Quarterly Statement 3rd Quarter/9 Months 2021

QUARTERLY STATEMENT

3RD QUARTER | 9 MONTHS 2021

QUARTERLY STATEMENT | 3RD QUARTER AND 9 MONTHS 2021

LETTER FROM THE EXECUTIVE BOARD

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LETTER FROM THE EXECUTIVE BOARD

DEAR SHAREHOLDERS,

Now that we have reached the end of the third quarter of this fiscal year, we are able to draw some initial conclusions. We promised you that we would guide PWO safely through the challenging market phases at present, make the Group more competitive and continue to generate substantial growth on international markets. We have already achieved these in the first nine months of 2021. Next year, we expect to continue reaping the benefits of the work we are doing at the moment.

We were already being realistic about developments in the mobility industry at the start of the year. This allowed us to respond immediately when supply chains came under pressure on account of the global shortage of semiconductors, forcing our customers to reduce production. We are mitigating the impact of the considerable rise in procurement prices with carefully considered procurement processes and in-depth discussions with our customers. A whole rafter of other measures and the strong commitment shown by our employees across all locations put us in the best possible position to handle these market developments.

All in all, after just nine months we have already achieved our forecast range for EBIT before currency effects in the 2021 fiscal year. Nevertheless, uncertainty regarding Q4 remains extremely high and so we are reiterating our forecast range for revenue and EBIT before currency effects for the 2021 fiscal year. We will respond to new developments quickly and decisively.

We continued to accelerate the "Operational Excellence" future program at our Germany location. The modern, product line-based matrix organization that we will launch by the start of 2022 will not only

further boost efficiency, it also entails more responsibility and thus more creative freedom for our managers. It also increases process quality and facilitates greater flexibility and faster decisions. This represents a continuation of the Oberkirch production site renovation communicated at the end of the last fiscal year and considerably strengthens our competitive edge in the long term.

We address the three areas of the mobility of the future: electrification, safety and comfort. As one of the few companies in the sector, we are also almost entirely independent of internal combustion engines and work with all vehicles, regardless of the type of drive. This combination makes us an attractive partner to OEMs and tier 1 suppliers. In the nine-month period, we thus again brought in a high volume of new busi- ness. Preparations have already begun for expansion at our locations in Czechia and Mexico in view of future growth.

We are deeply committed to our responsibility for future generations. This is why, together with external support, we are currently in the process of a major sustainability project and are stepping up our efforts to reduce our CO2 footprint to strengthen our position as the partner for future mobility.

Last but not least, we closely manage our statement of financial position and cash flow and so accounting ratios have noticeably improved in the current fiscal year. Extensive available credit lines give us the leeway to take advantage of our market opportunities.

Oberkirch, November 2021

The Executive Board

QUARTERLY STATEMENT | 3RD QUARTER AND 9 MONTHS 2021

BUSINESS DEVELOPMENT

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SELECTED INFORMATION ON THE SEGMENTS AND THE GROUP

EURK

												Consolida-
9M 2021		Germany		Czechia		Canada		Mexico		China		tion		Group
Total revenue	159,555	55,960	24,499	49,222	35,506	16	324,758
External revenue	150,181	54,137	24,120	49,159	31,208	16	308,821
Total output	159,928	55,960	24,499	49,222	35,506	-15,921	309,194
EBIT before currency effects	2,148	4,095	300	6,088	4,182	447	17,260
EBIT including currency
effects	1,745	4,079	258	6,060	4,440	447	17,029
Capital expenditure	5,213	2,265	1,887	1,053	385	0	10,803
9M 2020
Total revenue1	138,039	43,221	22,311	35,454	29,491	0	268,516
External revenue	129,075	41,790	22,270	35,416	27,837	0	256,388
Total output	138,527	43,221	22,311	35,454	29,491	-12,127	256,877
EBIT before currency effects	-11,317	1,342	351	878	4,836	0	-3,910
EBIT including currency
effects	-12,572	1,346	446	813	4,606	22	-5,339
Capital expenditure	2,487	933	3,800	2,722	622	0	10,564

1 Prior year adjusted due to change in accounting (see 2020 Annual Report, Note 5, 'Contract assets' section)

RESULTS OF OPERATIONS

Business performance in the nine-month period was shaped by a significant upturn compared to the previous year, which was still seriously affected by the pandemic, as well as by a steady slowdown over the

third quarter of 2021. This quarter-to-quarter development is certainly typical for the season for our business generally. Nevertheless, revenue declined by a massive 13.7 percent in the third quarter of 2021 compared to Q1 2021 on account of the global shortage of semiconductors. When making comparisons to the previous year, it should also be noted that expenses of EUR 10.0 million for personnel adjustments impacted earnings in the third quarter of 2020.

After a very good start to the 2021 fiscal year, beginning in the second quarter we had to continuously adjust our production capacities to account for customers' lower call-offs. Adjustments to capacities were stepped up further in the third quarter. At the same time, a rise in procurement prices hurt earnings in the nine-month period, as there was generally a time delay in passing these on.

Supply uncertainties for semiconductors, combined with rising prices for raw materials, consumables, supplies and purchased parts, tend to result in inflated call-offs along the entire supply chain as all market participants attempt to reduce their own supply risks. This presents additional problems for everyone affected. However, call-off figures are not usually revised downwards until very close to the production deadline. The permanent need to make changes to production quantities and, in turn, production process- es, naturally creates inefficiencies.

We are currently still closely managing all our business processes. We were able to deliver at all times in the entire reporting period. To cap the rise in the cost of materials ratio, we are in ongoing negotiations with our customers regarding passing on price increases.

In addition, we are also focusing on planning personnel resources as precisely as possible in the short term. To do so, we also draw on government schemes available in the countries in which our sites are located, such as short-time work. At our German location, we have also finished our efficiency analysis and identified additional potential changes, which are now being put into practice. Finally, we are making savings in other operating expenses.

In total, EBIT before currency effects came to EUR 17.3 million in the nine-month period (p/y: EUR -3.9

million), representing a margin of 5.6 percent (p/y: -1.5 percent). Including currency effects, EBIT

increased to EUR 17.0 million (p/y: EUR -5.3 million). After deducting the slightly lower finance costs and

taxes, net income for the period rose to EUR 11.5 million (p/y: EUR -7.6 million) and earnings per share to

EUR 3.67 (p/y: EUR -2.42). In the third quarter, net income for the period amounted to EUR 2.7 million

(p/y: EUR -3.8 million) and earnings per share to EUR 0.86 (p/y: EUR -1.21).

QUARTERLY STATEMENT | 3RD QUARTER AND 9 MONTHS 2021

BUSINESS DEVELOPMENT

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SEGMENTS

The PWO Group is represented worldwide by five production sites and three assembly locations. As the latter are separate facilities of the production sites, the following remarks are based on the five production sites or companies. In the explanation of segment earnings, we also refer to EBIT before currency effects because this figure reflects operating performance.

The Germany segment experienced a particularly sharp decline in total revenue in the reporting quarter compared to the first two quarters of 2021. This was not offset by EBIT and so the segment reported negative EBIT. Accordingly, we are continuing our efforts to strengthen the Oberkirch site at the same swift pace. We will launch a product line-based matrix organization in production by the start of 2022. This will integrate support functions in existing areas and further streamline and adapt the management hierarchy in production.

The change in staff headcount this will entail is part of the site renovation program already communicated. No further negative impact on earnings is expected in the 2021 fiscal year on account of existing provisions. The Executive Board has already begun talks with employee representatives about how to implement this responsibly.

Efficiency analyses conducted in the last few months have also shown that the new matrix organization improves productivity potential where synergies are harnessed consistently, which should be done through natural fluctuation.

The trend of total revenue development in the Czechia segment was essentially in line with that of the Germany segment. However, thanks to highly efficient and resilient processes overall, the Czech site largely offset the decline and the additional expenses for the site expansion with a whole host of measures. Considerable series start-ups planned in the Czechia segment will also create further high growth in the years ahead.

In the Canada segment, the ramp-up of new series production is continuing. Total revenue in the third quarter of 2021 was far higher than in the first two quarters of 2021. EBIT picked up significantly in line with this. This increase would have been greater if bottlenecks in our customers' supply chains had not curbed their release orders. The Canadian site also enjoyed good new business in the nine-month period and will generate growth in the next few years.

By contrast, at the Mexico site, production downtime at customers due to a shortage of electronic components resulted in a slight fall in total revenue in the third quarter of 2021 compared to the first two quar-

ters of 2021. Nevertheless, this had little impact on the site's EBIT margin. Further substantial growth is clearly in sight given new business levels in the Mexico segment.

Our site in the China segment was also affected by lower volumes in the third quarter as a result of semiconductor shortages. Nonetheless, staff costs were not reduced as much as total revenue as there is no equivalent in China to the German short-time work allowance and employees must remain on full salaries. This, increases in procurement prices and a 5-day site closure in September as a result of government electricity rationing depressed EBIT in the third quarter. The China segment also generated a high volume of new orders in the nine-month period.

NET ASSETS AND FINANCIAL POSITION

EQUITY RATIO

IN PERCENT

40.0
																				31.9
																31.8
						30.3
		30.6
						28.7
30.0				28.2			29.1

20.0

10.0

0.0

Q1	Q2	Q3	Q4	Q1	Q2	Q3
2020	2020	2020	2020	2021	2021	2021

Total assets continued to rise only cautiously in the nine-month period. This was a result primarily of the still relatively low investment volumes, which are explained in the following section. At EUR 222.8 million, non-current assets as of the reporting date were down slightly on the figure of EUR 225.7 million at the end of the fiscal year 2020.

QUARTERLY STATEMENT | 3RD QUARTER AND 9 MONTHS 2021

BUSINESS DEVELOPMENT

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By contrast, current assets increased to EUR 156.1 million as of September 30, 2021 compared to EUR 137.9 million at the end of the 2020 fiscal year thanks to business picking up as the coronavirus pandemic abated. Almost all items on the statement of financial position contributed to this. Of particular note are current contract assets, which primarily include tools manufactured and not yet accepted by the customer ahead of new series productions. This development therefore indicates our future growth. Trade receivables, however, were lower.

On the equity and liabilities side of the statement of financial position, equity increased to EUR 120.8 million as against EUR 104.5 million on December 31, 2020. This resulted in particular from the net income for the period and a lower valuation of pension provisions due to altered capital market interest rates, which primarily arose in the first quarter of 2021. In addition, foreign exchange differences had a positive effect on equity.

While non-current liabilities declined to EUR 134.2 million compared to EUR 140.0 million - chiefly due to lower pension provisions - current liabilities rose to EUR 123.9 million compared to EUR 119.2 million. Following the departure of employees due to the implementation of the personnel adjustment measures planned in the previous fiscal year, current other liabilities and current other provisions declined over the course of the reporting period.

The equity ratio as of September 30, 2021, improved to 31.9 percent as against 28.7 percent at the start of the fiscal year. Net debt rose only slightly to EUR 108.5 million as against EUR 102.5 million. We have extensive credit lines available. In the third quarter of 2021, it was decided to repay the existing EUR 30 million KfW loans, which had not yet been drawn, early.

Cash flow from operating activities came to EUR 10.7 million in the first nine months of the current fiscal year (p/y: EUR 37.0 million). While last year, in the middle of the coronavirus pandemic, business declined severely and capital employed in current assets decreased accordingly, the development in the reporting period was in the opposite direction. The change in current assets resulted in a negative cash flow effect of EUR 16.0 million after a positive effect of EUR 14.0 million in the previous year. In addition, payments were made in the reporting period in connection with the personnel adjustment measures.

The balance of other non-cash income and the change in non-current liabilities amounted to EUR -1.1 million (p/y: EUR 11.2 million). These items primarily reflect effects from the change in pension provisions and the other items contained in the statement of comprehensive income. In the previous year this also included the expense of EUR 10.0 million for staff adjustments.

Cash used in investing activities remained low at EUR 5.5 million (p/y: EUR 9.8 million). The investing activities of the reporting period are explained below. Free cash flow after interest paid of EUR 4.8 million (p/y: EUR 5.2 million) therefore amounted to EUR 0.4 million in the nine-month period (p/y: EUR 22.0 million).

CAPITAL EXPENDITURE

As shown in the segment report, capital expenditure amounted to EUR 10.8 million in the nine-month period, in line with the previous year. This volume partly reflects our close management approach and consistent liquidity management. In addition, rapid progress is being made in expanding our foreign locations and so we made additional investments in the fourth quarter.

The Germany segment accounted for EUR 5.2 million (p/y: EUR 2.5 million) in the first nine months. It related in part to the fully automated milling center for toolmaking as part of our digitalization project. Additional increases in process efficiency were secured by capital expenditure on automation - such as an automated setting for a press - on the replacement of component cleaning equipment, on an optical measurement system and on material handling in logistics.

Capital expenditure Czechia segment amounted to EUR 2.3 million (p/y: EUR 0.9 million). The Czech site is currently undergoing considerable expansion and being prepared for future growth. Accordingly, we purchased considerable additional land in the reporting quarter, on which primarily new press halls are to be built. Finally, the available space here will be almost tripled following the construction of a new assembly and logistics hall that is due to be completed at the start of 2022. In addition, project-related measures were also carried out such as the acquisition of a welding cell, the overhauling of a plant and the further expansion of quality management.

In the Canada segment, capital expenditure amounted to EUR 1.9 million (p/y: EUR 3.8 million). Besides project-related measures, a new 800 metric ton press was also purchased, chiefly for crossbeams orders. In the Mexico segment, capital expenditure of EUR 1.1 million (p/y: EUR 2.7 million) related to a new system, which essentially doubles cleaning capacities for metal components. This uses state-of-the-art technology that is both economical and environmentally friendly, helping lower energy consumption and reduce the use of solvents. In addition, it prevents the formation of aerosols. The foundations were also laid for a new logistics hall, which will begin operations in the first quarter of 2022. This also essentially doubles the logistics space at the Mexican site. Capital expenditure in the China segment was low at EUR 0.4 million (p/y: EUR 0.6 million).