FUCHS PETROLUB SE — Interim / Quarterly Report 2017

Aug 2, 2017

as at June 30

2017

Sales revenue outlook raised, earnings outlook reaffirmed

€ 1,247 million +4%

Earnings (EBIT) increase to € 190 million

Content

FUCHS at a glance		03
	Half-year financial report
1.	Half-year management report	04
1.1	Development of sales revenues in the Group	04
1.2	Development of sales revenues by region/segment	05
1.3	Group results of operations	06
1.4	Results of operations of the regions/segments	07
1.5	Net assets and financial position	08
1.6	Opportunities and risks	09
1.7	Outlook	09
2.	Half-year financial statements	10
2.1	Consolidated financial statements	10
	■ Income statement	10
	■ Statement of comprehensive income	11
	■ Balance sheet	12
	■ Statement of cash flows	13
	■ Statement of changes in shareholder's equity	14
	■ Segments (part of the notes)	15
2.2	Notes to the consolidated financial statements	16
3.	Responsibility statement	19
	Financial calendar, contact and imprint	20

The half-year financial report fulfills the requirements of the German Securities Trading Act (WpHG) regarding half-year financial reports and comprises a half-year management report, condensed half-year financial statements and a responsibility statement as per Section 37w (2) of the German Securities Trading Act (WpHG). The half-year financial report should be read together with the Annual Report for the financial year 2016 and the additional information contained therein.

FUCHS at a glance

in € million	H1 2017	H1 2016	Change in %
Sales revenues 1	1,247	1,136	9.8
Europe	751	721	4.2
Asia-Pacific, Africa	363	298	21.8
North and South America	205	172	19.0
Consolidation	–72	–55	–
Earnings before interest and tax (EBIT)	190	183	3.8
Earnings after tax	134	127	5.5
Capital expenditure	41	32	26.9
Free cash flow before acquisitions	53	72	–27.2
Earnings per share in €
Ordinary share	0.95	0.90	5.6
Preference share	0.96	0.91	5.5
Employees as at June 30	5,030	4,869	3.3

1 By company location.

"As expected, FUCHS PETROLUB is growing profitably. We have met our earnings targets and exceeded our sales revenue targets. Despite our growth initiative, which involves significant investments, we have once again generated a solid free cash flow."

Stefan Fuchs, Chairman of the Executive Board of FUCHS PETROLUB SE

1. Half-year management report

1.1 DEVELOPMENT OF SALES REVENUES IN THE GROUP

Development of sales revenues in the Group (in € million)

• Sales revenues grow mainly volume-driven by 9.8% to € 1,247 million (1,136)
• Strong organic growth in Asia-Pacific, Africa and North and South America
• Slight external growth through acquisitions in 2016 in North America
• Positive but declining currency effect

1.2 DEVELOPMENT OF SALES REVENUES BY REGION / SEGMENT

Europe

(in € million)

Europe growing organically, achieving a 4.2% increase in sales revenues to € 751 million (721)

• Organic growth in sales revenues, particularly in Central and Southern Europe
• Opposing currency effects of the Russian ruble (+) and the British pound (–) largely balance each other out

Asia-Pacific, Africa

(in € million)

Asia-Pacific, Africa grows mainly organic by 21.8% to € 363 million (298)

• Strong growth in sales revenues in China, and gains in Australia and South Africa as well
• Positive currency effect due to the recovery of the South African rand and Australian dollar, opposite effects from the Chinese renminbi

North and South America

(in € million)

North and South America achieves growth of 19.0% to € 205 million (172)

• Significant organic growth in North America
• Additional external growth in the USA as a result of acquisitions made in 2016
• Positive currency contribution from the Brazilian real and the US dollar

1.3 GROUP RESULTS OF OPERATIONS

Income statement

(in € million)

	H1 2017	H1 2016
Sales revenues	1,247	1,136
Cost of sales	–795	–709
Gross profit	452	427
Selling and distribution expenses	–183	–170
Administrative expenses	–62	–60
Research and development expenses	–24	–22
Other operating income and expenses	–2	–2
EBIT before income from companies consolidated at equity	181	173
Income from companies consolidated at equity	9	10
Earnings before interest and tax (EBIT)	190	183
Financial result	–1	–1
Earnings before tax (EBT)	189	182
Income taxes	–55	–55
Earnings after tax	134	127
Thereof
Non-controlling interests	0	0
Profit attributable to shareholders of FUCHS PETROLUB SE	134	127
Earnings per share in € 1
Ordinary share	0.95	0.90
Preference share	0.96	0.91

1 Basic and diluted in both cases.

• Gross profit up by 5.8% or € 25 million to € 452 million (427); as a result of the time-lag effect in the passing on of material price increases as well as a higher cost base due to the growth initiative, the increase was less pronounced than that of the sales revenues (+9.8%)
• Other function costs increase disproportionately low compared to sales revenues, by 6.9% or € 17 million to € 271 million (254)
• EBIT up by 3.8% or € 7 million to € 190 million (183)
• Tax rate improves by 1.3 percentage points to 30.6% (31.9%)
• Earnings after interest and tax increase by € 7 million or 5.5% to € 134 million (127)
• Earnings per ordinary share increase to € 0.95 (0.90) and earnings per preference share increase to € 0.96 (0.91)

1.4 RESULTS OF OPERATIONS OF THE REGIONS / SEGMENTS

Segments

(in € million)

	Europe	Asia-Pacific, Africa	North and South America	Holding including consolidation	FUCHS Group
H1 2017
Sales revenues by company location	751	363	205	–72	1,247
EBIT before income from companies consolidated at equity	93	58	32	–2	181
in % of sales	12.4%	15.9%	15.7%	–	14.5%
Income from companies consolidated at equity	1	8	–	–	9
Segment earnings (EBIT)	94	66	32	–2	190
Investments in long-term assets	22	14	5	0	41
Number of employees as at June 30	3,234	1,054	632	110	5,030
H1 2016
Sales revenues by company location	721	298	172	–55	1,136
EBIT before income from companies consolidated at equity	94	52	31	–4	173
in % of sales	13.1%	17.5%	18.3%	–	15.2%
Income from companies consolidated at equity	1	9	–	–	10
Segment earnings (EBIT)	95	61	31	–4	183
Investments in long-term assets	17	3	11	1	32
Number of employees as at June 30	3,135	1,041	598	95	4,869

Europe records EBIT of € 94 million (95), € 1 million or 1.3% down on the previous year

• Sales price adjustments driven by raw material prices have a delayed impact; specialty business posts strong growth; Northern Europe weaker
• Positive and negative currency effects largely balance each other out

Asia-Pacific, Africa increases EBIT by € 5 million or 8.7% to € 66 million (61)

• Increases seen primarily in China, Australia and South Africa
• Slightly positive currency effect

North and South America generate increased EBIT of € 32 million (31), up by 2.2% or € 1 million

• Disproportionally low EBIT development in North America due to mix effects and delayed sales price adjustments
• Currency effect slightly positive

1.5 NET ASSETS AND FINANCIAL POSITION

Balance sheet structure

(in € million)

		June 30, 2017		Dec. 31, 2016
Long-term assets	810	49%	814	49%
Short-term assets	858	51%	862	51%
Total assets	1,668	100%	1,676	100%
Shareholders' equity	1,188	71%	1,205	72%
Long-term liabilities	83	5%	84	5%
Short-term liabilities	397	24%	387	23%
Total equity and liabilities	1,668	100%	1,676	100%

■ Balance sheet structure virtually unchanged since the start of the year

• Rise in inventories and trade receivables due to increased business financed largely through own funds, hence stable percentage of short-term assets
• Equity ratio of 71% (72% as at December 31, 2016) despite dividend payments of € 123 million in May
• Slight rise in short-term liabilities mainly as a result of higher trade payables

Cash flow

(in € million)

	H1 2017	H1 2016
Earnings after tax	134	127
Depreciation and amortization	26	23
Change in NOWC	–67	–46
Other changes	1	0
Investments in non-current assets	–41	–32
Free cash flow before acquisitions	53	72
Acquisitions	–1	–20
Free cash flow	52	52

• Free cash flow before acquisitions down on the previous year due to greater commitment of funds in working capital and higher capital expenditure
• Rise in NOWC caused by significant expansion of business activities; but average capital tie-up period remains stable at 78 days
• Investments in property, plant and equipment increased as planned

1.6 OPPORTUNITIES AND RISKS

On pages 58 to 65 of the 2016 annual report, FUCHS PETROLUB provided a detailed report on the opportunities and risks resulting from its international business operations. There have been no significant changes to these statements since this time. On the basis of the information currently available, we are of the opinion that no significant individual risks exist for the FUCHS Group, neither now nor in the foreseeable future. Nor does the sum of all risks or combinations of risks threaten the continued existence of the Group.

1.7 OUTLOOK

Global macroeconomic conditions have improved slightly since the start of the year. The International Monetary Fund (IMF) has raised its January 2017 forecast for growth in the global economy by 0.1 percentage points to 3.5%.

The business development of the FUCHS Group was also positive in the first six months of the year and we expect this pleasing trend to continue, particularly in terms of sales revenues. This development is particularly volume-driven but also price-driven. The increased raw material prices can only be passed on with a time lag.

We reaffirm our earnings outlook for the financial year 2017 and adjust the sales revenue outlook in line with the changed overall conditions. Our updated outlook is therefore as follows:

• Growth in sales revenues of 7% to 10% for the year as a whole
• Sales revenue outlook includes only slight currency effects
• EBIT increase between 1% and 5%
• Free cash flow before acquisitions of around € 200 million
• FVA increase in the low single-digit percentage range

We expect development by region to be similar to the first half of the year, with the Asia-Pacific, Africa region acting as the main driver for sales revenue and earnings growth.

2. Half-year financial statements

2.1 CONSOLIDATED FINANCIAL STATEMENTS

Income statement

(in € million)

	H1 2017	H1 2016
Sales revenues	1,247	1,136
Cost of sales	–795	–709
Gross profit	452	427
Selling and distribution expenses	–183	–170
Administrative expenses	–62	–60
Research and development expenses	–24	–22
Other operating income and expenses	–2	–2
EBIT before income from companies consolidated at equity	181	173
Income from companies consolidated at equity	9	10
Earnings before interest and tax (EBIT)	190	183
Financial result	–1	–1
Earnings before tax (EBT)	189	182
Income taxes	–55	–55
Earnings after tax	134	127
Thereof
Non-controlling interests	0	0
Profit attributable to shareholders of FUCHS PETROLUB SE	134	127
Earnings per share in € 1
Ordinary share	0.95	0.90
Preference share	0.96	0.91

1 Basic and diluted in both cases.

Statement of comprehensive income

(in € million)

	H1 2017	H1 2016
Earnings after tax	134	127
Income and expenses recognized in equity
Amounts of other comprehensive income that may be reclassified to profit or loss in future periods
Change in foreign currency translation adjustments
Foreign subsidiaries	–28	–13
Shares in companies consolidated at equity	0	0
Amounts of other comprehensive income that will not be reclassified to profit or loss in future periods
Remeasurements of defined benefit pension commitments	0	–7
Deferred taxes on these amounts	0	2
Total income and expense recognized directly in equity	–28	–18
Total income and expenses for the period	106	109
Thereof
Non-controlling interests	0	0
Shareholders of FUCHS PETROLUB SE	106	109

Balance sheet

(in € million)

	June 30, 2017	Dec. 31, 2016
Assets
Intangible assets	303	317
Property, plant and equipment	437	427
Shares in companies consolidated at equity	40	38
Other financial assets	3	4
Deferred tax assets	26	27
Other receivables and other assets	1	1
Non-current assets	810	814
Inventories	349	325
Trade receivables	391	351
Tax receivables	5	4
Other receivables and other assets	22	23
Cash and cash equivalents	91	159
Current assets	858	862
Total assets	1,668	1,676
Equity and liabilities Subscribed capital	139	139
Group reserves	914	806
Group profits	134	259
Equity of shareholders of FUCHS PETROLUB SE	1,187	1,204
Non-controlling interests	1	1
Total equity	1,188	1,205
Pension provisions	35	35
Other provisions	3	3
Deferred tax liabilities	41	42
Financial liabilities	0	0
Other liabilities	4	4
Non-current liabilities	83	84
Trade payables	198	186
Other provisions	42	43
Tax liabilities	28	29
Financial liabilities	18	13
Other liabilities	111	116
Current liabilities	397	387
Total equity and liabilities	1,668	1,676

Statement of cash flows

(in € million)

	H1 2017	H1 2016
Earnings after tax	134	127
Depreciation and amortization of long-term assets	26	23
Change in long-term provisions and in other non-current assets (covering funds)	0	1
Change in deferred taxes	1	–4
Non-cash income from shares in companies consolidated at equity	–9	–10
Dividends received from companies consolidated at equity	7	11
Gross cash flow	159	148
Gross cash flow	159	148
Change in inventories	–33	–13
Change in trade receivables	–51	–55
Change in trade payables	17	22
Change in other assets and liabilities (excluding financial liabilities)	2	4
Net gain/loss on disposal of long-term assets	0	0
Cash flow from operating activities	94	106
Investments in long-term assets	–41	–32
Cash paid for shares in companies consolidated at equity	0	–2
Proceeds from the disposal of long-term assets	0	0
Cash paid for acquisitions	–1	–20
Cash acquired through acquisitions	0	0
Cash flow from investing activities	–42	–54
Free cash flow before acquisitions 1	53	72
Free cash flow	52	52
Dividends paid for previous year	–123	–114
Changes in financial liabilities	6	21
Cash flow from financing activities	–117	–93
Cash and cash equivalents as at Dec. 31 of the previous year	159	119
Cash flow from operating activities	94	106
Cash flow from investing activities	–42	–54
Cash flow from financing activities	–117	–93
Effect of currency translations	–3	–3
Cash and cash equivalents at the end of the period	91	75

¹ Free cash flow before cash paid for acquisitions and before cash acquired through acquisitions.

Statement of changes in shareholders' equity

(in € million)

	Outstanding shares (units)	Subscribed capital FUCHS PETROLUB SE	Capital reserves FUCHS PETROLUB SE	Equity capital generated in the Group	Differences arising from currency translation1	Equity of share holders of FUCHS PETROLUB SE	Non-controlling interests	Total equity
As at December 31, 2015	139,000,000	139	97	802	31	1,069	1	1,070
Dividend payments				–114		–114	0	–114
Earnings after tax H1 2016				127		127	0	127
Change in income and expenses recognized directly in equity				–52	–13	–18		–18
As at June 30, 2016	139,000,000	139	97	810	18	1,064	1	1,065
As at December 31, 2016	139,000,000	139	97	939	29	1,204	1	1,205
Dividend payments				–123		–123	0	–123
Earnings after tax H1 2017				134		134	0	134
Change in income and expenses recognized directly in equity				02	–28	–28		–28
As at June 30, 2017	139,000,000	139	97	950	1	1,187	1	1,188

1 Income and expenses recognized in equity of shareholders of FUCHS PETROLUB SE.

2 Amounts of other comprehensive income that will not be reclassified to profit or loss in future periods solely consist of remeasurements

of defined benefit pension commitments. These amounts are included in the equity capital generated in the Group.

Segments ¹

(in € million)

	Europe	Asia-Pacific, Africa	North and South America	Holding including consolidation	FUCHS Group
H1 2017
Sales revenues by company location	751	363	205	–72	1,247
EBIT before income from companies consolidated at equity	93	58	32	–2	181
in % of sales	12.4%	15.9%	15.7%	–	14.5%
Income from companies consolidated at equity	1	8	–	–	9
Segment earnings (EBIT)	94	66	32	–2	190
Investments in long-term assets	22	14	5	0	41
Number of employees as at June 30	3,234	1,054	632	110	5,030
H1 2016
Sales revenues by company location	721	298	172	–55	1,136
EBIT before income from companies consolidated at equity	94	52	31	–4	173
in % of sales	13.1%	17.5%	18.3%	–	15.2%
Income from companies consolidated at equity	1	9	–	–	10
Segment earnings (EBIT)	95	61	31	–4	183
Investments in long-term assets	17	3	11	1	32
Number of employees as at June 30	3,135	1,041	598	95	4,869

1 Part of the notes.

2.2 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The half-year financial statements of FUCHS PETROLUB SE, Mannheim, have been prepared in accordance with the principles of the International Financial Reporting Standards (IFRS), taking into account the standards and interpretations laid down in the guidelines of the International Accounting Standards Board (IASB), London, that are to be applied within the EU and were valid at the end of the reporting period. The half-year financial statements have been prepared in accordance with the rules of International Accounting Standard 34 (IAS 34) in abridged form. The accounting policies and calculation methods applied remained unchanged from the consolidated financial statements for 2016; we therefore refer to the notes to the consolidated financial statements made there.

The half-year financial statements and the half-year management report were not subject to examination by the auditor.

APPLICATION OF NEW ACCOUNTING STANDARDS

The accounting standards which are relevant to the FUCHS Group and are to be applied for the first time do not have any effects on the FUCHS Group's net assets, financial position, or results of operations.

SIGNIFICANT DISCRETIONARY DECISIONS, ESTIMATES, AND ASSUMPTIONS

The general statements made in the notes to the consolidated financial statements as at December 31, 2016, continue to apply.

OTHER OPERATING INCOME AND EXPENSES

Other operating income and expenses include the following items:

in € million	H1 2017	H1 2016
Net amount of currency gains/losses	–1	0
Write-downs of receivables	–2	–2
Net amount of miscellaneous items	1	0
Other operating income and expenses	–2	–2

FINANCIAL RESULT

The financial result includes the following items:

in € million	H1 2017	H1 2016
Interest income	1	1
Interest expense (excluding pensions)	–2	–2
Net interest expense from defined benefit plans	0	0
Financial result	–1	–1

The net interest expenses from defined pension obligations are the net amount resulting from interest expenses of € 1 million (1) from the accrued interest associated with the pension obligations minus interest income of € 1 million (1) from the return on plan assets in the first half of 2017.

INCOME TAXES

Income taxes break down as follows:

in € million	H1 2017	H1 2016
Germany	–23	–23
International	–32	–32
Income taxes	–55	–55
Adjusted rate of taxation (in %) ¹	30.6	31.9

1 Actual tax expense relative to earnings before tax (EBT) adjusted by the income from companies consolidated at equity.

CONTINGENT LIABILITIES AND OTHER FINANCIAL OBLIGATIONS

Contractual obligations of around € 32 million for the purchase of property, plant, and equipment are in place on June 30, 2017 (€ 36 million as at December 31, 2016). These essentially relate to our subsidiaries in Germany, the US, South Africa, Australia, and China. Besides this, there were no significant changes as compared to the contingent liabilities and other financial obligations described and disclosed in the 2016 annual report.

FINANCIAL INSTRUMENTS

The FUCHS Group's financial assets and financial liabilities measured at fair value through profit and loss consist exclusively of forward currency transactions, which are used to hedge foreign currency receivables and liabilities. Their valuation is based on generally recognized valuation models using the latest market data. As at June 30, 2017, the forward currency transactions display positive fair values of € 1 million (as at December 31, 2016: 0), which are disclosed under other short-term assets, and negative fair values of € 0 million (as at December 31, 2016: –1), which are disclosed under other shortterm liabilities.

RELATIONSHIPS WITH RELATED PARTIES

The FUCHS Group has trade receivables of € 2 million (December 31, 2016: 2) and other receivables of € 0 million (December 31, 2016: 0) from companies consolidated at equity. The non-consolidated portion of sales revenues from deliveries of goods to companies consolidated at equity was € 6 million (7) in the first half of 2017. The corresponding portion of other operating income was € 0 million (0) in the first half of 2017.

EXCHANGE RATE DEVELOPMENT

The exchange rates that have a significant impact on the consolidated financial statements have moved against the euro as follows:

Closing rate (€1)	June 30, 2017	Dec. 31, 2016	Change in %
US dollar	1.142	1.052	–7.9
British pound	0.877	0.852	–2.9
Chinese renminbi yuan	7.745	7.304	–5.7
Australian dollar	1.486	1.461	–1.7
South African rand	14.957	14.449	–3.4
Polish zloty	4.231	4.405	4.1
Brazilian real	3.778	3.423	–9.4
Argentinean peso	18.986	16.688	–12.1
Russian ruble	67.325	64.429	–4.3
South Korean won	1,308.34	1,269.67	–3.0
Swedish krona	9.624	9.583	–0.4

Average exchange rate (€1)	H1 2017	H1 2016	Change in %
US dollar	1.083	1.117	3.1
British pound	0.860	0.779	–9.4
Chinese renminbi yuan	7.444	7.299	–1.9
Australian dollar	1.435	1.522	6.1
South African rand	14.310	17.200	20.2
Polish zloty	4.269	4.368	2.3
Brazilian real	3.443	4.132	20.0
Argentinean peso	17.003	15.993	–5.9
Russian ruble	62.760	78.360	24.9
South Korean won	1,235.61	1,319.24	6.8
Swedish krona	9.597	9.303	–3.1

EVENTS AFTER THE REPORTING PERIOD

No significant events occurred after the reporting period.

3. Responsibility statement

To the best of our knowledge we declare that, in accordance with the applicable accounting principles for half-year financial reporting, the half-year financial statements give a true and fair view of the net assets, financial position, and results of operations of the FUCHS Group, and the half-year management report of the FUCHS Group includes a fair view of the development and performance of the business and the position of the FUCHS Group, together with a description of the principal opportunities and risks associated with the expected development of the FUCHS Group for the remaining months of the financial year.

Mannheim, July 31, 2017 FUCHS PETROLUB SE

The Executive Board

S. Fuchs D. Steinert

Dr. L. Lindemann Dr. R. Rheinboldt Dr. T. Reister

Financial calendar

Dates
August 1, 2017	Half-year financial report 2017
October 27, 2017	Quarterly statement Q1–3 2017
March 21, 2018	Annual report 2017
May 8, 2018	Annual General Meeting in Mannheim

The financial calendar is updated regularly. You can find the latest dates on the webpage at www.fuchs.com/financial-calendar

Contact and imprint

If you have any questions regarding the company or should you wish to be added to our mailing list for corporate publications, please contact our Investor Relations team:

E-mail: ir@fuchs-oil.de

Thomas Altmann
----------------	--

Head of Investor Relations Phone +49 (0) 621 3802-1201 Fax +49 (0) 621 3802-7274 thomas.altmann@fuchs-oil.de

Andrea Leuser

Specialist Investor Relations Phone +49 (0) 621 3802-1105 Fax +49 (0) 621 3802-7274 andrea.leuser@fuchs-oil.de

PUBLISHER

FUCHS PETROLUB SE Friesenheimer Straße 17 68169 Mannheim, Germany www.fuchs.com/group

NOTE REGARDING THE HALF-YEAR FINANCIAL REPORT

This report is a translation from the German version. In the event of deviations, the German version takes precedence.

NOTE ON ROUNDING

Due to rounding, numbers presented in this half-year financial report may not add up precisely to totals provided, and percentages stated may not precisely reflect the absolute figures to which they refer.

FORWARD-LOOKING STATEMENTS AND FORECASTS

This half-year financial report for the first half year contains statements about future developments that are based on assumptions and estimates by the management of FUCHS PETROLUB SE. Even if the management is of the opinion that these assumptions and estimates are accurate, future actual developments and future actual results may differ significantly from these assumptions and estimates due to a variety of factors. These factors can, for example, include changes in the overall economic climate, changes in procurement prices, changes to exchange rates and interest rates, and changes within the lubricants industry. FUCHS PETROLUB SE provides no guarantee that future developments and the results actually achieved in the future will match the assumptions and estimates set out in this half-year financial report and assumes no liability for such. We do not assume any obligation to update the future-oriented statements made in this half-year financial report.