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Rheinmetall Group Corporate Presentation January 2019
Rheinmetall Group
Rheinmetall Group
2018: best year in the company’s history expected
Order entry Sales Operating result
in €bn ~8 in €bn in €m
~ +36 %
5.9 ~ +5 %
5.9 ~ 6.2
400
> 7%
6.8%
2017 2018e 2017 2018e 2017 2018e
Strong vehicle orders Growth around 5% Group margin clearly above 7%
Germany with around €1 bn
© Rheinmetall AG / Corporate Presentation January 2019 2Leading and shaping change –
Focus on technology
3Rheinmetall Group
Rheinmetall Group
Markets have acknowledged operational development
∆ 2013- Op. margin: Sales: Share price:
to date > 9pp +40% >100%
6.3
5.5 6.8 >7
3.4
5,602 5,896
4,688 5,183
4,500 Share price RHM
Op. margin
-2.6 Sales
2013 2014 2015 2016 2017 2018c 2019c 2020c 2021p
Restructuring Phase One Rheinmetall Phase I One Rheinmetall Phase II
10 initiatives addressing Focus on technologies c= consensus
culture and cooperation p= plan
© Rheinmetall AG / Corporate Presentation January 2019 4Rheinmetall Group
Rheinmetall Technology Cluster
Top five technology cluster identified
Automation Digitalization Next Sensors E-Mobility Artificial
Intelligence
Advanced assistant New, digitalized vehicle New LIDAR* / Hybrid drive AI supported technologies
systems for driving, architectures Radar sensors E-drive - to handle complex
sensing, protection Virtual prototyping and Resistant to jamming / situations
and weaponing Micro mobility
digital twins spoofing - for decision support
System / health Next generation - for information
monitoring, predictive IR sensors superiority
maintenance, logistics
*LIDAR=light detection and ranging
© Rheinmetall AG / Corporate Presentation January 2019 5Automotive – Focus on innovation
6Rheinmetall Automotive
Automotive
Meet the current challenges of the business
1 China 3 Legislation
2 Diesel 4 E-Mobility
© Rheinmetall AG / Corporate Presentation January 2019 7Rheinmetall Automotive
Market trends
The growth drivers of Rheinmetall Automotive
Efficiency Emission Electrification
(CO2 Reduction) (Reduction)
© Rheinmetall AG / Corporate Presentation January 2019 8Rheinmetall Automotive
Innovations
The innovation pipeline for all three trends is packed
Efficiency Emission Electrification
(CO2 Reduction) (Reduction)
2021
2018
© Rheinmetall AG / Corporate Presentation January 2019 9Rheinmetall Automotive
Robust and flexible business model of Automotive
Resilient growth in a changing environment
Q1 14 out of the last 19 quarters exceeded the guidance floor of 8% operating margin Q3
2014 2018
8% guidance floor
Market outperformance Resilient profitability
Targeting the right market trends (emission Raw material inflation handled with price
reduction, efficiency improvement, e-mobility) escalation clauses (80%) and hedges (~20%)
Highly innovative product portfolio (~5.5% R&D to Fixed cost reduction due to transfer of production
sales ratio) capacity in lower cost countries since 2014
One third non-LV markets with strong mid-term Global flexibilization of labor cost
growth
© Rheinmetall AG / Corporate Presentation January 2019 10Rheinmetall Automotive
Robust and flexible business model of Automotive
Various instruments available to limit impact of negative markets
Sales scenarios Impact on operating earnings Possible measures
Short-term
Reduction of leased work force
Flexibility of working hours
Prioritization of projects (internal)
General cost saving programs (e.g.
travel, marketing)
Sales Stagnation (0%)
Structural
No new hires (replacement or additional)
Adjustment of capacities (e.g. line or
plant closure)
*above market growth
© Rheinmetall AG / Corporate Presentation January 2019 11Rheinmetall Automotive
Diversification
Increasing portfolio for non-LV applications
Trucks Large bore pistons Bearings & Aftermarket
continuous casting
Diverse portfolio for E.g. ship and locomotive
truck applications pistons Sanitary application Global supply of spare parts
© Rheinmetall AG / Corporate Presentation January 2019 12Rheinmetall Automotive Summary Automotive 1 On track to close 2018 on record levels 2 Markets are challenging, but outperformance realistic 3 Innovative portfolio accommodates growth trends 4 Margin resilience confirmed © Rheinmetall AG / Corporate Presentation January 2019 13
Defence – at the beginning of a “super cycle”
14Rheinmetall Defence
Defence market
International defence markets at the beginning of a “super cycle”
1990
2035
“Peace
dividend”
Upscaling of
forces and
modernization
Downscaling
of forces and Inflection Return to treaty and
armament point territorial defence
Out of 2014
area NATO 2% target
missions
Annexation of the
Crimean peninsula
© Rheinmetall AG / Corporate Presentation January 2019 15Rheinmetall Defence Drivers Defence Well positioned to participate in “home markets” growth German German Budget increase NATO commitment European Australian Vehicle Land Programs Programs © Rheinmetall AG / Corporate Presentation January 2019 16
Rheinmetall Defence
Strategic German mid-term projects
Timeline for German 100% equipment level
‘23
2023 ‘27
2027 ‘31
2031+
(1 brigade) (3 brigades) (8 brigades)
WLS / UTF
UTF SaZgMa 70 t UTF / GTF WLS Puma-VJTF Fuchs LLP PiMachine Puma S1 Puma 2. batch Boxer 3.batch
WLS / UTF
Weapon station MGCS studies Fox GBF IdZ NNbS TLVS / Patriot NG BPz 3 Leopard 2Ax MaKaBo Puma 90 Fz
STH ZukSysIndirF MGCS
GÜZ qFlgAbw LLM Helmet System
Digitization
Kick off Test units BMS VJTF´23 D-LbO
WLS / UTF
From framework agreements… WLS / UTF WLS / UTF …to partnering agreements
RV 155mm RV 120mm RV 30mm RV 40mm Ammo Logistic
© Rheinmetall AG / Corporate Presentation January 2019 17Rheinmetall Defence
Defence International
Foundation of two new hubs in 2018
Existing hubs
Scandinavia
Eastern Europe
Canada
Great Britain
Poland
Netherlands New
New Turkey
Participating
Acquiring a share in the
UAE in growth
largest defence market
ASIA
USA
NORTH AFRICA MIDDLE EAST
Rheinmetall
International
SOUTH AFRICA AUSTRALIA
© Rheinmetall AG / Corporate Presentation January 2019 18Rheinmetall Defence
Sales development
Strong sales growth supported by existing backlog
Defence sales plan 2018-2021
*Cagr: ~10%
Top 10 booked
projects
Land 400 Boxer
Land 121 5b
Puma VJTF
Trucks Bundeswehr
Gladius
Fox Kits
Air Defence Systems
3x Ammunition
2017 2018e 2019p 2020p 2021p contracts
© Rheinmetall AG / Corporate Presentation January 2019 19Rheinmetall Defence
Innovations
Demand-driven product development and targeted cooperations
New logistical platforms New tactical platforms New business models
Groundbreaking sub-systems Innovative weapon and ammunition New cooperations with
Sikorsky, Raytheon
Digitized command and reconnaissance
© Rheinmetall AG / Corporate Presentation January 2019 20Rheinmetall Defence
M&A
Future Main Battle Tank system MGCS will be a milestone for the industry
Germany with industrial and military lead for Main Ground Combat System (MGCS)
Technical focus
illustrative
Development
Prototyping
Start of production
Project kick-of as working group
2018 2019 2020 2025 2030 2035
Defining level of integration
Transaction focus
Political support for European consolidation
Shareholders open for discussions
All options on the table
Rheinmetall aims for a leading role in the MGCS project
© Rheinmetall AG / Corporate Presentation January 2019 21Rheinmetall Defence
Strengthening the position in the United Kingdom
Formation of JV Rheinmetall BAE Systems Land Systems (RBS-L)
JV with BAE Systems… …creates opportunities
Rheinmetall acquires 55%-stake Shaping Rheinmetall´s profile as global
in UK based combat vehicle supplier of military vehicles
business of BAE Systems Create a major player for land based
4 facilities in the UK with around systems in the United Kingdom
400 employees, thereof >200 Washington Significant improvement of chances in
engineers
major projects:
Renowned producer of:
Mechanised Infantry Vehicle (MIV):
• Armored engineering and
UK decision in favor of the Boxer
bridge laying vehicles,
Challenger 2 Life Extension program
• Self propelled artillery Telford (HQ)
(presently competition against BAE)
system AS 90
Filton Support and maintenance service for
Decision of anti-trust authorities
the British ground forces
expected in H1 2019
Expansion of engineering capacities as
Bovington
basis for future international business
© Rheinmetall AG / Corporate Presentation January 2019 22Rheinmetall Defence
Defence: Innovative products unfold their business potential
On track for profitable growth
> 7.0%
6-7% guidance corridor 5.7%
5.0%
3.5%
-0.4%
2014 2015 2016 2017 2018e
Guidance
Strong sales growth Substantial margin increase
Beginning of a super cycle: visible in order pattern Phasing out of legacy contracts
of home markets Good operating leverage
Backlog of €8bn boosted by major order wins Earlier than expected cost efficiencies
Growth of 10% (cagr) until 2021 expected Accretive profitability profile of order backlog
© Rheinmetall AG / Corporate Presentation January 2019 23Rheinmetall Defence Summary Defence 1 On track to close 2018 on record levels 2 Start of “super cycle” provides for long-lasting profitable growth 3 Continued internationalization taps into additional regional potentials 4 Sharpening profile of ES division as a system provider creates opportunities 5 Mid-term guidance update in 2019 after acquisition of further orders © Rheinmetall AG / Corporate Presentation January 2019 24
Rheinmetall Group
Key take aways Rheinmetall Group
FY 2018 Both segments will end the year on new record levels
Future sales growth largely driven by Defence “super cycle”
Group margin will further improve
Focus on technology
€€
€€ Dividend in the range of 30-35% of net income
© Rheinmetall AG / Corporate Presentation January 2019 25GROUP © Rheinmetall AG / Corporate Presentation January 2019 26
Rheinmetall Group
Rheinmetall
Meeting demand for mobility and security
Sales €5,896m
Key Op. result €400m Strategy Organic growth
Performance Order backlog €6,936m roadmap International expansion
Indicators Operating FCF
EPS
€276m
€5.24
2017 Leading by innovations
Targeted acquisitions
DPS €1.70
AUTOMOTIVE DEFENCE
€2,861m 49% Sales 51% €3,036m
€249m 62% Oper. Result 38% €174m
*€520m 7% Order backlog 93% €6,416m
11,166 (cap) 53% Headcount 47% 10,251(cap)
* short-term; cap: headcount at capacities;
© Rheinmetall AG / Corporate Presentation January 2019 27Rheinmetall Group
More than 100 production sites and offices on all continents
Germany UK
Defence Russia
USA Netherlands Norway
Singapore
Sites Canada Switzerland Sweden South Saudi Arabia Malaysia
Mexico Austria Poland Africa UAE Australia
Italy
USA
Mexico Japan
China
Germany India
France Spain
Automotive Brazil
Italy Czech Republic
Sites Malta Turkey
Romania UK
© Rheinmetall AG / Corporate Presentation January 2019 28Rheinmetall Group
Changing into an integrated technology group
Technology borders between Automotive and Defence will begin to fade
Sales in % of total sales
Automotive: 53% Automotive: ~47% Automotive
Combustion engines Combustion engines Combustion engines
Pumps Pumps Hybrid engines
EGR EGR E-engines
Pistons Pistons
Engine blocks Hybrid & E-engines Sensors
Artificial intelligence
Vehicle Systems Protection
Land Systems & Armament Boxer established
Puma, Lynx Digitization
Puma, Boxer (beginning)
Trucks Communication
Weapon & Ammunition
Air Defence & Electronics Weapon & Ammunition Weapon & Ammunition
Defence Electronics Vehicle Systems
Defence: 47% Defence: ~53% Defence
2008 2018e Mid-/long-term
© Rheinmetall AG / Corporate Presentation January 2019 29Rheinmetall Group
ESG with high importance for Rheinmetall
Environment Social Governance
• Reduction of the ecological footprint • Clear statement against cluster munition • Transparency towards customer,
• Decrease of energy needed • Promoting education and training investors and other stakeholder
• Selective use of raw materials
• Support of gender diversity • Non-compliant business behavior is
• „Road to 95“ and E-mobility • Women in management unacceptable
• Our products increase fuel efficiency
• Workforce • Zero tolerance of corruption and fraud
• New e-bike, e-motor and battery pack
• Integration of refugees via • Central Compliance Management System
• Support of conservation apprenticeships • Employee awareness initiative
• Transformation of the former production • Support of employee families
site in Düsseldorf
© Rheinmetall AG / Corporate Presentation January 2019 30Rheinmetall Group
Board remuneration based on three building blocks
Annual target salary (100%)
Fixum (60%) Performance-related variable remuneration (40%)
Twelve equal portions of monthly Short term incentive Long-term incentive
payments
Fringe benefits: • KPI: EBT, ROCE (each 50%) • KPI: Average adjusted EBT
• Pension insurance (or comparable) • Reference: Budget of the last three years
• Company car • Range: 0 - 200% (EBT capped at €300m)
• Escalators: 0% -Rheinmetall Automotive
AUTOMOTIVE
© Rheinmetall AG / Corporate Presentation January 2019 32Rheinmetall Automotive
Automotive with leading technology and market positions
Key Figures Structure Sales by region Sales by division
Sales: €2.9bn RoW
Hardparts Asia
4% Aftermarket
Op. result: €247m 15% 12%-3%
Pistons Large-bore Pistons 32% Hardparts
45% Europe
Op. margin: 8.7% NAFTA 16% w/o
Bearings Castings Germany
R&D: €151m 20% 53%
Germany Mechatronics
Capex: €176m Mechatronics
Automotive Sales by customer Operating result
Headcount: 11.166 Pump Technology
Emission Systems
by division
Commercial Diesel >10% Ford, VW, Other
Solenoid Valves Other Renault/Nissan
Systems -8%
32% Aftermarket 11% 26% Hardparts
Actuators 38%
Aftermarket 13% 17%
64%
2-3% DAF, 4-6% GM, Fiat,
All figures refer to FY 2017
Volvo, PSA, BMW Daimler Mechatronics
© Rheinmetall AG / Corporate Presentation January 2019 33Rheinmetall Automotive
Drivers for growth
Rising global fleet and regulatory restrictions are supporting our growth
Light vehicle production grows Emission thresholds decrease Stricter emission testing
million vehicles per year
WLTP
CO2 NOx Mainly EU!
151 in g/km in mg/km
+2%
124 -24% -56%
112
102 76 125 180
95
95
Stricter testing
85
90 sets the
89 80 benchmark
92
76 RDE even higher!
39
13 23
3
2017 2020 2025 2030 2040 2015 2020 EU5 EU6
95g =
4.1l Gasoline or
ICE HEV 3.6l Diesel
IHS and company estimates
Our goal is to outperform global market growth by 100 to 200 bp
© Rheinmetall AG / Corporate Presentation January 2019 34Rheinmetall Automotive
Overview Rheinmetall Automotive
Legislation is driving the business Gain bigger share in NEV market
1 International market offer great Growth strategy outperforming 2
growth potentials Chinese market development
E-Mob and Diesel impacts Build up strong local engineering /
Preserve technological leadership R&D capabilities
(thermo-mgmt., HV/EV competences) Environmental challenges
Mechatronics China
New products pipeline fully loaded
Manage- for-cash strategy for Optimize In-house production
Hardparts engine component segment Focus on high tech products and Aftermarket
Re-investment and growth by expand product portfolio
diversification & transformation Increase sales through new sales
Optimize global footprint channels and customers
3 Implement BU (Matrix) 4
organization and optimize
processes / project management
© Rheinmetall AG / Corporate Presentation January 2019 35Rheinmetall Automotive
Broad product range for alternative drive systems
Enlarging the traditional product portfolio for combustion engines …
+ … by products for hybrid and electric engines
Solenoid valves
Actuators Structural components
Electric throttle bodies Engine bearings Battery boxes
(as from 2018)
E-engine housing
(as from 2018)
Pistons
Electrical coolant pumps
EGR valves
Electrical vacuum
pumps
Engine blocks Electrical coolant
valve
Mechanical coolant Electrical oil pumps
pumps Oil pumps
Heat Pump Range Extender
(Predevelopment) (Predevelopment)
Hardparts products, non-shaded: Mechatronics
© Rheinmetall AG / Corporate Presentation January 2019 36Rheinmetall Automotive
E-mobility competence
underlined by contracts and by initiatives for new solutions
Contract volume for electric vehicles (EV)*
E-Taxi London
Pump technology for pure electric taxis
€ ~800 m Battery cell boxes
Lifetime order value Aluminum battery boxes for German
€ ~250m BEV, € ~550 m Hybrid premium OEM
Electric engine housing
Electric engine housing for German
premium OEM to serve the Chinese market
* Rheinmetall Automotive and Joint Ventures
© Rheinmetall AG / Corporate Presentation January 2019 37Rheinmetall Automotive
LV Diesel exposure limited; powertrain neutrality is the strategic target
Combined global engine production forecast* Automotive sales distribution by engine type**
100 30
LV Non Diesel units
80 25
Core Diesel
20
60 LV Diesel share in % Others
15 7%
40 18%
10 Fuel
20 LV Diesel units 5 23% independent
products
0 0
2000 2005 2010 2015 2020 2025
36% 13%
Gasoline 3% Truck
Further regulatory pressure expected
Large-Bore
Next regulation deadline approaching in 2020
Pistons
Real driving emission(RDE) testing will create further Benefitting from OEM’s effort to reduce emissions and
pressure to reduce emissions by hardware installation to avoid penalties
First city ban for diesel engines announced in Germany * IHS: Combined Engine Production Forecast April 2017
** Rheinmetall Automotive sales FY 2017
© Rheinmetall AG / Corporate Presentation January 2019 38Rheinmetall Automotive
Efficiency
CO2 - reduction with Automotive products – gasoline engine vehicle
130 g 95 g
CO2/km CO2/km
2015 2020
-2 g CO2/km
-2 g CO2/km
Reference model -7 g CO2/km Lightweight
design parts
Electr.
1.4L 4-cylinder -3 g CO2/km
Variable valve train EGR system
TC DI gasoline engine (115kW) -3 g CO2/km
Electr. control
Approx. 138 g CO2/km in NEDC -1 g CO2/km valve and variable
Tribology system
coolant pump
Variable oil pump
Rheinmetall Automotive products
© Rheinmetall AG / Corporate Presentation January 2019 39Rheinmetall Automotive
Automotive in China
50/50 joint ventures Wholly Foreign-Owned Enterprises JV subsidiary
with HASCO (SAIC group) (100% Rheinmetall Automotive)
Castings (KSHA) Pistons (KSSP) Castings (KPSNC) Pumps (PHP) Aftermarket Pierburg Large-bore pistons Pumps (PMP Ch.)
2014 1997 2001 2012 2008 2009 2013 2012
Engine blocks and Pistons Engine blocks, cylinder Electrical and Spare parts EGR modules and electric Large-bore pistons Electrical and
structural body parts heads and structural mechanical pumps throttle bodies mechanical pumps
body parts
Germany/
Europe China China China
+7%
Sales China in €m EBIT China in €m
71 76
+4%
53 53 WFOEs
871 934 972
WFOEs 37 JVs
681 30 (100%)
528 22
306 401 JVs
(100%)
2011 2012 2013 2014 2015 2016 2017 2011 2012 2013 2014 2015 2016 2017
KSHA: KS Huayu Alutech GmbH, Neckarsulm KPSNC: Kolbenschmidt Pierburg Shanghai Nonferrous Components Co., Ltd., Shanghai PMP: Pierburg Mikuni Pump Technology (Shanghai) Corp., Shanghai
KSSP: Kolbenschmidt Shanghai Piston Co., Ltd., Shanghai PHP: Pierburg Huayu Pump Technology Co., Ltd., Shanghai
© Rheinmetall AG / Corporate Presentation January 2019 40Rheinmetall Automotive
Truck
Our current product portfolio
Coolant Variable valve
Main coolant valves control
pumps
Aluminum pistons
Auxiliary
coolant pumps
Steel pistons
Electrical oil pumps
Piston rings
Cooperation with
Cylinder Riken
bore coating
Bearings for seat Main-bearings
adjustments and doors
Connecting rod bearings
Permaglide bearings for
truck compressors and
truck hydraulics EGR cooler modules
and mixer modules
Dual poppet valves
Exhaust gas flaps
Hydraulic valves EGR reed valves
Electrical Pressure High
Bushings for bypass regulating performance
injection pumps valves valves actuators
© Rheinmetall AG / Corporate Presentation January 2019 41Rheinmetall Automotive
Innovation Roadmap
Truck & Offroad
Products stable in Products for Products for
production (EU-VI) MY 2021 updates EU-VII regulation
2018 2019 2020 2021 2022 2023
Lead-free
Bearings
for Truck
Brakes
HD BPV Hot BPV HP-P-EGR
TM HD BPV Steel TM HD BPV BPV
SS body Gen I tbd.
Gen-I EC-Driver K&S body Pistons Gen-II EC-Driven EC Gen-2
PG body
RV HD EGR HD EGR RV EGR Castings RV EGR EC EGR Twinflap
Gen-I Twinflap Gen-II FlexVent Hight Flow Gen-2 EC Gen-2
© Rheinmetall AG / Corporate Presentation January 2019 42Rheinmetall Automotive
Robust and flexible business model of Automotive
Well prepared to maintain profitability in a changing environment
Markets Challenges Strengths
Light vehicles Macro picture/Business cycles Balanced product portfolio
Private customers, global light Global LV production Broad spectrum of pumps and valves
vehicle market Tariffs Know how transfer to truck products
Commercial vehicles Structural changes Innovations secure market leadership
Industrial customers, transport Decline of Diesel demand State of art technology
and shipping companies, bus E-Mobility Efficient CO2 and NOX reduction
operators High value-added for customers
Profitability
Aftermarket customers Cost structure Resilient earnings generation
Repair shops, whole sellers Pricing Benefits from restructurings
Flexible cost structure
Price escalation clauses
© Rheinmetall AG / Corporate Presentation January 2019 43DEFENCE © Rheinmetall AG / Corporate Presentation January 2019 44
Rheinmetall Defence
Defence is a leading supplier with an increasing international presence
Key Figures Structure Sales by region Sales by division
Sales: €3.0bn Weapon and Ammunition Vehicle Systems
RoW
Weapon and Protection Germany
Op. result: €174m 26% -8% Weapon and
Ammunition Systems 29% 32% Ammunition
Op. margin: 5.7% Propulsion
41%
Systems NAFTA 6%
R&D: €73m 17%
22% Europe 19% Electronic
Electronic Solutions Asia Solutions
Capex: €89m
Air Defence & Mission
Headcount: 10,251 Radar Systems Equipment Order backlog by division Operating result by division
Simulation and Technical Other
Training Publications Vehicle Weapon and
Systems Ammunition -10%
25%
34%
Vehicle Systems 46% Vehicle 20%
Systems Weapon and
73% Ammunition
Logistic Vehicles Tactical Vehicles 8% 29% 17%
20% Electronic
All figures refer to FY 2017 Solutions Electronic
Solutions
© Rheinmetall AG / Corporate Presentation January 2019 45Rheinmetall Defence
Defence at the beginning of long-lasting market growth
Rising awareness of military threats
Changes in macro Investment Islamist Crimea Geopolitical
environment… backlog Terror Annexation tensions
Growing project portfolios and rising budgets
Germany announced Franco-German NATO returns to Australian „One
to spend €130 bn defence initiative territorial defence Defence“ program
…trigger over the next decade EU Defence Initiative strategy Singapore and
comprehensive Defence budget EU Funds 2% spending target Indonesia accelerating
defence programs increases 3% cagr Pesco defence spending
East European armies
2016-2022 setting up various
UK tank programs vehicle programs
© Rheinmetall AG / Corporate Presentation January 2019 46Rheinmetall Defence
Germany
Drivers behind budget increase
“Turnarounds” in Germany Framework nation concept triggers standardization of
Personnel: equipment
Mid-term return to 220,000 soldiers
Material:
100% equipment level and additional division
Finance:
Increase of defence budget 24% from 2016 to 2021
Enhanced future profile Army 4.0: Rheinmetall integrates components to
Anchor army for smaller neighbor armies systems
Leading role in „enhanced Forward Presence“ in
Lithuania
Framework nation in „Very High Readiness Joint Task
Force as of 2019
Currently 14 international mandates
© Rheinmetall AG / Corporate Presentation January 2019 47Rheinmetall Defence
German defence policy
Additional structural demand of German army under discussion
Vehicles – mid-to-long term potential
Fox (400 vehicles) Boxer (300-400 vehicles) Trucks (> 10.000 vehicles) Puma (~250 vehicles)
Equipment and ammunition – multi billion programs
NNBS (Short range air defence) TLVS (Tactical air defence) D-LBO (> €5 bn net) (MoTaKo) Ammunition (~€2 bn net)
© Rheinmetall AG / Corporate Presentation January 2019 48Rheinmetall Defence
German Defence
Strong German project pipeline lining up – upcoming tenders until 2021
Major mid-term
potentials
NNBS ~€4bn TLVSRheinmetall Defence
Defence industry in Europe
Governmental shareholding restricts room
for cross-border consolidation
49.9%
Kongsberg Big common armament programs could be
50%
Nammo Patria catalysts for further consolidation
Saab
Cobham
BAE Systems Chemring Rheinmetall PL RO HUN CZ
Rheinmetall’s approach:
KMW/Nexter
Thales RUAG
JV partnerships with companies in different
Oto Melara nations instead of “putting all eggs in one basket”
Aselsan
Sufficient organic growth potential, but
suitable M&A transactions are possible
>25% state-ownedRheinmetall Defence
European Defence
Rheinmetall is a key beneficiary of large European vehicle programmes
Current or expected tenders tactical vehicles Drivers for European vehicle programs
− Return to territorial and treaty defence
UK MIV
Challenger upgrade
Lt
− Standardization of NATO equipment
− Modernization and upgrades
Pl
Cz
Sk
Estimate for European tactical vehicles demand
H
(number of vehicles)
Slo
Ru Germany Rest of Europe
Tracked ~250 >600
Bg Wheeled 700-800* >900** (includes
Lithuania, Slovenia and
UK)
* Fox and Boxer
** only Boxer
© Rheinmetall AG / Corporate Presentation January 2019 51Rheinmetall Defence
Mission Australia
Establishing a new “home market” down under
Australia timing and order size
of Land programs
Trucks 1st
& 2nd order 2016-2024 €2.0bn & €0.4bn
Boxer CRV 2019-2026 €2.1bn
Ammunition 2018/19 €65m*
Lynx tender 2024-2031 €4-5bn
Integrated
tbd
Training System
Technical publication tbd
*initial assessment, option for 5 year contract
© Rheinmetall AG / Corporate Presentation January 2019 52Rheinmetall Defence
Important strategic partnerships
Joint bid for MoTaKo /MoTIV Focus on cooperation regarding Complete solution consisting of the CH-53K
project the successor system for the helicopters as well as further services in
Scope German tactical air defence maintenance, repair, training and support.
JV agreement signed Sep 2017 “Strategic collaboration Strategic teaming agreement for the German
(74.9% Rheinmetall) agreement “ signed end of June Air Force’s “Heavy transportation helicopter
Status with defined work share and Program” signed Feb 2018
exclusivity for German market
Tender process starting 2019 3 years global exclusivity German MoD expected to issue request in H2
Timing Decision expected Q4 2020 2018; contract to be awarded in mid-2020;
first deliveries in 2023
© Rheinmetall AG / Corporate Presentation January 2019 53Rheinmetall Defence
Defence: Innovative products unfold their business potential
Staying on the path of growth and rising profitability
Markets Challenges Strengths
Germany Managing “super cycle” Product management
Expanding size of German army Turning high order intake into Roll-out phases of large-scale
with better equipment level profitable sales products with reduced risk profile
From 2019 on preparing for Improved project management
VJTF leadership Technology
Transfer of know-how to local Technology leadership
Europe production sites Largest European supplier of
Rising demand for tactical Cooperation with international military vehicles
vehicles (D/F, UK, Eastern partners Globally leading market position
Europe) in Weapon & Ammunition
Profitability
Global Maintaining and improving price Basis for earnings generation
Potential in Australia, Asia, quality of order s Top-line growth
North America Avoiding project risks Improving leverage
Legacy contracts phasing-out
© Rheinmetall AG / Corporate Presentation January 2019 54GROUP
Q3 2018
© Rheinmetall AG / Corporate Presentation January 2019 55Rheinmetall Group Q3 2018
Q3 2018 Group Commercial Highlights
Stable performance in a challenging quarter
Order backlog Sales Operating result EPS
€9.3bn +29% €1.4bn +5%
CER*
€98m +1% €1.80 +117%
Order backlog on new record level boosted by Australian contracts
Sales climbed 5.0% at constant exchange rates* (reported 3.3%) to €1.4bn
Operating result improved slightly to €98m despite a challenging quarter
EPS rose on higher EBIT driven by real estate profit and soft comparables from €0.83 to €1.80
FY Guidance 2018: profitability target raised, sales growth expectations lowered
© Rheinmetall AG / Corporate Presentation January 2019 56Rheinmetall Group Q3 2018
Top line growth and accelerated EPS development
Sales Operating result in €m Earnings per share
in €m Operating margin in % in €
adjusted EPS
1.80
+5.0% +2.0%
97 98 reported EPS 117%
2
-24 -1
1,411 1.33
69 -1.0% 1.18
-1.7%
1,366
0.83
7.1% 6.9%
+3.3% +1.0%
Q3 Operational FX Q3 Q3 Operational FX Q3 Q3 Q3
2017 2018 2017 2018 2017 2018
© Rheinmetall AG / Corporate Presentation January 2019 57Rheinmetall Group Q3 2018
Cash flow still negative but improving quarter by quarter
Cash flow development 2018 Operating free cash flow bridge
in €m in €m
9 0
42
5
167
-116
-140
5
-287 -116
Q1 Q2 Q3 Q3 2017 EAT D/A Delta Delta WC Invest Q3 2018
Pensions and others
© Rheinmetall AG / Corporate Presentation January 2019 58Rheinmetall Group Q3 2018
Further improvement of equity ratio despite net debt increase
Net debt Equity ratio
in €m in % of total assets
IFRS 16
effect Restated for Restated for leasing IFRS 15/16
leasing liabilities liabilities and 32.6%
230 effect
€158 m cost to obtain contract
72 31.6%
unadjusted
30.6%
30.4%
-242
-514
30.09.2017 31.12.2017 01.01.2018 30.09.2018 30.09.2017 31.12.2017 01.01.2018 30.09.2018
© Rheinmetall AG / Corporate Presentation January 2019 59Rheinmetall Group Q3 2018
FY Guidance
Higher profitability in light of more realistic sales expectations
Sales Operating margin
2017 2018e 2017 2018e
Growth y/y in % Reported growth y/y in % in %
in %
5.2 ~5 6.8 clearly above 7.0
Group (previously: ~8) (previously: ~7.0)
7.7 2-3 8.7 slightly above 8.5
Automotive (Global LV: 2.2%) (previously: 3-4) (previously: ~8.5)
Defence 3.1 6-7 5.7 slightly above 7.0
(previously: ~12) (previously: ~6.5)
IHS LV growth assumption as per 8 October FY 2018: 1.4%; Q4 2018: 1.8%
© Rheinmetall AG / Corporate Presentation January 2019 60Rheinmetall Group Q3 2018
Estimates
Selected key data
Rheinmetall Group In % of Automotive Defence
sales
2017 2018 2017 2017
Holding cost €23m ~€30m Capex €154m ~5.5 - 6.0% €89m ~3.5 - 4.5%
Tax rate 27%Rheinmetall Automotive
AUTOMOTIVE
Q3 2018
© Rheinmetall AG / Corporate Presentation January 2019 62Rheinmetall Automotive Q3 2018
Q3 2018 Summary: Automotive
Automotive resilient in a contracting market
Quarterly sales and margin development Comments on quarterly performance
Sales climbed to €708 million with a strong FX-adjusted growth
684 712 751 740 708 of 5.2% (rep 3.5%), largely driven by non-LV performance
9.2 Q3 supported by first successful product launches
8.8 8.6
8.3 8.5 Operating margin improved 0.2%p to 8.5% y-o-y, supporting FY
guidance
Q3 Q4 Q1 Q2 Q3 OFCF declined on increased capex, different timing of customer
payments and cash outs for restructuring booked in Q3 2017,
while PY included prepayments
in €m Q3 2017 Q3 2018 ∆ in % 9m 2017 9m 2018 ∆ in %
Sales 684 708 3.5% 2,149 2,199 2.3%
Operating result
Operating margin in %
57
8.3%
60 5.3%
8.5% 0.2%p
186
8.7%
Q2 193
8.8%
3.8%
0.1%p
Operating Free Cash Flow 81 -2 32 -16
Operating FCF / Sales 11.8% -0.3% -12.1%p 1.5% -0.7% -2.2%p
© Rheinmetall AG / Corporate Presentation January 2019 63Rheinmetall Automotive Q3 2018
Robust sales and margin improvement
Sales Automotive Operating result Automotive
in €m in €m
growth in % / (FX adjusted) Margin Mechatronics
Diesel business decline
+3.5% +5.3% compensated, especially in
(+5.2%) Commercial Diesel Systems and
684 708 57 60 8.5%
some SOP (e.g. electrical pumps)
Results held back by ramp-up cost
387
for further SOP in Q4 2018
382 +1.3% 38
40 -5.0% 9.8%
(+2.7%)
Hardparts
Sales growth mainly due to
equipment sale to licensee
232 +8.2% 251 Large Bore Pistons recovery
13 15
(+10.6%) +15.4% 6.0% continues
95 92 9 9 Aftermarket
-3.2% 0% 9.8%
-25 (-0.8%) -22 -5 -2 Weak markets in Middle East
Q3 2017 Q3 2018 Q3 2017 Q3 2018
Mechatronics Hardparts Aftermarket Consolidation
© Rheinmetall AG / Corporate Presentation January 2019 64Rheinmetall Automotive Q3 2018
Europe affected by Diesel and WLTP uncertainties
Regional sales development Automotive
in €m
3.5%
708
684
0.9%
5.5%
0.9% 10.1% Effect
9.7% 9.8%
3.9% Diesel sales declined,
3.4%
16.5%
especially in Germany and Europe
RoW 16.7%
China WLTP induced production cuts in Europe
Asia (excl. CN)
South America
Ramp-up of electrical pumps in Germany and
NAFTA 42.8% 38.8% China
Europe (excl. GER) 63.5% 59.0%
Germany
Good demand for truck related products
20.7% 20.2%
Q3 2017 Q3 2018
© Rheinmetall AG / Corporate Presentation January 2019 65Rheinmetall Automotive Q3 2018
China
Strong sales performance helped by product starts in a negative market
Sales
in €m +6.4% -1.7%
236 15 247
4
Sales increased by 6.4% to €247m (4.7% reported)
206 214
+4.7% vs. a negative LV-market growth of -4.2%
30 33 Result development held back by ramp-ups
Q3 2017 operational FX Q3 2018 scheduled for Q4
EBIT JV First product starts realized, majority expected for
in €m WFOE Q4 including SOP for Chinese producers
-5.9% -1.6%
18.7 17.3
1.1 FX continues to burden sales and results
0.3
15.2 15.1
-7.5%
3.5 2.2
Including 100% figures of 50/50 JV, consolidated at equity
Q3 2017 operational FX Q3 2018
© Rheinmetall AG / Corporate Presentation January 2019 66Rheinmetall Automotive Q3 2018
Q4 2018 outlook: Automotive
Market uncertainties responsible for growth adjustment
Sales
cumulated in €m
New H2 supported by product starts
2,861 guidance Ramp-ups in Germany and China
2.3% (e.g. electrical pumps)
2017
2018
but:
2,149 2,199 multiple issues unsettle the market
1.8% Global tariffs
WLTP
1,465 1,491
Diesel
2.3% China market slow-down
734 751 and:
adverse FX remains a topic throughout the year
More cautious on growth in Q4
3m 6m 9m 12me 12m FX
adjusted
© Rheinmetall AG / Corporate Presentation January 2019 67DEFENCE
Q3 2018
© Rheinmetall AG / Corporate Presentation January 2019 68Rheinmetall Defence Q3 2018
Q3 2018 Summary: Defence
Slower start to H2 because of additional burdens
Quarterly sales and margin development Comments on quarterly performance
Record order intake of €3bn, driven by AUS vehicle orders
1,011
682 754 703 Sales grew to €703m with an operational improvement of 4.9%
11.3
6.7
509 (3.1%rep), driven by ES and VS
5.8 6.3
-2.6 WA held back for various issues (e.g. explosion South Africa,
Q3 Q4 Q1 Q2 Q3
export approvals and delayed customer approval)
Strong result in VS mitigated by WM’s negative leverage
OFCF still affected by inventory build up to support Q4 sales
in €m Q3 2017 Q3 2018 ∆ in % 9m 2017 9m 2018 ∆ in %
Order intake 870 3,044 249.9% 2,292 4,471 95.1%
Sales
Operating result
Operating margin in %
682
46
6.7%
703
44
6.3%
3.1%
-4.3%
-0.4%p
2,025
60
3.0%
Q2 1,966
75
3.8%
-2.9%
25.0%
0.8%p
EBIT 46 43 -6.5% 57 66 15.8%
Operating Free Cash Flow -52 -98 -157 -508
Operating FCF / Sales -7.6% -13.9% -6.3%p -7.8% -25.8% -18.0%p
© Rheinmetall AG / Corporate Presentation January 2019 69Rheinmetall Defence Q3 2018
Strong performance of Vehicle Systems and Electronic Solutions
Sales Defence Operating result Defence Weapon and Ammunition
in €m in €m Negative operational leverage
growth in % / (operational) Margin Explosion in South Africa
+3.1% Missing export permits
(+4.8%) 46 -4.3%
682
703 44 6.3% Delayed customer approvals due
10
to cancelled testing because of fire
-21.0% 196 -64.3% 5.1%
248 (-20.2%) hazard at testing range
28 4.7%
8 Electronic Solutions
+3.0%
170 Optimized cost structure
165 (+3.2%)
Vehicle Systems
+33.3%
6 High utilization
30 7.6%
370 +6.8%
395 Continuously improved product mix
13 >100% (phasing out of Dutch Boxer)
(+9.7%)
Improvement of supply chain issues
-58 -1 -4
-101 (resolved by year-end)
Q3 2018 Q3 2017 Q3 2018
Q3 2017 Consolidation
Weapon & Ammunition Electronic Solutions Vehicle Systems Consolidation Elimination of intercompany profits
© Rheinmetall AG / Corporate Presentation January 2019 70Rheinmetall Defence Q3 2018
Record order intake in Vehicle Systems driven by Australian orders
Order intake by division Order backlog profile
in €m in €bn
change in %
Weapon and Ammunition
+30.5%
Electronic Solutions 3,044
Vehicle Systems 185 8.8
241 ~1.1 ~2.5 ~5.2
+250%
Consolidation
6.7
2,808
870
284
197
434
-45 -190
Q3 Q3 30.09.17 30.09.18 2018E 2019E 2020E ff.
2017 2018
© Rheinmetall AG / Corporate Presentation January 2019 71Rheinmetall Defence Q3 2018
Vehicle Systems propelled backlog to €8.8bn
Order backlog by Division Order backlog by Region
in % in %
RoW
Weapon & Germany
Ammunition
11%
Vehicle 22%
Systems
22%
MENA 22%
€8.8bn
€8.8bn 13% Europe
58% (excl. GER)
20%
32%
Electronic
Solutions
Australia
All 9/2018 excl. consolidation
© Rheinmetall AG / Corporate Presentation January 2019 72Rheinmetall Defence Q3 2018
Q4 2018 outlook: Defence
FY guidance too ambitious on the back of recent risk development
Sales
cumulated in €m
New
guidance Progressive closure of sales gap in the course of the year
3,036
2017 but:
2018
-3% pending export approvals
2,025 1,966 FY sales impact of South Africa
-6%
1,343 1,263
-17%
and:
612
adverse FX remains a topic throughout the year
509
Adjusted growth guidance
3m 6m 9m 12me 12m FX
adjusted
© Rheinmetall AG / Corporate Presentation January 2019 73Rheinmetall Defence Q3 2018
Q4 2018 outlook: Defence
…but high confidence for catch-up in Q4
Sales Defence Operating margin Defence Weapon and Ammunition
in €m in % on sales ~€70-80m higher sales level than PY
Q4 2017 Q4 2018 Better operating leverage due to a higher share
of pure ammunition business
~25% WA 17.9%
Beneficial product mix development since Q2
ES 8.1%
1,012 Electronic Solutions
VS 5.7%
~€90m higher sales level than PY
WM 431 Defence 11.3% ~12% Benefiting from German order intake in 2017
Optimized cost structure
ES 248 Expected sales growth in Q4 of
Vehicle Systems
~25% driven by all three Divisions ~€70-80m higher sales level than PY
VS 423 - Above average share of classic Enhanced pricing levels in tactical vehicles and
ammunitions business in WA phasing out of Dutch Boxer
-90 - Sales growth ES and VS driven by
Q4 2017 Q4 2018e
Higher production efficiencies
2017’s German orders
© Rheinmetall AG / Corporate Presentation January 2019 74GROUP
APPENDIX
© Rheinmetall AG / Corporate Presentation January 2019 75Appendix: Rheinmetall Group
Segments 2012 – 2017: Key figures
AUTOMOTIVE DEFENCE
2013 2014 2015 2016 2017 in EUR million 2013 2014 2015 2016 2017
2,270 2,466 2,621 2,670 2,922 Order intake 3,339 2,812 2,693 3,050 2,963
392 416 445 459 520 Order backlog (Dec. 31) 6,050 6,516 6,422 6,656 6,416
2,262 2,448 2,592 2,656 2,861 Sales 2,155 2,240 2,591 2,946 3,036
158 184 216 223 249 Operating result 60 -9 90 147 174
7.0 7.5 8.3 8.4 8.7 Operating margin (in %) 2.8 -0.4 3.5 5.0 5.7
225 295 332 356 367 EBITDA 96 17 175 239 268
124 184 216 223 227 EBIT 4 -67 90 147 172
5.5 7.5 8.3 8.4 7.9 EBIT margin (in %) 0.2 -3.0 3.5 5.0 5.7
142 158 167 174 176 Capex 62 76 96 95 89
10,927 10,830 10,934 10,820 11,166 Employees (Dec 31) according to capacity 9,193 9,184 9,581 10,002 10,251
1,171 1,322 1,450 1,527 1,621 Mechatronics Sales Weapon & 1,027 977 881 1,112 1,175
66 96 119 142 176 EBIT Ammunition* 31 -4 74 108 117
5.6 7.3 8.1 9.3 10.9 EBIT margin 3.0 -0.4 8.4 9.7 10.0
889 934 952 921 968 Hardparts Sales Electronic 710 705 759 745 691
27 72 73 62 38 EBIT Solutions 11 -53 26 25 20
3.0 7.7 7.7 6.7 3.9 EBIT margin 1.5 -7.5 3.4 3.4 2.9
268 269 285 305 358 Aftermarket Sales Vehicle 539 667 1,195 1,392 1,480
27 26 27 27 33 EBIT Systems* -35 -9 3 29 51
10.1 9.7 9.5 8.9 9.2 EBIT margin -6.5 -1.4 0.3 2.1 3.5
2013 figures adjusted according to IFRS 5 (Discontinued Operations) with regard to the formation of the ATAG JV and according to IFRS 11 (Joint Arrangements)
*Figures not readjusted to
© Rheinmetall AG / Corporate Presentation January 2019 current reporting structure
76Appendix: Rheinmetall Group
Continuing ROCE improvement
ROCE
in %
Pre-tax WACC
20% (2017):
19.0% 18.8% 18.7%
15% 16.7%
13.4%
12.3%
10.6% 10.5% Group
11.8%
10% 10.7%
9.8%
4.7%
5% 3.9% 6.1%
0.3%
0%
-4.6%
-5%
2013 2014 2015 2016 2017
Group Defence Automotive
© Rheinmetall AG / Corporate Presentation January 2019 77Appendix: Rheinmetall Group Glossary bn billions m million bp basis points NNBS Short range air defence CAGR compounded average growth rate NWC Net working capital CER Constant Exchange Rates OEM Original Equipment Manufacturer CTA Contractual trust agreement Operating FCF Operating free cash flow D&A Depreciation & Amortization Op. margin Operating margin e expected %P Percentage points EA Export approval P&L Profit & Loss Account EBIT Earnings before Interest and Tax PY Previous Year EBITDA Earnings before Interest, Tax , Depreciation and Amortization RDE Real Drive Emissions EBT Earnings before Tax rep reported EIB European Investment Bank ROCE Return on capital employed EPS Earnings per share RoW Rest of the World EPL Einzelplan SOP Start of production EV Electric Vehicle TLVS Tactical air defence system FTE Full Time Equivalents WACC Weighted average cost of capital FX Foreign exchange rate WLTP Worldwide Harmonized Light-Duty Vehicles Test Procedure GDP Gross Domestic Product WFoE Wholly foreign owned enterprise HEV Hybrid and Electric Vehicles IAA Internationale Automobil Ausstellung ICE Internal combustion engine IFRS International Financial Reporting Standards JV Joint Venture LBP Large bore piston LV Light vehicle © Rheinmetall AG / Corporate Presentation January 2019 78
Next events and IR contacts
Events 2019 IR Contacts
GIS Commerzbank Conference New York 15-16 January Franz-Bernd Reich
Head of IR
GCC Kepler Cheuvreux Conference Frankfurt 21-22 January
Tel: +49-211 473-4777
Lampe Conference London 31 January Email: franz-bernd.reich@rheinmetall.com
Provisional figures 1 March
Dirk Winkels
FY 2018 13 March Senior Investor Relations Manager
Lampe Conference Baden-Baden 5 April Tel: +49-211 473-4749
Email: dirk.winkels@rheinmetall.com
Q1 2019 9 May 2019
AGM 28 May
Rosalinde Schulte
Investor Relations Assistant
Tel: +49-211 473-4718
Email: rosalinde.schulte@rheinmetall.com
Quick link to documents
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© Rheinmetall AG / Corporate Presentation January 2019 79Disclaimer This presentation contains “forward-looking statements” within the meaning of the US Private Securities Litigation Reform Act of 1995 with respect to Rheinmetall’s financial condition, results of operations and businesses and certain of Rheinmetall’s plans and objectives. These forward-looking statements reflect the current views of Rheinmetall’s management with respect to future events. In particular, such forward-looking statements include the financial guidance contained in the outlook for 2018. Forward-looking statements are sometimes, but not always, identified by their use of a date in the future or such words as “will”, “anticipates”, “aims”, “could”, “may”, “should”, “expects”, “believes”, “intends”, “plans” or “targets”. By their nature, forward-looking statements are inherently predictive, speculative and involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements. In particular, such factors may have a material adverse effect on the costs and revenue development of Rheinmetall. Further, the economic downturn in Rheinmetall’s markets, and changes in interest and currency exchange rates, may also have an impact on Rheinmetall’s business development and the availability of financing on favorable conditions. The factors that could affect Rheinmetall’s future financial results are discussed more fully in Rheinmetall’s most recent annual and quarterly reports which can be found on its website at www.rheinmetall.com. All written or oral forward-looking statements attributable to Rheinmetall or any group company of Rheinmetall or any persons acting on their behalf contained in or made in connection with this presentation are expressly qualified in their entirety by factors of the kind referred to above. No assurances can be given that the forward-looking statements in this presentation will be realized. Except as otherwise stated herein and as may be required to comply with applicable law and regulations, Rheinmetall does not intend to update these forward-looking statements and does not undertake any obligation o do so. This presentation does not constitute an offering of securities or otherwise constitute an invitation or inducement to any person to underwrite, subscribe for or otherwise acquire or dispose of securities in Rheinmetall AG or any of its direct or indirect subsidiaries. © Rheinmetall AG / Corporate Presentation January 2019 80
© Rheinmetall AG / Corporate Presentation January 2019 81
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