Wacker Neuson SE — Interim / Quarterly Report 2019

May 13, 2019

Wacker Neuson Group Quarterly report Q1/2019

May 7, 2019, unaudited

Foreword

Wilfried Trepels (CFO) Martin Lehner (CEO) Alexander Greschner (CSO)

Highlights Q1/2019

Revenue +17% on previous year

• Double-digit growth in all reporting regions
• Pace of growth in the agricultural sector accelerates further

Increase in profitability (EBIT +31% yoy)

• Operating costs rise at a disproportionately low rate
• Restructuring in the US continues as planned

Net working capital impacted by seasonal increase in inventory and rise in trade receivables

Dear Ladies and Gentlemen,

2019 got off to a brisk start for us with the dynamic pace of growth that we experienced in the fourth quarter of 2018 continuing into the first quarter of 2019. Revenue rose sharply, increasing by 17 percent on the prior-year quarter. Profitability also improved significantly, with the EBIT margin rising by 0.7 percentage points to 6.9 percent.

In April, we presented our products and services at the leading international trade show Bauma in Munich, Germany. We were able to impress customers, business partners and other stakeholders from around the world with the Group's diverse range of new products, its broad portfolio of electric machines and our suite of digital services. The talks we held at the show once again confirmed that we are on the right track to consolidate and expand the success of the Wacker Neuson Group in the long term.

At the close of the first quarter, order intake and order backlog remained at high levels. As a result, we built up more inventory in recent months than in previous years. This will return to normal levels over the course of the fiscal year as revenue increases seasonally during the summer months and we gradually start to decrease our stock of pre-buy engines. This will also have a positive impact on cash flow.

Despite numerous uncertainties regarding the continued development of the global economy, we are optimistic about the remainder of the fiscal year. Backed by our strong start to the year, our well filled order books and the very positive feedback from customers at Bauma, we currently expect revenue to lie in the upper half of our projected range of EUR 1,775 to EUR 1,850 million.

Best regards,

The Executive Board team of Wacker Neuson SE

Wacker Neuson SE, quarterly report Q1/2019 (unaudited), May 7, 2019 ²

Q1/19
Revenue yoy	EBIT yoy
+17%	+31%
(€ 435m)	(margin: 6.9%)
Op. CF	FCF
€ -116m	€ -143m
(Q1/18: € -41m)	(Q1/18: € -45m)

March 31, 2019
NWC ratio1 : 45.8% (+6.5PP yoy)	DIO2 : 179 days (+26 days yoy)	Equity ratio: 57.7% (-7.8PP yoy)

Q1/19: Accelerated revenue growth continues from Q4/18

Q1/19: Comments

Revenue +17.3% yoy (adj. for FX effects: +15.6%)

• Double-digit growth in all reporting regions
• Compact equipment for the agricultural sector grew at a significantly higher-than-average rate (+42% yoy)

Gross profit +15.3% yoy (gross profit margin -0.5PP)

• Restructuring at the plant in Wisconsin, USA, continued as planned
• Increased costs in production and logistics caused by changes in the product mix, additional shifts required to manage increased production volumes and handle unfinished machines

EBIT +31.3% yoy (EBIT margin: +0.7PP)

• Operating costs increased at a disproportionately low rate despite a moderate increase in headcount, wage increases and costs for Bauma trade show
• Operating costs as a share of revenue fell by 1.2PP on the prior year

Earnings per share +42.9% yoy

• The financial result was EUR 2.1m up on the previous year: Positive FX effects (EUR +2.9m yoy) in particular due to the appreciation of currencies in several emerging economies; interest income slightly below prior year (EUR -0.8m yoy), mostly due to the initial application of IFRS 16
• The tax rate increased slightly to 30.4% (Q1/18: 29.1%)

Income statement (excerpt)

€ million	Q1/19	Q1/18	Δ
Revenue	434.6	370.5	17.3%
Gross profit	110.9	96.2	15.3%
as a % of revenue	25.5%	26.0%	-0.5PP
SG&A incl. other income/expenses	-80.7	-73.2	10.2%
as a % of revenue	-18.6%	-19.8%	1.2PP
EBIT	30.2	23.0	31.3%
as a % of revenue	6.9%	6.2%	0.7PP
Profit for the period	20.8	14.6	42.5%
EPS (in €)	0.30	0.21	42.9%

Q1/19: Double-digit growth in all regions

Q1/19: Compact equipment driving growth

Q1/19: Comments

Revenue Europe +18.3% yoy (adj. for FX effects: +18.4%)

• Strong demand for compact and light equipment in all regions
• Rapid growth in the UK (significant gains with dumpers and excavators), above-average growth in France, Poland and Austria with increased market shares
• Revenue generated with Weidemann- and Kramer-brand compact equipment for the agricultural sector +42% yoy

Revenue Americas +14.0% yoy (adj. for FX effects: +6.7%)

• Worksite technology (especially generators and light towers) and compact equipment were key growth drivers
• Growth dampened by pre-buy effects in Q4/18 related to changes in emissions legislation in Canada
• Positive developments in South America, uncertainties remain
• Earnings bolstered by improved currency situation, restructuring in the US continued as planned

Revenue Asia-Pacific +21.8% yoy (adj. for FX effects: +20.9%)

• Production in China ramped up on schedule, positive development with light equipment and excavators
• First mini and compact excavators delivered to John Deere

Rise in inventories and receivables drive up net working capital

Inventories [€ m] ^{428 439 434 459 462 500} 141 153 144 Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Q2/18 Q3/18 Q4/18 Q1/19 DIO¹ [days]

Trade payables

Inventories

Trade receivables

Comment

• Seasonal rise in inventories, further increase in pre-buy engines
• Rise in trade receivables due to the increased volume of business and expansion of the dealer network in North America
• Rise in trade payables due to the increased volume of business and an increase in inventory compared with the prior-year quarter.
• → Significant, temporary rise in net working capital (see the following slide)

Net working capital

Free cash flow

Cash flow from operating activities

Comment

• Increase in net working capital due to a temporary rise in inventory and increased trade receivables (see previous slide)
• Financing programs used to establish a network of anchor dealers in North America (rise in other assets)
• Increased investments in growth
• Major yet temporary impact on free cash flow, normalization of inventory levels and reduction in trade receivables expected over the coming months

Net financial debt and gearing¹

Equity and equity ratio

Net financial debt/EBITDA²

Comment

• Temporary reduction in equity ratio due to increased debt and a structural reduction of around 2PP due to the first-time application of IFRS 16
• Marked rise in net financial debt, gearing¹ increased to 29%
• May 2019: Promissory note (Schuldschein) successfully issued with attractive interest rates and terms of five and seven years to secure long-term funding for the Group's accelerated growth

Outlook for 2019

Revenue and earnings guidance for 2019 confirmed

Business index for construction industry at a high level Business index for agricultural industry subdued

Comments

• CECE business index at a high level, slight decrease in order intake in April; expectations in the agricultural sector have cooled slightly according to CEMA, high inventory levels among dealers
• IMF lowered its economic outlook once again in April, macroeconomic uncertainties remain in place
• Situation in the supply chain has improved compared with 2018; however, the risk of delayed deliveries remains
• Revenue and earnings guidance for 2019 confirmed, with revenue expected in the upper half of the projected range
• Net working capital expressed as a percentage of revenue is expected to be slightly lower than the prior-year level

Wacker Neuson SE, quarterly report Q1/2019 (unaudited), May 7, 2019

Consolidated Financial Statements

(unaudited)

IN € MILLION

	Q1/19	Q1/18
Revenue	434.6	370.5
Cost of sales	-323.7	-274.3
Gross profit	110.9	96.2
Sales and service expenses	-53.8	-47.5
Research and development expenses	-9.7	-8.7
General administrative expenses	-19.4	-19.3
Other income	2.4	2.4
Other expenses	-0.2	-0.1
Profit before interest and tax (EBIT)	30.2	23.0
Financial income	1.1	2.1
Financial expenses	-1.4	-4.5
Profit before tax (EBT)	29.9	20.6
Taxes on income	-9.1	-6.0
Profit for the period	20.8	14.6
Earnings per share in € (diluted and undiluted)	0.30	0.21

As of fiscal 2019, expenses for service technicians are reported under cost of sales (previously: personnel costs were reported under cost of sales while expenses for pro-rata property, plant and equipment costs were reported under sales and service expenses). Figures for 2018 have been adjusted accordingly.

Several items on the consolidated balance sheet have been modified (with a corresponding impact on the income statement) compared with the previous year as a result of changes to the accounting and valuation methods and to accountingrelated estimates as well as the correction of errors related to incidental acquisition costs for raw materials and supplies, the statutory Swiss pension plans, accruals/deferrals for outstanding invoices, finance leases and pre-paid customer bonuses. For further information on this, refer to page 103ff in the Notes to the Consolidated Financial Statement in the 2018 Annual Report.

Wacker Neuson SE, quarterly report Q1/2019 (unaudited), May 7, 2019

IN € MILLION IN € MILLION

Assets		Equity and liabilities

	March 31, 2019	Dec. 31, 2018	March 31, 2018		March 31, 2019	Dec. 31, 2018	March 31, 2018
Assets				Equity and liabilities
Property, plant and equipment	371.4	294.6	290.5	Subscribed capital	70.1	70.1	70.1
Property held as financial investment	25.7	25.8	26.6	Other reserves	590.8	587.5	576.4
Goodwill	238.0	237.8	237.1	Net profit/loss	579.9	563.8	475.9
Intangible assets	147.4	143.5	125.9	Total equity	1,240.8	1,221.4	1,122.4
Deferred tax assets	45.7	40.2	45.5	Long-term financial borrowings	216.5	214.7	236.0
Other non-current financial assets	98.8	78.8	41.9	Long-term leasing liabilities	55.2	2.6	1.5
Other non-current non-financial assets	0.2	1.7	0.2	Deferred tax liabilities	34.4	34.6	31.1
Total non-current assets	927.2	822.4	767.7	Long-term provisions	62.1	58.2	58.0
				Total non-current liabilities	368.2	310.1	326.6
Rental equipment	151.8	149.4	125.7	Trade payables	208.2	212.8	148.5
Inventories	633.4	553.4	458.5	Short-term liabilities to financial institutions	164.2	33.8	4.3
Trade receivables	371.3	303.3	273.1	Current portion of long-term borrowings	–	–	–
Tax offsets	0.3	0.4	2.7	Short-term leasing liabilities	24.2	1.4	0.8
Other current financial assets	19.6	16.2	13.5	Short-term provisions	16.3	15.7	17.2
Other current non-financial assets	22.5	22.5	18.4	Tax liabilities	1.4	1.0	2.2
Cash and cash equivalents	23.2	43.8	47.5	Other short-term financial liabilities	36.9	35.6	26.3
Non-current assets held for sale	2.8	2.8	7.1	Other short-term non-financial liabilities	91.9	82.4	65.9
Total current assets	1,224.9	1,091.8	946.5	Total current liabilities	543.1	382.7	265.2
Total assets	2,152.1	1,914.2	1,714.2	Total liabilities	2,152.1	1,914.2	1,714.2

The first-time application of IFRS 16 "Leases" has resulted in a new addition to the balance sheet as of fiscal 2019. For further information on this, refer to page 105 in the Notes to the Consolidated Financial Statements in the 2018 Annual Report. Several items on the consolidated balance sheet have been modified (with a corresponding impact on the income statement) compared with the previous year as a result of changes to the accounting and valuation methods and to accountingrelated estimates as well as the correction of errors related to incidental acquisition costs for raw materials and supplies, the statutory Swiss pension plans, accruals/deferrals for outstanding invoices, finance leases and pre-paid customer bonuses. For further information on this, refer to page 103ff in the Notes to the Consolidated Financial Statement in the 2018 Annual Report.

IN € MILLION

	Q1/19	Q1/18		Q1/19	Q1/18
EBT	29.9	20.6	Cash flow from operating activities	-115.6	-41.4
Adjustments to reconcile profit before tax with gross cash flows:			Purchase of property, plant and equipment	-11.3	-7.2
Depreciation and amortization of non-current assets	14.8	9.7	Purchase of intangible assets	-7.5	-4.0
Unrealized foreign exchange gains/losses	-5.4	1.9	Investments in participations	-8.8	0.0
Financial result	0.3	2.4	Proceeds from the sale of property, plant and equipment, intangible assets and assets held for sale	0.1	7.5
			Proceeds from the sale of a real-estate company	–	–
Gains from the sale of intangible assets and property, plant and equipment	–	–	Cash flow from investment activities	-27.5	-3.7
Changes in rental equipment, net	-2.2	-6.5	Free cash flow	-143.1	-45.1
Changes in misc. assets	-10.5	-13.7	Cash receipts from short-term borrowings	162.0	0.0
Changes in provisions	0.8	-0.6	Repayments from short-term borrowings	-31.6	-14.4
Changes in misc. liabilities	9.0	6.3	Cash receipts from long-term borrowings	0.0	81.4
Gross cash flow	36.7	20.1	Repayments from leasing liabilities	-5.1	0.0
Changes in inventories	-73.5	-28.7	Interest paid	-4.1	-2.2
Changes in trade receivables	-63.1	-40.3	Interest received	0.9	0.8
Changes in trade payables	-5.7	15.2	Cash flow from financial activities	122.1	65.6
			Change in cash and cash equivalents	-21.0	20.5
Changes in net working capital	-142.3	-53.8	Effect of exchange rates on cash and cash equivalents	0.4	-0.3
Cash flow from operating activities before income tax paid	-105.6	-33.7	Change in cash and cash equivalents	-20.6	20.2
Income tax paid	-10.0	-7.7	Cash and cash equivalents at the beginning of the period	43.8	27.3
Cash flow from operating activities	-115.6	-41.4	Cash and cash equivalents at the end of period	23.2	47.5

The first-time application of IFRS 16 "Leases" has resulted in increased write-downs and the addition of a separate line under financial activities for 2019 compared with the previous year. For further information on this, refer to page 105 in the Notes to the Consolidated Financial Statements in the 2018 Annual Report.

Several items on the consolidated cash flow statement have been modified compared with the previous year as a result of changes to the accounting and valuation methods and to accounting-related estimates as well as the correction of errors related to incidental acquisition costs for raw materials and supplies, the statutory Swiss pension plans, accruals/deferrals for outstanding invoices, finance leases and pre-paid customer bonuses. For further information on this, refer to page 103ff in the Notes to the Consolidated Financial Statement in the 2018 Annual Report.

Wacker Neuson SE, quarterly report Q1/2019 (unaudited), May 7, 2019

Geographical segments

IN € MILLION

Q1	Europe		Americas		Asia-Pacific			Consolidation	Group
	2019	2018	2019	2018	2019	2018	2019	2018	2019	2018
Total revenue	578.1	524.9	168.0	207.1	16.0	27.4			762.1	759.4
Revenue from external customers	316.7	267.8	104.5	91.7	13.4	11.0			434.6	370.5
EBIT1	46.1	36.2	2.5	1.4	-1.7	-0.7	-16.7	-13.9	30.2	23.0
EBIT-margin2 (%)	14.6	13.5	2.4	1.5	-12.7	-6.4			6.9	6.2

Business segments

IN € MILLION

Q1	2019	2018
Segment revenue from external customers
Light equipment	109.8	103.2
Compact equipment	245.8	197.1
Services	82.3	73.2
	437.9	373.5
Less cash discounts	-3.3	-3.0
Total	434.6	370.5

In Q1/19, financing components from different financing options posted under the cash discounts item were directly allocated to the compact equipment business segment. Prior-year values have been adjusted accordingly.

May 7, 2019	Publication of Q1 report 2019; analysts and investors call
May 14, 2019	Zurich roadshow
May 22, 2019	Berenberg Conference USA, New York
May 29, 2019	Annual General Meeting, Munich
June 12, 2019	London roadshow
June 13, 2019	Hamburg roadshow
July 1, 2019	Paris roadshow
August 6, 2019	Publication of 2019 half-year report; analysts and investors call
November 7, 2019	Publication of Q3 report 2019; analysts and investors call

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 2019. 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 IR contact: +49 - (0)89 - 354 02 - 427 ir@wackerneuson.com

www.wackerneusongroup.com