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Voith GroupNew growth with expertise for the digital industryStuttgart | Dec. 6, 2018

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Press briefing | Dr. Toralf Haag | 2018-12-06 | public 2

Dr. Toralf Haag President & CEO and CFO

Dr. Roland MünchMember of the Corporate Board of Management and President & CEO of Digital Ventures

Contents


1. Where we are today

1.1 Highlights of the 2017/18 fiscal year

1.2 Financial performance indicators for the 2017/18 fiscal year

2. Our plans

2.1 Strategic outlook: our growth agenda

2.2 Operating outlook: the 2018/19 fiscal year

2017/18 fiscal yearFinancial basis strengthened, important milestones reached


1 2 3 4

Sound growth in the operating business –Further financial strength achieved.

Digital agenda advanced –First market successes apparent.

Core business robust –Market positions further improved thanks to innovations.

Group structure streamlined– Increase in power and efficiency within the Voith organization.

1. Sound growth in the operating businessFurther financial strength achieved


• Group’s orders received and sales higher after adjustment for currency effects, weaker performance by Hydro prevents stronger growth.

• Operating result of the core business robust despite currency effects and Hydro’s weakness, adjusted group net result risen perceptibly.

• Voith’s financial position remains excellent, equity ratio at an all-time high.

2. Group structure streamlinedIncrease in power and efficiency


• Reduction in the number of legal entities in Germany from 70 to around 15 implemented over only a few months.

• Simplification of the structures means less bureaucracy, a more rapid response and more efficiency.

• Comparable reorganization of the legal structures also outside of Germany under review.

3. Digital agenda advancedProfile of Digital Ventures sharpened


• Sales-focused structure in order to generate even greater momentum for the Group.

• Bringing together all digital start-up activities under the umbrella of Digital Ventures (previously: Digital Solutions).

• Oversight of new venture activities and function as incubator for new, digital business models in all areas of the Voith Group.

• Support for the activities of the core businesses to refine their portfolios in the digital realm.

3. Digital Agenda advancedFirst market successes apparent


Industrial Internet-of-Things data platform OnCumulus taken to market maturity – first market successes achieved.

Extensive portfolio of smart digital solutions to improve the performance of hydropower plants developed and placed on the market.

Joint venture Voith Robotics and cooperation with Franka Emika open up new potential in the strongly growing market for lightweight robot systems.

4. Core business in robust condition Market positions improved thanks to innovations


Expertise as a full-line supplier pays off: first complete production line for the manufacture of corrugated medium sold in the USA.

Voith benefits from the e-mobility megatrend: innovative electric drive system for buses successfully launched on the market.

Innovative StreamDiver technology for small hydropower plants established at an international level.

Where we are todayConclusion


• Voith enjoyed sound growth in the 2017/18 fiscal year on a currency-adjusted basis in a challenging environment.

• The core business of the Voith Group is in a robust condition despite the temporary weakness at Hydro and in a good position for a positive development over the long term.

• Digital Ventures is growing and is developing an increasing momentum that will benefit the entire Voith Group.

• Voith is distinguishing itself by actively shaping the digital transformation. We are systematically building up a network of expertise for digital industry and are thus tapping into new growth potential.

Contents





2. Our plans



Group orders receivedHigh level – orders on hand remain in excess of 5 billion


• Adjusted for currency effects, orders received increased by 2%, slight decrease depending on currency.

• Heterogeneous picture in the Group Divisions: strong growth at Paper and slight growth at Turbo just about balance out appreciable decrease at Hydro.

• At € 5.17 billion, orders on hand remain high (previous year: € 5.19 billion).

4,367 4,285

2016/17 2017/18

Orders received Group in € millions

Orders received Group (€ 4,285 million) by Group Division (rounded)

Voith Turbo

32%

Voith Hydro

20%

Voith Paper

47%

Group salesCurrency-adjusted rise by 4%


• Considerable currency effects and Hydro’s failure to meet targets prevent stronger growth.

• After currency effects, slight decrease in Group’s sales.

Sales Group in € millions

4,224 4,209

Sales Group (€ 4,209 million ) by Group Division (rounded)

2016/17 2017/18

Voith Turbo

31% Voith Hydro

26%

Voith Paper

42%

Operating resultRobust performance in the core business


• Aggregate result of the three core businesses down on previous year – primarily on account of unexpectedly weaker development at Hydro.

• In total, core business remains robust, however, with a very good performance at Paper and a sound one at Turbo.

• In the current fiscal year, change in central operating performance indicator: EBIT in the future instead of profit from operations – with minor effects overall.

2016/17 2017/18

304

254*211*

267

= profit from operations of the three Group Divisions on aggregate

91

106

11477

76

107HydroPaperTurbo

304 267

Profit from operations of the core business in € million

Comparison profit from operations Group/core business in € millions

* Without discontinued operations; previous-year figure restated.

2016/17 2017/18

= profit from operations Group

Group net resultAppreciable rise


• Group net result increased by 61%, adjusted for KUKA effect in the previous year.

• Improvement mainly driven by interest and tax effects (specifically use of previously unused tax losses thanks to improved earnings situation).

33

53

Group net result* in € millions

2016/17 2017/18

* Without discontinued operations. Previous year additionally adjusted for effect on results from sale of the KUKA shareholding.

HydroWeaker than anticipated but remains in a good position in a challenging environment


HydroFinancial performance indicators weaker than expected


• Failure to meet targets on account of delays in construction work for some major contracts and delays in projects being awarded.

• In addition, considerable burden from negative currency effects.

• Orders received, sales and results below targets and below previous year.

• Weakness only temporary, prospects for rapid recovery intact, large-volume orders the offer pipeline.

2016/17 2017/18

2016/17 2017/18 2016/17 2017/18

4,5073,927

77

2017-09-30 2018-09-30

1,3811,103 1,180

856

106

Sales in € millions Orders received in € millions

Profit from operations in € millions

Employees


Paper Success story continues

PaperVery good fiscal year with figures at new highs


• Targets exceeded despite considerable negative currency effects: Paper returns to being a sustainably strengthened pillar of the Group following its successful turnaround.

• Central performance indicators up on the high previous-year figures: orders received, sales and result further increased.

2016/17 2017/18

Sales in € millions

2016/17 2017/18

Orders received in € millions


Employees

2016/17 2017/18

6,449 6,618

2017-09-30 2018-09-30

1,8131,995

1,5271,746

114107

TurboRobust development in demanding markets

20Press briefing | Dr. Toralf Haag | 2018-12-06 | public

TurboStable operating performance


• Sales and orders received slightly increased despite negative currency effects.

• Build-up costs for planned joint venture in China push result slightly below the high level seen in the previous year.

2016/17 2017/18

2016/17 2017/18 2016/17 2017/18

5,408 5,543

2017-09-30 2018-09-30

1,283 1,302 1,344 1,378

91 76

Sales in € millions Orders received in € millions


Employees

Digital Ventures Start-up momentum building up


Digital VenturesStrong sales growth and negative operating result reflect the start-up character of the Group Division


• Sales growth mainly driven by first-time full consolidation of Ray Sono and Flow Link.

• Scheduled increase to around 2,250 employees and high level of development expense for new digital applications.

• Slight increase in shortfall seen as conscious investment in future growth potential.

• Once again more than € 200 million sales generated in the core business Group Divisions with the assistance of the digital segment.

2016/17 2017/18

13

-43 -46

2016/17 2017/18

Sales in € millions


40

Research & developmentMore than € 1 billion invested over 5 years


• With a portfolio of more than 4,000 active patents, the Group is one of the most innovative companies in its sector.

• Another increase in R&D expenditure in the past year and higher R&D to sales ratio driven primarily by Digital Ventures.

2016/17 2017/18

217 225

2016/17 2017/18

5.1 5.4

Expenses for F&E in € millions R&D to sales ratio in percent

Balance sheet ratiosVoith Group financially strong


• Thanks to reduction in debt, equity ratio at historical high.

• Net liquidity still remains at a very comfortable level.

• Voith has considerable funds at its disposal to finance organic growth and acquisitions.

Equity ratio in percent

2016/17 2017/18

2017-09-30 2018-30-09

27.3 28.7

648 557

Net liquidity in € millionsAt end of year under review

2017/18 financial performance indicatorsConclusion


• On a currency-adjusted basis, sound growth in orders received and sales within the Group, currency effects and weak development at Hydro prevent stronger growth.

• Operating result robust, Group net result appreciably higher due to structural improvements.

• The Voith Group is in a better financial position than ever before – with an equity ratio at a historically strong level and an ongoing high level of net liquidity.

• This means that Voith has the necessary financial strength to make powerful investments in the next phase of its development.

Contents





2. Our plans



Our strategic agendaBy 2025, Voith will be distinctly larger and more profitable than today


• Focus on the core business: tapping into potential for organic growth by expanding the service business, innovations in all Group Divisions and geographical expansion (e.g. Africa).

• Additional growth from digitalization: through start-up activities and new digital applications in all areas.

• Active M&A strategy: focus on supplements to existing activities but also opening up new areas.

• Voith has the financial strength to invest in organic growth AND acquisitions.

Sales target: sustainable higher growth than the global economy

2025

Organic Growth

Digital

M&A+X%

Today

4.2 BEUR

Organic Growth

Digital

M&A

Contents





2. Our plans



Outlook for 2019Environment favorable overall for Voith


• Ongoing sound growth in the global economy expected, despite increasing geopolitical uncertainties – Above-average growth in emerging markets, particularly in Asia, but increasingly

also in Africa– Robust growth in most of the leading industrialized countries

• Positive business environments in all key Voith markets– Increasing energy needs driving demand in the field of energy generation– Paper market continues to grow and support demand for paper machines– Far-reaching transformation of mobility markets is opening up market opportunities

• Constantly increasing demand in all industries for digital solutions developed by Voith

Outlook for 2019Increased growth dynamics by increasing focus


• Concentration on strengthening the core business and defined focal points for growth is already starting in the current year; first visible effects anticipated in this context.

• Group’s orders received expected to increase perceptibly driven not only by the digital activities but also by the three established Group Divisions.

• Group sales similarly anticipated to be up on previous year, specifically due to further development of the core business.

• Improvement in Group’s EBIT, supported by all Group Divisions, expected.

• Profitability (ROCE) also expected to increase.

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