Capital Markets Day 2018 - GEA engineering for a better world · 12/03/2018 · Equipment business...

Capital Markets Day 2018

March 12th 2018

GEA GROUP, LONDON

2

Agenda

II Why invest in GEA?

I GEA ambition

III

IV

Value creation

V

Financial guidance and outlook

Key takeaways

7

4

37

68

74

J. Oleas, CEO

J. Oleas, CEO

Executive Board

Executive Board

Dr. H. Schmale, CFO

15 min break

Q&A – 60 min

GEA | CMD | March 12, 2018

Page number

3

Today’s presenters – the GEA Executive Board


• Finance

• Investor Relations

• Tax

• Treasury & Corporate

Finance

• Shared Service Center

Dr. Helmut Schmale

Chief Financial

Officer (CFO)

• Business Area

Equipment

Steffen Bersch

Member of the

Executive Board

• Labor Director

• Communication,

Marketing & Branding

• Corporate

Development

• Human Resources

• Internal Audit

• Legal & Compliance

Jürg Oleas

Chief Executive

Officer (CEO)

• Business Area

Solutions

Niels Erik Olsen

Member of the

Executive Board

• Regions & Countries

Martine Snels

Member of the

Executive Board

4

Agenda


I GEA ambition

III

IV

Value creation

V


Key takeaways

15 min break

Q&A


5

GEA AMBITION

Be the first-choice partner for customers worldwide

We strive to be the

world’s leading global

technology group in

supplying smart solutions

for sophisticated process

industries. Our goal is to

be the customer’s

preferred partner in the

industries we serve.


6

Mega trends support GEA business


URBANIZATION WITH

GROWING MIDDLE CLASS

Growing demand for processed

food and medication

GEA offers

components and process

technology for processed food,

ready meals, fortified lifestyle

beverages and food,

medications

GREATER FOOD SAFETY

AND QUALITY

Readiness of industry to invest

more for greater process

reliability

GEA offers

certified hygienic/aseptic

processes and components to

meet the strict standards of the

industry

ENERGY SCARCITY AND

STRICTER ENVIRONMENTAL

REGULATIONS

Greater interest in efficient and

resource-saving production

processes

GEA offers

intelligent engineering processes

for resource-friendly

technologies, energy-saving

machines and processes,

as well as heat recovery

7

Agenda


I GEA ambition

III

IV

Value creation

V


Key takeaways

15 min break

Q&A


8

Why invest in GEA?


Unique business model

combining equipment

and solutions based on

technology and

application process

know-how

Right

organization to

capture growth &

efficiency

Strong cash

generation

and balance sheet

profile

BUSINESS

MODEL

OneGEA

PLATFORM

CASH

GENERATION

BUY-AND-BUILD

POTENTIAL

Best positioning to

further consolidate

in existing and

new markets

Leading

engineering

and

innovation

power

TECHNOLOGY

& INNOVATION

Leading position in

attractive global

markets and

diversified

customer base

Unique positioning

based on balanced

technologies and

application portfolio

MARKET

LEADERSHIP

PORTFOLIO

& POSITIONING

9

Right

organization to

capture growth &

efficiency

Strong cash

generation

and balance sheet

profile

OneGEA

PLATFORM

CASH

GENERATION

BUY-AND-BUILD

POTENTIAL

Best positioning to

further consolidate

in existing and

new markets

Leading

engineering

and

innovation

power

TECHNOLOGY

& INNOVATION

Leading position in

attractive global

markets and

diversified

customer base

Unique positioning

based on balanced

technologies and


MARKET

LEADERSHIP

PORTFOLIO

& POSITIONING

Why invest in GEA?



combining equipment and

solutions based on technology

and application process

know-how

BUSINESS

MODEL

10

… seeks to switch from

conventional to

automated milking on its farm

… the state-of-the-art GEA

DairyProQ rotary parlor

with 28-80 milking stations

Equipment new machines business

Customer … Our GEA answer is…

… plans to introduce insulin to the market

… GEA supplies various

separators for separation

of various substances

throughout the production

process

… wants to reduce the energyconsumption of its juice line &

improve product viscosity

… the most powerful GEA

homogenizer on earth

saving 7% energy


11

Equipment new machines business

Equipment business model GEA depth of value-added

• Translation of complex

customer-specific needs into

configurable equipment

• Strong process know-how enabling

integration of equipment into customer

processes

• >3,500 sub-applications served

• Manufacturing excellence

• Standardized and partly customized

equipment

High ROCE driven by strong EBIT margin


12

… seeks a more efficient solution

to process aloe vera for use in

personal care, nutraceuticals and

food

… GEA spray drying solution for high-quality

powder

Solutions projects business

… plans a greenfield plant

for instant coffee

… GEA complete line solution for instant coffee

… wants to diversify product

portfolio with high-value add

product of bacterial culture

… GEA solution for a number

of complete lines



13

Solutions projects business

Solutions business model GEA depth of value-added

Complex and unique customer

requirements delivered in single

projects

Strong application and process know-how

incl. in-depth knowledge of customer end-

products

Make-or-buy excellence

Customized and modularized solutions

High ROCE driven by lower capital intensity


14

… increase uptime or yield of a plant

… GEA service team supports with the right solution

Service business of Equipment & Solutions

… has an urgent problem with one of the

milk lines in Chile and needs immediate support

… GEA 24/7 local support

offered by experienced service

engineers in more than 200

service branches

… seeks de-bottle-necking of an older

plant in order to increase output by 10%

… GEA upgrades &

optimizes customers’ plants



15

Service business of Equipment & Solutions

GEA depth of value-added

• Full range of services along

plant life cycle

• Global tools & coverage with designated

local execution with >4,000 service force

FTEs globally

• Strong process and technology know-

how

• Efficient delivery and technical support

with long history

Recurring revenues, continued growth and strong profitability

Service


16

Comprehensive application & technology portfolio

Note: SEP = Separation, MDF = Milking Dairy Farming, HOM = Homogenizer, FLC = Flow Components, FPP = Food Processing & Packaging, COM = Compression, PES = Pasta & Extruded Snacks, DRY = Drying, LIP = Liquid Processing, SEPP = Separation Process, RFG = Refrigeration

BEVERAGES

CHEMICAL

DAIRY FARMING

DAIRY PROCESSING

FOOD

PHARMA

OTHERS

MAIN PRODUCT GROUPS & TECHNOLOGIESSEP MDF HOM FLC FPP COM PES DRY LIP SEPP RFG

APPLICATIONS


17


combining equipment


technology and

application process

know-how

Right

organization to

capture growth &

efficiency

Strong cash

generation

and balance sheet

profile

BUSINESS

MODEL

OneGEA

PLATFORM

CASH

GENERATION

BUY-AND-BUILD

POTENTIAL

Best positioning to

further consolidate

in existing and

new markets

Leading

engineering

and

innovation

power

TECHNOLOGY

& INNOVATION

Leading position in

attractive global

markets and

diversified

customer base

Unique positioning

based on balanced

technologies and


MARKET

LEADERSHIP

PORTFOLIO

& POSITIONING

Why invest in GEA?


Right

organization to

capture growth

& efficiency

OneGEA

PLATFORM

18

We implemented significant strategic initiatives…


Formulation of GEA’s overall strategic

direction & priorities

In-depth analysis of >20 industries and prioritization

of focus growth areas

Transformation into OneGEA

Portfolio review and subsequent disposal of

HX business

Applications, Regions, Technology, Excellence set as strategic pillars

Further leverage of OneGEA organization

for growth & efficiency

A R T E

2013 2014 2015 2016 After 20162012

19

Before OneGEA – FRAGMENTATION

• Learning functional leadership and global cooperation

• Strategic topline growth plan and customer coordination

• Push global & local service business

• Drive pricing professionalism

• Capture procurement savings

• De-complex: Manufacturing Footprint Efficiencies

• CSR – QA – HSE

With the help of…

• Harmonized ERP

• One Finance

• Global Shared Services

• Professionalization through scale

OneGEA – GLOBAL & LOCAL STEERING

•Smaller P&L’s individually managed

•Entrepreneurial on a smaller scale

•Fragmented & intransparent

•Only local HR

•Only local procurement

•Large number of legal entities

•Scattered data

…and achieved a lot during the OneGEAtransformation


20

Good progress on OneGEA fine-tuning


• Roll-out of new structure advanced

• Former structures and responsibilities

mostly disappeared

• Managers still getting accustomed to

new organization and processes

Transformation roll-out

• Transformation initiated

• Former structures still operational

• Former responsibilities still active

• Mind-set shift initiated

New structures partially operationalOperationalization challenges

• Former structures and

responsibilities are gone

• New managers have no backing

through old structures

• Fine-tuning is taking place

• Challenging environment for all

employees

New structures in operation

• New structures in place and

widely operational

• Main adaptations / fine-tune of

new structures are done

• Employees are aligned and

motivated

1YEAR

3YEAR

4-5YEAR

2YEAR

Large scale

transformation

cycle

today

21


combining equipment


technology and

application process

know-how

Right

organization to

capture growth &

efficiency

Strong cash

generation

and balance sheet

profile

BUSINESS

MODEL

OneGEA

PLATFORM

CASH

GENERATION

BUY-AND-BUILD

POTENTIAL

Best positioning to

further consolidate

in existing and

new markets

Leading

engineering

and

innovation

power

TECHNOLOGY

& INNOVATION

Leading position in

attractive global

markets and

diversified

customer base

Unique positioning

based on balanced

technologies and


MARKET

LEADERSHIP

PORTFOLIO

& POSITIONING

Why invest in GEA?


Leading engineering

and innovation

power

TECHNOLOGY

& INNOVATION

22

GEA’s sources of front-end innovation


Basic research Customers Partners Trends

e.g. large scale plant for production

of lithiume.g. microfibrillated cellulose

production

e.g. in-line quality control measuring

oxygen content and seal integrity

e.g. alternative protein sources

(e.g. from insects); materials

research

23

Top-notch test centers close to customers

GLOBAL TEST CENTERS

Copenhagen, Denmark

Ahaus, Germany

Oelde, Germany

Karlsruhe, Germany

Parma, Italy

Schio and Verona, Italy

Wommelgem, Belgium

Bakel, Netherlands

Hudson, USA

Maryland, USA

Vancouver, Canada

Hamilton, New Zealand

Galliera Veneta, Italy

Shanghai, China

Seoul, South Korea


https://www.google.de/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwj89K_muLTZAhXEchQKHcrCC7wQjRwIBw&url=https://www.gea.com/de/news/corporate/2017/gea-closes-pavan-acquisition.jsp&psig=AOvVaw0KEA6V1tZOBtgQ03LcOraC&ust=1519214397512043

https://www.google.de/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwj89K_muLTZAhXEchQKHcrCC7wQjRwIBw&url=https://www.gea.com/de/news/corporate/2017/gea-closes-pavan-acquisition.jsp&psig=AOvVaw0KEA6V1tZOBtgQ03LcOraC&ust=1519214397512043

24

Opportunities for new digital solutions are tapped


GEA

Performance Plus

DAIRY

NET

DIGITAL

TWINREMOTE

EYEWEAR

25

Digitalization of internal processes is also tackled


IT FOUNDATION DIGITAL BUSINESS PROCESSES

DC1 / DC3 Frankfurt

VA1 / VA3 AshburnFDC1 / FDC2 Hong Kong

Express Route

Express Route

IT infrastructure in Cloud Cloud-based Workday HR system

26


combining equipment


technology and

application process

know-how

Right

organization to

capture growth &

efficiency

Strong cash

generation

and balance sheet

profile

BUSINESS

MODEL

OneGEA

PLATFORM

CASH

GENERATION

BUY-AND-BUILD

POTENTIAL

Best positioning to

further consolidate

in existing and

new markets

Leading

engineering

and

innovation

power

TECHNOLOGY

& INNOVATION

Leading position in

attractive global

markets and

diversified

customer base

Unique positioning

based on balanced

technologies and


MARKET

LEADERSHIP

PORTFOLIO

& POSITIONING

Why invest in GEA?


Leading position in

attractive global

markets and

diversified customer

base

MARKET

LEADERSHIP

27

Leading market positions


#1 or #2

in two thirds of

GEA business

SEPARATION

HIGH PRESSURE HOMOGENIZATION

FREEZE DRIED COFFEE TECHNOLOGY

INFANT MILK FORMULA SPRAY DRYING

#1 position examples

#2 position examples

PHARMA ORAL SOLID DOSAGE PROCESSING

DAIRY FARMING

PASTA & EXTRUDED SNACKS

Source: GEA management estimates based on publicly available sales figures

28

Exposure to multiple industries caters on robustness

over the various cycles

Growing markets portfolio catering on robustness

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

20

-10

-20

-30

10

0

30

Market development by Industryyoy growth

1. Non-weighted average

Source: Capital IQ, VDMA, VCI, Chemdata International, Oxford Economics, McKinsey, IFCN, US Census Bureau, EuroStat, Evaluate Pharma, IHS Markit, IFPM

Structurally growing market

Volatile milk prices

Stable growth of underlying base business

Larger project business rather cyclical

Equipment with stable market growth

Greenfield projects rather cyclical

Pricing pressure

Structurally stable market growth

Differing growth profile across sub-industries

Rather cyclical market

Innovations drive demand (e.g. Lithium)

Global medicine spending growing

Lower volatility due to increasing regulatory standards


3-4%

Dairy

Farming

Dairy

Processing

Beverages

Food

Pharma

ChemicalsMid-term

market outlook1

Beverages Pharma ChemicalDairy ProcessingDairy Farming Food Average1

Mid-term market outlook

29

Employees in 2017 (FTEs, reporting date)

Revenue in 2017

Strong local presence around the globe

GEA | CMD | March 12, 2018GEA | CMD | March 12, 2018

% Share of GEA revenue 2017

North America

1,763

846 million% 18

North and Central Europe

2,927

583 million

% 13

DACH &

Eastern Europe

6,398

944 million% 21

Asia Pacific

2,904

1,027 million

% 22

Western Europe, Middle East & Africa

3,401

889 million

% 19

Latin America

471

317 million% 7

GEA locations

(sales office, service branch or other GEA sites)

30


combining equipment


technology and

application process

know-how

Right

organization to

capture growth &

efficiency

Strong cash

generation

and balance sheet

profile

BUSINESS

MODEL

OneGEA

PLATFORM

CASH

GENERATION

BUY-AND-BUILD

POTENTIAL

Best positioning to

further consolidate

in existing and

new markets

Leading

engineering

and

innovation

power

TECHNOLOGY

& INNOVATION

Leading position in

attractive global

markets and

diversified

customer base

Unique positioning

based on balanced

technologies and


MARKET

LEADERSHIP

PORTFOLIO

& POSITIONING

Why invest in GEA?


PORTFOLIO

& POSITIONING

Unique positioning

based on balanced

technologies and


31

Stability due to application & technology spread

Significant application coverage Medium/lower application coverageStronger focus Lower focusStronger focus Lower focus

BEVERAGES CHEMICAL DAIRY FARMINGDAIRY PROCESSING FOOD PHARMA OTHERS

ALFA LAVAL

DeLAVAL

TETRA PAK

BÜHLER

JBT FOODTECH

KRONES

MAREL

EQUIPMENT SOLUTIONS

SPX FLOW


Note: GEA view

ApplicationsGEA MANAGEMENT VIEW

32

Comparable sales shareNon-comparable sales share

Comparable share of peer sales

GEA JBT FOODTECH

GEA ALFA LAVAL GEA DELAVAL1 GEA TETRA PAK2 GEA3 BÜHLER

GEA SPX FLOWGEA MARELGEA KRONES

COMPARABLE SALES SHARE FY17

1. FY2016

6-7 largest GEA competitors compete on average in around 20% of bids against us


GEA: Separation, Flow Components

Alfa Laval: Separation, Fluid Handling in Div. Food & WaterGEA: APC Dairy, APC Beverages, APC Food, Homogenizer

Tetra Pak: Processing

GEA: APC Food, Pasta & Extruded Snacks

Bühler: Parts of Value Nutrition, and Consumer Food

GEA: APC Food, Food Processing & Packaging

JBT FoodTech: Liquid Foods, Protein Technology

GEA: APC Beverages, Homogenizer, Flow Components

Krones: Entire business

GEA: Food Processing & Packaging

Marel: Entire business excl. MPS

GEA: Milking Dairy Farming

DELAVAL: Entire business

2. FY2015

GEA: APC Dairy, APC Food (parts), Homog., Flow C..

SPX Flow: Mainly Food and Beverages

3. Including pro forma Pavan acquisition revenues

GEA MANAGEMENT VIEW

33


combining equipment


technology and

application process

know-how

Right

organization to

capture growth &

efficiency

Strong cash

generation

and balance sheet

profile

BUSINESS

MODEL

OneGEA

PLATFORM

CASH

GENERATION

BUY-AND-BUILD

POTENTIAL

Best positioning to

further consolidate

in existing and

new markets

Leading

engineering

and

innovation

power

TECHNOLOGY

& INNOVATION

Leading position in

attractive global

markets and

diversified

customer base

Unique positioning

based on balanced

technologies and


MARKET

LEADERSHIP

PORTFOLIO

& POSITIONING

Why invest in GEA?


Strong cash

generation

and balance

sheet profile

CASH

GENERATION

34

Solid net cash position


-387 -326

904 982783

-179

105

2017

€M

2015 2016

6

201420112010 2012 2013

NET CASH (DEBT) POSITION

CFS

acquisition

HX

divest

Share

buyback,

Pavan

acquisition

Robust net cash position:

€1,030m from disposals

ca. €1,200m spent on acquisitions

ca. €900m spent on dividends

ca. €450m spent on share buyback

ca. €260m spent on restructuring

and Fit for 2020

€950m spent on capex

€170m spent on DOP

Solid net cash position that balances well payout to shareholders and invest in GEA development

35


combining equipment


technology and

application process

know-how

Right

organization to

capture growth &

efficiency

Strong cash

generation

and balance sheet

profile

BUSINESS

MODEL

OneGEA

PLATFORM

CASH

GENERATION

Leading

engineering

and

innovation

power

TECHNOLOGY

& INNOVATION

Leading position in

attractive global

markets and

diversified

customer base

Unique positioning

based on balanced

technologies and


MARKET

LEADERSHIP

PORTFOLIO

& POSITIONING

Why invest in GEA?


BUY-AND-BUILD

POTENTIAL

Best positioning

to further

consolidate in

existing and

new markets

36

Good opportunities for bolt-on acquisitions


Expansion into new

applications adjacent

to GEA markets

Additions to the

value chain of existing

applications

Acquisitions to

strengthen existing

technologies

Access to

new

technologies

Adjacent applications

Existing applications

Existingtechnologies

Newtechnologies

Strengthening of

GEA Group‘s

regional presence

Regional expansion

Multi-track approach to identify value-creating targets

GEA’s underlying industry fragmented with ample opportunities for buy and build

37

Agenda


I GEA ambition

III

IV

Value creation

V


Key takeaways

15 min break

Q&A


38

Four pillars of value creation at GEA


CAPITAL

ALLOCATION

ENABLERS

GROWTH

COST

EFFICIENCY

39



CAPITAL

ALLOCATION

ENABLERSCOST

EFFICIENCY

GROWTHGROWTH

40

Five levers of growth


Technology trends

GEA is well positioned to

serve technologies for trends

Key account excellenceContinue building key account

management to further strengthen

business with global clients, esp. to

support growth in Emerging Markets

Further sales

professionalization

GEA is performing a review

of the sales setup to fully seize growth

opportunities in current white spots

Service

Continue pushing Service

business to next level

Value

monetization

41

Three topics / initiatives drive our growth

####

GEA continues building up

key account management to

further strengthen business

with global clients

GEA is performing a review

of the sales setup to fully

seize growth opportunities in

current white spots

GEA is well positioned to

offer technologies to address

current trends with particular

short-term focus on:

Technology

trends

Key account

excellence

Further sales

professionalization

• Strengthen coordination

of large regional & global

accounts, especially to

support growth in

emerging markets

• Utilize more systematically

GEA’s full portfolio to

cross-sell to large accounts

• Review and adapt the

route to market, in line

with the strategic ambition

tailored to the targeted

customer segments

• Review allocation of

sales force to increase

proximity and expertise to

our customers

• Dairy specialty proteins

• High-tech dairy

• Lithium

• Craft brewing

• Biopharma


42

Service – Vision


VISION

OUR GLOBAL SERVICE CREATES A DAILY OPPORTUNITY TO EXPERIENCE THE GEA BRAND PROMISE

43

Service – Life cycle


Beginning of life servicesInstallation // Commissioning // Training

Lifetime servicesSpare parts // Corrective maintenance //

Preventive maintenance

Extended life servicesUpgrades/Modernization/Optimization // Predictive

maintenance // Factory-rebuilt equipment

Consulting services & operations Performance contracts // On-site project support

// Service software products

WE SERVE THE ENTIRE LIFE CYCLE IN ORDER TO HAVE CONTINUOUS TOUCHPOINTS TO OUR CUSTOMERS

44

Service – Share of Sales vs. Benchmarks


SERVICE SHARE

35% 35% 38% 39% 39%

FY13 FY17FY16FY15FY14

BA Equipment(% of sales)

BA Solutions(% of sales)

1. Comment on CAGR: Relates to Service sales in €m from 2013 to 2017

2. Comment on peers: Due to the heterogeneous product portfolio and maturity level, peers shall be compared on a like-for-like

base, i.e. equipment focused companies to be compared with BA-E and engineering companies to be compared with BA-S

(peer group contains companies like ABB, Alfa Laval, Andritz, Bühler, JBT, etc.)

18% 20% 22%22%

FY15 FY16 FY17FY14

19%

FY13

PEERS2

Ø 36-42%

PEERS2

Ø 20-27%

+5.4%CAGR1 +7.0%CAGR1

31%GEA GROUP 2017

• Solid development of GEA

Service share in the

recent years

• Comparable peers have in

general similar Service

share

• Aspiration to further grow

Service business and

Service share:

• 32-33% by 2020

• 33-35% by 2022

45

Service – Customer Feedback


CUSTOMER FEEDBACK

• GEA Service in general

perceived better than

competitors

• Comprehensive customer

survey will be established

on a continuous base

• Improvement levers

identified (e.g. parts

logistic process as

priority for ERP system

harmonization)

HOW DO YOU EVALUATE GEA’S FIELD SERVICE PERFORMANCE COMPARED

TO OTHER EQUIPMENT SUPPLIERS?

+

+

+

+

+

The process to schedule the Field service

Speed of help

Availability of Field service required on the requested date

Speed of response by the Field Service engineer

Conducting the service in timely manner

How the Field Service work was performed

+

Source: GEA Customer Satisfaction Survey 2017, sample size ~598 customers across 11 countries

GEA is worse than competitorsGEA is better than competitors+

46

Service – Initiatives


OPOSO (“One project one service order”)

Strengthen proactive service sales capabilities

“Service is people business” - Leverage regional capabilities

Establish global industry teams to focus on customers needs

Installed base coverage

Capture plant upgrade opportunities

Drive service excellence

Optimizing parts logistics

Advanced service portfolio development

Cloud based (digital) services

47

Value monetization - Mutually rewarded value proposition


Customer &

Consumer

needs

Technological

innovation

Competitive

situation

Macro

environment

Political

Economical

Social trends

Value Chain

CUSTOMER

CONSUMER

VALUE CHAIN

48

Value monetization – Initiatives


Increase transparency in pricing policies throughout GEA

Harmonize internal pricing policies in the aftersales business. Implement

respective price adherence monitoring and structured discount systems

Develop further value-driven differentiators and tailor product propositions for

various price segments

49



CAPITAL

ALLOCATION

ENABLERS

GROWTH

COST

EFFICIENCY

50

Global Manufacturing Footprint – Status quo

7

sites

NAM

1

site

LAM

12

sites

NCE

9

sites

WE&MEA

20

sites

DACH&EE

11

sites

APAC

Mu

lti-

pu

rpo

se

sit

es

Sin

gle

-pu

rpo

se

sit

es

Highly specialized and

automated with close

link to engineering

High capacity and

capabilities in proximity to

relevant regional markets

Suzhou

Parma

Multi-purpose sites Single-purpose sites


51

Global Manufacturing Footprint – Achievements

Relocation from Vadodara to Bangalore completed

In line with the relocation to Bangalore the production depth was increased dramatically –

new assembly line for mobile compressors allows significant increase of capacity

Vadodara

Bangalore

BangaloreVadodara


52

Global Manufacturing Footprint – Achievements

Relocation from Beijing and Songjiang to Shijiazhuang completed

Shijiazhuang was planned and executed as a GEA multi-purpose production site

– Production has now reached ~285,000 hours/year since the establishment in 2009

Beijing

Shijiazhuang

Shijiazhuang

Songjiang

Songjiang

Beijing


53

Global Manufacturing Footprint – Going forward

-8 sites

2015

68 sites60 sites1)

2018

FLEXIBILIZE

PRODUCTION EXCELLENCE

2018 2020 2022+

Further consoli-

dation of production

volumes in multi-

purpose sites to

better balance

demand fluctuations

Realization of

synergy potential

across business

areas and utilization

of best cost country

advantages

50 – 56 sitestarget size1)2)

41 – 50 sitestarget size1)2)

OPTIMIZE

1) excl. recent M&A activities (Vipoll and Pavan) 2) excl. future M&A activities


54

Global Manufacturing Footprint - Initiatives

####

####

…• Nearshoring of production volumes to reduce customer lead time and optimize

fix cost basis

• Establishment of further multi-purpose sites to increase utilization, flexibility

and quality

• Further consolidation of manufacturing footprint to reduce complexity and fix

cost basis


55

Procurement – Achievements


Recent achievements

SUCCESSFULL SHIFT OF SOURCING VOLUMES TO

LEVARAGE LOW COST BENEFITS (STILL ONGOING)

GLOBAL CROSS-REGIONAL CATEGORY

MANAGEMENT ESTABLISHED

EFFICIENCIES ACHIEVED AS PLANNED SUPPORTING COMPETITIVENESS

& HELPING OFFSET HEADWINDS

IMPLEMENTED PREFERRED SUPPLIER CONCEPT &

INCREASED SHARE OF PREFERED SUPPLIERS

Shifting Sourcing Volumes to Best-Cost-Countries

Asia Eastern Europe Latin America

SUCCESSFUL REDUCTION OF RECURRING

PROCUREMENT SPEND (STILL ONGOING)

Examples 2015 2017

Reduction of Procurement Costs

Selected Components Field Assembly

56

Procurement – Selected success cases


Motors & Drives Field Assembly Valves

• Close collaboration with

Engineering

• Supplier collaboration to drive

e.g. standardization & design-

to-cost improvements

• Increased best-cost-country

sourcing

• Performance benchmark as

negotiation lever

• Implemented price &

cost break down analysis

• Supplier collaboration for

innovations & design-to-cost

improvements

• Implemented preferred supplier

concept

• Should-cost-analysis as

negotiating lever

http://www.gea.com/global/en/products/butterfly-valves-t-smart-7.jsp

http://www.gea.com/global/en/products/butterfly-valves-t-smart-7.jsp

57

Procurement - Acceleration to cross-functional program


Engineering

• Simplify material &

product specifications

• Drive Standardization

& Modularization

(internally)

Procurement

• Enhance Supplier

Management &

Collaboration

• Shift volumes to Best-

Cost-Countries

Sales

• Simplify customer

specifications

• Drive

Standardization &

Modularization

(externally)

Finance

• Monitor progress

on savings initiatives

• Track spend &

savings against

budget

58

Procurement - Initiatives


####• Accelerate supply base consolidation including shift to Best-Cost-Countries

& extend coverage of global spend by category management

####

…• Expand procurement initiative to cross-functional GEA cost optimization program

• Further increase spend transparency to drive both commercial and technical

levers like standardization & modularization

59

SG&A – Peer comparison


• Reported SG&A ratio above peers (+3pp)

while total overheads in line with peer

average

– No adjustments for strategic

projects (~€54m/ ~1.2%p) and PPA

amortization (~€20m/ 0.4%p) made3

• Peer comparison challenging since:

– GEA business model as well as

portfolio/industry exposure differ

from that of peers

– peers have higher share of

commodity business

– peers tend to leverage more agents

compared to GEA

• GEA’s diversified client portfolio creates

stability, but comes with some

complexity cost1. Alfa Laval, JBT Corporation, Marel, SPX Flow 2. Gross margin minus EBIT 3. Figures relate to SG&A ratio; adjusted as part of operating EBIT (cf. Annual report)

Source: Annual reports, press releases

SG&A ratio Overhead ratio2

PEER1 COMPARISON2017 % of sales

GEA

Peer 2

Peer 1

Peer 3

Peer 4

22%

17%

18%

18%

23%

26%

23%

21%

20%

25%

Reported figures Peer average

Ø19% Ø23%

x%

60

SG&A – FF2020 Reductions


• During the transformation towards

OneGEA, significant FTE capacity

adjustments were made

• Recent benchmarking of overhead

functions has identified some areas

with improvement potential

• However, progress in strategic projects

and process/ system harmonization

required as enabler to exploit efficiency

potential

• GEA strongly committed to enable and

continuously improve SG&A

efficiency

Gross reduction of ~2,100 FTEs already conducted as

part of FF2020

2017

~17,900

Other

build-up

~300

Build-up

from

acquisitions

~1,400

Fit for 2020

reduction

~2,100

GCC2

R&C

BA-E

BA-S

SSC

Prior to

OneGEA

(Mar 2015)

~18,300

1. Full-time equivalents (FTE) excluding vocational trainees and inactive employment 2. Finance, HR and other

Group employees (#1)

61

SG&A – Initiatives


####

####

…

Accelerate harmonization and continuously drive efficiency – Based on

advancements in system and process harmonization, further drive SG&A

efficiency and reduce costs

Optimize indirect spend – Strengthen strategic procurement and drive

consolidation of supplier landscape

Streamline sales to handle growth – Streamline interfaces in sales setup and

drive systems automation to increase productivity

62



CAPITAL

ALLOCATION

GROWTH

COST

EFFICIENCYENABLERS

63

Systems and Processes


General timeline

2017 2018 2019 2020

One Finance

2017 2018 2019 2020

Workday

Project Execution Excellence

IT Systems

UPDATE GOALS & BENEFITS

• Risk management process

& project governance

process improved

• Efficient project execution

process

• Increased project profitability

• Common HR Management

System & Tool

• Simplified & harmonized HR

processes

• More effective steering of

OneGEA organization

• Higher transparency &

efficient processes

• Workday tool rolled out

group-wide

• Core functions implemented;

full function ramp-up in waves

• Key system interfaces

have been established

• Overhead reporting to be

implemented in 2018

• Cloud migration of IT

applications in progress

• Harmonization of ERP

kicked-off

• Complexity reduction by consolidated ERP landscape

• Increased efficiency of IT

backbone

Ramp-up Ongoing

http://www.google.de/url?sa=i&rct=j&q=&esrc=s&source=imgres&cd=&cad=rja&uact=8&ved=0ahUKEwi1qOyU6qDZAhUDzRQKHe7MAmAQjRwIBw&url=http://www.simplyjoined.com/services/people-development/&psig=AOvVaw2TIVx0QcIGPgRwXbhKW8aD&ust=1518540455404563

http://www.google.de/url?sa=i&rct=j&q=&esrc=s&source=imgres&cd=&cad=rja&uact=8&ved=0ahUKEwi1qOyU6qDZAhUDzRQKHe7MAmAQjRwIBw&url=http://www.simplyjoined.com/services/people-development/&psig=AOvVaw2TIVx0QcIGPgRwXbhKW8aD&ust=1518540455404563

https://www.google.de/url?sa=i&rct=j&q=&esrc=s&source=imgres&cd=&cad=rja&uact=8&ved=0ahUKEwjsyLrc6qDZAhUrAcAKHe9TAt4QjRwIBw&url=https://www.masonadvisory.com/&psig=AOvVaw2wYQRdUjphBki1ShOkeLBA&ust=1518540605646246

https://www.google.de/url?sa=i&rct=j&q=&esrc=s&source=imgres&cd=&cad=rja&uact=8&ved=0ahUKEwjsyLrc6qDZAhUrAcAKHe9TAt4QjRwIBw&url=https://www.masonadvisory.com/&psig=AOvVaw2wYQRdUjphBki1ShOkeLBA&ust=1518540605646246

64

Entrepreneurial steering through OneGEA Finance

Step by step, financial KPIs available by

PG1/APC1 and Org. Unit

Order Intake

Gross Margin

Other Operating Expenses

Personnel Expenses

SG&A

FTE

2016 2017 2018 2019

Sales

• In addition to Legal Entity

& BA reports: New

management reporting

by org. unit as well as by

country and Product

Group / Application set

up in the course of the

OneGEA Finance project

• History for these new

KPIs also need to be built

up


1. PG = Product Group, APC = Application

65



GROWTH

COST

EFFICIENCYENABLERS

CAPITAL

ALLOCATION

66

Balanced capital allocation policy


WE PURSUE

• Disciplined working capital management

• Prudent capex allocation

• Balanced policy regarding dividend,

share buyback and selective M&A

• Continuous portfolio management

CAPITAL

ALLOCATION

67

Selective M&A and active portfolio management


Divested 2014 Divested 2016Note: not published

Divested 2017

… based on a set of comprehensive criteria

Recent divestments

ARTE fit Strategic fit

Value creation

Applications

Regions

Technologies

Func. Excellence

Markets

Growth

Profitability

Competition

Margin

WACC

Cash Flow

Return

Portfolio under review

Review of non-core

businesses

Broad option space

• Special attention

• Restructuring

• Divestment

Progress to be

communicated in

2018

Recent M&AIn the last 24 months GEA analyzed >50

M&A opportunities

CMT HILGE PAVAN

COMAS IMAFORNI VIPOLL

https://www.gea.com/en/productgroups/food-processing-systems/bakery-equipment/piston-filling-injectors/index.jsp

https://www.gea.com/en/productgroups/food-processing-systems/bakery-equipment/piston-filling-injectors/index.jsp

https://www.gea.com/en/products/baking-tunnel-ovens.jsp

https://www.gea.com/en/products/baking-tunnel-ovens.jsp

68

Agenda


I GEA ambition

III

IV

Value creation

V


Key takeaways

15 min break

Q&A


69

GEA guidance FY2018


Group-level guidance Comment

Sales

Operating

EBITDA

margin

Cash flow

driver margin

5.0 6.0% growth

12.0 13.0%

8.7 9.7%

Including acquisitions Pavan and Vipoll

At average 2017 FX rates

Excluding strategic projects

70

Additional financial information for FY2018


Strategic

Projects one-

off impact

(€m)

80-

100

Depreciation

&

Amortization

(incl. PPA)

(€m)

Thereof

impact from

PPA in 2017

(€m)

LTM

Working

Capital

(of sales)

Target

Capex Level

(of sales)

Additional

capex for

strategic

projects

[~€40m]

Tax Rate Dividend

Policy

around

135around

45between

16%-

16.5%

Operating

max.

2%

around

22%Payout ratio

40%-

50% of net

income

71

Strategic Projects


• Three main categories

remain as strategic

projects in 2018:

• Restructuring /

footprint will be the

main focus in 2018

• IT transformation and

Steering systems will

be continued in 2018

Estimate to Actual 2017(rounded)

Initial to Latest Estimate 2018(rounded)

60

30

55

40

-45

Capex

P&L impact

FY 2017

Actual

70

FY 2017

Estimate

115

45 40

45

+30/+50

Capex

P&L impact

Latest 2018

Estimate

120-140

80-100

Initial 2018

Estimate

90

72

GEA mid-term guidance FY2022


Group-level guidance Comment

Sales

Operating

EBITDA

Margin

CAGR 2018-22 of

3.5 – 4.5%

Increase to

13.5 – 15.5%

Including acquisitions Pavan and Vipoll

Major future portfolio measures not included

At average 2017 FX rates

Going forward, adjustments will only be made

for strategic projects such as manufacturing

footprint, other material restructuring and

portfolio measures

Mid-term guidance is based on the assumption of no major changes in global economic

growth and no substantial slow-down in any of GEA’s customer industries

73

Additional considerations regarding mid-term guidance


Operating capex ratio of around 2%

Stable dividend policy, i.e. payout ratio of 40 - 50% of net income

Unchanged financial policy: Commitment to investment grade rating

Depreciation & Amortization ratio (excl. PPA) of around 2%

74

Agenda


I GEA ambition

III

IV

Value creation

V


Key takeaways

15 min break

Q&A


75

Coherent strategic plan 2018-2022 in place

GROWTH EFFICIENCY CAPITAL

ALLOCATION

ENABLERS

• Technology trends

• Global key accounts & cross-selling

• Emerging Markets

• Sales professionalization

• Mutually rewarding value propositions

• Pricing & discounts harmonization

• Service offering & delivery

• Technology and application innovation

• Productivity increase

• Manufacturing footprint

optimization

• Next level of procurement

• Stringent overhead management

• Strong focus on free cash flow

• Working capital management

• Prudent capex allocation

• Dividend, buyback, M&A policy

• Portfolio management

• Improved steering & systems

• New management reporting

• Process and system improvements


76

GEA’s sustainable value creation strategy targeting all key stakeholder groups

Value creation based on

growth, efficiency &

capital allocation

Diversified markets

robust against cyclicality

Strong balance sheet and

cash generation

Stringent portfolio

management

EMPLOYEES

Exciting jobs

Diverse and inclusive

work environment

Attractive career

perspectives

Environment of trust,

fairness and respect

CUSTOMERS

Unique engineering

capabilities solving

complex customer

requirements

Strong innovation for

and together with

customers

Customer proximity &

one-stop value

proposition

INVESTORS SOCIETY

GEA quality contributing

to better life of people

around the globe

Energy & water saving

for the environment

Avoidance of negative

environmental impacts

globally at GEA sites


77

Agenda


I GEA ambition

III

IV

Value creation

V


Key takeaways

15 min break

Q&A


78

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 may vary from 100%.

gea.com

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Capital Markets Day 2018 - GEA engineering for a better world · 12/03/2018 · Equipment business...

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