Klingelnberg : 2023/24 Financial Half-Year Statements

Financial Half-Year Statements 2023/24

KLINGELNBERG AG

Binzmühlestrasse 171

8050 Zürich, Switzerland

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Mail: [e-mail]

Web: www.klingelnberg.com

KLINGELNBERG GROUP

Financial Half-Year Statements 2023/24

Dear Shareholders,

During the first months of the 2023/24 financial year, the KLINGELNBERG Group continued on its successful path in an extremely challenging environment. While the economy was under considerable pressure and many companies in the mechanical engineering sector reported negative developments, KLINGELNBERG could once again improve its key performance indicators, surpassing the very high levels already achieved in the previous financial year.

Once again, order intake and order backlog reached new record highs in the Company's history. After KLINGELNBERG achieved positive EBIT in the first half of the last financial year, for the first time in many years, EBIT in the first six months of the current financial year were also at a solid level. KLINGELNBERG usually generates most of its profits in the second half of the financial year.

Free cash flow also went up - enabling the Company to reduce significantly net debt. KLINGELNBERG is thus not only a successful company, but also one that is operating on solid financial foundations.

It continues to pay off that the Company set the right strategic course at an early stage. KLINGELNBERG today presents itself as a strategically well-positioned company that participates in important global trends: our customers produce and measure highly accurate gears for the sophisticated transmissions in electric vehicles, wind turbines produce electricity thanks to profile- ground gears produced on KLINGELNBERG/HÖFLER machines, and gears from KLINGELNBERG play an important role in the raw material extraction required for battery production for example in mining machines and rock mills. KLINGELNBERG was also able to take advantage of the opportunities presented by the resurgence of aviation with its high demand for modern, environmentally friendly aircraft. In Asia in particular, KLINGELNBERG is benefiting from major global trends such as the growth of wind energy and electromobility.

All of this is all the more significant given that the underlying conditions were and still are not easy

• due to the war in Ukraine, soaring energy prices, inflation, ongoing difficulties in supply chains, and economic weakness in key economies.

KLINGELNBERG is clearly confident for the rest of the 2023/24 financial year. The existing guidance can be confirmed. At the same time, KLINGELNBERG again expects strong order intake numbers and a continuation of its course that is focused on innovation, solidity, and seizing forward-looking opportunities.

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KLINGELNBERG GROUP

Financial Half-Year Statements 2023/24

The Company is optimistic about the future, albeit with its usual caution. The Company is well positioned, leading with its products in terms of quality and innovation, and serving strong and sustained demand in key future markets.

KLINGELNBERG will know how to capitalize on these opportunities.

Dr. Jörg Wolle	Jan Klingelnberg
Chairman of the Board of Directors	CEO
Zürich, 17 November 2023

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KLINGELNBERG GROUP

Financial Half-Year Statements 2023/24

Financial report

Segments and markets

In the first half of the 2023/24 financial year, the KLINGELNBERG Group found itself in a persistently volatile market environment characterized by high geopolitical uncertainty and weak growth momentum. Following a growth surge in the first quarter of the 2023 calendar year as a result of easing inflationary pressures, more robust supply chains and China's abandonment of its zero-covid policy, the economic sentiment turned gloomy again and the global economy lost momentum in the further course of the year.

Despite the economic re-opening in China, industrial production remained flat and weighed on the economy, particularly in the euro area. World trade also found itself in a period of weakness over the course of the year: Overall, it was slightly downward sloping in the first half of the 2023 calendar year, and even significantly in the developed economies.

Despite massive monetary tightening by the Federal Reserve, the U.S. economy had proved resilient so far in the year. Economic output expanded by 0,5% quarter-on-quarter in the second quarter of the 2023 calendar year, which was the same pace as at the beginning of the year. The noticeable increase in capital investment was due in particular to massive government subsidies for the semiconductor and renewable energy sectors.

In the euro area, the economic situation in the past half-year was characterized by both cyclical and structural challenges. On the cyclical side, the main factors were the inflation-related slump in consumption and the increasing key interest rates. The significant rise in energy costs, triggered by the energy price shock of last year, had pushed up production costs in the euro area sharply and slowed down the industrial sector. Persistent supply bottlenecks and weak demand from China added to the challenges faced by the manufacturing sector in the past half-year. As a result, the economy in the monetary union grew only marginally in the first two quarters of 2023 (+0,1% quarter-on-quarter in each case).

In this broad spectrum of global challenges, the KLINGELNBERG Group was nevertheless able to hold its own and once again significantly increase its order intake by EUR 24,8 million compared to the same period of the previous financial year. Net sales at the end of the first half of the 2023/24 financial year amounted to EUR 105,4 million, down EUR 32,9 million on the same period of the previous financial year. This decrease in sales resulted from the absence of the flood-related shift in revenues from the 2021/22 financial year to the first six months of the 2022/23 financial year. The KLINGELNBERG Group thus returned to its usual asymmetrical revenues distribution, which will lead to a significant increase in sales in the second half of the 2023/24 financial year.

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KLINGELNBERG GROUP

Financial Half-Year Statements 2023/24

Bevel Gear segment:

The Bevel Gear segment closed the first half of the 2023/24 financial year with net sales of EUR 34,4 million - almost EUR 23,3 million down from the same period of the previous financial year. This is, in particular, attributable to the base affect of the delayed delivery of customer machines due to the flooding of July 2021, which contributed to a significant increase in sales in the same period of the previous financial year.

At the end of the first half of the 2023/24 financial year, order intake totaled EUR 61,9 million, around EUR 8,2 million higher than in the same period of the previous financial year. The KLINGELNBERG Group's broad product portfolio proved to be a key success factor. This enabled the Bevel Gear segment to hold its own in the structurally dynamic automotive industry and to compensate for car makers' shifted investment strategies against the backdrop of changing drive concepts. With the G 35 Dual-Spindle Grinding Machine, the Company could win another reference project in the aerospace industry. In addition, orders from the commercial vehicle industry and gear manufacturing had lifted order intake above the prior-year level and contributed to this segment's customer mix.

Cylindrical Gear segment:

The Cylindrical Gear segment reported net sales of EUR 27,4 million at the end of the first half of the 2023/24 financial year. The year-on-year decline in sales of EUR 11,0 million was based on the same effect as in the Bevel Gear segment. Due to the delayed delivery of customer machines from the 2021/22 financial year as a result of the flooding of July 2021, a jump in sales was realized in the same period of the 2022/23 financial year.

At the time of the financial half-year statements, order intake had increased by EUR 9,2 million to EUR 57,0 million compared to the same period of the previous financial year. In addition to orders from the wind energy, mining, and general mechanical and gear engineering sectors, further orders were received from the electromobility sector. The successful fulfillment of existing orders for the Speed Viper from automotive high-volume customers and suppliers, also in combination with the R 300, was evidence of promising growth in the electromobility sector.

Measuring Centers segment:

The Measuring Centers segment started the 2023/24 financial year with a record order in- take. For the first time in the Company's history, 43 measuring centers were recorded in the KLINGELNBERG Group's order books within a single month. In the entire first half of the 2023/24 financial year, the segment recorded order intake of EUR 52,5 million - an increase of EUR 8,8 million compared to the same period of the previous financial year. The high innovativeness of KLINGELNBERG's Measuring Centers and the increasing consolidation of global market positions in the electromobility and wind power sectors were reflected in the volume of orders in this segment.

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KLINGELNBERG GROUP

Financial Half-Year Statements 2023/24

The newly developed P 125 and P 152 have been very positively received by the market and have established themselves as successful products especially for wind power and industrial applications in this segment. With the sale of the first P 200 Measuring Centers, another new development was successfully launched on the market. The global expansion of electromobility and the need to provide measuring capacity for wind power projects, both implemented and still in the pipeline, mean that demand for KLINGELNBERG Measuring Centers is expected to further increase. Net sales at the end of the first half of the 2023/24 financial year amounted to EUR 34,8 million, up EUR 0,6 million on the same period of the previous financial year.

Drive Technology segment:

The Drive Technology segment generated net sales of EUR 7,5 million at the end of the first half of the 2023/24 financial year, EUR 1,3 million more than in the same period of the previous financial year.

Affected by the temporarily weak global growth dynamics in this area, order intake in the first half of the 2023/24 financial year was EUR 1,3 million below the same prior-year period. Nevertheless, after years of significant investment cutbacks in the marine sector (especially tugs and special- purpose ships), signs are pointing to worldwide growth, this had already become apparent in the Drive Technology segment's order books in the previous financial year.

At the same time, the mining sector boomed due to high raw material demands in the electrification of mobility, heat and semiconductors application areas. The existing order backlog of EUR 17,1 million resulting from these developments promises high utilization of our production capacities and an upturn in sales momentum in the second half of the 2023/24 financial year.

Gross profit

Compared to the same period of the previous financial year, net sales decreased by EUR 32,9 million. This decline of 23,8% resulted mainly from the absence of the flood-related shift in sales from the 2021/22 financial year to the first six months of the 2022/23 financial year. Due to the decline in sales and the significantly high order backlog, changes in inventory amounted to EUR +21,6 million. As a result, total operating performance amounted to EUR 126,9 million (-4,1%).

Material expense fell disproportionately to total operating performance due to the significant increase in inventories and amounted to EUR 55,6 million at the end of the first half of the 2023/24 financial year, EUR 0,3 million lower than in the same period of the previous financial year.

Gross profit thus amounted to EUR 71,3 million, down EUR 5,2 million on the same period of the previous financial year.

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KLINGELNBERG GROUP

Financial Half-Year Statements 2023/24

Personnel expense and employees

Personnel expense amounted to EUR 53,6 million at the end of the first half of the 2023/24 financial year, up EUR 4,1 million on the same period of the previous financial year. The KLINGELNBERG Group had 1.272 employees in the first half of the 2023/24 financial year, 55 employees more than in the same period of the previous financial year. In addition, KLINGELNBERG GmbH's expense increased due to the termination of the "collective restructuring agreement", which was agreed due to the flood, occurred in July 2021.

Other operating expense

Other operating expense was EUR 2,0 million lower than in the previous financial year and totaled EUR 20,7 million at the end of the first half of the 2023/24 financial year. The decrease in costs was mainly due to reduced freight costs and the absence of rent for the assembly hall in Ettlingen/ Germany.

The other operating expense ratio amounted to 16,3% at the end of the first half of the 2023/24 financial year and was thus lower than the previous financial year's level (-0,8 percentage points).

Other operating income

Other operating income amounted to EUR 9,6 million at the end of the first half of the 2023/24 financial year, up EUR 7,9 million on the same period of the previous financial year. This was due to the reimbursement for retroactive damage (flood related) of KLINGELNBERG AG of EUR 4,1 million and the reconstruction aid from the Federal State of "Nordrhein-Westfalen"/Germany of EUR 5,0 million for flood damage incurred by KLINGELNBERG GmbH in July 2021.

Operating result (EBIT)

The operating result increased by EUR 0,3 million year-on-year to EUR 4,7 million.

Financial result

The financial result increased by EUR 1,9 million compared to the first half of the 2022/23 financial year to EUR -2,7 million. As in the same period of the previous financial year, foreign currency losses impacted the financial result in the first half of the 2023/24 financial year.

Balance sheet

The total assets of the KLINGELNBERG Group rose by EUR 1,9 million compared to the annual report as at 31 March 2023 and amounted to EUR 286,3 million on 30 September 2023. While non-current assets decreased by EUR 1,6 million to EUR 74,4 million, mainly due to a KfW subsidy for the new assembly hall in Hückeswagen-Winterhagen/Germany, current assets increased by EUR 3,5 million (+1,7%) and amounted to EUR 211,9 million as at 30 September 2023.

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KLINGELNBERG GROUP

Financial Half-Year Statements 2023/24

Although receivables from goods and services decreased significantly by EUR 29,0 million, cash and cash equivalents increased by EUR 7,2 million and inventories by EUR 26,4 million.

Equity slightly decreased by EUR 0,9 million to EUR 125,7 million compared to the financial statements as at 31 March 2023. Although the KLINGELNBERG Group was able to achieve a positive result for the period ending 30 September 2023, the dividend payment for the 2022/23 financial year of EUR 3,7 million reduced equity. As a result, the equity ratio fell by 0,6 percentage points to 43,9% compared with 31 March 2023.

Liabilities increased by EUR 2,8 million compared to 31 March 2023 and amounted to EUR 160,7 million as at 30 September 2023. While both non-current(long-term) liabilities decreased by EUR 4,5 million and payables from goods and services by EUR 8,9 million, other short- term liabilities increased significantly by EUR 15,2 million due to advance payments received.

Cash flow statement

Cash flow from operating activities rose by EUR 5,2 million and amounted to EUR +12,7 million compared to the same period of the previous financial year. Among other things, net profit increased by EUR 2,6 million compared to the first half of the 2022/23 financial year.

Outflows from investing activities decreased significantly year-on-year. The construction of the new assembly hall in Hückeswagen-Winterhagen/Germany resulted in high outgoing payments in the same prior-year period. Cash flow from investing activities amounted to EUR -2,8 million in the first half of the 2023/24 financial year.

Cash flow from financing activities fell by EUR 8,8 million to EUR -2,2 million compared to the same period of the previous financial year. The biggest difference was the change in long-term financial liabilities of EUR -9,6 million.

Net change in cash was EUR 7,2 million in the first half of the 2023/24 financial year, an increase of EUR 2,6 million compared to the same period of the previous financial year.

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KLINGELNBERG GROUP

Financial Half-Year Statements 2023/24

Outlook

In the 2022/23 Annual Report, sales for the current 2023/24 financial year were forecasted to remain at the previous financial year's level and the EBIT margin to improve compared with the 2022/23 financial year. A new record high in the order backlog as at 30 September 2023 supports this forecast.

However, as mentioned at the beginning of this commentary, we are currently facing high geopolitical uncertainties in combination with weak macroeconomic growth dynamics, the consequences of which cannot be accurately estimated for the rest of the KLINGELNBERG Group's financial year. As of today, we keep our guidance unchanged, barring any unforeseen events.

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KLINGELNBERG GROUP

Financial Half-Year Statements 2023/24

Group key figures

	01.04.2023	01.04.2022
EUR million	- 30.09.2023	- 30.09.2022		01.04.2022
(unaudited)	(unaudited)	Change	- 31.03.2023
Net sales from goods and services	105,4	138,3	-32,9	309,0
Order intake	180,9	156,1	24,8	300,4
Order backlog	335,1	285,9	49,2	259,6
Operating result (EBIT)	4,7	4,4	0,3	23,8
Net profit / loss	1,1	-1,5	2,6	20,8
Basic earnings per share (in EUR)	0,12	-0,17	0,29	2,35
Diluted earnings per share (in EUR)	0,12	-0,17	0,29	2,35
Operating result as % of net sales from goods and	4,5%	3,2%	1,3%	7,7%
services
Net profit / loss as % of net sales from goods and	1,0%	(1,1%)	2,1%	6,7%
services
Cash flow from operating activities	12,7	7,5	5,2	15,7
Investments in fixed assets	3,0	10,3	-7,3	18,3
Free cash flow	9,9	-2,5	12,4	-1,9
Employees (FTE)	1.272	1.217	55	1.229
EUR million	30.09.2023	31.03.2023	Change	30.09.2022
Total liabilities and equity	286,3	284,4	1,9	278,7
Net debt	33,6	41,8	-8,2	42,3
Total equity	125,7	126,6	-0,9	109,4
Equity ratio	43,9%	44,5%	(0,6%)	39,3%

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