VARTA : Annual Report 2020

VARTA AG ANNUAL REPORT 2020

Contents

EXECUTIVE BOARD AND SUPERVISORY BOARD	2
SUCCESS FACTORS	15
CONSOLIDATED MANAGEMENT REPORT	37
Group structure	38
Economic report	43
Development of earnings, financial position and net assets	45
Research and development	49
Investments excluding M&A (CAPEX)	50
Earnings situation: segments	50
Information about VARTA AG	52
Employees	58
Remuneration report	58
Guidance, opportunities and risk report	62
Outlook	67
Supplementary report	68
Final declaration regarding the independence report	68
Takeover law information	68

CONSOLIDATED FINANCIAL STATEMENTS	71
Consolidated statement of financial position	74
Consolidated income statement	76
Consolidated statement of comprehensive income	77
Consolidated statement of cash flows	78
Consolidated statement of changes in equity	79
Notes to the consolidated financial statements	80
AUDITOR'S REPORT	159
FINANCIAL CALENDAR	169
CONTACTS AND IMPRINT	170

Key Data

Multi-Year Overview

(€ k)	2014	2015	2016	2017	2018	2019	2020*
Revenue		169,038	195,093	213,815	242,157	271,650	362,692	869,583
EBIT		13,440	22,480	14,845	23,643	36,871	70,767	146,014
Amortization and depreciation		-7,428	-8,511	-8,922	-9,446	-10,518	-20,855	-66,617
EBITDA		20,868	30,991	23,767	33,089	47,389	91,622	212,631
Adjusted EBITDA		19,368	22,857	26,099	39,132	50,219	97,481	241,030
EBT		12,083	19,371	12,073	21,025	36,482	71,079	133,124
Consolidated result		7,886	11,596	9,410	13,544	25,703	50,464	95,508
Balance sheet total in € m		158.1	155.7	164.9	331.5	401.7	668.8	1,122.8
Cash flow from ongoing		22,000	19,288	24,153	18,503	69,846	105,734	232,863
business activities
	7,119	-1,099	-21,613	-13,426	-58,982	-105,806	-372,969
Cash flow from investment activities
Cashflow aus financing activities		-13,729	-28,531	-1,210	121,577	-114	94,882	19,886
FTE employees as of Dec, 31		1,792
	1,879	2,012	2,112	2,256	2,834	4,584
Earnings per share (EPS) in €		1.3
	16.5	0.59	0.36	0.66	1.28	2.36

*Including first time consolidation of VARTA Consumer

We are accelerating growth

+139.8%	+147.3%	+89.3%
Revenue	Adjusted EBITDA	Consolidated result
€ m	€ m	€ m

	869.6		27.7%	241.0		95.5
362.7		97.5			50.5
		26.9%
2019	2020	2019		2020	2019	2020

VARTA AG | 1

EXECUTIVE BOARD AND SUPERVISORY BOARD

Foreword from the Executive Board

Dear Shareholders,

We can now look back on what was an historic year for the Company. In 2020, we recorded growth of 140%, with organic growth alone amounting to just under 50%. This success is the result of a collaborative effort across all business segments, following which we have managed to once more conclusively exceed the exceptional results recorded in the prior year. VARTA continues to benefit from high demand for our miniaturized ­CoinPower lithium-ion cells. This segment remains our growth driver. However, it is clear, too, that our strategy is paying off in other areas. The decision to focus on the brand business within the Household Batteries segment is bearing fruit. The re-integration of this segment within VARTA AG has been a total success. We are able to put these additional revenues toward continuing our growth strategy. In addition, our high level of profitability and solid equity basis have allowed us both to finance further growth and make dividend payments to you, our shareholders, for the first time. This historic year has been underpinned by a redesigned brand profile, which underlines that we as a technology company are looking ahead with great optimism to a future in which we will remain innovative and, above all, grow further.

Our business developed even more positively than expected in the previous year. Group revenue grew by around € 870m. Scaling the business model ensured that growth in operating earnings outpaced that of revenue. Adjusted EBITDA rose by roughly 147% to around

• 241m in 2020. In organic terms, this growth stands at
  approximately­90%. The adjusted EBITDA margin
  improved­ to around 27,7%.

In the Microbatteries & Solutions segment, we

­experienced highly dynamic growth of 49% to approximately € 508m in the past year. The driving force behind this development was incredibly strong growth in the market for Premium True Wireless Headsets (TWS), for which our CoinPower cells remain the first choice for manufacturers. Our cells offer the technological progress and quality required in their products. While the market is growing very dynamically, as leaders of technology and innovation VARTA's pace of growth

is actually outstripping that of the market, having

­established a highly successful business model in this area. However, we were also able to further expand our market position for rechargeable batteries in the area of hearing aids. The same applies to our business with smart, modular energy solutions (power pack solutions). In the past year, we launched new projects together with our customers and were able to continue high levels of growth.

2 | VARTA AG ANNUAL REPORT 2020

EXECUTIVE BOARD AND SUPERVISORY BOARD

Another landmark event of the historic year 2020 was the successful integration of the Consumer business under the umbrella of VARTA AG. As a result of this, that which always belonged together has finally been re­ united. As explained, the Household Batteries business is responsible for a significant portion of our growth. However, in the previous year the energy storage ­solutions business also recorded highly dynamic growth that outpaced the market. The energy revolution and the trend toward ever greater sustainability will ensure that this area remains of great interest.

And the key word here really is 'sustainability': Since the start of this year, our European lithium-ion cell plants are being powered by green electricity. By 2027, our aim is to operate all production facilities on a CO2-neutral basis. We have also been successful in our efforts to substantially reduce the use of cobalt. All of these measures offer strategic benefits. VARTA is very well prepared for the future, when the issue of sustainability will increasingly become a priority for our customers and other stakeholders, not forgetting you, our valued shareholders, as well.

We are very optimistic with regard to the current fiscal year and remain firmly convinced that VARTA will register a positive business performance. Over the coming months, the new production facility for lithium-ion cells will be operational. This means that we will therefore have sufficient production capacities to react quickly and flexibly to customer demands. We are keeping an eye on core markets undergoing a period of structural change, where we have established and plan to maintain a very strong market position. Last but not least, we have managed to generate a record profit result despite the ongoing global pandemic. Up to now, COVID-19 has not impacted production processes at our locations, meaning we have been able to continue manufacturing without any interruptions. Our supply chains have likewise remained intact.

For 2021, VARTA is anticipating high-level organic growth and substantial double-digit revenue growth in percentage terms. Performance over the second half of the year will above all contribute to this development. Moreover, at the end of this year we shall be launching pilot production of our new, large, rounded lithium-ion cells in 21700 format in Ellwangen. A large portion of the funding we received within the framework of an Important Project of Common European Interest (IPCEF) is being put toward research and development processes linked to these cells, which will enable us to tap into new fields of business.

For you, this all means that your investment in VARTA will continue to be the right decision in future as well. VARTA is innovative, profitable and will continue to grow. And this is all thanks to our employees as well as you, our investors, for displaying such confidence in us. This is a real motivation for us to continue along the path to success together with you.

Herbert Schein

Chief Executive Oficer

Armin Hessenberger

Chief Financial Officer

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