Wacker Neuson SE — Interim / Quarterly Report 2021

Nov 18, 2021

Wacker Neuson Group Quarterly report Q3/21

November 10, 2021, unaudited

Key messages Q3 & 9M/21

Q3 revenue 18% above previous year, massive supply chain disruptions prevent stronger growth

Profitability shaped by positive volume effects and systematic cost control measures; Supply chains impact productivity

Strong cash generation, NWC ratio within the strategic target range of ≤ 30%

Supply chains and increased prices for materials, components and shipping remain the biggest challenges

Revenue and earnings Q3/21

Improved profitability, revenue only slightly below pre-crisis level

Income statement (excerpt)

€ m	Q3/21	Q3/20	9M/21	9M/20
Revenue	461.4	390.8	1,389.7	1,187.5
Gross profit	119.2	98.0	370.0	302.9
as a % of revenue	25.8%	25.1%	26.6%	25.5%
Operating costs	-76.2	-76.9	-230.0	-227.3
as a % of revenue	-16.5%	-19.7%	-16.6%	-19.1%
EBIT	44.7	22.8	144.8	73.2
as a % of revenue	9.7%	5.8%	10.4%	6.2%
Financial result	-1.4	-5.6	-4.5	-19.4
Taxes on income	-12.1	-6.1	-39.1	-20.0
Profit for the period	31.2	11.1	101.2	33.8
EPS (in €)	0.45	0.16	1.46	0.48

Comments Q3/21

Revenue +18.1% yoy (adj. for currency effects: +17.5%)

• Positive trends in Europe and the Americas in particular
• Group revenue only slightly below pre-crisis level (-1.5% vs. Q3/19)
• Growth in construction and agriculture

Gross profit +21.6% yoy (gross profit margin +0.7 PP)

• Positive volume effect relative to previous year with improved cost recovery at plants
• In contrast, production downtime and rework resulting from supply chain strains and repeated disruptions as well as increased prices for raw material, components and shipping pushed the margin below the H1 figure

EBIT almost doubled (EBIT margin: +3.9 PP)

• Strong revenue growth with strict cost controls
• Operating costs (total selling, R&D and administrative expenses) expressed as a percentage of revenue amounted to -3.2 PP yoy; previous year impacted by bad debt allowances (EUR 7.5 m) and restructuring costs (EUR 1.7 m)

Earnings per share almost tripled

• At EUR -1.4 m, the financial result improved markedly (prev. year heavily impacted by currency effects)
• At 27.9%, the tax ratio aligns with the target value (Q3/20: 35.5%)

Revenue and earnings 9M/21

Improved profitability, revenue only slightly below pre-crisis level

Income statement (excerpt)

€ m	Q3/21	Q3/20	9M/21	9M/20
Revenue	461.4	390.8	1,389.7	1,187.5
Gross profit	119.2	98.0	370.0	302.9
as a % of revenue	25.8%	25.1%	26.6%	25.5%
Operating costs	-76.2	-76.9	-230.0	-227.3
as a % of revenue	-16.5%	-19.7%	-16.6%	-19.1%
EBIT	44.7	22.8	144.8	73.2
as a % of revenue	9.7%	5.8%	10.4%	6.2%
Financial result	-1.4	-5.6	-4.5	-19.4
Taxes on income	-12.1	-6.1	-39.1	-20.0
Profit for the period	31.2	11.1	101.2	33.8
EPS (in €)	0.45	0.16	1.46	0.48

Comments 9M/21

Revenue +17.0% yoy (adj. for currency effects: +17.9%)

• Group revenue only slightly below pre-crisis level (-2.2% vs. 9M/19)
• Europe and Asia already above pre-crisis levels (Europe +6.7% vs. 9M/19; Asia-Pacific +9.4% vs. 9M/19); Americas region still significantly below precrisis level following restructuring (-30.1% vs. 9M/19)
• Growth in construction and agriculture

Gross profit +22.2% yoy (gross profit margin +1.1 PP)

• Positive volume effect relative to previous year with improved cost recovery at plants
• In contrast, production downtime and rework resulting from supply chain strains and repeated disruptions as well as increased prices for raw material, components and shipping burdened earnings development

EBIT almost doubled (EBIT margin: +4.2 PP)

• Strong revenue growth with parallel cost controls
• Operating costs as a percentage of revenue at -2.5 PP yoy; prev. year impacted by bad debt allowances (EUR 12.1 m) and restructuring costs (EUR 3.8 m)
• Previous year impacted by goodwill impairment (EUR 9.3 m)

Earnings per share more than tripled

• At EUR -4.5 m, the financial result improved markedly (prev. year significantly impacted by currency effects)
• At 27.9%, the tax ratio aligns with target value (9M/20: 37.2%)

Business development by region and business segment

Q3/21: Growth driven by Europe and Americas

Q3/21: Compact equipment and services above pre-crisis levels

Comments Q3/21

Revenue Europe +16.8% yoy (adj. for currency effects: +16.6%)

• Dynamic trends in UK, France, Southern and Eastern Europe; Germany, Austria and Switzerland grow from strong baseline for comparison in prev. year; pos. trends continue in Northern Europe on completion of sales restructuring
• Business with Kramer- and Weidemann-branded compact equipment for the agricultural sector +23.2% yoy

Revenue Americas +27.9% yoy (adj. for currency effects: +26.9%)

• Strong growth in the Americas but the region remained below 2019 levels after completed restructuring
• Worksite technology, excavators and wheel loaders developed particularly positively
• Strong growth in Canada with revenue already higher than pre-crisis level

Revenue Asia-Pacific +0.0% yoy (adj. for currency effects +3.0%)

• Australia continued to develop exceptionally positively: Significant doubledigit growth continued in Q3 fueled by expansion of dealer network, increased focus on rental companies and a product portfolio tailored to local needs; excavators, telescopic handlers and dumpers developed particularly well
• China: Challenging market dynamics (shrinking excavator market combined with high production capacities among domestic manufacturers) lead to drop in Q3 revenue

¹ EBIT for regions before consolidation.

² Revenue by business segment before cash discounts.

Net working capital in target range of ≤ 30%

Inventories

Trade payables

Trade receivables

Comments

• Inventory below previous year: Numbers of finished machines fell due to strong market demand; in contrast, numbers of unfinished machines and components increased significantly due to overstretched and repeatedly disrupted supply chains
• Trade receivables and payables rose significantly since the start of the year due to a rise in revenue and production volumes
• → At 29.7%, the NWC⁴ ratio is within the target range

Wacker Neuson SE, quarterly report Q3/21 (unaudited), November 10, 2021 Days inventory outstanding = (inventory/(cost of sales*4))*365 days; ² Days sales outstanding = (receivables/(revenue*4))*365 days; Days payables outstanding = (payables/(cost of sales*4))*365 days. ⁴ Net working capital as a % of annualized revenue for the quarter.

Strong cash generation

Net working capital

Free cash flow

Free cash flow1,2 [€ m]

Cash flow from operating activities

Comments

3

• At 29.7%, the NWC ratio³ remains within the target range despite higher numbers of unfinished machines and components
• Positive development of cash flow from operating activities shaped by increased profitability and a fall in non-current financial assets (prev. year marked by sharp reduction in NWC)
• Investments still below planned target with positive effect on free cash flow
• Free cash flow² at EUR 186 m after nine months (prev. year: EUR 179 m)

Strong financial structure

Net financial debt and gearing¹

Equity and equity ratio

Wacker Neuson SE, quarterly report Q3/21 (unaudited), November 10, 2021 ¹ Non-current financial liabilities + short-term borrowings from banks + current portion of long-term borrowings - liquid funds - fixed short-term investments. ² Net financial debt/equity. ³ Net financial debt/annualized EBITDA for the quarter.

Net financial debt/EBITDA³

Comments

• Net financial debt¹ continues to fall due to positive cash flow developments; gearing² at 3.8%
• 1,529,300 treasury shares (2.2 percent of share capital) were repurchased for a total of EUR 36.57 m by the end of September as part of the share buyback program initiated in April 2021. Within the framework of the program, up to 2,454,900 treasury shares (3.5% of share capital) may be repurchased for a maximum total purchase price of EUR 53 m.
• Cash and cash equivalents incl. fixed, short-term investments with a term of less than one year: EUR 382.2 m
• The Group is in a strong position to actively shape the technological shift in the industry and make key investments in future growth.

Outlook: Dynamic demand, overstretched supply chains

Construction: CECE business barometer recently down slightly

Business Index Current Business Situation Future Expectations Source: CECE (Committee for European Construction Equipment), October 2021.

Agriculture: CEMA business barometer recently down slightly

Source: CEMA (European umbrella association for the agricultural machinery industry), October 2021.

1 Investments (property, plant and equipment and intangible assets). Investments in the Group's own rental equipment, purchases of investments and investments in financial assets are not included.

Outlook

• CECE business barometer for the European construction equipment sector remains at an exceptionally high level despite a slight drop in October.
• CEMA business barometer for the European agricultural sector has decreased slightly due to supply chain problems but still remains at a high level.
• Mood in key target markets for the Wacker Neuson Group remains very positive; dynamic trends in order intake; order book significantly higher than average.
• Overstretched and repeatedly disrupted supply chains remain the biggest challenge; no easing in sight. According to the German Engineering Federation (VDMA), 81% of engineering companies are experiencing noticeable or severe disruptions to their supply chains; prices for shipping containers at a record high.
• Guidance for fiscal 2021 raised
• − Revenue between € 1,775 and 1,825m (previously: between € 1,750 and 1,800m)
• − EBIT margin between 9.3 and 9.7% (previously: between 8.75 and 9.50%)
• − Investments in the amount of around € 90m¹ (previously: between € 100 and 110m)
• − Net working capital as a % of revenue to be stagnant or to improve slightly relative to December 31, 2020 (30.8%)

Consolidated Financial Statements

(unaudited)

Consolidated Income Statement

	Q3/21	Q3/20	9M/21	9M/20
Revenue	461.4	390.8	1,389.7	1,187.5
Cost of sales	-342.2	-292.8	-1,019.7	-884.6
Gross profit	119.2	98.0	370.0	302.9
Sales and service expenses	-45.8	-53.8	-139.6	-155.3
Research and development expenses	-9.8	-7.6	-33.8	-23.9
General administrative expenses	-20.6	-15.5	-56.6	-48.1
Other income	2.0	2.5	7.8	9.0
Other expenses	-0.3	-0.8	-3.0	-11.4
Profit before interest and tax (EBIT)	44.7	22.8	144.8	73.2
Financial income	0.0	1.8	2.0	8.8
Financial expenses	-1.4	-7.4	-6.5	-28.2
Profit before tax (EBT)	43.3	17.2	140.3	53.8
Taxes on income	-12.1	-6.1	-39.1	-20.0
Profit for the period	31.2	11.1	101.2	33.8
Earnings per share in € (diluted and undiluted)1	0.45	0.16	1.46	0.48

Consolidated Balance Sheet

IN € MILLION				IN € MILLION
	September 30, 2021	Dec. 31, 2020	September 30, 2020		September 30, 2021	Dec. 31, 2020	September 30, 2020
Assets				Equity and liabilities
Property, plant and equipment	380.4	391.6	391.9	Subscribed capital	70.1	70.1	70.1
Property held as financial investment	24.4	26.2	24.9	Other reserves	579.2	562.2	569.3
Goodwill	228.7	228.6	228.7	Net profit/loss	645.6	585.8	605.5
Other intangible assets	185.9	178.9	179.7	Treasury shares	-35.2	––	–
Investments	3.0	6.8	6.8	Equity	1,259.7	1,218.1	1,244.9
Deferred tax assets	29.1	29.4	40.7	Long-term financial borrowings	292.1	411.6	416.7
Non-current financial assets	36.9	109.7	137.1	Long-term lease liabilities	44.9	57.1	59.7
Other non-current non-financial assets	–	–	0.1	Deferred tax liabilities	47.7	43.9	41.7
Total non-current assets	888.4	971.2	1,009.9	Provisions for pensions and similar obligations	57.8	64.8	61.9
				Long-term provisions	10.6	9.8	8.9
				Long-term contract liabilities	6.9	5.0	5.2
				Total non-current liabilities	460.0	592.2	594.1
				Trade payables	174.0	137.1	112.8
Rental equipment	191.3	159.5	165.3	Short-term liabilities to financial institutions	137.5	9.2	20.8
Inventories	440.0	412.2	475.8	Current portion of long-term borrowings	0.9	0.2	0.4
Trade receivables	281.4	222.4	273.3	Short-term lease liabilities	22.3	25.7	25.7
Tax offsets	11.0	12.2	12.2	Short-term provisions	4.6	19.0	3.6
Other current financial assets	151.4	45.5	22.0	Short-term contract liabilities	19.3	5.1	19.1
Other current non-financial assets	23.2	16.5	21.2	Income tax liabilities	43.1	32.8	28.7
Cash and cash equivalents	267.2	283.1	161.8	Other current financial liabilities	74.6	38.5	34.4
Non-current assets held for sale	1.8	4.2	3.5	Other current non-financial liabilities	59.7	48.9	60.5
Total current assets	1,367.3	1,155.6	1,135.1	Total current liabilities	536.0	316.5	306.0
Total assets	2,255.7	2,126.8	2,145.0	Total liabilities	2,255.7	2,126.8	2,145.0

Consolidated Cash Flow Statement (1)

	Q3/21	Q3/20	9M/21	9M/20
EBT	43.3	17.2	140.3	53.8
Adjustments to reconcile profit before tax with gross cash flows
Depreciation, amortization and impairment of non-current assets	16.7	16.4	56.3	60.0
Unrealized foreign exchange gains/losses	1.5	4.0	0.8	6.8
Financial result	1.4	5.6	4.5	19.4
Gains from the sale of intangible assets and property, plant and equipment	0.2	0.3	-0.7	-0.8
Changes in rental equipment, net	-12.4	6.7	-31.9	-0.2
Changes in misc. assets	20.7	-12.4	64.2	-49.1
Changes in provisions	0.5	2.7	-2.4	1.6
Changes in misc. liabilities	10.7	-19.1	54.6	3.8
Gross cash flow	82.6	21.4	285.7	95.3
Changes in inventories	-9.8	61.2	-19.6	113.5
Changes in trade receivables	8.2	41.3	-55.9	75.3
Changes in trade payables	-13.9	-8.1	35.6	-36.3
Changes in net working capital	-15.5	94.4	-39.9	152.5
Cash flow from operating activities before income tax paid	67.1	115.8	245.8	247.8
Income tax paid	-0.7	-8.6	-24.1	-15.8
Cash flow from operating activities	66.4	107.2	221.7	232.0

Consolidated Cash Flow Statement (2)

	Q3/21	Q3/20	9M/21	9M/20
Cash flow from operating activities	66.4	107.2	221.7	232.0
Purchase of property, plant and equipment	-7.6	-11.8	-23.5	-28.0
Purchase of intangible assets	-8.2	-9.0	-26.8	-28.9
Purchase of investments	–	-0.6	–	-0.6
Proceeds of investments	–	–	8.6	–
Cash inflow from financial investments	–	–	–	–
Cash outflow from financial investments	–	–	-100.0	–
Proceeds from the sale of property, plant and equipment, intangible assets and assets held for sale	1.4	0.7	5.5	4.9
Cash flow from investment activities	-14.4	-20.7	-136.2	-52.6
Free cash flow	52.0	86.5	85.5	179.4
Dividends	–	–	-41.7	–
Cash outflow from share buyback program	-16.0	–	-35.2	–
Cash receipts from short-term borrowings	–	-33.4	–	30.0
Repayments from short-term borrowings	-0.4	-100.2	-0.8	-120.3
Cash receipts from long-term borrowings	–	50.0	–	50.0
Repayments from long-term borrowings	–	–	–	–
Repayments from lease liabilities	-5.2	-5.3	-17.5	-16.9
Interest paid	-3.0	-3.3	-9.0	-10.9
Interest received	0.3	0.4	0.6	1.1
Cash flow from financial activities	-24.3	-91.8	-103.6	-67.0
Change in cash and cash equivalents before effect of exchange rates	27.7	-5.3	-18.1	112.4
Effect of exchange rates on cash and cash equivalents	0.7	3.9	2.2	3.1
Change in consolidation group	–	–	–	–
Change in cash and cash equivalents	28.4	-1.4	-15.9	115.5
Cash and cash equivalents at the beginning of the period	238.8	163.2	283.1	46.3
Cash and cash equivalents at the end of period	267.2	161.8	267.2	161.8

Consolidated Segmentation

Geographical segments

IN € MILLION
Q3	Europe			Americas	Asia-Pacific			Consolidation	Group
	Q3/21	Q3/20	Q3/21	Q3/20	Q3/21	Q3/20	Q3/21	Q3/20	Q3/21	Q3/20
Total revenue	581.3	471.1	96.1	85.2	22.1	18.9			699.5	575.2
Revenue from external customers	362.2	310.0	84.3	65.9	14.9	14.9			461.4	390.8
EBIT1	44.3	27.1	2.6	-12.3	0.4	-0.9	-2.6	8.9	44.7	22.8

9M	Europe		Americas			Asia-Pacific	Consolidation		Group
	9M/21	9M/20	9M/21	9M/20	9M/21	9M/20	9M/21	9M/20	9M/21	9M/20
Total revenue	1,765.8	1,496.5	280.9	295.2	67.5	47.5			2,114.2	1,839.2
Revenue from external customers	1,099.3	941.4	242.7	209.3	47.7	36.8			1,389.7	1,187.5
EBIT1	143.1	108.4	9.9	-33.5	2.6	-3.7	-10.8	2.0	144.8	73.2

¹ EBIT for regions before consolidation..

Business segments

	Q3/21	Q3/20	9M/21	9M/20
Segment revenue from external customers
Light equipment	98.3	87.8	299.2	264.0
Compact equipment	258.4	199.6	788.3	639.5
Services	108.0	106.6	310.5	294.0
	464.7	394.0	1,398.0	1,197.5
Less cash discounts	-3.3	-3.2	-8.3	-10.0
Total	461.4	390.8	1,389.7	1,187.5

Financial calendar and contact

November 10, 2021	Publication of Q3 report 2021, analysts' & investors' conference call
November 15, 2021	eRoadshow Warburg, Germany & Switzerland
November 19, 2021	eRoadshow Metzler, Paris & Romandy
November 26, 2021	eRoadshow Jefferies, UK
March 29, 2022	Publication of the annual report 2021, analysts' & investors' conference call

Disclaimer

This presentation contains forward-looking statements which are based on the current estimates and assumptions by the corporate management of 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, uncertainties and other factors. Many of these factors, including, but not limited to, those described in disclosures, in particular in the risk report of the Company, are outside the Company's control and cannot be accurately estimated in advance, such as the future economic environment, the actions of competitors and others involved in the market-place or the legal and regulatory framework. If these risks or uncertainties materialize, or if the assumptions underlying any of these statements prove incorrect, then actual results may be materially different from those expressed or implied by such statements. Above and beyond legal requirements, the Company neither plans nor undertakes to update any forward-looking statements.

All rights reserved. Valid November 2021. Wacker Neuson SE accepts no liability for the accuracy and completeness of information provided in this presentation. Reprint only with the written approval of Wacker Neuson SE in Munich, Germany.

Contact

Wacker Neuson SE Contact IR: +49 - (0)89 - 354 02 - 427 ir@wackerneuson.com