CEWE Stiftung & Co. KGaA — Call Transcript 2018

May 14, 2018

Results Q1 2018

Analyst Conference Call

CEWE Stiftung & Co. KGaA

Oldenburg May 14, 2018

This presentation contains forward-looking statements that are based on current assumptions and forecasts of the management of CEWE. Known and unknown risks, uncertainties and other factors could lead to material differences between the forward-looking statements given here and the actual development, in particular the results, financial situation and performance of our Company. The Company assumes no liability to update these forward-looking statements or to conform them to future events or developments.

All numbers are calculated as exactly as possible and rounded for the presentation. Due to this, rounding errors might occur.

Dr. Olaf Holzkämper CFO

Dr. Christian Friege CEO

Highlights Q1 2018		Q1 2017	Q1 2018	Comment
Photofinishing
Sales Volume Turnover EBIT EBIT w/o one-offs	in photo m. in EUR m.	438 85.6 1.3 1.5	466 94.5 1.9 2.0	▪ At 6.4% higher than 2017, volume is more than in line with annual target ▪ Additional sales through Cheerz and Comeback of CEWE PHOTOBOOK ▪ Added-value products drive increase in turnover and profitability ▪ One-time item: PPA-effect (DeinDesign)
Commercial Online-Print
Turnover EBIT EBIT w/o one-offs	in EUR m.	20.6 0.1 0.3	24.4 -0.5 -0.2	▪ Sales increase through acquisition of Laserline ▪ EBIT carries integration costs of Laserline and cost increases ▪ One-time items: PPA-effect (Saxoprint) and integration costs of Laserline
Retail
Turnover EBIT	in EUR m.	11.8 -0.3	10.8 -0.5	▪ Focus on profitability and photofinishing reduce sales ▪ Due to seasonality EBIT traditionally negative in Q1
Other
Turnover EBIT	in EUR m.	0.7 -0.5	0.9 -0.4	▪ Segment Other covers administrative costs for company structure, supervisory board costs, IR costs, real estate, futalis
Group
Turnover EBIT EBIT w/o one-offs	in EUR m.	118.6 0.6 1.0	130.6 0.6 1.0	▪ Group turnover up due to acquisitions and organic growth in photofinishing ▪ EBIT on previous year's level despite (so far) negative contribution of acquisitions
Free Cash Flow	in EUR m.	-7.0	-59.5	▪ Acquisitions decrease free cash flow
ROCE	%	20.8	18.9	▪ ROCE still strong, reduced due to acquisitions
Equity ratio	%	63.2	59.3	▪ Solid equity ratio

sollten Q1 confirms the annual targets for 2018

Rounding differences might occur.

Agenda

1. Results
- Photofinishing
- Commercial Online-Print
- Retail
- Other
- Group
2. Financial Report (P&L-Details, Balance Sheet, Cash Flow, Return On Capital)
3. Outlook
4. Q&A

CEWE Innovation Day 2018

CEWE acquires shares in leading French photo app specialist

• Fast-growing "Cheerz" premium brand for smartphone customers
• Market leader in France for photofinishing apps
• Dynamic increase in sales in France, Spain and Italy
• CEWE expects the acquisition to generate additional growth in mobile business to strengthen business in France and Southern Europe
• Synergies in the areas of mobile competence, sales, production and logistics
• CEWE acquired 80 % of the shares in the Cheerz Group for 36 million euros with the option of the remaining 20 %
• The transaction estimates the company at around slightly more than one-and-a-half times the expected turnover for 2018
• CEWE Board of Management expects the takeover including the purchase price allocation and the transaction costs – to still have a negative impact on EBIT 2018 in an amount of around 4 million euros
• Acquisition effective as of February 2018

Sustained positive effect on the value of the entire company expected

Brand-marketing: Broad media-mix also in Q1

CEWE is the best photo service in the world: In the category "Best Photo Print Service", CEWE won with the CEWE PHOTOBOOK with hardcover refinement

Multi-channel brand-marketing for CEWE PHOTOBOOK

Brand Awareness CEWE PHOTOBOOK in Germany

Source: 2011-2016 GfK, 20172017 Nielsen

Again, substantial increases in brand awareness in Germany as well as in many other countries

Net Promoter Score CEWE PHOTOBOOK in Germany

Source: Own survey

Q1 volume development better than expected

Rounding differences might occur.

CEWE PHOTOBOOK

Comeback of the CEWE PHOTO BOOK: Negative base effects in 2017 (delivery stop of a trading partner,

Rounding differences might occur.

Photos Total by Quarter

Saisonal distribution: CEWE 2014 to 2018 – Total share of photos per quarter as a percentage

2018 Target 2.12 to 2.14 billion

Q1 Actual 465.8 million✓

Q1 volume slightly better than expected

Value of Photos Q1

Rounding differences might occur. * including Cheerz turnover Feb/March 2018

Value-added products further support photofinishing turnover

Business segment Photofinishing

in Euro millions

Good first quarter in photofinishing: sales and EBIT up

• Q1 sales with good growth momentum: Acquisition of Cheerz generates additional sales, organic photofinishing is also growing well
• CEWE PHOTOBOOK grows excellently in volume and sales

• Photo gifts and CEWE CALENDARS are also driving sales growth in addition to the CEWE INSTANT PHOTOS

• Despite (planned) negative EBIT contribution from Cheerz, EBIT increases to EUR 1.9 million, the EBIT margin rises to 2.1%

• Purchase price allocation of Cheerz will be finalized and posted in Q4 2018

Shares in Turnover by Quarter – Photofinishing

Seasonal distribution: CEWE 2014 to 2018 – Share in turnover by quarter as a percentage

Value added products are keeping photofinishing at the upper end of expected revenue range

* Photofinishing turnover approx. on previous year´s level (2017: 459.0 Euro mill.). Planned group turnover w/o target turnover of segments retail, commercial online-print and other. Rounding differences may occur.

EBIT before Restructuring by Quarter – Photofinishing

Seasonal distribution: CEWE 2014 to 2018 – EBIT share by quarter as a percentage

Photofinishing EBIT exceeds expected range

* 48.0-54.0 Euro mill. group EBIT-target less planned retail, online printing and from segment Others. Rounding differences might occur.

Agenda

1.	Results
	- Photofinishing
	- Commercial Online-Print
	- Retail
	- Other
	- Group
2.	Financial Report (P&L-Details, Balance Sheet, Cash Flow, Return On Capital)
3.	Outlook
4.	Q&A

The three CEWE online print brands

CEWE brand awareness Industrial printing company Small orders

Portals focus on different customer groups e.g. through designs, order processes or product portfolios

CEWE takes over online printing company LASERLINE

• LASERLINE expected to contribute 15 million euros to turnover in 2018
• As of 2019, LASERLINE to contribute positively to Group earnings
• Contribution to earnings is not yet expected to be positive in 2018
• LASERLINE operates in Berlin and has a staff of more than 160 employees
• LASERLINE has an outstanding customer base, a comprehensive product range, high-quality technical facilities
• Acquisition effective as of January 2018
• CEWE continues to grow in commercial online printing
• Takeover enables CEWE to generate mutual growth and achieve better purchase conditions and other economies of scale

Business segment Commercial Online-Print

in Euro millions

• Laserline acquisition raised revenue by 18.8% in the first quarter
• Continuing price pressure in Germany inhibited stronger growth
• UK business continued to be weakened by Brexit
• March this year with two working days less than last year
• EBIT still bears negative EBIT contribution from Laserline (including -0.2 million euros in integration costs)
• Higher material costs (paper price increase), increased marketing costs (for product lines "Easybox" and "Promoline") and temporarily higher logistics costs (express deliveries to guarantee promised delivery times) are a burden on the cost side
• Purchase price allocation of Laserline will be finalized Rounding difference might occur. and posted in Q4 2018

Commercial Online-Print grows in Q1 through Laserline acquisition

Agenda

1.	Results
	- Photofinishing
	- Commercial Online-Print
	- Retail
	- Other
	- Group
2.	Financial Report (P&L-Details, Balance Sheet, Cash Flow, Return On Capital)
3.	Outlook
4.	Q&A

CEWE´s retail business

• 146 retail stores
• EUR 53.0 million revenue (2017) with photohardware (cameras, lenses, tripods, etc.)

• Sales of fotofinishing products in fotofinishing segment

• Retail segment contains hardware revenue only, fotofinishing revenue is shown in fotofinishing segment

• Own retail business provides an excellent window to the market

Retail strategy

Focus on photofinishing products in CEWE-retail shops

Adjustments in hardware pricing to improve margins

Business segment Retail

in Euro millions

Hardware sales in Q1 declined again significantly

Due to seasonality EBIT in Q1 traditionally negative

• CEWE RETAIL continues to be competitive with the market, but sales in the first quarter decline due to the continuing difficult business with high quality SLR cameras
• At the same time, Retail was able to increase its turnover from photofinishing products, which is reported in Photofinishing segment, by 4.7 %
• Due to seasonality first quarter traditionally negative
• Despite revenue decline: Focus on margins let earnings decline only moderately

^* Only hardware, no photofinishing Rounding differences might occur.

Agenda

1.	Results
	- Photofinishing
	- Commercial Online-Print
	- Retail
	- Other
	- Group
2.	Financial Report (P&L-Details, Balance Sheet, Cash Flow, Return On Capital)
3.	Outlook
4.	Q&A

Business segment Other

in Euro millions

Structural and corporate costs and profits arising from real estate property and the acquisition of stocks are shown in the business segment Other.

Since August 2015 (date of initial consolidation), futalis has been reported in this business segment since the business activities cannot be allocated to the other business segments.

• The reported EUR 0.9 million in sales are exclusively attributable to futalis (Q1 2017: EUR 0.7 million)
• EBIT slightly improved

Business segment "Other" increases sales and improves earnings

Rounding differences might occur.

Agenda

1. Results

• Photofinishing
• Commercial Online-Print
• Retail
• Other

- Group

• 1. Financial Report (P&L-Details, Balance Sheet, Cash Flow, Return On Capital)
• 1. Outlook
• 1. Q&A

Revenue

In Q1, Photofinishing and Commercial Online-Print are contributing to the Group's revenue growth Fx-adjusted: Development in all segements slightly stronger than reported figures

Rounding differences might occur.

EBIT

Photofinishing carries the Group EBIT in the first quarter

Rounding differences might occur.

AGM (June 6, 2018): Ninth consecutive dividend increase

* recommendation of supervisory board and board of management to AGM (June 6, 2018)

• Dividend for the 2017 business year is to increase to 1.85 euros
• Since analogue/digital transformation: ninth consecutive dividend increase

Agenda

1. Results

2. Financial Report (P&L-Details, Balance Sheet, Cash Flow, Return On Capital)

3. Outlook

1. Q&A

Group P&L

in millions of euros	Q1	% of revenues	Q1	% of revenues	Change*	Change*
	2017		2018		as %	m€
Revenues	118.6	100.0%	130.6	100.0%	+10.1	+12.0
Increase / decrease in finished and unfinished
goods	-0.2	-0.2%	-0.1	-0.1%	+64.1	+0.1
Other own work capitalised	0.3	0.2%	0.2	0.1%	-27	-0.1
Other operating income	4.4	3.7%	3.9	3.0%	-10.3	-0.5
Cost of materials	-33.7	-28.4%	-37.4	-28.6%	-10.9	-3.7
Gross profit	89.4	75.3%	97.3	74.5%	+8.9	+7.9
Personnel expenses	-37.9	-32.0%	-41.9	-32.1%	-10.5	-4.0
Other operating expenses	-42.3	-35.7%	-45.2	-34.6%	-6.9	-2.9
EBITDA	9.1	7.7%	10.1	7.8%	+11.1	+1.0
Amortisation of intangible assets, depreciation
of property, plant and equipment	-8.5	-7.2%	-9.6	-7.3%	-12.0	-1.0
EBIT	0.6	0.5%	0.6	0.4%	-2.5	-0.0
Financial income	0.1	0.1%	0.1	0.1%	-32	-0.0
Financial expenses	-0.1	-0.1%	-0.5	-0.4%	-584	-0.4
EBT	0.7	0.6%	0.2	0.1%	-73.5	-0.5

Turnover growth in Photofinishing and Commercial Online-Print more important than decline in Retail

Organic growth in Photofinishing as well as acquisition of Cheerz and LASERLINE

Mainly attributable to acquisition of Cheerz and LASERLINE and to a few recruitments in central functions (R&D, Marketing) of Photofinishing

Acquisition of Cheerz and LASERLINE

Only the substantial, significant differences to the previous year are illustrated. Rounding differences might occur.

Balance Sheet data at 31 March

Earnings growth keeps equity ratio close to 60% despite balance sheet extension Balance sheet extension mainly due to the acquisitions and the purchase of Saxopark

From Balance Sheet to Management Achievement

Balance Sheet

Management Balance Sheet

Management Balance Sheet at 31 March

Long-term assets increased due to the acquisition of Saxopark, Laserline and Cheerz Net working capital increased mainly as a result of the decrease in income tax liabilities

Capital Employed I

Capital Employed I
in millions of euros	Dec. 31,	% of	March 31,	% of	Change	Change
	2017	C E	2018	C E	as %	m€
Property, plant and equipment	148.1	57.4 %	150.7	50.1 %	+1.7 %	+2.6
Investment properties	17.9	6.9 %	17.9	5.9 %	+0.0 %	-0.0
Goodwill	25.8	10.0 %	66.0	22.0 %	+155 %	+40.2
Intangible assets	14.1	5.5 %	15.3	5.1 %	+8.8 %	+1.2
Financial assets	6.8	2.6 %	10.8	3.6 %	+58.6 %	+4.0
Non-current receivables from income tax refunds	0.0	0.0 %	0.0	0.0 %	-	+0.0
Non-current financial assets	0.4	0.2 %	0.8	0.3 %	+112 %	+0.4
Non-current other receivables and assets	0.6	0.2 %	0.1	0.0 %	-81.6 %	-0.5
Deferred tax assets	7.8	3.0 %	7.8	2.6 %	-0.1 %	-0.0
Non-current assets	221.5	85.8 %	269.4	89.6 %	+21.6 %	+47.9
Inventories	50.3	19.5 %	47.5	15.8 %	-5.6 %	-2.8
+ Current trade receivables	84.5	32.8 %	39.6	13.2 %	-53.1 %	-44.9
Operating gross working capital	134.9	52.2 %	87.2	29.0 %	-35.4 %	-47.7
- Current trade payables	95.9	37.1 %	52.8	17.5 %	-45.0 %	-43.1
Operating net working capital	39.0	15.1 %	34.4	11.4 %	-11.8 %	-4.6

Investements more than counterbalancing effect of depreciation

Acquisition of LASERLINE and Cheerz

IFRS 9 fair value measurement

Seasonal decrease; compared to March 31, 2017 increase due to acquisitions

Seasonal decrease; compared to March 31, 2017 increase due to acquisitions

Only the substantial, significant differences to the previous year are illustrated. Rounding differences might occur.

Capital Employed II

Capital Employed II
in millions of euros	Dec. 31, 2017	% of C E	March 31, 2018	% of C E	Change as %	Change m€
Assets held for sale	1.4	0.5 %	1.4	0.5 %	+0.1 %	+0.0
+ Current receivables from income tax refunds	1.5	0.6 %	6.3	2.1 %	+324 %	+4.8
+ Current financial assets	2.4	0.9 %	2.5	0.8 %	+6.5 %	+0.2
+ Other current receivables and assets	5.6	2.2 %	8.9	2.9 %	+57.4 %	+3.2
Other gross working capital	10.9	4.2 %	19.1	6.4 %	+75.1 %	+8.2
- Current tax liabilities	3.9	1.5 %	3.5	1.2 %	-10.0 %	-0.4
- Current other accruals	3.5	1.4 %	3.9	1.3 %	+10.1 %	+0.4
- Current financial liabilities	1.3	0.5 %	3.7	1.2 %	+174 %	+2.3
- Current other liabilities	43.3	16.8 %	26.7	8.9 %	-38.5 %	-16.7
Other current liabilities	52.1	20.2 %	37.7	12.5 %	-27.6 %	-14.4
Other net working capital	-41.2	-15.9 %	-18.6	-6.2 %	+54.8 %	+22.6
Operating net working capital	39.0	15.1 %	34.4	11.4 %	-11.8 %	-4.6
Other net working capital	-41.2	-15.9 %	-18.6	-6.2 %	-54.8 %	+22.6
Net working capital	-2.1	-0.8 %	15.8	5.3 %	+837 %	+17.9
Non-current assets	221.5	85.8 %	269.4	89.6 %	+21.6 %	+47.9
+ Net working capital	-2.1	-0.8 %	15.8	5.3 %	+837 %	+17.9
+ Cash and cash equivalents	38.8	15.0 %	15.4	5.1 %	-60.3 %	-23.4
Capital employed	258.2	100.0 %	300.6	100.0 %	+16.5 %	+42.5

Capitalization of tax prepayments in quarterly reporting

Accrued expenses and VAT receivables

Purchase price liabilities related to acquisitions

Settlement of VAT payment as well as salary liabilities resulting from outstanding vacation and bonus payments

Only the substantial, significant differences to the previous year are illustrated.

Rounding differences might occur.

Capital Invested

Capital Invested
in millions of euros	Dec. 31, 2017	% of C I	March 31, 2018	% of C I	Change as %	Change m€
Equity	227.2	88.0 %	231.8	77.1 %	+2.0 %	+4.6
Non-current accruals for pensions Non-current deferred tax liabilities Non-current financial liabilities Non-current other liabilities Non-operating liabilities	27.2 1.5 0.1 0.5 29.4	10.5 % 0.6 % 0.1 % 0.2 % 11.4 %	27.7 1.6 0.1 0.8 30.2	9.2 % 0.5 % 0.0 % 0.3 % 10.0 %	+1.9 % +3.5 % +0.0 % +51.6 % +2.9 %	+0.5 +0.1 +0.0 +0.3 +0.8
Non-current interest-bearing financial liabilities	0.0	0.0 %	1.3	0.4 %	-	+1.3
+ Current interest-bearing financial liabilities	1.6	0.6 %	37.3	12.4 %	>1.000 %	+35.7
Gross financial liabilities	1.6	0.6 %	38.6	12.8 %	>1.000 %	+37.0
Capital invested	258.2	100.0 %	300.6	100.0 %	+16.5 %	+42.5

Positive comprehensive income Change in accounting due to IFRS 9 Owner-related equity Changes like sale of treasury shares and stock option plans

Financing of acquisitions

Only the substantial, significant differences to the previous year are illustrated.

Rounding differences might occur.

Free Cash Flow Q1

• Seasonal peak in Q4 2017 with an increase in VAT payable of EUR 8 million (partly due to tax rate change) shows consequences in Q1 2018: funds are passed on to the tax authorities
• The cash outflow from investing activities includes acquisition payments of € 30.7 million for Cheerz and € 6.7 million for Laserline

Free Cash Flow Q1

in millions of euros	Q1	Q1	Change	Change
	2017	2018	as %	m€
EBITDA	9.1	10.1	11.1%	1.0
+/- Non-cash factors	0.6	1.6	150%	0.9
+ Decrease/-Increase in operating net working capital	2.9	6.5	125%	3.6
+ Decrease/- Increase in other net working capital (excluding income tax items)	-11.2	-23.9	-113%	-12.7
- Taxes paid	-3.0	-5.2	-73.0%	-2.2
+ Interest received	0.0	0.1	-638%	0.1
= Cash flow from operative business	-1.6	-10.7	-590%	-9.2
- Outflows from investments in fixed assets	-5.4	-11.0	-103%	-5.6
- Outflows from purchases of consolidated interests / acquisitions	0.0	-37.4	-	-37.4
- Outflows from investments in financial assets	-0.3	-0.3	-31%	-0.1
- Outflows from investments in non-current financial instruments	0.1	-0.4	-	-0.6
+ Inflows from the sale of property, plant and equipment and
intangible assets	0.1	0.4	410%	0.3
= Cash flow from investing activities	-5.5	-48.8	-789%	-43.3
= Free cash flow	-7.0	-59.5	-745%	-52.5

Decrease in payments to suppliers

Change in VAT tax rate on photobooks in Germany as of Jan 1, 2017

Increased tax prepayments due to positive income situation

E.g., purchase of buildings which were previously leased

Outflows due to acquisitions

Only the substantial, significant differences to the previous year are illustrated.

Rounding differences might occur.

ROCE as of March 31

* Return On Capital Employed

• Rounding differences might occur. * * Weighted Average Cost of Capital
• Acquisition of the Saxopark and recent acquisitions (Laserline, Cheerz) increase average capital employed, as a result ROCE drops to still strong 18.9%

Agenda

• 1. Results
• 1. Financial Report (P&L-Details, Balance Sheet, Cash Flow, Return On Capital)

3. Outlook

1. Q&A

Outlook 2018

Targets		2017	Target 2018	Change
Photos total	billion photos	2.17	2.12 to 2.14	-3% to -2%
CEWE PHOTO BOOK	million photos	6.02	6.08 to 6.14	+1% to +2%
Investments*	Euro millions	44.6**	55
Revenue	Euro millions	599.4	630 to 665	+5% to +11%
EBIT	Euro millions	49.2	48 to 54	-2% to +10%
EBT	Euro millions	48.9	47.5 to 53.5	-3% to +9%
Earnings after tax	Euro millions	33.6	33 to 37	-2% to +10%
Earnings per share	Euro millions	4.70	4.55 to 5.13	-3% to +9%

Rounding differences might occur.

Q1 confirms the annual targets for 2018

* Operative investments without potential investments in expanding the business volume and, for example, corporate acquisitions and/or additional customer-base acquisitions

** EUR 44.6 million in operational investments including building expansion in Oldenburg, plus acquisition of property "Saxopark" in Dresden (EUR 27.6 million)

Agenda

1. Results

1. Financial Report (P&L-Details, Balance Sheet, Cash Flow, Return On Capital)

3. Outlook

4. Q&A

Q&A-Session

Q1 2018 Analyst Conference Call May 14, 2018