J.P. Morgan European Capital Goods CEO Conference 2016 Jürg Oleas PENNYHILL PARK HOTEL, 10 JUNE 2016
Disclaimer This presentation contains forward-looking statements. Forward-looking statements may include, in particular, statements about future events, future financial performance, plans, strategies, expectations, prospects, competitive environment, regulation and supply and demand. Statements with respect to the future are characterized by the use of words such as "expect", "intend", "plan", "anticipate", "believe", "estimate" and similar terms. Forward-looking statements are based on our current assumptions and forecasts. These statements naturally entail risks and uncertainties, which may cause the actual results of operations, financial position or performance to diverge materially from the estimates given here. Factors that could cause such a divergence include, inter alia, changes in the economic and business environment, fluctuations in exchange rates and interest rates, launches of competing products, poor acceptance of new products or services, and changes in business strategy. Given these uncertainties, readers should not put undue reliance on any forward-looking statements. We undertake no obligation to update or revise any forward-looking statements. Due to rounding, the sum of percentages of order intake and sales by region as well as by customer industry may vary from 100%. 2 J.P. Morgan European Capital Goods CEO Conference June 2016
ARTE framework as pillars for GEA’s strategy Target Footprint 2020 A pplications R egions T echnologies Functional E xcellence • Exploit market potential • Capture global growth • Strengthen innovation • Increase efficiency in target applications opportunities and technological in operations and leadership support functions • Align GEA-wide • Expand local presence • Foster cross-business • Reduce organizational application strategy • Coordinate regional and customer colla-boration in R&D complexity approaches across approach GEA 3 J.P. Morgan European Capital Goods CEO Conference June 2016
Project “Fit for 2020”: From four stand -alone Segments to two integrated Business Areas Former organization New current organization Executive Board Executive Board Equipment Solutions Global Head- SSC FT ME RT PE BA BA Corp. quarter Center Support Support Support Support Regions Regions Regions Regions Regions / Countries • Stand-alone effective Segments driving • Bundling of Segments into two BAs own technologies and market approaches according to business model logic • Limited group perspective and role of the • “One GEA” in countries as a platform for corporate center growth within regions / countries • Each Segment with individual go-to-market • Strengthening and streamlining of concepts and regional footprint global group functions • Increased efficiency and standardization in newly established Shared Service Center 4 J.P. Morgan European Capital Goods CEO Conference June 2016
Financial Targets for FY 2017 - FY 2020: Operating EBIT Margin: 13% to 16% GEA has gradually managed up Operating EBIT Margin to > 11% Max. 16% Operating EBIT-Margin (LTM) Upside: Service Op. leverage * 11.7% 11.4% Underperforming unit 10.6% Min. 13% 10.5% 10.3% 8.8% 8.4% 6.8% 2008 2009 2010 2011 2012 2013 2014 2015 2 1 2017 12 13 2020 * In FY 2015 € 23m out of the guided € 125m cost savings until 2017 were already achieved 5 J.P. Morgan European Capital Goods CEO Conference June 2016
Implementation of “ OneGEA ” organization opens up further optimization potentials Material costs (~EUR 2.2bn) are the Global manufacturing footprint most significant cost lever for GEA instrumental for scale economies at GEA • GEA to now kick-off in-depth analysis of optimization potential • Quantification of the details in H2 2016 6 J.P. Morgan European Capital Goods CEO Conference June 2016
Use of funds: Acquisitions have priority Capital allocation priorities 1. Dividend payments: Change of payout ratio from 1/3 to 40-50% of net income 2. Strengthen GEA’s application know -how by doing (bolt-on) acquisitions 3. Repayment of financial debt 4. Invest in organic business development (Service, R&D, regional presence) 5. Distribution of residual cash to shareholders 7 J.P. Morgan European Capital Goods CEO Conference June 2016
Acquisition criteria focus on strategy and value creation A pplications R egions T echnologies Functional E xcellence A ARTE fit B Strategic fit Market Target attractiveness attractiveness Value C creation Earnings Total share- DCF > CFD > ROCE > per share holder return Price hurdle rate hurdle rate 8 J.P. Morgan European Capital Goods CEO Conference June 2016
Order trends by customer industry as of Q1 2016 Q1 16 Quarter selective Q1 16 LTM Share of order intake Q/Q Y/Y Y/Y Q1 16 LTM Dairy Farming 13% Dairy Processing 24% Food 23% Beverages 12% Food & Beverages 72% Pharma 8% Chemical 7% Pharma/Chemical 15% Oil & Gas 1% Marine 3% Others 9% Other Industries 13% GEA Group 100% Less than -5% Between -5% and -1% Between -1% and 1% Between 1% and 5% More than 5% 9 J.P. Morgan European Capital Goods CEO Conference June 2016
Current scope of BA Solutions’ food applications Coffee & Tea Frozen Food Oils, Starch & Ingr. Bakery Applications Starch & Coffee & Starch Liquid Meat & Fruit & Ready Tea Edible Oils Ingredients Food Seafood Vegetables Meals Bakery Derivatives Processed Meat Instant Coffee Edible Oils Starch Cultures Sauces Frozen Fruit Ready Meals Bread & Poultry Processed Fish Frozen Instant Tea Margarine Modified Starch Emulsifiers Dressings Cakes & Seafood Vegetables Frozen Spreadable Starch Frozen Baked Coffee Extract Fibers Mayonnaise Meat Substitutes Processed Oils & Fats Derivatives Goods Potatoes Dried Fruits & Tea Extract Flavors Ketchup Pastries Vegetables Sub- Tomato Pastes & Cocoa Powder Proteins Biscuits Applications Purees X-in-1 (Coffee/Tea; Milk; Raising Agents Spreads Pizza Sugar) Sugars & Soups Frozen Desserts Sweeteners Pet Food Ingredients Coffee / Tea Whitener 10 J.P. Morgan European Capital Goods CEO Conference June 2016
FY 2016 guidance • In the absence of any further weakening of global economic growth and • provided that there are no significant currency translation impacts, and • before new acquisitions in 2016 as well as • before one-offs we are aiming in FY 2016 for: Sales Operating EBITDA (EURm) Operating Cash Flow Driver Margin 645 – 715 moderate growth 10.0% - 11.0% (in reported terms) 11 J.P. Morgan European Capital Goods CEO Conference June 2016
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