Expanding Horizons with Fineblanking, Forming and Stamping

FEINTOOL GROUP EXPANDING HORIZONS WITH FINEBLANKING, FORMING AND STAMPING Annual Report 2018 KEY FIGURES AT A GLANCE (ongoing operations only) 2018 2017 2016 2015 2014 01/01/–12/31/18 01/01/–12/31/17 01/01/–12/31/16 01/01/–12/31/15 01/01/–12/31/14 Operating figures in CHF m . Expected releases – high volume parts manufacturing 286.1 264.0 240.9 209.6 213.9 Orders received third (investment goods) 87.7 82.7 57.2 77.2 86.7 Orders backlog third (investment goods) 31.0 38.3 19.1 36.0 32.9 Net sales 679.6 612.3 552.2 508.9 503.4 Earnings before interest, taxes, depreciation and amortization (EBITDA) 89.7 83.2 76.0 1) 61.4 62.9 Operating profit (EBIT) 47.5 46.3 41.3 1) 32.9 35.1 Net earnings 30.5 27.7 26.6 1) 20.1 24.6 Return figures in % EBITDA margin 13.2 13.6 13.8 1) 12.1 12.5 EBIT margin 7.0 7.6 7.5 1) 6.5 7.0 Net return on sales 4.5 4.5 4.8 1) 3.9 4.9 Cash flow and balance sheet statistics in CHF m Cash flow from operating activities 66.0 38.5 74.1 40.1 50.8 Cash flow from investing activities (net) -121.0 -77.1 -59.4 -29.9 -12.1 Free cash flow -55.0 -38.6 14.7 10.2 38.7 Total assets 705.3 600.4 530.7 426.9 427.4 Equity 320.8 255.2 229.9 207.9 202.9 Liabilities 384.5 345.1 300.8 219.0 224.6 Net debt 147.9 81.9 16.2 11.1 9.3 Equity ratio 45.5 % 42.5 % 43.3 % 48.7 % 47.5 % Gross investments 101.2 60.1 74.9 31.8 43.4 Key figures per share in CHF Earnings per share (basic) 6.63 6.22 5.97 1) 4.51 5.53 Dividend per share 2.00 2) 2.00 2.00 1.50 1.50 Equity per share 65.26 57.19 51.61 46.72 45.55 Other Number of employees at year-end (excl. apprentices) 2 697 2 485 2 239 2 049 1 987 1) In financial year 2016, the Swiss pension fund approved an amendment to the regulations, which, according to IAS 19, had a positive impact on the consolidated statement of comprehensive income in the previous period to the tune of kCHF 7 083 (amount excl. deferred taxes of kCHF 1 629). The EBITDA, EBIT, net earnings, net return on sales as well as earnings per share are shown in this overview without this effect. 2) Board of Directors’ proposal Annual Report 2018 | Key figures 3 Feintool increases its sales by 11 percent in financial year. The profit before depreciation (EBITDA) increases to CHF 90 million. Netsales EBITDA 1) in kCHF in kCHF 700 000 90 000 80 000 650 000 70 000 600 000 60‘000 550 000 50 000 500 000 40 000 30 000 450 000 20 000 400 000 10 000 350 000 0 2016 2017 2018 2016 2017 2018 EBIT 1) in kCHF 50 000 45 000 40 000 35 000 30 000 25 000 20 000 1) In financial year 2016, the Swiss 15 000 pension fund adopted a change in policy that had a positive effective 10 000 of kCHF 7 083 on the statement of comprehensive income in accordance 5 000 with IAS 19. The EBITDA and EBIT 0 are shown in this overview without 2016 2017 2018 this effect. 4 Annual Report 2018 | Table of Contents 5 Feintool – the Company Financial Report Corporate Governance | Remuneration Report 6–21 22– 105 106–134 6 Letter to the Shareholders 22 Financial Report of the 107 Group Structure and Shareholders Feintool Group 10 Market report 107 Capital Structure 38 Notes to the Consolidated 14 Fineblanking Technology Segment Financial Statements 110 Board of Directors 16 System Parts Segment 84 Report by the Statutory Auditor 116 Management on the Consolidated Financial 18 Human Resources Statements 117 Compensation, Investments and Loans 20 Sustainability 90 Financial Report of Feintool International Holding AG 118 Shareholders' Participation Rights 93 Notes to the Financial 119 Change in Control and Statements of Feintool Defense Measures International Holding AG 119 Auditors 95 Affiliated Companies 120 Information Policy 101 Proposal of the Board of Directors 122 Risk Assessment 102 Report by the Statutory Auditor on the Annual Financial Statements 124 Remuneration Report 129 Report of the Statutory Auditor on the Remuneration Report 130 Glossary 132 Addresses of Operating Companies 6 KNUT ZIMMER ALEXANDER VON WITZLEBEN Dear Shareholders, Feintool closed the 2018 financial year with a pleasing result and continued the growth trend of previous years. Sales in the Feintool Group increased 11.0 % to CHF 679.6 million. The Group result rose slightly to CHF 30.0 million, with an equity ratio of 45.5 %. We would like our shareholders to share in this success, which is why the Board of Directors will propose a dividend of CHF 2.00 per share to the General Meeting. Complex market environment marred by political uncertainties Growth in the automotive industry temporarily came to a standstill in 2018. According to market researchers at LMC Automotive, global production of passenger cars and light commercial vehicles fell -0.5 % in the year as a whole compared to 2017. The European market performed best, recording slight growth of +0.2 %. By contrast, Asia and North America experienced declines of -1.1 % and -0.2 %, respectively. However, Feintool was largely able to withstand this trend: The System Parts segment, which supplies components to the automotive industry, grew +7.2 %. This was driven by continued good sales of SUVs, premium vehicles, automatic transmission and all-wheel drive cars as well as hybrid and, most recently, battery-powered electric vehicles. The System Parts segment recorded the largest growth in Europe (+8.3 %), followed by North America (+6.1 %) and Asia (+5.8 %). Within the automotive industry – which was weaker in the financial year 2018 – Feintool benefit- ed from the fact that, the segment mainly supplied the vehicle types that recorded significant (in Annual Report 2018 | Letter to the Shareholders 7 some cases double-digit) growth. Since the trend towards SUVs, premium vehicles (especially in the emerging markets), alternative drive systems and autonomous vehicles is likely to continue in the coming years, a further increase in demand for Feintool products is expected. For 2019, LMC Automotive is forecasting global market growth for the automotive industry of +1.0 % compared to 2018, despite the ongoing difficult market environment. The trade dispute between the USA and China, global trade policy in general, the upcoming Brexit and stricter CO2 targets make forecasts difficult. The first automobile manufacturers have already begun to relocate their production from the US to China – the effects of this development on the industry will become apparent in the course of the year. As end customer needs continue to develop in line with the trends already mentioned, Feintool expects business growth to continue in 2019, despite possible political uncertainties. Fineblanking Technology expands its technology leadership Business with fineblanking presses and tools developed very positively and once again exceeded the previous year’s result. The new FB one hydraulic press generation launched in 2018 is part of a consolidation concept that makes fineblanking even more energy-efficient, connectable, reli- able, cost-effective and powerful. The high demand shows that the high energy and resource efficiency of the FB one fits very well with existing and future customer requirements. In order to strengthen and further expand our market leadership, the product and service areas were radi- cally modernized. Thanks to optimized processes and numerous innovations, the Fineblanking Technology segment is perfectly positioned and – thanks to the orders received to date – expects to develop very well in 2019 as well. Investments in increasing market shares Business with the newly integrated electro sheet metal stamping technology also developed encouragingly. Due to the steadily rising demand for efficient electric motors, especially in the field of mobility, the investment in the acquisition of Stanz- und Laser Technik Jessen GmbH has proven to be the right move. The integration into the Feintool Group was completed towards the end of 2018. Feintool is thus expanding its technological portfolio to include electro sheet metal stamping expertise. In combination with the fineblanking and forming technologies, the company is very well positioned and prepared to gain further market shares. After completing the first electro sheet metal stamping orders in Europe in 2019, the technology will subsequently be rolled out in Asia and North America to supply the growth market of electromobility worldwide. Feintool is also benefiting from increasing demand for electric motors beyond the automotive industry, for example in industrial applications (assembly robots) or in the energy sector (actua- tors for wind turbines). Long-term strategy proves its worth Feintool owes its overall positive development in a challenging environment to a long-term strategy that we have been consistently implementing since 2010. Our focus is on fineblanking, forming and now also electro sheet metal stamping technologies, specifically in the European, North American and Asian markets. All our activities serve to strengthen and expand our position in these markets. In 2018, we invested around CHF 100 million, including in the fineblanking opera- tion in Most, Czech Republic. In the reporting period, the plant was equipped with production facilities and a state-of-the-art tool-room.

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