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EN Speech Krause ŠKODA Annual Press Conference 2015

EN Speech Krause ŠKODA Annual Press Conference 2015

ŠKODA Annual Press Conference 2015
Mladá Boleslav, 16th March 2015

Winfried Krause
ŠKODA AUTO Commercial Affairs

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– The spoken word prevails –

Speech for Winfried Krause
ŠKODA AUTO a.s., Annual Press Conference 2015
on the 16th March 2015

Ladies and Gentlemen,

For my part, I too would like to offer you a warm welcome to our annual press
conference. In the next few minutes I would like to inform you of last year’s key
financial figures.

Slide: ‘Financial highlights 2014’

Professor Vahland has already mentioned that in 2014, for the first time, ŠKODA
sold more than 1 million vehicles to customers within a year. A great
performance from our colleagues and retail partners and clear proof that we have
taken the right approach with our model campaign that we launched four years
ago.
Along with this sales record for deliveries to customers, turnover also increased
and reached a new record level at 11.76 billion euros.
An excellent result was also achieved in regard to our operating profit: last year
the ŠKODA brand generated 817 million euros, an improvement over the same
period of the previous year of 295 million euros, and a historical record. From
this, it is apparent that the new Octavia family, with just under 390,000 vehicles
delivered, is not only the ‘heart of the brand’, but also an important earnings
driver for ŠKODA. I would like to highlight the very positive development of the
sales numbers for emotionally charged derivatives, such as the Octavia RS and
Octavia Scout, which have considerably exceeded our expectations.

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In the past year, we have emphatically advanced the biggest model campaign in
the company’s history. We have made comprehensive investments in our new
models, both in terms of real investments and development costs. Here, the
focus was specifically on the new Fabia and Superb.
Last financial year, not only did we generate very good financial results but we
also further strengthened our financial position: at the end of the year, key
financial variables such as net cash flow and net liquidity closed on their highest
ever values.

Slide: ‘ŠKODA deliveries to customers vs. total car market’

Before we look in detail at the significant key performance figures of 2014, I
would like to illustrate the positive development of ŠKODA deliveries compared
to the respective total market development:
In Western Europe, once again ŠKODA achieved above-average growth and
increased its market share even further. An equally positive development for
ŠKODA was seen in Central Europe. Even though we were not able to fully
escape the tense political and economic situation in Eastern Europe and vehicle
sales there decreased by -5%, this was noticeably lower than the total market
reduction and as a result increased our market share here as well.
In addition to the overall very positive development in Western and Central
Europe, both the intensely competitive individual markets of Germany and the
Czech Republic deserve a special mention: in the Czech market, we were able to
significantly increase the sales of ŠKODA vehicles and to defend our excellent
market share. In the German market, ŠKODA successfully achieved just under
+10% increase and continued to strengthen its position as the strongest import
brand.
The Chinese car market, with a growth of almost 12%, was an important catalyst
for the whole of Asia: despite the double-figure growth, there was a slight
reduction in the speed of growth compared to the previous year. ŠKODA
increased deliveries in this increasingly competitive market very successfully with

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a +24% growth on the previous year. The Chinese market is, and also remains,
ŠKODA’s most important market.

Ladies and gentlemen, let me just summarise the key figures of the 2014
financial year:

Slide: ‘Key figures’

Our worldwide sales record was not just down to the Chinese market. Excluding
the China region, we delivered 756,000 vehicles to customers worldwide, which
is a significant increase of +8.9% compared to the previous year. 281,000
deliveries to customers in the Chinese market signified an increase of +24%
compared to 2013.
ŠKODA revenue reached around 11.76 billion euros, which was a new record.
Compared to the previous year, this represented an increase of +13.9%. Thanks
to the improved vehicle mixes and specifications, revenue was disproportionately
higher than the increase in volume.
Please note that deliveries in China are not included in ŠKODA’s revenue figures.
Shanghai Volkswagen is not a part of the ŠKODA brand – the consolidation ‘at
equity’ is included in the financial results of Volkswagen Group.
The operating profit considerably surpassed that of 2013 with 817 million euros.
The pre-tax profit reached 775 million euros and was negatively influenced by
the development of the financial results. The return on investment amounted to
18.3% – significantly more than the previous year’s value and more than the
required minimum return of 9%.

In conclusion: despite a challenging market, especially in Eastern Europe, ŠKODA
was able to achieve new record figures with regards to deliveries to customers
and financial results.

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Ladies and Gentlemen,

now to the individual items of the profit and loss accounts and the reconciliation
of the operating profit year-on-year.

Slide: ‘Operating profit (reconciliation)’

After the solid performances in 2013, we significantly increased our financial
results by +57%. The main drivers behind the positive performance compared to
the previous year were increased car sales, improved mixes – mainly driven by
the new Octavia – and optimised product costs. We should emphasise that
consistent costs and efficiency management remains a top priority at ŠKODA.

The results were negatively affected by the high depreciation on investments
carried out in the last few years as well as by negative influences from exchange
rates, in particular the significant devaluation of the Russian rouble.

Slide: ‘Return on sales’

ŠKODA’s high profitability is also reflected in the return on sales: in 2014 an
operational profit margin of 7.0% was achieved, an improvement of +1.9%. This
places ŠKODA at the upper end amongst European competitors and yet again
demonstrates its high profitability.

Slide: ‘Profit and loss account’

In 2014, ŠKODA achieved a pre-tax profit of 775 million euros, an increase of
around +44.6% compared to the previous year’s figure. The financial result was
down by -42 million euros, primarily caused by negative effects from financial
derivatives.
After tax, the profit was 665 million euros, which was significantly higher than
the previous year.

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Ladies and Gentlemen,

let me briefly come to real investments, the development of net cash flow, the
net liquidity and return on investment.

Slide: ‘Investments in tangible assets’

Last year, ŠKODA continued to consistently implement its model campaign and,
in the process, once again made important investments in future products,
engines and gearboxes. After the record investments in 2012/2013, we also
invested just short of 700 million euros last year. Although this represents a
reduction of -6% compared to 2013, it is also a statement that we remain
committed and will continue to advance with the update and expansion of our
model range.

Slide: ‘Net cash flow’

As in the previous year, ŠKODA has been successful in financing all investment
activity from self-generated funds. This is impressively reflected in the net cash
flow: compared to 2013, we more than doubled the net cash flow by around
+500 million euros. The significant increase compared to 2013 is mainly a result
of the higher operating profit, a better working capital and higher depreciation.
ŠKODA was therefore not only in a position to finance all investments into new
products from current business, but could also achieve a significant surplus of
840 million euros.

Slide: ‘Net liquidity’

This is also reflected in the positive development of the net liquidity:
With over 2 billion euros, we not only reached a new record at the end of 2014,
but also have a very solid financial basis upon which to continue to finance the
model campaign from our own resources.

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To summarise: ŠKODA is a truly healthy and completely profitable operating
business.
Slide: ‘ROI after tax’

The return on investment is another important financial key indicator for us:
Last year, ŠKODA reached a return on investment of 18.3% after tax –
significantly more than in the previous year and once again above the internally
required minimum of 9%. The increase compared to the previous year is
primarily down to the significantly higher operating profit.

Slide: ‘Development of model range and investments’

Ladies and Gentlemen,

since the beginning of ŠKODA’s model campaign, the product portfolio has been
fundamentally updated and additional model lines have been added. Since 2010,
the model range has not only seen the addition of the Rapid, Rapid Spaceback
and Citigo model series, but most of the existing model series have also been
renewed.
The implementation of the model campaign is also reflected in the high real
investments since 2010: in the record year of 2012, ŠKODA invested 832 million
euros, primarily in refreshing and expanding the model range. This included
extensive investments in gearbox production and in the new engine centre.
During that period ŠKODA showed, on average, an investment quota of slightly
over 6%.
The newly gained attractiveness of the model range is also reflected positively in
the financial development.

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Slide: ‘Development of operating profit and net cash flow’

We have not only reached an operating profit of 648 million euros on average
since 2010, but financial results have also substantially improved. This is a
notable performance in light of the adverse market conditions within Europe in
the past five years.

I would also like to point out that the net cash flow – that is, the cash flow after
taking into account investments and tax payments, as well as before dividends –
has shown a significant surplus in the last five years. This shows that the product
campaign launched in 2010 not only won over significantly more customers to
our products, but also further increased ŠKODA’s financial results and financial
strength.

Ladies and Gentlemen,

Let me give you a short summary of the 2014 financial year and a forecast for
2015:
Slide: ‘Summary’

Despite an in parts very challenging, competitive environment, we can look back
at the most successful financial year in our company’s history.
As well as the deliveries to customers, ŠKODA has also reached record figures in
terms of revenue.
The operating profit increased to 817 million euros, a real record-breaking figure
for the ŠKODA brand. In addition, ŠKODA had an operating return on sales of 7.0%
which is – even when compared with rest of the sector within Europe – a very
good level.
Despite further high investments, net cash flow reached 840 million euros and
exceeded the previous year’s figure significantly. As a result, net liquidity at the
end of the year was increased to the new record level of 2 billion euros.

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2014 was marked by a mainly positive development of the automotive markets
relevant to ŠKODA in which we were able to increase our shares disproportionally.
Our expanded and updated model range has been very well received by our
customers and encourages us to further advance our company strategy. Despite
numerous product introductions and despite the difficult conditions in Eastern
Europe, 2014 was ŠKODA’s best financial year to date thanks to the strong,
highly motivated staff and an attractive product range.
We will continue to consistently implement our growth strategy in 2015: as a
first highlight, the Superb saloon has already been presented to the international
public in Prague and Geneva; the Combi version will be on display for the first
time at the Frankfurt Motor Show.
We shall continue to work hard, not only on our products but also on our internal
processes and structures, in order to perfectly prepare ŠKODA for future
challenges.
Despite further uncertain conditions in Eastern Europe and volatile exchange
rates, we are expecting good financial results for 2015.
Now I would like to pass the floor to my fellow Board Member, Bohdan Wojnar.