SAF-HOLLAND SE

Investor Presentation • Jan 21, 2020

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Investor Presentation

January / February 2020

Agenda

• Business model and strategy
• ESG at SAF-HOLLAND
• Market positioning
• Our Acquisitions
• Financial Performance 9M 2019
• Outlook
• Appendix

Business model and strategy

Product portfolio (1)

SAF-HOLLAND offers a comprehensive product portfolio for one-stop shopping also covering the aftermarket

Product portfolio (2)

V. Orlandi S.p.A. Axscend Ltd. York

Product portfolio – Recent Innovations

TRAKe Adaptive Air Damping

SMART STEEL provides for add-on business opportunities in a digitized transport world

SAF-HOLLAND combines mechanics with sensors and electronics. The Company's integration and data interpretation know-how enables smart/autonomous drive systems.

New revenue sources - acquisition of Axscend provides for complementary data-based business model

Start-up innovation power …

• Trailer Master turns trailers into "smarties"
• Connectivity and data interpretation
• Successfully established licensebased business model
• Already a couple of thousand licenses in the UK alone

… meets market leading position

• Scalable at SAF-HOLLAND Group level
• License-based model to be rolled out to more than 20.000 SAF-HOLLAND fleet customers
• SAF-HOLLAND achieved a significant time gain

Successful data- and license-based business model offers a scalable platform for a roll out at the group level.

High aftermarket share - the most comprehensive aftermarket spare parts and service network worldwide provides for generic growth and consistent cash flows

The key asset: approx. 10,000 spare parts dealers and service stations in more than 80 countries guarantee spare parts availability

• "Razor and blade" business model generates growth based on consistently increased OE product population in the field

• 1 Network in Europe and North America a key asset for fleet customers and huge barrier to market entry

• Narrows down volatility from OEM industry cycles
• Add-on potential from expanding PDC network and positioning of GoldLine/ Sauer Quality Parts brands
• Around 24 per cent of sales originate from the resilient service and aftermarket business

Global footprint and local content - reduce cyclical risks and provide for structural growth in new markets

Diversified customer base - Unique selling model based upon direct access to broad end customer base that specifies products

• Large footprint into fleets of different sizes and OEs
• Top 10 customers represent only approx. 35% of sales¹

Resilient business model supported by

High aftermarket share	Global footprint and local content
Around 25 per cent of total sales*  with high margin contribution  # 1 Network in Europe and North America	 Strong core brands across the two main regions (SAF, HOLLAND) complemented by strong regional brands (York, KLL, V.Orlandi) with international potential  Different brands for specific customer needs and markets  Local application engineering
Operational Strict SG&A Excellence control
Diversified customer base	New revenue sources
 Large footprint into OEs and fleets of different sizes  Broad industry and application coverage	 Digital trailer management (SMART STEEL)  Sustainability related aspects of lightweight strategy and innovative additions to product portfolio

Strategy 2020: Megatrends driving SAF-HOLLAND's business development are in full effect

ESG at SAF-Holland

Integration of ESG Aspects Into Strategy Development and Execution

"Grow our business, while reducing our impact" - SAF-HOLLAND´s approach to Corporate Responsibility

16

Our Acquisitions

SAF-HOLLAND plus V.Orlandi S.p.A.

PROFILE	RATIONALE
 Supplier of couplings for trucks and specialty fifth wheels	 Strengthen N° 2 position in fifth-wheels and couplings in the European market with attractive growth perspective
 Specialty business with couplings and drawbar eyes for trailers and specialized commercial vehicles systems	 Integration into SAFH AM logistics out of Germany for Europe
	 Expanded presence in attractive growth markets in Russia, the Middle East and Australia
 Serves the industrial, agricultural, forestry and mining segments	 Complementary product range of couplings for trucks and specialty fifth wheels
 Well-established international sales	 Significant sales efficiencies from worldwide cross-selling of Orlandi products
network for OEM and Aftermarket	 Exploring China and U.S. market
 60 employees	 Offering choice for customers in markets where lenders have a high share in
 Based in Flero, Brescia (Italy)	combination with other group products

FINANCIAL IMPACT

• Full year sales (annualized): approx. EUR 26 million
• Expected adj. EBIT margin: in the mid teens, i.e. clearly margin accretive

Tackling cross-selling opportunities in selected markets

SAF-HOLLAND plus York Transportation Equipment (Asia) Pte. Ltd.

PROFILE

• Manufacturer and distributor of trailer axles, trailer suspensions, and trailer components
• Strong market position in Asia, Africa, and Australia
• Strong service and spare parts network in India with more than 200 service points
• 220 employees, 90 contract workers
• Manufacturing facilities in India; R&D centers in India, Australia and Singapore (headquarter)

RATIONALE

• Rapid expansion in attractive Indian and APAC/China transportation markets
• Acquisition of related engineering knowledge
• Reach top position in the fast-growing Indian trailer axle and suspension systems market
• Strengthened market position in Middle East and Africa
• Complementary sales, service and spare parts network
• Extended aftermarket business, particularly in Southeast Asian markets
• Adressing product segment and markets that cannot be served with premium offerings
• Excellent positioning for growing transportation volumes and infrastructure investment caused by Belt and Road Initiative

FINANCIAL IMPACT

• Full year sales (annualized): approx. EUR 70 million
• Expected adj. EBIT margin: mid-single-digit percentage range for the first year after closing; moving successively higher in the direction of the overall EBIT margin for the Group through sourcing, SG&A, and PMI synergies

Gaining further market share in a weak Indian market environment and expand in other emerging territories

York sells its products in 6 main markets and a large range of emerging territories

SAF-HOLLAND plus Axscend Ltd.

PROFILE

• Specialist for digital trailer management: telematics and connectivity
• TrailerMaster Connect: patented intelligent interface for line connection technology, e.g. lighting function control, load monitoring and optimization and brake system performance monitoring for better fleet efficiency
• Marketed by license-based model
• 10 specialists employed
• Based in Cheshire (UK)

RATIONALE

• Expansion of technology portfolio for digital trailer applications
• Acquisition of engineering and software knowledge
• Strong combination of SAF-HOLLAND's chassis systems and Axscend's digital trailer applications
• Significant growth potential of digital solutions for trailer management in European and North America
• Strong client base with several thousand trailer licenses sold (incl. hardware)
• Synergies from combined R&D activities for data-based business models
• Dynamic growth of margin accretive business activities

FINANCIAL IMPACT

• Full year sales (annualized): approx. EUR 2 million
• Expected adj. EBIT margin: significantly above Group average

Preparation for entering the Western European Market

SAF-HOLLAND plus Stara Group

	PROFILE		RATIONALE
 Leading distribution company for trailer components in Finland and		Comprehensive customer base and established Stara network offers ideal starting point for addressing the Nordic Market
	Sweden		Strengthen brand awareness in Northern Europe
 Focus on axle and suspension systems		Expansion of market position and additional market share gains
	for trailers in the original equipment and aftermarket segments		Increase share of added value as well as profitability through insourcing sales activities
	Previously distribution partner of the SAF HOLLAND Group in the above two countries		Platform for AM business and cross-selling
			Increase fleet focus
	Around 20 employees

FINANCIAL IMPACT

• Full year sales (annualized): approx. EUR 10 million
• Expected adj. EBIT margin: margin accretive

Secure business in Northern Europe for the long-term with higher fleet focus, increased AM, and cross-sell of product range and brands

Operational Excellence – An Example: Building a Global Axle Production Platform based on SAP

Creating IT foundation for a global axle production platform to enable operational excellence

Financial performance 9M 2019

9M 2019 at a glance

• 1. Sales and adj. EBIT margin development in line with revised outlook
• 2. Americas region: earnings development stabilises
• 3. China region: reorganisation progressing according to plan
• 4. Continued high investment level supports future growth and operational excellence
• 5. Operating free cash flow: significant turnaround into positive territory
• 6. Acquisitions of the years 2016 to 2019 help to gain market share

Q2

Q3

Q4

* All figures shown are rounded, minor discrepancies may arise from additions of these amounts.

Q1

YTD

Operating free cash flow (€ mn)*

Net debt at € 274.7 mn – Equity ratio remains solid at 33.3%

* Net debt (incl. finance lease liabilities) per September 30, 2019 increased to € 274.7 mn. First time application of IFRS 16 alone accounts for approx. € 33.3 mn. Cash and cash equivalents and other short-term investments fell from € 155.0 mn to € 126.1 mn and were influenced by dividend payments and purchase price payments for Stara Group and PressureGuard. The equity ratio as of Sept 30, 2019 was 33.3 per cent.

2019/2020: Setting solid foundations for the next phase

• Re-start China in Yangzhou

• Provide competitive products for the domestic Chinese market
• Win new orders in the domestic Chinese market
• Expand strategic customer relationships
• Reduce operating losses in China substantially
• Accelerate efforts regarding Program FORWARD with focus on operational excellence
• Improve SG&A ratio worldwide
• Drive aftermarket expansion in core markets
• Enhance free cash flow generation – Focus on sound capital allocation and working capital optimisation
• Secure solid financial profile
  • Even out debt profile
  • Financial covenants under control

Outlook

Outlook: Truck and trailer production

Western & Eastern Europe				North America		China
	Truck1	2 Trailer		Truck3	3 Trailer		Truck1	2 Trailer
2018	-2%	+6%	2018	+27%	+12%	2018	-7%	-4%
2019E	+1%	-10% to -15%	2019E	+6%	+2%	2019E	-3%	-20%
2020E	-10% to -15%	+0% to -5%	2020E	-31%	-18%	2020E	-13%	+0%

2020E: No growth in Western & Eastern Europa and in China, North America with a significant decline.

Outlook: Truck and trailer production

South America			India
	Truck1	Trailer 2		Truck1	Trailer 2
2018	+23%	+55%	2018	+41%	+13%
2019E	+14%	+27%	2019E	-60%	-60%
2020E	+15%	+0%	2020E	-10%	-12%

Financial targets 2019

	FY 2018	FY 2019 (new)	FY 2019 (old)
Sales	€ 1,300.6 mn	0 to -3 per cent	+ 4 to 5 per cent
Adj. EBIT margin	6.9 per cent	6.0 per cent to 6.5 per cent	Around the mid-point of the 7 to 8 per cent range
Net working capital ratio	13.5 per cent	13 per cent to 14 per cent	13 per cent
CAPEX	€ 40.8 mn	€ 58 to 63 mn	€ 68 to 70 mn

Change of legal form into a European Company (SE) and subsequent transfer of the registered office to Germany

Current Financing Structure before planned refinancing activities (€ mn)

* Promisssory note loan: total amount of € 200 mn

** Revolving credit line of € 200 mn (due 10/2025) incl. an option of an additional € 100 mn

Appendix

Key OEM customers: Trailer, truck and bus manufacturers

Almost every major truck, trailer and bus OEM is a SAF-HOLLAND customer.

End customers: Fleet operators

SAF-HOLLAND focuses on fleet operators (infrastructure, logistics, specialty, heavy duty, port, etc.).

SAF-HOLLAND market-leading positions in North America and EMEA in an oligopolistic set-up

EMEA				North America
	Trailer axles		Fifth Wheels		Trailer axles + suspensions	Fifth Wheels
1/2	SAF HOLLAND	1	Jost	1	Hendrickson	SAF HOLLAND
1/2	BPW	2	SAF HOLLAND / V.ORLANDI	2	SAF-HOLLAND	Jost
3	Schmitz	3	Fontaine	3	Meritor	Fontaine

North America

• Market-leading position in NA in fifth wheels
• Already No. 2 position in trailer axles in NA

EMEA

• Leading in European trailer axles
• No. 2 position in EMEA fifth wheels strengthened by acquisition of No. 3 V.ORLANDI

Among the market leaders in China and India

	China (Premium segment)	India
	Trailer axles		Trailer axles
1	BPW	1	SAF-HOLLAND / YORK
2	SAF-HOLLAND	2	Tata Motors
3	Fuwa	3	H.D. Trailers

India

• Acquisition of Indian market leader in trailer axle systems York

• 1 position in trailer axles in the fastest growing TA market worldwide

China

• Organic growth driven by new greenfield operation in Yangzhou
• Legislation boosting the premium segment in China

Truck and trailer production Q1-Q3 2019

Western & Eastern Europe			North America			China
	Truck1	2 Trailer		Truck3	3 Trailer		Truck1	2 Trailer
Q1-Q3 2019	+3%	-10% to -15%	Q1-Q3 2019	+14%	+6%	Q1-Q3 2019	-2%	-15% to -20%

Sustained upswing in North America. European trailer market easing after historic highs in 2018. Trade conflict between China and the US weighed on trailer production in China.

Truck and trailer production Q1-Q3 2019

South America				India
	Truck1	Trailer2		Truck1	2 Trailer
Q1-Q3 2019	+12%	+27%	Q1-Q3 2019	-60%	-60%

Lasting recovery in South America; strong slump of the Indian trailer market as the expected catch-up effect after the April/May elections did not materialize and lower than expected GDP growth.

Profit and loss account

(kEUR)	Q1-Q3 2019	Q1-Q3 2018
Sales	1,008,626	980,853
Gross profit	164,241	155,382
as % of sales	16.3	15.8
EBIT	38,895	59,299
as % of sales	3.9	6.0
Financial result	-8,747	-9,309
Result before tax	30,148	49,990
Income tax	-12,868	-12,963
Tax rate (%)	42.7	25.9
Result for the period	17,280	37,027

* All figures shown are rounded, minor discrepancies may arise from additions of these amounts.

44

* All figures shown are rounded, minor discrepancies may arise from additions of these amounts.

45

Business segment: APAC

* All figures shown are rounded, minor discrepancies may arise from additions of these amounts.

Business segment: China

• 9M/2019 sales influenced by

• Declining export business of Chinese customers following the trade dispute between China and the US
• Short notice cancellations and delays in orders in declining domestic market
• Temporary strikes following the announcement of plant closures

• Adj. EBIT margin in 9M/2019 burdened by

• Low level of capacity utilization at the Xiamen and Qingdao plant (-)
• Temporary cost burden from duplicate structures in the course of the integration of the other Chinese locations into the new Greenfield plant (-)
• Inventory and accounts receivable impairments (-)
• Strike-related costs (-)
• Losses on disposal of fixed assets (-)

China: Adj. EBIT excl. one-off items

(kEUR)	Q1/2019	Q2/2019	Q3/2019	9M/2019
EBIT	-2,688	-5,637	-15,660	-23,985
Additional depreciation / amortization of PPE and intangible assets from PPA	15	14	15	44
Goodwill impairment *	-	-	6,691	6,691
Restructuring and transactions costs	1,658	1.518	4,125	7,301
Adj. EBIT	-1,015	-4,105	-4,829	-9,949
as % of sales	-8.3	-32.0	-84.5	-32.3
Inventory write-downs	-103	-1.414	-2,416	-3,933
Accounts receivable write-downs	0	-968	-187	-1,155
Loss on disposal of fixed assets	0	0	-761	-761
Strike related costs	0	-800	0	-800
One-off items	-103	-3,182	-3,364	-6,649
Adj. EBIT excl. one-offs	-912	-923	-1,466	-3,300
as % of sales	-7.4	-7.2	-25.6	-10.7

* Goodwill impairment results from historic goodwills allocated to the China region in the course of the separation of the APAC/China region into two distinct regions APAC and China at the beginning of the year.

Investments and depreciation

• Investments in plant, property, equipment and intangible assets of € 36.9 mn
• Operating cash flow covers investment level
• Focus of investments: construction of the Chinese Greenfield project, rationalisation and expansion investments in the US, office building in Germany
• Close monitoring of the investment approval process to streamline capital allocation
• Depreciation increased mainly due to IFRS 16 effects (€ 5.8 mn) and goodwill impairment (€ 6.7 mn)

Net working capital ratio (%)

• Net working capital (NWC) 10.4 per cent or € 22.8 mn below previous year's figure
  • Inventories 5.6 per cent below prior year's level despite sales increase of 2.8 per cent
  • Trade receivables down 19.5 per cent on substantially improved cash collection
  • Trade payables down 17.1 per cent or € 27.2 compared to 9M/2018
  • NWC ratio decreased from 16.0 per cent to 15.6 per cent despite sales increase of 2.8 per cent

IR Contact

SAF-HOLLAND Group

Hauptstraße 26 63856 Bessenbach Germany www.safholland.com

Michael Schickling

Head of Investor Relations / Corporate Communications michael.schickling@safholland.de Phone: +49 - 6095 301-617

Alexander Pöschl

Senior Manager Investor Relations / Corporate Communications alexander.poeschl@safholland.de Phone: +49 - 6095 301-117

Klaus Breitenbach

Senior Manager Investor Relations / Corporate Communications klaus.breitenbach@safholland.de Phone: +49 - 6095 301-565

Disclaimer

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This presentation has been prepared by SAF-HOLLAND S.A. ("SAF-HOLLAND") and comprises written materials concerning SAF-HOLLAND. It is furnished to you solely for your information and may not be reproduced or redistributed, in whole or in part, to any other person. It contains summary information only and does not purport to be comprehensive and is not intended to be (and should not be used as) the sole basis of any analysis or other evaluation. No representation or warranty, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of any information, including projections, estimates, targets and opinions, contained herein, and no liability whatsoever is accepted as to any errors, omissions or misstatements contained herein, and, accordingly, neither SAF-HOLLAND nor any of its directors, officers, employees or advisors nor any other person shall have any responsibility or liability whatsoever (for negligence or otherwise) arising, directly or indirectly, from the use of this presentation, or its contents or otherwise in connection with this presentation.

This presentation contains certain statements related to our future business and financial performance and future events or developments involving SAF-HOLLAND and/or the industry in which SAF-HOLLAND operates that may constitute forward-looking statements. These statements may be identified by words such as "believes," "expects," "predicts," "intends," "projects," "plans," "estimates," "aims," "foresees," "anticipates," "targets," and similar expressions. Forward-looking statements are not historical facts, but solely opinions, views and forecasts which are based on current expectations and certain assumptions of SAF-HOLLAND's management or cited from third party sources which are uncertain and subject to risks. Actual events may differ significantly from the anticipated developments due to a number of factors, including without limitation, changes in general economic conditions, changes affecting the fair values of the assets held by SAF-HOLLAND and its subsidiaries, changes affecting interest rate levels, changes in competition levels, changes in laws and regulations, environmental damages, the potential impact of legal proceedings and actions and the Group's ability to achieve operational synergies from past or future acquisitions. Should any of these risks or uncertainties materialize, or should underlying expectations not occur or assumptions prove to be incorrect, actual results, performance or achievements of SAF-HOLLAND may (negatively or positively) vary materially from those described, explicitly or implicitly, in the relevant forward-looking statement.

The information contained in this presentation, including any forward-looking statements expressed herein, speaks only as of the date hereof and reflects current legislation and the business and financial affairs of the SAF-HOLLAND which are subject to change and audit. Neither the delivery of this presentation nor any further discussions of SAF-HOLLAND with any of the recipients thereof shall, under any circumstances, create any implication that there has been no change in the affairs of SAF-HOLLAND since such date. Consequently, SAF-HOLLAND neither accepts any responsibility for the future accuracy of the information contained in this presentation, including any forward-looking statements expressed herein, nor assumes any obligation, to update or revise this information to reflect subsequent events or developments which differ from those anticipated.

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