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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
engineering for a better world
• Financial Targets for FY 2017 – FY 2020
• Capital Allocation
• Acquisition Criteria
• Preliminary Key Figures Q3 2014 / Guidance FY 2014
Agenda
1
3
2
4
GEA Capital Markets Day 2014 - Financial Status and Targets 3
engineering for a better world
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%
GEA Capital Markets Day 2014 - Financial Status and Targets 4
1 For the corresponding definition please refer to the last page of this presentation
engineering for a better world
Financial Targets Organic sales growth of 4% to 6% p.a. until 2020
GEA Capital Markets Day 2014 - Financial Status and Targets 5
(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
engineering for a better world
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:
GEA Capital Markets Day 2014 - Financial Status and Targets 6
engineering for a better world
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
engineering for a better world
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
engineering for a better world
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
9 GEA Capital Markets Day 2014 - Financial Status and Targets
[EURm]
2.0%
1.5%
Target 2017 - 2020
Target Capex:
1.5% to 2.0% of sales
engineering for a better world
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)
10 GEA Capital Markets Day 2014 - Financial Status and Targets
[EURm]
15%
12%
Target 2017 - 2020
engineering for a better world
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)
11 GEA Capital Markets Day 2014 - Financial Status and Targets
25%
20%
Target 2017 - 2020
engineering for a better world
• Financial Targets
• Capital Allocation
• Acquisition Criteria
• Preliminary Key Figures Q3 2014 / Guidance FY 2014
Agenda
1
3
2
4
GEA Capital Markets Day 2014 - Financial Status and Targets 12
engineering for a better world
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
GEA Capital Markets Day 2014 - Financial Status and Targets 13
Why GEA wants to continue to earn investment grade rating
engineering for a better world
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
GEA Capital Markets Day 2014 - Financial Status and Targets 14
Adjusted leverage ratio main trigger for GEA’s rating
engineering for a better world
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]
15 GEA Capital Markets Day 2014 - Financial Status and Targets
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
engineering for a better world
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]
16 GEA Capital Markets Day 2014 - Financial Status and Targets
engineering for a better world
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
17 GEA Capital Markets Day 2014 - Financial Status and Targets
[EURbn] 1. Dividend payments: Change of payout ratio
from 1/3 to 40-50% of net income
engineering for a better world
• Financial Targets
• Capital Allocation
• Acquisition Criteria
• Preliminary Key Figures Q3 2014 / Guidance FY 2014
Agenda
1
3
2
4
GEA Capital Markets Day 2014 - Financial Status and Targets 18
engineering for a better world
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
GEA Capital Markets Day 2014 - Financial Status and Targets 19
engineering for a better world
Strategy process defined “white spots” in GEA’s portfolio
GEA Capital Markets Day 2014 - Financial Status and Targets 20
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"
engineering for a better world
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
GEA Capital Markets Day 2014 - Financial Status and Targets 21
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
engineering for a better world
Acquisition criteria focus on strategy and value creation
GEA Capital Markets Day 2014 - Financial Status and Targets 22
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
engineering for a better world
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
23 GEA Capital Markets Day 2014 - Financial Status and Targets
engineering for a better world
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
GEA Capital Markets Day 2014 - Financial Status and Targets 24
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
engineering for a better world
Acquisitions (revenue p.a.)
~150 ~70
~130 ~210 ~200
~60 ~40
~510
~45 0 ~40
2004 2005 2006 2007 2008 2009 2010 2011 2012
GEA Capital Markets Day 2014 - Financial Status and Targets 25
[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
engineering for a better world
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
GEA Capital Markets Day 2014 - Financial Status and Targets 26
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
engineering for a better world
• Financial Targets
• Capital Allocation
• Acquisition Criteria
• Preliminary Key Figures Q3 2014 / Guidance FY 2014
Agenda
1
3
2
4
GEA Capital Markets Day 2014 - Financial Status and Targets 27
engineering for a better world
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
28 GEA Capital Markets Day 2014 - Financial Status and Targets
GEA RT
GEA PE
GEA ME
GEA FT
[EURm] [EURm]
[EURm] [EURm]
engineering for a better world
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 - - +
GEA Capital Markets Day 2014 - Financial Status and Targets 29
engineering for a better world
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).
GEA Capital Markets Day 2014 - Financial Status and Targets 31
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