VARTA AG

9M 2023 Earnings Presentation

14 November 2023

Disclaimer

This presentation contains certain financial measures (including forward-looking measures) that are not calculated in accordance with IFRS and are therefore considered "non-IFRS financial measures". The management of VARTA believes that these non-IFRS financial measures used by VARTA, when considered in conjunction with (but not in lieu of) other measures that are computed in accordance with IFRS, enhance an understanding of VARTA' s results of operations, financial position or cash flows. A number of these non-IFRS financial measures are also commonly used by securities analysts, credit rating agencies and investors to evaluate and compare the periodic and future operating performance and value of other companies with which VARTA competes. These non-IFRS financial measures should not be considered in isolation as a measure of VARTA' s profitability or liquidity, and should be considered in addition to, rather than as a substitute for, net income and the other income or cash flow data prepared in accordance with IFRS. In particular, there are material limitations associated with the use of non-IFRS financial measures, including the limitations inherent in determination of each of the relevant adjustments. The non-IFRS financial measures used by VARTA may differ from, and not be comparable to, similarly-titled measures used by other companies. Certain numerical data, financial information and market data (including percentages) in this presentation have been rounded according to established commercial standards. Furthermore, in tables and charts, these rounded figures may not add up exactly to the totals contained in the respective tables and charts. This presentation contains forward-looking statements which are based on certain assumptions, expectations and opinions of the management of VARTA AG (the "Company") or cited from third-party sources. These statements are, therefore, subject to certain known or unknown risks and uncertainties. A variety of factors, many of which are beyond the Company's control, affect the Company's business activities, business strategy, results, performance and achievements. Should one or more of these factors or risks or uncertainties materialize, actual results, performance or achievements of the Company may vary materially from those expressed or implied as being expected, anticipated, intended, planned, believed, sought, estimated or projected in the relevant forward-looking statement. The Company does not guarantee that the assumptions underlying such forward-looking statements are free from errors nor does the Company accept any responsibility for the actual occurrence of the forecasted developments. The Company neither intends, nor assumes any obligation, to update or revise these forward-looking statements in light of developments which differ from those anticipated.

2

Executive Summary

Q3 2023 has been the strongest quarter of FY 2023 to date with regards to revenue and adjusted EBITDA.

  • Q3 2023 results exceed Q3 2022: revenue Q3 2023: €215.1 m (Q3 2022: €193.9 m), adjusted EBITDA Q3 2023: €29.4 m (Q3 2022: -€2.5 m)
  • This also applies when considering positive effects totaling EUR €12.5 m, which result from the reimbursement of ramp-up costs that incurred primarily in the first half of the year in in the area of large-formatlithium-ion cells.
  • Broad product portfolio carries overall success in Q3 2023.

Seasonal increase in demand, successful restructuring measures, decrease of costs for raw materials and energy have positive impact.

  • Personnel costs YTD reduced by €7.8 m; personnel costs in Q3 2023 lower than €60 m for the first time since Q1 2022.
  • Material costs decreased by €23.1 m compared to 9M 2022.
  • Other operating expenses reduced by €25.3 m (-19.8% y/y) through stringent cost reduction programs.
  • Thereof, Energy costs virtually halved from €18.3 m in 9M 2022 to €9.6 m in 9M 2023.
  • Level of inventories has declined by 18.6% from €262.5 m as at 30 September 2022 to €213.7 m as at 30 September 2023.

Confirmation of guidance for full financial year 2023:

  • Revenue around €820 m.
  • Adjusted EBITDA* between €40 m and €60 m.

*) Including adj. items from shared-based payments, expenses from M&A transactions, restructuring and integration costs and inventory step-up from purchase price allocation (PPA)

3

**) Negative effects on the VARTA AG Group cannot be ruled out. For details refer to the outlook in this presentation and VARTA's 9M 2023 report

VARTA Group - Significantly improved Q3

leads to adj. EBITDA of €22.6 m in 9M 2023

Revenue and adj. EBITDA, € m

Description

Revenues

-2.9%

570.7

554.1

Q3

193.9

215.1

Q2

191.5

174.8

Q1

185.3

164.2

9M 2022

9M 2023

Adj. EBITDA

•

adjusted EBITDA margin

•

-65.9%

66.4 11.2%

22.6

4.1%

•

38.1

28.2

29.4

-1.9

-2.0-4.8

9M 2022

9M 2023

•

Q1

Q2

Q3

Revenues down 2.9% y/y to €554.1 m.

At segment level, the revenue decline in 9M was driven by Micro Batteries and Lithium-IonCoinPower. Revenues in Consumer Batteries were in line with previous year's level while

Energy Storage Systems revenues grew

substantially (86.2% y/y growth).

Significant improvement on the cost side through strict cost containment measures: personnel expenses fell by 4.0% to €190.3 m; other operating expenses fell by 19.8% to

€102.2 m; higher material prices in 9M 2023,

and effects from product mix led to a higher cost of materials ratio (52.2% from 49.2%). Cost of materials ratio for Q3 alone declined (47.1% in Q3 2023 from 49.2% in Q3 2022).

Adjusted EBITDA of €22.6 m down from €64.3

m, mainly resulting from the volume decline in Lithium-Ion CoinPower in HY1 2023. Q3 2023 strongly improved at €29.4 m vs. -€1.9 m in Q3

2022.4

Strong margin improvement in Consumer

Batteries and further growth in Energy Storage (ESS)

Revenue and adj. EBITDA, € m

Description

Consumer

Batteries

The power of freedom:

From radio to toys to blood pressure monitor - we provide you the optimal power.

Energy Storage Systems (ESS)

Future-proof and flexible: The storage capacity can be expanded at any time, even after installation.

Revenues

+0.5%

231.1

232.2

Q3

84.5

89.7

Q2

64.3

67.6

Q1

82.2

74.9

9M

9M

2022

2023

Revenues

+86.2%

121.9

Q3

65.5

40.4

Q2

22.9

41.8

Q1

27.9

14.7

39.7

9M

9M

2022

2023

Adj. EBITDA

•

adjusted EBITDA margin

+55.0%

14.3

6.2%

22.1

9.5%

11.6

14.6

•

6.2

1.6

1.1

1.3

9M

9M

2022

2023

Q1

Q2

Q3

Adj. EBITDA

•

adjusted EBITDA margin

> +100%

1.7

2.6%

16.0

13.1%

5.8

5.6

4.5

•

-0.22.9 -1.0

9M

9M

2022

2023

Q1

Q2

Q3

HY1 2023 Consumer Batteries revenues slightly up y/y. Partial price pass-onsand new customer acquisition outweighed slight volume decline and contributed to the improved sales momentum (Q3 2023: +6.1% y/y).

Falling costs for raw materials and typical

stronger net sales in HY2 significantly improved profitability for Consumer Batteries (9M 2023: 9.5%; +3.3 percentage points). VARTA expects to return to its 2020/21 margin levels in the medium term.

Revenues in Energy Storage Systems continue

to grow impressively at >86% y/y, driven by the structural shift towards home storage solutions and VARTA's highly competitive product and service offering.

In Q3 2023, the very high adj. EBITDA margin

has fallen slightly due to price reductions (sales price adjustments of around -7% in August 2023). Margin for 9M 2023 stands at

13.1%.5

Sustained high margins in Micro Batteries,

Q3 improvement in challenging year for CoinPower

Revenue and adj. EBITDA, € m

Description

Micro Batteries

Hearing aid batteries with an even higher energy density are the result of consistent research and ongoing development.

Lithium-Ion

CoinPower

Lithium-Ion Cells:

Main power for portable and cordless devices like true wireless headsets.

*) TWS = True Wireless Stereoheadsets

Revenues

-14.2%

123.7

106.1

Q3

40.7

36.1

Q2

39.8

35.8

Q1

43.3

34.2

9M

9M

2022

2023

Revenues

-61.3%

114.5

Q3

34.8

Q2

45.0

44.4

Q1

34.6

25.2

2.7

16.5

9M

9M

2022

2023

Adj. EBITDA

•

adjusted EBITDA margin

+17.6%

13.5

10.9%

15.9

14.9%

7.4

6.1

•

5.7

3.9

5.9

0.5

9M

9M

2022

2023

Q1

Q2

Q3

Adj. EBITDA

•

adjusted EBITDA margin

> -100%

35.6 31.1%

•

20.0 18.3 -2.7

-2.5

-18.2-11.2

-31.9-71.9%

9M9M

20222023

Q1 Q2 Q3

Demand for Micro Batteries continued to be affected by subdued market sentiment, reflecting e.g. customer stock piling during the pandemic and the market shift to rechargeable hearing devices.

Adjusted EBITDA increased significantly in Q3 y/y due to lower raw material prices and the favorable product mix. The adjusted EBITDA margin rose to the attractive level of 14.9% YTD (9M 2022: 10.9%).

In Lithium-Ion CoinPower, the strong decline

in demand for TWS* had a significant impact on revenues. Q3 2023 significantly improved: Revenue in Q3 (€ 25.2 m) > HY1 (€ 19.2m).

Y/y decline in sales volumes, in particular from the major customer, and costs from underutilization resulted in highly negative adjusted EBITDA. The 2022 bottom-linewas positively impacted by gov. grants payments of €29.2 m from a funding program that was

finalized as expected in 2022.

6

Reimbursement of ramp-up costs in Li-Ion

Large Cells drives top- and bottom-line growth

Revenue and adj. EBITDA, € m

Description

Revenues

Adj. EBITDA

•

The segment Other consists of the business

Other

adjusted EBITDA margin

divisions Lithium-Ion Battery Packs and

+37.9%

-55.5%

Lithium-Ion Large Cells (V4Drive and

Includes the businesses of

49.6

1.3

0.6

RoundPower).

3.7%

1.2%

9M 2023 net revenues up 37.9% y/y, due to

"Lithium-Ion Battery

36.0

•

Packs" and "Lithium-Ion

Q3

23.7

7.0

effects from reimbursement of ramp-up costs

0.3

Large Cells" (V4Drive and

11.0

-0.7

2.4

-0.4

RoundPower).

Q2

14.5

13.2

-6.7

in Q3 of €12.5 m. Lower adj. EBITDA margin in

Potential special effects

Q1

10.6

12.7

2023 (9M 2023: 1.2%) attributable to subdued

of the Group may fall into

9M

9M

this segment.

9M

9M

2022

2023

Battery-Pack business revenues.

2022

2023

Q1

Q2

Q3

VARTA Group

9.0%

Adj. EBITDA

•

~42% of Group revenues attributable to

9M 2023

Consumer Batteries.

8.0%

22.6

•

Energy Storage Systems has become the

Consumer Batteries

Revenues

41.9%

22.1

second largest segment accounting for 22%

9M 2023

of company revenues.

19.1%

~ €55 m

Energy Storage Systems

16.0

€554.1 m

•

Significant bottom-line contribution from

15.9

Micro Batteries

0.6

Consumer, Micro Batteries and Energy Storage

CoinPower

22.0%

-31.9

Systems. Substantial improvement of Lithium-

Others

Ion CoinPower in Q3, but still a highly negative

adj. EBITDA for 9M 2023.

7

Consistent focus on balance sheet

resilience and net working capital management

Balance sheet positions, € m

Description

Assets

-9.0%

1,258.5

1,145.8

749.2

722.9

509.2

422.9

FY

9M

2022

2023

Non-current assets

Current assets

Net Working Capital

NWC ratio*

-11.7%

214.0

162.7

189.1

9M

FY

9M

2022

2022

2023

27.6%

17.2%

22.0%

Inventories

Operative payables

Trade receivables

Customer bonuses

Equity & Liabilities

Equity-Ratio

-9.0%

1,258.5

1,145.8

239.5

175.3

1,019.0

970.5

19.0%

15.3%

FY

9M

2022

2023

Equity

Total Liabilities

• Total assets declined by 9.0% vs. end- 2022,

reflecting lower non-current and current

assets.

• The net working capital increased from €162.7

m end-2022 to €189.1 m as at 30 September

2023. It was well below the €214.0 m as at 30

September 2022, though.

• The letter was mainly due to the substantial

decline in inventories which fell from €262.5

m (30 September 2022) to €213.7 m as (30

September 2023).

Inventories

-18.6%

262.5

223.3

213.7

9M

FY

9M

2022

2022

2023

Trade receivables**

+3.8%

107.3

114.3

111.3

9M

FY

9M

2022

2022

2023

Current trade payables***

-16.7%

108.1

119.2

90.1

9M

FY

9M

2022

2022

2023

• As a result, the NWC ratio* fell from 27.6% on

30 September 2022 to 17.2% in FY 2022 and

amounted to 22.0% on 30 September 2023.

• Equity fell from € 239.5 m as at 31 December

2022 to € 175.3 m as at 30 September 2023.

The equity ratio amounted to 15.3 % as at the

reporting date (31 December 2022: 19.0 %). The main effects are the capital increase of € 50.7

m carried out Q1 2023 and the negative

*) The net working capital ratio is calculated in relation to the revenue of the last three months extrapolated to one year **) Trade receivables including contract assets

***) Current trade payables including advanced payments received and contract liabilities

consolidated result of -€115.8 m.

8

Further improvement of Free Cash Flow

remains a top priority

Cash flow statement, € m

Description

2023

108.7

-8.3

-18.7

-55.7

-0.2

39.8

(CAPEX**)

14.0

-74.4

Cash & cash

Cash flow from

Cash flow from

Cash flow from

Cash & cash

equivalents

Exchange rate

equivalents

operating

investing

financing

1 January

fluctuations

30 September

activities

activities

activities

2023

2023

2023

9M 2023

-82.7

Free Cash Flow (FCF)

• The Free Cash Flow substantially improved vs.

the previous year but has remained negative.

• The cash flow from operating activities

improved to -€8.3 m in 9M 2023. Thus, it rose

by €50.1 m. The improvement was driven by the

ongoing restructuring programme and the

consistent cash flow management.

• The cash flow from investing activities has

improved from -€127.1 m in the same period of

the previous year to -€74.4 m, largely

2022

73.1

-58.4

-35.7

142.5

-91.4

(CAPEX**)

-127.1

2.2

32.4

2022

9M 2022

-156.7

reflecting the lower CAPEX**.

• Cash flow from financing activities decreased

in the reporting period from €142.5 m in 2022

to €14.0 m. Main drivers: capital increase

(+€50.7 m), higher interest expenses (-€15.5 m),

both in 2023, and base effects from

promissory note (€250.0 m) and dividend

Cash & cash

Cash flow from

Cash flow from

Cash flow from

equivalents

operating

investing

financing

1 January

activities

activities

activities

2022

Cash & cash

Exchange rate

equivalents

fluctuations

30 September

2022

Free Cash Flow (FCF)

payment (-€100.2 m) in 2022.

• As at 30 September 2023, cash and cash

equivalents totalled €39.8 m (2022: €32.4 m).

*) 2022 financial figures adjusted according to IAS 8 (further details can be found in the annual report 2022) **) CAPEX denotes investments in intangible assets and property, plant and equipment

9

Moving forward to restore operational

excellence - base for the successful turnaround

Action plan

Implementation of sales

initiatives across segments to

increase top line and bring

VARTA back to the growth

path

Execution on cost reduction

through clearly defined

restructuring concept to boost

EBITDA and return to an

adequate profitability level

Leveraging operational

excellence, installed

capacities, strong brand and position in growing markets to increase top- and bottom-line

Outlook FY 2023 & FY2024*

FY sales revenue

at ~ €820 m

[ confirmed ]

FY adj. EBITDA**

at €40 m to €60 m

[ confirmed ]

as amended on 26 July 2023 and confirmed on 10 November 2023

  • €900 m

sales revenue

20 24

Clear management focus

Management laying the foundation for the successful turnaround

*) The outlook is subject to the further developments of the very high inflationary pressure and the associated central-bank increases in interest rates as well as the development in the wars in Ukraine and Israel/Gaza and their impact on the global economy. The further macroeconomic and geopolitical

development therefore results in an exceptionally high level of uncertainty. Furthermore, the outlook is dependent on impact of the intended restructuring measures. Adj. EBITDA accounts, among other factors, for potential costs associated with restructuring and adjusts them accordingly.10 **) Including adj. items from shared-based payments, expenses from M&A transactions, restructuring and integration costs and inventory step-up from purchase price allocation (PPA)

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Disclaimer

VARTA AG published this content on 14 November 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 14 November 2023 06:04:07 UTC.