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Wacker Construction Equipment AG
Wacker Construction Equipment AG Annual General Meeting 2008 June 3, 2008 Reference (apr02) Wacker Construction Equipment AG Annual General Meeting 2008 – Management Report Dr.-Ing. Georg Sick, CEO and President June 3, 2008 Reference (apr02) Overview The Company IPO Merger Financials 2007 and Q1/2008 Outlook Reference (apr02) 3 From blacksmith’s shop to profitable global market leader in 160 years Wacker founded as a blacksmith’s shop in Dresden, Germany 1848 Following total loss of production facilities, company headquarters relocated to Munich in 1945 1951 2008 First affiliate in the USA Acquisition of Weidemann GmbH, a leading wheel loader manufacturer for the agricultural industry 1957 2005 2006 Acquisition of Drillfix AG and Ground Heaters, Inc. Reference (apr02) 2007 2007 Company name changed to Wacker Neuson SE (AGM, June 2008) Merger with Neuson Kramer Baumaschinen AG IPO, listing on SDAX 4 Internal and external relations based on mature valueoriented corporate culture Value-oriented culture (extract) Headcount Honest relations in all customer dealings 3,659 Fair competitive landscape and anti-corruption stance that fights any methods aimed at gaining improper advantage Close attention to user safety 2,837 2,934 2006 20071 2,168 Keen awareness of environmental and social responsibilities …… Avoidance of all forms of staff discrimination Cost-consciousness and rapid execution 1 2003 2007 incl. Neuson Kramer Baumaschinen AG (yellow) Reference (apr02) 5 Extensive sales and service network with over 30 subsidiaries and more than 180 locations worldwide More than 5,200 dealers worldwide based at over 12,400 sites Reference (apr02) 6 Strong focus on employee empowerment – giving our local people the freedom to add value to our customers Quality-driven Trustworthy Customer Responsive Reliable Innovative Reference (apr02) 7 70 percent of products in the light equipment segment are used in the infrastructure and industrial sector Reference (apr02) 8 Continuous product enhancement to meet market demands – 420 patents worldwide Changes 80 Four-stroke low oil shut-off and general enhancements 70 Major upgrade of complete line featuring improved air filtration, starting and high temperature performance 60 50 40 30 Four-stroke Wacker engine rammers 20 Two-stroke oil injection models and Asian rammers 10 All new two-stroke BS500-BS700 plus diesel DS720 0 1998 Reference (apr02) 1999 2000 2001 2002 2003 9 2004 2005 2006 2007 Examples of product innovations Altitude test in a vacuum test chamber Special motor for rammers and gasoline breakers Reference (apr02) 10 Examples of product innovations Trend-setting security technology with infrared remote control Reference (apr02) 11 Examples of product innovations Non-linear crash simulation of plastic Reference (apr02) Global innovation: highperformance compaction 12 Each product group1 is manufactured at a single location for natural currency hedging Reichertshofen (Germany) Manila (Philippines) Internal vibrators, reversible plates Wet screeds, cut-off-saws Breakers, floor saws Vibratory plates New: Norton Shores (USA) Milwaukee (USA) Hydronic heating equipment Trowels, rammers, rollers Mobile generators, light towers Portable generators, pumps 1 Selection of products in the light equipment segment. Reference (apr02) 13 High flexibility and personal responsibility coupled with performance-driven remuneration increases productivity Leadership Well-trained employees Flexible working hours High automation Flat hierarchy without team-leaders/self-organisation of teams Open communication on targets and team achievements Employees trained for the broad majority of different tasks in the production process of their respective focus factory 27 to 50 working hours per week, depending on demand Individual focus factory teams organise their working hours independently Considerable investments made over the last years Innovative quality and improvement management Employee incentives Fix Salary Reference (apr02) Individual Bonus Productivity Bonus 14 Quality Bonus Delivery Bonus Total Salary Active staff involvement and promotion Apprenticeships in Germany1 Philosophy (extract) Employees encouraged to “think outside the box” + 5.7 % Flat hierarchies and freedom to make decisions 106 Hermann Wacker Innovation Award for technical and process innovations 2006 112 2007 Employee turnover in Germany2 Voluntary benefits (extract) Curt Wacker foundation provides emergency financial support for employees In-house academy for further training 5.78% 5.25% 2006 2007 Employee share program at IPO Collaboration with the Don Bosco institute in Manila 1 2 Figures for Wacker Construction Equipment AG, Weidemann GmbH, Kramer-Werke GmbH Figures for Wacker Construction Equipment AG Reference (apr02) 15 Steady organic growth complemented by acquisitions since 2005 Sales 1995 through 20061 (€ million) CAGR: + 22.7% 619.3 503.2 411.2 CAGR: + 4.7% 472.7 Acquisition of Ground Heaters, Acquisition of Weidemann Drillfix 361.9 356.7 249.8 607.2 ……. 1995 1 2002 2003 2004 All figures prepared according to IFRS Reference (apr02) 16 2005 2006 Overview The Company IPO Merger Financials 2007 and Q1/2008 Outlook Reference (apr02) 17 Successful IPO in May 2007 Start of trading: May 15, 2007 Frankfurt Stock exchange: Prime Standard, SDAX I Shares: 18.4 million shares1 P 0 Price range: 18 up to 22 Euro Initial price: 24.60 Euro Lock-up: 12 months for management and family Prospectus: Detailed report of merger with Neuson Kramer Baumaschinen AG 1 Total shares as of 31. December 2007: 70.14m shares Reference (apr02) 18 Share price reflects trend away from small and mid-sized caps as well as effects of US subprime crisis SDAX Reference (apr02) 19 Share price development in line with peer group (50%) Reference (apr02) 20 Active Investor Relations program at and after IPO Investor Relations Current analyst recommendations Recommendation Target price UBS (IPO) Buy EUR 18 Deutsche Bank (IPO) Buy EUR 27 Sal. Oppenheim (IPO) Buy EUR 21 Dresdner Kleinwort Buy EUR 15.34 SES Research (M.M. Warburg) Buy EUR 17 Bankhaus Reuschel Buy EUR 17 Neutral EUR 14 Underperform EUR 13 Over 85 investor meetings during the IPO roadshow Post-IPO actions: Two analyst conferences Countless roadshows and investor conferences Meetings with over 100 institutional investors Active corporate governance International award for the annual report for fiscal 2006 Reference (apr02) Goldman Sachs Cheuvreux 21 Overview The Company IPO Merger Financials 2007 and Q1/2008 Outlook Reference (apr02) 22 Merger creates a global market leader for light and compact equipment Memorandum of Understanding March 30, 2007 Signing September 23, 2007 and October 18, 2007 Approval by the Antitrust Authorities Closing October 31, 2007 May 4 and 11, 2007 Reference (apr02) AGM 23 June 3, 2008 Neuson Kramer: From foundation to market leader for compact equipment in just a few years Neuson Hydraulik GmbH founded 1981 First mini excavator developed 1984 2008 Neuson Baumaschinen GmbH founded 1990 Acquisition of dumper manufacturer Lifton Ltd., UK 1998 1999 Partnership with Gehl Company, USA Reference (apr02) 2007 2001 Name of parent company changed to Wacker Neuson SE (AGM, June 2008) Merger with Wacker Construction Equipment AG Merger with Kramer-Werke GmbH, name changed to Neuson Kramer Baumaschinen AG 24 Merger executed exactly as announced in the IPO prospectus Neuson Kramer sales1 Merger details EBIT-based asset-transfer ratio using fiscal (€ million) 2006 figures : CAGR: + 28.9% Wacker: 62.5 percent Neuson Kramer: 37.5 percent 329.9 264.0 Transfer of around 23.5 million shares to 198.5 Neuson Kramer shareholders around 19,1 million shares from capital increases around 4.4 million treasury shares Payment of cash settlement of 18.1 million euros prior to merger in recognition of strong growth in 2007 20052 1 All figures prepared according to IFRS Fiscal 1.2.-31.1., 2005 figure: expenditure format, 2006 figure: cost of sales format 3 Fiscal 1.2.-31.12., only 11 months for Neuson Baumaschinen GmbH, cost of sales format 2 Reference (apr02) 25 20062 20073 Clearly defined brand structure for construction and agriculture LIGHT EQUIPMENT COMPACT EQUIPMENT OLD BRANDS NEW BRANDS produced for CONSTRUCTION, LANDSCAPING, MUNICIPAL BODIES, RECYCLING, INDUSTRY Reference (apr02) 26 AGRICULTURE Business segments: Our portfolio optimizes the entire construction process flow Light Equipment Concrete technology Demolition Wheel loaders (articulated steering) Soil and asphalt compaction Utility Services Compact Equipment Rental in Central and Eastern Europe Compact loaders Wheel loaders (all-wheel steering) Tracked excavators Telehandlers Tele wheel loaders Wheeled excavators Service Wheel loaders for agriculture Telehandlers for agriculture Over 250 product groups Reference (apr02) Over 40 product groups 27 Dumpers Compact equipment – premium product portfolio marketed under the Wacker Neuson brand Reference (apr02) 28 Compact equipment – premium product portfolio marketed under the Kramer Allrad brand Reference (apr02) 29 Compact equipment – premium product portfolio marketed under the Weidemann brand Reference (apr02) 30 In compact equipment, production mainly involves assembly work (low degree of vertical integration) Linz (Austria) Tredegar (Great Britain) Korbach (Germany) Track and mobile excavators Dumpers Wheel loaders (articulated) Skid-steer loaders (SSL) Track dumpers Pfullendorf (Germany) Wheel loaders (all-wheeled) Tele wheel loaders Telehandlers Note: Selected products. Reference (apr02) 31 Telehandlers Gotha (Germany) Interplay between light and compact equipment for the same customer processes Floor/cut-off saws Breakers Mini excavators Wheel loaders Rammers Vibratory plates Cutting Breaking Excavation Filling Compaction Asphalt compaction Utility Light towers Reference (apr02) Generators 32 Pumps Utilizing sales synergies in line with merger strategy Introduction of compact class leveraging Wacker’s sales and service network Introduction in 2008: USA, France, Spain, Great Britain, Switzerland, Russia, Australia and New Zealand Introduction USA: 14 models presented at several trade shows in the USA, e.g. Conexpo in March in Las Vegas High dealer interest Planning to build a production facility for compact products in North America Reference (apr02) 33 Wacker Neuson Management – delivering on strategy Management structure Supervisory Board Dr. Georg Sick CEO and President Hans Neunteufel (Chairman of the Supervisory Board) Dr. Ulrich Wacker (Deputy Chairman of the Supervisory Board) Dr. Eberhard Kollmar, Kurt Helletzgruber Herbert Santl and Elvis Schwarzmair (Employee Representative) Martin Lehner Deputy Chairman of the Executive Board Compact Equipment Reference (apr02) Richard Mayer Light Equipment Werner Schwind Sales, Service, Rental 34 Günther Binder CFO, IT Overview The Company IPO Merger Financials 2007 and Q1/2008 Outlook Reference (apr02) 35 2007 saw Wacker pursue its growth strategy as announced and fulfill all promises made at the time of the IPO Strategy Result 1 Expansion of rental business in CEE Significant investment (2007 capex ~ 25m €), broadening of offering 2 Geographic Expansion Expansion sales and service coverage in Russia and India 3 Expansion Light Equipment 47 new products / product launches – new Manila plant for Light Equipment products 4 Expansion Compact Equipment Launch of own compact equipment range for construction business New Weidemann plant for wheel loaders Merger with Neuson Kramer Reference (apr02) 36 2007: Strong growth and high profitability Revenues1 EBITDA before PPA1,2 (€ million) (€ million) + 19.4 % + 19.8 % 119.6 120 100.2 742.1 720 2007 Forecast 2006 619.3 EBITDA incl. PPA1,2 (€ million) + 16.7 % 117.0 100.2 2006 1 2 2006 2007 Forecast All figures prepared according to IFRS; figures for 2007 include Q4 results for Neuson Kramer. PPA = Purchase Price Allocation Reference (apr02) 37 2007 2007: Key figures up despite PPA effects Income Statement1,2 (€ million) 2007 excl. PPA PPA 2007 incl. PPA 2006 Change in % Revenues 742.1 - 742.1 619.3 19.8 Gross profit 293.2 (10.6) 282.5 255.7 10.5 39.5 - 38.1 41.3 - (140.1) - (140.1) (123.9) 13.1 Research and development costs (20.0) (0.8) (20.8) (16.1) 29.2 Administration cost (48.2) (0.1) (48.3) (45.3) 6.6 EBIT 90.4 (11.5) 78.9 76.7 2.9 EBIT margin (in %) 12.2 - 10.6 12.4 - EBT 89.8 (11.6) 78.2 76.2 2.6 (27.6) 3.5 (24.1) (27.6) (12.7) 62.0 (7.9) 54.1 48.6 11.3 Gross margin (in %) Sales costs Taxes on income Profit for the period 1 All figures prepared according to IFRS; figures for 2007 include Q4 results for Neuson Kramer. PPA = Purchase Price Allocation 3 Without Other income and Other expense 38 Reference (apr02) 2 2007: Substantially enhanced revenues on pro-forma basis Revenues Wacker Neuson2 Revenues Wacker + Q4 Neuson Kramer1 (€ million) (€ million) + 10.9 % 979.5 883.2 742.1 + 19.8% 658.2 619.3 +6.3% 2006 1 2 Wacker 2007 2006 All figures prepared according to IFRS; figures for 2007 include Q4 results for Neuson Kramer. All figures prepared according to IFRS; Revenues on pro-forma basis, only 11 months Neuson Baumaschinen GmbH (1.2.-31.12.) Reference (apr02) 39 2007 Dividend proposal: Increased payout - rise in number of eligible shares Dividend proposal Payout (€ million) + 44.5 % 35.07 70.14 24.27 million shares 2006 39.15 million shares 0.62€ 2006 1 Annual General Meeting (extract) Resolution to authorize the procurement and subsequent resale of treasury shares within the meaning of Section 71 (1) No. 8 of the AktG 0.50€ Resolution to change the legal form of Wacker Construction Equipment AG to a European company (Societas Europaea, SE) 20071 Dividends of EUR 0.27 per share + bonus of EUR 0.23 per share (yellow) Reference (apr02) 2007 40 2007: Demand in Europe and Asia remains healthy – strong demand in all business segments Revenues Europe1 (€ million) Revenues Americas1 (€ million) (€ million) + 33.1% Revenues Asia1 520.7 391.1 - 4.4% 205.0 196.1 + 9.0% 23.2 2006 2007 Revenues Light Equipment (€ million) 2007 Revenues Compact Equipment 179.5 88.2 1 2007 2006 2007 All figures prepared according to IFRS; figures for 2007 include Q4 results for Neuson Kramer (Previous year). Reference (apr02) 2007 Revenues Services 408.2 + 103.4% 2006 2006 (€ million) (€ million) + 4.3% 391.4 2006 25.3 41 + 10.4% 144.7 2006 159.7 2007 Use of proceeds of the IPO to fund potential growth Purchase of property, plant and equipment1 Construction of new production plant (€ million) Weidemann GmbH in Korbach (Germany) Expansion of the rental business in Central and Eastern Europe + 159.9 % 81.6 Construction of a new production plant in Manila 31.4 Construction of new production plant Ground Heaters, Inc in Norton Shores (USA) Construction of new training centre in 2006 1 2 Reichertshofen (Germany) 20072 All figures prepared according to IFRS; figures for 2007 include Q4 results for Neuson Kramer. Inclusive Purchase Price Allocation Reference (apr02) 42 2007: Expansion of profitable rental business in Central and Eastern Europe Rental business strategy: In countries with their own regional branches (direct sales) Not in countries with potential for conflict with existing customers, such as Spain, the US, France, Great Britain, Scandinavia Objective: rental pool of own equipment from the light and compact equipment segments Rental business is profitable: Equipment at manufacturing costs in rental pool Depreciation over four to six years Subsequent sale as used equipment Reference (apr02) 43 Q1/2008: Revenues and earnings up due to merger Revenues1 EBITDA1,2 (€ million) (€ million) + 20.0% 29.4 30.0 24.5 + 42.3% 228.2 100% 160.4 Q1/2007 Q1/2008 Q1/2008 incl. PPA before PPA Adjusted EBITDA2,3 (€ million) 41.3 29.4 Q1/2007 Q1/2008 1 Q1/2008 Q1/2008 incl. PPA adjusted All figures prepared according to IFRS; figures for 2007 Wacker stand alone, for 2008 Wacker plus Neuson Kramer PPA = Purchase Price Allocation 3 Adjusted EBITDA = EBITDA, we would have realized by selling invested compact equipment to third parties 2 Reference (apr02) 44 Q1/2008: Earnings effects from consolidation Consolidation effects1,2 (€ million) Q1/2008 incl. PPA Factors affecting earnings PPA Adjusted 29.4 11.3 0.6 41.3 - 5.8 0.6 - EBITDA margin (as a %) 12.9 - - - EBIT 19.1 11.1 2.8 33.0 EBIT margin (as a %) 8.4 - - - Profit for the period 12.3 7.7 1.9 21.9 EBITDA Neuson Kramer consolidation expenses 1 All figures prepared according to IFRS; figures for 2007 Wacker stand alone, for 2008 Wacker plus Neuson Kramer PPA = Purchase Price Allocation 3 Proceeds from the sale equipment that would normally have accrued to the company had the products been sold to third parties, but which were not realized. The reason was that these products were channeled into rental and demo fleets as part of our investment policy to stock our fleets with compact machines from our own production facilities 2 Reference (apr02) 45 Q1/2008: Increasing revenues in Europe and compact equipment Regions1 1 Business Segments1 Asia 2.5% (3.0%) Compact Equipment 43.1% (13.3%) Europe 78.2% (64.7%) Light Equipment 39.8% (65.8%) Americas 19.3% (32.3%) Services 17.1% (20.9%) All figures prepared according to IFRS; figures for 2007 Wacker stand alone, for 2008 Wacker plus Neuson Kramer Reference (apr02) 46 Q1/2008: High demand in Europe and Asia – positive trend for compact equipment and services segments Revenues Europe1 (€ million) Revenues Americas1 (€ million) (€ million) + 72.0% Revenues Asia1 178.4 103.3 - 15.0% 51.9 44.1 + 20.9% 4.8 Q1/2007 Q1/2008 Revenues Light Equipment (€ million) 106.3 Q1/2007 Q1/2008 Q1/2007 Revenues Compact Equipment + 361.1% 91.3 Revenues Services 98.8 21.4 Q1/2007 1 Q1/2008 Q1/2007 Q1/2008 All figures prepared according to IFRS; figures for 2007 Wacker stand alone, for 2008 Wacker plus Neuson Kramer Reference (apr02) Q1/2008 (€ million) (€ million) - 14.2% 5.8 47 + 16.0% 33.8 39.2 Q1/2007 Q1/2008 Overview The Company IPO Merger Financials 2007 and Q1/2008 Outlook Reference (apr02) 48 Bright medium to long-term market forecasts for the construction industry Global Construction Industry Growth Market Performance Germany US$ 5 trillion Construction investment 2008 +3.0% Source: Federation of the German Construction Industry. Europe +5.3% Non-residential construction 2008 +3.1% 2009 and 2010 p.a. +2.2% Underground construction by 2010 Ø p.a. +3.5% Source: Euroconstruct. +5.3% Americas +3.6% USA: Residential construction by 2011 +0.4% USA: Non-residential construction by 2011 +7.1% South America: Construction projects 2008 +7,6% Source: Global Insight. Asia Construction projects 2008 Construction industry by 2010 2007 Source: Global Insight. Reference (apr02) 2008e 2009e 2010e Source: Global Insight. 49 +7.7% Ø p.a. +4.6% Wacker Neuson is striving for sustained expansion through both organic growth and acquisitions Expansion of product portfolio in the light and compact equipment business segments Global launch of products from the compact equipment business segment Expansion of rental business in Central and Eastern Europe International expansion, including Russia, Eastern Europe, India and China Acquisitions to round off product portfolio Reference (apr02) 50 Wacker Neuson is aiming for further growth in sales and earnings Revenues (€ million) >1,000 742.1 >17.0% 619.3 16.1% 503.2 411.2 2004 1 2005 2006 20071 All figures prepared according to IFRS; figures for 2007 include Q4 results for Neuson Kramer. All figures prepared according to IFRS; Sales on pro-forma basis 51 Reference (apr02) 2 2008e2 EBITDA ratio Wacker Construction Equipment AG Annual General Meeting 2008 June 3, 2008 Reference (apr02)
