BNP Paribas 9th Annual High Yield & Leveraged Finance Conference · 1,349 +340-37 1,144-270-54 EBIT...

BNP Paribas 9th Annual High Yield & Leveraged Finance ConferenceLondon – January 15, 2013

Schaeffler Group

Schaeffler Group BNP Paribas 9th Annual High Yield & Leveraged Finance Conference January 15, 2013

Disclaimer

Page 2

This presentation contains forward-looking statements. The words "anticipate", "assume", "believe", "estimate", "expect", "intend", "may", "plan", "project", "should" and similar expressions are used to identify forward-looking statements. Forward-looking statements are statements that are not historical facts; they include statements about Schaeffler Group's beliefs and expectations and the assumptions underlying them. These statements are based on plans, estimates and projections as they are currently available to the management of Schaeffler AG. Forward-looking statements therefore speak only as of the date they are made, and Schaeffler Group undertakes no obligation to update any of them in light of new information or future events.

By their very nature, forward-looking statements involve risks and uncertainties. These statements are based on Schaeffler AG management's current expectations and are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Actual results may differ from those set forth in the forward-looking statements as a result of various factors (including, but not limited to, future global economic conditions, changed market conditions affecting the automotive industry, intense competition in the markets in which we operate and costs of compliance with applicable laws, regulations and standards, diverse political, legal, economic and other conditions affecting our markets, and other factors beyond our control).

This presentation is intended to provide a general overview of Schaeffler Group’s business and does not purport to deal with all aspects and details regarding Schaeffler Group. Accordingly, neither Schaeffler Group nor any of its directors, officers, employees or advisers nor any other person makes any representation or warranty, express or implied, as to, and accordingly no reliance should be placed on, the accuracy or completeness of the information contained in the presentation or of the views given or implied. Neither Schaeffler Group nor any of its directors, officers, employees or advisors nor any other person shall have any liabilitywhatsoever for any errors or omissions or any loss howsoever arising, directly or indirectly, from any use of this information or its contents or otherwise arising in connection therewith.

The material contained in this presentation reflects current legislation and the business and financial affairs of Schaeffler Group which are subject to change and audit.


Business

Capital structure

Results 9M 2012

Agenda

Outlook


Leading manufacturer of high-precision components and systems for automotive and industrial applicationsGlobal footprint with approx. 76,000 employees in more than 50 countriesAbove industry average profitability and revenue growth Strategic participation in Continental AG

Key characteristics

1 BusinessSchaeffler at a glance

Automotive OEM57%

Sales by business¹) Sales by region1)

1) As of September 30, 2012; by location of customers

Industrial OEM19%

Industrial Aftermarket12%

Automotive Aftermarket12%

Asia/Pacific22%

Europe w/o Germany31%

Germany27%

South America5%

North America15%

1) As of September 30, 2012

2008 2009 2010 2011LTM09/12

Salesgrowth in %

8,905-1.2%

7,336-17.6%

9,49529.4%

10,69412.6%

11,0344.5%

EBITin % of sales

1,04011.7%

4466.1%

1,50915.9%

1,68915.8%

1,48413.4%

EBITDAin % of sales

1,73119.4%

1,10315.0%

2,09722.1%

2,24321.0%

2,07218.8%

Key financials (in EUR mn)


Above average growth and sector-leading margins

Proven ability to preserve cash flow

Experienced management team

Top three positions in core market sectors

Strong and resilient aftermarket business

Growing above market

Leading positions in attractive

growth markets1

Highly diversified customer base

Broad product and application spectrum

Strong regional diversification

Well-balanced business portfolio2

Technology leadership and superior quality

Outstanding operational excellence

Best-in-class innovation platform

Technology, quality and innovation leadership3

Strong track-record and experienced

management team4

1 BusinessWorldwide leader in bearings and automotive components


1

Automotive Industrial

1 BusinessTwo divisions with top three positions in core market sectors¹)

Production Machinery Wind PowerPower

Transmission

Aerospace Heavy IndustryRailwayMotorcycles

Fluids & Pneumatics

Power Generation

Consumer Products

Industrial Aftermarket

Transmission

Chassis

Engine

Aftermarket

1) Company estimates

67% of sales 32% of sales


~ 7,500 Automotive customers ~ 17,000 Industrial customers

Other customers 84% TOP 10 customers

16% of Industrial sales

TOP 10 customers

53% of Automotive sales

Other customers 47%

1 Business Highly diversified customer base2



Engine components and systems

INA-FAG catalog with40,000 articles

Transmission components and systems

Chassis and accessory-drive components and systems

Radial insertball bearings

Components for

parallel kinematics

Linear guides

Thrust/radial cylindrical

roller bearings with an outside diameter

up to4 meters

smallest ball bearing withan 1 mm inside diameter

Tapered rollerbearings

Sphericalroller bearings Direct drives

1 BusinessBroad spectrum of components and systems2



1

23

Germany Europew/o Germany

North &South America Asia/Pacific Total

Plants 24 19 14 13 70

R&D centers 13 9 8 10 40

Planned greenfield sites and plant extentions for

2012-2014Irapuato, Mexico

Kysuce, Slovakia

Skalica, Slovakia

Szombathely, Hungary

Brasov, Romania

Ulyanovsk, Russia

Nanjing, China

Yinchuan, China

Taicang 5, China

Taicang 6, China

Suzhou, China

Savli, India

Pune, India

Hosur, India

BienHoa City, Vietnam

1

2

3

4

5

6

7

8

9

10

11

11

12

10

5

9

4

8

7

1413

15

14

12

13

Global footprint with five dedicated regions

1 BusinessOngoing regional diversification – “In the region – for the region”2

15

6


State-of-the-art plants and testing facilities

Outstanding know-how in raw material processing

High level of value added ensured by first class precision manufacturing

Uniform quality management system in all plants worldwide

High-profile business excellence programs support Schaeffler's zero-defect policy

1 Business Technology/quality leadership based on outstanding operational excellence 3

… basic materials (steel) … inhouse tools design

… low cost precisionmanufacturing… surface treatment


1 Business Best-in-class innovation platform3

Key aspects

Rank in Germany2)

#5 #5#7#9 #4

Number of patent registrations1)

1,641

551667

826

1,146

Innovation is a key success factor for Schaeffler

Schaeffler is in the Top 4 of the most innovative companies in Germany in 20111), 2)

~ 6,000 employees at 40 locations worldwide operating in close cooperation with customers

R&D spending rate of 5% of sales

1) Source: German Patent and Trademark Office 2) Measured by number of patent applications

1,832

20102006 2007 2008 2009 2011

#4


EBIT and EBITDA 2003 - LTM 09/121)

in EUR bnSales 2003 - LTM 09/121)

in EUR bn

EBITDAmargin 19.4% 19.4% 15.0% 22.1% 21.0%

2003 2004 20092008200720062005 20102003 2004 20092008200720062005 2011 2010

1) 2002-2005 according to German Commercial Code (HGB), 2006-2011 according to IFRS

8.9

7.3

9.5

10.7

9.0

18.7% 19.0% 19.5% 19.9%8.4% -1.2% -17.6% 29.4% 12.6%-0.1% 7.2% 8.7% 4.7%Sales growth

6.87.3

8.37.9

2011

EBITmargin 12.6% 11.7% 6.1% 15.9% 15.8%9.8% 10.8% 12.2% 12.9%

EBIT EBITDA

1 BusinessAbove average growth and sector-leading margins

LTM 09/12

11.0

4.5% 18.8%

13.4%

LTM 09/12

1.1

1.7

2.12.2

1.7

1.31.4

1.71.5

1.0

1.51.7

1.1

0.70.8

1.11.0

2.1

0.4

1.5

4


Business

Capital structure

Results 9M 2012

Agenda

Outlook


31% 32%

Gross profit margin:

33% 30%

+4.2%vs. 9M 2011

2,1602,402 2,452 2,481

32%

2,6972,682

30%

10,694

2,703

31%

9,495

28%

2,612

Salesin EUR mn

2,858

31%

2 Results 9M 2012Sales growth continued but momentum further weakening

Sales by region1)

in % and y-o-y growth

9M 2012 9M 2011

Automotive 5,761 5,403 +6.6%

Industrial 2,613 2,609 +0.2%

Other 48 70 -22 mn

Total 8,422 8,082 +4.2%

Sales by divisionin EUR mn

1) Market view (= location of customers)

GermanyQ3: +2% (9M: +4%)

Europe (w/o Germany)Q3: -3% (9M: -3%)

North AmericaQ3: +20% (9M:+20%)

South AmericaQ3: -13% (9M: -12%)

Asia/PacificQ3: +5% (9M: +10%)

15%31%

22% 27%

5%

Q1

2011

Q2 Q3 Q4Q1

2010

Q2 Q3 Q4 Q1

2012

Q2

2,794

8,422

30%

2,770

Q3

31%


EBITmargin

335

404 398 372

472

411

-15.2%vs. 9M 2011

1,6891,509

466

340

15.5% 16.8% 16.2% 15.0% 17.5% 15.3% 17.2% 13.0%

EBITin EUR mn

14.0%

401 379

13.6%

1,144

EBITin EUR mn

EBITmargin 13.6%16.7%

1,349

+340

-37 1,144-270

-54

EBIT 9M 2011

Sales COGS R&D Selling Admin EBIT 9M 2012

-102

-82

Other

2 Results 9M 2012Profitability impacted by weakness in industrial businesses

EBIT by divisionin EUR mn

9M '12EBIT

9M '11EBIT in %

9M '12margin

9M' 11margin

Automotive 764 857 -10.9 13.3% 15.9%

Industrial 380 492 -22.8 14.5% 18.9%

Total 1,144 1,349 -15.2 13.6% 16.7%

364

Q1

2011

Q2 Q3 Q4Q1

2010

Q2 Q3 Q4 Q1

2012

Q2 Q3

13.1%

15.9% 15.8% 13.6%


545515

484

553

613

552

2,097 2,243

605

473

EBITDAin EUR mn

549

2 Results 9M 2012 9M free cash flow at EUR 122 mn

EBITDAmarginin %

22.4 23.0 22.2 20.8 22.7 20.6 22.4 18.1 19.2

LTMEBITDA 1,381 1,701 1,899 2,097 2,226 2,225 2,285 2,243 2,179

530

19.0

2,157

1,599

Net workingcapital

Capex Taxes1)/other

Interestpayments

EBITDA Free cash flow

Free cash flow 9M 2012in EUR mn

-200 1 -47 92Q32012 19520

1) 'Income taxes paid' as cash out of EUR -205 mn (2011: EUR -169 mn)

-201

Dividends

Q1 Q2 Q3 Q4 Q12012Q2

2011

137

-107

1166

15290

80

520

Q1

2011

Q2 Q3 Q4Q1

2010

Q2 Q3 Q4 Q1

2012

Q2 Q3

18.8

2,072

1,599

-244

-672

-456-186

122

+81

92

Q3


2 Results 9M 2012 Net debt down – Leverage ratio unchanged

Leverage ratio (Net financial debt / LTM EBITDA)

1) Excluding shareholder loans

Net financial debt / Leverage ratio¹)

in EUR mn

4.4x

3.5x

2.7x 2.7x3.0x

2.7x 2.9x

6,0205,930

5,763

6,124

5,744

6,069

7,145

3.0x

7,088

6,468 6,514 6,503 6,477 6,482 6,422 7,645 7,485Grossdebt

448 584 740 733 358 353 500 397Cashposition

600 420

7,164

7,455

291

3.2x

280

Shareholder loans

7,412

318

3.2x

7,094

266

Q1

2011

Q2 Q3 Q4Q1

2010

Q2 Q3 Q4 Q1

2012

Q2 Q3

6,940

3.2x

7,238

298

242

Available fundsin EUR mn

Revolving Facility and Ancilliary Lines Cash and cash equivalents

1,1901,325

1,481 1,475

1,049 1,0931,243

1,140 1,141 1,165

Q1

2011

Q2 Q3 Q4Q1

2010

Q2 Q3 Q4 Q1

2012

Q2 Q3

1,244


Business

Capital structure

Results 9M 2012

Agenda

Outlook


3 Capital structureThe Schaeffler refinancing story 2009-2012 – "Promised and delivered"

Initial refinancing of acquisition debtSeparating total debt into Holding debt (Junior) and operating business debt (Senior)

11/09 + 06/10

03/11 + 10/11

EUR 8.0 bn Refinancing of Senior debtPlacement of EUR 2.3 bn of bonds and EUR 1.4 bn of institutional loans, bank syndication closed

01/12 + 06/12

Refinancing of Holding debtConversion of Schaeffler GmbH into Schaeffler AG

Four major steps

Step 1

Reduction of Schaeffler Holding liabilities by approx. EUR 1.6 bn and refinancing of Junior debtImprovement of structural flexibility

09/12 + 12/12

Step 2

Step 3

Step 4


Small adjustment of Interest Cover testfrom 2012 to 2014

Fall-away concept for Cash Flow Cover if leverage below 2.5x

Covenantflexibility1

Allocation of repayments in the event of raising net debt proceeds at borrower's discretion

Customary 'lender replacement' clause

Repaymentflexibility

Flexibility for intra-group reorganizationwith borrower change

Credit / collateral position of lenders remain unchanged

Structuralflexibility

2

3

Key aspects

Relationship banks committed to new Senior Facilities Agreement

Offer for cash-less roll-over of existing commitments for institutional lenders

Amendment fee of 15 bps for all lenders on existing commitments

All other key terms of SFA unchanged, such as maturity structure, pricing and collateral package

3 Capital structureFinal step 2012 – 3 primary amendments to Senior Facilities Agreement


3 Capital structureAmendment by refinancing – Maturity profile further improved

Maturity profile1)

in EUR mn

2012 2013 2014 2015 2016 2017 2018 2019

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

Senior Term Loan A3 years

Institutional Loan B2 (EUR/USD)5 years

High-Yield Bond 2017 (EUR/USD) 5 years

Senior Term Loan B1 – 5 years

High-Yield Bond 2019 (EUR/USD) – 7 years

HY1 HY2 HY1 HY2 HY1 HY2 HY1 HY2 HY1 HY2 HY1 HY2 HY1 HY2 HY1

High-Yield Retail Bond – 5 years

1) Without Revolving Credit Facility of about EUR 1.0 bn

~ €2.4 bn

~ €0.5 bn

~ €1.7 bn

~ €1.3 bn

~ €0.8 bn

~ €0.3 bn

Bond performancein %

Yield to worst (as of January 4, 2013)

EUR 2017: 4.26%EUR 2019: 3.71%

EUR 2017 Retail: 3.07%

USD 2017: 4.42%USD 2019: 4.32%

98,00100,00102,00104,00106,00108,00110,00112,00114,00116,00118,00

10-Feb 10-Apr 10-Jun 10-Aug 10-Oct 10-Dec

Euro 2017 Euro 2019 USD 2017

USD 2019 Euro 2017 RETAIL


Corporate & financing structure

1) Carrying values end of September 2012

3 Capital structureHolding liabilities reduced – Structural flexibility increased

Junior Term Loan (EUR ~1,500 mn)1)

Bullet structure maturing in June 2017,EURIBOR +1.7% cash interest plus 6% PIK interest p.a.

NEW Junior Term Loan (EUR ~800 mn)1)

Bullet structure maturing in June 2017,EURIBOR +2.0% cash interest plus 5% PIK interest p.a.

Junior Bond (EUR ~1,200 mn)1)

Zero-coupon bond maturing in March 2018,9.625% p.a. PIK interest

Schaeffler AG

Continental AG

SchaefflerTechnologies AG & Co. KG

Schaeffler Holding

GmbH & Co. KG

36.1% 50.1%

Free float

13.8%

100%

Schaeffler Finance

B.V.

100%

Holding

Schaeffler Group

100%

Schaeffler Verwaltungs

GmbH

100%

SchaefflerNewCo

100%

Intra-group reorganization with borrower change to streamline current corporate structure

Schaeffler NewCo became the new borrower using existing subsidiary

All assets and liabilities of Schaeffler AG – except participation in Continental AG – were transferred to Schaeffler NewCo

Collateral structure remains unaffected, Continental shares remain pledged, Schaeffler AG continues to guarantee all Senior liabilities

Holding liabilities reduced

Structural flexibility increased

Bonds

Loans

Chart simplified for illustration

purposes

Junior Term Loan/Bond


Business

Capital structure

Results 9M 2012

Agenda

Outlook


Sales growth

Capex

Growth

Quality policy

Employees

Quality

EBIT margin

Free cash flow

Profitability

R&D expenses

Innovation

Innovation

4 %

6-8 % of sales

> 13 %

Sustainably positive

Further improve

> 2,500 new jobs

~ 5 % of sales

Maintain leading position in patent applications

Target 2012

Target 2012 Target 2012

Target 2012

4 Outlook Sales guidance amended – Profitability targets unchanged

Schaeffler IR contact

Investor Relations Financial Calendar 2013

phone: + 49 9132 82 4440 FY 2012 results: March 21, 2013fax: + 49 9132 82 4444 Q1 2013 results: May 21, [email protected] Q2 2013 results: August 28, 2013www.schaeffler-group.com/ir Q3 2013 results: November 19, 2013


Backup Consolidated segment information (9M 2012)

In € millions 2012 2011 2012 2011 2012 2011 2012 2011Revenue 5.761 5.403 2.613 2.609 48 1) 70 1) 8.422 8.082Cost of sales -4.157 -3.893 -1.651 -1.623 -48 -70 -5.856 -5.586Gross profit 1.604 1.510 962 986 0 0 2.566 2.496EBIT 764 857 380 492 0 0 1.144 1.349

- in % of revenue 13,3 15,9 14,5 18,9 - - 13,6 16,7Depreciation, amortization and impairments

-317 -301 -138 -120 0 0 -455 -421

Inventories 2) 936 890 729 722 0 0 1.665 1.612Trade receivables 2) 1.272 1.214 547 548 0 0 1.819 1.762Property, plant and equipment 2) 2.421 2.081 1.111 1.015 0 0 3.532 3.096Capital expenditures 481 395 177 129 0 0 658 524Prior year information presented based on 2012 segment structure.

2) Amounts as at September 30.

Automotive Other1st nine months1st nine months

Industrial1st nine months

1) The amount consists mainly of materials provided to subcontractors.

Total1st nine months


Backup Consolidated segment information (Q3 2012)

In € millions 2012 2011 2012 2011 2012 2011 2012 2011Revenue 1,919 1,814 840 876 11 1) 13 1) 2,770 2,703Cost of sales -1,372 -1,309 -540 -544 -11 -13 -1,923 -1,866Gross profit 547 505 300 332 0 0 847 837EBIT 260 294 104 172 0 0 364 466

- in % of revenue 13.5 16.2 12.4 19.6 - - 13.1 17.2Depreciation, amortization and impairments -110 -99 -46 -40 0 0 -156 -139Inventories 2) 936 890 729 722 0 0 1,665 1,612

Trade receivables 2) 1,272 1,214 547 548 0 0 1,819 1,762Property, plant and equipment 2) 2,421 2,081 1,111 1,015 0 0 3,532 3,096Capital expenditures 143 159 56 53 0 0 199 212Prior year information presented based on 2012 segment structure.

2) Amounts as at September 30.

1) The amount consists mainly of materials provided to subcontractors.

Total3rd quarter 3rd quarter 3rd quarter 3rd quarter

Automotive Industrial Other

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