gea presentation at bank of america merrill lynch conference · mega trends support gea business...

GEA presentation at Bank of America Merrill Lynch Conference

March 20th 2018

GEA GROUP CFO, DR HELMUT SCHMALE

2

Mega trends support GEA business

GEA at Bank of America MerrillLynch Conference March 2018

URBANIZATION WITH

GROWING MIDDLE CLASS

Growing demand for processed

food and medication

GEA offers

components and process

technology for processed food,

ready meals, fortified lifestyle

beverages and food,

medications

GREATER FOOD SAFETY

AND QUALITY

Readiness of industry to invest

more for greater process

reliability

GEA offers

certified hygienic/aseptic

processes and components to

meet the strict standards of the

industry

ENERGY SCARCITY AND

STRICTER ENVIRONMENTAL

REGULATIONS

Greater interest in efficient and

resource-saving production

processes

GEA offers

intelligent engineering processes

for resource-friendly

technologies, energy-saving

machines and processes,

as well as heat recovery

3

Comprehensive application & technology portfolio

Note: SEP = Separation, MDF = Milking Dairy Farming, HOM = Homogenizer, FLC = Flow Components, FPP = Food Processing & Packaging, COM = Compression, PES = Pasta & Extruded Snacks, DRY = Drying, LIP = Liquid Processing, SEPP = Separation Process, RFG = Refrigeration

BEVERAGES

CHEMICAL

DAIRY FARMING

DAIRY PROCESSING

FOOD

PHARMA

OTHERS

MAIN PRODUCT GROUPS & TECHNOLOGIESSEP MDF HOM FLC FPP COM PES DRY LIP SEPP RFG

APPLICATIONS


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… seeks to switch from

conventional to

automated milking on its farm

… the state-of-the-art GEA

DairyProQ rotary parlor

with 28-80 milking stations

Equipment new machines business

Customer … Our GEA answer is…

… plans to introduce insulin to the market

… GEA supplies various

separators for separation

of various substances

throughout the production

process

… wants to reduce the energyconsumption of its juice line &

improve product viscosity

… the most powerful GEA

homogenizer on earth

saving 7% energy


5

… seeks a more efficient solution

to process aloe vera for use in

personal care, nutraceuticals and

food

… GEA spray drying solution for high-quality

powder

Solutions projects business

… plans a greenfield plant

for instant coffee

… GEA complete line solution for instant coffee

… wants to diversify product

portfolio with high-value add

product of bacterial culture

… GEA solution for a number

of complete lines



6

… increase uptime or yield of a plant

… GEA service team supports with the right solution

Service business of Equipment & Solutions

… has an urgent problem with one of the

milk lines in Chile and needs immediate support

… GEA 24/7 local support

offered by experienced service

engineers in more than 200

service branches

… seeks de-bottle-necking of an older

plant in order to increase output by 10%

… GEA upgrades &

optimizes customers’ plants



7

Stability due to application & technology spread

Significant application coverage Medium/lower application coverageStronger focus Lower focusStronger focus Lower focus

BEVERAGES CHEMICAL DAIRY FARMINGDAIRY PROCESSING FOOD PHARMA OTHERS

ALFA LAVAL

DeLAVAL

TETRA PAK

BÜHLER

JBT FOODTECH

KRONES

MAREL

EQUIPMENT SOLUTIONS

SPX FLOW


Note: GEA view

ApplicationsGEA MANAGEMENT VIEW

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Comparable sales shareNon-comparable sales share

Comparable share of peer sales

GEA JBT FOODTECH

GEA ALFA LAVAL GEA DELAVAL1 GEA TETRA PAK2 GEA3 BÜHLER

GEA SPX FLOWGEA MARELGEA KRONES

COMPARABLE SALES SHARE FY17

1. FY2016

6-7 largest GEA competitors compete on average in around 20% of bids against us


GEA: Separation, Flow Components

Alfa Laval: Separation, Fluid Handling in Div. Food & WaterGEA: APC Dairy, APC Beverages, APC Food, Homogenizer

Tetra Pak: Processing

GEA: APC Food, Pasta & Extruded Snacks

Bühler: Parts of Value Nutrition, and Consumer Food

GEA: APC Food, Food Processing & Packaging

JBT FoodTech: Liquid Foods, Protein Technology

GEA: APC Beverages, Homogenizer, Flow Components

Krones: Entire business

GEA: Food Processing & Packaging

Marel: Entire business excl. MPS

GEA: Milking Dairy Farming

DELAVAL: Entire business

2. FY2015

GEA: APC Dairy, APC Food (parts), Homog., Flow C..

SPX Flow: Mainly Food and Beverages

3. Including pro forma Pavan acquisition revenues

GEA MANAGEMENT VIEW

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Exposure to multiple industries caters on robustness

over the various cycles

Growing markets portfolio catering on robustness

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

20

-10

-20

-30

10

0

30

Market development by Industryyoy growth

1. Non-weighted average

Source: Capital IQ, VDMA, VCI, Chemdata International, Oxford Economics, McKinsey, IFCN, US Census Bureau, EuroStat, Evaluate Pharma, IHS Markit, IFPM

Structurally growing market

Volatile milk prices

Stable growth of underlying base business

Larger project business rather cyclical

Equipment with stable market growth

Greenfield projects rather cyclical

Pricing pressure

Structurally stable market growth

Differing growth profile across sub-industries

Rather cyclical market

Innovations drive demand (e.g. Lithium)

Global medicine spending growing

Lower volatility due to increasing regulatory standards


3-4%

Dairy

Farming

Dairy

Processing

Beverages

Food

Pharma

ChemicalsMid-term

market outlook1

Beverages Pharma ChemicalDairy ProcessingDairy Farming Food Average1

Mid-term market outlook

10

Levers of growth


Technology trends

GEA is well positioned to

serve technologies for trends

Key account excellenceContinue building key account

management to further strengthen

business with global clients, esp. to

support growth in Emerging Markets

Further sales

professionalization

GEA is performing a review

of the sales setup to fully seize growth

opportunities in current white spots

Service

Continue pushing Service

business to next level

11

Opportunities for new digital solutions are tapped


GEA

Performance Plus

DAIRY

NET

DIGITAL

TWINREMOTE

EYEWEAR

12

Service – Share of Sales vs. Benchmarks


SERVICE SHARE

35% 35% 38% 39% 39%

FY13 FY17FY16FY15FY14

BA Equipment(% of sales)

BA Solutions(% of sales)

1. Comment on CAGR: Relates to Service sales in €m from 2013 to 2017

2. Comment on peers: Due to the heterogeneous product portfolio and maturity level, peers shall be compared on a like-for-like

base, i.e. equipment focused companies to be compared with BA-E and engineering companies to be compared with BA-S

(peer group contains companies like ABB, Alfa Laval, Andritz, Bühler, JBT, etc.)

18% 20% 22%22%

FY15 FY16 FY17FY14

19%

FY13

PEERS2

Ø 36-42%

PEERS2

Ø 20-27%

+5.4%CAGR1 +7.0%CAGR1

31%GEA GROUP 2017

• Solid development of GEA

Service share in the

recent years

• Comparable peers have in

general similar Service

share

• Aspiration to further grow

Service business and

Service share:

• 32-33% by 2020

• 33-35% by 2022

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Service – Life cycle


Beginning of life servicesInstallation // Commissioning // Training

Lifetime servicesSpare parts // Corrective maintenance //

Preventive maintenance

Extended life servicesUpgrades/Modernization/Optimization // Predictive

maintenance // Factory-rebuilt equipment

Consulting services & operations Performance contracts // On-site project support

// Service software products

WE SERVE THE ENTIRE LIFE CYCLE IN ORDER TO HAVE CONTINUOUS TOUCHPOINTS TO OUR CUSTOMERS

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We implemented significant strategic initiatives…


Formulation of GEA’s overall strategic

direction & priorities

In-depth analysis of >20 industries and prioritization

of focus growth areas

Transformation into OneGEA

Portfolio review and subsequent disposal of

HX business

Applications, Regions, Technology, Excellence set as strategic pillars

Further leverage of OneGEA organization

for growth & efficiency

A R T E

2013 2014 2015 2016 After 20162012

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Systems and Processes


General timeline

2017 2018 2019 2020

One Finance

2017 2018 2019 2020

Workday

Project Execution Excellence

IT Systems

UPDATE GOALS & BENEFITS

• Risk management process

& project governance

process improved

• Efficient project execution

process

• Increased project profitability

• Common HR Management

System & Tool

• Simplified & harmonized HR

processes

• More effective steering of

OneGEA organization

• Higher transparency &

efficient processes

• Workday tool rolled out

group-wide

• Core functions implemented;

full function ramp-up in waves

• Key system interfaces

have been established

• Overhead reporting to be

implemented in 2018

• Cloud migration of IT

applications in progress

• Harmonization of ERP

kicked-off

• Complexity reduction by consolidated ERP landscape

• Increased efficiency of IT

backbone

Ramp-up Ongoing

http://www.google.de/url?sa=i&rct=j&q=&esrc=s&source=imgres&cd=&cad=rja&uact=8&ved=0ahUKEwi1qOyU6qDZAhUDzRQKHe7MAmAQjRwIBw&url=http://www.simplyjoined.com/services/people-development/&psig=AOvVaw2TIVx0QcIGPgRwXbhKW8aD&ust=1518540455404563

http://www.google.de/url?sa=i&rct=j&q=&esrc=s&source=imgres&cd=&cad=rja&uact=8&ved=0ahUKEwi1qOyU6qDZAhUDzRQKHe7MAmAQjRwIBw&url=http://www.simplyjoined.com/services/people-development/&psig=AOvVaw2TIVx0QcIGPgRwXbhKW8aD&ust=1518540455404563

https://www.google.de/url?sa=i&rct=j&q=&esrc=s&source=imgres&cd=&cad=rja&uact=8&ved=0ahUKEwjsyLrc6qDZAhUrAcAKHe9TAt4QjRwIBw&url=https://www.masonadvisory.com/&psig=AOvVaw2wYQRdUjphBki1ShOkeLBA&ust=1518540605646246

https://www.google.de/url?sa=i&rct=j&q=&esrc=s&source=imgres&cd=&cad=rja&uact=8&ved=0ahUKEwjsyLrc6qDZAhUrAcAKHe9TAt4QjRwIBw&url=https://www.masonadvisory.com/&psig=AOvVaw2wYQRdUjphBki1ShOkeLBA&ust=1518540605646246

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Global Manufacturing Footprint – Going forward

-8 sites

2015

68 sites60 sites1)

2018

FLEXIBILIZE

PRODUCTION EXCELLENCE

2018 2020 2022+

Further consoli-

dation of production

volumes in multi-

purpose sites to

better balance

demand fluctuations

Realization of

synergy potential

across business

areas and utilization

of best cost country

advantages

50 – 56 sitestarget size1)2)

41 – 50 sitestarget size1)2)

OPTIMIZE

1) excl. recent M&A activities (Vipoll and Pavan) 2) excl. future M&A activities


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Procurement - Initiatives


####• Accelerate supply base consolidation including shift to Best-Cost-Countries

& extend coverage of global spend by category management

####

…• Expand procurement initiative to cross-functional GEA cost optimization program

• Further increase spend transparency to drive both commercial and technical

levers like standardization & modularization

18

GEA guidance FY2018


Group-level guidance Comment

Sales

Operating

EBITDA

margin

Cash flow

driver margin

5.0 6.0% growth

12.0 13.0%

8.7 9.7%

Including acquisitions Pavan and Vipoll

At average 2017 FX rates

Excluding strategic projects

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Strategic Projects


• Three main categories

remain as strategic

projects in 2018:

• Restructuring /

footprint will be the

main focus in 2018

• IT transformation and

Steering systems will

be continued in 2018

Estimate to Actual 2017(rounded)

Initial to Latest Estimate 2018(rounded)

60

30

55

40

-45

Capex

P&L impact

FY 2017

Actual

70

FY 2017

Estimate

115

45 40

45

+30/+50

Capex

P&L impact

Latest 2018

Estimate

120-140

80-100

Initial 2018

Estimate

90

20

GEA mid-term guidance FY2022


Group-level guidance Comment

Sales

Operating

EBITDA

Margin

CAGR 2018-22 of

3.5 – 4.5%

Increase to

13.5 – 15.5%

Including acquisitions Pavan and Vipoll

Major future portfolio measures not included

At average 2017 FX rates

Going forward, adjustments will only be made

for strategic projects such as manufacturing

footprint, other material restructuring and

portfolio measures

Mid-term guidance is based on the assumption of no major changes in global economic

growth and no substantial slow-down in any of GEA’s customer industries

21

Selective M&A and active portfolio management


Divested 2014 Divested 2016Note: not published

Divested 2017

… based on a set of comprehensive criteria

Recent divestments

ARTE fit Strategic fit

Value creation

Applications

Regions

Technologies

Func. Excellence

Markets

Growth

Profitability

Competition

Margin

WACC

Cash Flow

Return

Portfolio under review

Review of non-core

businesses

Broad option space

• Special attention

• Restructuring

• Divestment

Progress to be

communicated in

2018

Recent M&AIn the last 24 months GEA analyzed >50

M&A opportunities

CMT HILGE PAVAN

COMAS IMAFORNI VIPOLL

https://www.gea.com/en/productgroups/food-processing-systems/bakery-equipment/piston-filling-injectors/index.jsp

https://www.gea.com/en/productgroups/food-processing-systems/bakery-equipment/piston-filling-injectors/index.jsp

https://www.gea.com/en/products/baking-tunnel-ovens.jsp

https://www.gea.com/en/products/baking-tunnel-ovens.jsp

22

Disclaimer


This presentation contains forward-looking statements. Forward-looking statements may include, in

particular, statements about future events, future financial performance, plans, strategies,

expectations, prospects, competitive environment, regulation and supply and demand. Statements

with respect to the future are characterized by the use of words such as "expect", "intend", "plan",

"anticipate", "believe", "estimate" and similar terms. Forward-looking statements are based on our

current assumptions and forecasts. These statements naturally entail risks and uncertainties, which

may cause the actual results of operations, financial position or performance to diverge materially

from the estimates given here. Factors that could cause such a divergence include, inter alia,

changes in the economic and business environment, fluctuations in exchange rates and interest

rates, launches of competing products, poor acceptance of new products or services, and changes in

business strategy. Given these uncertainties, readers should not put undue reliance on any forward-

looking statements. We undertake no obligation to update or revise any forward-looking statements.

Due to rounding, the sum of percentages may vary from 100%.

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