KRONES AG — Interim / Quarterly Report 2016

Oct 26, 2016

Quarterly statement for the period from 1 January to 30 September 2016

Contents

• 3 Highlights and key fi gures
• 4 Letter from the Executive Board
• 5 The KRONES share

Assets, fi nancial position, and results of operations

• 6 Revenue
• 8 New orders and orders on hand
• 9 Earnings
• 12 Cash fl ow
• 13 Employees
• 14 Assets and capital structure
• 16 Report from the segments
• 18 Report on expected developments

Interim consolidated fi nancial statements for the period ended 30 September 2016

• 21 Separate income statement
• 22 Statement of fi nancial position
• 24 Statement of cash fl ows
• 25 Statement of changes in equity
• 26 Statement of comprehensive income
• 27 Segment reporting
• 28 Members of the Supervisory Board and the Executive Board
• 29 Financial calendar
• Publishing information
• 30 Contact us

KRONES confi rms its targets for 2016 and has set new medium-term targets

• Revenue increased 4.8% in the fi rst three quarters of 2016 to €2.38 billion.
• New orders rose 6.1% to €2.45 billion.
• The EBT margin was stable at 6.9% aft er nine months.
• KRONES confi rms its revenue and earnings forecast for 2016 as a whole and has set medium-term targets of 7/8/20 for 2020.

Key fi gures for 1 January – 30 September		1 Jan – 30 Sep	1 Jan – 30 Sep	Change
		2016	2015
Revenue	€ million	2,380.1	2,270.7	+ 4.8%
New orders	€ million	2,452.5	2,311.3	+ 6.1%
Orders on hand at 30 September	€ million	1,167.0	1,119.7	+ 4.2%
EBITDA	€ million	224.2	218.2	+ 2.7%
EBIT	€ million	158.4	152.6	+ 3.8%
EBT	€ million	163.6	156.1	+ 4.8%
EBT margin	%	6.9	6.9	–
Net income	€ million	114.3	108.3	+ 5.5%
Earnings per share	€	3.65	3.45	+ 5.8%
Capital expenditure for PP&E
and intangible assets	€ million	58.2	55.4	+ €2.8 million
Free cash fl ow	€ million	– 197.0	– 48.1	– €148.9 million
Net cash and cash equivalents at 30 September*	€ million	121.8	253.7	– €131.9 million
ROCE (liabilities side)	%	15.5	17.0	–
ROCE (assets side)	%	14.0	14.9	–
Employees at 30 September
Worldwide		14,132	13,149	+ 983
Germany		9,959	9,655	+ 304
Outside Germany		4,173	3,494	+ 679

* Cash and cash equivalents less debt

Key fi gures for Q3	1 Jul – 30 Sep	1 Jul – 30 Sep	Change
	2016	2015
Revenue € million	819.8	767.0	+ 6.9%
New orders € million	850.1	787.2	+ 8.0%
EBITDA € million	77.0	74.1	+ 3.9%
EBIT € million	55.1	51.4	+ 7.2%
EBT € million	56.3	52.0	+ 8.3%
EBT margin %	6.9	6.8	–
Net income € million	39.9	35.6	+ 12.1%
Earnings per share €	1.27	1.13	+ 12.4%

Dear shareholders and friends of KRONES,

Aft er a turbulent fi rst half, which saw sharp fl uctuations in oil prices, share prices, and currencies as well as the passage of the Brexit vote, the world economy appears to have stabilised in the third quarter. The International Monetary Fund (IMF) in its October forecast has maintained its projections for global growth at 3.1% for 2016 and 3.4% for 2017.

The fact that KRONES is still on target aft er nine months despite the diffi cult market environment can be attributed to effi ciency gains and various other measures taken under our Value strategy programme. Aft er the fi rst three quarters, revenue is up 4.8% and new orders have increased 6.1%. Earnings before taxes increased 4.8%. Overall, we are confi dent that we will achieve our targets for revenue growth (+3%) and EBT margin (7.0%) for the fi nancial year 2016.

KRONES has set new medium-term targets. By 2020, we want

• 7% annual revenue growth on average
• 8% EBT margin
• 20% ROCE

These targets are certainly ambitious given the challenging market. The fi ght for orders remains intense as the fi eld of competitors grows in number and quality. On the customers' side of things, mergers and acquisitions are delaying capital investments and creating even larger customers with increased buying power. Therefore, we see no reason to expect prices to improve in the short or medium term.

The entire KRONES team will work hard to achieve our targets. We must grow profi tably if we are to make crucial investments with our own resources and recruit the best people. And doing that will enable us to strengthen KRONES' position in our promising market and continue to do business successfully in the long term.

Christoph Klenk CEO

Low interest rates bolstered equity markets in the third quarter

Aft er incurring losses (some quite signifi cant) in the fi rst half of 2016, most of the world's stock markets recovered in the third quarter. Apart from rising oil prices, low interest rates were the main factor driving shares upward. Bond yields dropped further as central banks continued their loose monetary policy. For example, most German sovereign bonds had negative yields in the third quarter. Even yields on higher-risk corporate bonds were low at best. Seeking higher returns, investors increasingly turned to the stock markets. As a result, Germany's DAX blue-chip index rose 8.6% in the period from July to September, recouping much of its fi rst-half losses (–9.9%). At 30 September, the DAX was down only 2.2% from the start of the year.

Other major stock markets around the world did not advance quite as much as the DAX. The Euro Stoxx 50 gained 4.8%, Japan's Nikkei index 5.6%. Continual speculation over the timing of an interest rate hike in the US tempered gains on Wall Street. The Dow Jones Industrial Average rose just 2.1% in the third quarter of 2016.

KRONES' share price dropped dramatically in the third quarter following the release of secondquarter results on 21 July. Our share signifi cantly underperformed the MDAX in the fi rst nine months of 2016.

KRONES share MDAX (indexed)

Analyst downgrades weighed on KRONES share price

KRONES' share price declined 8.6% in the period from July to September 2016. Thus, our share underperformed in the third quarter compared with the MDAX, which rose 8.8% in the same period. Our results for the second quarter of 2016 had disappointed analysts' high expectations and were the main reason for the poor performance. Analysts lowered their price targets even as we confi rmed our targets for the year 2016 as a whole. Some analysts even downgraded their rating of KRONES to "sell". On 30 September, the share closed at €86.60, down 21.5% from the start of the year. As a result, our shareholders incurred losses for the fi rst time aft er many years of strong per formance. The MDAX gained a total of 3.9% in the fi rst nine months of 2016.

KRONES continues stable growth

Despite macroeconomic uncertainties and intense competition, revenue for the period from July to September 2016 increased 6.9% year-on-year from €767.0 million to €819.8 million. Thus, the company's growth accelerated in the third quarter. The main forces driving our growth were our comprehensive range of products and services and KRONES' strong international presence. We are very well positioned in both the emerging markets and mature industrialised countries.

In all, revenue at KRONES was up 4.8% from €2,270.7 million in the previous year to €2,380.1 million in the fi rst nine months of 2016. The machines and lines for the compact class segment posted the highest percentage growth (+14.2%). From a regional perspective, revenue developed best in Central and Eastern Europe, the Middle East/Africa, and China in the fi rst three quarters of 2016.

KRONES' revenue grew 4.8% in the fi rst three quarters of 2016. That puts our growth target of 3% for the year as a whole well within reach.

Revenue by region

Aft er strong growth in the fi rst half, revenue in Germany was slightly lower in the third quarter of 2016 due to invoice timing. In all in the fi rst nine months of 2016, revenue generated in Germany was up 2.3% year-on-year to €242.6 million. Domestic revenue's share of consolidated revenue decreased slightly to 10.2% (previous year: 10.4%).

Overall, business in Europe (excluding Germany) developed in line with expectations in the fi rst three quarters of 2016. In Western Europe, revenue was down 12.5% year-on-year from the high year-earlier level, to €386.6 million. Conversely, revenue increased 18.3% in Central Europe and 19.6% in Eastern Europe. Revenue in the economically troubled Russia/CIS region stabilised at a low level in the third quarter. Nine-month revenue there was down 18.3%. All-in-all, KRONES' revenue in Europe (excluding Germany) was down 5.4% from €670.9 million to €634.5 million in the fi rst three quarters of 2016. The share of consolidated revenue decreased to 26.7% (previous year: 29.5%).

Business picked up considerably in China, where we completed a large number of projects in the third quarter. In the fi rst nine months of 2016, revenue there improved 37.1% year-on-year to €249.9 million. Revenue in the rest of the Asia-Pacifi c region was down somewhat in the period from January to September, dropping 5.0% year-on-year to €302.1 million. However, there was a slight improvement in the third quarter. KRONES' revenue in the large Middle East/Africa region continued to grow. At €394.9 million, it exceeded the already high year-earlier fi gure by 12.8%.

KRONES' business continued to improve in North and Central America. Revenue there increased 8.6% to €317.6 million in the fi rst three quarters despite the high baseline. KRONES' business in the South America/Mexico sales region grew in the reporting period despite the fact that some South American countries are mired in economic diffi culties. In all, revenue in the South America/Mexico region was up 8.5% to €238.5 million.

Quarterly revenue fi gures for the various regions are generally not very telling because ordering activity and revenue can fl uctuate considerably from quarter to quarter.

KRONES Group revenue by region

Share of consolidated revenue	30 September 2016		30 September 2015		Change
	€ million	%	€ million	%	%
Germany	242.6	10.2	237.1	10.4	+ 2.3
Central Europe (excluding Germany)	115.5	4.9	97.6	4.3	+ 18.3
Western Europe	386.6	16.2	441.8	19.5	– 12.5
Eastern Europe	78.7	3.3	65.8	2.9	+ 19.6
Russia, Central Asia (CIS)	53.7	2.3	65.7	2.9	– 18.3
Middle East/Africa	394.9	16.6	350.0	15.4	+ 12.8
Asia-Pacifi c	302.1	12.7	318.1	14.0	– 5.0
China	249.9	10.5	182.3	8.0	+ 37.1
South America/Mexico	238.5	10.0	219.9	9.7	+ 8.5
North and Central America	317.6	13.3	292.4	12.9	+ 8.6
Total	2,380.1	100.0	2,270.7	100.0	+ 4.8

KRONES generated 55.4% of consolidated revenue in the emerging markets in the period from January to September 2016 (previous year: 52.9%). Thus, KRONES' revenue is well balanced internationally between the emerging and established markets.

New orders up 6.1% year-on-year after the fi rst three quarters

Our customers' capital spending was satisfactory overall in the fi rst nine months of 2016. Aft er a temporary dip in demand in the second quarter, orders picked up again in the third. New orders in the period from July to September 2016 were up 8.0% year-on-year to €850.1 million. In the fi rst three quarters of 2016, the contract value of new orders rose 6.1% from €2,311.3 million to €2,452.5 million. The increase in new orders came in both individual machines and complete fi lling and packaging lines.

The strongest orders intake in the fi rst three quarters of 2016 came from Europe and North America. Demand was also strong in South America, Eastern Europe, and the Russia/CIS region. By contrast, business was somewhat weaker in Asia and the Middle East/Africa region, as expected, due to the economic situation there.

Demand for KRONES products and services was high in the fi rst three quarters of 2016. New orders were up 6.1%.

KRONES' orders backlog grew

At the end of September 2016, KRONES had orders on hand totalling €1,167.0 million. Thus, orders on hand exceeded the previous year by 4.2%. In all, the comfortable orders backlog serves as a solid basis for balancing the company's capacity utilisation in the months ahead.

Earnings

EBT margin of 6.9% for the fi rst three quarters

In the period from July to September 2016, earnings before taxes (EBT) rose 8.3% yearon-year to €56.3 million. KRONES' EBT margin improved slightly, from 6.8% to 6.9%. Market prices continued to provide no positive eff ects. The higher margin can be attributed to measures taken under the Value strategy programme as well as additional short-term cost savings. At €39.9 million aft er taxes, net income for the third quarter was up 12.1% year-on-year. Earnings per share rose from €1.13 to €1.27.

Earnings before taxes were up by the same rate as revenue in the fi rst three quarters of 2016 (4.8% to €163.6 million). The EBT margin was stable at 6.9%. Negative currency eff ects in the second quarter of 2016 prevented us achieving a better margin. Consolidated net income increased 5.5% to €114.3 million in the fi rst nine months. Earnings per share rose from €3.45 in the previous year to €3.65.

Earnings per share for the third quarter rose from €1.13 in the previous year to €1.27.

KRONES Group earnings structure

€ million	2016	2015	Change
	1 Jan – 30 Sep	1 Jan – 30 Sep	%
Revenue	2,380.1	2,270.7	+ 4.8
Changes in inventories of fi nished goods
and work in progress	– 72.8	37.0
Total operating performance	2,307.3	2,307.7	± 0.0
Goods and services purchased	– 1,109.9	– 1,107.7	+ 0.2
Personnel expenses	– 727.2	– 695.2	+ 4.6
Other operating income (expenses)
and own work capitalised	– 246.0	– 286.6	– 14.2
EBITDA	224.2	218.2	+ 2.7
Depreciation and amortisation on non-current assets	– 65.8	– 65.6	+ 0.3
EBIT	158.4	152.6	+ 3.8
Financial income	5.2	3.5
EBT	163.6	156.1	+ 4.8
Income tax	– 49.3	– 47.8	+ 3.1
Consolidated net income	114.3	108.3	+ 5.5

At €2,307.3 million, total operating performance in the fi rst three quarters of 2016 was virtually unchanged from the previous year (€2,307.7 million). It was up less steeply than revenue (+4.8%) because inventories of fi nished goods and work in progress decreased by €72.8 million in the period from January to September (previous year: +€37.0 million).

KRONES' earnings performance was as forecast in the reporting period. At €1,109.9 million, goods and services purchased were nearly unchanged (+0.2%) in the fi rst nine months of 2016 (previous year: €1,107.7 million). The ratio of expenses for goods and services purchased to total operating performance increased only marginally from 48.0% in the previous year to 48.1%.

Personnel expenses increased more than total operating performance in the period from January to September 2016. This fi gure rose 4.6% to €727.2 million due to workforce growth and an increase in pay rates as a result of collective bargaining. The ratio of personnel expenses to total operating performance increased from 30.1% in the year-earlier period to 31.5% in the fi rst nine months of 2016.

The lower net of other operating income and expenses and own work capitalised had a positive impact. It was down from –€286.6 million to –€246.0 million primarily on cost reducing measures taken under the Value programme. At €65.8 million, depreciation and amortisation of non-current assets in the fi rst nine months of 2016 were just barely higher than the year-earlier fi gure (€65.6 million).

Earnings before interest and taxes (EBIT) improved 3.8% to €158.4 million in the fi rst three quarters. With fi nancial income of €5.2 million, which is higher than in the previous year (€3.5 million), earnings before taxes (EBT) were up 4.8% to €163.6 million, a slightly stronger increase than EBIT. The EBT margin, the ratio of earnings before taxes to revenue, came to 6.9% as in the previous year. Because KRONES' tax rate was down slightly in the reporting period, to 30.1% from 30.6%, consolidated net income for the fi rst nine months of 2016 increased 5.5% to €114.3 million (previous year: €108.3 million).

The increase in personnel expenses was off set by the lower net of other operating income and expenses and own work capitalised. The EBT margin was 6.9%, unchanged from the previous year.

KRONES Group cash fl ow

€ million	2016	2015
	1 Jan – 30 Sep	1 Jan – 30 Sep
Earnings before taxes	163.6	156.1
Non-cash expenses and income	+ 120.0	+ 83.4
Changes in working capital	– 340.2	– 189.0
Other (primarily income taxes)	– 52.8	– 29.5
Cash fl ow from operating activities	–109.4	+ 21.0
Capital expenditure for intangible assets and property,
plant and equipment	– 58.2	– 55.4
Other	– 29.4	– 13.7
Free cash fl ow	– 197.0	– 48.1
Cash fl ow from fi nancing activities	+ 48.5	– 39.5
Change in cash and cash equivalents arising
from exchange rates	0.0	+ 4.9
Net change in cash and cash equivalents	– 148.5	– 82.7
Cash and cash equivalents at the end of the period	216.1	253.7

In the period from January to September 2016, cash fl ow from operating activities decreased from +€21.0 million in the year-earlier period to –€109.4 million. The main reason for this was a signifi cant increase in working capital. In the reporting period, KRONES' working capital grew by €340.2 million, considerably more than in the previous year (€189.0 million). One factor was that the company paid down a total of €177.9 million in trade payables and other liabilities. Higher receivables and inventories as well as other assets also contributed €162.3 million to the increase in working capital. As a result, the ratio of average working capital for the past four quarters to revenue increased from 24.5% in the previous year to 26.3%.

Average working capital for the past four quarters to revenue was very high at 26.3%. We are stepping up our eff orts to remedy this.

KRONES invested €58.2 million in intangible assets and property, plant and equipment in the fi rst nine months of the year (previous year: €55.4 million). That was in keeping with our capital expenditure planning. In the reporting period, €32.3 million went towards the acquisition of stakes in other companies. KRONES' free cash fl ow

(net cash generated from operating activities) came to –€197.0 million for the fi rst three quarters of 2016 aft er –€48.1 million in the previous year. Excluding expenditures for acquisitions, free cash fl ow was –€164.7 million. We are not satisfi ed with this development.

Free cash fl ow was down considerably at the end of nine months due to a sharp increase in working capital.

Cash fl ow from fi nancing activities improved to +€48.5 million in the fi rst nine months of 2016, from –€39.5 million in the year-earlier period. This item includes the dividend payout of €45.8 million as well as €94.3 million in proceeds from new borrowing. All told, KRONES had cash and cash equivalents totalling €216.1 million at 30 September 2016 (previous year: €253.7 million).

Employees

KRONES' workforce grows to 14,132

At the end of September 2016, KRONES employed 14,132 people worldwide (previous year: 13,149). The biggest share of new hiring was outside Germany. We increased our workforce abroad by 679 year-on-year to 4,173, which refl ects KRONES' internationalisation strategy. The acquisition of majority stakes in SYSTEM LOGISTICS and TRANS-MARKET also contributed to our international workforce growth. The number of employees at KRONES in Germany grew by 304 to 9,959.

KRONES' workforce grew by 983 in the fi rst three quarters. That fi gure includes 331 new employees acquired with TRANS-MARKET and SYSTEM LOGISTICS.

€ million	30 Sep 2016	31 Dec 2015	31 Dec 2014	31 Dec 2013
Non-current assets	771	697	672	642
of which fi xed assets	690	646	624	605
Current assets	2,064	2,010	1,756	1,596
of which cash and equivalents	216	365	336	240
Equity	1,173	1,111	989	954
Total debt	1,662	1,596	1,439	1,284
Non-current liabilities	275	278	275	213
Current liabilities	1,387	1,318	1,164	1,071
Total	2,835	2,707	2,428	2,238

KRONES Group asset and capital structure

Due to the higher business volume, KRONES' total assets at 30 September 2016 were up 4.7% over the end of 2015, to €2,834.5 million.

At the end of the fi rst nine months, the company had non-current assets totalling €771.0 million (31 December 2015: €697.2 million). Fixed assets were up to €689.5 million (31 December 2015: €646.2 million) because the acquisition of TRANS-MARKET and SYSTEM LOGISTICS resulted in a dramatic increase in the com pany's intangible assets to €216.0 million (31 December 2015: €163.2 million). Of the fi xed assets, €468.3 million were property, plant and equipment.

At the end of the reporting period, current assets totalled €2,063.5 million, which is 2.7% more than at 31 December 2015 (€2,009.4 million). Trade receivables increased from €796.8 million to €914.4 million. Inventories increased from €724.5 million to €773.2 million. Cash and cash equivalents decreased from €364.6 million to €216.1 million in the fi rst nine months of 2016.

Higher inventories and receivables from customers made for lower cash and cash equivalents in the reporting period.

Cash and cash equivalents at 30 Sep (€ million)

On the liabilities side, KRONES' non-current liabilities, primarily provisions for pensions, were down slightly, to €275.1 million at 30 September 2016 (31 December 2015: €278.5 million). The company had no non-current bank debt at 30 September 2016.

Current liabilities were up 5.2% over the end of the year 2015, to €1,386.2 million. The increase was due to short-term borrowing totalling €94.3 million. The company's net cash and cash equivalents (cash and cash equivalents less bank debt) amounted to €121.8 million at the end of September 2016.

Due to the positive consolidated earnings, equity increased from €1,110.7 million to €1,173.2 million in the reporting period. Thus, our equity ratio was 41.4% at 30 September 2016 (31 December 2015: 41.0%). All in all, our balance sheet shows that KRONES still has an extremely robust fi nancial and capital structure.

ROCE drops to 15.5%

KRONES' return on capital employed (ROCE), that is the ratio of EBIT to average net tied-up capital, decreased to 15.5% in the reporting period (previous year: 17.0%). The dramatic increase in working capital was primarily responsible for the decline.

Our ROCE target of 18% for 2016 is very ambitious.

A comfortable liquidity cushion and a sound equity position give KRONES a high level of fi nancial stability and fl exibility.

Segment revenue

Business in our core segment, machines and lines for product fi lling and decoration, developed well in the third quarter of 2016. Revenue improved 12.7% year-on-year. The emerging markets contributed a large share to this growth. In the fi rst nine months of 2016, revenue increased 7.0% overall, to €2,039.1 million. The core segment contributed 85.6% of consolidated revenue in the fi rst three quarters of 2016 (previous year: 83.9%).

Due to longer production lead times, revenue in the machines and lines for beverage production/process technology segment is subject to sharp fl uctuations throughout the year. Because some ongoing projects will not be invoiced until the fourth quarter of 2016, segment revenue aft er the fi rst three quarters was down 12.3% from the previous year to €251.6 million. For the year 2016 as a whole, we expect internal growth to come to around 10%. The additional revenue generated through the acquisition of SYSTEM LOGISTICS and TRANS-MARKET is expected to further increase process technology revenue in 2016. The segment contributed 10.6% of consolidated revenue in the fi rst nine months of 2016 (previous year: 12.6%).

The smallest segment, machines and lines for the compact class, performed well overall in the fi rst three quarters of 2016. With the subsidiaries KOSME and GERNEP, the segment addresses the lower output range. Revenue was up 14.2% year-on-year in the period from January to September 2016, to €89.4 million. Thus, the segment grew its share of consolidated revenue to 3.8% (previous year: 3.5%).

KRONES' core segment and compact class segment both posted revenue growth in the fi rst three quarters of 2016. Process technology revenue fell short of the year- earlier fi gure due to invoice timing.

Segment earnings

Earnings in the company's core segment, machines and lines for product fi lling and decoration, improved in the fi rst nine months of 2016 despite the unchanged price situation. Segment earnings before taxes (EBT) rose 8.8% year-on-year to €158.4 million. The EBT margin widened from 7.6% to 7.8%. Effi ciency gains made under the Value strategy programme were the main force behind to this improvement. We are confi dent that the core segment will achieve an EBT margin of around 8% for the year 2016 as a whole despite the lack of support from market prices.

Earnings before taxes (EBT) in the machines and lines for beverage production/process technology segment were down considerably in the fi rst three quarters of 2016, from €6.4 million to €0.6 million. Revenue will likely increase sharply in the fourth quarter. Thus, the fi nal quarter of the year is expected to contribute signifi cantly to 2016 earnings. KRONES is still projecting an EBT margin of around 1% for the year 2016 as a whole. Implementation of measures aimed at strengthening the segment's profi tability for the long term is progressing as planned.

Earnings in the machines and lines for the compact class segment developed within our range of expectations. In the fi rst three quarters of 2016, earnings before taxes (EBT) increased 12.2% to €4.6 million. The EBT margin was down slightly from 5.2% in the year-earlier period to 5.1%. We expect the margin to be similar for the year 2016 as a whole.

Product fi lling and decoration	2016	2015
	1 Jan – 30 Sep	1 Jan – 30 Sep
EBT € million	158.4	145.6
EBT margin %	7.8	7.6

Beverage production/process technology	2016	2015
	1 Jan – 30 Sep	1 Jan – 30 Sep
EBT € million	0.6	6.4
EBT margin %	0.2	2.2

Compact class	2016	2015
	1 Jan – 30 Sep	1 Jan – 30 Sep
EBT € million	4.6	4.1
EBT margin %	5.1	5.2

All three of KRONES' segments were in the black after the fi rst nine months. The core segment's EBT margin widened from 7.6% to 7.8%.

KRONES is on track for 2016 – new medium-term targets through 2020

KRONES is confi dent that consolidated revenue growth of 3% and an EBT margin of 7.0% for the year 2016 will be achieved as forecast despite the many economic and political uncertainties. All three segments will contribute by achieving their own growth and earnings targets. We continue to aim for an ROCE of 18%. However, it is a very ambitious goal.

After the fi rst three quarters, KRONES is confi dent it will achieve its growth and earnings targets for 2016 as a whole.

	Forecast for 2016	Actual value 9M 2016
Revenue growth	+ 3%	+ 4.8%
EBT margin	7.0%	6.9%
ROCE	18%	15.5%

7/8/20 is our new medium-term target through 2020

To keep moving the company forward for the long term, the KRONES Team has set new medium-term targets through 2020. 7/8/20 stands for:

• 7 percent revenue growth per year on average
• 8 percent EBT margin
• 20 percent ROCE (return on capital employed)

To achieve 7% annual revenue growth, we must systematically seize the opportunities the market presents. Therefore, KRONES intends to pick up market shares in regions where beverage consumption is growing faster than average. The rapidly growing diversity of products and packaging is another growth driver as it requires extremely versatile machines and lines. KRONES intends to capture a big piece of this high-growth market segment by off ering the most advanced technology and products. Acquisitions and the expansion of our own product range will also contribute a large part to our forecast growth.

KRONES aims to further increase profi tability. Because we don't expect any support from prices, even in the medium term, we will have to work hard to achieve our EBT margin target of 8%. One focus of our eff orts will be growing our global footprint. To this end, we plan to shift a large part of procurement and engineering as well as parts of production to the regions in which our customers operate their plants. Doing so enables us to off er our customers there tailored, cost-optimized products. We are also continuing to advance the modularisation of our products and expand our highly profi table service business. To achieve our medium-term ROCE target of 20%, we will sharpen our focus on working capital.

The concrete measures and programmes with which we intend to achieve our targets can be found in our Q3 presentation, which is available on our website at http://www.krones.com/en/investor_relations/presentation-2016.php

€ million	2016	2016	Change
	1 January –	1 January –	%
	30 September	30 September
Revenue	2,380.1	2,270.7	+ 4.8
Changes in inventories of fi nished goods and work in progress	– 72.8	37.0
Total operating performance	2,307.3	2,307.7	± 0.0
Goods and services purchased	– 1,109.9	– 1,107.7	+ 0.2
Personnel expenses	– 727.2	– 695.2	+ 4.6
Other operating income/expenses and own work capitalised	– 246.0	– 286.6	– 14.2
Depreciation and amortisation on fi xed assets	– 65.8	– 65.6	+ 0.3
EBIT	158.4	152.6	+ 3.8
Financial income/expense	5.2	3.5
Earnings before taxes	163.6	156.1	+ 4.8
Income tax	– 49.3	– 47.8	+ 3.1
Consolidated net income	114.3	108.3	+ 5.5
Profi t share of non-controlling interests	– 0.9	– 0.8
Profi t share of KRONES Group shareholders	115.2	109.1
Earnings per share (diluted/basic) in €	3.65	3.45

€ million	2016	2015	Change
	1 July –	1 July –	%
	30 September	30 September
Revenue	819.8	767.0	+ 6.9
Changes in inventories of fi nished goods and work in progress	– 73.3	12.5
Total operating performance	746.5	779.5	– 4.2
Goods and services purchased	– 360.5	– 382.2	– 5.7
Personnel expenses	– 231.2	– 226.3	+ 2.2
Other operating income/expenses and own work capitalised	– 77.8	– 96.9	– 19.7
Depreciation and amortisation on fi xed assets	– 21.9	– 22.7	– 3.5
EBIT	55.1	51.4	+ 7.2
Financial income/expense	1.2	0.6
Earnings before taxes	56.3	52.0	+ 8.3
Income tax	– 16.4	– 16.4	± 0.0
Consolidated net income	39.9	35.6	+ 12.1
Profi t share of non-controlling interests	– 0.3	– 0.3
Profi t share of KRONES Group shareholders	40.2	35.9
Earnings per share (diluted/basic) in €	1.27	1.13

Assets	30 September 2016		31 December 2015
€ million
Intangible assets	216.0		163.2
Property, plant and equipment	468.3		481.5
Non-current fi nancial assets	5.2		1.5
Fixed assets	689.5		646.2
Deferred tax assets	20.9		22.0
Trade receivables	57.2		23.8
Income tax receivables	0.0		1.7
Other assets	3.4		3.5
Non-current assets		771.0		697.2
Inventories	773.2		724.5
Trade receivables	914.4		796.8
Current income tax receivables	16.9		15.0
Other assets	142.9		108.5
Cash and cash equivalents	216.1		364.6
Current assets		2,063.5		2,009.4
Total		2,834.5		2,706.6

Equity and liabilities	30 September 2016		31 December 2015
€ million
Equity		1,173.2		1,110.7
Provisions for pensions	198.5		196.9
Deferred tax liabilities	9.3		17.3
Other provisions	58.1		50.1
Liabilities to banks	0.0		0.0
Other fi nancial liabilities	7.0		12.6
Other liabilities	2.2		1.6
Non-current liabilities		275.1		278.5
Other provisions	174.5		147.0
Provisions for taxes	25.9		9.5
Liabilities to banks	94.3		0.0
Advances received	537.2		545.7
Trade payables	223.1		247.9
Current tax liabilities	2.0		17.4
Other fi nancial liabilities	18.1		56.3
Other liabilities and accruals	311.1		293.6
Current liabilities		1,386.2		1,317.4
Total		2,834.5		2,706.6

€ million	2016	2015
	1 January –	1 January –
	30 September	30 September
Earnings before taxes	163.6	156.1
Depreciation and amortisation (reversals)	65.8	65.6
Increase in provisions	49.4	30.7
Deferred tax item changes recognised in profi t or loss	9.1	– 10.4
Interest expenses and interest income	– 3.3	– 1.5
Proceeds and losses from the disposal of fi xed assets	– 0.1	– 0.1
Other non-cash expenses and income	– 0.9	– 0.9
Increase in inventories, trade receivables, and other assets not attributable
to investing or fi nancing activities	– 162.3	– 190.3
Decrease (previous year: increase) in trade payables and other liabilities
not attributable to investing or fi nancing activities	– 177.9	1.3
Cash generated from operating activities	– 56.6	50.5
Interest paid	– 0.7	– 0.5
Income tax paid and refunds received	– 52.1	– 29.0
Cash fl ow from operating activities	– 109.4	21.0
Cash payments to acquire intangible assets	– 31.5	– 27.0
Cash payments to acquire property, plant and equipment	– 26.7	– 28.4
Proceeds from the disposal of property, plant and equipment	1.4	0.4
Cash payments to acquire non-current fi nancial assets	– 3.3	0.0
Proceeds from the disposal of non-current fi nancial assets	0.2	0.1
Cash payments to acquire shares in affi liated companies	– 32.3	– 18.3
Interest received	2.8	2.1
Dividends received	1.8	2.0
Cash fl ow from investing activities	– 87.6	– 69.1
Cash payments to company owners	– 45.8	– 39.5
Proceeds from new borrowing	94.3	0.0
Cash payments to service debt	0.0	0.0
Cash fl ow from fi nancing activities	48.5	– 39.5
Net change in cash and cash equivalents	– 148.5	– 87.6
Change in cash and cash equivalents arising from exchange rates	0.0	4.9
Cash and cash equivalents at the beginning of the period	364.6	336.4
Cash and cash equivalents at the end of the period	216.1	253.7

	Parent company						Non controlling interests	Group equity
€ million	Share capital	Capital reserves	Profi t reserves	Currency diff erences in equity	Other reserves	Group retained earnings	Equity	Equity
At 31 December 2014	40.0	141.7	364.2	– 0.5	– 89.5	531.8	987.7	0.8	988.5
Dividend payment (€1.25 per share)						– 39.5	– 39.5		– 39.5
Consolidated net income 9 months 2015						109.1	109.1	– 0.8	108.3
Currency diff erences				– 19.1			– 19.1		– 19.1
Actuarial gains (losses) on pension plans					0.5		0.5		0.5
Hedge accounting					3.6		3.6		3.6
At 30 September 2015	40.0	141.7	364.2	– 19.6	– 85.4	601.4	1,042.3	0.0	1,042.3
Consolidated net income Q4 2015						48.3	48.3	– 0.4	47.9
Allocation to profi t reserves			0.3			– 0.3	0.0		0.0
Currency diff erences				12.5			12.5		12.5
Actuarial gains (losses) on pension plans					11.8		11.8		11.8
Hedge accounting					– 3.8		– 3.8		– 3.8
At 31 December 2015	40.0	141.7	364.5	– 7.1	– 77.4	649.4	1,111.1	– 0.4	1,110.7
Dividend payment (€1.45 per share)						– 45.8	– 45.8		– 45.8
Consolidated net income 9 months 2016						115.2	115.2	– 0.9	114.3
Currency diff erences				– 12.9			– 12.9		– 12.9
Changes in the consolidated group							0.0	6.0	6.0
Actuarial gains (losses) on pension plans					– 0.6		– 0.6		– 0.6
Hedge accounting					1.5		1.5		1.5
At 30 September 2016	40.0	141.7	364.5	– 20.0	– 76.5	718.8	1,168.5	4.7	1,173.2

€ million	2016	2015
	1 January –	1 January –
	30 September	30 September
Consolidated net income	114.3	108.3
Items that will not be reclassifi ed subsequently to profi t or loss
Actuarial gains and losses on pensions and similar obligations	– 0.6	0.5
	– 0.6	0.5
Items that may be reclassifi ed subsequently to profi t or loss
Exchange diff erences on translation	– 12.9	– 19.1
Derivative fi nancial instruments	1.5	3.6
	– 11.4	– 15.5
Other comprehensive income	– 12.0	–15.0
Total comprehensive income	102.3	93.3
of which attributable to non-controlling interests	– 0.9	– 0.8
of which attributable to KRONES Group shareholders	103.2	94.1

²⁷ Segment reporting

	Machines and lines for product fi lling and decoration		Machines and lines for beverage production/ process technology		Machines and lines for the compact class		KRONES Group
€ million	2016	2015	2016	2015	2016	2015	2016	2015
	1 Jan – 30 Sep	1 Jan – 30 Sep	1 Jan – 30 Sep	1 Jan – 30 Sep	1 Jan – 30 Sep	1 Jan – 30 Sep	1 Jan – 30 Sep	1 Jan – 30 Sep
Revenue	2,039.1	1,905.5	251.6	286.9	89.4	78.3	2,380.1	2,270.7
EBT	158.4	145.6	0.6	6.4	4.6	4.1	163.6	156.1
EBT margin	7.8%	7.6%	0.2%	2.2%	5.1%	5.2%	6.9%	6.9%
Employees at 30 September*	11,944	11,344	1,321	926	517	487	13,782	12,757

* Consolidated group

Pursuant to Section 8 (1) of the articles of association, six members are elected by the shareholders in accordance with the German Stock Corporation Act (Sections 96 (1) and 101). Six members are elected by the employees pursuant to Sections 1 (1) and 7 (1) Sentence 1 Number 1 of the Codetermination Act.

Supervisory Board Executive Board

Ernst Baumann

Chairman of the Supervisory Board until 15 June 2016 * ZF FRIEDRICHSHAFEN AG

Volker Kronseder

• Chairman of the Supervisory Board since 15 June 2016
• * UNIVERSITÄTSKLINIKUM REGENSBURG * ECONOMIC ADVISORY COUNCIL
• BAYERISCHE LANDESBANK

Werner Schrödl**

Chairman of the Group Works Council Chairman of the Central Works Council Deputy Chairman of the Supervisory Board * ADVISORY BOARD OF BAYERISCHE BETRIEBSKRANKENKASSEN

Klaus Gerlach** Head of Central International Operations and Services

Norman Kronseder Farmer and forester * BAYERISCHE FUTTERSAATBAU GMBH

Philipp Graf

von und zu Lerchenfeld Member of the German Bundestag, Dipl.-Ing. agr., auditor and tax consultant

Dr. Alexander Nerz Attorney until 30 May 2016

Professor Dr. jur. Susanne Nonnast Professor at OTH Regensburg since 15 June 2016

Dr. Verena Di Pasquale** Deputy Chairperson of DGB Bayern (the German Trade Union Confederation in Bavaria)

Johann Robold** Member of the Works Council

Petra Schadeberg-Herrmann Managing partner at KROMBACHER FINANCE GMBH, SCHAWEI GMBH, DIVERSUM HOLDING GMBH & CO. KG * CHOCOLADEFABRIKEN LINDT & SPRÜNGLI AG

Jürgen Scholz**

1st authorised representative of the IG METALL administrative offi ce in Regensburg * INFINEON TECHNOLOGIES AG

Hans-Jürgen Thaus * HAWE HYDRAULIK SE * MASCHINENFABRIK REINHAUSEN GMBH * KURTZ HOLDING GMBH &

BETEILIGUNGS KG * SCHULER AG

Josef Weitzer** Deputy Chairman of the Group Works Council Deputy Chairman of the Central Works Council Chairman of the Works Council in Neutraubling * SPARKASSE REGENSBURG

Christoph Klenk CEO Human Resources, Communication, Quality, Information Management

Michael Andersen CFO Finance, Controlling, Strategic Purchasing

Rainulf Diepold Sales and Marketing

Thomas Ricker Bottling and Packaging Equipment

Markus Tischer International Operations and Services

Ralf Goldbrunner Plants and Components

* Other Supervisory Board seats held, pursuant to Section 125 (1) Sentence 5 of the German Stock Corporation Act

** Elected by the employees

In addition, each of the group companies is the responsibility of two members of the Executive Board.

Financial calendar

23 March 2017	Annual report 2016
27 April 2017	Quarterly statement for the period from 1 January to 31 March 2017
20 June 2017	Annual General Meeting 2017
20 July 2017	Interim report for the period ended 30 June 2017
26 October 2017	Quarterly statement for the period from 1 January to 30 September 2017

Publication Credits

Published by	KRONES AG
	Böhmerwaldstrasse 5
	93073 Neutraubling
	Germany
Project lead	Roland Pokorny,
	Leiter Corporate Communications
Design	Büro Benseler
Text	KRONES AG,
	InvestorPress GmbH
Photography	KRONES AG
Printing & litho	G. Peschke Druckerei GmbH

This English language report is a translation of the original German "Quartalsmitteilung über den Zeitraum vom 1. Januar bis 30. September 2016". In case of discrepancies the German text shall prevail.

KRONES AG Investor Relations Olaf Scholz Phone +49 9401 70-1169 Fax +49 9401 70-911169 E-mail investor-relations@krones.com Böhmerwaldstrasse 5 93073 Neutraubling Germany