Investor Presentation • Mar 1, 2021
Investor Presentation
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March 2021 Vitesco Technologies
Public
The presentation contains forward-looking statements and information on the business development of Continental AG's subsidiary group, Vitesco Technologies. These statements and information may be spoken or written and can be recognized by terms such as "expects", "anticipates", "intends", "plans", "believes", "seeks", "estimates", "will" or words with similar meaning. These statements and information are based on assumptions relating to the companies' business and operations and the development of the economies in the countries in which the company is activ e. Vitesco Technologies has made such forward-looking statements on the basis of the information available to it and assumptions it believes to be reasonable. The forward-looking statements and information may involve risks and uncertainties, and actual results may differ materially from those forecasts. If any of these or other risks or uncertainties materialize, or if the assumptions underlying any of these statements prove incorrec t, the actual results may significantly differ from those expressed or implied by such forward looking statements and information. These forward-looking statements take into account the potential impact of the coronavirus on production volumes, as can be determined to date. The forward-looking statements do not include possible further disruptions to production and the supply chain as well as demand as a result of the continuing spread of the coronavirus or a resulting negative impact on economic fundamentals and consumer confidence. Such disruptions, their impact and/or the impact of a further economic downturn cannot be gauged at the current time. Neither Continental AG, nor Vitesco Technologies will update the following presentation, particularly not the forward-looking statements. The presentation is valid on the date of publication only.
The financial information and financial data included in this presentation are prepared in accordance with IFRS. It is antici pated that, following its spin-off from Continental AG, Vitesco Technologies will report its financial results using four segments, comprised of Electrification Technology, Electronic Controls, Sensing & Actuation and Contract M anufacturing. Past events or performance should not be taken as a guarantee or indication of future events or performance. This presentation contains certain supplemental financial or operative measures that are not calculated in accordance with IFRS or German GAAP (HGB) and are therefore considered as non-IFRS measures. Vitesco Technologies believes that such non-IFRS measures used, when considered in conjunction with (but not in lieu of) other measures that are com puted in accordance with IFRS, enhance the understanding of its business, results of operations, financial position or cash flows. There are, however, material limitati ons associated with the use of non-IFRS measures including (without limitation) the limitations inherent in the determination of relevant adjustments. The non-IFRS measures used by Vitesco Technologies may differ from, and not be comparable to, similarly-titled measures used by other companies, including Continental AG. Rounding differences may occur.
The term "vehicles" as used in this presentation refers to "light vehicles <6 metric tons", unless stated otherwise.
To the extent available and if so denoted, the industry and market data contained in this presentation has been derived from official or third-party sources. All information not separately sourced is derived from Vitesco Technologies' data and estimates, some of which are in turn derived from multiple sources such as internal surveys, customer feedback as well as a commissioned study from Roland Berger "Powertrain Market", December 2020 and other third-party sources, including data from IHS Markit or market experts. Third party industry publications, studies and surveys generally state that the data contained therein have been obtained from sources believed to be reliable, but that there is no guarantee, representation or warranty (either expressly or implied) of the accu racy or completeness of such data or changes to such data following publication thereof. While Continental AG and Vitesco Technologies believe that each of these publications, studies and surveys has been prepared by a r eputable source, neither company has independently verified the data contained therein. In addition, certain of the industry and market data contained in this presentation are derived from Vitesco Technologies intern al research and estimates based on the knowledge and experience of its management in the markets in which it operates. Continental AG and Vitesco Technologies believe that such research and estimates are reasonable and rel iable, but their underlying methodology and assumptions have not been verified by any independent source for accuracy or completeness and are subject to change without notice. Market data from third party source s speak as of their dates and may therefore not take into account the impact of disruptions to production and the supply chain as well as demand as a result of the continuing spread of the coronavirus or a resulting nega tive impact on economic fundamentals and consumer confidence. Beside the already experienced volatility in the automotive markets, such disruptions and their impact as well as the impact of a further economic downturn on cannot be gauged at the current time. Accordingly, undue reliance should not be placed on any of the industry or market data contained in this presentation.
This presentation has been prepared for information purposes only. It does not constitute or form part of any offer or invita tion to sell or issue, or any solicitation of any offer to purchase or subscribe for, any securities of Continental AG, Vitesco Technologies Group Aktiengesellschaft or any company of Continental Corporation, including Vitesco Technologies, in any jurisdiction. Neither this presentation, no r any part of it, nor the fact of its distribution, shall form the basis of, or be relied on in connection with, any contractual commitment or investment decision in relation to the securities of Continental AG, Vitesco Technologies Group Aktiengesellschaft or any company of Continental Corporation, including Vitesco Technologies, in any jurisdiction, nor does it constitute a recommendation regarding any such securities.
This document does not contain or constitute an offer of, or the solicitation of an offer to buy or subscribe for, securities to any person in Australia, Canada, Japan, or the United States of America or in any jurisdiction to whom or in which such offer or solicitation is unlawful. Any securities referred to herein may not be offered or sold in the United States absent registration under the U.S. Securities Act of 1933, as amended (the "Securities Act") or another exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. Sub ject to certain exceptions, any securities referred to herein may not be offered or sold in Australia, Canada or Japan or to, or for the account or benefit of, any national, resident or citizen of Australia, Canada or Japan. The offer and sale of any securities referred to herein has not been and will not be registered under the Securities Act or under the applicable securities laws of Australia, Canada or Japan. There will be no public offer of securities in the United States of America.
of propulsion solutions to make driving more efficient, cleaner and convenient
with >10 years of field experience and a portfolio covering all major current and future scenarios
with strong DNA in electronics, software and mechatronics
in electronic control systems, sensing technologies and actuators
Source: Company information. Notes: 1 The Contract Manufacturing business unit comprises legacy manufacturing of Continental AG products in Vitesco Technologies locations as a remainder of the carve-out. Substantial majority of CM phase-out planned to be completed by 2025.
| 1 | We are convinced that the future is electric. | ~60% of new light vehicles worldwide will be electrified by 20301,2 |
|---|---|---|
| 2 | We are well positioned across all business units. | >€13bn electrification backlog across all business units3 |
| 3 | We have a clear vision and a resolute plan how to get there. | Mid-term phase-out of non-core ICE technologies and Contract Manufacturing |
| 4 | We self-fund our profitable growth. | >5x electrification sales increase targeted mid-term4 |
Source: Company information. Notes: 1 Roland Berger, "Powertrain Market Industry Study", 12/2020. 2 Electrification share represents expected. 3 Order backlog defined as sum of cumulative order intake not yet booked as sales as per end of FY2020. 4 Refers to core technologies sales across all business units with 2020 as base year.
Source: 1 Roland Berger, "Powertrain Market" Study, 12/2020; 2 company information. Notes: Electrification share represents expected outlook on propulsion shares in global light vehicle production by units. Power (in kW) corresponds to typical peak electric drive power of the indicated propulsion types.
Source: 1 Company estimate based on expert studies prepared in cooperation with Vitesco Technologies. Reflects the CPV opportunity for the portfolio offering in 2018. 2 Roland Berger, "Powertrain Market" Study, 12/2020. Reflects the CPV opportunity for the current portfolio offering. Notes: ICE: Internal Combustion Engine. CPV: Content Per Vehicle.
Source: 1 Company information. 2 IHS Markit, Alternative Propulsion Forecast, 10/2020. Notes: 3Sales include non-light vehicle applications like commercial vehicles and two-wheelers. 4 Excluding non-core ICE technologies and Contract Manufacturing.
>€13 bn electrification order backlog across all business units1
>5x electrification sales increase targeted mid-term2
~7,100 engineers, thereof ~5,300 electronics, software and systems3
Source: Company information. Notes: 1Order backlog defined as sum of cumulative order intake not yet booked as sales as per end of FY2020. 2Refers to core technologies sales across all business units with 2020 as base year. 3 Number of engineers as per end of FY2020.
Source: Company information. Notes: ICE: Internal Combustion Engine. Phase-out timeline may vary depending on strategic decisions and customer demand. 1 Substantial majority of CM phase-out planned to be completed by 2025. 2 Around 1/3 of non-core ICE technologies phase-out planned to be completed mid-term. 3 Excluding non-core ICE technologies and Contract Manufacturing.
Contract Manufacturing with Continental1
Priority setting on company level
Contract Manufacturing & non-core ICE technologies sales
2020 mid-term target long-term target
Digitalization
carbon neutral3 scope 1 & 2
2030
Source: Company information. Notes: ICE: Internal Combustion Engine. Phase-out timeline may vary depending on strategic decisions and customer demand. 1 Substantial majority of CM phase-out planned to be completed by 2025. 2 Around 1/3 of non-core ICE technologies phase-out planned to be completed mid-term. 3 Referring to scope 1 and 2 CO2 emissions as defined by the Greenhouse Gas Protocol, World Resources Institute (WRI), World Business Council for Sustainable Development.
| FY2019 | H1-20 | H2-20 | FY2020 | ||
|---|---|---|---|---|---|
| Sales | 9,093 | 3,409 | 4,619 | 8,028 | |
| % growth | -0.6% | -26.3% | 3.3% | -11.7% | |
| EBITDA | 180 | -3 | 256 | 253 | |
| % margin | 2.0% | -0.1% | 5.5% | 3.2% | |
| Adj. EBITDA1 | 536 | 26 | 374 | 400 | |
| % margin | 5.9% | 0.8% | 8.1% | 5.0% | |
| EBIT | -635 | -301 | -24 | -324 | |
| % margin | -7.0% | -8.8% | -0.5% | -4.0% | |
| Adj. EBIT2 | 53 | -218 | 126 | -92 | |
| % margin | 0.6% | -6.4% | 2.7% | -1.1% | |
| Capex3 | 596 | 162 | 267 | 428 | |
| % margin | 6.5% | 4.7% | 5.8% | 5.3% |
11
| COVID-19 with significant impact on FY2020 |
|---|
| Organic sales4 declined by -9.4% in FY2020 |
| Outperformance of light vehicle production5 by 4.4pp in FY2020 |
| Adj. EBIT2 without ET BU of €254 mn |
| FY20 operating leverage6 of 13.6%; increasing sales in H2 vs. H1 led to an incremental 28.4% |
Cost cutting measures in FY2020 of ~€320 mn, Capex reduction of ~€170 mn
Source: Company information. 5Based on IHS Markit, Automotive Alternative Propulsion Forecast as of 02/2021. Notes: FX: Foreign Exchange Rates. Sales includes non-light vehicle applications like commercial vehicles and two-wheelers. Outperformance refers to sales growth over light vehicle production within the respective period. 1Before consolidation and special effects. 2Before consolidation, amortization of intangibles from PPA and special effects. 3 Capex 2019 and 2020 excluding right of use assets (IFRS 16). 4 Before changes in the scope of consolidation and exchange-rate effects. 6 Operating leverage defined as delta adj. EBIT divided by delta sales. FY2020 operating leverage refers to development in FY2020 vs FY2019, H2 2020 refers to development vs. H1 2020.
Source: Company information. Notes: Order backlog defined as sum of cumulative order intake not yet booked as sales as per end of FY2020. 1Before consolidation, amortization of intangibles from PPA and special effects.
Source: Company information. Notes: ICE: Internal Combustion Engine. Adj. EBIT before consolidation, amortization of intangibles from PPA and special effects. 1Includes consolidation (FY2018: €2 mn; FY2019: €-0 mn; FY2020: €4 mn).
Source: Company information. Notes: 1Equity divided by total equity and liabilities. 2Net debt as per end of FY2020 amounts to -€406 mn, which includes long- and short-term debt of €870 mn (incl. financing with Continental), receivables from financing with Continental of €1,021 mn and cash & cash equivalents of €255 mn. Mid-term target not considering inorganic growth. 3 Before consolidation and special effects.
| Sales CAGR1 % growth |
Group | 3.0-5.0% | Sales CAGR1 % growth |
3.0-5.0% | ||
|---|---|---|---|---|---|---|
| Core Technologies | ||||||
| Electrification Technology | More than €2 bn mid-term | Adj. EBIT2 % of sales |
7.0-9.0% | |||
| Electronic Controls | Non-core ICE | |||||
| Sensing & Actuation | technologies: Around 1/3 to be phased-out mid-term |
Capex3 % of sales |
~6.0% | |||
| Contract Manufacturing | Subst. phased-out 2025 | |||||
| Adj. EBIT2 % of sales |
Group | 7.0-9.0% | Group | Free cash flow | >€400 mn | |
| Core Technologies | ||||||
| Electrification Technology | Break-even targeted in 2024 | Net debt5 / | ||||
| Electronic Controls | adj. EBITDA6 | <1.0x | ||||
| Sensing & Actuation | ||||||
| Contract Manufacturing | Subst. phased-out 2025 | Dividend payout7 | 15-30% |
Source: Company information. Notes: Phase-out timeline may vary depending on strategic decisions and customer demand. 1Mid-term growth target as a CAGR based on FY2020. 2Before consolidation, amortization of intangibles from PPA and special effects. 3 Capex excluding right of use assets (IFRS 16). 4 FCF calculated as operating cash flow + investing cash flow. 5Net debt as per end of FY2020 amounts to -€406 mn,
15 which includes long- and short-term indebtedness of €870 mn (incl. financing with Continental), receivables from financing with Continental of €1,021 mn and cash & cash equivalents of €255 mn. Mid-term target not considering inorganic growth. 6 Before consolidation and special effects. 7 Dividend payout defined as dividend payment divided by net income attributable to common shareholders. Timing of dividend payments to be determined at a later stage.
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