Announcements

ElringKlinger expands revenue in fiscal 2018 amid challenging business conditions

- Revenue up by 2.1% to EUR 1,699 million in 2018, organically by 7.4%

- EBIT before purchase price allocation (PPA) totals EUR 100 million: downside pressure from external and internal factors - EBIT margin before PPA at 5.9%

- Suspension of dividend agreed for 2018 financial year

- Focus on core business: sale of Swiss Hug Group and new enerday GmbH successfully concluded

- Guidance for 2019 confirmed

Dettingen/Erms (Germany), March 27, 2019 +++ Over the course of 2018, the ElringKlinger Group had to contend with a challenging business environment dominated by political and macroeconomic uncertainties, spiraling commodity prices, and internal capacity constraints. At the same time, the company continued to cement its strategic position in the area of alternative drive concepts in order to establish the best possible foundations for next-generation mobility. With a continued focus on its core business, ElringKlinger sold the Swiss Hug Group in 2018, thus divesting itself of an entity that specializes in exhaust gas purification. ElringKlinger also disposed of its interest in new enerday GmbH, a company based in Neubrandenburg, Germany, and will in future concentrate solely on low-temperature PEM fuel cells within the area of fuel cell technology; PEM fuel cells are of relevance to mobile applications. Another milestone in 2018 was the first series production contract for a complete battery system, for which the company is currently installing production lines.

CEO Dr. Stefan Wolf: "We at ElringKlinger were quick off the mark when it came to making preparations for an evolving automotive industry and we expect to generate strong growth in the coming years, particularly in the area of battery and fuel cell technology but also in the field of lightweight structural engineering. By 2030, the proportion of revenue generated from sales within these fields of strategic importance to the future is to rise from around 7% at present to over 25%."

Revenue target exceeded - EBIT impacted by external and internal factors
Based on definitive, audited figures, ElringKlinger managed to maintain its trajectory of growth in 2018, despite difficult market conditions. Group revenue increased by 2.1%, taking the figure to EUR 1,699.0 million (prev. year: EUR 1,664.0 million). Due to foreign exchange effects, particularly from the translation of the Turkish lira, Brazilian real, and US dollar into euro, revenues were diluted by 2.6%. M&A activities (sale of Hug and new enerday) also exerted downward pressure on revenue, equivalent to 2.7%. In organic terms, i.e., adjusted for these effects, the company managed to expand revenues by 7.4%, thus exceeding its target of outpacing growth in global vehicle production (-0.4%) by 2 to 4 percentage points on the basis of organic revenue growth.

Earnings before interest and taxes (EBIT) was impacted by high commodity prices. The substantial increase in material-related prices, primarily for steel, aluminum, and plastic, translated into additional expenses of around EUR 25 million in 2018. At the same time, demand within the NAFTA region remained high: in the fourth quarter of 2018 alone, currency-adjusted revenue increased by 28%, whereas the market as a whole expanded by just 1%. As a result, plants were operating at the top end of their capabilities in terms of capacity, leading to a disproportionately large increase in costs as well as exceptional cost items, e.g., for additional shifts, overnight freight forwarding, and external inspections. In order to optimize operations at the NAFTA-based plants, the Group successfully introduced improvement measures. These efforts, however, did not produce the effects on earnings to the extent anticipated for 2018. In total, EBIT before PPA fell short of the previous year's figure at EUR 100.2 million (prev. year: EUR 141.8 million). This corresponds to an EBIT margin, before PPA, of 5.9% (prev. year: 8.5%). The Group had originally projected a margin of around 7%. Of this total, the fourth quarter of 2018 accounted for revenue growth of 3.0% (organically +7.6%), taking the figure to EUR 431.8 million (prev. year: EUR 419.3 million), and EBIT before PPA of EUR 11.8 million (prev. year: EUR 30.7 million). The EBIT margin before PPA was 2.7% (prev. year: 7.3%).

Although net finance costs were down at EUR -14.7 million in fiscal 2018 (prev. year: EUR -27.3 million), earnings before taxes fell to EUR 81.4 million (prev. year: EUR 110.1 million). As income tax expenses failed to decrease at the same rate, net income (i.e., profit after taxes) stood at EUR 47.9 million (prev. year: EUR 73.8 million). Net income attributable to shareholders amounted to EUR 43.8 million (prev. year: EUR 69.9 million). Calculated on this basis, earnings per share stood at EUR 0.69, which was down on the prior-year figure of EUR 1.10.

Suspension of dividend
In view of the Group's earnings performance in fiscal 2018, the Management Board and the Supervisory Board have jointly decided to depart from the Group's established dividend policy and suspend the dividend for the 2018 financial year. This is aimed at further strengthening internal financing in support of the company's transformation process.

Investment ratio within target range at 9.6%
ElringKlinger maintained its disciplined approach to capital expenditure. The investment ratio (in property, plant, and equipment and in investment property) was 9.6% in 2018 (prev. year: 9.3%), i.e., within the target range of between 9 and 10% of Group revenue. Investments were directed primarily at the fields of business considered to be of particular importance to the future in strategic terms. A prime example is the Technology Center for electromobility currently being established at the Group's headquarters in Dettingen/Erms, the focus being on battery and fuel cell applications. The facility is expected to be operational in the first quarter of 2020.

Positive operating free cash flow in fourth quarter
Despite growth, capital absorption in net working capital (primarily inventories and trade receivables/payables) remained largely unchanged year on year in relation to revenue at 33.4% for 2018 as a whole (prev. year: 33.3%). In conjunction with lower earnings, this resulted in negative operating free cash flow of EUR -86.2 million (prev. year: EUR -66.6 million), despite a disciplined investment approach. In the fourth quarter the comparatively lower level of capital absorption within net working capital led to positive operating free cash flow of EUR 2.6 million (prev. year: EUR -13.3 million).

Improved maturity structure through syndicated loan
Net debt was expanded in the context of investing activities and was up at EUR 723.5 million at the end of the 2018 financial year (prev. year: EUR 655.3 million). However, with a solid equity ratio of 42.8% (prev. year: 44.0%), sufficient cash, and ample financial scope in the form of undrawn credit lines, the Group's financial situation remains solid. Furthermore, the syndicated loan agreement concluded in February 2019 for a sum of EUR 350 million over a term of at least 5 years has led to an improvement in the Group's maturity profile and provides a more solid foundation for corporate planning.

Guidance for 2019 confirmed
Looking ahead to 2019, Dr. Wolf said, "Given the fundamentals, the financial year ahead is also likely to produce a number of challenges. Precise forecasting has become more difficult due to the range of influencing factors."

The outlook for 2019, published on February 19, has been confirmed. According to the company's projections, global vehicle production will grow by between 0 and 1% in 2019 - with signs of seasonal divergence. Following a downturn in the first six months of the year, economists expect the second half to produce a positive performance. Group revenue is to exceed market growth by 2 to 4 percentage points in organic terms. Due to difficult market conditions, however, it is considered unlikely that downside factors (e.g., more pronounced trade conflicts or a market downturn in China) will be fully offset by the improvements in EBIT targeted by the Group. Additionally, the Group will no longer have the benefit of proceeds from the sale of Hug. In total, ElringKlinger's EBIT margin before PPA is expected to be around 4 to 5% in 2019. The investment ratio is to be pushed down to below 9% and net working capital is to be improved in relation to revenue. Based on these measures, operating free cash flow should be positive in 2019, while net debt in relation to EBITDA is to be scaled back. The Group has confirmed its medium-term targets.

Key financials for FY 2018 and Q4 2018

The annual report for 2018 is available online at: https://www.elringklinger.de/investor/2018-gb-en.pdf

For further information, please contact:
ElringKlinger AG
Dr. Jens Winter
Strategic Communications
Max-Eyth-Straße 2
72581 Dettingen/Erms (Germany)
Phone: +49 7123 724-88335
Fax: +49 7123 724-85 8335
E-mail: jens.winter[at]elringklinger.com

About ElringKlinger AG
As an independent and globally positioned supplier, ElringKlinger is a powerful and reliable partner to the automotive industry. Be it passenger car or commercial vehicle, equipped with an optimized combustion engine, with hybrid technology, or with an all-electric motor - we offer innovative solutions for all types of drive system. In doing so, we are making a committed contribution to sustainable mobility. Our lightweighting concepts help to reduce the overall weight of vehicles. As a result, vehicles powered by combustion engines consume less fuel and emit less CO₂, while those equipped with alternative propulsion systems benefit from an extended range. Developing cutting-edge battery and fuel cell technology as well as electric drive units, we were among the frontrunners when it came to positioning ourselves as a specialist in the field of e-mobility. At the same time, we are committed to evolving our sealing technology for a wide range of applications. Our shielding systems are designed to ensure high-end temperature and acoustics management throughout the vehicle. Dynamic precision parts developed by ElringKlinger can be used in all types of drive system. Additionally, the Group's portfolio includes engineering services, tooling technology, and products made of high-performance plastics, which are also marketed to industries beyond the automotive sector. These efforts are supported by a dedicated workforce of more than 10,000 people at 45 ElringKlinger Group locations around the globe.

Disclaimer
This release contains forward-looking statements. These statements are based on expectations, market evaluations and forecasts by the Management Board and on information currently available to them. In particular, the forward-looking statements shall not be interpreted as a guarantee that the future events and results to which they refer will actually materialize. Whilst the Management Board is confident that the statements as well as the opinions and expectations on which they are based are realistic, the aforementioned statements rely on assumptions that may conceivably prove to be incorrect. Future results and circumstances depend on a multitude of factors, risks and imponderables that can alter the expectations and judgments that have been expressed. These factors include, for example, changes to the general economic and business situation, variations of exchange rates and interest rates, poor acceptance of new products and services, and changes to business strategy.

ElringKlinger announces preliminary results for fiscal 2018:
visible revenue growth in challenging market environment; earnings affected by internal and external factors

- Revenue up by 2.0 % to EUR 1,697 million, organically by 7.3 %

- EBIT before purchase price allocation (PPA) at EUR 100.4 million, EBIT margin before PPA at 5.9 %

- Q4 2018: Revenue up by 2.5 %, organically by 7.1 %; EBIT of EUR 11.9 million before PPA, corresponding to margin of 2.8 %

- Management Board proposes suspension of dividend payment

- Guidance for 2019: organic revenue growth of 2 to 4 percentage points above global market growth, EBIT margin before PPA of 4 to 5%

Dettingen/Erms (Germany), February 19, 2019 +++ Based on preliminary, unaudited figures, the ElringKlinger Group saw a significant improvement in revenue during the financial year just ended. At EUR 1,697.0 million, revenue increased by EUR 33.0 million or 2.0 % in 2018, despite the dilutive effects of currency translation equivalent to EUR 44.0 million or 2.6 %. Additionally, the Group was faced with changes to the scope of consolidation as a result of M&A transactions (primarily the sale of Hug) totaling EUR 45.5 million or minus 2.7 %. Eliminating the effects of currencies and consolidation, the Group saw revenue expand by EUR 121.8 million or 7.3 % organically. Calculated on the basis of global automobile production, which declined by 0.4% in 2018, the Group saw its revenue outpace the market as a whole by 7.7 percentage points. Thus, the company has exceeded its target of outperforming market growth organically by 2 to 4 percentage points.

Group EBIT before purchase price allocation amounted to EUR 100.4 million, which corresponds to a margin of 5.9 %. The Group had originally anticipated an EBIT margin of around 7%. In the fourth quarter, too, several factors contributed to the lower-than-expected EBIT margin: in the NAFTA region, commodity prices were again impacted by tariffs on steel and aluminum, while prices for plastic granules remained high worldwide. The picture with regard to optimization measures implemented in the NAFTA region was mixed. Although the Group succeeded in further implementing improvement measures, these efforts have not yet produced the anticipated effects on earnings. In total, revenue generated in the fourth quarter of 2018 amounted to EUR 429.8 (419.3) million (+2.5 %, organically +7.1 %); EBIT before purchase price allocation stood at EUR 11.9 (30.7) million, which corresponds to a margin of 2.8 % (7.3 %).

Based on the Group's preliminary figures, the Management Board will put forward a proposal for a dividend suspension in respect of the 2018 financial year, the aim being to further strengthen internal financing for the Group's transformation process. Viewed in conjunction with the successful conclusion of a syndicated loan agreement for EUR 350 million, the Management Board is confident that this will pave the way for a visible improvement in the Group's financing structure in the short term.

As Dr. Stefan Wolf, CEO of ElringKlinger AG, explained: "Our goal remains to significantly strengthen the Group's earnings performance in the medium term in order to improve operating free cash flow in conjunction with measures planned in respect of working capital and the continued disciplined investment approach. In going forward, we will manage growth in our well-established areas of business in order to unlock the potential associated with strategic fields of the future."

The Group will take significant steps in this direction as early at the current financial year. Efforts aimed at cost streamlining in Switzerland will be completed in 2019 and measures implemented in the NAFTA region are expected to advance significantly. By contrast, the challenging economic climate, e.g., difficult market conditions in many regions of the world, political and economic volatility, and, in particular, the uncertain repercussions of increasingly severe trade disputes - especially with regard to commodity prices and vehicle-specific tariffs - may limit the earnings effect of the aforementioned measures.

As Dr. Wolf puts it, "Overall, global economic conditions have become more complex and uncertain compared to previous years. Forecasting has become increasingly difficult due to the range of influencing factors, which also applies to the current financial year."

Overall, the Group remains confident that, in 2019, it can outpace global automobile production by a significant margin calculated on the basis of revenue growth. ElringKlinger anticipates that it will outperform the market as a whole by 2 to 4 percentage points in terms of organic revenue growth. At present, global automobile production is expected to expand by 0 to +1 %. Despite the improvements in earnings, however, it is unlikely that the proceeds from the sale of Hug, which contributed to earnings in 2018, can be fully compensated for in fiscal 2019. Therefore, the Group is expecting to achieve an EBIT margin, before purchase price allocation, of 4 to 5 % for the 2019 financial year. Based on the range of measures implemented, the Group also anticipates that its cash flow situation can be decisively improved as early as 2019 - with the prospect of positive operating free cash flow. The Group has confirmed its medium-term targets.

ElringKlinger will publish its full and definitive results for the 2018 financial year on March 27, 2019.

For further information, please contact:
ElringKlinger AG
Dr. Jens Winter
Strategic Communications
Max-Eyth-Straße 2
72581 Dettingen/Erms (Germany)
Phone: +49 7123 724-88335
Fax: +49 7123 724-85 8335
E-mail: jens.winter[at]elringklinger.com

About ElringKlinger AG
As an automotive supplier, ElringKlinger has become a trusted partner to its customers - with a firm commitment to shaping the future of mobility. Be it optimized combustion engines, high-performance hybrids, or environmentally-friendly battery and fuel cell technology, ElringKlinger provides innovative solutions for all types of drive systems. ElringKlinger's lightweighting concepts help to reduce the overall weight of vehicles. As a result, vehicles powered by combustion engines consume less fuel and emit less CO₂, while those equipped with alternative propulsion systems benefit from an extended range. In response to increasingly complex combustion engine technology, the Group also continues to make refinements with regard to gaskets in order to meet the highest possible standards. This is complemented by solutions centered around thermal and acoustic shielding technology. Additionally, the Group's portfolio includes products made of the high-performance plastic PTFE which are also marketed to industries beyond the automotive sector. These efforts are supported by a dedicated workforce of more than 10,000 employees at 45 ElringKlinger Group locations around the globe.

Disclaimer
This release contains forward-looking statements. These statements are based on expectations, market evaluations and forecasts by the Management Board and on information currently available to them. In particular, the forward-looking statements shall not be interpreted as a guarantee that the future events and results to which they refer will actually materialize. Whilst the Management Board is confident that the statements as well as the opinions and expectations on which they are based are realistic, the aforementioned statements rely on assumptions that may conceivably prove to be incorrect. Future results and circumstances depend on a multitude of factors, risks and imponderables that can alter the expectations and judgments that have been expressed. These factors include, for example, changes to the general economic and business situation, variations of exchange rates and interest rates, poor acceptance of new products and services, and changes to business strategy.

ElringKlinger with preliminary results for fiscal 2018, outlook for 2019, and proposal for dividend suspension

Dettingen/Erms (Germany), February 19, 2019 +++ Based on preliminary, unaudited figures, the ElringKlinger Group saw a significant improvement in revenue during the financial year just ended. At EUR 1,697.0 million, revenue was up by EUR 33.0 million or 2.0 % in 2018. Organic revenue growth, i.e., adjusted for the effects of currencies and consolidation, stood at EUR 121.8 million or 7.3 %. Thus, the company has exceeded its target of outperforming market growth organically by 2 to 4 percentage points.

EBIT before purchase price allocation amounted to EUR 100.4 million, which corresponds to a margin of 5.9 %. The Group had originally anticipated a margin of around 7%. In the fourth quarter, too, several factors contributed to the lower-than-expected EBIT margin: commodity prices - also due to tariffs on steel and aluminum - remained high. In addition, although the Group succeeded in further implementing optimization measures in the NAFTA region, the positive effects on earnings fell short of expectations so far. In total, revenue generated in the fourth quarter of 2018 amounted to EUR 429.8 (419.3) million (+2.5 %, organically +7.1 %); EBIT before purchase price allocation stood at EUR 11.9 (30.7) million, which corresponds to a margin of 2.8 % (7.3 %).

Based on the Group's preliminary figures, the Management Board will put forward a proposal for a dividend suspension in respect of the 2018 financial year, the aim being to further strengthen internal financing - also in conjunction with the successful conclusion of a syndicated loan agreement for EUR 350 million - for the Group's transformation process.

For 2019, ElringKlinger anticipates that it will again exceed in terms of organic growth - by 2 to 4 percentage points - the rate of expansion in global automobile production, which is currently estimated at 0 to +1 %. However, as regards earnings performance, it is unlikely that the proceeds generated from the sale of the Hug subgroup, which contributed to earnings in 2018, can be fully compensated for in fiscal 2019. Efforts aimed at cost streamlining in Switzerland will be completed in 2019 and measures implemented in the NAFTA region are expected to advance significantly. However, difficult market conditions in many regions of the world, the political and economic uncertainty, and the unpredictable repercussions of increasingly severe trade disputes - especially with regard to commodity prices and vehicle-specific tariffs - may limit the earnings effect of the aforementioned measures. Therefore, the Group will be looking to achieve an EBIT margin, before purchase price allocation, of 4 to 5% for the 2019 financial year. Based on the range of measures implemented, the Group also anticipates that its cash flow situation can be decisively improved as early as 2019 - with the prospect of positive operating free cash flow. The Group has confirmed its medium-term targets.

ElringKlinger will publish its full and definitive results for the 2018 financial year on March 27, 2019.

For further information, please contact:
ElringKlinger AG
Dr. Jens Winter
Strategic Communications
Max-Eyth-Straße 2
72581 Dettingen/Erms
Germany
Phone: +49 7123 724-88335
Fax: +49 7123 724-85 8335
E-mail: jens.winter[at]elringklinger.com

About ElringKlinger AG
As an automotive supplier, ElringKlinger has become a trusted partner to its customers - with a firm commitment to shaping the future of mobility. Be it optimized combustion engines, high-performance hybrids, or environmentally-friendly battery and fuel cell technology, ElringKlinger provides innovative solutions for all types of drive systems. ElringKlinger's lightweighting concepts help to reduce the overall weight of vehicles. As a result, vehicles powered by combustion engines consume less fuel and emit less CO₂, while those equipped with alternative propulsion systems benefit from an extended range. In response to increasingly complex combustion engine technology, the Group also continues to make refinements with regard to gaskets in order to meet the highest possible standards. This is complemented by solutions centered around thermal and acoustic shielding technology. Additionally, the Group's portfolio includes products made of the high-performance plastic PTFE which are also marketed to industries beyond the automotive sector. These efforts are supported by a dedicated workforce of more than 10,000 employees at 45 ElringKlinger Group locations around the globe.

Disclaimer
This release contains forward-looking statements. These statements are based on expectations, market evaluations and forecasts by the Management Board and on information currently available to them. In particular, the forward-looking statements shall not be interpreted as a guarantee that the future events and results to which they refer will actually materialize. Whilst the Management Board is confident that the statements as well as the opinions and expectations on which they are based are realistic, the aforementioned statements rely on assumptions that may conceivably prove to be incorrect. Future results and circumstances depend on a multitude of factors, risks and imponderables that can alter the expectations and judgments that have been expressed. These factors include, for example, changes to the general economic and business situation, variations of exchange rates and interest rates, poor acceptance of new products and services, and changes to business strategy.