Jost Werke Se

A very good morning and welcome to our 2021 financial year conference. I hope all of you are doing very well. We are broadcasting from our Just Studios that some of you already know from the Capital Market Days. and that's something that we developed during the corona pandemic as part of our digitalization efforts we're mainly using it for product training but today we're using it to explain to you our financial results for 2021 and the outlook for 2022. 2020 2021 were very turbulent years and it seems like 2022 will be just like that but let's come to 2021 i'm very happy to report that we've fully achieved all our financial targets for the year 2021. Coming out of a COVID impacted 2020, our sales grew by 32% to a total of 1,049 million euros. That's surpassing the 1 billion mark for the first time in JOST history. Our adjusted EBIT outperformed grew that growth by 42%, and we ended up at a total of 105 million Euro adjusted EBIT for the year 2021. That calculates to a margin of 10%, which is a growth of 0.8 percentage points versus the year before. Despite the expansion of our business, we could keep our working capital below the 20% target and ended at 18%. And also our financial position, the leverage was reduced to 1.45 times. What were the main highlights of 2021? Just grew in all of our regions, both in the transport business and the agriculture business. Despite a challenging supply environment, we all know about the material prices that went up steeply in 2021. We could improve our profitability, reaching the 10% adjusted EBIT margin. Our high operational flexibility allowed us to manage the volatile demands from our OEMs. A lot of them were suffering from semiconductor shortages. but also logistic constraints. We all remember the closure of the Suez Canal and supply chain disruptions. We could significantly improve our energy efficiency and our carbon footprint per production hour. We want our shareholders to participate in this success, and we propose a dividend payment of one euro and five euro cents per share for the year 2021. Let's come to the markets and see how the markets developed. And this is the comparison to 2020. And you have to remember that 2020 obviously was impacted by COVID more than 2021. So we've seen growth in almost all regions. In Europe, we had a strong growth in the truck, trailer and agricultural tractor market, more or less 16, 17, 19%. just benefited from our strong market position and we outperformed this market growth with a sales growth of 28%. Mainly, that is market share gains and also to a certain degree, price impact that we transferred to the market. North American market grew more or less the same way for truck and agricultural tractors. On trailers, we had a much stronger growth of 26%. The Just team in North America did a tremendous job and the business grew by 50%. Mainly market share gains, also pricing forwarded to the market, and also higher value products and logistics services that we offered to our customers. Asia Pacific Africa, a very heterogeneous group. Obviously, China plays a big role in that. China, as we've presented earlier had a very strong first half year, a very weak second half year. So that impacts the numbers here on truck. On traders, the situation looked much better. For JOST, we had a 23% growth in the overall region. So that's the stronger markets, Australia, South Africa, but also MENA market could outperform the weakness that we saw in the second half in China. With that, I would like to hand it over to Christian to explain in more detail the financial numbers of 2021.

Thank you very much Joachim and hello everyone. A warm welcome also from my side. You've already heard it from Joachim. 2021 was a record year for Joost in many ways. And in the following minutes, I would like to share some more details about these results with you. Contrary to what we've done previously, I would like to start with the group and also to look maybe not only in the last year, but the year before. And what you see there is 2019 was a record year for Yoast and 2019 was the last year before the acquisition of ALO. And then in 2020, you know that we had this coronavirus pandemic, which is still going on. But essentially, a lot of things came to a standstill in the first half of the year. And therefore, it had a significant negative impact on our sales development. so if you if you look at that last year 794 or in the year 2020 794 million in sales and this year is really the first time that just is able to surpass the 1 billion euro sales mark for the first time in the history of the company and what is even I mean, obviously, this is a major milestone for us as a company, but more so, I would like to point out the significant sales improvement that we were able to achieve, especially on the agricultural side. What you see here is a 43% growth compared to the year before. Yes. The year before was impacted by Corona, but it was not that severely impacted on the agricultural side as it was on the transport side. And to see a growth of 43% is something that we didn't believe would be possible. Not only because we did not assume that we would have the production capacities to make this all happen, but we did. But more so that the markets were also developing that favorably. As you may recall, when we acquired ALO and we presented this acquisition to you, we all said the typical agriculture market would move somewhere around the 0% to 1% mark. And maybe in good years, you'd see growth of 5%. Bad years, it could be negative. But 43% is something that we appreciated. All didn't see before and are very, very fortunate to, to have it, uh, have it happen. Um, also the transport side is back, uh, to where it basically was 785Million in sales is also a record year for the transport side. But I would like to point out that this is not, in terms of volume, the best year we've ever seen. So there is still room for potential growth in the years to come. So that's certainly something we're looking for. The OE business really propelled sales. Basically, all three original equipment manufacturing markets, truck, trailer, and tractors, really, really performed quite nicely despite all the challenges that we already knew would be coming. And we've talked about it in every quarterly call. about the the supply chain disruptions coming out of china we knew about shortages also of semiconductors which impact our customers and all of that in the end led to the already said 32 growth compared to the prior year and a new record level in sales Q4 basically returned to the typical historical seasonality, with Q4 being the weakest quarter for Joost, mainly dominated by the European region, where we have the longest customer shutdowns, which are typically coming from extended holiday seasons, especially in Europe, as I mentioned. And the comparison to the last year of Q4 is not really a fair one, because we had very high pent-up demand in Q4 last year because of the shutdowns in the first half of the year 2020. And therefore, we're still quite fortunate to see a growth of 15%. But this is the typical seasonality. And this typical seasonality is more so reflected if you go to the EBIT line for the quarter where you see a drop of 23% compared to the prior year, but with a margin of 7.8%, we are quite fortunate to see that despite all the challenges on the material side, that this is better than the year before. When you look at the global or the total margin for the year, you see also a record Number there, 105 million EBIT, a million euros EBIT has never been achieved by the company. And, uh, Again, we're fortunate to have it seen happen, and I'm very pleased to report that we're back in double-digit EBIT territory. That is something that we already announced as a mid-term target during our capital market stay, that we want to, even in challenging environments and challenging years, we want to be on a double-digit EBIT margin and Even though it sounds all very good, this was a challenging year for JOST. And we had to do a lot to make this happen. But again, I'm very happy to say we did it. And 10% EBIT margin is something that we're also quite proud of. Let's move to the next slide. So let's go through the regions very quickly. not to bore you too much uh so so also for for europe it was a was a very very good year 680 million in sales despite all of these impacts of the truck production where we saw very very short notices for for cancellations of our oems when they ran out of certain parts mainly semiconductors uh but but still uh this is a 28 percent growth compared to prior year and even for the quarter 14.4 percent is something that we're very happy to have seen certainly there there were first effects of uh price increases due to material pass through clauses uh but uh the bulk is yet to come and uh so so we will see more of that uh in the in the following year again Q4, normal seasonality, only a smaller growth with 14.4%. This was expected given the typical seasonality. The EBIT development in the full year, very positive, 22% higher EBIT, not quite in line with the growth on the sales side, but we need to bear in mind that especially the pass-through of material price increases would typically lead to a lower EBIT margin because you can only pass, I mean, whatever you do on the bottom line will happen on the top line, and that just mathematically brings down your margin somewhat. But still, 22% growth, a margin of 7.3% for the region of Europe is good. This is certainly something what you need to bear in mind. Europe is... the region which suffered most from supply chain disruptions, not only on the customer side, but also on our own company side, because especially the agricultural part of the business is tremendously relying on pre-production material coming out of China. We have a dedicated plant in China that produces front loaders for sales in North America and especially Europe. And there we saw quite some challenges that you are all aware of with chips stuck in the Suez Canal. ports being shut down in china due to one corona case and so on and and there's just a multitude of things that that were impacting that and and and given given all those challenges i'm again i'm quite happy to see still a 7.3 ebit and also i would like to remind you again that uh that the uh that we do not pass through uh the headquarter costs that are The bulk of that is shown in Europe, and that is one of the reasons why the margins in Europe are typically lower than in North America and in Asia Pacific Africa. Speaking about North America, let's go to the next slide. So North America, yet another very, very successful year. We are very happy to report that we were able to strengthen and to grow our market position in North America, both on the agricultural and on the transport side. We've outpaced markets significantly, and we grew our sales by more than 50% in the last year. And that came despite all the challenges that we had, like almost all manufacturing companies to find and hire enough blue-collar workers that That was quite a big challenge. But overall, not only did we achieve a 50% growth in sales, we also see a 100% growth in adjusted EBIT. So adjusted EBIT grew from 11.8% to 23.7% in North America. I mean, it's an unbelievable result. I think there are... two main items, first of all, that were causing this significant improvement. So first of all, we saw a very high utilization of our production capacity and high utilization means a better margin. That is the one thing. The other thing is on the agricultural side, after the plant relocation that took place in the year 2020, we were fully operational in our North American front loader plant. And that also caused margins to grow significantly. So in North America, also in Q4, we achieved a 10% margin and overall for the year, a 9.1% margin. Now we go to the last region, Asia Pacific and Africa. Next slide, please. So Asia Pacific Africa was an interesting region to say the least. Joachim already mentioned that China had two totally different parts of the year. So in the first half, we've never seen before high production volumes because of the shift from the China 4 emissions regulation to China 6. So the pre-buy effects were enormous. And then in the second half of the year, all of that came to almost complete standstill. So if we simply speak about Q4, we've had probably roughly 50% of our sales in China in Q4 2021 compared to Q4 2020. So that just gives you an indication how significant this drop was and how significant also this uptake was in the first half of the year. But overall, we were able to also grow in Asia-Pacific Africa by 23%. We saw what I already mentioned as a decline in the quarter four by 14%, only driven by China, because all of the other end markets in Asia-Pacific Africa performed very, very strongly. And that was led by the Pacific region, Australia, New Zealand. South Africa, but even more so, I'm very happy to report that India, India who's been really our concern uh for the last two years has has come back and is now uh back on on track and is producing on a very high level and this is also visible if you look at the the margins and the overall profit 30 million for the year is 41 higher than last year margin now up to 17.5 for the full year and in the last quarter already 18.7 percent and that is uh That is the reason why the other countries really took up what was left behind from China and therefore quite happy to say that also in that region we saw a very high growth. Now let's go to more some of the balance sheet items and well, not balance sheet, right? But let's go to the more financial related items. So net income and adjusted earnings per share. What you see here is the typical bridge that you're probably used to see. And what we're showing here is the typical development from 44 million in net income. We add back some taxes, again, on a very low level with 4 million. And this is This is not going to change for the near future. Finance result of 6 million. Most of that is unrealized foreign exchange losses. And then we have the typical adjustments that you're quite used to. The 28 million in purchase price allocation is something that happens every year for the next many years that you are well aware of. And then we had the one-time effect of the disposal of JustUK. Our Edbro cylinder production unit was sold in the first half of the year, and that led to an 11 million negative effect due to a non-cash impairment plus an additional 2 million cost effect, which was cash relevant that we had to adjust. And then last but not least, some of the usual other adjustments, the majority of those are related to relocation projects that took place and are still ongoing in the year. So all of all in all the adjusted EBIT of 105 million and then the typical more artificial walk to the adjusted net income take out again the six million finance result and then this overall As I said, a blended tax rate, uh, not, not really blended. No, it's not right. Uh, it's, it's the typical rate for Germany, uh, that you would see with 30%, uh, corporate income tax that brings you down to a 69Million adjusted net income, which is significantly better than the adjusted net income the year before 47Million. And this leads to an adjusted earnings per share of 4.63 Euro cent or 4.63 Euro in 2021 compared to 3.18 in 2020. And you know, and you heard already from Joachim, we are more than happy to share the part of that result with our shareholders and propose a dividend of 1 Euro and 5 cents. So now let's talk about some other items. ROSI back above 16%. So we are at 16.6%, a quite strong development, slightly lower than after Q3, mainly due to the lower result in Q4. Equity ratio, very happy to see it again above 30%. This is a, well, this is a threshold that's quite important for financing discussions. So 31.2%. is the first time that we're above 30 again after the acquisition of ALO. And also our net debt declined to 194 million, and that leads to a leverage ratio of 1.45 times at the end of the year. And just bearing in mind, when we acquired ALO, our leverage was immediately following post the closing was above three, and we're already down to 1.45. Again, a testament to the strong cash generation of our business model. Speaking about cash, here we come, the free cash flow of 33 million is probably one of the few weakest points in the last year. And our cash conversion rate of 0.5, Also here, I would like to mention this is according to the new definition that we had introduced during the capital market state. And we've also said that our target for the cash conversion rate should be somewhere between 1 and 1.3. So here we have to state that we didn't achieve this one target, but I can give you some reasons for that. And it's something that you also see when you look at the development of networking capital on the bottom of that slide. You see that our networking capital increased by 19 point. Yeah, it's it's up to 18 percent of sales. So that's already higher than last year, still below the 20 percent mark that we had had before. But you see here that especially our receivables went up significantly faster than our sales or the other parts of the networking capital. So you see a 46 percent increase. increase in receivables, sorry, inventories. I was speaking about inventories. So you saw a 46% increase in inventories, 23% increase in receivables and 28% increase in payables. And that is a, comparing to a sales growth of 32%. So you really see that our inventories grew significantly stronger than our sales and the other two portions of networking capital. And the reason for that is something that I mentioned already before. We had significant supply chain disruptions. And in the end, we were doing everything to protect the business for our customers. So we wanted to make sure that we will be able to deliver under all circumstances. And that certainly sometimes led to higher inventories. And the good thing is, yes, our free cash flow is not at the level where we had expected it. But the good thing is investments in inventory are typically not useless investments. This is something that we will use this year and we will bring it down this year. And therefore, we are certain we can further improve our free cash flow in the year 2022. I left out the middle portion of this slide, that is capital expenditures. Capital expenditures were down to 1.9% of the of sales. And this is certainly very low for a company of Joe's. We spent 20 million. This is in line with what we did last year. But it just shows that the growth in sales was just very, very high. And we do not base our capital expenditures on an assumed sales number. We base our capital expenditures on needs to maintain the plants, the facilities. and 20 million was enough. I do expect it to be slightly higher for the year, but it will still be within our long-term range of 2.5% of sales. So last but not least, I would also like to talk a little bit more about our ESG targets and our ESG achievements. And I'm very happy to say that our energy efficiency and our CO2 footprint significantly improved compared to the last year. What you see here is on the top part of the slide, you see the energy consumption in kilowatt hours, and you see that, or in million kilowatt hours, and you see that we had an increase of 5.5%. This doesn't sound too good, but if you compare it to a sales increase and also an increase in production hours of around 32%, this gives you a good indication that with the higher capacity utilization, we were also able to reduce our overall sales. energy consumption in percent of the production hours. And this is again visible if you look at the lower part of the slide where you see a separation between scope one and scope two CO2 emissions. And here you can see that despite a growth of 32%, we were able to lower our total CO2 emissions down down to 35.8 million CO2 tons per year. But what's even more important, our kilogram CO2 emissions per production hour went down by 24%. And the significant improvement really came from a better electricity mix. And that is not electricity that we decided to switch suppliers, go to more greener energy. But it was more so that we were able to use more electricity in countries which have a better energy mix in general. And therefore, our overall CO2 emissions already went down by 24 percent. And that brings us to our overall long term target of a reduction of at least 50 percent, much, much closer than we had thought. So with that being said, I would like to hand it back over to Joachim. I think it was a great year and up to you to finish it.

Okay, thank you, Christian. So let's come to the outlook for this year. And if we go back to the market slide, then the market expectation that was drawn by the Prognosis Institutes is for Europe still slightly positive. Mind you, all those numbers were calculated before the Russia-Ukraine conflict came in. But I will give you a little bit of the background behind these numbers and how we judge it and also make some comments how they're impacted by the recent developments. So for Europe, truck, trailer and tractors, a slight positive development is expected. And of course, If the crisis and the conflict continues for a longer time, it has an effect also on the total European economy that would have an impact. If it remains just an impact for Russia and Ukraine, then we don't expect a huge change from this. But of course, that's all hard to predict and dependent on how that conflict develops. For North America, we are still quite bullish. We and the Prognosis Institute and our customers still expect a growth in the double digit percentage region in trucks and trailers. And the year has also started quite strong when it comes to demand. So we see a continuous demand. The issues are a little more the available labor for the production of these vehicles and also for our products and some material prices that may have an impact in demand. But right now, we're not really seeing that. Asia-Pacific Africa, everybody reads the news about COVID hitting China and the close downs that we have. So that could impact these numbers a little more than the already expected decline. But as we've both pointed out earlier, in these numbers, you see a lot of impact from the Chinese market. Our exposure to the Chinese market, even though it's a high volume for us, is not as as big because we are also in the other Pacific areas and MENA areas quite strongly represented. So it doesn't weight as heavy on our business as these numbers may suggest. So let's come to the next slide, what we will be focusing on in 2022. We will certainly continue to ensure our operational flexibility. to accelerate the digitalization and to maintain the cost and cash focus. That has been the recipe for the last two years and it has served us well. And we were able to generate good results in 2020 and 21, as you've just heard. And we certainly want to continue that in 2022. We will also continue to monitor the market developments closely and adapt flexibly to potential changes in the market environment. We are well trained to do that because we had to go through the roller coaster in many markets and you followed us doing that for the last two years. Also, we will increase our penetration in our new products for transport fleets and for agricultural dealers and farmers, especially when it comes to digital products that we are implementing into the trucks, trailers and agricultural tractors. And we will certainly explore opportunities to grow our agricultural business in Asia and in Latin America, either with organic growth or through M&As. And of course, we will also implement the already identified measures to further reduce our CO2 emissions and reach the 50% reduction by 2023. Let's come to the outlook. So what does that mean for our guidance? And all of this is assuming that the that's the conflict that we see between Russia and Ukraine is limited in time and remains local. So if that spreads, then we will have to adjust to that. But for the time being and assuming that this will only have the local impact that we're currently seeing and that it's not an endless story, we still plan to grow our sales in the mid single digit year over year. And here as a reference, the 1,049 billion euros is the basis. So we expect mid single digit growth on sales and an EBIT adjusted EBIT growth to follow that sales development also in the mid single digit range. That then calculates to a more or less stable EBIT margin. CapEx, Christian just mentioned is as usual, two and a half percent of sales that will serve as well. And that's what we've had over the years. There may be some years like last year where the sales develops a little quicker and there may be other years where we do larger investments, but that's more or less the guideline and we will stay in that guideline. Okay. Then let's come to the total summary of this call. We've had record sales and earnings in 2021. We clearly surpassed the 1 billion mark the first time in your history and reached the 105 million euros adjusted EBIT. We benefited from our strong market position in transport and in agriculture, with both business lines contributing to these record results. The acquisition and the successful integration of ALO brought us new growth opportunities and increased the value of JOST's shareholders. Logistic disruptions, sharply rising material cost affected 2021, but with price increases, operational flexibility, we were able to partially offset this negative impact. Our business model is intact. We have the right products. Our products do not depend from the industry transformation that we see towards electric vehicles, quite the opposite. There's additional opportunities to sell higher value products. Therefore, we aim to achieve further profitable growth in 2022, despite a challenging market environment and rising uncertainties. With that, I would like to thank you very much for your attention, and we're looking forward to your questions.