STS Group AG

Investor Presentation • Oct 22, 2019

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STS Group AG Capital Markets Day

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Kameha Suite, Frankfurt October 22, 2019

Capital Markets Day - STS Group AG

Personal & third party confidential

Welcome to our first Capital Markets Day!

Capital Markets Day - STS Group AG

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Capital Markets Day STS Group

09:30 a.m.	Opening Andreas Becker, CEO "STS Group AG: Strategy update"
10:00 a.m.	Dr. Ulrich Hauck, CFO "Business Figures and Financial Status"
10:30 a.m.	Q&A Session
10:50 a.m.	Coffee break
11:00 a.m.	Key Note: Sebastian Wolff, TUM "Trends and Challenges in the Commercial Vehicle Industry"
11:30 a.m.	Q&A Session
11:40 a.m.	Eric Morvan, VP Research & Development "Innovation @ STS"
12:10 a.m.	Get-together & Lunch

Who are we?

ANDREAS BECKER, CEO

STS Board Member since 2013. 22 years of industry experience. He has been CEO of the STS Group since its foundation and occupied before several management positions within the Autoneum Group management in Italy as well as the Truck Business Worldwide division.

Term of office: 06/2023

DR. ULRICH HAUCK, CFO

STS Board Member and CFO of the STS Group since April 2019. 20 years of industry experience. Previously he was CFO of the Schaeffler Group, Corporate Senior Vice President at Bayer AG, heading global accounting and controlling of Bayer and Vice President at Rheinmetall.

Term of office: 06/2022

PATRICK OSCHUST, COO

STS Board Member since 2013. 19 years of industry experience. He has been COO of the STS Group since its foundation. He previously held several positions at the German automotive supplier Dräxlmaier, most recently as Managing Director in Germany and Romania.

Term of office: 06/2021

We are the preferred global acoustics and plastics solution provider for transportation systems when it comes to design, comfort and efficiency!

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Capital Markets Day - STS Group AG

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Successful transformation to global system supplier

Long history to become one of the leading global Tier 1 truck suppliers for soft and hard trim. Until 2013 part of Autoneum (former Rieter Group) as Truck Division and Italian Business Unit.

Footprint

STS Group has operations in 4 continents with about 2,500 employees.

STS Group has actually 13 production plants and 4 logistic/service plants.

With the 4 R&D centers in Europe and China STS Group supports their customers already with the development of new products.

Intelligence for interior and exterior excellence

STS designs and provides solutions for a broad variety of interior and exterior systems. So STS is the perfect partner to engineer successful heavy and light commercial vehicles as well as passenger cars.

The product portfolio includes among others:

• − Inner and outer acoustic systems
• − Front and side modules
• − Roof spoiler
• − Storage modules
• − Tailgate
• − Engine encapsulation
• − Cover for Battery systems

Megatrends

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Capital Markets Day - STS Group AG

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Megatrends of the automotive industry

STS Group is well positioned to develop new innovative solutions to changing market conditions. All megatrends are an opportunity for the actual and future STS product portfolio.

STS Group can provide intelligent solutions for all megatrends

STS Solutions

STS Group is well positioned to develop new innovative solutions to changing market conditions. All megatrends are an opportunity for the actual and future STS product portfolio.

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STS Grou p Strategy

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Capital Markets Day - STS Group AG

Roadmap to global preferred system supplier with sustainable profit growth

China as the largest automotive market worldwide, offers high growth potential for STS Group: market share growth, new regulations, eMobility.

USA is an attractive market being the third largest truck market worldwide. Long-nose truck cabins represent higher sales volumes per unit.

GROWTH IN CHINA MARKET ENTRY USA ADD-ON ACQUISITIONS

Continuous market screening for potential targets to realize further growth due to potential strategic add-on acquisitions.

New emission regulations and eMobility trigger need for new product characteristics and solutions.

NEW PRODUCTS COST STRUCTURES EUROPE

Continuous improvement of cost structures in Europe through automatization of processes, operational excellence and improved footprint.

Growth in China

POTENTIAL FOR STS

• − Largest market worldwide
• − Local competitors only small local family businesses
• − Engineering know-how through own R&D on site
• − New emission regulations

OBJECTIVES

• − Double current sales volume in the mid-term
• − Growth in market share with existing customers
• − Expansion of the eMobility business

THE ROAD TO SUCCESS

• − All major truck manufacturers are already STS customers
• − Injection molding technology introduced and third manufacturing site inaugurated in 2019
• − Promising order intake
• − Expansion of product and customer portfolio ongoing

China with substantial order intake in 2019

Intensive sales activities in China in 2019 to acquire additional orders for Truck and eVechicle.

Order intake achieved in China in 2019 translates into significant increase of annual sales volume.

Sales contribution from these new orders in 2020 amounts up to ard. 10 mEUR.

Market entry USA

POTENTIAL FOR STS

• − Third-largest truck market worldwide
• − Long-nose trucks with higher value per vehicle (+120% more revenue per vehicle)
• − No global competitors on site

OBJECTIVES

• − Market entry with composite technology
• − Better utilization of Mexican plant
• − Invest in US manufacturing site to be close to the customers
• − In the mid-term approx. 20-25 mEUR sales

THE ROAD TO SUCCESS

• − Projects for American truck OEM acquired
• − Further projects under negotiation to reach volume for a Green / Brownfield plant
• − Expansion of product and customer portfolio ongoing

New Products

POTENTIAL FOR STS

• − eMobility and emission regulation trigger need for new products
• − Market trends towards global system suppliers
• − Further demand for lightweight solutions

OBJECTIVES

• − Supplier for emerging eMobility market
• − Innovative lightweight solution provider
• − Strengthen positioning as preferred system supplier for commercial vehicles

THE ROAD TO SUCCESS

• − Tech-Days with several customers
• − Bundling of group-wide R&D activities
• − License agreement with AMA composites
• − First projects for battery covers awarded

eVehicle development within the next years

• − Total share of HEV (Hybrid Electric Vehicles) and BEV (Battery Electrit Vehicles) increases up to ard. 67% in 2025
• − Total production of up to 13.1 Mio. electric vehicle expected in 2025

• − Total share of HEV and BEV increases up to ard. 60% in 2025
• − Total production of up to 18.8 Mio. electric vehicle expected in 2025

• − Total share of HEV and BEV increases up to ard. 62% in 2025
• − Total production of up to 3.8 Mio. electric vehicle expected in 2025

Significant sales potential with battery covers

1) Increase of hybrid- and battery electric vehicle production until 2025, leads to further sales volume from battery covers.

STS solution for battery covers is based on SMC technology combined with aluminum or injection molding compound (IMC).

• − Market share of Battery Covers with SMC technology ard. 40%
• − Potential market volume of SMC Battery Covers up to 200 mEUR
• − STS sales share in 2025 of up to 30% in Europe

• − Market share of Battery Covers with SMC technology ard. 50%
• − Potential market volume of SMC Battery Covers up to 240 mEUR
• − STS sales share of up to 20%, with an upside due to growing relevance for EMC2) shielding in China

¹⁾ all values based on IHS Markit Data and Management assumptions 2) Electro Magnetic Compatibility

Achievement of several milestones in line with STS strategy

February	New business for BU Acoustics passenger car business awarded
April	Third Chinese plant opened in Shiyan with successful SOP
May	Major order for innovative long-nose trucks in China
June	License agreement for innovative lightweight solutions
July	Two orders received for electric vehicles battery covers from Chinese OEMs
August	Third order received for electric vehicles battery covers from Chinese OEMs
October	Hybrid door as an innovative lightweight solution for a Chinese BEV

STS Group an attractive asset for today and tomorrow

Investment in STS Group with attractive value proposition:

• − leading market positions,
• − well positioned with regard to relevant megatrends,
• − high technical expertise,
• − currently low valuation.

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Financial Highlights H1 2019

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2019 is challenging due to weak automotive and truck markets

Comments:

• Revenues decreased by 11.2% in H1 2019
  • − Weak passenger car market in Europe, especially in Italy
  • − Planned end of a major order within BU Plastics
  • − Significant decline in Chinese automotive market
• Adj. EBITDA impacted by:
  • − Significantly lower volumes
  • − Overall improved efficiency in plants
  • − Profitability of Polish plant improved, however still negative
  • − Ramp up costs at the new production location in Shiyan

Adj. EBITDA (in mEUR) Adj. EBITDA Margin (in %) Adj. EBITDA Q2 2019 below prior year, but improved versus Q1 2019

	Q2 18	Q2 19	H1 18	H1 19
Acoustics	0.9	2.6	1.5	1.2
Plastics	13.2	9.6	10.4	8.0
China	16.3	16.7	17.2	13.1
Materials	3.6	4.8	6.1	4.3
STS Group	7.7	5.9	7.6	5.2

Comments:

• EBITDA in Q2 2019 improved over prior year quarter
• Adj. EBITDA in Q2 2019 below prior year quarter, however up on a quarter-on-quarter basis
• Positive IFRS 16 impact of ard. 1.3 mEUR in Q2 2019 (H1 2019: 2.3 mEUR), thereof 0.4 mEUR each for BU Acoustics, Plastics and China

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Free Operating Cash Flow improved versus Q2 2018

Comments:

• CAPEX in H1 amounted to ard. 3% of sales
• Free Operating Cash Flow in Q2 2019 (+0.9 mEUR) significantly improved versus prior year (-6.6 mEUR) mainly due to positive working capital development in Q2 2019

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Several cash flow optimization measures applied

EARNINGS

Measures with short- and midterm impact:

• Optimizing operational performance within BU Acoustics
• Review footprint Europe ongoing
• Profitable growth in China

Focus on CAPEX to enhance efficiency or accommodate new orders

TRADE WORKING CAPITAL

Optimize Trade Working Capital

Improving cash flow with working capital optimization

Leverage ratio of 2.2 as per end of Q2 2019 on a solid level

Net financial debt and leverage (in mEUR / multiple)

Financial Debt (in mEUR)

Comments:

• Net Financial Debt 33.4 mEUR as of June 30, 2019
• Excluding recourse factoring liabilities of 38.1 mEUR, STS has positive net liquidity position of ard. 4.7 mEUR
• Leverage ratio as per June 30, 2019 of 2.2 is still very solid

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Guidance for 2019 adjusted due to weaker than expected automotive markets

	2019 OLD (February 27, 2019)	2019 NEW (August 2, 2019)
MARKET	Market environment in the automotive industry will continue to be challenging	Reduced expectations for automotive markets in H2 2019
REVENUES	≈ 400 mEUR (2018: 401 mEUR)	Reduction between 4.5-9.5% compared to previous year (2018: 401 mEUR)
EBITDA	Adj. EBITDA: ≈ 23.7 mEUR (2018: 23.7 mEUR) No adjustments planned EBITDA: ≈ 23.7 mEUR (2018: 11.9 mEUR)	Adj. EBITDA margin between 4.6-5.3% (2018: 5.9%)

Thank you for your attention!

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Contact us

Stefan Hummel Head of Investor Relations ir@sts.group +49 81 12 44 94 12

Capital Markets Day - STS Group AG

Disclaimer

This presentation may contain forward-looking statements that are subject to risks and uncertainties, including those pertaining to the anticipated benefits to be realized from the proposals described herein. Forward-looking statements may include, in particular, statements about future events, future financial performance, plans, strategies, expectations, prospects, competitive environment, regulation and supply and demand. STS Group AG has based these forward-looking statements on its current views and expectations and on certain assumptions of which many are beyond STS Group AG's control. Actual financial performance could differ materially from that projected in forward-looking statements due to the inherent uncertainty of estimates, forecasts and projections, and financial performance may be better or worse than anticipated. Given these uncertainties, readers should not put undue reliance on any forward-looking statements. The information contained in this presentation is subject to change without notice and STS Group AG does not undertake any duty to update the forward-looking statements, and the estimates and assumptions associated with them, except to the extent required by applicable laws and regulations.

This presentation includes references to non-IFRS financial measures, including, but not limited to: FOCF, EBITDA, Adjusted EBITDA, EBITDA Margin, Adjusted EBITDA Margin, EBIT, EBIT margin, capital expenditure as percentage of revenue, other operating income, net financial debt, and net working capital. We have provided these measures and other information in this presentation because we believe they provide investors with additional information to assess our performance. Our use of these supplemental financial measures may vary from others in our industry and should not be considered in isolation or as an alternative to our results as reported under IFRS.

Due to rounding, numbers presented throughout this and other documents may not add up precisely to the totals provided and percentages may not precisely reflect the absolute figures.