Issuer Profile - Automotive

26 June 2015 Credit Research

Issuer Profile - Automotive

UniCredit Research page 1 See last pages for disclaimer.

MAHLE Group

■ MAHLE GmbH, headquartered in Stuttgart, is the parent company of the leading worldwide automotive supplier MAHLE Group (MAHLE). The group’s customers in the automotive industry are served by the following business units (FY13): Engine Systems and Components (36% of revenues); Filtration and Engine Peripherals (28%) and Thermal Management (11%), which was added in 2013. The Aftermarket business unit (12%) supplies the independent automotive spare parts market and MAHLE’s industrial activities are combined within the Industry business unit (6%). The group is one of the world’s 20 largest automotive suppliers. The group's sales in FY13 amounted to EUR 6.9bn and were generated in Europe (49.5%), North America (21.1%), Asia/Pacific (19.1%), South America (10.1%) and Africa (0.2%). The company is not listed and is 99.9% owned by MAHLE Foundation and 0.1% owned by MABEG, which has all voting rights.

■ In FY13, MAHLE generated EUR 771mn in EBITDA and had net financial debt of EUR 684.9mn and (on-balance sheet) pension liabilities of EUR 466mn. The group has a EUR 300mn bond outstanding, the MAHLGR 2.5% 5/21, which was issued in May 2014. As of 1 October 2013, MAHLE acquired a majority stake in MAHLE Behr GmbH & Co. KG (50.71%). Thus, it achieved a controlling influence and was fully consolidated in 2013. MAHLE Behr forms MAHLE’s Thermal Management business unit. Mainly due to this acquisition and full consolidation, MAHLE’s net debt increased by EUR 318mn in FY13.

■ MAHLE is not rated. MAHLE's sales increased from EUR 2.4bn in 2000 to EUR 6.9bn in 2013, which is a CAGR of >8.5%, supported by growth acquisitions. MAHLE expects total annual sales in 2014 to increase to around EUR 9.7-9.8bn, mainly due to the full consolidation of MAHLE Behr. MAHLE’s equity ratio has been quite stable, at around 35-40% since 2007 (1H14: 35.4%). Also, the group’s reported net debt/EBITDA ratio has been 0.5-1.0x since 2007 (with the exception of 2009, when it was at 1.9x) and was at 0.5x in LTM1H14. Except in 2008/2009, the EBIT margin was always 6-7%. In 2010-13, MAHLE generated an average normalized FCF (after dividends) of EUR 216mn p.a. given average FFO of EUR 560mn, capex of EUR 317mn and dividends (incl. payments to minorities) of EUR 27mn. MAHLE’s cash generation is, however, significantly influenced by working-capital swings and M&A activities. Call options enable MAHLE to increase its stake in Behr over time.

■ On 19 February 2015, MAHLE announced that it signed a definitive agreement to acquire the wholly owned thermal business of Delphi Automotive Plc for USD 727mn (around EUR 668mn). In 2014, the division achieved annual sales of around USD 1.2bn (roughly EUR 1.1bn). After approval by the relevant antitrust authorities, a closing of the deal is anticipated for the fall of 2015. Furthermore, it intends to acquire the JV of Delphi Thermal in China.

■ On 10 September 2014, MAHLE completed the acquisition of Slovenian Letrika d.d. (FY13 sales of EUR 242.5mn), which complements its mechatronics activities.

Contents SWOT Analysis _____________________________ 2 Company description and strategy _______________ 3 Business units and profit centers ________________ 7 Financial analysis ___________________________ 10

Sales and profitability ______________________ 10 Cashflow conversion _______________________ 12 Adjusted net debt & debt structure ____________ 12 Credit metrics, financial flexibility and policy _____ 14 1H14 results and 2014 outlook _______________ 15

Auto supplier peer table ______________________ 17 Financial statistics* __________________________ 18 Company web site www.mahle.com www.mahlestiftung.de Financial calendar April: Annual report September: Semiannual report

P&L DEVELOPMENT AND 2014 GUIDANCE*

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*MAHLE Behr fully consolidated since 1 October 2013 Source: Bloomberg, UniCredit Research

Author Dr. Sven Kreitmair, CFA (UniCredit Bank) +49 89 378-13246 [email protected] Bloomberg UCCR Internet www.research.unicredit.eu

http://www.mahle.com/

http://www.mahlestiftung.de/


Issuer Profile - MAHLE Group


SWOT Analysis Strengths/opportunities ■ MAHLE has global leading market positions in Engine Systems and Components (e.g.

pistons, piston rings, bearings), filtration and engine peripherals (e.g. oil filter modules, air filter and air intake systems, cylinder head covers, oil coolers, fuel filters), and Thermal Management (e.g. charge air coolers, condensers and radiators). MAHLE is one of the world’s 20 largest automotive suppliers. The group is one of the world’s largest aftermarket businesses for automobile spare parts, representing 12% of group revenues in FY13.

■ The significant increase in MAHLE’s Thermal Management business with the full consolidation of Behr and the announced acquisition of Delphi’s Thermal Management division has extended MAHLE’s production footprint in Europe, North America and Asia and will strengthen its product range and systems competence – particularly with air conditioning compressors.

■ High degree of diversification by region: Europe (49.5%), North America (21.1%), Asia/Pacific (19.1%), South America (10.1%) and by customer industry (passenger cars, trucks, other industries).

■ MAHLE has positioned itself with core technologies to benefit from future powertrain solutions and to focus on fuel consumption and CO2-emission reduction.

■ The group's FFO/sales margin has been 8-11% since FY07 (except FY08/09), demonstrating a strong cash conversion rate; in the absence of swings in working capital and M&A, MAHLE (in 2010-13) generated annual average FCF (after dividends) of EUR 216mn. MAHLE had solid financial figures with a strong equity ratio of 36.0% at FYE 2013.

■ Stable ownership structure with long term strategic approach. Since 2009, the dividend payment to the MAHLE foundation was constantly 3% of net income and the minimum payment was EUR 3mn. In addition, MAHLE pays dividends to minority shareholders (e.g. MAHLE Metal Leve S.A., MAHLE Behr GmbH & Co. KG).

Weaknesses/threats ■ Automotive (passenger cars, trucks) production is cyclical; there is constant competitive, innovation, capex, price, cost and consolidation pressure as well as development and project risks in connection with new orders; continued consolidation has led to a limited number of key customer groups.

■ Frequent debt-financed acquisition activity since 2008 (e.g. Behr, Letrika, Delphi Thermal Management) with integration risks; call options enable MAHLE to increase its stake in Behr over time.

■ MAHLE Behr GmbH & Co. KG (FY13 Revenue EUR 3.8bn, EBITDA EUR 389mn) and listed Brazilian subsidiary MAHLE Metal Leve S.A. (FY14 Revenue EUR 748mn, EBITDA EUR 123mn) are fully consolidated, but only 50.71% and 70% owned, respectively.

■ An accounting provision in the form of an accrual was created in FY12 for the investigation proceedings brought against the Behr Group in May 2012 by European and U.S. antitrust authorities for suspected restrictive practices in automotive thermal systems.

■ On-balance-sheet pension liabilities (EUR 466mn); off-balance-sheet liabilities, such as factoring (EUR 153mn) and operating lease (EUR 42mn). Risks from fluctuations in currencies, energy and raw material prices (steel, scrap, aluminum, nickel, copper, resins, cellulose), interest rates and credit spreads




Company description and strategy Description MAHLE is a leading global development partner for the automotive and engine industry

and offers systems competence in the areas of engine systems, filtration, electrics/mechatronics, and thermal management. MAHLE is one of the world’s three major suppliers of engine components, as well as of products for management and filtration of air and fluid systems. It is global leader in partnership for powertrain development. In the original equipment industry, MAHLE provides technologically innovative solutions for automotive, commercial vehicle, machinery, and other industrial applications. The Aftermarket business unit also serves the independent parts market with MAHLE products in original equipment quality. MAHLE has a local presence in all major world markets. At FYE 2013, MAHLE had 64,345 employees, thereof 22.6% in Germany, and it has over 150 production locations. At ten major R&D centers in Germany, the UK, the US, Brazil, Japan, China, and India, more than 4,500 development engineers and technicians work on forward-looking concepts, products, and systems.

Full consolidation of MAHLE Behr in FY13

For FY13, MAHLE’s consolidated statement (German GAAP accounting) included 33 domestic and 148 foreign subsidiaries, of which 37 companies are proportionately consolidated. Furthermore, nine companies were valued according to the equity method. In July 2010, MAHLE took over a stake of 19.9% in Behr Group by means of a capital increase. In January 2011, MAHLE increased its stake in Behr Group from 19.9% to 36.85%. Until September 30, 2013, shares in Behr GmbH & Co. KG (Behr) were valued according to the equity method (36.85%). As of 1 October 2013, MAHLE Beteiligungen GmbH acquired the majority of the shares in MAHLE Behr GmbH & Co. KG (50.71%), Behr was re-named MAHLE Behr GmbH & Co. KG (MAHLE Behr) and MAHLE achieved a controlling influence and was fully consolidated in FY13. MAHLE Behr forms the Thermal Management business unit. In FY13, MAHLE reported five business units and seven profit centers.

DIVERSIFIED PRODUCT PORTFOLIO* GOOD REGIONAL DIVERSIFICATION

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Filtration and EnginePeripherals

Engine Systems andComponents

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*full consolidation of Behr since 1 October 2013 Source: MAHLE, UniCredit Research

Company history MAHLE’s story begun in 1920 when pistons made of heavy gray cast iron were being used in internal combustion engines for automobiles. The Mahle brothers countered this trend by producing light-alloy pistons at their small, newly established company. However, the technology was still finicky and problems arose frequently. To keep dirt and dust out of the engine, the brothers eventually developed air and oil filters as well. Their perseverance paid off: the light-alloy pistons began to take over the market. Nowadays, half of all automobiles produced worldwide contain MAHLE components. MAHLE has developed from a small test workshop into a technologically leading, globally active group.




Shareholders In 1964, company founders Hermann and Ernst Mahle transferred 99.9% of their ownership of the company to the MAHLE Foundation and 0.1% to MABEG-Beteiligungen GmbH (today MABEG – Verein zur Förderung und Beratung der MAHLE Gruppe e.V., Stuttgart), which was entitled to the sole voting rights in the corporation. The objective was to take the company out of the line of succession in order to avoid possible fragmentation. The aim of a moderate and stable distribution of profits to the MAHLE Foundation was to allow the company to make extensive long-term investments and achieve further growth. The plan was also to ensure that the foundation could undertake sustainable project work. The MAHLE Foundation serves charitable causes by promoting health care, youth development and welfare, schooling, general adult education and vocational training, as well as organic farming. Its funding priorities have included the Filderklinik near Stuttgart, a hospital where doctors combine modern, scientific conventional medicine with holistic, anthroposophical medicine. The MAHLE Foundation also sponsors education and research projects. In recent years, the foundation has expanded its area of activity to the international arena and now supports medical and social projects in many countries, particularly in Brazil.

Management team and supervisory board

MAHLE is led by an experienced eight-member management board. The CEO and the CFO positions are held by:

■ Prof. Dr.-Ing. Heinz K. Junker (born 1949), Chairman and CEO, responsible for the business unit Industry and the profit centers Engineering Services, Motorsports and Special Applications as well as Research and Advanced Engineering, Corporate Planning and Corporate Communications. He holds an engineer’s degree and a PhD in automotive engineering, was an engineer at TRW from 1986-1993, is a lecturer at Ruhr University of Bochum for Automotive Engineering (Professor) since 1987 and since 1996 has been chairman of the management board and CEO of the MAHLE.

■ Wolf-Henning Scheider (born 1962), CEO with effect from 1 July 2015. He joined MAHLE on 1 April in the role of Vice Chairman of the Management Board. He has been employed at Bosch since 1987. In 2010, he was appointed Member of the Board of Management of Robert Bosch GmbH and since 2013 has had overall responsibility for the automotive technology division. Prof. Dr.-Ing. Heinz K. Junker, who has held the role of Chairman of the MAHLE Management Board since 1996, will transfer to the Supervisory Board of MAHLE GmbH and to MABEG when Schneider takes over as Chairman of the Management Board. Prof. Dr.-Ing. Junker will replace the chairman of both committees, Dr. Klaus P. Bleyer, who has been a member of the Supervisory Board since 1993.

■ Michael Frick (born 1966), CFO, is in charge of Corporate Finances and Controlling, IT Services, Corporate Insurances and Corporate Internal Audit. He has an university degree in business administration and has worked for MAHLE since 2003 in different controlling, finance and accounting positions. Since 2011 he has been a member of the management board of MAHLE Behr (formerly Behr). Since July, he is CFO of MAHLE:

The Supervisory Board has 20 members, with Dr. Klaus P. Bleyer as chairman. He was formerly chairman of the management board of ZF Friedrichshafen AG. Ten of the supervisory board members are employee representatives.

Technology focus According to MAHLE, combustion engines will remain the main technology for passenger cars as well as trucks for the foreseeable future. The group believes that in the future, more engine generations will be focused on fuel consumption and CO2 emission reductions via the continuation of engine downsizing with higher mechanical and thermal loads. The following innovations for future powertrain technology are envisaged by MAHLE: turbocharger, exhaust gas recirculation-technology, higher flexibility (valve train, flex fuel, engine displacement), mechatronics and thermal management. The group’s product development is oriented to future technological requirements for promoting long-term growth.




In summary, MAHLE’s product innovations are driven by friction, reduction, downsizing, thermal management and electrification.

■ Engine Systems and Components: A significant trend in meeting CO2 emission reduction targets is the downsizing of engines, which means the scaling down of displacement and decreasing the number of cylinders, while maintaining and improving performance. This is associated with a rise in the thermal and mechanical load of engine components and the need for a further reduction in friction loss and weight. These technical changes will continue to lead to a significant increase in the complexity of products, a trend addressed by MAHLE’s R&D activities (e.g. also with products to address the variability of the valve train).

■ Filtration and Engine Peripherals: The development of products for air and liquid management (e.g. oil pumps) is in line with a perceived market trend towards lower CO2 emissions and fuel consumption. Air filters and air guidance systems make a substantial contribution to meeting these requirements. MAHLE thrives on innovative products and benefits from a high degree of process expertise in the automotive air management market.

■ Thermal Management: Three major trends are currently driving product development in this segment: 1. the downsizing of engines aimed at a reduction of CO2 emissions and fuel consumption; 2. powertrain electrification; and 3. in the area of air conditioning, a growing requirement for improved comfort and lower energy consumption. Furthermore, there is also a trend towards chemical refrigerants currently used in Europe to be replaced by CO2 as a natural refrigerant in the foreseeable future.

Competitive positioning MAHLE aims for economic independence through diversification: global footprint with a strong presence in each automobile region, highly diversified product range; operates one of the world’s largest aftermarket businesses for automobile spare parts; services all original equipment manufacturers (OEM); only competes in products where it can assume a top 3 role; among the top 20 global suppliers and mainly acts as a Tier-1 supplier to OEMs; positioned itself with core technologies to benefit from future powertrain solutions.

TOP GLOBAL AUTO OEM PARTS SUPPLIERS (2013)

0 5 10 15 20 25 30 35 40 451. Pro-forma Continental-Schaeffler

2. Robert Bosch (--/AA-s)3. Pro-forma ZF-TRW

4. Denso (--/AA-s)5. Magna Int. (Baa1s/A-s)

Continental (Baa3s/BBBs/BBBp)6. Aisin Seiki (--/A+s)

7. Hyundai Mobis (Baa1s/A-s)8. Faurecia (Ba3s/--/BB-s)

9. Johnson Controls (Baa2s/BBB+s)ZF Friedrichshafen (NR)

TRW (Ba1wn/BBB-s/BBB-wn)10. Yazaki (NR)

11. Delphi Automotive…12. Valeo (Baa3p/BBBs)

13. Sumitomo Electric Industries (A1s/As)14. BASF SE (A1s/A+s/A+s)

15. JTEKT (NR)16. Toyota Boshoku (NR)

17. Autoliv (--/A-s)18. Hitachi Automotive Systems (NR)

19. CalsonicKansei (NR)20. Mahle (NR)

Automotive OEM revenues in USD bn (2013)

Source: Automotive News, UniCredit Research




Strategy MAHLE’s strategy focuses on maintaining and strengthening its leading global market positions. Accordingly, MAHLE expects to continue strengthening its position in the growing, emerging vehicle markets such as China and Asia, by providing sufficient R&D competence and capacity there. The global demand for lower CO2 emissions of powertrains enables MAHLE to provide its innovative solutions to the important automotive regions; for example to supply controlled oil pumps and assembled camshafts to a number of customers, e.g. in China. Accordingly, MAHLE sees itself in a position to significantly participate in the increased need for higher technology applications in a number of vehicle markets, and is therefore currently in the process of increasing its global market penetration for a number of products. Where possible, MAHLE strives to be among the top 3 suppliers of manufactured parts and is able to offer most product solutions on a global basis. Beyond new products that MAHLE added to the portfolios of its existing business units, a dedicated mechatronic profit center has been established in order to provide innovative mechatronic solutions for the optimization of internal combustion engines, such as electric wastegate actuators. Furthermore, MAHLE is in the process of increasing its participation in the electrification of light vehicle powertrains. Beyond organic R&D projects that focus on the development and industrialization of electrically driven auxiliaries for passenger cars, MAHLE has initiated a 39% stake in the Japanese electric motor manufacturer Kokusan Denki Co. Ltd. The growth of the worldwide automotive original equipment sector is accompanied by a continuous expansion of the global independent aftermarket sector, in order to profit from the attractive margin potential of the repair and spare parts business. MAHLE’s Industrial business is continuing with the internationalization of its activities, focusing on North and South America, as well as China, and is expanding its product portfolio with filtration and thermal management technologies in the growing market segments of energy efficiency and water technologies.

Research and Development MAHLE’s R&D efforts are intended to continue leading to the market launch of various new products. Due to new regulatory requirements, increasing energy prices and the strong competition in the automotive sector, which all require increased efficiency and the reduction of costs, there is a lot of innovation in the automotive sector as a whole, particularly in the development and production of engines and engine peripheral components for passenger cars and commercial vehicles. Therefore, current market trends inter alia refer to the reduction of fuel consumption or the further split of powertrain configurations (such as by downsizing engines through the reduction of pistons, further development of efficient peripheral components such as controlled oil pumps, oil mist separators or turbocharging systems including integrated charge air coolers). MAHLE’s R&D practice is structured in three levels: 1. MAHLE’s fundamental research practice (corporate advanced engineering), which focuses on new materials, new technology and applications, for example, is centralized at MAHLE’s headquarters in Stuttgart; 2. MAHLE’s product-oriented R&D practice (i.e. any research related to the development and further development of current products and applications) is pooled at its 10 R&D centers employing over 4,500 engineers, which are located around the globe (in: Brazil, China, Germany, the UK, India, Japan and the US); and 3. MAHLE’s application engineering creates solutions for specific customer projects, which is carried out by specialized teams and application engineers mainly based at its regional headquarters.

Strategic Alliances In the automotive industry, the development of complex systems is increasingly assigned to suppliers. MAHLE provides its customers with forward-looking solutions, not least in order to accommodate the growing pressure to increase productivity. Close- cooperation with long-standing partners is one efficient way to meet such elevated requirements. JVs and development partnerships are often the result. Next to the JVs with HBPO and BHTC, MAHLE’s current most significant JV is “Bosch Mahle Turbo Systems” between MAHLE and Robert Bosch GmbH, which was established in 2008 as a 50:50 JV between its two partners. The aim of this JV is to develop and produce tailor-made exhaust gas turbochargers for passenger cars and commercial vehicles.




Business units and profit centers Group organization MAHLE is split into five business units and seven profit centers. Customers in the

automotive industry are mainly served by Engine Systems and Components, Filtration and Engine Peripherals, and Thermal Management (consolidated in 2013). Aftermarket supplies the independent automotive spare parts market with products of original equipment quality. All MAHLE industrial activities are combined in the Industry business unit, with its Filtration, Engine Components, and Thermal Systems divisions. Its profit centers are geared toward very specific customer segments. The Mechatronics profit center was created in 2011 to meet the steadily rising demand and requirements for mechatronics systems and components, particularly against the backdrop of growing powertrain electrification in combustion engines and in hybrid and electric vehicles. In the course of the acquisition of the majority share in the Behr Group, the Thermostats and Valves, Control Units for vehicle air conditioning, and Front-end Modules profit centers were integrated into the MAHLE in 2013.




BUSINESS SEGMENT OVERVIEW (FY13)

Engine Systems and Components

Filtration and Engine Peripherals

Thermal Management

Aftermarket

Industry

Profit Centers

Aluminum pistons for gasoline and diesel engines, articulated and steel pistons for commercial vehicle engines, piston assemblies, and complete power cell units Piston rings, piston pins, connecting rods, cylinder liners, bearings, and bushings for combustion engines and other automotive applications, piston inserts Complete valve train systems and their components, camshafts, valves, and valve actuating components JV Bosch Mahle Turbo Systems (at-equity consolidated)

Filter modules for fuel, oil, and air filtration as well as cabin air filters Air intake modules for gasoline and diesel engines, cylinder head covers with integrated oil mist separation, controlled oil pump systems, oil coolers for engine and trans mission applications, and activated carbon canister modules for tank ventilation

Complete HVAC systems, condensers, evaporators, storage evaporators and evaporator coatings, heater cores, blowers, air vents, fragrancing units. Control panels for passenger car and commercial vehicle air conditioning systems. Cooling plates and chillers for lithium-ion battery cooling Cooling modules, expansion tanks, high- and low-temperature radiators, exhaust gas coolers, direct and indirect charge air coolers, power steering oil coolers. VISCO® clutches and fans as well as VISCO® coolant pumps for commercial vehicle applications

Products for vehicle maintenance and engine repair for passenger cars, motorcycles, transporters, commercial vehicles, stationary engines, as well as agricultural and construction machinery: engine components, filters, engine gaskets, exhaust gas turbochargers, air compressors, thermostats, and components for vehicle air conditioning and engine cooling. Workshop equipment for air conditioning, oil, and cooling circuit maintenance. Supplementary ranges

Filters and filtration systems, fluid separation, and dedusting for a variety of industrial applications. Membrane technology for water treatment and product filtration Pistons, piston pins and rings, cylinder liners, valve train components, camshafts, and bearings for large engines Cooling systems and cooling applications for large engines, various vehicles as well as wind power and electronics. Air conditioners and complete air conditioning systems for special vehicles

Motorsports and Special Engines Engineering Services Small Engine Components Mechatronics Thermostats and Valves (Behr Thermot-tronik since 1.10.2013 consolidated) Control Units (JV 50% Behr-Hella-ThermoControl BHTC, since 1.10.2013 quotal consolidated) Front-end Modules (JV 33.3% Hella Behr Plastic Omnium HBPO, since 1.10.2013 quotal consolidated)

Business unit sales EUR 2,727mn EUR 2,148mn EUR 773mn EUR 805mn EUR 458mn EUR 785mn Share of group sales EUR 2,494mn EUR 1,946mn EUR 747mn EUR 796mn EUR 445mn EUR 512mn Capex on tangible fixed assets EUR 173mn EUR 110mn EUR 38mn EUR 29mn EUR 12mn EUR 50mn Production locations 51 32 27 23 21 48 Headcount 29,568 9,711 14,968 1,670 2,246 6,452 Major competitors The automotive piston market is

dominated by few global players and many regional players. Few of the key players include Mahle GmbH (Germany), Aisin-Seiki Co. Ltd. (Japan), Rheinmetall AG (Germany), Hitachi Ltd. (Japan), and Federal-Mogul Corporation (U.S.).

The automotive filtration market is occupied by few large and many small/medium players. Some of the notable names are Mann+Hummel (Germany), Affinia Group (U.S.), Fram/UCI (U.S.), Cummins Inc. (U.S.), Sogefi SpA (Italy), Donaldson (U.S.), MAHLE and Clarcor Inc. (U.S.). These players account for about 61% of the market and the rest 39% is occupied by Denso (Japan) and many other small/medium players, which have their presence limited to a particular region.

Denso, Halla Visteon Climate Control, Valeo, Delphi, Borg Warner, Benteler

Source: www.marketsandmarkets.com, company reports, UniCredit Research

http://www.marketsandmarkets.com/




SALES AND OPERATING INCOME DATA OF SELECTED SEGMENT COMPETITORS

ENGINE SYSTEMS AND COMPONENTS

EUR mn Revenues Operating Income Operating Margin 2014 2013 2014 2013 2014 2013 MAHLE 2,495 Hitachi Ltd. (Automotive Systems) 6,632 7,563 353 334 5.3% 4.4% Federal Mogul (Powertrain Energy) 3,662 3,036 n.a. n.a. n.a. n.a. Eaton Corp Plc (Vehicle) 3,311 2,791 533 431 16.1% 15.4% Kolbenschmidt Pierburg (Rheinmetall – Automotive) thereof: Hardparts

2,448 934

2,262 889

184 72

124 49

7.5% 7.7%

5.5% 5.5%

Aisin Seiki (Engine & Related Parts) 2,135 2,308 n.a. n.a. n.a. n.a. TRW Automotive (Automotive Components) 1,563 1,388 n.a. n.a. n.a. n.a. Daido Steel Co Ltd (Parts for Automobile & Industries) 682 779 26 28 3.8% 3.6% Taiho Kogyo Co Ltd (Auto Parts Related) 562 604 57 56 10.1% 9.3% Teikoku Tsushin Kogyo Co Ltd (Other-Industrial Machinery)*

2 3 -2 -1 n.a. n/a

Source: Bloomberg, company reports, UniCredit Research

FILTRATION AND ENGINE PERIPHERALS

EUR mn Revenues Operating Income Operating Margin 2014 2013 2014 2013 2014 2013 MAHLE 1,946 Mann + Hummel GmbH 2,795 2,675 140 151 5.0% 5.6% Denso Corp (Automotive) thereof: Powertrain Control Systems

28,384 8,711

29,404 10,366

n.a. n.a.

n.a. n.a.

n.a. n.a.

n.a. n.a.

Aisin Seiki (Automobile Parts) 19,086 20,347 n.a. n.a. n.a. n.a. Toyota Boshoku Corp (Car Interior Components) 8,763 9,012 n.a. n.a. n.a. n.a. Modine Manufacturing Co 1,221 1,001 31 26 2.5% 2.6% Donaldson Co. Inc. (Engine Products) 1,164 1,157 172 (EBT) 170 (EBT) 14.7% 14.7% Dana Holding Corp (Power Technologies) 870 749 n.a. n.a. n.a. n.a. Sogefi SpA (Automotive Filters) 844 818 42 46 4.9% 5.6% Cummins Inc. (Components) thereof: Filtration

3,859 811

3,270 774

516 397 13.4% 12.1%

Affinia Group Holdings Inc. (Filtration) 799 655 124 96 15.5% 14.7% Clarcor Inc. (Engine/Mobile Filtration) 451 383 91 80 20.2% 20.9% Inzi Controls Co Ltd (Automotive Parts Manufacturing) n.a. 379 n.a. n.a. n.a. n.a.


THERMAL MANAGEMENT

EUR mn Revenues Operating Income Operating Margin 2014 2013 2014 2013 2014 2013 MAHLE (=Behr fully consolidated since 1 October 2013) 747 Behr 3,820 208 5.4% Denso Corp (Thermal Systems) 8,763 8,828 n.a. n.a. n.a. n.a. Benteler Deutschland GmbH (Automotive) n/a 5,955 n.a. n.a. n.a. n.a. Halla Visteon Climate Control Corp 4,133 3,597 280 252 6.8% 7.0% Valeo SA (Thermal Systems) 3,598 3,340 n.a. n.a. n.a. n.a. BorgWarner Inc (Drivetrain) 2,175 1,780 251 184 11.5% 10.3% Delphi Automotive Plc (Thermal Systems) 1,286 1,068 39 20 3.0% 1.9%





Financial analysis

Sales and profitability Sales growth history MAHLE's Group sales increased from EUR 2.4bn in 2000 to EUR 6.9bn in 2013, which is

a CAGR of >8.5%. This was not only due to organic growth, which is mainly dependent on the automotive production growth rate in the regions in which MAHLE is active, plus external growth with acquisitions. Worth mentioning is the cyclical decline of sales by 2% in FY08 and by 22% in FY09. In FY08, turnover was down despite an acquisition-related revenue increase of EUR 94mn, a decline by 9.0% in Europe, by 1.2% in the Americas and an increase by 30.5% in Asia/Pacific. In FY09, group revenues were down by 22.9% (by 29.1% in Europe, 22.8% in America and by 6.6% in Asia/Pacific).

CYCLICAL DOWTURN IN 2009 EBT MARGIN DEVELOPMENT

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Sales (LS) EBT (LS) EBT margin

Source: Bloomberg, UniCredit Research

Operating result history Except in 2008/09, the EBT margin since 2000 has mostly been 4-6% and the EBIT margin 6-7%. MAHLE’s cost structure (based on data from 2007-2013, excluding 2009) consists of:

■ Cost of sales: represents around 78-80% of sales; Key material groups are aluminum, nickel, copper, steel, scrap, resins, cellulose (basis for filter paper); price adjustments are partly shared with customers as a result of contractual agreements. In Germany, a significant increase in levies for renewable energies led to a noticeable increase in electricity costs for the German plants. A key component of MAHLE’s supplier risk management is rigorous supplier development and adherence to a multi-supplier strategy for critical parts.

■ Selling expenses: 5.6-6.3% of sales

■ R&D expenses: 4.8-5.9% of sales

■ General administrative expenses: 4.4-4.9% of sales

Average EBIT margin MAHLE’s EBIT margin of 6-7% is average compared with many European auto suppliers. We provided an overview about EBIT margin, sales and sales growth of important auto suppliers in Europe, North America and Asia and current consensus expectations according to Bloomberg.




EBIT MARGINS, SALES AND SALES GROWH (BLOOMBERG CONSENSUS EXPECTATIONS)

EBIT margin Sales growth NAME FY FY FY+1 FY+2 Sales

(EUR mn) FY+1 FY+2

ELRINGKLINGER AG 12/14 Y 11.7% 12.2% 13.1% 1,326 8.6% 6.2% BREMBO SPA 12/14 Y 9.9% 10.4% 10.3% 1,803 10.6% 7.9% AUTOLIV INC 12/14 Y 7.8% 9.1% 10.0% 6,967 -1.0% 7.2% PLASTIC OMNIUM 12/14 Y 8.0% 8.8% 9.0% 4,437 12.7% 7.7% GKN PLC 12/14 Y 8.8% 8.2% 8.6% 8,664 9.9% 5.4% VALEO SA 12/14 Y 6.3% 7.4% 7.7% 12,725 13.1% 9.0% LEONI AG 12/14 Y 4.5% 5.2% 6.1% 4,103 5.7% 12.1% RHEINMETALL AG 12/14 Y 1.7% 5.0% 5.6% 4,688 5.5% 5.1% POLYTEC HOLDING AG 12/14 Y 4.2% 4.7% 5.2% 491 25.7% 4.9% GRAMMER AG 12/14 Y 4.2% 4.4% 4.8% 1,366 3.7% 5.4% FAURECIA 12/14 Y 3.6% 4.1% 4.6% 18,829 10.6% 5.6%

Median European auto suppliers 6.3% 7.4% 7.7% 9.9% 6.2% BORGWARNER INC 12/14 Y 11.6% 13.2% 13.6% 6,262 3.3% 11.7% CUMMINS INC 12/14 Y 12.3% 13.1% 13.6% 14,492 3.0% 5.3% DELPHI AUTOMOTIVE PLC 12/14 Y 10.9% 13.0% 13.5% 12,835 -8.1% 10.1% TRW AUTOMOTIVE HOLDINGS CORP 12/14 Y 2.9% 8.4% 8.5% 13,224 -5.2% 9.6% DANA HOLDING CORP 12/14 Y 5.7% 8.4% 8.8% 4,989 -3.5% 5.5% VISTEON CORP 12/14 Y 4.9% 7.7% 8.4% 5,662 -57.6% 7.2% JOHNSON CONTROLS INC 09/14 Y 4.4% 7.5% 8.5% 31,572 -7.8% -2.1% MAGNA INTERNATIONAL INC 12/14 Y 6.6% 7.1% 7.6% 27,627 -7.4% 5.6% LEAR CORP 12/14 Y 5.2% 6.5% 6.7% 13,366 4.6% 6.7% FEDERAL-MOGUL HOLDINGS CORP 12/14 Y 0.0% 3.4% 4.5% 5,517 10.7% 7.4%

Median US auto suppliers 5.5% 8.1% 8.5% -4.4% 6.9% HYUNDAI MOBIS CO LTD 12/14 Y 8.5% 8.4% 8.5% 25,905 4.8% 5.9% DENSO CORP 03/14 Y 9.2% 8.3% 9.0% 30,530 4.4% 5.4% TOKAI RIKA CO LTD 03/14 Y 6.9% 6.9% 7.4% 3,263 2.8% 4.7% AISIN SEIKI CO LTD 03/14 Y 6.1% 5.7% 6.2% 21,036 4.4% 5.4% TOYODA GOSEI CO LTD 03/14 Y 6.4% 5.6% 5.8% 5,139 2.5% 4.6% JTEKT CORP 03/14 Y 4.6% 5.2% 5.7% 9,393 6.6% 4.5% SUMITOMO ELECTRIC INDUSTRIES 03/14 Y 4.7% 4.7% 5.2% 19,147 8.3% 5.0% TAKATA CORP 03/14 Y 4.7% 4.7% 4.4% 4,152 11.2% 4.5% MODINE MANUFACTURING CO 03/14 Y 2.5% 4.3% 4.7% 1,103 2.4% 1.3% DAIDO STEEL CO LTD 03/14 Y 4.1% 4.1% 5.3% 3,412 6.0% 3.2% CALSONIC KANSEI CORP 03/14 Y 3.1% 3.1% 3.4% 6,848 4.4% 4.7% TOYOTA BOSHOKU CORP 03/14 Y 2.4% 2.2% 2.5% 9,082 3.2% 4.6%

Median Asian auto suppliers 4.7% 5.0% 5.5% 4.4% 4.7% PIRELLI & C. 12/14 Y 14.4% 15.3% 15.2% 6,018 6.4% 5.9% BRIDGESTONE CORP 12/14 Y 13.0% 13.9% 13.9% 26,181 9.4% 4.1% MICHELIN (CGDE) 12/14 Y 11.2% 11.9% 12.1% 19,553 5.1% 3.5% CONTINENTAL AG 12/14 Y 10.7% 11.2% 11.5% 34,506 10.9% 5.9% GOODYEAR TIRE & RUBBER CO 12/14 Y 7.8% 10.3% 11.0% 13,676 -5.1% 2.1%

Median tire manufacturer 11.2% 11.9% 12.1% 6.4% 4.1%

Source: Bloomberg 24 April 2015, UniCredit Research




Cashflow conversion Stable FFO margin Starting in 2007 (excl. FY08/09), MAHLE's FFO/sales margin was within a robust range of

8-11% (between EUR 478mn and EUR 660mn), and capex/sales has been around 4.5% and 6%. Up to and including 2010, the combined annual dividend payment (to owners and to minority shareholders) was in total EUR 15-17mn p.a., except in 2009, when it fell to EUR 7mn. Since 2010, the dividend payment has increased to EUR 25-35mn, mainly as MAHLE Metal Leve S.A. increased its dividend payments and given the consolidation of Behr). Since 2009, the dividend payment to the MAHLE foundation was constantly 3% of net income and the minimum payment was EUR 3mn. In addition, MAHLE pays dividends to minority shareholders (e.g. MAHLE Metal Leve S.A., MAHLE Behr GmbH & Co. KG). Since 2008, the group has spent significant amounts on acquisitions, particularly since 2010, when it began the takeover of 51% of Behr in three steps (November 2010, January 2011 and January 2013).

Normalized free cash flow Aside from swings in working capital and M&A, in 2010-13, MAHLE generated annual average FCF (after dividends) of EUR 216mn. This calculation is based on FFO of EUR 560mn, capex of EUR 317mn and dividends (incl. payments to minorities) of EUR 27mn. MAHLE’s cash generation was significantly distorted by working-capital swings and M&A activities.

CASH FLOW HISTORY

EUR mn 2007 2008 2009 2010 2011 2012 2013 FFO (Funds from operations) 517.0 276.5 -65.5 596.5 478.2 505.7 659.7 FFO/Sales in % 10.2% 5.5% -1.7% 11.3% 8.0% 8.2% 9.5% Change in Working Capital reported -23.0 10.9 206.8 -285.1 -135.9 75.1 -172.2 Operating Cash flow 494 287.4 141.3 311.4 342.3 580.8 487.5 561.4 Capex -317.7 -420.2 -175.0 -204.3 -324.8 -329.4 -408.4 Capex/sales in % 6.3% 8.4% 4.5% 3.9% 5.4% 5.3% 5.9% Dividend payments (incl. Dividends to Minorities) -16.6 -17.2 -7.0 -15.1 -34.7 -33.5 -25.0 FCF (after capex, dividends) 159.8 -150.1 -40.7 92.0 -17.2 217.9 54.0 Acquisitions -8.1 -147.3 -31.8 -120.9 -154.4 -85.3 -205.6 Disposals 35.8 5.1 16.8 19.7 130.0 32.0 10.0 Share buybacks / Issues 0.2 0.0 5.0 0.1 1.7 1.1 1.7

Source: MAHLE, UniCredit Research

Adjusted net debt & debt structure MAHLE BOND PRICE MAHLE BOND SPREADS

99

100

101

102

103

104

105

Dec

-14

Jan-

15

Jan-

15

Feb-

15

Feb-

15

Mar

-15

Mar

-15

Apr

-15

Apr

-15

Pric

e

MAHLGR 1.6% 12/19 MAHLGR 2.5% 5/21

130

140

150

160

170

180

190

Jan-

15

Jan-

15

Jan-

15

Feb-

15

Feb-

15

Mar

-15

Mar

-15

Apr

-15

Apr

-15

OA

S s

prea

d bi

d in

bp

MAHLGR 2.5% 5/21 MAHLGR 1.6% 12/19


Reported net debt and adjustments

At FYE 2013, MAHLE reported a net debt position of EUR 684.9mn and a cash position of EUR 465mn. We have adjusted the group's net debt for the present value of operating lease commitments of EUR 33.9mn. In addition, we have adjusted net debt for reported pension liabilities of EUR 466.3mn and factoring of EUR 153.3mn.




Debt structure The group’s debt structure at FYE 2013 consisted of EUR 1,046.8mn in bank liabilities and a hybrid bond of EUR 103.6mn. Behr’s EUR 100mn hybrid bond was fully consolidated in FY13 and called on 15 July 2014. The group has a EMTN program. MAHLE currently has two bonds outstanding:

■ MAHLEGR 2.5% 5/21 (EUR 300mn), issued in May 2014 at 130bp vs. mid-swaps

■ MAHLEGR 1.6% 12/19 (EUR 29mn), issued in November 2014 at 120bp vs. mid-swaps

ADJUSTED NET DEBT

EUR mn 2012 2013 1H14 Cash & equivalents 335.8 465.5 705.5 Liabilities to banks 702.6 1,046.8 931.2 - up to 1 year 191.3 206.7 293.3 - 1 year to 5 years 511.3 810.1 444.4 - more than 5 years 0.0 30.0 600.9 Liabilities on hybrid bond 0.0 103.6 0.0 Reported net debt (net cash) 366.8 684.9 225.7 Pension liabilities adjustment 397.4 466.3 n.a. Factoring adjustment 90.5 153.3 n.a. Operating lease commitments adjustment 25.4 33.9 n.a. Adjusted net debt 880.2 1,338.4 n.a.


Debt structure at FYE 2013 At the FYE 2013, parent/holding company MAHLE GmbH and 51%-owned MAHLE Behr GmbH & Co. KG (previously Behr GmbH & Co. KG) held 31% and 41% of gross group debt respectively (Source: www.bundesanzeiger.de).

■ Parent/holding company MAHLE GmbH held 41% of MAHLE’s group debt. The parent company generated EUR 285.9mn in revenues, EBIT of EUR -10.2mn and EBITDA of EUR -3.6mn (before income from participations and profit-transfer-agreements of EUR 173mn); it had EUR 470.9mn in bank liabilities and EUR 153.7mn in pension liabilities.

■ In FY13, Behr generated EUR 3.8bn in revenues, EBIT of EUR 208mn and EBITDA of EUR 390mn. Behr’s debt consisted of EUR 91.8mn in hybrid bonds, EUR 213.2mn in current financial liabilities and EUR 56.9mn in non-current financial liabilities. It also had pension liabilities of EUR 77.2mn. At FYE 2013, Behr had gross debt of EUR 361.9mn and net debt of EUR 174mn. Behr’s reported net debt/EBITDA in FY13 was 0.4x.

MAHLE METAL LEVE S.A. SINCE 2007 MARKET CAP DEVELOPMENT

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Mar

ket c

ap in

BR

L m

n

LEVE3 BZ Equity Cur Mkt Cap





MAHLE Metal Leve S.A. Brazilian MAHLE Metal Leve S.A. is 70%-owned by MAHLE GmbH and is listed. The company is fully consolidated in MAHLE GmbH accounts. The company had the following key figures in FY14 (Bloomberg data, in Euro): Revenues EUR 748mn, operating margin 11.9%, EBITDA EUR 123.8mn, total dividend payment EUR 81.6mn (BRL 254mn), cash EUR 67.8mn, borrowings EUR 184.3mn. Net debt/EBITDA is 0.9x. The market cap as of 24 April 2015 was BRL 2,736mn (EUR 849mn).

Collateral for bank debt At FYE 2013, EUR 34,259mn (or 3%) of MAHLE’s bank liabilities were collateralized:

■ EUR 7,841mn with mortgage-rights

■ EUR 26,418mn with other collateral

Provision for antitrust investigation proceedings

In May 2012, MAHLE was informed in its role as shareholder by Behr’s Management Board that antitrust authorities in both Europe and the USA had launched investigations against manufacturers of thermal systems for the automotive industry, including Behr. An accounting provision in the form of an accrual was created in the previous year for the investigation proceedings brought against the Behr Group in May 2012 by European and U.S. antitrust authorities for suspected restrictive practices in automotive thermal systems. Although MAHLE did not disclose the amount of the provision, we note that in Behr’s annual report, the positon “other provisions” of EUR 185.6mn included among other things also this provision.

Credit metrics, financial flexibility and policy

Improvement in credit metrics MAHLE’s equity ratio has been fairly stable, at 35-40%, since 2007. Also, the group’s reported net-debt/EBITDA ratio has been 0.5-1.0x since 2007, with the exception of FY09, when it was at 1.9x. Despite continued acquisitions, this was mainly due to strong net-income generation of, on average, EUR 198mn p.a. in 2010-13.

Financial flexibility At the end of 1H14, MAHLE had only EUR 293.3mn in short-term debt and cash and cash equivalents of EUR 705.5mn. According to Bloomberg, MAHLE has a EUR 1.25bn 5Y RCF, which matures on 16 December 2018, plus additional uncommitted bilateral credit lines of a low, nine-figure amount.

NET LEVERAGE AND GROSS DEBT HISTORY STABLE EQUITY RATIO

0

200

400

600

800

1,000

1,200

1,400

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

2007 2008 2009 2010 2011 2012 2013 1H14

in E

UR

mn

Total debt rep. (RS) Net debt/EBITDA (reported) Net debt adj./EBITDA adj.

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

2007 2008 2009 2010 2011 2012 2013 1H14

Equity/total assets





Moderate financial policy The group follows a moderate financial policy. Despite constant debt-financed acquisitions since 2008, the group, nevertheless, pays low dividends and has fairly stable and decent net-leverage and equity ratios.

■ Since 2009, the dividend payment to the MAHLE foundation was constantly 3% of net income and the minimum payment was EUR 3mn. In addition, MAHLE pays dividends to minority shareholders (e.g. MAHLE Metal Leve S.A., MAHLE Behr GmbH & Co. KG).

■ Frequent debt-financed acquisition activity since 2008 (e.g. Behr, Letrika, Delphi Thermal Management) with integration risks; call options enable MAHLE to increase its stake in Behr over time.

■ On-balance-sheet pension liabilities are EUR 466mn; off-balance sheet liabilities, such as factoring (EUR 153mn) and operating lease are EUR 42mn.

1H14 results and 2014 outlook

1H14 results Results in 1H14 were mainly impacted by the full consolidation of Behr, which began on 1 October 2013. In 1H14, sales increased by 62.0% yoy to EUR 4,914.6mn (Europe +80.3%, Americas +46.1%, Asia/Pacific +40.1%). Growth of 62.0% was due to +64.4% in consolidation changes, +3.3% organic growth and -5.8% in FX effects. EBT was up to EUR 217.1mn vs. EUR 115.3mn yoy, and net income was up to EUR 146.1mn vs. EUR 60.4mn yoy. Capex was EUR 178.4mn vs. EUR 132.6mn yoy. Headcount was 63,519. The number of product locations was up to 140 from 100, and the number of R&D centers rose to 10 from 7. Cash flow from operating activities was EUR 274.6mn vs. EUR 200.4mn yoy. The equity ratio at the end of 1H14 was 35.4%, and the cash position was EUR 705.5mn. Pension liabilities were EUR 479.0mn, and financial liabilities (bank liabilities and bonds) were EUR 1,231.2mn. Net debt was EUR 525.7mn.

Recent acquisitions In FY14 and 2015, MAHLE finalized or announced the following acquisitions:

■ MAHLE finalized the acquisition of Letrika d.d. on 10 September 2014. Transaction approvals have been issued from all relevant antitrust authorities. The acquisition of the majority stake in Letrika d.d., which is listed on the Ljubljana Stock Exchange, was completed on 10 September 2014. In the future, Letrika is to be integrated and consolidated into MAHLE as the “Electric actuators and engine accessories” profit center. The acquisition of approximately 54% of the shares in the Letrika Group is part of a privatization initiative that began in Slovenia in May 2013. MAHLE signed the share purchase agreement on 20 June 2014. Having already acquired an additional 27% of the shares on the stock exchange, MAHLE will hold around 80% of the shares in Letrika after closing. The successful closing gave the green light for an integration project that will spur the incorporation of the functional divisions of development, sales, controlling and finance and all relevant service-related functional divisions within MAHLE structures. In 2013, Letrika generated sales of EUR 242.5mn, with its 2,416 employees at seven production and development locations in Slovenia, Bosnia and Herzegovina, Belarus, China and Brazil. The group develops and produces innovative electric motors, generators and electric and mechatronic drive systems. The global production structure complements MAHLE’s mechatronics activities. With its portfolio, Letrika largely serves the same customers and market segments as MAHLE but also offers interesting new approaches for industrial applications, such as electric drive systems for non-automotive sectors. Together with MAHLE, the group's position in the different segments can now be expanded even further. MAHLE should generate sales of around EUR 500mn in the fields of electrics and mechatronics in the medium term and should achieve this figure many times over in the long run.




■ MAHLE acquired the thermal management division of US automotive supplier Delphi in 19 February 2015. MAHLE has signed a definitive agreement to acquire the wholly owned thermal business of US automotive supplier Delphi Automotive Plc (NYSE: DLPH). In 2014, the division and its approximately 7,600 employees achieved annual sales of around USD 1.2bn (roughly EUR 1.0bn). After approval by the relevant antitrust authorities, a closing of the deal is anticipated for autumn 2015. Furthermore, MAHLE intends to acquire Delphi Thermal’s JV in China. This takeover supports the strategic expansion of the important thermal management growth sector within the MAHLE. Comprehensive thermal management systems will play an increasingly significant role for all potential drive systems in the future – combustion engines, electric drives (batteries and power electronics) or fuel cells. Delphi Thermal is represented in all regions of the world. Its product portfolio, ranging from HVAC modules and air conditioning compressors to cooling components, is an ideal complement to MAHLE’s existing thermal-management activities. The identically named MAHLE business unit, which was formed in connection with the majority acquisition of the Behr Group in 2013, will thus be in an even-stronger position to serve the automotive industry as its global systems partner. Furthermore, the air conditioning compressor technology will round out MAHLE’s thermal-management product range. The goal is to integrate the 13 Delphi plants in Europe (Poland, Slovakia, Hungary), North and South America (US, Mexico, Brazil) and Asia (China, India), as well as the development centers in the US and Luxembourg, into the global MAHLE organization. With the acquisition of Delphi’s thermal-management division, MAHLE will reinforce its commitment in this promising field. On the one hand, it will extend its production footprint in Europe, North America and Asia. On the other hand, MAHLE will strengthen its product range and systems competence, particularly with air conditioning compressors, which are already economically significant in today’s global automotive industry.

2014 outlook With the release of its 1H14 results, MAHLE continued to anticipate uneven development in Europe for 2014. Slight increases are expected in the passenger car sector, whereas a slight decline will likely be observed in the commercial vehicle sector. The recovery in both vehicle segments was forecast to continue in North America, while significantly declining market development in both vehicle segments is anticipated in South America. For Asia, continued positive development and additional growth is expected, although market stagnation is currently occurring in some countries. Overall, MAHLE envisaged total annual sales in FY14 of around EUR 9.7-9.8bn. The situation in the eastern-European and Arab crisis regions will likely burden both sales and results.




Auto supplier peer table Issuer (FY14) Mahle (FY13) Valeo Delphi Automotive PLC Continental Hella (FY13/14) Schaeffler AG Faurecia Currency in mn EUR EUR USD EUR EUR EUR EUR Ratings Not rated Baa3p/BBBs/-- Baa3p/BBBs/BBBs Baa3s/BBBs/BBBp Baa2s/--/-- Ba3s/BB-s (Group) Ba3s/--/BB-s Revenue 6,941 12,725 17,023 34,506 5,343 12,124 18,829 Operating profit margin 5.8% 6.8% 10.9% 10.7% 5.8% 12.6% 3.6% EBITDA 755 1,502 2,611 5,467 616 2,172 1,229 EBITDA Margin 10.9% 11.8% 15.3% 15.8% 11.8% 17.9% 6.5% Sales by segment 36% Engine Systems and

Components 28% Filtration and Engine

Peripherals 12% Aftermarket

11% Thermal Management

7% Other Business 6% Unit Industry

28% Thermal Systems 28% Visibility Systems

26% Powertrain Systems 18% Comfort and Driving

Assistance Systems

48% Electrical 26% Powertrain Systems

17% Electronics and Safety

9% Thermal Systems

28% Tires 22% Chassis & Safety

20% Interior 19% Powertrain 11% ContiTech

40% Electronics 38% Lighting

22% Aftermarket & Special OE

74% Automotive 26% Industrial

(23% of group revenues are aftermarket-related)

36% Emission Control Technologies

28% Automotive Seating 25% Interior Systems

11% Automotive Exteriors

Sales by region 46% Europe 32% America

21% Asia/Pacific 1% Africa

9% France 43% Other Europe

25% Asia 19% North America 4%South America

38% Europe, Middle East & Africa

33% United States 23% Asia Pacific

5% South America 1% Other North America

23% Germany 30% Other Europe

22% NAFTA 20% Asia 5% Other

14% Germany 39% Other Europe 26% Asia-Pacific

21% NAFTA

57% Europe 20% Americas

13% Greater China 10% Asia/Pacific

24% USA 10% France

21% Germany 24% Other Europe

16% South Asia 4% South America

1% Other Gross debt

thereof bonds 1,150

329 (=29%) 1,839

1,120 (=61%) 2,451

2,257 (=92%) 8,130

3,178 (=39%) 1,418

800 (=56%) 6,414

4,678 (=73%) 2,412

1,690 (=70%) Net debt 685 342 1,547 4,503 426 5,778 1,396 Total equity/total assets 36% 29% 28% 36% 30% 2% 21% S&P debt/EBITDA -- 1.6x 2013: 1.0x 1.5x -- 2013: 4.6x (Group) -- Moody’s RCF/Net debt -- 39% 56% 2013: 44% 60% 2013: 9.8% (Group) 15% UniCredit FFO adj./total debt adj. 37% 30% 57% 43% 35% 12% (Group) 12% UniCredit Net debt adj./EBITDA adj. 1.7x 1.3x 1.1x 1.3x 1.8x 5.2x (Group) 3.3x UniCredit Total debt adj./EBITDA adj. 2.3x 2.5x 1.5x 1.9x 2.8x 5.5x (Group) 4.5x

Source: Bloomberg, company reports, Moody’s, S&P, UniCredit Research




Financial statistics* EUR mn 2007 2008 2009 2010 2011 2012 2013 1H14 Sales 5,060 5,014 3,864 5,261 6,002 6,159 6,941 4,915 EBIT margin adj. 7.1% 3.7% -1.8% 6.2% 7.2% 6.7% 6.3% 6.0% EBITDA rep. 554 491 264 625 740 708 755 529 EBITDA margin adj. 11.1% 10.1% 7.2% 12.2% 12.5% 11.6% 11.1% 11.1% Net income 223 22 -379 177 231 149 236 146 Funds from operations (FFO) 517 276 -66 596 478 506 660 n.a. Operating cash flow 494 287 141 311 342 581 487 275 Free cash flow rep. (after Capex) 176 -133 -34 107 17 251 79 96 Dividend payment -17 -17 -7 -15 -35 -34 -25 n.a. Retained cash flow (RCF) 500 259 -73 581 444 472 635 n.a. Acquisitions / disposals 28 -142 -15 -101 -24 -53 -196 n.a. Share buybacks / issues 0 0 5 0 2 1 2 n.a. Total debt rep. 441 687 759 905 1,066 703 1,150 1,231 Net debt rep. 162 442 498 550 561 367 685 526 Adj. for pensions 372 404 403 402 412 397 466 479 Adj. for operating leases and others 45 60 97 155 108 116 187 187 Net debt adj. 580 905 997 1,108 1,081 880 1,338 1,192

DEBT LEVERAGE

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

-20%

0%

20%

40%

60%

80%

100%

2007 2008 2009 2010 2011 2012 2013 1H14

FFO adj./net debt adj. Net debt adj./EBITDA adj.Total debt adj./EBITDA adj.

PROFITABILITY AND INTEREST COVERAGE

0

1

2

3

4

5

6

7

8

9

10

0%

2%

4%

6%

8%

10%

12%

14%

2007 2008 2009 2010 2011 2012 2013 1H14

EBITDA margin adj. EBITDA gross interest cover adj.

CREDIT METRICS

2007 2008 2009 2010 2011 2012 2013 1H14 EBIT net interest cover adj. 7.8 2.3 -1.0 7.6 6.4 6.3 4.2 5.6 EBIT gross interest cover adj. 5.7 2.0 -0.9 4.4 4.1 4.6 3.8 5.0 EBITDA net interest cover adj. 12.3 6.3 4.1 15.1 11.0 10.9 7.3 10.0 EBITDA gross interest cover adj. 8.9 5.3 3.4 8.8 7.1 8.0 6.6 9.0 FFO adj. / net debt adj. 90.4% 31.5% -6.0% 54.7% 44.5% 57.9% 49.7% n.a. FFO adj. / total debt adj. 61.0% 24.8% -4.8% 41.5% 30.3% 41.9% 36.9% n.a. RCF adj. / net debt adj. 87.5% 29.6% -6.7% 53.4% 41.3% 54.1% 47.8% n.a. RCF adj. / total debt adj. 59.0% 23.3% -5.3% 40.4% 28.2% 39.1% 35.5% n.a. Net debt adj. / EBITDA adj. 1.0 1.8 3.6 1.7 1.4 1.2 1.7 1.2 Total debt adj. / EBITDA adj. 1.5 2.3 4.5 2.3 2.1 1.7 2.3 1.9 FFO adj. / net interest adj. 11.5 3.5 -0.9 14.3 7.1 7.8 6.4 n.a. FFO adj. / gross interest adj. 8.3 3.0 -0.7 8.3 4.6 5.7 5.7 n.a. Total debt adj. / total capital. adj. 32.6% 39.4% 47.0% 45.9% 44.7% 37.4% 41.8% 41.7% Net debt adj. / net capital. adj. 24.6% 33.8% 41.3% 39.1% 35.5% 30.2% 34.8% 31.0% Equity / total assets 41.1% 38.7% 33.4% 35.0% 36.7% 41.8% 36.0% 35.4%

*UniCredit Research adjustments Source: company data, UniCredit Research



UniCredit Research page 19

Disclaimer Our recommendations are based on information obtained from, or are based upon public information sources that we consider to be reliable but for the completeness and accuracy of which we assume no liability. All estimates and opinions included in the report represent the independent judgment of the analysts as of the date of the issue. We reserve the right to modify the views expressed herein at any time without notice. Moreover, we reserve the right not to update this information or to discontinue it altogether without notice. This analysis is for information purposes only and (i) does not constitute or form part of any offer for sale or subscription of or solicitation of any offer to buy or subscribe for any financial, money market or investment instrument or any security, (ii) is neither intended as such an offer for sale or subscription of or solicitation of an offer to buy or subscribe for any financial, money market or investment instrument or any security nor (iii) as an advertisement thereof. The investment possibilities discussed in this report may not be suitable for certain investors depending on their specific investment objectives and time horizon or in the context of their overall financial situation. The investments discussed may fluctuate in price or value. Investors may get back less than they invested. Changes in rates of exchange may have an adverse effect on the value of investments. Furthermore, past performance is not necessarily indicative of future results. In particular, the risks associated with an investment in the financial, money market or investment instrument or security under discussion are not explained in their entirety. This information is given without any warranty on an "as is" basis and should not be regarded as a substitute for obtaining individual advice. Investors must make their own determination of the appropriateness of an investment in any instruments referred to herein based on the merits and risks involved, their own investment strategy and their legal, fiscal and financial position. As this document does not qualify as an investment recommendation or as a direct investment recommendation, neither this document nor any part of it shall form the basis of, or be relied on in connection with or act as an inducement to enter into, any contract or commitment whatsoever. Investors are urged to contact their bank's investment advisor for individual explanations and advice. Neither UniCredit Bank nor any of their respective directors, officers or employees nor any other person accepts any liability whatsoever (in negligence or otherwise) for any loss howsoever arising from any use of this document or its contents or otherwise arising in connection therewith. This analysis is being distributed by electronic and ordinary mail to professional investors, who are expected to make their own investment decisions without undue reliance on this publication, and may not be redistributed, reproduced or published in whole or in part for any purpose. Responsibility for the content of this publication lies with: UniCredit Group and its subsidiaries are subject to regulation by the European Central Bank a) UniCredit Bank AG (UniCredit Bank), Am Tucherpark 16, 80538 Munich, Germany, (also responsible for the distribution pursuant to §34b WpHG). The company belongs to UniCredit Group. Regulatory authority: “BaFin“ – Bundesanstalt für Finanzdienstleistungsaufsicht, Lurgiallee 12, 60439 Frankfurt, Germany. b) UniCredit Bank AG London Branch (UniCredit Bank London), Moor House, 120 London Wall, London EC2Y 5ET, United Kingdom. Regulatory authority: “BaFin“ – Bundesanstalt für Finanzdienstleistungsaufsicht, Lurgiallee 12, 60439 Frankfurt, Germany and subject to limited regulation by the Financial Conduct Authority, 25 The North Colonnade, Canary Wharf, London E14 5HS, United Kingdom and Prudential Regulation Authority 20 Moorgate, London, EC2R 6DA, United Kingdom. Further details regarding our regulatory status are available on request. c) UniCredit Bank AG Hong Kong Branch (UniCredit Bank Hong Kong), 25/F Man Yee Building, 68 Des Voeux Road Central, Hong Kong. Regulatory authority: Hong Kong Monetary Authority, 55th Floor, Two International Financial Centre, 8 Finance Street, Central, Hong Kong d) UniCredit Bank AG Singapore Branch (UniCredit Bank Singapore), Prudential Tower, 30 Cecil Street, #25-01, Singapore 049712 Regulatory authority: Monetary Authority of Singapore, 10 Shenton Way MAS Building, Singapore 079117 e) UniCredit Bank AG Tokyo Branch (UniCredit Tokyo), Otemachi 1st Square East Tower 18/F, 1-5-1 Otemachi, Chiyoda-ku, 100-0004 Tokyo, Japan Regulatory authority: Financial Services Agency, The Japanese Government, 3-2-1 Kasumigaseki Chiyoda-ku Tokyo, 100-8967 Japan, The Central Common Government Offices No. 7.

POTENTIAL CONFLICTS OF INTERESTS Company Key – –

Key 1a: UniCredit Bank AG and/or any related legal person owns at least 2% of the capital stock of the analyzed company. Key 1b: The analyzed company owns at least 2% of the capital stock of UniCredit Bank AG and/or any related legal person. Key 2: UniCredit Bank AG and/or any related legal person has been lead manager or co-lead manager over the previous 12 months of any publicly disclosed offer of financial instruments of the analyzed company, or in any related derivatives. Key 3: UniCredit Bank AG and/or any related legal person administers the securities issued by the analyzed company on the stock exchange or on the market by quoting bid and ask prices (i.e. acts as a market maker or liquidity provider in the securities of the analyzed company or in any related derivatives). Key 5: The analyzed company and UniCredit Bank AG and/or any related legal person have concluded an agreement on the preparation of analyses. Key 6a: Employees or members of the Board of Directors of UniCredit Bank AG and/or any other employee that works for UniCredit Research (i.e. the joint research department of the UniCredit Group) and/or members of the Group Board (pursuant to relevant domestic law) are members of the Board of Directors of the analyzed company. Members of the Board of Directors of the analyzed company hold office in the Board of Directors of UniCredit Bank AG (pursuant to relevant domestic law). The application of this Key 6a is limited to persons who, although not involved in the preparation of the analysis, had or could reasonably be expected to have access to the analysis prior to its dissemination to customers or the public. Key 6b: The analyst is on the Supervisory Board/Board of Directors of the company they cover.

RECOMMENDATIONS, RATINGS AND EVALUATION METHODOLOGY Company Date Rating Currency Target price – – – – –

Overview of our ratings You will find the history of rating regarding recommendation changes as well as an overview of the breakdown in absolute and relative terms of our investment ratings on our website www.disclaimer.unicreditmib.eu/credit-research-rd/Recommendations_CR_e.pdf. Note on the evaluation basis for interest-bearing securities: Recommendations relative to an index: For high grade names the recommendations are relative to the "iBoxx EUR Benchmark" index family, for sub investment grade names the recommendations are relative to the "iBoxx EUR High Yield" index family. Marketweight: We recommend having the same portfolio exposure in the name as the respective iBoxx index. We expect that the average total return of the instruments of the issuer is equal to the total return of the index. Overweight: We recommend having a higher portfolio exposure in the name as the respective iBoxx index. We expect that the average total return of the instruments of the issuer is greater than the total return of the index. Underweight: We recommend having a lower portfolio exposure in the name as the respective iBoxx index. We expect that the average total return of the instruments of the issuer is less than the total return of the index. Outright recommendations: Hold: We recommend holding the respective instrument for investors who already have exposure. We expect that the total return of the instruments of the issuer is equal to the yield. Buy: We recommend buying the respective instrument for investors who already have exposure. We expect that the total return of the instruments of the issuer is greater than the yield. Sell: We recommend selling the respective instrument for investors who already have exposure. We expect that the total return of the instruments of the issuer is less than the yield. We employ three further categorizations for interest-bearing securities in our coverage: Restricted: A recommendation and/or financial forecast is not disclosed owing to compliance or other regulatory considerations such as a blackout period or a conflict of interest.




Coverage in transition: Due to changes in the research team, the disclosure of a recommendation and/or financial information are temporarily suspended. The interest-bearing security remains in the research universe and disclosures of relevant information will be resumed in due course. Not rated: Suspension of coverage. Trading recommendations for fixed-interest securities mostly focus on the credit spread (yield difference between the fixed-interest security and the relevant government bond or swap rate) and on the rating views and methodologies of recognized agencies (S&P, Moody’s, Fitch). Depending on the type of investor, investment ratings may refer to a short period or to a 6 to 9-month horizon. Please note that the provision of securities services may be subject to restrictions in certain jurisdictions. You are required to acquaint yourself with local laws and restrictions on the usage and the availability of any services described herein. The information is not intended for distribution to or use by any person or entity in any jurisdiction where such distribution would be contrary to the applicable law or provisions. If not otherwise stated daily price data refers to pre-day closing levels and iBoxx bond index characteristics refer to the previous month-end index characteristics. Coverage Policy A list of the companies covered by UniCredit Bank is available upon request. Frequency of reports and updates It is intended that each of these companies be covered at least once a year, in the event of key operations and/or changes in the recommendation.

SIGNIFICANT FINANCIAL INTEREST UniCredit Bank AG and/or a company affiliated (pursuant to relevant national law) with them regularly trade shares of the analyzed company. UniCredit Bank AG and/or a company affiliated may hold significant open derivative positions on the stocks of the company which are not delta-neutral. UniCredit Bank AG and/or other related legal persons have a significant financial interest relating to the analyzed company or may have such at any future point of time. Due to the fact that UniCredit Bank AG and/or any related legal person are entitled, subject to applicable law, to perform such actions at any future point in time which may lead to the existence of a significant financial interest, it should be assumed for the purposes of this information that UniCredit Bank AG and/or any related legal person will in fact perform such actions which may lead to the existence of a significant financial interest relating to the analyzed company. Analyses may refer to one or several companies and to the securities issued by them. In some cases, the analyzed companies have actively supplied information for this analysis.

INVESTMENT BANKING TRANSACTIONS The analyzed company and UniCredit Bank AG and/or any related legal person concluded an agreement on services in connection with investment banking transactions in the previous 12 months, in return for which the Bank and/or such related legal person received a consideration or promise of consideration or intends to do so. Due to the fact that UniCredit Bank AG and/or any related legal person are entitled to conclude, subject to applicable law, an agreement on services in connection with investment banking transactions with the analyzed company at any future point in time and may receive a consideration or promise of consideration, it should be assumed for the purposes of this information that UniCredit Bank AG and/or any related legal person will in fact conclude such agreements and will in fact receive such consideration or promise of consideration.

ANALYST DECLARATION The author’s remuneration has not been, and will not be, geared to the recommendations or views expressed in this study, neither directly nor indirectly.

ORGANIZATIONAL AND ADMINISTRATIVE ARRANGEMENTS TO AVOID AND PREVENT CONFLICTS OF INTEREST To prevent or remedy conflicts of interest, UniCredit Bank has established the organizational arrangements required from a legal and supervisory aspect, adherence to which is monitored by its compliance department. Conflicts of interest arising are managed by legal and physical and non-physical barriers (collectively referred to as “Chinese Walls”) designed to restrict the flow of information between one area/department of UniCredit Bank and another. In particular, Investment Banking units, including corporate finance, capital market activities, financial advisory and other capital raising activities, are segregated by physical and non-physical boundaries from Markets Units, as well as the research department. Disclosure of publicly available conflicts of interest and other material interests is made in the research. Analysts are supervised and managed on a day-to-day basis by line managers who do not have responsibility for Investment Banking activities, including corporate finance activities, or other activities other than the sale of securities to clients.

ADDITIONAL REQUIRED DISCLOSURES UNDER THE LAWS AND REGULATIONS OF JURISDICTIONS INDICATED You will find a list of further additional required disclosures under the laws and regulations of the jurisdictions indicated on our website www.cib-unicredit.com/research-disclaimer. Notice to Austrian investors: This analysis is only for distribution to professional clients (Professionelle Kunden) as defined in article 58 of the Securities Supervision Act. Notice to investors in Bosnia and Herzegovina: This report is intended only for clients of UniCredit in Bosnia and Herzegovina who are institutional investors (Institucionalni investitori) in accordance with Article 2 of the Law on Securities Market of the Federation of Bosnia and Herzegovina and Article 2 of the Law on Securities Markets of the Republic of Srpska, respectively, and may not be used by or distributed to any other person. This document does not constitute or form part of any offer for sale or subscription for or solicitation of any offer to buy or subscribe for any securities and neither this document nor any part of it shall form the basis of, or be relied on in connection with or act as an inducement to enter into, any contract or commitment whatsoever. Notice to Brazilian investors: The individual analyst(s) responsible for issuing this report represent(s) that: (a) the recommendations herein reflect exclusively the personal views of the analysts and have been prepared in an independent manner, including in relation to UniCredit Group; and (b) except for the potential conflicts of interest listed under the heading “Potential Conflicts of Interest” above, the analysts are not in a position that may impact on the impartiality of this report or that may constitute a conflict of interest, including but not limited to the following: (i) the analysts do not have a relationship of any nature with any person who works for any of the companies that are the object of this report; (ii) the analysts and their respective spouses or partners do not hold, either directly or indirectly, on their behalf or for the account of third parties, securities issued by any of the companies that are the object of this report; (iii) the analysts and their respective spouses or partners are not involved, directly or indirectly, in the acquisition, sale and/or trading in the market of the securities issued by any of the companies that are the object of this report; (iv) the analysts and their respective spouses or partners do not have any financial interest in the companies that are the object of this report; and (v) the compensation of the analysts is not, directly or indirectly, affected by UniCredit’s revenues arising out of its businesses and financial transactions. UniCredit represents that: except for the potential conflicts of interest listed under the heading “Potential Conflicts of Interest” above, UniCredit, its controlled companies, controlling companies or companies under common control (the “UniCredit Group”) are not in a condition that may impact on the impartiality of this report or that may constitute a conflict of interest, including but not limited to the following: (i) the UniCredit Group does not hold material equity interests in the companies that are the object of this report; (ii) the companies that are the object of this report do not hold material equity interests in the UniCredit Group; (iii) the UniCredit Group does not have material financial or commercial interests in the companies or the securities that are the object of this report; (iv) the UniCredit Group is not involved in the acquisition, sale and/or trading of the securities that are the object of this report; and (v) the UniCredit Group does not receive compensation for services rendered to the companies that are the object of this report or to any related parties of such companies. Notice to Cyprus investors: This document is directed only at clients of UniCredit Bank who are persons falling within the Second Appendix (Section 2, Professional Clients) of the law for the Provision of Investment Services, the Exercise of Investment Activities, the Operation of Regulated Markets and other Related Matters, Law 144(I)/2007 and persons to whom it may otherwise lawfully be communicated who possess the experience, knowledge and expertise to make their own investment decisions and properly assess the risks that they incur (all such persons together being referred to as “relevant persons”). This document must not be acted on or relied on by persons who are not relevant persons or relevant persons who have requested to be treated as retail clients. Any investment or investment activity to which this communication related is available only to relevant persons and will be engaged in only with relevant persons. This document does not constitute an offer or solicitation to any person to whom it is unlawful to make such an offer or solicitation. Notice to investors in Ivory Coast: The information contained in the present report have been obtained by Unicredit Bank AG from sources believed to be reliable, however, no express or implied representation or warranty is made by Unicredit Bank AG or any other person as to the completeness or accuracy of such information. All opinions and estimates contained in the present report constitute a judgement of Unicredit Bank AG as of the date of the present report and are subject to change without notice. They are provided in good faith but without assuming legal responsibility. This report is not an offer to sell or solicitation of an offer to buy or invest in securities. Past performance is not an indicator of future performance and future returns cannot be guaranteed, and there is a risk of loss of the initial capital invested. No matter contained in this document may be reproduced or copied by any means without the prior consent of Unicredit Bank AG. Notice to New Zealand investors: This report is intended for distribution only to persons who are “wholesale clients” within the meaning of the Financial Advisers Act 2008 (“FAA”) and by receiving this report you represent and agree that (i) you are a “wholesale client” under the FAA (ii) you will not distribute this report to any other person, including (in particular) any person who is not a “wholesale client” under the FAA. This report does not constitute or form part of, in relation to any of the securities or products covered by this report, either (i) an offer of securities for subscription or sale under the Securities Act 1978 or (ii) an offer of financial products for issue or sale under the Financial Markets Conduct Act 2013.




Notice to Omani investors: This communication has been prepared by UniCredit Bank AG. UniCredit Bank AG does not have a registered business presence in Oman and does not undertake banking business or provide financial services in Oman and no advice in relation to, or subscription for, any securities, products or financial services may or will be consummated within Oman. The contents of this communication are for the information purposes of sophisticated clients, who are aware of the risks associated with investments in foreign securities and neither constitutes an offer of securities in Oman as contemplated by the Commercial Companies Law of Oman (Royal Decree 4/74) or the Capital Market Law of Oman (Royal Decree 80/98), nor does it constitute an offer to sell, or the solicitation of any offer to buy non-Omani securities in Oman as contemplated by Article 139 of the Executive Regulations to the Capital Market Law (issued vide CMA Decision 1/2009). This communication has not been approved by and UniCredit Bank AG is not regulated by either the Central Bank of Oman or Oman’s Capital Market Authority. Notice to Pakistani investors: Investment information, comments and recommendations stated herein are not within the scope of investment advisory activities as defined in sub-section I, Section 2 of the Securities and Exchange Ordinance, 1969 of Pakistan. Investment advisory services are provided in accordance with a contract of engagement on investment advisory services concluded with brokerage houses, portfolio management companies, non-deposit banks and the clients. The distribution of this report is intended only for informational purposes for the use of professional investors and the information and opinions contained herein, or any part of it shall not form the basis of, or be relied on in connection with or act as an inducement to enter into, any contract or commitment whatsoever. Notice to Polish Investors: This document is intended solely for professional clients as defined in Art. 3.39b of the Trading in Financial Instruments Act of 29 July 2005 (as amended). The publisher and distributor of the document certifies that it has acted with due care and diligence in preparing it, however, assumes no liability for its completeness and accuracy. This document is not an advertisement. It should not be used in substitution for the exercise of independent judgment. Notice to Serbian investors: This analysis is only for distribution to professional clients (profesionalni klijenti) as defined in article 172 of the Law on Capital Markets. Notice to UK investors: This communication is directed only at clients of UniCredit Bank who (i) have professional experience in matters relating to investments or (ii) are persons falling within Article 49(2)(a) to (d) (“high net worth companies, unincorporated associations, etc.”) of the United Kingdom Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 or (iii) to whom it may otherwise lawfully be communicated (all such persons together being referred to as “relevant persons”). This communication must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this communication relates is available only to relevant persons and will be engaged in only with relevant persons.

This document may not be distributed in Canada.

CR e 5




UniCredit Research* Erik F. Nielsen Group Chief Economist Global Head of CIB Research +44 207 826-1765 [email protected]

Dr. Ingo Heimig Head of Research Operations +49 89 378-13952 [email protected]

Credit Research

Luis Maglanoc, CFA, Head +49 89 378-12708 [email protected]

Credit Strategy & Structured Credit Research

Dr. Philip Gisdakis, Head Credit Strategy +49 89 378-13228 [email protected]

Dr. Christian Weber, CFA, Deputy Head Credit Strategy +49 89 378-12250 [email protected]

Dr. Tim Brunne Quantitative Credit Strategy +49 89 378-13521 [email protected]

Holger Kapitza Credit Strategy & Structured Credit +49 89 378-28745 [email protected]

Dr. Stefan Kolek EEMEA Corporate Credits & Strategy +49 89 378-12495 [email protected]

Manuel Trojovsky Credit Strategy & Structured Credit +49 89 378-14145 [email protected]

Financials Credit Research

Franz Rudolf, CEFA, Head Covered Bonds +49 89 378-12449 [email protected]

Valentina Stadler, Deputy Head Sub-Sovereigns & Agencies +49 89 378-16296 [email protected]

Dr. Tilo Höpker Banks +49 89 378-12960 [email protected]

Luis Maglanoc, CFA Regulatory & Accounting Service +49 89 378-12708 [email protected]

Natalie Tehrani Monfared Regulatory & Accounting Service +49 89 378-12242 [email protected]

Emanuel Teuber Covered Bonds +49 89 378-12961 [email protected]

Robert Vielhaber Sub-Sovereigns & Agencies, Green Bonds +49 89 378-12004 [email protected]

Dr. Martina von Terzi Banks, Financial Services, Insurance +49 89 378-14245 [email protected]

Dr. Claudia Vortmüller Banks +49 89 378-12429 [email protected]

Corporate Credit Research

Stephan Haber, CFA, Co-Head Telecoms, Technology +49 89 378-15192 [email protected]

Dr. Sven Kreitmair, CFA, Co-Head Automotive & Mobility +49 89 378-13246 [email protected]

Christian Aust, CFA Industrials +49 89 378-12806 [email protected]

David Bertholdt Capital Goods & Services +49 89 378-13211 [email protected]

Mehmet Dere Retail, Travel & Leisure, Oil & Gas +49 89 378-11294 [email protected]

Michael Gerstner Utilities, Hybrids +49 89 378-15449 [email protected]

Alexander Rozhetskin Russia/CIS (Banks, Oil & Gas, Basic Resources, Telecoms) +44 207 826-7953 [email protected]

Jonathan Schroer, CFA Media/Cable, Logistics, Business Services +49 89 378-13212 [email protected]

Dr. Silke Stegemann, CEFA Health Care & Pharma, Food & Beverage, Personal & Household Goods +49 89 378-18202 [email protected]

Publication Address

UniCredit Research Corporate & Investment Banking UniCredit Bank AG Arabellastrasse 12 D-81925 Munich [email protected]

Bloomberg UCCR Internet www.research.unicredit.eu

*UniCredit Research is the joint research department of UniCredit Bank AG (UniCredit Bank), UniCredit Bank AG London Branch (UniCredit Bank London), UniCredit Bank AG Milan Branch (UniCredit Bank Milan), UniCredit Bank New York (UniCredit Bank NY), UniCredit Bulbank, Zagrebačka banka d.d., UniCredit Bank Czech Republic and Slovakia, Bank Pekao, ZAO UniCredit Bank Russia (UniCredit Russia), UniCredit Tiriac Bank (UniCredit Tiriac). CR 17

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