STS Group AG

Investor Presentation • Sep 23, 2019

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Investor Presentation STS Group AG

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September 2019

Investor Presentation STS Group AG

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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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Investor Presentation STS Group AG

Megatrends of the automotive industry

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

Megatrend – Emission Reduction

MEGATREND MARKET IMPACT

• − New regulations for emission reduction in Europe (EURO6) and China (CHINA6)
• − Noise reduction (passive acoustics of the vehicle)

WHAT CAN STS DO?

• − Reduce total weight of the vehicle with lightweight solutions, by replacing metal with plastics
• − Improve Aerodynamics of vehicles
• − Noise reduction through acoustic insulation

PRODUCT SOLUTIONS (examples)

• − Entire exterior trim solutions for commercial vehicles (e.g. modules for roof, spoiler, front and side panels)
• − Complete engine cover and outer wheel arches

Megatrend – Alternative Powertrain

MEGATREND MARKET IMPACT

• − Alternative powertrain systems for vehicles
• − Advance of eMobility
• − For passenger cars, as well for commercial vehicles

WHAT CAN STS DO FOR THAT?

• − Lightweight solutions to reduce the total weight of the vehicle (longer range of the vehicle)
• − Development of new components for eVehicles

PRODUCT SOLUTIONS (examples)

• − Component to cover battery systems
• − Lightweight system solutions with integrated acoustic function (e.g. spoiler, rear wall, tailgate)

Megatrend – Digitalization

MEGATREND MARKET IMPACT

• − Autonomous or semi-autonomous driving
• − Platooning in the truck sector
• − Connected driving
• − New autonomous mobility solutions

WHAT CAN STS DO?

• − Development of complex systems, to include radar and camera technologies
• − Higher comfort for truck cabin interior

PRODUCT SOLUTIONS (examples)

• − Spoiler roof for camera systems
• − Interior trim applications with optimized acoustics
• − SMC products is best material for transmittance of radar waves

Megatrend – Transport Growth

MEGATREND MARKET IMPACT

• − Growing e-commerce market
• − Increasing logistic activities through commercial vehicles

WHAT CAN STS DO?

− Extend customer portfolio and global footprint to become a leading system supplier for OEMs

PRODUCT SOLUTIONS (examples)

− Smart and efficient system solutions for commercial vehicles

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STS Group at a glance

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Investor Presentation STS Group AG

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

Successful transformation to global system supplier

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

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What do we do?

Products Passenger Cars

• − Inner and outer acoustic insulation
• − SMC tailgate and fender carrier
• − Engine encapsulation
• − Battery system cover

Products Truck

• − Assembled front and side modules
• − Interior storage systems
• − Inner acoustic trim
• − Engine encapsulation

Products Light Commercial Vehicle

• − Cabin acoustic trim and floor
• − Exterior pillar trim
• − Door guards
• − Engine encapsulation

Diversified global customer portfolio

STS Group is strategic partner for major part of global commercial vehicle OEMs, supplying as well the emerging eVehicle producers. Within the light vehicle sector our main partner is the FCA Group.

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Project life cycle of STS Group

STS Group acts within a market with long product cycles, which implies long-lasting projects once acquired.

• − After RFQ the procurement process can lead up to one year of contracting with the customer
• − After the project award, it can lead up to more than one year until Start of Production (SOP)
• − Projects within the Truck market generally last up to 10 years

Unique selling points of the STS Group

COMBINE TECHNOLOGIES Technological know-how for structural, visual, acoustic and thermal parts

HIGH VERTICAL INTEGRATION

Vertically integrated production from semifinished goods to complete systems

BATCH-SIZE FLEXIBILITY

Flexible organization focused on medium large batch sizes in terms of development and production.

FOOTPRINT Global customer reach through local production

Combine Technologies

STS is able to combine different technologies

• − Acoustic- and thermal-isolation components
• − Injection molding technology
• − Composite component production

and to offer complete systems to the customer.

Global truck market trends towards global system suppliers.

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Vertical Integration

− Resin paste − Glass fiber reinforcement and compression

− Glass fiber − Resins

− Maturation

MOLDING

FINISHING

− Mold design − Prototyping − Process control

− In Mold Coating (IMC)

− Deburring, machining − Painting and gluing

− Assembly

− Quality control

Batch-Size Flexibility

STS Group focuses on medium batch size with a yearly production of up to 100,000 parts per year, what is mostly attractive for SMC compression.

STS is competitive in medium series sizes what is likely to be the future trend of electric vehicles.

Cell production allows lower investments costs and flexible production processes.

Total production costs include unit costs plus tooling production

Cell production with lower investments costs vs. high serial investment costs

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.

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STS Group Strategy

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Investor Presentation 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.

GROWTH IN CHINA MARKET ENTRY USA ADD-ON ACQUISITIONS

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

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

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 Light Weight 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

Business & Financial Highlights H1 2019

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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	First general assembly after IPO
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

Key Financials

in % mEUR /	Q2 2018	Q2 2019	in % var	H1 2018	H1 2019	in % var
Revenues	109.3	98.3	-10 1	218.2	193.8	-11 2
EBITDA	3.5	5.8	+65 7	6.9	10.1	+46 4
EBITDA Margin	3.2%	5.9%	+2 7 pts	3.2%	5.2%	+2 0 pts
Adj. EBITDA	8.4	5.8	-31 0	16.5	10.1	-38 8
Adj. EBITDA Margin	7.7%	5.9%	-1 8 pts	7.6%	5.2%	-2 4 pts
EBIT	0.2	1.1	+450 0	0.2	0.9	+350 0
EBIT Margin	0.2%	1.1%	+0 9 pts	0.1%	0.5%	+0 4 pts
NET Income	-1.1	-1.0	+9 1	-2.8	-2.3	+17 9
EPS (in €)	-0.55	-0.16	+70 9	-1.42	-0.38	+73 2
CAPEX	3.0	3.2	+6 7	5.9	6.3	+6 8
FOCF1)	-6.6	+0.9	+113 6	-11.4	-4.0	+64 9	1) FOCF (= Free Operating Cash Flow) = Op CF - CAPEX - Leasing Cash Out
Cash				30.9 (as of 30.06.)	28.7 (as of 30.06.)	-7 1
NFD2)				33.1 (as of 30.06)	33.4 (as of 30.06.)	+0 6	2) NFD (=Net Financial Debt) = Bank Loans + Third Party Loans + Recourse Factoring - Cash

Decline in revenues and profitability due to weak 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

Revenue decline versus 2018 due to overall weak markets

Comments:

• Market driven revenue decline across all Business Units (BU)
• Quarter-on-quarter revenue growth of +2.9%
• Planned phase-out of significant project at BU Plastics in Q2 2018 with negative topline impact (-4.2 mEUR)
• Positive FX effect of 0.6 mEUR mainly from Mexico (BU Plastics)

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

Adj. EBITDA Margin (in %)

	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

Net income -2.3 mEUR in H1 2019 improved versus prior year

Adj. EBITDA / Net Result Bridge H1 2019 (in mEUR) Net Income (in mEUR)

5.000.000 until May 7, 2018; 6.000.000 from May 8, 2018 on.

Comments:

Net income and EPS still negative in Q2 2019, however slightly improved versus Q2 2018 and Q1 2019

Free Operating Cash Flow improved versus Q2 2018

Comments:

• CAPEX in Q2 with 3.2 mEUR or 3.2% of revenues above prior year (previous year quarter 3.0 mEUR, 2.7%)
• 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

Leverage ratio of 2.2 as per end of Q2 2019 on a very 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 & Capital Market

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Investor Presentation STS Group AG

Guidance for 2019 adjusted to weaker than expected automotive markets

	2019 OLD	2019 NEW
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%)

Automotive market development puts pressure on share

ISIN	DE000A1TNU68
Number of Shares	6,000,000
Market Cap (02/09/19)	31 mEUR
Designated Sponsoring	Hauck & Aufhäuser Privatbankiers AG Mwb fairtrade Wertpapierhandelsbank AG

Share information & shareholder structure Share price since IPO & Analyst Recommendations

Date	Publ.	Target	Rec.
20/08/2019	MainFirst	6.00 €	Neutral
14/08/2019	SMC Research	10.00 €	Speculative Buy
09/08/2019	Kepler Cheuvreux	5.00 €	Reduce
12/07/2019	H&A	7.00 €	Hold
20/05/2019	Quirin Privatbank	6.50 €	Sell

Upcoming conferences and relevant publications in 2019

23 SEPTEMBER 2019	Roadshow, Hamburg
22 OCTOBER 2019	Capital Markets Day, Frankfurt/Main
6 NOVEMBER 2019	Publication Quarterly Statement (call-date Q3)
13 NOVEMBER 2019	Roadshow, Madrid
25-27 NOVEMBER 2019	German Equity Forum 2019, Frankfurt/Main

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.

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

Investor Presentation STS Group AG