Schaeffler Group back to profitable growth
Full Year Results 2010
Analyst Conference
March 29th, 2011
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 are not historical facts; they include statements about Schaeffler Group's beliefs and expectations
and the assumptions underlying them. These statements are based on plans, estimates and projections as they are currently
available to the management of Schaeffler GmbH. Forward-looking statements therefore speak only as of the date they are made,
and Schaeffler Group undertakes no obligation to update any of them in light of new information or future events.
By their very nature, forward-looking statements involve risks and uncertainties. These statements are based on Schaeffler GmbH
management's current expectations and are subject to a number of factors and uncertainties that could cause actual results to differ
materially from those described in the forward-looking statements. Actual results may differ from those set forth in the forwardlooking statements as a result of various factors (including, but not limited to, future global economic conditions, changed market
conditions affecting the automotive industry, intense competition in the markets in which we operate and costs of compliance with
applicable laws, regulations and standards, diverse political, legal, economic and other conditions affecting our markets, and other
factors beyond our control).
This presentation is intended to provide a general overview of Schaeffler Group’s business and does not purport to deal with all
aspects and details regarding Schaeffler Group. Accordingly, neither Schaeffler Group nor any of its directors, officers, employees
or advisers nor any other person makes any representation or warranty, express or implied, as to, and accordingly no reliance
should be placed on, the accuracy or completeness of the information contained in the presentation or of the views given or implied.
Neither Schaeffler Group nor any of its directors, officers, employees or advisors nor any other person shall have any liability
whatsoever for any errors or omissions or any loss howsoever arising, directly or indirectly, from any use of this information or its
contents or otherwise arising in connection therewith.
The material contained in this presentation reflects current legislation and the business and financial affairs of Schaeffler Group
which are subject to change and audit.
Page 2
Schaeffler FY2010 Analyst Conference ● March 29th, 2011
Agenda
Page 3
Overview
Dr. J. Geißinger
Financials 2010
K. Rosenfeld
Refinancing
K. Rosenfeld
Outlook 2011
Dr. J. Geißinger
Schaeffler FY2010 Analyst Conference ● March 29th, 2011
1 Overview
Worldwide leader in bearings and automotive components
3 strong brands
Global Presence
Employees: approx. 67,000 worldwide
Locations: 180 worldwide
• Clutch systems
• Transmission
systems
• Rolling and
plain bearings,
linear guides
• Dual mass flywheels • Engine systems
• Precision
• Torque converters
components
• Rolling bearings for
industrial and
automotive
applications
• High-precision
bearings
• Aerospace
1998
Page 4
1999
2000
2001
2002
2003
2004
2005
2006
Schaeffler FY2010 Analyst Conference ● March 29th, 2011
2007
2008
2009
2010
1 Overview
Schaeffler at a glance
Global technology manufacturer with leading market positions
in various industrial sectors and in the automotive industry
Sales
€9.5 bn
Well-balanced business mix in OEM and aftermarket
From standard catalogue products to highly engineered solutions
High value-added due to integrated manufacturing processes,
superior product quality and outstanding innovation platform
EBIT margin
16%
Worldwide presence with excellent positioning in growth markets
Strong long-term track record of achieving above average
growth and sector leading profitability
Page 5
Schaeffler FY2010 Analyst Conference ● March 29th, 2011
1 Overview
We create value through our unique skill-set and know-how in …
… basic materials (steel)
… antifriction bearing
design
… inhouse tools design
… tribology
… low cost precision
manufacturing
… application
… aftermarket services
engineering expertise
Page 6
… surface treatment
Schaeffler FY2010 Analyst Conference ● March 29th, 2011
… condition monitoring
1 Overview
We have a strong track record of profitable growth
Sales
EBIT
in EUR bn
in EUR bn
4.1% CAGR
9.0
9.5
8.9
8.3
6.6
6.8
6.8
7.3
7.9
7.3
13.8% CAGR
1.1
1.5
1.1
1.0
1.0
0.8
0.7
0.5
2001 2002
2003 2004
2005 2006 2007
2008 2009 2010
2001 2002
EBIT
margin 8%
Page 7
0.5
7%
Schaeffler FY2010 Analyst Conference ● March 29th, 2011
0.4
2003 2004
2005 2006 2007
10%
12%
11%
13%
13%
2008 2009 2010
11%
5%
16%
1 Overview
We are growing in all regions
New plants 2001 – 2010
4
Lanskroun, Czech Republic
7
Kysuce, Slovakia
8
Debrecen, Hungary
5
Skalica, Slovakia
6
Szombathely, Hungary
9
Brasov, Romania
7
5
4
6
8
9
12
10
11
1
2
Page 8
14 15
13
1
Irapuato, Mexico
2
Puebla, Mexico
3
Sorocaba, Brasil
16
3
10
Dubai, United
Arab Emirates
11
Pune, India
Schaeffler FY2010 Analyst Conference ● March 29th, 2011
12
Yinchuan, China
13
Anting, China
14
Taicang 1, China
15
Taicang 2, China
16
Ho Chi Minh,
Vietnam
1 Overview
We are well diversified
Automotive
Industrial
Business Portfolio
Business Portfolio
Automotive
Aftermarket
16%
Engine
Systems
26%
Industrial Aftermarket
Transmission
Systems
41%
Chassis
Systems
17%
Sales 2010 = € 6,341 mn
Consumer Products
Fluids & Pneumatics
Heavy Industries
Motorcycles
Power Generation
Production Machinery
Power Transmission
Railway
Wind Power
Aerospace
Customer Portfolio
47%
Other customers
TOP
10 Customers
53% of Sales
Page 9
62%
Sales 2010 = € 3,012 mn
Customer Portfolio
Other customers
38%
Schaeffler FY2010 Analyst Conference ● March 29th, 2011
83%
TOP
10 Customers
17% of Sales
1 Overview
Highlights 2010 – Automotive division
Market growth 2010:
Schaeffler sales growth 2010:
25 %
34 %
Growth drivers were North America and Asia Pacific,
Engine and Chassis with overproportional sales increase
Schaeffler contributes strongly to key industry theme:
"Enhancing efficiency of combustion engines"
Success story – 25 years dual mass flywheel
Further growth drivers: dry dual clutch system / UniAir
Schaeffler Concept Cars – "Co2ncept-10%" and "Schaeffler Hybrid"
Page 10
Schaeffler FY2010 Analyst Conference ● March 29th, 2011
1 Overview
Dry dual clutch system – An innovation success story
Production volumes
2004:
- Project kick-off in R&D
2007:
- Start of production
- Market launch with first OEM customer
(VW)
2008:
- First full year of production
2010:
- Expansion of production capacities
in Hungary and China
- New OEM customers (e.g. Fiat)
2011:
- Further expansion of production
capacities in North America and Mexico
- New OEM customers
- Production of one million dry dual clutch
systems
2004
Page 11
2005 2006 2007 2008
2009 2010 2011E
Schaeffler FY2010 Analyst Conference ● March 29th, 2011
1 Overview
Highlights 2010 – Industrial division
Market growth 2010:
Schaeffler sales growth 2010:
7%
20 %
Strongest sales growth in wind power in China as well as
in Industrial Aftermarket
Sales in Asia Pacific now represent 31% of total Industrial sales
All businesses about to reach full capacity levels
Start of mass production of Generation C ball bearings
Wind Power: Supplier Awards in 2010 from Goldwind (China)
and Clipper Windpower (USA)
Page 12
Schaeffler FY2010 Analyst Conference ● March 29th, 2011
1 Overview
Industrial division – "Growing with the wind"
4Strong double digit market growth in wind power
market expected over the next years
4Schaeffler expects to outgrow the market:
4Market leader in bearings for the wind power
market
4Excellently positioned to service the fast
growing Chinese market
4Covering the entire product portfolio,
delivering up to 30 bearing parts in a wind
turbine
4Providing innovative products for new market
trends (e.g. large single-bearing solutions for
direct drive or hybrid solutions)
4Meeting today's market needs with our
comprehensive system knowledge in
engineering, prototyping, assembly and
condition monitoring
Page 13
Schaeffler FY2010 Analyst Conference ● March 29th, 2011
Agenda
Page 14
Overview
Dr. J. Geißinger
Financials 2010
K. Rosenfeld
Refinancing
K. Rosenfeld
Outlook 2011
Dr. J. Geißinger
Schaeffler FY2010 Analyst Conference ● March 29th, 2011
2 Financials 2010
Strong performance on all levels
2010
2009
∆
in EUR mn
in EUR mn
in EUR mn
1 Strong sales growth
Sales
9,495
7,336
+2,159
2 Excellent operating result
EBIT
1,509
446
+1,063
3 Positive net income
Net income
63
-1,204
+1,267
4 Sustainable positive free cash flow
Free cash
flow
566
-1,400
+1,966
5 Net debt reduced
Net debt
5,744
6,131
-387
Page 15
Schaeffler FY2010 Analyst Conference ● March 29th, 2011
2 Financials 2010
1
Q4 sales in line with positive trend
Sales
Schaeffler Group
Sales by region
Schaeffler Group
in EUR bn
share in % / vs. 2009 in %
+29%
vs. FY 2009
2.3
2.4
2.4
2.2
2.5
2.5
2.2
2.0
1.7
1.8
1.9
Asia / Pacific
2.0
Germany
+52%
+23%
22%
South America
+33%
6%
North America
8,905
7,336
9,495
27%
+36%
13%
32%
Europe1
Q1
Q2
Q3
Q4
2008
Gross
Profit 30%
Margin
Page 16
28% 28% 24%
Q1
Q2
Q3
Q4
2009
23% 22% 27% 25%
Q1
Q2
Q3
Q4
+20%
2010
31% 32% 33% 30%
1) without Germany
Schaeffler FY2010 Analyst Conference ● March 29th, 2011
2 Financials 2010
1
Automotive on a high level – Industrial catching up
Sales
Automotive
Sales
Industrial
+34%
in EUR mn
in EUR mn
vs. FY 2009
1,612
1,512 1,491
1,494
1,603
1,632
1,351
1,339
1,254
1,134
1,130
+20%
1,008
vs. FY 2009
819 868 820
788
814 806
703
5,476
Q1
Q2
Q3
4,743
Q4
2008
Gross
Profit 26%
Margin
Page 17
24% 23% 16%
Q1
Q2
Q3
6,341
Q4
2009
17% 20% 27% 24%
Q1
Q2
Q3
3,295
Q4
Q1
2010
29% 29% 31% 27%
Q2
Q3
Q4
37% 37% 34%
Schaeffler FY2010 Analyst Conference ● March 29th, 2011
623 600 587
642
3,012
2,513
2008
Gross
Profit 37%
Margin
750
Q1
Q2
Q3
Q4
2009
32% 27% 29% 28%
Q1
Q2
Q3
Q4
2010
38% 39%
39% 37%
2 Financials 2010
2
EBIT margin around 16% at record level
EBIT
Schaeffler Group
Δ EBIT
Schaeffler Group
in EUR mn
in EUR mn
+1,063
vs. FY 2009
404
398
+2,159
372
335
329
302
-954
+60
1,509
-83
-119
204 205
187
151
71
446
37
1,040
Q1
Q2
Q3
446
Q4
Q1
2008
EBIT
margin 14%
Page 18
13%
9%
Q2
Q3
1,509
Q4
2009
10%
2%
4%
10%
Q1
Q2
Q3
Q4
2010
8%
EBIT
FY 2009
Sales
16% 17% 16% 15%
Schaeffler FY2010 Analyst Conference ● March 29th, 2011
COGS
R&D
Selling Admin &
EBIT
Others FY 2010
2 Financials 2010
2
Industrial division with significant improvement of results
EBIT
Automotive
EBIT
Industrial
+722
in EUR mn
in EUR mn
vs. FY 2009
275
255
242
233
+341
184
151
149
145
133
153
vs. FY 2009
139
156
129
93
78
65
40
49
447
31
283
1,005
593
143 139
36
18
163
504
-41
Q1
Q2
Q3
Q4
Q1
2008
EBIT
Margin 12%
Page 19
10%
5%
Q2
Q3
Q4
2009
4%
-4%
4%
12% 10%
Q1
Q2
Q3
Q4
Q1
2010
16% 17% 16% 14%
Q2
Q3
Q4
Q1
2008
EBIT
Margin 18%
19% 16% 19%
Schaeffler FY2010 Analyst Conference ● March 29th, 2011
Q2
Q3
Q4
2009
11%
5%
6%
Q1
Q2
Q3
Q4
2010
3%
15% 17% 18% 17%
2 Financials 2010
3
Positive net income in 2010
Net Income1)
Schaeffler Group
Net Income1)
Schaeffler Group
in EUR mn
in EUR mn
236
9,495
180
147
176
97
1,509
Interest
Result
55
39
At-equity
Result
-7,986
-47
+47
Oneoff
effect
-810
One-off dilution loss of
EUR -396 mn
63
-396¹)
-203
-235
-287
Sales
Costs
EBIT
Financial
Result
Taxes/
Net
Minorities Income
-357
Q4
Q1
-422
Q1
Q2
Q3
Q4
2008
1) One-off dilution loss from capital increase Conti of EUR -396 mn.
Page 20
-344
Schaeffler FY2010 Analyst Conference ● March 29th, 2011
Q1
Q2
Q3
2009
Q2
Q3
2010
Q4
2 Financials 2010
Cash interest result at EUR 557 mn
3
Interest Result
Schaeffler Group1)
Composition of Interest Result
Schaeffler Group
in EUR mn
in EUR mn
810
121
132
557
310
289
255
246
240
224
170
141
119
124
15
34
428
Q1
Q2
Q3
2008
929
Q4
Q1
Q2
Q3
234
810
Q4
2009
Q1
Q2
Non-Cash
Q3
2010
Q4
P&L
Mark-to-market
interest rate
derivatives
1) For presentation purposes, results are shown as positive figures.
Page 21
323
Schaeffler FY2010 Analyst Conference ● March 29th, 2011
Others
Cash
Δ
Interest expenses Others /
Cash
financial debt IR hedging
2 Financials 2010
4
Strong Cash Flow generation
Free Cash Flow
Schaeffler Group
Capital Expenditure
Schaeffler Group
in EUR mn
in EUR mn
2,097
-227
292
250
-361
231
205
162
119
-557
98
566
65
-386
39
978
EBITDA
Q4
2010
Page 22
515
Δ Net
Working
Capital
86
Capex
-162
Interest
-120
Others
-279
Free
Cash Flow
40
Q1
Q2
Q3
Q4
Q1
9%
12% 10% 13%
Schaeffler FY2010 Analyst Conference ● March 29th, 2011
Q2
Q3
361
Q4
Q1
2009
7%
6%
2%
76
51
321
2008
in %
of
sales
72
Q2
Q3
Q4
2010
3%
2%
3%
3%
7%
2 Financials 2010
5
Leverage ratio reduced to 2.7x
Net Financial Debt / Leverage Ratio
Schaeffler Group
Available Funds
Schaeffler Group
in EUR bn
in EUR bn
1.5
1.5
Q3
Q4
1.3
1.2
6.1
6.1
6.1
5.9
1.2
1.1
6.0
5.6x
5.9
5.8
1.0
1.0
Q1
Q2
5.7
5.0x
4.4x
4.9x
4.2x
3.5x
3.0x
2.7x
Q1
Q2
Q3
2009
Q4
Q1
Q2
Q3
2010
Leverage Ratio (Net Financial Debt / LTM EBITDA)
Page 23
Q4
Q3
Q4
Q1
2009
Revolver
Schaeffler FY2010 Analyst Conference ● March 29th, 2011
Q2
2010
Bilateral Lines
Cash
2 Financials 2010
We create sustainable value
ROCE Schaeffler Group
ROCE Schaeffler Group
in %
in %
25.1
25.1
21.6
16.5 17.0
15.5
18.0
16.0 15.5
12.4
11.2
7.3
7.9
Q1
2008
Page 24
2009
2010
Q2
Q3 Q4
2008
Schaeffler FY2010 Analyst Conference ● March 29th, 2011
Q1
7.9 7.3
Q2 Q3 Q4
2009
Q1 Q2 Q3
2010
Q4
Agenda
Page 25
Overview
Dr. J. Geißinger
Financials 2010
K. Rosenfeld
Refinancing
K. Rosenfeld
Outlook 2011
Dr. J. Geißinger
Schaeffler FY2010 Analyst Conference ● March 29th, 2011
3 Refinancing
Current financing structure
Status quo1)
4 CUI
2 Junior Revolver
Key elements
1 Junior Term Loan
►
Bullet structure maturing in 2015 and interest rate
of 7% p.a. PIK2)
Schaeffler
Holding GmbH
& Co. KG
2 Junior Revolver
►
Not drawn yet
1 Junior Term Loan
3 CRP
Schaeffler
Verwaltungs
GmbH
ITPBanks3)
Holding
Schaeffler Group
1 Senior Term Loan
2 Senior Revolver
100%
Schaeffler
Technologies
GmbH & Co. KG
Schaeffler
GmbH
32.9%
42.2%
Free
Float
24.9%
Continental AG
►
3 Contingent Remuneration Payment (CRP)
Pushes interest rate of Junior facility to 17% p.a.
4 Contingent Upside Instrument (CUI)
►
Additional compensation for banks in an amount
of 25% of a calculative value appreciation
► Senior Term Loan
1 Bullet structure maturing in 2014 and customary
cash interest rates
► Senior Revolver
2 Only marginally drawn
1) Structure after capital increase Continental AG in January 2010 and before Junior Refinancing
3) M.M.Warburg and Bankhaus Metzler
Page 26
2) Incl. a small cash element
Schaeffler FY2010 Analyst Conference ● March 29th, 2011
3 Refinancing
Refinancing concept
3 key elements
1
Page 27
Refinancing Junior loan
2
Rearranging participation structure
3
Converting into a stock corporation (AG)
Schaeffler FY2010 Analyst Conference ● March 29th, 2011
Strategic
and financial
flexibility
3 Refinancing
1
Refinancing Junior Loan: Significant pay down at Schaeffler Holding
Refinancing structure
Key elements
Junior (in EUR bn)
7.4
CUI
PIK
-0.4
Excess
Cashflow
► €2.8 billion net paydown of Junior Term Loan
from Excess Cash Flow, debt pushdown und ABO1)
-0.6
Debt
Pushdown
Junior
Term
Loan
4.6
-1.8
ABO1)
2.8
repayment
3/2011
Total
Leverage 7.1x
4.6
1.7
Junior
Bond
2.9
Junior
Term
Loan
pro forma 3/2011
► CUI and Junior Interest crystallized
► Refinancing through €1.7 billion Junior Bond
maturing in March 2018 and €2.9 billion
Junior Term Loan maturing in December 2015
6.0x
Senior (in EUR bn)
7.0
+0.1
5.9
+0.4
Net
Debt
Senior
7.0
Excess
Cash Flow
+0.6
Others
Debt
Pushdown
3/2011
Senior
Leverage 3.0x
Senior
Term
Loan
► Net Debt at Senior level increased to approx.
€7.0 billion (interest rates unchanged for the time
being)
► Total leverage ratio (Junior and Senior) reduced
pro forma 3/2011
3.5x
1) Proceeds from sale of Continental shares
Page 28
Schaeffler FY2010 Analyst Conference ● March 29th, 2011
3 Refinancing
2
Rearranging participation structure: Increasing holding in Continental
Key changes
New structure
► ABO increases Continental AG Free Float from 25%
to approx. 40%; enabling potential DAX re-entry
Schaeffler
Holding GmbH
& Co. KG
► Schaeffler increases participation in Continental AG
from 42.2% to 49.9%; upstreaming of approx. 6% of
holdings from GmbH to Holding
Schaeffler
Verwaltungs
GmbH
► 12-months lock-up for remaining shares of
Schaeffler, B. Metzler and M.M. Warburg
ITPBanks 1)
13.8%
10.4%
New shareholder structure Continental AG
extended
liabilitiy
Free
Float
Schaeffler
GmbH
100%
Schaeffler
Technologies GmbH
& Co. KG
Schaeffler
Verwaltungs
GmbH
(before: 0%)
39.7%
(before: 24.9%)
39.7%
36.1%
36.1%
Continental AG
Schaeffler
GmbH
(before: 42.2%)
1) M.M.Warburg und Bankhaus Metzler
Page 29
Free Float
13.8%
Schaeffler FY2010 Analyst Conference ● March 29th, 2011
10.4%
B. Metzler/
M.M. Warburg
(before: 32.9%)
Agenda
Page 30
Overview
Dr. J. Geißinger
Financials 2010
K. Rosenfeld
Refinancing
K. Rosenfeld
Outlook 2011
Dr. J. Geißinger
Schaeffler FY2010 Analyst Conference ● March 29th, 2011
4 Outlook 2011
Schaeffler creates flexibility for further strategic development
Strong operating business
Refinancing Junior and
rearranging holdings in Continental AG
Profitable growth above market
Page 31
Schaeffler FY2010 Analyst Conference ● March 29th, 2011
Strategic
and financial
flexibility
4 Outlook 2011
Well positioned for further profitable growth
Page 32
1
Key trends will drive sector growth
2
Leading positions in fast growing markets
3
Components, modules and systems
4
Full innovation pipeline
Schaeffler FY2010 Analyst Conference ● March 29th, 2011
We will continue to
grow above market
4 Outlook 2011
Key trends will drive sector growth
1
Energy Efficiency / CO2 - reduction
Regenerative Energies
Friction optimized bearings
Comprehensive portfolio for wind turbines
Performance optimized bearings (x-Life)
Co2ncept-10%
Simulation of the entire drive train in wind turbines
Bearing solutions for new energy technologies
Schaeffler defines
new standards
in modern engineering
From Mechanics to Mechatronics
E-Mobility
UniAir
Schaeffler Hybrid Car
Electromechanic drive train components
Bearings with integrated functions
Page 33
eWheelDrive (wheel hub motor)
E-Bike: torque sensor bottom bracket
Schaeffler FY2010 Analyst Conference ● March 29th, 2011
4 Outlook 2011
Leading positions in fast growing markets
2
Aerospace, Railway
Automotive, Consumer Products
Market
CAGR 2010-2013
+2.5-5.0 %
Market
CAGR 2010-2013
+5.0-7.5 %
Schaeffler sales
estimation
Above
market growth
Schaeffler sales
estimation
Above
market growth
Production Machinery, Power Transmission
Wind Power
Market
CAGR 2010-2013
+7.5-10.0 %
Market
CAGR 2010-2013
>10 %
Schaeffler sales
estimation
Above
market growth
Schaeffler sales
estimation
Well above
market growth
Page 34
Schaeffler FY2010 Analyst Conference ● March 29th, 2011
4 Outlook 2011
Aligning regional production with fast growing regions
2
New locations* and plant extensions (2011 – 2013)
2
Kysuce, Slovakia
3
Brasov, Romania
2
3
5
4
4
Nanjing*, China
5
Yinchuan, China
6
Taicang 4, China
7
Taicang 5, China
8
Suzhou, China
6
7
9
10
1
1
Page 35
11
Irapuato, Mexico
9
Savli*, India
10
Pune, India
11
Hosur, India
Schaeffler FY2010 Analyst Conference ● March 29th, 2011
8
4 Outlook 2011
3
Great mix of components, modules and systems
Content Share
Complexity Level
Value Added
From mechanics
to mechatronics
Systems
Modules
Components
Page 36
Schaeffler FY2010 Analyst Conference ● March 29th, 2011
4 Outlook 2011
4
Full innovation pipeline
Number of patent registrations
Key aspects
1,641
1,276
4 5,000 employees at 40 locations worldwide
develop new and efficient solutions in close
cooperation with customers
1,146
1,084
4 Schaeffler is in the Top 4 of the most innovative
companies in Germany in 2010
896
4 Constant R&D spending rate of 5% of sales
4 More than 16,000 running patents in Germany
2006
Rank in
Germany¹
#9
2007
2008
2009
#7
#5
#5
2010
#4
1) Source: German Patent and Trademark Office
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Schaeffler FY2010 Analyst Conference ● March 29th, 2011
4 Outlook 2011
Key focus areas in 2011
Growth
Profitability
Sales growth
8-10 %
EBIT Margin
> 13 %
CAPEX
6-8 % of sales
Free Cash Flow
sustainably positive
Quality
Innovation
Quality policy
Zero defects
R&D expenses
around 5 % of sales
Employees
Dedicated education
for new employees
Innovation
management
Increase of patent
registrations
Page 38
Schaeffler FY2010 Analyst Conference ● March 29th, 2011
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