JFH
Understanding Uncertainty
Mastering Volatility
Shaping the Future
Capital Market Day 2020
12th of November 2020
2 |Capital Market Day 2020
The Global Impact of COVID-19 is severe,…
Travel Restrictions | On-Trade Sales | Supply Chain |
…but long-term Growth Fundamentals remain intact…
Population Growth | Middle Class | Urbanization |
…and Krones is well positioned for the "New Normal"!
Remote & Digital | Sustainable | Localized |
3 |Capital Market Day 2020
Agenda
- Review Financials Q3/2020
- Where do we stand in times of pandemic
- Feedback from our customers
- Long-termmegatrends
--- Discussion/ Q&As ---
- Shaping our future
- Securing our future: Costs & structures
- Designing our future: Innovation & Growth
- Financial Implications
- Key Takeaways
--- Discussion/ Q&As ---
4 |Capital Market Day 2020
Agenda
- Review Financials Q3/2020
5 |Capital Market Day 2020
Krones Highlights Q1 - Q3 2020
-22.2%
2,301 EURm
New orders
6.0%
147,3 EURm
2,449
-58.4
Sales (-15.3%)
EURm
Free cash flow
EURm (PY -294.5 EURm)
EBITDA margin (PY 164,3 EURm; 5.7%)
6 |Capital Market Day 2020
Order Intake in Q3 clearly better than Q2 - but still affected by COVID-19
4,084
2,301
-22.2%
-8.2%
844
3,959
2,449
-15.3%
-25.0%
750
-16.5%
▪ | Order intake in Q3 2020 was 8% below prior |
year, but with a strong increase vs. Q2 2020 | |
(+37%). | |
▪ | As a result from low Q2 2020 order intake, the |
-38.2%
616
-19.3%
841
-4.2%
757
942
decrease in sales in Q3 was 25% compared to |
Q3 2019. |
2019 | 2020 | 2019 | 2020 |
Order intake (EURm) | Sales (EURm) |
7 |Capital Market Day 2020
Cost Savings compensate the negative Sales Effect on the EBITDA in Q3
▪ Cost savings in personnel and material costs compensate most of the negative effects from the decrease in sales on the EBITDA
▪ EBITDA margin in Q3 with 6.0% was higher than prior year (5.7%)
▪ EBT affected by 13.6 EURm impairments in Q2 2020
8 |Capital Market Day 2020
Development of Sales and EBITDA per Segment 9 Months
Segment | Sales (EURm) 9 months | EBITDA (EURm) 9 months | ||||
Product filling | Growth | EBITDA margin | ||||
and decoration | +6% | +6% | -13% | 8.7% | 7.0% | 8.3% |
2,271 | 2,418 | 2,094 | ||
197.9 | 169.7 | 173.4 | ||
Beverage production/ | Growth | EBITDA margin | |||||||
Process technology | +14% | +12% | -25% | 1.9% | -1.1% | -7.4% | |||
(incl. Intralogistics) | 472 | ||||||||
421 | |||||||||
355 | |||||||||
+8.2 | |||||||||
-5.4 | |||||||||
-26.1 | |||||||||
Product filling
- The measures to reduce personnel costs (short-term) as well as reduction of employees on one hand and the positive product mix on the other hand have had positive effects in the core segment, which was influenced by decrease in sales mainly in the third quarter.
Process technology
-
This segment improved its profitability in Q3, but still with a small loss of
1 EURm in Q3 2020. - Intralogistics as part of the segment has recovered in Q3 the shutdown of Q2 and posted a small profit of 0.5 EURm in Q3.
2018 | 2019 | 2020 | 2018 | 2019 | 2020 |
9 |Capital Market Day 2020
Free Cash Flow improved significantly by 236 EURm vs. prior Year
Q1 - Q3 (in EURm) | 2020 | 2019 |
Earnings before taxes | 26.7 | 61.4 |
+/- Other non-cash changes | +176.6 | +187.9 |
+/- Changes in working capital | -85.5 | -321.1 |
+/- Changes in other assets and liabilities | -107.9 | -50.2 |
Cash flow from operating activities | 9.9 | -122.0 |
+/- Capex | -68.5 | -138.3 |
+/- M&A activities | 0 | -34.9 |
+/- Other | +0.2 | +0.7 |
Free cash flow | -58.4 | -294.5 |
+/- Financing activities | +124.5 | +248.9 |
Other | 0 | +3.8 |
Net change in cash | +66.1 | -41.8 |
Cash at the end of the period | 176.5 | 177.0 |
- Change in working capital favorable developed compared to last year
- Investments were reduced by 50% compared to the same period of the previous year
- No M&A activities
- Free cash flow improves by more than 230 EURm in the first nine months
10 |Capital Market Day 2020
Krones Outlook 2020
Revenue growth | EBITDA margin |
~-17%5.5-6.0%
Sales | Equivalent to EBT margin |
~€3.3bn 1.0-1.6%
This outlook does not include any one-off expenses for impairments and structural measures for capacity adjustments.
If further countries and regions impose lockdowns, partial lockdowns or travel restrictions because of Covid 19, this could negatively impact the completion of orders and order intake and consequently have a negative influence on Krones' financial performance.
11 |Capital Market Day 2020
Krones Group KPI's
Actuals, Outlook 2020 and Base Case 2021/2022
EURm | Actual | Actual* | Actual * | Outlook* | Base Case | Base Case | |
2017 | 2018 | 2019 | 2020 | 2021 | 2022 | ||
SALES | 3,691 | 3,854 | 3,959 | ~ 3,300 | |||
EBITDA | 9.2% | 8.7% | 6.6% | 5.5% | - 6.0% | ||
margin | |||||||
EBT margin | 7.0% | 6.4% | 2.8% | 1.0% | - 1.6% | ||
Working | |||||||
Capital | 27.3% | 27.3% | 26.9% | 28% | - 29% | ||
(in % of sales) | |||||||
* = without one-time impacts for restructuring costs and impairments
12 |Capital Market Day 2020
Q3 Financials & Outlook Confirmation
Detailed Q3/2020 financial figures are
published today and we confirm our
FY2020 outlook
13 |Capital Market Day 2020
Agenda
- Where do we stand in times of pandemic
14 |Capital Market Day 2020
Number of Infections is rinsing globally - biggest Momentum in Northern Hemisphere
Status 11/11/2020
While a second wave of infections hits Europe in particular, daily infections have been rising steadily on a global level.
15 |Capital Market Day 2020
Why and for how long the Virus is likely resurging in Europe & North America
1)Less sun exposure → low Vitamin-D levels | 1) | Dry mucous membrane | ||||
More social activities in closed spaces | 2) | Increased virus survival (lipid bilayer) | ||||
Critical
October to April
Scenario for Infection Prevalence in the UK (northern hemisphere)
UK Academy of Medical Sciences / adopted illustration
Study: "Preparing for a challenging winter 2020/21" (14.7.2020)
02/2020 | 06/2020 | 09/2020 | 12/2020 | 03/2021 | 07/2021 |
During Spring, uncertainty prevailed. Now we know how to effectively respond to rising cases!
16 |Capital Market Day 2020
Krones' COVID-19 Response: Successful Adaptation of our Operational Setup
Health Management
The health & safety of our employees is paramount! We do our best, to keep ALL colleagues healthy.
- First precautionary measures approved by executive board & implemented as early as January 2020(!)
- Fast ramp-up of IT infrastructure creating capacity for 8000 VPN remote workspaces by mid-March 2020
- Comprehensive 3-stageresponse & containment scheme for our premises based on local virus prevalence
Travel Management
Over 50% of our revenue is outside Europe. Travel restrictions presented an extraordinary challenge to us!
- Operational shift to remote sales & customer support in all regions using technologies like AR-glasses
- COVID-19travel assistance in place: guidelines, travel kits, 24/7 hotline, medical advice, evacuation plans
- Over 100 service technicians from Germany provide essential assistance for customers in risk areas
Krones' operations are largely classified as "systemically relevant".
We were permitted to carry on business even under strict lockdown rules!
17 |Capital Market Day 2020
Agenda
- Feedback from our customers
18 |Capital Market Day 2020
Regional Second Wave of Infections hits Europe - Ramifications for the Beverage Market
Second Wave
Implications
▪ A rebound of on-trade sales
throughout summer reverses
as restrictions return
▪ Volume shifts from on-trade to
off-trade are now increasingly
becoming permanent
▪ Businesses must adapt, e.g. craft breweries with taprooms need to invest in can lines
The resurgence of infections forces our European customers to adapt operations.
19 |Capital Market Day 2020
Market Insights from our Discussions with Customers on Executive Level
Current situation of our customers
- Revenue decline by 10-15%
- Overall profitability down 25-30%
- Changes in product portfolio: less SKUs & higher volumes
- Shift in distribution channels: more off-trade & eCommerce
- Budgets and scheduled projects delayed and/ or cut
Customers' mid-term assessment of beverage market
- Full recovery of consumption expected within appr. 2 years
- Recovery of capex budgets in 2.5 - 3 years from now
- Volatility leads to instable planning assumptions
- Higher share of at-home consumptions (incl. home delivery)
- Consumer preference shift to value segment (affordability)
- Customer focus: productivity, efficiency, cost cutting
COVID-19 will impact our customers' business throughout the next two years.
20 |Capital Market Day 2020
Investment Strategy Insights from our Discussions with Customers on Executive Level
Customer investment plans
- Limited capex in upcoming years
- Opex in focus => Alternatives
- Supply-chainschange alongside customer behavior
- More operator-free processes (remote/automation)
- Revenue-mixis tilting towards can lines
- Market volatility necessitates faster "time-to-market"
- Impact on Krones
- Total performance counts: costs, quality & deadlines
- Temporary pressure on pricing
- Opportunities for Krones: local structures, digital solutions, new maintenance & business models
Mid-term investment plans will be shaped by conclusions drawn from COVID-19.
21 |Capital Market Day 2020
Anticipated Changes in Beverage Consumption & Market Potential
Global beverage consumption by industry
(in bn litre)
CAGR* | CAGR 14/19 | CAGR 20/25 | ||||
Beverage consumption | +2,0% | CAGR 19/20 | +1,4 % | |||
Global: | ||||||
-5,4% | ||||||
Beer | 1.239 | 1.366 | 1.292 | 1.383 | ||
211 | ||||||
Wine/Spirits | 207 | |||||
205 | 183 | 62 | ||||
70 | ||||||
61 | 154 | |||||
62 | 146 | |||||
Sensitive beverages | 137 | |||||
147 | 242 | 179 | ||||
233 | ||||||
222 | ||||||
Milk/New Dairy | 227 | |||||
237 | 242 | 227 | ||||
CSD | 459 | 451 | 513 | |||
367 | ||||||
Bottled water | 2014 | 2019 | 2020 | 2025 FC | ||
Source: Global Data | *CAGR: Compound Annual Growth Rate
A strong rebound in volumes is projected in the years 2020 - 2025.
22 |Capital Market Day 2020
Krones Group KPI's
Actuals, Outlook 2020 and Base Case 2021/2022
EURm | Actual | Actual* | Actual * | Outlook* | Base Case | Base Case | |
2017 | 2018 | 2019 | 2020 | 2021 | 2022 | ||
SALES | 3,691 | 3,854 | 3,959 | ~ 3,300 | 3,300 - 3,400 | 3,500 - 3,600 | |
EBITDA | 9.2% | 8.7% | 6.6% | 5.5% | - 6.0% | ||
margin | |||||||
EBT margin | 7.0% | 6.4% | 2.8% | 1.0% | - 1.6% | ||
Working | |||||||
Capital | 27.3% | 27.3% | 26.9% | 28% | - 29% | ||
(in % of sales) | |||||||
* = without one-time impacts for restructuring costs and impairments
Figures for 2021 and 2022 do not constitute a binding financial guidance and shall not be interpreted as such.
Ranges are subject to assumptions that depend upon external factors beyond the influence of Krones' management.
23 |Capital Market Day 2020
Agenda
- Long-termmegatrends
24 |Capital Market Day 2020
COVID-19 will notchange long-term Tendencies of Population Growth
The Size of Human
World Population
projection until 2100
Population by country, available from 1800 to 2100 based on Gapminder data, HYDE, and UN Population Division (2019) medium variant scenario projections.
Visualization CC-BY OurWorldInData.org/world- population-growth
25 |Capital Market Day 2020
Neitherwill COVID-19 change the long-term Trend towards Urbanization
Split of Population
Urban vs. Rural based on UN projection until 2050
ourworldindata.org CC-BY
26 |Capital Market Day 2020
Rising Middle Class: 2020 marks a setback in Eradication of poverty - but it's temporary
Forecasted 2020 increase of extreme poverty by 70-100Mio. individuals to a total of 700 million people globally*
* The Economist 26.9.2020
Income per Day/Capita (adjusted for purchasing power)
Global Tiers of
Income per Capita
ourworldindata.org CC-BY
27 |Capital Market Day 2020
Additional Aspects of the "New Normal" post-COVID-19 World
Sustainable Packaging and Beyond
Roughly 1kg of plastic waste per person / year is leaking into the world's oceans globally1
- Consumers, regulators and our customers are no longer willing to accept this situation
Action on Climate Change
If the global temperatures rise more than 1.5°C, adverse environmental effects may be irreversible2
- The IPCC calls for a 45% reduction of emissions from 2010 levels until 2030 to thwart disaster
Decade of COVID-19 Economic Rebound
Firm monetary & fiscal response in mature markets coincides with persistent EM megatrends
- Long-termgrowth fundamentals indicate a strong rebound after COVID-19 setbacks
1Jambeck, J. R., Geyer, R., Wilcox, C., Siegler, T. R., Perryman, M., Andrady, A., … & Law, K. L. (2015). Plastic waste inputs from land into the ocean. Science, 347(6223), 768-771.
²IPCC, 2018: Summary for Policymakers. In: Global Warming of 1.5°C. An IPCC Special Report on the impacts of global warming of 1.5°C above pre-industrial levels and related global greenhouse gas emission pathways, in the context of strengthening the global response to the threat of climate change, sustainable development, and efforts to eradicate poverty.
28 |Capital Market Day 2020
Agenda
--- Discussion/ Q&As ---
29 |Capital Market Day 2020
Organizational Notes on Q&A Session
If you have inquiries, please make use of the "raise your hand" feature
When not talking, please mute your microphone
? …
30 |Capital Market Day 2020
Agenda
-
Shaping our future
▪ Securing our future: Costs & structures
31 |Capital Market Day 2020
Our Strategy for Shaping Krones' Future in the New Normal
Shaping the Future
Short-term
Mid-term
Saving the Future
- Costs and Structure
- Adaptation of capacities
- More efficient structure in indirect departments
- Reduced manufacturing costs
- Employees & Management: Develop "New Normal" skills
- Product portfolio: Future of Process Technology
- Establish cost-efficient global value chain
- Reduction of internal degree of added value
Short-term
Mid-term
Designing the Future
- Innovation and Growth
- Digital & remote solutions for the "New Normal"
- Sustainability Packaging & Beyond
- Pricing as part of Krones' DNA - Selection & USP
- ESG - Focus on Climate Action
- Regional Markets - Global Reach
- Levering Intralogistics' potential
- Innovation Programs
32 |Capital Market Day 2020
Our Strategy for Shaping Krones' Future in the New Normal
Short-term
Mid-term
Shaping the Future
Saving the Future
- Costs and Structure
- Adaptation of capacities
- More efficient structure in indirect departments
- Reduced manufacturing costs
- Employees & Management: Develop "New Normal" skills
- Product portfolio: Future of Process Technology
- Establish cost-efficient global value chain
- Reduction of internal degree of added value
33 |Capital Market Day 2020
Adaptation of Capacities
Temporary
Sustainable
Extensive, but targeted use of government furlough schemes (Kurzarbeit) in departments with low utilization
Temporary insourcing of service contracts to increase internal utilization
Termination of temporary contract workers wherever possible
Voluntary leave program offering employees early retirement and severance packages
Further measures for capacity adjustment are being negotiated
We adapt resources to anticipated market volume.
34 |Capital Market Day 2020
Capacity Adjustment Krones AG Entity / Germany
10,707 | -15 % (-1,637) | -22 to -25% | ||||||
FTE'S | ||||||||
Thereof: | 10,248 | Capacity | ||||||
Target | ||||||||
1,201 | 9,071 | & | ||||||
2022 | ||||||||
466 | - 807 sustainable | 9,072 | Efficiency | |||||
691 | 8,545 | 8,200 - 8,400 | ||||||
170 | 8,413 | |||||||
reduction | ||||||||
FTE'S | ||||||||
of temps | ||||||||
300 | ||||||||
and own | 200 | |||||||
FTE's | ||||||||
7,700-7,900 | ||||||||
9,041 | - 830 temporary | |||||||
reduction | 8,744 | |||||||
through | ||||||||
- short time | ||||||||
program | ||||||||
- overtime | ||||||||
- time banks | ||||||||
- …. | ||||||||
Average | Average | Q1 | Q2 | Q3 | Q4 | Q1 | ||
2019 | 2020 | 2020 | 2020 | 2020 | 2020 | 2022 |
Temporary labor | Overtime converted in FTE's | Own FTE's | ||||
Decisive adjustment of capacities at German sites will be pursued throughout 2021.
35 |Capital Market Day 2020
Our Strategy for Shaping Krones' Future in the New Normal
Short-term
Mid-term
Shaping the Future
Saving the Future
- Costs and Structure
- Adaptation of capacities
- More efficient structure in indirect departments
- Reduced manufacturing costs
- Employees & Management: Develop "New Normal" skills
- Product portfolio: Future of Process Technology
- Establish cost-efficient global value chain
- Reduction of internal degree of added value
36 |Capital Market Day 2020
Portfolio optimization in Krones House
Digitalization
Processing | Bottling and | Intralogistics | ||||||||
Packaging | ||||||||||
Technology | ||||||||||
Technology | ||||||||||
LCS | LCS | LCS | ||||
Processing Technology: Review ongoing
- Initiated: unbundling and stand-alone ability
- Priority: brewery activities
- Halt on acquisitions: utilize current footprint, leverage China and India
- Update on CMD 2020
Bottling and Packaging Technology: Optimize portfolio
- Innovate Glass and Can product portfolio
- Push sustainable plastic packaging
- Divest low potential technologies
Intralogistics: Manage high growth
- Stand-alonelegal structure established
Lifecycle Service: Maintain growth
- Digitalize after sales business and establish next level business models
Digitalization: Invest
- Implement digital solutions in core business activities
- Develop and commercialize stand-alone products
37 |Capital Market Day 2020
Why we carve out Steinecker Breweries Unit: Differing Business Models
Equipment for
Filling & Packaging
Machinery
Short investment cycles (~10 years)
Single Machines & Lines
Configuration for base machines
Recurring after-sales business
High innovation pressure
Equipment for
Breweries
5
Plants/ Systems
Long investment cycles (>30 years)
Integrated, unique projects
Project-specific engineering
Sporadic after-sales business
Moderate innovation pressure
Different
operational
requirements
Systems
Processes
Organization
Manufacturing
Logistics
Installation
As an integral part of Krones AG entity, Steinecker was lacking the necessary latitude to adopt the business setup to industry-specific needs.
38 |Capital Market Day 2020
Update Current Status of Carve-Out Breweries/ Steinecker (Freising Plant)
Deliverables as of 12th of November 2020
▪ Successful appointment of Managing Director & Head of Finance/ Admin
for brewery unit
- IT separation effort in advanced stage
- New organizational chart suitable for stand-alone setup fully implemented
- Internal communication of carve-out plans & alignment with labor representatives
- Headcount capacity adjustments in final negotiation stage
Milestones for 2021
- Business development with focus on life cycle services and sustainability
- Legal completion of carve-out with new entity operating under well- established Steinecker brand
- Implementation of profitability improvement strategy in new entity
Implementation of carve-out plan is on track despite pandemic-induced hurdles.
39 |Capital Market Day 2020
Our Strategy for Shaping Krones' Future in the New Normal
Short-term
Mid-term
Shaping the Future
Saving the Future
- Costs and Structure
- Adaptation of capacities
- More efficient structure in indirect departments
- Reduced manufacturing costs
- Employees & Management: Develop "New Normal" skills
- Product portfolio: Future of Process Technology
- Establish cost-efficient global value chain
- Reduction of internal degree of added value
40 |Capital Market Day 2020
A strong presence on all continents allows us capture growth & saving potentials worldwide……
…and lowers our exposure to protectionist trade policies.
41 |Capital Market Day 2020
Ramp-Up of Krones Debrecen / Hungary Facility
Update November 2020
Over 15.000h of utilization
in October 2020 production
Manufacturing fully
operational
First pre-assemblies
successfully completed
We confirm our July 2020 timeline and expect full operation by Q1/2021.
42 |Capital Market Day 2020
Best Cost Country Sourcing and further Procurement Levers
BCC Sourcing Approach
- Labor costs
1 ▪ Infrastructure
Selection ▪ Risks
Criteria ▪ Duties
- Subsidiaries
▪ China | |
2 | ▪ Asia / Pacific |
Regional | ▪ India |
Focus | ▪ Central- & |
Eastern Europe |
3
Ramp-up
Process
1 Price
5 Order 2 Quality
4 Contract | 3 TCO |
▪ Reduction of | |
4 | Material Costs |
- Increased
Targets/ Localization Results ▪ Resilience
Targets
confirmed
In the "New Normal", we further strengthen our effort to built resilient & competitive supply chains.
43 |Capital Market Day 2020
Our Strategy for Shaping Krones' Future in the New Normal
Short-term
Mid-term
Shaping the Future
Saving the Future
- Costs and Structure
- Adaptation of capacities
- More efficient structure in indirect departments
- Reduced manufacturing costs
- Employees & Management: Develop "New Normal" skills
- Product portfolio: Future of Process Technology
- Establish cost-efficient global value chain
- Reduction of internal degree of added value
44 |Capital Market Day 2020
Depth & Flexibilization of Value Chain - Continuous Improvement Process
Machine | |||||||||||||||||||||||
today | Future | Modules | |||||||||||||||||||||
Chain | |||||||||||||||||||||||
Units | |||||||||||||||||||||||
Value | Parts | ||||||||||||||||||||||
We assess and optimize the depth of our value chain to strengthen profitability & flexibility.
Employed Capital
45 |Capital Market Day 2020
Agenda
-
Shaping our future
▪ Designing our future: Innovation & Growth
46 |Capital Market Day 2020
Our Strategy for Shaping Krones' Future in the New Normal
Shaping the Future
Short-term
Mid-term
Designing the Future
- Innovation and Growth
- Digital & remote solutions for the "New Normal"
- Sustainability Packaging & Beyond
- Pricing as part of Krones' DNA - Selection & USP
- ESG - Focus on Climate Action
- Regional Markets - Global Reach
- Levering Intralogistics' potential
- Innovation Programs
47 |Capital Market Day 2020
Krones Digital Solutions - Securing our Market Position and enabling Growth
Digital Customer Solution
Digital machine option
Extension/enhancement of stand-alone hardware with digital add-ons, e.g. to achieve an increase in productivity in the customer's production
Digital systems
Digital systems are combined with hardware and sensors, software and service to create a system that gives the customer added value in his production
Software platform
Multi tenant platforms manage production processes and devices, connect users and companies and provide business applications
Process optimization software
Cloud-based or on-premise software solutions are used in production processes
Digitally-enhanced Services
Extension of existing services with digital components
Digital consulting
Advising customers on questions of digital transformation and supporting the customer during the introduction of digital solutions in the customer company
Krones as provider
of the leading digital platform for beverage industry
Krones eBusiness
as commercial platform
Over 300 employees are dedicated to the development & improvement of our digital solutions.
48 |Capital Market Day 2020
Our Strategy for Shaping Krones' Future in the New Normal
Shaping the Future
Short-term
Mid-term
Designing the Future
- Innovation and Growth
- Digital & remote solutions for the "New Normal"
- Sustainability Packaging & Beyond
- Pricing as part of Krones' DNA - Selection & USP
- ESG - Focus on Climate Action
- Regional Markets - Global Reach
- Levering Intralogistics' potential
- Innovation Programs
49 |Capital Market Day 2020
Approximately 50% of Krones' current addressable Market is Plastic-based
Non-Plastics - Krones Scope | Plastics - Krones Scope | Non-Plastics - Out of Scope | Plastics - Out of Scope | |||||
Plastics: 34% of all containers, ~50% within Krones scope
We are well aware of our exposure to plastics and took decisive action mitigate risks by focusing on improved packaging sustainability & recycling solutions.
50 |Capital Market Day 2020
Our Key Accounts are looking towards Recycling to address issues concerning Plastic Waste
Recycled Content Target | ||||
PepsiCo | Our Base Case | |||
25% until 2025 | ||||
Assumption for 2030 | ||||
Coca-Cola | 50% until 2030 |
Nestlé (Water) | 50% until 2025 |
Dr Pepper Snapple | 30% until 2025 | ~50% |
average rPET | ||
Danone (Water) | 50% until 2025 | content globally |
Key Accounts pledge to increase their recycling effort - a vast opportunity for Krones!
51 |Capital Market Day 2020
European Circular Economy | |||
is a proud member and made the following voluntary commitments1 | |||
Stakeholder Platform | |||
1 | rPET Compatibility |
By 2025, all new PET bottling lines will be suitable for processing high-quality rPET contents of up to 100% without compromising output quality, efficiency or effectiveness. | |
2 | Plastic-free secondary Packaging |
By 2022, alternative secondary packaging solutions free of disposable plastics will be available for every well-establishmultipack SKU format. | |
3 | Advisory for recycling-friendly Packaging Design |
We will leverage our technological expertise to help customers design packaging that specifically facilitates post-consumer recycling. | |
4 | Upgrading from Linear to Circular Economy |
We will assist our customers to adapt existing lines in order to achieve the best possible outcomes when using recycled or renewable input materials. | |
5 | Tethered Caps |
With immediate effect, we make capping equipment available, that allows for the application of tethered caps. | |
6 | Sustainable Labelling |
We enable fitting detachable labels to enhance recyclability. Our ultimate objective is making labels jointly recyclable | |
with containers or eliminating the necessity for separate labelling altogether. | |
7 | Investing in Recycling Solutions |
We will continue to allocate substantial R&D resources to our recycling technology division in order to facilitate physical recycling of post-consumer plastics | |
(rigid/flexible, PET, Polyolefins & PS). | |
8 | Beyond PET Packaging |
We will actively explore disruptive new technologies for delivering beverages to consumers beyond conventional PET packaging (e.g. pulp bottle, no-packaging solutions). |
1Commitments are voluntary and do not constitute or imply any legal obligations, commercially binding offers or product guarantees
52 |Capital Market Day 2020
Our Strategy for Shaping Krones' Future in the New Normal
Shaping the Future
Short-term
Mid-term
Designing the Future
- Innovation and Growth
- Digital & remote solutions for the "New Normal"
- Sustainability Packaging & Beyond
- Pricing as part of Krones' DNA - Selection & USP
- ESG - Focus on Climate Action
- Regional Markets - Global Reach
- Levering Intralogistics' potential
- Innovation Programs
53 |Capital Market Day 2020
Krones' Pricing and Project Selection Tactics during the COVID-19 Crisis
Market Growth & Pricing Model →
Base Case Estimates
Market | Market | Market | ||||||||||
Market | Growth | Growth | COVID-19 | Market | Growth | |||||||
Growth | contraction | Growth | ||||||||||
Pricing | Pricing | Securing | Pricing | |||||||||
Pricing | Volume | Pricing | ||||||||||
2017 | 2018 | 2019 | 2020 | 2021 | 2022 |
We expect improved pricing leverage as market volumes recover after the crisis.
54 |Capital Market Day 2020
Increased Pricing Power through value-adding Technology: LineXpress PET Line
Case Study
- CSD customer in North America
- Output: ~160m bottles p.a.
- Over 50 different SKUs
Technical Obsolescence → PET lines after approximately 14 - 20 years (wear & tear)
Economic Obsolescence → Premature replacement viable through OPEX savings
study is an simulation. of product properties. |
Setup
Old Filling Lines
2 x 30k bottle per hour, low flexibility
New Filling Line with LineXpress
1 x 48k bottle per hour, high flexibility automized and guided changeovers
OPEX Savings | Return on Invest | ||||
Variable production costs | |||||
w/o raw & packaging material, depreciation | CAPEX / Investment | ||||
Maintenance | ~ 9 million € | ||||
Electricity | |||||
Operators | |||||
-49.7% | Utilities | OPEX Savings p.a. | |||
~ 1.8 million €
ROI (w/o discounting) | ||
Old Setup | LineXpress | |
~ 5 years | ||
- Annual OPEX savings of 1.8m €
assumptions & calculations. The case | an offer, guarantee or binding description |
All figures are based on internal estimates, | Information on this page do not constitute |
Substantial OPEX savings for our customers increase new machinery pricing latitude for us.
55 |Capital Market Day 2020
Our Strategy for Shaping Krones' Future in the New Normal
Shaping the Future
Short-term
Mid-term
Designing the Future
- Innovation and Growth
- Digital & remote solutions for the "New Normal"
- Sustainability Packaging & Beyond
- Pricing as part of Krones' DNA - Selection & USP
- ESG - Focus on Climate Action
- Regional Markets - Global Reach
- Levering Intralogistics' potential
- Innovation Programs
56 |Capital Market Day 2020
Krones Climate Strategy 2030: Our new Climate Targets by 2030
Climate Target 1:
Reducing the absolute
(Scope 1 + Scope 2) of the KRONES Group by 80% by the year 2030 (base year: 2019) and operational climate neutrality by the year 2040
Climate Target 2:
Reducing the absolute Product Carbon Footprint
(Scope 3) of the KRONES Group by 25% until 2030 (base year: 2019)
Scope 1 - Direct internal emissions
Scope 2 - Procured indirect emissions
Scope 3 - Indirect emissions by products/ services
emissions | -25% |
2 | |
CO | |
-80% |
Scope 1 Scope 2 Scope 3 | Scope 1 Scope 2 Scope 3 |
20192030
Krones is committed to mitigating climate change by leveraging our internal & external potential.
57 |Capital Market Day 2020
Lifecycle Comparison of Beverage Packaging Carbon Footprint
500ml Carbonized Softdrink Beverage Packaging1
Carbon Footprint in g CO²-equivalent2
Distance Filling Plant to Supermarket: 300km
100% rPET reduces the CO² footprint by | ||||||
over 20% due to lower energy requirements | ||||||
in disposal & pellet production | 105g | |||||
80g | 71g | 69g | ||||
62g | 61g | |||||
Virgin PET | rPET 50% | rPET 100% | refPET | Can | Glass | Glass |
disposable | disposable | disposable | returnable | disposable | returnable | disposable |
Recycling & reusage may be equally beneficial to mitigate the carbon footprint of beverages.
Source: Fehringer, R. (2019) Ökobilanz für Gebinde aus PET und anderen Materialien [for ALPLA Werke] | Scope: Production, Filling, Transport, Distribution, Disposal | Calculation Basis: Austrian Market Transport Distance Filling Plant to Supermarket: 300km (for Carton: 200km) |
1 | 2 |
58 |Capital Market Day 2020
Food Waste accounts for >6% of global Carbon Emissions - we save Food!
Total Food Waste | |
42 | in% of Production |
25 | 23 | Production | |
22 | |||
19 | Handling/ Storage | ||
17 |
15 | Processing |
Distribution | |
Consumption |
Higher tolerance for input raw materials, lower production losses & better preservation/ shelf life
Processing
Filling & Packaging
Food Waste- | (2013). |
based on FAO. 2011. Global Food Losses and | Prevention. AgricultureOrganization of the United Nations. |
Efficient Supply Chain Management to lower excess production/ inventories Digital solutions
Intralogistics
Krones can lower food waste throughout the entire value chain of the F&B industry.
Source: WRI analysis Extent, Causes, and & FAO - Food and |
59 |Capital Market Day 2020
Krones' Position on Climate Change: Doing well by doing good!
External Product Range | Internal Value Chain | Packaging Solutions | |||||||||
Approach | |||||||||||
Our enviro program: | Taking energy consumption in | Offering closed-loop solutions | |||||||||
development for | consideration for internal | and dedicated sustainable | |||||||||
sustainability excellence | investment decisions | packaging design | |||||||||
Achievements | Average energy saving | CO² Emissions / Revenue1 | Global rPET use | ||||||||
kwh per 1000 bottles | 2020 - 20252 | ||||||||||
2010 | -25%2019 | 2010 | |||||||||
-50% | |||||||||||
2018 | >12% | ||||||||||
CAGR | |||||||||||
Impact | |||||||||||
Lower utility consumption | Energy savings | End-consumer awareness | |||||||||
→ faster ROI for customers | → OPEX savings | → Demand for sustainable packaging | |||||||||
Financial | → more Capex for machinery | = | → Customer investment | ||||||||
= | Working Capital & | = | |||||||||
Revenue Growth | Profit Improvement | Revenue Growth | |||||||||
At Krones, environmental and financial objectives are complementary.
and indirect energy-related CO2 emission (metric tons per €1 million in consolidated revenue) | PCI Wood Mackenzie |
Direct | Study |
1 | 2 |
60 |Capital Market Day 2020
Our Strategy for Shaping Krones' Future in the New Normal
Shaping the Future
Short-term
Mid-term
Designing the Future
- Innovation and Growth
- Digital & remote solutions for the "New Normal"
- Sustainability Packaging & Beyond
- Pricing as part of Krones' DNA - Selection & USP
- ESG - Focus on Climate Action
- Regional Markets - Global Reach
- Levering Intralogistics' potential
- Innovation Programs
61 |Capital Market Day 2020
We will take you on a Journey to Krones' Future Markets across the World
Rising | Aspiring | Resilient |
Africa | Asia | North America |
The world's growth | Lasting economic | Who says developed |
story for the next | growth with no end in | market cannot grow |
three decades ahead. | sight any time soon. | persistently? |
62 |Capital Market Day 2020
We will take you on a Journey to Krones' Markets across the World
Rising
Africa
The world's growth
story for the next
three decades ahead.
63 |Capital Market Day 2020
Africa is much bigger than you think - quite literally…
Due to the ubiquitous Mercator cartographic projection, areas near the equator appear much smaller than they are…
BY-CC 4.0 Jakub Nowosad
64 |Capital Market Day 2020
UN Projections foresee Africa overtaking Europe & Americas combined by 2035
Population by country, available from 1800 to 2100 based on Gapminder data,
HYDE, and UN Population Division (2019) medium variant scenario projections.
Visualization CC-BY
OurWorldInData.org/world-population-growth
By 2040, Africa will likely have ~700 Mio. inhabitants more than today;
that is roughly the entire size of Europe's current population.
65 |Capital Market Day 2020
We are investing in the size and skills of our employee base across MEA
Number of Employees
Region Africa
671
LCS Center East Africa Kenia | 452 | |
LCS Center West Afrika Nigeria | ||
376 | 386 | 393 |
2015 2016 2017 2018 2019
Krones Center East Africa Ethiopia | Krones Southern Africa South Africa |
66 |Capital Market Day 2020
We will take you on a Journey to Krones' Markets across the World
Aspiring
Asia
Lasting economic
growth with no end in
sight any time soon.
67 |Capital Market Day 2020
Asia Market Outlook & Potential
You think the Beverage Market in Asia is running out of steam? Think twice...
amid the 2020 pandemic briefly made
Zhong Shanshan the richest Man in China, ahead of Alibaba's Jack Ma!1
As of October 2020 the company has a 43.9 b € Market Cap and is valued at a P/E of 66.9x!²
Supermarket in Bangladesh | Customer Line in Cambodia | Krones China / Taicang Facility | Taicang Office | |||
Our Asian foothold remains strong thanks to years of experience in multiple markets & industries.
7.9.2020 | & EURHKD:CUR, 29.10.2020, 9:45 AM CET |
ForbesMagazine (Forbes.com) | Bloomberg Quotation 9633:HK |
1 | 2 |
68 |Capital Market Day 2020
Asia - Focus on Building our local Engineering, Manufacturing and Service Setup
Number of Employees | ||
Region APAC + China | 1801 | |
1546 | ||
1342 | ||
Krones China (Taicang) | 1110 | Krones-IzumiSingapur |
953 | ||
2015 | 2016 | 2017 | 2018 | 2019 |
Krones Thailand | Krones South Korea |
We mitigate our risk exposure to trade conflicts by strengthening our decentralized value chain.
69 |Capital Market Day 2020
We will take you on a Journey to Krones' Markets across the World
Resilient
North America
Who says developed
market cannot grow
persistently?
70 |Capital Market Day 2020
Developed Markets - Krones Persistent Strength in North America
CAGR = 16,45%
Revenue in m €
Region North / | 683 | ||
Central America |
545 533
505
438 | Krones USA, Franklin (WI) | US Customer (Bottling Line) | |
274
2014 | 2015 | 2016 | 2017 | 2018 | 2019 | Canadian Customer (Brewhouse) | Wide CSD Choice (Supermarket) | |
Developed markets drive Krones' organic growth alongside emerging economies.
71 |Capital Market Day 2020
Our Strategy for Shaping Krones' Future in the New Normal
Shaping the Future
Short-term
Mid-term
Designing the Future
- Innovation and Growth
- Digital & remote solutions for the "New Normal"
- Sustainability Packaging & Beyond
- Pricing as part of Krones' DNA - Selection & USP
- ESG - Focus on Climate Action
- Regional Markets - Global Reach
- Levering Intralogistics' potential
- Innovation Programs
72 |Capital Market Day 2020
The "New Normal" will drive further Growth in Intralogistics
COVID-19 induced changes that are here to stay in the "New Normal"
73 |Capital Market Day 2020
Intralogistics: Strategic Rationale within Krones Group
Opening the Door to new Market Segments
System Logistics has long-standing customer relations beyond beverage industry - a unique opportunity to build upon for venturing into new markets
Delivering Growth & Risk Diversification
Within Krones Group, System Logistics has delivered above average revenue growth and provides a hedge against volatility of other units within the group
Enabling holistic Digitalization of Supply Chain
By extending our scope of solutions to in- & outbound logistics, we provide customers with integrated digital solutions from raw materials reception to shipping
74 |Capital Market Day 2020
Our Strategy for Shaping Krones' Future in the New Normal
Shaping the Future
Short-term
Mid-term
Designing the Future
- Innovation and Growth
- Digital & remote solutions for the "New Normal"
- Sustainability Packaging & Beyond
- Pricing as part of Krones' DNA - Selection & USP
- ESG - Focus on Climate Action
- Regional Markets - Global Reach
- Levering Intralogistics' potential
- Innovation Programs
75 |Capital Market Day 2020
Krones R&D Programs: Industries & Packaging
Sustainable | High Performance | Lean Glass | Advanced | Hygienics@ | Digital | |||||
Plastic Packaging | Flexibility Plant | System | Aseptic | Flexible Can Line | Ecosystem | |||||
All | CSD & Water | CSD & Beer | Sensitives & Dairy | CSD & Beer | Beverage Industry |
Each R&D Program contains multiple industries requirements and thus allows us to realize significant development synergies.
76 |Capital Market Day 2020
Agenda
- Financial Implications
77 |Capital Market Day 2020
Net Cash, free Credit Lines and high Equity Ratio in Q3
Liquidity reserves > €1bnEquity in EURm and equity ratio in %
Used credit lines 255 EURm | |
1,433 | |
1,330 | 1,370 |
1,314 | |
1,226
Cash 177 EURm
43.8% 43.2%
41.3% 41.7%
39.9%
Free credit lines 800 EURm
2016 | 2017 | 2018 | 2019 | 2020 |
30.09.
Financially, Krones is very well positioned.
78 |Capital Market Day 2020
Focus on Cash, Net Working Capital and Capex
Net Working Capital development | Capex development |
in % | in % | |||||||||
of Sales | ||||||||||
of Sales | ||||||||||
28-29% | 3.2% | corridor | ||||||||
27.3% | 27.3% | corridor | 2.7% | 3.0% | ||||||
26.9% | 2.1% | |||||||||
122 | ||||||||||
1.7% | ||||||||||
26-28% | 108 | 2.0% | ||||||||
24-26% | in EURm | |||||||||
78 | ||||||||||
~55 | ||||||||||
2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2017 | 2018 | 2019 | 2020 | 2021/2022 |
Outlook | Base case | Base case | Outlook | Base case |
- Program to speed up project execution
- Supplier financing program with Deutsche Bank in implementation phase
- Decentralized inventory management to be centralized
- Analysis of order to cash process completed and changes in execution
- High investments in manufacturing in the past (Hungary, China, Germany)
- Decision to reduce own added value in manufacturing will reduce Capex needs
- Focus on Digitalization & ERP (S4 HANA)
79 |Capital Market Day 2020
Roadmap to increase Profitability
2020 | Programs to improve efficiencies |
2023
Sales
~ 3,300 EURm
EBITDA*
Program
Topics
Structure & | Global Footprint | |||
Process | ||||
▪ | Adjust capacities | ▪ | Plant Hungary | |
▪ | Product cost | ▪ | Plant China | |
reduction | ▪ | Localize supply | ||
▪ | ||||
Reduce own | chains and | |||
added value in | increase BCC | |||
manufacturing | sources | |||
▪ | Accelerate | ▪ | Localize service | |
project through put time
Portfolio
- Reshape product portfolio
- Address future of Brewery Business
- Increase profitability of Intralogistics
Growth
- Pricing
- Innovations in sustainable filling & packaging
- Digital and remote service eco system
- Localize sales activities
Sales
3,700 EURm to
4,000 EURm
EBITDA
5.5% - 6.0% | Impact | 1.5% - 2.0% | 1.0% - 1.5% | 0.5% - 1.0% | ||||
*w/o one-time expenses 30 - 60 EURm (structural adjustments)
0.5% - 1.5%
9.0% - 12.0%
Figures for 2023 do not constitute a binding financial guidance and shall not be interpreted as such.
Ranges are subject to assumptions that depend upon external factors beyond the influence of Krones' management.
80 |Capital Market Day 2020
Krones Group KPI's
Actuals, Outlook 2020 and Base Case 2021/2022
EURm | Actual | Actual* | Actual * | Outlook* | Base Case | Base Case | |||
2017 | 2018 | 2019 | 2020 | 2021 | 2022 | ||||
SALES | 3,691 | 3,854 | 3,959 | ~ 3,300 | 3,300 - 3,400 | 3,500 - 3,600 | |||
EBITDA | 9.2% | 8.7% | 6.6% | 5.5% | - 6.0% | 6.5% | - 7.5% | 8.0% | - 9.0% |
margin | |||||||||
EBT margin | 7.0% | 6.4% | 2.8% | 1.0% | - 1.6% | 2.5% | - 4.0% | 4.5% | - 6.0% |
Working | |||||||||
Capital | 27.3% | 27.3% | 26.9% | 28% | - 29% | 26% | - 27% | 24% | - 26% |
(in % of sales) | |||||||||
* = without one-time impacts for restructuring costs and impairments
Figures for 2021 and 2022 do not constitute a binding financial guidance and shall not be interpreted as such.
Ranges are subject to assumptions that depend upon external factors beyond the influence of Krones' management.
81 |Capital Market Day 2020
Our Midterm Targets remain unchanged…
Growth | EBITDA margin | Working Capital | ||
2% - 5% | 9% - 12% | 24% - 26% | ||
(organic growth) | (EBT margin 6% - 8%) | |||
…and they are achievable in 2023
82 |Capital Market Day 2020
Agenda
- Key Takeaways
83 |Capital Market Day 2020
The Global Impact of COVID-19 is severe,…
Travel Restrictions | On-Trade Sales | Supply Chain |
…but long-term Growth Fundamentals remain intact…
Population Growth | Middle Class | Urbanization |
…and Krones is well positioned for the "New Normal"!
Remote & Digital | Sustainable | Localized |
84 |Capital Market Day 2020
Agenda
--- Discussion/ Q&As ---
85 |Capital Market Day 2020
Organizational Notes on Q&A Session
If you have inquiries, please make use of the "raise your hand" feature
When not talking, please mute your microphone
? …
86 |Capital Market Day 2020
Disclaimer
This investor presentation contains forward-looking statements that are based on current estimates, forecasts and assumptions made by KRONES AG management to the best of its knowledge and other information currently available to KRONES AG.
The forward-looking statements of this presentation are by their very nature subject to various known and unknown risks, uncertainties and other factors, the non-occurrence or occurrence of which could cause material differences in future results of operations, financial situation, development or performance of KRONES AG. Factors that could cause such differences include but are not limited to changes in political, business, economic and competitive environment, effects of future legal and legislative issues, fiscal, and other regulatory measures, foreign exchange rate fluctuations, interest rates, the availability of financing, developments in raw material and personnel costs, launches of competing products or services, poor acceptance of new products or services, and changes in business strategy.
KRONES AG does not intend and does not assume any liability whatsoever to publicly update or revise any forward-looking statements or other information contained in this presentation as a result of new information, future events or otherwise. No representation or warranty, express or implied, is made by KRONES AG and/or its management with respect to the fairness, completeness, correctness, reasonableness, or accuracy of any information, facts, expectations or opinions contained herein. Neither KRONES AG nor any of its affiliates, representatives or advisors shall have any liability whatsoever (in negligence or otherwise) for any losses or damages arising from any use of this presentation or its content or otherwise arising in connection with the statements given herein.
Digitalisation | Process | Bottling and | Intralogistics | Lifecycle |
technology | packaging equipment | Service |
We do more.
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Krones AG published this content on 12 November 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 12 November 2020 13:28:03 UTC