Gea%20cmd%20 %20cfo%20presentation%20financial%20status%20and%20targets tcm11 27962

GEA Group Aktiengesellschaft

Financial Status and Targets CFO Dr. Helmut Schmale

London, October 13, 2014

engineering for a better world

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

significantly from the estimates given here. Factors that could cause such a divergence include 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. We are under no obligation to update

forward-looking statements.

Due to rounding, the sum of percentages of order intake and sales by region as well as by customer industry may vary

from 100%.

Disclaimer

GEA Capital Markets Day 2014 - Financial Status and Targets 2


• Financial Targets for FY 2017 – FY 2020

• Capital Allocation

• Acquisition Criteria

• Preliminary Key Figures Q3 2014 / Guidance FY 2014

Agenda

1

3

2

4



Financial Targets

FY 2014 - 2020

CAGR Organic Sales Growth FY 2014 - FY 2020: 4% to 6% p.a.

FY 2017 - 2020

Service to Sales Ratio: ~30%

Operating EBIT-Margin1: 13% to 16%

Working Capital to Sales Ratio: 10% to 12%

Capex to Sales Ratio: 1.5% to 2.0%

Cash Flow Driver Margin1: 12% to 15%

ROCE1: 20% to 25%

Net Effective Tax Rate: 24%


1 For the corresponding definition please refer to the last page of this presentation


Financial Targets Organic sales growth of 4% to 6% p.a. until 2020


(Index 2009 = 100)

70

80

90

100

110

120

130

2009 2010 2011 2012 2013

GEA:

+5.8% p.a.

GDP:

+3.8% p.a.

GEA organic sales growth until 2020:

4% to 6% CAGR

until 2020

GEA organic sales growth 2009 – 2013

has outperformed GDP by ~200 bps


Financial Targets for FY 2017 - FY 2020 Service Business: ~30% of sales

• Increasing installed

equipment base

• Improving coverage ratio

of own installed base in

particular in Emerging

Markets

• Increasing service intensity

per machine (e.g. “condition

monitoring”)

Service

business

today

Increasing

service

intensity

Target

2017 - 2020

Increasing

installed base

Improving

coverage

ratio

27%

of sales

~30%

of sales

Dimensions to further grow the service business:



294

192

248

403 426

459 479

8.8%

6.8%

8.4%

10.5% 10.3% 10.6% 10.9%

13,2%

2008 2009 2010 2011 2012 2013 Q2 2014(LTM)

1 Target 2017-2020

Operating EBIT Operating EBIT-Margin (LTM)

GEA has gradually managed up Operating EBIT-Margin to ~11%

Financial Targets for FY 2017 - FY 2020 Operating EBIT-Margin: 13% to 16%

7

Sales growth

[EURm]

GEA Capital Markets Day 2014 - Financial Status and Targets

16%

13% 100

Savings

“Fit for 2020“

Target

2017 - 2020

Target

Range


Target Ratio Working Capital:

10% to 12% of sales

Financial Targets for FY 2017 - FY 2020 Working Capital: 10% to 12% of sales

• At currently ~12%, the Working

Capital to sales ratio came down

from 2008/2009 levels

• Group wide factory coordination

will facilitate inventory reductions

in future

• During stronger growth periods,

WC ratio tends to come up a little

436 430

343

438

525 506 524

13.0%

15.3%

11.6%

11.4%

12.7%

11.7% 11.9%

0%

2%

4%

6%

8%

10%

12%

14%

16%

0

100

200

300

400

500

600

700

800

2008 2009 2010 2011 2012 2013 Q22014

x y Target

Working Capital (average LTM)

Working Capital (average LTM) as % of sales (LTM)

8 GEA Capital Markets Day 2014 - Financial Status and Targets

[EURm]

12%

10%

Target 2017 - 2020


Financial Targets for FY 2017 - FY 2020 Capex: 1.5% to 2.0% of sales

• Capex was above 3% of sales due

to investments into new production

facilities mainly in Europe and

China

• New organization bundling

production activities in dedicated

areas will even better allocate

production capacities

and hence reduce need for Capex

92

75

59

125 125 121

42

2.7%

2.7%

2.0%

3.3%

3.0% 2.8%

2.0%

-1%

2%

4%

0

20

40

60

80

100

120

140

160

2008 2009 2010 2011 2012 2013 H12014

x y Target2017

Capex

Capex as % of sales


[EURm]

2.0%

1.5%

Target 2017 - 2020

Target Capex:

1.5% to 2.0% of sales


Target CFD-Margin:

12% to 15%

Financial Targets for FY 2017 - FY 2020 Cash Flow Driver Margin: 12% to 15%

CFD-Margin to benefit from:

• Rising EBIT-Margins (min. 13%)

• Capex restraint

(max. 2% of sales)

• Working Capital discipline

(max. 12% of sales)

119

299

221

207

414 394

4.2%

10.1%

5.8%

5.0%

9.6% 9.0%

-7%

-2%

3%

8%

13%

-50

50

150

250

350

450

550

650

2009 2010 2011 2012 2013 Q22014

x y Target

Cash Flow Driver (LTM)

Cash Flow Driver Margin (LTM)


[EURm]

15%

12%

Target 2017 - 2020


Target ROCE:

20% to 25%

1,063 1,094 1,069

1,620 1,887 1,895 1,912

26.4%

11.3%

18.9% 21.4%

16.7%

22.1% 22.9%

2008 2009 2010 2011 2012 2013 Q22014

x y Target2017

Capital Employed (average LTM)

ROCE (average LTM)

Financial Targets for FY 2017 - FY 2020 ROCE: 20% to 25%

[EURm] • Increasing EBIT-Margins

(numerator) and decreasing

Working Capital and Capex to

sales ratios (denominator) should

strengthen ROCE

• However, acquisitions will have an

adverse temporary impact due to

ppa amortizations and delayed full

year earning recognition

(numerator), but immediate

addition of target’s asset to capital

employed (denominator)


25%

20%

Target 2017 - 2020


• Financial Targets




Agenda

1

3

2

4



Reputation

and illustration

of financial

leeway

More

opportunities

to use group

guarantees

instead of

external bank

guarantees

Some debt

covenants

require

investment

grade

Lower

interest

level

(especially in

times of

distress)

Better

access to

debt capital

markets


Why GEA wants to continue to earn investment grade rating


Credit rating does not account for cash position

Rating relevant (adjusted)

gross debt: gross

financial debt plus

pension liability plus

lease liabilities (inferred

from operating leases)

Only gross debt

is taken into

consideration,

while cash on hand

gets ignored

Main leverage ratio

according to

Moody’s:

adjusted gross

debt/adjusted

EBITDA

GEA’s strategic minimum

cash reserve of around

EUR 150m to 200m not

viewed as a safety

cushion


Adjusted leverage ratio main trigger for GEA’s rating


552

392 944

680

384

Target corridor for indebtedness levels

applying Q2 2014 numbers

2,008

Operating

lease

Pensions Gross

financial

debt

Rating-

relevant

gross debt

Cash Net debt Net debt Rating-

relevant

gross debt

Target Gross Debt:

2.0-2.5x EBITDA

552

2,008

Average Net Debt:

0.5-1.0x EBITDA

[EURm] [EURm]


Trigger thresholds for GEA’s credit rating

Debt reduction

GEA’s rating relevant gross debt is four

times its net financial debt per Q2 2014


Actual average interest level: < 3% p.a.

Maturity of GEA's main financial debt

structure per Q2 2014

GEA’s current main financial debt structure contains redemption potential

2017 2016 2015 2014

KfW Loans

GEA Bond

EIB Loan

Borrower‘s Note Loan

34

450

7

434

34

400

150

300

GEA Bond (4.25% coupon; no call option): EUR 400m

KfW Loans: EUR 75m

European Investmentbank: EUR 150m

Borrower‘s Note Loan: EUR 300m

[EURm]



Sources of funds:

Significant cash flow 2015 - 2017

GEA with stronger cash generation going forward

2. Strengthen GEA’s application know-how by

doing (bolt-on) acquisitions over a couple of

years

3. Repayment of financial debt

4. Invest in organic business development

(Service, R&D, regional presence)

5. Distribution of residual cash to shareholders

Capital allocation priorities

2017 Proceeds GEA HX Cash flow before

M&A and dividends

~1

~2

~1

Key objectives

• Maintain financial flexibility

• Maintain investment grade credit rating

• Rating relevant gross debt: 2.0-2.5x EBITDA

• Average net financial debt: 0.5-1.0x EBITDA


[EURbn] 1. Dividend payments: Change of payout ratio

from 1/3 to 40-50% of net income






Agenda

1

3

2

4



Post merger integration M&A

M&A criteria with focus on

value creation

Structured integration approach

to unlock synergies

GEA follows an integrated M&A strategy

Clear strategic direction for

M&A transactions

Strategy

EBITA

44

37

Value

to GEA

6

W/C &

Capex

Invest

0

W/C &

Capex

syn

0

One-off

1

Dis-

Syn

3

Rev.

Syn

8

Cost

Syn

3

37

Synergy bridge Value added



Strategy process defined “white spots” in GEA’s portfolio


New

applications

with many

"white spots"

Existing applications, e.g. A

Milk Powder

Fruit & Vegetables

…

Meat & Poultry

Cheese

Fish & Shrimps

Pet Food

Personal Care

…

Cross-application technologies, e.g. C

New applications, e.g. B

Online Monitoring Process Automation …

Attractive "white spots"




value creation


to unlock synergies



M&A transactions

Strategy


EBITA

44

37

Value

to GEA

6

W/C &

Capex

Invest

0

W/C &

Capex

syn

0

One-off

1

Dis-

Syn

3

Rev.

Syn

8

Cost

Syn

3

37



Acquisition criteria focus on strategy and value creation


ARTE fit A

Regions Technologies Applications Functional Excellence

Strategic fit B

Value creation C

Market

attractiveness

Target

attractiveness

Earnings

per share

Total share-

holder return

DCF >

Price

CFD >

hurdle rate

ROCE >

hurdle rate


Acquisition criteria – Strategic fit Focusing on market and target attractiveness

23

Market attractiveness Target attractiveness

Relative market share

Relative growth

Relative profitability

Service sales

Cost flexibility

Competitive advantages

Strategic fit

4

1

2

3

5

6

7

Market size

Market growth

Market profitability

Service potential

Cyclicality

Competition

Entry barriers

4

1

2

3

5

6

7





value creation


to unlock synergies



M&A transactions

Strategy


EBITA

44

37

Value

to GEA

6

W/C &

Capex

Invest

0

W/C &

Capex

syn

0

One-off

1

Dis-

Syn

3

Rev.

Syn

8

Cost

Syn

3

37



Acquisitions (revenue p.a.)

~150 ~70

~130 ~210 ~200

~60 ~40

~510

~45 0 ~40

2004 2005 2006 2007 2008 2009 2010 2011 2012


[EURm]

2013 2014

• Agroserve

• Goedhart

• WTT

• Messo-

Chemie-

technik

• Colby

• Diessel

• Membraflow

• FlatPlate

• Steris

• 2H Kunst-

stoff

• Hapco

• Huppmann

• ISISAN

• Denco

• AWP Kälte-

Klima-

Armaturen

• Munters/

2H Aqua

• Procomac

• J. Houle

& Fils

• Aero Heat

Exchangers

• Univalve

• ViEx

• ICG

• Bloksma

• PSSP

Fabrication

• Caldemon

Iberica

• Norbco

• Astair

• Deichmann

• ADG

• NEMA Air

FIN

• Eurotek

Engineering

• Intec

• DB Wilaard

Holding

• Ion Blast

• ACO

Engineering

(India)

• Skiold

Mullerup

• ACC Air

Pollution

Control

Division

• Farmers

Industries

• BSGT Beijing

• Breconcherry

• CPM

Manufacturing

• Mashimpeks

• Bock Kälte-

maschinen

• CFS

• Nu-Con

• San-Joaquin

• Aseptomag

• Marine

Services

• Milfos

• de Klokslag

• Scan Vibro

GEA has a good track record in managing the integration of several smaller targets in parallel


Shared Services Center

Global Corporate Center

North

America

Latin

America

Western E.

& MEA

Nordics,

UK/IE, &

BeNeLux

Asia-Pacific DACH &

Eastern E.

Equipment Business Area

Product Engineering & Development

Product Management & Sales

Supply Chain & Production

Equipment Service

Solutions Business Area

Technology Centers

Application Centers

Solutions Service


Administration

Regions

Engineering

Sales

Production

Service

Aquired company

GEA

The new organization allows to integrate targets better along their various functional dimensions

Different functions of acquired company will be benchmarked with best in class processes






Agenda

1

3

2

4



Sales Q1 - Q3

Sales Q3 Order Intake Q3

Order Intake Q1 - Q3

Preliminary Key Figures Q3 2014 and change YoY

175 194

515 506

358 326

151 166

0%

1,165 1,168

Q3 2013 Q3 2014

-9%

-2%

+11%

+10%

organic: -1%

185 196

441 460

336 344

157 176

+5%

GEA RT

GEA PE

GEA ME

GEA FT

1,147 1,089

Q3 2013 Q3 2014

+2%

+4%

+6%

+12%

organic: +5%

534 591

994

445 498

GEA RT

GEA PE

GEA ME

3,359 GEA FT

-4%

1,374

3,483

1,566

1,034 -4%

-12%

+11%

+12%

organic: -2%

526 540

968 995

402 457

3,216

GEA FT

1,320

3,078

1,271 GEA PE

+4%

GEA RT

GEA ME +3%

+4%

+3%

+14%

organic: +6%

Q3 2013 Q3 2014 Q3 2013 Q3 2014


GEA RT

GEA PE

GEA ME

GEA FT

[EURm] [EURm]

[EURm] [EURm]


At the condition of no unexpected economic downturns, assuming constant FX-rates

versus FY 2013 and disregarding potential acquisitions and one-off expenses we are

aiming in 2014 for:

Cash Flow Driver Margin:

Guidance FY 2014 continuing operations confirmed

Sales

moderate growth

Operating EBITDA (EURm)

550 - 590

Cash Flow Driver Margin

9.0% - 9.5%

EBITDA Capex Working Capital (LTM)

Sales Sales Sales - - +



Definitions

• Operating EBIT = EBIT before ppa and one-off expenses

• Cash Flow Driver Margin = [EBITDA – Capex -/+ Working Capital (LTM)] / Sales

• Capital employed excluding goodwill from the acquisition of the former GEA AG by the former Metallgesellschaft AG

in 1999.

• ROCE LTM = EBIT reported (LTM) / Capital employed excluding goodwill from the acquisition of the former GEA

AG by the former Metallgesellschaft AG in 1999 (average LTM).


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