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SAF-HOLLAND SE

Investor Presentation Jan 4, 2021

6218_ip_2021-01-04_fdae7580-424a-4a09-99d7-b4dffc3f511c.pdf

Investor Presentation

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SAF-HOLLAND SE Investor Presentation

January 2021

1. Business model and strategy

SAF-HOLLAND PROVIDES INNOVATIVE CHASSIS SOLUTIONS…

  • The story of SAF begins in 1881 with the invention of a new plough, followed by building the first steel axles for agricultural vehicles.
  • In 1910 the Safety Release Clevis Company was founded in South Dakota, USA. With the move to Holland, Michigan, the company emerged as one of the largest suppliers to the commercial vehicles industry under the name of The Holland Hitch Company.
  • SAF-Holland is one of the leading global manufacturers of chassis-related components for trailer, trucks and buses
  • Offering a broad range of high-quality products/ solutions tailored to the needs of our customers
  • Highly diversified portfolio in terms of product and application mix

LEADING MARKET POSITIONS – TOP 3 SUPPLIER AND #1 GLOBALLY FOR TRAILER AXLES SOLUTIONS

TRUCK TRAILER
FIFTH
WHEELS
TRAILER
AXLES
TRAILER SUSPENSIONS LANDING
GEAR
SAF-HOLLAND
global positioning
#2 #1* #3 #2
SAF-HOLLAND
regional positioning
#1
North America
#2
EMEA
#1
EMEA, India
#2
North America
#2
North America
#2
North America
#2
EMEA
Competitors 1.
Jost
2 .
SAF-HOLLAND
3.
Fontaine
4.
Fuwa
1 .
SAF-HOLLAND*
2.
Fuwa
3.
Hendrickson
1.
BPW
2.
Hendrickson
3 .
SAF-HOLLAND
1.
Jost
2 .
SAF-HOLLAND
3.
Fuwa

GLOBAL PRESENCE – STRONG GLOBAL FOOTPRINT WITH THE LARGEST AFTERMARKET SERVICES NETWORK IN THE INDUSTRY

  • High brand recognition: Superior product performance combined with aftermarket excellence
  • Large footprint into fleets of different sizes and OEs
  • Top 10 customers represent only approx. 35 per cent of sales*

Customer feedback on technical and market requirements

(> 80 per cent of purchasing decisions)

OEM REFERENCES – ALMOST EVERY MAJOR TRUCK, TRAILER AND BUS OEM IS OUR CUSTOMER

FLEET OPERATOR REFERENCES – WE FOCUS ON LARGE FLEET OPERATORS FROM ALL SECTORS

ACQUISITIONS – WE HAVE SUCCESSFULLY EXPANDED OUR GLOBAL FOOTPRINT AND PRODUCT PORTFOLIO

ONE-STOP SHOP – COMPREHENSIVE PORTFOLIO OF HIGH-QUALITY PRODUCTS TAILORED TO THE NEEDS OF OUR CUSTOMERS

2. Performance 9M 2020 – Very solid performance in a challenging market environment

9M 2020 RESULTS DEMONSTRATE RESILIENCE OF OUR BUSINESS MODEL – GUIDANCE RAISED

  • 9M 2020 adj. EBIT margin with 5.4 per cent above the upper end of the FY guidance range of 3 to 5 per cent
  • High share of aftermarket business safeguards profitability in crisis times
  • Comprehensive cost-cutting programs continued (blue collar & white collar)
  • Disciplined capex investment policy executed
  • Solid financial profile; Net debt reduced by € 42.3 MN in Q3 2020

GROUP – ADJ. EBIT MARGIN ABOVE THE UPPER END OF THE PREVIOUS GUIDANCE RANGE

  • Sales 9M 2020 down by 29.7 per cent yoy
  • But Q3 2020 sales figure shows recovery compared to Q2 2020 (+ 20.5 per cent) led by the EMEA region
  • Adj. EBIT margin 9M 2020 already slightly above previous FY guidance reflecting resilience of the business model and actions to reduce costs
  • Main drivers: higher share of aftermarket business and SG&A cost savings
  • Includes inventory write-downs of € 8.8 mn in the EMEA and Americas region and fixed-cost progression effect
  • Adj. EBIT margin in Q3 2020 exceeds pre-corona value for the same quarter of last year
  • Restructuring expenses (€ 11.7 mn)
  • Severance payments (€ 3.3 mn)
  • Corpco wind-down (€ 2.6 mn)
  • Closure of subsidiaries (€ 1.8 mn)
  • Project FORWARD 2.0 (€ 2.3 mn)
  • Change of legal form (€ 1.2 mn)
  • No goodwill impairments

EMEA – ADJ. EBIT MARGIN VERY ROBUST DESPITE COVID-19

  • Sales 9M 2020 down by 17.8 per cent yoy
  • Q3 2020 sales figure down only 5.4 per cent yoy; good recovery in all areas
  • Adj. EBIT margin 9M 2020 at 8.7 per cent (9M 2019: 9.5 per cent)
    • Main driver: higher share of aftermarket business
    • Includes inventory write-downs of € 4.7 mn and fixed-cost progression effect
  • Adj. EBIT margin in Q3 2020 with 10.0 per cent above previous year's pre-corona level

Restructuring expenses (€ 2.8 mn)

Mainly severance payments and costs related to the change of the legal form and transfer of the registered office to Germany (S.A. SE)

AMERICAS – IMPROVED ADJ. EBIT MARGIN DESPITE MASSIVE SALES DECLINE

  • Sales 9M 2020 down by 39.9 per cent yoy
  • Americas region strongly hit by COVID-19 even in Q3 with sales down by 47.0 per cent yoy
  • Adj. EBIT margin 9M 2020 at 3.5 per cent reflecting successful restructuring efforts
  • Main drivers: higher share of aftermarket business and substantial SG&A cost savings
  • Includes Inventory write downs of € 4.1 mn and fixed-cost progression effect
  • Adj. EBIT margin in Q3 2020 with 5.6 per cent significantly better than Q1 2020, Q2 2020 and even above previous year's pre-corona level
  • Adj. EBIT margin 9M 2019 included positive one-offs (contractually agreed passing on of the 2018 steel price increases)
  • Restructuring expenses (€ 4.0 mn) Mainly severance payments and costs related to Program FORWARD 2.0

APAC – LOCKDOWN AND DELAYED RAMP-UP WEIGH ON SALES AND PROFITABILITY

Sales 9M 2020 down by 46.2 per cent yoy

  • Several weeks lockdown of the Chinese, Australian, Indian and Singapore entities
  • Ceased export business as a result of the trade dispute between China and the USA
  • Delayed ramp-up of the new Chinese facility in Yangzhou
  • Sales Q3 2020 down by 22.1 per cent yoy
  • Adj. EBIT margin 9M 2020 at – 9.9 per cent
  • Main drivers: continuing low volumes and special sale of old stock
  • Adj. EBIT Margin Q3 2020 at – 15.1 per cent
  • Restructuring expenses (€ 4.9 mn) Mainly costs related to Corpco wind-down and closure of subsidiaries

TRUCK AND TRAILER PRODUCTION 9M 2020 VS. 9M 2019 – COVID-19 STRONGLY IMPACTED ALREADY WEAKENING MARKETS

EUROPE NORTH
AMERICA
CHINA SOUTH
AMERICA*
INDIA
Truck Trailer Truck Trailer Truck Trailer Truck Trailer Truck Trailer
-30% to -35% -25% to -30% -45% to -50% -40% to
-45%
+10% to +20% +10% -35% to -40% -10% to -15% -70% -60%

INVESTMENTS AND D&A – CAPEX RATIO WITHIN TARGET RANGE OF 2.0 TO 2.5 PER CENT

  • Investments in plant, property, equipment and intangible assets reached 2.3 per cent of Group sales (FY 2020 guidance: around 2.5 per cent of Group sales)
  • Operating cash flow with € 79.8 mn (149.2 per cent of EBITDA) covers investments by far
  • Focus of investments: Rationalisation investments in the US and Germany
  • Close monitoring of the investment approval process to streamline capital allocation
  • Depreciation and Amortization ratio (excl. PPA, impairment of goodwill and R&D projects) increased due to higher investments in recent years and significantly lower sales

NET WORKING CAPITAL – CASH-IS-KING PROGRAM WELL ON TRACK

  • Net working capital (NWC) in Q3 significantly down both in absolute and relative terms compared to previous year
  • Minus 36.2 per cent from € 217.3 mn to € 138.7 mn
  • Main driver:
    • Trade receivables down 33.6 per cent due to cash collection
    • Inventories down 26.9 per cent with a decrease in sales of 29.7 per cent
  • NWC ratio down from 16.4 per cent to 14.1 per cent
  • Cash-is-King program shows good results and will be continued with enhanced

* Net working capital ratio (ratio of inventories and trade receivables less trade payables to LTM sales); Ratios for Q1 2018 to Q4 2019 retrospectively adjusted according to the new definition

OPERATING FREE CASH FLOW SIGNIFICANTLY IMPROVED DUE TO SUCCESSFUL NWC MANAGEMENT AND LOWER CAPEX

in
EUR thousands
Q1 2019 Q2 2019 Q3 2019 Q1-Q3
2019
Q4 2019 Q1-Q4
2019
Q1 2020 Q2 2020 Q3 2020 Q1-Q3
2020
EBITDA 28,411 29,195 12,120 69,726 18,487 88,213 25,876 6,550 21,061 53,486
Delta
NWC
-14,914 -7,298 -1,741 -24,583 33,334 8,750 13,927 -19,937 27,560 21,550
Net cash
flow from
operating activities
8,559 19,046 17,116 44,721 45,825 90,546 32,014 -9,487 57,260 79,787
Purchase of PP&E -13,304 -7,772 -10,859 -31,935 -13,656 -45,591 -5,446 -3,719 -3,672 -12,837
Purchase
of intangible
assets
-1,112 -2,048 -1,766 -4,926 -2,464 -7,390 -1,295 -1,374 -643 -3,312
Proceeds from sale of
PP&E
164 1,292 3,009 4,465 789 5,254 418 63 242 723
Operating
free cash flow*
-5,693 10,518 7,500 12,325 30,494 42,819 25,691 -14,517 53,187 64,361
  • 9M operating cash flow at € 79.8 mn (9M 2019: € 44.7 mn)
  • 9M operating free cash flow at € 64.4 mn (9M 2019: € 12.3 mn)

  • 9M net investing cash flow at € -15.4 mn (PP&E and intangible assets) (9M 2019: € -32.4 mn)

  • Factoring volume at € 35.5 mn (9M 2019: € 35.2 mn)

* Operating Free Cash Flow = Net cash flow from operating activities less Net cash flow from investing activities (purchase of PP&E and intangible assets less proceeds from sales of PP&E); Operating free cash flow for Q1 2018 to Q4 2019 retrospectively adjusted according to the new definition

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

Q3 2020 – Net debt reduced by € 46.5 mn vs. Q2 2020 due to improved cash generation

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

3. Outlook

2020 OUTLOOK TRUCK AND TRAILER PRODUCTION – GLOBAL DOWNTURN EXPECTED VS. 2019

EUROPE NORTH
AMERICA
CHINA SOUTH
AMERICA***
INDIA
Truck Trailer Truck Trailer Truck Trailer Truck Trailer Truck Trailer
New* -30% to
-35%
-15% to
-20%
New* -40% to
-45%
-40% to
-45%
New* 0% to
+5%
-5% to
-10%
New* -30% to
-35%
-5% to
-10%
New* -40% to
-50%
-40% to
-50%
Old** -35% to
-40%
-20% Old** -40% to
-50%
-40% to
-50%
Old** -20% -25% Old** -35% -15% Old** -40% -40%

2020E:

  • China with stable volumes
  • Lower volumes in Europe and South America
  • Significant declines in North America and India
FY 2019 FY 2020* (new) FY 2020 (old)
Sales € 1,284 mn Decline by 20 to
30 per cent
Decline by 20 to
30 per cent
Adj. EBIT margin 6.2 Between 5 and 6 Between 3 and 5
per cent per cent per cent
CAPEX 4.1 per cent of Around 2.5 per Around 2.5 per
sales cent of sales cent of sales

* The new EBIT guidance for FY 2020 as of November 18, 2020 is based on the assumption that in the remainder of the year there will be no new, unexpected impacts from the ongoing COVID-19 pandemic on the production and supply chains.

  • Consistent aftermarket business safeguards profitability
  • SG&A savings programs will be continued
  • Cash-is-King program on track
  • Solid financial profile
  • Operational excellence as key driver
Kepler Cheuvreux German Corporate Conference

INVESTOR RELATIONS CONTACT

Michael Schickling T: +49 (0) 6095 301 617 E: [email protected]

Alexander Pöschl T: +49 (0) 6095 301 117 E: [email protected]

Klaus Breitenbach T: + 49 (0) 6095 301 565 E: [email protected]

4. Appendix

CHANGE OF LEGAL FORM INTO A EUROPEAN COMPANY (SE) AND TRANSFER OF THE REGISTERED OFFICE TO GERMANY

Step 1: Conversion (decided by the EGM on February 14, 2020)

Step 3: Simplification of the legal group structure and alignment with the management structure

INTEGRATION OF ESG ASPECTS INTO STRATEGY DEVELOPMENT AND EXECUTION

"GROW OUR BUSINESS, WHILE REDUCING OUR IMPACT" – SAF-HOLLAND´S APPROACH TO CORPORATE RESPONSIBILITY

"Attracting the right talent"

EMPLOYEES

  • Equal opportunity
  • International and diverse project teams
  • Training and development
  • Occupational health and safety

"It´s the WE that counts"

CORPORATE CITIZENSHIP

  • Local engagement in the regions
  • Initial and further education of children and adolescents

"Reducing the footprint in our own operations"

OPERATIONAL EXCELLENCE

• Production without wastage / Lean & Green

society

  • Environmental and energy management for resource-efficient manufacturing
  • Kaizen Continuous Improvement

"Leading the way in integrating sustainability in business"

COMPLIANCE

  • Code of Conduct
  • Human rights (CSR-RUG, NAP, MSA)
  • Whistleblowing Hotline

"Enabling GHG emission reductions for our customers"

CUSTOMERS

  • Product portfolio for safe, clean and economical transportation
  • Business driven innovations
  • Customer satisfaction and quality

"Supply chain in ecological and social responsibility"

SUPPLIERS

  • Code of Conduct
  • Supply chain risk assessment
  • Environmental and social audits
  • Supplier development

Disclaimer

Not for general release, publication or distribution in the United States, Australia, Canada or Japan.

By attending this presentation you agree to be bound by the following limitations:

This presentation has been prepared by SAF-HOLLAND SE ("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.

This presentation is not directed to, or intended for distribution to or use by, any person or entity that is a citizen or resident or located in any state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would require any registration or licensing within such jurisdiction. This presentation is for information purposes only and does neither constitute an offer to sell securities, nor any recommendation of, or solicitation of an offer to buy, any securities of SAF-HOLLAND in the United States, Germany or any other jurisdiction. In the United States, any securities may not be offered or sold absent registration or an exemption from registration under the U.S. Securities Act of 1933.

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