GEA Group AG

Earnings Release • May 9, 2018

Quarterly Statement

Q1 2018 January 1 to March 31, 2018

GEA announces figures for the first quarter

Thanks to robust growth in small and mid-sized orders, GEA's order intake in the first quarter of 2018 almost matched the level of the previous year. Although no orders were posted with a volume in excess of EUR 15 million, order intake amounted to EUR 1,103 million. In the same period GEA increased its revenue to EUR 1,039 million. Organic growth, adjusted for exchange rate and acquisition effects, stood at 4.5 percent. While the Business Area (BA) Equipment even recorded double-digit organic growth, the figure for the Business Area Solutions remained at the previous year's level. Operating EBITDA declined to almost EUR 67 million.

"As announced at the beginning of April with the preliminary figures for the first quarter, GEA is still operating in a challenging environment. As a result, we posted currency-related costs and disproportionate growth in revenue from our lower-margin product groups. Likewise, there was a weak result in the US and a lower gross margin especially in the Business Area Solutions," stated Jürg Oleas, CEO of GEA, in his assessment of the quarterly results.

IFRS key figures¹ of GEA

(EUR million)	Q1 2018	Q1 2017	Change in %
Results of operations
Order intake	1,102.6	1,136.0	–2.9
Revenue	1,039.4	1,003.9	3.5
Order backlog	2,401.0	2,388.9	0.5
Operating EBITDA2	66.6	96.4	–31.0
as % of revenue	6.4	9.6	–
Operating EBIT2	43.8	76.3	–42.7
as % of revenue	4.2	7.6	–
EBIT	23.5	63.6	–63.0
Net assets
Working capital intensity in % (average of the last 12 months)	15.6	15.4	–
Net liquidity (+)/Net debt (-)	–162.9	718.2	–
Financial position
Operating cash flow driver margin in %3	9.1	8.0	–
ROCE in % (goodwill adjusted)4	13.6	16.5	–
Full-time equivalents (reporting date)	18,073	17,035	6.1
GEA Shares
Earnings per share (EUR)	0.02	0.29	–93.7

1) The key figures for the constant exchange rates are presented on page 5 of the quartely statement.

2) Before effects of purchase price allocations and adjustments (see page 5)

3) Operating cash flow driver = operating EBITDA – capital expenditure + adjustment of capital expenditure in strategic projects – change in working capital (average of the last 12 months) 4) Capital employed excluding goodwill from the acquisition of the former GEA AG by former Metallgesellschaft AG in 1999 (average of the last 12 months)

Report on Economic Position

Course of business

Order intake

Order intake (EUR million)	Q1 2018	Q1 2017	Change in %
BA Equipment	701.4	621.7	12.8
BA Solutions	462.0	564.1	–18.1
Consolidation/others	–60.8	–49.8	–22.1
GEA	1,102.6	1,136.0	–2.9

• Order intake in the first quarter, adjusted for exchange rate and acquisition effects, 3.8 percent down on the previous year
• Robust growth in basic business (orders below EUR 1 million)
• Negative currency translation effects of almost EUR 60 million
• Business Area Equipment records biggest ever quarterly figure for order intake, and double-digit organic growth
• By contrast, Business Area Solutions records significant drop in growth, mainly as a result of a lack of major orders in excess of EUR 15 million (in the previous year, there were two orders with a combined order volume of EUR 50 million), in general, the situation with major orders is more volatile than basic business

Order intake1 GEA (last 12 months)	Change Q1/2018 to Q1/2017	Share2 of order intake in %
PGs Food Processing & Packaging; Pasta, Extrusion & Milling		10
PGs Separation, Homogenizers, Flow Components, Compression		25
PG Milking Dairy Farming		15
APC Dairy		10
APC Beverage		10
APC Food		10
APC Utilities		10
APC Pharma		5
APC Chemical		5
GEA		100

5 percentage points 1 to 5 percentage points 1 to –1 percentage points –1 to –5 percentage points > –5 percentage points

1) external business only; PG = Product Group, APC = Application Center

2) split rounded to nearest 5%

Revenue

Revenue (EUR million)	Q1 2018	Q1 2017	Change in %
BA Equipment	592.2	531.6	11.4
BA Solutions	504.0	520.7	–3.2
Consolidation/others	–56.8	–48.4	–17.3
GEA	1,039.4	1,003.9	3.5

• Revenue in the first quarter, adjusted for exchange rate and acquisition effects, grew by around 4.5 percent
• Negative currency translation effects of over EUR 50 million
• Business Area Equipment with double-digit adjusted revenue growth and biggest figure ever recorded for revenue in a first quarter
• Business Area Solutions hampered in the period under review by decline in revenue at the Application Center Dairy

Revenue1 GEA (last 12 months)	Change Q1/2018 to Q1/2017	Share2 of revenue in %
PGs Food Processing & Packaging; Pasta, Extrusion & Milling		10
PGs Separation, Homogenizers, Flow Components, Compression		25
PG Milking Dairy Farming		15
APC Dairy		15
APC Beverage		10
APC Food		10
APC Utilities		10
APC Pharma		5
APC Chemical		5
GEA		100

5 percentage points 1 to 5 percentage points 1 to –1 percentage points –1 to –5 percentage points > –5 percentage points 1) external business only; PG = Product Group, APC = Application Center 2) split rounded to nearest 5%

Revenue by regions GEA (last 12 months)	Change Q1/2018 to Q1/2017	Share of revenue in %
Asia Pacific		22
DACH & Eastern Europe		21
Western Europe, Middle East & Africa		19
North- and Central Europe		13
Latin America		7
North America		18
GEA		100

GEA Q1 2018

Results of operations

• Operating EBITDA well under previous year, mainly in Business Area Solutions
• Business Area Equipment: positive volume growth accompanied by disproportionate growth in revenue from lower-margin product groups, and a weak result in the USA
• Business Area Solutions: besides a reduction of the gross margin weak earnings performance by American companies and challenging economic environment especially in the Application Center Dairy

Operating EBITDA/operating EBITDA margin* (EUR million)	Q1 2018	Q1 2017	Change in %
BA Equipment	66.2	69.3	–4.6
as % of revenue	11.2	13.0	–
BA Solutions	0.0	23.6	–
as % of revenue	0.0	4.5	–
Consolidation/others	0.4	3.5	–89.6
GEA	66.6	96.4	–31.0
as % of revenue	6.4	9.6	–

*) Before effects of purchase price allocations and adjustments (see page 5)

Reconciliation of operating EBITDA to operating EBIT (EUR million)	Q1 2018	Q1 2017	Change in %
Operating EBITDA*	66.6	96.4	–31.0
Realization of step-up amounts on inventories	–	–0.4	–
Adjustments	–9.2	–5.1	–
EBITDA	57.3	90.9	–36.9
Depreciation of impairment losses on property, plant, and equipment, and investment property, and amortization of and impairment losses on intangible assets and goodwill, as reported in the statement of changes in non-current assets	–33.8	–27.3	–
EBIT	23.5	63.6	–63.0
Depreciation and amortization on capitalization of purchase price allocation	11.0	7.2	–
Realization of step-up amounts on inventories	–	0.4	–
Adjustments	9.3	5.1	–
Operating EBIT*	43.8	76.3	–42.7

*) Before effects of purchase price allocations and adjustments (see page 5)

Cash flow drivers

Operating cash flow driver/operating cash flow driver margin (EUR million)	03/31/2018
Operating EBITDA (last 12 months)	533.7
Capital expenditure on property, plant and equipment (last 12 months)	–118.0
Adjustment of capital expenditure in strategic projects (last 12 months)	29.4
Change in working capital (average of the last 12 months)	–21.6
Operating cash flow driver	423.5
as % of revenue (last 12 months)	9.1

Düsseldorf, May 4, 2018

Financial information

In fiscal year 2016, the definition of the key indicators for the operating result as used by the management for controlling purposes has been elaborated in the context of the guidelines on alternative performance measures published by the European Securities and Markets Authority (ESMA) as follows: Thus, as in previous years, the figures for operating EBITDA and operating EBIT will be adjusted for items which, in the opinion of the management, do not reflect GEA's financial achievements in the period under review. This relates, on the one hand, to adjustments for purchase price allocation effects that were determined for all significant past acquisitions, and, on the other hand, to the adjustment of expenses for strategy projects. These include restructuring costs, expenses for external consultants, outlay on scheduled and completed company acquisitions, together with other material expenses and internal costs directly attributable to the projects. The figures in the reporting period were adjusted to take account of the following projects:

• "Restructuring/Footprint" measures to optimize the production network, including ongoing expenses in respect of the "Fit for 2020" program
• "IT Transformation" to standardize and outsource the IT platform as the basis for digital transformation, and to roll out a uniform ERP system
• "Steering Systems" to align the financial information and management systems to the functional OneGEA organization

On this basis, operating EBITDA in the first three months of the financial year was adjusted for expenses totaling EUR 9.2 million (previous year: EUR 5.1 million). Of these expenses, EUR 3.5 million was accounted for by "Restructuring/Footprint" (previous year: EUR 4.2 million for ongoing expenses for "Fit for 2020"). In the period under review, the "IT Transformation" and "Steering Systems" projects gave rise to expenditures of EUR 1.0 million and EUR 4.1 million respectively (previous year: EUR 0.0 million and EUR 0.2 million respectively). No expenses in connection with company acquisitions were recorded during the first quarter (previous year: EUR 0.1 million). As in the previous year, other expenditure on strategy projects amounting to EUR 0.6 million was attributable to other projects.

Outlook 2018

The outlook for 2018 assumes that exchange rates will remain constant against 2017, and takes account of the acquisitions of Pavan Group and VIPOLL. The key indicators developed as follows over the first quarter of 2018:

	reported	constant exchange rates against (2017)
Revenue (EUR million)	1,039.4	1,090.5
Growth in revenue (in %)	+3.5	+8.6
Operating EBITDA margin (in %)	6.4	6.0
Operating cash flow driver margin* (in %)	9.1	8.7

*) last 12 months

GEA Q1 2018

Effects of the switch to the new IFRS 15 and IFRS 9 standards

GEA will initially apply IFRS 15 and IFRS 9 for the fiscal year beginning January 1, 2018, using the "modified retrospective" method.

Application of IFRS 15, "Revenue from Contracts with Customers"

• The new standard IFRS 15 pools the previous revenue recognition requirements and establishes a single revenue recognition model
• Based on analyses from a Group-wide project, the effects of applying IFRS 15 were determined and an initial application in the amount of EUR 3.4 million was recognized in retained earnings
• The ongoing application of IFRS 15 will also result in additional revenues in Q1 2018 in the amount of EUR 14.8 million, mainly through the change from over time revenue recognition to point in time revenue recognition

Application of IFRS 9, "Financial Instruments"

• The new standard IFRS 9 replaces the previous regulations of IAS 39
• Based on analyses from a Group-wide project, the effects of applying IFRS 9 were determined and an initial application in the amount of EUR 1.0 million was recognized in retained earnings
• The first-time adoption effect shows the impact of applying the new impairment model as well as the impact of applying the new rules of classification and measurement

Consolidated Balance Sheet as of March 31, 2018

Assets (EUR thousand)	03/31/2018	12/31/2017	Change in %
Property, plant and equipment	494,276	501,448	–1.4
Investment property	2,397	2,415	–0.7
Goodwill	1,726,136	1,725,808	0.0
Other intangible assets	528,300	539,844	–2.1
Equity-accounted investments	15,661	14,414	8.7
Other non-current financial assets	62,070	38,723	60.3
Deferred taxes	424,447	411,290	3.2
Non-current assets	3,253,287	3,233,942	0.6
Inventories	751,039	659,580	13.9
Trade receivables	1,276,912	1,391,993	–8.3
Income tax receivables	36,670	30,738	19.3
Other current financial assets	221,584	180,642	22.7
Cash and cash equivalents	223,804	250,507	–10.7
Current assets	2,510,009	2,513,460	–0.1
Total assets	5,763,296	5,747,402	0.3

Equity and liabilities			Change
(EUR thousand)	03/31/2018	12/31/2017	in %
Issued capital	487,927	489,372	–0.3
Capital reserve	1,217,861	1,217,861	–
Retained earnings	740,085	756,923	–2.2
Accumulated other comprehensive income	13,894	38,247	–63.7
Non-controlling interests	1,252	1,191	5.1
Equity	2,461,019	2,503,594	–1.7
Non-current provisions	166,341	152,531	9.1
Non-current employee benefit obligations	786,286	794,716	–1.1
Non-current financial liabilities	262,559	6,008	> 100
Other non-current liabilities	32,295	33,041	–2.3
Deferred taxes	174,075	171,170	1.7
Non-current liabilities	1,421,556	1,157,466	22.8
Current provisions	130,534	127,920	2.0
Current employee benefit obligations	137,085	147,071	–6.8
Current financial liabilities	135,768	256,809	–47.1
Trade payables	638,645	736,906	–13.3
Income tax liabilities	27,883	28,489	–2.1
Other current liabilities	810,806	789,147	2.7
Current liabilities	1,880,721	2,086,342	–9.9
Total equity and liabilities	5,763,296	5,747,402	0.3

GEA Q1 2018

Consolidated Income Statement

for the period January 1 to March 31, 2018

(EUR thousand)	Q1 2018	Q1 2017	Change in %
Revenue	1,039,363	1,003,913	3.5
Cost of sales	753,196	686,513	9.7
Gross margin	286,167	317,400	–9.8
Selling expenses	125,641	135,485	–7.3
Research and development expenses	16,259	15,269	6.5
General and administrative expenses	125,756	111,001	13.3
Other income	135,284	77,759	74.0
Other expenses	131,050	70,391	86.2
Share of profit or loss of equity-accounted investments	511	559	–8.6
Other financial income	275	–	–
Earnings before interest and tax (EBIT)	23,531	63,572	–63.0
Interest income	1,033	2,381	–56.6
Interest expense	12,858	5,495	> 100
Profit before tax from continuing operations	11,706	60,458	–80.6
Income taxes	2,458	13,301	–81.5
Profit after tax from continuing operations	9,248	47,157	–80.4
Profit or loss after tax from discontinued operations	–5,874	8,196	–
Profit for the period	3,374	55,353	–93.9
thereof attributable to shareholders of GEA Group AG	3,314	55,348	–94.0
thereof attributable to non-controlling interests	60	5	> 100

(EUR)	Q1 2018	Q1 2017	Change in %
Basic and diluted earnings per share from continuing operations	0.05	0.25	–79.3
Basic and diluted earnings per share from discontinued operations	–0.03	0.04	–
Basic and diluted earnings per share	0.02	0.29	–93.6
Weighted average number of ordinary shares used to calculate basic and diluted earnings per share (million)	180.6	192.3	–6.1

Consolidated Cash Flow Statement for the period January 1 to March 31, 2018

(EUR thousand)	Q1 2018	Q1 2017
Profit for the period	3,374	55,353
plus income taxes	2,458	13,301
minus profit or loss after tax from discontinued operations	5,874	–8,196
Profit before tax from continuing operations	11,706	60,458
Net interest income	11,825	3,114
Earnings before interest and tax (EBIT)	23,531	63,572
Depreciation, amortization, impairment losses, and reversal of impairment losses on non-current assets	33,794	27,285
Other non-cash income and expenses	1,554	2,173
Employee benefit obligations from defined benefit pension plans	–10,293	–10,336
Change in provisions and other employee benefit obligations	–6,956	–33,837
Losses and disposal of non-current assets	–261	–83
Change in inventories including unbilled construction contracts*	–90,565	–43,816
Change in trade receivables	80,592	93,969
Change in trade payables	–85,641	–60,005
Change in other operating assets and liabilities	–29,849	–39,933
Tax payments	–17,666	–15,875
Cash flow from operating activities of continued operations	–101,760	–16,886
Cash flow from operating activities of discontinued operations	–1,161	–1,066
Cash flow from operating activities	–102,921	–17,952
Proceeds from disposal of non-current assets	227	2,389
Payments to acquire property, plant and equipment, and intangible assets	–19,043	–19,585
Payments from non-current financial assets	–	–24
Interest income	679	859
Dividend income	61	559
Payments to acquire subsidiaries and other businesses	–23,434	–348
Cash flow from investing activities of continued operations	–41,510	–16,150
Cash flow from investing activities of discontinued operations	–55	–342
Cash flow from investing activities	–41,565	–16,492
Payments for acquisition of treasury shares	–20,953	–32,268
Payments from finance leases	–1,003	–989
Proceeds from finance loans	–	5,902
Proceeds from bond issue	249,500	–
Repayments of finance loans	–107,015	–
Interest payments	–729	–723
Cash flow from financing activities of continued operations	119,800	–28,078
Cash flow from financing activities of discontinued operations	–54	–23
Cash flow from financing activities	119,746	–28,101
Effect of exchange rate changes on cash and cash equivalents	–1,262	721
Change in unrestricted cash and cash equivalents	–26,002	–61,824
Unrestricted cash and cash equivalents at beginning of period	249,493	928,004
Unrestricted cash and cash equivalents at end of period	223,491	866,180
Restricted cash and cash equivalents	313	865
Cash and cash equivalents total	223,804	867,045

*) Including advanced payments received

Consolidated Statement of Changes in Equity as of March 31, 2018

				Accumulated other comprehensive income
(EUR thousand)	Issued capital	Capital reserves	Retained earnings	Translation of foreign operations	Result of available for-sale financial assets	Result of cash flow hedges	Equity attributable to shareholders of GEA Group AG	Non controlling interests	Total
Balance at Jan. 1, 2017 (192,495,476 shares)	520,376	1,217,861	1,067,812	189,962	–467	–518	2,995,026	578	2,995,604
Profit for the period	–	–	55,348	–	–	–	55,348	5	55,353
Other comprehensive income	–	–	1,502	–6,155	–66	237	–4,482	–	–4,482
Total comprehensive income	–	–	56,850	–6,155	–66	237	50,866	5	50,871
Purchase of treasury shares	–2,279	–	–39,719	–	–	–	–41,998	–	–41,998
Change in other non-controlling interests	–	–	–	–	–	–	–	–9	–9
Balance at March 31, 2017 (191,406,028 shares)	518,097	1,217,861	1,084,943	183,807	–533	–281	3,003,894	574	3,004,468
Balance at Jan. 1, 2018 (181,026,744 shares)	489,372	1,217,861	756,923	38,749	–502	–	2,502,403	1,191	2,503,594
Adjustments IFRS 9	–	–	–1,032	–	–	–	–1,032	–	–1,032
Adjustments IFRS 15	–	–	–3,390	–	–	–	–3,390	–	–3,390
Adjusted balance at Jan. 1, 2018	489,372	1,217,861	752,501	38,749	–502	–	2,497,981	1,191	2,499,172
Profit for the period	–	–	3,314	–	–	–	3,314	60	3,374
Other comprehensive income	–	–	3,778	–24,855	502	–	–20,575	–	–20,575
Total comprehensive income	–	–	7,092	–24,855	502	–	–17,261	60	–17,201
Purchase of treasury shares	–1,445	–	–19,508	–	–	–	–20,953	–	–20,953
Change in other non-controlling interests	–	–	–	–	–	–	–	1	1
Balance at March 31, 2018 (180,492,172 shares)	487,927	1,217,861	740,085	13,894	–	–	2,459,767	1,252	2,461,019

Financial Calendar

July 30, 2018 Half-yearly Financial Report for the period to June 30, 2018
October 29, 2018 Quarterly Statement for the period to September 30, 2018

The GEA Stock: Key data

WKN 660 200
ISIN DE0006602006
Reuters code G1AG.DE
Bloomberg code G1A.GR
Xetra G1A.DE

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Imprint

	Published by: GEA Group Aktiengesellschaft
	Peter-Müller-Straße 12
	40468 Düsseldorf
	Germany
	gea.com
Layout: Christiane Luhmann
	luhmann & friends

This quarterly statement includes forward-looking statements on GEA Group Aktiengesellschaft, its subsidiaries and associates, and on the economic and political conditions that may influence the business performance of GEA. All these statements are based on assumptions made by the Executive Board using information available to it at the time. Should these assumptions prove to be wholly or partly incorrect, or should further risks arise, actual business performance may differ from that expected. The Executive Board therefore cannot assume any liability for the statements made.

Note regarding the rounding of figures

Due to the commercial rounding of figures and percentages, small deviations may occur.

Note to the quarterly statement

This quarterly statement is the English translation of the original German version; in case of deviations between these two, the German version prevails.

We live our values.

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GEA is a global technology company with multi-billion euro sales operations in more than 50 countries. Founded in 1881 the company is one of the largest providers of innovative equipment and process technology. GEA is listed in the STOXX® Europe 600 Index. In addition, the company is included in selected MSCI Global Sustainability Indexes.

GEA Group Aktiengesellschaft

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