BNP Paribas 9th Annual High Yield & Leveraged Finance ConferenceLondon – January 15, 2013
Schaeffler Group
Schaeffler Group BNP Paribas 9th Annual High Yield & Leveraged Finance Conference January 15, 2013Page 2
Disclaimer
Page 2
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 AG. 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 AG 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 liabilitywhatsoever 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.
Schaeffler Group BNP Paribas 9th Annual High Yield & Leveraged Finance Conference January 15, 2013Page 3
Business
Capital structure
Results 9M 2012
Agenda
Outlook
Schaeffler Group BNP Paribas 9th Annual High Yield & Leveraged Finance Conference January 15, 2013Page 4
Leading manufacturer of high-precision components and systems for automotive and industrial applicationsGlobal footprint with approx. 76,000 employees in more than 50 countriesAbove industry average profitability and revenue growth Strategic participation in Continental AG
Key characteristics
1 BusinessSchaeffler at a glance
Automotive OEM57%
Sales by business¹) Sales by region1)
1) As of September 30, 2012; by location of customers
Industrial OEM19%
Industrial Aftermarket12%
Automotive Aftermarket12%
Asia/Pacific22%
Europe w/o Germany31%
Germany27%
South America5%
North America15%
1) As of September 30, 2012
2008 2009 2010 2011LTM09/12
Salesgrowth in %
8,905-1.2%
7,336-17.6%
9,49529.4%
10,69412.6%
11,0344.5%
EBITin % of sales
1,04011.7%
4466.1%
1,50915.9%
1,68915.8%
1,48413.4%
EBITDAin % of sales
1,73119.4%
1,10315.0%
2,09722.1%
2,24321.0%
2,07218.8%
Key financials (in EUR mn)
Schaeffler Group BNP Paribas 9th Annual High Yield & Leveraged Finance Conference January 15, 2013Page 5
Above average growth and sector-leading margins
Proven ability to preserve cash flow
Experienced management team
Top three positions in core market sectors
Strong and resilient aftermarket business
Growing above market
Leading positions in attractive
growth markets1
Highly diversified customer base
Broad product and application spectrum
Strong regional diversification
Well-balanced business portfolio2
Technology leadership and superior quality
Outstanding operational excellence
Best-in-class innovation platform
Technology, quality and innovation leadership3
Strong track-record and experienced
management team4
1 BusinessWorldwide leader in bearings and automotive components
Schaeffler Group BNP Paribas 9th Annual High Yield & Leveraged Finance Conference January 15, 2013Page 6
1
Automotive Industrial
1 BusinessTwo divisions with top three positions in core market sectors¹)
Production Machinery Wind PowerPower
Transmission
Aerospace Heavy IndustryRailwayMotorcycles
Fluids & Pneumatics
Power Generation
Consumer Products
Industrial Aftermarket
Transmission
Chassis
Engine
Aftermarket
1) Company estimates
67% of sales 32% of sales
Schaeffler Group BNP Paribas 9th Annual High Yield & Leveraged Finance Conference January 15, 2013Page 7
~ 7,500 Automotive customers ~ 17,000 Industrial customers
Other customers 84% TOP 10 customers
16% of Industrial sales
TOP 10 customers
53% of Automotive sales
Other customers 47%
1 Business Highly diversified customer base2
Automotive Industrial
Schaeffler Group BNP Paribas 9th Annual High Yield & Leveraged Finance Conference January 15, 2013Page 8
Engine components and systems
INA-FAG catalog with40,000 articles
Transmission components and systems
Chassis and accessory-drive components and systems
Radial insertball bearings
Components for
parallel kinematics
Linear guides
Thrust/radial cylindrical
roller bearings with an outside diameter
up to4 meters
smallest ball bearing withan 1 mm inside diameter
Tapered rollerbearings
Sphericalroller bearings Direct drives
1 BusinessBroad spectrum of components and systems2
Automotive Industrial
Schaeffler Group BNP Paribas 9th Annual High Yield & Leveraged Finance Conference January 15, 2013Page 9
1
23
Germany Europew/o Germany
North &South America Asia/Pacific Total
Plants 24 19 14 13 70
R&D centers 13 9 8 10 40
Planned greenfield sites and plant extentions for
2012-2014Irapuato, Mexico
Kysuce, Slovakia
Skalica, Slovakia
Szombathely, Hungary
Brasov, Romania
Ulyanovsk, Russia
Nanjing, China
Yinchuan, China
Taicang 5, China
Taicang 6, China
Suzhou, China
Savli, India
Pune, India
Hosur, India
BienHoa City, Vietnam
1
2
3
4
5
6
7
8
9
10
11
11
12
10
5
9
4
8
7
1413
15
14
12
13
Global footprint with five dedicated regions
1 BusinessOngoing regional diversification – “In the region – for the region”2
15
6
Schaeffler Group BNP Paribas 9th Annual High Yield & Leveraged Finance Conference January 15, 2013Page 10
State-of-the-art plants and testing facilities
Outstanding know-how in raw material processing
High level of value added ensured by first class precision manufacturing
Uniform quality management system in all plants worldwide
High-profile business excellence programs support Schaeffler's zero-defect policy
1 Business Technology/quality leadership based on outstanding operational excellence 3
… basic materials (steel) … inhouse tools design
… low cost precisionmanufacturing… surface treatment
Schaeffler Group BNP Paribas 9th Annual High Yield & Leveraged Finance Conference January 15, 2013Page 11
1 Business Best-in-class innovation platform3
Key aspects
Rank in Germany2)
#5 #5#7#9 #4
Number of patent registrations1)
1,641
551667
826
1,146
Innovation is a key success factor for Schaeffler
Schaeffler is in the Top 4 of the most innovative companies in Germany in 20111), 2)
~ 6,000 employees at 40 locations worldwide operating in close cooperation with customers
R&D spending rate of 5% of sales
1) Source: German Patent and Trademark Office 2) Measured by number of patent applications
1,832
20102006 2007 2008 2009 2011
#4
Schaeffler Group BNP Paribas 9th Annual High Yield & Leveraged Finance Conference January 15, 2013Page 12
EBIT and EBITDA 2003 - LTM 09/121)
in EUR bnSales 2003 - LTM 09/121)
in EUR bn
EBITDAmargin 19.4% 19.4% 15.0% 22.1% 21.0%
2003 2004 20092008200720062005 20102003 2004 20092008200720062005 2011 2010
1) 2002-2005 according to German Commercial Code (HGB), 2006-2011 according to IFRS
8.9
7.3
9.5
10.7
9.0
18.7% 19.0% 19.5% 19.9%8.4% -1.2% -17.6% 29.4% 12.6%-0.1% 7.2% 8.7% 4.7%Sales growth
6.87.3
8.37.9
2011
EBITmargin 12.6% 11.7% 6.1% 15.9% 15.8%9.8% 10.8% 12.2% 12.9%
EBIT EBITDA
1 BusinessAbove average growth and sector-leading margins
LTM 09/12
11.0
4.5% 18.8%
13.4%
LTM 09/12
1.1
1.7
2.12.2
1.7
1.31.4
1.71.5
1.0
1.51.7
1.1
0.70.8
1.11.0
2.1
0.4
1.5
4
Schaeffler Group BNP Paribas 9th Annual High Yield & Leveraged Finance Conference January 15, 2013Page 13
Business
Capital structure
Results 9M 2012
Agenda
Outlook
Schaeffler Group BNP Paribas 9th Annual High Yield & Leveraged Finance Conference January 15, 2013Page 14
31% 32%
Gross profit margin:
33% 30%
+4.2%vs. 9M 2011
2,1602,402 2,452 2,481
32%
2,6972,682
30%
10,694
2,703
31%
9,495
28%
2,612
Salesin EUR mn
2,858
31%
2 Results 9M 2012Sales growth continued but momentum further weakening
Sales by region1)
in % and y-o-y growth
9M 2012 9M 2011
Automotive 5,761 5,403 +6.6%
Industrial 2,613 2,609 +0.2%
Other 48 70 -22 mn
Total 8,422 8,082 +4.2%
Sales by divisionin EUR mn
1) Market view (= location of customers)
GermanyQ3: +2% (9M: +4%)
Europe (w/o Germany)Q3: -3% (9M: -3%)
North AmericaQ3: +20% (9M:+20%)
South AmericaQ3: -13% (9M: -12%)
Asia/PacificQ3: +5% (9M: +10%)
15%31%
22% 27%
5%
Q1
2011
Q2 Q3 Q4Q1
2010
Q2 Q3 Q4 Q1
2012
Q2
2,794
8,422
30%
2,770
Q3
31%
Schaeffler Group BNP Paribas 9th Annual High Yield & Leveraged Finance Conference January 15, 2013Page 15
EBITmargin
335
404 398 372
472
411
-15.2%vs. 9M 2011
1,6891,509
466
340
15.5% 16.8% 16.2% 15.0% 17.5% 15.3% 17.2% 13.0%
EBITin EUR mn
14.0%
401 379
13.6%
1,144
EBITin EUR mn
EBITmargin 13.6%16.7%
1,349
+340
-37 1,144-270
-54
EBIT 9M 2011
Sales COGS R&D Selling Admin EBIT 9M 2012
-102
-82
Other
2 Results 9M 2012Profitability impacted by weakness in industrial businesses
EBIT by divisionin EUR mn
9M '12EBIT
9M '11EBIT in %
9M '12margin
9M' 11margin
Automotive 764 857 -10.9 13.3% 15.9%
Industrial 380 492 -22.8 14.5% 18.9%
Total 1,144 1,349 -15.2 13.6% 16.7%
364
Q1
2011
Q2 Q3 Q4Q1
2010
Q2 Q3 Q4 Q1
2012
Q2 Q3
13.1%
15.9% 15.8% 13.6%
Schaeffler Group BNP Paribas 9th Annual High Yield & Leveraged Finance Conference January 15, 2013Page 16
545515
484
553
613
552
2,097 2,243
605
473
EBITDAin EUR mn
549
2 Results 9M 2012 9M free cash flow at EUR 122 mn
EBITDAmarginin %
22.4 23.0 22.2 20.8 22.7 20.6 22.4 18.1 19.2
LTMEBITDA 1,381 1,701 1,899 2,097 2,226 2,225 2,285 2,243 2,179
530
19.0
2,157
1,599
Net workingcapital
Capex Taxes1)/other
Interestpayments
EBITDA Free cash flow
Free cash flow 9M 2012in EUR mn
-200 1 -47 92Q32012 19520
1) 'Income taxes paid' as cash out of EUR -205 mn (2011: EUR -169 mn)
-201
Dividends
Q1 Q2 Q3 Q4 Q12012Q2
2011
137
-107
1166
15290
80
520
Q1
2011
Q2 Q3 Q4Q1
2010
Q2 Q3 Q4 Q1
2012
Q2 Q3
18.8
2,072
1,599
-244
-672
-456-186
122
+81
92
Q3
Schaeffler Group BNP Paribas 9th Annual High Yield & Leveraged Finance Conference January 15, 2013Page 17
2 Results 9M 2012 Net debt down – Leverage ratio unchanged
Leverage ratio (Net financial debt / LTM EBITDA)
1) Excluding shareholder loans
Net financial debt / Leverage ratio¹)
in EUR mn
4.4x
3.5x
2.7x 2.7x3.0x
2.7x 2.9x
6,0205,930
5,763
6,124
5,744
6,069
7,145
3.0x
7,088
6,468 6,514 6,503 6,477 6,482 6,422 7,645 7,485Grossdebt
448 584 740 733 358 353 500 397Cashposition
600 420
7,164
7,455
291
3.2x
280
Shareholder loans
7,412
318
3.2x
7,094
266
Q1
2011
Q2 Q3 Q4Q1
2010
Q2 Q3 Q4 Q1
2012
Q2 Q3
6,940
3.2x
7,238
298
242
Available fundsin EUR mn
Revolving Facility and Ancilliary Lines Cash and cash equivalents
1,1901,325
1,481 1,475
1,049 1,0931,243
1,140 1,141 1,165
Q1
2011
Q2 Q3 Q4Q1
2010
Q2 Q3 Q4 Q1
2012
Q2 Q3
1,244
Schaeffler Group BNP Paribas 9th Annual High Yield & Leveraged Finance Conference January 15, 2013Page 18
Business
Capital structure
Results 9M 2012
Agenda
Outlook
Schaeffler Group BNP Paribas 9th Annual High Yield & Leveraged Finance Conference January 15, 2013Page 19
3 Capital structureThe Schaeffler refinancing story 2009-2012 – "Promised and delivered"
Initial refinancing of acquisition debtSeparating total debt into Holding debt (Junior) and operating business debt (Senior)
11/09 + 06/10
03/11 + 10/11
EUR 8.0 bn Refinancing of Senior debtPlacement of EUR 2.3 bn of bonds and EUR 1.4 bn of institutional loans, bank syndication closed
01/12 + 06/12
Refinancing of Holding debtConversion of Schaeffler GmbH into Schaeffler AG
Four major steps
Step 1
Reduction of Schaeffler Holding liabilities by approx. EUR 1.6 bn and refinancing of Junior debtImprovement of structural flexibility
09/12 + 12/12
Step 2
Step 3
Step 4
Schaeffler Group BNP Paribas 9th Annual High Yield & Leveraged Finance Conference January 15, 2013Page 20
Small adjustment of Interest Cover testfrom 2012 to 2014
Fall-away concept for Cash Flow Cover if leverage below 2.5x
Covenantflexibility1
Allocation of repayments in the event of raising net debt proceeds at borrower's discretion
Customary 'lender replacement' clause
Repaymentflexibility
Flexibility for intra-group reorganizationwith borrower change
Credit / collateral position of lenders remain unchanged
Structuralflexibility
2
3
Key aspects
Relationship banks committed to new Senior Facilities Agreement
Offer for cash-less roll-over of existing commitments for institutional lenders
Amendment fee of 15 bps for all lenders on existing commitments
All other key terms of SFA unchanged, such as maturity structure, pricing and collateral package
3 Capital structureFinal step 2012 – 3 primary amendments to Senior Facilities Agreement
Schaeffler Group BNP Paribas 9th Annual High Yield & Leveraged Finance Conference January 15, 2013Page 21
3 Capital structureAmendment by refinancing – Maturity profile further improved
Maturity profile1)
in EUR mn
2012 2013 2014 2015 2016 2017 2018 2019
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
Senior Term Loan A3 years
Institutional Loan B2 (EUR/USD)5 years
High-Yield Bond 2017 (EUR/USD) 5 years
Senior Term Loan B1 – 5 years
High-Yield Bond 2019 (EUR/USD) – 7 years
HY1 HY2 HY1 HY2 HY1 HY2 HY1 HY2 HY1 HY2 HY1 HY2 HY1 HY2 HY1
High-Yield Retail Bond – 5 years
1) Without Revolving Credit Facility of about EUR 1.0 bn
~ €2.4 bn
~ €0.5 bn
~ €1.7 bn
~ €1.3 bn
~ €0.8 bn
~ €0.3 bn
Bond performancein %
Yield to worst (as of January 4, 2013)
EUR 2017: 4.26%EUR 2019: 3.71%
EUR 2017 Retail: 3.07%
USD 2017: 4.42%USD 2019: 4.32%
98,00100,00102,00104,00106,00108,00110,00112,00114,00116,00118,00
10-Feb 10-Apr 10-Jun 10-Aug 10-Oct 10-Dec
Euro 2017 Euro 2019 USD 2017
USD 2019 Euro 2017 RETAIL
Schaeffler Group BNP Paribas 9th Annual High Yield & Leveraged Finance Conference January 15, 2013Page 22
Corporate & financing structure
1) Carrying values end of September 2012
3 Capital structureHolding liabilities reduced – Structural flexibility increased
Junior Term Loan (EUR ~1,500 mn)1)
Bullet structure maturing in June 2017,EURIBOR +1.7% cash interest plus 6% PIK interest p.a.
NEW Junior Term Loan (EUR ~800 mn)1)
Bullet structure maturing in June 2017,EURIBOR +2.0% cash interest plus 5% PIK interest p.a.
Junior Bond (EUR ~1,200 mn)1)
Zero-coupon bond maturing in March 2018,9.625% p.a. PIK interest
Schaeffler AG
Continental AG
SchaefflerTechnologies AG & Co. KG
Schaeffler Holding
GmbH & Co. KG
36.1% 50.1%
Free float
13.8%
100%
Schaeffler Finance
B.V.
100%
Holding
Schaeffler Group
100%
Schaeffler Verwaltungs
GmbH
100%
SchaefflerNewCo
100%
Intra-group reorganization with borrower change to streamline current corporate structure
Schaeffler NewCo became the new borrower using existing subsidiary
All assets and liabilities of Schaeffler AG – except participation in Continental AG – were transferred to Schaeffler NewCo
Collateral structure remains unaffected, Continental shares remain pledged, Schaeffler AG continues to guarantee all Senior liabilities
Holding liabilities reduced
Structural flexibility increased
Bonds
Loans
Chart simplified for illustration
purposes
Junior Term Loan/Bond
Schaeffler Group BNP Paribas 9th Annual High Yield & Leveraged Finance Conference January 15, 2013Page 23
Business
Capital structure
Results 9M 2012
Agenda
Outlook
Schaeffler Group BNP Paribas 9th Annual High Yield & Leveraged Finance Conference January 15, 2013Page 24
Sales growth
Capex
Growth
Quality policy
Employees
Quality
EBIT margin
Free cash flow
Profitability
R&D expenses
Innovation
Innovation
4 %
6-8 % of sales
> 13 %
Sustainably positive
Further improve
> 2,500 new jobs
~ 5 % of sales
Maintain leading position in patent applications
Target 2012
Target 2012 Target 2012
Target 2012
4 Outlook Sales guidance amended – Profitability targets unchanged
Schaeffler IR contact
Investor Relations Financial Calendar 2013
phone: + 49 9132 82 4440 FY 2012 results: March 21, 2013fax: + 49 9132 82 4444 Q1 2013 results: May 21, [email protected] Q2 2013 results: August 28, 2013www.schaeffler-group.com/ir Q3 2013 results: November 19, 2013
Schaeffler Group BNP Paribas 9th Annual High Yield & Leveraged Finance Conference January 15, 2013Page 26
Backup Consolidated segment information (9M 2012)
In € millions 2012 2011 2012 2011 2012 2011 2012 2011Revenue 5.761 5.403 2.613 2.609 48 1) 70 1) 8.422 8.082Cost of sales -4.157 -3.893 -1.651 -1.623 -48 -70 -5.856 -5.586Gross profit 1.604 1.510 962 986 0 0 2.566 2.496EBIT 764 857 380 492 0 0 1.144 1.349
- in % of revenue 13,3 15,9 14,5 18,9 - - 13,6 16,7Depreciation, amortization and impairments
-317 -301 -138 -120 0 0 -455 -421
Inventories 2) 936 890 729 722 0 0 1.665 1.612Trade receivables 2) 1.272 1.214 547 548 0 0 1.819 1.762Property, plant and equipment 2) 2.421 2.081 1.111 1.015 0 0 3.532 3.096Capital expenditures 481 395 177 129 0 0 658 524Prior year information presented based on 2012 segment structure.
2) Amounts as at September 30.
Automotive Other1st nine months1st nine months
Industrial1st nine months
1) The amount consists mainly of materials provided to subcontractors.
Total1st nine months
Schaeffler Group BNP Paribas 9th Annual High Yield & Leveraged Finance Conference January 15, 2013Page 27
Backup Consolidated segment information (Q3 2012)
In € millions 2012 2011 2012 2011 2012 2011 2012 2011Revenue 1,919 1,814 840 876 11 1) 13 1) 2,770 2,703Cost of sales -1,372 -1,309 -540 -544 -11 -13 -1,923 -1,866Gross profit 547 505 300 332 0 0 847 837EBIT 260 294 104 172 0 0 364 466
- in % of revenue 13.5 16.2 12.4 19.6 - - 13.1 17.2Depreciation, amortization and impairments -110 -99 -46 -40 0 0 -156 -139Inventories 2) 936 890 729 722 0 0 1,665 1,612
Trade receivables 2) 1,272 1,214 547 548 0 0 1,819 1,762Property, plant and equipment 2) 2,421 2,081 1,111 1,015 0 0 3,532 3,096Capital expenditures 143 159 56 53 0 0 199 212Prior year information presented based on 2012 segment structure.
2) Amounts as at September 30.
1) The amount consists mainly of materials provided to subcontractors.
Total3rd quarter 3rd quarter 3rd quarter 3rd quarter
Automotive Industrial Other
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