Gea%20capital%20markets%20day%202014%20 %20ceo%20presentation%20onegea tcm30 25495

GEA Group Aktiengesellschaft

London, October 13, 2014

GEA’s strategic transformation to “OneGEA” Jürg Oleas, CEO GEA Group

engineering for a better world

Forward-looking statements are based on our current assumptions and forecasts. These statements naturally entail

risks and uncertainties, which may cause the actual results of operations, financial position or performance to diverge

significantly from the estimates given here. Factors that could cause such a divergence include changes in the

economic and business environment, fluctuations in exchange rates and interest rates, launches of competing products,

poor acceptance of new products or services, and changes in business strategy. We are under no obligation to update

forward-looking statements.

Due to rounding, the sum of percentages of order intake and sales by region as well as by customer industry may vary

from 100%.

Disclaimer

GEA Capital Markets Day - GEA’s strategic transformation to “OneGEA” 2


• Strategic Roadmap “GEA 2020”

• ARTE framework as pillars for GEA’s strategy

• Future organizational set-up “Fit for 2020”

Agenda

1

3

2

3 GEA Capital Markets Day - GEA’s strategic transformation to “OneGEA”


The steps of GEA’s strategic transformation

“Fit for 2020”

reorganization

With which

core businesses?

Where are

we driving

GEA?

2012

GEA

long-term

strategic

direction

GEA

strategic

portfolio review

“GEA 2020”

target footprint

2013

With focus on which

growth areas?

In which efficient

organizational setup?

Divestment of HX Segment

2014: Concept

2015: Implementation 2012 – 2013



2003 – 2008 2009 – 2014

• Divestiture of

Chemicals & Plant

Engineering, Closure

of Zinc Smelter

• Reorganization into 5 distinct segments

and 31 business units

• Elimination of overlaps

1 mg acquired GEA in 1999; 2 mg and GEA merged in 2005 for legal and tax reasons; 3 the portfolio of GEA Group 2009 was similar to pre 1999 GEA “old”

GEA has focused its portfolio and organization in steps

GEA Group3

FS

-Segm

ent

FT

-Se

gm

en

t

HX

-Se

gm

en

t

PE

-Se

gm

en

t

ME

-Se

gm

en

t

RT

-Se

gm

en

t

GEA Group2 mg

technologies1

Sp

ecia

lty M

ech

.

En

gin

ee

rin

g

Pla

nt

Eng.

Chem

icals

Oth

er

firm

s

Focus on specialty

mechanical engineering

Portfolio analysis

and HX divestiture

• Focusing on food and

beverages as prime

customer industries

Carving out HX from among 5 divisions,

consolidating HX factory landscape

GEA Group

A-D

ivis

ion

R-D

ivis

ion

C-D

ivis

ion

M-D

ivis

ion

D-D

ivis

ion

E-D

ivis

ion

H-D

ivis

ion

P-D

ivis

ion

B-D

ivis

ion

FT

-Se

gm

en

t

HX

-Se

gm

en

t

PE

-Se

gm

en

t

ME

-Se

gm

en

t

RT

-Se

gm

en

t



GEA’s long-term strategic direction

Agenda

Pursue clear technology and market

leadership

Further develop food processing focus

and solutions for demanding

production processes

Become global by getting closer

to our customers

Use of portfolio management as tool

to leverage strengths and allocate

resources

Build an organization and capabilities

to support strategic vision

Drive sustainable value creation

Guardrails for

the overall GEA

strategy

Guardrails for the

overall GEA

strategy defined

by GEA Executive

Board in a first step



GEA’s long-term strategic direction

• Foster cash generation mindset

across GEA Group

• Grow the GEA business

organically at target level above

GDP growth

• Maintain GEA Group ROCE within

a corridor of 20-25% throughout

the cycle

• Perform prudent cash and risk

management ensuring sufficient

liquidity headroom, healthy capital

structure and robustness against

risk scenarios

• Sustain investment grade and

keep dividend payout ratio at a

level of industry benchmarks

• Intensify role of the GEA

Group corporate center to

ensure all businesses work

towards GEA Group strategic

direction (strategy process)

• Leverage cooperation

potential across businesses

(synergies)

• Strengthen value-add of

corporate center (e.g.,

standardized processes,

bundling of knowhow, shared

services)

• Develop HR strategy and

capabilities to support growth

and leadership

• Seek balanced portfolio

(cash generation, industry

and geographic

diversification, and risks)

• Divest business for which

GEA is not best owner or

which cannot contribute to

strategic vision

• Develop global presence

and grow especially in

emerging markets with long-

term potential

• Defend market position in

developed markets

• Continue expanding service

business in order to ensure

sustainable profitability and

customer satisfaction

• Intensify customer focus

through leveraging local

sales network and key

account management for

major customers

• Expand presence in

attractive niche markets

within food processing

• Opportunistically serve other

innovation-driven

industries that leverage our

technologies and business

models

• Avoid markets not

supported by long-term

global trends, markets with

high cyclicality or

commoditized markets

• Sustain technology and

innovation leadership as

key USP in each market

• Avoid markets where GEA

has significant technologic

disadvantage or where GEA

is disadvantaged in terms of

relative market share

Agenda

Pursue clear technology and market

leadership

Further develop food processing focus

and solutions for demanding

production processes

Become global by getting closer

to our customers

Use of portfolio management as tool

to leverage strengths and allocate

resources

Build an organization and capabilities

to support strategic vision

Drive sustainable value creation

Guardrails for the

overall GEA

strategy defined

by GEA Executive

Board in a first step

§1

Pursue clear

technology

and market

leadership

§2

Further develop food

processing focus

and solutions for

demanding

production

processes

§3

Become global

by getting

closer to our

customers

§4

Use of portfolio

management as

tool to leverage

strengths and

allocate resources

§5

Build an

organization

and capabilities

to support

strategic vision

§6

Drive

sustainable

value creation



GEA wants to serve markets with these criteria

Customer industry willing to

pay a premium for process

quality and reliability

Limited project risk profile,

maximum project duration

1-2 years

Scope of supply limited

to elements directly

controllable by us



Urbanization

Shanghai

necessary agricultural supply area

Illustrative

What we like about the food industry (1): Steady growth rates due to continuing urbanization

2.6

5.3

2010 2050

Emerging markets (B)

1.0 1.1

2010 2050

Developed economies (B)

~ 200 million people moving into cities p.a. consuming

ever more processed and convenience food

Source: United Nations; Euromonitor; The Guardian; Oxford Economics; Documentation “Wie wird die Stadt satt” (ARD 24.09.2014)

By the year 2050 the

world’s population will live

50% in the cities

50% in the countryside

300 KM

Germany

Today the world’s

population lives

75% in the cities

25% in the countryside



What we like about the food industry (2): Stable consumer spending also in tough times

Economically

good times

Economically

difficult times



Food brands thrive on long-term product consistency in taste, texture and appearance. Precise process technology warrants that.

What we like about the food industry (3): Branded food producers prefer precision equipment



What we like about the food industry (4): Zero failure tolerance a significant entry barrier

If equipment fails e.g. in the marine

industry, the industrial customer suffers

some efficiency loss


If equipment fails in the food industry,

the end customer’s health could be at

risk


„Avatar” meat (…)

contaminated by a

phosphorescent bacteria”

(China) Source: Telegraph, 27.04.2011

„Horse meat scandal

in Europe” Source: NY Dailynews, 08.02.2013

Periodic food scandals have sensitized customers for food safety concerns



…

…

…

…

Quality of After-Sales Service 23%

Price 30%

Machine Quality and Performance 71%

…

…

Ranking of key buying criterion according to GEA customer satisfaction survey,

September 20141

For GEA’s cutomers, machine quality and performance is by far #1 buying criterion

What we like about the food industry (5): Price apparently not the most decisive purchase criterion

1 Stratified sample size n=3274, external poll



Our vision “GEA 2020”: To be the first choice of our customers

Our ARTE framework defines our strategy how to reach

the target footprint “GEA 2020”


In particular we always want to be the first choice

of our customers in the relevant food industry.

the globally leading engineering group to provide smart

solutions to sophisticated process industries.

GEA to become





Agenda

1

3

2



ARTE framework as pillars for GEA’s strategy

Applications Regions Technologies Functional Excellence

• Exploit market

potential in target

applications

• Align GEA-wide

application strategy

and customer

approach

• Capture global

growth opportunities

• Expand local

presence

• Coordinate regional

approaches across

GEA

• Strengthen

innovation and

technological

leadership

• Foster cross-

business colla-

boration in R&D

• Increase efficiency

in operations and

support functions

• Reduce

organizational

complexity

Target Footprint 2020



Application strategy to maximally support customers in solving their process challenges

Customers

…are looking for a

solutions partner with end-

to-end know-how, who

knows the whole

production process for their

application

Application

know-how

Unique selling proposition

Application strategy

• Expand GEA’s process

competencies into new

applications

• Identify attractive “white

spots” along process chains

and fill gaps by acquisitions


A R T E


1

4

2

3

5

8

6

Targeted applications for target footprint “GEA 2020”

Grow leading position in dairy

Grow leading position in liquid food

Strengthen personal care

Expand in animal proteins

Expand in total solutions for

edible oils, starch & sugar

Enter confectionery, biscuits & pizza

Strengthen packaging

competencies

Foster processing intelligence &

automation


7

A R T E


In cheese making technology, GEA had a gap…

Milk intake

& preparation

Milk storage

& distribution Standardization

Bacteria removal

(optional) Pasteurization

Milk intake & preparation

• Milking

parlor

• Standardization

separator

• Sterilization

separator

• Heat

exchanger

• Valves

• Pumps

• Tanks

Whey drainage

& pre-press Pressing

Water cooling,

brining, ripening

Cutting

& Slicing

Primary

packaging

Curd

production

Final process Press & ripe Coagulate & de-whey

• Tank

• Dosing unit • Cheese vat • Pressing line • Brining system

• Brine treatment

• Cutter

• Slicer

• Packer • Curd filler

Bacteria

starter mixing


A R T E


…which GEA filled by taking over de KLOKSLAG

Milk intake

& preparation

Milk storage

& distribution Standardization

Bacteria removal

(optional) Pasteurization

Whey drainage

& pre-press Pressing

Water cooling,

brining, ripening

Cutting

& Slicing

Primary

packaging

Curd

production

Final process Press & ripe Coagulate & de-whey

Bacteria

starter mixing

• Milking

parlor

• Standardization

separator

• Sterilization

separator

• Heat

exchanger

• Valves

• Pumps

• Tanks

• Tank

• Dosing unit • Cheese vat • Pressing line • Brining system

• Brine treatment

• Cutter

• Slicer

• Packer • Curd filler


A R T E

Milk intake & preparation


Attractive market

Leading market position

Significant upsides

• Rising consumption of milk and cheese products is driving the demand for production capacities

• Market for cheese production machines grows steadily

• Extension of GEA’s product portfolio towards full solutions provider for semi-hard cheeses

• Leading supplier for semi-hard cheese manufacturing equipment in Western Europe

• Innovative group with strong established R&D

• De Klokslag’s current growth is restricted by regional range; larger volume possible through integration

into GEA network; in particular in Emerging Markets such as Latin America

• Ability for GEA to act as full solutions provider → a key selling point in non-EU markets

• Mutual advantages through integration of R&D resources and bundling of manufacturing

de KLOKSLAG is an ideal complement


A R T E


GEA’s food exposure to grow to 75% - 80%

Food

Non-

Food

Sales exposure 2020:

75% - 80% food No 100% food exposure due to multi-purpose

functionality of our products:


A R T E




• Exploit market

potential in target

applications

• Align GEA-wide


and customer

approach

• Capture global


• Expand local

presence


approaches across

GEA

• Strengthen

innovation and

technological

leadership

• Foster cross-

business colla-

boration in R&D


in operations and

support functions

• Reduce

organizational

complexity




Local Emerging Markets food producers grow faster than multinationals

1 65 listed local food players in EM with sales > EUR 1bn, in total sales of EUR 210bn in FY 2013 ; 11% CAGR based on FY 2010 – FY 2013 sales in EUR Source: Thomson Reuters

Sales CAGR FY 2010-13

Local EM

food producers1

32%

68%

1/3 of local players are

not yet GEA customers1

GEA

customers

Selection of local GEA customers in Emerging Markets


11%

A R T E


China 53

GEA has still room for improvement in Emerging Markets

1Value for Germany = Index 100; Source: IMF GEA 3rd party sales in EUR million and GDP USD billion

Germany

= Index 100

Countries where GEA‘s sales coverage as a % of GDP is higher than in Germany

Countries where GEA‘s sales coverage as a % of GDP is lower than in Germany

Brazil 54

Argentina 82 Chile 66

Mexico 34

Colombia 23

Peru 41

Russia 79

Turkey 67

Vietnam 260

Thailand 141

Indonesia 38

South Africa 198

India 38

Germany 100

Indexation average GEA Sales/GDP per country 2011 - 20131

USA 40


A R T E



Applications Regions Technologies

• Capture global


• Expand local

presence


approaches across

GEA


in operations and

support functions

• Reduce

organizational

complexity


• Strengthen

innovation and

technological

leadership

• Foster cross-

business colla-

boration in R&D

• Exploit market

potential in target

applications

• Align GEA-wide


and customer

approach

Functional Excellence



Source: Frankfurter Allgemeine Zeitung (26.06.2014)

~ 3,500 new products entered

the US food market in 2012

~ 2,000 new food products p.a.

in German supermarkets alone


The continual market launch of new food products creates markets for innovative food processing equipment

Additionally, higher resource efficiency (e.g. power, water usage) is a major competitive

advantage for an equipment supplier

A R T E


Innovations made by GEA help industrial clients to launch new innovative products

• Continuous process to withdraw water by freezing

instead of evaporation

GEA Juice Freeze

Concentration

Innovation

Impact on product quality

• Natural flavor can be preserved in the concentrate

(e.g. juices, coffee, milk)

• Better taste and aroma of end product justifying higher price

• Higher overall equipment efficiency due to less demanding

cleaning in place (CIP)

Benefit for industrial customers


A R T E


Innovations made by GEA help industrial clients to reduce total cost of ownership

GEA Niro MSD™ Spray Dryer Size 4000:

Up to 700 tonnes milk powder per day

GEA Capital Markets Day 2014 - GEA’s strategic transformation to “OneGEA” 30

Equivalent of ~300 truckloads

of raw milk per day1

• Use scale-up algorithm based on computational

fluid dynamics (CFD) modelling and deep

process know-how to design the world’s largest

milk powder plant

Innovation

• Approximately 10% lower total cost of

ownership (TCO)

Benefit for industrial customer

Impact on costs

• Compact spray dryer chamber

• Simpler operation

• Lower energy cost

1 based on assumption of 15,000 litres raw milk per truckload (4.4m litres of raw milk shall be processed to 700t milk powder)

A R T E




• Capture global


• Expand local

presence


approaches across

GEA


• Exploit market

potential in target

applications

• Align GEA-wide


and customer

approach

• Strengthen

innovation and

technological

leadership

• Foster cross-

business colla-

boration in R&D


in operations and

support functions

• Reduce

organizational

complexity



Current segments with diverse organizational set-up

Farm Technologies Refrigeration Technologies Process Engineering Mechanical Equipment

BU Farm

Equipment

BU Milking & Cooling

BU Farm

Services

TC Engin.

Solutions

TC Comp.

TC Freezing

BU MSP

BU FS

BU HOM

'Matrix' between

Products and Sales

'Matrix' between

TCs and Sales

Matrix between

TCs and Sales

(SBUs for steering)

Stand-alone BUs with

matrix organization

= Stand-alone businesses

PD/PM

= Operations (Purchasing, Production & Procurement) = Sales only = Product Development/ Product Management

PD/PM PD/PM PD/PM PD/PM PD/PM PD/PM PD/PM PD/PM

BU FLC

PD/PM

Sales Sales Sales Sales Sales

Operations Ops Ops Ops Ops Ops Ops Ops

TC TC TC … … …

SBU

SBU

PD/PM PD/PM PD/PM

Sales (MCs)

Note: TC = Technology Center; MC = Market Company PE; PD = Product Development; PM = Product Management

Current structures display high complexity from a customer’s as well as from an administrative point of view


A R T E


• GEA a partner

for its customers

due to application

know-how

• Exploit market potential

in target applications

• Align GEA-wide


and customer approach

Applications Regions Technologies

• Untapped potential

mainly in Emerging

Markets

• Capture global growth

opportunities

• Expand local presence


approaches across GEA


• GEA perceived as

technology leader

• Further strengthen

innovation and

technological leadership

• Foster cross-business

collaboration in R&D

• High complexity in

organization and no

standardization of

processes

• Increase efficiency in

operations and support

functions

• Reduce organizational

complexity

Functional Excellence

“OneGEA”: Closer operational and organizational integration of key dimensions to maximize value-add to customer

GEA will improve particularly with regard to regional coverage and functional excellence






Agenda

1

3

2



Project “Fit for 2020”: From four stand-alone Segments to two integrated Business Areas

Current Organization Future Blueprint


Executive Board

• Stand-alone effective Segments driving

own technologies and market approaches

• Limited group perspective and role of the

corporate center

• Each Segment with individual go-to-market

concepts and regional footprint

• Bundling of Segments into two BAs

according to business model logic

• “One GEA” in countries as a platform for

growth within regions / countries

• Strengthening and streamlining of

global group functions

• Increased efficiency and standardization in

newly established Shared Service Center

Equipment BA

Solutions BA

Global Corp.

Center

SSC RT FT ME PE Head-

quarter

Regions Regions Regions Regions

Support Support Support Support

Regions / Countries

Executive Board



Future organizational set-up (“Fit for 2020”) reflects all elements of ARTE strategy

Executive Board

Shared Services Center (SCC)

Global Corporate Center (GCC)

North

America

Latin

America

Western E.

& MEA

Nordics, UK/IE,

& BeNeLux Asia-Pacific

DACH &

Eastern E.

36 GEA Capital Markets Day 2014 - GEA’s strategic transformation to “OneGEA”

Product Engineering & Development (PED)

Product Management & Sales (PMS)

Supply Chain & Production (SCP)

Equipment Service (SER)

Global Corporate Center (GCC)

Technology Centers (TEC)

Application Centers (APC)

Solutions Service (SER)

Equipment Business Area Solutions Business Area


Future setup will significantly strengthen our core cash flow generation ability

Streamlined Capex

Working Capital Discipline

Stronger Top-line Growth

Quantum

leap on GEA

Cash Flow

Drivers

Cost Savings €

€

€

€



Sales

&

Service

Operations

&

Engineering

General

&

Administration

“Fit for 2020” Savings: Design Teams with top-down savings mandates

• Functional bundling in countries

• Delayering / Increased span of control

• Shared Service Center

• Optimized production network

• Leverage outsourcing

• Increase span of control

• Delayering / Increased span of control

• Sales effectiveness & sales support synergies

• Bundling of after sales

Main Levers Savings Target


Cost

Savings

at least

EUR

100m

p.a.

Personnel

approx.

1000 FTE

engineering for a better world 39 GEA Capital Markets Day - GEA’s strategic transformation to “OneGEA”

“Fit for 2020” Commitment: Savings come fully on top of regular budget

Ongoing business

Growth

Flat

Moderate

Decline

Increase

Slight

increase

Keep

New GEA

Volume growth

Operational leverage

Efficiency increase

Operational measures

Top-line

Scenarios

Severe

Downturn

Strict Budget tracking

Operating

EBITDA-Margin Drivers

Efficiency increase

Cost cutting initiatives

“Fit for 2020”

+ EUR 100m |-1000 FTE

Savings by 2017

+ EUR 100m |-1000 FTE

+ EUR 100m |-1000 FTE

Severe macroeconomic downturns need to be handled separately

Strict Savings tracking

+

+

+

=

=

=

Operating

EBITDA-Margin


“Fit for 2020” savings

target substantiated

with detailed measures

Anticipation of imple-

mentation progress and

cost budget overruns

Realization of savings

and overall budget

Measure

implementation

Cost budget

compliance

Project Tracking

• Clear responsibilities

• Detailed milestone

plan

• Detailed savings plan

(incl. timing, FTE, cost

type)

• Steering and

monitoring of cost

drivers (e.g. FTE)

• Easy to monitor

• Early indicators

Cost driver

development

• Monthly review

• Cost and FTE budgets

• No tolerance

of deviation

• Strict escalation

process

Actual

Delta

Target


“Fit for 2020” Tracking: Project progress and savings closely monitored from three angles


Design Team has been carefully screened - incentives tied to delivering on savings and operational targets

Regions and countries

R-LAM R-NCE R-WE&MEA R-APC R-DACH&EE R-NAM

GCC SSC

G-FIN G-HR G-TAX G-IR G-CD G-CMB G-IT G-SIM G-LC SSC

Equipment BA

E-CFO E-PED E-PMS E-SER E-SCP

Solutions BA

S-CFO S-TEC S-APC S-SER



Major organizational design rules to warrant a leaner and better organization

Physical design of the future organization

• Span of control of new organizational units: Increase by 2

• Number of layers of the new organization: Reduction of 2 complete management levels

A

Saving targets – top-down guidelines for target sizing of new organization

• At least EUR 100m savings allocated to different business functions

B

ARTE guardrails – adherence with the ARTE framework

• Coordinated regional approaches across GEA with one country “Head of GEA” with own P&L

C

Flexibility & Simplicity & Scalability rule

• Reduced complexity, scalable and acquisitions easy to integrate, flexibility in downturn; “must-have” vs. “nice to have”

D

“Customer First” – each organizational decision is for customers benefit

• Implement-ability, increased customer reach & proximity

E



Board: 4-7 layers apart

from customers

Executive Board

4-7 layers

Customer

Board: 3-5 layers apart

from customers

3-5 layers

GEA taking out two complete

management layers:

• Segment Management

• Business Unit

Management

Cutting management layers is an important design deliverable for the new organization

Future set-up Situation today

Executive Board

Customer


Executing “Fit for 2020”


Capital Markets

Day 2014

Implementation to begin in Q2 2015 after a diligent charting process

Milestone: Detailed plan for

new organizational structure


Preparation for

execution of new

structure (e.g. systems

adaption)

Sizing of functions

Detailed organizational

design/blueprint

(new org charts,

processes, governance)

Implementation and

external reporting from

Q2 2015 onwards

2015 2014

Strict ongoing saving

tracking

Preparation for implementation

”saving tracking tool”

Documents

Gea%20capital%20markets%20day%202014%20 %20ceo%20presentation%20onegea tcm30 25495