Fuchs SE

Dear ladies and gentlemen, welcome to the analyst conference call of Fuchs Petrolok SE. At our customer's request, this conference will be recorded. As a reminder, all participants will be in a listen-only mode. After the presentation, there will be an opportunity for the analysts of Fuchs to ask questions. If any participant has difficulties hearing the conference, please press star key followed by zero on your telephone for operator assistance. May I now hand you over to Lux Ackermann, who will start the meeting today. Please go ahead.

Good afternoon, ladies and gentlemen. On behalf of Fuchs Petrolub, I wish you a very warm welcome to today's conference call on the fiscal year 2021 figure. As always, all relevant documents have been uploaded at 7 a.m. this morning on the IR section of our homepage. With me on the call today is Stefan Fuchs, CEO, and Dagmar Steiner, CFO of Fuchs Petrolub. Stefan and Dagmar will run you through the presentation, which is then followed by a Q&A session. One last remark. Stefan has a very tight schedule today. He may have to leave a bit earlier. Having said that, I would like to hand over to Dagmar. Dagmar, please go ahead.

Yeah, thank you, Lutz, and a warm welcome from my side. Stefan Fuchs, as he has a tight time schedule today, will dial in in a couple of minutes Therefore, I will start and run you through the figures, and then of course Stefan Fuchs will make some comments on other topics. Therefore, I would like to start with chart number five, our highlights for the year 21. It was really a challenging environment in 21. It was like the second year in a crisis, and we completed it successfully. Compared with 2020, our sales increased significantly by 21% to 2.9 billion. We also exceeded the level of the pre-crisis year 2019 by 12%. Our EBIT improved by 50 million and came in at 363 million euro. With all that, we exceeded our original forecast of the year 21 and, of course, also the results from the year 2019. Our sales growth 21 was driven by a surge from sales price increases. And it was a really challenging environment with all these price increases on the raw material side and, of course, other inflationary cost increases. What we've seen as well is a strong net operating working capital buildup, and this is due to higher business volume and, of course, these inflation in raw material prices. Overall, as already said, it was a successful year for us, and the executive board and supervisory board are therefore proposing a 4% higher dividend for the year 21. Now I would like to turn to chart number six, our sales development. There you can see our quarterly sales development for three years, starting with 19, 20, 21. And of course, you see in the second quarter of the year 2020, the strong impact of COVID-19 and then the recovery of the economic environment. It started in the second half of 2020 and was continued in the first half of 21. In the second half of 21, we see more an increase in sales prices due to price increases to compensate for our raw material price increases. Looking at the next chart, number seven, our EBIT development, it's more somehow looking at the year 19 or 20, a similar development, but what you see here on the earnings side, of course, as well, is in the year 21, the impact of inflation, not only raw materials, but as well the impact of other cost inflation. Now I come to our next chart, chart number eight, our group sales. As you can see, the strong year-on-year growth of 21% is based on organic growth of 20%. and that is driven largely by an expansion in business volume. In addition, of course, as already said, increases in sales prices to compensate for the price rises on the procurement side became increasingly significant the second half of the year. Acquisitions and exchange rate effects played no role, and all regions contributed to the sales growth. I will come to the regions in a minute. Therefore, I would like to continue with our earnings summary for the full year 21. Our sales are up 21%. And of course, we benefited from our increase in higher selling prices. And we managed to increase our gross profit only by 13%. That is due to the impact of higher raw material prices. Our gross profit margin of 33.6% is 2.3 percentage points down due to the strong increase in raw material prices. If you look at the other functions costs, they increase as well. but this increase is mainly driven by higher freight costs, however, but they increase lower compared to the sales growth as well as to the gross profit. Our equity companies, they provided $9 million EBIT to our earnings, and overall, our EBIT came in by... 363 million Euro compared with 313 million in the year before. So our EBIT is up 16% year on year and our EBIT margin is 12.6%. Our CAPEX is significantly lower and it's now on the level of depreciation and amortization. Our net operating working capital increased quite a lot, and that reflects the higher business volume and, of course, the price inflation. Therefore, our free cash flow before acquisitions came in by 90 million compared with 2020 with 238 million. Now I would like to come to chart number 10 to give you a slightly overview about our region, EMEA. In EMEA, our sales are up 18% year on year. That was mainly driven by organic growth. Compared with 2019, we achieved an 8% increase. We have seen negative currency effects. of Eastern European countries, but they are slightly overcompensated by positive effects, mostly from South Africa and the UK. The EBIT of the region EMEA was significantly impacted by increase in raw material prices and a considerable increase in transport and labor costs. Therefore, the EBIT for the region EMEA is 166, which is 2 million below previous year. If you look at Asia-Pacific, and there we can see that our sales, that's chart number 11, our sales are up 22% year-on-year, and as well, mainly driven by the organic growth in China. Compared to 2019, sales were up 19%. In addition to China, all other countries recorded organic increases in sales revenues, except Malaysia, but that was COVID-19 related. A strong Chinese renminbi and Australian dollar more than offset negative translation effects resulting from weakness in the rest of the region's currencies. The EBIT of the region was $122 million, is as well as the sales, 22% above previous year. Coming to the next chart, number 12, North and South America, there we see as well an increase in sales by 22% year on year, and this is volume driven, and we see a strong organic growth in North America, but we have also seen an uptick in South America. Compared with 2019, sales are up 13%. Of course, the region continued to benefit from our acquisition of Nye and Polizai in the last year, and Nye as well increased profitability. We've seen negative currency effects from the weak U.S. dollar and, of course, of the South American currencies. We have a strong increase in earnings. Our EBIT of the region is $60 million in the year 2021 compared with $42 million in the year 2020. But the year 2020 in the region North and South America was quite a very weak performance and a very weak year. Now I would like to draw your attention to the next chart, to our net liquidity. As we have been able to exceed our forecast In terms of sales and EBIT, we missed it in our free cash flow before acquisitions. And on this chart number 13, you can see the development of our net liquidity starting with December 2020. We get cash in from our earnings after tax with our depreciation and capex as we put our capex down on depreciation level, we have more or less no impact. But then with a cash outflow of 152 million euro, you can see that we significantly increased our net operating working capital. And this is mainly based on an increase of inventories, which reflects the massive price increases. In addition to that, we have another cash outflow of other changes of minus 18. And this is due to the tax payment and the tax effect. In the year 2020, we had less tax payments. And in the year 21, we had to pay taxes regarding the year 2020. as well as advance payments for the year 21. In total, the difference or it was an amount of 34 million euro above 2020. On the next chart, net operating working capital, you can see the development of our net operating working capital as already mentioned. significantly up, and we are reporting 22.6% of sales. It's not the highest number. You can see in 2018 it was even higher, but of course, compared with 2020, it's a steep increase, and that is based on the not only on the increase of business volume, but as well on the price inflation. On the next chart, number 15, you just see some numbers of our strong solid balance sheet, and that reflects as well in the timeline our strong cash flow generation. In the first rows, you can see that as we increased our business volume, of course, we increased the number of total assets. But looking at our equity, we report an equity ratio of 76% compared with 75% the year before, and that's a very strong number. We are... We have a net liquidity position, even if it's below last year. We reduced our capex back to depreciation amortization levels. In 2016, we already started our capex program and our free cash flow before acquisitions. Of course, in the years 2016 to 2020, has an impact of this CapEx program. And in the year 21, yes, it looks quite low with $90 million, but I already commented on the strong net operating working capital increase. Coming to the next chart, number 16, there you can just see what I already mentioned. we propose a higher dividend by 4% for the year 21, and that is the 20 consecutive years with dividend increases. With that, I would like to hand over to Stefan, who is going to take over for the outlook and some other remarks.