Palfinger AG — Interim / Quarterly Report 2017

Oct 27, 2017

KEY FIGURES OF THE PALFINGER GROUP

EUR thousand	Q1-Q3 2013	Q1-Q3 2014	Q1-Q3 2015	Q1-Q3 2016	Q1-Q3 2017
Income statement
Revenue	712,192	782,476	898,925	996,606	1,093,106
EBITDAn1)	74,453	81,997	114,326	131,066	147,581
EBITDAn margin1)	10.5%	10.5%	12.7%	13.2%	13.5%
EBITn1)	50,852	55,714	83,980	96,930	105,325
EBITn margin1)	7.1%	7.1%	9.3%	9.7%	9.6%
EBITDA	74,453	81,997	107,676	121,395	134,131
EBITDA margin	10.5%	10.5%	12.0%	12.2%	12.3%
EBIT (operating result)	50,852	55,714	77,330	86,356	91,875
EBIT margin	7.1%	7.1%	8.6%	8.7%	8.4%
Result before income tax	41,199	47,752	68,665	76,945	79,600
Consolidated net result for the period	29,034	32,219	48,123	49,739	50,504
Balance sheet
Current capital (average)3)	274,509	307,914	318,907	358,194	393,154
Current capital ratio2)3)	28.6%	29.5%	27.0%	27.0%	27.0%
Capital employed (average)3)	599,960	720,028	848,623	969,741	1,099,112
Equity ratio3)	44.2%	41.7%	41.3%	36.5%	36.9%
Net debt3)	245,379	382,606	383,384	528,970	525,945
Gearing3)	65.4%	83.5%	76.3%	95.8%	90.8%
Cash flows and investments
Cash flows from operating activities	35,501	7,338	53,671	71,459	61,444
Free cash flows	4,341	(166,813)	11,809	(84,733)	24,568
Net investments	34,330	162,498	44,118	48,477	52,195
Depreciation, amortization and impairment	23,601	26,283	30,346	35,039	42,256
Human resources
Average payroll during the reporting period4)	6,436	7,376	8,765	9,144	9,732
Share
Number of shares	35,730,000	37,593,258	37,593,258	37,593,258	37,593,258
Market capitalization	1,032,597	939,831	904,118	970,282	1,445,085
Price as at month end (EUR)	28.90	25.00	24.05	25.81	38.44
Earnings per share in EUR	0.82	0.89	1.29	1.33	1.34

1) Starting in 2015, these figures were normalized (n=normalized) by restructuring costs.

2) Current capital (average) in proportion to revenue of the previous 12 months.

3) The 2016 figures were adjusted with retrospective effect (see Interim Report for the First Half of 2017, pages 16–17). 4) Consolidated group companies excluding equity shareholdings as well as excluding temporary workers.

PERFORMANCE OF THE PALFINGER GROUP

In the first three quarters of 2017, the PALFINGER Group continued to post strong growth. The positive trend thus remained unbroken in the third quarter, although the global environment was still heterogeneous. The main reasons for the significant expansion of business were the good performance in Europe, Russia and China, as well as the acquisitions and changes in the scope of consolidation made by the Group since 2016. As expected, the ongoing restructuring in North America and in the marine business had a detrimental effect on earnings.

The PALFINGER Group's revenue for the first three quarters reached a new record high of EUR 1,093.1 million. Compared to the revenue of EUR 996.6 million posted in the same period of the previous year, this corresponds to an increase of 9.7 per cent.

EBITDA normalized by restructuring costs (EBITDAn) rose by 12.6 per cent from EUR 131.1 million to EUR 147.6 million. The EBITDAn margin thus amounted to 13.5 per cent, as compared to 13.2 per cent in the first three quarters of 2016. EBITn grew from EUR 96.6 million to EUR 105.3 million; the EBITn margin came to 9.6 per cent, which is slightly lower than the previous year's figure of 9.7 per cent.

The development of revenue (Q1: EUR 361.9 million; Q2: EUR 391.9 million; Q3: EUR 339.4 million), EBITDAn (Q1: EUR 50.9 million; Q2: EUR 54.6 million; Q3: EUR 42.1 million) and EBITn (Q1: EUR 36.6 million; Q2: EUR 40.5 million; Q3: EUR 28.2 million) over the individual quarters also shows that, due to seasonal influences, the third quarter was not as strong as the first two quarters of 2017.

In the reporting period, restructuring costs came to EUR 13.5 million (Q1–Q3 2016: EUR 10.6 million). EBIT (operating result) thus increased by 6.4 per cent year on year from EUR 86.4 million to EUR 91.9 million. In the first three quarters of 2017, the consolidated net result was EUR 50.5 million, 1.5 per cent higher than the previous year's figure of EUR 49.7 million. Earnings per share amounted to EUR 1.34, as compared to EUR 1.33 in the first three quarters of 2016.

At 27.0 per cent, average current capital in proportion to revenue was the same in the reporting period as in the previous year. Equity increased to EUR 579.3 million, raising the equity ratio from 36.5 per cent in the previous year to 36.9 per cent. Net debt decreased from EUR 529.0 million in the previous year to EUR 525.9 million. Hence, the gearing ratio amounted to 90.8 per cent as at 30 September 2017, as compared to 95.8 per cent as at 30 September 2016.

DEVELOPMENT OF REVENUE

DEVELOPMENT OF EBITDAn

		External revenue		Intra-group revenue		EBITDAn1)		EBITn1)		EBIT
EUR thousand	Jan–Sept 2016	Jan–Sept 2017	Jan–Sept 2016	Jan–Sept 2017	Jan–Sept 2016	Jan–Sept 2017	Jan–Sept 2016	Jan–Sept 2017	Jan–Sept 2016	Jan–Sept 2017
LAND	861,236	908,802	9,025	10,290	134,969	153,806	107,348	123,489	101,634	114,627
SEA	135,370	184,304	3,820	4,743	7,588	5,776	3,220	(3,754)	117	(7,836)
HOLDING	–	–	0	0	(11,464)	(11,994)	(13,611)	(14,403)	(15,368)	(14,909)
Segment consolidation	–	–	(12,845)	(15,033)	(27)	(7)	(27)	(7)	(27)	(7)
PALFINGER Group	996,606	1,093,106	0	0	131,066	147,581	96,930	105,325	86,356	91,875

PERFORMANCE BY SEGMENT

1) Starting in 2015, these figures were normalized (n=normalized) by restructuring costs.

LAND SEGMENT

In the first three quarters of 2017, revenue in the LAND segment increased by 5.5 per cent year on year from EUR 861.2 million to EUR 908.8 million. The segment's normalized EBITDA (EBITDAn) grew by a substantial 13.9 per cent from EUR 135.0 million to EUR 153.8 million. The EBITDAn margin of the LAND segment thus rose from 15.7 per cent to 16.9 per cent in the first three quarters of 2017. The restructuring costs allocated to this segment amounted to EUR 8.9 million in the reporting period, as compared to EUR 5.7 million in the first three quarters of 2016.

This growth was based on the expansion of business in the regions EMEA, CIS and Asia. In Europe, economic recovery in the fields of construction and infrastructure continued to be noticeable, and the acquisition of the Danish distribution partner Palfinger Danmark AS generated positive momentum as well. The restructuring in North America brought substantial success: In this region, PALFINGER adapted its internal organization and, in the first quarter of 2017, sold its service body business. The revision of the product portfolio is already well advanced; the first newly developed products are almost ready for the market. Provided that the demand for loader cranes continues to be satisfactory, profitability in North America is expected to grow further. In South America, PALFINGER continued to operate in a highly difficult market environment, but it appears that the downturn has bottomed out. In Asia, particularly in China, the partnership with SANY has proved to be the foundation for the sound development of business; the revenue generated by the joint venture increased considerably in the reporting period. In Russia/CIS, local value creation facilitated additional growth despite the challenging economic environment.

SEA SEGMENT

In the first three quarters of 2017, the SEA segment's revenue increased by 36.1 per cent year on year from EUR 135.4 million to EUR 184.3 million. The contribution of the segment to PALFINGER's consolidated revenue thus rose from 13.6 per cent to 16.9 per cent, reflecting the acquisition of the Harding Group at the end of June 2016. Harding contributed EUR 77.3 million to revenue in the reporting period. However, the segment's normalized EBITDA (EBITDAn) declined from EUR 7.6 million in the first three quarters of 2016 to EUR 5.8 million. The EBITDAn margin came to 3.1 per cent, as compared to 5.6 per cent in the first three quarters of 2016. The restructuring costs incurred by this segment increased from the previous year's figure of EUR 3.1 million to EUR 4.1 million.

The business environment of the SEA segment remained highly challenging as a result of the strained situation of the oil and gas industry. However, excluding the acquisition of Harding, PALFINGER posted only slight yearon-year declines in revenue. In the reporting period, the level of incoming orders increased in some areas, pointing to a stabilization of the market situation. PALFINGER intends to position itself favourably for future upturns by means of targeted restructuring. Some measures, such as the consolidation of business operations and sites in Korea and the Netherlands, have already been finalized, also with the aim of using synergies between PALFINGER's established marine business and the Harding Group.

HOLDING UNIT

Reporting on the HOLDING unit presents the set of group functions that are bundled at headquarters, as well as strategic project costs incurred by this unit. In the first three quarters of 2017, EBITDAn amounted to –EUR 12.0 million, after –EUR 11.5 million in the same period of the previous year. In the reporting period, the restructuring costs allocated to this unit came to EUR 0.5 million, as compared to EUR 1.8 million in the previous year.

OTHER EVENTS

In January 2017, PALFINGER acquired 20 per cent of the shares in Sky Steel Systems LLC, Dubai. In addition, a call option for another 29 per cent was agreed upon. Sky Steel Systems produces facade access equipment, which is primarily used to maintain and clean the facades of high-rise buildings. PALFINGER's Railway Systems business unit has already been engaged in the business of maintenance of infrastructure and buildings, and the Group expects numerous synergies in this field.

At the end of January 2017, PALFINGER acquired 100 per cent of the shares in its Danish dealer, Palfinger Danmark AS. Since then, the previous owner has focused on its core business. PALFINGER took over all the staff and has kept the entire sales and service network in operation under the direction of the company's established management team.

On 31 January 2017, PALFINGER acquired 100 per cent of the shares in Capital Investment d.o.o. The seller was Capital Investment GmbH, a company of the private foundation Palfinger Privatstiftung. The acquired company is the owner of a property at the Maribor site that is being rented by the PALFINGER Group, and has no business operations apart from that. At the beginning of October, this company was merged into PALFINGER proizvodnja d.o.o.

PALFINGER has held an at-equity interest of 30 per cent in the Argentinian company Andrés N. Bertotto S.A.I.C. (Hidro-Grubert) since 2014. Hidro-Grubert produces access platforms, hydraulic knuckle-boom cranes and truck bodies. As PALFINGER was granted a call option for another 40 per cent in the company, exercisable between 2017 and 2019, there is currently the ability of PALFINGER to exercise control over Hidro-Grubert. Therefore, the company has been fully consolidated since the beginning of 2017. The fair value measurement of the 30 per cent interest held so far, carried out in the course of the initial consolidation, resulted in proceeds of EUR 1,218 thousand reported under income from companies reported at equity.

At the time of acquisition, the preliminary purchase price allocation for the acquisitions was made on the basis of the estimated fair values as follows:

EUR thousand	Sky Steel Systems LLC	Palfinger Danmark AS	Capital Investment d.o.o.	Hidro Grubert
Purchase price paid in cash	1,626	3,585	2,818	0
Fair value of shares already held	0	0	0	4,453
Pro-rata net assets of non-controlling interests	0	0	0	5,223
Subtotal	1,626	3,585	2,818	9,676
Net assets	(29)	(2,472)	(2,818)	(7,460)
Goodwill	1,597	1,113	0	2,216

At the end of September, SANY sold 900,000 PALFINGER shares at a price of EUR 37.00 per share, in connection with the refinancing of its European business operations. SANY's share in PALFINGER AG was thus reduced from almost 10 per cent to 7.5 per cent.

On 1 October 2017, PALFINGER AG appointed Felix Strohbichler as its new CFO. He succeeds Christoph Kaml, who left the Company at the end of August. Felix Strohbichler was most recently employed by the B&C Group as the managing director of B&C Industrieholding GmbH, which is a majority shareholder of Lenzing AG, Semperit AG Holding, AMAG Austria Metall AG and others. Prior to that, he gained 15 years of experience with the PALFINGER Group, holding executive positions in various business units.

OUTLOOK

The high level of incoming orders gives reason to expect that in the fourth quarter of 2017 overall business performance will continue to be satisfactory despite regional variations. The Harding Group has been a part of PALFINGER since the end of June 2016. This has resulted in a significant expansion of the PALFINGER Group's marine business, which is reflected in the key figures for the first three quarters. The costs incurred for the restructuring measures in North America and in the marine business will impact negatively on the 2017 earnings.

On this basis, PALFINGER expects 2017 to be another record year and is also optimistic for 2018. For the 2017 financial year as a whole, the management continues to expect growth in revenue as well as in earnings normalized by integration and restructuring costs. PALFINGER's target for 2017 is to achieve a two-digit EBITn margin.

Group-wide initiatives with a focus on customer orientation, digitalization and the optimization of processes will support PALFINGER in positioning the Group for the challenges of the coming years. In this connection, PALFINGER has also been revising its corporate vision. PALFINGER's strategic corporate planning up to 2022 takes these issues into account as well.

CONSOLIDATED INCOME STATEMENT (CONDENSED)

EUR thousand	July–Sept 2016	July–Sept 2017	Jan–Sept 2016	Jan–Sept 2017
Revenue	331,035	339,355	996,606	1,093,106
Cost of sales	(253,091)	(253,980)	(743,914)	(821,841)
Gross profit	77,944	85,375	252,692	271,265
Other operating income	2,626	5,014	7,956	18,098
Research and development costs	(6,846)	(6,809)	(20,712)	(20,923)
Distribution costs	(24,983)	(25,349)	(70,331)	(81,340)
Administrative costs	(28,010)	(31,030)	(81,477)	(88,484)
Other operating expenses	(1,765)	(6,451)	(7,581)	(15,329)
Income from companies reported at equity	2,450	4,285	5,809	8,588
Earnings before interest and taxes – EBIT	21,416	25,035	86,356	91,875
Net financial result	(3,273)	(4,971)	(9,411)	(12,275)
Result before income tax	18,143	20,064	76,945	79,600
Income tax expense	(6,832)	(5,182)	(21,434)	(20,526)
Result after income tax	11,311	14,882	55,511	59,074
attributable to
shareholders of PALFINGER AG (consolidated net result for the period)	10,004	11,880	49,739	50,504
non-controlling interests	1,307	3,002	5,772	8,570
EUR
Earnings per share (undiluted and diluted)	0.27	0.32	1.33	1.34
Average number of shares outstanding	37,415,094	37,593,258	37,415,094	37,593,258

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (CONDENSED)

EUR thousand	July–Sept 2016	July–Sept 2017	Jan–Sept 2016	Jan–Sept 2017
Result after income tax	11,311	14,882	55,511	59,074
Amounts that will not be reclassified to the income statement in future periods
Remeasurement acc. to IAS 19 (after tax)	0	0	(3,501)	0
Amounts that may be reclassified to the income statement in future periods
Unrealized profits (+)/losses (–) from foreign currency translation (after tax)	2,480	(5,982)	2,620	(43,190)
Unrealized profits (+)/losses (–) from cash flow hedge (after tax)	2,905	2,098	6,365	6,879
Other comprehensive income after income tax	5,385	(3,884)	5,484	(36,311)
Total comprehensive income	16,696	10,998	60,995	22,763
attributable to
shareholders of PALFINGER AG	15,297	8,486	54,435	15,433
non-controlling interests	1,399	2,512	6,560	7,330

CONSOLIDATED BALANCE SHEET

EUR thousand	30 Sept 20161)	31 Dec 20161)	30 Sept 2017
Non-current assets
Intangible assets	376,482	380,111	374,163
Property, plant and equipment	300,937	312,314	313,083
Investment property	333	328	313
Investments in companies reported at equity	168,756	171,871	164,350
Other non-current assets	4,449	5,715	2,365
Deferred tax assets	15,418	18,128	16,234
Non-current financial assets	31,084	32,707	31,256
	897,459	921,174	901,764
Current assets
Inventories	292,338	282,702	301,156
Trade receivables	242,868	251,672	268,963
Other current receivables and assets	41,671	35,152	44,946
Income tax receivables	4,514	4,195	2,257
Current financial assets	6,509	5,137	9,625
Cash and cash equivalents	28,313	33,922	40,801
	616,213	612,780	667,748
Non-current assets held for sale	0	1,893	0
Total assets	1,513,672	1,535,847	1,569,512
Equity
Share capital	37,593	37,593	37,593
Additional paid-in capital	86,960	86,844	86,844
Retained earnings	408,800	418,180	455,663
Foreign currency translation reserve	(3,630)	11,851	(30,099)
	529,723	554,468	550,001
Non-controlling interests	22,217	25,452	29,281
	551,940	579,920	579,282
Non-current liabilities
Liabilities from puttable non-controlling interests	2,952	3,004	3,196
Non-current financial liabilities	425,344	431,918	524,476
Non-current purchase price liabilities from acquisitions	15,683	15,364	15,754
Non-current provisions	54,736	49,576	45,029
Deferred tax liabilities	20,408	22,795	18,314
Other non-current liabilities	2,771	2,621	2,663
	521,894	525,278	609,432
Current liabilities
Liabilities from puttable non-controlling interests	9,212	0	0
Current financial liabilities	169,438	152,804	83,071
Current provisions	18,062	18,973	18,575
Income tax liabilities	10,322	7,924	15,099
Trade payables and other current liabilities	232,804	250,948	264,053
Total equity and liabilities	439,838 1,513,672	430,649 1,535,847	380,798 1,569,512

1) The 2016 figures were adjusted with retrospective effect (see Interim Report for the First Half of 2017, pages 16–17).

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (CONDENSED)

	Equity attributable to the shareholders		of PALFINGER AG
EUR thousand	Share capital	Additional paid-in capital	Treasury stock	Retained earnings	Foreign currency translation reserve	Non controlling interests	Equity
As at 1 Jan 2016	37,593	82,141	(1,543)	378,193	(5,372)	19,646	510,658
Total comprehensive income
Result after income tax	0	0	0	49,739	0	5,772	55,511
Other comprehensive income after income tax
Remeasurement acc. to IAS 19	0	0	0	(3,411)	0	(90)	(3,501)
Unrealized profits (+)/losses (–) from foreign currency translation	0	0	0	0	1,742	878	2,620
Unrealized profits (+)/losses (–) from cash flow hedge	0	0	0	6,365	0	0	6,365
	0	0	0	52,693	1,742	6,560	60,995
Transactions with shareholders
Dividends	0	0	0	(14,551)	0	(6,090)	(20,641)
Reclassification non-controlling interests	0	0	0	(3,949)	0	(116)	(4,065)
Sale of own shares	0	4,573	1,543	0	0	0	6,116
Addition non-controlling interests	0	0	0	0	0	3,480	3,480
Disposal non-controlling interests	0	0	0	(3,561)	0	(1,263)	(4,824)
Other changes	0	246	0	(25)	0	0	221
	0	4,819	1,543	(22,086)	0	(3,989)	(19,713)
As at 30 Sept 2016	37,593	86,960	0	408,800	(3,630)	22,217	551,940
As at 1 Jan 2017	37,593	86,844	0	418,180	11,851	25,452	579,920
Total comprehensive income
Result after income tax	0	0	0	50,504	0	8,570	59,074
Other comprehensive income after income tax
Unrealized profits (+)/losses (–) from foreign currency translation	0	0	0	0	(41,950)	(1,240)	(43,190)
Unrealized profits (+)/losses (–) from cash flow hedge	0	0	0	6,879	0	0	6,879
	0	0	0	57,383	(41,950)	7,330	22,763
Transactions with shareholders
Dividends	0	0	0	(21,428)	0	(8,715)	(30,143)
Reclassification non-controlling interests	0	0	0	(327)	0	(9)	(336)
Addition non-controlling interests	0	0	0	0	0	5,223	5,223
Other changes	0	0	0	1,855	0	0	1,855
	0	0	0	(19,900)	0	(3,501)	(23,401)
As at 30 Sept 2017	37,593	86,844	0	455,663	(30,099)	29,281	579,282

CONSOLIDATED STATEMENT OF CASH FLOWS

EUR thousand Jan–Sept 2016		Jan–Sept 2017
Result before income tax	76,945	79,600
Write-downs (+)/write-ups (–) of non-current assets	35,015	42,254
Gains (–)/losses (+) on the disposal of non-current assets	(146)	1,707
Interest income (–)/interest expenses (+)	8,843	9,766
Income from companies reported at equity	(5,808)	(8,589)
Change in puchase price liability	(185)	197
Other non-cash income (–)/expenses (+)	2,498	6,735
Increase (–)/decrease (+) of assets	(13,607)	(71,262)
Increase (+)/decrease (–) of provisions	7,737	(5,073)
Increase (+)/decrease (–) of liabilities	(10,594)	25,132
Cash flows generated from operations	100,698	80,467
Interest received	1,467	1,178
Interest paid	(9,273)	(9,726)
Dividends received from companies reported at equity	2,439	4,222
Income tax paid	(23,872)	(14,697)
Cash flows from operating activities	71,459	61,444
Cash receipts from the sale of intangible assets and property, plant and equipment	1,133	5,590
Cash payments for the acquisition of intangible assets and property, plant and equipment	(49,598)	(60,066)
Cash payments for the acquisition of subsidiaries net of cash acquired	(114,108)	(2,958)
Cash payments for investments in companies reported at equity	(1,700)	(1,626)
Cash receipts from the sale of subsidiaries and other businesses	0	12,337
Cash payments for the acquisition of securities	0	(856)
Cash payments for/cash receipts from other assets	1,117	3,154
Cash flows from investing activities	(163,156)	(44,425)
Dividends to shareholders of PALFINGER AG	(14,551)	(21,428)
Dividends to non-controlling shareholders	(6,693)	(9,001)
Cash receipts from the sale of own shares	7,640	0
Cash payments for the acquisition of non-controlling interests	(4,164)	(9,845)
Cash receipts non-controlling interests	246	0
Loans for the acquisition of interests	80,000	60,000
Repayment of loans for acquisitions	(5,542)	(2,000)
Long-term refinancing of redemptions and maturing short-term loans	20,000	0
Repayment of maturing/terminated loans	(94,295)	(105,000)
Bridge financing loans for the acquisition of interests	170,000	0
Issue of promissory note loans	0	200,000
Repayment of bridge financing loans for the acquisition of interests	(80,000)	(90,000)
Repayment of maturing/terminated leasing liabilities	0	(9,609)
Cash payments for/cash receipts from other financial liabilities	25,317	(21,084)
Cash flows from financing activities	97,958	(7,967)
Total cash flows	6,261	9,052
EUR thousand	2016	2017
Funds as at 1 Jan	21,551	33,922
Effects of changes in foreign exchange rates	501	(2,173)
Total cash flows	6,261	9,052
Funds as at 30 Sept	28,313	40,801

FINANCIAL CALENDAR

8 February 2018	Balance sheet press conference
25 February 2018	Record date Annual General Meeting
7 March 2018	Annual General Meeting
9 March 2018	Ex-dividend date
12 March 2018	Record date dividend
13 March 2018	Dividend payment date
30 April 2018	Publication of results for the first quarter of 2018
30 July 2018	Publication of results for the first half of 2018
29 October 2018	Publication of results for the first three quarters of 2018

Additional dates such as trade fairs or road shows will be announced on the Company's website under Financial Calendar.

INVESTOR RELATIONS

Hannes Roither

Phone +43 662 2281– 81100 Fax +43 662 2281– 81070 h.roither@palfinger.com

PALFINGER AG LAMPRECHTSHAUSENER BUNDESSTRASSE 8 5101 BERGHEIM AUSTRIA

WWW.PALFINGER.AG

Minimal arithmetic differences may arise from the application of commercial rounding to individual items and percentages in this report.

This report contains forward-looking statements made on the basis of all information available at the date of the preparation of this report. Forward-looking statements are usually identified by the use of terminology such as "expect", "plan", "estimate", "believe", etc. Actual outcomes and results may be different from those predicted.

Published on 27 October 2017.

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No liability is assumed for any typographical or printing errors.