUR 130 mn in total)
SOP in China and North America in HY1
and HY2 2015 respectively
Significant follow-up market potential,
licensing contract terms in negotiation

31

E-Mobility Update: Fuel Cell Technology and Battery

Components
Cell contact systems for fully battery electric
vehicles and plug-in hybrids

2014 below expectations: sales at EUR 11.0

(8.4) mn, EBIT EUR -8.0 (-7.2 m) due to
sluggish demand for EVs
For the time being low oil and fuel prices
burden competitive position of BEVs
Fuel-cell: Bipolar plates and fuel-cell stacks
SOFC auxiliary power units for trucks, ships,
RVs, homes and stationary applications in
development (new enerday takeover adds
system expertise)
First contract for PEM fuel cell stacks for
material handling equipment
32

Outlook car markets 2015: Another year of moderate

growth - divergence continues
EK expects overall worldwide LV production to grow by 2% in 2015
NAFTA: continued slight growth
China: slowing growth at record levels, car sales expected to grow approx. 7%
Western Europe: Ongoing modest recovery in Western Europe but still way below precrisis level (2007); German car market will expand only slightly
Mixed signals from BRI markets:
Brazil: stabilization at low levels
Russia: another weak year ahead (-20 to -25%)
India: expected to continue recovery
Truck sales in Europe recovering (+5%) from low levels;
US truck sales increasing moderately following double digit gains in 2014

33

Outlook 2015: The Group

Outperforming market growth by 4-5%

Strong structural growth across all divisions
Due to ongoing sluggish demand in BEV/ PHEV market and low fuel prices
the E-Mobility division is not likely to see a fundamental improvement in
earnings performance (originally break-even target)
Brazil and Russia to remain at depressed levels
Positive earnings contribution from M&W acquisition but temporarily slight
margin dilution
Currency tailwinds

34

Outlook 2015: Financial performance

Guidance
FY 2015

FY 2014
in mn
1,325.8

5-7% organic growth

(plus 30 mn scope change M&W)

Clean EBIT
pre ppa

162.3

170-180

Investments1

147.0

approx. 110

ROCE

12.4%

slight increase

Sales
2

in plant, (investment) property and equipment

Order intake up 10.5% at EUR 1,418.6 mn (up 8.3% excl. scope changes)
Order backlog up 15.6% at EUR 688.2 mn
Capex also dependent on euro exchange rate

35

Bilanzpressekonferenz
zum Geschftsjahr 2014 Ausblick und Strategie
31. Mrz 2015
36

Disclaimer Forward-looking Statements and Predictions

This presentation contains statements about the future. These statements are based on current
expectations, market evaluations and predictions by the Management Board, and on information
that is currently available to them. The statements about the future should not be interpreted as
guarantees of the future developments and results that they refer to. Whilst the Management
Board are convinced that the statements that have been made, and the convictions and
expectations on which they are based, are realistic, they rely on suppositions that may
conceivably prove to be incorrect; future results and developments are dependant on a
multitude of factors, they involve various risks and imponderabilities that can affect whether the
ongoing development deviates from the expectations that have been expressed. These factors
include, for example, changes to the general economic and business situation, variations of
exchange rates and interest rates, poor acceptance of new products and services, and changes
to business strategy.

37