Wacker Neuson SE — Interim / Quarterly Report 2018

May 9, 2018

Wacker Neuson Group Quarterly report Q1/2018

May 8, 2018, unaudited

Foreword

Highlights

Revenue

• Revenue > +9% on previous year, growth in all regions, negative currency effects especially from EUR/USD exchange rate
• Deliveries delayed by bottlenecks on supplier side

Profitability

• EBIT +61% on previous year thanks to strict cost controls
• Increased material prices and limited material availability squeeze gross profit margin to prior-year level

Guidance for fiscal 2018 confirmed

Dear Ladies and Gentlemen,

Our company got off to a strong start in 2018 with revenue for the first quarter of the year increasing by over 9 percent. When adjusted for currency effects, which were largely unfavorable for us, revenue growth was even higher at 14 percent.

Business was fueled by continued strong construction activity in Europe and the success of our two brands for the agricultural sector. Demand in North America is high and the region is again having a positive impact on earnings. As such, we remained on the path to sustainable growth in earnings and saw Group EBIT increase 61 percent relative to the prior-year quarter.

In April, we presented many of our new products and innovations to customers and business partners at INTERMAT in Paris, which is this year's largest construction industry trade show. The mood across the industry is very positive. As things stand, we can thus confirm our guidance for fiscal 2018, which we announced in March. However, a degree of uncertainty surrounds the situation with suppliers and future exchange rate developments, especially with regard to the EUR/USD rate.

We would like to thank our shareholders and business partners for the trust they have shown in us.

The Executive Board team of Wacker Neuson SE

Q1/18
Revenue yoy	EBIT yoy	Adj. EBIT yoy
+9.5%	+60.8%	+41.1%
(€ 370.5m)	(margin: 6.2%)	(margin: 6.2%)
Op. CF	FCF	EPS yoy
€ -41m	€ -45m	+61.5%
(Q1/17: € -19m)	(Q1/17: € -26m)	(€ 0.21)

	March 31, 2018
NWC1 -ratio: 37.9% (-4.9PP yoy)	DIO2 : 150 days (-17 days yoy)	Equity ratio: 65.8% (-1.2PP yoy)

¹ Average net working capital for the quarter / annualized revenue for the quarter.

Revenue and earnings significantly higher than in Q1/17

Comments

Revenue +9.5%

• Strong demand in core markets Europe and North America, deliveries delayed by bottlenecks on supplier side
• Currency-adjusted revenue increased 14.2%

Gross profit margin at prior-year level (+0.1PP)

• Less favorable regional and product mix yoy
• Higher material prices, limited material availability

EBIT +60.8%

• Operating cost at prior-year level, percentage of revenue down by 2.0PP
• Adjustments: In Q1/18, no adjustments were made. A negative one-off effect in the amount of € 2.0m was reported in Q1/17.¹

Earnings per share +61.5%

• Financial result: Negative FX effects (€ -1.6m), slight increase in interest income (€ +0.3m)
• Tax rate stable at 29.1% (Q1/17: 29.0%)

Income statement (excerpt)

[€ m]	Q1/18	Q1/17	Δ
Revenue	370.5	338.5	9.5%
Gross Profit	100.6	91.9	9.5%
as a % of revenue	27.2%	27.1%	0.1PP
SG&A incl. other income/expenses	-77.6	-77.6	0.0%
as a % of revenue	-20.9%	-22.9%	2.0PP
EBIT	23.0	14.3	60.8%
as a % of revenue	6.2%	4.2%	2.0PP
Adj. EBIT	23.0	16.3	41.1%
as a % of revenue	6.2%	4.8%	1.4PP
Profit for the period	14.6	9.3	57.0%
EPS (in €)	0.21	0.13	61.5%

Growth mainly driven by Europe and North America

Strongest growth in the compact equipment segment

Comments

Revenue Europe +8% yoy (adj. for currency effects: +9%)

• Strong growth in particular in France, England, Poland, Austria and Benelux countries; recovery momentum continues in Southern Europe
• Revenue compact equipment for the agricultural sector +12%, alliance with John Deere developing as planned

Revenue Americas +13% yoy (adj. for currency effects: +29%)

• Double-digit growth in both North and South America
• Region again makes positive contribution to earnings
• Strong growth in worksite technology and compact equipment
• Intensified competitive pressures due to imports from the Eurozone becoming more expensive
• Rental chains show high level of investment activity

Revenue Asia-Pacific +16% yoy (adj. for currency effects: +26%)

• Strong growth reported for excavators in China
• Start of production at new plant in Pinghu (near Shanghai)
• Restructuring in Australia completed (provision for negative one-off effect from the sale of a building already recognized in Q4/17)

Gearing¹ further reduced yoy

Stable equity ratio

Net financial debt/EBITDA² at low level

Comments

• At 17%, gearing¹ remains at a conservative level
• Net financial debt higher than at the close of the year due to seasonally higher net working capital
• Promissory note (Schuldschein) of USD 100m issued end of February 2018
• Short-term credit lines replaced with three medium-term credit lines

Free cash flow negative due to seasonality

Net working capital ratio¹ down 5PP yoy

Days inventory outstanding (DIO)² down 17 days yoy

Comments

• Cash flow from operating activities € -41.4m (Q1/17: € -19.1m) primarily due to an increase in net working capital € +52.4m (Q1/17: € +21.4m)
• Seasonal increase in inventory in Q1
• Delayed deliveries (due to bottlenecks on supplier side)
• Increase in trade receivables due to higher business volume
• Drop in cash flow from investment activities (Q1/18: € -3.7m; Q1/17: € -6.9m) due to sale of building in Australia

¹ Average net working capital for the quarter / annualized revenue for the quarter. 2 (Average inventory for the quarter / annualized cost of sales for the quarter)*365.

Highlights from operational activities

Zero emission products at the Wacker Neuson stand, INTERMAT 2018, Paris.

Asia: Excavator production starts on schedule in China

• Series production of mini excavators started in January; first machines successfully delivered to customers. Further models to be localized during the year.
• Integration of first products from Philippine plant: Series production of floor saws started in March, preparations for vibratory plate production underway

EMEA: Numerous new products launched, including:

• 3.5-ton excavator: increased productivity thanks to optimized drive technology
• Telescopic handlers in 3- to 6-ton class
• Light towers specifically for Europe, Middle East and Africa

EMEA: Broad zero emission range on show at INTERMAT

• First battery-powered mini excavator unveiled
• Ideal for construction sites in enclosed spaces (e.g. tunnels, car parks)
• Market launch planned for 2019
• First completely emission-free vibratory plate unveiled
• Full lineup for small, urban construction sites (significant noise reduction, zero emissions)

Progress with "Strategy 2022"

CUSTOMER-CENTRICITY

• Expansion of (direct) sales network to include Slovakia¹
• Optimization and expansion of dealer structure in North America
• Progress with financing solutions for customers and distribution partners
• Expansion of rental portfolio to include more flexible solutions tailored to individual customer needs

ACCELERATION

• R&D focus: Alternative drive technologies, presentation of further zero emission products at INTERMAT in France (April 2018)
• Successful net working capital management, with optimized inventory structure in particular

• Improvements to processes and organizational structure in aftermarket proving effective

• Profitable business field: Aftermarket & services now an independent legal entity

• Initiatives to enhance delivery capabilities
• Internationalization: Successful launch of excavator production in China

• Targeted financing for further growth: promissory note in USD (Schuldschein), new medium-term credit lines

• Reduction in structure costs and optimization of value chain:

• Integration of light equipment production from Manila (Philippines) into plant Pinghu (China) underway
• Integration of Light equipment production from Norton Shores, (Michigan, USA) into plant Menomonee Falls (Wisconsin, USA) underway
• Employee development programs
• Training initiatives

Outlook for 2018

Business index for the construction industry at a high level Business index for the agricultural sector at a high level

Source: CECE, April 2018. Source: CEMA, March 2018. 47.0 2012 2013 2014 2015 2016 2017

Guidance for fiscal 2018 as a whole confirmed

Comments

• Business index in core industries at a high level
• Order intake higher than prior-year figure
• Mid-year price increase of 2% on average planned for July 2018
• Guidance for fiscal 2018 confirmed
• Special risks:
• Delayed deliveries (suppliers having difficulties meeting orders)
• Currency developments, especially EUR/USD (negative translation effects on revenue, negative transaction effects on earnings)

Wacker Neuson SE, quarterly report Q1/2018 (unaudited), May 8, 2018

Consolidated Financial Statements

(unaudited)

Consolidated Income Statement

IN € MILLION

	Q1/18	Q1/17	Δ
Revenue	370.5	338.5	9.5%
Cost of sales	-269.9	-246.6	9.4%
Gross profit	100.6	91.9	9.5%
Sales and service expenses	-51.9	-49.8	4.2%
Research and development expenses	-8.7	-9.2	-5.4%
General administrative expenses	-19.3	-20.6	-6.3%
Other income	2.4	2.2	9.1%
Other expenses	-0.1	-0.2	-50.0%
Profit before interest and tax (EBIT)	23.0	14.3	60.8%
Financial income	2.1	0.8	162.5%
Financial expenses	-4.5	-2.0	125.0%
Profit before tax (EBT)	20.6	13.1	57.3%
Taxes on income	-6.0	-3.8	57.9%
Profit for the period	14.6	9.3	57.0%
Of which are attributable to:
Shareholders in the parent company	14.6	9.1	60.4%
Minority interests	0.0	0.2	-100.0%
	14.6	9.3	57.0%
Earnings per share in € (diluted and undiluted)	0.21	0.13	61.5%

IN € MILLION				IN € MILLION
	March 31, 2018	Dec. 31, 2017	March 31, 2017		March 31, 2018	Dec. 31, 2017	March 31, 2017
Assets				Equity and liabilities
Property, plant and equipment	290.5	292.0	319.5	Subscribed capital	70.1	70.1	70.1
Property held as financial investment	26.6	26.8	20.9	Other reserves	576.5	582.3	612.0
Goodwill	237.1	237.4	238.5	Retained earnings Equity attributable to shareholders in the parent	477.0	462.4	418.4
Intangible assets	125.9	125.6	124.9	company	1,123.6	1,114.8	1,100.5
Deferred tax assets	44.4	40.5	43.8	Minority interests	0.0	0.0	1.0
Other non-current financial assets	34.3	29.9	28.2	Total equity	1,123.6	1,114.8	1,101.5
Other non-current non-financial assets	6.4	4.9	2.6	Long-term financial borrowings	236.0	155.0	154.9
Total non-current assets	765.2	757.1	778.4	Deferred tax liabilities	30.2	31.6	29.6
				Long-term provisions	53.6	54.7	53.7
Rental equipment1	125.7	119.5	119.3	Total non-current liabilities	319.8	241.3	238.2
Inventories	455.4	431.4	461.7	Trade payables	144.2	128.0	112.6
Trade recievables	273.1	235.1	240.9	Short-term borrowings from banks	4.3	20.3	96.3
Tax offsets	2.7	6.5	10.1	Current portion of long-term borrowings	0.0	0.0	0.0
Other current financial assets	10.3	8.3	2.5	Short-term provisions	17.2	16.9	15.8
Other current non-financial assets	20.8	16.6	15.4	Tax liabilities	2.2	1.0	0.8
Cash and cach equivalents	47.5	27.3	14.0	Other short-term financial liablities	30.7	32.7	24.1
Non-current assets held for sale	7.1	14.1	1.4	Other short-term non-financial liablities	65.8	60.9	54.4
Total current assets	942.6	858.8	865.3	Total current liablities	264.4	259.8	304.0
Total assets	1,707.8	1,615.9	1,643.7	Total liabilities	1,707.8	1,615.9	1,643.7

Wacker Neuson SE, quarterly report Q1/2018 (unaudited), May 8, 2018

¹ Rental equipment is recognized under current assets as of Q4/17 (previously recognized under property, plant and equipment). Values for the previous year have been adjusted accordingly.

Consolidated Cash Flow Statement

IN € MILLION

	Q1/18	Q1/17	Δ
EBT	20.6	13.1	57.3%
Adjustments to reconcile profit before tax with gross cash flows1
Depreciation and amortization of non-current assets	9.7	9.9	-2.0%
Unrealized foreign exchange gains/losses	1.9	0.2	850.0%
Financial result	2.4	1.2	100.0%
Gains from sale of intangable assets and property, plant and equipment	0.0	-0.3	-100.0%
Changes in rental equipment, net	-6.5	-12.5	-48.0%
Changes in misc. assets	-13.1	-6.2	111.3%
Changes in provisions	-0.6	0.2	-400.0%
Changes in misc. liabilities	4.3	2.9	48.3%
Gross cash flow	18.7	8.5	120.0%
Changes in inventories	-28.7	-19.1	50.3%
Changes in trade recivables	-40.3	-27.4	47.1%
Changes in trade payables	16.6	25.1	-33.9%
Changes in net working capital	-52.4	-21.4	144.9%
Cash flow from operating activities before income tax paid	-33.7	-12.9	161.2%
Income tax paid	-7.7	-6.2	24.2%
Cash flow from operating activities	-41.4	-19.1	116.8%
Purchase of property, plant and equipment	-7.2	-6.2	16.1%
Purchase of intangible assets	-4.0	-3.5	14.3%
Proceeds from the sale of property, plant and equipment, intangible assets
and assets held for sale	7.5	2.8	167.9%
Cash flow from investment activities	-3.7	-6.9	-46.4%
Free cash flow	-45.1	-26.0	73.5%
Dividends	0.0	0.0	-
Cash receipts from short-term borrowings	0.0	44.2	-100.0%
Repayments from short-term borrowings	-14.4	-141.6	-89.8%
Cash receipts from long-term borrowings	81.4	124.9	-34.8%
Repayments from long-term borrowings	0.0	0.0	-
Interest paid	-2.2	-5.6	-60.7%
Interest received	0.8	0.5	60.0%
Cash flow from financial activities	65.6	22.4	192.9%
Change in cash and cash equivalents before exchange rate effects	20.5	-3.6	-669.4%
Effect of exchange rates on cash and cash equivalents	-0.3	0.0	-
Change in cash and cash equivalents	20.2	-3.6	-661.1%
Cash and cash equivalents at the beginning of the period	27.3	17.6	55.1%
Cash and cash equivalents at the end of period	47.5	14.0	239.3%

¹ Some items in the consolidated cash flow statement have been adapted compared to Q1/17. For further information on this, refer to item 30 in the Notes to the Consolidated Financial Statement in the 2017 Annual Report.

Geographical segments

IN € MILLION

	Europe			Americas	Asia-Pacific			Consolidation	Group
Q1	2018	2017	2018	2017	2018	2017	2018	2017	2018	2017
Total revenue1	524.9	480.9	207.1	199.9	27.4	12.1			759.4	692.9
Revenue third party	267.8	248.2	91.7	80.8	11.0	9.5			370.5	338.5
EBIT1	36.2	31.7	1.4	1.9	-0.7	-1.8	-13.9	-17.5	23.0	14.3
EBIT-margin2 (%)	13.5	12.8	1.5	2.4	-6.4	-18.9			6.2	4.2

Business segments

IN € MILLION

Q1	2018	2017
Segment revenue third party
Light equipment	103.2	98.4
Compact equipment	199.4	176.4
Services	73.2	68.7
	375.8	343.5
Less cash discounts	-5.3	-5.0
Total	370.5	338.5

August 7, 2018	Publication of 2018 half-year report; analysts and investors call
June 28, 2018	Lugano roadshow
June 27, 2018	Milan roadshow
June 21, 2018	Warburg Highlights Conference, Hamburg
June 20, 2018	Paris roadshow
June 6, 2018	DB Access Conference, Berlin
May 30, 2018	Annual General Meeting, Munich
May 23, 2018	Berenberg Tarrytown Conference, New York
May 16, 2018	Equity Forum (spring edition), Frankfurt
May 15, 2018	Zurich roadshow
May 14, 2018	London roadshow

Disclaimer

This report contains forward-looking statements which are based on current estimates and assumptions made by corporate management at Wacker Neuson SE. Forward-looking statements are characterized by the use of words such as expect, intend, plan, predict, assume, believe, estimate, anticipate and similar formulations. Such statements are not to be understood as in any way guaranteeing that those expectations will turn out to be accurate. Future performance and the results actually achieved by Wacker Neuson SE and its affiliated companies depend on a number of risks and uncertainties and may therefore differ materially from forward-looking statements. Many of these factors are outside the Company's control and cannot be accurately estimated in advance, such as the future economic environment and the actions of competitors and market players. The Company neither plans nor undertakes to update any forward-looking statements.

All rights reserved. Valid May 2018. Wacker Neuson SE accepts no liability for the accuracy and completeness of information provided in this brochure. Reprint only with the written approval of Wacker Neuson SE in Munich, Germany. The German version shall govern in all instances.

Contact

Wacker Neuson SE

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ir@wackerneuson.com

www.wackerneusongroup.com