Letter to Shareholders

ElringKlinger is in the midst of a transformation. Our core business relating to the long-standing units within the Group remains strong. The associated products have been tried and tested for decades, which includes continuous optimization and refinement. Alongside the state-of-the-art cylinder head gaskets featured in this portfolio, our cam covers and elastomer gaskets are prime examples of our efforts in this field. The Group generates the majority of its annual revenue with products used in internal combustion engines. This business model provides the financial resources needed to drive the Group's transformation process. ElringKlinger is an acknowledged partner when it comes to developing efficient product solutions tailored to every facet of the optimized combustion engine.

At the same time, we have made a point of gradually evolving our expertise over the past decades. Our focus was and remains on the growth areas of electromobility and the hydrogen economy. We have developed a broad product portfolio centered around battery, drive system, fuel cell, and electrolyzer applications. The financial year just ended saw us secure a number of orders. This includes, for example, a high-volume nomination by the BMW Group for its "New Class" series. Customers have also nominated us in the Metal Forming & Assembly Technology business unit, which to date has mainly been producing punched and formed parts as well as shielding systems. Among them, for example, are a global Tier 1 supplier with a nomination for battery housings and a global battery manufacturer with one for battery housing components. Furthermore, in the second half of the financial year under review, series production commenced for an order placed by a global battery manufacturer covering a total volume in the mid triple-digit million euro range. Nominations such as these confirm that the strategic direction we have taken is the right one. Not only when it comes to providing a compelling product proposition but also in our efforts to tap into new customer groups. ElringKlinger is an established partner for the drive technologies of the future.

Alongside the nominations received over the course of the year, ElringKlinger’s business performance as a whole proved thoroughly successful despite difficult market conditions. Group revenue reached a level of EUR 1.85 billion which corresponds to organic growth of 4.6%. Recording an adjusted EBIT margin of 5.4%, we once again boosted the Group's profitability and, at EUR 36.7 million, achieved year-on-year growth in operating free cash flow. As a result, we were able to further reduce net financial liabilities and lower our net debt-to-EBITDA ratio to 1.6. Based on this solid foundation, we, the Management Board, together with the Supervisory Board, are proposing to you, our valued shareholders, a dividend payment of EUR 0.15, unchanged from the previous year. It is this proposal that will be presented to the Annual General Meeting, thus reflecting our belief that shareholders should benefit appropriately from the company's successful performance.

For my Management Board colleagues Reiner Drews and Dirk Willers and myself, the above-mentioned financial metrics represent the starting point in our efforts to advance the Group in the coming years. In this context, our primary mission is to continue the successful transformation of ElringKlinger. This clearly defined strategic focus includes reviewing the Group's portfolio to ensure that it is fit for the future. We will analyze exactly which of our product groups can be considered promising, and we will focus our full attention on these activities. After all, focus has always been one of ElringKlinger’s key strengths.

Looking ahead, ElringKlinger has committed itself to a strategic concept, referred to as SHAPE30, which, as the name suggests, will assist us in our efforts to further shape the Group. It provides the basis for guiding ElringKlinger toward a successful future. The first step is product transformation. Taking a consistent approach, we will continue to build on the milestones we have already achieved with the ambition of pursuing our successful path of transformation. Our long-standing business is very well positioned within the market. Following the ramp-up of series production associated with high-volume orders in the field of new drive technologies, we will be able to cover our costs to a greater extent on the back of higher revenues, thus emerging from the current start-up phase. Against this backdrop, the overall profitability of the Original Equipment segment looks set to improve in the medium term. In the Aftermarket segment, meanwhile, our growth strategy is already taking effect, particularly in the regions of North and South America as well as China. Indeed, our positioning in this segment is very solid overall. The Engineered Plastics segment is making its contribution to diversifying the Group. In this area, we can draw on a successful track record not only in the automotive industry but also in market segments such as medical technology and mechanical engineering.

Alongside product transformation, the aspect of sustainability plays a key role. We are committed to gearing the Group toward sustainability, the ultimate goal being to pass on a world that is viable for future generations. We plan to be carbon-neutral in net terms worldwide by 2030 and are integrating not only environmental considerations into our activities but also social and ethical aspects. The latter includes, above all, sound corporate governance. The future will also bring a raft of new statutory requirements in the area of sustainability, for which we are already making the necessary preparations.

At the same time, it is essential that we take a determined approach to advancing digitalization. This creates added value for both our customers and the Group. We are also keen to leverage further potential through process and performance excellence.

In parallel, we are determined to evolve ElringKlinger's corporate culture. After all, our employees form the core of the Group. It is therefore all the more important that we continue to offer an appropriate framework that allows team members to perform to the best of their ability. In this context, I would like to thank, also on behalf of my colleagues on the Management Board, all employees around the globe – whether in Japan, South Korea, China, Thailand, Indonesia, or India, whether in South Africa, Brazil, Mexico, the USA, or Canada, whether in the United Kingdom, France, Spain, Italy, Hungary, Romania, Turkey, Switzerland, or Germany – for their tireless efforts. They are our Group's most valuable asset.

ElringKlinger has a strong foundation on which to successfully embark on the next stage of its transformation. We are thoroughly committed to building on this foundation in an effort to increase enterprise value. With its broad and compelling product portfolio, its long-standing business as the backbone for ongoing change, and its strategic positioning, complemented by its sales performance in the field of new drive technologies, ElringKlinger is a transformation success story.

Please see for yourself on the following pages and in our "pulse" magazine.

Dettingen/Erms, March 2024