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 forward- looking 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
Overview Dr. J. Geißinger
Financials 2010 K. Rosenfeld
Refinancing K. Rosenfeld
Outlook 2011 Dr. J. Geißinger
Page 3 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 • Rolling and • Rolling bearings for • Transmission plain bearings, industrial and systems linear guides automotive applications • Dual mass flywheels • Engine systems • High-precision • Torque converters • Precision components bearings • Aerospace
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Page 4 Schaeffler FY2010 Analyst Conference ● March 29th, 2011 1 Overview Schaeffler at a glance
Global technology manufacturer with leading market positions in various industrial sectors and in the automotive industry
Sales Well-balanced business mix in OEM and aftermarket €9.5 bn
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 …
… antifriction bearing … basic materials (steel) … inhouse tools design … surface treatment design
… low cost precision … application … tribology … aftermarket services … condition monitoring manufacturing engineering expertise
Page 6 Schaeffler FY2010 Analyst Conference ● March 29th, 2011 1 Overview We have a strong track record of profitable growth
Sales EBIT in EUR bn in EUR bn 4.1% CAGR 9.5 9.0 8.9 8.3 7.9 7.3 7.3 6.8 6.8 6.6 13.8% CAGR 1.5
1.1 1.1 1.0 1.0 0.8 0.7 0.5 0.5 0.4
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
EBIT margin 8% 7% 10% 11% 12% 13% 13% 11% 5% 16%
Page 7 Schaeffler FY2010 Analyst Conference ● March 29th, 2011 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
5 7 4 6 8 9 12 Yinchuan, China
13 Anting, China
12 14 15 14 Taicang 1, China 10 13 11 15 Taicang 2, China 1 2 16 16 Ho Chi Minh, Vietnam
1 Irapuato, Mexico 10 Dubai, United 2 Puebla, Mexico Arab Emirates 3 3 Sorocaba, Brasil 11 Pune, India
Page 8 Schaeffler FY2010 Analyst Conference ● March 29th, 2011 1 Overview We are well diversified
Automotive Industrial
Business Portfolio Business Portfolio
Automotive Engine Industrial Aftermarket 38% 62% Consumer Products Aftermarket 16% Systems 26% Fluids & Pneumatics Heavy Industries Motorcycles Power Generation Transmission Chassis Production Machinery Systems 41% Systems 17% Power Transmission Railway Wind Power Aerospace Sales 2010 = € 6,341 mn Sales 2010 = € 3,012 mn
Customer Portfolio Customer Portfolio
Other customers 47% Other customers 83% TOP TOP 10 Customers 10 Customers
17% of Sales 53% of Sales
Page 9 Schaeffler FY2010 Analyst Conference ● March 29th, 2011 1 Overview Highlights 2010 – Automotive division
Market growth 2010: 25 % Schaeffler sales growth 2010: 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 2005 2006 2007 2008 2009 2010 2011E
Page 11 Schaeffler FY2010 Analyst Conference ● March 29th, 2011 1 Overview Highlights 2010 – Industrial division
Market growth 2010: 7 % Schaeffler sales growth 2010: 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
Overview Dr. J. Geißinger
Financials 2010 K. Rosenfeld
Refinancing K. Rosenfeld
Outlook 2011 Dr. J. Geißinger
Page 14 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
Free cash 4 Sustainable positive free cash flow 566 -1,400 +1,966 flow
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 Sales by region Schaeffler Group Schaeffler Group in EUR bn +29% share in % / vs. 2009 in % vs. FY 2009 2.5 2.5 2.4 2.3 2.4 2.2 2.2 Asia / Pacific Germany 2.0 2.0 1.9 +52% +23% 1.7 1.8 22% 27%
South America 6% +33%
North America 13% 8,905 7,336 9,495 +36% 32% Europe1 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 +20% 2008 2009 2010 Gross Profit 30% 28% 28% 24% 23% 22% 27% 25% 31% 32% 33% 30% Margin 1) without Germany
Page 16 Schaeffler FY2010 Analyst Conference ● March 29th, 2011 2 Financials 2010 1 Automotive on a high level – Industrial catching up
Sales Sales Automotive +34% Industrial in EUR mn vs. FY 2009 in EUR mn
1,612 1,632 1,603 1,5121,491 1,494 1,339 1,351 1,254 1,134 1,130 +20% 1,008 vs. FY 2009 819 868 788 820 814 806 750 703 642 623 600 587
5,476 4,743 6,341 3,295 2,513 3,012
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2008 2009 2010 2008 2009 2010 Gross Gross Profit 26% 24% 23% 16% 17% 20% 27% 24% 29% 29% 31% 27% Profit 37% 37% 37% 34% 32% 27% 29% 28% 38% 39% 39% 37% Margin Margin
Page 17 Schaeffler FY2010 Analyst Conference ● March 29th, 2011 2 Financials 2010 2 EBIT margin around 16% at record level
EBIT Δ EBIT Schaeffler Group Schaeffler Group in EUR mn in EUR mn +1,063 vs. FY 2009 404 +2,159 398 372 329 335 302 -954 +60 1,509 -83 -119 204 205 187 151
71 446 37
1,040 446 1,509
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 EBIT Sales COGS R&D Selling Admin & EBIT FY 2009 Others FY 2010 2008 2009 2010
EBIT margin 14% 13% 9% 10% 2% 4% 10% 8% 16% 17% 16% 15%
Page 18 Schaeffler FY2010 Analyst Conference ● March 29th, 2011 2 Financials 2010 2 Industrial division with significant improvement of results
EBIT EBIT Automotive Industrial +722 in EUR mn vs. FY 2009 in EUR mn
275 255 242 233
184 +341 vs. FY 2009 149 151 153 156 145 139 143 139 133 129
93 78 65 40 49 31 36 18 447 283 1,005 593 163 504
-41
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2008 2009 2010 2008 2009 2010
EBIT 14% EBIT 17% Margin 12% 10% 5% 4% -4% 4% 12% 10% 16% 17% 16% Margin 18% 19% 16% 19% 11% 5% 6% 3% 15% 17% 18%
Page 19 Schaeffler FY2010 Analyst Conference ● March 29th, 2011 2 Financials 2010 3 Positive net income in 2010
Net Income1) Net Income1) Schaeffler Group Schaeffler Group in EUR mn in EUR mn
9,495 236 180 176 147 97 55 39 Interest At-equity 1,509 Result Result -7,986 +47 -47 One-off dilu- One- tion loss of -810 off effect EUR -396 mn 63 ) -203 -396¹ -235 -287
-344 -357
-422 Sales Costs EBIT Financial Taxes/ Net Result Minorities Income Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2008 2009 2010
1) One-off dilution loss from capital increase Conti of EUR -396 mn.
Page 20 Schaeffler FY2010 Analyst Conference ● March 29th, 2011 2 Financials 2010 3 Cash interest result at EUR 557 mn
Interest Result Composition of Interest Result Schaeffler Group1) Schaeffler Group in EUR mn in EUR mn
810 121 132
557 310 323 289 255 246 240 224
170 141 124 119 234
34 15 428 929 810 Non-Cash Cash
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 P&L Mark-to-market Others Δ Interest expenses Others / interest rate Cash financial debt IR hedging 2008 2009 2010 derivatives
1) For presentation purposes, results are shown as positive figures.
Page 21 Schaeffler FY2010 Analyst Conference ● March 29th, 2011 2 Financials 2010 4 Strong Cash Flow generation
Free Cash Flow Capital Expenditure Schaeffler Group Schaeffler Group in EUR mn in EUR mn
2,097
-227 292
250 -361 231 205
162 119 -557 98 566 76 65 72 -386 51 39 978 321 361
EBITDA Δ Net Capex Interest Others Free Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Working Cash Flow Capital 2008 2009 2010 in % Q4 515 86 -162 -120 -279 40 of 9% 12% 10% 13% 7% 6% 2% 3% 2% 3% 3% 7% 2010 sales
Page 22 Schaeffler FY2010 Analyst Conference ● March 29th, 2011 2 Financials 2010 5 Leverage ratio reduced to 2.7x
Net Financial Debt / Leverage Ratio Available Funds Schaeffler Group Schaeffler Group in EUR bn in EUR bn 1.5 1.5 1.3 1.2 1.2 1.1 6.1 6.1 6.1 6.0 1.0 1.0 5.9 5.9 5.6x 5.8 5.7 5.0x
4.9x 4.4x
4.2x
3.5x
3.0x 2.7x
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2009 2010 2009 2010
Leverage Ratio (Net Financial Debt / LTM EBITDA) Revolver Bilateral Lines Cash
Page 23 Schaeffler FY2010 Analyst Conference ● March 29th, 2011 2 Financials 2010 We create sustainable value
ROCE Schaeffler Group ROCE Schaeffler Group in % in %
25.1 25.1
21.6
18.0 15.5 16.5 17.0 16.0 15.5 12.4 11.2 7.3 7.9 7.9 7.3
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2008 2009 2010 2008 2009 2010
Page 24 Schaeffler FY2010 Analyst Conference ● March 29th, 2011 Agenda
Overview Dr. J. Geißinger
Financials 2010 K. Rosenfeld
Refinancing K. Rosenfeld
Outlook 2011 Dr. J. Geißinger
Page 25 Schaeffler FY2010 Analyst Conference ● March 29th, 2011 3 Refinancing Current financing structure
Status quo1) Key elements
4 CUI Schaeffler ►1 Junior Term Loan Holding GmbH Bullet structure maturing in 2015 and interest rate 2 Junior Revolver & Co. KG of 7% p.a. PIK2)
►2 Junior Revolver Not drawn yet 1 Junior Term Loan Schaeffler ITP- ►3 Contingent Remuneration Payment (CRP) Verwaltungs Banks3) 3 CRP GmbH Pushes interest rate of Junior facility to 17% p.a.
Holding ►4 Contingent Upside Instrument (CUI) Additional compensation for banks in an amount Schaeffler Group of 25% of a calculative value appreciation
1 Senior Term Loan Schaeffler ► Senior Term Loan 32.9% 2 Senior Revolver GmbH Free 1 Bullet structure maturing in 2014 and customary Float cash interest rates 24.9% 100% 42.2% ► Senior Revolver Schaeffler 2 Only marginally drawn Technologies Continental AG GmbH & Co. KG
1) Structure after capital increase Continental AG in January 2010 and before Junior Refinancing 2) Incl. a small cash element 3) M.M.Warburg and Bankhaus Metzler Page 26 Schaeffler FY2010 Analyst Conference ● March 29th, 2011 3 Refinancing Refinancing concept
3 key elements
1 Refinancing Junior loan
Strategic 2 Rearranging participation structure and financial flexibility
3 Converting into a stock corporation (AG)
Page 27 Schaeffler FY2010 Analyst Conference ● March 29th, 2011 3 Refinancing 1 Refinancing Junior Loan: Significant pay down at Schaeffler Holding
Refinancing structure Key elements
Junior (in EUR bn) 7.4 ► €2.8 billion net paydown of Junior Term Loan CUI -0.4 1) Excess -0.6 from Excess Cash Flow, debt pushdown und ABO Cashflow PIK Debt 4.6 4.6 Push- down -1.8 1.7 Junior ► CUI and Junior Interest crystallized Junior ABO1) Bond Term Loan Junior ► Refinancing through €1.7 billion Junior Bond 2.9 Term 2.8 Loan maturing in March 2018 and €2.9 billion repayment Junior Term Loan maturing in December 2015 3/2011 pro forma 3/2011 Total Leverage 7.1x 6.0x
Senior (in EUR bn)
7.0 7.0 ► Net Debt at Senior level increased to approx. +0.1 5.9 +0.6 Others €7.0 billion (interest rates unchanged for the time +0.4 Debt being) Excess Push- Senior Net Cash Flow down Term Debt Loan Senior ► Total leverage ratio (Junior and Senior) reduced
3/2011 pro forma 3/2011 Senior Leverage 3.0x 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
New structure Key changes
► ABO increases Continental AG Free Float from 25% Schaeffler Holding GmbH to approx. 40%; enabling potential DAX re-entry & Co. KG ► Schaeffler increases participation in Continental AG from 42.2% to 49.9%; upstreaming of approx. 6% of holdings from GmbH to Holding ► 12-months lock-up for remaining shares of Schaeffler ITP- Verwaltungs 1) Schaeffler, B. Metzler and M.M. Warburg GmbH Banks
13.8% 10.4% New shareholder structure Continental AG extended liabilitiy Schaeffler Free Verwaltungs Schaeffler Float Free Float GmbH (before: 24.9%) GmbH (before: 0%) 13.8% 39.7% 39.7% 100% 36.1%
36.1% Schaeffler Technologies GmbH Continental AG Schaeffler 10.4% B. Metzler/ & Co. KG GmbH M.M. Warburg (before: 42.2%) (before: 32.9%)
1) M.M.Warburg und Bankhaus Metzler
Page 29 Schaeffler FY2010 Analyst Conference ● March 29th, 2011 Agenda
Overview Dr. J. Geißinger
Financials 2010 K. Rosenfeld
Refinancing K. Rosenfeld
Outlook 2011 Dr. J. Geißinger
Page 30 Schaeffler FY2010 Analyst Conference ● March 29th, 2011 4 Outlook 2011 Schaeffler creates flexibility for further strategic development
Strong operating business
Refinancing Junior and Strategic rearranging holdings in Continental AG and financial flexibility
Profitable growth above market
Page 31 Schaeffler FY2010 Analyst Conference ● March 29th, 2011 4 Outlook 2011 Well positioned for further profitable growth
1 Key trends will drive sector growth
2 Leading positions in fast growing markets
We will continue to 3 Components, modules and systems grow above market
4 Full innovation pipeline
Page 32 Schaeffler FY2010 Analyst Conference ● March 29th, 2011 4 Outlook 2011 1 Key trends will drive sector growth
Energy Efficiency / CO2 - reduction Regenerative Energies
Friction optimized bearings Comprehensive portfolio for wind turbines
Performance optimized bearings (x-Life) Simulation of the entire drive train in wind turbines
Co2ncept-10% 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 eWheelDrive (wheel hub motor)
Bearings with integrated functions E-Bike: torque sensor bottom bracket
Page 33 Schaeffler FY2010 Analyst Conference ● March 29th, 2011 4 Outlook 2011 2 Leading positions in fast growing markets
Aerospace, Railway Automotive, Consumer Products
Market Market +2.5-5.0 % +5.0-7.5 % CAGR 2010-2013 CAGR 2010-2013
Schaeffler sales Above Schaeffler sales Above estimation market growth estimation market growth
Production Machinery, Power Transmission Wind Power
Market Market +7.5-10.0 % >10 % CAGR 2010-2013 CAGR 2010-2013
Schaeffler sales Above Schaeffler sales Well above estimation market growth estimation market growth
Page 34 Schaeffler FY2010 Analyst Conference ● March 29th, 2011 4 Outlook 2011 2 Aligning regional production with fast growing regions
New locations* and plant extensions (2011 – 2013)
2 Kysuce, Slovakia
3 Brasov, Romania
2 4 Nanjing*, China 3 5 Yinchuan, China 4 6 5 6 Taicang 4, China 7 9 8 7 Taicang 5, China 10 1 11 8 Suzhou, China
1 Irapuato, Mexico
9 Savli*, India
10 Pune, India
11 Hosur, India
Page 35 Schaeffler FY2010 Analyst Conference ● March 29th, 2011 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
4 Schaeffler is in the Top 4 of the most innovative 1,641 companies in Germany in 2010 1,276 4 5,000 employees at 40 locations worldwide 1,084 1,146 develop new and efficient solutions in close cooperation with customers 896 4 Constant R&D spending rate of 5% of sales 4 More than 16,000 running patents in Germany
2006 2007 2008 2009 2010
Rank in Germany¹ #9 #7 #5 #5 #4
1) Source: German Patent and Trademark Office
Page 37 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
Dedicated education Innovation Increase of patent Employees for new employees management registrations
Page 38 Schaeffler FY2010 Analyst Conference ● March 29th, 2011 For questions please refer to
Schaeffler Investor Relations Team
Phone: +49 9132 82-4440 email: [email protected]