Vossloh AG

Quarterly Report • Oct 24, 2019

Quarterly statement as of September 30, 2019

Werdohl, October 24, 2019

Grasping the future. Shaping the future.

Disclaimer

Note:

This presentation contains statements concerning the future business performance of the Vossloh Group that are based on assumptions and estimates from the Company management. If the assumptions that the projections are based on fail to occur, the actual results of the projected statements may differ substantially. Uncertainties include changes in the political, commercial and economic climate, the actions of competitors, legislative reforms, the effects of future case law and fluctuations in exchange rates and interest rates. Vossloh and its Group companies, consultants and representatives assume no responsibility for possible losses associated with the use of this presentation or its contents. Vossloh assumes no obligation to update the forecast statements in this presentation.

The information contained in this presentation does not constitute an offer or an invitation to sell or buy Vossloh shares or the shares of other companies.

Vossloh Group: Grasping the future. Shaping the future.

New composition of Executive Board, further details about performance program

Changes to Executive Board	▪ Oliver Schuster appointed as CEO, Dr. Karl Martin Runge appointed as additional member of the Executive Board ▪ Increased focus on achieving a sustainable improvement in profitability and strengthening self-financing power
Performance program	▪ Sale of largest Customized Modules subsidiary in the U.S. ▪ Further portfolio streamlining resolved, affecting companies in the Customized Modules division in the U.S. and South America ▪ Positive cash effect from performance program already in 2019, negative one-time effects (mainly booking effects) expected from todays perspective of around €85 million in 2019 ▪ Sustainable annual savings of €15 – 20 million, majority already expected in 2020
Operating performance after nine months	▪ Sales 6.2 % higher than in the previous year, particularly due to acquisition in the Tie Technologies business unit; EBIT adjusted for one-time effects from the performance program (only EBIT and EBIT margin adjusted); slight decrease in adjusted EBIT, primarily due to lower EBIT contributions from Customized Modules ▪ Outlook for operating business in 2019 concretized; EBIT and EBIT margin expected to improve significantly in 2020

Vossloh Group: Grasping the future. Shaping the future.

Transformation almost complete, core business strengthened in China

Sale of Vossloh Locomotives	▪ Contract for the sale of Vossloh Locomotives to CRRC ZELC has been signed ▪ Purchase price subject to adjustment on closing date, projected to amount to a low single digit million figure, additional revenues from sale of assets possible (up to €10 million) ▪ Additional burden on result from discontinued operations due to signing of selling contract in the third quarter, totaling around €35 million ▪ CRRC ZELC contractually obliged to take over all guarantees and warranties that Vossloh AG had taken on for the Locomotives business unit
Anyang joint venture	▪ Joint venture established with Anyang Railway Equipment Co., Ltd.; Vossloh holds 51 %, company expected to be fully consolidated at beginning of 2020 ▪ Production of components for rail fastening systems, increased vertical integration for VFS in China ▪ Anyang Railway Equipment is a well-established company in China with over 600 employees ▪ Joint venture improves position in market segments conventional rail and urban transport in China

Revenues significantly increased, net income burdened by one-time effects

Key Group indicators		1-9/2019	1-9/2018
Sales revenues	€ mill.	662.1	623.2
EBIT	€ mill.	(5.8)	35.2
Adjusted EBIT1)	€ mill.	31.9	-
EBIT margin (2019 adjusted1))	%	4.8	5.7
Net income	€ mill.	(85.4)	12.6
Earnings per share	€	(5.30)	0.57
Free cash flow2)	€ mill.	(70.8)	(45.3)
Capital expenditure	€ mill.	33.9	37.2
Value added	€ mill.	(57.3)	(8.9)

Notes

• Sales revenues above previous year, particularly due to stronger sales contributions from Core Components (also result of the Austrak acquisition in 2018)
• EBIT burdened by expenses of €37.7 million from the performance program (of which €8.3 million for staff reduction and €29.4 million related to unprofitable activities), adjusted EBIT and EBIT margin slightly below the previous year due to lower EBIT contributions from Customized Modules
• Net income burdened by effects of performance program and negative result from discontinued operations
• Free cash flow significantly negative, driven primarily by VL; substantial improvement expected in Q4/2019
• Value added impacted by expenses from performance program and increase in average capital employed, among other things due to first-time application of IFRS 16 and acquisitions in 2018
• 1) "Adjusted EBIT" corresponds to EBIT adjusted for one-time expenses from the performance program (expenses in connection with releasing employees, earnings effects from the module unprofitable or disadvantageous activities); see also slide 20

2) Includes the effects from discontinued operations; free cash flow comprises the cash flow from operating activities, investments in intangible assets and property, plant and equipment, and cash receipts and payments associated with companies accounted for using the equity method

Equity ratio over 30% despite one-time effects

Key Group indicators		1-9/2019/ 9/30/2019	2018/ 12/31/2018	1-9/2018/ 9/30/2018
Equity	€ mill.	463.2	523.3	520.1
Equity ratio	%	32.7	41.4	42.9
Closing working capital	€ mill.	226.9	216.0	242.7
Average working capital intensity	%	26.6	25.2	25.8
Average capital employed	€ mill.	916.5	799.7	785.0
Closing capital employed	€ mill.	894.4	862.0	825.7
Net financial debt	€ mill.	388.71)	307.3	287.4

• Equity lower, particularly due to the negative net income and dividend payout; capital increase had positive effect
• Closing working capital down on 9/30 compared to previous year's figure due to reclassification of sold company CTM (effect of approximately €25 million) to assets held for sale
• Closing capital employed well above previous year (9/30), largely due to acquisitions in 2018 and application of IFRS 16; counteracted by reclassification of CTM
• Net financial debt significantly increased especially as a result of negative free cash flow; substantial decrease anticipated in Q4/2019 due to cash inflow from disposals and expected positive free cash flow

Substantial increase in orders received and order backlog

• Orders received up 11.7 % on the previous year, improved in all divisions compared to previous year; encouraging improvement in Tie Technologies business unit, particularly in Australia
• Book-to-bill ratio above 1 in all divisions, 1.15 for the Group
• Order backlog: Increase mainly due to major orders in China in the Fastening Systems business unit, at Vossloh Tie Technologies several contracts for mine projects in Australia included; sold unit CTM still contributing €68 million to order backlog of Customized Modules on 9/30

Core Components division

Sales significantly above previous year, adjusted EBIT margin still double digit

• Adjusted EBIT up slightly compared to previous year, primarily due to EBIT contributions from Austrak and rail fastening system business in North America; Vossloh Fastening Systems expected to do significantly more business in Asia in Q4
• One-time effects from the performance program after the first nine months of 2019: €0.9 million

ROCE	1-9/2019:	11.9
(in %)	1-9/2018:	15.2
Value	1-9/2019:	9.3
added (in € mill.)	1-9/2018:	12.6

Fastening Systems business unit

Sales at the previous year's level, book-to-bill ratio at 1.15

• Value added lower than previous year, mainly as a result of lower earnings contributions from China and negative one-time effects from the performance program
• Order backlog well above the previous year, particularly due to increase in orders received in China, but also with improvements in North America and Russia contributing to a lesser extent

Orders received	1-9/2019:	180.0
(in € mill.)	1-9/2018:	192.3
Order backlog	9/30/2019:	215.2

Tie Technologies business unit

Sales and orders received well above previous year also due to acquisitions

• Significant increase in sales, primarily due to acquisition in Australia (increase of €28 million), alongside substantial increase in sales in the USA and Canada (CN framework agreement)
• Value added improved despite negative effects from the purchase price allocation and burdens from the performance program and start-up costs at the new plant in Canada
• Orders received significantly higher, primarily due to substantial orders won in Australia; also well above the previous year in the USA; high book-to-bill ratio of 1.59

Orders	1-9/2019:	152.2
received (in € mill.)	1-9/2018:	59.3
Order backlog	9/30/2019:	107.1
(in € mill.)	9/30/2018:	45.5

Customized Modules division

Sales at previous year's level, adjusted EBIT margin lower than previous year

• Lower sales in Poland and the UK, partially compensated by higher sales in lossmaking North American market
• Lower EBIT contributions from operational business, mainly due to French management company and companies in UK and Poland; Sweden on the other hand improved; high EBIT contributions expected from operational business in Q4
• One-time effects from the performance program after the first nine months of 2019: €30.5 million

ROCE	1-9/2019:	(5.0)
(in %)	1-9/2018:	6.3
Value	1-9/2019:	(42.7)
added (in € mill.)	1-9/2018:	(3.8)

Lifecycle Solutions division

Sales significantly higher than previous year, adjusted EBIT down on previous year

• Framework agreement signed for corrective maintenance in Netherlands
• Increased sales, especially in the Milling and Logistics segments
• Adjusted EBIT mainly due lower EBIT contribution from sale of vehicles below previous year; additional earnings contributions from vehicle sales expected in Q4
• One-time effects from performance program after nine months of 2019: €3.8 million
• Value added primarily burdened by one-time effects from the performance program and application of IFRS 16 for the first time, in addition to adjusted EBIT performance

ROCE	1-9/2019:	(0.1)
(in %)	1-9/2018:	4.8
Value	1-9/2019:	(10.4)
added (in € mill.)	1-9/2018:	(2.8)

Sales increases primarily in Australia and North America

Vossloh Group Outlook

General framework

• Negative one-time effects 2019 from today's perspective of approximately €85 million (primarily booking effects), positive cash effect in 2019 resulting from performance program
• Sustainable annual savings of €15 million 20 million, majority already in 2020 for the first time
• Higher visibility of deliveries in China after winning a number of major projects, deliveries will begin in Q4/2019 with the majority in 2020

Outlook for 2019 with regard to the operational business

• Forecast sales range €900 – 1,000 million: Sales higher than 2018 in the Core Components and Lifecycle Solutions divisions, primarily due to the acquisitions of Austrak and the milling business
• Adjusted EBIT expected in the lower third of the forecast range of €50 – 60 million among others due to weaker business performance of sold company CTM
• Value added also expected to be significantly below the negative previous year's value particularly due to one-time expenses from the performance program

Looking ahead to 2020

• Forecast sales range now €900 – 1,000 million after portfolio streamlining
• Forecast EBIT range €65 – 80 million, corresponding to significant improvement in EBIT margin of around 2 percentage points

Financial calendar and contact information How to reach us

Financial calendar
▪ March 19, 2020 ▪ May 27, 2020	Annual Report 2019 Annual General Meeting
Contact information for investors:	Contact information for the media:
▪ Dr. Daniel Gavranovic ▪ Email: investor.relations@vossloh.com Phone: +49 (0) 23 92 / 52-609 Fax: +49 (0) 23 92 / 52-219	▪ Gundolf Moritz (Mirnock Consulting) ▪ Email: presse@vossloh.com Phone: +49 (0) 23 92 / 52-608 Fax: +49 (0) 23 92 / 52-219

Thank you for your time.

Q&A

Grasping the future. Shaping the future.

Notes

Income statement

€ mill.	1 -9/2019	1 -9/2018
Sales revenues	662.1	623.2
Cost of sales	(535.9)	(481.5)
General administrative and selling expenses	(119.6)	(108.6)
Research and development costs	(7.7)	(8.1)
Other operating result	(6.5)	8.0
Operating result	(7.6)	33.0
Income from investments in companies accounted for using the equity method	4.4	0.9
Other net financial result	(2.6)	1.3
Earnings before interest and taxes (EBIT)	(5.8)	35.2
Interest income	0.7	0.5
Interest expenses	(16.8)	(10.7)
Earnings before taxes (EBT)	(21.9)	25.0
Income taxes	(2.1)	(9.5)
Result from continuing operations	(24.0)	15.5
Result from discontinued operations	(61.4)	(2.9)
Net income	(85.4)	12.6
thereof attributable to shareholders of Vossloh AG	(87.7)	9.2
thereof attributable to noncontrolling interests	2.3	3.4
Earnings per share
Basic/diluted earnings per share (in €)	(5.30)	0.57
thereof attributable to continuing operations	(1.59)	0.76
thereof attributable to discontinued operations	(3.71)	(0.19)

Balance sheet

Assets (€ mill.)	9/30/2019	12/31/2018	9/30/2018	Equity and liabilities (€ mill.)	9/30/2019	12/31/2018	9/30/2018
Intangible assets	290.9	301.3	280.8	Capital stock	49.8	45.3	45.3
Property, plant and equipment	295.0	268.6	224.9	Additional paid-in capital	190.5	146.5	146.7
Investment property	2.1	2.2	2.5	Retained earnings and net income	215.4	318.7	308.6
Investments in companies accounted for using the equity method	73.0	66.2	65.8	Accumulated other comprehensive income	(1.5)	2.0	1.4
Other noncurrent financial instruments	6.6	7.7	9.3	Equity excluding noncontrolling interests	454.2	512.5	502.0
Other noncurrent assets	3.3	4.3	3.7	Noncontrolling interests	9.0	10.8	18.1
Deferred tax assets	18.5	13.4	20.0	Equity	463.2	523.3	520.1
Noncurrent assets	689.4	663.7	607.0	Pension provisions	22.6	22.1	22.8
Inventories	193.8	174.8	182.6	Other noncurrent provisions	17.5	17.0	20.2
Trade receivables	201.9	212.6	207.5	Noncurrent financial liabilities	284.1	267.9	252.2
Contract assets	13.1	6.9	9.0	Other noncurrent liabilities	15.6	7.4	2.0
Income tax assets	5.6	7.6	5.3	Deferred tax liabilities	7.7	7.1	4.4
Other current financial instruments	27.3	27.9	21.2	Noncurrent liabilities	347.5	321.5	301.6
Other current assets	30.4	18.2	16.1	Other current provisions	43.4	36.4	39.0
Short-term securities	0.0	0.5	0.5	Current financial liabilities	189.4	88.6	88.5
Cash and cash equivalents	36.4	48.7	52.8	Current trade payables	112.0	139.2	119.4
Current assets	508.5	497.2	495.0	Current income tax liabilities	1.3	1.8	5.5
Assets held for sale	218.9	104.5	111.4	Other current liabilities	108.5	84.0	80.2
				Current liabilities	454.6	350.0	332.6
				Liabilities related to assets held for sale	151.5	70.6	59.1
Assets	1,416.8	1,265.4	1,213.4	Equity and liabilities	1,416.8	1,265.4	1,213.4

Assets and liabilities classified as held for sale consist of the Locomotives business unit and one group company in the Customized Modules division (CTM) for which a sale has been contractually agreed.

Reconciliation of EBIT to adjusted EBIT

€ mill.	1-9/2019
EBIT	(5.8)
Core Components	0.9
Customized Modules	30.5
Lifecycle Solutions	3.8
Holding companies	2.5
Adjusted EBIT	31.9

The adjustment encompasses one-time effects arising from the performance program. These are mainly anticipated in the elements related to reducing the number of employees (costs for employee redundancies) and unprofitable/disadvantageous activities. One-time effects totaled €37.7 million in the first nine months of the fiscal year. The amount of €8.3 million is attributed to the element related to reducing the number of employees (primarily provisions for severance payments). The amount of €29.4 million is attributed to the element related to unprofitable/disadvantageous activities (mainly booking effects to do with the sale of the company CTM).

Vossloh Group Key figures (1/2)

			Core Components	Fastening Systems		Tie Technologies
		1-9/2019	1-9/2018	1-9/2019	1-9/2018	1-9/2019	1-9/2018
Sales revenues	€ mill.	244.2	203.3	155.8	155.0	95.6	50.1
EBIT (2019 adjusted)	€ mill.	25.8	24.9
EBIT margin (2019 adjusted)	%	10.6	12.2
Average working capital	€ mill.	89.7	68.7
Average working capital intensity	%	27.6	25.3
Average capital employed	€ mill.	278.0	218.4
ROCE	%	11.9	15.2
Value added	€ mill.	9.3	12.6	12.9	17.5	(3.6)	(4.9)
Orders received	€ mill.	327.5	249.9	180.0	192.3	152.2	59.3
Order backlog (as of 9/30)	€ mill.	320.6	183.2	215.2	137.6	107.1	45.5
Capital expenditure	€ mill.	19.6	8.2	9.7	4.0	9.9	4.2
Depreciation/amortization	€ mill.	(14.5)	(11.9)	(5.8)	(5.1)	(8.7)	(6.8)

21

Vossloh Group Key figures (2/2)

		Customized Modules		Lifecycle Solutions
		1-9/2019	1-9/2018	1-9/2019	1-9/2018
Sales revenues	€ mill.	353.0	356.0	76.8	69.7
EBIT (2019 adjusted)	€ mill.	13.4	20.4	3.7	4.9
EBIT margin (2019 adjusted)	%	3.8	5.7	4.8	7.1
Average working capital	€ mill.	132.8	136.5	14.6	12.4
Average working capital intensity	%	28.2	28.8	14.3	13.4
Average capital employed	€ mill.	453.9	430.0	183.8	137.6
ROCE	%	(5.0)	6.3	(0.1)	4.8
Value added	€ mill.	(42.7)	(3.8)	(10.4)	(2.8)
Orders received	€ mill.	370.4	366.7	78.8	72.6
Order backlog (as of 9/30)	€ mill.	363.0	337.4	14.9	25.0
Capital expenditure	€ mill.	6.1	17.5	8.0	11.2
Depreciation/amortization	€ mill.	(31.7)	(9.8)	(9.8)	(4.5)

Cash flow statement1)

€ mill.	1-9/2019	1-9/2018
Earnings before interest and taxes (EBIT)		35.2
EBIT from discontinued operations	(60.6)	(2.9)
Amortization/depreciation/impairment losses (less write-ups) of noncurrent assets	103.6	28.0
Change in noncurrent provisions	2.8	(1.4)
Gross cash flow	40.0	58.9
Income taxes paid	(6.8)	(11.4)
Change in working capital	(73.0)	(47.6)
Other changes	(1.6)	(10.0)
Cash flow from operating activities	(41.4)	(10.1)
Investments in intangible assets and property, plant and equipment		(35.3)
Investments in companies accounted for using the equity method		0.0
Cash-effective dividends from companies accounted for using the equity method		0.1
Free cash flow		(45.3)

Employees

	Closing date		Average
Employees1	9/30/2019	9/30/2018	1-9/2019	1-9/2018
Core Components	888	789	892	782
Customized Modules	2,351	2,409	2,388	2,403
Lifecycle Solutions	558	517	564	500
Vossloh AG	60	64	63	63
Total	3,857	3,779	3,907	3,748

Price performance, share information and shareholder structure

Information on the Vossloh share
ISIN	DE0007667107
Trading locations	Xetra, Düsseldorf, Frankfurt, Berlin, Hamburg, Hanover, Stuttgart, Munich
Number of outstanding shares on 9/30/2019	17,564,180
Share price (9/30/2019)	€ 37.80
High price/low price January to September 2019	€ 44.85/€ 31.00
Market capitalization (9/30/2019)	€663.9 million
Reuters code	VOSG.DE
Bloomberg code	VOS GR

Shareholder structure in %