ElringKlinger AG — Interim / Quarterly Report 2017

Nov 15, 2017

REPORT ON THE 3RD QUARTER AND 1ST NINE MONTHS 2017

pure mobility

KEY FIGURES

ELRINGKLINGER GROUP

		3rd Quarter 2017	2nd Quarter 2017	1st Quarter 2017	4th Quarter 2016	3rd Quarter 2016
ORDER SITUATION
Order intake	€ million	381.0	413.3	494.3	444.9	383.7
Order backlog	€ million	976.5	999.1	993.5	932.5	894.7
SALES/EARNINGS
Sales revenue	€ million	403.6	407.8	433.3	407.2	374.2
Cost of sales	€ million	299.9	299.1	323.9	300.0	280.6
Gross profit margin		25.7%	26.7%	25.3%	26.3%	25.0%
EBITDA	€ million	59.4	60.5	62.6	64.5	55.1
EBIT /Operating result	€ million	33.9	35.8	37.9	38.4	31.2
EBIT margin		8.4%	8.8%	8.7%	9.4%	8.3%
EBIT pre ppa1	€ million	34.8	37.2	39.1	39.5	32.6
EBIT margin pre ppa		8.6%	9.1%	9.0%	9.7%	8.7%
Earnings before taxes	€ million	25.9	28.0	34.5	39.4	27.6
Net income	€ million	17.2	19.4	26.0	21.3	19.9
Net income attributable to shareholders of ElringKlinger AG	€ million	16.1	18.4	25.1	19.7	19.0
CASH FLOW
Net cash from operating activities	€ million	13.0	30.9	19.8	57.6	46.3
Net cash from investing activities	€ million	-44.5	-41.0	-62.2	-62.1	-44.5
Net cash from financing activities	€ million	22.3	22.1	46.2	-3.3	-27.8
Operating free cash flow2	€ million	-31.5	-10.2	-11.6	0.4	1.8
BALANCE SHEET
Balance sheet total	€ million	2,006.0	1,988.3	1,985.7	1,878.2	1,859.7
Equity	€ million	884.1	883.6	919.1	886.4	872.8
Equity ratio		44.1%	44.4%	46.3%	47.2%	46.9%
HUMAN RESOURCES
Employees (as at end of quarter)		9,376	9,012	8,738	8,591	8,433
STOCK
Earnings per share	€	0.25	0.29	0.40	0.31	0.30

¹ EBIT adjusted for amortization resulting from purchase price allocation

Net cash from operating activities minus net cash from investing activities (excluding acquisitions and excluding investments in financial assets)

pure mobility

Climate change and the resulting emissions legislation are to be seen as the key drivers behind technological advancement in the automotive industry. Against this backdrop, manufacturers have been stepping up their efforts to increase the proportion of alternative-drive vehicles within their fleets in the foreseeable future. This is motivated by the fact that ever-stricter CO2 standards can ultimately only be met with the help of more efficient combustion engines or alternative powertrain technology. ElringKlinger was quick off the mark when it came to embracing the idea of next-generation mobility. For more than a decade, the company has been focusing closely on areas that are of particular significance to the future of the industry, such as battery systems, fuel cell technology, and lightweight design. ElringKlinger provides innovative solutions for all types of drive systems. Building on its extensive portfolio of products, it is actively shaping the path that leads to tomorrow's mobility.

LITHIUM-ION BATTERIES AND FUEL CELLS

Products for lithium-ion batteries

• Cell contact systems
• Battery modules
• Module connectors
• Pressure equalizing elements
• Cell housings
• Plastic battery enclosures

Components for fuel cells

• For PEMFC: bipolar plates, end and media modules, sealing solutions, casings
• PEMFC stacks
• For SOFC: interconnectors, end modules, clamping system, thermal shielding/enclosure
• SOFC stacks

CONTENTS

PAGE

INTERIM GROUP MANAGEMENT REPORT

• 04 Macroeconomic Conditions and Business Environment
• 05 Significant Events
• 06 Sales and Earnings Performance
• 11 Financial Position and Cash Flows
• 15 Opportunities and Risks
• 15 Report on Expected Developments

PAGE

40 Imprint 18

ELRINGKLINGER AND THE CAPITAL MARKETS

PAGE

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

• 22 Group Income Statement
• 23 Group Statement of Comprehensive Income
• 24 Group Statement of Financial Position
• 26 Group Statement of Changes in Equity
• 28 Group Statement of Cash Flows
• 29 Group Sales by Region
• 30 Segment Reporting
• 32 Notes to the Interim Consolidated Financial Statements
• 39 Responsibility Statement

MACROECONOMIC CONDITIONS AND BUSINESS ENVIRONMENT

Moderate growth in global economy

Picking up the pace slightly, the world economy maintained its modest recovery in the third quarter of 2017. The eurozone proved to be particularly robust in terms of economic performance. With the European Central Bank continuing to embrace a loose monetary policy, the real economy maintained its forward momentum on the back of more extensive lending and an improved labor market. Germany, too, recorded solid economic growth, despite the dampening effects on exports of a steep rise in the euro against many of the other currencies, most notably the US dollar. In the United States, meanwhile, growth was underpinned by a robust labor market and more expansive investments. Benefiting from substantial foreign trade and supportive measures by the country's central government, the Chinese economy saw just a slight dip in its rate of growth.

G D P G R OW T H R AT E S

Year-on-year change in %	1st Quarter 2017	2nd Quarter 2017	3rd Quarter 2017
Germany	1.9	2.1	2.3
Eurozone	2.0	2.3	2.3
USA	2.0	2.2	2.2
Brazil	-0.4	0.3	1.8
China	6.9	6.9	6.7
India	6.1	5.7	6.4
Japan	1.5	1.4	1.7

Source: HSBC (October 2017)

Sustained growth in global car market

Although the pace of growth recorded by global car markets decelerated slightly in the first nine months of 2017 when compared with the same period a year ago, the sustained upward trend within the industry as a whole fundamentally remained intact.

New car registrations in Western Europe continued to expand, although the substantial rate of growth seen in the first quarter (around 8%) proved impossible to match in the subsequent quarters. With the exception of the United Kingdom (-3.9%), all top markets saw an increase in sales volumes over the course of the first nine months. The German car market was more dynamic than originally anticipated. Alongside favorable labor market conditions, the latest trade-in incentives introduced by vehicle manufacturers with regard to older diesel-powered cars are likely to have had a positive impact. The slight decline in domestic car production by around 2% – and the associated downturn in German exports by approx. 1% – during the first nine months of 2017 clearly illustrates the growing trend towards overseas production within the automotive industry.

The light vehicle market in the United States trended slightly lower in the first nine months of 2017, albeit from a high base. Having said that, the market showed signs of substantial growth again in September, fueled by strong demand for replacement vehicles in the wake of the US hurricanes.

China's car market achieved solid single-digit growth, having expanded in double figures during the previous year with the support of tax incentives for smaller vehicles. Brazil and Russia recorded double-digit growth rates in the third quarter of 2017. In doing so, they cemented their trend reversal on their way to becoming growth markets again.

NEW CAR REGISTRATIONS JAN. – SEP. 2017 Year-on-year change (in %)

European truck market loses momentum

Having enjoyed sustained buoyancy in the two previous years, the European commercial vehicle market lost much of its forward momentum over the course of 2017. According to figures published by the European manufacturers' federation ACEA, around 230,000 new mid-sized and heavy trucks (> 3.5 t) were registered in the first nine months of 2017, which corresponds to a slight gain of 0.8% compared to the same period a year ago. In this context, the key markets developed along different lines. Italy took the lead with doubledigit growth, while the heavyweights – Germany (- 1.6%) and the United Kingdom (- 2.7%) – recorded a slight year-on-year decline in the first nine months of the year.

The North American commercial vehicle market moved in the opposite direction, recording growth in the segment of Class 6–8 trucks during the third quarter of 2017 for the first time since 2015.

Source: VDA (October 2017)

SIGNIFICANT EVENTS

Amalgamation of two subsidiaries

Effective from January 1, 2017, the sales company ElringKlinger North America, Inc., with its registered office in Plymouth, USA, was merged into ElringKlinger Automotive Manufacturing, Inc., with its registered office in Southfield, USA. The two companies were brought together at a single site for the purpose of reducing administrative processes and creating more efficient operational structures.

Interest acquired in Hofer

Effective from March 1, 2017, ElringKlinger AG acquired 27.0% of the ownership interests in hofer AG, with its registered office in Nürtingen, Germany. Effective from February 6, 2017, ElringKlinger AG acquired 53.0% of the ownership interests in the aforementioned entity's subsidiary hofer powertrain products GmbH, also with its registered office in Nürtingen, Germany. Effective from March 23, 2017, ElringKlinger AG acquired 53.0% of the interests in hofer powertrain products UK Ltd., with its registered office in Warwick, United Kingdom.

The hofer Group is a skilled automotive developer of systems used within the exhaust tract. In acquiring the ownership interest, ElringKlinger will benefit from the aforementioned innovatory abilities, particularly in the development and production of alternative drive technologies.

Extension of Management Board contracts brought forward

At its meeting on March 24, 2017, the Supervisory Board agreed to extend by five years, i.e., up to January 31, 2023, the contracts with Management Board members Dr. Stefan Wolf and Theo Becker, which were scheduled to end at the beginning of 2018. In taking this approach, it has ensured that the company will benefit at an early stage from managerial continuity at the most senior level. Dr. Wolf has held a seat on the Management Board since January 2005 and was appointed its Chairman/CEO in March 2006. Becker joined the Management Board in January 2006 and is responsible for operations.

Establishment of a new subsidiary

ElringKlinger Chongqing Ltd., with its registered office in Chongqing, China, was established effective from April 10, 2017. ElringKlinger AG holds 100.0% of the interests in this new subsidiary.

Klaus Eberhardt becomes new Chairman of the Supervisory Board

As announced at the Supervisory Board meeting on March 24, 2017, Prof. Walter H. Lechler stepped down from his post as Chairman of the Supervisory Board of ElringKlinger AG for reasons of age at the end of the Annual General Meeting on May 16, 2017, and resigned from the Supervisory Board. Subsequent to the Annual General Meeting the members of the Supervisory Board elected Klaus Eberhardt, who has been a member of the Supervisory Board of ElringKlinger AG since May 2013, as the new Chairman of the Supervisory Board. Prof. Walter H. Lechler was elected as Honorary Chairman of the Supervisory Board. Andreas Wilhelm Kraut was appointed as a replacement member to fill the vacant seat on the Supervisory Board. He is Chief Executive Officer of weighing technology specialist Bizerba SE & Co. KG, with its registered office in Balingen, Germany.

There was also a change to the company's staff representation on the Supervisory Board: as a replacement for Ernst Blinzinger, who vacated his seat on the Supervisory Board at the end of the Annual General Meeting in May 2017, Gerald Müller of IG Metall Reutlingen-Tübingen was appointed to the Supervisory Board of ElringKlinger AG on the basis of a resolution passed on August 3, 2017.

SALES AND EARNINGS PERFORMANCE

ElringKlinger benefits from sustained buoyancy in car markets

On the back of a robust performance by the global automobile industry, ElringKlinger succeeded in further expanding Group sales in the third quarter of 2017. Recording year-on-year growth of 7.9%, the Group saw its sales revenue increase to EUR 403.6 (374.2) million in the third quarter of 2017. This figure includes revenue of EUR 1.4 million attributable to hofer powertrain products GmbH, Nürtingen, Germany, an entity acquired in 2017. The negative effects of foreign currency translation, particularly with regard to the Chinese yuan, the US dollar, and the Swiss franc, amounted to EUR -10.9 million in the quarter under review. In the first nine months as a whole Group sales revenue rose by 8.2% to EUR 1,244.7 (1,150.3) million.

Sales revenue up substantially year on year in many regions

ElringKlinger saw revenues expand in all of its sales regions over the course of the first nine months of 2017. The most pronounced gain was attributable to the NAFTA region, where Group revenue rose by EUR 11.1 million year on year to EUR 80.6 (69.5) million

FACTORS INFLUENCING GROUP REVENUE

EUR million	3rd Quarter 2017	3rd Quarter 2016	Change in EUR m	in %	9 months 2017	9 months 2016	Change in EUR m	in %
Group revenue	403.6	374.2	+29.4	+7.9	1,244.7	1,150.3	+94.4	+8.2
of which FX effects			-10.9	-2.9			-11.8	-1.0
of which acquisitions			+1.4	+0.4			+7.3	+0.6
of which organic			+38.9	+10.4			+98.9	+8.6

in the third quarter and by EUR 28.2 million year on year to EUR 247.1 (218.9) million in the first nine months. ElringKlinger's plant in Mexico, in particular, recorded another substantial increase in sales revenue. Additionally, the production companies in the United States saw aggregate revenue expand, despite the regional decline in auto sales. Overall, the revenue contribution made by the NAFTA region was up at 19.9% (19.0%).

The sales region covering Asia-Pacific performed similarly well, although the third quarter saw a slight slowdown in the dynamic rate of growth recorded during the first half. Solid single-digit growth in new car registrations prompted a rise in demand. In conjunction with strong currency effects, sales revenue improved by 6.1% to EUR 79.5 (74.9) million. In the first nine months of 2017 Group revenue in this sales region rose by 11.5% to EUR 236.3 (211.9) million. The share of the Asia-Pacific region in total Group revenue now stands at 19.0% (18.4%).

Markets in the region covering South America and Rest of the World developed well, with new car registrations increasing significantly in Brazil. This solid market performance was reflected in revenues generated by ElringKlinger's local production company. With sales revenue totaling EUR 57.3 (45.6) million, this region managed to grow by as much as 25.7% year on year in the first nine months. In the quarter under review sales revenue grew by 14.3% to EUR 20.0 (17.5) million.

In Europe (including Germany), ElringKlinger benefited from a number of new product rollouts, which resulted in solid revenue growth for many of the Group's companies. In total, sales revenue increased by 4.3% to EUR 387.6 (371.5) million in the Rest of Europe (excluding Germany) over the course of the first nine months; in the third quarter of 2017 sales revenue was up by 4.0% at EUR 118.2 (113.7) million. At +6.8%, Germany managed to expand sales revenue at a slightly faster rate, taking the figure to EUR 105.4 (98.7) million. In the first nine months, domestic sales revenue grew by 4.6% to EUR 316.3 (302.4) million. Correspondingly, the domestic share of Group sales revenue stood at 25.4% (26.3%) at the end the first nine months; the proportion of foreign sales increased further to 74.6% (73.7%).

Gradual improvement for Original Equipment

All divisions within the Original Equipment segment recorded strong sales during the third quarter and the first nine months. Products supplied by the Lightweighting/Elastomer Technology, Specialty Gaskets, and Shielding Technology divisions were in particularly high demand. Project-driven business in the area of Exhaust Gas Purification, which is exposed to larger fluctuations in revenue due to its emphasis on projects, produced positive revenue and earnings contributions in the quarter under review. In total, the Original Equipment segment saw revenue increase by 8.6% to EUR 1,028.9 (947.8) million in the period from January to September 2017. With a gain of 7.3%, taking the figure to EUR 331.1 (308.5) million, the third quarter also made a strong contribution to revenue growth.

Measures aimed at raising efficiency levels in the Shielding Technology division progressed well in the third quarter, having been delayed temporarily in the second quarter of 2017 due to an ERP system alignment at the Swiss production site. In the period under review, the focus was on transferring machinery and

SALES REVENUE BY SEGMENT JAN. – SEP. 2017 (prior year) in %

Industrial Parks	0.3 (0.3)
Services	0.6 (0.6)
Engineered Plastics	6.8 (6.8)
Aftermarket	9.7 (9.9)

Original Equipment 82.7 (82.4)

tools to the Spanish production company in order to further scale down revenue volumes at the Swiss site and also for the purpose of manufacturing in close proximity to customers. In the first nine months of 2017 the division already managed to slightly reduce its fixed costs, which remain substantial, as efforts to migrate machinery and tools to Hungary, France, and Spain moved forward. ElringKlinger anticipates that a determined and step-by-step approach to implementing measures aimed at streamlining costs in the coming years will bring about a further reduction in fixed operating costs. This, in turn, will allow the division in question to consistently raise its profitability to the level seen within the Group as a whole.

Sales revenue in the E-Mobility division rose by EUR 4.6 million year on year, taking the figure to EUR 12.3 (7.7) million in the first nine months of 2017. As in the first half, growth was driven primarily by revenues from hofer powertrain products GmbH, which has been fully consolidated since February. In addition, more buoyant demand for electric vehicles prompted an increase in the volume of ElringKlinger products requested as part of customers' production scheduling. As a result of the substantial increase in revenue, the loss before interest and taxes (negative EBIT) within the E-Mobility division was scaled back to EUR 2.6 (4.0) million in the first nine months of 2017.

In total, Original Equipment managed to lift segment earnings before interest and taxes by 4.7% in the third quarter. The rate of expansion in earnings before interest and taxes in the first nine months was more pronounced than that of revenue growth, up by 11.4% to EUR 68.3 (61.3) million.

Continued success for Aftermarket business

ElringKlinger's classic Aftermarket business is centered around spare parts such as cylinder-head gaskets and complete gasket sets for vehicle repairs. Its established sales channels currently cover most of Europe. Its key sales markets include Eastern Europe, the Middle East, and Germany. The Aftermarket segment generated revenue of EUR 120.5 (114.1) million in the period from January to September 2017, which was 5.6% more than in the same period a year ago. The third quarter of 2017 saw revenue increase by 12.0% to EUR 40.2 (35.9) million. Despite geopolitical tensions in many of the markets covered, Eastern and Western Europe as well as Africa produced the most pronounced growth in absolute terms. At EUR 24.6 (24.2) million, segment earnings before interest and taxes for the first nine months were up slightly on the prior-year figure; of this total EUR 8.1 (7.6) million was attributable to the third quarter.

Profit margin up substantially in Engineered Plastics segment

The Engineered Plastics segment manufactures and supplies products used in the automotive industry, in the field of mechanical engineering, and in the chemical and plant engineering sector. Its core competency is centered around processing high-performance plastics (e.g., PTFE, PFA, PVDF), which also includes the associated applications technology.

The third quarter of 2017 saw the Engineered Plastics segment expand its revenue to EUR 28.9 (25.8) million; in the first three quarters of the current financial year segment revenue rose by 9.4% to EUR 84.7 (77.4) million. As in the previous quarters, revenue growth was driven not only by products destined for the automotive and mechanical engineering industries but also by those used in the energy sector and by power stations.

Having completed major relocation measures in the previous year, the segment recorded a strong quarterly performance in earnings. Segment earnings before interest and taxes rose faster in relation to segment revenue, taking the total to EUR 13.8 (10.2) million in the first nine months of 2017.

Stable revenue contribution from Industrial Parks

In the first nine months of 2017, revenue from the industrial parks in Idstein, Germany, and Kecskemét, Hungary, amounted to EUR 3.2 (3.5) million. Ongoing refurbishment measures at the Idstein industrial park had an impact on segment earnings. As a result, the Group recorded a slight loss of EUR 0.2 (-0.2) million in this segment in the first nine months of 2017.

Services segment at solid prior-year level

Elring Klinger Motortechnik GmbH, Idstein, Germany, ElringKlinger Logistic Service GmbH, Rottenburg/ Neckar, Germany, and KOCHWERK Catering GmbH, Dettingen/Erms, Germany, together generated revenue of EUR 7.5 (7.4) million in the Services segment during the period from January to September 2017. At EUR 1.1 (1.6) million, segment earnings before interest and taxes were slightly below the figure posted a year ago.

Expansion of workforce at international sites

In response to strong revenue growth, the Group had to make appropriate adjustments to its personnel base at many of its international sites. In percentage terms, the NAFTA region accounted for the biggest jump in staffing levels in the 2017 financial year to date, followed by the region covering South America and Rest of the World. Additionally, the Group adjusted its headcount in line with progress made with production relocations from Switzerland to Hungary. In total, the number of people employed abroad rose to 5,614 or 59.9% (Dec. 31, 2016: 58.6%). At the end of the quarter, a further 3,762 employees were based at ElringKlinger's domestic sites, close to 6% more than at the end of 2016. As a result of significant growth abroad, the proportion of staff employed in Germany now stands at 40.1% (Dec. 31, 2016: 41.4%).

Gross profit margin up at close to 26%

The cost of sales within the ElringKlinger Group amounted to EUR 922.8 (861.5) million in the first nine months of 2017, of which EUR 299.9 (280.6) million was attributable to the third quarter. A sizeable proportion of this increase in costs is due to current developments within the area of commodity prices. In some cases, supply-side prices within the procurement markets were substantially higher in the reporting quarter than in the same period a year ago and in the preceding three-month period. This applies in particular to high-grade steels, with an increase in alloy surcharges, as well as steel as a raw material, which has become increasingly expensive following anti-dumping measures introduced by the EU with regard to steel imports and the thus associated reduction in supply. The cost of sales nevertheless increased at a slower rate in relation to revenue in the respective periods under review. The gross profit margin improved to 25.7% (25.0%) in the third quarter and to 25.9% (25.1%) in the first nine months of 2017.

Research and development expense remains high

Expenditure on research and development (R&D) was down temporarily year on year in the third quarter, at EUR 15.9 (17.0) million. In the nine-month period, however, R&D expenditure rose by 6.0% to EUR 53.4 (50.4) million. Overall, taking into account R&D costs of EUR 2.8 million capitalized as intangible assets, ElringKlinger channeled EUR 56.2 (54.4) million into development projects in the first three quarters of 2017. Of this total, an amount of EUR 17.4 (18.3) million was attributable to the third quarter. Calculated in relation to sales revenue, the R&D ratio stood at 4.3% (4.9%) in the third quarter and at 4.5% (4.7%) in the period covering the first nine months.

Selling expenses rose by EUR 5.0 million to EUR 34.4 (29.4) million in the third quarter. As in the second quarter of 2017, more expansive business in the NAFTA region prompted a temporary increase in HR and freight costs. In the period from January to September 2017 selling expenses totaled EUR 103.5 (86.2) million.

EBITDA rises by a good 9%

ElringKlinger managed to increase earnings before interest, taxes, depreciation, and amortization (EBITDA) by EUR 4.3 million to EUR 59.4 (55.1) million in the third quarter of 2017. In the first nine months of 2017 the Group saw EBITDA rise by as much as 9.4% to EUR 182.5 (166.8) million. Reflecting the Group's consistently high investment ratio, amortization and depreciation of intangible assets and property, plant, and equipment increased from EUR 69.6 million to EUR 74.9 million. This figure includes effects associated with the purchase price allocation amounting to EUR 3.5 (3.6) million. The third quarter of 2017 accounted for EUR 0.9 (1.4) million. Thus, earnings before interest and taxes (EBIT) rose by 10.8% to EUR 107.7 (97.2) million in the period from January to September 2017, of which EUR 33.9 (31.2) million was attributable to the third quarter. Group EBIT before purchase price allocation was EUR 111.1 (100.8) million; in the period from July to September 2017 it was EUR 34.8 (32.6) million. Correspondingly, the EBIT margin before purchase price allocation was 8.9% (8.8%) in the first nine months and 8.6% (8.7%) in the third quarter of 2017.

EBIT PRE PURCHASE PRICE ALLOCATION JAN. – SEP. 2017 in € million

Net finance cost up after substantial foreign exchange losses

As was the case in the second quarter of 2017, the strength of the euro resulted in significant exchange differences in the period under review. Foreign exchange losses rose by EUR 7.0 million compared to the same quarter a year ago. After offsetting foreign exchange gains, the net result of currency translation in the third quarter of 2017 was EUR -4.2 (0.0) million; for the period from January to September 2017 it stood at EUR -8.6 (-2.5) million. As a result, net finance costs of EUR 8.0 (3.6) million and EUR 19.2 (12.5) million respectively had a dampening effect on earnings before taxes, which amounted to EUR 25.9 (27.6) million in the third quarter and EUR 88.4 (84.7) million in the first nine months.

Income tax expenses totaled EUR 8.7 (7.8) million in the period from July to September 2017 and EUR 25.9 (23.4) million in the period from January to September 2017. At 29.3% (27.6%), the computed tax rate for the first nine months of 2017 was thus slightly higher than the figure recorded in the previous year.

Net income at EUR 17 million

Due to higher foreign exchange losses and income tax expenses, net income totaled EUR 17.2 (19.9) million in the third quarter. However, the strong first quarter of 2017 helped to lift net income to EUR 62.5 (61.3) million in the nine-month period, a year-on-year increase of 2.0%.

Net income attributable to non-controlling interests, mainly consisting of non-controlling interests in ElringKlinger Kunststofftechnik GmbH and the Hug Group, rose to EUR 2.9 (2.5) million in the period from January to September 2017. Eliminating these interests, net income attributable to the shareholders of ElringKlinger AG increased by 1.4% to EUR 59.6 (58.8) million. The third quarter accounted for EUR 16.1 (19.0) million.

As of September 30, 2017, earnings per share stood at EUR 0.94 (0.93). However, at EUR 0.25 (0.30), the third quarter failed to match the prior-year figure.

P R O F I T AT T R I B U TA B L E T O S H A R E H O L D E R S OF ELRINGKLINGER AG JAN. – SEP. 2017 in € million

FINANCIAL POSITION AND CASH FLOWS

The financial position and cash flows of the ElringKlinger Group remained solid as of September 30, 2017, underpinned by an equity ratio of 44.1% and positive operating cash flow of EUR 63.6 million in the first nine months of 2017.

Total assets up as business expands

As of September 30, 2017, total assets accounted for by the ElringKlinger Group rose to EUR 2,006.0 million. This represents an increase of EUR 127.8 million or 6.8% compared to the 2016 year-end figure (EUR 1,878.2 million). The key factors are outlined below:

The expansion in property, plant, and equipment by EUR 18.2 million compared to the end of 2016 is a reflection of the Group's significant investment activities as a result of solid order intake. The increase in inventories and trade receivables is also attributable to more buoyant business. Tool-related inventories also expanded over the course of the year. This is due to the large number of new product rollouts, for which corresponding tools are required. Upon their completion, these tools are accounted for in inventories until they are sold on to the customer.

The acquisition of an equity stake in hofer, which was concluded in the first quarter of 2017, also contributed to an increase in total assets. The interests in hofer AG (27.0%) have been accounted for as an investment using the equity method and are recognized in the Group's non-current assets; as of September 30, 2017, this item stood at EUR 28.1 million. hofer powertrain products GmbH (ElringKlinger's interest: 53.0%), which was fully consolidated as of February 6, added EUR 5.7 million to the Group's total assets.

Due to the currency translation of balance sheets relating to Group companies outside the euro area, the majority of balance sheet carrying amounts were slightly lower in the second and third quarter of 2017.

Solid equity ratio of 44%

The direction taken by equity in the first nine months of 2017 was influenced to a large extent by the effects of foreign currency translation. As a result of foreign exchange translation differences, other reserves were reduced by EUR 32.8 million compared to the yearend 2016 and by EUR 14.2 million compared to the end of the previous quarter.

EUR million	Sep. 30, 2017	June 30, 2017	Dec. 31, 2016
Intangible assets	202.4	207.8	212.4
Property, plant and equipment	935.5	928.8	917.3
Other	68.8	67.7	38.2
Non-current assets	1,206.7	1,204.3	1,167.9
Inventories	374.8	354.9	328.3
Trade receivables	333.0	329.6	299.5
Other	91.5	99.4	82.5
Current assets	799.3	783.9	710.3
Total assets	2,006.0	1,988.3	1,878.2

CURRENT AND NON-CURRENT ASSETS

ElringKlinger AG dividends (EUR 34.2 million) accounted for in the period from January to September 2017 – the majority of which were paid out in the second quarter – also contributed to a reduction in equity by a corresponding amount. The allocation of net income of EUR 62.5 million for the first three quarters had a contrary effect. At the end of the reporting period, equity for the ElringKlinger Group amounted to EUR 884.1 million, which corresponds to 44.1% of total assets. The equity ratio remains well within the range of 40 to 50% targeted by the Group.

Increase in net financial debt

The increase in non-current and current financial liabilities by EUR 109.3 million to EUR 687.5 (Dec. 31, 2016: 578.2) million as of September 30, 2017, includes the financing of the purchase price payment in respect of the investment in hofer during the first quarter (EUR 27.6 million). Furthermore, the dividend paid out to shareholders of ElringKlinger AG (EUR 31.7 million) in the second quarter was covered by interim financing in the form of short-term bank loans.

The Group's net debt (current and non-current financial liabilities less cash) amounted to EUR 644.4 (Dec. 31, 2016: 538.8) million as of September 30, 2017.

On July 14, 2017, ElringKlinger placed a Schuldscheindarlehen (loan granted to the company against a form of promissory note) covering a volume of EUR 200 million. These funds were used primarily for the purpose of refinancing existing Group liabilities. This represents an additional financial instrument deployed by ElringKlinger to diversify Group financing at attractive terms; it also provides financial room for maneuver when it comes to the strategic development of the Group.

CURRENT AND NON-CURRENT LIABILITIES

EUR million	Sep. 30, 2017	June 30, 2017	Dec. 31, 2016
Equity	884.1	883.6	886.4
Provisions for pensions	135.3	135.7	136.6
Non-current financial liabilities	488.4	342.9	320.8
Other	31.9	32.4	33.9
Non-current liabilities	655.6	511.0	491.3
Trade payables	112.1	113.9	103.2
Current financial liabilities	199.1	324.9	257.4
Other	155.0	154.9	139.9
Current liabilities	466.2	593.7	500.5

Cash flow impacted by higher working capital

In the first nine months of 2017 the ElringKlinger Group generated EUR 63.6 (118.1) million in net cash from operating activities, of which EUR 13.0 (46.3) million was attributable to the third quarter.

Cash declined visibly due to the increase in working capital (inventories and trade receivables), which was necessary in response to growth. As the expansion in inventories and trade receivables was not matched by a corresponding increase in trade payables, the direction taken by net working capital (working capital less trade payables) both in the third quarter and in the first nine months of 2017 had an adverse effect on cash flows. Additionally, an obligation in the low single-digit millions following investigations into an issue dating back several years in connection with regulations governing market competition, which had been accounted for in the fourth quarter of 2016, was paid during the third quarter of 2017. By contrast, the "change in inventories, trade receivables/payables, and other assets/liabilities not attributable to investing or financing activities" reduced operating cash flow by EUR 78.5 million in the first nine months of the year. During the same period of the previous year, this cash outflow had been substantially lower at just EUR 12.9 million. The reporting quarter accounted for EUR -28.6 (2.5) million of the total.

CASH FLOW FROM OPERATING ACTIVITIES JAN. – SEP. 2017 in € million

"Other non-cash expenses and income" mainly include adjusting items relating to currency effects.

Disciplined approach to investment

In the first nine months of 2017, the ElringKlinger Group expended EUR 114.1 (116.6) million on property, plant, and equipment as well as investment property. The investment ratio (capital expenditure on property, plant, and equipment and on investment property relative to Group sales revenue) of 9.2% was considerably lower than in the previous year (10.1%).

In the third quarter, a total of EUR 42.1 (43.0) million was invested in property, plant, and equipment as well as investment property. This corresponds to a ratio of 10.4% (11.5%).

One of the focal points of investment spending was centered around expansion measures for the purpose of raising capacity levels and for new ramp-ups. Capital expenditure was directed at the majority of the Group's production companies; the largest projects were attributable to the subsidiaries in North America and Hungary as well as the corporate headquarters in Dettingen/Erms.

After around twelve months of construction work, a new logistics building used by the Lightweighting/ Elastomer Technology division commenced operations in Dettingen/Erms during the third quarter of 2017. Alongside the optimization of logistical processes, the investment also involved additional space for production purposes.

Over the course of the first nine months ElringKlinger established a plant in Kecskemét, Hungary, for the manufacture of shielding parts and the ramp-up of production for lightweight door module carriers. Serial production for these lightweight components used in vehicle bodies – the parts are destined for a Tier 1 automotive supplier and will be fitted to a compact-class vehicle produced by a global car maker – is scheduled to commence as from the fourth quarter of 2017. Capital expenditure on production technology was also directed at plants located in the NAFTA region. In Fremont, USA, ElringKlinger Silicon Valley, Inc., commenced production of innovative cockpit cross-car beams as from mid-2017. The Canadian site in Leamington invested in new production lines for the manufacture of plastic housing modules.

In January, the Group spent EUR 27.6 million on the acquisition of hofer AG (accounted for using the equity method) and its subsidiary hofer powertrain products GmbH (fully consolidated), a deal closed in the first quarter of 2017.

In total, net cash used in investing activities amounted to EUR 147.7 (127.5) million in the first nine months of 2017; in the third quarter net cash used in investing activities totaled EUR 44.5 (44.5) million, i.e. unchanged year on year.

Operating free cash flow in negative territory

Due to the factors outlined above, operating free cash flow (cash flow from operating activities less cash flow from investing activities, adjusted for payments in respect of acquisitions and investments in financial assets) deteriorated to EUR -53.3 (-3.9) million in the first nine months of 2017. In the third quarter, too, the Group recorded negative operating free cash flow of EUR -31.5 (prev. year: +1.8) million.

Temporary expansion of financing activities

In the first nine months of 2017 the Group covered part of its financing requirements from operating cash flow. Additionally, ElringKlinger recorded a net inflow of funds from the change in long- and short-term loans totaling EUR 124.9 (45.7) million in the first three quarters of 2017. Of this cash inflow, a total of EUR 24.6 (prev. year: outflow of 27.8) million was attributable to the third quarter.

In the first nine months of 2017 net cash from financing activities totaled EUR 90.6 (7.8) million; in the third quarter it stood at EUR 22.3 (-27.8) million.

1 Investments in property, plant and equipment, investment property and intangible assets

Incl. payments for investments accounted for using the equity method

3 Dividends paid to shareholders and to non-controlling interests

CHANGES IN CASH JAN. – SEP. 2017 in € million

OPPORTUNITIES AND RISKS

ElringKlinger is closely monitoring the separatist movement in Catalonia. In June, the Catalan government announced an independence referendum to be held on October 1, 2017. On September 6, 2017, the referendum was approved by the Catalan parliament. As a result of these events, the political situation within this autonomous region of Spain has become more unstable. Should the situation escalate further, e.g., in the form of a general strike, the Group's site in Reus, Spain, may also be adversely affected.

Beyond this, an assessment of opportunities and risks for the ElringKlinger Group in respect of the third quarter of 2017 shows that there were no significant changes to the details discussed in the 2016 Annual Report of the ElringKlinger Group (page 88 et seqq.).

There are currently no identifiable risks that might jeopardize the future existence of the Group as a going concern, either in isolation or in conjunction with other risk factors.

The report on opportunities and risks from the 2016 Annual Report can also be accessed on the website of ElringKlinger at www.elringklinger.de/ar2016/ report-on-opportunities-and-risks.

REPORT ON EXPECTED DEVELOPMENTS

Outlook – Market and Sector

Outlook for the world economy remains favorable

The short-term prospects for the global economy remain favorable, according to recent estimates by the International Monetary Fund (IMF). In its World Economic Outlook issued in October 2017 the IMF does not discount the possibility that global recovery will continue to accelerate. In the medium term, however, it points to risks associated with geopolitical uncertainties and, possibly, a deterioration in the terms and conditions of financing.

The eurozone is expected to see a further improvement in the labor market and national budgets. The global upturn is also likely to be supported by the economies of Japan and Canada. In the United States, by contrast, uncertainty surrounding tax reforms announced by the government – among other factors – is likely to contribute to a slight slowdown in economic performance. The same applies to the United Kingdom and India.

G D P G R OW T H P R OJ EC T I O N S

Year-on-year change
in %	2016	Projections 2017	Projections 2018

World	3.2	3.6	3.7
Advanced economies	1.7	2.2	2.0
Emerging Market and Developing Economies	4.3	4.6	4.9
Germany	1.9	2.0	1.8
Eurozone	1.8	2.1	1.9
USA	1.5	2.2	2.3
Brazil	-3.6	0.7	1.5
China	6.7	6.8	6.5
India	7.1	6.7	7.4
Japan	1.0	1.5	0.7

Continued momentum in car markets

The outlook presented by Germany's automotive industry association (Verband der Automobilindustrie – VDA) points to a relatively solid performance for the key markets in 2017 as a whole. On the back of an encouraging trend seen during the year to date, the VDA revised upward its original outlook for Western Europe, Russia, and Brazil in September.

In Europe, an improvement in labor markets and positive consumer sentiment, together with trade-in incentives for more environmentally friendly vehicles, should provide fresh impetus for demand. Germany and France, in particular, are now expected to put in a more dynamic performance. At the same time, the upward trend in Eastern Europe as well as in Spain and Italy is likely to continue. As for the United States, the VDA predicts a trend reversal fueled in part by less favorable terms for consumer loans; at the beginning of the year the VDA had issued a forecast that suggested this market would remain stable. The outlook for China's car market had already been downgraded marginally in June in response to a slightly weaker second quarter. The world's largest single market nevertheless remains on track for an all-time annual record of an estimated 24.1 million new vehicles.

M A R K E T F O R EC A S T N E W PA S S E N G E R V E H I C L E S 2 0 17

Year-on-year change in %	Jan. –Dec. 2017
Western Europe	+3%
Germany	+4%
USA	-4%
Brazil	+5%
China	+2%

Source: Verband der Automobilindustrie (VDA)

Commercial vehicle market: slowdown in Europe, improvement in North America

The outlook for 2017 as a whole points to a further slowdown in Europe's commercial vehicle market. Industry experts predict a downturn in demand in the fourth quarter, as a result of which the total annual volume is expected to remain stable at a level comparable to that seen in the previous year.

In North America, meanwhile, demand for mid-sized and heavy trucks is likely to improve further. An increase in order intake by manufacturers suggests a robust performance in the fourth quarter, particularly with regard to Class 8 trucks. Overall, however, market performance in 2017 is still likely to fall slightly short of the previous year's figure.

Outlook – Company

Robust order intake and strong order backlog

Given the Group's consistently solid performance in terms of incoming orders, ElringKlinger can look forward to sustained organic revenue growth in the quarters to come. At EUR 381.0 (383.7) million, order intake was down 0.7% compared to the same quarter a year ago. However, taking currency effects into account, the volume of incoming orders was up markedly by EUR 23.9 million or 6.2%.

As of September 30, 2017, order backlog increased by EUR 81.8 million or 9.1% year on year to EUR 976.5 (894.7) million; adjusted for currencies, it rose by as much as EUR 106.0 million or 11.8%.

Dynamic revenue growth

With global vehicle production expanding by 3%, ElringKlinger also generated visible growth in the period under review. In the first nine months the Group recorded organic revenue growth of close to 9%, thereby outpacing the markets by around six percentage points. The fourth quarter is expected to see sustained growth, albeit at a less pronounced level. This is due to a slightly more restrained market outlook for the fourth quarter. Against the backdrop of differing projections for the respective regions, ElringKlinger remains confident that it can exceed the global market growth rate by 2 to 4 percentage points as regards organic revenue growth. Additionally, the Group anticipates that hofer powertrain products GmbH, fully consolidated in 2017 for the first time, will contribute revenue in the mid-singledigit million range.

Restrained earnings performance

As regards earnings, the first three quarters have shown that the Group's performance was not as dynamic as originally anticipated in terms of the internal baseline scenario outlined at the beginning of the year. External influences such as the large volume of components requested by customers in the NAFTA region as part of their production scheduling as well as internal factors such as the implementation of SAP at the Swiss site had a dampening effect on earnings performance in respect of the baseline scenario. As a result of this, at 8.9%, the EBIT margin (before purchase price allocation) is currently at the lower end of the range of around 9 to 10% anticipated for the annual period as a whole.

Assuming that the fourth quarter does not produce any macroeconomic turbulence, e.g., due to an escalation of the conflict in North Korea, and that the situation in Catalonia is not exacerbated, e.g., in the form of a general strike, the Group continues to anticipate that it will meet the target range of around 9 to 10% with regard to its EBIT margin (before purchase price allocation).

Other financial indicators

The Group's restrained earnings performance also has an impact on other key financial indicators used for guidance purposes. Operating free cash flow is only expected to be just within positive territory if the final quarter of the financial year proves particularly buoyant. From today's perspective, it would appear more probable that operating free cash flow will be positioned just below the previous year's figure of around EUR -4 million (previously: slightly positive), despite a disciplined approach to investments. Net working capital is influenced to a large extent by inventories – primarily tools held for customers – and receivables. Under normal circumstances, the ratio (in % of sales revenue) is still expected to be below the prior-year level. In numerical terms, this means that ROCE is likely to deteriorate marginally (previously: slight improvement compared to the previous year). Due to a disciplined approach, the investment ratio with regard to property, plant, and equipment and investment property will be lower than in the previous year; the equity ratio should remain well within the target range of 40 to 50%.

Dettingen/Erms, November 7, 2017 The Management Board

Chairman/CEO

Dr. Stefan Wolf Theo Becker Thomas Jessulat

ELRINGKLINGER AND THE CAPITAL MARKETS

General bullishness in stock markets continues

Having recorded a slight dip in performance during the summer months of July and August due to seasonal factors, international stock markets resumed the positive trend seen at the beginning of the year as the end of the third quarter of 2017 drew closer. This produced further gains within the respective stock market indices. The upturn was particularly apparent in the United States, where the Dow Jones, Nasdaq, and S&P 500 reached historic highs. Germany's blue chip index, the DAX, achieved a gain of around 4% in the third quarter of 2017, thus remaining hard on the heels of its all-time high recorded in June this year.

Sustained bullishness within the stock markets was attributable, among other things, to the situation in Germany, the eurozone, and the United States, where the overall economic outlook remained favorable. Other positive factors in the third quarter of 2017 included the outcome of Germany's general election, which had a stabilizing and calming effect on the markets. At the same time, a return to higher oil prices and flourishing M&A business provided fresh impetus. By contrast, the strength of the euro, which rose to a two-year high in relation to the US dollar, as well as persistent geopolitical risks and news emerging in July of alleged collusion within the German automobile industry merely had a temporary impact on stock market performance in the third quarter of 2017.

ElringKlinger stock closes at EUR 15.77 after turbulent third quarter

Having completed the year of trading at EUR 15.88 in 2016, ElringKlinger's stock continued to rally in January 2017, thus remaining on the path of recovery established as early as the end of last year. In February, the company's share price consolidated at a level of EUR 16. A benign trading environment and the announcement of the Group's financial results for fiscal 2016, which were well received by the capital markets, gave ElringKlinger's stock further growth impetus at the end of March.

E LRING KLINGER'S SHARE PRICE PERFORMANCE (XETRA) SINCE JANUARY 1, 2017 (INDEXED, DEC. 30, 2016 = 100%) compared with DAX and SDAX

In April the company's share price stood at around EUR 18, thus initially retaining the position it had established for itself at the end of March. Following the presentation of results for the first quarter of 2017 at the beginning of May, ElringKlinger's stock was propelled to EUR 20.14, its highest level in the year to date. Profit-taking over the following days then resulted in a downward correction in the share price. The stock was unable to make any consistent progress during the remainder of the second quarter of 2017, as a result of which it mainly trended sideways up to the end of June.

During the third quarter of 2017 allegations emerging at the end of July against five German car manufacturers concerning their possible implication in a cartel served to fuel investors' general concern over auto industry stocks, as a result of which trading within this segment was more subdued. In the ensuing days ElringKlinger's share price trended lower amid more pronounced sell-side pressure. The company's financial results for the second quarter of 2017, announced at the beginning of August, prompted a further decline in ElringKlinger's share price, culminating in an annual low of EUR 14.10 for the financial year to date. After a solid performance in September that saw August's losses offset in their entirety ElringKlinger shares closed the third quarter of 2017 at EUR 15.77.

Trading volume down in first nine months of 2017

The first nine months of 2017 saw a year-on-year decline in the average daily volume of ElringKlinger shares traded; the figure fell to 180,000 (242,600). Thus, the comparatively high trading volume recorded in 2016 returned to more normal levels in the ninemonth period under review.

Expressed in euros, the average daily trading value of ElringKlinger shares on German stock exchanges was EUR 3,021,900 (4,740,700). ElringKlinger's stock thus offered sufficiently high levels of liquidity for institutional investors to conduct larger share transactions.

Capital market communications driven by IAA

As part of the International Motor Show (IAA) held in Frankfurt/Main in September 2017, ElringKlinger's Investor Relations team engaged in extensive dialogue with investors, analysts, and representatives of the business press, in addition to conducting guided tours of the exhibition stand. Additionally, the company presented its business model to an international audience at a capital market conference hosted by Deutsche Bank in parallel with the trade show.

Under the heading of "e-xperience mobility" ElringKlinger showcased products for all types of drive system at its exhibition booth. Supplying solutions for the full range of drive systems currently available, the company focused in particular on innovative battery and fuel cell technologies, a newly developed e-axle, and lightweight plastic components used in various fields of application. The company's presentation at the IAA also included two show cars that illustrated ElringKlinger's broad scope of knowledge within the area of lightweighting and e-mobility. One of the show cars was dedicated entirely to solutions used in electric drivetrains, an offering made possible by ElringKlinger's investment in engineering specialist hofer. Among the key areas of interest was an e-axle (electric drive unit) developed by hofer powertrain; it combines power electronics, transmission, and electric motor in a single unit.

In total, ElringKlinger took part in four capital market conferences and organized the same amount of road shows over the course of the third quarter of 2017. Its Investor Relations activities saw the company travel to the financial hubs of London, Frankfurt/ Main, and Paris as well as Canada and the East Coast of the United States.

Awards galore for ElringKlinger's Annual Report

ElringKlinger's annual report for the 2016 financial year – featuring "pure mobility" as its central theme – received multiple awards as part of various highly prestigious communication and design competitions.

The League of American Communications Professionals (LACP) honored ElringKlinger's annual report with a silver medal within the Automobiles&Components category of the LACP Vision Awards. Additionally, the company's annual report received a gold medal within the Automotive Parts category of the ARC (Annual Report Competition) coordinated by US awards organization MerComm, Inc. The report was also among the winners of the Automotive Brand Contest within the category of Corporate Publishing.

ELRINGKLINGER STOCK (ISIN DE 0007856023)

	Jan. –Sep. 2017	Jan. –Sep. 2016
Number of shares outstanding	63,359,990	63,359,990
1 Share price (daily closing price in EUR)
High	20.14	24.09
Low	14.10	15.10
Closing price as of September 30	15.77	15.79
Average daily trading volume (German stock exchanges; no. of shares traded)	180,000	242,600
Average daily trading value (German stock exchanges; in EUR)	3,021,900	4,740,700
Market capitalization as of September 30 (EUR millions)	999.2	1,000.5

Xetra trading

ElringKlinger AG — Interim Report Q3 2017

GROUP INCOME STATEMENT

EUR k	3rd Quarter 2017	3rd Quarter 2016	9 months 2017	9 months 2016
Sales revenue	403,594	374,191	1,244,728	1,150,268
Cost of sales	-299,871	-280,618	-922,819	-861,497
Gross profit	103,723	93,573	321,909	288,771
Selling expenses	-34,374	-29,371	-103,477	-86,240
General and administrative expenses	-19,997	-18,238	-61,348	-59,271
Research and development costs	-15,889	-17,038	-53,387	-50,396
Other operating income	3,357	4,219	12,429	11,725
Other operating expenses	-2,899	-1,929	-8,475	-7,402
Operating result	33,921	31,216	107,651	97,187
Finance income	5,503	3,098	14,954	9,192
Finance costs	-13,521	-6,675	-34,176	-21,692
Net finance costs	-8,018	-3,577	-19,222	-12,500
Earnings before taxes	25,903	27,639	88,429	84,687
Income tax expense	-8,733	-7,785	-25,904	-23,392
Net income	17,170	19,854	62,525	61,295
of which: attributable to non-controlling interests	1,108	842	2,937	2,474
of which: attributable to shareholders of ElringKlinger AG	16,062	19,012	59,588	58,821
Basic and diluted earnings per share in EUR	0.25	0.30	0.94	0.93

GROUP STATEMENT OF COMPREHENSIVE INCOME

EUR k	3rd Quarter 2017	3rd Quarter 2016	9 months 2017	9 months 2016
Net income	17,170	19,854	62,525	61,295
Currency translation difference	-14,342	-4,745	-33,847	-6,887
Gains and losses that can be reclassified to the income statement in future periods	-14,342	-4,745	-33,847	-6,887
Remeasurement of defined benefit plans, net	0	0	1,058	0
Gains and losses that cannot be reclassified to the income
statement in future periods	0	0	1,058	0
Other comprehensive income after taxes	-14,342	-4,745	-32,789	-6,887
Total comprehensive income	2,828	15,109	29,736	54,408
of which: attributable to non-controlling interests	927	353	1,926	1,878
of which: attributable to shareholders of ElringKlinger AG	1,901	14,756	27,810	52,530

GROUP STATEMENT OF FINANCIAL POSITION

of ElringKlinger AG, as at September 30, 2017

EUR k	Sep. 30, 2017	Dec. 31, 2016	Sep. 30, 2016
ASSETS
Intangible assets	202,437	212,440	210,600
Property, plant and equipment	935,472	917,318	878,797
Investment property	16,738	15,822	15,738
Financial assets	1,022	1,029	1,052
Investment accounted for using the equity method	28,061	0	0
Non-current income tax assets	95	211	885
Other non-current assets	3,924	4,291	2,580
Deferred tax assets	18,954	16,808	15,570
Non-current assets	1,206,703	1,167,919	1,125,222
Inventories	374,804	328,334	336,059
Trade receivables	332,975	299,522	302,184
Current income tax assets	7,668	3,803	5,982
Other current assets	40,710	39,184	43,080
Cash and cash equivalents	43,093	39,407	47,182
Current assets	799,250	710,250	734,487
	2,005,953	1,878,169	1,859,709

LIABILITIES AND EQUITY
Share capital	63,360	63,360	63,360
Capital reserves	118,238	118,238	118,238
Revenue reserves	700,543	672,635	652,906
Other reserves	-34,607	-2,829	4,612
Equity attributable to the shareholders of ElringKlinger AG	847,534	851,404	839,116
Non-controlling interest in equity	36,564	34,963	33,686
Equity	884,098	886,367	872,802
Provisions for pensions	135,343	136,562	120,431
Non-current provisions	13,561	13,604	14,021
Non-current financial liabilities	488,365	320,813	365,049
Deferred tax liabilities	14,624	16,456	22,311
Other non-current liabilities	3,743	3,834	4,499
Non-current liabilities	655,636	491,269	526,311
Current provisions	16,427	17,279	19,156
Trade payables	112,073	103,228	97,216
Current financial liabilities	199,149	257,392	211,045
Tax payable	20,948	26,151	21,741
Other current liabilities	117,622	96,483	111,438
Current liabilities	466,219	500,533	460,596
	2,005,953	1,878,169	1,859,709

EUR k Sep. 30, 2017 Dec. 31, 2016 Sep. 30, 2016

GROUP STATEMENT OF CHANGES IN EQUITY

	Share	Capital	Revenue
EUR k	capital	reserves	reserves
Balance as of Dec. 31, 2015/Balance as of Jan. 1, 2016	63,360	118,238	628,933
Dividend distribution			-34,848
Change in scope of consolidated financial statements
Purchase of shares from controlling interests
Total comprehensive income			58,821
Net income			58,821
Other comprehensive income
Balance as of Sep. 30, 2016	63,360	118,238	652,906
Balance as of Dec. 31, 2016/Balance as of Jan. 1, 2017	63,360	118,238	672,635
Dividend distribution			-31,680
Change in scope of consolidated financial statements
Total comprehensive income			59,588
Net income			59,588
Other comprehensive income
Balance as of Sep. 30, 2017		118,238	700,543

					Other reserves
Group equity	Non-controlling interests in equity	Equity attributable to the shareholders of ElringKlinger AG	Currency translation differences	Equity impact of controlling interests	Remeasurement of defined benefit plans
855,731	34,102	821,629	44,100	-17	-32,985
-37,696	-2,848	-34,848
521	521
-162	33	-195		-195
54,408	1,878	52,530	-6,291
61,295	2,474	58,821
-6,887	-596	-6,291	-6,291
872,802	33,686	839,116	37,809	-212	-32,985
886,367	34,963	851,404	40,999	-212	-43,616
-34,241	-2,561	-31,680
2,236	2,236
29,736	1,926	27,810	-32,836		1,058
62,525	2,937	59,588
-32,789	-1,011	-31,778	-32,836		1,058
884,098	36,564	847,534	8,163	-212	-42,558

GROUP STATEMENT OF CASH FLOWS

EUR k	3rd Quarter 2017	3rd Quarter 2016	9 months 2017	9 months 2016
Earnings before taxes	25,903	27,639	88,429	84,687
Depreciation/amortization (less write-ups) of non-current assets	25,497	23,917	74,883	69,566
Net interest	3,465	3,623	9,696	9,951
Change in provisions	-959	68	-712	3,988
Gains/losses on disposal of non-current assets	892	127	1,225	291
Profit/loss from investments accounted for using the equity method	387	0	879	0
Dividends from investments accounted for using the equity method	0	0	0	0
Change in inventories, trade receivables and other assets not resulting from financing and investing activities	-34,804	-19,134	-112,154	-48,811
Change in trade payables and other liabilities not resulting from financing and investing activities	6,163	21,625	33,665	35,882
Income taxes paid	-16,630	-9,370	-38,064	-34,608
Interest paid	-2,025	-2,978	-7,343	-8,264
Interest received	63	44	159	167
Other non-cash expenses and income	5,034	711	12,940	5,244
Net cash from operating activities	12,986	46,272	63,603	118,093
Proceeds from disposals of property, plant and
equipment, intangible assets and investment property	0	187	324	482
Proceeds from disposals of financial assets	0	209	2,940	456
Payments for investments in intangible assets	-2,373	-1,897	-6,103	-6,310
Payments for investments in property, plant and
equipment and investment property	-42,085	-42,951	-114,066	-116,590
Payments for investments in financial assets	0	0	-3,134	-248
Payments for investments accounted for using the equity method	0	0	-28,940	0
Proceeds from the acquisition of subsidiaries and other entities	0	0	1,321	-5,323
Net cash from investing activities	-44,458	-44,452	-147,658	-127,533
Payments to non-controlling interests for the purchase of shares	0	0	0	-163
Dividends paid to shareholders and to non-controlling interests	-2,303	0	-34,241	-37,696
Proceeds from the addition of non-current financial liabilities	200,644	23,262	233,081	69,451
Payments for the repayment of non-current financial liabilities	-3,757	-9,322	-25,965	-24,840
Change in current financial liabilities	-172,243	-41,779	-82,243	1,072
Net cash from financing activities	22,341	-27,839	90,632	7,824
Changes in cash	-9,131	-26,019	6,577	-1,616
Effects of currency exchange rates on cash	-961	-238	-2,891	-127
Cash at beginning of period	53,185	73,439	39,407	48,925
Cash at end of period	43,093	47,182	43,093	47,182

GROUP SALES BY REGION

EUR k	3rd Quarter 2017	3rd Quarter 2016	9 months 2017	9 months 2016
Germany	105,356	98,711	316,330	302,408
Rest of Europe	118,180	113,652	387,614	371,503
NAFTA	80,567	69,495	247,120	218,893
Asia-Pacific	79,452	74,865	236,343	211,889
South America and rest of the world	20,039	17,468	57,321	45,575
Group	403,594	374,191	1,244,728	1,150,268

SEGMENT REPORTING

of ElringKlinger AG, July 1 to September 30, 2017

Segment	Original Equipment		Aftermarket		Engineered Plastics
EUR k	2017	2016	2017	2016	2017	2016
Sales revenue	331,120	308,537	40,153	35,850	28,889	25,808
Intersegment revenue	5,495	4,555	0	0	5	23
Segment revenue	336,615	313,092	40,153	35,850	28,894	25,831
EBIT 1	19,948	19,046	8,058	7,632	5,696	3,948
Depreciation
and amortization2	-22,651	-21,610	-614	-427	-1,512	-1,223
Capital expenditures 3	41,983	40,802	112	419	1,092	1,431

January 1 to September 30, 2017

Segment	Original Equipment		Aftermarket		Engineered Plastics
EUR k	2017	2016	2017	2016	2017	2016
Sales revenue	1,028,905	947,846	120,480	114,145	84,714	77,411
Intersegment revenue	16,626	16,254	0	0	12	68
Segment revenue	1,045,531	964,100	120,480	114,145	84,726	77,479
EBIT1	68,261	61,310	24,624	24,249	13,793	10,181
Depreciation
and amortization2	-66,451	-62,673	-1,747	-1,418	-4,502	-3,679
Capital expenditures3	115,119	111,023	815	1,199	2,408	5,394

Earnings before interest and taxes (operating result)

² Excluding impairments

³ Investments in intangible assets, property, plant and equipment and investment property

Services Consolidation Group		Industrial Parks
2017 2016 2017 2016 2017	2016	2017
2,384 2,472 403,594	1,524	1,048
57 1,796 1,032 -7,368 -5,667 0		72
4,180 3,504 -7,368 -5,667 403,594	1,581	1,120
263 636 33,921	-46	-44
-473 -386 -25,497	-271	-247
88 116 1,000 44,458		1,155

Industrial Parks			Services		Consolidation		Group
2017	2016	2017	2016	2017	2016	2017	2016
3,162	3,482	7,467	7,384			1,244,728	1,150,268
126	175	4,980	4,119	-21,744	-20,616	0
3,288	3,657	12,447	11,503	-21,744	-20,616	1,244,728	1,150,268
-169	-150	1,142	1,597			107,651	97,187
-759	-701	-1,424	-1,095			-74,883	-69,566
1,391	2,342	436	2,942			120,169	122,900

NOTES TO THE THIRD QUARTER AND FIRST NINE MONTHS OF 2017

ElringKlinger AG is an exchange-listed stock corporation headquartered in Dettingen/Erms, Germany.

The accompanying condensed consolidated interim financial statements of ElringKlinger AG and its subsidiaries as of September 30, 2017, have been prepared on the basis of IAS 34 (Interim Financial Reporting). The interim financial statements conform with the International Financial Reporting Standards (IFRS), including the Interpretations issued by the IFRS Interpretations Committee, as adopted by the European Union.

As the consolidated interim financial statements are presented in a condensed format, the financial statements as of September 30, 2017, do not include all information and disclosures required under IFRS for annual consolidated financial statements.

The consolidated interim financial statements as of September 30, 2017, have been neither audited nor reviewed in any way by an independent auditor.

They were authorized for issue based on a resolution passed by the Management Board on November 7, 2017.

Basis of reporting

Reporting

Based on an initial analysis, IFRS 9, application of which is mandatory as from the 2018 financial year, will have no significant impact on the consolidated financial statements of the ElringKlinger Group. As regards the first-time application of IFRS 15 – Revenue from Contracts with Customers – effective from January 1, 2018, please refer to the details presented in the notes to the consolidated financial statements for 2016. The Group's global impact analysis, which has yet to be completed, includes an examination of the potential effects of a separation of performance obligations required under specific circumstances and the thus resulting allocation of the transaction price. To date, there have been no material changes in respect of the assessments presented in the 2016 annual report. As regards the expected impact of IFRS 16 Leases, for which an EU endorsement has not yet been issued, please also refer to the 2016 annual report.

Scope of consolidated financial statements

Alongside the financial statements of ElringKlinger AG, the interim financial statements as of September 30, 2017, include the financial statements of nine domestic and 35 foreign entities in which ElringKlinger AG holds 50% of the interests, either directly or indirectly, or over which, for other reasons, it has the power to govern the financial and operating policies ("Control"). Inclusion in the consolidated group commences on the date on which control is obtained; it ceases as soon as control no longer exists.

Effective from January 1, 2017, ElringKlinger North America, Inc., with its registered office in Plymouth, USA, was merged into ElringKlinger Automotive Manufacturing, Inc., with its registered office in Southfield, USA.

With the exception of the acquisition of hofer powertrain products GmbH, Nürtingen, Germany, the acquisition of hofer powertrain products UK Ltd., Warwick, United Kingdom, the founding of Elring-Klinger Chongqing Ltd., Chongqing, China, and the merger of ElringKlinger North America, Inc. into ElringKlinger Automotive Manufacturing, Inc., Southfield, USA, there were no other changes to the scope of consolidation compared with the consolidated financial statements as of December 31, 2016.

Corporate acquisition

Effective from March 1, 2017, ElringKlinger AG acquired 27.0% of the ownership interests in hofer AG, with its registered office in Nürtingen, Germany. Effective from February 6, 2017, ElringKlinger AG acquired 53.0% of the ownership interests in the aforementioned entity's subsidiary hofer power-train products GmbH, also with its registered office in Nürtingen, Germany. In both cases, the acquisition of interests was transacted by means of an increase in capital.

As regards hofer AG, ElringKlinger AG paid an amount of EUR 3,570k into share capital and an amount of EUR 25,370k into the capital reserve. The interests held in hofer AG are accounted for using the equity method and are recognized as financial assets. The net finance result includes a loss of EUR 879k from equity investments.

As regards hofer powertrain products GmbH, ElringKlinger AG paid an amount of EUR 1,060k into share capital. All payments were made in January 2017. Additionally, the contractual agreement includes a global loan arrangement totaling EUR 30,000k for the purpose of financing future investments relating to hofer powertrain products GmbH. The associated interest advantage amounts to EUR 1,654k, which is attributable to the purchase price. The costs related to the transaction, amounting to EUR 80k, were recognized as general and administrative expenses.

The hofer Group is a skilled automotive developer of systems used within the exhaust tract. In acquiring the ownership interest, ElringKlinger will benefit from the aforementioned innovatory abilities, particularly in the development and production of alternative drive technologies.

The assets and liabilities of the acquired interests pertaining to hofer powertrain products GmbH were measured at the fair value as of the date of acquisition. Within this context, an excess of EUR 192k was recognized as goodwill, having additionally accounted for deferred tax liabilities (EUR 318k) on hidden reserves realized (EUR 1,078k). The aforementioned goodwill was paid primarily in respect of the favorable earnings prospects as well as anticipated synergies.

Due to the first-time full consolidation of hofer powertrain products GmbH effective from February 6, 2017, Group revenue increased by EUR 3,738k, while earnings before taxes rose by EUR 95k. Had the acquisition become effective as early as January 1, 2017, hofer powertrain products GmbH would have contributed EUR 4,293k to Group revenue and would have increased earnings before taxes by EUR 182k.

The preliminary allocation of the purchase price to assets and liabilities is presented in the table below:

EUR k	IFRS carrying amount at date of purchase	Purchase price allocation	Fair value at date of purchase
Intangible assets	8	1,078	1,086
Property, plant, and equipment	52	–	52
Inventories	930	–	930
Trade receivables	2,656	–	2,656
Other current assets	38	–	38
Cash and cash equivalents	2,382	–	2,382
Total assets	6,066	1,078	7,144
Deferred tax liabilities	0	318	318
Non-current financial liabilities	1,048	0	1,048
Current provisions	22	–	22
Trade payables	347	–	347
Tax liabilities	45		45
Other current liabilities	606	–	606
Total liabilities	2,068	318	2,386
Net assets	3,998	760	4,758
Goodwill			192
Non-controlling interests in net assets			-2,236
Purchase price			2,714

No contingent liabilities were identified during the acquisition procedure. The fair values presented for the respective assets and liabilities are provisional.

Effective from March 23, 2017, ElringKlinger AG acquired 53.0% of the interests in hofer powertrain products UK Ltd., with its registered office in Warwick, United Kingdom. The cash purchase price of these interests amounted to EUR 62. The share capital of the entity established in 2016 is EUR 117.

Newly established company

ElringKlinger Chongqing Ltd., with its registered office in Chongqing, China, was established effective from April 10, 2017. ElringKlinger AG holds 100% of the ownership interests.

Exchange rates

Exchange rates developed as follows:

Currency	Abbr.	Closing rate Sep. 30, 2017	Closing rate Dec. 31, 2016	Average rate Jan. –Sep. 2017	Average rate Jan.–Dec. 2016
US dollar (USA)	USD	1.18060	1.05410	1.12182	1.10317
Pound (United Kingdom)	GBP	0.88178	0.85618	0.87367	0.82269
Swiss franc (Switzerland)	CHF	1.14570	1.07390	1.09923	1.09085
Canadian dollar (Canada)	CAD	1.46870	1.41880	1.45993	1.45892
Real (Brazil)	BRL	3.76350	3.43050	3.56397	3.81926
Mexican peso (Mexico)	MXN	21.46140	21.77190	21.02006	20.68174
RMB (China)	CNY	7.85340	7.32020	7.61202	7.34151
WON (South Korea)	KRW	1,351.83000	1,269.36000	1,270.64667	1,279.91750
Rand (South Africa)	ZAR	15.94400	14.45700	14.82168	16.12887
Yen (Japan)	JPY	132.82000	123.40000	125.28444	120.440830
Forint (Hungary)	HUF	310.67000	309.83000	308.55333	311.90917
Turkish lira (Turkey)	TRY	4.20130	3.70720	4.00979	3.34263
Leu (Romania)	RON	4.59930	4.53900	4.55322	4.49330
Indian rupee (India)	INR	77.06900	71.59350	73.01170	74.20010
Indonesian rupiah (Indonesia)	IDR	15,888.51000	14,173.43000	14,971.13000	14,678.48083
Bath (Thailand)	THB	39.33800	37.72600	38.20711	38.86225

Disclosures relating to financial instruments

This section provides a comprehensive overview of the significance of financial instruments and offers additional information on line items of the statement of financial position containing financial instruments. There was no offsetting of financial instruments recognized by the company.

The following table shows the carrying amounts (CA) and fair values (FV) of financial assets:

	Cash	Trade re ceivables	Other current assets	Deriva tives	Non-current securities		Other financial investments		Total
EUR k	CA	CA	CA	CA	CA	FV	CA	FV	CA
as of Sep. 30, 2017
Loans and receivables	43,093	332,975	10,823	0	0	0	8	8	386,899
held to maturity	0	0	0	0	824	837	0	0	824
held for trading	0	0	0	69	0	0	0	0	69
available for sale	0	0	0	0	183	183	7	7	190
Total	43,093	332,975	10,823	69	1,007	1,020	15	15	387,982
as of Dec. 31, 2016
Loans and receivables	39,407	299,522	5,752	0	0	0	8	8	344,689
held to maturity	0	0	0	0	819	819	0	0	819
held for trading	0	0	0	0	0	0	0	0	0
available for sale	0	0	0	0	194	194	8	8	202
Total	39,407	299,522	5,752	0	1,013	1,013	16	16	345,710

The following table shows the carrying amounts (CA) and fair values (FV) of financial liabilities:

	Other current liabilities	Current financial liabilities	Finance leases		Trade payables
EUR k	CA	CA	CA	FV	CA
as of Sep. 30, 2017
Financial liabilities measured at acquisition cost	48,490	198,873	0	0	112,073
Financial liabilities measured at fair value through profit or loss	0	0	0	0	0
No measurement category under IAS 39	0	0	276	292	0
as of Dec. 31, 2016
Financial liabilities measured at acquisition cost	48,685	257,231	0	0	103,228
Financial liabilities measured at fair value through profit or loss	0	0	0	0	0
No measurement category under IAS 39	0	0	161	167	0

				Non-current financial
		Derivatives		liabilities	Finance leases		Total
EUR k		FV	CA	FV	CA	FV	CA
as of Sep. 30, 2017
Financial liabilities measured at acquisition cost	0	0	488,047	475,977	0	0	847,483
Financial liabilities measured at fair value through profit or loss	56	56	0	0	0	0	56
No measurement category under IAS 39	0	0	0	0	318	327	594
as of Dec. 31, 2016
Financial liabilities measured at acquisition cost	0	0	320,495	318,100	0	0	729,639
Financial liabilities measured at fair value through profit or loss	0	0	0	0	0	0	0
No measurement category under IAS 39	0	0	0	0	318	344	479

The other current liabilities include two purchase price liabilities totaling EUR 33,801k (2016: EUR 33,801k) in respect of written put options, which are measured at amortized cost.

The management has ascertained that the carrying amounts of cash, trade receivables, other receivables, trade payables, other current financial liabilities, and other current liabilities largely correspond to their fair values, primarily as a result of the short maturities of these instruments.

The fair values of other financial instruments held to maturity are based on prices in an active market as of the end of the reporting period.

ElringKlinger determines the market value of noncurrent fixed-interest liabilities to banks, finance lease liabilities, and derivatives by discounting expected future cash flows with the current prevailing interest rates for similar financial liabilities with comparable residual terms and the company-specific interest rate.

The fair value of the put option, included in other current liabilities, of non-controlling interests in ElringKlinger Marusan Corporation, Tokyo, Japan, in respect of their interests is based on internal projections of the enterprise value. As regards the valuation of this put option of non-controlling interests, estimates are made with regard to the forecast of business performance as well as with regard to the choice of the interest rate to be applied in respect of the liability to be recognized. A change in the enterprise value by 10% would result in an increase/decrease in the put option by approx. EUR 3,293k.

Financial assets and liabilities measured at fair value are classified into the following three-level fair value hierarchy as of the end of the reporting period of September 30, 2017:

Sep. 30, 2017 Financial assets Non-current securities 183 0 0 Other financial investments 7 0 0 Derivatives 0 69 0 Total 190 69 0 Financial liabilities Derivatives 0 56 0 Total 0 56 0 Dec. 31, 2016 Financial assets Non-current securities 194 0 0 Other financial investments 8 0 0 Derivatives 0 0 0 Total 202 0 0 Financial liabilities Derivatives 0 0 0 Total 0 0 0	EUR k	Level 1	Level 2	Level 3

* These are derivatives that do not qualify for hedge accounting

The following table provides details of the classification of financial assets and liabilities that are not measured at fair value but for which a fair value has been presented, according to the three-level fair value hierarchy as of the end of the reporting period of September 30, 2017:

EUR k	Level 1	Level 2	Level 3
Sep. 30, 2017
Financial assets
Non-current securities	837	0	0
Other financial investments	0	0	8
Total	837	0	8
Financial liabilities
Non-current liabilities from finance leases	0	0	327
Non-current financial liabilities	0	475,977	0
Purchase price liability from written put option	0	0	33,801
Total	0	475,977	34,128
Dec. 31, 2016
Financial assets
Non-current securities	819	0	0
Other financial investments	0	0	8
Total	819	0	8
Financial liabilities
Non-current liabilities from finance leases	0	0	344
Non-current financial liabilities	0	318,100	0
Purchase price liability from written put option	0	0	33,801
Total	0	318,100	34,145

The levels of the fair value hierarchy are defined as follows:

Level 1: Measurement based on quoted prices

• Level 2: Measurement based on inputs for the asset or liability that are observable in active markets either directly or indirectly
• Level 3: Measurement based on inputs for assets and liabilities not representing observable market data

The assessment as to whether a transfer has occurred between the levels of the fair-value hierarchy with regard to the assets and liabilities carried at fair value is conducted in each case at the end of the reporting period. No transfers occurred in the reporting period under review.

Contingencies and related-party disclosures

The contingencies and related-party relationships disclosed in the consolidated financial statements for 2016 were not subject to significant changes in the first nine months of 2017.

Government grants

As a result of government grants received, other operating income rose by EUR 5,199k in the first nine months of 2017. These grants were attributable primarily to development projects.

Events after the reporting period

There were no further significant events after the end of the interim reporting period that necessitate additional explanatory disclosure.

RESPONSIBILITY STATEMENT

To the best of our knowledge, and in accordance with the applicable reporting principles for interim financial reporting, the interim consolidated financial statements give a true and fair view of the assets, liabilities, financial position, and profit or loss of the Group, and the interim management report of the

Dettingen/Erms, November 7, 2017 The Management Board

Group includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal opportunities and risks associated with the expected development of the Group for the remaining months of the financial year.

Chairman/CEO

Dr. Stefan Wolf Theo Becker Thomas Jessulat

IMPRINT

ElringKlinger AG

Max-Eyth-Straße 2 D-72581 Dettingen/Erms Phone +49 (0)71 23/724-0 Fax +49 (0)71 23/724-90 06

IR Contact

Dr. Jens Winter Phone +49 (0)71 23/724-88335 Fax +49 (0)71 23/724-858335 jens.winter@elringklinger.com

Further information is available at

Disclaimer – Forward-looking Statements and Forecasts

This report contains forward-looking statements. These statements are based on expectations, market evaluations and forecasts by the Management Board and on information currently available to them. In particular, the forward-looking statements shall not be interpreted as a guarantee that the future events and results to which they refer will actually materialize. Whilst the Management Board is confident that the statements as well as the opinions and expectations on which they are based are realistic, the aforementioned statements rely on assumptions that may conceivably prove to be incorrect. Future results and circumstances depend on a multitude of factors, risks and imponderables that can alter the expectations and judgments that have been expressed. These factors include, for example, changes to the general economic and business situation, variations of exchange rates and interest rates, poor acceptance of new products and services, and changes to business strategy.

Supplementary Notes

Due to rounding, some of the numbers and percentage figures specified in this document may differ from the actual values, particularly in the case of summation and percentage calculations.

This report was published on November 7, 2017, and is available in German and English. Only the German version shall be legally binding.

Imprint

41

FINANCIAL CALENDAR

27 MARCH 2018

Annual Press Conference, Stuttgart Analysts' Meeting, Frankfurt/Main

16 MAY 2018

113th Annual General Shareholders' Meeting, Stuttgart, Cultural and Congress Center Liederhalle, 10:00 a.m. CEST

Changes to the above dates cannot be ruled out.

We therefore recommend visiting our website to check specific financial dates at .

CALENDAR TRADE FAIRS 2017

NOV/DEC 29 – 02 Automechanika, Shanghai, China

DECEMBER 05– 06 International CTI Symposium, Berlin, Germany

For further events and trade fairs please visit our websites:

www.elringklinger.de/en/press /dates-events www.elringklinger-kunststoff.de/english/ service/trade-fair-dates

www.hug-engineering.com/en/news /exhibitions

ElringKlinger AG Max-Eyth-Straße 2 72581 Dettingen /Erms (Germany)