Announcements

• Supply of three fuel cell stacks in total to be incorporated into various applications by system integrator zepp.solutions
• Realized prototype in a Terberg terminal tractor used for container and material handling in ports and logistics centers as well as planned use in water taxi at Port of Rotterdam
• More far-reaching collaboration covering supply of additional fuel cell stacks currently under negotiation

Dettingen/Erms (Germany), October 22, 2020 +++ Fuel cells provide the basis for emission-free propulsion in various fields of application. In those cases in which the requisite hydrogen is produced by wind, solar, or water power, the drive system that relies on such fuel cell technology can be considered completely climate-neutral. In this context, ElringKlinger AG has supplied three fuel cell stacks to Dutch system integrator zepp.solutions B.V. The high power density of ElringKlinger's fuel cell stacks proved a key factor with regard to the selection process and the potential areas of use. On the basis of these stacks, zepp.solutions is capable of developing an extremely compact and highly efficient fuel cell system for various heavy-duty applications.

The first stack supplied by ElringKlinger includes 260 cells and was tested and configured by zepp.solutions on a rig for the purpose of integrating it into fuel cell systems. As a next step, a passive hydrogen recirculation unit was also supplied by the company. Working on this basis, zepp.solutions then fitted its fuel cell system - including ElringKlinger's stack and recirculation unit - to a demonstration vehicle developed by the Dutch manufacturer Terberg Special Vehicles; it is used in a terminal tractor for container and material handling in ports and logistics centers.

A second ElringKlinger stack is to be used in the same area of application following the completion of tests by zepp.solutions with regard to downstream system integration. It, too, is to be deployed in a Terberg terminal tractor used for container and material handling in ports and logistics centers. Additionally, ElringKlinger has provided zepp.solutions with a fuel cell stack with 300 cells, including hydrogen recirculation unit. Subsequent to testing, this unit is to be fitted to a water taxi operated in the port of Rotterdam.

The two parties to the contract are looking to pursue their collaborative efforts based on their accomplishments to date and are currently engaged in negotiations with regard to additional fuel cell stacks of a new generation, which are to be supplied to zepp.solutions in the coming years for subsequent integration into fuel cell systems.

Fuel cell technology at ElringKlinger
ElringKlinger has been actively pursuing research and development in the area of fuel cell technology for around 20 years and serves the market as both a system and a component supplier. The compact stacks are based on proton-exchange membrane (PEM) technology and convert chemical into electrical energy using hydrogen and oxygen.

Fuel cell stacks are suitable above all for mobile applications with a long range and cyclical operation. Apart from vehicles such as buses and cars, PEMFC stacks can also be used for mobile industrial applications, e.g., in commercial vehicles and fork lift trucks. In addition, the hydrogen-based propulsion unit is also suitable for trains, ships, or aircraft.

ElringKlinger offers stacks in various configurations for integration into customer systems. Stacks with peripheral components and system functionalities integrated into the media module are also available as an option. These features enable considerable simplification and cost reduction with regard to the fuel cell system. In addition to the stack platform, a fuel cell system includes the control unit, the hydrogen pressure regulator, the air filter, the primary cooling circuit, and the power electronics. Interfaces to the customer system include the supply and exhaust air connection, the hydrogen supply at medium pressure level, and the removal of purge hydrogen and product water.

• Development of hydrogen propulsion system including fuel cells for aircraft in a strategic partnership with Airbus
• ElringKlinger with non-controlling interest in a newly established company, majority stake held by Airbus
• ElringKlinger provides access to technology and receives compensation in the low to mid double-digit million euro range
• Joint goal of significant reduction in aviation emissions

Dettingen/Erms (Germany), October 14, 2020 +++ In view of the finite nature of fossil fuels and the consequences of global climate change, the aviation industry is also faced with the challenge of having to make mobility as climate-neutral as possible. With this in mind, ElringKlinger AG has entered into an agreement with Airbus for a long-term partnership within the area of fuel cell technology. Following the delivery of stacks and a customized test rig this summer, the agreement will see ElringKlinger and Airbus work together to initially develop and validate aviation-compatible fuel cell stacks in the coming years.

ElringKlinger will provide the newly established company with access to technology relevant to hydrogen-powered fuel cells, while in turn receiving compensation in the low to mid double-digit million euro range. A major part of the aforementioned compensation is payable as of closing scheduled for the end of 2020. Additionally, ElringKlinger will supply the newly established joint company with certain components needed for development activities. Relevant financial details will be included in ElringKlinger's 2020 financial statements.

This Partnership Agreement follows the recent unveiling of Airbus' ZEROe concept aircraft. Hydrogen technology is key to Airbus' ambition to develop the world's first zero-emission commercial aircraft by 2035. Airbus is exploring a variety of configurations and hydrogen technologies including the use of hydrogen fuel cells to create electrical power.

Airbus conducted an extensive analysis of the fuel cell stack market prior to the agreement. As part of the international selection process, ElringKlinger's best-in-class performance proved decisive. The high power density of its stacks and its extensive expertise with regard to industrialization processes, proved key differentiators.

ElringKlinger will hold a non-controlling interest in the newly established company, while the majority stake will be held by Airbus. Both parties have agreed not to disclose further details of the Partnership Agreement. The closing of the transaction and the creation of the joint company is subject to customary regulatory clearances in various jurisdictions.

Dr. Stefan Wolf, CEO of ElringKlinger AG, commented: "The fact that Airbus opted in favor of ElringKlinger as a technology partner points to the performance capabilities of our fuel cell technology. In the aviation industry, in particular, the power density of stacks is of primary importance. At the same time, other high-tech performance criteria such as service life or operational parameters such as operating temperature or operating humidity must be met in an aviation-specific manner."

A power output was defined as the target for the fuel cell stacks supplied by ElringKlinger during a pre-contractual stage. As part of extensive tests, this target was exceeded by an impressive 15 %. At the heart of the high power density of the ElringKlinger stack is the use of metallic bipolar plates as well as specially designed membrane electrode assembly (MEA) sealing solutions.

New power generation technologies for the aviation sector
A pure battery-powered propulsion unit quickly reaches its limits for certain applications in the aviation sector, such as over longer distances or for larger aircraft, due to the limited power capacity at a given weight. Fuel cells, on the other hand, represent a powerful alternative because they generate the required energy efficiently on board. "All in all, fuel cells can reduce emissions in aviation by a considerable margin. This is just one of the reasons why there is significant market potential for our technology, which confirms our strategic path of the last two decades. We as a Group will of course continue to pursue the route charted so far," Dr. Wolf continued.

Fuel cell technology at ElringKlinger
ElringKlinger has been actively pursuing research and development in the area of fuel cell technology for around 20 years and serves the market as both a system and a component supplier. The compact stacks are based on proton-exchange membrane (PEM) technology and convert chemical energy into electrical energy using hydrogen and oxygen. A completely climate-neutral drive is possible with fuel cells if the required hydrogen is produced by wind, solar or hydro power.

Fuel cell stacks are suitable above all for mobile applications with a long range and cyclical operation. Apart from vehicles such as buses and cars, PEMFC stacks can also be used for mobile industrial applications, e.g., in commercial vehicles and fork lift trucks. In addition, the hydrogen-based propulsion unit is also suitable for trains, ships, or aircraft.

ElringKlinger stacks can be integrated within customer systems and, as an option, they can be equipped with peripheral components and system functionalities integrated into the media module. These features enable considerable simplification and cost reduction with regard to the fuel cell system.

• Operating free cash flow in positive territory at EUR 25.8 million despite COVID-19 economic crisis; net debt scaled back by EUR 120.0 million or 17.1% within twelve months
• Revenue down by 41.9% to EUR 252.2 million in second quarter, organically by 40.5% - Global automobile production slumps by 44.5%
• EBIT at EUR -32.4 million in second quarter of 2020 and EUR -16.4 million in first half
• CEO Dr. Stefan Wolf: "Even against the backdrop of the corona crisis, we were able to continue on our chosen path: we achieved positive operating cash flow and further reduced net debt."

Dettingen/Erms (Germany), August 7, 2020 +++ The second quarter of 2020 was dominated by the coronavirus pandemic, particularly in Europe and in North and South America. Social-distancing measures were introduced as early as March, factories had to interrupt production, schools and kindergartens were forced to close - public life came to a standstill. This also precipitated a slump in demand within the automotive industry. While vehicle production in Europe was gradually ramped up again from the end of April, North America had to wait until May before it saw a resumption in manufacturing. Nevertheless, the recovery there proved more dynamic compared to that seen in Europe. China, the largest automotive market, was only marginally affected by the pandemic in the second quarter of 2020 and only in certain regions.

Organic decline in revenue less pronounced than market downturn
ElringKlinger AG's key financials for the second quarter are to be judged within this context. Overall, the Group generated sales revenue of EUR 252.2 million, which constitutes a year-on-year decline of EUR 181.9 million or 41.9%. Taking into account changes in the scope of consolidation and assuming constant exchange rates, the decline amounted to EUR 175.9 million or 40.5%. Therefore, the Group's organic change in revenue in the second quarter was again better than the performance of the global automobile industry, which saw production output fall by 44.5% in the same period. Even when reviewing the first half of the year as a whole, the organic decline in revenue of 25.0% was less pronounced than the change recorded within the global market, which declined by 33.2%.

The spread of the coronavirus was also reflected in Group revenue in the individual regions during the second quarter: while the region covering Asia/Pacific, at EUR 62.7 million, saw a comparatively small decline of 13.3% compared with the same quarter of the previous year, revenue from sales in Germany and the Rest of Europe declined significantly, by -34.8% and -49.2% respectively. Stoppages of several weeks also caused revenues in the region encompassing North America to fall by 54.3%. Here, the market slumped by almost 70%.

Order situation against the backdrop of the corona crisis
The corona-related decline in demand in the second quarter can be seen to a similar extent in the order situation: adjusted for currency effects, order intake decreased by EUR 216.5 million or 15.2% to EUR 192.6 million. At EUR 929.4 million, order backlog was down by EUR 133.6 million or 12.6% compared to the same quarter of the previous year.

Earnings visibly influenced by corona crisis
The reduction in revenue was also reflected in earnings before interest and taxes (EBIT). At EUR -32.4 million, EBIT was EUR 42.6 million lower in the second quarter than in the same quarter of the previous year. As a result, the EBIT margin stood at -12.8%. In the first half of the year, EBIT was EUR -16.4 million, while the margin amounted to -2.5%. After taxes, the result for the period was EUR -35.5 million, which corresponds to earnings per share of EUR -0.53.

Dr. Stefan Wolf, CEO of ElringKlinger AG, commented as follows: "Despite the effects of the coronavirus pandemic, our figures for the first half of the year are to be seen as relatively robust. This is due in part to the measures swiftly taken by us in response to the coronavirus pandemic as well as our solid performance in the first quarter." Here, the Group had been able to achieve EBIT of EUR 16.0 million despite the COVID-19 effects in Asia and the slowing economy in Europe. "Overall, we are well on track when it comes to our program aimed at raising efficiency levels, despite the fact that the benefits are not being seen at all levels due to the corona crisis," said Dr. Wolf. "What is important, however, is that we were able to continue on our chosen path: we achieved positive operating cash flow and further reduced net debt."

Operating free cash flow in positive territory
The program aimed at raising efficiency levels was implemented back in 2019. The disciplined investment approach initiated by ElringKlinger was again pursued over the course of the first half of 2020. A total of EUR 22.7 million was invested in property, plant, and equipment and investment property during the first half of the year, EUR 10.4 million of which was invested in the course of the second quarter. This represents a ratio of 4.1% in relation to Group revenue in the second quarter and 3.5% in the first half of the year. Overall, the Group now expects a ratio below 5% (previously: below 7%) for the year as a whole.

Net working capital was also optimized: while the effects of trade receivables and trade payables almost balanced each other out, inventories were actively managed, resulting in a supporting effect for operating free cash flow. Despite negative earnings, operating free cash flow was thus in positive territory at EUR 23.6 million. As a result, net debt, which amounted to EUR 595.3 million at the end of 2019, was scaled back by EUR 15.4 million to EUR 579.9 million.

Major uncertainties for the year as a whole - Outlook confirmed
The economic impact of the coronavirus pandemic still cannot be accurately assessed, as the uncertainties are simply too pronounced at present. It is impossible to predict how quickly the demand-side situation in Europe will improve, nor is it possible to assess whether the economy in North America will develop at a sustainable level. In view of the rising number of COVID-19 cases in numerous countries, it is also difficult to predict whether there will be a further wave of infection necessitating protective measures. Due to these major uncertainties, providing a sufficiently reliable and accurate outlook for the year continues to be a challenge. Based on the information and estimates available at the time of reporting, ElringKlinger can confirm its annual guidance and anticipates that the change in revenue will be slightly better than the figure relating to global automobile production for the financial year as a whole. The latter is currently being estimated at -22% compared with the previous year. In terms of earnings, the Group is again anticipating an EBIT margin (earnings before interest and taxes relative to Group revenue) that is visibly lower than in the previous year.

Key financials for the second quarter and first half of 2020