Krones : Capital Market Day 2020

JFH

Understanding Uncertainty

Mastering Volatility

Shaping the Future

Capital Market Day 2020

12th of November 2020

2 ｜Capital Market Day 2020

The Global Impact of COVID-19 is severe,…

Travel Restrictions

On-Trade Sales

Supply Chain

…but long-term Growth Fundamentals remain intact…

Population Growth

Middle Class

Urbanization

…and Krones is well positioned for the "New Normal"!

Remote & Digital	Sustainable	Localized

3 ｜Capital Market Day 2020

Agenda

• Review Financials Q3/2020
• Where do we stand in times of pandemic
• Feedback from our customers
• Long-termmegatrends

--- Discussion/ Q&As ---

• Shaping our future
• • Securing our future: Costs & structures
  • Designing our future: Innovation & Growth
• Financial Implications
• Key Takeaways

--- Discussion/ Q&As ---

4 ｜Capital Market Day 2020

Agenda

• Review Financials Q3/2020

5 ｜Capital Market Day 2020

Krones Highlights Q1 - Q3 2020

-22.2%

2,301 EURm

New orders

6.0%

147,3 EURm

2,449

-58.4

Sales (-15.3%)

EURm

Free cash flow

EURm (PY -294.5 EURm)

EBITDA margin (PY 164,3 EURm; 5.7%)

6 ｜Capital Market Day 2020

Order Intake in Q3 clearly better than Q2 - but still affected by COVID-19

4,084

2,301

-22.2%

-8.2%

844

3,959

2,449

-15.3%

-25.0%

750

-16.5%

▪	Order intake in Q3 2020 was 8% below prior
	year, but with a strong increase vs. Q2 2020
	(+37%).
▪	As a result from low Q2 2020 order intake, the

-38.2%

616

-19.3%

841

-4.2%

757

942

decrease in sales in Q3 was 25% compared to

Q3 2019.

2019

2020

2019

2020

Order intake (EURm)

Sales (EURm)

7 ｜Capital Market Day 2020

Cost Savings compensate the negative Sales Effect on the EBITDA in Q3

▪ Cost savings in personnel and material costs compensate most of the negative effects from the decrease in sales on the EBITDA

▪ EBITDA margin in Q3 with 6.0% was higher than prior year (5.7%)

▪ EBT affected by 13.6 EURm impairments in Q2 2020

8 ｜Capital Market Day 2020

Development of Sales and EBITDA per Segment 9 Months

Segment	Sales (EURm) 9 months		EBITDA (EURm) 9 months
Product filling	Growth			EBITDA margin
and decoration	+6%	+6%	-13%	8.7%	7.0%	8.3%

2,271	2,418	2,094
		197.9	169.7	173.4

Beverage production/	Growth			EBITDA margin
Process technology	+14%	+12%	-25%	1.9%		-1.1%	-7.4%
(incl. Intralogistics)		472
421
	355
				+8.2
							-5.4
							-26.1

Product filling

• The measures to reduce personnel costs (short-term) as well as reduction of employees on one hand and the positive product mix on the other hand have had positive effects in the core segment, which was influenced by decrease in sales mainly in the third quarter.

Process technology

• This segment improved its profitability in Q3, but still with a small loss of
  1 EURm in Q3 2020.
• Intralogistics as part of the segment has recovered in Q3 the shutdown of Q2 and posted a small profit of 0.5 EURm in Q3.

2018

2019

2020

2018

2019

2020

9 ｜Capital Market Day 2020

Free Cash Flow improved significantly by 236 EURm vs. prior Year

Q1 - Q3 (in EURm)	2020	2019
Earnings before taxes	26.7	61.4
+/- Other non-cash changes	+176.6	+187.9
+/- Changes in working capital	-85.5	-321.1
+/- Changes in other assets and liabilities	-107.9	-50.2
Cash flow from operating activities	9.9	-122.0
+/- Capex	-68.5	-138.3
+/- M&A activities	0	-34.9
+/- Other	+0.2	+0.7
Free cash flow	-58.4	-294.5
+/- Financing activities	+124.5	+248.9
Other	0	+3.8
Net change in cash	+66.1	-41.8
Cash at the end of the period	176.5	177.0

• Change in working capital favorable developed compared to last year
• Investments were reduced by 50% compared to the same period of the previous year
• No M&A activities
• Free cash flow improves by more than 230 EURm in the first nine months

10 ｜Capital Market Day 2020

Krones Outlook 2020

Revenue growth

EBITDA margin

~-17%5.5-6.0%

Sales

Equivalent to EBT margin

~€3.3bn 1.0-1.6%

This outlook does not include any one-off expenses for impairments and structural measures for capacity adjustments.

If further countries and regions impose lockdowns, partial lockdowns or travel restrictions because of Covid 19, this could negatively impact the completion of orders and order intake and consequently have a negative influence on Krones' financial performance.

11 ｜Capital Market Day 2020

Krones Group KPI's

Actuals, Outlook 2020 and Base Case 2021/2022

EURm	Actual	Actual*	Actual *	Outlook*	Base Case	Base Case
2017	2018	2019	2020	2021	2022
SALES	3,691	3,854	3,959	~ 3,300
EBITDA	9.2%	8.7%	6.6%	5.5%	- 6.0%
margin
EBT margin	7.0%	6.4%	2.8%	1.0%	- 1.6%
Working
Capital	27.3%	27.3%	26.9%	28%	- 29%
(in % of sales)

* = without one-time impacts for restructuring costs and impairments

12 ｜Capital Market Day 2020

Q3 Financials & Outlook Confirmation

Detailed Q3/2020 financial figures are

published today and we confirm our

FY2020 outlook

13 ｜Capital Market Day 2020

Agenda

• Where do we stand in times of pandemic

14 ｜Capital Market Day 2020

Number of Infections is rinsing globally - biggest Momentum in Northern Hemisphere

Status 11/11/2020

While a second wave of infections hits Europe in particular, daily infections have been rising steadily on a global level.

15 ｜Capital Market Day 2020

Why and for how long the Virus is likely resurging in Europe & North America

			1)Less sun exposure → low Vitamin-D levels	1)	Dry mucous membrane
				More social activities in closed spaces	2)	Increased virus survival (lipid bilayer)

Critical

October to April

 Scenario for Infection Prevalence in the UK (northern hemisphere)

UK Academy of Medical Sciences / adopted illustration

Study: "Preparing for a challenging winter 2020/21" (14.7.2020)

02/2020

06/2020

09/2020

12/2020

03/2021

07/2021

During Spring, uncertainty prevailed. Now we know how to effectively respond to rising cases!

16 ｜Capital Market Day 2020

Krones' COVID-19 Response: Successful Adaptation of our Operational Setup

Health Management

The health & safety of our employees is paramount! We do our best, to keep ALL colleagues healthy.

• First precautionary measures approved by executive board & implemented as early as January 2020(!)
• Fast ramp-up of IT infrastructure creating capacity for 8000 VPN remote workspaces by mid-March 2020
• Comprehensive 3-stageresponse & containment scheme for our premises based on local virus prevalence

Travel Management

Over 50% of our revenue is outside Europe. Travel restrictions presented an extraordinary challenge to us!

• Operational shift to remote sales & customer support in all regions using technologies like AR-glasses
• COVID-19travel assistance in place: guidelines, travel kits, 24/7 hotline, medical advice, evacuation plans
• Over 100 service technicians from Germany provide essential assistance for customers in risk areas

Krones' operations are largely classified as "systemically relevant".

We were permitted to carry on business even under strict lockdown rules!

17 ｜Capital Market Day 2020

Agenda

• Feedback from our customers

18 ｜Capital Market Day 2020

Regional Second Wave of Infections hits Europe - Ramifications for the Beverage Market

Second Wave

Implications

▪ A rebound of on-trade sales

throughout summer reverses

as restrictions return

▪ Volume shifts from on-trade to

off-trade are now increasingly

becoming permanent

▪ Businesses must adapt, e.g. craft breweries with taprooms need to invest in can lines

The resurgence of infections forces our European customers to adapt operations.

19 ｜Capital Market Day 2020

Market Insights from our Discussions with Customers on Executive Level

Current situation of our customers

• Revenue decline by 10-15%
• Overall profitability down 25-30%
• Changes in product portfolio: less SKUs & higher volumes
• Shift in distribution channels: more off-trade & eCommerce
• Budgets and scheduled projects delayed and/ or cut

Customers' mid-term assessment of beverage market

• Full recovery of consumption expected within appr. 2 years
• Recovery of capex budgets in 2.5 - 3 years from now
• Volatility leads to instable planning assumptions
• Higher share of at-home consumptions (incl. home delivery)
• Consumer preference shift to value segment (affordability)
• Customer focus: productivity, efficiency, cost cutting

COVID-19 will impact our customers' business throughout the next two years.

20 ｜Capital Market Day 2020

Investment Strategy Insights from our Discussions with Customers on Executive Level

Customer investment plans

• Limited capex in upcoming years
• Opex in focus => Alternatives
• Supply-chainschange alongside customer behavior
• More operator-free processes (remote/automation)
• Revenue-mixis tilting towards can lines
• Market volatility necessitates faster "time-to-market"

• Impact on Krones
• Total performance counts: costs, quality & deadlines
• Temporary pressure on pricing
• Opportunities for Krones: local structures, digital solutions, new maintenance & business models

Mid-term investment plans will be shaped by conclusions drawn from COVID-19.

21 ｜Capital Market Day 2020

Anticipated Changes in Beverage Consumption & Market Potential

Global beverage consumption by industry

(in bn litre)

CAGR*		CAGR 14/19	CAGR 20/25
Beverage consumption		+2,0%	CAGR 19/20	+1,4 %
Global:
			-5,4%
	Beer	1.239	1.366	1.292	1.383
			211
	Wine/Spirits	207
	205		183	62
		70
			61	154
		62		146
	Sensitive beverages		137
	147		242	179
				233
		222
	Milk/New Dairy				227
	237		242	227
	CSD			459	451	513
		367
	Bottled water	2014		2019	2020	2025 FC

Source: Global Data | *CAGR: Compound Annual Growth Rate

A strong rebound in volumes is projected in the years 2020 - 2025.

22 ｜Capital Market Day 2020

Krones Group KPI's

Actuals, Outlook 2020 and Base Case 2021/2022

EURm	Actual	Actual*	Actual *	Outlook*	Base Case	Base Case
2017	2018	2019	2020	2021	2022
SALES	3,691	3,854	3,959	~ 3,300	3,300 - 3,400	3,500 - 3,600
EBITDA	9.2%	8.7%	6.6%	5.5%	- 6.0%
margin
EBT margin	7.0%	6.4%	2.8%	1.0%	- 1.6%
Working
Capital	27.3%	27.3%	26.9%	28%	- 29%
(in % of sales)

* = without one-time impacts for restructuring costs and impairments

Figures for 2021 and 2022 do not constitute a binding financial guidance and shall not be interpreted as such.

Ranges are subject to assumptions that depend upon external factors beyond the influence of Krones' management.

23 ｜Capital Market Day 2020

Agenda

• Long-termmegatrends

24 ｜Capital Market Day 2020

COVID-19 will notchange long-term Tendencies of Population Growth

The Size of Human

World Population

projection until 2100

Population by country, available from 1800 to 2100 based on Gapminder data, HYDE, and UN Population Division (2019) medium variant scenario projections.

Visualization CC-BY OurWorldInData.org/world- population-growth

25 ｜Capital Market Day 2020

Neitherwill COVID-19 change the long-term Trend towards Urbanization

Split of Population

Urban vs. Rural based on UN projection until 2050

ourworldindata.org CC-BY

26 ｜Capital Market Day 2020

Rising Middle Class: 2020 marks a setback in Eradication of poverty - but it's temporary

Forecasted 2020 increase of extreme poverty by 70-100Mio. individuals to a total of 700 million people globally*

* The Economist 26.9.2020

Income per Day/Capita (adjusted for purchasing power)

Global Tiers of

Income per Capita

ourworldindata.org CC-BY

27 ｜Capital Market Day 2020

Additional Aspects of the "New Normal" post-COVID-19 World

Sustainable Packaging and Beyond

Roughly 1kg of plastic waste per person / year is leaking into the world's oceans globally1

• Consumers, regulators and our customers are no longer willing to accept this situation

Action on Climate Change

If the global temperatures rise more than 1.5°C, adverse environmental effects may be irreversible2

• The IPCC calls for a 45% reduction of emissions from 2010 levels until 2030 to thwart disaster

Decade of COVID-19 Economic Rebound

Firm monetary & fiscal response in mature markets coincides with persistent EM megatrends

• Long-termgrowth fundamentals indicate a strong rebound after COVID-19 setbacks

1Jambeck, J. R., Geyer, R., Wilcox, C., Siegler, T. R., Perryman, M., Andrady, A., … & Law, K. L. (2015). Plastic waste inputs from land into the ocean. Science, 347(6223), 768-771.

²IPCC, 2018: Summary for Policymakers. In: Global Warming of 1.5°C. An IPCC Special Report on the impacts of global warming of 1.5°C above pre-industrial levels and related global greenhouse gas emission pathways, in the context of strengthening the global response to the threat of climate change, sustainable development, and efforts to eradicate poverty.

28 ｜Capital Market Day 2020

Agenda

--- Discussion/ Q&As ---

29 ｜Capital Market Day 2020

Organizational Notes on Q&A Session

If you have inquiries, please make use of the "raise your hand" feature

When not talking, please mute your microphone

? …

30 ｜Capital Market Day 2020

Agenda

• Shaping our future
  ▪ Securing our future: Costs & structures

31 ｜Capital Market Day 2020

Our Strategy for Shaping Krones' Future in the New Normal

Shaping the Future

Short-term

Mid-term

Saving the Future

• • Costs and Structure
• Adaptation of capacities
• More efficient structure in indirect departments
• Reduced manufacturing costs
• Employees & Management: Develop "New Normal" skills
• Product portfolio: Future of Process Technology
• Establish cost-efficient global value chain
• Reduction of internal degree of added value

Short-term

Mid-term

Designing the Future

• • Innovation and Growth
• Digital & remote solutions for the "New Normal"
• Sustainability Packaging & Beyond
• Pricing as part of Krones' DNA - Selection & USP
• ESG - Focus on Climate Action
• Regional Markets - Global Reach
• Levering Intralogistics' potential
• Innovation Programs

32 ｜Capital Market Day 2020

Our Strategy for Shaping Krones' Future in the New Normal

Short-term

Mid-term

Shaping the Future

Saving the Future

• • Costs and Structure
• Adaptation of capacities
• More efficient structure in indirect departments
• Reduced manufacturing costs
• Employees & Management: Develop "New Normal" skills
• Product portfolio: Future of Process Technology
• Establish cost-efficient global value chain
• Reduction of internal degree of added value

33 ｜Capital Market Day 2020

Adaptation of Capacities

Temporary

Sustainable

Extensive, but targeted use of government furlough schemes (Kurzarbeit) in departments with low utilization

Temporary insourcing of service contracts to increase internal utilization

Termination of temporary contract workers wherever possible

Voluntary leave program offering employees early retirement and severance packages

Further measures for capacity adjustment are being negotiated

We adapt resources to anticipated market volume.

34 ｜Capital Market Day 2020

Capacity Adjustment Krones AG Entity / Germany

10,707	-15 % (-1,637)						-22 to -25%
FTE'S
Thereof:		10,248				Capacity
					Target
1,201		9,071					&
					2022
466	- 807 sustainable			9,072			Efficiency
691		8,545		8,200 - 8,400
170		8,413
	reduction
							FTE'S
	of temps
							300
	and own							200
	FTE's
							7,700-7,900
9,041	- 830 temporary
	reduction	8,744
	through
	- short time
	program
	- overtime
	- time banks
	- ….
Average		Average	Q1	Q2	Q3	Q4		Q1
2019		2020	2020	2020	2020	2020		2022

		Temporary labor		Overtime converted in FTE's		Own FTE's

Decisive adjustment of capacities at German sites will be pursued throughout 2021.

35 ｜Capital Market Day 2020

Our Strategy for Shaping Krones' Future in the New Normal

Short-term

Mid-term

Shaping the Future

Saving the Future

• • Costs and Structure
• Adaptation of capacities
• More efficient structure in indirect departments
• Reduced manufacturing costs
• Employees & Management: Develop "New Normal" skills
• Product portfolio: Future of Process Technology
• Establish cost-efficient global value chain
• Reduction of internal degree of added value

36 ｜Capital Market Day 2020

Portfolio optimization in Krones House

Digitalization

	Processing				Bottling and				Intralogistics
				Packaging
	Technology
				Technology

LCS		LCS		LCS

Processing Technology: Review ongoing

• Initiated: unbundling and stand-alone ability
• Priority: brewery activities
• Halt on acquisitions: utilize current footprint, leverage China and India
• Update on CMD 2020

Bottling and Packaging Technology: Optimize portfolio

• Innovate Glass and Can product portfolio
• Push sustainable plastic packaging
• Divest low potential technologies

Intralogistics: Manage high growth

• Stand-alonelegal structure established

Lifecycle Service: Maintain growth

• Digitalize after sales business and establish next level business models

Digitalization: Invest

• Implement digital solutions in core business activities
• Develop and commercialize stand-alone products

37 ｜Capital Market Day 2020

Why we carve out Steinecker Breweries Unit: Differing Business Models

Equipment for

Filling & Packaging

Machinery

Short investment cycles (~10 years)

Single Machines & Lines

Configuration for base machines

Recurring after-sales business

High innovation pressure

Equipment for

Breweries

5

Plants/ Systems

Long investment cycles (>30 years)

Integrated, unique projects

Project-specific engineering

Sporadic after-sales business

Moderate innovation pressure

Different

operational

requirements

Systems

Processes

Organization

Manufacturing

Logistics

Installation

As an integral part of Krones AG entity, Steinecker was lacking the necessary latitude to adopt the business setup to industry-specific needs.

38 ｜Capital Market Day 2020

Update Current Status of Carve-Out Breweries/ Steinecker (Freising Plant)

Deliverables as of 12th of November 2020

▪ Successful appointment of Managing Director & Head of Finance/ Admin

for brewery unit

• IT separation effort in advanced stage
• New organizational chart suitable for stand-alone setup fully implemented
• Internal communication of carve-out plans & alignment with labor representatives
• Headcount capacity adjustments in final negotiation stage

Milestones for 2021

• Business development with focus on life cycle services and sustainability
• Legal completion of carve-out with new entity operating under well- established Steinecker brand
• Implementation of profitability improvement strategy in new entity

Implementation of carve-out plan is on track despite pandemic-induced hurdles.

39 ｜Capital Market Day 2020

Our Strategy for Shaping Krones' Future in the New Normal

Short-term

Mid-term

Shaping the Future

Saving the Future

• • Costs and Structure
• Adaptation of capacities
• More efficient structure in indirect departments
• Reduced manufacturing costs
• Employees & Management: Develop "New Normal" skills
• Product portfolio: Future of Process Technology
• Establish cost-efficient global value chain
• Reduction of internal degree of added value

40 ｜Capital Market Day 2020

A strong presence on all continents allows us capture growth & saving potentials worldwide……

…and lowers our exposure to protectionist trade policies.

41 ｜Capital Market Day 2020

Ramp-Up of Krones Debrecen / Hungary Facility

Update November 2020







Over 15.000h of utilization

in October 2020 production

Manufacturing fully

operational

First pre-assemblies

successfully completed

We confirm our July 2020 timeline and expect full operation by Q1/2021.

42 ｜Capital Market Day 2020

Best Cost Country Sourcing and further Procurement Levers

BCC Sourcing Approach

• Labor costs
  1 ▪ Infrastructure

Selection ▪ Risks

Criteria ▪ Duties

• Subsidiaries

	▪ China
2	▪ Asia / Pacific
Regional	▪ India
Focus	▪ Central- &
	Eastern Europe

3

Ramp-up

Process

1 Price

5 Order 2 Quality

4 Contract

3 TCO

	▪ Reduction of
4	Material Costs

• Increased
  Targets/ Localization Results ▪ Resilience

Targets

confirmed

In the "New Normal", we further strengthen our effort to built resilient & competitive supply chains.

43 ｜Capital Market Day 2020

Our Strategy for Shaping Krones' Future in the New Normal

Short-term

Mid-term

Shaping the Future

Saving the Future

• • Costs and Structure
• Adaptation of capacities
• More efficient structure in indirect departments
• Reduced manufacturing costs
• Employees & Management: Develop "New Normal" skills
• Product portfolio: Future of Process Technology
• Establish cost-efficient global value chain

• Reduction of internal degree of added value

44 ｜Capital Market Day 2020

Depth & Flexibilization of Value Chain - Continuous Improvement Process

Machine

today

Future

Modules

Chain

Units

Value

Parts

We assess and optimize the depth of our value chain to strengthen profitability & flexibility.

Employed Capital

45 ｜Capital Market Day 2020

Agenda

• Shaping our future
  ▪ Designing our future: Innovation & Growth

46 ｜Capital Market Day 2020

Our Strategy for Shaping Krones' Future in the New Normal

Shaping the Future

Short-term

Mid-term

Designing the Future

• • Innovation and Growth
• Digital & remote solutions for the "New Normal"
• Sustainability Packaging & Beyond
• Pricing as part of Krones' DNA - Selection & USP
• ESG - Focus on Climate Action
• Regional Markets - Global Reach
• Levering Intralogistics' potential
• Innovation Programs

47 ｜Capital Market Day 2020

Krones Digital Solutions - Securing our Market Position and enabling Growth

Digital Customer Solution

Digital machine option

Extension/enhancement of stand-alone hardware with digital add-ons, e.g. to achieve an increase in productivity in the customer's production

Digital systems

Digital systems are combined with hardware and sensors, software and service to create a system that gives the customer added value in his production

Software platform

Multi tenant platforms manage production processes and devices, connect users and companies and provide business applications

Process optimization software

Cloud-based or on-premise software solutions are used in production processes

Digitally-enhanced Services

Extension of existing services with digital components

Digital consulting

Advising customers on questions of digital transformation and supporting the customer during the introduction of digital solutions in the customer company

Krones as provider

of the leading digital platform for beverage industry

Krones eBusiness

as commercial platform

Over 300 employees are dedicated to the development & improvement of our digital solutions.

48 ｜Capital Market Day 2020

Our Strategy for Shaping Krones' Future in the New Normal

Shaping the Future

Short-term

Mid-term

Designing the Future

• • Innovation and Growth
• Digital & remote solutions for the "New Normal"
• Sustainability Packaging & Beyond
• Pricing as part of Krones' DNA - Selection & USP
• ESG - Focus on Climate Action
• Regional Markets - Global Reach
• Levering Intralogistics' potential
• Innovation Programs

49 ｜Capital Market Day 2020

Approximately 50% of Krones' current addressable Market is Plastic-based

		Non-Plastics - Krones Scope		Plastics - Krones Scope		Non-Plastics - Out of Scope		Plastics - Out of Scope

Plastics: 34% of all containers, ~50% within Krones scope

We are well aware of our exposure to plastics and took decisive action mitigate risks by focusing on improved packaging sustainability & recycling solutions.

50 ｜Capital Market Day 2020

Our Key Accounts are looking towards Recycling to address issues concerning Plastic Waste

	Recycled Content Target
PepsiCo				Our Base Case
25% until 2025
Assumption for 2030

Coca-Cola

50% until 2030

Nestlé (Water)

50% until 2025

Dr Pepper Snapple	30% until 2025	~50%
		average rPET
Danone (Water)	50% until 2025	content globally

Key Accounts pledge to increase their recycling effort - a vast opportunity for Krones!

51 ｜Capital Market Day 2020

European Circular Economy
is a proud member and made the following voluntary commitments1
Stakeholder Platform

1	rPET Compatibility
By 2025, all new PET bottling lines will be suitable for processing high-quality rPET contents of up to 100% without compromising output quality, efficiency or effectiveness.
2	Plastic-free secondary Packaging
By 2022, alternative secondary packaging solutions free of disposable plastics will be available for every well-establishmultipack SKU format.
3	Advisory for recycling-friendly Packaging Design
We will leverage our technological expertise to help customers design packaging that specifically facilitates post-consumer recycling.
4	Upgrading from Linear to Circular Economy
We will assist our customers to adapt existing lines in order to achieve the best possible outcomes when using recycled or renewable input materials.
5	Tethered Caps
With immediate effect, we make capping equipment available, that allows for the application of tethered caps.
6	Sustainable Labelling
We enable fitting detachable labels to enhance recyclability. Our ultimate objective is making labels jointly recyclable
	with containers or eliminating the necessity for separate labelling altogether.
7	Investing in Recycling Solutions
We will continue to allocate substantial R&D resources to our recycling technology division in order to facilitate physical recycling of post-consumer plastics
	(rigid/flexible, PET, Polyolefins & PS).
8	Beyond PET Packaging
	We will actively explore disruptive new technologies for delivering beverages to consumers beyond conventional PET packaging (e.g. pulp bottle, no-packaging solutions).

1Commitments are voluntary and do not constitute or imply any legal obligations, commercially binding offers or product guarantees

52 ｜Capital Market Day 2020

Our Strategy for Shaping Krones' Future in the New Normal

Shaping the Future

Short-term

Mid-term

Designing the Future

• • Innovation and Growth
• Digital & remote solutions for the "New Normal"
• Sustainability Packaging & Beyond
• Pricing as part of Krones' DNA - Selection & USP
• ESG - Focus on Climate Action
• Regional Markets - Global Reach
• Levering Intralogistics' potential
• Innovation Programs

53 ｜Capital Market Day 2020

Krones' Pricing and Project Selection Tactics during the COVID-19 Crisis

Market Growth & Pricing Model →

Base Case Estimates

Market

Market

Market

Market

Growth

Growth

COVID-19

Market

Growth

Growth

contraction

Growth

Pricing

Pricing

Securing

Pricing

Pricing

Volume

Pricing

2017

2018

2019

2020

2021

2022

We expect improved pricing leverage as market volumes recover after the crisis.

54 ｜Capital Market Day 2020

Increased Pricing Power through value-adding Technology: LineXpress PET Line

Case Study

• CSD customer in North America
• Output: ~160m bottles p.a.
• Over 50 different SKUs

Technical Obsolescence → PET lines after approximately 14 - 20 years (wear & tear)

Economic Obsolescence → Premature replacement viable through OPEX savings

study is an simulation. of product properties.

Setup

Old Filling Lines

2 x 30k bottle per hour, low flexibility

New Filling Line with LineXpress

1 x 48k bottle per hour, high flexibility automized and guided changeovers

OPEX Savings				Return on Invest
Variable production costs
w/o raw & packaging material, depreciation	CAPEX / Investment
			Maintenance	~ 9 million €
			Electricity
			Operators
-49.7%		Utilities	OPEX Savings p.a.

~ 1.8 million €

		ROI (w/o discounting)
Old Setup	LineXpress
~ 5 years

• Annual OPEX savings of 1.8m €

assumptions & calculations. The case	an offer, guarantee or binding description
All figures are based on internal estimates,	Information on this page do not constitute

Substantial OPEX savings for our customers increase new machinery pricing latitude for us.

55 ｜Capital Market Day 2020

Our Strategy for Shaping Krones' Future in the New Normal

Shaping the Future

Short-term

Mid-term

Designing the Future

• • Innovation and Growth
• Digital & remote solutions for the "New Normal"
• Sustainability Packaging & Beyond
• Pricing as part of Krones' DNA - Selection & USP
• ESG - Focus on Climate Action
• Regional Markets - Global Reach
• Levering Intralogistics' potential
• Innovation Programs

Corporate Carbon Footprint

56 ｜Capital Market Day 2020

Krones Climate Strategy 2030: Our new Climate Targets by 2030

Climate Target 1:

Reducing the absolute

(Scope 1 + Scope 2) of the KRONES Group by 80% by the year 2030 (base year: 2019) and operational climate neutrality by the year 2040

Climate Target 2:

Reducing the absolute Product Carbon Footprint

(Scope 3) of the KRONES Group by 25% until 2030 (base year: 2019)

Scope 1 - Direct internal emissions

Scope 2 - Procured indirect emissions

Scope 3 - Indirect emissions by products/ services

emissions	-25%
2
CO
	-80%

Scope 1 Scope 2 Scope 3

Scope 1 Scope 2 Scope 3

20192030

Krones is committed to mitigating climate change by leveraging our internal & external potential.

57 ｜Capital Market Day 2020

Lifecycle Comparison of Beverage Packaging Carbon Footprint

500ml Carbonized Softdrink Beverage Packaging1

Carbon Footprint in g CO²-equivalent2

Distance Filling Plant to Supermarket: 300km

100% rPET reduces the CO² footprint by
over 20% due to lower energy requirements
in disposal & pellet production		105g
80g	71g				69g
	62g	61g
Virgin PET	rPET 50%	rPET 100%	refPET	Can	Glass	Glass
disposable	disposable	disposable	returnable	disposable	returnable	disposable

Recycling & reusage may be equally beneficial to mitigate the carbon footprint of beverages.

Source: Fehringer, R. (2019) Ökobilanz für Gebinde aus PET und anderen Materialien [for ALPLA Werke]	Scope: Production, Filling, Transport, Distribution, Disposal | Calculation Basis: Austrian Market Transport Distance Filling Plant to Supermarket: 300km (for Carton: 200km)
1	2

58 ｜Capital Market Day 2020

Food Waste accounts for >6% of global Carbon Emissions - we save Food!

	Total Food Waste
42	in% of Production

25		23	Production
	22
		19	Handling/ Storage
		17

15	Processing
	Distribution
	Consumption

Higher tolerance for input raw materials, lower production losses & better preservation/ shelf life

Processing

Filling & Packaging

Food Waste-	(2013).
based on FAO. 2011. Global Food Losses and	Prevention. AgricultureOrganization of the United Nations.

Efficient Supply Chain Management to lower excess production/ inventories Digital solutions

Intralogistics

Krones can lower food waste throughout the entire value chain of the F&B industry.

Source: WRI analysis Extent, Causes, and & FAO - Food and

59 ｜Capital Market Day 2020

Krones' Position on Climate Change: Doing well by doing good!

		External Product Range		Internal Value Chain	Packaging Solutions
Approach
Our enviro program:	Taking energy consumption in	Offering closed-loop solutions
		development for	consideration for internal	and dedicated sustainable
	sustainability excellence	investment decisions	packaging design
Achievements	Average energy saving	CO² Emissions / Revenue1	Global rPET use
	kwh per 1000 bottles						2020 - 20252
	2010	-25%2019		2010
				-50%
								2018		>12%
											CAGR
Impact
Lower utility consumption		Energy savings	End-consumer awareness
	→ faster ROI for customers		→ OPEX savings	→ Demand for sustainable packaging
Financial	→ more Capex for machinery	=			→ Customer investment
		=				Working Capital &	=
		Revenue Growth	Profit Improvement	Revenue Growth

At Krones, environmental and financial objectives are complementary.

and indirect energy-related CO2 emission (metric tons per €1 million in consolidated revenue)	PCI Wood Mackenzie
Direct	Study
1	2

60 ｜Capital Market Day 2020

Our Strategy for Shaping Krones' Future in the New Normal

Shaping the Future

Short-term

Mid-term

Designing the Future

• • Innovation and Growth
• Digital & remote solutions for the "New Normal"
• Sustainability Packaging & Beyond
• Pricing as part of Krones' DNA - Selection & USP
• ESG - Focus on Climate Action
• Regional Markets - Global Reach
• Levering Intralogistics' potential
• Innovation Programs

61 ｜Capital Market Day 2020

We will take you on a Journey to Krones' Future Markets across the World

Rising	Aspiring	Resilient
Africa	Asia	North America

The world's growth	Lasting economic	Who says developed
story for the next	growth with no end in	market cannot grow
three decades ahead.	sight any time soon.	persistently?

62 ｜Capital Market Day 2020

We will take you on a Journey to Krones' Markets across the World

Rising

Africa

The world's growth

story for the next

three decades ahead.

63 ｜Capital Market Day 2020

Africa is much bigger than you think - quite literally…

Due to the ubiquitous Mercator cartographic projection, areas near the equator appear much smaller than they are…

BY-CC 4.0 Jakub Nowosad

64 ｜Capital Market Day 2020

UN Projections foresee Africa overtaking Europe & Americas combined by 2035

Population by country, available from 1800 to 2100 based on Gapminder data,

HYDE, and UN Population Division (2019) medium variant scenario projections.

Visualization CC-BY

OurWorldInData.org/world-population-growth

By 2040, Africa will likely have ~700 Mio. inhabitants more than today;

that is roughly the entire size of Europe's current population.

65 ｜Capital Market Day 2020

We are investing in the size and skills of our employee base across MEA

Number of Employees

Region Africa

671

LCS Center East Africa Kenia		452
	LCS Center West Afrika Nigeria
376	386	393

2015 2016 2017 2018 2019

Krones Center East Africa Ethiopia

Krones Southern Africa South Africa

66 ｜Capital Market Day 2020

We will take you on a Journey to Krones' Markets across the World

Aspiring

Asia

Lasting economic

growth with no end in

sight any time soon.

Our Customer Nongfu Spring's IPO

67 ｜Capital Market Day 2020

Asia Market Outlook & Potential

You think the Beverage Market in Asia is running out of steam? Think twice...

amid the 2020 pandemic briefly made

Zhong Shanshan the richest Man in China, ahead of Alibaba's Jack Ma!1

As of October 2020 the company has a 43.9 b € Market Cap and is valued at a P/E of 66.9x!²

Supermarket in Bangladesh		Customer Line in Cambodia		Krones China / Taicang Facility		Taicang Office

Our Asian foothold remains strong thanks to years of experience in multiple markets & industries.

7.9.2020	& EURHKD:CUR, 29.10.2020, 9:45 AM CET
ForbesMagazine (Forbes.com)	Bloomberg Quotation 9633:HK
1	2

68 ｜Capital Market Day 2020

Asia - Focus on Building our local Engineering, Manufacturing and Service Setup

	Number of Employees
	Region APAC + China	1801
	1546
	1342
Krones China (Taicang)	1110	Krones-IzumiSingapur
953

2015

2016

2017

2018

2019

Krones Thailand

Krones South Korea

We mitigate our risk exposure to trade conflicts by strengthening our decentralized value chain.

69 ｜Capital Market Day 2020

We will take you on a Journey to Krones' Markets across the World

Resilient

North America

Who says developed

market cannot grow

persistently?

70 ｜Capital Market Day 2020

Developed Markets - Krones Persistent Strength in North America

CAGR = 16,45%

Revenue in m €

Region North /	683
Central America

545 533

505

438		Krones USA, Franklin (WI)	US Customer (Bottling Line)

274

2014	2015	2016	2017	2018	2019	Canadian Customer (Brewhouse)		Wide CSD Choice (Supermarket)

Developed markets drive Krones' organic growth alongside emerging economies.

71 ｜Capital Market Day 2020

Our Strategy for Shaping Krones' Future in the New Normal

Shaping the Future

Short-term

Mid-term

Designing the Future

• • Innovation and Growth
• Digital & remote solutions for the "New Normal"
• Sustainability Packaging & Beyond
• Pricing as part of Krones' DNA - Selection & USP
• ESG - Focus on Climate Action
• Regional Markets - Global Reach
• Levering Intralogistics' potential
• Innovation Programs

72 ｜Capital Market Day 2020

The "New Normal" will drive further Growth in Intralogistics

COVID-19 induced changes that are here to stay in the "New Normal"

73 ｜Capital Market Day 2020

Intralogistics: Strategic Rationale within Krones Group

Opening the Door to new Market Segments

System Logistics has long-standing customer relations beyond beverage industry - a unique opportunity to build upon for venturing into new markets

Delivering Growth & Risk Diversification

Within Krones Group, System Logistics has delivered above average revenue growth and provides a hedge against volatility of other units within the group

Enabling holistic Digitalization of Supply Chain

By extending our scope of solutions to in- & outbound logistics, we provide customers with integrated digital solutions from raw materials reception to shipping

74 ｜Capital Market Day 2020

Our Strategy for Shaping Krones' Future in the New Normal

Shaping the Future

Short-term

Mid-term

Designing the Future

• • Innovation and Growth
• Digital & remote solutions for the "New Normal"
• Sustainability Packaging & Beyond
• Pricing as part of Krones' DNA - Selection & USP
• ESG - Focus on Climate Action
• Regional Markets - Global Reach
• Levering Intralogistics' potential

• Innovation Programs

75 ｜Capital Market Day 2020

Krones R&D Programs: Industries & Packaging

Sustainable		High Performance	Lean Glass		Advanced		Hygienics@		Digital
Plastic Packaging		Flexibility Plant	System		Aseptic		Flexible Can Line		Ecosystem

All

CSD & Water

CSD & Beer

Sensitives & Dairy

CSD & Beer

Beverage Industry

Each R&D Program contains multiple industries requirements and thus allows us to realize significant development synergies.

76 ｜Capital Market Day 2020

Agenda

• Financial Implications

77 ｜Capital Market Day 2020

Net Cash, free Credit Lines and high Equity Ratio in Q3

Liquidity reserves > €1bnEquity in EURm and equity ratio in %

Used credit lines 255 EURm
	1,433
1,330	1,370
1,314

1,226

Cash 177 EURm

43.8% 43.2%

41.3% 41.7%

39.9%

Free credit lines 800 EURm

2016

2017

2018

2019

2020

30.09.

Financially, Krones is very well positioned.

78 ｜Capital Market Day 2020

Focus on Cash, Net Working Capital and Capex

Net Working Capital development

Capex development

in %						in %
of Sales
					of Sales
			28-29%			3.2%			corridor
27.3%	27.3%			corridor			2.7%		3.0%
		26.9%		2.1%
					122
								1.7%
				26-28%				108	2.0%
					24-26%	in EURm
					78
									~55
2017	2018	2019	2020	2021	2022	2017	2018	2019	2020	2021/2022
			Outlook	Base case	Base case				Outlook	Base case

• Program to speed up project execution
• Supplier financing program with Deutsche Bank in implementation phase
• Decentralized inventory management to be centralized
• Analysis of order to cash process completed and changes in execution

• High investments in manufacturing in the past (Hungary, China, Germany)
• Decision to reduce own added value in manufacturing will reduce Capex needs
• Focus on Digitalization & ERP (S4 HANA)

79 ｜Capital Market Day 2020

Roadmap to increase Profitability

2020	Programs to improve efficiencies

2023

Sales

~ 3,300 EURm

EBITDA*

Program

Topics

	Structure &		Global Footprint
	Process
▪	Adjust capacities		▪	Plant Hungary
▪	Product cost		▪	Plant China
	reduction		▪	Localize supply
▪
Reduce own			chains and
	added value in			increase BCC
	manufacturing			sources
▪	Accelerate		▪	Localize service

project through put time

Portfolio

• Reshape product portfolio
• Address future of Brewery Business
• Increase profitability of Intralogistics

Growth

• Pricing
• Innovations in sustainable filling & packaging
• Digital and remote service eco system
• Localize sales activities

Sales

3,700 EURm to

4,000 EURm

EBITDA

5.5% - 6.0%		Impact		1.5% - 2.0%		1.0% - 1.5%		0.5% - 1.0%

*w/o one-time expenses 30 - 60 EURm (structural adjustments)

0.5% - 1.5%

9.0% - 12.0%

Figures for 2023 do not constitute a binding financial guidance and shall not be interpreted as such.

Ranges are subject to assumptions that depend upon external factors beyond the influence of Krones' management.

80 ｜Capital Market Day 2020

Krones Group KPI's

Actuals, Outlook 2020 and Base Case 2021/2022

EURm	Actual	Actual*	Actual *	Outlook*	Base Case	Base Case
2017	2018	2019	2020	2021	2022
SALES	3,691	3,854	3,959	~ 3,300	3,300 - 3,400	3,500 - 3,600
EBITDA	9.2%	8.7%	6.6%	5.5%	- 6.0%	6.5%	- 7.5%	8.0%	- 9.0%
margin
EBT margin	7.0%	6.4%	2.8%	1.0%	- 1.6%	2.5%	- 4.0%	4.5%	- 6.0%
Working
Capital	27.3%	27.3%	26.9%	28%	- 29%	26%	- 27%	24%	- 26%
(in % of sales)

* = without one-time impacts for restructuring costs and impairments

Figures for 2021 and 2022 do not constitute a binding financial guidance and shall not be interpreted as such.

Ranges are subject to assumptions that depend upon external factors beyond the influence of Krones' management.

81 ｜Capital Market Day 2020

Our Midterm Targets remain unchanged…

Growth		EBITDA margin		Working Capital
2% - 5%		9% - 12%		24% - 26%
(organic growth)		(EBT margin 6% - 8%)

…and they are achievable in 2023

82 ｜Capital Market Day 2020

Agenda

• Key Takeaways

83 ｜Capital Market Day 2020

The Global Impact of COVID-19 is severe,…

Travel Restrictions

On-Trade Sales

Supply Chain

…but long-term Growth Fundamentals remain intact…

Population Growth

Middle Class

Urbanization

…and Krones is well positioned for the "New Normal"!

Remote & Digital	Sustainable	Localized

84 ｜Capital Market Day 2020

Agenda

--- Discussion/ Q&As ---

85 ｜Capital Market Day 2020

Organizational Notes on Q&A Session

If you have inquiries, please make use of the "raise your hand" feature

When not talking, please mute your microphone

? …

86 ｜Capital Market Day 2020

Disclaimer

This investor presentation contains forward-looking statements that are based on current estimates, forecasts and assumptions made by KRONES AG management to the best of its knowledge and other information currently available to KRONES AG.

The forward-looking statements of this presentation are by their very nature subject to various known and unknown risks, uncertainties and other factors, the non-occurrence or occurrence of which could cause material differences in future results of operations, financial situation, development or performance of KRONES AG. Factors that could cause such differences include but are not limited to changes in political, business, economic and competitive environment, effects of future legal and legislative issues, fiscal, and other regulatory measures, foreign exchange rate fluctuations, interest rates, the availability of financing, developments in raw material and personnel costs, launches of competing products or services, poor acceptance of new products or services, and changes in business strategy.

KRONES AG does not intend and does not assume any liability whatsoever to publicly update or revise any forward-looking statements or other information contained in this presentation as a result of new information, future events or otherwise. No representation or warranty, express or implied, is made by KRONES AG and/or its management with respect to the fairness, completeness, correctness, reasonableness, or accuracy of any information, facts, expectations or opinions contained herein. Neither KRONES AG nor any of its affiliates, representatives or advisors shall have any liability whatsoever (in negligence or otherwise) for any losses or damages arising from any use of this presentation or its content or otherwise arising in connection with the statements given herein.

Digitalisation	Process	Bottling and	Intralogistics	Lifecycle
	technology	packaging equipment		Service

We do more.