RENK Group AG

Investor Presentation • Sep 10, 2024

REMK

CAPITAL MARKETS DAY 2024

Munich
September 10, 2024

Disclaimer

This presentation has been prepared for information and background purposes only and should not be treated as investment advice or recommendation. It does not constitute or form part of, and should not be construed as, an offer of, a solicitation of an offer to buy, or an invitation to subscribe for, underwrite or otherwise acquire, any securities of RENK Group AG (the "Company", and together with its subsidiaries, the "Group"), nor should it or any part of it form the basis of, or be relied on in connection with, any contract to purchase or subscribe for any securities of the Company or with any other contract, commitment or investment decision whatsoever. This presentation may not, at any time, be reproduced, distributed or published (in whole or in part) without prior written consent of the Company. Any securities referred to herein have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the "Securities Act"), or the laws of any state of the United States, and may not be offered, sold or otherwise transferred in the United States absent registration or pursuant to an available exemption from registration under the Securities Act.

Certain financial data included in this presentation consists of non-IFRS financial measures. These non-IFRS financial measures may not be comparable to similarly titled measures presented by other companies, nor should they be construed as an alternative to other financial measures determined in accordance with IFRS. You are cautioned not to place undue reliance on any non-IFRS financial measures included herein. Past events or performances should not be taken as a guarantee or indication of future events or performance. Financial information presented in parentheses denotes the negative of such number presented. Any assumptions, views or opinions (including statements, projections, forecasts or other for -ward-looking statements) contained in this presentation represent the assumptions, views or opinions of the Company as of the date indicated and are subject to change without notice. All information not separately sourced is from Company data and estimates.

To the extent available and unless denoted otherwise, the industry and market data contained in this presentation has been derived from Company estimates as well as official or third-party sources. Market and market share data has been derived from Company estimates as well as official or third-party sources. Market and market share data are based on company internal estimates derived from continuous analysis and aggregation of local management feedback on market share and ongoing market development. 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 of the accuracy or completeness of such data. While the Company believes that each of these publications, studies and surveys has been prepared by a reputable source, the Company has not independently verified the data contained therein. In addition, certain of the industry and market data, if not labelled otherwise, contained in this presentation are derived from the Company's internal research and estimates based on the knowledge and experience of its management in the markets in which it operates. The Company believes that such research and estimates are reasonable and reliable, 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. Accordingly, undue reliance should not be placed on any of the industry or market data contained in this presentation. Information contained in this presentation related to past performance is not an indication of future performance. The information in this presentation is not intended to predict actual results, and no assurances are given with respect thereto.

The information contained in this presentation has not been independently verified, and no representation or warranty, express or implied, is made by the Company nor its affiliates, advisers, connected persons or any other person as to the fairness, accuracy, completeness or correctness of the information contained herein, and no reliance should be placed on it. Neither the Company nor its affiliates, advisers, connected persons, and/or any third-party provider of industry and market data referred to in this presentation or any other person accepts any liability for any loss howsoever arising (in negligence or otherwise), directly or indirectly, from this presentation or its contents or otherwise arising in connection with this presentation. This shall not, however, restrict or exclude or limit any duty or liability to a person under any applicable law or regulation of any jurisdiction which may not lawfully be disclaimed (including in relation to fraudulent misrepresentation).

This presentation includes "forward-looking statements". These statements contain the words "anticipate", "believe", "intend", "estimate", "expect" or words of similar meaning. All statements other than statements of historical facts included in this presentation, including, without limitation, those regarding the Company's financial position, business strategy, plans and objectives of management for future operations (including cost savings and productivity improvement plans) are forward-looking statements. By their nature, such forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of the Company to be materially different from results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding the Company's present and future business strategies and the market environment in which the Company will operate in the future. These forward-looking statements speak only as of the date of this presentation. Each of the Company, the relevant subsidiaries and their respective agents, employees and advisers, expressly disclaims any obligation or undertaking to update any forward-looking statements contained herein. You are urged to consider these factors carefully in evaluating the forward-looking statements in this presentation and not to place undue reliance on such statements. The Company assumes no liability whatsoever to update these forward-looking statements or to adjust them to future events or developments.

The information contained in this presentation is provided as of the date of this presentation and is subject to change without notice.

AGENDA

08:00		Arrival	11:15	Q\&A Session	Executive board
08:30	Strategy	Susanne Wiegand CEO, RENK Group AG
09:15	Financials	Christian Schulz CFO, RENK Group AG	12:00		Lunch break
		Anja Mänz-Siebje Designated CFO, RENK Group AG
10:00		Break	12:45	Guest speech	LTG Ben Hodges Former 3-star commanding General US Army Europe
10:30	Operations	Dr. Alexander Sagel COO, RENK Group AG
	Production/ Supply chain	Dr. Emmerich Schiller MD Production and Supply Chain, RENK GmbH	14:00		Product demonstration
			16:30		End of CMD

CONTENT

Strategy Susanne Wiegand
Chief Executive Officer, RENK Group AG
Financials Christian Schulz
Chief Financial Officer, RENK Group AG
Anja Mänz-Siebje
Designated Chief Financial Officer, RENK Group AG
Operations Dr. Alexander Sagel
Chief Operating Officer, RENK Group AG
Production/
Dr. Emmerich Schiller
Supply chain
MD Production and Supply Chain, RENK GmbH

In light of recent events, RENK recognizes its obligation as the #1 provider of mission-critical drive systems

... while continuing to build up foundational layers to drive shareholder value

RENK has potential to nearly double its revenue to reach $€ 2 \mathrm{bn}$ organically in medium-term with further growth through strategic M\&A

I-III: Geopolitical tensions are driving the need for higher defense spending

The past years witnessed a growing threat environment

A Invasion of Ukraine after a period of cautious relations between NATO and Russia

B Attacks on Israel and the Houthi Red Sea crisis with first direct escalation between Israel and Iran

Rising tensions in Indo-pacific region

I-III: As a result, defense budgets grow significantly across geographies with a cumulated increase of $>\in 500$ bn

I: Land defense will continue to regain importance across all key regions ...

Land market size, 2021-27 in Ebn

Key takeaways

Total land defense market ${ }^{1}$

1. Excluding embargoed nations (Afghanistan, Belarus, China, CAR, DRC, Iran, Libya, Myanmar, Russia, Syria, Venezuela, Yemen, Zimbabwe); 2. Excluding programs awarded to competitors and programs outside RENK's core competencies

Source: RS Advisors proprietary database, RS Advisors analysis

Ukraine invasion driving aging
fleet replacement in Europe and
backfilling of donated vehicles in
North America

RENK's short-term addressable
market outpacing overall market
growth by $\sim 5$ pp annually

RENK today already has a high
share of its market

RENK equipment used in 70+
armies globally

II: ... with Naval applications especially in the APAC region experiencing strong growth as well

Naval market size, 2021-27 in €bn

Total naval defense market ${ }^{1}$

1. Excluding embargoed nations (Afghanistan, Belarus, China, CAR, DRC, Iran, Libya, Myanmar, Russia, Syria, Venezuela, Yemen, Zimbabwe); 2. Excluding programs awarded to competitors and programs outside RENK's core competencies

Source: RS Advisors proprietary database, RS Advisors analysis

Key takeaways

Renewed importance of maritime domain driving both large surface and subsurface combatants

RENK's short-term addressable market outpacing overall market growth by $\sim 4$ pp annually

RENK today already captures a large share of its current addressable market

RENK equipment used in 40+ navies globally

I-III: The market growth in NATO Europe is not temporary - it is structural and for the long-term

I-II: Low spend has impacted equipment availability of the German armed forces long-term

I-II: We have a strong foundation in core European and North American markets, which we leverage to drive growth in target markets globally

I: RENK is well positioned in the current MBT platform generation and set for the next while working on closing gaps

RENK is serving most large MBT platforms

Retro

	M1 Abrams	Active units
- Localized production in US footprint
- Potential for both transmission and suspension upgrades		$>5,000$

Challenger 2

• Existing suspension integration
• Ongoing discussions for Challenger 3 powerpack

Ariete

• Cooperation with Italian partner
• 80 active units subject to midlife repowering

Active units
$>115$

III: Recent increase of equipment usage is driving up maintenance requirements compared to previous 20 years

Significantly increased use in operations and exercises ...
increasing service need

Increased pace of exercises by NATO and individual countries

More time in active operations with high wear and tear

Ongoing discussions to increase reserve inventories across customers

RENK with sufficient operational capacity to serve increased demand

III: We have an unrivalled and further growing installed base as a strong basis for our aftermarket business

Installed base in 2022 vs. future

IV: We are looking into M\&A options centered on defense with an approach tailored to respective regional peculiarities

North America
Status-
quo

M\&A approach

Europe

Largeest \& mature market with small to large players

Active approach as focus region

APAC

Established national champions and emerging markets

Focus on opportunities for localization and capability building

We have developed from a small noncore subsidiary of VW Group to a strong, global defense company

From ...	To ...	RENK
Small part of Volkswagen Group under MAN ownership with no growth ambition	$\checkmark$	Strong, independent, public company and part of SDAX with ambition to grow
Relatively unknown member of German "Mittelstand" without a clear profile	$\checkmark$	Recognized and leading German defense company aiming for the MDAX
"Mittelstand" typical management and leadership team	$\checkmark$	Recognized and industry-experienced management with (M)DAX track record
Loosely connected set of legal entities, with inconsistent organizational structure	$\checkmark$	One globally integrated firm, with capital markets ready central backbone
Departments being strongly focused on own silos	A	A culture of entrepreneurship and shared accountability

Nevertheless, there is significant untouched potential for the next years to further improve our performance and realize our growth ambitions

Finance

• Enhance value creation focus in our financial steering model
• Implement structural measures for NWC optimization

Operations

• Bring RENK America to the next level and turn it into a unique US stronghold
• Tackle opportunities in future areas like electrification and digital business model
• Improve RENK's internal IT systems

Production and Supply Chain

• Further increase output and efficiency at VMS Augsburg to accelerate growth
• Roll out RENK's Production System to all RENK manufacturing sites
• Further strengthen RENK global footprint across markets

RENK's stock has outperformed the market and our key peers since the listing

Source: Xetra / Last closing price on 4 September 2024 / Indexed to €15 as starting price
(2) $2 / 5$

MDAX

We have a strong and diversified investor base with increasing free float and balanced geographical coverage

Shareholder structure at listing Shareholder structure today

Record breaking Q2-24 results with substantial year-on-year growth ...

... provided support to narrow 2024 guidance towards upper end

[^0]
[^0]: 1. Adj. EBIT is defined as operating profit before the PPA depreciation and amortization as well as income/losses from PPA asset disposals and adjusted for certain items which management considers to be exceptional or nonrecurring in nature. Adj. EBIT margin is defined as adj. EBIT divided by revenue

Our cash generation strengthened our balance sheet and allowed us to maintain our leverage despite significant onetime payouts

Net debt ${ }^{1}$ development, in $€ \mathrm{~m}$

Ratings
Net leverage ${ }^{2} \quad$ Extraordinary payment

[^0]
[^0]: 1. Net debt is defined as the sum of bank debt (previous year: senior secured notes) and lease liabilities less cash and cash equivalents based on the carrying amounts in the

Through past investments in a downturn market, we are now in a prime position to capture the current defense super cycle ...

... as our portfolio, capabilities, assets, and people are ready for growth with about $€ 380 \mathrm{~m}$ of M\&A and more than $€ 400 \mathrm{~m}$ of Capex investments

We will enhance our focus on value creation through refinement of our financial steering model

We will drive further EBIT and margin expansion through continuous growth, operating leverage, and operational improvements

Adj. EBIT path ${ }^{1}$, in €m

Our constantly increasing order backlog will serve as the basis for our growth in new sales and expanding aftermarket

1. Fixed order backlog represents with respect to binding customer contracts and purchase orders concluded and/or received the portion of the associated transaction price for which the amount of revenue has not yet been recognized in accordance with IFRS. 2. Frame order backlog includes signed frame contracts with fixed annual volumes or volume estimates based on customer information or historical call offs over the entire contract duration, booked for the period of the frame contract term, 3. Soft order backlog includes estimated volumes of sole source projects and successor business until 2028 based on public information and customer information, booked for the period Jul-24 to Jun-28

We have integrated a ROCE-based value creation focus into our financial steering model to optimize the use of available capital

We will also update our cash conversion definition to more accurately reflect our ability to generate cash in relation to our capital structure

Cash conversion definition

Cash conversion, in \%

Updated

definition

• Negative change in NWC mainly driven by inventory buildup
• Continued buildup of inventory
• Increase in interest payments due to SSFA ${ }^{5}$ interests and prepayment penalties of corporate bond refinancing
  
  -29

2022
2023
LTM Jun-24

[^0]
[^0]: 1. Adj. EBITDA is defined as operating profit before depreciation, amortization, and impairment losses on intangible assets and property, plant and equipment, and adjusted for certain items which management considers to be exceptional or nonrecurring in nature; 2. Capex defined as payments to acquire property, plant and equipment, and intangible assets, 3. Free cash flow is calculated by adding depreciation and amortization, interest paid, income taxes and capital expenditures to EBIT. Free cash flow is reduced by any increase in net working capital and increased by any decrease in net working capital. Other reconciliation items includes changes in provision, other receivables and liabilities, insofar as these are not attributable to the net working capital, as well as other cash and non-cash effects with minor individual relevance 4. Adj. net income defined as profit after tax before the PPA depreciation and amortization as well as income/losses from PPA asset disposals and loan interest, and adjusted for certain items which management considers to be exceptional or nonrecurring in nature; 5. Super Senior Facilities Agreement

To improve cash conversion, we will enhance capital efficiency through reduced inventory and target-oriented cash management

NWC ${ }^{1}$ development, as \% of revenue
Key levers

NWC stable despite significant topline growth

Initiation of structured program for legal entity-based NWC management

Focus on target-oriented cash management with bottom-up forecast and monthly tracking

Start of initiative to optimize procurement and purchasing spend

Based on our allocation framework, we will make the best use of our available capital along 4 future areas

ROCE-optimized investments

Shareholder return

Value-accretive M\&A

Medium-term highlight figures to keep in mind and to track our performance against

1. Adj. EBIT is defined as operating profit before the PPA depreciation and amortization as well as income/losses from PPA asset disposals and adjusted for certain items which management considers to be exceptional or nonrecurring in nature. Adj. EBIT margin is defined as adj. EBIT divided by revenue; 2. Includes inventories, receivables, contract assets, trade payables, and contract liabilities; 3. Capex defined as payments to acquire property, plant and equipment, and intangible assets

Just to recap: 3 main megatrends driving future business development of RENK

Megatrends:
Empowering Security

RENK 2.0 setting the pace for the next years by doing our homework to capture the market potential

$\Theta>2,000 \mathrm{~m}$
Revenue ambition

Leverage market potential of defense super cycle (land/navy)
Strive towards world-class operational excellence through RENK Production System including IT

$\sim 20 \%$
Adj. EBIT margin ambition

Convert top-line growth
Drive high-margin segments (e.g., aftersales)

Disciplined cost management with profitability criteria
(R) Restore RAM profitability

#1
In Market and Technology

IIII Focus R\&D on 4 key technology fields

Drive M\&A for growth, product portfolio, and technology

II: We implemented a structured program to increase operational performance and efficiency level of RAM in 3 main areas

Supply chain

Not exhaustive

Deployed comprehensive parts availability strategies and enabled dramatic production scale-up

Active parts management and tracking in win rooms

Increased
output ability

Operating model
(2) Clear operational responsibility and P\&L accountability through dedicated business units

Shared company goals via new North Star vision with ambitious growth targets

Enhanced
transparency

Material cost

Created and syndicated cost models to set aspirational targets

Integrated global and local team collaboration for cost excellence and supplier strategies

Reduced material costs

III: Our technology is centered around improving the mobility of military forces, which will have an even higher importance in the future

Reliable and proven drivetrain technology critical for combat power

Increasing availability of information makes battlefield of the future transparent ("Gläsernes Gefechtsfeld")

If the enemy knows where you are at all times, you need to be constantly on the move

Importance of mobility to combat power will grow significantly in the future

III: Our transmissions are highly complex, high-tech systems and ruggedized for the most demanding battlefield use

Use of space - Luxury watches

Use of space - Achieved through decades of engineering excellence

III: Our cutting-edge, hard-to-replicate, and complex technologies are unmatched in the market

RENK

Our brand stands for reliability and performance

III: We will expand our technology core and focus on three future areas: electrification/hybridization, digitalization as well as system engineering

Enabling technology (core ${ }^{1}$ )
New technologies expanding the core

Core
technology

Electrification/
hybridization

Digitalization ${ }^{2}$

System engineering

III-A: Expansion of our transmission portfolio for vehicles in lighter weight classes, especially tracked vehicles <20t and UGVs

III-A: We are complementing our internal R\&D efforts, as well as our customer-funded R\&D projects, with technological partnerships

GINETIQ \& R E N K

MoU signed: GinetiQ is our Advanced Mobility Technology Partner

III-B: We have developed a new transmission with hybrid capabilities for MBTs and other heavy tracked vehicle platforms of the future

Future MGCS platform concept

III-B: We are developing an advanced electric propulsion technology securing order potential for future surface and underwater combatants

III-C: Digitalization is an important enabler to secure our current and future business portfolio

Support of Core Business
("Hardware")
New Softwarebased business models

2

Training, Education, and Documentation

III-C: Our in-arm dampers use advanced sensors and networks to optimize usable lifetime and performance

Key facts

Market
attractiveness
$>€ 500 \mathrm{~m}$

III-C: Looking to the future - Our digitalization products will have many use cases in the connected battlefield

RENK - a technology-driven company for supporting our customer demands and driving future business development

Technology

leader in the super cycle

Unmatched product performance and reliability driving our ability to capture the defense super cycle

Dr. Emmerich Schiller MD Production and Supply Chain RENK GmbH

We have a global production footprint and are present in all major regions and countries

Mskk

Musk

Bath

Augsburg

Winterthur

Hanover

• Production footprint

Sales, services, and/or R\&D

Manover

Hanover

• Sales
  

65 m fund to secure business continuity through enhanced site security measures

We have a global supply chain which we are continuously improving to secure critical material and safeguard our production

Measures

(4) Redundancies for all critical suppliers to avoid dependencies

(5) Flexibility to shift production either in-house or to external suppliers

(6) Regional balanced and hedged supplier base

Capability to insource production key parts

Manufacturing excellence is in RENK's DNA with deep coverage and significant value addition along our independent value chain

Covered by RENK

Illustrative

$\sim 65 \%$

High level of vertical integration ${ }^{1}$

$\sim 60 \%$

Share of headcount in manufacturing ${ }^{2}$ Jul-24

[^0]
[^0]: 1. Calculated by dividing the sum of (i) variable manufacturing costs, (ii) direct labor costs, (iii) fixed indirect material costs, (iv) fixed manufacturing costs, and (v) DB2 by total order-related costs and DB2. Total order-related costs comprise costs of materials, order-related outsourced products/services, variable manufacturing costs, indirect labor costs, fixed indirect material costs, and fixed manufacturing costs; 2. Production, logistics

We have done our homework: After solving last year's challenges in Augsburg, we are ready for future growth

From...

Shortages of critical components and materials disrupting production

To ...

Increased supply security for key materials by broadening supplier base and targeted inventory $\sim+50 \%$ of production start without missing items

Inefficiencies in sales- \& production planning during steep ramp-up

Refocus towards consistent alignment between customer orders and production planning

$\sim+15 \mathrm{pp}$

On time delivery (OTD)

Limited efficiency due to low-volume manufacturing production system

Increased efficiency and benefits by shifting to small series production principles

$\sim-20 \%$

Hours per transmission $(\mathrm{HPT})^{1}$

Testing bottlenecks for transmissions
Increased testing capacities through addition of new test bench in Augsburg (in Jan-24) and improved first pass yield

+1

New test bench

[^0]
[^0]: 1. Final assembly, metric for internal efficiency depended on output structure within the year

We are bringing RENK operations to the next level by focusing on 2 dimensions

We have a clear plan to further increase production volumes

Fields of action

Production philosophy and steering with flexible assembly cells and frozen sequences (pearl chain)
Focus on basics with streamlined planning, clear responsibilities, and standardization

Implementation of a Shopfloor Management System

Consequent implementation of line back principles
Continuous improvement through line-walks, quality standards, and tracking

Strong IT Tools with SAP, assembly BoM ${ }^{1}$, workflow processes, and real-time production control

We have improved alignment between sales- and production planning

Selected examples of identified efficiency measures and the effect on the "hours per transmission"

Material kitting in line with assembly sequence

Before
After $-15 \%$

Standardized assembly cell for sub components

Before
After $-20 \%$

We have increased our output by about 50\% with no capex and additional headcount

# of new transmissions built at VMS Augsburg p.a.

Five performance indicators underlining our improvements at our new vehicle transmission production

Performance indicators, $\varnothing 2023$ vs. target 2024 (new transmissions Augsburg)

• If transmission output p.a.

Hours per transmission $^{1}$

• of transmissions per working day ${ }^{2}$

First pass yield

On time delivery

Next step: Implementing a small series assembly/logistic concept to further improve efficiency and capacity

Next step: Implementing a small series assembly/logistic concept to further improve efficiency and capacity

Next step: Implementing a small series assembly/logistic concept to further improve efficiency and capacity

Leveraging our learnings from VMS in Augsburg, we are in the process of rolling out operational excellence to all RENK sites

RENK Production System to set standardization and realize synergies between sites

Operational excellence
Cross-segment initiatives

Closing Remarks

Summary: As easy as 1, 2, and 3

RENA

Ambition
€2bn
€400m
Revenue
Adj. EBIT ${ }^{1}$

1. Adj. EBIT is defined as operating profit before the PPA depreciation and amortization as well as income/losses from PPA asset disposals and adjusted for certain items which management considers to be exceptional or nonrecurring in nature Adj. EBIT margin is defined as adj. EBIT divided by revenue; 2. Includes inventories, receivables, contract assets, trade payables, and contract liabilities; 3. Capex defined as payments to acquire property, plant and equipment, and intangible assets; 4. #1 position for transmissions in tracked military vehicles in our accessible markets