ElringKlinger AG Business Report FY ended Dec. 2015

Financial Overview

(in million EUR)

	FY ended Dec. 31, 2015	FY ended Dec. 31, 2014	Rate of Change (%)	Factors
Overall
Net Sales	1,507.3	1,325.8	13.7	1)
EBITDA	222.8	233.4	(4.5)	-
Original Equipment segment
Sales	1,255.8	1,089.7	15.2	2)

Factors
1) Net Sales
-In the fiscal year ended December 31, 2015, the Company’s net sales increased by 13.7% over the previous year to EUR 1,507.3 million. Excluding the positive effects of currency translation, the Company’s organic growth amounted to approximately 6.0%, meeting previously set targets. Sales increased due to the acquisition of M&W Manufacturing Co., and increased sales in North America, Europe, and Asia Pacific regions.

2) Original Equipment segment sales
-Sales for the Company’s Original Equipment segment increased by 15.2% over the previous year to EUR 1,255.8 million in the fiscal year ended December 31, 2015. The increase in sales was caused by the acquisition of M&W Manufacturing Co., growing demand for automatic transmission components, turbocharger gaskets, thermal-acoustic shielding parts, and lightweight plastic modules. Other contributions came from a number of new product rollouts, including polymer hybrid components for a premium German automaker.

Acquisitions

-The Company has acquired all interests in U.S. automotive supplier M&W Manufacturing Co., Michigan, thereby significantly expanding its market position as a supplier of spacer plates for automatic transmissions. The acquisition of M&W is seen as an important milestone in the expansion of the Company's Specialty Gaskets division. The division primarily develops and produces turbocharger gaskets, high temperature gaskets and components for exhaust gas recirculation (EGR) and exhaust systems as well as control plates for automatic and dual-clutch transmissions. M&W employs approximately 100 people at its two company sites at Warren and Roseville, Michigan. (From a press release on February 13, 2015)

Contracts

-The Company announced that it has secured a major contract for the supply of lightweight shielding systems to a volume car maker from Japan. The volume of the order stands at approximately USD 10 million per year with series supply commencing in 2017. The Company will supply lightweight shielding components for exhaust manifolds fitted to a next-generation engine. The Company's lightweight shielding components are produced at the Japanese site of ElringKlinger Marusan Corporation in Greater Tokyo to cover demand in Japan, while products required in the U.S. are made at the Company’s facility in Buford, Georgia. (From a press release on July 20, 2015)

Awards

-In April 2015, the Company’s subsidiary, Elring Klinger do Brasil Ltda. received an award from Toyota in recognition of outstanding product quality and supplier reliability.

R&D Expenditure

(in million EUR)

	FY ended Dec. 31, 2015	FY ended Dec. 31, 2014	FY ended Dec. 31, 2013
Overall	71.2	66.5	65.7
% of Sales	4.7%	5.0%	5.7%

Note: Figures include capitalized research and development costs.

-The majority of the Company’s research and development related expenses in the fiscal year ended December 31, 2015 was dedicated towards its core divisions such as Cylinder-head Gaskets, Specialty Gaskets, Plastic Housing Modules, Shielding Technology, and Exhaust Gas Purification.

R&D Structure

-As of December 31, 2015, the Company has 562 employees working in research and development.

Patents

-In 2015, the Company applied for a total of 67 new patents.

Product Development

Projects focused around lightweight construction
-In regards to lightweight construction, the Company focused primarily on new material concepts:

Organo sheets: A lightweight fiber-reinforced composite made of woven fibers embedded in a thermoplastic matrix which provides improved resilience and rigidity. Can be used in vehicle body, battery mounting, and seat pan applications.
Lighter underbody paneling material: A material based on compressed textiles which reduces noise, vibration levels, air resistance, and improves the vehicle’s aerodynamic performance.
Plastic resonators: Resonators installed in the charged air duct to reduce noise.
Engine brackets: Engine brackets made from glass fiber-reinforced polyamides improve acoustic performance, provide better thermal insulation, and reduce weight.

Engine-related technologies
-In 2015, the Company was involved in the following research projects related to engine technologies:

EGR gaskets: EGR gaskets with integrated screening fabric to filter out ceramic particles and soot.
Gaskets and coatings: New gasket solutions for air conditioning compressors and improved coatings for V-ring gaskets to improve leakage rates.
Oil separation systems: The system uses a variable-flow separator to capture a percentage of blow-by flows that leak into the crankcase.

Capital Expenditure

(in million EUR)

	FY ended Dec. 31, 2015	FY ended Dec. 31, 2014	FY ended Dec. 31, 2013
Overall	189.8	163.1	125.6

-The increase in the Company’s capital expenditures in 2015 is due to the acquisition of M&W Manufacturing Co., and the added investment in capacity expansions and streamlining projects.