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ElringKlinger AG (OTCPK:EGKLF) This fall 2022 Earnings Convention Name March 28, 2023 3:30 AM ET
Firm Members
Stefan Wolf – Chief Govt Officer
Thomas Jessulat – Chief Monetary Officer
Convention Name Members
Christoph Laskawi – Deutsche Financial institution
Michael Punzet – DZ Financial institution
Jürgen Pieper – Metzler
Frank Biller – LBW
Operator
Women and gents thanks for standing by. Welcome, and thanks for becoming a member of the ElringKlinger Group Full Yr 2022 Analyst Convention. At our prospects’ request, this convention will probably be recorded. [Operator Instructions] After the presentation by Dr. Stefan Wolf, CEO; and Mr. Thomas Jessulat, CFO, there will probably be a question-and-answer session with individuals who’re current with us right here in Frankfurt.
I’d now like to show the convention over to Dr. Stefan Wolf, CEO.
Stefan Wolf
Sure. Thanks very a lot. Additionally a heat welcome from me. For those which might be right here in presence, very good that a few folks confirmed up. I all the time assume it’s necessary to interchange additionally personally once more after this lengthy COVID interval. But in addition, after all, a really heat welcome to all people that’s with us on-line at the moment. And we’d similar to to tell you in regards to the fiscal 12 months 2022. The figures are going to be performed by Mr. Jessulat, my colleague, our CFO. And I’ll simply present you a few strategic points and outlooks with regard to what we’re as much as within the years to return.
Sure, strategic overview. To start with, the excellent news is that the automotive market stays a rising market. After now in 2022, with 82.4 million models that had been produced worldwide by automobile producers, we’re strolling in the direction of 97 million in 2030. After all, these are estimations, however I feel it’s fairly reasonable.
One factor I wish to level out. You see right here on this slide, 2019 with 89 million models worldwide, however we had 94 million models in 2018. In order that implies that it takes us till 2028 to succeed in the volumes that we had earlier than corona and earlier than the small recession that we had in 2019. However nonetheless, issues are rising. We’re in rising markets, and that’s good.
So, wanting on the transformation in our sector, within the mobility sector. You see right here international gentle autos produced, battery electrical automobiles and gasoline cell electrical automobiles, and likewise hybrid automobiles which after all have a combustion engine, which is sweet for us. In 2030, you noticed the 97 million automobiles, models that we see – or we anticipate in 2030. And out of these 97 million automobiles, 70 million are with new propulsion techniques. Which means battery electrical, gasoline cell electrical or hybrid. In order that exhibits the expansion potential that we’ve got right here with our new merchandise that I’ll clarify later.
Sure. After all, we’re in a metamorphosis course of in our trade. And in addition at ElringKlinger, we’re in a metamorphosis course of. We nonetheless have after all our classical enterprise, the gaskets, the warmth shields, the plastic housing elements. And naturally, we’ve got to handle the demand right here within the classical enterprise. And we attempt to turn into even a stronger market place with regard to these merchandise which might be nonetheless going into the combustion engine within the years to return. And I feel we’re going to be very profitable right here as a result of I see an extra consolidation in that enterprise. A number of our rivals should not have the concentrate on the gasketing, should not have the concentrate on the merchandise that we produce in our classical enterprise. In order that capacities, from my viewpoint, are going to be decreased sooner or later, and the demand remains to be there, so that provides us good alternatives to essentially earn good cash in these class classical enterprise models.
We additionally, after all, began already a few years in the past to develop new merchandise in our classical enterprise models. So, particular gaskets, additionally warmth shields, plastic housing elements. Now we have performed this transformation and developed elements for functions in battery electrical automobiles and gasoline cell electrical automobiles. You see a few of these merchandise right here. Now we have displayed right here. They arrive, as I mentioned, from the classical enterprise models. And we’ve got already elements in sequence manufacturing from the classical enterprise models that go into electromobility, in electrical automobiles. And naturally, our new enterprise models, we add new applied sciences that go into the e-mobility sector, and that actually provides us a superb development potential sooner or later. I’ll present that later.
Right here, you see the classical enterprise. After all, we’ve got to handle this classical enterprise as a result of if I take a look at the cylinder head gasket, the calls for are going to go down sooner or later. By the best way, the cylinder head gasket is the one product that we’ve got that can not be utilized in {an electrical} automobile, that’s actually linked 100% to the combustion engine. Nevertheless it’s lower than 10% that we – of our gross sales that we make with cylinder head gaskets. So we will simply overcompensate that if the calls for are happening. You see right here, calls for are going again. We’re going to look into consolidation the place it’s attainable, put demand collectively. Perhaps we’ve got factories the place we simply produce then all of the cylinder head gaskets and never in 5 factories, however in 1 manufacturing facility, in order that we will use synergies almost about the merchandise that also go into the inner combustion engine.
And I’m satisfied that we are going to construct combustion engines in decrease numbers, however we are going to construct them till 2050, 2060, possibly even 2070 on this world. After which ElringKlinger remains to be supplying these elements as a result of any individual has to provide these elements, and we’re in all probability going to be the specialist that also can do it. And that may be a place that we work on. After all, right here, you see from our classical enterprise models, merchandise that go into, for instance, the left – right here on the left, you see {an electrical} drive unit. Now we have right here elastomer gaskets in there, steel elastomer gaskets. Now we have pure battery pack with plastic elements additionally with gaskets. We’re engaged on a housing half made out of steel for lithium ion battery pack within the underbody of a automobile. So each enterprise unit, outdated enterprise unit, has quite a lot of potential almost about these new applied sciences.
And naturally, the brand new applied sciences that is essential for us. Right here, gasoline cell know-how. We began 20 years in the past with bipolar plates, and we developed full gasoline cell stacks. Now we have additionally full gasoline cell techniques. And almost about gasoline cell know-how but additionally battery know-how, our technique is to have full techniques, but additionally to have elements. In order that, for instance, we provide stacks, gasoline cell stacks. And also you see a gasoline cell models proper right here, this field, this gasoline field, that’s a gasoline cell unit. We full techniques, and gasoline cell stacks. And in addition elements like bipolar plates. If for instance, the shoppers develop their very own gasoline cell system, then they want these elements, the identical, after all, with a battery know-how. We began greater than 10 years in the past with cell connector system, cell contacting system for lithium ion battery. That was the BMW i3, one of many first pure electrical automobiles that we had in the marketplace right here in Germany. We did the cell connecting system. And we, after all, develop this know-how additional on in order that we’re additionally capable of provide full techniques, battery techniques, battery modules and the identical within the drivetrain know-how, electrical drivetrain techniques that we additionally provide proper now in sequence manufacturing. Or for these functions, the auto-starter or disk provider is supplied by the enterprise models.
Steel Sealing Techniques & Drivetrain Parts, you additionally see these merchandise right here on this desk from my level on the fitting, these are these merchandise that we provide already in sequence manufacturing into electrical automobile functions. One factor that is essential for us, there’s a program on the EU degree, a funding program for R&D and for the event of recent applied sciences. It’s known as IPCEI, necessary mission of frequent curiosity within the EU, in Europe. And we obtained right here, IPCEI funding in a quantity of €33.8 million and that, we get that till the tip of 2026 in numerous installments. And that is for battery housing, for battery cell home design, and we managed to do that design.
In contrast, you see left – on the left, the cutting-edge. And on the fitting, you see our design. And we had been capable of lower the fabric required for these elements by about 25%. And that additionally, after all, lowers the CO2 footprint by about 40%. So a really modern mission. We’re not the one ones on this IPCEI mission. There’s quite a lot of different firms. And the concept of the EU, it’s additionally sponsored by the Federal Republic of Germany and likewise by the state the place the corporate is positioned. Which means for us, Baden-Württemberg, so it’s a co-funding state, federal degree and likewise EU.
And the concept is to deliver firms collectively that develop a whole battery system, right here on this case, battery system. In order that we’ve got – that we safe to have all that right here in Europe with European firms, and that this doesn’t go overseas to China or to the U.S. or no matter. In order that’s the concept of this mission. We’re in that, and we’re comfortable to get these €33.8 million for that extremely modern product. Sure, you see the broad product portfolio that we’ve got for future applied sciences.
On the left, you see inner combustion engine elements like gaskets and shieldings. We attempt to enhance right here our know-how to assist, that we see much less gasoline consumption in inner combustion engines, which works fairly properly. Additionally our lightweighting elements, like one again right here that you simply see right here close to the again, a dashboard that helps to cut back weight within the automobile as a result of quite a lot of occasions, we substitute steel by plastic. And people plastic elements’, additionally after all decrease weight, reduces the gasoline consumption in combustion engines, and that reduces CO2 emissions. After which, after all, our gasoline cell know-how, the battery know-how and the drivetrain know-how that may be a 0 CO2 emission as a result of that’s after all pure electrical driving. And right here, we’ve got superb merchandise and superb options readily available which might be properly revered and accepted by the client.
After all, we’ve got the clear aim to turn into CO2-neutral within the firm group, within the ElringKlinger firm group, by 2030. Now we have quite a lot of issues that we do. We set up – we use inexperienced power. We wish to be worldwide on inexperienced power till 2030. We’re already, since 2021, on inexperienced power in Germany. And right here, as I mentioned, we wish to be arrange the manufacturing to be CO2 impartial by 2030. Which means we’ve got to lower that by 2.5% yearly. And by the best way, additionally for lots of traders, it’s in the mean time, essential to have this, let’s say, sustainability situation and to have the CO2 emission discount situation in order that they make investments as a result of that is without doubt one of the standards that they often have, that the corporate has to work on that factor.
And in addition, it’s additionally necessary with regard to the shoppers as a result of in quite a lot of tasks, new tasks we get from the shoppers, earlier than we quote on enterprise, we get a questionnaire that we’ve got to fill out. They usually wish to see, what are you doing with regard to sustainability? What are you doing with regard to cut back – discount of CO2 emissions? In order that’s why we’ve got a robust concentrate on that as a result of generally they determine when you can quote for a mission or when you can’t quote for tasks. So it’s additionally not solely the capital market and the traders, but additionally our prospects which have a transparent concentrate on that matter, and that’s the reason that is for us so necessary. And we’re engaged on that actually intensively.
Sure. Now we have put in new departments for digitalization. We wish to make this firm as digital as attainable. Which means the digital enterprise platforms, we’ve got – our enterprise mannequin will probably be tailored to this digitalization situation. And naturally, we try to teach our folks in order that they turn into additionally folks which might be designated and devoted to digitalization. And we wish to be, within the close to future, digital-intelligent firm. And as I mentioned, we’re engaged on that.
Nicely, you see right here, we’ve got a broad spectrum of techniques and elements. Within the above, you see gasoline cell stack, battery pack and EDU, electrical drivetrain unit. And on the decrease image, you see the elements like bipolar plates or cell connecting techniques. In order that’s our technique. Now we have techniques, however we additionally provide elements.
A few orders that we obtained over the past years with regard to e-mobility since 2021. We produced an electrical drivetrain unit for a high-end sports activities automobile mannequin that’s produced within the U.Okay. This can be a actual good mission. It’s a distinct segment mission, after all, it’s not a excessive quantity, however extremely worthwhile. Now we have additionally an order for a European all-electric sports activities automobile mannequin, mass market manufacturing that’s gasoline cell enterprise. We manufacture that within the – in Dettingen our headquarter.
Now we have orders for prototypes for battery techniques. I’m fairly positive that we get this additionally for sequence manufacturing. You would possibly all have learn that and seen that. There’s a Swiss-German producer by the identify of Piëch, the son of Ferdinand Piëch, the well-known Ferdinand Piëch from Volkswagen. He designed a brand new actual fancy sports activities automobile which is pushed with battery electrical, and we do that battery system, provided prototypes already. And I’m fairly positive we go into sequence manufacturing.
An excellent success is we’ve got simply obtained an order for cell contacting techniques in 2021 already. This can be a mid-triple-digit million euro vary. Contract runs 9 years. It’s a worldwide producer of battery techniques. They usually simply constructed a manufacturing facility in Germany, we provide it in Germany. And the tip buyer is a premium OEM right here in Germany. We’re within the ramp-up section, and that is going to begin the most recent within the second half of 2023. So an actual good order. Now we have numerous prototype orders, quite a lot of growth contracts for gasoline cell functions, be it within the business aviation. Now we have this three way partnership with Airbus since 2020, the place we developed a gasoline cell system for passenger airplane. Now we have quite a lot of maritime functions in each our ships or – and likewise intra-logistics autos the place we do gasoline cells. In order that’s fairly good. Now we have proper now a functionality of as much as 10,000 stacks per 12 months in our manufacturing facility in Dettingen, which after all will probably be amended, the capability, as soon as we’ve got the orders readily available.
Very good new order that we simply obtained every week or 10 days in the past, is we’ve got obtained the order for the sequence manufacturing for metallic bipolar plates for a gasoline cell system of a world automobile producer. It’s going to be gross sales in 5 years within the mid-triple-digit million vary and about €500 million, €550 million in 5 years. They develop and design proper now their very own gasoline cell system, however they purchase the bipolar plates that you simply want for a gasoline cell stack. They purchase that from a provider, and the provider is ElringKlinger.
It was numerous work, however we satisfied them that our know-how is the perfect. By the best way, on this enterprise, you need to persuade by innovation and by know-how. If you don’t persuade by innovation and know-how, you don’t get the order. And right here, I feel at first, we had been 6 or 7 suppliers that they had been speaking to they usually lastly determined for us as a result of they mentioned, “You could have the perfect know-how in these bipolar plates.”
Different orders that we’ve got readily available, cross-car beam that’s behind the dashboard. It’s a worldwide OEM, good. Order begins – the manufacturing begins in 2023. Now we have structural plastic elements, one thing such as you see again there on the desk. That can also be for a worldwide OEM. Now we have – for an American OEM we’ve got a front-end module which can also be made out of plastic, discount of weight. And we’ve got steel elastomer gaskets additionally for a worldwide OEM that additionally goes right into a pure battery electrical automobile. So, once more, an instance that our classical merchandise are additionally utilized in these new functions in pure electrical automobiles.
So we see, with our techniques and likewise after all with our elements, based mostly on the orders that we’ve got readily available that I simply confirmed you, we see a robust gross sales development for the group. And that is anticipated each by techniques but additionally loads by elements. These elements are actually – they actually like that. As a result of you need to see, this international OEM that simply gave us the auto sequence manufacturing, mid triple million gross sales. It could be simply too costly for them to supply the bipolar plates by themselves. It’s mainly the identical story that we’ve got with the cylinder head gaskets, no OEM produces cylinder head gaskets for his or her inner combustion engine as a result of the numbers are so low that they don’t have any scale results. They might not make the most of a full line, a stamping press and mounting tools, only for their very own demand. And naturally, if Daimler would begin to produce cylinder head gaskets, no different automobile producer will purchase from them the cylinder head gaskets. That’s why suppliers are doing that. And with the bipolar plate, it’s the identical story. They might by no means make the most of a line, which is fairly costly. You want a 500,000-, 600,000-tonne press to stamp these bipolar plates. They might by no means function that economically. That’s why they get these elements from suppliers, and we’re right here main in bipolar plate. Our know-how is worldwide the perfect for bipolar plates. That’s what they inform us and why we get these orders.
Sure. Now we have a imaginative and prescient, very bold, very bold. We’re going to succeed in – we wish to attain €3 billion gross sales in 2030. We had €1.8 billion within the fiscal 12 months 2022. A number of that robust development, after all, is coming from gasoline cell battery know-how and drivetrain, but additionally structural lightweighting additionally will contribute to this development. And we may have an under-proportional development by the elements for the combustion engine, however nonetheless, we are going to earn some huge cash due to this consolidation that I simply described earlier than that we see in these outdated applied sciences. Sustainability. I mentioned it earlier than, we perceive this as considered one of our key priorities based mostly on traders but additionally based mostly on the shoppers which might be very a lot targeted on that.
And one factor I wish to point out, we’ve got this aftermarket enterprise, Mr. Jessulat will present that later, round about €250 million final 12 months in gross sales. We’re the main firm almost about aftermarket elements for combustion engines, the model Elring. – we. Solely Elring, the model of the aftermarket, is the Cadillac on the planet. All people desires to have Elring elements as a result of they are saying, “Nicely, these are the originals. They provide it to the OEs. And so we get these elements that go to the OE, we get that within the free aftermarket.” That’s why that is operating rather well. Now we have round about – EBIT margins of about 20% within the aftermarket, so actually good.
And naturally, our Engineered Plastics subsidiary based mostly in Bietigheim right here in Germany, but additionally with actions in China and within the U.S. That’s Teflon enterprise, and that’s about 40% automotive and the remainder is basic trade, but additionally medical trade, which is very worthwhile. Medical trade is far simpler than automotive, sure. I’ve to say that. It’s a lot simpler to take care of the shoppers, the costs are higher, the margins are higher. So that is additionally a superb development story that we’ve got right here within the Engineered Plastics enterprise, and that contributes fairly a bit additionally to the margin within the group.
Sure. You see the product transformation right here is de facto ongoing. If we take a look at the present gross sales break up on the left aspect above this little image. You see in 2022, we had about 80% of our gross sales had been associated to the inner combustion engine and 20% had been non-internal combustion engine enterprise. However when you take a look at the brand new orders that we’ve got readily available, and right here, after all, this bipolar plate order from this worldwide automobile producers, included new orders from 2021 till February 2023, we’ve got in these new orders, 75% are non-internal combustion engine and solely 25% are inner combustion engines.
So that you see the change. You see this transformation. Additionally on this subsequent little slide, gross sales projection, you see how these new issues, our new applied sciences are ramping up – are actually ramping up till 2030. In order that I’m satisfied, based mostly on this image and based mostly on what’s behind this, what you see right here, that our imaginative and prescient and – our bold imaginative and prescient to succeed in €3 billion in 2030 appears to be not unrealistic.
Sure. That’s from my aspect. I’d suggest that Mr. Jessulat exhibits the figures, then I offer you an outlook of the market and what we anticipate for 2023. And after that, we go into the query and solutions.
Thomas Jessulat
Sure. Dr. Wolf, thanks very a lot. As we will see right here on this slide, ElringKlinger had an order consumption in 2022 within the quantity of €1.874 billion, and we got here to order backlog in the direction of finish of December ‘22 of €1.462 billion, which represents a 5% improve over the earlier 12 months. Beginning with €1.6 billion in gross sales for 2021, we had, particularly, natural development within the quantity of €120 million, and we had additionally overseas trade results within the quantity of €54 million. In order that in complete, we got here up at nearly €1.8 billion in gross sales, which represents a rise of 10.7% to the earlier 12 months.
As we will see right here, we may broaden revenues throughout the most important segments and likewise throughout the totally different enterprise models of ElringKlinger. And if we undergo this, we see lightweighting, we may improve from €500 million to €575 million. Lightweighting is one strategic column for us when it comes to additional development. Now we have seen, over the previous couple of years, a superb development. And we are going to see additionally additional potential right here within the – sure, we’ve got to say, in the meantime, largest enterprise unit of ours.
Within the BU, Steel Sealing Techniques & Drivetrain Parts, the identical. We may improve gross sales from €448 million to €497 million. And in addition within the steel forming and meeting know-how, we may improve from €269 million to €293 million. E-Mobility declined a little bit bit based mostly on some interactions in provide in a single – many of the vegetation the place we provide a drive system, from €59 million to €42 million.
Aftermarket is the enterprise unit that has actually a selected demand scenario, as Dr. Wolf identified. We may improve from €215 million to €251 million in gross sales in 2022. And in addition we may improve gross sales in Engineered Plastics from €125 million to €133 million. After we take a look at the worldwide distribution of gross sales, then we see that ranging from Germany in 2012, the share of enterprise in Germany declined from 30% to twenty% to the expense of North America, the place we may improve from 18% to 26%, and the remainder of Europe stayed pretty the identical.
After we take a look at the diversified buyer base of ElringKlinger, once we see that, primarily, we should not have a really vital publicity to particular person prospects. And we see right here, for instance, in North America – for North American OEMs, 8% to the utmost and 9% for German OEMs. Tier 1 and different prospects had been primarily very distributed and developed in an excellent approach over time. Sure. Then we come to the associated fee inflation, right here within the stroll from the working EBIT in 2021 to 2022. Then we see that we had in 2021, the divestment of the Austrian subsidiary, so we’ve got to deduct it by €11 million. And we’ve got had a rise within the uncooked materials price of €11 million that went in opposition to gross sales development and we’ve got to say the natural, let’s say, working leverage on this interval. After we stroll by means of this, it’s essential to know that the €11 million right here when it comes to uncooked supplies have an early improve in 2022 relative to compensation from the shoppers that occurred a little bit bit later within the 12 months.
So which means, is that this €11 million actually lasting once we go into 2023? Sure, we’ve got to say it to some extent, however not in full. And that is necessary once we see we do the stroll from ‘22 to ‘23, which of the elements listed here are actually the lasting elements. And €11 million from uncooked supplies is – a fraction of that will probably be additionally a burden for 2023. However what we see right here, with the extra power and logistics prices, then we see that the – it is a price sort that was hitting the ElringKlinger group fairly exhausting in 2022. And it is a matter that also must be negotiated with prospects going ahead.
Now we have seen, on the opposite aspect additionally, that power price and logistic prices additionally went all the way down to some extent. However once we look into 2023 popping out of 2022, then actually power and logistics price is extra what I’m involved about relative to materials price, sure, once we look actually on the price will increase from an incremental viewpoint. HR-related objects. Okay, that is primarily restructuring at a web site in Germany the place we’re within the strategy of closing one plant location right here in Germany and we needed to file some price in 2022 in regard to that.
Ramp-up prices, the €11 million right here for ‘22, it is a start-up price in a number of vegetation. The one plant is in Texas, it’s a brand new plant for lightweighting. And we’ve got additionally, in Germany, a brand new plant, additionally for lightweighting enterprise that’s going to be beginning up within the interval between ‘23 and ‘24. So that is, in my view, for some additional extent, it will likely be a burden, however that is going out primarily with the expansion that we are going to see right here primarily within the light-weight enterprise. So we got here – right here, with this stroll to the working EBIT of €61 million, and we see that total, we had impairments on property and immaterial property within the quantity of €103 million, which brings us to the reported EBITDA of 2022 within the quantity of minus €42 million.
And the EBITDA growth, you see right here on the left aspect. EBITDA is necessary for us in an effort to with the ability to generate money and to have the ability to put money into the brand new applied sciences. And we see right here that, at €174 million, burdened by the objects that I’ve defined, we’re a little bit bit under the earlier years, however considerably under 2021. As we should streamline the group going ahead, actually, in regard to the strategic mission of ElringKlinger, we determined to report, ranging from 2023, an adjusted EBIT. And I’m going by means of this. We’re beginning with the reported EBIT, and we add or subtract the amortization of intangible property from buy worth allocation as we’ve got performed previously. And we are going to exclude additionally within the adjusted EBIT adjustments within the scope of consolidation and impairment on goodwill in addition to impairment on property, write-ups, positive aspects, losses from the disposal of entities, restructuring, restructuring-related bills and different that might not be so apparent at this level however which may happen.
That is just about consistent with the standard reporting of the adjusted EBIT. And once more, for 2022, this isn’t included, 2022 goes to be reported right here because the comparable interval to the 2023 reporting that we are going to do, which we’ve got initiated starting of 2023. Simply so that you – so that you can know. After we take a look at the earnings scenario right here, we see on the left aspect, based mostly of the impairments. I used to be speaking about, minus €56 million in EBT relative to €101 million much less 12 months earnings per share comes as much as minus €1.41. And dividend cost as a coverage, in regard to continuation right here in regard to dividend coverage, we determined, along with the Supervisory Board, for a proposal of a dividend of €0.15 for the interval 2022.
Sure. If we come to the opposite monetary KPIs right here, investments, CapEx is pretty in line, 2022 with 2021. It’s nonetheless a really disciplined method that we comply with as a result of, once more, we’ve got to organize for future investments within the new enterprise fields that we’ve got simply seen earlier than. Working capital, we got here up with 25.3% from the quantity a little bit bit larger from the share relative to gross sales is in line primarily with earlier 12 months. And the primary driver is right here stock. And inside stock, the primary driver is, by 50% roughly, worth after which to some extent, overseas trade, and to some extent, actually portions when it comes to materials, extra portions that we’ve got on the stability sheet.
Right here, after all, that is for us an necessary matter as a result of we expect we will enhance right here. I say we goal extra a degree of 20% going ahead and attempt to obtain that step-by-step. However ‘22 has been a fairly tough 12 months as a result of we’ve got seen these results and likewise, after all, limitations within the provide chain. On the fitting aspect, because of this primarily of that, and because of the burdens that we’ve got seen, we’ve got a free money circulation, €15 million for 2022, which compares with €72 million for 2021. Now we have, as ElringKlinger gone by means of a path of consolidation, once we take a look at our debt scenario right here. So web debt on the finish of 2022 comes as much as €364 million. And the online debt to EBITDA as a monetary KPI is 2.1 on the finish of the 12 months. And naturally, right here additionally, we wish to enhance, we wish to keep under 2. And there’s a little little bit of solution to go, not solely from an indebtedness of the corporate, however particularly, after all, in regard to the standard of earnings. However we’ve got seen right here a degree that’s increasingly more attainable, after all, for ElringKlinger to do investments additionally with that sort of financing, which is, once more, essential to make the following steps when it comes to our additional industrialization.
Sure, once we see right here on the left aspect, the maturities of our debt. Then we see in 2023, there is no such thing as a compensation that’s going to be due. In 2024, we’ve got roughly €100 million. So we’ve got just about a peaceful scenario in regard to refinancing and the occasions of those that we see at the moment. And the following vital quantity is our syndicated mortgage that’s going to be due in 2026. And afterwards, the final portion of the Schuldschein of 10 years that we’ve got performed a few years in the past.
Sure. So fairness ratio comes as much as 43.8%, which is just about inside the limits that we’ve got, 40% to 50% is our goal. And once we take a look at the efficiency of the enterprise, then we see within the OE section right here, after all, the impairment is an impairment right here when it comes to goodwill and likewise when it comes to property on the OE section aspect. And subsequently, we’ve got, based mostly on €1.4 billion right here in gross sales, minus 7.9% in 2022. However we see on the opposite aspect, within the aftermarket right here, €251 million with €20 million of EBIT and likewise Engineered Plastics, €133 million in gross sales and €14.9 million. So these parts give ElringKlinger a fairly good inner money circulation so as to have the ability to finance CapEx and likewise to pay down debt to some extent. After we take a look at the Different section right here, it’s not likely taking part in a major function anymore, so I’ll go over that.
So once we take a look at that and see what’s on the monetary agenda of ElringKlinger for this 12 months and likewise the years to return, then it’s primarily the preparation and the execution of additional development in our prime line. This is essential that we get orders on board within the strategic fields of e-mobility and light-weight, and that we align the group construction with this technique. And that is on the one aspect, after all, consolidation of efforts; and on the expansive aspect, when it comes to rising the opposite enterprise models to essentially stability this manner relative to the event of demand in ICE know-how versus the brand new applied sciences.
Then on the following slide, we are going to proceed to be very disciplined when it comes to price and CapEx in an effort to actually enhance earnings high quality over the following couple of intervals. And we may also proceed to deal with the high-cost objects that we’ve got – that we nonetheless have in some areas with our prospects. So that is one thing that we’ve got performed considerably within the 12 months 2022, I feel with good success. However this will probably be continued additionally in 2023.
Sure, like Dr. Wolf mentioned, pushing digitization. Right here, we purpose on the digitization of our factories. We see right here the digital and seamless manufacturing facility from an info circulation and likewise from a cloth circulation. So there’s quite a lot of potential for ElringKlinger that we will get out of this course of, however we additionally need to watch out that we’re not overdo digitization when it comes to a value perspective. So that is additionally an merchandise that must be consistent with the overall exercise. After which on the fitting aspect, that is one thing that we mentioned already right here, concentrate on working capital administration, particularly the brand new enterprise that we purchased that on with parameters that drive us in the direction of the 20% working capital of gross sales and to free additional money flows out of this place in order that we will cut back debt moreover, and likewise to shorten the stability sheet to the extent attainable.
Sure. That’s from my aspect. Thanks very a lot. And I hand again to Dr. Wolf.
Stefan Wolf
Thanks, Mr. Jessulat. So let’s take a look at markets and outlook. What we see for 2023, the financial atmosphere, after all, stays difficult. The worldwide GDP expectations for 2023 are, let’s say, modest. We thought final 12 months, center of 2022, all of the specialists mentioned in 2023 we’re going to have an enormous recession. Right here in Europe and likewise in Germany, they anticipated GDP to go down by round about 4% to 4.5%. Now the German authorities expects minus 0.3%, 0.4% in GDP. Which means stagnation. However total, we see that inflation is an issue. We see that, after all, the rise of rates of interest of a number of central banks, that’s going to be an issue. And so we additionally anticipate a modest development for the GDP in 2023.
We nonetheless have quite a lot of uncertainties. The warfare between Ukraine and Russia remains to be not over and we have no idea when it’s going to be over. We additionally produce other areas on this world the place we see geopolitical uncertainties. The associated fee for uncooked materials has gone down, but it surely’s nonetheless on a really excessive degree. Power is on a really excessive degree, particularly right here in Germany. And naturally, transportation prices are additionally excessive. They’re, all three prices, now approach above 2018, 2019. So that actually burdens the corporate.
The provision chain scenario is a little bit bit higher. With regard to semiconductors, it appears to be higher than it was in 2021 and ‘22. However nonetheless, it isn’t because it was earlier than. It’s nonetheless very susceptible, the scenario with regard to provide chain. So uncertainties. So we’ve got to watch out, and that’s additionally why Mr. Jessulat mentioned that we’re very a lot wanting on prices and attempt to save prices and cut back price to be right here on the protected aspect.
Sure. The worldwide development in manufacturing, automobile manufacturing, we anticipate 15.1 million in North America after 14.3 million in 2022, however nonetheless approach above the 16.3 million in 2019. The identical scenario in Europe 2019, we had 19.5 million models. Now we’re heading in the direction of 16.1 million models in 2023. And also you see right here on this image that, from my viewpoint, an important info. The one huge market or huge space that generated development from 2019 till 2023, what is predicted, is China, from 24.7 million to 26.6 million. So – and it additionally exhibits, when you take a look at the figures down there with 89 million in 2019 and now 85.1 million models in 2023, that out of these 85.1 million models, China is chargeable for 26.6 million. That exhibits the significance and the dominance of this market within the automobile trade and within the provider trade.
That is an important marketplace for us, and that’s additionally why ElringKlinger has a really robust concentrate on China. After all, different Asian international locations, additionally Europe and North America, after all. However I feel this image exhibits very, very clearly what’s occurring in our trade, China turns into stronger and stronger, and they’re mainly dominating the automobile and the provider market, that’s fairly clear.
Sure. Our objectives, as you understand, gross sales all the time, we wish to generate natural development considerably above market degree. I’m fairly positive that we are going to obtain that. In 2023, we anticipate roughly 5% EBIT margin on group degree. The working free money circulation, after all, constructive. And we wish to, after all, be higher than in 2022, so we’re going to extend free money circulation with regard to – if we examine in ‘22, that was €14.8 million. So we wish to improve that, after all.
The return on capital employed, we anticipate of seven% to eight%. Web debt to EBITDA, the speed, Mr. Jessulat talked about that already, we wish that to be under 2. We wish to additional enhance our web working capital right here, particularly with supplies, but additionally with elements that we purchase for our aftermarket kits there, we nonetheless have potential to turn into a little bit bit higher right here. We’re going to spend no more than 5% to 7% of group revenues in CapEx. However this 12 months, we nonetheless be very reluctant with regard to CapEx. Might be much less. This 12 months in 2023, R&D prices, 5% to six% of group income and fairness ratio between 40% and 50% of complete property. We all the time attain that. This 12 months, July 1, I’m 26 years with ElringKlinger within the firm, and we’ve by no means been beneath 40% in these 26 years. So I anticipate that to remain right here. We had been at 42.8% – 43.8% in 2022. So, these are our objectives.
And when you take a look at the general view on ElringKlinger, we’ve got a transparent concentrate on know-how. You probably have improvements, in case you are main in know-how in our trade and particularly almost about these new propulsion techniques like battery electrical automobiles, gasoline cell electrical automobiles, additionally light-weight, all that, all the pieces we do, you need to be primary technologically, then you might be profitable. And that’s the reason we’ve got such a robust concentrate on know-how, and we wish to be all the time the innovator in our trade. After all, we nonetheless have a transparent view and likewise concentrate on the inner combustion engine enterprise that also exists. And we’ve got good prospects right here to earn good cash as a result of there’s a additional consolidation occurring in that enterprise. And no one is de facto investing in enterprise for the inner combustion engine, however we do it in a really, let’s say, clever approach. Not an excessive amount of, however maintain us on a really excessive technical requirements in order that we’re higher than our rivals.
After all, we’ve got our new product portfolio to remodel product portfolio, additionally a robust concentrate on that. I talked about sustainability earlier than, necessary for traders, but additionally necessary for patrons. So, that’s key precedence for us within the group to concentrate on sustainability, and that’s not solely CO2 discount, that’s way more than solely CO2 reductions. A part of CO2 reductions, a part of it’s sustainability and that’s way more, what we’re as much as right here. Now we have our key monetary efficiency indicators. We all the time work on that, and we sharpen them. We actually look into that. Typically, we’ve got new ones. So, we mainly lead the corporate group on these info, on these monetary – key monetary efficiency indicators. All people is aware of that in all of the enterprise models and the company models, they usually act with regard to that. And naturally, we wish to develop profitably by these techniques, as I described, but additionally with elements within the new enterprise models and new enterprise areas.
So removed from my aspect right here, the monetary calendar, we’re right here in Frankfurt at the moment, March twenty eighth, with the complete figures for 2022. Now we have Q1, Could 9, 2023. Now we have our Annual Basic Assembly on Could 16, 2023. We determined to do it once more in a digital format, so no presence, the legislator opened the chance additionally after Corona to do it in a digital format. That’s what we do. We determined for that. Now we have August 3th, Q2 figures after which November seventh, Q3 figures. So, that’s the monetary calendar.
Sure. So removed from my aspect, thanks very a lot. And Mr. Jessulat and me, we’re very happy to take your questions.
Query-and-Reply Session
Q – Christoph Laskawi
Are you able to hear me okay? I don’t know if that is working. Christoph Laskawi, Deutsche Financial institution. Thanks for taking my questions. The primary one will probably be on the margin steering and the bridge to ‘23. Mr. Jessulat, you already elaborated a bit on that uncooked mats in all probability aren’t the identical headwind, so we will anticipate probably that being impartial or a slight constructive. Power and wages, ought to we anticipate a similar-sized headwind as in ‘22, or ought to or not it’s smaller? Might it probably be even flat? After which simply on the HR price of €11 million, I anticipate that to be fully gone in ‘23, proper? So, if we construct the bridge, that ought to be a web constructive into ‘23. After which the second, constructing guide of the questions, the outperformance in ‘23 overproduction. Traditionally, you may have achieved 500 foundation factors plus. Is the substantial outperformance pointing to the identical vary, or ought to or not it’s even larger? And will you elaborate on the startup productions that are driving that, kind of tasks that are developing, and may these be a margin constructive as a result of they’re combine constructive, or not? Thanks.
Thomas Jessulat
Sure. Thanks in your query. Like I mentioned through the presentation, if we take a look at the EBIT bridge, then we must have in mind that the fabric prices as a web impact in 2022 is de facto having an early impression in ‘22 from a value aspect and delayed compensation that was not stretching over the complete 12 months. However the compensations that we negotiated with the shoppers have a long-lasting impression to a really massive extent, so actually excessive double-digit proportion. So most of it, what we’ve got negotiated, is de facto lasting when it comes to sustainable enchancment right here. Now we have to say, on the opposite aspect, throughout these negotiations, we modified the construction of our buyer contracts to a big extent. And previously, we had floating costs largely for LME sort of issues differently, someplace between 10% and 50%. And now we’re in all necessary commodities to us for listed price varieties, we’ve got to say, we’re in a high-double digit proportion quantity. So, it’s 80% roughly when it comes to what we’ve got now has a floating worth relative to index. so uncooked materials is in some segments for 2023, is giving me a little bit little bit of a headache. Particularly, after I take a look at chemical compounds and after I take a look at rubber sort of fabric, that’s giving us nonetheless some issues. Plastic stays on a excessive degree, however we don’t assume that plastic goes to be going up moreover. So, there’s going to be an impression from materials between, from a cumulative foundation from ‘21 to ‘23, sure, but it surely’s a low-double digit determine, I feel. After we take a look at power and logistics prices, and we see logistics price has come down in some areas, however in some areas, it stayed excessive. So, it is a burden that we nonetheless have that’s going to be negotiated as additional price varieties with our prospects additionally in 2023. And once we take a look at power prices, everyone knows that gasoline costs have come down, which is after all, the manufacturing price for among the commodities utilized by us, but additionally our inner processing prices. So, power is de facto extra of a priority right here. And that is additionally a sort that must be negotiated. HR-related objects is a ‘22 merchandise for the matters readily available, so this isn’t going to be lasting. And ramp-up price is possibly one other necessary merchandise to speak about as a result of we’ve got a number of plans within the beginning section. And people plans are, from a manufacturing perspective, operating at idle proper now, however they go into the income cycle in ‘23 into 2024. So, there’s a portion of that, that may keep. However there’s additionally quite a lot of merchandise, particularly, light-weight, but additionally e-mobility that go into the income cycle this 12 months. So, we see at the very least a portion of that gone for ‘23, but it surely’s largely gone in 2024. Plus additionally, after all as we notice extra revenues within the enterprise models that we ramp up, and naturally, we are going to generate extra contribution margin, which is, in my view, on the finish ‘24 going ahead, is greater than these €11 million, is a extremely vital double-digit quantity the place we are going to see some enchancment by these merchandise going into income cycle. The second level, labor price, is we’ve got had an expectation for 2023. The settlement didn’t come to that expectation. However nonetheless, ranging from 1st of June, we may have these will increase, and we may also have the second a part of the inflation element that’s going to be paid out. So, that’s actually an impression that may hit us in 2023 for positive. And that’s additionally going to be a part of the bundle that will have to be negotiated in ‘23 with the shoppers. On the third level, a part of that, I feel I defined already the outperformance drivers is de facto income cycle associated to new merchandise. That is the primary driver for losses going out of the group and for getting extra contribution margin in there. For instance, on the cell contacting system right here, we’re proper now making ready for the ramp-up in Q3. And in This fall, we’re going to be in a income cycle for that. So, as a part of that’s in ‘23. Most of that’s going to be a really steep incline, goes to be in 2024. So, it’s a little bit little bit of combine, however there are some price results that we expect we may have on this 12 months. And that is additionally the rationale why we’re on the decrease finish of what we’ve got seen right here on the earnings high quality degree in 2001. We’re a little bit bit under the 6% that we’ve got seen. And when you say, okay, it is a lasting for 2023, lasting lower-double digit quantity, then it’s primarily based mostly on these objects that I simply described.
Michael Punzet
Michael Punzet, DZ Financial institution. I’ve two questions with regard to the event within the fourth quarter. First one is on the monetary outcomes. This was extraordinarily detrimental. Perhaps you’ll be able to elaborate, what’s the rationale for that? And in addition the Engineered Plastics enterprise posted solely a margin of 6.7%. After the primary 9 months, you may have 17.2%, so what’s occurred there?
Thomas Jessulat
After we take a look at the fourth quarter monetary outcomes, it’s a 13 – wait a minute, it’s €16.5 million. And that is primarily based mostly in your reversals of overseas trade results. Now we have a excessive protection, we’ve got to say, of swaps in opposition to intercompany loans, largely U.S. greenback but additionally in opposition to the Swiss franc. However these had been some technical results right here relative to the rolling of these devices. And the second query on the Engineered Plastics enterprise, that is objects round provision for losses to some extent for expectation that we had within the plan for materials price which will come into play or not. However right here, we’ve got been considering within the group, in some areas, we’ve got been considering from a planning perspective with larger materials prices that will not come. So, I feel that is going to be remoted merchandise relative to these results. Sure. In This fall, by the best way, there’s additionally a mid-single digit impairment within the gross margin. Once you take a look at gross margin high quality, it’s necessary to notice that for This fall, there was a mid-single digit quantity in there. Thanks.
Jürgen Pieper
Jürgen Pieper, Metzler. There’s – I’ve one query in your buyer checklist. There isn’t a concrete Chinese language identify in your key buyer checklist. So, what are the biggest names right here in Asia? And is there the distribution between ICE enterprise and e-mobility enterprise just like right here, or is that this nonetheless extra conventional enterprise?
Stefan Wolf
Most of that’s conventional enterprise. And we’ve got all the most important Chinese language prospects like Chery, Geely, Brilliance, Nice Wall. However that’s all combustion engine merchandise. However we began about 0.5 years in the past – 9 months in the past, we began a brand new subsidiary for EKPO, ElringKlinger Plastic Omnium, EKPO Gas Cell Applied sciences, in China. It’s positioned at our location in Suzhou, near Shanghai. And we’re engaged on element enterprise. And I don’t assume that we’re going to achieve success with the techniques in China. They’re producing their very own battery packs. They’re producing their very own gasoline cell techniques. After all, gasoline cell stacks that they produce are far behind our know-how, however I feel we’ve got good potential for elements. The bipolar plates, for instance, from us or they purchase cell connecting techniques from us. However as of at the moment, I’d say nearly 100% of the enterprise in China is inner combustion engine.
Thomas Jessulat
Sure. Let me add one thing to that. The standard product that goes in China is modern sealing functions. For instance, EDUs when it comes to shaft seals for high-RPM EDUs, the place we’ve got an excellent place in China, popping out of Engineered Plastics. After which we’ve got additionally functions in China in regard to EDU sealing when it comes to the metal-elastomer software sort of factor. And we’ve got additionally battery seals when it comes to metal-elastomer software in China. What Dr. Wolf is saying from the quantity is de facto, after all, not the excessive quantity right here. However we see that the there’s modern sealing options wanted that, even within the Chinese language market, we will make some headwind there in regard to the location of recent merchandise. However like not with the large greenback objects, aside from light-weight. Sure.
Stefan Wolf
Perhaps so as to add this, that it’s a basic pattern in China. You need to be modern and you need to have a know-how that’s not out there from a Chinese language provider. Every part that’s out there from Chinese language suppliers, they’re consequently altering their provide bases, simply eliminating worldwide suppliers, they usually go to Chinese language – pure Chinese language suppliers. So, you win the battle sooner or later in China with Chinese language prospects when you’ve got know-how that’s not out there from Chinese language rivals, and that’s our focus. That’s why we’re targeted on these merchandise that Mr. Jessulat simply talked about, but additionally in bipolar plates and cell connecting techniques and so forth, as a result of we’re, right here, higher than the Chinese language suppliers. And that may be a clear pattern, that may be a clear new course that Chinese language automobile producers, they wish to purchase Chinese language if it’s attainable. And naturally, you noticed the figures that I confirmed. This market is essential for our trade. It’s an important marketplace for our trade. And I nonetheless see quite a lot of potential there. I’m going to – I’m positive that inside a few years, we are going to see 30 million models in China. Frank Biller?
Frank Biller
A few questions right here. Frank Biller, LBW. The one query is about your chart right here, product transformation. When this chart till 2030, it appears to me that you’re heading for outperformance of 4% to five% every year. And when wanting on the proportion charge in ICE drivetrains and BEV automotives, it appears to me that you’re underperforming the market regardless of a really excessive magnitude in orders for the brand new electrical enterprise. So, the chart appears to be that it’s 60% in electrical mobility and the market ought to be at a 73% vary right here with these charts you offered on Web page 3. So, what’s behind there? Is it the content material per automobile happening for you, or is it only a cautious assumption right here of your aspect? The opposite query is dividend coverage right here, so a steady dividend in 2022. So, what’s your dividend technique behind it? Are you extra wanting on the web earnings and right here a ratio, or is it extra on the free money circulation aspect right here? And what we should always assume right here for the longer term? And the opposite factor on this new definition on adjusted EBIT, what you might be guiding right here, so 5%, what’s calculated from at the moment’s perspective, what’s as an adjustment already seeable right here for 2023, after all, sure.
Thomas Jessulat
Sure. Thanks in your query. On the adjusted EBIT, a long-lasting matter could be depreciation on buy worth allocation, and there’s not going to be something left that we’ve got had previously. It could be actually a brand new begin in regard to that. There isn’t a lasting element. There’s after all, price varieties that we internally specify and actually in a decent approach, in keeping with IFRS, for instance, restructuring. Now, there’s an inner ruling in regard to that and it’s not a really broad interpretation that we’d have. After we take a look at your first query right here when it comes to the state of affairs, sure, that is – in our perspective, it ought to be actually a sturdy state of affairs that takes into consideration possibly a extra detrimental growth additionally in regard to ICE which will occur. It must be strong in a approach that this development that we see here’s a vital quantity once we discuss non-ICE. And the goal that we’ve got right here is that the expansion within the new merchandise, these strategic merchandise carries us in the direction of the goal of the €3 billion, which is a snug scenario to see the additional decline of ICE, at the very least in Europe, down the street. So, it’s a little bit little bit of a state of affairs considering in right here, and we wish to have a sturdy plan in regard to what we go for right here when it comes to the identified ICE share, and it is a little little bit of a background of that. It’s not additionally 100% if you take a look at the run down in the direction of 2030 and 2035, possibly when it comes to ICE, it’s not one-to-one an S&P [ph] determine.
Stefan Wolf
And I assume that you simply took the 97.1 million models in 2030 on Web page 3, and then you definately took the 70.7 million models on Web page 4, and also you simply divided that. However you need to see, that in these 70.7 million models, there are 26.6 million models, hybrid, and hybrids have an inner combustion engine. So, you need to add these 26.6 million to the inner combustion engines, sure, in order that – the ratio is just not – you can not take – you need to take out the 26.6 million models. Nicely, we simply wished to have this 12 months continuity. We take that call yearly in spring, and we after all talk about it with the Supervisory Board, additionally after all with the bulk shareholder, fairly clear. They’ve 52% of the shares. So and we’d simply wish to get again into – we had a fairly steady continued annuity. Till, I feel 3 years in the past, we had 3 years with no dividend, however we wish to get again into that. Additionally, considered one of our issues that we’ve got to satisfy is to earn cash and to let the shareholders contribute. As a result of the founder household, they provide quite a lot of the dividend in two trusts. And people two trusts, they’ve after all, obligations, social issues. And that’s why considered one of our clear focus can also be to realize good EBIT, to realize good and noteworthy free money flows, to have the ability to pay a dividend additionally almost about these obligations which might be in these two trusts of the household. So, focus is on EBIT and free money circulation. Additional questions? It doesn’t appear to be the case. So, thanks very a lot for attending our convention right here, additionally those that had been right here digital with us, so all the perfect. The one factor that those that simply dialed in are lacking is the great buffet that we’ve got on the market that’s supplied by Commerzbank. Thanks very a lot additionally for Commerzbank that we will have this analyst convention yearly right here on this great constructing. And so thanks very a lot to Commerzbank, all the perfect to you. You understand the dates for our quarterly stories and the calls. And so then I’m wanting ahead to listening to you in these calls. And naturally, wanting ahead, I hope seeing you right here subsequent 12 months once more. Thanks very a lot.
Operator
Women and gents, the convention has now concluded and you could disconnect your telephones. Thanks for becoming a member of and have a pleasing day. Goodbye.
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